EXHIBIT 10.1
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AMENDED AND RESTATED
LOAN AGREEMENT
dated effective as of
June 7, 2006
among
GMX RESOURCES INC.,
as Borrower,
AND
CAPITAL ONE, NATIONAL ASSOCIATION,
as Administrative Agent,
AND
THE BANKS LISTED ON THE SIGNATURE PAGE,
as Banks
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT ("Agreement"), dated
effective as of June 7, 2006, is made among GMX RESOURCES INC., an Oklahoma
corporation (the "Borrower"), the BANKS (as defined below), CAPITAL ONE,
NATIONAL ASSOCIATION, a national banking association, as administrative agent
for the Banks (and individually as a Bank), who agree as follows:
PRELIMINARY STATEMENT
WHEREAS, the Borrower and Capital One, National Association
(under its former name Hibernia National Bank, the "Initial Bank"), are parties
to the Loan Agreement dated effective as of August 15, 2000, as amended by the
Interim Agreement dated as of November 3, 2005, and the Second Amendment thereto
dated as of December 20, 2005 (as so amended, the "Prior Loan Agreement").
WHEREAS, the Borrower and the Initial Bank desire to amend the
line of credit under said Prior Loan Agreement, to provide for the participation
by other banks in said line of credit on an agented credit basis, to reflect the
joinder of Union Bank of California as a Bank and an increase in the Borrowing
Base, and to permit certain subordinated borrowing by the Borrower, and in
connection therewith to amend and restate said Prior Loan Agreement in its
entirety.
NOW, THEREFORE, in consideration of the premises, and the
mutual agreements contained herein, the Borrower, the Initial Bank, the Agent
and the Banks do hereby (i) agree that nothing in this Amended and Restated Loan
Agreement shall constitute the satisfaction or extinguishment of the amount owed
under the revolving promissory note issued under said Prior Loan Agreement, nor
shall it be a novation of the amount owed under such revolving promissory note,
and (ii) amend and restate said Prior Loan Agreement in its entirety as follows:
ARTICLE 1
GENERAL TERMS
Section 1.1 Terms Defined Above. As used in this Agreement,
the terms "Agreement", "Borrower", "Initial Bank", and "Prior Loan Agreement"
shall have the meanings indicated above.
Section 1.2 Certain Definitions. As used in this Agreement,
the following terms shall have the meanings indicated (and as provided in
Section 10.14), unless the context otherwise requires:
"Advances" shall mean the borrowings on the Closing Date under
the Loan and all or any portion of such borrowings and other
or subsequent reborrowings under the Loan so long as same
remain outstanding and unpaid.
"Affiliate" shall mean, with respect to a specified Person,
another Person that directly, or indirectly through one or
more intermediaries, controls or is controlled by or is under
common control with the Person specified (and the term
"control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or
policies of a Person through the ability to exercise voting
power) (and the terms "controlling" and "controlled" have
meanings correlative thereto).
"Agent" shall mean Capital One, National Association in its
capacity as administrative agent of the Banks pursuant to
Article 9 and any successor administrative agent pursuant to
Section 9.1.
"Amount" shall mean thirty five million ($35,000,000.00)
dollars. Although the aggregate face amount of the initial
Notes under this Agreement is one hundred million
($100,000,000.00) dollars, the Amount (and hence the
Commitment Limit) is acknowledged by Borrower to be a lesser
number, subject to one or more future increases by the Banks
in their sole discretion and the Borrower's request in
conjunction with any future increases in the Borrowing Base
and further bank management approvals. Such periodic increases
in the Amount may be made without need of formal amendment to
this Agreement (up to the notational amount of one hundred
million ($100,000,000.00) dollars), but nonetheless evidenced
in writing, and subject to any fees payable on the incremental
increased portion under Section 2.5.
"Applicable LIBO Rate Margin" shall have the meaning set forth
in the definition of "LIBO Rate".
"Banks" shall mean the lenders listed on Schedule 1 hereto and
on the signature pages of this Agreement, and their respective
successors and assigns in accordance with Section 9.6.
"Base Rate" shall mean, for any day, an interest rate per
annum equal to the Prime Rate in effect on such day. Without
notice to the Borrower, the Base Rate shall change
automatically from time to time as and in the amount by which
the Prime Rate shall
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fluctuate, with each such change in the Base Rate to be
effective as of the date of each change in the Prime Rate,
adjusted daily.
"Borrowing Base" shall mean, at any time, the dollar amount
calculated as the maximum loan value of the Collateral as
determined by the Agent, in each case with the consent of the
Required Banks or all the Banks, as applicable, as provided
below in this definition, in their sole discretion, but based
upon their respective customary standards and practices from
time to time in effect with respect to secured oil and gas
property lines of credit in determining the discounted present
value of the Collateral's production and the Borrower's cash
flows. Any good faith determination by the Agent and the Banks
of the Borrowing Base shall be final and conclusive as to the
Borrower. The Borrowing Base may be revised by Agent and the
Banks at any time to reflect changes in the Collateral or the
occurrence of events or economic conditions or otherwise
pursuant to Agent's and the Banks' customary standards and
practices as such exist at that particular time, and further
will be subject to scheduled semi-annual redeterminations
(approximately April 1 and October 1, starting October 1,
2006) during the term of this Loan. Additionally, the Borrower
may request once per any six month period between scheduled
redeterminations that an unscheduled redetermination be done
by Agent and the Banks, subject to Borrower's payment to Agent
for distribution to the Banks of a fee in accordance with
Section 2.5. The Agent shall notify the Borrower of the result
of each Borrowing Base redetermination at least fifteen (15)
days before its effective date. Each determination of the
Borrowing Base shall be effective until redetermined by the
Agent in accordance with this Agreement (or until the Maturity
Date). Such redetermination may lead to increased or decreased
credit availability to the Borrower under the revised
Borrowing Base schedule, and any increase shall be subject to
Banks' credit approval process. The Borrowing Base after any
redetermination may be subject to automatic Periodic
Reductions (with notice to Borrower) as provided and defined
in Subsection 2.4 (c). Without limiting the foregoing, the
Agent may exclude, in its sole and absolute discretion, any
property or portion of production therefrom from the Borrowing
Base, at any time, because title information on, or the status
of title to, such property is not reasonably satisfactory to
Agent, such property is not Collateral, the Agent's Lien
therein is not first and prior to all others, such property is
subject to contractual agreements or commitments not
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reasonably satisfactory to Agent, or such property is not
assignable. The Borrower acknowledges that the determination
of the Borrowing Base contains an equity cushion (market value
in excess of loan value), which is acknowledged by the
Borrower to be essential for the adequate protection of the
Agent and the Banks. On the Closing Date, the Borrowing Base
is $35,000,000.00. Thereafter, the Agent shall make a
preliminary redetermination of the Borrowing Base each March 1
and September 1 of each year (assuming timely delivery of
requested information from the Borrower), and otherwise at
such times as deemed appropriate by the Agent or the Required
Banks (including as may be provided by Section 3.3). The Agent
promptly shall notify the Banks in writing of each such
preliminary redetermination. Each Bank shall notify the Agent
in writing of either its approval or disapproval of any such
preliminary redetermination of the Borrowing Base within ten
(10) Business Days after its receipt of such notice. Each
re-determination of the Borrowing Base which results in an
increase shall require the consent of all of the Banks; each
other redetermination of the Borrowing Base (which results in
no change or a decrease) shall require the consent of the
Required Banks. Upon approval of all the Banks or the Required
Banks, as applicable, of each redetermination, the Agent shall
notify the Borrower as provided above.
"Business Day" shall mean (a) for all purposes other than as
covered by clause (b) of this definition, a day other than a
Saturday, Sunday or legal holiday for commercial banks in
either New Orleans, Louisiana, or New York, New York, and (b)
with respect to all requests, notices and determinations in
connection with LIBO Rate Loans, a day which is a Business Day
described in clause (a) of this definition and which is a day
for trading by and between banks for dollar deposits in the
London interbank market.
"Closing Date" shall mean the date on which the Notes are
executed and delivered by the Borrower to the Banks and all
the other conditions in Section 7.1 are met or waived
(temporarily or otherwise).
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
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"Collateral" shall mean the properties and property rights
described in the Collateral Documents described in Section 3.1
as primary security for the Indebtedness.
"Collateral Documents" shall mean collectively the documents
from time to time required by the Agent and the Banks to
obtain the security interest in the Collateral, or otherwise
guarantee or secure the Indebtedness, or otherwise pertaining
to this Agreement (including without limitation the letter of
credit applications described in Subsection 2.1(f) below),
such documents which exist on the Closing Date being described
in Article 3 hereof, as all such documents are amended,
restated or renewed from time to time.
"Commitment Limit" shall mean, at any particular date, the
lesser of (x) the Amount (as it may be increased by the Banks
from time to time) or (b) the Borrowing Base as most recently
determined and in effect (including the effect of any Periodic
Reductions).
"Commitments" shall mean the commitments of each of the Banks
for the Loan set forth on Schedule 1 hereto as amended from
time to time.
"Companies" shall mean collectively, on the Closing Date, the
Borrower, Endeavor, and Diamond, and thereafter all such
Persons plus any Subsidiary formed or acquired after the
Closing Date, and "Company" shall mean any one of the
Companies.
"Contracts" shall mean those agreements, contracts and other
instruments to which the Borrower's interest in the oil, gas
and mineral leases comprising the Collateral are subject.
"Debt" shall mean any and all amounts and/or liabilities owing
from time to time by a Company to any Person, including any
Secured Party, direct or indirect, liquidated or contingent,
now existing or hereafter arising, including without
limitation (i) indebtedness for borrowed money or the deferred
purchase price of property; (ii) unfunded portions of
commitments for money to be borrowed; (iii) the amounts of all
standby and commercial letters of credit and bankers
acceptances, matured or unmatured, issued on behalf of such
Company, and (without duplication) all drafts drawn thereon;
(iv) guaranties of the obligations of any other Person,
whether direct or indirect, whether by agreement to purchase
the indebtedness of any other Person or by agreement for the
furnishing of funds to any other Person through the purchase
or
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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 otherwise; (v) indebtedness of the types described
above secured by any Lien on any property owned by such
Company, to the extent attributable to such Company's interest
in such property, even though such Company has not assumed or
become liable for the payment thereof personally; (vi) the
present value of all obligations for the payment of rent or
hire of property of any kind (real or personal) under leases
or lease agreements required to be capitalized under generally
accepted accounting principles, (vii) trade payables and
operating leases incurred in the ordinary course of business
or otherwise; (viii) Hedging Obligations; (ix) obligations of
such Company owing in respect of redeemable preferred stock;
and (x) obligations of such Company owing in connection with
production payments.
"Deed of Trust" shall mean the Texas Deed of Trust described
in Section 3.1(i), as amended, supplemented or restated from
time to time.
"Default" shall mean the occurrence of any of the events
specified in Article 8 hereof, whether or not any requirement
for notice or lapse of time or other condition precedent has
been satisfied.
"Default Rate" shall mean, on any particular date, the Prime
Rate plus five (5%) percent per annum, but in no event to
exceed the Maximum Rate.
"Diamond" shall mean Diamond Blue Drilling Co., an Oklahoma
corporation and a wholly owned Subsidiary of the Borrower.
"Diamond Note" shall mean the promissory note issued by
Diamond payable to the order of the Borrower, meeting the
requirements of and pursuant to Section 5.20.
"EBITDA" shall mean, for each period of four preceding fiscal
quarters, the sum of the Borrower's (i) net income for that
period, plus (ii) any extraordinary loss and other expenses
not considered to be operating in nature reflected in such net
income, minus (iii) any extraordinary gain, interest income
and other income not considered operating in nature reflected
in such net income, plus (iv) depreciation, depletion,
amortization and all other non-cash expenses for that period,
plus (v) all interest, fees, charges and
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related expenses paid or payable (without duplication) for
that period to a lender in connection with borrowed money or
the deferred purchase price of assets that are considered
"interest expense" under generally accepted accounting
principles, together with the portion of rent paid or payable
(without duplication) for that period under capital lease
obligations that should be treated as interest in accordance
with Financial Accounting Standards Board Statement No. 13,
plus (vi) the aggregate amount of federal and state taxes on
or measured by income for that period (whether or not payable
during that period).
"Endeavor" shall mean Endeavor Pipeline Inc., an Oklahoma
corporation, and a wholly owned Subsidiary of the Borrower.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Event of Default" shall mean the occurrence of any of the
events specified in Article 8 hereof, provided that any
requirement for notice or lapse of time or any other condition
precedent has been satisfied.
"Expedition" shall mean Expedition Natural Resources Inc., an
Oklahoma corporation, formerly a wholly owned Subsidiary of
the Borrower, merged into the Borrower on or about July 29,
2005.
"Hedge Agreement" shall mean any agreement or arrangement
providing for payments which are related to, or the value of
which is dependent upon, fluctuations of interest rates,
currency exchange rates or forward rates, or fluctuations of
commodity prices, including without limitation any swap
agreement, cap, collar, floor, exchange transaction, forward
agreement or exchange or protection agreement or similar
futures contract or swap or other derivative agreement related
to interest rates, currency exchange rates or hydrocarbons or
other commodities, or any option with respect to such
transaction.
"Hedging Obligations" of a Person shall mean any and all
obligations of such Person, whether absolute or contingent and
howsoever and whensoever created, arising or evidenced
(including all renewals, extensions and modifications thereof
and substitutions therefor), under any and all Hedge
Agreements and any and all cancellations, buybacks, reversals,
terminations or assignments of any Hedge Agreement.
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"Indebtedness" shall mean any and all amounts, liabilities or
obligations owing from time to time by the Borrower to the
Agent or to all or any of the Banks pursuant to this
Agreement, the Notes and the Collateral Documents (including
attorneys' fees incurred in connection with the execution,
enforcement or collection of the Borrower's obligations
hereunder or thereunder or any part thereof and all fees
payable in connection herewith to the Agent or to the Banks),
whether such amounts, liabilities or obligations be liquidated
or unliquidated, now existing or hereafter arising.
"Indemnified Parties" shall have the meaning provided in
Section 5.14.
"Intercreditor Agreement" shall mean the Intercreditor
Agreement among the Agent and the Banks, on the one hand, and
the Subordinated Holders, on the other, setting forth terms of
subordination substantially as set forth on Addendum II.
"Interest expense" shall mean, for each period, the sum of all
interest, fees, charges and related expenses payable (without
duplication) for that period to a lender in connection with
borrowed money or the deferred purchase price of assets that
are considered "interest expense" under generally accepted
accounting principles, plus the portion of rent paid or
payable (without duplication) for that period under capital
lease obligations that should be treated as interest in
accordance with Financial Accounting Standards Board Statement
No. 13.
"Issuing Bank" shall mean Capital One, National Association,
and any successor issuing bank pursuant to Section 9.1.
"Letter of Credit Sublimit" shall mean ten million
($10,000,000.00) dollars.
"LIBO Rate" shall mean, during any Interest Period (as defined
below) for any Advance, an interest rate per annum equal to
the Reserve Adjusted LIBO Rate (as defined below) plus the
Applicable LIBO Rate Margin (as defined below). "Reserve
Adjusted LIBO Rate" shall mean with respect to each Interest
Period for a LIBO Rate Advance, an interest rate per annum
equal to the quotient (converted to a percentage, rounded
upward to the nearest whole multiple of 1/100 of 1% per annum)
of (i) the rate per annum as determined by the Agent at or
about 10:00 a.m. Central Time (or as soon thereafter as
practicable) on the second
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Business Day prior to the first day of each Interest Period,
to be the annual rate of interest for deposits in United
States dollars for the selected Interest Period as shown on
the Dow ▇▇▇▇▇ Telerate Matrix page for British Bankers
Association Interest Settlement Rates as of two Business Days
prior to the first day of such Interest Period, divided by
(ii) the amount by which 1.00 exceeds the LIBOR Reserve
Requirement (as defined below), expressed as a decimal, for
such Interest Period. "LIBOR Reserve Requirement" shall mean
for any day during an Interest Period for any LIBO Rate
Advance, that percentage (expressed as a decimal) which is
specified by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve
requirement (including, but not limited to, any marginal
reserve requirement) for the Banks with respect to liabilities
consisting of or including "Eurocurrency liabilities" (as
defined in Regulation D of the Board of Governors of the
Federal Reserve System) with a maturity equal to such Interest
Period. In determining this percentage, the Agent may use any
reasonable averaging and attribution method. "Interest Period"
shall mean the period between the Business Day on which the
LIBO Rate shall begin and the day on which the LIBO Rate shall
end. The duration of each Interest Period for a LIBO Rate
Advance shall be one (1) month, two (2) months, or three (3)
months, at the Borrower's election, subject to the following:
(i) no Interest Period shall extend past the Maturity Date;
(ii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last
day of such Interest Period shall be extended to occur on the
next succeeding Business Day, except that if the next
succeeding Business Day would occur in the next following
calendar month, the last day of such Interest Period shall be
shortened to occur on the next preceding Business Day; (iii)
whenever the first day of any Interest Period occurs on a day
of an initial calendar month for which there is no numerically
corresponding day in the calendar month that succeeds such
initial calendar month by the number of months in such
Interest Period, such Interest Period shall end on the last
Business Day of such succeeding calendar month; and (iv) if
the Borrower fails to designate an Interest Period, the
Interest Period for a LIBO Rate Advance (recognizing that
under Subsection 2.1(b) below the Banks are not obligated to
make such a LIBO Rate Advance in the absence of such
designation by the Borrower) shall be deemed to be one month
until a different designation is made for a subsequent
Interest Period. No Interest Period for a LIBO Rate Advance
shall have a duration of less than
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one month, and if any such Interest Period would otherwise be
a shorter period, the relevant Advance shall be a Base Rate
Advance during such period. The "Applicable LIBO Rate Margin"
shall mean the following per annum interest rate from time to
time, determined for each fiscal quarter by reference to the
Percentage Outstanding for the immediately prior fiscal
quarter, in accordance with the following schedule:
Applicable LIBO
Percentage Outstanding Rate Margin
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0 to 50% 1.50%
above 50% to 90% 1.75%
above 90% 2.25%
The Applicable LIBO Rate Margin shall remain fixed during each
fiscal quarter of the Borrower's fiscal year, determined on
the first day of each fiscal quarter depending upon the
Percentage Outstanding for the immediately prior quarter.
(During the first partial quarter of this Agreement,
commencing on the Closing Date, the Applicable LIBO Rate
Margin shall be 1.50% percent.) No more than four (4) LIBO
Rate tranches at any one time are permitted for the Notes. The
Borrower will comply with the provisions of Addendum I hereto,
relating to the LIBO Rate, which is an integral part of this
Agreement. The LIBO Rate shall remain fixed for the duration
of the LIBO Rate Interest Period selected. The Borrower shall
not have the right to voluntarily prepay Advances outstanding
at the LIBO Rate prior to the end of the applicable LIBO Rate
Interest Period unless the Borrower includes payment of
amounts, if any, required to be paid pursuant to paragraph 6
of Addendum I.
"Lien" shall mean any interest in property securing an
obligation owed to, or a claim by, a Person other than the
owner of the property, whether such interest is based on
jurisprudence, statute or contract, and including but not
limited to the lien or security interest arising from a
mortgage, encumbrance, pledge, security agreement, production
payment, conditional sale, bond for deed or trust receipt or a
lease, consignment or bailment for security purposes. The term
"Lien" shall include reservations, exceptions, encroachments,
easements, servitudes, usufructs, rights-of-way, covenants,
conditions, restrictions, leases, and other title
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exceptions and encumbrances affecting property. For the
purposes of this Agreement, the Borrower shall be deemed to be
the owner of any property which it has accrued or holds
subject to a conditional sale agreement, financing lease or
other arrangement pursuant to which title to the property has
been retained by or vested in some other Person for security
purposes.
"Loan" shall mean the line of credit and standby letters of
credit as described in Article 2 hereof.
"Loan Excess" shall mean, at any point in time, the amount, if
any, by which the outstanding principal balance of the
Advances plus the undisbursed amount of all outstanding
standby letters of credit issued pursuant to this Agreement
exceeds the Commitment Limit then in effect.
"Maturity Date" shall mean the July 29, 2008, or such earlier
date on which the Loan is accelerated pursuant to Section 8.2
hereof.
"Maximum Rate" shall mean the maximum nonusurious interest
rate permitted under applicable law (determined under such
laws after giving effect to any items which are required by
such laws to be construed as interest in making such
determination, including without limitation if required by
such laws, certain fees and other costs), as such laws are
presently in effect, or, to the extent allowed by applicable
law, as such laws may hereafter be in effect and which allow a
higher maximum non-usurious interest rate than such laws now
allow.
"Maximum Subordinated Amount" shall mean forty five million
($45,000,000.00) dollars.
"Notes" shall mean the promissory notes executed by the
Borrower, each substantially in the form of Exhibit A hereto,
initially dated the Closing Date (and subsequently dated on
the date that additional Banks become a party to this
Agreement), payable to the order of each Bank in the amount of
the Bank's Commitment, in representation of the Advances
available to be made under the line of credit Loan, together
with any and all amendments, modifications, extensions,
renewals, increases or rearrangements thereof or therefor.
(The Notes dated the Closing Date payable to the order of each
Bank in the amount of the Bank's Commitment as shown on
Schedule 1 hereto have been given in renewal and extension of
the indebtedness previously evidenced by
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that certain Line of Credit Note dated July 29, 2005, issued
under the Prior Loan Agreement.)
"Operator" shall mean each Person which is an operator of any
of the Borrower's properties.
"Patriot Act" shall have the meaning set forth in Section
4.22.
"Participation Agreement" shall mean the Participation
Agreement dated December 29, 2003, by and among Penn Virginia
Oil & Gas Corporation, the Borrower, and Expedition and
Endeavor, as amended by the First Amendment dated February 27,
2004, the Second Amendment dated March 9, 2004, the Third
Amendment dated April 6, 2004, the Amendment No. 4 dated
August 11, 2004, the Amendment No. 5 dated February 25 and
March 2, 2005, the Amendment No. 6 entered January 3 and 13,
2006, and as further amended after the Closing Date in
accordance with this Agreement. PVOG is the successor to Penn
Virginia Oil and Gas Corporation under the Participation
Agreement.
"Percentage Outstanding" shall mean, for any fiscal quarter
(or lesser time period as applicable), the fraction (expressed
as a percentage) obtained by dividing (x) the average unpaid
and outstanding aggregate principal balance of the Advances
under the Notes plus the undisbursed amount of all standby
letters of credit during such quarter, by (y) the average of
the Commitment Limit for such quarter.
"Periodic Reduction" shall have the meaning provided in
Subsection 2.4(c).
"Permitted Commodity Hedge" shall mean non-speculative
transactions in futures, forwards, swaps or option contracts
(including both physical and financial settlement
transactions), engaged in by the Borrower or any Subsidiary as
part of its normal business operations with the purpose and
effect of hedging prices as a risk management strategy or
hedge against adverse changes in the prices of natural gas or
oil (including without limitation commodity price ▇▇▇▇▇▇,
swaps, caps, floors, collars and similar agreements designed
to protect the Borrower or such Subsidiary against
fluctuations in commodity prices or any option with respect to
any such transaction) and not intended primarily as a
borrowing of funds, provided that all times: (1) no such
contract fixes a price for a term of more than thirty six (36)
months without the prior
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written consent of the Required Banks; (2) the aggregate
monthly production covered by all such contracts (considered
both individually and in the aggregate) by the Borrower and
all its Subsidiaries (determined, in the case of contracts
that are not settled on a monthly basis, by a monthly
proration acceptable to the Agent) for any single month during
the next six (6) month period (on a rolling basis) does not
exceed (x) for oil, one hundred (100%) percent of the
Borrower's aggregate Existing Production (as defined below) of
oil sold for the immediately preceding month, and (y) for gas,
one hundred (100%) of Borrower's aggregate Existing Production
of gas sold for the immediately preceding month; (3) the
aggregate production covered by all such contracts (considered
both individually and in the aggregate) by the Borrower and
all its Subsidiaries does not in the aggregate exceed (x) for
oil, seventy five (75%) percent of the Borrower's aggregate
Projected Production (as defined below) of oil anticipated to
be sold in the ordinary course of the Borrower's business for
the time period(s) covered by such contracts, and (y), for
gas, seventy five (75%) percent of the Borrower's aggregate
Projected Production of gas anticipated to be sold in the
ordinary course of the Borrower's business for the time
period(s) covered by such contracts; (4) no such contract
requires the Borrower or such Subsidiary to put up money,
assets, letters of credit or other security against the event
of its nonperformance prior to actual default by the Borrower
or such Subsidiary in performing its obligations thereunder,
other than letters of credit issued under this Agreement; and
(5) each such contract shall be either with any Bank or an
Affiliate of any Bank (without restriction as to rating), or
with a counterparty who (or have a guarantor of the obligation
of the counterparty who), at the time the contract is made,
has long-term obligations rated AA or Aa2 or better,
respectively, by Standard & Poor's Corporation or ▇▇▇▇▇'▇
Investors Services, Inc. (or a successor credit rating agency)
or with a counterparty otherwise approved in advance by the
Required Banks. As used herein, the term "Existing Production"
means the actual production of oil or gas (measured by volume
unit or BTU equivalent, not sales price), as applicable, sold
in the ordinary course of the Borrower's business for a
particular month from properties and interests owned by the
Borrower which are Collateral and which have attributable to
them proved developed oil or gas reserves as reflected in the
most recent engineering report delivered pursuant to
Subsection 5.2(c), after deducting production from any
properties or interests sold that had been included in such
report
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and after adding actual production from any properties or
interests owned by the Borrower which have become Collateral
and have not been reflected in such report that are reflected
in a separate or supplemental report meeting requirements of
such Subsection 5.2(c) or otherwise satisfactory to the Agent.
As used herein, the term "Projected Production" means the
projected production of oil or gas (measured by volume unit or
BTU equivalent, not sales price), as applicable, for the term
of the contracts or a particular month, as applicable, from
properties and interests owned by the Borrower which are
Collateral and which have attributable to them proved
developed producing oil or gas reserves as reflected in the
most recent engineering report delivered pursuant to
Subsection 5.2(c), after deducting projected production from
any properties or interests sold or under contract for sale
that had been included in such report and after adding
projected production from any properties or interests owned by
the Borrower which have become Collateral and had not been
reflected in such report that are reflected in a separate or
supplemental report meeting requirements of such Subsection
5.2(c) and otherwise satisfactory to the Agent.
"Permitted Hedge Agreement" shall mean any Hedge Agreement
which is a Permitted Commodity Hedge or a Permitted Interest
Hedge.
"Permitted Hedge Obligations" shall mean any and all present
and future amounts, obligations and liabilities, contingent or
otherwise, of the Borrower and its Subsidiaries under,
collectively, all Permitted Commodity ▇▇▇▇▇▇ and all Permitted
Interest ▇▇▇▇▇▇.
"Permitted Interest Hedge" shall mean any forward contract,
futures contract, swap, option or other financial agreement or
arrangement (including without limitation caps, floors,
collars, puts and similar agreements or any option with
respect to any such transaction) relating to, or the value of
which is dependent upon, interest rates, entered into by the
Borrower with one or more financial institutions or one or
more futures exchanges as part of its normal business
operations (recognizing that Borrower has not done so in the
past) with the purpose and effect of hedging interest rates on
a principal amount of the Borrower's Debt that is accruing
interest at a variable rate as a risk-management strategy, and
not for purposes of speculation and not intended primarily as
a borrowing of funds, and which are designed to protect the
Borrower against fluctuations in interest rates with respect
to Debt,
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provided that at all times: (1) the aggregate notional amount
of such contracts never exceeds one hundred (100%) percent of
the anticipated outstanding principal balance of the Debt of
the Borrower to be hedged by such contracts or an average of
such principal balances calculated using a generally accepted
method of matching interest swap contracts to declining
principal balances; (2) the floating rate index of each such
contract generally matches the index used to determine the
floating rates of interest on the corresponding Debt of the
Borrower to be hedged by such contract; and (3) each such
contract shall be either with any Bank or any Affiliate of any
Bank (without restriction as to rating), or with a
counterparty who (or have a guarantor of the obligation of the
counterparty who), at the time the contract is made, has
long-term obligations rated AA or Aa2 or better, respectively,
by Standard & Poors Corporation or ▇▇▇▇▇'▇ Investors Services,
Inc. (or a successor credit rating agency), or with a
counterparty otherwise approved in advance by the Required
Banks.
"Person" shall mean any individual, corporation, limited
liability company, partnership, joint venture, association,
joint stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof, or
any other form of entity.
"Plan" shall mean any plan subject to Title IV of ERISA and
maintained by the Borrower, or any such plan to which the
Borrower is required to contribute on behalf of its employees.
"Prime Rate" shall mean, at any particular date, the prime or
base rate as reflected in The Wall Street Journal (or if such
rate is not published or is no longer available, such other
index satisfactory to the Agent). Without notice to the
Borrower, the Prime Rate shall change automatically from time
to time as and in the amount by which said index rate shall
fluctuate, with each such change in the Prime Rate to be
effective as of the date of each change in such index rate.
The Wall Street Journal index rate is a reference rate and
does not necessarily represent the lowest or best rate
actually charged to any customer by the Agent or any Bank (or
by such institutions comprising said index).
"Prior Loan Agreement" shall have the meaning provided in the
Preliminary Statement of this Agreement.
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"Qualified Redeemable Preferred Equity" shall mean redeemable
preferred stock issued by the Borrower which (i) does not
exceed in total consideration paid to or for the account of
the Borrower in connection therewith, when added to the total
principal amount of all Qualified Subordinated Debt issued by
the Borrower, the Maximum Subordinated Amount, (ii) is not
redeemable in any part earlier than five (5) years after its
issuance date except only at the voluntary option of the
Borrower, (iii) has a stated interest or dividend rate of less
than ten (10%) percent per annum, (iv) sets forth covenants
that in the judgment of the Agent and Agent's counsel are no
more restrictive on the Companies and their operations and
affairs than the covenants contained in this Agreement, and
(v) is unsecured by any Liens.
"Qualified Subordinated Debt" shall mean Debt of Borrower to
any one or more Subordinated Holders which (i) does not exceed
in aggregate principal amount, when added to the total
consideration paid to or for the account of the Borrower in
connection with all Qualified Redeemable Preferred Equity
issued by the Borrower, the Maximum Subordinated Amount, (ii)
has a maturity date of greater than one year after the
Maturity Date, (iii) sets forth covenants that in the judgment
of the Agent and Agent's counsel are no more restrictive on
the Companies and their operations and affairs than the
covenants contained in this Agreement, and (iv) is
subordinated to the Indebtedness and the Secured Hedge
Obligations both as to payment and as to liens and collateral
pursuant to a written Intercreditor Agreement in favor of and
satisfactory to the Agent and the Banks duly authorized and
executed by each applicable Subordinated Holder.
"Required Banks" shall mean Banks in the aggregate holding at
least sixty-six and two-thirds (66 2/3%) percent of the
aggregate unpaid principal amount of the Notes (or if no
Advances are outstanding then 66 2/3% of the aggregate
Commitments).
"PVOG" shall mean Penn Virginia Oil & Gas, L.P., a wholly
owned subsidiary of Penn Virginia Corporation.
"PVOG Production Payment" shall mean the dollar denominated
production payment purchased by PVOG from the Borrower in the
original amount of $2,233,435.76, repayable solely from 75% of
the Borrower's share of production revenues from only four
certain ▇▇▇▇▇ (▇▇▇▇▇▇ #2, ▇▇▇▇▇▇ #3, ▇▇▇▇▇▇▇▇▇▇ #3 and ▇▇▇▇▇
#1), without
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interest. On March 31, 2006, the balance owed was
$1,929,613.43.
"Secured Hedge Agreements" shall mean all Hedging Agreements,
whether now in existence or hereafter arising, which establish
Secured Hedge Obligations by the Borrower or any Subsidiary in
favor of a Secured Hedge Provider.
"Secured Hedge Obligations" shall mean any Permitted Hedge
Obligations of the Borrower or any Subsidiary owing to any one
or more of the (present and future) Secured Hedge Providers,
and includes the due performance and compliance by the
Borrower or any Subsidiary with all the terms, conditions and
agreements contained in the Secured Hedge Agreement pertaining
thereto.
"Secured Hedge Provider" shall mean any one or more of the
(present and future) Banks under this Agreement, or any
Affiliate of such Bank which is a party to one or more Secured
Hedge Agreements with the Borrower or any Subsidiary, so long
as any such Bank is a "Bank" under this Agreement at the time
such Secured Hedge Obligation is entered into with such Bank
or Affiliate of such Bank (even if such Bank subsequently
ceases to be a "Bank" under this Agreement for any reason).
"Secured Liabilities" shall mean collectively the Indebtedness
and the Secured Hedge Obligations.
"Secured Parties" shall mean the Agent, the Banks and the
Secured Hedge Providers.
"Shared Collateral" shall have the meaning provided in Section
3.4.
"Subordinated Holder" shall mean each Person which is owed any
portion of Qualified Subordinated Debt.
"Subsidiary" shall mean each corporation of which the Borrower
owns, directly or indirectly, fifty percent or more of the
outstanding capital stock, and each partnership, limited
liability company or other Person of which the Borrower owns,
directly or indirectly, fifty percent (50%) or more of the
outstanding partnership, membership or other ownership or
voting interest.
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Section 1.3 Accounting Terms. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared in accordance with generally accepted
accounting principles as in effect from time to time (except for changes in
accounting principles or practice approved by independent certified public
accountants for the Borrower) on a basis consistent with the most recent
financial statements of the Borrower.
ARTICLE 2
THE CREDIT
Section 2.1 Line of Credit and Letters of Credit. (a) Line of
Credit. Subject to and upon the terms and conditions contained in this
Agreement, and relying on the representations and warranties contained in this
Agreement, on the Closing Date each Bank, severally, agrees to make a revolving
line of credit available to the Borrower in the maximum aggregate principal
amount equal to such Bank's Commitment set forth in Schedule I hereto. The
aggregate amount of all Advances, plus the face amount of all standby letters of
credit permitted to be issued under this Agreement, cannot exceed the Commitment
Limit. The line of credit is represented by the Notes in the aggregate principal
amount of one hundred million ($100,000,000.00) dollars, payable to the order of
the Banks. Principal and all accrued and unpaid interest on the line of credit
shall be payable in full on the Maturity Date, after which no further Advances
will be made. Payments may be debited from the Borrower's accounts with the
Agent as provided in this Agreement.
(b) Interest. The interest rate applicable to each Loan
Advance beginning on the date such Advance is made shall be either (i) the Base
Rate, adjusted daily, or (ii) the LIBO Rate, adjusted on the first day of each
LIBO Rate Interest Period and remaining fixed for the duration of the LIBO Rate
Interest Period, selected at the Borrower's option by written notice to Agent in
accordance with the terms hereof, but in no event shall the interest rate
applicable to any Loan Advance exceed the Maximum Rate. Effective on the first
day following the end of any LIBO Rate Interest Period, the Borrower may from
time to time change the interest rate which is to apply to the Advances or a
portion thereof (including any yet to be made Advance which is made on the
effective date of the interest rate change) by notifying the Agent of the
Borrower's desire to change the interest rate not less than three (3) Business
Days prior to the date on which such change shall be effective. No more than
four (4) LIBO Rate tranches and one Base Rate tranche (all Base Rate Advances
constituting one tranche) shall be permitted for the Notes at any one time. In
the absence of any timely specific interest rate election by the Borrower (as
provided above in this Subsection 2.1(b) and in the definition of LIBO Rate),
unless otherwise agreed by the Agent, an Advance (if outstanding as a LIBO Rate
Advance) will be automatically converted into a Base Rate Advance on the last
day of the then current LIBO Rate Interest Period for such Advance or (if not
then outstanding) an Advance shall bear interest at the Base Rate. The Borrower
further will comply with the provisions of Addendum I hereto,
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relating to the LIBO Rate, which is an integral part of this Agreement. Interest
on the Notes shall be payable (x) on Advances bearing interest at the Base Rate
monthly in arrears on the last day of each month, and (y) on LIBO Rate Advances
on the last day of each applicable LIBO Rate Interest Period for each LIBO Rate
Advance. Interest on (i) Base Rate Advances and all other Indebtedness except
for LIBO Rate Advances shall be calculated on the basis of a 365 (or in a leap
year 366) day year and the actual number of days elapsed, and (ii) on LIBO Rate
Advances shall be calculated on the basis of a 360-day year by applying the
ratio of the annual interest rate over a year of 360 days, times the applicable
principal balance, times the actual number of days such applicable principal
balance is outstanding. Payments may be debited from the Borrower's accounts
with the Agent as provided in this Agreement. The Maximum Rate shall be
calculated based on a 365-day or 366-day year, as is applicable.
(c) Draw Requests. In accordance with the provisions in this
Section, the Banks will make Advances to the Borrower from time to time on any
Business Day on and after the Closing Date until and including the last Business
Day before the Maturity Date in such amounts as the Borrower may request, up to
the Commitment Limit, and the Borrower may make borrowings, repayments and
reborrowings in respect thereof. Requests for Advances must be made by written
notice from the Borrower sent to the Agent by mail, courier or facsimile in
accordance with Section 10.1, specifying the amount of the Advance, subject to
Section 2.12. A request shall be fully authorized by the Borrower if made by any
one of ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. or ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. or other individual designated by
the Borrower as an authorized person in accordance with resolutions of the Board
of Directors of the Borrower certified to the Agent. The Agent and the Banks may
rely fully and completely upon the authority of the signatory of such request or
confirmation unless such authority is terminated by written notice to the Agent,
and any such termination shall be effective only prospectively. The request for
any Advance by the Borrower shall constitute a certification by the Borrower
that all of the representations and warranties contained in Article 4 (other
than those representations and warranties, if any, that are by their specific
terms limited in application to a specific date) are true and correct as of the
date of such request and also as of the date of the Advance.
(d) Timing. Requests for Advances at the Base Rate shall be
made on written notice from the Borrower to the Agent, received by the Agent no
later than 10:00 a.m. (Central Time) on the first Business Day before such Base
Rate Advance specifying the amount thereof. Request for Advances at the LIBO
Rate shall be made on written notice from the Borrower to the Agent received by
the Agent no later than 11:00 a.m. (Central Time) on the third (3rd) Business
Day before such LIBO Rate Advance, specifying the amount thereof (including the
amount of each tranche, if more than one) and the LIBO Rate Interest Period (or
Interest Periods, if more than one tranche). Each such written notice by the
Borrower shall be irrevocable by the Borrower. The Agent shall promptly give
each Bank notice of such proposed Advance.
(e) Funding. Not later than 12:00 noon (Central Time) on the
date of any Advance, each of the Banks shall make available to the Agent, in
immediately available funds, the amount of such Bank's prorata portion (i.e.,
the percentage of its Commitment as compared
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to the aggregate of the Commitments) of the amount of the requested Advance.
Upon receipt from each Bank of such amount, and upon fulfillment of the
applicable conditions set forth in this Agreement in Article 7, the Agent (on
behalf of the Banks) will make available to the Borrower the aggregate amount of
such Advance in accordance with the further terms of this Section 2.1. The
failure or refusal of any Bank to make available to the Agent at the aforesaid
time and place on any date of an Advance the amount of its portion of the
requested Advance shall not relieve any other Bank from its several obligation
hereunder to make available to the Agent the amount of such other Bank's portion
of any requested Advance (but no Bank shall be responsible for the failure of
any Bank to make available to the Agent such other Bank's portion of any
requested Advance).
The Agent may, unless notified to the contrary by any Bank
prior to the date of an Advance, assume that each Bank has made available to the
Agent on such date of the applicable Advance the amount of each Bank's portion
of the Advance to be made on such date, and the Agent shall, in reliance upon
such assumption, make available to Borrower a corresponding amount. If any Bank
makes available to the Agent such amount on a date after the date of the
applicable Advance, such Bank shall pay to the Agent on demand an amount equal
to the product of (i) the average computed for the period referred to in clause
(iii) below, of the weighted average interest rate paid by the Agent for federal
funds acquired by the Agent during each day included in such period, times (ii)
the amount of such Bank's portion of such Advance, times (iii) a fraction, the
numerator of which is the number of days that elapse from and including such
date of the Advance to the date on which the amount of such Bank's portion of
such Advance shall become immediately available to the Agent, and the
denominator of which is 365; provided, that if such Bank has not paid to the
Agent such Bank's portion of the Advance by 12:00 noon (Central Time) on the
third (3rd) Business Day after the Advance was made to the Borrower, then the
interest rate in clause (i) above shall be the Prime Rate (adjusted daily) from
and after such second (2nd) Business Day after the Advance was made until and
including the date such Bank makes available to the Agent such Bank's portion of
the Advance; provided, further, that if such Bank has not paid to the Agent such
Bank's portion of the Advance by 12:00 noon (Central Time) on the fifth (5th)
Business Day after the Advance was made to Borrower, then the interest rate in
clause (i) above shall be the Prime Rate (adjusted daily) plus three (3.0%)
percent per annum from and after such fifth (5th) Business Day after the Advance
was made until and including the date such Bank makes available to the Agent
such Bank's portion of the Advance. A statement of the Agent submitted to each
Bank with respect to any amounts owing under this paragraph shall be prima facie
evidence of the amount due and owing to the Agent by such Bank. If any Bank
fails to pay to Agent its portion of any Advance within thirty (30) days after
an Advance or if any Bank twice fails to timely make its portion of Advances to
be made to the Borrower available to the Agent before 12:00 noon (Central Time)
on the dates Advances are made to the Borrower (counting failures in
reimbursement under Subsection 2.1(g) as a failure hereunder), then, if
requested to do so by the Borrower or any other Bank or the Agent, such Bank
shall sell all of its interests, rights and obligations under this Agreement
(including all of its Commitment and its portion of the Loan at the time owing
to it) and the Note held by it to
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another Bank or bank under Section 9.6 hereof, provided such a willing,
qualified assignee is identified by the requesting party.
Not later than 3:00 p.m. (Central Time) on the date properly
and timely requested for the Advance and upon fulfillment of the applicable
conditions set forth in Article 7 of this Agreement, the Agent will make such
Advance available to the Borrower in same day funds in the account maintained by
the Borrower with the Agent and the credit advice resulting therefrom shall be
mailed by the Agent to the Borrower. The Borrower irrevocably agrees that the
deposit of the proceeds of any Advance in any account of Borrower with the
Agent, or the Agent's copy of any cashier's check representing all or any part
of the proceeds of the disbursements, shall be deemed prima facie evidence of
the Borrower's Indebtedness to the Banks under the Loan.
(f) Minimum. Notwithstanding anything in this Agreement to the
contrary, the aggregate principal amount of all LIBO Rate Advances having the
same LIBO Rate Interest Period shall be at least equal to $100,000.00; and if
any LIBO Rate tranche would otherwise be in a lesser principal amount for any
period, such tranche shall bear interest at the Base Rate during such period.
(g) Letters of Credit. As a portion of the line of credit
availability up to the Letter of Credit Sublimit (and subject to the Borrowing
Base and the other terms and conditions contained in this Agreement), the
Issuing Bank will issue standby letters of credit for the account of the
Borrower (including for the commercial needs of any one or more of the
Borrower's wholly-owned Subsidiaries from time to time in existence, so long as
such entity is wholly owned directly or indirectly) from time to time. The
expiration of such letters of credit shall be on a Business Day not later than
one year after issuance, and further shall not extend beyond the Maturity Date
of the line of credit. The expiration date of a letter of credit may not be
extended on or after the Maturity Date and no letter of credit may be renewed,
replaced or increased on or after the Maturity Date. The Borrower shall pay to
the Agent, for disbursement to the Banks in accordance with Subsection 9.1(a)
except as provided in the next sentence, a fee for each standby letter of credit
on the issuance date at the per annum rate equal to the Applicable LIBO Rate
Margin then in effect on the face amount of the letter of credit for the period
from the date of issuance to the expiration date, payable quarterly in arrears
on each June 30, September 30, December 31 and March 31 (and on the Maturity
Date). From the fee for each standby letter of credit the Agent shall retain as
a fronting fee, for its own account as letter of credit Issuing Bank,
one-quarter of one (0.25%) percent on the face amount (i.e., the first 0.25% of
the Applicable LIBO Rate Margin). The Borrower also shall pay to the Agent, for
the account solely of the Issuing Bank, additional amounts customarily charged
by the Issuing Bank for the issuance and processing of letters of credit. Each
letter of credit shall be issued not later than the close of the Issuing Bank's
business (Central Time) on the third (3rd) Business Day after receipt (including
by facsimile pursuant to Section 10.1 hereof) by the Issuing Bank of the
Borrower's written application in substantially the form of the Issuing Bank's
then standard Application for Irrevocable Standby Letter of Credit and Letter of
Credit Agreement, executed by the Borrower (by any one of the persons designated
by the Borrower in writing to the Agent in accordance
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with the terms of Subsection 2.1(d) below). Such application and agreement shall
be Collateral Documents under this Agreement, supplemental to and not in
replacement of this Agreement and the other Collateral Documents, provided that
in the event of a conflict between such application and agreement and this
Agreement then this Agreement shall prevail (even if such application or
agreement is executed later). In the event such written application is
telecopied to the Issuing Bank, the Issuing Bank may but need not confirm such
application before acting thereupon. The Issuing Bank may rely fully and
completely upon the authority of the signatory of such written application and
the contents thereof unless such authority is terminated by written notice to
the Issuing Bank, and any such termination of authority shall be effective only
prospectively. Such letters of credit will be documented on the Issuing Bank's
standard forms. No letter of credit will be issued (x) if the face amount
thereof plus the aggregate undisbursed amount of all standby letters of credit
then outstanding would exceed the Letter of Credit Sublimit, or (y) if the face
amount thereof plus the aggregate of all Advances then outstanding plus the
aggregate undisbursed amount of all standby letters of credit then outstanding
would exceed the Commitment Limit. Payment by the Issuing Bank of a draw on a
standby letter of credit, if not reimbursed in full on the same day by the
Borrower, automatically (notwithstanding the limitation in Subsection 2.1(a)
above) shall be an Advance as a part of the Loan bearing interest from the date
of such draw at the Prime Rate. Upon its issuance of any such letter of credit,
the Issuing Bank shall promptly notify each other Bank of such issuance.
Immediately upon the issuance by the Issuing Bank of any letter of credit, the
Issuing Bank shall be deemed to have sold and transferred to each other Bank and
each such other Bank shall be deemed irrevocably and unconditionally to have
purchased and received from the Issuing Bank, without recourse or warranty, an
undivided interest and participation in such letter of credit, each drawing made
thereunder and the obligations of the Borrower under this Agreement with respect
thereto, and any security therefor or guaranty pertaining thereto. The amount of
such other Bank's participation shall be such other Bank's prorata portion
(i.e., such Bank's Commitment as compared to the aggregate of the Commitments).
In the event that the Issuing Bank makes any payment under any
letter of credit and the Borrower shall not have reimbursed such amount in full
to the Issuing Bank on the date of such payment, the Issuing Bank shall promptly
notify the Agent, which shall promptly notify each other Bank of such failure,
and each other Bank shall promptly and unconditionally pay to the Issuing Bank
the amount of such other Bank's prorata portion (i.e., such Bank's Commitment as
compared to the aggregate of the Commitments) of such unreimbursed payment in
immediately available funds. If the Agent so notifies, prior to 11:00 a.m.
(Central Time) on any Business Day, each Bank shall make such payment on such
Business Day. The failure or refusal by any Bank to make reimbursement to the
Issuing Bank at the aforesaid time and place in the amount of its portion of
such reimbursement shall not relieve any other Bank from its several obligation
hereunder to make reimbursement to the Issuing Bank in the amount of such other
Bank's portion of such requested reimbursement (but no Bank shall be responsible
for the failure of any Bank to make reimbursement to the Issuing Bank of such
other Bank's portion of such requested reimbursement). If any Bank makes
reimbursement to the Issuing Bank of such amount on a date after the aforesaid
date for reimbursement, such Bank shall pay to the Issuing
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Bank on demand an amount computed on the basis set forth in Subsection 2.1(e)
above (substituting such reimbursement due date for the Advance Date), which
Subsection 2.1(e) shall be fully applicable to such failure.
The obligations of the other Banks to make reimbursement
payments to the Issuing Bank with respect to letters of credit issued by it
shall be irrevocable and not subject to any qualification or exception
whatsoever. In determining whether to pay under any letter of credit, the
Issuing Bank shall have no obligation relative to the other Banks other than to
confirm that any documents required to be delivered under such Letter of Credit
appear to have been delivered and that they appear to comply on their face with
the requirements of such letter of credit. Any action taken or omitted to be
taken by the Issuing Bank under or in connection with any letter of credit if
taken or omitted in the absence of gross negligence or willful misconduct shall
not create for the Issuing Bank any resulting liability to the Borrower or any
Bank.
Letters of credit issued under the Prior Loan Agreement and
still outstanding on the Closing Date shall hereafter be counted under and
governed by this Agreement.
Section 2.2 Business Days. If the date for any payment,
prepayment, Periodic Reduction, or fee payment hereunder falls on a day which is
not a Business Day, then for all purposes of this Agreement (unless otherwise
provided herein) the same shall be deemed to have fallen on the next following
Business Day, and such extension of time shall in such case be included in the
computation of payments of interest.
Section 2.3 Payments. The Borrower shall make each payment
hereunder and under the Notes and any Collateral Documents in lawful money of
the United States of America in same day funds to the Agent at its main office
in New Orleans, Louisiana, not later than 11:00 a.m. (Central Time) on the day
when due, or such other place in the United States as designated in writing by
the Agent. The Agent shall promptly send to each Bank by federal wire transfer
its respective proportionate share of all amounts to which the Banks are
entitled in accordance with Subsection 9.1(a). The Borrower hereby authorizes
the Agent to charge from time to time against the Borrower's accounts with the
Agent any amount which is then so due, and acknowledges that such accounts will
be established for that purpose (among other purposes) under Section 5.16 and
Section 5.17 and may be so used even in the absence of an Event of Default.
Section 2.4 Prepayment. (a) Voluntary. The Borrower may prepay
the Loan in full or in part at any time without payment of premium or penalty;
provided, however, that (i) the Borrower shall give the Agent notice of each
such prepayment of all or any portion of a LIBO Rate Advance no less than three
(3) Business Days prior to prepayment, (ii) any LIBO Rate Advance may be prepaid
only on the last day of the Interest Period for such LIBO Rate Advance, unless
the Borrower includes payment of amounts, if any, required to be paid pursuant
to paragraph 6 of Addendum I, (iii) the Borrower shall give the Agent notice of
each such prepayment of all or any portion of a Base Rate Advance no less than
one (1) Business Day prior
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to prepayment, (iv) the Borrower shall pay all accrued and unpaid interest on
the amounts prepaid, and (v) no such prepayment shall serve to postpone the
repayment when due of any other Indebtedness. Each such notice of a prepayment
under this Section shall be irrevocable and the amounts specified in each such
notice shall be due and payable on the date specified. Upon receipt of such
notice, the Agent shall promptly notify each Bank thereof. Each partial
prepayment shall be in an aggregate principal amount of (x) $100,000.00 or an
integral multiple of $50,000.00 in excess thereof or (y) if the outstanding
principal balance of the Loan is less than the minimum amount set forth in the
preceding clause (i) of this sentence, then such lesser outstanding principal
balance, as the case may be.
(b) Mandatory. The Agent shall notify the Borrower of the
result of each Borrowing Base redetermination in accordance herewith. If at any
time the Agent determines that a Loan Excess exists, then within ninety (90)
days of receipt by the Borrower of notice of such Loan Excess the Borrower shall
(x) prepay the Advances (together with accrued interest on the amount to be
prepaid to the date of payment) in an amount sufficient to reduce the Advances
plus the face amount of all standby letters of credit then outstanding to the
then Commitment Limit, and/or (y) execute, deliver and record or cause to be
executed and delivered such additional Collateral Documents pursuant to Section
3.1, sufficient to induce the Agent and the Banks to make an increased
redetermination of the Borrowing Base to an amount not less than the outstanding
principal balance of the Advances plus the face amount of all standby letters of
credit then outstanding. The Borrower specifically acknowledges that no
additional grace period (beyond the period stated in the preceding sentence) is
applicable under this Agreement to any failure to make such mandatory prepayment
before such failure is an Event of Default hereunder.
(c) Periodic Reductions in Borrowing Base. As part of a
Borrowing Base redetermination, the Agent may include as part of the Borrowing
Base an automatic reduction schedule, monthly or quarterly, in an amount
determined by the Agent in its sole discretion, but based upon the Agent's
customary standards and practices from time to time in effect with respect to
secured oil and gas property lines of credit, and with the approval of the
Required Banks. Such automatic reductions, each in the amounts so determined and
so scheduled (each a "Periodic Reduction"), shall cause an automatic reduction
to the Borrowing Base on the dates set in the schedule so determined by the
Agent, which shall be the last day of a month or quarter. Each reduction to the
Borrowing Base by a Periodic Reduction shall be permanent, subject to any
increase agreed to as part of a subsequent Borrowing Base redetermination. As
part of the notification by the Agent to the Borrower of the result of a
Borrowing Base redetermination, the Agent shall notify the Borrower of the terms
and schedule of any Periodic Reductions included therein. Notwithstanding the
foregoing provisions of Subsection 2.4(b), the Borrower shall pay the amount of
any Loan Excess that results from the application of each Periodic Reduction to
the Borrowing Base on the day that such Periodic Reduction takes effect. The
Borrower specifically acknowledges that the ninety (90) day grace period set
forth in Subsection 2.4(b) pertaining to a Loan Excess resulting from a
Borrowing Base redetermination is not applicable to any failure to make such
mandatory prepayment triggered by a Loan Excess due to a Periodic Reduction as
provided in this Subsection 2.4(c). However, any changes in the Periodic
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Reduction schedule shall not increase the amount of a Periodic Reduction which
is to take effect sooner than ninety (90) days after the effective date of that
Borrowing Base redetermination which includes such change in the Periodic
Reduction schedule as a part thereof. On the Closing Date the Periodic Reduction
in effect is a $1,500,000.00 quarterly reduction on June 30, 2006, and in the
same amount on the last day of each calendar quarter thereafter, subject to
waiver or change in the amount or schedule as part of a subsequent Borrowing
Base redetermination.
Section 2.5 Fees. (a) The Borrower shall pay on the Closing
Date an upfront commitment/origination fee equal to thirty five thousand
($35,000.00) dollars, being one-quarter of one percent (0.25%) percent of UBOC's
portion of the Borrowing Base ($14,000,000.00. This upfront fee, in this sole
instance, shall be paid entirely to the new Bank (Union Bank of California) in
consideration of its new participation in the Loan. (Upfront fees in connection
with future increases in availability under the Loan shall be paid and divided
pro rata among the Banks as provided below in Subsection 2.5(f).) Further, the
Borrower shall pay the Initial Bank, for its own account, on the Closing Date an
unused facility fee under the Prior Loan Agreement in an amount equal to
one-quarter of one percent (0.25%) per annum on (x) the Commitment Limit under
the Prior Loan Agreement less (y) the average outstanding aggregate principal
balance under the Advances under the Prior Loan Agreement plus the undisbursed
amount of all standby letters of credit outstanding, during the period from
April 1, 2006 through the Closing Date.
(b) The Borrower shall pay the Agent, for disbursement in
accordance with Subsection 9.1(a) hereof to the Banks, an unused facility fee
quarterly in arrears beginning June 30, 2006 (for the period from the Closing
Date through such date) and on the last day of each succeeding September,
December, March and June and on the Maturity Date of the Loan, in an amount
equal to one-quarter of one percent (0.25%) per annum on (x) the Commitment
Limit less (y) the average outstanding aggregate principal balance of the
Advances under the Notes plus the undisbursed amount of all standby letters of
credit then outstanding during such quarter (or lesser time period, as
applicable.)
(c) Letter of credit fees are owed and paid as provided in
Subsection 2.1(g).
(d) The Borrower shall pay to the Agent, for its own account,
such fees as are agreed to in a separate agreement between the Borrower and the
Agent with respect to the Agent's services provided hereunder and in connection
herewith.
(e) The Borrower shall pay the Agent, for disbursement to the
Banks (equally, not pro rata), a Borrowing Base redetermination fee in the
amount equal to $7,500.00 for each Bank for each unscheduled redetermination
requested by the Borrower at the time of such request. (For the avoidance of
doubt, the Agent receives one fee under this subsection in its capacity as a
Bank, but not as Agent.)
(f) The Borrower acknowledges that any subsequent increases in
the Commitment Limit after the Closing Date (which will require the Borrower's
and the Banks'
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unanimous mutual agreement) shall be subject to the payment of an appropriate
upfront commitment fee, not to exceed one-quarter of one percent (0.25%),
determined by the Banks on the incremental increased portion of the new
Commitment Limit in excess of its previous highest level.
(g) All fees shall be paid on the dates due in immediately
available funds. Fees paid shall not be refundable under any circumstances.
Section 2.6 Use of Proceeds. The Borrower shall use the
proceeds of the Loan (i) in connection with the acquisition and development of
oil and gas properties as well as general corporate and working capital purposes
(including letters of credit hereunder) and (ii) to loan funds under the Diamond
Note to Diamond in accordance with Section 5.20 and Section 6.3(h).
Section 2.7 Default Rate. Anything in the Notes or in any
other agreement, document or instrument to the contrary notwithstanding,
effective upon an Event of Default or upon the Maturity Date, the Agent and the
Required Banks shall have the right to prospectively increase the interest rate
under the Notes to the Default Rate until the Notes are paid in full. Upon the
acceleration of the principal amount of the Indebtedness represented by the
Notes, the accelerated principal balance of the Loan shall bear interest from
the date of acceleration up to the actual payment (as well after as before
judgment) at the Default Rate. All such interest at the Default Rate shall be
payable upon demand.
Section 2.8 Additional Regulatory Costs. If any governmental
authority, central bank, or other comparable authority shall at any time impose,
modify or deem applicable any reserve (including without limitation any imposed
by the Board of Governors of the Federal Reserve System), special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by, the Agent or any Bank, or shall impose on the Agent or any
Bank any other condition affecting an Advance or the obligation of the Agent or
any Bank to make an Advance; and the result of any of the foregoing is to
increase the cost to the Agent or such Bank of making or maintaining the
Advances to the Borrower, or to reduce the amount of any sum received or
receivable by the Agent or any Bank under this Agreement or under the Notes by
an amount deemed by the Agent or such Bank to be material, then, within sixty
(60) days after demand by the Agent or such Bank, the Borrower shall pay to the
Agent or such Bank, for its own account, such additional amount or amounts as
will compensate the Agent or such Bank for such increased cost or reduction. The
Agent or such Bank will promptly notify the Borrower of any event of which it
has knowledge, occurring after the date hereof, which will entitle the Agent or
such Bank to compensation pursuant to this Section. A certificate of the Agent
or such Bank claiming compensation under this Section and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error.
Section 2.9 Application of Payments to Indebtedness. Payments
made under this Agreement, the Notes or the Collateral Documents, whether made
when due or after
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foreclosure on Collateral, for application to the Indebtedness shall be applied
to the Indebtedness as follows:
(i) To the Agent, with respect to fees and expenses accrued
and outstanding (including without limitation reasonable
attorneys' fees and expenses);
(ii) To the Banks, ratably according to their Commitments,
with respect to fees, expenses and late charges accrued and
outstanding;
(iii) To the Banks, ratably according to their Commitments,
with respect to interest accrued and outstanding; and
(iv) To the Banks, ratably according to their Commitments,
with respect to principal amounts of the Loan due and payable.
Payments made pursuant to realization under the Collateral Documents are also
subject to the Section 3.4.
Section 2.10 Sharing of Payments among Banks. If any Bank,
whether by setoff or otherwise, has payment made to it upon its portion of the
Loan, other than pursuant to Section 2.8 or Addendum 1, in a greater proportion
than that received by any other Bank, such Bank agrees, promptly upon demand, to
purchase a portion of the Loan held by the other Banks so that after such
purchase each Bank will hold its ratable proportion of the Loan. If any Bank,
whether in connection with setoff or amounts which might be subject to setoff or
otherwise, receives collateral or other protection for its Indebtedness or such
amounts which may be subject to setoff, such Bank agrees, promptly upon demand,
to take such action necessary such that all Banks share in the benefits of such
Collateral ratable in proportion to their Commitment. In case any such payment
is disturbed by legal process, or otherwise, appropriate further adjustment
shall be made. However, nothing in this Section 2.10 is intended, or shall be
construed, to amend the provisions of or alter the application of Section 3.4.
Section 2.11 Hedge Agreement Quotes. Upon the Borrower's
request from time to time, the Agent will provide to Borrower interest rate swap
quotes for interest rate Hedge Agreements pertaining to the Loan, not to exceed
the Amount or the Maturity Date.
Section 2.12 Telephonic or Electronic Notice to Agent. Without
in any way limiting the obligation of the Borrower to confirm in writing any
telephonic notice of borrowing or the like given to the Agent, the Agent may act
without liability upon the basis of telephonic notice of such request believed
by the Agent in good faith to be from an authorized officer of the Borrower
prior to receipt of written confirmation. In each such case, the Agent's records
with regard to any such telephone notice shall be presumptive correct, absent
manifest error. Additionally, the Borrower may transmit notices of borrowing or
letter of credit requests or the like by electronic communication, if
arrangements for doing so have been approved by the Agent.
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Section 2.13 Lost Interest Recapture; Usury Savings.
(i) If, with respect to the Banks, the effective rate of
interest contracted for under this Agreement, the Notes and the Collateral
Documents (the "Loan Documents"), including the stated rates of interest and
fees contracted for hereunder and any other amounts contracted for under the
Loan Documents which are deemed to be interest, at any time exceeds the Maximum
Rate, then the outstanding principal amount of the loans made by the Banks
hereunder shall bear interest at a rate which would make the effective rate of
interest for the Banks under the Loan Documents equal the Maximum Rate until the
difference between the amounts which would have been due at the stated rates and
the amounts which were due at the Maximum Rate (the "Lost Interest") has been
recaptured by the Banks.
(ii) If, when the loans made hereunder are repaid in full, the
Lost Interest has not been fully recaptured by a Bank pursuant to the preceding
paragraph, then, to the extent permitted by law, for the loans made hereunder by
such Bank the interest rates charged under Section 2.1 hereunder shall be
retroactively increased such that the effective rate of interest under the Loan
Documents was at the Maximum Rate since the effectiveness of this Agreement to
the extent necessary to recapture the Lost Interest not recaptured pursuant to
the preceding sentence and, to the extent allowed by law, the Borrower shall pay
to such Bank the amount of the Lost Interest remaining to be recaptured by such
Bank.
(iii) NOTWITHSTANDING THE FOREGOING OR ANY OTHER TERM IN THIS
AGREEMENT AND THE LOAN DOCUMENTS TO THE CONTRARY, IT IS THE INTENTION OF THE
BANKS AND THE BORROWER TO CONFORM STRICTLY TO ANY APPLICABLE USURY LAWS.
ACCORDINGLY, IF A BANK CONTRACTS FOR, CHARGES, OR RECEIVES (INCLUDING WITHOUT
LIMITATION FOLLOWING ACCELERATION OR PREPAYMENT) ANY CONSIDERATION WHICH
CONSTITUTES INTEREST IN EXCESS OF THE MAXIMUM RATE, THEN ANY SUCH EXCESS SHALL
BE CANCELED AUTOMATICALLY WITHOUT THE NECESSITY OF THE EXECUTION OF ANY NEW
DOCUMENT AND, IF PREVIOUSLY PAID, SHALL AT SUCH BANK'S OPTION BE APPLIED TO THE
OUTSTANDING AMOUNT OF THE LOAN MADE HEREUNDER BY SUCH BANK OR BE REFUNDED TO THE
BORROWER.
(iv) All sums paid or agreed to be paid to Banks for the use,
forbearance or detention of the Indebtedness shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
term of the Indebtedness until payment in full so that the rate or amount of
interest on account of the Indebtedness does not exceed the applicable usury
limit allowed by applicable law through the full term hereof.
Section 2.14 Business Loans. The Borrower warrants and
represents that the Loan and Advances evidenced by the Notes are and shall be
for business, commercial, investment, or other similar purposes and not
primarily for personal, family, household, or
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agricultural use, as such terms are used in Chapter 306 of the Texas Finance
Code. At all such times, if any, as Chapter 303 of the Texas Finance Code shall
establish a Maximum Rate, the Maximum Rate shall be determined in accordance
with Chapter 303 of the Texas Finance Code based on the "weekly ceiling" (as
such term is defined in Chapter 303 of the Texas Finance Code) from time to time
in effect.
ARTICLE 3
SECURITY FOR THE OBLIGATIONS
Section 3.1 Security. (a) The Loan shall be primarily secured
by the following:
(i) Texas Deed of Trust, Mortgage, Assignment, Security
Agreement and Financing Statement, executed by the Borrower, granting a first
priority mortgage, security interest and assignment of production in the
Borrower's interests in various oil and gas properties in North Carthage Field
in ▇▇▇▇▇▇▇▇ and Panola Counties, State of Texas (and after the Closing Date in
future locations as Borrower and Agent and Required Banks may agree from time to
time) and collateral relating thereto, together with UCC Financing Statements
pertaining thereto.
(ii) Certain deposit accounts (and funds therein) maintained
with the Agent.
(iii) Guaranty Agreement executed by Endeavor.
(iv) Security Agreement executed by the Borrower, granting a
first priority security interest in 100% of the outstanding shares of Endeavor,
together with a UCC Financing Statement pertaining thereto.
(v) Collateral documents executed by Endeavor, granting a
first priority lien and security interest in its gas gathering system, together
with a UCC Financing Statement pertaining thereto.
(vi) Liens assigned by IBC Bank to the Agent.
(vii) Such additional deeds of trust, mortgage and other
collateral documents executed after the Closing Date encumbering such properties
as the Borrower and the Agent and Required Banks may agree from time to time.
(viii) Security Agreement executed by the Borrower, granting a
first priority security interest in 100% of the outstanding shares of Diamond,
together with a UCC financing statement pertaining thereto, and together with
the original stock certificate for the shares of Diamond, duly endorsed in blank
and delivered to the Agent with an executed stock power.
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(ix) The Diamond Note, pledged by the Borrower to the Agent
pursuant to a security agreement, accompanied by delivery and endorsement of the
Diamond Note, and an acknowledgment of pledge document in favor of the Agent
executed by Diamond, together with a copy of the Security Agreement executed by
Diamond securing the Diamond Note and the filed UCC Financing Statement
pertaining thereto with Diamond as debtor and Borrower as secured party, and a
UCC Amendment Statement assigning said Financing Statement to the Agent.
(x) Undated letters (in lieu of division or transfer orders)
executed by Borrower, in form and substance satisfactory to the Agent, to each
purchaser of production or disburser of the proceeds of production from or
attributable to the Collateral, together with additional letters with the
addressees left blank, authorizing and directing that payment of all production
proceeds attributable to the Collateral and other properties in the Borrowing
Base be made directly to the Agent. Such letters shall be held by Agent and not
delivered, as provided in Subsection 8.2(c), until the occurrence of an Event of
Default.
(b) The Borrower confirms that the Collateral Documents secure
all of the Indebtedness to the Agent and to each of the Banks. The Borrower, the
Agent and the Banks acknowledge that the Collateral Documents described in
Section 3.1 above secure both such Indebtedness and the Secured Hedge
Obligations. The Banks confirm the application of Section 3.4 to govern the
Collateral Documents, the Indebtedness and the Secured Hedge Obligations.
Section 3.2 Confirmation. (a) The Borrower hereby reaffirms
its original intention as stated in the Collateral Documents executed prior to
the Closing Date that said existing Collateral Documents secure the Indebtedness
as extended and renewed from time to time, including without limitation this
Agreement and the Notes executed by the Borrower pursuant to this Agreement. The
Borrower confirms and agrees that said existing Collateral Documents securing
the Indebtedness, this Agreement and the Notes include without limitation the
documents described in Section 3.1 above. The Borrower hereby ratifies and
confirms in all respects the existing Collateral Documents executed by it, which
remain in full force and effect in accordance with all of their terms,
conditions and provisions in favor of the Agent, for the ratable benefit of the
Banks, and are hereby renewed and carried forward to secure the Indebtedness
under this Agreement. To the extent necessary, the Borrower hereby grants anew
all liens and security interests set forth in such Collateral Documents executed
by it to Agent, for the ratable benefit of the Banks, as security for the
Indebtedness.
(b) The Borrower will confirm the application of any
Intercreditor Agreement to the Collateral.
Section 3.3 Acquisition Collateral. (a) After each acquisition
by the Borrower or any Subsidiary of any interest in oil, gas and other mineral
properties (wherever located) involving an expenditure (in money or property)
the total amount of which (whether in one transaction or a series of related
transactions) either (x), when added to the total consideration
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paid by the Borrower or any Subsidiary to or for the account of any Person in
connection with all such acquisitions during the six months immediately
preceding such acquisition date, exceeds two million five hundred thousand
($2,500,000.00) dollars, or (y) when added to the total consideration paid by
the Borrower and any Subsidiary to or for the account of any Person in
connection with all such acquisitions during the period from the Closing Date
through and including such acquisition date, exceeds five million
($5,000,000.00) dollars, the Borrower at its expense will promptly, and in no
event later than ninety (90) days after such acquisition, complete the execution
and recordation of appropriate Collateral Documents in favor of the Agent, for
the ratable benefit of the Secured Parties, and the submission of Title Opinions
in favor of the Agent reasonably acceptable to the Agent, covering all such
acquired properties.
(b) In connection with and at the time of each redetermination
of the Borrowing Base, the Borrower at its expense will promptly, and in no
event later than ninety (90) days after such redetermination, complete the
execution and recordation of appropriate Collateral Documents in favor of the
Agent, for the ratable benefit of the Secured Parties, covering all rights of
way, easements, surface leases or other property rights utilized in the
operation of the pipeline and gathering systems which are material to the
operation and sale of the Collateral (including without limitation the
production, transportation or marketing of Collateral hydrocarbons). As part of
the foregoing requirement, the Borrower shall cause such rights of way and other
interests to be recorded in the appropriate land title records.
(c) In connection with and at the time of each redetermination
of the Borrowing Base, the Borrower at its expense will promptly, and in no
event later than ninety (90) days after such redetermination, (i) complete the
execution and recordation of appropriate Collateral Documents in favor of the
Agent, for the ratable benefit of the Secured Parties, covering any property
included within the Borrowing Base which is not already encumbered as
Collateral, and (ii) submit title opinions in favor of the Agent reasonably
acceptable to the Agent covering any ▇▇▇▇▇ within the Borrowing Base not
previously covered by accepted title opinions, provided that clause (ii) is
subject to the exception set forth in the following sentence. Upon the
Borrower's request and demonstration of good cause satisfactory to the Agent and
the Required banks (in their sole and absolute discretion, as part of the
process of the Borrowing Base redetermination), a portion of the property within
the Borrowing Base may be exempted from this covenant for acceptable title
opinions. The continuing justification for each such exemption shall be
reconsidered as part of each redetermination of the Borrowing Base. Nonetheless,
the Borrower expressly acknowledges that, as provided in the definition of the
Borrowing Base, the Agent may exclude, in its sole and absolute discretion, any
property or portion of production therefrom from the Borrowing Base, at any
time, because title information on, or the status of title to, such property is
not reasonably satisfactory to Agent, such property is not collateral, the
Agent's lien or security interest therein is not first and prior to all others,
or such property is not assignable.
Section 3.4 Sharing among Secured Liabilities. (a) The Agent
and the Banks hereby agree that upon the foreclosure, sale, set-off or other
realization against any of the
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Collateral which secures the Secured Liabilities (and not securing by its terms
just the Indebtedness) (the "Shared Collateral"), the Secured Parties shall
share in all of the proceeds of such Shared Collateral on a pari passu basis,
ratably according to the Secured Liabilities owing to each Secured Party as
specified in the following sentence. Proceeds from realization against such
Shared Collateral shall be applied by the Agent as follows:
(i) To the Agent, with respect to fees and expenses accrued
and outstanding (including without limitation reasonable attorneys' fees and
expenses); and
(ii) To the Secured Parties, ratably according to the Secured
Liabilities owing to the Secured Parties.
The Banks by unanimous consent may determine from time to time
whether any, and which portions, of the Collateral is to be Shared Collateral
beyond the Collateral described in Section 3.1.
(b) If any Secured Party has payment made to it of proceeds
arising from the foreclosure, sale, set-off or other realization on any of the
Shared Collateral pursuant to the remedies provided by the Collateral Documents
in a greater proportion than that received by any other Secured Party (except
for the Agent as specified in Subsection (a) above), such Secured Party shall
(and each Bank agrees to cause any of its Affiliates which are such a Secured
Party to) take such action as is necessary such that all Secured Parties shall
share in the benefits of such Shared Collateral ratably in proportion to the
Secured Liabilities owing to each Secured Party. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments shall
be made. The foregoing sharing pertains solely to the realization against the
Shared Collateral and the proceeds therefrom, and is not a general sharing
arrangement regarding the Secured Hedge Providers and the Agent and the Banks
for other purposes (including without limitation payments by the Borrower and
Subsidiaries from the Borrower's and Subsidiaries' general funds, including
funds derived from the Shared Collateral or the other Collateral). The Agent and
the Banks shall have the right to receive, and the Borrower and Subsidiaries
shall have the right and obligation to pay, all amounts owing as part of the
Indebtedness to be paid by the Borrower and Subsidiaries to the Agent and the
Banks as and when due. The Secured Hedge Providers shall have the right to
receive, and the Borrower and Subsidiaries shall have the right and obligation
to pay, all amounts owing as part of the Secured Hedge Obligations to be paid by
the Borrower and Subsidiaries to the Secured Hedge Providers as and when due.
The foregoing sharing arrangement pertains only to the proceeds arising from the
foreclosure, sale, set-off or other realization pursuant to the remedies
provided by the applicable Collateral Documents by the Agent, the Banks and the
Secured Hedge Providers on any of the Collateral which secures all the Secured
Liabilities.
(c) Should any payment or distribution from any such
realization upon any Shared Collateral or proceeds thereof (except payments
permitted by Subsection (b) above) be received by any Secured Party before
either the Indebtedness has, or the Secured Hedge
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Obligations have, as the case may be, been paid and satisfied in full and
terminated such that no further liabilities will be incurred thereunder, that
Secured Party shall (and each Bank shall cause any of its Affiliates which is a
Secured Party to) deliver the same to the Agent in precisely the form received
(except for the endorsement, without recourse, or assignment of that Secured
Party where necessary), for application on the Secured Liabilities ratably as
provided in Subsection (a) above, and, until so delivered, the same shall be
held in trust by that Secured Party as property of the Agent.
(d) The agreement by the Agent and the Banks to so share the
Shared Collateral with the Secured Hedge Providers is expressly conditioned upon
and limited by (i) the right of the Agent and the Banks, at any time and from
time to time, to enter into such agreement or agreements with the Borrower and
Subsidiaries as the Agent and the Banks may deem proper extending the time of
payment or increasing or renewing or otherwise altering the terms of all or any
of the Indebtedness without notice to the Secured Hedge Providers and without in
any way impairing or affecting this Agreement, (ii) the right of the Agent to
release any portion or portions of the Collateral (including the Shared
Collateral) from to time as the Agent and the Banks may agree, and in connection
therewith for the Agent to have the express power to release any Secured Hedged
Provider's lien on the Shared Collateral under the Collateral Documents insofar
as it secures the Secured Hedge Obligations, without notice to or such Secured
Hedge Provider's consent, so long as such Collateral is simultaneously released
insofar as it secures the Indebtedness; and (iii) the right of the Agent and the
Banks holding the Indebtedness to control all decisions and determinations in
enforcing the Collateral Documents so long as any portion of the Indebtedness
remains outstanding, and decisions and determinations of the Required Banks in
enforcing the Collateral Documents and in guiding the Agent in such matters
shall be binding upon the Secured Hedge Providers, including without limitation
when and whether to realize upon the Collateral (including the Shared
Collateral), and when and whether to authorize the Agent at the pro rata expense
of all the Secured Parties (to the extent not reimbursed by the Borrower) to
retain attorneys to seek judgment on the Collateral Documents. This Section 3.4
is expressly limited by the requirements and definitions in this Agreement for
the creation of a Secured Hedge Obligation, and notwithstanding any provision in
any commodity, interest rate or currency rate protection agreement to the
contrary, liabilities thereunder which do not meet the requirements and
definitions in this Agreement for the creation of a Secured Hedge Obligations
shall not be secured by the Collateral or otherwise entitled to the benefits of
this Section 3.4.
(e) This sharing of the Shared Collateral with respect to the
Secured Liabilities shall remain in full force and effect not withstanding any
filing of a petition for relief by or against the Borrower under the Federal
Bankruptcy Code or similar laws from time to time in effect and shall apply with
full force and effect with respect to all such Shared Collateral covered by the
Collateral Documents acquired by the Borrower or any Grantor after the date of
such petition and all Indebtedness and Secured Hedge Obligations incurred after
the date of such petition. Such sharing shall apply with full force and effect
with respect to all Shared Collateral covered by the Collateral Documents from
time to time, including without limitation pursuant to supplements or amendments
to the Collateral Documents after the date hereof, subject to the
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foregoing preserved right of the Agent and the Banks for partial releases. In
the event of any liquidation, dissolution, receivership, insolvency or
bankruptcy proceeding, any payment or distribution of any kind or character,
either in cash or other property, which shall be payable or deliverable upon or
with respect to any or all of the Shared Collateral shall be paid or delivered
directly to the Agent for application as provided in Subsection (a).
(f) Neither the Agent nor any of its directors, officers,
agents or employees shall be liable to any Secured Hedge Provider for any action
taken or omitted to be taken by it under or in connection with this Agreement,
except for its or their own gross negligence or willful misconduct. Without
limiting the generality of the foregoing, the Agent (i) may treat a Secured
Hedge Provider as the payee of its Secured Hedge Obligations until the Agent
receives written notice of the assignment or transfer thereof, signed by such
Secured Hedge Provider in a form satisfactory to the Agent; (ii) may consult
with legal counsel (including counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts; (iii) makes no warranty or
representation to any Secured Hedge Provider and shall not be responsible to any
Secured Hedge Provider for any statements, warranties or representations made in
or in connection with this Agreement or the Collateral Documents; (iv) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of this Agreement or the Collateral
Documents, or to inspect any property (including the books and records) of the
Borrower and Subsidiaries; (v) shall not be responsible to any Secured Hedge
Provider for the due execution, legality, validity, enforce ability,
genuineness, sufficiency or value of this Agreement or the Collateral Documents;
and (vi) shall incur no liability under or in respect to this Agreement or the
Collateral Documents by acting upon any notice, consent, certificate or other
instrument or writing (which may be by facsimile, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
The Agent shall not have a fiduciary relationship in respect of any Secured
Hedge Provider by reason of this Agreement. The Agent shall not have any implied
duties to the Secured Hedge Providers, or any obligation to the Secured Hedge
Providers to take any action under this Agreement or the Collateral Documents
except any actions specifically provided by such documents to be taken by it.
The Agent shall have the same rights and privileges under this Agreement as any
other Secured Hedge Provider and may exercise the same as though it were not the
Agent; and the term "Secured Hedge Provider" shall, unless otherwise expressly
indicated, include the Agent in its individual capacity when applicable. The
granting of benefits under this Agreement and the Collateral Documents to the
Secured Hedge Providers is expressly conditioned upon the benefits and
protections provided to the Agent under Article 9 of this Agreement applying
with each force and effect to the Secured Hedge Providers.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Banks to enter into this
Agreement, the Borrower represents and warrants to the Agent and the Banks
(which representations and warranties will survive the extensions of credit
under this Agreement) that:
Section 4.1 Existence. (a) The Borrower is a corporation duly
organized, legally existing, duly registered and in good standing under the laws
of its state of formation (Oklahoma) and is duly qualified in all other
jurisdictions wherein the property it owns or the business it transacts make
such qualification necessary and the failure to so qualify would have a material
adverse effect on its financial condition, business or operations.
(b) Each of Endeavor, Diamond and any other Subsidiary is a
corporation duly organized, legally existing and in good standing under the laws
of the state of incorporation (Oklahoma) and is duly qualified as a foreign
corporation in all other jurisdictions wherein the property it owns or the
business it transacts makes such qualification necessary and the failure to so
qualify would have a material adverse effect on its financial condition,
business or operations.
Section 4.2 Names, Numbers and Offices of Borrower. (a) The
Borrower is not doing business under any name (including trade names) other than
the exact name of the Borrower set forth above, and has never done business
previously under any other name. The Borrower's Subsidiaries do business only
under their exact names as provided in this Agreement.
(b) Each Company's location of its state of organization are
accurately set forth in the Collateral Documents. Each Company's chief executive
office has been continuously located in the State of Oklahoma on and after its
respective formation.
Section 4.3 Power and Authorization. Each Company is duly
authorized and empowered to execute, deliver and perform this Agreement, the
Notes and the Collateral Documents executed by it. All corporate action on the
part of each Company (including all shareholder action) requisite for the due
creation and execution of the Loan and this Agreement, the Notes and Collateral
Documents have been duly and effectively taken.
Section 4.4 Review of Documents; Binding Obligations. Each
Company has reviewed this Agreement, the Notes and the Collateral Documents with
counsel for the Companies and has had the opportunity to discuss the provisions
thereof with the Agent prior to execution. This Agreement, the Notes and the
Collateral Documents constitute valid and binding obligations of the Companies
which are party thereto, enforceable in accordance with their terms (except that
enforcement may be subject to any applicable bankruptcy, insolvency or similar
laws generally affecting the enforcement of creditors' rights). Each Company
further represents and warrants that it is in compliance with all of the
affirmative and negative covenants contained in this Agreement and the
Collateral Documents.
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Section 4.5 No Legal Bar or Resultant Lien. This Agreement,
the Notes and the Collateral Documents do not and will not violate any
provisions of any Company's articles of incorporation or bylaws, will not
violate any contract, agreement, law, regulation, order, injunction, judgment,
decree or writ to which any Company is subject, and will not result in the
creation or imposition of any Lien upon any property of any Company other than
as contemplated by this Agreement.
Section 4.6 No Consent. The Companies' execution, delivery and
performance of this Agreement, the Notes and the Collateral Documents do not
require the consent or approval of any other Person, 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.
Section 4.7 Financial Condition. All financial statements of
the Borrower and any affiliates delivered to the Agent and the Banks fairly and
accurately present the financial condition of the parties for whom such
statements are submitted and the financial statements of the Borrower and any
affiliates have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, and there are
no contingent liabilities not disclosed thereby which would adversely affect the
financial condition of Borrower or any affiliates. Since the close of the period
covered by the latest financial statement delivered to the Agent and the Banks
with respect to Borrower and any affiliates, there has been no material adverse
change in the assets, liabilities, or financial condition of Borrower or any
affiliates. No event has occurred (including, without limitation, any litigation
or administrative proceedings) and no condition exists or, to the knowledge of
Borrower, is threatened, which (i) might render Borrower unable to perform its
obligations under this Agreement, the Notes or the Collateral Documents, or (ii)
would constitute a Default hereunder, or (iii) might adversely affect the
financial condition of the Borrower or any affiliates or the validity or
priority of the Lien of the Collateral Documents. Each Company is solvent and
has the ability to pay its Debts when and as due.
Section 4.8 Taxes and Governmental Charges. Each Company has
filed all tax returns and reports required to be filed and have paid all taxes,
assessments, fees and other governmental charges levied upon it or upon its
property or income which are due and payable, including interest and penalties,
or is contesting the same in good faith by appropriate proceedings and has
provided adequate reserves for the payment thereof.
Section 4.9 Defaults. The Companies are not in default under
any indenture, mortgage, deed of trust, agreement or other instrument to which
such Company is a party or by which it or any of its property is bound.
Section 4.10 Liabilities and Litigation. (a) Except for
liabilities incurred in the normal course of business, the Borrower and its
Subsidiaries have no material (individually or in the aggregate) liabilities,
direct or contingent, except as disclosed in the most recent financial
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statements furnished to the Agent. Except as disclosed in the most recent
financial statements furnished to the Agent, there is no litigation, legal or
administrative proceeding, investigation or other action of any nature pending
or, to the knowledge of Borrower, threatened against or affecting any Company
which involves the possibility of any judgment or liability not fully covered by
insurance which may materially and adversely affect the business or the property
of the Borrower or such Subsidiary or its ability to carry on business as now
conducted.
(b) Without limiting the foregoing, on the Closing Date there
is no litigation, legal or administrative proceeding, investigation or other
action pending or, to the knowledge of Borrower, threatened against or affecting
the Borrower involving non-compliance by the Borrower or its properties with any
Applicable Environmental Laws (as defined in Section 4.17).
(c) Without limiting the foregoing, there is no litigation,
legal or administrative proceeding, investigation or other action pending, or to
the knowledge of Borrower, threatened against or affecting the Borrower
involving allegations that Borrower has failed to adequately develop its
properties.
Section 4.11 Federal Regulations. None of the Loan proceeds
will be used for the purpose of, and the Borrower is not engaged 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. The Borrower is not
engaged principally, or as one of the Borrower's important activities, in the
business of extending credit for the purpose of purchasing or carrying margin
stocks. Neither the Borrower nor any Person acting on behalf of the Borrower has
taken or will take any action which might cause 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
hereinafter be in effect. No part of the proceeds of the Loan will be used,
directly or indirectly, to fund a personal loan to or for the benefit of a
director or executive officer of the Borrower or any Subsidiary.
Section 4.12 Utility or Investment Company. No Company is
engaged in the generation, transmission, or distribution and sale of electric
power; operation of a local distribution system for the sale of natural or other
gas for domestic, commercial, industrial, or other use; ownership or operation
of a pipeline for the transmission or sale of natural or other gas, crude oil or
petroleum products (except for ownership of interests in gathering line
systems); provision of telephone or telegraph service to others; production,
transmission, or distribution and sale of steam or water; operation of a
railroad; or provision of sewer service to others; or any other activity which
cause such Company to be subject to regulation as a utility. The Borrower is not
an "investment company" within the meaning of the Investment Company Act of
l940, as amended.
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Section 4.13 Compliance with the Law. Each Company (i) is not
in violation of any law, judgment, decree, order, ordinance, or governmental
rule or regulation to which such Company or any of its property is subject; and
(ii) has not failed to obtain any license, permit, franchise or other
governmental authorization necessary to the ownership of any of its property or
the conduct of its business; in each case, which violation or failure could
reasonably be anticipated to materially and adversely affect the business,
prospects, profits, property or condition (financial or otherwise) of such
Company.
Section 4.14 ERISA. The 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 4043 of ERISA, has occurred with
respect to any Plan of the Borrower.
Section 4.15 Other Information. All information, reports,
papers and data given to the Agent and the Banks by the Borrower pursuant to
this Agreement and in connection with the Borrower's application for the Loan
and the Agent's commitment letter are accurate and correct in all material
respects, and together constitute a complete and accurate presentation of all
facts material thereto. All financial projections given to the Agent were
prepared in good faith based on facts and circumstances existing at the time of
preparation and were believed by the Borrower to be accurate in all material
respects. No information, exhibit or report furnished by the Borrower to the
Agent in connection with the negotiation of this Agreement contains any material
misstatement of fact or fails to state a material fact or any fact necessary to
make the statement contained therein not materially misleading.
Section 4.16 Collateral. (a) The Borrower has good and
marketable title to the Collateral, and the Collateral Documents constitute the
legal, valid and perfected Liens on the Collateral, free of all Liens except
those permitted by this Agreement in Section 6.2.
(b) The Borrower has, with respect to the Collateral, the
working interests and net revenue interests therein as reported to the Agent in
connection with the negotiation of this Agreement. Without limiting the
preceding sentence, except as otherwise specifically disclosed to the Agent in
writing, all of the proved reserves (whether producing or not, and whether
proved developed or proved undeveloped) included in the reserve report covering
the Borrower's properties in the States of Texas and New Mexico most recently
delivered to the Agent (on the Closing Date, the third party engineering report
prepared by ▇▇▇▇▇▇▇ Associates Inc., dated effective as of January 1, 2006) are
owned as so reported, are encumbered Collateral in favor of the Agent, and are
properly described in the Collateral Documents. Except as otherwise specifically
disclosed to the Agent in writing with respect to any particular part of the
Borrower's properties, (i) the Borrower is not obligated, whether by virtue of
any payment under any contract providing for the sale by the Borrower of
hydrocarbons which contains a "take or pay" clause or under any similar
arrangement or by virtue of any production payment or otherwise, to deliver
hydrocarbons produced or to be produced from the Borrower's properties at any
time after the Closing Date without then or thereafter receiving full payment
therefor, except for Permitted Hedge Agreements; (ii) none of the Borrower's
properties is subject to any contractual
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or other arrangement whereby payment for production is to be deferred for a
substantial period after the month in which such production is delivered; (iii)
none of the Borrower's properties is subject to an arrangement or agreement
under which any purchaser or other Person is currently entitled to "make-up" or
otherwise receive material deliveries of hydrocarbons at any time after the
Closing Date without paying at such time the full contract price therefor; and
(iv) no Person is currently entitled to receive any material portion of the
interest of the Borrower in any hydrocarbons or to receive cash or other
payments from the Borrower to "balance" any disproportionate allocation of
hydrocarbons under any operating agreement, cash balancing and storage
agreement, gas processing or dehydration agreement, or other similar agreements.
For purposes of this paragraph, "material" shall mean two hundred ($200,000.00)
dollars (or more) or an amount of property with an equivalent value.
(c) None of the Collateral is subject to any calls on
production of hydrocarbons or any gathering or transportation dedications or
commitments of any kind.
(d) Endeavor has good and marketable title to the gas
gathering system servicing the Collateral in East Texas.
(e) On the Closing Date all of the natural gas produced by the
Borrower from (and as) Collateral in East Texas for which the Borrower is the
operator is sold by the Borrower to Endeavor at the wellhead.
Section 4.17 Environmental Matters. No friable asbestos, or
any substance containing asbestos deemed hazardous by federal or state
regulations on the date of this Agreement, has been installed in any Collateral
constituting real property. Such real property and the Companies are not in
violation of or subject to any existing, pending, or threatened investigation or
inquiry by any governmental authority or to any remedial obligations under any
applicable laws pertaining to health or the environment (hereinafter sometimes
collectively called "Applicable Environmental Laws"), including without
limitation the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986 (as amended, hereinafter called "CERCLA"), the Resource Conservation and
Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, the
Solid Waste Disposal Act Amendments of 1980, and the Hazardous and Solid Waste
Amendments of 1984 (as amended, hereinafter called "RCRA"), and this
representation and warranty would continue to be true and correct following
disclosure to the applicable governmental authorities of all relevant facts,
conditions and circumstances, if any, pertaining to such property and known to
the Borrower. No hazardous substances or solid wastes have been disposed of or
otherwise released on or to such property. The terms "hazardous substance" and
"release" as used in this Agreement shall have the meanings specified in CERCLA,
and the terms "solid waste" and "disposal" (or "disposed") shall have the
meanings specified in RCRA; provided, in the event that the laws of any
applicable state establish a meaning for "hazardous substance," "release,"
"solid waste," or "disposal" which is broader than that specified in either
CERCLA or RCRA, such broader meaning shall apply.
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Section 4.18 Governmental Requirements. Any Collateral
constituting real (immovable) property is in compliance with all current
governmental requirements affecting such property, including, without
limitation, all current coastal zone protection, zoning and land use
regulations, building codes and all restrictions and requirements imposed by
applicable governmental authorities with respect to the construction of any
improvements on such property and the contemplated use of such property.
Section 4.19 Contracts. (a) The Contracts when considered as a
whole do not materially affect the rights, benefits or security of the Agent and
the Banks under the Collateral Documents and the Contracts do not contain any
provision which would prevent the Agent's practical realization of the benefits
of the Collateral Documents as to the Collateral. After giving effect to the
Contracts, the net revenue interests of the Borrower in the Collateral are not
less than those set forth in the Collateral Documents.
(b) The Borrower has provided to the Agent true, accurate and
complete copies of the Participation Agreement (including all amendments).
Section 4.20 Affiliates. (a) On the Closing Date, the Borrower
has no Subsidiaries other than Endeavor and Diamond, and each of those
Subsidiaries has no Subsidiary. On the Closing Date, none of the Companies has
an ownership (direct or beneficial) interest in any Person (whether stock,
partnership interest, membership interest or otherwise) other than as stated in
the preceding sentence. The Borrower owns and controls 100% of the ownership and
voting rights in Endeavor and Diamond. The Borrower has furnished to the Agent
true, accurate and complete copies of the organizational documents (articles of
incorporation and bylaws) of the Companies.
(b) None of the Collateral is owned by, or has record title to
it in the name of, another company than Borrower and as to the gathering system
Endeavor.
(c) The Borrower owns and controls 100% of the ownership and
voting rights in Diamond. On the date that each advance by the Borrower to
Diamond is made under the Diamond Note, Diamond will be (i) a duly organized and
legally existing corporation in good standing under the laws of the State of
Oklahoma, and (ii) solvent and having the ability to pay its debt when and as
due. Diamond has no ownership (direct or beneficial) interest in any Person
(whether stock, partnership interest, membership interest or otherwise).
Section 4.21 Debt and Preferred Stock. (a) The Borrower has no
Debt for borrowed money from any Person (other than this new Loan), except the
PVOG Production Payment (on the terms described in the definition thereof). The
Borrower has no material accounts payable more than sixty days old. The only
documents evidencing the PVOG Production Payment are the Participation Agreement
(including all amendments).
(b) On the Closing Date, the Borrower has no preferred stock
issued and outstanding.
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Section 4.22 Patriot Act. To the extent applicable, each
Company is in compliance, in all material respects, with the (i) federal Trading
with the Enemy Act, as amended, and each of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) and any other enabling legislation or executive order
relating thereto, and (ii) Federal Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA
Patriot Act of 2001) (the "Patriot Act"). No part of the proceeds of any Loan
will be used, directly or indirectly, for any payments to any governmental
official or employee, political party, official of a political party, candidate
for office or any one use acting in an official capacity, in order to obtain,
retain or direct business or obtain any improper advantage, in violation of the
United States Foreign Corrupt Practices Act of 1977, as amended.
Section 4.23 Operations. On the Closing Date, the Operators of
the Borrower's Texas properties are as follows:
Operator Field
-------- -----
PVOG Participation Agreement Areas I
and II
Borrower Participation Agreement Area III
▇▇▇▇ Petroleum Corporation ▇▇▇ ▇▇▇▇▇▇▇▇ Units
Section 4.24 Continuing Accuracy. All of the representations
and warranties contained in this Article or elsewhere in this Agreement shall be
true through and until the date on which all obligations of Borrower under this
Agreement, the Notes and the Collateral Documents and any other documents
executed in connection therewith are fully satisfied.
ARTICLE 5
AFFIRMATIVE COVENANTS
Unless the Agent's and the Required Banks' (or if required by
Section 10.4 hereof, all of the Banks') prior written consent to the contrary is
obtained, the Borrower will at all times comply with the covenants contained in
this Article 5 (including where applicable, without the necessity of expressly
so stating in each instance, causing its Subsidiaries to comply with such
covenant), from the date hereof and for so long as any part of the Indebtedness
is outstanding.
Section 5.1 Performance of Obligations. The Borrower will
repay the Indebtedness according to the reading, tenor and effect of the Notes
and this Agreement. The Borrower will do and perform every act required of it by
this Agreement, the Notes or in the Collateral Documents at the time or times
and in the manner specified.
Section 5.2 Financial Statements and Reports. The Borrower
will furnish or cause to be furnished to the Agent from time to time: (and the
Agent shall furnish promptly to each Bank from time to time copies of all such
documents received by the Agent from the
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Borrower, except that documents under paragraphs (e), (i) and (n) below shall be
forwarded by Agent only upon request by a Bank).
(a) Borrower's Annual Reports - as soon as available and in
any event within 120 days after the close of each fiscal year of the Borrower,
the consolidated audited balance sheet of the Borrower as of the end of such
year, the consolidated audited statement of income of the Borrower for such
year, the consolidated audited statement of changes in shareholder equity of the
Borrower for such year, and the consolidated audited statement of cash flow of
Borrower for such year, setting forth in each case in comparative form the
corresponding figures for the preceding fiscal year, accompanied by a report of
the Borrower's independent certified public accountants acceptable to the Agent.
Such annual reports shall be accompanied by the certificates of compliance
required by Section 5.3.
(b) Borrower's Quarterly Reports - as soon as available and in
any event within 60 days after the end of each fiscal quarter in each fiscal
year of the Borrower, the unaudited consolidated balance sheet of the Borrower
as of the end of such fiscal quarter, the unaudited consolidated statement of
income of the Borrower for the period from the beginning of the fiscal year to
the close of such fiscal quarter, the unaudited consolidated statement of
changes in shareholders equity of the Borrower for the period from the beginning
of the fiscal year to the close of such fiscal quarter, and the unaudited
consolidated statement of cash flow of Borrower for the period from the
beginning of the fiscal year to the close of such fiscal quarter, setting forth
in each case in comparative form the corresponding figures for the corresponding
period of the preceding fiscal year (and showing without limitation any over or
under produced imbalances of production). Such internally prepared quarterly
reports shall be accompanied by the certificates of compliance required by
Section 5.3.
(c) Semi-Annual Engineering Reports - as soon as available and
in any event by April 1 and October 1 of each year, a semi-annual engineering
report covering the Borrowing Base properties, with an effective date of
December 31 for the April 1 report and no more than 60 days earlier for the
October 1 report, in form and substance acceptable to the Agent. The report for
the April 1 determination shall be reviewed by an independent third party
petroleum engineers firm acceptable to the Agent. The report for the October 1
determination may be an internal update report furnished by the Borrower with
technical review in a meeting between the Borrower and Agent's Energy Technical
Services. Without limiting the foregoing sentences, such reports shall include a
discussion of assumptions as to engineering, pricing and expenses, and an
economic evaluation together with the reserve value of each well of each
property in the Borrowing Base, and further categorized as Collateral or
non-Collateral and as Proved Developed Producing Reserves, Proved Developed
Non-Producing Reserves, or Proved Undeveloped Reserves. (The Borrower
acknowledges that the Agent reserves the right to determine the Borrowing Base
based on the provisions hereof and Agent's own evaluations of rates, volumes,
prices, assumptions and other factors regardless of this outside engineering
data or then market prices.)
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(d) Quarterly Reports - within 60 days after the end of each
calendar quarter, three production and price tracking monthly reports pertaining
to the Borrowing Base properties on a well by well basis in form acceptable to
the Agent's Energy Technical Services, including production volumes, sales
volume, sales revenues, production taxes, operating expenses, capital
expenditures, and revenue and expense statements. Such report shall include the
status of all gas balancing (if any) affecting any of the Borrowing Base
properties.
(e) Periodic Title Information - periodically as available and
in any event no later than the date for the delivery of the semi-annual
engineering reports under Subsection 5.2(c), copies of drill site title opinions
or division order title opinions covering newly drilled ▇▇▇▇▇ included in the
Collateral which are not covered by title opinions previously delivered to the
Agent (i.e., ▇▇▇▇▇ drilled within the preceding period); and in addition
promptly upon the Agent's request, detailed information concerning any and all
requirements or exceptions set forth in any title opinions concerning any of the
Collateral.
(f) Environmental - (I) promptly upon receipt thereof,
complete documentation pertaining to any fines levied during the prior year
against the Borrower, or to the extent known and available to the Borrower
against an Operator of any Collateral, for non-compliance with all applicable
federal, state and local environmental laws and regulations; and (II) promptly
upon learning thereof, notice of Borrower's acquisition of actual knowledge of
the presence of any hazardous materials or solid waste (as defined elsewhere in
this Agreement) on or under any Collateral.
(g) Notices - when required by the terms thereof, the notices
required under Section 5.11.
(h) Audit Reports -promptly upon receipt thereof, one copy of
each report (if any) submitted to the Borrower by independent accountants in
connection with any annual, interim or special audit made by them of the books
of the Borrower.
(i) Insurance Report - within 30 days after the end of each
fiscal year of the Borrower, an annual insurance coverage report detailing the
insurance program maintained by or for the Borrower.
(j) S.E.C. Reports -promptly upon becoming available, copies
of all (i) regular, periodic or special reports, schedules and other material
which the Borrower may be required to file with or deliver to any securities
exchange or the Securities and Exchange Commission (or any other governmental
authority succeeding to the functions thereof) and (ii) material news releases
and annual reports relating to the Borrower. Such documents shall be deemed to
have been delivered on the date such document is included in materials otherwise
filed with the Securities and Exchange Commission electronically so as to be
publicly available on an internet website to which the Agent has access.
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(k) Hedge Agreements - promptly after entering into such
contract if requested by the Agent but in any event at the end of each fiscal
quarter, written notice of the fact that the Borrower or a Subsidiary has
entered into a Hedge Agreement, together with a list of all Hedge Agreements of
the Borrower and its Subsidiaries describing the material terms thereof. Absent
a specific request, this information may be provided as part of the Borrower's
Form 10-Q.
(l) Participation Agreement - promptly after execution
thereof, copies of each amendment or supplement to or replacement of the
Participation Agreement.
(m) Other Information - promptly upon the request of the Agent
or any Bank, all regular budgets and such other financial, technical or other
information regarding the business and affairs and financial condition of the
Borrower as the Agent or such Bank may reasonably request (for review and
copying).
(n) Diamond Note - concurrently with the furnishing of the
certificates of compliance under Section 5.3, and at other times promptly upon
the request of the Agent, a report detailing the status of the loan evidenced by
the Diamond Note as to loan amount, payment history and default (if any), all as
the Agent may reasonably request.
All balance sheets and other financial reports referred to above shall be in
such detail as the Agent or the Required Banks may reasonably request and shall
conform to the standards described in Section 1.3.
Section 5.3 Certificates of Compliance. (a) So long as not
contrary to the then current rules, regulations or recommendations of the
American Institute of Certified Public Accountants or similar body, concurrently
with the furnishing of the annual financial statements described above, the
Borrower will cause to be furnished to the Agent a certificate from the
independent certified public accountants for the Borrower stating that in the
ordinary course of their audit of the Borrower, insofar as it relates to
accounting matters, their audit has not disclosed the existence of any condition
which constitutes a Default, or if their audit has disclosed the existence of
any such condition, specifying the nature, period of existence and status
thereof; provided, however, that the independent certified public accountants
shall not be liable to the Agent and the Banks for their failure to discover a
Default.
(b) Concurrently with the furnishing of the annual and
quarterly financial statements described above, the Borrower will furnish to the
Agent, for distribution to the Banks, a certificate signed by the principal
financial officer of the Borrower, stating either that no Default occurred
during such quarter (or if it did but no longer exists, the nature and duration
thereof) and that no Default then exists, or if a Default exists, the nature,
period of existence and status thereof, and specifically setting forth the
calculations showing the Borrower's compliance with the financial covenants in
Section 5.15.
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Section 5.4 Taxes and Other Liens. Each Company will file all
tax returns and reports required to be filed and pay and discharge promptly when
due all taxes, assessments and governmental charges or levies imposed upon it or
upon income or upon any of its property (including production, severance,
windfall profit, excise and other taxes assessed against or measured by the
production of, or the value or proceeds of production of, the Collateral) as
well as all claims of any kind (including claims for labor, materials, supplies
and rent) which, if unpaid, might become a Lien upon any or all of its property;
provided, however, such Company 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 and if the contesting party shall have set up reserves
therefor adequate under generally accepted accounting principles (provided that
such reserves may be set up under generally accepted accounting principles) and
so long as the payment of same is not a condition to be met in order to maintain
an oil, gas or mineral lease in force.
Section 5.5 Maintenance and Compliance. The Borrower will, and
will cause each Subsidiary to, (i) maintain its corporate existence and rights
and its current business operations; (ii) observe and comply (to the extent
necessary so that any failure will not materially and adversely affect the
business of such Person) with all valid existing and future laws, statutes,
codes, acts, ordinances, orders, judgments, decrees, injunctions, rules,
regulations, certificates, franchises, permits, licenses, authorizations,
directions and requirements (including without limitation applicable statutes,
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, courts, authorities,
officials and officers, domestic or foreign; and (iii) maintain its properties
(and any property leased by or consigned to it or held under title retention or
conditional sales contracts) in generally good and workable condition at all
times and make all repairs, replacements, additions, betterments and
improvements to its properties to the extent necessary so that any failure will
not materially and adversely affect the business of such Person.
Section 5.6 Further Assurances. The Borrower at its expense
will, and will cause each Subsidiary to, promptly (and in no event later than 30
days after written notice from the Agent is received) cure any defects, errors
or omissions in the creation, execution, delivery or contents of this Agreement,
the Notes or the Collateral Documents, and execute and deliver to the Agent upon
request all such other and further documents, agreements and instruments in
compliance with or accomplishment of the covenants and agreements of the
Companies in this Agreement, the Notes or in the Collateral Documents or to
further evidence and more fully describe the Collateral (including without
limitation any renewals, additions, substitutions, replacements or accessions to
the Collateral), or to correct any omissions in the Collateral Documents, or
more fully state the security obligations set out herein or in any of the
Collateral Documents, or to perfect, protect or preserve any Liens and the
priority thereof created pursuant to any of the Collateral Documents, or to make
any recordings, to file any notices, or obtain any consents as may be necessary
or appropriate in connection with the transactions contemplated by this
Agreement.
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Section 5.7 Reimbursement of Expenses. The Borrower will pay
all reasonable legal fees and expenses incurred by the Agent and the Banks in
connection with the preparation or administration of this Agreement, the Notes
and the Collateral Documents. The Borrower will upon request promptly reimburse
the Agent and the Banks for all amounts expended, advanced or incurred by the
Agent and the Banks to satisfy any obligation of the Borrower under this
Agreement, or to protect the property or business of any Company or to collect
the Secured Liabilities, or to enforce the rights of the Agent and the Banks
under this Agreement, the Notes, the Collateral Documents or the Secured Hedge
Agreements, which amounts will include all court costs, attorneys' fees and
expenses, fees and expenses of engineers, auditors and accountants, travel
expenses and investigation expenses reasonably incurred by the Agent and the
Banks in connection with any such matters, together with interest at the Default
Rate on each such amount from the date that is thirty (30) days after demand by
the Agent and the Banks therefor until the date of reimbursement to the Agent or
such Bank. The Borrower also agrees to pay, and to hold the Agent and the Banks
harmless from any failure or delay in paying, all recording taxes, documentary
stamp taxes or other similar taxes, if any, which may be payable or determined
to be payable in connection with the execution and delivery of this Agreement,
the Notes, the Collateral Documents, the Secured Hedge Agreements, or any
modification or supplement thereof or thereto.
Section 5.8 Insurance. Each Company will maintain with
financially sound and reputable insurers, insurance with respect to its
properties and businesses against such liabilities, casualties, risks and
contingencies and in such types and amounts as are reasonably satisfactory to
the Agent and customary in accordance with standard industry practice or as more
specifically provided in the Collateral Documents. Upon request of the Agent,
the Borrower will furnish or cause to be furnished to the Agent from time to
time a summary of the insurance coverage of the Companies in form and substance
satisfactory to the Agent and if requested will furnish the Agent original
certificates of insurance and/or copies of the applicable policies.
Section 5.9 Accounts and Records. The Borrower will keep books
of record and accounts in which true and correct entries will be made as to all
material matters of all dealings or transactions in relation to the Companies'
business and activities.
Section 5.10 Right of Inspection. The Borrower will permit any
officer, employee or agent of the Agent or any Bank at such Person's risk to
visit and inspect any of the property of the Companies, examine the books of
record and accounts of the Companies, take copies and extracts therefrom, and
discuss the affairs, finances and accounts of the Companies with the Borrower's
officers, accountants and auditors, and the Borrower will furnish information
concerning the Collateral, including schedules of all internal and third party
information identifying the Collateral (such as, for example, lease and well
names and numbers assigned by the Borrower or the Operator of any mineral
properties, division orders and payment names and numbers assigned by purchasers
of the hydrocarbons, and internal identification names and numbers used by the
Borrower in accounting for revenues, costs and joint interest transactions
attributable to the mineral properties), all on reasonable notice, at such
reasonable
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times without hindrance or delay and as often as the Agent or any Bank may
reasonably desire. The Borrower will furnish to the Agent promptly upon request
and in the form and content specified by the Agent lists of purchasers of
hydrocarbons and other account debtors, schedules of equipment and other data
concerning the Collateral as the Agent may from time to time specify.
Section 5.11 Notice of Certain Events. (a) The Borrower shall
promptly notify the Agent if the Borrower learns of the occurrence of any event
which constitutes a Default, together with a detailed statement by a responsible
officer of the Borrower of the steps being taken to cure the effect of such
Default.
(b) The Borrower shall promptly notify the Agent of any change
in location of any Company's principal place of business or the office where it
keeps its records concerning accounts and contract rights or a change in its
name, state of organization or organizational status.
(c) The Borrower shall promptly notify the Agent of the
arising of any litigation or dispute threatened against or affecting the
Borrower or any Subsidiary which, if adversely determined, would have a material
adverse effect upon the financial condition or business of the Borrower or such
Subsidiary. In the event of such litigation, the Borrower will cause such
proceedings to be vigorously contested in good faith and, in the event of any
adverse ruling or decision, the Borrower shall prosecute all allowable appeals.
The Agent may (but shall not be obligated to), after prior notice to Borrower,
commence, appear in, or defend any action or proceeding purporting to affect the
Loan, or the respective rights and obligations of Agent and the Banks and
Borrower pursuant to this Agreement, and the Borrower agrees to repay the Agent
upon demand all necessary expenses, including reasonable attorneys' fees and
expenses, incurred by the Agent in connection with such proceedings or actions.
(d) The Borrower shall promptly notify the Agent of the
occurrence of any material adverse change in the value of any oil or gas
property or properties which is or are included in and in the aggregate
represents at least five (5%) percent of the Borrowing Base, or from which any
Company otherwise derives at least five (5%) percent of its revenue. Without
limiting the foregoing, the Borrower shall promptly notify the Agent of any
notice of default or cancellation from any lessor of any mineral lease in the
Collateral. This paragraph does not apply to changes in value resulting from
market price changes affecting the oil and gas industry generally.
(e) The Borrower shall promptly notify the Agent of the
creation, incurrence, assumption, existence or filing of any Lien on any
Borrowing Base property now owned or hereafter acquired, except for Liens
permitted under Section 6.2.
(f) The Borrower shall promptly notify the Agent of each
creation, acquisition, disposition, dissolution, merger or other change in the
status of or addition or removal of any Subsidiary.
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(g) The Borrower shall promptly notify the Agent (if possible
in advance) of any change in the identity of the Operator of any of the
Borrower's properties.
(h) The Borrower shall promptly notify the Agent of any notice
of default received from or sent to (i) PVOG under the Participation Agreement
or (ii) any Operator.
(i) The Borrower shall promptly notify the Agent of any event
which would render any of the representations and warranties set forth in
Article 4 untrue or misleading in any material respect, except as such
representations and warranties relate to matters as are changed as permitted by
this Agreement.
(j) The Borrower shall promptly notify the Agent of the
occurrence of any event which constitutes a default under the Qualified
Subordinated Debt or the Qualified Redeemable Preferred Equity.
(k) The Borrower shall promptly furnish the Agent with a copy
of any notice of default or waiver (retroactive or prospective) pertaining to
the Qualified Subordinated Debt or the Qualified Redeemable Preferred Equity.
(l) The Borrower shall promptly furnish the Agent with copies
of each amendment, modification or waiver pertaining to the Qualified
Subordinated Debt or the Qualified Redeemable Preferred Equity or any new
agreement pertaining to either.
The foregoing requirements of notice shall not be construed to imply permission
or consent by the Agent and the Banks as to such events or to waive any
representations, covenants and defaults set forth in this Agreement.
Section 5.12 ERISA Information and Compliance. The Borrower
will promptly furnish to the Agent (i) promptly after the filing thereof with
the United States Secretary of Labor or the Pension Benefit Guaranty
Corporation, copies of each annual and other report with respect to each Plan or
any trust created by the Borrower, and (ii) 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 Code, in connection with any Plan or any trust created by
the Borrower, a written notice signed by the president or the principal
financial officer of the Borrower specifying the nature thereof, what action the
Borrower is taking or proposes to take with respect thereto, and, when known,
any action taken by the Internal Revenue Service with respect thereto. The
Borrower will comply with all of the applicable funding and other requirements
of ERISA as such requirements relate to the Plans of the Borrower.
Section 5.13 Indemnification. (a) The Borrower will indemnify
the Agent and the Banks and other Indemnified Parties and hold the Agent and the
Banks and other Indemnified Parties harmless from claims of brokers with whom
the Borrower has contracted in the execution hereof or the consummation of the
transactions contemplated hereby. The Agent and each Bank,
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severally, will indemnify the Borrower and hold the Borrower harmless from
claims of brokers with whom the Agent or such Bank, respectively, has contracted
in connection with the transactions contemplated hereby.
(b) The Borrower will indemnify the Agent and the Banks and
other Indemnified Parties and hold the Agent and the Banks and other Indemnified
Parties harmless from any and all liabilities, obligations, losses, damages,
penalties, claims, actions, suits, costs and expenses of whatever kind or nature
which may be imposed on, incurred by or asserted at any time against the
Indemnified Parties in any way relating to, or arising in connection with, the
use or occupancy of any of the Collateral or any breach of any representation,
warranty or covenant under the terms of this Agreement or the Collateral
Documents.
Section 5.14 Environmental Indemnity. The Borrower shall
defend, indemnify and hold the Agent and each Bank and its respective
shareholders, directors, officers, agents, employees, subsidiaries and
Affiliates (collectively the "Indemnified Parties", and each as "Indemnified
Party") harmless from and against all claims, demands, causes of action,
liabilities, losses, costs and expenses (including, without limitation, costs of
suit, reasonable attorneys' fees and fees of expert witnesses) arising from or
in connection with (i) the presence on or under all Collateral constituting real
(immovable) property of any hazardous substances or solid wastes (as defined
elsewhere in this Agreement), or any releases or discharges of any hazardous
substances or solid wastes on, under or from such property, or (ii) any activity
carried on or undertaken on or off such property, whether prior to or during the
term of this Agreement, and whether by Borrower or any predecessor in title or
any officers, employees, agents, contractors or subcontractors of Borrower or
any predecessor in title, or any third persons at any time occupying or present
on such property, in connection with the handling, use, generation, manufacture,
treatment, removal, storage, decontamination, clean-up, transport or disposal of
any hazardous substances or solid wastes at any time located or present on or
under such property. The foregoing indemnity shall further apply to any residual
contamination on or under such property, or affecting any natural resources, and
to any contamination of any property or natural resources arising in connection
with the generation, use, handling, storage, transport or disposal of any such
hazardous substances or solid wastes, and irrespective of whether any of such
activities were or will be undertaken in accordance with applicable laws,
regulations, codes and ordinances. Without prejudice to the survival of any
other agreements of the Borrower hereunder, the provisions of this Section shall
survive the final payment of all Indebtedness and the termination of this
Agreement and shall continue thereafter in full force and effect.
Section 5.15 Financial Covenants. The Borrower shall comply
with the following financial covenants (determined in accordance with Section
1.3), except as specifically stated otherwise:
(a) Minimum Current Ratio. The Borrower shall maintain, on a
quarterly basis as of the last day of each fiscal quarter, a current ratio in an
amount not less than 1.00 to 1.00. For purposes of this Section, "current ratio"
shall mean the ratio of (x) current assets plus
-49-
the unused and available portion of the Commitment Limit (being the amount, if
any, by which the Commitment Limit then in effect exceeds the sum of the
principal balance of unpaid and outstanding Advances and the total undisbursed
amount of all letters of credit outstanding as of such date of determination) to
(y) current liabilities (excluding therefrom the outstanding balance on the
Loan). This calculation will not include the effects, if any, of marking to
market Hedging Obligations pursuant to Financial Accounting Standards Board
Statement No. 133.
(b) Minimum Net Worth. The Borrower shall have a net worth of
not less than the amount established by the next sentence on the Closing Date,
and thereafter shall maintain at all times the minimum net worth requirement as
changed annually on the following basis. During 2006 the Borrower's minimum net
worth requirement shall be $69,832,406.00, being 90% of the actual net worth
number contained in the Borrower's interim financial statement (as of March 31)
most recently submitted to the Agent before the Closing Date ($77,591,563.00).
Thereafter, this minimum net worth requirement shall be changed annually by the
Agent after the end of each fiscal year as to the amount to be met during the
new calendar year, with the amount to be met during the new calendar year
(tested quarterly as of the last day of each fiscal quarter) being increased
(but not reduced) by the sum of (x) fifty (50%) percent of the Borrower's prior
fiscal year's positive net income plus (y) one hundred (100%) percent of the net
proceeds from stock or other equity offerings of any nature by the Borrower or
any Subsidiary (including without limitation any Qualified Redeemable Preferred
Equity). For purposes of this covenant, the non-cash effects, if any, of Hedging
Agreements pursuant to Financial Accounting Standards Board Rule No. 133
(Accounting for Derivative Instruments and Hedging Activities) will not be
included, nor will the effect, if any, of fair value adjustments or ceiling test
write-downs pursuant to Regulation S-X 4-10 of the Securities and Exchange
Commission be included.
(c) Minimum EBITDA to Interest Expense. The Borrower shall
maintain, on a quarterly basis as of the last day of each fiscal quarter, a
ratio (on a rolling four fiscal quarter basis) of EBITDA to Interest Expense
during the four preceding fiscal quarters of not less than 3.00 to 1.00.
(d) Calculation. The Borrower acknowledges that any
outstanding Qualified Subordinated Debt and any Qualified Redeemable Preferred
Equity shall be counted and included as Debt for purposes of the financial
covenants in this Section 5.15. Without limiting the foregoing, the dividends
payable under the Qualified Redeemable Preferred Equity shall be counted and
included within Interest Expense for purposes of the financial covenant in
Subsection 5.15(c).
Section 5.16 Bank Accounts. (a) The Borrower shall maintain
(and cause to be maintained) with the Agent the Companies' primary operating,
money market/treasury management, collection and disbursement accounts,
including without limitation as provided in Section 5.17.
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(b) The Borrower hereby grants to the Agent for the benefit of
the Secured Parties a continuing security interest in all of Borrower's deposit
accounts now existing or hereafter maintained with Agent as security for the
Secured Liabilities, and all funds, investment property and proceeds pertaining
thereto.
(c) The Agent will be granted security interests by the
Subsidiaries in all of their respective deposit accounts (if any) (separate from
the Borrower's deposit accounts) maintained with Agent as security for the
Secured Liabilities, and all funds, investment property and proceeds pertaining
thereto.
Section 5.17 Revenues. (a) The Borrower and Endeavor each
shall immediately deposit daily all payments for oil or natural gas sales from
the Borrower's properties (whether or not such property is Collateral), or for
resales thereof by Endeavor, to a revenue clearing deposit account with the
Agent at all times. All such deposits shall be made no later than the first
Business Day after collection by such Company. Without limiting the foregoing,
the Borrower shall use its best efforts to cause all Operators of any Company's
Collateral or purchasers from the Borrower or any Subsidiary (including
Endeavor) which make payments for oil or natural gas sales or purchases by
electronic transfer payments to change such electronic payments to be made
directly to Borrower's or such Subsidiary's accounts with the Agent. (The
foregoing covenant is separate from the Agent's right after an Event of Default
to send letters in lieu of transfer orders signed by the Borrower under Sections
3.1(a)(x) and 8.2(c) below.)
(b) The Borrower, the Agent and the Banks acknowledge that
Collateral is comprised in part of the Borrower's undivided interests in mineral
properties for which the Borrower is operator, and accordingly a portion of the
payments made to the Borrower from the sale of hydrocarbons from such properties
may be owed by the Borrower to the non-operator working interest owners or to
royalty or overriding royalty owners. In the event that revenues of another
Person attributable to such other Person's working interest or royalty or
overriding royalty interest ("Other Revenues") are deposited into the revenue
clearing account at the Agent, then the Agent and the Banks agrees that such
Other Revenues will be released by the Agent to such Persons (even if an Event
of Default has occurred and is continuing) upon the receipt by the Agent of
appropriate evidence that such funds are Other Revenues (i.e., are not the
Borrower's funds). The Agent and the Banks shall not be liable, however, for any
actions by Agent which are taken in compliance with the terms of this Agreement
and the Collateral Documents with respect to funds in the revenue clearing
account that are Other Revenues and which are taken before Agent received such
evidence that such funds are Other Revenues.
(c) Upon the occurrence of any Event of Default, the Borrower
shall upon Agent's or the Required Banks' request execute such division orders,
transfer orders or letters in lieu thereof as are necessary to direct that all
payments of mineral production due to the Borrower from its properties are paid
directly to the Agent, including as further provided in the Deed of Trust.
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Section 5.18 Hedging Program. At all times when the Percentage
Outstanding exceeds seventy-five (75%), the Borrower shall enter into and
maintain in effect a hedging program (the "Hedging Program") consisting of
Permitted Hedge Agreements that are mutually satisfactory to the Agent, the
Required Banks and the Borrower. Without limiting the foregoing, the Borrower
acknowledges the Agent's and the Banks' general expectation that at such time
the Permitted Hedge Agreements comprising the Hedging Program (i) shall in no
contract fix a price for a term of more than three (3) years, and (ii) in the
aggregate shall cover no more than seventy-five (75%) percent of the Borrower's
projected oil and gas PDP production set forth in the most recent third party
engineering report.
Section 5.19 Payables. The Companies shall pay all accounts
payable for which applicable law grants the account holder a Lien against any
property of such Company within 60 days from the date such payable is due and
owing; provided, however, such Company shall not be required to pay any such
account if the amount or validity thereof shall currently be contested in good
faith by appropriate proceedings diligently conducted and if such Company shall
have set up reserves therefore adequate under generally accepted accounting
principles (provided that such reserves may be set up under generally accepted
accounting principles) and so long as such contest proceedings conclusively
operate to stay the sale of any property subject to such Lien to satisfy such
account.
Section 5.20 Diamond Note. The Borrower shall cause all loan
advances made by the Borrower to Diamond to be evidenced by a negotiable
promissory note which (i) is payable to the order of the Borrower, (ii) waives
Diamond's right to set off, (iii) is secured by a security interest in all of
Diamond's drilling rigs, and (iv) is otherwise (together with the related
security agreement and UCC financing statement by Diamond as debtor) in form and
substance reasonably satisfactory to the Agent. The Borrower shall execute a
security agreement pledging the Diamond Note, and endorse and deliver the
Diamond Note to the Agent, together with a UCC-3 Amendment Statement. The
Borrower shall further cause Diamond to execute and deliver an acknowledgment of
the pledge of the Diamond Note by the Borrower to the Agent as further security
for the Secured Liabilities, in form and substance reasonably satisfactory to
the Agent. The Borrower shall make an initial or subsequent loan advance to
Diamond only if such advance (x) is evidenced by the Diamond Note, and (y) is in
compliance with Subsection 6.3(h). The Borrower shall not agree to any
amendment, modification or waiver of the terms of the Diamond Note or the
security agreement securing it or agree to any subordination pertaining to
either, in each case without the prior written consent of the Agent and the
Required Banks.
ARTICLE 6
NEGATIVE COVENANTS
Unless the Agent's and the Required Banks' (or if required by
Section 10.4 hereof, all of the Banks) prior written consent to the contrary is
obtained, the Borrower will at all times
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comply with the covenants contained in this Article 6 (including where
applicable, without the necessity of expressly so stating in each instance,
causing its Subsidiaries to comply with such covenant), from the date hereof and
for so long as any part of the Indebtedness is outstanding.
Section 6.1 Debts, Guaranties and Other Obligations. Each
Company will not incur, create, assume or in any manner become or be liable in
respect of any Debt direct or contingent, except for:
(a) The Indebtedness to the Agent and the Banks under
this Agreement and the Notes.
(b) Customary trade payables or operating leases, and
endorsements of negotiable instruments for deposit or
collection, all from time to time incurred in the
ordinary course of business.
(c) Debt under operating agreements, unitization and
pooling agreements and orders, farmout agreements and
gas balancing agreements, in each case that are
customary in the oil, gas and mineral production
business and that are entered into in the ordinary
course of business. [For the avoidance of doubt, it
is acknowledged that this covenant is separate and
independent of the Event of Default under Section
8.1(n).]
(d) 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 generally accepted accounting principles
shall have been made therefor.
(e) Hedging Obligations incurred under Permitted Hedge
Agreements.
(f) Debt owing by a Subsidiary to the Borrower.
(g) The PVOG Production Payment; provided, the Borrower
shall not (i) prepay any portion of such Debt before
it is due while a Default has occurred and is
continuing, (ii) allow the amount owing thereunder to
exceed at any one time $2,050,000.00
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outstanding, nor (iii) amend any of the documents
evidencing or pertaining to the PVOG Production
Payment as in effect on the Closing Date or enter
into any new agreements pertaining thereto which
affect the terms of the PVOG Production Payment
adversely to the Borrower, in each case without the
Agent's and the Required Banks' prior written
consent.
(h) Qualified Subordinated Debt, and Qualified Redeemable
Preferred Equity, in combined amounts (as provided in
the definitions thereof) which do not exceed the
Maximum Subordinated Amount, provided that the
conditions in Sections 6.10 and 6.11 are satisfied.
Section 6.2 Liens. The Borrower will not, and will not allow
or suffer any Subsidiary to, create, incur, assume or permit to exist any Lien
on any of its property now owned or hereafter acquired, except for:
(a) Liens for taxes, assessments, or other governmental
charges not yet due or which are being contested in
good faith by appropriate action promptly initiated
and diligently conducted, if such reserve as shall be
required by generally accepted accounting principles
shall have been made therefor, and so long as the
payment of same is not a condition to be met in order
to maintain in force such Person's interest in such
property or (if applicable) the Agent's first Lien
therein.
(b) Liens of landlords, vendors, carriers, warehousemen,
mechanics, laborers and materialmen arising by law in
the ordinary course of business for sums either not
more than 90 days past due or being contested in good
faith by appropriate action promptly initiated and
diligently conducted, if such reserve as shall be
required by generally accepted accounting principles
shall have been made therefor, and so long as the
payment of same is not a condition to be met in order
to maintain in force such Person's interest in such
property or (if applicable) the Agent's first Lien
therein.
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(c) Inchoate liens arising under ERISA to secure the
contingent liability of the Borrower permitted by
this Agreement.
(d) The pledge of the Collateral and any other Liens in
favor of the Agent to secure on a pari passu basis,
(i) the Indebtedness of the Borrower to the Agent and
the Banks and (ii) (in some or all cases as
determined by the Banks) the Secured Hedge
Obligations permitted hereby.
(e) Minor imperfections of title or non-monetary Liens
that do not materially impair the development,
operation or value of property in its intended use or
the title thereto and which are of a nature commonly
existing with respect to properties of a similar
character as the Collateral.
(f) Royalties, overriding royalties, net profits
interests, production payments, reversionary
interests, calls on production, preferential purchase
rights and other burdens on or deductions from the
proceeds of production, that do not secure Debt for
borrowed money and that are taken into account in
computing the net revenue interests and working
interests of the Borrower warranted in the Collateral
Documents.
(g) Operating agreements, unitization and pooling
agreements and orders, farmout agreements, gas
balancing agreements and other agreements, in each
case that are customary in the oil, gas and mineral
production business in the general area of such
property and that are entered into in the ordinary
course of business in good faith. [For the avoidance
of doubt, it is acknowledged that this covenant is
separate and independent of the Event of Default
under Section 8.1(n).]
(h) Judgment Liens arising in the ordinary course of
business (provided the litigation is actively being
contested in good faith and by appropriate
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proceedings) and which do not constitute an Event of
Default under Section 8.1(j).
(i) Liens resulting from good faith deposits to secure
payments of workmen's compensation or other social
security programs (excluding Liens under Section 4068
of ERISA) or to secure the performance of bids,
tenders, statutory obligations, surety and appeal
bonds, contracts (other than for payment of debt) or
operating leases, in each case made in the ordinary
course of business.
(j) The PVOG Production Payment (non-recourse to the
Borrower except as provided in the definition
thereof).
(k) Liens securing Qualified Subordinated Debt, fully
subordinated to the Liens securing the Secured
Liabilities under an Intercreditor Agreement
satisfactory to the Agent.
The inclusion of this Section 6.2 shall not constitute in any way an
acknowledgment by the Agent and the Banks of the validity, legality,
enforceability or binding effect on the Agent and the Banks of such Liens, the
sole purpose of this provision being to provide that the existence of any such
permitted Liens shall not in and of itself constitute an Event of Default under
this Agreement.
Section 6.3 Investments, Loans and Advances. The Borrower will
not (directly or indirectly through any Subsidiary), and will not allow or
suffer any Subsidiary to, make or permit to remain outstanding any loans or
advances or extensions of credit to, or purchases or other acquisitions of
capital stock or ownership (direct or beneficial) interests or obligations of,
or other investments in, any Person (including without limitation any
Subsidiary), except for:
(a) Investments in readily marketable direct obligations
of the United States of America or any agency
thereof.
(b) Investments in either certificates of deposit of
maturities less than one year issued by the Agent or
any Bank, or, if no Bank is substantially competitive
(in terms of its certificate of deposit interest rate
for comparable amounts) with other banks (having a
credit rating equal or better than the
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Banks), then certificates of deposit of maturities
less than one year issued by one or more of such
other banks.
(c) Investments in commercial paper of maturities less
than one year with the best rating by Standard &
Poors, ▇▇▇▇▇'▇ Investors Service, Inc., or any other
rating agency satisfactory to the Agent.
(d) Routine advances to employees made in the ordinary
course of business, and that do not exceed historical
levels in a material manner.
(e) Advances pursuant to operating agreements,
unitization and pooling agreements and orders,
farmout agreements and gas balancing agreements, in
each case that are customary in the oil, gas and
mineral production business and that are entered into
in the ordinary course of business.
(f) Accounts receivable created or acquired in the
ordinary course of business and upon terms common in
the industry for such accounts.
(g) The Borrower's ownership of equity interests in
Endeavor, and in Diamond, provided that the total
amount of the Borrower's investment (both debt and
equity) in Diamond at any one time (i) shall not
exceed a maximum limit of fifteen million
($15,000,000.00) dollars and (ii) shall not consist
of more than 50% equity.
(h) Loans and advances made by the Borrower to its
Subsidiaries in the ordinary course of business to be
used in normal business operations of such
Subsidiary, provided that with respect to any loan to
Diamond, (i) such loans by the Borrower to Diamond
shall not violate the limit in paragraph (g) of this
Section, (ii) all loan advances by the Borrower to
Diamond are evidenced by the Diamond Note issued by
Diamond to the Borrower, and secured by a security
interest in Diamond's drilling rigs, which Diamond
Note and security
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agreement shall be subject to a first priority pledge
by the Borrower to the Agent, and (iii) such loan is
otherwise in compliance with Section 5.20.
For the avoidance of doubt, pursuant to the foregoing the Borrower shall not
establish, acquire or otherwise own any new Subsidiary after the Closing Date,
without in each case the prior written consent of the Agent and the Required
Banks.
Section 6.4 Nature of Business. The Borrower will not permit
any material change to be made in the character of its business as carried on at
the date hereof.
Section 6.5 Mergers and Consolidations. The Borrower will not,
and will not allow or suffer any Subsidiary to, acquire, merge with or
consolidate with any Person or acquire by purchase, lease or otherwise all or
substantially all of the assets of any Person (whether or not such acquisition,
merger or consolidation requires any capital expenditures on the part of the
Borrower).
Section 6.6 ERISA Compliance. The Borrower will not at any
time permit any Plan maintained by it to engage in any "prohibited transaction"
as such term is defined in Section 4975 of the Code; incur any "accumulated
funding deficiency" as such term is defined in Section 302 of ERISA; or
terminate any such Plan in a manner which could result in the imposition of a
Lien on the property of the Borrower pursuant to Section 4068 of ERISA.
Section 6.7 Changes. Each Company will not without 30 days
prior notice to the Agent change the location of any of its Collateral, or
change the location of its state of organization or chief executive office or
change its name.
Section 6.8 Sales. The Borrower will not, and will not allow
or suffer any Subsidiary to, sell, assign, transfer by bond for deed, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its property (whether now owned or hereafter
acquired) to any Person. The Borrower will not, and will not allow or suffer any
Subsidiary to, sell, assign, transfer by bond for deed, lease or otherwise
dispose (including by any sale-leaseback transaction) of any of its Collateral
or any material portion of its other property, business, or assets, including
without limitation any producing mineral properties or equity interests in a
Subsidiary, except for sales of production (in compliance with the terms of the
Collateral Documents and this Agreement), collection of its accounts, sales of
items of equipment which are obsolete or otherwise no longer useful for such
Person's operations, and sales of items of equipment to the extent the proceeds
of such sale are promptly reinvested in the acquisition of replacement
equipment, in each case in the ordinary course of business. For purposes of the
preceding sentence, "material" means asset sales which exceed in the aggregate
$100,000.00 during any one fiscal year.
Section 6.9 Agreements. Each Company will not enter into or be
a party to any contract or agreement for the purchase of materials, supplies or
other property or services if
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such contract or agreement shall require that such Company make payment for such
materials, supplies or other property irrespective of whether delivery thereof
is made or whether such services are rendered. Except in the ordinary course of
business, each Company will not enter into any arrangement with any gas pipeline
company or any other purchaser of hydrocarbons regarding the Collateral whereby
the Company agrees that said gas pipeline company or purchaser may set off any
claim against the Company by withholding payment for any hydrocarbons actually
delivered.
Section 6.10 Distributions or Redemption. The Borrower will
not (i) pay or declare any dividend on any shares of any class of its stock
(other than stock dividends), (ii) make any other distribution or other
shareholder expenditure on account of any shares of any class of its stock, nor
set aside any funds for such purpose, nor (iii) otherwise make or agree to pay
for or make, directly or indirectly, any other distribution with respect to any
shares of any class of its stock, or any payment (whether in cash, securities or
other property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancellation or termination
of any such shares or any option, warrants or other right to acquire any such
shares, except that if at the time thereof and immediately after giving effect
thereto no Default or Event of Default shall have occurred and be continuing (or
be created), and no Loan Excess shall then exist, the Borrower may declare, and
agree to declare and pay, dividends (interest expense) in cash to the holders of
Qualified Redeemable Preferred Equity, and the Borrower may make and pay such
cash dividends so declared within thirty (30) days of such declaration. For the
avoidance of doubt, shares of Qualified Redeemable Preferred Equity are
Borrower's stock for purposes of clauses (i), (ii) and (iii) above, and the
Borrower shall not elect (or agree to elect) any option to redeem any Qualified
Redeemable Preferred Equity without the prior written consent of the Required
Banks.
Section 6.11 Subordinated Financings. (a) The Borrower shall
not make any cash or other payment or transfer of property (i) on account of any
Qualified Subordinated Debt except as expressly permitted under the
Intercreditor Agreement pertaining thereto and (ii) on account of any Qualified
Redeemable Preferred Equity except as expressly permitted under Section 6.10
hereof.
(b) The Borrower shall not enter into the initial closing and
funding of any Qualified Subordinated Debt or Qualified Redeemable Preferred
Equity without the Agent's prior written approval as to the form and substance
of the documentation pertaining thereto, based upon the Agent's receipt of a
certificate of an officer of the Borrower attaching true, correct and complete
copies thereof (including without limitation a copy of the prospectus for any
Qualified Redeemable Preferred Equity). The Borrower shall not enter into or
agree to any amendment, modification or waiver of any term or condition of, or
any of its rights under, the documents pertaining to any issued Qualified
Subordinated Debt or any issued Qualified Redeemable Preferred Equity, which
amendment, modification or waiver could, in the reasonable opinion of the Agent,
materially and adversely affect the interests of the Banks.
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Section 6.12 Management. The Borrower will not permit or
suffer a change in the key management of the Borrower and its Affiliates to
occur. For purposes of this Section, key management shall mean the continued
active full time employment of each of ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇. (as CEO and President)
and ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. (as CFO and EVP); provided, however, that the cessation of
active employment of one such officer due to death or disability or the
retirement of ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. (as CFO and EVP) shall not be a Default
hereunder so long as the Borrower hires or promotes a replacement officer with
experience and qualifications reasonably acceptable to the Agent and the
Required Banks within four (4) months of the former officer's cessation of
activity.
Section 6.13 Change of Ownership or Control. (a) No Person or
group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934),
other than existing management of Borrower as of the Closing Date, shall become
the beneficial owner of more than 33% of the total voting power of the capital
stock of the Borrower then outstanding.
(b) A majority of the members of the Board of Directors of the
Borrower shall not cease to be Continuing Directors. For purposes of this
Section, the term "Continuing Directors" of a Person means any member of such
Person's Board of Directors who: (x) was a member of such Person's Board of
Directors on the Closing Date; or (y) was nominated for election or elected with
the approval of a majority of the Continuing Directors who were then members of
such Person's Board of Directors (but excluding any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Continuing
Directors).
Section 6.14 Transactions with Affiliates. The Borrower will
not sell, transfer, lease or otherwise dispose of (including pursuant to any
merger) any property or assets to, or purchase, lease or otherwise acquire
(including pursuant to a merger) any property or assets from, or otherwise
engage in any other transactions with, any Affiliates, except in the ordinary
course of business at prices and on terms and conditions not less favorable to
the Borrower as could be obtained on an arms-length basis from unrelated third
persons in a comparable transaction.
Section 6.15 Subsidiaries. The Borrower will not allow or
suffer any changes to be made in the ownership structure of each Subsidiary, and
shall not own and control directly or indirectly less than one hundred (100%)
percent of the ownership and voting rights in each Subsidiary. The Borrower will
not create, incur, assume or permit to exist any Lien on its equity interest in
any Subsidiary, other than in favor of the Agent.
Section 6.16 Restrictive Agreements. The Borrower will not
directly or indirectly enter into, incur or permit to exist, or permit any
Subsidiary so to do, any agreement or other arrangement that (i) prohibits,
restricts or imposes any condition upon the ability of a Subsidiary to create,
incur or permit to exist any Lien upon any of its property or assets or (ii)
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prohibits, restricts or imposes any condition upon the ability of any Subsidiary
to pay dividends or other distributions with respect to any shares of its equity
securities or other ownership interest or to repay to the Borrower any loans or
advances, provided that (x) the foregoing shall not apply to restrictions and
conditions imposed by corporate law or by this Agreement and (y) clause (i) of
this Section shall not apply to customary provisions in leases restricting the
transfer thereof.
ARTICLE 7
CONDITIONS OF LENDING
Section 7.1 Conditions of Lending. The obligation of the Banks
to make the Loan (or the Issuing Bank to issue a standby letter of credit) is
subject to the accuracy of each and every representation and warranty of the
Borrower contained in this Agreement, the absence of a Default or an Event of
Default, and to the receipt of the following on or before the Closing Date by
the Agent (and the receipt by each Bank of a counterpart of this Agreement and
its respective Note):
(a) Agreement. A duly executed counterpart of this
Agreement signed by all the parties hereto.
(b) Notes. The duly executed Notes signed by the
Borrower.
(c) Good Standing. Certificates of good standing of the
Companies issued by the Secretaries of State of
Oklahoma, Texas, Louisiana and New Mexico.
(d) Corporate Certificates. A certificate of the
secretary of each Company (i) setting forth
resolutions of its board of directors in form and
substance satisfactory to the Agent and Agent's
counsel with respect to the unanimous authorization
of this Agreement, the Notes and the Collateral
Documents to which it is a party, (ii) attaching the
articles of incorporation and bylaws of such Company,
and (iii) setting forth the officers authorized to
sign such instruments.
(e) Fees. The fees required by Subsections 2.5(a) and
(d).
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(f) Collateral Documents. Duly executed restatements of,
or supplements to, mortgages or deeds of trust,
security agreements, and guaranty agreement.
(g) Stock Certificates. The original stock certificates
held by the Borrower for its shares in Endeavor, duly
endorsed in blank and delivered to the Agent with
executed stock powers.
(h) Lien Searches. UCC lien searches satisfactory to the
Agent from Oklahoma, Texas and other pertinent states
pertaining to the Companies.
(i) Legal Opinion. Legal Opinion from the Borrower's
counsel (▇▇▇▇▇ & ▇▇▇▇▇▇▇) in form, scope and
substance satisfactory to the Agent and Agent's
counsel.
(j) Legal Fees. Payment of the reasonable legal fees and
expenses incurred by the Agent in accordance with
Section 5.7.
(k) Termination. After giving effect to the application
of proceeds of the Advances on the Closing Date, the
Indebtedness under the Prior Loan Agreement shall
have been fully repaid.
In the event that the Agent and the Required Banks in their sole and absolute
discretion waive the receipt of any items set forth above, the Borrower agrees
that it nonetheless will promptly deliver such item to the Agent and the Banks
upon request within the time period reasonably specified by the Agent. Until
such conditions are satisfied, Section 11.3 shall apply.
Section 7.2 Certification. The obligation of the Banks to make
the Loan is further subject to the certification by the Borrower, which the
Borrower hereby makes, that no Default or Event of Default exists, and that no
material adverse change (in the Agent's and the Required Banks' sole
determination) in the Collateral or other assets, liabilities, financial
condition, business operations, affairs or circumstances of the Companies or
other facts, circumstances or conditions (financial or otherwise) upon which
Agent and the Banks has relied or utilized in making its decision to make this
Loan have occurred from those reflected in the most recent financial statements
furnished to the Agent prior to the Closing Date or otherwise existing at the
time of the issuance of Agent's commitment letter.
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Section 7.3 Post-Closing Items. (a) The Borrower will furnish
the Agent no later than August 8, 2006, with (i) an executed supplement to the
Texas Deed of Trust, (ii) an executed New Mexico mortgage or deed of trust, and
(iii) title opinions and title opinion updates, in each case covering the
Borrower's interest in producing ▇▇▇▇▇ drilled after the Closing Date under the
Prior Loan Agreement (or otherwise not previously mortgaged as Collateral), and
in each case in form, scope and substance satisfactory to Agent and Agent's
counsel, and indicating that Borrower has good and marketable title to the
interest in such new Collateral subject to no Liens other than the Collateral
Documents and those accepted by Agent in writing.
(b) Certain properties included within the Borrowing Base from
time to time at zero or low value may not be covered by title opinions at the
time of their inclusion in the Borrowing Base. The Borrower acknowledges and
agrees that the Agent has the right under the terms of this Agreement to require
title opinions on such Borrowing Base properties in the future at the time of a
material increase in the value attributed to such property in the Borrowing
Base, and Borrower agrees promptly to deliver such title opinions and
acknowledges that in the absence thereof such properties may be excluded by the
Agent from the Borrowing Base (as provided in the definition of Borrowing Base).
Section 7.4 Each Additional Advance. The obligation of the
Banks to make additional Advances on the line of credit or the Issuing Bank to
issue standby letters of credit is subject to the satisfaction of each of the
following conditions:
(a) Each of the representations and warranties of the
Companies contained in this Agreement and the
Collateral Documents shall be true and correct on and
as of the date of each subsequent Advance or
issuance, both before and after giving effect to the
proposed Advance or issuance and to the application
of the proceeds therefrom, as though made on and as
of such date, except as such representations and
warranties relate to matters that are changed as
permitted by this Agreement, or except to the extent
such representations and warranties by their terms
specifically refer and relate to an earlier date, in
which case such representations and warranties shall
have been true and correct on and as of such earlier
date.
(b) At the time of such Advance, no Default shall have
occurred and be continuing.
(c) There shall have occurred no material adverse change
(in the Agent's and the Required Banks' sole
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determination), either individually or in the
aggregate, in the assets, liabilities, financial
condition, business operations, affairs or
circumstances of the Borrower and the Subsidiaries
taken as a whole, except to the extent that such
changes are permitted by this Agreement.
(d) If reasonably required by Agent, a bringdown title
search report by a ▇▇▇▇▇▇▇ or land title service in
the appropriate states, confirming the absence of
Lien filings against the Borrower since the effective
date of the preceding bringdown search.
Section 7.5 Title Opinions. It is expressly acknowledged by
the Borrower that the waiver by the Borrower (on the basis of the Borrower's
business judgment) of any title requirements contained in any title opinions
delivered to the Agent from time to time in connection with this Agreement, and
funding by the Banks of Advances, shall not constitute a waiver by the Agent and
the Banks of any of the representations or warranties of the Borrower contained
herein.
ARTICLE 8
DEFAULT
Section 8.1 Events of Default. Any of the following events
shall be considered an "Event of Default" as that term is used herein:
(a) Principal and Interest Payments. The Borrower fails
to make payment (x) when due of any principal or
interest installment on any Note, any unused facility
fee, any commitment fee, engineering fee or any other
Indebtedness incurred pursuant to this Agreement to
the Agent or any Bank, and such failure continues
unremedied for a period of three (3) Business Days
after the earlier of (i) notice thereof being given
by the Agent to the Borrower or (ii) such default
otherwise becoming known to the president or chief
financial officer of the Borrower or (y) when due of
any mandatory prepayment under Subsection 2.4(b) or
Subsection 2.4(c).
(b) Representations and Warranties. Any representation or
warranty made by or on behalf of any Company
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contained in this Agreement, the Notes or any of the
Collateral Documents proves to have been incorrect in
any material respect as of the date thereof; or any
representation, statement (including financial
statements), certificate or data furnished or made to
the Agent and the Banks by any Person under this
Agreement, the Notes or any of the Collateral
Documents proves to have been untrue in any material
adverse respect as of the date as of which the facts
therein set forth were stated or certified. For
purposes of this paragraph, to the extent such
representation or warranty pertains to individual
properties, "material" shall mean two hundred
thousand ($200,000.00) dollars or amount of property
with an equivalent value.
(c) Specific Covenants. The Borrower fails to observe or
perform at any time any covenant or agreement
contained in Section 5.6, Section 5.8, Section 5.15,
Section 5.16, Section 5.17, or Article 6 of this
Agreement.
(d) Covenants. The Borrower or other Person (other than
the Agent and the Banks) defaults in the observance
or performance of any of the covenants or agreements
contained in this Agreement, the Notes or any of the
Collateral Documents to be kept or performed by the
Borrower or such Person (other than a default under
Subsections (a) through (c) hereof), and such default
continues unremedied for a period of 30 days after
the earlier of (i) notice thereof being given by the
Agent to the Borrower or such Person, as applicable,
or (ii) such default (and the fact that it is a
default) otherwise becoming known to the president or
chief financial officer of the Borrower or other
Person, as applicable.
(e) Other Debt to Agent or Bank. The Borrower or any
other Company defaults in the payment of any amounts
due to the Agent or any Bank not covered under
Subsection (a) above or in the observance or
performance of any of the covenants, or agreements
contained in any loan agreements, notes, leases,
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collateral or other documents relating to any other
Debt of the Borrower to the Agent or any Bank
(including without limitation any Permitted Hedge
Obligations or other Hedge Agreements) other than the
Indebtedness, and any grace period applicable to such
default has elapsed.
(f) Other Debt to Other Lenders. The Borrower defaults
(x) under the PVOG Production Payment, (y) under any
Qualified Subordinate Debt, or (z) in the payment of
any amounts due to any Person (other than the Agent
and the Banks) or in the observance or performance of
any of the covenants or agreements contained in any
credit agreements, notes, leases, collateral or other
documents relating to any Debt of the Borrower to any
Person (other than the Agent or any Bank) which is
not Indebtedness (including without limitation any
Hedging Obligations) in excess of $50,000.00, and in
each case of clause (x), (y) or (z) any grace period
applicable to such default has elapsed or if the
effect of such default is to cause, or permit the
holder of such obligation to be able to cause
(whether or not so done), such obligation to become
due prior to its stated maturity.
(g) Involuntary Bankruptcy or Receivership Proceedings. A
receiver, conservator, liquidator or trustee of any
Company, or of any of its respective Collateral, is
appointed by order or decree of any court or agency
or supervisory authority having jurisdiction; or an
order for relief is entered against any Company under
the Federal Bankruptcy Code; or any Company is
adjudicated bankrupt or insolvent; or any material
portion of the property of is sequestered by court
order and such order remains in effect for more than
30 days after such party obtains knowledge thereof;
or a petition is filed against any Company under any
reorganization, arrangement, insolvency, readjustment
of debt, dissolution, liquidation or receivership law
of any jurisdiction, whether now or
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hereafter in effect, and such petition is not
dismissed within 60 days.
(h) Voluntary Petitions. Any Company files a case under
the Federal Bankruptcy Code or seeking relief under
any provision of any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect, or consents to
the filing of any case or petition against it under
any such law.
(i) Assignments for Benefit of Creditors. Any Company
makes an assignment for the benefit of its creditors,
or admits in writing its inability to pay its debts
generally as they become due, or consents to the
appointment of a receiver, trustee or liquidator of
any Company or of all or any part of its property.
(j) Undischarged Judgments. Judgment for the payment of
money in excess of $50,000.00 (which is not covered
by insurance) is rendered by any court or other
governmental body against any Company, and such
Company does not discharge the same or provide for
its discharge in accordance with its terms, or
procure a stay of execution thereof within 30 days
from the date of entry thereof, and within said
30-day period or such longer period during which
execution of such judgment shall have been stayed,
appeal therefrom and cause the execution thereof to
be stayed during such appeal while providing such
reserves therefor as may be required under generally
accepted accounting principles.
(k) Attachment. A writ or warrant of attachment or any
similar process shall be issued by any court against
all or any material portion of the property of any
Company, and such writ or warrant of attachment or
any similar process is not released or bonded within
30 days after its entry.
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(l) Condemnation. The Collateral, or any substantial
portion thereof, is condemned or expropriated under
power of eminent domain by any legally constituted
governmental authority.
(m) Invalidity. Any Company shall assert in writing that
any material provision of this Agreement, any Note or
any of the Collateral Documents shall for any reason
be or cease to be valid and binding on such Company
after the Closing Date.
(n) Debt to Operator. On the last day of any calendar
month the Borrower has owed any Operator (not
counting the PVOG Production Payment) the cumulative
amount of $200,000.00 or greater for more than
forty-five consecutive days without the Agent's and
the Required Banks' written consent; provided,
however, such Debt shall not be an Event of Default
and such Company shall not be required to pay any
such account if the amount or validity thereof shall
currently be contested in good faith by appropriate
proceedings diligently conducted and if such Company
shall have set up reserves therefore adequate under
generally accepted accounting principles (provided
that such reserves may be set up under generally
accepted accounting principles) and so long as such
contest proceedings conclusively operate to stay and
prevent the set off or withholding of monies by such
Operator and the sale or seizure of any property
subject to any Lien held by such Operator to satisfy
such account.
(o) Qualified Redeemable Preferred Equity. The Borrower
defaults in the payment of any amounts due under or
in the observance or performance of any of the
covenants or agreements contained in any documents
pertaining to any Qualified Redeemable Preferred
Equity, and any grace period applicable to such
default has elapsed; or any shares of Qualified
Redeemable Preferred Equity shall for any reason
become subject to mandatory redemption by the
Borrower before the fifth anniversary of the date on
which such shares are issued; or any judgment for
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redemption of any shares of Qualified Redeemable
Preferred Equity is rendered by any court or other
governmental body; or if any event or condition
occurs that results in any shares of Qualified
Redeemable Preferred Equity becoming redeemable or
that enables or permits (with or without the giving
of notice, the lapse of time or both) the holder of
any shares of any Qualified Redeemable Preferred
Equity to cause any shares of any Qualified
Redeemable Preferred Equity to be redeemable or to
require the redemption thereof by the Borrower (in
each case after giving effect to any applicable cure
period).
Section 8.2 Remedies. (a) Upon the happening of any Event of
Default specified in the preceding Section (other than Subsections (g) or (h)
thereof), (i) all obligations, if any, of the Banks to make Advances to the
Borrower or issue letters of credit at the request of the Borrower shall
immediately cease and terminate, and (ii) the Agent shall at the direction, or
may with the consent, of the Required Banks by written notice to the Borrower
declare the entire principal amount of all Indebtedness then outstanding
including interest accrued thereon to be immediately due and payable without
presentment, demand, protest, notice of protest or dishonor or other notice of
default of any kind, all of which are hereby expressly waived by the Borrower.
(b) Upon the happening of any Event of Default specified in
Subsections (g) or (h) of the preceding Section, (i) all obligations, if any, of
the Banks to make Advances to the Borrower or issue letters of credit at the
request of the Borrower shall immediately cease and terminate, and (ii) the
entire principal amount of all obligations then outstanding including interest
accrued thereon shall, without notice or action by the Agent and the Banks, be
immediately due and payable without presentment, demand, protest, notice of
protest or dishonor or other notice of default of any kind, all of which are
hereby expressly waived by the Borrower.
(c) In addition to the foregoing, the Agent may exercise any
of the rights and remedies established in the Collateral Documents or avail
itself of any other rights and remedies provided by applicable law, including
without limitation completing and sending the letters described in Subsection
3.1(a)(x). In the event the Agent sends such letters, the Agent agrees that it
shall request such purchasers of production to remit any proceeds net of lease
operating expenses and production taxes. However, the Agent may accept any gross
payments made despite such requests without liability thereunder.
(d) In furtherance of the foregoing, to the extent that any
standby letters of credit are outstanding upon the occurrence of any Event of
Default, the Agent may be written notice to the Borrower require the Borrower to
pay to the Agent immediately on such demand the full undisbursed amount of such
letters of credit to be held by the Agent as collateral for the
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payment of such letters of credit. Such amount shall bear interest from demand
until paid at the Default Rate notwithstanding any interest rate provision to
the contrary in any letter of credit application or agreement between the
Borrower and the Issuing Bank, even if executed after this Agreement.
Section 8.3 Set-Off. Upon the occurrence of any Event of
Default, the Agent and the Banks shall have the right to set-off any funds of
the Borrower or any Company in the possession of the Agent or such Bank
(including without limitation funds in the accounts provided for in Article 5)
against any amounts then due by the Borrower to the Agent or such Bank pursuant
to the Agreement (but the Borrower acknowledges that the Agent may apply funds
in such accounts against any interest, fee or mandatory principal prepayment
amounts then due and payable by the Borrower even without the occurrence of an
Event of Default). The Borrower agrees that any holder of a participation in any
Note may exercise any and all rights of counter-claim, set-off, banker's lien
and other liens with respect to any and all monies owing by Borrower to such
holder as fully as if such holder of a participation were a holder of a note in
the amount of such participation.
Section 8.4 Marshaling. The Companies shall not in any time
hereafter assert any right under any law pertaining to marshaling (whether of
assets or liens) and the Borrower expressly agrees that the Agent may execute or
foreclose upon the Collateral Documents in such order and manner as the Agent,
in its sole discretion, deems appropriate.
ARTICLE 9
THE AGENT
Section 9.1 Appointment and Authorization. (a) Each Bank
irrevocably appoints and authorizes the Agent to receive all payments of
principal, interest, fees and other amounts payable by the Borrower under this
Agreement and to remit same that is payable to the Banks promptly to the Banks,
to disburse the Advances from the Banks, and to take such action and to exercise
such powers under this Agreement, the Notes, and the Collateral Documents as are
delegated to the Agent by the Banks from time to time. The Agent shall promptly
distribute to the Banks upon receipt all payments and prepayments of principal,
interest, fees (except for those fees which by their express terms are payable
on another basis) and other amounts paid by the Borrower under this Agreement
that are payable to the Banks, in proportion to the Banks' Commitments.
Similarly, the Banks shall be obligated to fund Advances in proportion to their
Commitments. If the Agent receives a payment in immediately available funds by
11:00 a.m. (Central Time), the Agent will make available to each Bank on the
same date, by wire transfer of immediately available funds, such Bank's ratable
share of such payment, and if such payment is received after 11:00 a.m. (Central
Time) or in other than immediately available funds, the Agent will make
available to each Bank its ratable share of such payment by wire transfer of
immediately available funds on the next succeeding Business Day (or in the case
of uncollected funds, as soon as practicable after collected). If the Agent
shall not have made a required distribution to the Banks as required
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by the preceding sentence after receiving a payment for the account of such
Banks, the Agent shall pay to each such Bank, on demand, its ratable share of
such payment with interest thereon at the Federal Funds Rate (as defined in the
next sentence) for each day from the date such amount was required to be
disbursed by the Agent until the date repaid to such Bank. The Federal Funds
Rate shall mean, for any day, an interest rate per annum (expressed as a
decimal, rounded upwards, if necessary, to the next higher 1/100 of 1%) equal to
the weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers on such
day, as published 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. (Central Time) on such day
on such transactions received by the Agent from three federal funds brokers of
recognized standing selected by the Agent.
(b) The Agent or the Issuing Bank may resign at any time by
written notice to the Banks and the Borrower. The Agent or the Issuing Bank may
be removed at any time with or without cause by the Required Banks. The
successor Agent or successor Issuing Bank shall be selected by the Required
Banks from among the remaining Banks. If no successor Agent or successor Issuing
Bank has been so appointed by the Required Banks (and approved by the Borrower
as provided below) and has accepted such appointment within thirty (30) days
after such notice of resignation or removal, then the retiring Agent or retiring
Issuing Bank may, on behalf of the Banks and the Borrower, appoint a successor
Agent or successor Issuing Bank from among the remaining Banks. Any successor
Agent or successor Issuing Bank must be approved by the Borrower, which approval
will not be unreasonably withheld, delayed or conditioned. Upon the acceptance
of any appointment as Agent or Issuing Bank by a successor Agent or successor
Issuing Bank, such successor Agent or successor Issuing Bank shall thereupon
succeed to and become vested with all the rights, powers, privileges, and duties
of the retiring Agent or retiring Issuing Bank, and the retiring Agent or
retiring Issuing Bank shall be discharged from its duties and obligations under
this Agreement and the Collateral Documents, except that the retiring Issuing
Bank shall remain the Issuing Bank with respect to any letters of credit
outstanding hereunder on the effective date of its resignation or removal and
the provisions affecting the Issuing Bank with respect to such letters of credit
shall inure to the benefit of the retiring Issuing Bank until the termination of
all such letters of credit. After any retiring Agent's or retiring Issuing
Bank's resignation or removal hereunder as Agent or Issuing Bank, the provisions
of this Article 9 shall inure to its benefit as to any actions taken or omitted
to be taken while it was acting as Agent or Issuing Bank.
(c) Each Bank irrevocably appoints and authorizes the Agent to
hold this Agreement and the Collateral Documents (but not the Notes, which will
be held by the respective Banks), and to take such action and exercise such
powers under this Agreement, the Notes and the Collateral Documents as are
delegated to the Agent by the Banks from time to time. Any requests by the
Borrower for consent by the Banks or waiver or amendment of provisions of this
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Agreement shall be delivered by the Borrower to the Agent, but favorable action
on such requests shall require the approval of the Required Banks or all of the
Banks, as the case may be.
Section 9.2 Agent's Reliance. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it under or in connection with this Agreement, the Notes
or the Collateral Documents, except for its or their own gross negligence or
willful misconduct. Without limiting the generality of the foregoing, the Agent:
(i) may treat the payee of any of the Notes as the holder thereof until the
Agent receives written notice of the assignment or transfer thereof, signed by
such payee and in form satisfactory to the Agent; (ii) may consult with legal
counsel (including counsel for the Borrower), independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the advice of such
counsel, accountants or experts; (iii) makes no warranty or representation to
any Bank and shall not be responsible to any Bank for any statements, warranties
or representations made in or in connection with this Agreement, the Notes and
the Collateral Documents; (iv) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement, the Notes or the Collateral Documents (except
receipt of items expressly required to be delivered to the Agent hereunder), or
to inspect any property (including the books and records) of the Borrower; (v)
shall not be responsible to any Bank for the due execution, legality, validity,
enforce ability, genuineness, sufficiency or value of this Agreement, the Notes
or the Collateral Documents; and (vi) shall incur no liability under or in
respect to this Agreement, the Notes or the Collateral Documents by acting upon
any notice, consent, certificate or other instrument or writing (which may be by
facsimile, telegram, cable or telex) believed by it to be genuine and signed or
sent by the proper party or parties. The Agent shall not have a fiduciary
relationship in respect of any Bank by reason of this Agreement. The Agent shall
not have any implied duties to the Banks, or any obligation to the Banks to take
any action under this Agreement, the Notes, the Collateral Documents or the
Intercreditor Agreement except any actions specifically provided by such
documents to be taken by it.
Section 9.3 Acts by Agent after Default, etc. In the event
that the Agent shall have been notified in writing by any of the Borrower or the
Banks of any Event of Default (or in the event that the officer of the Agent
responsible for the Borrower' account obtains actual knowledge of an Event of
Default), the Agent (i) shall immediately notify the Banks; (ii) shall take such
action and assert such rights under this Agreement as it is expressly required
to do pursuant to the terms of this Agreement with the consent of or direction
by the Required Banks; (iii) may take such other actions and assert such other
rights as it deems advisable, in its discretion, for the protection of the
interests of the Banks pursuant to applicable laws with the consent of the
Required Banks; and (iv) shall inform all the Banks of the taking of action or
assertion of rights pursuant to this Section. Each Bank agrees with the Agent
and the other Banks that the decisions and determinations of the Required Banks
in enforcing this Agreement, the Notes and the Collateral Documents and guiding
the Agent in those matters shall be binding upon all the Banks, including
without limitation authorizing the Agent at the pro rata expense of all the
Banks (to the extent not reimbursed by the Borrower) to retain attorneys to seek
judgment
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on this Agreement, the Notes and the Collateral Documents. Each Bank agrees with
the other Banks that it will not, without the consent of all the other Banks,
separately seek to institute any legal action with respect to the Loan. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder and under any Collateral Document or the Intercreditor
Agreement in accordance with written instructions signed by the Required Banks
(or, where required, all the Banks), and such instructions and any action taken
or failure to act pursuant thereto shall be binding on all of the Banks and on
all of the holders of Notes, provided, however, that the Agent shall not be
required to take any action which exposes the Agent to personal liability or
which is contrary to this Agreement or the Intercreditor Agreement or applicable
law.
Section 9.4 Bank Credit Decision. Each Bank acknowledges that
it has, independently and without reliance upon the Agent or any other Bank and
based on the financial statements referred to herein and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Bank also acknowledges that it will,
independently and without reliance upon the Agent or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement, the Notes and the Collateral Documents. No representation or
warranty, express or implied, is made by the Agent as to the accuracy or
completeness of information provided by the Borrower to the Banks, and the Agent
assumes no responsibility for its accuracy or completeness.
Section 9.5 Agent. The Agent shall have the same rights and
powers under this Agreement, the Notes and the Collateral Documents as any other
Bank and may exercise the same as though it were not the Agent; and the term
"Bank" or "Banks" shall, unless otherwise expressly indicated, include Agent in
its individual capacity. The Agent may accept deposits from, lend money to, act
as trustee under indentures of, and generally engage in any kind of business
with Borrower and its Subsidiaries as if the Agent were not the Agent and
without any duty to account therefor to the Banks. The Banks acknowledge that
Section 3.4 shall govern the relationship among the Secured Parties with respect
to the Secured Liabilities. The Banks acknowledge that the Intercreditor
Agreement shall govern the relationship between the Agent and the Banks and the
Subordinated Holders with respect to loans made by the Subordinated Holders to
the Borrower.
Section 9.6 Assignments and Participations. (a) No Bank may
assign to any other Person any portion of its interests, rights and obligations
under this Agreement (including, without limitation, any portion of its
Commitment or the Loan at the time owing to it and Note held by it) unless each
of the following conditions is or has been satisfied: (i) the Agent has given
its prior written consent (which consent will not be unreasonably withheld),
(ii) the Borrower has given its prior written consent (which consent will not be
unreasonably withheld, and shall not be required upon the occurrence and during
the continuance of an Event of Default), (iii) each such assignment is of a
constant, and not a varying, percentage of all the assigning Bank's rights and
obligations under this Agreement, (iv) the assignment is for a
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Commitment of $5,000,000.00 or more, (v) the parties to such assignment have
executed and delivered to the Agent an Assignment and Acceptance, substantially
in the form of Exhibit B hereto (the "Assignment and Acceptance"), together with
any Note subject to such assignment, one or more signature pages to this
Agreement containing the signature of the assignee, one or more signature pages
to the Intercreditor Agreement (if in effect) containing the signature of the
assignee, and (following the Effective Date, as defined in the applicable
Assignment and Acceptance) payment by the assignee to the Agent for its own
account of an assignment administration fee in the amount of $3,500.00, (vi)
either the assignor or assignee shall have paid the Agent's reasonable costs and
expenses (including without limitation attorneys' fees and expenses) in
connection with the assignment, (vii) the Agent shall have delivered to the
Borrower a fully executed copy of such Assignment and Acceptance, and (viii) the
assignee is (A) a state or national commercial bank located in the United States
or (B) a bank organized under a jurisdiction other than the United States,
provided that such foreign bank has provided the Agent and the Borrower with
accurate and complete signed original forms prescribed by the Internal Revenue
Service certifying as to such Bank's status for purposes of determining
exemption from United States withholding taxes with respect to all payments to
be made to such Bank hereunder, and provided further that such foreign bank
shall not transfer its interests, rights and obligations under this Agreement to
any Affiliate of such foreign bank unless such Affiliate provides the Agent and
the Borrower with the aforesaid tax forms. Upon satisfaction of each of the
foregoing conditions and upon acceptance and notation by the Agent, from and
after the Effective Date specified in each Assignment and Acceptance, which
Effective Date shall be at least five (5) Business Days after the execution
thereof, (x) the assignee thereunder shall be a party hereto and, to the extent
provided in such Assignment and Acceptance, have the rights and obligations of a
Bank, and (y) the assigning Bank shall, to the extent provided in such
assignment, be released from its obligations under this Agreement.
Notwithstanding the foregoing, the restrictions contained above in this
Subsection 9.6(a) shall not apply to assignments to any Federal Reserve Bank,
and the conditions set forth in clauses (i) and (ii) above shall not apply to
assignments by any Bank to any Person which controls, is controlled by, or is
under common control with, or is otherwise substantially affiliated with that
Bank.
(b) Upon its receipt of an Assignment and Acceptance executed
by the parties to such assignment together with any Note subject to such
assignment and the written consent of the Agent and the Borrower to such
assignment, the Agent shall give prompt notice thereof to the Borrower and the
Banks. Within five (5) Business Days after receipt of such notice, the Borrower
at its own expense, shall execute and deliver to the Agent, in exchange for the
surrendered Note, a new Note to the order of such assignee(s) in an amount equal
to the amount assumed by such assignee(s) pursuant to such Assignment and
Acceptance and, if the assigning Bank has retained some portion of its
obligations hereunder, a new Note to the order of the assigning Bank in an
amount equal to the amount retained by it hereunder. Such new Note or Notes
shall be in an aggregate principal amount equal to the aggregate principal
amount of the surrendered Note, shall be dated the effective date of such
Assignment and Acceptance and shall otherwise be in the form of the assigned
Note. The surrendered Note shall be canceled and
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returned to the Borrower. The Agent shall have the right to substitute a revised
Schedule 1 hereto to reflect the respective Commitments following each such
assignment.
(c) Each Bank, without the consent of the Agent or the other
Banks but with the prior written consent of the Borrower (which consent will not
be unreasonably withheld, and shall not be required during the existence and
continuance of an Event of Default), may sell participations to one or more
banks or other financial institutions (and such bank or banks or financial
institution or financial institutions shall be bound by the terms of this
Agreement, including without limitation this Section 9.6) in all or a portion of
the Loan (including its Commitment) under this Agreement; provided, that the
selling Bank shall retain the sole right and responsibility to enforce the
obligations of the Borrower relating to the Loan and that the only rights
granted to the participant pursuant to such participation arrangements with
respect to waivers, amendments or modifications of this Agreement shall be the
right to approve waivers, amendments, or modifications which require the consent
of all of the Banks as provided in Section 10.4 hereof. Notwithstanding the
foregoing, the Borrower's consent shall not be required for any participation
granted to any Federal Reserve Bank.
Section 9.7 Indemnification of the Agent and Issuing Bank. The
Banks ratably (computed by reference to each Bank's respective Commitment) shall
indemnify the Agent, its respective Affiliates, the Issuing Bank, its respective
Affiliates, and the respective shareholders, directors, officers, employees,
agents and counsel of the foregoing (each an "Agent Indemnitee") and hold each
Agent Indemnitee harmless from and against any and all claims (whether
groundless or otherwise), liabilities, losses, damages, costs and expenses of
any kind (including, without limitation, (i) the reasonable fees and
disbursements of counsel and (ii) any expenses for which the Agent has not been
reimbursed by the Borrower as required by this Agreement) which may be incurred
by such Agent Indemnitee arising out of or related to this Agreement or the
transactions contemplated hereby, or the Agent's actions taken hereunder
(including the Agent Indemnitee's own negligence); provided, that no Agent
Indemnitee shall have the right to be indemnified hereunder for such Agent
Indemnitee's own gross negligence or willful misconduct, as determined by a
court of competent jurisdiction, or to the extent that such claim relates to the
breach by such Agent Indemnitee of its obligations under this Agreement. The
foregoing shall survive the termination of this Agreement.
ARTICLE 10
MISCELLANEOUS
Section 10.1 Notices. Any notice or demand which by provision
of this Agreement or any Collateral Document referencing this provision, is
required or permitted to be given by one party to the other party hereunder
shall be given by (i) deposit, postage prepaid, in the mail, registered or
certified mail, or (ii) delivery to a recognized express courier service, or
(iii) delivery by hand, or (iv) by facsimile, in each case addressed (until
another address or addresses is given in writing by such party to the other
party) as follows:
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If to Borrower: GMX Resources Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
If to Agent: Capital One, National Association
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
If to Bank: At the addresses set forth on Schedule 1
hereto.
All notices sent by facsimile transmission shall be deemed received by the
addressee upon the transmitter's receipt of acknowledgment of receipt from the
offices of such addressee (if before 5:00 p.m. on a Business Day; if later, then
on the next Business Day).
Section 10.2 Entire Agreement. This Agreement, the Notes and
the Collateral Documents together with the letter agreement referred to in
Subsection 2.5(d) set forth the entire agreement between the Borrower and the
Agent and the Banks with respect to the Indebtedness, and supersede all prior
written or oral understandings with respect thereto; provided, however, that all
written representations, warranties and certifications made by the Borrower to
the Agent and the Banks with respect to the Indebtedness and the security
therefor shall survive the execution of this Agreement. The Borrower is not
relying on any representation by the Agent or any Bank, and no representation
has been made, that the Agent or any Bank will, at the time of a Default or at
any other time, waive, negotiate, discuss, or take or refrain from taking any
action with respect to such Default.
Section 10.3 Renewal, Extension or Rearrangement. All
provisions of this Agreement relating to the Notes shall apply with equal force
and effect to each and all promissory notes or security instruments hereinafter
executed which in whole or in part represent a renewal, extension for any
period, increase or rearrangement of any part of the Notes.
Section 10.4 Amendment. No amendment or waiver of any
provision of this Agreement or consent to any departure therefrom by the
Borrower or the Banks shall be effective unless the same shall be in writing and
signed by the Borrower, the Agent and the Required
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Banks; provided, that without the written consent of all of the Banks, no
amendment or waiver to this Agreement, any Note or any Collateral Document shall
(i) change the scheduled payment dates or maturity of the Loan, or (ii) change
the principal of or decrease the rate or change the time of payment of interest
or fees or decrease any premium payable with respect to any Note, or change the
currency in which the Loan is to be paid, or (iii) increase the Commitments, or
permit the Borrower to assign its rights hereunder, or add additional borrowers
hereunder, or (iv) release the Borrower, or affect the time, amount or
allocation of any required prepayments, or (v) effect the release of any
Collateral (other than as expressly permitted in the Collateral Documents or
this Agreement) or subordinate the rights of the Agent and the Banks with
respect to Collateral, or (vi) reduce the proportion of the Banks required to
agree on each determination of the Borrowing Base, or on which portion of the
Collateral is Shared Collateral under Section 3.4 or (vii) reduce the proportion
of the Banks or the Required Banks (as applicable) required with respect to any
consent, waiver, determination or change made hereunder, (viii) change the
definition of Required Banks or amend this Section 10.4, or (ix) change any
provisions hereof in a manner that would alter the pro rata sharing of payments
required by Section 2.9 and Section 2.10. No amendment of any provision of this
Agreement relating to the Agent shall be effective without the written consent
of the Agent, and no amendment of any provision of this Agreement relating to
the Issuing Bank issuing letters of credit shall be effective without the
written consent of such Issuing Bank. However, the Agent may waive or reduce
payment of its own fee required under Section 2.5(d) or clause (v) of Subsection
9.6(a) without obtaining the consent of any of the Banks. The Borrower, the
Agent and the Banks agree that no Bank will receive compensation from the
Borrower in order to obtain such Bank's consent to an amendment or waiver in a
greater proportion than that received by any other Bank for the same matter (but
this provision does not restrict fees to the agents for their services in
connection with this Agreement).
Section 10.5 Invalidity. In the event that any one or more of
the provisions contained in this Agreement, the Notes, or the Collateral
Documents shall, for any reason, be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement, the Notes or the Collateral Documents.
Section 10.6 Survival of Agreements. All representations and
warranties of the Borrower herein, and all covenants and agreements herein not
fully performed before the effective date of this Agreement, shall survive such
date.
Section 10.7 Waivers. No course of dealing on the part of the
Agent, any Bank, its respective officers, employees, consultants or agents, nor
any failure or delay by the Agent or any Bank with respect to exercising any of
its rights, powers or privileges under this Agreement, the Notes or the
Collateral Documents, shall operate as a waiver thereof.
Section 10.8 Cumulative Rights. The rights and remedies of the
Agent and the Banks under this Agreement, the Notes and the Collateral Documents
shall be cumulative, and
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the exercise or partial exercise of any such right or remedy shall not preclude
the exercise of any other right or remedy.
Section 10.9 Time of the Essence. Time shall be deemed of the
essence with respect to the performance of all of the terms, provisions and
conditions on the part of the Borrower, and the Agent and the Banks to be
performed hereunder.
Section 10.10 Successors and Assigns; Participants. All
covenants and agreements made by or on behalf of the Borrower in this Agreement,
the Notes and the Collateral Documents shall bind its successors and assigns and
shall inure to the benefit of the Agent and the Banks and their respective
successors and assigns. The Borrower may not assign its rights or obligations
under this Agreement.
Section 10.11 Relationship Between the Parties. The
relationship between the Agent and the Banks, on the one hand, and the Borrower
on the other, shall be solely that of lender and borrower, and such relationship
shall not, under any circumstances whatsoever, be construed to be a joint
venture, joint adventure, or partnership. Neither the Agent nor any Bank has a
fiduciary obligation to the Borrower with respect to this Agreement or the
transactions contemplated hereby.
Section 10.12 Limitation of Liability. This Agreement, the
Notes and the Collateral Documents are executed by officers of the Agent and the
Banks, and by acceptance of the Loan, the Borrower agrees that for the payment
of any claim or the performance of any obligations hereunder resulting from any
default by the Agent or any of the Banks, resort shall be had solely to the
assets and property of the Agent or such Bank, and no shareholder, officer,
employee or agent of the defaulting Agent or Bank shall be personally liable
therefor.
Section 10.13 Titles of Articles, Sections and Subsections.
All titles or headings to articles, sections, subsections or other divisions of
this Agreement or the exhibits hereto are only for the convenience of the
parties and shall not be construed to have any effect or meaning with respect to
the other content of such articles, sections, subsections or other divisions,
such other content being controlling as to the agreement between the parties
hereto.
Section 10.14 Singular and Plural. Words used herein in the
singular, where the context so permits, shall be deemed to include the plural
and vice versa. The definitions of words in the singular herein shall apply to
such words when used in the plural where the context so permits and vice versa.
SECTION 10.15 GOVERNING LAW. THIS AGREEMENT IS, AND THE NOTES
WILL BE, CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE UNITED STATES OF AMERICA (INCLUDING FEDERAL LAW THAT
PERMITS A BANK TO CHARGE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE
WHERE SUCH BANK IS LOCATED) AND THE STATE OF TEXAS. Without limiting the intent
of the
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parties set forth above, (a) Chapter 346 of the Texas Finance Code, as amended
(relating to revolving loans and revolving tri-party accounts (formerly Tex.
Rev. Civ. Stat. ▇▇▇. Art. ▇▇▇▇, ▇▇. 15)), shall not apply to this Agreement, the
Notes, or the transactions contemplated hereby and (b) to the extent that a Bank
may be subject to Texas law limiting the amount of interest payable for its
account, such Bank shall utilize the indicated (weekly) rate ceiling from time
to time in effect, provided that such Bank may also rely, to the extent
permitted by applicable laws including without limitation the laws of the United
States, on alternative maximum rates of interest under other laws applicable to
such Bank for calculation of the Maximum Rate if the application thereof results
in a greater Maximum Rate.
Section 10.16 Counterparts. This Agreement may be executed in
two or more counterparts, and it shall not be necessary that the signatures of
all parties hereto be contained on any one counterpart hereof; each counterpart
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
Section 10.17 WAIVER OF JURY TRIAL; SUBMISSION TO
JURISDICTION. (a) THE BORROWER, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVE
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWER, THE AGENT AND
THE BANKS MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (i) THE
NOTES, (ii) THIS AGREEMENT, (iii) THE COLLATERAL DOCUMENTS OR (iv) THE
COLLATERAL. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF
TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS,
INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. THIS
WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE BORROWER, THE AGENT
AND THE BANKS, AND THE BORROWER, THE AGENT AND THE BANKS HEREBY REPRESENT THAT
NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE
THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE
BORROWER, THE AGENT AND THE BANKS EACH FURTHER REPRESENT THAT IT HAS BEEN
REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAD THE
OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
(b) THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE
NON-EXCLUSIVE JURISDICTION OF THE STATE COURTS OF LOUISIANA AND THE FEDERAL
EASTERN DISTRICT COURT IN LOUISIANA, AND AGREES THAT ANY ACTION OR PROCEEDING
ARISING OUT OF OR BROUGHT TO ENFORCE THE PROVISIONS OF THE NOTES, THIS AGREEMENT
AND/OR THE COLLATERAL DOCUMENTS MAY BE BROUGHT IN ANY COURT HAVING SUBJECT
MATTER JURISDICTION. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTIONS THAT
IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION
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OR PROCEEDING IN ANY SUCH COURT OR THAT ANY SUCH ACTION OR PROCEEDING WAS
BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME. THE
BORROWER AGREES THAT NOTHING HEREIN SHALL LIMIT THE AGENT'S AND THE BANKS' RIGHT
TO ▇▇▇ IN ANY OTHER JURISDICTION.
(c) THE BORROWER HEREBY AGREES THAT SERVICE OF PROCESS IN ANY
SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY BY REGISTERED OR
CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL) POSTAGE PREPAID, TO
THE BORROWER AT ITS ADDRESS SET FORTH IN SECTION 10.1 OR AT SUCH OTHER ADDRESS
AS TO WHICH THE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO. THE BORROWER
AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 10.18 AGREEMENT SUPERCEDES ALL PRIOR AGREEMENTS. THIS
AGREEMENT, TOGETHER WITH THE NOTES, THE COLLATERAL DOCUMENTS, AND ANY OTHER
WRITTEN INSTRUMENTS EXECUTED PURSUANT TO THIS AGREEMENT REPRESENT, COLLECTIVELY,
THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT
HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES AND SHALL SUPERSEDE ANY PRIOR
AGREEMENT BETWEEN THE PARTIES HEREOF, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT HEREOF.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 10.19 Imaging. The Borrower understands and agrees
that the Agent's or a Bank's document retention policy may involve the imaging
of executed loan documents and the destruction of the paper originals, and the
Borrower waives any right that it may have to claim that the imaged copies of
this Agreement and the Collateral Documents are not originals in any court
proceedings pertaining thereto.
Section 10.20 Patriot Act. The Agent and the Banks each hereby
notifies the Borrower that pursuant to the requirements of the Patriot Act, it
is required to obtain, verify and record information that identifies the
Borrower and the other Companies, which information includes the name and
address of the Borrower and other information that will allow the Agent and the
Banks each to identify the Borrower in accordance with the Patriot Act.
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ARTICLE 11
RENEWAL
Section 11.1 No Novation. The Borrower confirms that this
Agreement has been given in renewal and extension of the Indebtedness to the
Banks and the Issuing Bank under the Prior Loan Agreement described in the
Preliminary Statement to this Agreement, and that nothing in this Agreement
shall constitute the satisfaction or extinguishment of the amount owed
thereunder, nor shall it be a novation of the amount owed thereunder.
Section 11.2 No Defenses. The Borrower represents and warrants
that there is no defense, offset, compensation, counterclaim or reconventional
demand with respect to amounts due under, or performance of the terms of, the
prior Note or the Prior Loan Agreement; and to the extent any such defense,
offset, compensation, counterclaim or reconventional demand or other causes of
action might exist, known or unknown, such items are hereby waived by the
Borrower.
Section 11.3 Transition. Until the conditions precedent in
Section 7.1 have been met, the terms of the Prior Loan Agreement shall remain in
full force and effect, and the Borrower may borrow under the terms established
thereunder (but only until and no later than June 30, 2006), so long as all of
the conditions and requirements otherwise established in this Agreement are met.
The Borrower, the Agent and the Banks acknowledge that certain provisions of the
Prior Loan Agreement shall remain pertinent for a time after the effectiveness
of this Agreement, such as the Percentage Outstanding under the Prior Loan
Agreement being used for the determinations of the initial Applicable LIBO Rate
Margin and Applicable Prime Rate Margin, the fee payable under Subsection 2.5(a)
to the Initial Bank, and pertaining to letters of credit issued under the Prior
Loan Agreement which remain outstanding on and after the Closing Date.
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IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be duly executed as of the date first above written.
SECTIONS 2.8, 5.13 AND 5.14 CONTAIN AN INDEMNITY.
BORROWER: GMX RESOURCES INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
Title: Executive Vice President and CFO
AGENT: CAPITAL ONE, NATIONAL ASSOCIATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
BANKS: CAPITAL ONE, NATIONAL ASSOCIATION,
as a Bank
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Vice President
-82-
LIST OF SCHEDULE
1. Commitments of the Banks
LIST OF ADDENDA
1. LIBO Rate Provisions
2. Subordination Terms
LIST OF EXHIBITS
A. Form of Note
B. Form of Assignment and Acceptance
SCHEDULE 1
Effective June 7, 2006
Commitments of the Banks
Name and Address of Bank Commitment of Bank
1. Capital One, National Association $ 60,000,000.00
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
2. Union Bank of California, N.A. $ 40,000,000.00
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
ADDENDUM I
LIBO RATE PROVISIONS
1. The Agent shall determine the interest rate applicable to LIBO Rate
Advances, and its determination shall be conclusive in the absence of manifest
error. The Agent shall endeavor to notify the Borrower prior to the date on
which an interest payment is due, provided that the failure of the Agent to
provide such notice shall not affect the Borrower's obligation to pay interest
on such date.
2. If any applicable law or regulation, or the action of any applicable
regulatory requirement increases the reserves or capital required to be
maintained by any Bank or the Agent with respect to the Loan (including unfunded
commitments and obligations on letter of credit), such Bank or the Agent shall
promptly deliver a certificate to the Borrower specifying the additional amount
as will compensate such Bank or the Agent for the additional costs, which
certificate shall be conclusive in the absence of manifest error. The Borrower
shall pay the amount specified in such certificate promptly upon receipt.
3. If the Agent gives notice to the Borrower that no LIBO bid rate is
quoted to the Agent (or otherwise that adequate and reasonable methods do not
exist for ascertaining the LIBO Rate) for the applicable Interest Period or in
the applicable amounts (which notice shall be conclusive and binding on the
Borrower and the Banks absent manifest error), then (A) the obligation of the
Agent and the Banks to make a LIBO Rate Advance and the ability of the Borrower
to select the LIBO Rate for an Advance shall be suspended, and (B) the Borrower
shall either prepay all LIBO Rate Advances for which an interest rate is to be
determined on such date or the Loan shall thereafter bear interest at the Prime
Rate.
4. If any applicable domestic or foreign law, treaty, rule or
regulation (whether now in effect or hereinafter enacted or promulgated,
including Regulation D of the Board of Governors of the Federal Reserve System)
or any interpretation or administration thereof by any governmental authority
charged with the interpretation or administration thereof (whether or not having
the force of law):
(i) changes the basis of taxation of payments to any Bank or
the Agent or any principal, interest, or other amounts attributable to
any LIBO Rate Advance (other than taxes imposed on the overall net
income of such Bank or the Agent);
(ii) changes, imposes, modifies, applies or deems applicable
any reserve, special deposit or similar requirements in respect of any
such LIBO Rate Advance (excluding those for which such Bank or the
Agent is fully compensated pursuant to adjustments made in the
definition of LIBO Rate) or against assets of, deposits with or for the
account of, or credit extended by, any Bank or the Agent; or
ADDENDUM I
PAGE -2-
(iii) imposes on any Bank or the Agent or the interbank
eurocurrency deposit and transfer market any other condition or
requirement affecting any such LIBO Rate Advance,
and the result of any of the foregoing is to increase the cost to such Bank or
the Agent of funding or maintaining any such LIBO Rate Advance (other than costs
for which such Bank or the Agent is fully compensated pursuant to adjustments
made in the definition of LIBO Rate) or to reduce the amount of any sum
receivable by such Bank or the Agent in respect of any such LIBO Rate advance by
an amount deemed by such Bank or the Agent to be material, then such Bank or the
Agent shall promptly notify the Borrower in writing of the happening of such
event and (1) Borrower shall upon demand pay to such Bank or the Agent such
additional amount or amounts as will compensate such Bank or the Agent for such
additional cost or reduction and (2) Borrower may elect, by giving to the Agent
not less than three Business Days' notice, to change the interest rate
applicable to such Advance, and any other portion of the Loan bearing interest
at the LIBO Rate, to the Prime Rate.
5. Notwithstanding any other provision hereof, if any change in
applicable laws, treaties, rules or regulations or in the interpretation or
administration thereof of or in any jurisdiction whatsoever, domestic or
foreign, shall make it unlawful or impracticable for any Bank to maintain
Advances bearing interest at the LIBO Rate, or shall materially restrict the
authority of any Bank to purchase, sell or take certificates of deposit or
offshore deposits of dollars, then, upon notice by such Bank to Borrower and the
Agent, such Bank's portion of all LIBO Rate Advances which are then outstanding
and which cannot lawfully or practicably be maintained shall immediately cease
to bear interest at the LIBO Rate and shall commence to bear interest at the
Prime Rate. The Borrower agrees to indemnify each Bank and hold it harmless
against all costs, expenses, claims, penalties, liabilities and damages which
may result from any such change in law, treaty, rule, regulation, interpretation
or administration. The Borrower hereby agrees promptly to pay the Agent for the
account of such Bank, upon demand by such Bank, any additional amounts necessary
to compensate such Bank for any costs incurred by such Bank in making any
conversion in accordance with this Paragraph, including any interest or fees
payable by such Bank to lenders of funds obtained by it in order to make or
maintain hereunder its portion of the Loan accruing interest based on the LIBO
Rate.
6. The Borrower will indemnify the Agent and each Bank against, and
reimburse the Agent and each Bank on demand for, any loss or expense incurred or
sustained by the Agent and each Bank (including without limitation, any loss or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by the Agent and each Bank to fund or maintain LIBO Rate
Advances) as a result of (i) any payment or prepayment (whether authorized or
required hereunder or otherwise) of all or a portion of any LIBO Rate Advance on
a day other than the day on which the applicable Interest Period ends, (ii) any
payment or prepayment, whether required hereunder or otherwise, of the LIBO Rate
Advances made after the delivery, but before the effective date, of an election
to have the LIBO Rate apply to LIBO
ADDENDUM I
PAGE -3-
Rate Advance, if such payment or prepayment prevents such election from becoming
fully effective, or (iii) the failure of any LIBO Rate Advance to be made by the
Agent and each Bank or of any such election to become effective due to any
condition precedent to a LIBO Rate Advance not being satisfied or due to any
other action or inaction of Borrower. For purposes of this section, funding
losses arising by reason of liquidation or reemployment of deposits or other
funds acquired by the Agent or any Bank to fund or maintain LIBO Rate Advances
shall be calculated as the remainder obtained by subtracting: (1) the yield
(reflecting both stated interest rate and discount, if any) to maturity of
obligations of the United States Treasury as determined by the Agent or such
Bank in an amount equal or comparable to such advance for the period of time
commencing on the date of the payment, prepayment or change of rate as provided
above and ending on the last day of the subject Interest Period, from (2) the
LIBO Rate of the subject Interest Period, times the number of days from the date
of payment, prepayment or change of rate to the last day of the subject Interest
Period, divided by 360. Any payment due under this paragraph will be paid to the
Agent or such Bank within five days after demand therefor by the Agent or such
Bank.
7. The Borrower covenants and agrees that:
(i) The Borrower will pay, within five days after notice
thereof from Agent (on behalf of itself or any Bank) and on an
after-tax basis, all present and future income, stamp and other taxes,
levies, costs and charges whatsoever imposed, assessed, levied or
collected on or in respect of any LIBO Rate Advance whether or not
legally or correctly imposed, assessed, levied or collected (excluding
taxes, levies, costs or charges imposed on or measured by the overall
net income of the Agent or any Bank) (all such non-excluded taxes,
levies, costs and charges being collectively called "Reimbursable
Taxes"). Promptly after the date on which payment of any Reimbursable
Taxes is due pursuant to applicable law, the Borrower will, at the
request of the Agent, furnish to the Agent evidence in form and
substance satisfactory to the Agent that Borrower has met its
obligation under this paragraph.
(ii) The Borrower will indemnify the Agent and each Bank
against, and reimburse the Agent and each Bank on demand for, any
Reimbursable Taxes paid by the Agent or such Bank and any loss,
liability, claim or expense, including interest, penalties and legal
fees, that the Agent and each Bank may incur at any time arising out of
or in connection with the failure of Borrower to make any payment of
Reimbursable Taxes when due, unless such failure is due to Agent or
such Bank's failure to give notice to Borrower of Borrower's obligation
to pay such Reimbursable Taxes at least five days prior to the date
when they are due. Any payment due under this subsection will be paid
to the Agent or such Bank within five days after demand therefor by the
Agent or such Bank.
ADDENDUM I
PAGE -4-
(iii) All payments on account of the principal of, and
interest on, LIBO Rate Advances and all other amounts payable by
Borrower to the Agent and the Banks hereunder shall be made free and
clear of and without reduction by reason of any Reimbursable Taxes.
(iv) If Borrower is ever required to pay any Reimbursable
Taxes with respect to any LIBO Rate Advance, Borrower may elect, by
giving to the Agent not less than three (3) Business Days' notice, to
change the interest rate applicable to any such advance from the LIBO
Rate to the Prime Rate, but such election shall not diminish Borrower's
obligation to pay all Reimbursable Taxes therefore imposed, assessed,
levied or collected.
ADDENDUM II
APPROVED SUBORDINATION TERMS
----------------------------
Reference is made to the Amended and Restated Loan Agreement, dated as
of June 7, 2006, by and among GMX Resources Inc., as Borrower, the Banks party
thereto, and Capital One, National Association, as Agent (the "Loan Agreement").
Capitalized terms used herein and not defined herein shall have the meanings
assigned to such terms in the Loan Agreement. In the event that the
subordination terms are in connection with a guaranty, the term "Guarantor"
shall be substituted for the term "Borrower".
Following are the subordination terms to be applicable to Indebtedness
or Guarantees permitted pursuant to Section 6.1(h) of the Loan Agreement.
DEFINITIONS
-----------
"Insolvency Event" means any event with respect to the Borrower
described in Sections 8.1(g), 8.1(h) or 8.1(i) of the Loan Agreement.
"Junior Creditors" means any holder of, or obligee under or in respect
of, any Junior Obligations.
"Junior Documents" means (i) [IDENTIFY THE DOCUMENTS CREATING THE
SUBORDINATED INDEBTEDNESS OR SUBORDINATED GUARANTEES], (ii) each agreement,
instrument or other document executed or delivered in connection with the
refinancing of any Junior Obligations, and (iii) each agreement, instrument or
other document executed or delivered in connection with any of the foregoing.
"Junior Liens" means any Liens securing all or any portion of the
Junior Obligations.
"Lien" means any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on jurisprudence, statute or contract, and including without
limitation the lien or security interest arising from a mortgage, pledge,
security agreement, production payment, conditional sale, bond for deed or trust
receipt or a lease, consignment or bailment for security purposes. For the
purposes of this definition, the Borrower shall be deemed to be the owner of any
property which it has accrued or holds subject to a conditional sale agreement,
financing lease or other arrangement pursuant to which title to the property has
been retained by or vested in some other Person for security purposes.
"Junior Obligations" means all of the obligations and liabilities of
the Borrower under the Junior Documents, whether fixed, contingent, now existing
or hereafter arising, created, assumed or incurred, and including any obligation
or liability in respect of any breach of any representation or warranty and in
respect of any rights of repurchase, redemption or rescission.
ADDENDUM II
PAGE -2-
"Remedies" means, with respect to any debt (including without
limitation the Junior Obligations) (i) the acceleration of the maturity of any
such debt, (ii) the exercise of any put right or other similar right to require
the Borrower or any Subsidiary to repurchase any such debt prior to the stated
maturity thereof, (iii) the collection or commencement of proceedings against
the Borrower, any Subsidiary or any other Person obligated on such debt or any
of their respective property, to enforce or collect any such debt, (iv) taking
possession of or foreclosing upon (whether by judicial proceedings or otherwise)
any Liens, or causing a marshaling of any property of the Borrower or any
Subsidiary, (v) the making of a demand and respect of any guaranty given by any
Person of such debt, (vi) exercising any other remedies with respect to such
debt or any claim with respect thereto, or (vii) the taking of any action
against the Borrower, any Subsidiary or any other Person obligated on or for
such debt, or any of their respective assets, pertaining to the terms of the
agreements governing such debt (including documents regarding the Junior Liens).
"Senior Agent" means the Agent.
"Senior Creditors" means any holder of, or obligee under or in respect
of, any Senior Obligations.
"Senior Documents" means (i) the Loan Agreement, (ii) each agreement,
instrument or other document executed or delivered in connection with
refinancing of Senior Obligations, (iii) any Secured Hedge Agreement, and (iv)
each agreement, instrument or other document executed or delivered in connection
with any of the foregoing.
"Senior Liens" means any Liens securing all or any portion of the
Senior Obligations.
"Senior Obligations" means all of the obligations and liabilities of
the Borrower under the Senior Documents, whether fixed, contingent, now existing
or hereafter arising, created, assumed or incurred, and including (i) any
obligation or liability in respect of any breach of any representation or
warranty and in respect of any rights of redemption or rescission and (ii) all
post-petition interest and make-whole premiums, whether or not allowed as a
secured claim or as an unsecured claim in any proceeding, including any
proceeding arising under Title 11 of the United States Code, arising in
connection with an Insolvency Event.
PAYMENT PROVISIONS
------------------
1. Payment Defaults. No payment of Junior Obligations may be
made by the Borrower in the event that the principal of, or interest on, or any
other amount payable in respect of, the Senior Obligations is not paid when due,
whether at maturity or at a date fixed for prepayment or by declaration or
otherwise (a "Payment Default"), unless and until such Payment Default has been
cured or waived or otherwise has ceased to exist.
ADDENDUM II
PAGE -3-
2. Non-Payment Defaults. No payment of Junior Obligations may
be made by the Borrower in the event that an Event of Default other than a
Payment Default (a "Non-Payment Default") has occurred, and has not been cured
or waived, provided that the Senior Agent delivers written notice (a "Blockage
Notice") to the Borrower and to the Junior Creditors directing the Borrower not
to make payment of the Junior Obligations. Notwithstanding the foregoing, unless
(i) the Senior Obligations have been declared due and payable in their entirety
within ninety (90) days after the Blockage Notice is given as set forth above
(the "Blockage Period") and (ii) such declaration has not been rescinded or
waived upon expiration of the Blockage Period, the Borrower will be required to
pay to the Junior Creditors all sums not paid to the Junior Creditors during the
Blockage Period due to the prohibitions of this paragraph (and upon the making
of such payments any acceleration of the Borrower's obligations with regard to
the Junior Obligations which was declared during the Blockage Period because of
the Borrower's failure to make payments due to the prohibitions in this
paragraph will be of no further force or effect) and to resume all other
payments due under the Junior Obligations as and when they are due. Not more
than one Blockage Notice may be given in any consecutive 365 day period,
irrespective of the number of defaults with respect to Senior Obligations that
may occur during such period. In no event may the number of days during which
any Blockage Period is, or Blockage Periods are, in effect exceed 180 days in
the aggregate during any consecutive 365 day period.
3. Insolvency Events. Upon any distribution of assets of the
Borrower as a result of any dissolution, winding up, liquidation or
reorganization (including as a result of an Insolvency Event), all Senior
Obligations must be paid in full in cash before any payment is made on account
of the Junior Obligations.
4. Turn-Over. If the Junior Creditors receive any payments in
respect of the Junior Obligations which they are not entitled to receive
pursuant to the applicable subordination terms, such payment must be delivered
to the Senior Agent on behalf of the holders of the Senior Obligations as their
interests may appear.
LIEN PROVISIONS
---------------
5. Priority. The Senior Liens shall be senior and superior to
the Junior Liens. The foregoing priority shall remain irrespective of
modifications, amendments, renewals or extensions of the Senior Obligations, and
irrespective of any advances made by either party to preserve the collateral or
the priority of their Liens in the Collateral.
6. No Contest. The Junior Creditors shall not contest the
validity, perfection, priority or enforceability of any Lien granted to the
Senior Creditors by the Borrower or its affiliates. The Junior Creditors shall
not contest Remedies actions taken by the Senior Creditors.
7. Standstill. The Junior Creditors shall not exercise any
Remedies in respect of the Junior Liens until ninety (90) days after the first
to occur of (i) the date the Agent receives
ADDENDUM II
PAGE -4-
notice from the Junior Creditors of the occurrence of an Event of Default under
the Junior Obligations or (ii) the Borrower files or consents by answer or
otherwise to the filing against it of a petition for relief or reorganization or
other partition in bankruptcy.
8. Release of Collateral. The Junior Creditors shall agree and
consent in advance to the automatic release of the Junior Liens on any
collateral upon a sale thereof in compliance with the asset sale covenant in the
Senior Documents.
OTHER PROVISIONS
----------------
9. Maturity. The maturity of the Junior Obligations shall be
at least one year after the Maturity Date.
10. Maximum Amount. The maximum aggregate principal amount of
the Junior Obligations outstanding at any time and from time to time, when added
to the total amount of Qualified Redeemable Preferred Equity issued by the
Borrower, shall not exceed twenty five million ($25,000,000.00) dollars.
11. No Cross Default. No Default under the Senior Obligations
shall result in a default under the Junior Obligations, except for a Payment
Default on the Maturity Date. Cross acceleration is permitted.
12. Filing Claims. The Senior Agent shall be irrevocably
authorized to file any required proof of claim if the Junior Creditors fail to
do so in a timely manner.
13. Bankruptcy. The Junior Creditors shall agree and give
advance consent with respect to any of the following actions in any bankruptcy
proceedings of the Borrower: (i) any use of cash collateral approved by the
Senior Creditors, (ii) any court-approved asset sale that is also approved by
the Senior Creditors, so long as the Junior Liens attach to the proceeds of the
sale in accordance with the Lien priorities agreed to in the Intercreditor
Agreement, and (iii) debtor-in-possession financings under which the Liens
securing such debtor-in-possession financing rank prior or equal to the Liens
securing the Senior Obligations.
14. Amendments. No amendment to the subordination provisions
is permitted without the consent of the Senior Agent.
EXHIBIT A
---------
FORM OF NOTE
LINE OF CREDIT NOTE
Borrower: Bank:
-------- ----
GMX Resources Inc. ________________________
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ________________________
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ________________________
________________________
________________________________________________________________________________
Principal Amount: Maturity Date of Note: Date of Note
U.S. $____________ July 29, 2008 June __, 2006
PROMISE TO PAY. GMX RESOURCES INC. ("Borrower"), an Oklahoma corporation,
promises to pay to the order of ("Bank") at the main office in New Orleans,
Louisiana (313 Carondelet Street) of Capital One, National Association
("Agent"), in lawful money of the United States of America, the sum of and
00/100 dollars (U.S. $ ), or such other or lesser amount as from time to time
equals the aggregate unpaid principal balance of loan advances made to Borrower
by Bank on a revolving line of credit basis as provided below, together with
simple interest assessed on the variable rate(s) basis provided below, with
interest being assessed on the unpaid principal balance of this Note as
outstanding from time to time, commencing on the date hereof and continuing
until this Note is paid in full. Interest on Base Rate Advances under this Note
shall be calculated on the basis of a 365 (or in a leap year 366) day year and
the actual number of days elapsed, and on LIBO Rate Advances under this Note
shall be calculated on a 365/360 simple interest basis, that is, by applying the
ratio of the annual interest rate over a year of 360 days, times the outstanding
principal balance, times the actual number of days the principal balance is
outstanding.
LOAN AGREEMENT. This Note is a Note referred to in and executed pursuant to that
certain amended and restated loan agreement dated as of June 7, 2006 among
Borrower, Agent and the banks from time to time party thereto (as amended,
renewed or restated from time to time, the "Loan Agreement"), and is entitled to
the benefits thereof. Unless otherwise defined herein, each capitalized term
used herein shall have the same meaning set forth in the Loan Agreement.
Reference is made to the Loan Agreement for provisions for the acceleration of
the maturity
EXHIBIT A
PAGE -2-
hereof on the occurrence of certain events specified therein, for mandatory
prepayments required of the Borrower in certain circumstances, and for all other
pertinent provisions.
LINE OF CREDIT. This Note evidences revolving line of credit advances that may
be made from time to time to Borrower under the Loan Agreement (including loan
advances arising from draws on standby letters of credit issued thereunder).
Borrower agrees to be liable for all sums either (a) advanced in accordance with
the instructions of an authorized person as specified in the Loan Agreement or
(b) credited pursuant to the Loan Agreement to any of Borrower's deposit
accounts with Agent. The unpaid principal balance owing on this Note at any time
may be evidenced by endorsements on this Note or by Agent's or Bank's internal
records, including daily computer print-outs. Advances shall only be made in
accordance with the terms and conditions of the Loan Agreement.
PAYMENT. Borrower will pay interest on Base Rate Advances at the Base Rate
monthly in arrears on the last day of each successive calendar month, but in no
event greater than the Maximum Rate (as such term is defined in the Loan
Agreement). Borrower will pay interest on LIBO Rate Advances at the applicable
LIBO Rate on the last day of each applicable LIBO Rate Interest Period for each
LIBO Rate Advance, but in no event greater than the Maximum Rate. Borrower will
pay the balance of all outstanding principal on this Note, together with all
accrued but unpaid interest, at the Maturity Date. Borrower will pay Bank at
Agent's address shown above or at such other place as Bank may designate in
writing. All payments and prepayments made by Borrower hereunder shall be made
to Bank, in immediately available funds, before 11:00 a.m. (Central Time) on the
day that such payment is required, or otherwise is, to be made. Any payment
received and accepted by Bank after such time shall be considered for all
purposes (including the calculation of interest to the extent permitted by law)
as having been made on the next following Business Day. Whenever any payment to
be made hereunder falls on a day other than a Business Day, then unless
otherwise provided in the Loan Agreement such payment shall be made on the next
succeeding Business Day (without penalty or default), and such extension of time
shall in each case be included in the calculation of interest. Unless otherwise
agreed or required by applicable law, payments will be applied first to accrued
unpaid interest, then to principal, and any remaining amount to any unpaid
collection costs and late charges.
VARIABLE INTEREST RATES. This Note bears interest on and after the date hereof
to and including the Maturity Date at the variable rate(s) per annum equal to
the Base Rate or LIBO Rate, as selected by Borrower in accordance with the Loan
Agreement, but in no event greater than the Maximum Rate. The interest rate on
this Note is subject to change from time to time based on changes in the Prime
Rate and the LIBO Rate. If the index rate used in determining the Prime Rate
becomes unavailable during the term of this Note, Agent may designate a
substitute index after notice to Borrower. Agent will tell Borrower the Prime
Rate upon Borrower's request. Borrower understands that Bank may make loans
based on other rates as well. The interest rate change will not occur more than
once each day. Under no circumstances will the interest rate on this Note be
more than the Maximum Rate allowed by applicable law. The
EXHIBIT A
PAGE -3-
unpaid principal balance of this Note shall bear interest from and after an
Event of Default or the Maturity Date until paid at the Default Rate from time
to time in effect.
PREPAYMENT. Borrower may prepay this Note in full or in part at any time by
paying the then unpaid principal balance of this Note, plus accrued simple
interest and any unpaid late charges through date of prepayment, subject to
restrictions regarding permitted timing and advance notice set forth in the Loan
Agreement, but without penalty or premium. Borrower may be required to prepay
this Note from time to time in accordance with the Loan Agreement. If Borrower
prepays this Note in full, or if Bank accelerates payment, Borrower understands
that, unless otherwise required by law, any prepaid fees or charges will not be
subject to rebate and will be earned by Bank at the time this Note is signed.
LATE CHARGE. If Borrower fails to pay any payment under this Note in full within
ten (10) days of when due, Borrower agrees to pay Bank a late payment fee in an
amount equal to 5.000% of the delinquent interest due. Late charges will not be
assessed following declaration of default and acceleration of maturity of this
Note.
DEFAULT. If any Event of Default occurs, Agent and Bank shall have all the
rights and remedies (including acceleration of the Maturity Date of this Note)
available to them pursuant to the Loan Agreement or applicable law.
ATTORNEYS' FEES. If Bank refers this Note to an attorney for collection, or
files suit against Borrower to collect this Note, or if Borrower files for
bankruptcy or other relief from creditors, Borrower agrees to pay Agent's and
Bank's reasonable attorneys' fees.
DEPOSIT ACCOUNTS. As collateral security for repayment of this Note and all
renewals and extensions, as well as to secure any and all Indebtedness that
Borrower may now or in the future owe to Agent or any Bank in connection with
the Loan Agreement, Borrower hereby grants Agent for itself and the ratable
benefit of the Banks a continuing security interest in any and all funds that
Borrower may now and in the future have on deposit with Agent or in certificates
of deposit or other deposit accounts as to which Borrower is an account holder
(with the exception of ▇▇▇, pension, and other tax-deferred deposits).
COLLATERAL. This Note is secured by the Collateral and Collateral Documents as
provided in the Loan Agreement.
WAIVERS. Borrower and each guarantor of this Note hereby waive presentment for
payment, protest, notice of protest and notice of nonpayment, and all pleas of
division and discussion, and severally agree that their obligations and
liabilities to Bank hereunder shall be on a "solidary" or "joint and several"
basis. Borrower and each guarantor further severally agree that discharge or
release of any party who is or may be liable to Bank for the indebtedness
represented hereby, or the release of any collateral directly or indirectly
securing repayment hereof, shall not have the effect of releasing any other
party or parties, who shall remain liable to Bank, or of releasing any
EXHIBIT A
PAGE -4-
other collateral that is not expressly released by Bank. Borrower and each
guarantor additionally agree that Bank's acceptance of payment other than in
accordance with the terms of this Note, or Bank's subsequent agreement to extend
or modify such repayment terms, or Bank's failure or delay in exercising any
rights or remedies granted to Bank, shall likewise not have the effect of
releasing Borrower or any other party or parties from their respective
obligations to Bank, or of releasing any collateral that directly or indirectly
secures repayment hereof. In addition, any failure or delay on the part of Bank
to exercise any of the rights and remedies granted to Bank shall not have the
effect of waiving any of Bank's rights and remedies. Any partial exercise of any
rights and/or remedies granted to Bank shall furthermore not be construed as a
waiver of any other rights and remedies; it being Borrower's intent and
agreement that Bank's rights and remedies shall be cumulative in nature. A
waiver or forbearance on the part of Bank as to one event of default shall not
be construed as a waiver or forbearance as to any other default. Borrower and
each guarantor of this Note further agrees that any late charges provided for
under this Note will not be charges for deferral of time for payment and will
not and are not intended to compensate Bank for a grace or cure period, and no
such deferral, grace or cure period has been or will be granted to Borrower in
return for the imposition of any late charge. Borrower recognizes that
Borrower's failure to make timely payment of amounts due under this Note will
result in damages to Bank, including but not limited to Bank's loss of the use
of amounts due, and Borrower agrees that any late charges imposed by Bank
hereunder will represent reasonable compensation to Bank for such damages.
Failure to pay in full any installment or payment timely when due under this
Note, whether or not a late charge is assessed, will remain and shall constitute
an event of default hereunder.
SUCCESSORS AND ASSIGNS LIABLE. Borrower's and each guarantor's obligations and
agreements under this Note shall be binding upon Borrower's and each guarantor's
respective successors, heirs, legatees, devisees, administrators, executors and
assigns. The rights and remedies granted to Bank under this Note shall inure to
the benefit of Bank's successors and assigns, as well as to any subsequent
holder or holders of this Note.
CAPTION HEADINGS. Caption headings of the sections of this Note are for
convenience purposes only and are not to be used to interpret or to define their
provisions. In this Note, whenever the context so requires, the singular
includes the plural and the plural also includes the singular.
WAIVER OF JURY TRIAL. BANK AND BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
BROUGHT BY EITHER BANK OR BORROWER AGAINST THE OTHER.
GOVERNING LAW. THIS NOTE IS A CONTRACT MADE UNDER AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE UNITED STATES OF AMERICA
(INCLUDING FEDERAL LAW THAT PERMITS
EXHIBIT A
PAGE -5-
BANK TO CHARGE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE BANK
IS LOCATED) AND THE STATE OF TEXAS. Without limiting the intent of the parties
set forth above, Chapter 346 of the Texas Finance Code, as amended (relating to
revolving loans and revolving tri-party accounts (formerly Tex. Rev. Civ. Stat.
▇▇▇. Art. ▇▇▇▇, ▇▇. 15)), shall not apply to this Note, or the transactions
contemplated hereby.
AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS. THIS NOTE, AND THE LOAN AGREEMENT AND
THE COLLATERAL DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT BETWEEN
THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES, AND SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE
PARTIES HEREOF, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT HEREOF.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SEVERABILITY. If any provision of this Note is held to be invalid, illegal or
unenforceable by any court, that provision shall be deleted from this Note and
the balance of this Note shall be interpreted as if the deleted provision never
existed.
RENEWAL. This Note is given in renewal of Indebtedness under a prior promissory
note, and nothing in this Note shall constitute the satisfaction or
extinguishment of such Indebtedness, nor shall it be a novation of the amount
owed by Borrower under the Loan Agreement prior to its restatement; rather this
Note merely evidences a replacement of the amounts available to be borrowed by
Borrower from Bank under the Loan Agreement.
USURY SAVINGS. The usury savings provisions set forth in the Loan Agreement
(including the provisions of subparts (iii) and (iv) of Section 2.13 of the Loan
Agreement), are hereby incorporated into this Note by this reference.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER: GMX RESOURCES INC.
By: _____________________________________
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
Title: Executive Vice President & CFO
EXHIBIT A
PAGE -6-
STATE OF OKLAHOMA )
)
) SS:
)
COUNTY OF OKLAHOMA )
BEFORE ME, the undersigned Notary Public duly commissioned
qualified and sworn within and for the State and County written above,
personally came and appeared ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇., to me personally known, and
who being by me duly sworn, did say that he is the authorized Executive Vice
President & CFO of GMX Resources Inc., whose name is subscribed to the foregoing
Line of Credit Note and that he executed the foregoing Line of Credit Note by
authority of said corporation's board of directors on behalf of said
corporation.
THUS DONE AND SIGNED before me and the two undersigned
witnesses in the County and State aforesaid, on this ____ day of June, 2006.
Witness my hand and official seal.
WITNESSES:
_____________________ ___________________________________
Name: Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
_____________________
Name:
___________________________________
NOTARY PUBLIC
Seal
My Commission expires:_____________
Commission number: ________________
EXHIBIT B
---------
FORM OF ASSIGNMENT AND ACCEPTANCE
Dated Effective ____________, 200
Reference is made to the Amended and Restated Loan Agreement
dated effective as of June 7, 2006, as the same may be amended, modified or
supplemented from time to time (as so amended, modified or supplemented from
time to time, the "Agreement"), among GMX Resources Inc., as Borrower, Capital
One, National Association, as Agent, and the banks party thereto (the "Banks").
Capitalized terms which are used herein without definition and which are defined
in the Agreement shall have the same meanings herein as in the Agreement.
__________________(the "Assignor") and ___________________(the
"Assignee") agree as follows:
1. Assignment. The Assignor hereby sells and assigns, without
recourse, to the Assignee, and the Assignee hereby purchases and assumes,
without recourse, from the Assignor, as of the Effective Date (as hereinafter
defined) a ___% interest in and to all the Assignor's rights and obligations
under the Agreement (including, without limitation, its Commitment, the Loan
currently owing to it and the Note held by it and the related participations in
respect of issued letters of credit).
2. Concerning the Assignor. The Assignor (i) represents that
as of the date hereof, its Commitment percentage (without giving effect to
assignments thereof which have not yet become effective) is ___%, and the
outstanding balance of its Loan (unreduced by any assignments thereof which have
not yet become effective) is $_____________; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Agreement or any other instrument or document furnished pursuant thereto,
other than that it is the legal and beneficial owner of the interest being
assigned by it hereunder and that such interest is free and clear of any adverse
claim; (iii) makes no representation or warranty and assumes no responsibility
with respect to the financial condition of the Borrower or the performance or
observance by the Borrower of any of its obligations under the Agreement, the
Note, or any Collateral Document or any other instrument or document furnished
pursuant thereto; and (iv) attaches the Note delivered to it under the Agreement
and requests that the Borrower exchange such Note for a new Note payable to each
of the Assignor and the Assignee as follows:
EXHIBIT B
PAGE -2-
Notes Payable to
the Order of: Amount of Note
---------------- --------------
[Name of Assignor] [Note ($ )]
[Name of Assignee] [Note ($ )]
3. Concerning the Assignee. The Assignee (i) represents and
warrants that it is legally authorized to enter into this Assignment and
Acceptance; (ii) confirms that it has received a copy of the Agreement, together
with copies of the financial statements referred to therein and the most recent
financial statements delivered pursuant thereto and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (iii) agrees that it
will, independently and without reliance upon the Assignor, the Agent or any
other Banks and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Agreement; (iv) appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers under the
Agreement and the Note as are delegated to the Agent by the terms thereof,
together with such powers as are reasonably incidental thereto; (v) agrees that
it will perform in accordance with their terms all the obligations which the
Agreement, the Note, and the Collateral Documents require are to be performed by
it as a Bank; and (vi) attaches any U.S. Internal Revenue Service forms required
under Section 9.6(a)(viii)(B) of the Loan Agreement.
4. Substitution. The Assignee shall deliver to the Agent one
or more signature pages to the Loan Agreement, and one or more signatures to the
Intercreditor Agreement (if in effect), in each case containing the signature of
the Assignee. The Assignee's address for notices to be given under the Loan
Agreement, and to be noted on the revised Schedule 1 to the Loan Agreement, is:
_____________________
_____________________
_____________________
Facsimile Number:_____________________
5. Effective Date. The effective date for this Assignment and
Acceptance shall be __________________ (the "Effective Date") (which Effective
Date shall be at least five (5) Business Days after the execution of this
Assignment and Acceptance). Following the execution of this Assignment and
Acceptance, it will be delivered to the Agent for acceptance together with the
Agent's fee and reasonable expenses as required by Loan Agreement Section
9.6(a)(v) and (vi).
EXHIBIT B
PAGE -3-
6. Obligations. Upon such acceptance and recording, from and
after the Effective Date, (i) the Assignee shall be a party to the Agreement
and, to the extent provided in this Assignment and Acceptance, have the rights
and obligations of a Bank thereunder, and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Agreement, other than confidentiality
requirements.
7. Payments. Upon such acceptance and recording, from and
after the Effective Date, the Agent shall make all payments in respect of the
interest assigned hereby (including payments of principal, interest and other
amounts) to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments for periods prior to the Effective Date (such as accrued
interest and fees up to but excluding the Effective Date) or with respect to the
making of this assignment directly between themselves.
8. GOVERNING LAW. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
THE REST OF THIS PAGE IS LEFT BLANK INTENTIONALLY.
EXHIBIT B
PAGE -4-
9. Counterparts. This Assignment and Acceptance may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed taken together shall
constitute one and the same instrument.
[NAME OF ASSIGNOR]
By:
------------------------------------
Name:
Title:
Date:
[NAME OF ASSIGNEE]
By:
------------------------------------
Name:
Title:
Date:
Each of the undersigned hereby consents to the assignment
contemplated by this Assignment and Acceptance.
GMX RESOURCES INC.
By:
------------------------------------
Name:
Title:
Date:
CAPITAL ONE, NATIONAL ASSOCIATION,
as Agent
By:
------------------------------------
Name:
Title:
Date: