1
EXHIBIT 6.1
================================================================================
CREDIT AGREEMENT
BETWEEN
COMPASS BANK
AND
▇▇▇▇▇▇▇ RESOURCES COMPANY, INC.
December 24, 1997
------------------------------------
REVOLVING LINE OF CREDIT OF UP TO $10,000,000
-------------------------------------
================================================================================
2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS.....................................................................................1
SECTION 1.1 Definitions...............................................................1
ARTICLE II
COMMITMENT TO LEND.............................................................................12
SECTION 2.1 Commitment...............................................................12
SECTION 2.2. Method of Borrowing and Obtaining Letters of Credit......................12
SECTION 2.3. Note.....................................................................13
SECTION 2.4. Certain Payments and Prepayments of Principal............................13
SECTION 2.5 Interest.................................................................13
SECTION 2.6 Commitment, Engineering, Facility and Letter of Credit Fees;
Authorized Payments by Lender............................................13
SECTION 2.7. Termination of Revolving Commitment......................................14
SECTION 2.8. Determination of Borrowing Base; Automatic Reductions in Borrowing Base;
Borrowing Base Deficiency................................................14
ARTICLE III
GENERAL PROVISIONS.............................................................................15
SECTION 3.1 General Provisions as to Payments and Loans..............................15
SECTION 3.2. Computation of Interest..................................................16
SECTION 3.3. Overdue Principal and Interest...........................................16
ARTICLE IV
COLLATERAL.....................................................................................16
SECTION 4.1 Security.................................................................16
ARTICLE V
CONDITIONS PRECEDENT TO LOAN...................................................................16
SECTION 5.1. All Loans and Letters of Credit..........................................16
SECTION 5.2 In the case of the initial Loan..........................................17
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BORROWER.................................................19
SECTION 6.1 Existence and Power......................................................19
SECTION 6.2 Corporate and Governmental Authorization; Contravention..................19
SECTION 6.3 Binding Effect...........................................................19
i
3
SECTION 6.4 Subsidiaries............................................................20
SECTION 6.5 Disclosure..............................................................20
SECTION 6.6 Financial Information...................................................20
SECTION 6.7 Litigation..............................................................20
SECTION 6.8 Compliance with ERISA...................................................20
SECTION 6.9 Taxes and Filing of Tax Returns.........................................21
SECTION 6.10 Title to Properties; Liens; Environmental Liability.....................21
SECTION 6.11 Business; Compliance....................................................21
SECTION 6.12 Licenses, Permits, Etc..................................................21
SECTION 6.13 Compliance with Law.....................................................21
SECTION 6.14 Governmental Consent....................................................22
SECTION 6.15 Investment Company Act..................................................22
SECTION 6.16 Public Utility Holding Company Act; State Utility.......................22
SECTION 6.17 Refunds; Certain Contracts. ...........................................22
SECTION 6.18 No Default..............................................................22
ARTICLE VII
COVENANTS......................................................................................22
SECTION 7.1 Use of Proceeds and Letters of Credit...................................22
SECTION 7.2 Financial Statements; Reserve Reports;
Compliance Certificates; Certain Notices................................23
SECTION 7.3 Inspection of Properties and Books......................................25
SECTION 7.4 Maintenance of Security; Insurance; Operating
Accounts; Transfer Orders...............................................25
SECTION 7.5 Payment of Taxes and Claims.............................................26
SECTION 7.6 Payment of Debt; Additional Debt........................................26
SECTION 7.7 Liens...................................................................26
SECTION 7.8 Loans and Advances to Others; Investments;
Restricted Payments.....................................................26
SECTION 7.9 Consolidation, Merger, Maintenance, Change of Control; Disposition
of Property; Restrictive Agreements; Hedging Agreements.................27
SECTION 7.10 Primary Business; Location of Borrower's Office; Ownership of Assets....28
SECTION 7.11 Operation of Properties and Equipment; Changes to Certain Contracts.....28
SECTION 7.12 Transactions with Affiliates............................................29
SECTION 7.13 Plans...................................................................29
SECTION 7.14 Compliance with Laws and Documents......................................29
SECTION 7.15 Certain Financial Covenants.............................................29
SECTION 7.16 Additional Documents; Quantity of Documents; Title Data; Additional
Information.............................................................30
ii
4
SECTION 7.17 ENVIRONMENTAL INDEMNIFICATION...........................................31
SECTION 7.18 Exceptions to Covenants.................................................32
ARTICLE VIII
DEFAULTS; REMEDIES.............................................................................32
SECTION 8.1 Events of Default; Acceleration of Maturity..............................32
SECTION 8.2 Suits for Enforcement....................................................34
SECTION 8.3 Remedies Cumulative......................................................34
SECTION 8.4 Remedies Not Waived......................................................34
ARTICLE IX
MISCELLANEOUS..................................................................................35
SECTION 9.1 Amendments and Waivers...................................................35
SECTION 9.2 Highest Lawful Interest Rate.............................................35
SECTION 9.3 INDEMNITY................................................................35
SECTION 9.4 Expenses.................................................................36
SECTION 9.5 Taxes....................................................................37
SECTION 9.6 Notices..................................................................37
SECTION 9.7 Right of Set-Offs........................................................37
SECTION 9.8 Survival.................................................................38
SECTION 9.9 Successors and Assigns: Rights of Other Holders..........................38
SECTION 9.10 Applicable Law; Venue; Waiver of Jury Trial.............................38
SECTION 9.11 Headings................................................................39
SECTION 9.12 Counterparts............................................................39
SECTION 9.13 Invalid Provisions, Severability........................................39
SECTION 9.14 Revolving Loan..........................................................39
SECTION 9.15 Preclusion of Oral Agreements...........................................40
FORM OF PROMISSORY NOTE
FORM OF NOTICE OF BORROWING
FORM OF COMPLIANCE CERTIFICATE
FORM OF OFFICER'S CORPORATE CERTIFICATE
iii
5
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is entered into as of December 24, 1997, by and
between ▇▇▇▇▇▇▇ RESOURCES COMPANY, INC., a Utah corporation, and COMPASS BANK, a
Texas banking association.
RECITALS:
▇. ▇▇▇▇▇▇▇ Resources Company, Inc. ("▇▇▇▇▇▇▇") is indebted to Endowment
Energy Partners, L.P., a Delaware limited partnership ("EEP"); and
▇. ▇▇▇▇▇▇▇ desires to refinance its indebtedness to EEP and to provide
for additional credit facilities;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. The following terms, as used herein, have the
following meanings:
"Acceptable Hedging Agreements" means Hedging Agreements meeting all
the following criteria:
(a) The quantity of hydrocarbons owned by the Borrower subject to
Hedging Agreements shall not be greater than 75% of the monthly production of
the Collateral forecast in the Lender's most recent engineering evaluation
delivered to the Borrower, without the prior written approval of the Lender;
(b) The "strike prices" under any Hedging Agreements shall not be less
than the lowest prices utilized in the Lender's most recent base case evaluation
of the Collateral reported to the Borrower, except that under certain downside
conditions such lower strike price as the Lender may approve in writing
following a written request by the Borrower;
(c) The Lender must have given its written consent to the
counter-parties under the Hedging Agreements; and
(d) The Lender shall have received first and prior perfected security
interests pursuant to security agreements in form and substance reasonably
satisfactory to the Lender in and to the Hedging Agreements.
1
6
"Affiliate" means any Person directly or indirectly controlling, or
under common control with, the Borrower and includes any Subsidiary of the
Borrower and any "affiliate" of the Borrower within the meaning of Reg.
Section 240.12b-2 of the Securities Exchange Act of 1934, as amended, with
"control," as used in this definition, meaning possession, directly or
indirectly, of the power to direct or cause the direction of management,
policies or action through ownership of voting securities, contract, voting
trust, or membership in management or in the group appointing or electing
management or otherwise through formal or informal arrangements or business
relationships. The term "Affiliate" shall include Affiliates of Affiliates (and
so on).
"Agreement" means this Credit Agreement, as the same may hereafter be
modified or amended from time to time.
"Borrower" means ▇▇▇▇▇▇▇ Resources Company, Inc., a Utah corporation.
"Borrowing Base" means the amount most recently determined and
designated by the Lender as the Borrowing Base in accordance with Section
2.8(a), but in no event in excess of the Commitment Amount, as such Borrowing
Base is reduced in accordance with Section 2.8(b). The Borrowing Base under
Section 2.8(a) is deemed to be $1,100,000 as of the Closing Date.
"Borrowing Base Deficiency" means, as of the date of determination, the
amount, if any, by which the outstanding principal balance of the Loans exceeds
the Borrowing Base.
"Business Day" means any day (other than Saturdays and Sundays) on
which the Lender is open for general banking business in Dallas, Texas.
"CBIR Rate" means, on any day, the prime rate as published in The Wall
Street Journal's "Money Rates" table for such day. If multiple prime rates are
quoted in such table, then the highest prime rate quoted therein shall be the
CBIR Rate. In the event that a prime rate is not published in The Wall Street
Journal's "Money Rates" table, the Lender will choose a substitute CBIR Rate,
for purposes of calculating the interest rate applicable hereunder, which is
based on comparable information, until such time as a prime rate is published in
The Wall Street Journal's "Money Rates" table. Each change in the CBIR Rate
shall become effective without notice to the Borrower on the effective date of
each such change.
"Change of Management Event" means the departure, mental incapacity or
material reduction in authority or responsibility of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as
President of the Borrower, and the failure of the Borrower to promptly elect a
replacement for him satisfactory to the Lender in the Lender's reasonable
judgement; provided that, if until such replacement is elected, the Borrower's
existing operating superintendent serves as chief operating officer of the
Borrower then the Borrower shall have up to 120 days to elect such replacement.
"Closing" means the consummation of the transactions contemplated
herein.
"Closing Date" means the date of this Agreement.
2
7
"Collateral" means the Property pledged to the Lender as security for
the Note.
"Collateral Value" means, with respect to any Property, the positive
dollar amount which such Property contributed to the most recently determined
Borrowing Base.
"Commitment Amount" means the amount of $10,000,000.
"Commonly Controlled Entity" means any Person which is under common
control with the Borrower within the meaning of Section 4001 of ERISA.
"Compliance Certificate" means a certificate, substantially in the form
attached hereto entitled "Form of Compliance Certificate", executed by a
Responsible Officer of the Borrower and furnished to the Lender from time to
time in accordance with Section 7.2(a).
"Debt" of any Person means at any date, without duplication:
(a) all obligations of such Person for money borrowed, including,
without limitation, (i) the obligations of such Person for money borrowed by a
partnership of which such Person is a general partner, (ii) obligations which
are secured in whole or in part by the Property of such Person, and (iii) any
obligations of such Person in respect of letters of credit and repurchase
agreements;
(b) all obligations of such Person evidenced by notes, debentures,
bonds or similar instruments;
(c) all obligations of such Person to pay the deferred purchase price
of Property or services (except trade accounts arising in the ordinary course of
business if interest is not paid or accrued thereon);
(d) all obligations of such Person as lessee under capital leases,
other than usual and customary oil and gas leases; and
(e) all Guarantees by such Person of Debt of another Person.
"Default" means the occurrence of an Event of Default or any event
which with notice, lapse of time or both would, unless cured or waived, become
an Event of Default.
"Default Rate" means a per annum interest rate equal to the CBIR Rate
plus five percent (5.0%), but in no event exceeding the Highest Lawful Rate.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"Environmental Laws" means: any law, statute, regulation, order or rule
promulgated by any Governmental Authority, whether local, state or federal
relating to air pollution, water pollution,
3
8
noise control and/or transporting, storing, handling, discharge, disposal or
recovery of on-site or off-site hazardous substances or materials, as each of
the foregoing may be amended from time to time.
"Environmental Liability" means any claim, demand, obligation, cause of
action, accusation, allegation, order, violation, damage, injury, judgment,
penalty or fine, cost of enforcement, cost of remedial action or any other cost
or expense whatsoever, including reasonable attorneys, fees and disbursements,
resulting from the violation or alleged violation of any Environmental Law or
the imposition of any Environmental Lien.
"Environmental Lien" means a Lien in favor of a Tribunal or other
Person (i) for any liability under an Environmental Law or (ii) for damages
arising from or costs incurred by such Tribunal or other Person in response to a
release or threatened release of hazardous or toxic waste, substance or
constituent into the environment.
"Equity Infusions" shall mean the net proceeds received by the Borrower
from any stock or other equity interests issued by the Borrower plus any other
capital contributions to the Borrower.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, together with all presently effective and future regulations issued
pursuant thereto.
"ERISA Group" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Event of Default" has the meaning stated in Section 8.1 hereof.
"Floating Rate" means a per annum interest rate equal to the sum of the
CBIR Rate from time to time in effect plus zero percent (plus 0%), but in no
event exceeding the Highest Lawful Rate.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the American Institute of Certified
Public Accountants acting through its Accounting Principles Board or by the
Financial Accounting Standards Board or through other appropriate boards or
committees thereof. Any accounting principle or practice required to be changed
by the Accounting Principles Board or Financial Accounting Standards Board (or
other appropriate board or committee of such Boards) in order to continue as a
generally accepted accounting principle or practice may be so changed. In the
event of a change in GAAP, the Loan Papers shall continue to be construed in
accordance with GAAP as in existence on the date hereof.
"Governmental Authority" means any nation, country, commonwealth,
territory, government, state, county, parish, municipality, or other political
subdivision and any entity exercising executive, legislative, judicial,
regulatory, or administrative functions of or pertaining to government.
4
9
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, to make reimbursement in connection with any letter-of-credit or to
maintain financial statement conditions, by "comfort letter" or other similar
undertaking of support or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Debt or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part). The term "Guarantee" includes the pledging or other
encumbrance of assets by a Person to secure the obligations of another Person
and restrictions or limitations on a Person or its assets agreed to in
connection with the obligations of another Person, but does not include
endorsements for collection or deposit in the ordinary course of business; and
"Guaranteed" by a Person shall mean the act or condition of providing a
Guarantee by such Person or permitting a Guarantee of such Person to exist.
"Hedging Agreement" means (i) any interest rate or currency swap, rate
cap, rate floor, rate collar, forward agreement, or other exchange or rate
protection agreement or any option with respect to any such transaction and (ii)
any swap agreement, cap, floor, collar, exchange transaction, forward agreement,
or other exchange or protection agreement relating to hydrocarbons or any option
with respect to any such transaction.
"Highest Lawful Rate" means the maximum non-usurious interest rate, if
any (or, if the context so requires, an amount calculated at such rate), that at
any time or from time to time may be contracted for, taken, reserved, charged,
or received under applicable laws of the State of Texas or the United States of
America, whichever authorizes the greater rate, as such laws are presently in
effect or, to the extent allowed by applicable law, as such laws may hereafter
be in effect and which allow a higher maximum non-usurious interest rate than
such laws now allow. To the extent the laws of the State of Texas are applicable
for the purpose of determining the "Highest Lawful Rate", such term shall mean
the "weekly ceiling" from time to time in effect as referred to and defined in
Chapter 1D, Title 79, Revised Civil Statutes of Texas, 1925, as amended. The
determination of the Highest Lawful Rate shall, to the extent required by
applicable law, take into account as interest paid or contracted for any and all
relevant payments or charges under the Loan Documents.
"Insolvency Proceeding" of any Person means application (whether
voluntary or instituted by another Person) for or the consent to the appointment
of a receiver, trustee, conservator, custodian, or liquidator of such Person or
of all or a substantial part of the Property of such Person, or the filing of a
petition (whether voluntary or instituted by another Person) commencing a case
under Title 11 of the United States Code, seeking liquidation, reorganization,
or rearrangement or taking advantage of any bankruptcy, insolvency, debtor's
relief, or other similar law of the United States, the State of Texas, or any
other jurisdiction.
"Intangible Assets" of any Person means those assets of such Person
which are (i) deferred assets, other than prepaid insurance and prepaid taxes,
(ii) Intellectual Property, (iii) goodwill,
5
10
experimental expenses and other assets which would be classified as intangible
assets on a balance sheet of such Person, prepared in accordance with GAAP, (iv)
unamortized debt discount and expenses, (v) assets located, and notes and
receivables due from obligors domiciled, outside of the United States of America
and (vi) costs in excess of fair value of the net assets acquired.
"Intellectual Property" means all patents, patent applications,
trademarks, trade names, franchise agreements, license agreements, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, logos, formulae, recipes, trade secrets, other source and
business identifiers, copyrights and the like.
"Investment" in any Person shall mean any stock, bond, note, or other
evidence of Debt, or any other security (other than current trade and customer
accounts) of, investment or partnership interest in or loan or advance to, such
Person.
"Lender" means Compass Bank, a Texas banking association, and its
successors and assigns.
"L/C Exposure" shall mean, at any time, the aggregate maximum amount
available to be drawn under outstanding Letters of Credit at such time.
"Letter of Credit" means any letter of credit issued pursuant to this
Agreement.
"Letter of Credit Application" shall mean the standard letter of credit
application employed by the Lender from time to time in connection with letters
of credit.
"Letter of Credit Fee" shall mean each fee payable to the Lender by the
Borrower in connection with the issuance of a Letter of Credit.
"Lien" means, as to any Person, any mortgage, lien, pledge, adverse
claim, charge, security interest, negative pledge or other encumbrance in or on,
or any interest or title of any vendor, lessor, lender or other secured party to
or of the Person under any conditional sale or other title retention agreement
or capital lease with respect to, any property or asset of the Person, or the
signing or filing of a financing statement which names the Person as debtor, or
the signing of any security agreement authorizing any other Person as the
secured party thereunder to file any financing statement.
"Loan" means a loan made, deemed made in connection with the payment
by the Lender on any Letter of Credit or to be made by the Lender to the
Borrower pursuant to this Agreement or the aggregate outstanding amount of all
such loans, as the context may require.
"Loan Documents" or "Loan Papers" shall mean this Agreement, the Note,
the Letter of Credit Applications, the Security Instruments, and all other
documents and instruments now or hereafter delivered pursuant to the terms of or
in connection with this Agreement, the Note, the Letter of Credit Applications,
or the Security Instruments, and all renewals and extensions of, amendments and
supplements to, and restatements of, any or all of the foregoing from time to
time in effect.
6
11
"Loan Papers". See Loan Documents.
"Material Adverse Effect" shall mean, with respect to any Person, (i)
any material adverse effect on the business, operations, properties, condition
(financial or otherwise), or prospects of such Person, (ii) any material adverse
effect upon the business operations, properties, condition (financial or
otherwise), or prospects of such Person which increases the risk that any of the
Debt of such Person will not be repaid as and when due, or (iii) any material
adverse effect upon the Collateral or the priority or enforceability of the
Liens securing the Note. Unless otherwise specified, the "Person" referred to in
this definition shall be deemed to be the Borrower.
"Material Agreement" means, with respect to any Person, any material
written or oral agreement, contract, commitment, or understanding to which such
Person is a party, by which such Person is directly or indirectly bound, or to
which any Property of such Person may be subject, which is not cancellable by
such Person upon notice of 90 days or less without (i) liability for further
payment other than nominal penalty or (ii) forfeiture of valuable Property.
"Margin Regulations" means Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System, as in effect from time to time.
"Mortgages" mean deeds of trust, mortgages, assignments of production,
security agreements, collateral mortgages, and acts of pledge in form and
substance acceptable to the Lender to be executed by the appropriate Person
pursuant to which the Lender is granted a first and prior Lien on the
Collateral, subject only to Permitted Liens.
"Note" means the promissory note of the Borrower (and any renewal or
extension thereof) evidencing the obligation of the Borrower to repay the Loans,
substantially in the form attached hereto entitled "Form of Promissory Note",
with appropriate insertions.
"Notice of Borrowing" has the meaning given such term in Section 2.2
and shall be substantially in the form of attached hereto entitled "Form of
Notice of Borrowing."
"Obligations" shall mean, without duplication, (i) all Debt evidenced
by the Note, (ii) the Reimbursement Obligations, (iii) the undrawn, unexpired
amount of all outstanding Letters of Credit, (iv) the obligation of the Borrower
for the payment of the fees payable hereunder or under the other Loan Documents,
and (v) all other obligations and liabilities of the Borrower to the Lender, now
existing or hereafter incurred, under, arising out of or in connection with any
Loan Document, and to the extent that any of the foregoing includes or refers to
the payment of amounts deemed or constituting interest, only so much thereof as
shall have accrued, been earned and which remains unpaid at each relevant time
of determination.
"Officer's Certificate" means as to the Borrower a certificate signed
by a Responsible Officer.
7
12
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Indebtedness" means (i) the Obligations, (ii) unsecured
accounts payable incurred in the ordinary course of business, which are not
unpaid in excess of 120 days beyond invoice date or are being contested in good
faith and as to which such reserve as is required by GAAP has been made and on
which interest charges are not paid or accrued, or (iii) unsecured accounts
payable owed to insurance companies for insurance contracts maintained by
Borrower in its ordinary course of business.
"Permitted Investments" means investments in (i) indebtedness,
evidenced by notes maturing not more than 180 days after the date of issue,
issued or guaranteed by the government of the United States of America, (ii)
certificates of deposit maturing not more than 180 days after the date of issue,
issued by commercial banking institution each of which is a member of the
Federal Reserve System and which has combined capital and surplus and undivided
profits of not less than $50,000,000, (iii) commercial paper, maturing not more
than 90 days after the date of issue, issued by (a) the Lender (or any parent
corporation of the Lender) or (b) a corporation (other than an Affiliate of the
Borrower) with a rating of "P1" (or its then equivalent) according to ▇▇▇▇▇'▇
Investors Service, Inc., "A-1" (or its then equivalent) according to Standard &
Poor's Corporation or "F-1" (or its then equivalent) according to Fitch's
Investors Services, Inc. or (iv) such other instruments, evidences of
indebtedness or investment securities as the Lender may approve.
"Permitted Liens" means, with respect to any Property,
(a) Liens in favor of the Lender;
(b) the following, if the validity and amount thereof are being
contested in good faith and by appropriate legal proceedings and so long as (i)
levy and execution thereon have been stayed and continue to be stayed, (ii) they
do not in the aggregate materially detract from or threaten the value of the
asset, or materially impair the use thereof in the operation of the Borrower's
business, and (iii) a reserve therefor, if appropriate, has been established:
claims and Liens for Taxes due and payable; claims and Liens upon and defects of
title to real and personal property, including any attachment of personal or
real property or other legal process prior to adjudication of a dispute on the
merits; claims and Liens of mechanics, materialmen, warehousemen, or carriers,
or similar Liens; and adverse judgments on appeal;
(c) Liens for Taxes not past due;
(d) mechanics' and materialmen's Liens for services or materials for
which payment is not past due;
(e) operators' Liens incurred pursuant to operating agreements entered
into by the Borrower in the ordinary course of business which secure obligations
not past due; and
8
13
(f) Liens in favor of the lessor on the Property being leased under any
capital lease permitted hereunder.
"Permitted Loans and Investments" means (i) loans by the Borrower to or
the acquisition of Investments by the Borrower in any Person not exceeding in
the aggregate outstanding at any time the amount of $25,000 and not otherwise
permitted under this Agreement and (ii) Permitted Investments.
"Person" means a corporation, an association, a joint venture, an
organization, a business, an individual or a government or political subdivision
thereof or any governmental agency.
"Plan" means, at any time, any employee benefit plan which is covered
by ERISA and in respect of which the Borrower or any Commonly Controlled Entity
is (or, if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, tangible or intangible.
"Reimbursement Obligation" means the obligation of the Borrower to
provide to the Lender or reimburse the Lender for any amounts payable, paid, or
incurred by the Lender with respect to Letters of Credit.
"Requirement of Law" means, as to any Person, the certificate or
articles of incorporation and by-laws or other organizational or governing
documents of such Person, and any applicable law, treaty, ordinance, order,
judgment, rule, decree, regulation, or determination of an arbitrator, court, or
other Governmental Authority, including, without limitation, rules, regulations,
orders, and requirements for permits, licenses, registrations, approvals, or
authorizations, in each case as such now exist or may be hereafter amended and
are applicable to or binding upon such Person or any of its Property or to which
such Person or any of its Property is subject. Unless otherwise specified, the
"Person" referred to in this definition shall be deemed to be the Borrower.
"Responsible Officer" means as to the Borrower, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
President.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Restricted Payment" means:
(a) the declaration or payment of any dividend on, or the incurrence of
any liability to make any other payment or distribution in respect of, any
shares of or other ownership interests in the Borrower;
9
14
(b) any payment or distribution on account of the purchase, redemption
or other retirement of any shares of or other ownership interests in the
Borrower, or of any warrant, option or other right to acquire such shares or
such other ownership interests, or any other payment or distribution made in
respect thereof, either directly or indirectly;
(c) the repayment by the Borrower or any of its Subsidiaries of any
Debt owed to an Affiliate, other than payments to the Borrower; or
(d) any loan or extension of credit by the Borrower to any Affiliate.
The amount of any Restricted Payment in Property shall be deemed to be the
greater of its fair market value or its net book value ("fair market value" will
be determined by an appraisal in form, and prepared by an appraiser, acceptable
to the Lender).
"Revolving Commitment" has the meaning given such term in Section 2.1.
"Revolving Credit Termination Date" has the meaning given such term in
the definition of "Revolving Credit Period."
"Revolving Credit Period" means the period commencing on the Closing
Date and ending November 1, 2000 (the "Revolving Credit Termination Date.")
"Security Document". See Security Instruments.
"Security Instruments" or "Security Documents" means the security
instruments executed and delivered in satisfaction of the condition set forth in
Section 5.2(c), and all other documents and instruments at any time executed as
security for all or any portion of the Obligations, as such instruments may be
amended, restated, or supplemented from time to time.
"Subsidiary" means for any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned, collectively, by such
Person and any Subsidiaries of such Person. The term Subsidiary shall include
Subsidiaries of Subsidiaries (and so on). Unless otherwise specified, the
"Person" referred to in this definition shall be deemed to be the Borrower.
"Taxes" means all taxes, assessments, filing or other fees, levies,
imposts, duties, deductions, withholdings, stamp taxes, interest equalization
taxes, capital transaction taxes, foreign exchange taxes or charges, or other
charges of any nature whatsoever from time to time or at any time imposed by any
law or Tribunal.
"Transferee" means any Person to which the Lender has sold, assigned,
transferred, or granted a participation in any of the Obligations, as authorized
hereunder, and any Person acquiring,
10
15
by purchase, assignment, transfer, or participation, from any such purchaser,
assignee, transferee, or participant, any part of such Obligations.
"Tribunal" means any court, tribunal, governmental body, agency or
instrumentality.
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the State of Texas.
SECTION 1.2 Accounting Terms and Determinations; Changes in Accounting.
(a) 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 GAAP, applied on a basis consistent (except for changes
concurred in by the independent public accountants and with respect to which the
Borrower shall have promptly notified the Lender on becoming aware thereof) with
the most recent financial statements of the Borrower delivered to the Lender.
(b) The Borrower will not, and will not permit any of its Subsidiaries
to change its method of accounting, other than immaterial changes in methods,
changes permitted by GAAP in which the Borrower's independent public accountants
concur and changes required by a change in GAAP, without the prior written
consent of the Lender.
SECTION 1.3 References. References in this Agreement to Exhibits,
Schedules, Annexes, Appendixes, Attachments, Articles, Sections or clauses shall
be to Exhibits, Schedules, Annexes, Appendixes, Attachments, Articles, Sections
or clauses of this Agreement, unless expressly stated to the contrary.
References in this Agreement to "hereby," "herein," "hereinafter,"
"hereinabove," "hereinbelow," "hereof," "hereunder" and words of similar import
shall be to this Agreement in its entirety and not only to the particular
Exhibit, Schedule, Annex, Appendix, Attachment, Article, or Section in which
such reference appears. This Agreement, for convenience only, has been divided
into Articles and Sections; and it is understood that the rights and other legal
relations of the parties hereto shall be determined from this instrument as an
entirety and without regard to the aforesaid division into Articles and Sections
and without regard to headings prefixed to such Articles or Sections. Whenever
the context requires, reference herein made to the single number shall be
understood to include the plural; and likewise, the plural shall be understood
to include the singular. Definitions of terms defined in the singular or plural
shall be equally applicable to the plural or singular, as the case may be,
unless otherwise indicated. Words denoting sex shall be construed to include the
masculine, feminine and neuter, when such construction is appropriate; and
specific enumeration shall not exclude the general but shall be construed as
cumulative. The Exhibits, Schedules, Annexes, Appendixes and Attachments
attached to this Agreement and items referenced as being attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for all purposes.
11
16
ARTICLE II
COMMITMENT TO LEND
SECTION 2.1 Commitment.
(a) During the Revolving Credit Period, the Lender agrees, subject to
the other terms and conditions of this Agreement:
(i) To lend to the Borrower subject to clause (ii) below from
time to time amounts not to exceed in the aggregate at any one time outstanding
an amount equal to the Borrowing Base (the "Revolving Commitment"). The Borrower
may borrow under this Section, repay Loans and reborrow under this Section at
any time during the Revolving Credit Period.
(ii) To issue letters of credit for the account of the
Borrower from time to time in amounts not to exceed the aggregate at any one
time outstanding the lesser of the amount of $250,000 or the unused Revolving
Commitment, it being understood that outstanding funding obligations under
Letters of Credit shall reduce the unused Revolving Commitment hereunder.
(b) The Lender shall not be obligated to lend to the Borrower, and the
Borrower shall not be entitled to borrow hereunder, any amount which would cause
the sum of the outstanding principal amount of all Loans made by the Lender and
the undrawn amount of all outstanding Letters of Credit to exceed the Revolving
Commitment of the Lender then in effect.
(c) The Lender shall not be obligated to issue a letter of credit
pursuant to Section 2.1(a) or to renew a Letter of Credit, and the Borrower
shall not be entitled to have a letter of credit issued pursuant to such Section
or to have a Letter of Credit renewed, if the issuance of the requested letter
of credit or the renewal of an existing Letter of Credit would cause, after
taking into account the mandatory reductions in the Borrowing Base required
during the proposed term of such requested letter of credit or existing Letter
of Credit, the undrawn amount of all Letters of Credit to ever exceed the
Revolving Commitment.
SECTION 2.2. Method of Borrowing and Obtaining Letters of Credit. (a)
The Borrower shall give the Lender notice (a "Notice of Borrowing") prior to
12:00 p.m. (Dallas time) of the day of the requested Loan under Section 2.1, in
the form of Exhibit 2.2(a).
(b) Unless the Lender determines that any applicable condition
specified in Article V or elsewhere herein has not been satisfied, the Lender
will make the funds available to the Borrower at the Lender's address referred
to in Section 9.6.
(c) The Borrower shall give the Lender a request for letter of credit
prior to 12:00 p.m. (Dallas time) at least three (3) Business Days before each
requested letter of credit under Section 2.1, by completing and delivering a
Letter of Credit Application. The expiry date of such requested letter of credit
cannot be later than the earlier of (A) one (1) year from the date of issuance
or (B) the last
12
17
date before which the Borrowing Base is scheduled to reduce to an amount less
than the aggregate undrawn amount of the requested letter of credit and the
outstanding Letters of Credit which, by their terms, might be outstanding on
such reduction date. The Letter of Credit Application must be completed in a
manner and shall use such wording as is acceptable to the Lender.
(d) Upon receipt of the Letter of Credit Application, the Lender shall
issue such letter of credit if the conditions of Article V or elsewhere herein
have been satisfied.
(e) Subject to the terms hereof, in the event that any beneficiary of a
Letter of Credit shall have taken the steps necessary to obligate the Lender to
make a payment under such Letter of Credit, the Borrower shall be deemed to have
delivered to the Lender an irrevocable Notice of Borrowing under Section 2.2 for
a Loan in the amount of such payment amount, regardless of any limitations set
forth herein. The Lender shall pay over the proceeds of such Loan to itself as
reimbursement for amounts paid under such Letter of Credit.
SECTION 2.3. Note. The Loans shall be evidenced by the Note issued by
the Borrower, payable to the order of the Lender in the Commitment Amount.
SECTION 2.4. Certain Payments and Prepayments of Principal. (a) If at
any time the aggregate principal of the Loans outstanding and the undrawn amount
of the outstanding Letters of Credit exceed the Revolving Commitment then in
effect, the Borrower shall within five (5) Business Days after it becomes aware
or should have become aware of such occurrence, repay the principal of the Loans
in an amount equal to such excess, except that if the circumstances described in
this Section are the direct result of a new determination of the Borrowing Base,
then the provisions of Section 2.8 shall apply.
(b) In the event that a prepayment is required under this Section or
Section 2.8 and the outstanding Loans are less than the amount required to be
prepaid, the Borrower shall repay the entire Loan balance and, in accordance
with the provisions of the relevant Letter of Credit Application executed by the
Borrower or otherwise to the satisfaction of the Lender, deposit with the Lender
as additional collateral securing the Obligations, an amount of cash, in
immediately available funds, equal to the L/C Exposure minus the Borrowing Base.
SECTION 2.5 Interest. (a) The unpaid principal balance of the Loans
shall bear interest, payable monthly as it accrues on the 1st day of each month,
commencing January 1, 1998, and at maturity (stated or by acceleration), at a
rate per annum equal to the lesser of the (i) Highest Lawful Rate or (ii) the
Floating Rate.
(b) Each change in the rate of interest charged hereunder shall become
effective automatically and without notice to the Borrower upon the effective
date of each change in the Floating Rate or the Highest Lawful Rate, as the case
may be.
SECTION 2.6 Commitment, Engineering, Facility and Letter of Credit
Fees; Authorized Payments by Lender. (a) The Borrower shall pay to the Lender a
commitment fee of one-half of one
13
18
percent (1/2 of 1%) per annum, calculated daily on the actual number of days the
Revolving Commitment is outstanding on the amount of the unused portion of the
Revolving Commitment in effect from time to time, such commitment fee to be
payable quarterly as it accrues on each January 1, April 1, July 1, and October
1 and upon termination of the Revolving Commitment.
(b) The Borrower shall pay to the Lender an engineering fee in the
amount of $3,000 on the Closing Date and thereafter shall pay an engineering fee
in the amount of $3,000 if the Lender's internal engineers perform the
engineering review of the Collateral or the actual fees and expenses of any
third-party engineers retained to prepare an engineering report, payable at the
time of each semi-annual or Borrower requested determination of the Borrowing
Base referred to in Section 2.8.
(c) To compensate the Lender for the costs of the extension of credit
hereunder, the Borrower shall pay to the Lender (i) on the Closing Date, the
remaining portion of the facility fee in the amount of $5,500 and (ii)
thereafter upon each determination of an increase in the Borrowing Base pursuant
to Section 2.8, a facility fee in the amount of one-half of one percent (1/2 of
1%) of the amount by which the Borrowing Base is increased over that in effect
on the date of such determination.
(d) The Borrower shall pay to the Lender at the time of issuance of
each Letter of Credit, (i) a letter of credit fee equal to the greater of (1)
one and one-half percent (1.5%) per annum of the face amount of such Letter of
Credit for the maximum number of days which such Letter of Credit, by its terms,
could remain outstanding or (2) $500, and (ii) the normal and standard charges
of the Lender for the issuance, delivery and confirmation of such Letter of
Credit.
(e) The Lender is irrevocably authorized to make Loans for the payment
of the fees and expenses of the Lender required to be paid by the Borrower
hereunder. The Lender shall pay over such Loan proceeds to itself or directly to
such other Person entitled to payment hereunder.
SECTION 2.7. Termination of Revolving Commitment. (a) The Revolving
Commitment shall terminate no later than the Revolving Credit Termination Date,
and any Loans then outstanding (together with accrued interest thereon) shall be
due and payable in full on such date.
(b) The Borrower shall have the right upon payment in full of the
Obligations and the cancellation of all outstanding Letters of Credit, to cancel
in full (but not in part) the Revolving Commitment, with no right of
reinstatement.
SECTION 2.8. Determination of Borrowing Base; Automatic Reductions in
Borrowing Base; Borrowing Base Deficiency. (a) On the basis of the information
furnished to the Lender hereunder and such other reports, appraisals and
information as the Lender may deem appropriate, the Lender shall have the right
to determine a new Borrowing Base as of each June 1 and December 1 during the
Revolving Credit Period (the "semi-annual determinations"), or at such other or
additional times during the Revolving Credit Period as the Lender in its
reasonable discretion and at its sole cost may elect ("discretionary
determinations"), and the Lender shall determine a new Borrowing Base at such
additional times, but no more often than one (1) time in any 12-month
14
19
period without the Lender's consent, as the Borrower may request ("Borrower
requested determinations"). Such determinations, if made, shall be in accordance
with the Lender's customary practices and standards for loans of a similar
nature as in effect at the time such determinations are made and shall be
conclusive, and any increases in the Borrowing Base shall be subject to the
Lender's complete credit approval process.
(b) The Borrowing Base shall be automatically reduced as of the 1st day
of each month commencing January 1, 1998, and continuing throughout the
Revolving Credit Period. The initial monthly reduction shall be in the amount of
$17,333 per month. At the time of each new Borrowing Base determination under
Section 2.8(a), the Lender in its sole discretion may increase or decrease the
amount of such monthly reduction.
(c) Upon the occurrence of a Borrowing Base Deficiency, the Borrower
shall, within thirty (30) days following notice by the Lender of the existence
of such Borrowing Base Deficiency, do any one or more of the following in an
aggregate amount at least equal to such Borrowing Base Deficiency: (i) prepay
the principal of the outstanding Loans or (ii) cause to be created first and
prior perfected Liens (subject only to Permitted Liens) in favor of the Lender,
by instruments satisfactory to the Lender, on producing oil and gas properties
(or cash if the circumstances described in Section 2.4(b) are applicable) which
in the opinion of the Lender would increase the Borrowing Base by an amount
sufficient, in combination with clause (i) preceding, to eliminate such
Borrowing Base Deficiency.
ARTICLE III
GENERAL PROVISIONS
SECTION 3.1 General Provisions as to Payments and Loans.
(a) All payments of principal and interest on the Loans and of fees
hereunder shall be made by 12:00 noon (Dallas, Texas time) on the date such
payments are due in federal or other funds immediately available at the
principal office of the Lender referred to in Section 9.6, and, if not made by
such time or in immediately available funds, then such payment shall be deemed
made when such funds are available to the Lender for its full and unrestricted
use. Whenever any payment of principal of or interest on the Loans or of fees
hereunder shall be due on a day which is not a Business Day, the date for
payment thereof shall be extended to the next succeeding Business Day. If the
date for any payment is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) All payments made by the Borrower on the Loans shall be made free
and clear of, and without reduction by reason of, any Taxes.
(c) All requests for Loans shall be made on a Business Day.
15
20
(d) All Loans shall be made available to the Borrower on a Business Day
at the Lender's address referred to in Section 9.6.
(e) All payments and fundings shall be denominated in United States of
America dollars.
SECTION 3.2. Computation of Interest. Each determination of interest
and fees hereunder shall be computed on the basis of a year of 360 days and paid
for the actual number of days elapsed (including the first day but excluding the
last day), subject to the limitations of the Highest Lawful Rate.
SECTION 3.3. Overdue Principal and Interest. Unless waived by the
Lender, any overdue principal and, to the extent permitted by law, overdue
interest on the Loans shall bear interest at the Default Rate.
ARTICLE IV
COLLATERAL
SECTION 4.1 Security.
(a) To secure full and complete payment and performance of the
obligations of the Borrower to the Lender, the Borrower will cause the
appropriate Person to execute and deliver to the Lender the following documents
and instruments:
(i) the Mortgages from the Borrower granting the Lender a
first and prior Lien on all oil and gas Properties of the Borrower in
the states of Texas and Oklahoma, together with financing statements
relating thereto, subject only to Permitted Liens.
(b) All documents delivered or to be delivered hereunder shall be in
form and substance reasonably satisfactory to the Lender and its counsel and
shall be supported by such legal opinions as the Lender or its counsel may
reasonably request.
(c) All Liens to be created by delivery of the documents referred to in
this Section shall be first and prior perfected Liens in favor of the Lender,
subject only to Permitted Liens.
ARTICLE V
CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT
The obligation of the Lender to make Loans or issue Letters of Credit
hereunder shall be subject to the satisfaction of each of the following
conditions:
SECTION 5.1. All Loans and Letters of Credit. In the case of each Loan
or Letter of Credit issued hereunder (except the initial Loan issued hereunder):
16
21
(a) timely receipt by the Lender of a Notice of Borrowing or Letter of
Credit Application;
(b) the fact that, immediately before such requested Loan or Letter of
Credit, no Default shall have occurred and be continuing and that the making of
any such Loan will not cause a Default; and
(c) the fact that the representations and warranties of the Borrower
contained in this Agreement (except the representations set forth in Sections
6.7 and 6.10(a)) shall be true on and as of the date of such Loan.
Each request for a Loan hereunder shall be deemed to be a representation and
warranty by the Borrower on the date of such request, as to the facts specified
in clauses (b) and (c) immediately preceding.
SECTION 5.2 In the case of the initial Loan:
(a) Receipt by the Lender of the following:
(i) copies of the Articles or Certificates of Incorporation
and all amendments thereto, of the Borrower, accompanied by certificates that
such copies are correct and complete, one issued by the Secretary of State of
the state of incorporation of the Borrower, dated a current date, and one
executed by the President or a Vice President and the Secretary or an Assistant
Secretary (or other authorized representatives) of the Borrower, dated the
Closing Date;
(ii) copies of the Bylaws and all amendments thereto, of the
Borrower, accompanied by certificates that such copies are correct and complete
of the President or a Vice President and the Secretary or an Assistant Secretary
(or other authorized representatives) of the Borrower, dated the Closing Date;
(iii) certificates of the appropriate Tribunals of each
jurisdiction in which the Borrower has an executive office or principal place of
business, the Borrower was formed or in which any Collateral is located, each
dated a current date, to the effect that the Borrower is in good standing with
respect to the payment of franchise and/or other Taxes and, if required by law,
are duly qualified to transact business in such jurisdictions, accompanied by
the certificate of the President or a Vice President and the Secretary or an
Assistant Secretary (or other authorized representatives) of the Borrower, that
such Tribunal certificates are true and correct as of the Closing Date;
(iv) certificates of incumbencies and signatures of all
officers of the Borrower who will be authorized to execute or attest any of the
Loan Papers on behalf of the Borrower, executed by the President or a Vice
President and the Secretary or an Assistant Secretary (or other authorized
representatives) of the Borrower, dated the Closing Date; and
(v) copies of resolutions approving the Loan Papers and
authorizing the transactions contemplated therein, duly adopted by the Board of
Directors of the Borrower,
17
22
accompanied by certificates of the Secretary or an Assistant Secretary (or other
authorized representative) of the Borrower that such copies are true and correct
copies of resolutions duly adopted at the meeting of, or by the unanimous
written consent of, the Board of Directors of the Borrower, and that such
resolutions constitute all the resolutions adopted with respect to such
transactions, have not been amended, modified or revoked in any respect, and are
in full force and effect as of the Closing Date;
(b) receipt by the Lender of the duly executed Note, dated the Closing
Date;
(c) receipt by the Lender of the documents described in Section 4.1(a),
each duly executed and delivered by the appropriate Person;
(d) receipt by the Lender of the following:
(i) such title opinions as the Lender may reasonably request,
in form and substance and from attorneys acceptable to the Lender, covering such
portions of the Collateral as the Lender may specify; and
(ii) such other documentation and information required by the
Lender to satisfy the Lender of the status of the title of the Collateral;
(e) receipt by the Lender of a certificate certifying as to the
Borrower's ownership interest in the Collateral in form and substance
satisfactory to the Lender;
(f) receipt by the Lender of a certificate from the President or a Vice
President and the Secretary or an Assistant Secretary (or other authorized
representatives) of the Borrower certifying as to the truth and correctness of
each representation and warranty contained in Article VI hereof as of the
Closing Date;
(g) receipt by the Lender of satisfactory evidence that the Borrower's
Debt to EEP is being repaid in full concurrently with the Closing;
(h) receipt by the Lender of the opinions of counsel to the Borrower in
form and substance satisfactory to the Lender and its counsel; and
(i) receipt by the Lender of such additional information and
documentation as the Lender may reasonably require relating to the Loan Papers
(and all renewals, extensions, amendments, restatements and modifications of the
same) and the transactions contemplated hereby and thereby. The requirements of
Sections 5.1(a)(i), 5.1(a)(ii), 5.1(a)(iv), 5.1(a)(v), and 5.1(f) may be
satisfied by the delivery of a certificate substantially in the form of that
attached hereto entitled "Form of Officer's Corporate Certificate" with exhibits
attached as described therein.
18
23
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
The Borrower hereby represents and warrants to the Lender as follows:
SECTION 6.1 Existence and Power. The Borrower:
(a) is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Utah;
(b) has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted;
(c) is duly qualified to transact business as a foreign entity in the
states of Oklahoma and Texas and each other jurisdiction where the nature of its
business requires the same, except where the failure to so qualify could not
reasonably be expected to have a material adverse effect on its business or
financial condition; and
(d) owns, both beneficially and of record, all of its assets reflected
in its financial statements delivered to the Lender.
SECTION 6.2 Corporate and Governmental Authorization; Contravention.
The execution, delivery and performance by each Person (other than the Lender)
purporting to execute the same of this Agreement or the other Loan Papers are
within such Person's power, have been duly authorized by all necessary action,
require no action by or in respect of, or filing with, any governmental body,
agency or official (except that the perfection of Liens created by certain of
the Security Documents may require the filing of financing statements, mortgages
or similar instruments in the appropriate recordation offices), and do not
contravene, or constitute a default under, any provision of applicable law or
regulation (including, without limitation, the Margin Regulations) or any
agreement creating or governing such Person or any agreement, judgment,
injunction, order, decree or other instrument binding upon such Person or result
in the creation or imposition of any Lien on any Property of the Borrower,
except Liens securing the Obligations.
SECTION 6.3 Binding Effect. (a) This Agreement constitutes a valid and
binding agreement of the Borrower; the Note, when executed and delivered in
accordance with this Agreement, will constitute the valid and binding obligation
of the Borrower; the Security Documents, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations of
each Person purporting to execute the same;
(b) Each Loan Paper is enforceable in accordance with its terms except
as (i) the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors, rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability.
19
24
SECTION 6.4 Subsidiaries. The Borrower has no Subsidiaries.
SECTION 6.5 Disclosure. No document, certificate or statement delivered
to the Lender by or on behalf of the Borrower in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact. All information heretofore furnished by the Borrower to the Lender for
purposes of or in connection with this Agreement or any transaction contemplated
hereby is, and all such information hereafter furnished by the Borrower to the
Lender will be, true and accurate in every material respect or based on
reasonable estimates on the date as of which such information is stated or
certified. The Borrower has disclosed to the Lender in writing any and all facts
(except facts of general public knowledge) which materially and adversely affect
or may affect (to the extent the Borrower can now reasonably foresee) the
business, operations, prospects or condition, financial or otherwise, of the
Borrower or the ability of the Borrower to perform its obligations under this
Agreement.
SECTION 6.6 Financial Information.
(a) The balance sheet of the Borrower as of July 31, 1997, and the
related statements of operations or income, stockholders' equity or retained
earnings, and cash flow for the period indicated, a copy of which has been
delivered to the Lender, fairly present, in conformity with GAAP, the financial
position of the Borrower as of such date and the results of operations, changes
in stockholders' equity and cash flow for the period indicated.
(b) Except as disclosed in writing by the Borrower to the Lender prior
to the execution and delivery of this Agreement, since the date referenced in
Section 6.6(a) above, there has been no material adverse change in the business,
financial position, results of operations or prospects of the Borrower.
SECTION 6.7 Litigation. There is no action, suit or proceeding pending
against, or to the knowledge of the Borrower threatened against or affecting the
Borrower before any Tribunal or arbitrator in which there is a reasonable
possibility of an adverse decision which could materially and adversely affect
the business, financial position or results of operations of the Borrower, or
which could in any manner draw into question the validity of this Agreement or
any other Loan Papers.
SECTION 6.8 Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan, or made any amendment to any Plan, which
has resulted or could result in the imposition of a Lien or the posting of a
bond or other security under ERISA or the Internal Revenue Code or (iii)
incurred any liability under Title IV of ERISA.
20
25
SECTION 6.9 Taxes and Filing of Tax Returns. The Borrower has filed or
properly extended all returns required to have been filed or extended with
respect to Taxes and has paid all Taxes shown to be due and payable by it on
such returns, including interest and penalties, and all other Taxes which are
payable by it, to the extent the same have become due and payable (unless, with
respect to such other Taxes, the criteria set forth in Section 7.5 are being
met). The Borrower does not know of any proposed assessment of Taxes of a
material amount against it and all liabilities for Taxes of the Borrower are
adequately provided for.
SECTION 6.10 Title to Properties; Liens; Environmental Liability. (a)
The Borrower has good and indefeasible title to all Property purported to be
owned by it (except for Permitted Liens, minor defects in title and minor
encumbrances not in any case materially detracting from the value of the assets
affected thereby). All Property of the Borrower is free and clear of all Liens
other than Permitted Liens and Liens in favor of EEP Holdings being assigned to
the Lender or released on the Closing Date. Upon the recordation of the Security
Documents in the appropriate recordation offices, the Liens covering the
Collateral will be valid, enforceable, first and prior, perfected Liens in favor
of the Lender, except for Permitted Liens.
(b) The Borrower has not (i) received notice or otherwise learned of
any Environmental Liability which could individually or in the aggregate have a
Material Adverse Effect on the Borrower arising in connection with (A) any
non-compliance with or violation of the requirements of any Environmental Law or
(B) the release or threatened release of any toxic or hazardous waste, substance
or constituent, or other substance into the environment, or (ii) received notice
or otherwise learned of any federal or state investigation evaluating whether
any remedial action is needed to respond to a release or threatened release of
any toxic or hazardous waste, substance or constituent into the environment for
which the Borrower is or may be liable which would individually or in the
aggregate have a Material Adverse Effect on the Borrower.
SECTION 6.11 Business; Compliance. The Borrower has performed and
abided by all obligations required to be performed by it to the extent it could
be materially and adversely affected under any license, permit, order,
authorization, grant, contract, agreement, or regulation to which it is a party
or by which it or any of its Property is bound.
SECTION 6.12 Licenses, Permits, Etc. The Borrower possesses such valid
franchises, certificates of convenience and necessity, operating rights,
licenses, permits, consents, authorizations, exemptions and orders of Tribunals
as are necessary to carry on its business as now being conducted and to own its
properties.
SECTION 6.13 Compliance with Law. The business and operations of the
Borrower have been and are being conducted in accordance with all applicable
laws, rules and regulations of all Tribunals, other than violations which could
not (either individually or collectively) have a Material Adverse Effect on the
Borrower.
21
26
SECTION 6.14 Governmental Consent. No consent, approval or
authorization of, or declaration or filing with, any governmental authority is
required for the valid execution, delivery and performance of this Agreement or
any other Loan Papers.
SECTION 6.15 Investment Company Act. The Borrower is not an "investment
company," or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
SECTION 6.16 Public Utility Holding Company Act; State Utility. (a) The
Borrower is not a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company," or of a "subsidiary company"
of a "holding company," as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended.
(b) The Borrower is not defined as a "utility" under the laws of any
state.
SECTION 6.17 Refunds; Certain Contracts. (a) No orders of, proceedings
pending before, or other requirements of, the Federal Energy Regulatory
Commission, the Texas Railroad Commission, or any Governmental Authority exist
which could result in the Borrower being required to refund any material portion
of the proceeds received or to be received from the sale of hydrocarbons
constituting part of the Collateral.
(b) The Borrower (i) is not obligated in any material respect by virtue
of any prepayment made under any contract containing a "take-or-pay" or
"prepayment" provision or under any similar agreement to deliver hydrocarbons
produced from or allocated to any of the Collateral at some future date without
receiving full payment therefor within 90 days of delivery, and (ii) has not
produced gas, in any material amount, subject to, and neither the Borrower nor
any of the Collateral is subject to, balancing rights of third parties or
subject to balancing duties under governmental requirements.
SECTION 6.18 No Default. No Default has occurred which is continuing as
of the Closing Date.
ARTICLE VII
COVENANTS
During the Revolving Credit Period, and thereafter so long as any
principal of or interest on the Note shall remain unpaid or any Letter of Credit
remains outstanding, the Borrower will duly perform and observe each and all of
the covenants and agreements hereinafter set forth:
SECTION 7.1 Use of Proceeds and Letters of Credit. (a) The Borrower
will use the proceeds of the Loans solely for the purposes of refinancing its
existing indebtedness to EEP in the aggregate approximate amount of $500,000, to
finance the acquisition and development of oil and gas properties and for
general corporate purposes.
22
27
(b) Letters of Credit shall be used for the support of oil and gas
operations; provided, however, no Letter of credit may be used in lieu or in
support of stay or appeal bonds.
(c) The Borrower will not, directly or indirectly, use any of the
proceeds of the Loans for the purpose of purchasing or carrying any "margin
stock" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System (12 C. F. R. 221, as amended), or any "security that is
publicly-held" within the meaning of Regulation T of such Board of Governors (12
C.F.R. 220, as amended), or otherwise take or permit any action which would
involve a violation of such Regulation U, Regulation T or Regulation X (12
C.F.R. 224, as amended) or any other regulation of such Board of Governors. The
Loans are not secured, directly or indirectly, in whole or in part, by
collateral that includes any "margin stock" within the meaning of Regulation U.
The Borrower will not engage principally, or as one of its important activities,
in the business of extending credit for the purpose of purchasing or carrying
any "margin stock" within the meaning of such Regulation U.
SECTION 7.2 Financial Statements; Reserve Reports; Compliance
Certificates; Certain Notices. The Borrower will furnish to the Lender:
(a) (i) as soon as available and in any event within 90 days after the
end of each fiscal year of the Borrower, copies of the balance sheet of the
Borrower as of the end of such fiscal year, and copies of the related statements
of operations or income, stockholders' equity or retained earnings, and cash
flow for such fiscal year, setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP, and audited by a firm of independent certified public
accountants acceptable to the Lender;
(ii) on or before the 45th day after the last day of each
fiscal quarter, a copy of (A) the unaudited balance sheet of the Borrower as at
the close of such quarter and from the beginning of such fiscal year to the end
of such quarter and (B) the related statements of operations or income,
stockholders' equity or retained earnings, and cash flows for the quarter just
ended and for that portion of the year ending on such date, all in reasonable
detail and prepared on a basis consistent with the financial statements
previously delivered under this Section; such financial statements to be
certified by a Responsible Officer of the Borrower as having been prepared in
accordance with GAAP, consistently applied and as a fair presentation of the
condition of the Borrower; and
(iii) simultaneously with the delivery of each set of
financial statements pursuant to the preceding clauses of this Section, a
Compliance Certificate of the Borrower stating that such financial statements
fairly and accurately reflect the financial condition and results of operation
of the Borrower for the periods and as of the dates set forth therein, and that
the signers have reviewed the terms of this Agreement and the other Loan Papers,
and have made, or caused to be made under their supervision, a review of the
transactions and financial condition of the Borrower during the fiscal period
covered by such financial statements, and that such review has not disclosed the
existence during such period, and that the signers do not have knowledge of the
existence as of the date of such certificate, of any condition or event which
constitutes a Default, or, if any such
23
28
condition or event existed or exists, specifying the nature and period of
existence thereof and what action the Borrower has taken or is taking or
proposes to take with respect thereto; and
(iv) within 15 days after each filing thereof with any
Governmental Authority, complete copies of the federal and state tax returns so
filed.
(b) (i) as soon as available, and in any event on or before January 1
of each year during the term of this Agreement, engineering reports in form and
substance satisfactory to the Lender in its reasonable judgment, certified by
any nationally- or regionally-recognized independent consulting petroleum
engineers acceptable to the Lender as fairly and accurately setting forth (i)
the proven and producing, shut-in, behind-pipe, and undeveloped oil and gas
reserves (separately classified as such) attributable to the Collateral as of
September 30 of such year, (ii) the aggregate present value of the future net
income with respect to such Collateral, discounted at a stated per annum
discount rate of proven and producing reserves, (iii) projections of the annual
rate of production, gross income, and net income with respect to such proven and
producing reserves, and (iv) information with respect to the "take-or-pay,"
"prepayment," and gas-balancing liabilities of the Borrower; and
(ii) within 60 days following a request therefor, production
reports in form and substance satisfactory to the Lender in its reasonable
judgment, prepared by the Borrower containing data concerning pricing,
quantities of production from the Collateral, volumes of production sold,
purchasers of production, gross revenues, expenses, production taxes, and such
other information with respect thereto as the Lender may reasonably request for
use by the Lender to prepare for its own exclusive use, internally generated
engineering reports; and
(iii) simultaneously with the delivery of such engineering
reports or production reports, an Officer's Certificate from the Borrower
stating that such engineering report or production report fairly and accurately
reflects the production, the joint interest ▇▇▇▇▇▇▇▇ and the operating cash flow
for the Collateral for the periods covered in such report;
(c) (i) immediately after any Responsible Officer of the Borrower
becomes aware of the occurrence of any condition or event which constitutes a
Default, an Officer's Certificate of the Borrower specifying the nature of such
condition or event, the period of existence thereof, what action the Borrower
has taken or is taking and proposes to take with respect thereto and the date,
if any, on which it is estimated the same will be remedied;
(ii) if and when the Borrower (A) gives or is required to give
notice to the PBGC of any "reportable event" (as defined in Section 4043 of
ERISA) with respect to any Plan which might constitute grounds for a termination
of such Plan under Title IV of ERISA, or knows that the plan administrator of
any Plan has given or is required to give notice of any such reportable event, a
copy of the notice of such reportable event given or required to be given to the
PBGC; (B) receives notice of complete or partial withdrawal liability under
Title IV of ERISA, a copy of such notice; or (C) receives notice from the PBGC
under Title IV of ERISA of an intent to terminate or appoint a trustee to
administer any Plan, a copy of such notice;
24
29
(iii) promptly after the delivery of the same to the
Securities and Exchange Commission ("SEC") or the securities commission of any
state or other similar Governmental Authority of any report or document
containing information similar to that contained in Forms 10-K, 10-Q, S-1 or 8-K
(as such forms are described in the regulations promulgated by the SEC), a copy
of such report or document;
(iv) promptly upon the Borrower's learning that it or any of
its Subsidiaries has received notice or otherwise learned of any claim, demand,
action, event, condition, report or investigation indicating any potential or
actual liability arising in connection with (i) the non-compliance with or
violation of the requirements of any Environmental Law, (ii) the release or
threatened release of any toxic or hazardous waste, substance or constituent
into the environment, or (iii) the existence of any Environmental Lien on any
Properties of the Borrower or any of its Subsidiaries, notice thereof;
(v) promptly upon the Borrower's learning of any litigation or
other event or circumstance which could have a Material Adverse Effect on the
Borrower, notice thereof;
(vi) the change in identity or address of any Person remitting
to the Borrower proceeds from the sale of hydrocarbon production from or
attributable to any Collateral; and
(vii) any change in the senior management of the Borrower.
(d) with reasonable promptness, such other information relating
directly or indirectly to the financial condition, business or Properties of the
Borrower or its Subsidiaries as from time to time may reasonably be requested by
the Lender.
SECTION 7.3 Inspection of Properties and Books. The Borrower will
permit any officer, employee or agent of the Lender to visit and inspect any of
the Properties of the Borrower or any of its Subsidiaries, to examine its and
their books of account (and to make copies thereof and take extracts therefrom)
and to discuss its and their affairs, finances and accounts (including
transactions, agreements and other relations with any shareholders) with, and to
be advised as to the same by, its and their officers and independent public
accountants, all at such reasonable times and intervals as the Lender may desire
and, if a Default has occurred and is continuing, at the expense of the
Borrower.
SECTION 7.4 Maintenance of Security; Insurance; Operating Accounts;
Transfer Orders. (a) The Borrower shall execute and deliver, or cause the
appropriate Person to execute and deliver, to the Lender all mortgages, deeds of
trust, security agreements, financing statements, assignments and such other
documents and instruments (including division and transfer orders), and
supplements and amendments thereto, and take such other actions as the Lender
deems necessary or desirable in order to (i) maintain as valid, enforceable,
first-priority, perfected Liens (subject only to the Permitted Liens), all Liens
granted to the Lender to secure the Note or (ii) monitor or control the proceeds
therefrom.
25
30
(b) The Borrower and its Subsidiaries will at all times maintain or
cause to be maintained insurance covering such risks as are customarily carried
by businesses similarly situated.
(c) The Borrower will maintain its primary operating accounts with the
Lender, although such requirement shall not be construed a requiring the
Borrower to maintain deposit balances with the Lender.
(d) The Borrower shall upon request of the Lender, execute such
transfer orders, letters-in-lieu of transfer orders or division orders as the
Lender may from time to time request in respect of the Collateral to effect a
transfer and delivery to the Lender of the proceeds of production attributable
to the Collateral.
SECTION 7.5 Payment of Taxes and Claims. The Borrower will, and will
cause its Subsidiaries to pay (a) all Taxes imposed upon it or any of its assets
or with respect to any of its franchises, business, income or profits before any
material penalty or interest accrues thereon and (b) all material claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which have or might
become a Lien (other than a Permitted Lien) on any of its assets; provided,
however, that no payment of such Taxes or claims shall be required if (i) the
amount, applicability or validity thereof is currently being contested in good
faith by appropriate action promptly initiated and diligently conducted, (ii)
the Borrower or such Subsidiary, as appropriate, shall have set aside on its
books reserves (segregated to the extent required by GAAP) reasonably deemed by
it to be adequate with respect thereto, and (iii) the Borrower has notified the
Lender of such circumstances, in detail satisfactory to the Lender.
SECTION 7.6 Payment of Debt; Additional Debt. (a) The Borrower will,
and will cause its Subsidiaries to (i) pay, renew or extend or cause to be paid,
renewed or extended the principal of, and the prepayment charge, if any, and
interest on all Debt heretofore or hereafter incurred or assumed by it when and
as the same shall become due and payable; (ii) faithfully perform, observe and
discharge all unwaived covenants, conditions and obligations imposed on it by
any instrument evidencing such Debt or by any indenture or other agreement
securing such Debt or pursuant to which such Debt is issued; and (iii) not
permit the occurrence of any act or omission which would constitute a default
under any such instrument, indenture or agreement.
(b) The Borrower will not, and will not permit any of its Subsidiaries
to create, incur or suffer to exist any Debt, except without duplication (a)
Debt to the Lender and (b) Permitted Indebtedness.
SECTION 7.7 Liens. The Borrower will not create, suffer to exist or
otherwise allow any Liens to be on or otherwise to affect any of its Property
whether now owned or hereafter acquired, except Permitted Liens.
SECTION 7.8 Loans and Advances to Others; Investments; Restricted
Payments. (a) The Borrower will not, and will not permit any of its Subsidiaries
directly or indirectly, to make or suffer to exist any loan, advance or
extension of credit to any Person except (i) current trade and customer
26
31
accounts receivable which are for goods furnished or services rendered in the
ordinary course of business and which are payable in accordance with customary
trade terms and (ii) Permitted Loans and Investments.
(b) the Borrower will not, and will not permit any of its Subsidiaries
to make any capital contribution to or to acquire any Investment in, or to
purchase or make a commitment to purchase any interest in, any Person except as
set forth in clause (a) above.
(c) The Borrower will not, directly or indirectly, make any Restricted
Payment.
(d) The Borrower shall not form or acquire any Subsidiaries without the
prior written consent of the Lender.
SECTION 7.9 Consolidation, Merger, Maintenance, Change of Control;
Disposition of Property; Restrictive Agreements; Hedging Agreements. (a) The
Borrower will not (i) consolidate or merge with or into any other Person (unless
the Borrower is the surviving entity and no Default has occurred and is
continuing or will result from such merger or consolidation) without the prior
written consent of the Lender, (ii) sell, lease or otherwise transfer all or
substantially all of its Property to any other Person, (iii) terminate, or fail
to maintain, its existence as a corporation in the State of Utah or (iv)
terminate, or fail to maintain, its good standing and qualification to transact
business in the states of Oklahoma and Texas and all other jurisdictions where
the nature of its business requires the same (except where the failure to
maintain its good standing or qualification could not reasonably be expected to
have a material adverse effect on its business or financial condition) or (v)
permit a Change of Management Event to occur.
(b) The Borrower will not sell, encumber, or otherwise transfer all or
any portion of the Collateral, any Property having Collateral Value, or any of
its other Property without the consent of the Lender, except for (i) sales of
oil and gas after severance in the ordinary course of business provided that no
contract for the sale of hydrocarbons shall obligate the Borrower to deliver
hydrocarbons produced from any of the Collateral at some future date without
receiving full payment therefor within 90 days of delivery, (ii) the sale or
other disposition of its personal Property destroyed, worn out, damaged, or
having only salvage value or no longer used or useful in the business of the
Borrower, or (iii) undeveloped leasehold acreage not constituting Collateral.
Any consent by the Lender to the sale of Collateral or other Property of the
Borrower may include a requirement that a new Borrowing Base be determined and
that the proceeds of such sale plus such additional amounts as the Lender deems
necessary to avoid the occurrence of a Borrowing Base Deficiency be applied to
the Obligations. In this connection, the Lender will not unreasonably withhold
its consent to sales during any 12-month period of Property, in the aggregate,
having Collateral Value of up to 10% of all Property having Collateral Value.
(c) The Borrower will not be or become party to or bound by any
agreement (including, without limitation, any undertaking in connection with the
incurrence of Debt or issuance of securities) which imposes any limitation on
the disposition of the Collateral more restrictive than those set forth above or
which in any way would be contravened by the Borrower's performance of
27
32
its obligations hereunder or under the other Loan Papers or which contains any
negative pledge on all or any portion of the Borrower's Property (except in
favor of the Lender).
(d) The Borrower will not, and will not permit any Subsidiary to enter
into any Hedging Agreement, other than Acceptable Hedging Agreements.
SECTION 7.10 Primary Business; Location of Borrower's Office; Ownership
of Assets. (a) The primary business of the Borrower shall be and remain the oil
and gas exploration, development and production business.
(b) The location of the Borrower's principal place of business and
executive office shall remain at ▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, unless at least 10 days prior to any change in such address the
Borrower provides the Lender with written notice of such pending change.
(c) The Borrower will at all time own, both beneficially and of record,
all assets reflected in its financial statements delivered to the Lender from
time to time.
SECTION 7.11 Operation of Properties and Equipment; Changes to Certain
Contracts. (a) The Borrower shall, and shall cause each of its Subsidiaries to
maintain, develop and operate its oil and gas properties in a good and
workmanlike manner and will observe and comply with all of the terms and
provisions, express or implied, of all oil and gas leases relating to such
properties so long as such oil and gas leases are capable of producing
hydrocarbons in commercial quantities, to the extent that the failure to so
observe and comply could have a Material Adverse Effect on the Borrower or any
such Subsidiary.
(b) The Borrower shall remain as the named operator for each well
comprising the Collateral if it is currently the operator thereof.
(c) The Borrower shall comply and shall cause each of its Subsidiaries
to comply in all material respects with all agreements applicable to or relating
to its oil and gas properties or the production and sale of hydrocarbons
therefrom and all applicable proration and conservation laws of the
jurisdictions in which such properties are located, to the extent that the
failure to so comply with such laws or agreements could expose the Borrower or
such Subsidiary to any material penalty or forfeiture.
(d) The Borrower shall at all times, maintain, preserve and keep all
operating equipment used or useful with respect to the oil and gas properties of
the Borrower in proper repair, working order and condition, and make all
necessary or appropriate repairs, renewals, replacements, additions and
improvements thereto so that the efficiency of such operating equipment shall at
all times be properly preserved and maintained, provided that no item of
operating equipment need be so repaired, renewed, replaced, added to or
improved, if the Borrower shall in good faith determine that such action is not
necessary or desirable for the continued efficient and profitable operation of
the business of the Borrower.
28
33
(e) With respect to the oil and gas properties referred to in this
Section which are operated by operators other than the Borrower, the Borrower
shall not be obligated itself to perform any undertakings contemplated by the
covenants and agreements contained in this Section which are performable only by
such operators and are beyond the control of the Borrower, but the Borrower
shall use its best efforts to cause such operators to perform such undertakings.
(f) The Borrower will not amend, alter or change in any material
respect which could reasonably be expected to be adverse to the interests of the
Borrower or the Lender any agreements relating to the Borrower's operations or
business arrangements or the compression, gathering, sale or transportation of
oil and gas without the prior written consent of the Lender, which consent shall
not be unreasonably withheld.
SECTION 7.12 Transactions with Affiliates. The Borrower will not, and
will not permit any of its Subsidiaries to engage in any transaction with an
Affiliate unless (i) such transaction is at least as favorable to the Borrower
or such Subsidiary as could be obtained in an arm's length transaction with an
unaffiliated third party, (ii) such transaction is not disadvantageous to the
Lender as holder of the Note and (iii) the Lender is advised in writing of the
terms of such transaction prior to the consummation thereof.
SECTION 7.13 Plans. The Borrower will not assume or otherwise become
subject to an obligation to contribute to or maintain any Plan other than Plans
of the Borrower in existence on the Closing Date or acquire any Person which has
at any time had an obligation to contribute to or maintain any Plan.
SECTION 7.14 Compliance with Laws and Documents. The Borrower will not,
directly or indirectly, violate the provisions of any laws, the certificate of
incorporation or bylaws of any of them, or any Material Agreement of any of
them, if such violation, alone or when combined with all other such violations,
could have a Material Adverse Effect on the Borrower.
SECTION 7.15 Certain Financial Covenants.
(a) Cash Flow to Debt Service Ratio. The Borrower will not permit the
ratio of Cash Flow to Debt Service to be less than 1.25 to 1.0, determined as of
the end of each fiscal quarter of the Borrower ending on or after March 31,
1998.
"Cash Flow" means, for any fiscal quarter of the Borrower, the
net income from operations of the Borrower for such quarter
plus depreciation, amortization, depletion, and other non-cash
expenses of the Borrower for such quarter less gains on sales
of assets and other non-cash income for such quarter included
in the determination of net income from operations of the
Borrower. Cash Flow is a quarter-by-quarter calculation.
29
34
"Debt Service" means with respect to any fiscal quarter of the
Borrower, the actual principal payments on the Debt of the
Borrower during such quarter other than for the Note plus
required principal payments on the Note during such quarter.
(b) Net Worth. The Borrower will not permit Tangible Net Worth to be
less at any time than $5,500,000 plus 50% of positive Net Income for all fiscal
periods ending subsequent to the Closing Date, plus 100% of any Equity Infusions
occurring subsequent to the Closing Date.
"Net Income" means, for any period, the net income of the
Borrower for such period, determined in accordance with GAAP.
"Tangible Net Worth" means, (a) total assets, as would be
reflected on a balance sheet of the Borrower prepared in
accordance with GAAP, exclusive of Intellectual Property,
experimental or organization expenses, franchises, licenses,
permits, and other Intangible assets, treasury stock,
unamortized underwriters' debt discount and expenses, goodwill
and amounts due from officers, directors and shareholders of
the Borrower minus (b) total liabilities, as would be
reflected on a balance sheet of the Borrower prepared in
accordance with GAAP.
(c) Current Ratio. The Borrower will not permit its ratio of Current
Assets to its Current Liabilities to be less than 1.25 to 1.00, determined as of
the end of each fiscal quarter of the Borrower ending on or after March 31,
1998.
"Current Assets" means the current assets of the Borrower plus
the unused portion of the Revolving Commitment, but excluding
the current portion of Intangible Assets.
"Current Liabilities" means the current liabilities of the
Borrower, exclusive of the current portion of the Note.
SECTION 7.16 Additional Documents; Quantity of Documents; Title Data;
Additional Information. (a) The Borrower shall execute and deliver or cause to
be executed and delivered such other and further instruments or documents as in
the judgment of the Lender may be required to better effectuate the transactions
contemplated herein and in the other Loan Papers.
(b) The Borrower will deliver all certificates, opinions, reports and
documents hereunder in such number of counterparts as the Lender may reasonably
request.
(c) The Borrower shall cause to be delivered to the Lender such title
opinions as the Lender may from time to time reasonably request, in form and
substance and from attorneys acceptable to the Lender, covering such portions of
the Collateral as the Lender may from time to time specify.
30
35
(d) The Borrower shall furnish to the Lender, promptly upon the request
of the Lender, such additional financial or other information concerning the
assets, liabilities, operations, and transactions of the Borrower as the Lender
may from time to time request; and notify the Lender not less than ten Business
Days prior to the occurrence of any condition or event that may change the
proper location for the filing of any financing statement or other public notice
or recording for the purpose of perfecting a Lien in any Collateral, including,
without limitation, any change in its name or the location of its principal
place of business or chief executive office; and upon the request of the Lender,
execute such additional Security Instruments as may be necessary or appropriate
in connection therewith.
SECTION 7.17 ENVIRONMENTAL INDEMNIFICATION. THE BORROWER SHALL
INDEMNIFY, DEFEND AND HOLD THE LENDER AND ITS SHAREHOLDERS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, AND AFFILIATES AND EACH TRUSTEE FOR THE
BENEFIT OF THE LENDER UNDER ANY SECURITY INSTRUMENT (COLLECTIVELY, THE
"INDEMNIFIED PARTIES") HARMLESS ON A CURRENT BASIS FROM AND AGAINST ANY AND ALL
CLAIMS, LOSSES, DAMAGES, LIABILITIES, FINES, PENALTIES, CHARGES, ADMINISTRATIVE
AND JUDICIAL PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS, REQUIREMENTS
AND ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND EXPENSES INCURRED IN
CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES
AND EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, FROM (A) THE
PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER, OR FROM ANY PROPERTY OF THE
BORROWER, WHETHER PRIOR TO OR DURING THE TERM HEREOF, (B) ANY ACTIVITY CARRIED
ON OR UNDERTAKEN ON OR OFF ANY PROPERTY OF THE BORROWER, WHETHER PRIOR TO OR
DURING THE TERM HEREOF, AND WHETHER BY THE BORROWER OR ANY PREDECESSOR IN TITLE,
EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER OR ANY OTHER
PERSON AT ANY TIME OCCUPYING OR PRESENT ON SUCH PROPERTY, IN CONNECTION WITH THE
HANDLING, TREATMENT, REMOVAL, STORAGE, DECONTAMINATION, CLEANUP, TRANSPORTATION,
OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES AT ANY TIME LOCATED OR PRESENT ON OR
UNDER SUCH PROPERTY, (C) ANY RESIDUAL CONTAMINATION ON OR UNDER ANY PROPERTY OF
THE BORROWER, OR (D) ANY CONTAMINATION OF ANY PROPERTY OR NATURAL RESOURCES
ARISING IN CONNECTION WITH THE GENERATION, USE, HANDLING, STORAGE,
TRANSPORTATION OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES BY THE BORROWER OR ANY
EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER WHILE SUCH PERSONS
ARE ACTING WITHIN THE SCOPE OF THEIR RELATIONSHIP WITH THE BORROWER,
IRRESPECTIVE OF WHETHER ANY OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN
ACCORDANCE WITH APPLICABLE REQUIREMENTS OF LAW, INCLUDING ANY OF THE FOREGOING
IN THIS SECTION ARISING FROM THE SOLE NEGLIGENCE, COMPARATIVE NEGLIGENCE OR
CONCURRENT NEGLIGENCE OF THE INDEMNIFIED PARTIES, BUT NOT ANY OF THE FOREGOING
31
36
IN THIS SECTION ARISING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE
PART OF THE INDEMNIFIED PARTY SEEKING INDEMNIFICATION UNDER THIS SECTION; WITH
THE FOREGOING INDEMNITY SURVIVING SATISFACTION OF ALL OBLIGATIONS AND THE
TERMINATION OF THIS AGREEMENT.
SECTION 7.18 Exceptions to Covenants. Neither the Borrower nor any
other Person shall be deemed to be permitted to take any action which is
permitted by any of the covenants contained in this Agreement if such action is
in breach of any other covenant contained in this Agreement.
ARTICLE VIII
DEFAULTS; REMEDIES
SECTION 8.1 Events of Default; Acceleration of Maturity. If any one or
more of the following events (each an "Event of Default") shall have occurred
and be continuing (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body or otherwise):
(a) the Borrower shall fail to pay, when due, any principal of, or
interest on, the Note or any fees or any other amount payable hereunder;
(b) the Borrower shall fail to observe or perform any covenant or
agreement contained in Sections 7.1, 7.6(b), 7.7, 7.8 or 7.9;
(c) the Borrower or any other Person (other than the Lender) shall fail
to observe or perform any covenant or agreement contained in this Agreement or
the other Loan Papers (other than those covered by Sections 8.1(a) or (b)), for
a period of fifteen (15) days after the earlier of (i) any Responsible Officer
of the Borrower shall become aware or reasonably should have become aware
(regardless of the source of such awareness) of such default or (ii) written
notice specifying such default has been given to the Borrower by the Lender;
(d) the Borrower or any of Borrower's Subsidiaries shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate or other action to authorize any of the
foregoing;
32
37
(e) an involuntary case or other proceeding shall be commenced against
the Borrower or any of Borrower's Subsidiaries seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed or unstayed for a
period of 30 days; or an order for relief shall be entered against the Borrower
or any of the Borrower's Subsidiaries under the federal bankruptcy laws as now
or hereafter in effect;
(f) the Borrower or any of the Borrower's Subsidiaries shall fail to
pay, when due, any amount which it shall have become liable to pay to the PBGC
or to a Plan under Title IV of ERISA; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate or to cause a trustee to be appointed to
administer any Plan or a proceeding shall be instituted by a fiduciary of any
Plan against the Borrower or any of the Borrower's Subsidiaries to enforce
Section 515 of ERISA; or a condition shall exist by reason of which the PBGC
would be entitled to obtain a decree adjudicating that any such Plan must be
terminated;
(g) the Borrower or any of the Borrower's Subsidiaries (i) shall
default in the payment of any of their respective Debts (other than the Note)
and such default shall continue beyond any applicable cure period, (ii) shall
default in the performance or observance of any other provision contained in any
agreements or instruments evidencing or governing such Debt and such default is
not waived and continues beyond any applicable cure period, or (iii) any other
event or condition occurs which results in the acceleration of such Debt;
(h) one or more judgments or orders for the payment of money
aggregating in excess of $50,000 shall be rendered against the Borrower or any
of the Borrower's Subsidiaries and such judgment or order (i) shall continue
unsatisfied or unstayed (unless bonded with a supersedeas bond at least equal to
such judgment or order) for a period of 30 days, or (ii) is not fully paid and
satisfied at least ten (10) days prior to the date on which any of its Property
may be lawfully sold to satisfy such judgment or order;
(i) any representation, warranty, certification or statement made or
deemed to have been made by or on behalf of the Borrower in this Agreement or by
the Borrower or any other Person in any certificate, financial statement or
other document delivered pursuant to this Agreement shall prove to have been
incorrect in any respect when made if such incorrect representation, warranty,
certification or statement (i) could reasonably be expected to have any adverse
effect whatsoever upon the validity, performance or enforceability of any Loan
Paper, (ii) is or might reasonably be expected to be material and adverse to the
financial condition or business operations of any Person or to the prospects of
any Person, (iii) could reasonably be expected to impair the Borrower's ability
to fulfill its obligations under the terms and conditions of the Loan Papers, or
(iv) could reasonably be expected to impair the Lender's ability to receive full
and timely payment of the Note;
(j) if any default shall have occurred and be continuing under any
Security Document;
33
38
(k) any material license, franchise, permit, or authorization issued to
the Borrower or any of the Borrower's Subsidiaries by any Tribunal is forfeited,
revoked, or not renewed; or any proceeding with respect to such forfeiture or
revocation is instituted and is not resolved or dismissed within one year of the
date of the publication of the order instituting such proceeding; or
(l) a default shall occur under any Material Agreement, other than this
Agreement, to which the Borrower or any of the Borrower's Subsidiaries is a
party or by which any of their respective Property is bound;
then, and in every such event, the Lender may, at its option, (i) declare the
outstanding principal balance of and accrued interest on the Note to be, and the
same shall thereupon forthwith become, due and payable without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or other
notice of any kind, all of which are hereby waived by the Borrower, (ii) proceed
to foreclose the Liens securing the Note, and (iii) take such other actions as
are permitted by law; provided that in the case of any of the Events of Default
specified in clauses (d) or (e) above with respect to the Borrower, without any
notice to the Borrower or any other act by the Lender, the Revolving Commitment
shall terminate and the Note (together with accrued interest thereon) shall
become immediately due and payable without presentment, demand, protest, notice
of intent to accelerate, notice of acceleration or other notice of any kind, all
of which are hereby waived by the Borrower. Upon the occurrence and continuance
of a Default, the Lender may terminate the commitment to lend under this
Agreement and the Revolving Commitment shall thereupon terminate.
SECTION 8.2 Suits for Enforcement. In case any one or more of the
Events of Default specified in Section 8.1 shall have occurred and be
continuing, the Lender may, at its option, proceed to protect and enforce its
rights either by suit in equity or by action of law, or both, whether for the
specific performance of any covenant or agreement contained in this Agreement or
in aid of the exercise of any power granted in this Agreement.
SECTION 8.3 Remedies Cumulative. No remedy herein conferred upon the
Lender is intended to be exclusive of any other remedy and each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
SECTION 8.4 Remedies Not Waived. No course of dealing and no delay in
exercising any rights under this Agreement or under the other Loan Papers shall
operate as a waiver of any rights hereunder or thereunder of the Lender.
34
39
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Amendments and Waivers. (a) Any term, covenant, agreement
or condition of this Agreement or any other Loan Paper may be amended, or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively) by a written instrument signed by the
Borrower and the Lender.
(b) No failure or delay by the Lender in exercising any right, power or
privilege under this Agreement or any other Loan Paper shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law or in equity or in any of the other Loan
Papers.
SECTION 9.2 Highest Lawful Interest Rate. Regardless of any provision
contained in any of the Loan Papers, the Lender shall never be entitled to
receive, collect, or apply as interest on all or any part of the Loans, any
amount in excess of the Highest Lawful Rate in effect from day to day, and, in
the event the Lender ever receives, collects, or applies as interest any such
excess, such amount which would be deemed excessive interest shall be deemed a
partial prepayment of the principal of the Loans and treated hereunder as such;
and, if the entire principal amount of the Loans owed to the Lender is paid in
full, any remaining excess shall be repaid to the Borrower. In determining
whether the interest paid or payable, under any specific contingency, exceeds
the Highest Lawful Rate in effect from day to day, the Borrower and the Lender
shall, to the maximum extent permitted under applicable law, (i) characterize
any nonprincipal payment as an expense, fee, or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread the total amount of interest throughout the entire
contemplated term of the Loans so that the interest rate is uniform throughout
the entire term of the Loans; provided that, if the interest received by the
Lender for the actual period of existence thereof exceeds the Highest Lawful
Rate in effect from day to day, the Lender shall apply or refund to the Borrower
the amount of such excess as provided in this Section, and, in such event, the
Lender shall not be subject to any penalties provided by any laws for
contracting for, charging, taking, reserving, or receiving interest in excess of
the Highest Lawful Rate in effect from day to day.
SECTION 9.3 INDEMNITY. (a) WHETHER OR NOT ANY LOANS ARE EVER FUNDED OR
ANY LETTER OF CREDIT IS EVER ISSUED HEREUNDER, THE BORROWER AGREES TO INDEMNIFY
AND DEFEND AND HOLD HARMLESS ON A CURRENT BASIS THE LENDER AND ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS AND ATTORNEYS, AND EACH OF THEM (THE "INDEMNIFIED
PARTIES"), FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, COSTS,
INTEREST, CHARGES, COUNSEL FEES AND OTHER EXPENSES AND PENALTIES OF ANY KIND
WHICH ANY OF THE INDEMNIFIED PARTIES MAY SUSTAIN OR INCUR IN CONNECTION WITH ANY
INVESTIGATIVE, ADMINISTRATIVE OR JUDICIAL
35
40
PROCEEDING (WHETHER OR NOT THE LENDER SHALL BE DESIGNATED A PARTY THERETO) OR
OTHERWISE BY REASON OF OR ARISING OUT OF THE EXECUTION AND DELIVERY OF THIS
AGREEMENT OR ANY OF THE OTHER LOAN PAPERS AND/OR THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH INDEMNIFIED PARTY SHALL BE
INDEMNIFIED UNDER THIS SECTION WITHOUT REGARD TO THE CAUSE OR THE NEGLIGENCE OF
ANY INDEMNIFIED PARTY, WHETHER SUCH NEGLIGENCE BE THE SOLE NEGLIGENCE,
COMPARATIVE NEGLIGENCE OR CONCURRENT NEGLIGENCE OF ANY INDEMNIFIED PARTY.
(b) Any amount to be paid under this Section to the Lender shall be a
demand obligation owing by the Borrower and if not-paid within ten days of
demand shall bear interest from the date of expenditure by the Lender until paid
at a per annum rate equal to the lesser of (i) the default rate or (ii) the
Highest Lawful Rate. The obligations of the Borrower under this Section shall
survive payment of the Note and the assignment of any right hereunder.
SECTION 9.4 Expenses. (a) Whether or not any one or more of the Loans
are ever funded, the Borrower shall pay (i) all out-of-pocket expenses of the
Lender, including, without limitation, fees and disbursements of counsel for the
Lender in connection with the preparation of this Agreement and the other Loan
Papers (including, without limitation, the furnishing of any written or oral
opinions or advice incident to this transaction) and, if appropriate, the
recordation of the Loan Papers, any waiver or consent hereunder or any amendment
hereof or any Default or alleged Default hereunder, and (ii) if an Event of
Default occurs, all out-of-pocket expenses incurred by the Lender, including,
without limitation, fees and disbursements of counsel in connection with such
Event of Default and collection and other enforcement proceedings resulting
therefrom, fees of auditors, consultants, engineers and other Persons incurred
in connection therewith (including, without limitation, the supervision,
maintenance or disposition of the Collateral) and investigative expenses
incurred by the Lender in connection therewith, which amounts shall be deemed
compensatory in nature and liquidated as to amount upon notice to the Borrower
by the Lender and which amounts shall include, but not be limited to (A) all
court costs, (B) reasonable attorneys' fees, (C) reasonable fees and expenses of
auditors and accountants incurred to protect the interests of the Lender, (D)
fees and expenses incurred in connection with the participation by the Lender as
a member of the creditors' committee in a case commenced under any Insolvency
Proceeding, (E) fees and expenses incurred in connection with lifting the
automatic stay prescribed in Section 362 Title 11 of the United States Code, and
(F) fees and expenses incurred in connection with any action pursuant to Section
1129 Title 11 of the United States Code all reasonably incurred by the Lender in
connection with the collection of any sums due under the Loan Papers, together
with interest at the per annum interest rate equal to the Floating Rate,
calculated on a basis of a calendar year of 365 or 366 days, as the case may be,
counting the actual number of days elapsed, on each such amount from the date of
notification that the same was expended, advanced, or incurred by the Lender
until the date it is repaid to the Lender, with the obligations under this
Section surviving the non-assumption of this Agreement in a case commenced under
any Insolvency Proceeding and being binding upon the Borrower and/or a trustee,
receiver, custodian, or liquidator of the Borrower appointed in any such case.
36
41
(b) THE BORROWER SHALL INDEMNIFY THE LENDER AGAINST ANY TRANSFER TAXES,
DOCUMENTARY TAXES, ASSESSMENTS OR CHARGES MADE BY ANY GOVERNMENTAL AUTHORITY BY
REASON OF THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE OTHER LOAN PAPERS.
(c) Any amount to be paid under this Section to the Lender shall be a
demand obligation owing by the Borrower and if not paid within ten days of
demand shall bear interest from the date of expenditure by the Lender until paid
at a per annum rate equal to the Default Rate. The obligations of the Borrower
under this Section shall survive payment of the Note and the assignment of any
right hereunder.
SECTION 9.5 Taxes. The Borrower will, to the extent they may lawfully
do so, pay all Taxes (including interest and penalties) but expressly excluding
federal or state income taxes which may be payable in respect of the execution
and delivery of this Agreement or the other Loan Papers, or in respect of any
amendment of or waiver under or with respect to the foregoing, and will save the
Lender harmless against any loss or liability resulting from nonpayment or delay
in payment of any such Taxes (as limited above). The obligations of the Borrower
under this Section shall survive the payment of the Note and the assignment of
any right hereunder.
SECTION 9.6 Notices. Except as otherwise provided in Section 2.2 with
respect to requests for Loans or the issuance of letters of credit, all notices,
requests and other communications to any party hereunder shall be in writing
(including by telecopy or similar writing) and shall be given to such party at
its address and to the attention of the Person set forth on the signature pages
hereof or such other address or telecopy number or Person as such party may
hereafter specify for such purpose by notice to the other party. Each such
notice, request or other communication shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopier number specified
in this Section and the receipt thereof is acknowledged, (ii) if given by mail,
72 hours after such communication is deposited in the mails (certified, return
receipt requested) addressed as aforesaid or (iii) if given by any other means,
when delivered at the address specified in this Section, provided that notice to
the Lender under Section 2.2 shall not be effective until received.
SECTION 9.7 Right of Set-Offs. (a) Upon the occurrence and during the
continuance of any Event of Default, the Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Lender
to or for the credit or the account of the Borrower against the obligations of
the Borrower to the Lender, irrespective of whether or not the Lender shall have
made any demand under this Agreement or any other Loan Paper and although such
obligations may be unmatured. The Lender agrees promptly to notify the Borrower
after any such set-off and application made by the Lender, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Lender under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) which the Lender may have.
37
42
(b) The Borrower agrees, to the fullest extent it may effectively do so
under applicable law, that any holder of a participation in the Loans may
exercise rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of the Borrower in the amount of such participation.
SECTION 9.8 Survival. All representations, warranties and covenants
made by or on behalf of the Borrower in this Agreement or the other Loan Papers
herein or in any certificate or other instrument delivered by it or in its
behalf under the Loan Papers shall be considered to have been relied upon by the
Lender and shall survive the delivery to the Lender of such Loan Papers or the
extension of the Loans (or any part thereof), regardless of any investigation
made by or on behalf of the Lender.
SECTION 9.9 Successors and Assigns: Rights of Other Holders. (a) This
Agreement shall be binding on the parties hereto and their respective successors
and inure to the benefit of and be enforceable by the Lender, its legal
representatives, successors and assigns. With respect to the Borrower, this
Agreement and the other Loan Papers and the rights of the Borrower hereunder and
thereunder shall not be assignable in any respect.
(b) The Lender may at any time sell, transfer, assign, or grant
participations in the Obligations or any portion thereof; and the Lender may
forward to each Transferee and prospective Transferee all documents and
information relating to such Obligations, whether furnished by the Borrower or
otherwise obtained, as the Lender determines necessary or desirable. The
Borrower agrees that each Transferee, regardless of the nature of any transfer
to it, may exercise all rights (including, without limitation, rights of
set-off) with respect to the portion of the Obligations held by it as fully as
if such Transferee were the direct holder thereof, subject to any agreements
between such Transferee and the transferor to such Transferee.
SECTION 9.10 APPLICABLE LAW; VENUE; WAIVER OF JURY TRIAL. (A) THIS
AGREEMENT HAS BEEN NEGOTIATED, IS BEING EXECUTED AND DELIVERED, AND WILL BE
PERFORMED IN WHOLE OR IN PART, IN THE STATE OF TEXAS, AND THE SUBSTANTIVE LAWS
OF SUCH STATE AND THE APPLICABLE FEDERAL LAWS OF THE UNITED STATES OF AMERICA
SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND INTERPRETATION OF THE
LOAN PAPERS, EXCEPT TO THE EXTENT THE LAWS OF ANY JURISDICTION WHERE COLLATERAL
IS LOCATED REQUIRE APPLICATION OF SUCH LAWS WITH RESPECT TO SUCH COLLATERAL.
(b) ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY OR
INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT MAY BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE
LENDER, IN COURTS HAVING SITUS IN DALLAS, DALLAS COUNTY, TEXAS. THE BORROWER
HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED
IN DALLAS, DALLAS COUNTY, TEXAS, AND HEREBY WAIVES ANY RIGHTS IT MAY
38
43
HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT
AGAINST IT BY THE LENDER IN ACCORDANCE WITH THIS SECTION.
(c) THE BORROWER AND THE LENDER HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL BY
JURY IN ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT
RELATES TO OR ARISES OUT OF ANY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR
THE ACTS OR OMISSIONS OF THE LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR
PROVISIONS OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH
RESPECT THERETO. THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR
THE LENDER ENTERING INTO THIS AGREEMENT.
SECTION 9.11 Headings. The headings in this Agreement are for purposes
of reference only and shall not limit or otherwise affect the meaning hereof and
words such as "hereunder" or "herein" shall refer to the entirety of this
Agreement unless specifically indicated otherwise.
SECTION 9.12 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original and all of which together
shall constitute one and the same instrument. This Agreement shall become
effective at such time as the counterparts hereof which, when taken together,
bear the signature of the Borrower and the Lender, shall be delivered to the
Lender.
SECTION 9.13 Invalid Provisions, Severability. If any provision of this
Agreement or the other Loan Papers is held to be illegal, invalid, or
unenforceable under present or future laws effective during the term hereof or
thereof, such provision shall be fully severable, this Agreement and the other
Loan Papers shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part thereof, and the remaining
provisions hereof and thereof shall remain in full force and effect and shall
not be affected by the illegal, invalid, or unenforceable provision or by its
severance therefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision there shall be added automatically as a part of this
Agreement or the other Loan Papers a provision as similar in terms to such
illegal, invalid, or unenforceable provision as may be possible and be legal,
valid and enforceable.
SECTION 9.14 Revolving Loan. Pursuant to Section 346.004 of the Finance
Code of Texas, the Borrower agrees that Chapter 346 of such Finance Code shall
not govern or in any manner apply to the Loans.
39
44
SECTION 9.15 PRECLUSION OF ORAL AGREEMENTS. THIS WRITTEN LOAN AGREEMENT
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
BORROWER:
▇▇▇▇▇▇▇ RESOURCES COMPANY, INC.
▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: 972/556-0220 By: /s/ ▇▇▇▇▇ ▇.▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
LENDER:
COMPASS BANK
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Energy Group By: /s/ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy: 214/706-8054 ---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Senior Vice President
40