CREDIT AGREEMENT
REDUCING REVOLVING LINE OF CREDIT
OF UP TO $35,000,000.00
FROM
BANK ONE, NA
TO
TENGASCO, INC.,
TENNESSEE LAND & MINERAL CORPORATION AND
TENGASCO PIPELINE CORPORATION
November 8, 2001
CREDIT AGREEMENT
dated November 8, 2001
from
BANK ONE, NA
to
TENGASCO, INC.,
TENNESSEE LAND & MINERAL CORPORATION AND
TENGASCO PIPELINE CORPORATION
TABLE OF CONTENTS
ARTICLE I.
DEFINITIONS ............................................................ 1
ARTICLE II.
THE LOAN ............................................................... 11
2.01 The Revolving Loan ............................................. 11
2.02 Advances and Payments of Principal Under the Revolving Note .... 12
2.03 Payments of Interest under the Revolving Note .................. 12
2.04 General Provisions Relating to Interest ........................ 12
2.05 Borrowing Base Determination ................................... 13
2.06 Mandatory Prepayment of the Note ............................... 14
2.07 Advances to Satisfy Obligations of the Borrower ................ 15
2.08 Assignment of Production ....................................... 15
2.09 Commitment Fee ................................................. 15
2.10 Facility Fee ................................................... 15
2.11 Administrative Fee ............................................. 16
2.12 Addition/Deletion of Borrowing Base Oil & Gas Properties ....... 16
2.13 Adjustment to Revolving Commitment Limit ....................... 16
ARTICLE III.
CONDITIONS ............................................................. 17
i
3.01 Conditions to the Closing ...................................... 17
3.02 Documents Required for Subsequent Disbursements ................ 18
3.03 General Conditions to all Disbursements ........................ 18
3.04 Legal Matters .................................................. 19
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES ......................................... 19
4.01 Existence ...................................................... 19
4.02 Due Authorization .............................................. 20
4.03 Valid and Binding Obligations .................................. 20
4.04 Scope and Accuracy of Financial Statements ..................... 20
4.05 Title to Borrowing Base Oil and Gas Properties ................. 20
4.06 Oil and Gas Leases ............................................. 20
4.07 Interest in the Borrowing Base Oil and Gas Properties .......... 21
4.08 Oil and Gas Contracts .......................................... 21
4.09 Producing ▇▇▇▇▇ ................................................ 21
4.10 Purchasers of Production ....................................... 22
4.11 Authorizations and Consents .................................... 22
4.12 Environmental Laws ............................................. 22
4.13 Compliance with Laws, Rules, Regulations and Orders ............ 23
4.14 Liabilities, Litigation and Restrictions ....................... 23
4.15 Existing Indebtedness .......................................... 23
4.16 Material Commitments ........................................... 23
4.17 Margin Stock ................................................... 24
4.18 Proper Filing of Tax Returns and Payment of Taxes Due .......... 24
4.19 ERISA .......................................................... 24
4.20 Investment Company Act Compliance .............................. 24
4.21 Public Utility Holding Company Act Compliance .................. 24
4.22 Insurance ...................................................... 25
4.23 Material Misstatements and Omissions ........................... 25
4.24 Pipeline Assets ................................................ 25
4.25 Ownership Interests ............................................ 25
ARTICLE V.
AFFIRMATIVE COVENANTS .................................................. 25
5.01 Use of Funds ................................................... 25
5.02 Maintenance and Access to Records .............................. 25
5.03 Quarterly Unaudited Financial Statements ....................... 25
5.04 Annual Audited Financial Statements ............................ 26
5.05 Compliance Certificate ......................................... 26
5.06 Statement of Material Adverse Change in Condition .............. 26
ii
5.07 Title Defects .................................................. 26
5.08 Additional Information ......................................... 26
5.09 Compliance with Laws and Payment of Assessments and Charges .... 26
5.10 Maintenance of Existence and Good Standing ..................... 26
5.11 Further Assurances ............................................. 27
5.12 Initial Expenses of the Bank ................................... 27
5.13 Subsequent Expenses of the Bank ................................ 27
5.14 Maintenance of Tangible Property ............................... 28
5.15 Maintenance of Insurance ....................................... 28
5.16 Inspection of Tangible Assets/Right of Audit ................... 28
5.17 Payment of Note and Performance of Obligations ................. 28
5.18 Borrowing Base ................................................. 28
5.19 Compliance with Environmental Laws ............................. 28
5.20 Hazardous Substances Indemnification ........................... 28
5.21 Properties Not Operated by the Borrower ........................ 29
5.22 Transactions with Affiliates ................................... 29
5.23 Leases ......................................................... 29
5.24 Operation of Borrowing Base Oil and Gas Properties ............. 30
5.25 Assignments .................................................... 30
5.26 Change of Purchasers of Production ............................. 30
5.27 Payment of Taxes, Etc .......................................... 30
5.28 Notice of Litigation ........................................... 30
5.29 Notice of Events of Default .................................... 31
5.30 Notice of Change of Principal Offices .......................... 31
5.31 Employee Benefit Plans ......................................... 31
5.32 Production Reports ............................................. 31
5.33 Operating Accounts ............................................. 31
5.34 Payment of Obligations ......................................... 31
5.35 Agreements ..................................................... 31
ARTICLE VI.
NEGATIVE COVENANTS ..................................................... 32
6.01 Other Indebtedness ............................................. 32
6.02 Loans or Advances .............................................. 32
6.03 Mortgages or Pledges of Assets ................................. 32
6.04 Sales of Assets ................................................ 32
6.05 Dividends ...................................................... 33
6.06 Payment of Accounts Payable .................................... 33
6.07 Cancellation of Insurance ...................................... 33
6.08 Investments .................................................... 33
6.09 Changes in Structure or Business ............................... 33
6.10 Limitation on Leases ........................................... 33
iii
6.11 Pooling or Unitization ......................................... 33
6.12 Hedge Agreements ............................................... 33
6.13 Capital Stock of Borrower ...................................... 34
6.14 Margin Stock ................................................... 34
6.15 General and Administrative Expenses ............................ 34
6.16 Minimum Tangible Net Worth ..................................... 34
6.17 Current Ratio .................................................. 34
6.18 Debt Service Coverage Ratio .................................... 34
ARTICLE VII.
EVENTS OF DEFAULT ...................................................... 35
7.01 Enumeration of Events of Default ............................... 35
7.02 Rights Upon Unmatured Event of Default ......................... 36
7.03 Rights Upon Default ............................................ 36
7.04 Remedies ....................................................... 37
7.05 Right of Set-off ............................................... 38
ARTICLE VIII.
MISCELLANEOUS .......................................................... 38
8.01 Security Interests in Deposits and Right of Offset
or the Banker's Lien ........................................... 38
8.02 Survival of Representations, Warranties and Covenants .......... 38
8.03 Notices and Other Communications ............................... 38
8.04 Parties in Interest ............................................ 39
8.05 Renewals and Extensions ........................................ 39
8.06 No Waiver by the Bank .......................................... 39
8.07 Waiver, Release, and Indemnification by the Borrower ........... 40
8.08 GOVERNING LAW .................................................. 40
8.09 Incorporation of Exhibits and Schedules ........................ 40
8.10 Survival Upon Unenforceability ................................. 40
8.11 Rights of Third Parties ........................................ 40
8.12 Amendments or Modifications .................................... 41
8.13 Agreement Construed as an Entirety ............................. 41
8.14 Number and Gender .............................................. 41
8.15 AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS ...................... 41
8.16 Controlling Provision Upon Conflict ............................ 41
8.17 Time, Place and Method of Payments ............................. 41
8.18 Termination .................................................... 42
8.19 Non-Application of Chapter 346 of Texas Finance Code ........... 42
8.20 Counterpart Execution .......................................... 42
iv
EXHIBITS
EXHIBIT A Borrowing Base Oil and Gas Properties
EXHIBIT B Revolving Note
EXHIBIT C Compliance Certificate
EXHIBIT D Security Instruments
SCHEDULES
Schedule 4.01 Information Regarding the Borrower and its Subsidiaries
Schedule 4.10 List of Purchasers of Production
Schedule 4.14 Litigation
Schedule 4.15 Existing Indebtedness
Schedule 4.16 Material Commitments
Schedule 4.22 Insurance Certificate
Schedule 4.24 Pipeline Assets and Facilities
Schedule 4.25 Ownership Interests
v
CREDIT AGREEMENT
----------------
THIS CREDIT AGREEMENT (this "Agreement"), dated effective November 8,
2001, is by and between TENGASCO, INC., a Tennessee corporation, TENNESSEE LAND
& MINERAL CORPORATION, a Tennessee corporation, and TENGASCO PIPELINE
CORPORATION, a Tennessee corporation (collectively, the "Borrower") and BANK
ONE, NA, a national banking association (the "Bank").
W I T N E S S E T H
-------------------
WHEREAS, the Borrower desires to obtain a loan from the Bank in
order to repay certain indebtedness of the Borrower and to satisfy certain
working capital needs, including the exploration, development and/or acquisition
of oil and gas properties and for general corporate purposes; and
WHEREAS, the Bank is willing to loan such funds to the Borrower in
accordance with the terms of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the Bank and the Borrower agree as follows:
ARTICLE I.
DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the
meanings indicated:
"AFFILIATE" means, as applied to any Person, any other Person,
directly or indirectly, controlling, controlled by, or under common control
with, that Person. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by," and "under
common control with"), as applied to any Person, means either: (a) the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract, or otherwise, or (b) the legal or
beneficial ownership of or voting rights with respect to ten percent (10%) or
more of the equity interest in such Person.
"AGREEMENT" means this Credit Agreement, as the same may be
amended or supplemented from time to time.
"BANK PARTIES" has the meaning given such term in Section 8.07(B).
"BORROWING BASE" means the maximum Loan amount supported by the
Borrowing Base Oil and Gas Properties, as determined by the Bank from time to
time in accordance with Section 2.05 of this Agreement.
"BORROWING BASE OIL AND GAS PROPERTIES" means those Oil and Gas
Properties of the Borrower that are subject to the liens created by the Security
Instruments to secure the Obligations, including, but not limited to, the
indebtedness evidenced by the Note, which Borrowing Base Oil and Gas Properties
are described in Exhibit "A" attached hereto and made a part hereof.
"BUSINESS DAY" means a day other than a Saturday, Sunday or legal
holiday for commercial banks under the laws applicable to national banking
associations and those applicable to national association banks.
"CHANGE OF CONTROL" means an event or series of events, occurring
without Bank's prior written approval, by which (i) any reduction of greater
than ten percent (10%) occurs in the aggregate of total percentage of the stock
of Tengasco, Inc. that is owned by the officers and directors of Tengasco, Inc.
as shown on Schedule 4.25; (ii) any change of ownership of the stock in any of
Tengasco, Inc.'s Subsidiaries, including, but without limitation, Tennessee Land
& Mineral Corporation and Tengasco Pipeline Corporation, resulting in Tengasco,
Inc. owning less than one hundred percent (100%) of the stock of each of its
Subsidiaries; or (iii) any change in the board of directors of any Borrower, or
any change of the Person who holds any position of president, vice-president or
chief financial officer of any of the Borrowers.
"CLOSING" has the meaning provided in Section 3.01.
"COMPLIANCE CERTIFICATE" means the certificate of the President,
Chief Executive Officer or Chief Financial Officer of the Borrower submitted to
the Bank from time to time pursuant to this Agreement and attesting to the
financial covenants and stating, to such officer's knowledge, whether or not an
Event of Default or an Unmatured Event of Default has occurred and is continuing
and, if such an event has occurred, the actions being taken by the Borrower, to
remedy such situation and that GAAP has been used in the preparation of the
Financial Statements, which certificate shall be in the form attached hereto as
Exhibit "C".
"CONSOLIDATED TANGIBLE NET WORTH" means, as of any reporting
period, Stockholders' Equity less the sum of:
(A) Goodwill, including any amounts, however designated on a
consolidated balance sheet of the Borrower and its Subsidiaries,
representing the excess of the purchase price paid for assets or
stock acquired over the value assigned thereto on the books of the
Borrower;
(B) Patents, trademarks, trade names, and copyrights;
(C) Any amount at which shares of capital stock of the Borrower
appear as an asset on the Borrower's balance sheet;
2
(D) Loans and advances to stockholders, directors, officers, or
employees, to the extent they exceed $10,000.00 in the aggregate;
and
(E) Any other amount in respect of an intangible that should be
classified as an asset on a consolidated balance sheet of the
Borrower in accordance with GAAP.
"▇▇▇▇▇" means the Accounting Procedure Joint Operations
Recommended by the Council of Petroleum Accountants Society, with respect to
onshore operations.
"CURRENT ASSETS" means at any time, all assets, that should in
accordance with GAAP, be classified as current assets on a consolidated balance
sheet of Borrower and its Subsidiaries.
"CURRENT LIABILITIES" means at any time, all liabilities that
should in accordance with GAAP, be classified as current liabilities on a
consolidated balance sheet of the Borrower and its Subsidiaries, MINUS the
amount of Loans under this Agreement which are deemed to be current in
accordance with GAAP.
"CURRENT RATIO" means the ratio derived from dividing Current
Assets by Current Liabilities.
"DEBT SERVICE COVERAGE RATIO" means the ratio derived from
dividing quarterly EBITDA less cash dividend payments made by Borrower for any
such quarter by the sum of (i) actual cash payments of interest expense of
Borrower for such quarter, (ii) eight and one third percent (8.33%) of the
outstanding balance of the Loans at the end of such quarter, and (iii) twenty-
five percent (25%) of the current maturities of Indebtedness of Borrower other
than under this Agreement, calculated at the end of such quarter.
"EBITDA" means, for any reporting period, Borrower's earnings for
such period, before deductions for interest, taxes, depreciation, depletion,
amortization and other non-cash charges and addition of non-cash credit.
"ENVIRONMENTAL LAWS" means (a) the following federal laws as they
may be cited, referenced and amended from time to time: the Clean Air Act, the
Clean Water Act, the Safe Drinking Water Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Endangered Species Act, the
Resource Conservation and Recovery Act, the Occupational Safety and Health Act,
the Hazardous Materials Transportation Act, the Superfund Amendments and
Reauthorization Act, the Toxic Substances Control Act, and the Oil Pollution Act
of 1990; (b) any and all environmental statutes of any state in which property
of the Borrower is situated, as they may be cited, referenced and amended from
time to time; (c) any rules or regulations promulgated under or adopted pursuant
to the above federal and state laws; and (d) any other federal, state or local
statute or any requirement, rule, regulation, code, ordinance or order adopted
pursuant thereto, including, without limitation, those relating to the
generation, transportation, treatment, storage, recycling, disposal, handling or
release of Hazardous Substances.
3
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations and published interpretations
thereof.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) which together with the Borrower would be treated as a single
employer under Section 4001 of ERISA.
"EVENT OF DEFAULT" means any of the events specified in Section
7.01 of this Agreement.
"FINANCIAL STATEMENTS" means the statements of the financial
condition of the indicated Person, on a consolidated basis, as at the point in
time and for the period indicated and consisting of at least a balance sheet,
income statement and statement of changes in financial position, and, when the
foregoing are audited, accompanied by the certification of such Person's
independent certified public accountants and footnotes to any of the foregoing,
all of which shall be prepared in accordance with GAAP applied on a basis
consistent with that of the preceding year.
"FLOATING RATE" means a per annum interest rate equal to the Prime
Rate in effect from time to time plus one-quarter percent (.25%) in the absence
of any Event of Default, or plus four and one-quarter percent (4.25%) following
and during the continuation of any Event of Default.
"GAAP" means generally accepted accounting principles, applied on
a consistent basis, as set forth in Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants and/or in statements
of the Financial Accounting Standards Board and/or their respective successors
and which are applicable in the circumstances as of the date in question.
Accounting principles are applied on a "consistent basis" when the accounting
principles observed in a current period are comparable in all material respects
to those accounting principles applied in a preceding period.
"GENERAL AND ADMINISTRATIVE EXPENSES" means total expenses of
Borrower, MINUS (A) lease operating expenses, (B) dry-hole costs and other
exploration expenses, (C) depreciation, depletion, and amortization, (D)
interest expense, (E) ▇▇▇▇▇ overhead, and (F) severance and ad valorem taxes,
(G) state and federal income taxes.
"HAZARDOUS SUBSTANCES" means flammables, explosives, radioactive
materials, hazardous wastes, asbestos or any material containing asbestos,
polychlorinated biphenyls (PCBs), toxic substances or related materials,
petroleum and petroleum products and associated oil or natural gas exploration,
production and development wastes or any substances defined as "hazardous
substances", "hazardous materials", "hazardous wastes" or "toxic substances"
under the Comprehensive Environmental Response, Compensation and Liability Act,
as amended, the Superfund Amendments and Reauthorization Act, as amended, the
Hazardous Materials Transportation Act, as amended, the Resource Conservation
and Recovery Act, as amended, the Toxic Substances Control Act, as amended, or
any other Environmental Laws now or hereafter
4
enacted or promulgated by any regulatory authority or governmental body, but
only to the extent any such law is or becomes applicable to the Borrower or any
of its property.
"HEDGE AGREEMENT" means any swap agreement, cap, collar, floor,
exchange transaction, forward agreement or exchange or protection agreement
related to Hydrocarbons or any option with respect to such transaction, as more
specifically provided in those certain master swap agreements on International
Swaps and Derivatives Association forms and the schedules thereto and any
confirmations thereunder entered into by Borrower with any other Person.
"HYDROCARBONS" means crude oil, condensate, natural gas, natural
gas liquids and other hydrocarbons.
"INDEBTEDNESS" means, as to any Person, (a) all items of
indebtedness or liability (other than capital, surplus, deferred credits and
reserves, as such) which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side of a balance sheet
as at the date as of which Indebtedness is to be determined, (b) indebtedness
secured by (or for which the holder of such indebtedness has a right, contingent
or otherwise, to be secured by) any mortgage, deed of trust, pledge, lien,
security interest, or other charge or encumbrance existing on or encumbering
property owned by the Person whose Indebtedness is being determined, whether or
not the indebtedness secured thereby shall have been assumed, (c) all
indebtedness of others which such Person has directly or indirectly guaranteed,
endorsed (otherwise than for collection or deposit in the ordinary course of
business), discounted with recourse, agreed (contingently or otherwise) to
purchase or repurchase or otherwise acquire, or in respect of which such Person
has agreed to supply or advance funds (whether by way of loan, purchase of
securities or capital contribution, through a commitment to pay for property or
services regardless of the nondelivery of such property or the nonfurnishing of
such services or otherwise), or in respect of which such Person has otherwise
become directly or indirectly liable, contingently or otherwise, whether now
existing or hereafter arising, and (d) all leases that, in accordance with GAAP,
should not be reflected on the Borrower's balance sheet.
"INVESTMENT" in any Person means any stock, bond, note or other
evidence of Indebtedness or any other security (other than current trade and
customer accounts) of, or loan to, such Person.
"LAWS" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, or decrees of any government or political subdivision or
agency thereof, or any court or similar entity established by any thereof.
"LEASES" means oil and gas leases and all oil, gas and mineral
leases constituting any part of the Borrowing Base Oil and Gas Properties.
"LIMITATION PERIOD" means any period while any amount remains
owing on the Note when interest on such amount, calculated at the applicable
rate prescribed on the Note, plus any fees
5
payable hereunder and deemed to be interest under applicable Law, would exceed
the Maximum Rate.
"LOAN" means, singly, any advance by the Bank to the Borrower
pursuant to this Agreement and "LOANS" means, cumulatively, the aggregate sum of
all money advanced by the Bank to the Borrower pursuant to this Agreement.
"LOAN DOCUMENTS" means this Agreement, the Note, the Security
Instruments, and all other promissory notes, security agreements, and other
instruments, documents, and agreements executed and delivered pursuant to or in
connection with this Agreement, as such instruments, documents, and agreements
may be amended, modified, renewed, extended, or supplemented from time to time.
"LOAN EXCESS" means, at any point in time, the amount, if any, by
which the outstanding balance on the Loans evidenced by the Note exceeds the
Revolving Commitment then in effect.
"MARKETABLE TITLE" means good and defensible title, free and clear
of all mortgages, liens and encumbrances, except for Permitted Encumbrances.
"MAXIMUM RATE" means the maximum rate of non-usurious interest
permitted from day to day by applicable law, including as to Chapter 303 of the
Texas Finance Code (and as the same may be incorporated by reference in other
Texas statutes), but otherwise without limitation, that rate based upon the
"indicated weekly rate ceiling."
"MONTHLY BORROWING BASE REDUCTION" means the amount of the
automatic monthly reduction to the Borrowing Base, as determined by the Bank
from time to time in accordance with Section 2.05 of this Agreement.
"MULTI-EMPLOYER PLAN" means a plan described in Section 4001(a)(3)
of ERISA which covers employees of the Borrower or any ERISA Affiliate.
"NISHIWAKI NOTE" means, collectively, (i) that certain promissory
note dated August 16, 2000 executed by Tengasco Pipeline Corporation in favor of
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("NISHIWAKI") for the principal amount of Two Million Dollars
($2,000,000.00), (ii) that certain Loan Agreement dated August 16, 2000 between
Tengasco Pipeline Corporation and Nishiwaki, (iii) that certain Throughput
Agreement dated August 16, 2000 between Tengasco Pipeline Corporation and
Nishiwaki, (iv) that certain letter agreement dated April 20, 2001 between
Tengasco Pipeline Corporation and Nishiwaki, and (v) that certain promissory
note dated August 16, 2000 executed by Tengasco Pipeline Corporation in favor of
Morita Properties, Inc. ("MORITA") for the principal amount of Five Hundred
Thousand Dollars ($500,000.00) which was assigned by Morita to Nishiwaki per
that certain agreement dated January 4, 2001 between Morita and Nishiwaki, (vi)
that certain Loan Agreement dated August 16, 2000 between Tengasco Pipeline
Corporation and Morita,
6
the benefits and obligations of which were assigned by Morita to Nishiwaki per
that certain agreement dated January 4, 2001 between Morita and Nishiwaki, and
(vii) that certain Throughput Agreement dated August 16, 2000 between Tengasco
Pipeline Corporation and Morita, the benefits and obligations of which were
assigned by Morita to Nishiwaki per that certain agreement dated January 4, 2001
between Morita and Nishiwaki.
"NOTE" means the Revolving Note, and any extension, renewal, or
rearrangement of, or substitute for, such Note.
"OBLIGATIONS" means all obligations, indebtedness, and liabilities
of the Borrower to the Bank, now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated, unliquidated,
joint, several, or joint and several, including, without limitation, the
obligations, indebtedness, and liabilities of the Borrower under this Agreement
and the other Loan Documents and any Hedge Agreement entered into between
Borrower and Bank, and all interest accruing thereon and all attorneys' fees and
other expenses incurred in the administration, enforcement or collection
thereof.
"OIL AND GAS PROPERTIES" means fee, leasehold or other interests
in or under mineral estates or oil, gas and other liquid or gaseous hydrocarbon
leases with respect to properties situated in the United States, including,
without limitation, overriding royalty and royalty interests, leasehold estate
interests, net profits interests, production payment interests and mineral fee
interests, together with contracts executed in connection therewith and all
tenements, hereditaments, appurtenances and properties, real or personal,
appertaining, belonging, affixed or incidental thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PERMITTED ASSET SALES" means sales, leases, assignments,
transfers or disposals of, in one or any series of related transactions, all or
any portion of Borrower's: (a) equipment, whether now owned or hereafter
acquired, including transfers to Subsidiaries, which, in the aggregate, do not
exceed $250,000.00 in any rolling twelve month period, or (b) Oil and Gas
Properties that neither are covered by any of the Security Instruments nor
contain any proved oil and gas reserves.
"PERMITTED ENCUMBRANCES" means:
(A) Liens for taxes, assessments, or similar charges, incurred
in the ordinary course of business that are not yet due and
payable;
(B) Liens of mechanics, materialmen, warehousemen, carriers, or
other like liens, securing obligations incurred in the ordinary
course of business that are not yet due and payable;
7
(C) Pledges or deposits in connection with or to secure
workmen's compensation, unemployment insurance, pensions or other
employee benefits;
(D) Encumbrances consisting of covenants, zoning restrictions,
rights, easements, liens or other restrictions on the use of real
property, none of which materially impairs the use of such
property by the Borrower in the operation of its business, and
none of which is violated in any material respect by existing or
proposed operations;
(E) Liens of operators and/or co-working interest owners under
joint operating agreements or similar contractual arrangements
with respect to the Borrower's proportionate share of the expense
of exploration, development and operation of oil, gas and mineral
leasehold or fee interests owned jointly with others, to the
extent that same relate to sums not yet due;
(F) Liens securing surety or other bonds required in the normal
course of business not to exceed $25,000.00 in the aggregate at
any time in effect;
(G) The following, if the validity or amount thereof is being
contested in good faith by appropriate and lawful proceedings, so
long as levy and execution thereon have been stayed and continue
to be stayed and they do not, in the aggregate, materially detract
from the value of the property of the Borrower or any Subsidiary,
or materially impair the use thereof in the operation of its
business:
(1) Claims or liens for taxes, assessments, or charges
due and payable and subject to interest or penalty;
(2) Claims, liens, and encumbrances upon, and defects of
title to, real or personal property, including any
attachment of personal or real property or other legal
process prior to adjudication of a dispute on the merits;
(3) Claims or liens of mechanics, materialmen,
warehousemen, carriers, or other like liens; and
(4) Adverse judgments on appeal.
(H) Liens securing payment and performance of the Obligations;
(I) Liens securing purchase money obligations included in the
definition of Permitted Indebtedness if such liens encumber only
the property for which such purchase money obligation was
incurred; and
(J) Inchoate liens in respect of royalty or overriding royalty
owners.
8
"PERMITTED HEDGE AGREEMENT" means any Hedge Agreement which
Borrower enters into with or through the Bank or any Affiliate thereof or with
any other Person reasonably acceptable to the Bank, and any other confirmations
which Borrower may hereafter enter into with or through the Bank or any
Affiliate thereof or any other Person reasonably acceptable to the Bank.
"PERMITTED INDEBTEDNESS" means:
(A) The Loans;
(B) Loans by the Bank under other credit arrangements;
(C) Unsecured current accounts payable incurred in the ordinary
course of business which are (i) not overdue, or (ii) being
contested in good faith by appropriate proceedings, or (iii) the
subject of usual and customary review and evaluation;
(D) Loans, advances or extensions of credit from suppliers,
contractors or other Persons who are not Affiliates of Borrower
under applicable contracts or agreements in connection with
Borrower's oil and gas exploration and development activities,
which are not overdue or are being contested in good faith by
appropriate proceedings;
(E) Letters of credit or performance bonds required to be
obtained by the Borrower in the normal course of its business to
assure the proper plugging and abandonment of oil or gas drilling
or production locations or bonds required by any governmental
agency or instrumentality in the normal course of the Borrower's
business; and
(F) Purchase money obligations of the Borrower of up to
$100,000 at any time for the purchase of equipment so long as the
purchase money obligations do not exceed the fair market value of
the equipment purchased therewith.
"PERSON" means an individual, company, corporation, partnership,
joint venture, limited liability company, trust, association, unincorporated
organization or a government or any agency or political subdivision thereof.
"PLAN" means, at any time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or any ERISA Affiliate 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.
9
"PRIME RATE" means a rate per annum equal to the prime rate of
interest announced from time to time by the Bank (which is not necessarily the
lowest rate charged to any customer), changing when and as said prime rate
changes.
"PROHIBITED TRANSACTION" means any transaction set forth in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended from time to time.
"PROVED RESERVES" means the estimated quantities of crude oil,
condensate, natural gas liquids and natural gas which geological and engineering
data demonstrate with reasonable certainty to be recoverable by primary
producing mechanisms in future years from known reservoirs underlying lands or
interests therein constituting Oil and Gas Properties, under existing economic
and operating conditions. Reserves which can be produced economically through
application of improved recovery techniques (i.e., fluid injection) will be
included in Proved Reserves when successful testing by a pilot project or the
operation of an installed program in the reservoir provides support for the
engineering analysis on which the pilot project or installed program was based.
In general, the economic productivity of the estimated proved reserves is
supported by actual production or a conclusive formation test; however, in
certain instances proved reserves are assigned to reservoirs on the basis of a
combination of electrical and other type logs and core analyses which indicate
these reservoirs are analogous to similar reservoirs in the same field which are
producing or have demonstrated the ability to produce on a formation test.
"REPORTABLE EVENT" means any of the events set forth in Section
4043 of ERISA.
"REQUEST FOR ADVANCE" means the written request by Tengasco, Inc.
for an advance by the Bank pursuant to this Agreement, which Request for Advance
shall be signed by an authorized officer of Tengasco, Inc. and shall include a
statement of the amount requested to be advanced, the date of the requested
advance and such other information as the Bank in its reasonable discretion
deems necessary.
"REVOLVING COMMITMENT" means the obligation of the Bank, subject
to the provisions of this Agreement and existing only through the Revolving Loan
Termination Date, to advance to the Borrower funds in an amount not to exceed at
any one time outstanding the lesser of: (a) the Borrowing Base then in effect,
or (b) the Revolving Commitment Limit.
"REVOLVING COMMITMENT LIMIT" means $10,000,000.00 as of the
Closing, but such amount may be increased by the Bank in its sole discretion
from time to time with the agreement of the Borrower should the Borrower
contribute additional Oil and Gas Properties of the Borrower to the Borrowing
Base Oil and Gas Properties in accordance with Section 2.11 hereof or should the
Borrowing Base, as determined in accordance with Section 2.05, ever exceed such
amount.
"REVOLVING LOAN" means the loan made pursuant to Section 2.01.
"REVOLVING LOAN TERMINATION DATE" means November 8, 2004.
10
"REVOLVING NOTE" means the promissory note in the original face
amount of $35,000,000.00 dated of even date herewith made by the Borrower
payable to the order of the Bank, in substantially the form attached hereto as
Exhibit "B," together with all deferrals, renewals, extensions, amendments,
modifications or rearrangements thereof, which promissory note shall evidence
certain advances to the Borrower by the Bank pursuant to Section 2.01 hereof.
"SECURITY INSTRUMENTS" means the security instruments described on
Exhibit "D," in form and substance satisfactory to the Bank, to be executed by
Borrower pursuant to Section 3.01, and any and all other instruments or
documents hereafter executed in connection with or as security for the payment
of the Note.
"STOCKHOLDERS' EQUITY" means, at any time, the sum of the
following accounts set forth on a consolidated balance sheet of the Borrower,
prepared in accordance with GAAP: (A) the par or stated value of all outstanding
capital stock; (B) capital surplus; and (C) retained earnings.
"SUBSIDIARY" means, as to any Person, any corporation in which
such Person, directly or indirectly through its Subsidiaries, owns more than
fifty percent (50%) of the stock of any class or classes having by the terms
thereof the ordinary voting power to elect a majority of the directors of such
corporation, and any partnership, association, joint venture, or other entity in
which such Person, directly or indirectly through its Subsidiaries, has more
than a fifty percent (50%) equity interest at the time.
"TRANSFER ORDER LETTERS" means the letters in lieu of division or
transfer orders, in form acceptable to the Bank.
"UNMATURED EVENT OF DEFAULT" means any event or occurrence which
solely with the lapse of time or the giving of notice or both will ripen into an
Event of Default.
UNDEFINED TERMS. Undefined financial accounting terms used in this
Agreement shall be defined according to GAAP.
ARTICLE II.
THE LOAN
--------
2.01 THE REVOLVING LOAN. Upon the terms and conditions
(including, without limitation, the right of the Bank to terminate the Revolving
Commitment hereunder upon an Event of Default or to suspend its obligation to
make advances under the Revolving Commitment upon an Unmatured Event of Default)
and relying on the representations and warranties contained in this Agreement,
the Bank agrees, for a period from and after the date hereof through the
Revolving Loan Termination Date, to make advances to the Borrower from time to
time following receipt of a Request for Advance at least one Business Day prior
to such requested advance, in such amounts as the Borrower may request;
PROVIDED, HOWEVER, each such advance shall be in an amount of not less
11
than $100,000.00 and in an integral multiple of $10,000.00 and the aggregate
principal amount of all advances made pursuant to this Section 2.01 and at any
one time outstanding shall not exceed the Revolving Commitment.
Through the Revolving Loan Termination Date, the Borrower may use
this revolving credit by borrowing, prepaying and reborrowing, all in accordance
with the terms and conditions of this Agreement. The borrowings made by the
Borrower pursuant to the Revolving Commitment shall be solely requested by
Tengasco, Inc. through a Request for Advance and all advances to the Borrower
may be made by the Bank to Tengasco, Inc's account at the principal office of
the Bank in Houston, Texas. All Loans shall be evidenced by the Revolving Note.
The entire principal amount of the Revolving Note is due on the Revolving Loan
Termination Date.
2.02 ADVANCES AND PAYMENTS OF PRINCIPAL UNDER THE REVOLVING
NOTE. Each time an advance is made against or payment is made on the Revolving
Note, the Bank is hereby irrevocably authorized by the Borrower to make
appropriate entries of such in its records in accordance with the usual and
customary practices of accounting for advances and payments on notes; provided,
however, the failure of the Bank to do so shall not relieve the Borrower of its
correct liability hereunder or under the Revolving Note.
The aggregate unpaid amount of advances reflected by the notations
by the Bank on its records or the ledger sheets affixed to the Revolving Note
shall be deemed rebuttably presumptive evidence of the principal amount owing on
the Revolving Note. The liability for payment of principal and interest
evidenced by the Revolving Note shall be limited to principal amounts actually
advanced to the Borrower and outstanding under this Agreement and interest on
such amounts calculated in accordance with this Agreement. Interest provided for
in the Revolving Note and herein shall be calculated on unpaid sums actually
advanced and outstanding under the Revolving Note pursuant to the terms of this
Agreement and only for the period from the date or dates of such advances until
repayment.
2.03 PAYMENTS OF INTEREST UNDER THE REVOLVING NOTE. Subject to
the terms and provisions of this Agreement, interest on the Revolving Loan,
calculated at the Floating Rate, shall be due and payable monthly as it accrues
beginning December 1, 2001, and continuing thereafter on the first day of each
succeeding calendar month while any amount remains owing on the Revolving Note
and at the Revolving Loan Termination Date, the interest payment in each
instance to be that which has been earned and remains unpaid. The rate of
interest charged on the Revolving Loan shall be adjusted, effective on the
effective date of each change in the Prime Rate, and in the ordinary course of
business the Bank shall send written notice to the Borrower that a change in the
Prime Rate has occurred.
2.04 GENERAL PROVISIONS RELATING TO INTEREST. All Loans
hereunder and outstanding from time to time shall bear interest at the rate
prescribed in the Revolving Note, as applicable, calculated on the basis of a
year of three hundred sixty (360) days from the date of advance to, but not
including, the date of repayment.
12
It is the intention of the parties hereto to comply strictly with
the usury Laws of the State of Texas and the United States of America and, in
this connection, there shall never be collected, charged or received on any sums
advanced hereunder interest in excess of the Maximum Rate. For purposes of
Chapter 303 of the Texas Finance Code, as amended, the Borrower agrees that the
maximum rate to be charged shall be the "indicated (weekly) rate ceiling" as
defined in said Chapter, provided that the Bank may also rely to the extent
permitted by applicable Laws of the State of Texas or the United States of
America, on alternative maximum rates of interest under other applicable Laws of
the State of Texas or the United States of America applicable to the Bank, if
greater. Notwithstanding anything herein or in the Note to the contrary, during
any Limitation Period, the interest rate to be charged on amounts evidenced by
the Note shall be the Maximum Rate and the obligation of the Borrower for any
fees payable hereunder and deemed to be interest under applicable Law shall be
suspended. During any period or periods of time following a Limitation Period,
to the extent permitted by applicable Laws of the State of Texas or the United
States of America, the interest rate to be charged hereunder shall remain at the
Maximum Rate until such time as there has been paid to the Bank (a) the amount
of interest in excess of the Maximum Rate that the Bank would have received
during the Limitation Period had the interest rate remained at the relevant
rates specified in the Note, and (b) all interest and fees otherwise due to the
Bank but for the effect of such Limitation Period.
If under any circumstances the aggregate amounts paid on the Note
or under this Agreement include amounts which by Law are deemed interest and
which would exceed the amount permitted if the Maximum Rate were in effect, the
Borrower stipulates that such payment and collection will have been and will be
deemed to have been, to the extent permitted by applicable Laws of the State of
Texas or the United States of America, the result of mathematical error on the
part of both the Borrower and the Bank, and the Bank shall promptly refund the
amount of such excess (to the extent only of such interest payments above the
Maximum Rate which could lawfully have been collected and retained) upon
discovery of such error by the Bank or notice thereof from the Borrower.
2.05 BORROWING BASE DETERMINATION. The initial Borrowing Base is
hereby established at $10,000,000.00. Subject to the other provisions of this
Agreement, the initial Monthly Borrowing Base Reduction is hereby established at
$0.00. If the next Borrowing Base redetermination has not occurred on or before
February 1, 2002, the Monthly Borrowing Base Reduction will be established as
$200,000.00 commencing February 1, 2002. On or before December 1, 2002, the
Borrower shall furnish to the Bank information sufficient to update to an
effective date of November 1, 2001, the most recent petroleum engineering
reports provided to the Bank prior to Closing relative to the Proved Reserves
attributable to the Borrowing Base Oil and Gas Properties. Upon receipt of such
report, the Bank shall, in the normal course of business, make a determination
of the Borrowing Base and the Monthly Borrowing Base Reduction which shall
become effective upon written notification from the Bank to the Borrower, and
which, subject to the other provisions of this Agreement, shall be the basis on
which the Borrowing Base shall thereafter be calculated until the effective date
of the next redetermination of the Borrowing Base and the Monthly Borrowing Base
Reduction as set forth in this Section. Thereafter, on or before each June
13
1 and December 1 until the Revolving Loan Termination Date, the Borrower shall
furnish to the Bank a report, in form and substance satisfactory to the Bank,
which report shall set forth, as of each preceding May 1 or November 1, as
applicable, the Proved Reserves attributable to the Borrowing Base Oil and Gas
Properties. Each report to be provided on or before each June 1 shall be a
complete report relating to the Proved Reserves attributable to the Borrowing
Base Oil and Gas Properties prepared by an independent petroleum engineer or
firm of engineers reasonably satisfactory to the Bank. Each report to be
provided on or before each December 1 shall simply update the previous complete
report, and may be prepared by the Borrower's own engineers and shall be
certified by the President, Chief Executive Officer or Chief Financial Officer
of the Borrower. Upon receipt of each such report, the Bank shall, in the normal
course of business, make a determination of the Borrowing Base and the Monthly
Borrowing Base Reduction which shall become effective upon written notification
from the Bank to the Borrower, and which, subject to the other provisions of
this Agreement, shall be the basis on which the Borrowing Base shall thereafter
be calculated until the effective date of the next redetermination of the
Borrowing Base and the Monthly Borrowing Base Reduction as set forth in this
Section 2.05. The Bank may redetermine the Borrowing Base and the Monthly
Borrowing Base Reduction, at any time, and from time to time, which
redetermination shall become effective upon written notification from the Bank
to the Borrower and which, subject to the other provisions of this Agreement,
shall be the basis on which the Borrowing Base shall thereafter be calculated
until the effective date of the next redetermination of the Borrowing Base and
the Monthly Borrowing Base Reduction, as set forth in this Section. The Bank may
require the Borrower to provide a report prepared by an independent petroleum
engineer or firm of engineers reasonably satisfactory to the Bank regarding the
Proved Reserves attributable to the Borrowing Base Oil and Gas Properties at any
time upon ninety (90) days advance notice to the Borrower.
The Borrowing Base shall represent the Bank's determination, in
accordance with its customary lending practices, of the maximum loan amount with
respect to the Borrowing Base Oil and Gas Properties and the Borrower
acknowledges, for purposes of this Agreement, such determination by the Bank as
being the maximum loan amount with respect to the Borrowing Base Oil and Gas
Properties. In making any redetermination of the Borrowing Base, the Bank shall
apply the parameters then generally being utilized by the Bank for Borrowing
Base redeterminations for other similarly situated borrowers. The Borrower and
the Bank acknowledge that (a) due to the uncertainties of the oil and gas
extraction process, the Borrowing Base Oil and Gas Properties are not subject to
evaluation with a high degree of accuracy and are subject to potential rapid
deterioration in value, and (b) for this reason and the difficulties and
expenses involved in liquidating and collecting against the Borrowing Base Oil
and Gas Properties, the Bank's determination of the maximum loan amount with
respect to the Borrowing Base Oil and Gas Properties contains an equity cushion,
which equity cushion is acknowledged by the Borrower as essential for the
adequate protection of the Bank.
2.06 MANDATORY PREPAYMENT OF THE NOTE. In the event that the
Bank determines that a Loan Excess exists, the Borrower shall immediately, but
in no event later than thirty (30) days following notice from the Bank of any
such scheduled or non-scheduled Borrowing Base
14
determination, (i) prepay the principal of the Revolving Note in an aggregate
amount at least equal to such Loan Excess or (ii) add to the Borrowing Base Oil
and Gas Properties additional Oil and Gas Properties of the Borrower sufficient
in value, as determined by the Bank in its sole discretion pursuant to Section
2.05, to increase the Borrowing Base to equal the unpaid principal amount of the
Revolving Note. Notwithstanding the foregoing provisions of this section, the
Borrower shall pay the amount of any Loan Excess that would result from the
application of each Monthly Borrowing Base Reduction on or before the day that
such Monthly Borrowing Base Reduction becomes applicable.
2.07 ADVANCES TO SATISFY OBLIGATIONS OF THE BORROWER. The Bank
may, but shall not be obligated to, make advances hereunder and apply same to
the satisfaction of any condition, warranty, representation or covenant of the
Borrower contained in this Agreement, and the funds so advanced and applied
shall be part of the Loan proceeds advanced under this Agreement and evidenced
by the Revolving Note.
2.08 ASSIGNMENT OF PRODUCTION. Certain of the Security
Instruments covering the Borrowing Base Oil and Gas Properties contain an
assignment unto and in favor of the Bank of all oil, gas and other minerals
produced and to be produced from or attributable to the Borrowing Base Oil and
Gas Properties together with all of the revenues and proceeds attributable to
such production, and such Security Instruments further provide that all such
revenues and proceeds which may be so collected by the Bank pursuant to the
assignment shall be applied to the payment of the Note and the satisfaction of
all other Indebtedness to be secured by such Security Instruments. The Borrower
hereby appoints the Bank its agent and attorney-in-fact until this Agreement has
been terminated in accordance with Section 8.18 hereof for purposes of
completing the letter transfer orders delivered to the Bank pursuant to Section
3.01 hereof which power is coupled with an interest and is not revocable.
2.09 COMMITMENT FEE. As consideration for the commitment of the
Bank to make Loans to the Borrower through the Revolving Loan Termination Date
pursuant to this Agreement, the Borrower agrees to pay to the Bank within five
(5) Business Days of receipt of the Bank's statement as to quarterly periods
ending March 31, June 30, September 30 and December 31 of each year (except the
first period shall be for a period of time from the Closing to December 31,
2001) during the period commencing on the date of this Agreement to and
including the Revolving Loan Termination Date and at the Revolving Loan
Termination Date, a fee equal one-half of one percent (1/2 of 1%) per annum
(computed on the basis of 360) multiplied by an amount equal to the daily
average excess, if any, of the Revolving Commitment over the aggregate principal
amount outstanding on the Note, throughout the period from the date of this
Agreement or previous calculation date provided above, whichever is later, to
the relevant calculation date or the Revolving Loan Termination Date, as the
case may be.
2.10 FACILITY FEE. As consideration for the commitment of the
Bank to make Loans to the Borrower pursuant to this Agreement, the Borrower
shall pay to the Bank a facility fee of one and one fourth percent (1 1/4%) of
the amount of the initial Borrowing Base established in
15
Section 2.05 hereof. Any time the Borrowing Base is increased pursuant to
Section 2.05, an additional facility fee shall be paid to Bank by Borrower in
the amount of three-fourths of one percent (3/4 of 1%) of any such increase
above the highest Borrowing Base that was in effect at any time prior to such
increase.
2.11 ADMINISTRATIVE FEE. As further consideration for the Bank's
obligations pursuant to this Agreement, Borrower shall pay to Bank an
administrative fee of $15,000.00 on each anniversary of the date of Closing, and
on the Revolving Loan Termination Date.
2.12 ADDITION/DELETION OF BORROWING BASE OIL & GAS PROPERTIES.
The Borrower may, from time to time upon fifteen (15) days prior written notice
to the Bank, propose to add Oil and Gas Properties of the Borrower to the
Borrowing Base Oil and Gas Properties. Any such proposal to add Oil and Gas
Properties of the Borrower to the Borrowing Base Oil and Gas Properties shall be
accompanied by an engineering report applicable to such properties that conforms
to the requirements of Section 2.05 and evidence sufficient to establish that
the Borrower has Marketable Title to such Oil and Gas Properties, and any such
addition shall become effective at such time as: (a) the Bank has made its
determination of the amount by which the Borrowing Base would be increased as
the result of such addition and (b) the conditions set forth in Article III
hereof, to the extent they are applicable to such additional Oil and Gas
Properties of the Borrower, have been satisfied.
2.13 ADJUSTMENT TO REVOLVING COMMITMENT LIMIT. Borrower may
propose not more than twice during any rolling twelve (12) month period, in
addition to the Borrowing Base redetermination allowed pursuant to Section 2.05,
to increase the Borrowing Base by adding additional Oil and Gas Properties to
the Borrowing Base Oil and Gas Properties pursuant to Section 2.12, Borrower may
also request that Bank increase the amount of the Revolving Commitment Limit. At
any time that Borrower makes such a request it shall promptly provide Bank with
such financial information as Bank may request to assist the Bank in evaluating
such request. Following the receipt of such information from Borrower, the Bank
shall, in the normal course of its business, make a redetermination of the
Revolving Commitment Limit, which shall become effective upon written
notification from the Bank to Borrower of the new Revolving Commitment Limit.
The Borrower may, on a quarterly basis, upon written notice to the Bank, amend
the definition of the Revolving Commitment Limit by reducing the amount set
forth in such definition. Upon such reduction, the Bank shall not be obligated
to extend Loans in excess of such reduced Revolving Commitment Limit. If and
when the Bank increases the Revolving Commitment Limit at Borrower's request,
the commitment fee, as determined pursuant to Section 2.09 of this Agreement,
shall be calculated using such increased amount for all of the calculation
period in which such Revolving Commitment Limit was increased.
16
ARTICLE III.
CONDITIONS
----------
The obligation of the Bank to make the Loans is subject to the
following conditions precedent:
3.01 CONDITIONS TO THE CLOSING. The Borrower shall have duly
delivered or caused to be delivered to the Bank, prior to the initial
disbursement of the Loans (the "Closing"), the following:
(A) The Revolving Note;
(B) Each of the Security Instruments;
(C) Transfer Order Letters applicable to the production of oil
and gas from the Borrowing Base Oil and Gas Properties;
(D) The results of a Uniform Commercial Code search showing all
financing statements and other documents or instruments on file
against the Borrower in the Offices of the Secretaries of State of
the State of Tennessee, the State of Kansas and each State in
which any of the Borrowing Base Oil and Gas Properties are located
or deemed to be located, and the counties and/or parishes in which
the Borrower maintains its principal place of business and in
which any of the Borrowing Base Oil and Gas Properties are
located, such search to be as of a date no more than ten (10) days
prior to the date of Closing.
(E) A certified (as of the date of the Closing) copy of
resolutions of each Borrower's Board of Directors authorizing the
execution, delivery, and performance of this Agreement, the Note,
and each other document to be delivered pursuant hereto;
(F) A certificate (dated the date of the Closing) of each
Borrower's corporate secretary as to the incumbency and signatures
of the officers of the Borrower signing this Agreement, the Note,
and each other document to be delivered pursuant hereto;
(G) A copy, certified as of the most recent date practicable by
the Secretary of State of the state in which Borrower is
incorporated, of each Borrower's certificate of incorporation,
together with a certificate (dated the date of the Closing) of
each Borrower's corporate secretary to the effect that true and
correct copies of the articles of incorporation and bylaws of such
Borrower are attached thereto and that such articles of
incorporation and bylaws have not been amended;
17
(H) Certificates, as of the most recent dates practicable, of
the aforesaid Secretaries of State, the Secretary of State of each
state in which each Borrower is qualified as a foreign
corporation, and the department of revenue or taxation of each of
the foregoing states, as to the good standing of the Borrower;
(I) A Compliance Certificate, dated the date of the Closing;
(J) Evidence satisfactory to the Bank, in its sole discretion,
that as of the date of Closing, all existing Indebtedness owed by
Borrower, including, without limitation, the debt described on
Schedule 4.15 attached hereto has been fully and completely
repaid.
(K) Payment of the facility fee pursuant to Section 2.10
hereof;
(L) Payment of the Bank's attorneys' fees upon receipt of a
reasonably detailed invoice pursuant to Section 5.12 hereof; and
(M) A legal opinion of outside counsel to the Borrower in form
and substance reasonably satisfactory to the Bank confirming the
legal conclusions expressed in Borrower's representations set
forth in Sections 4.01 through 4.03, 4.11, 4.20 and 4.21.
3.02 DOCUMENTS REQUIRED FOR SUBSEQUENT DISBURSEMENTS. As of the
time of funding any additional advances to Borrower that have been approved by
the Bank pursuant to Section 2.01 and are made in conjunction with the addition
of Oil and Gas Properties owned by the Borrower to the Borrowing Base Oil and
Gas Properties, the Borrower shall have duly delivered to the Bank: (i) the
Security Instruments that are necessary or appropriate, in the reasonable
opinion of the Bank, relating to such additional Oil and Properties, and (ii)
Transfer Order Letters applicable to the production of oil and gas from the such
additional Borrowing Base Oil and Gas Properties.
3.03 GENERAL CONDITIONS TO ALL DISBURSEMENTS. At the time of the
Closing and each subsequent disbursement:
(A) No Event of Default shall have occurred and be continuing,
and no Unmatured Event of Default shall have occurred;
(B) The representations and warranties contained in Article IV
of this Agreement shall be true and correct in all material
respects as though such representations and warranties had been
made on such date, except such as are expressly limited to a prior
date, which shall have been true and correct in all material
respects as of such prior date;
18
(C) The Bank shall have been, and shall continue to be,
satisfied, in its sole good faith discretion, that the Borrower
holds Marketable Title to the Borrowing Base Oil and Gas
Properties, and that such ownership includes record title to an
undivided net revenue interest in the production from each such
Borrowing Base Oil and Gas Property that is not less than, as well
as an undivided working interest in each Borrowing Base Oil and
Gas Property that is not greater than (unless there is a
corresponding increase in the net revenue interest attributed to
such party therein), the net revenue interest therein and the
working interest therein, respectively, attributed to the Borrower
on Exhibit "A," subject to the limitations and qualifications on
such exhibit (or attributed to Borrower in any Security Instrument
applicable to any Oil and Gas Property that is added to the
Borrowing Base Oil and Gas Properties in connection with any
subsequent funding after the Closing);
(D) No material adverse change shall have occurred in the
Borrower's financial condition since the date of the latest
Financial Statements provided to the Bank prior to its execution
of this Agreement and pursuant to Sections 5.03 and 5.04 hereof;
and
(E) All of the Security Instruments shall have remained in full
force and effect.
3.04 LEGAL MATTERS. At the time of the Closing and each subsequent
disbursement, all legal matters incidental thereto shall be reasonably
satisfactory to the Bank's designated legal counsel.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce the Bank to enter into this Agreement and to make the
Loans hereunder, Borrower represents and warrants to the Bank that:
4.01 EXISTENCE. Each Borrower is a corporation, duly organized,
legally existing, and in good standing under the Laws of the State of Tennessee;
each Subsidiary is a corporation duly organized, validly existing, and in good
standing under the Laws of its state of incorporation; the Borrower and its
Subsidiaries have the lawful power to own their properties and to engage in the
businesses they conduct, and each is duly qualified and in good standing as a
foreign corporation in the jurisdictions wherein the nature of the business
transacted by it or property owned by it makes such qualification necessary; the
states in which the Borrower and each Subsidiary are incorporated and qualified
to do business are set forth in Schedule 4.01; the addresses of all places of
business of the Borrower and its Subsidiaries are as set forth in Schedule 4.01;
neither the Borrower nor any Subsidiary has changed its name, been the surviving
corporation in a merger, acquired any business, or changed its principal
executive office within five (5) years and one (1) month prior to the date
hereof, except as disclosed on Schedule 4.01; the Borrower has no Subsidiaries
other than the
19
Subsidiaries named in Schedule 4.01; and all of the authorized, issued and
outstanding shares of capital stock of each Subsidiary is owned by the Borrower.
4.02 DUE AUTHORIZATION. Upon execution of the Loan Documents,
the execution and delivery by the Borrower of this Agreement and the borrowings
hereunder; the execution and delivery by the Borrower of the Note, the Security
Instruments, and the Transfer Order Letters; and the repayment by the Borrower
of the Indebtedness evidenced by the Note and interest and fees provided in the
Note and this Agreement are (a) within the corporate power of the Borrower; (b)
have been duly authorized by all necessary corporate action, and (c) do not and
will not (i) require the consent of any regulatory authority or governmental
body, (ii) contravene or conflict with any provision of Law or of the articles
or bylaws of the Borrower, (iii) contravene or conflict with any indenture,
instrument or other agreement to which the Borrower is a party or by which its
property may be presently bound or encumbered, or (iv) result in or require the
creation or imposition of any mortgage, lien, pledge, security interest, charge
or other encumbrance in, upon or of any of the properties or assets of the
Borrower under any such indenture, instrument or other agreement, other than
under any of the Security Instruments.
4.03 VALID AND BINDING OBLIGATIONS. This Agreement, the Note,
and the Security Instruments when duly executed and delivered, will be legal,
valid and binding obligations of and enforceable against the Borrower, in
accordance with their respective terms (subject to any applicable bankruptcy,
insolvency or other Laws of general application affecting creditors' rights,
general equitable principles, whether considered in a proceeding in equity or at
law, and judicial decisions interpreting any of the foregoing).
4.04 SCOPE AND ACCURACY OF FINANCIAL STATEMENTS. All Financial
Statements submitted and to be submitted to the Bank hereunder are and will be
complete and correct in all material respects, are and will be prepared in
accordance with GAAP consistently applied, and do and will fairly reflect the
financial condition and the results of the operations of the Borrower in all
material respects as of the dates and for the period stated therein (subject
only to normal year-end audit adjustments with respect to such unaudited interim
statements of the Borrower) and no material adverse change has since occurred in
the condition, financial or otherwise, of the Borrower.
4.05 TITLE TO BORROWING BASE OIL AND GAS PROPERTIES. The
Borrower has Marketable Title to the working and net revenue interests in the
Borrowing Base Oil and Gas Properties as set forth on Exhibit "A", free and
clear of all mortgages, liens and encumbrances, except for Permitted
Encumbrances and any other exceptions, limitations or qualifications expressly
disclosed on Exhibit "A."
4.06 OIL AND GAS LEASES. The Leases which constitute any part of
the Borrowing Base Oil and Gas Properties are in full force and effect as to
those portions within the Borrowing Base Oil and Gas Properties, are valid,
subsisting leases as to those portions within the Borrowing Base Oil and Gas
Properties to which they pertain and all rentals, royalties and other amounts
due and payable in accordance with the terms of the Leases as to those portions
within the Borrowing
20
Base Oil and Gas Properties, overriding royalties, net profits or other
production burdens have been duly paid or provided for; the obligations to be
performed under the Leases as to those portions within the Borrowing Base Oil
and Gas Properties have been duly performed; and the Borrower is not aware of
any default by any third party under any of the Leases with respect to such
third party's obligations.
4.07 INTEREST IN THE BORROWING BASE OIL AND GAS PROPERTIES.
Except as otherwise set forth on Exhibit "A" hereto, with respect to each of the
Borrowing Base Oil and Gas Properties the ownership of the Borrower in such
property will, with respect to the ▇▇▇▇▇, units and/or tracts of land described
in Exhibit "A" hereto in connection with such property, (i) entitle the Borrower
to receive (subject to the terms and provisions of this Agreement) a Net Revenue
Interest decimal share of the oil and gas produced from, or allocated to, such
▇▇▇▇▇, units and/or tracts equal to not less than the NRI decimal share set
forth in Exhibit "A" in connection with such ▇▇▇▇▇, units and/or tracts, and
(ii) cause the Borrower to be obligated to bear a Working Interest decimal share
of the cost of exploration, development and operation of such ▇▇▇▇▇, units
and/or tracts of land not greater than the W.I. decimal share set forth in
Exhibit "A" in connection with such ▇▇▇▇▇, units and/or tracts, unless any
increase in the Borrower's share of costs is accompanied by a pro-rata increase
in the Borrower's share of revenue. Except as set forth in the instrument and
agreements, if any, more particularly described in Exhibit "A" hereto, all such
shares of production which the Borrower is entitled to receive, and shares of
expenses which the Borrower is obligated to bear, are not subject to change,
except for changes attributable to future elections by the Borrower not to
participate in operations proposed pursuant to customary forms of applicable
joint operating agreements, and except for changes attributable to changes in
participating areas under any federal units wherein participating areas may be
formed, enlarged or contracted in accordance with the rules and regulations of
the applicable governmental authority.
4.08 OIL AND GAS CONTRACTS. The Borrower is not obligated, by
virtue of any prepayment under any contract providing for the sale by the
Borrower of hydrocarbons which contains a "take-or-pay" clause or under any
similar prepayment agreement or arrangement, including, without limitation, "gas
balancing agreements", to deliver a material amount of hydrocarbons produced
from the Borrowing Base Oil and Gas Properties at some future time without then
or thereafter receiving full payment therefor (I.E., in the case of oil, not in
excess of sixty (60) days, and in the case of gas, not in excess of ninety (90)
days). The Borrowing Base Oil and Gas Properties are not subject to any
contractual, or other arrangement for the sale of crude oil which cannot be
canceled on ninety (90) days' (or less) notice, unless the price provided for
therein is equal to or greater than the prevailing market price in the vicinity.
The Borrowing Base Oil and Gas Properties are not subject to any gas sales
contract that contains any material terms which are not customary in the
industry within the region in which the Borrowing Base Oil and Gas Properties
affected thereby are located. The Borrowing Base Oil and Gas Properties are not
subject to any regulatory refund obligation and no facts exist which might cause
the same to be imposed.
4.09 PRODUCING ▇▇▇▇▇. All producing ▇▇▇▇▇ located on the
Borrowing Base Oil and Gas Properties have been, during all times that such were
under the direction or control of the
21
Borrower and, to the knowledge of the Borrower, at all other times, drilled,
operated and produced in conformity with all applicable Laws, rules, regulations
and orders of all regulatory authorities having jurisdiction, are subject to no
penalties on account of past production, and are bottomed under and are
producing from, and the well bores are wholly within, the Borrowing Base Oil and
Gas Properties, or on Oil and Gas Properties which have been pooled, unitized or
communitized with the Borrowing Base Oil and Gas Properties.
4.10 PURCHASERS OF PRODUCTION. The persons who are purchasing
the Borrower's interests in oil and gas produced from the Borrowing Base Oil and
Gas Properties as of the calendar month during which the initial Loans are made
hereunder are identified on Schedule 4.10 attached hereto.
4.11 AUTHORIZATIONS AND CONSENTS. No authorization, consent,
approval, exemption, franchise, permit or license of, or filing with, any
governmental or public authority or any third party is required to authorize, or
is otherwise required in connection with the valid execution and delivery by the
Borrower of this Agreement, the Note, and the Security Instruments, or any other
instrument contemplated hereby, the repayment by the Borrower of advances
against the Note and interest and fees provided in the Note and this Agreement,
or the performance by the Borrower of its obligations under any of the
foregoing.
4.12 ENVIRONMENTAL LAWS. The Borrower (a) is and has in the past
been in compliance with all Environmental Laws and all permits, requests and
notifications relating to health, safety or the environment applicable to the
Borrower or any of its properties, assets, operations and businesses; (b) has
obtained and adhered to and currently possesses all necessary permits and other
approvals, including interim status under the Federal Resource Conservation and
Recovery Act, necessary to store, dispose of and otherwise handle Hazardous
Substances and to operate its properties, assets and businesses; (c) has
reported, to the extent required by all federal, state and local statutes, Laws,
ordinances, regulations, rules, permits, judgments, orders and decrees, all past
and present sites owned and/or operated by the Borrower where any Hazardous
Substance has been released, treated, stored or disposed of and (d) has not
used, stored, or Released any Hazardous Substance in excess of amounts allowed
by Environmental Law. There is (x) no location on any property currently or
previously owned or operated by the Borrower where Hazardous Substances are
known to have entered or are likely to enter into the soil or groundwater or
such property, other than immaterial releases of oil or natural gas in the
ordinary course of business none of which releases (i) either individually, or
in the aggregate, has had or may be expected to have material adverse effect on
the Borrower's business or (ii) has violated or may be expected to violate any
Environmental Laws, and (y) no on-site or off-site location to which the
Borrower has released or transported Hazardous Substances or arranged for the
transportation or disposal of Hazardous Substances, which is or is likely to be
the subject of any federal, state, local or foreign enforcement action or any
investigation which could lead to any material claims against any such entity
for any clean-up cost, remedial work, damage to natural resources, common law or
legal liability, including, but not limited to, claims under Comprehensive
Environmental Response, Compensation, and Liability Act. For the purposes of
this Section, references to "the Borrower" shall include all
22
predecessors, successors-in-interest of the Borrower; PROVIDED, that with
respect to the Borrower's properties or assets, the foregoing representations as
to predecessors and successors-in-interest are limited to the knowledge of the
Borrower.
4.13 COMPLIANCE WITH LAWS, RULES, REGULATIONS AND ORDERS. Except
to the extent that the failure to comply would not materially interfere with the
conduct of the business of the Borrower or any Subsidiary, the Borrower and its
Subsidiaries have each complied with all applicable Laws with respect to: (1)
the conduct of its business; and (2) the use, maintenance, and operation of the
Borrowing Base Oil and Gas Properties and personal properties owned or leased by
it in the conduct of its business; except as expressly set forth on Exhibit "A"
hereto, the Borrower and its Subsidiaries possess all licenses, approvals,
registrations, permits and other authorizations necessary to enable it to carry
on its business in all material respects as now conducted, and all such
licenses, approvals, registrations, permits and other authorizations are in full
force and effect; and the Borrower has no reason to believe that the Borrower or
any of its Subsidiaries will be unable to obtain the renewal of any such
licenses, approvals, registrations, permits and other authorizations.
4.14 LIABILITIES, LITIGATION AND RESTRICTIONS. Except as
disclosed in the Financial Statements, the Borrower and its Subsidiaries do not
have any liabilities, direct or contingent, which may materially and adversely
affect it, its business or assets. Except as disclosed on Schedule 4.14 attached
hereto, there is no litigation or other action of any nature pending before any
court, governmental instrumentality, regulatory authority or arbitral body or,
to the actual knowledge of the Borrower threatened against or affecting the
Borrower or its Subsidiaries which might reasonably be expected to result in any
material, adverse change in the Borrower or its Subsidiaries, or the business or
assets of either. To the best of the Borrower's knowledge, no unduly burdensome
restriction, restraint or hazard exists by contract or Law that would materially
and adversely affect the Borrower or the pursuit of the business activities
conducted by the Borrower.
4.15 EXISTING INDEBTEDNESS. All existing Indebtedness of the
Borrower and any Subsidiary is described in Schedule 4.15 and neither the
Borrower nor any Subsidiary is in default with respect to any of its existing
Indebtedness.
4.16 MATERIAL COMMITMENTS. Except as described in Schedule 4.16
hereto, (a) neither the Borrower nor any Subsidiary has any material leases
(other than oil and gas leases), contracts or commitments of any kind
(including, without limitation, employment agreements; collective bargaining
agreements; powers of attorney; distribution arrangements; patent license
agreements; contracts for future purchase or delivery of goods or rendering of
services; bonuses, pension and retirement plans; or accrued vacation pay,
insurance and welfare agreements); (b) to the best of the Borrower's knowledge,
all parties to all such material leases, contracts, and other commitments to
which the Borrower or any Subsidiary is a party have complied with the
provisions of such leases, contracts, and other commitments; and (c) to the best
of the Borrower's knowledge, no party is in default under any thereof and no
event has occurred that but for the giving of notice or the passage of time, or
both, would constitute a default;
23
4.17 MARGIN STOCK. The Borrower is not engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of
Regulations T, U, or X of the Board of Governors of the Federal Reserve System),
and no part of the proceeds of any extension of credit under this Agreement will
be used to purchase or carry any such margin stock or to extend credit to others
for the purpose of purchasing or carrying margin stock. Neither the Borrower nor
any Person acting on its behalf has taken any action that might cause the
transactions contemplated by this Agreement or the Note to violate Regulations
T, U, or X or to violate the Securities Exchange Act of 1934, as amended.
4.18 PROPER FILING OF TAX RETURNS AND PAYMENT OF TAXES DUE.
Except as otherwise permitted herein, the Borrower has filed all federal, state,
and local tax returns and other reports required by any applicable Laws to have
been filed prior to the date hereof, has paid or caused to be paid all taxes,
assessments, and other governmental charges that are due and payable prior to
the date hereof, and has made adequate provision for the payment of such taxes,
assessments, or other charges accruing but not yet payable; the Borrower has no
knowledge of any material deficiency or additional assessment in connection with
any taxes, assessments, or charges not provided for on its books.
4.19 ERISA. The Borrower is in compliance in all material
respects with all applicable provisions of ERISA. Neither a Reportable Event nor
a Prohibited Transaction has occurred and is continuing with respect to any
plan; no notice of intent to terminate a plan has been filed, nor has any plan
been terminated; no circumstances exist which constitute grounds under Section
4042 of ERISA entitling the PBGC to institute proceedings to terminate, or
appoint a trustee to administrate a plan, nor has the PBGC instituted any such
proceedings; neither the Borrower nor any ERISA Affiliate has completely or
partially withdrawn under Sections 4201 or 4204 of ERISA from a Multi-Employer
Plan; the Borrower and each ERISA Affiliate has met its minimum funding
requirements under ERISA with respect to all of its plans and the present value
of all vested benefits under each plan exceeds the fair market value of all plan
assets allocable to such benefits, as determined on the most recent valuation
date of the plan and in accordance with the provisions of ERISA and the
regulations thereunder for calculating the potential liability of the Borrower
or any ERISA Affiliate to the PBGC or the plan under Title IV of ERISA; and
neither the Borrower nor any ERISA Affiliate has incurred any liability to the
PBGC under ERISA.
4.20 INVESTMENT COMPANY ACT COMPLIANCE. Neither the Borrower nor
any Subsidiary is directly or indirectly controlled by, or acting on behalf of,
any, Person which is an "Investment Company," within the meaning of the
Investment Company Act of 1940, as amended.
4.21 PUBLIC UTILITY HOLDING COMPANY ACT COMPLIANCE. The Borrower
is not a "holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
24
4.22 INSURANCE. The Borrower maintains insurance with respect to
the properties and business of the Borrower providing coverage for such
liabilities, casualties, risks and contingencies and in such amounts as is
customary in the industry. The insurance coverage reflected on the Certificate
of Insurance attached hereto as Schedule 4.22 is in full force and effect, and
all premiums due thereon have been paid.
4.23 MATERIAL MISSTATEMENTS AND OMISSIONS. No representation or
warranty by or with respect to the Borrower or any Subsidiary contained herein
or in any certificate or other document furnished by the Borrower or any
Subsidiary pursuant hereto contains any untrue statement of a material fact or
omits to state a material fact necessary to make such representation or warranty
not misleading in light of the circumstances under which it was made.
4.24 PIPELINE ASSETS. The Borrower owns Marketable Title to the
pipeline assets and facilities as shown on Schedule 4.24.
4.25 OWNERSHIP INTERESTS. Each officer and each director of each
Borrower is identified on Schedule 4.25, along with the stock owned by each in
Tengasco, Inc. In addition, Tennessee Land & Mineral Corporation and Tengasco
Pipeline Corporation are each wholly owned Subsidiaries of Tengasco, Inc.
ARTICLE V.
AFFIRMATIVE COVENANTS
---------------------
Borrower covenants so long as any Indebtedness of the Borrower to
the Bank remains unpaid under this Agreement, or any Obligations of the Borrower
to the Bank remain unsatisfied, or the Bank remains obligated to make advances
hereunder, to:
5.01 USE OF FUNDS. Use the proceeds advanced under the Loan to:
(a) refinance Borrower's existing indebtedness listed on Schedule 4.15, and (b)
fund (i) acquisitions of Oil and Gas Properties, (ii) development drilling
programs, (iii) working capital, (iv) general operations, and (v) other general
corporate purposes.
5.02 MAINTENANCE AND ACCESS TO RECORDS. Keep adequate records in
accordance with good accounting practices, of all of the transactions of the
Borrower so that at any time, and from time to time, such records present fairly
the financial condition of the Borrower which may be readily determined and, at
the Bank's reasonable request, make all financial records and records relating
to the Borrowing Base Oil and Gas Properties available for the Bank's inspection
and permit the Bank to make and take away copies thereof.
5.03 QUARTERLY UNAUDITED FINANCIAL STATEMENTS. Deliver to the
Bank, on or before the forty-fifth (45th) day after the end of each calendar
quarter, unaudited Financial Statements of the Borrower, as at the end of such
period and from the beginning of such fiscal year to the end of
25
the respective period, as applicable, which Financial Statements shall be
certified by the president or chief financial officer of the Borrower, as being
true and correct, subject to changes resulting from year-end audit adjustments.
5.04 ANNUAL AUDITED FINANCIAL STATEMENTS. Deliver to the Bank,
on or before the ninetieth (90th) day after the close of each fiscal year of the
Borrower a copy of annual audited Financial Statements of the Borrower, together
with the report and opinion thereon of BDO ▇▇▇▇▇▇▇ or such other firm of
independent certified public accountants acceptable to the Bank at its
reasonable discretion.
5.05 COMPLIANCE CERTIFICATE. At the time of Closing, and at the
time of delivery of the certified but unaudited Financial Statements pursuant to
Section 5.03 above, and the delivery of the annual audited Financial Statements
pursuant to Section 5.04 above, deliver to the Bank a Compliance Certificate.
5.06 STATEMENT OF MATERIAL ADVERSE CHANGE IN CONDITION. Deliver
to the Bank, promptly upon any officer of the Borrower having knowledge of any
material adverse change in the condition, financial or otherwise, of the
Borrower (or any event or circumstance that would result in any such material
adverse change in condition), a statement of the President, Chief Executive
Officer, or the Chief Financial Officer of the Borrower, setting forth the
change in condition or event or circumstance likely to result in any such change
and the steps being taken by the Borrower with respect to such change in
condition or event or circumstance.
5.07 TITLE DEFECTS. Cure any title defects to the Borrowing Base
Oil and Gas Properties material in value, in the sole opinion of the Bank, and,
in the event any title defects are not cured in a timely manner, pay all related
costs and fees incurred by the Bank to do so.
5.08 ADDITIONAL INFORMATION. Furnish to the Bank all
information, if any, filed with the SEC by the Borrower and all information
routinely provided by the Borrower to its shareholders, generally. Furnish to
the Bank, promptly upon the Bank's reasonable request, such additional financial
or other information concerning the assets, liabilities, operations, and
transactions of the Borrower, including, without limitation, information
concerning title to any of the Borrowing Base Oil and Gas Properties.
5.09 COMPLIANCE WITH LAWS AND PAYMENT OF ASSESSMENTS AND
CHARGES. Materially comply with all applicable statutes and government
regulations, including, without limitation, ERISA, and pay all taxes,
assessments, governmental charges, claims for labor, supplies, rent and other
obligations which, if unpaid, might become a lien other than a Permitted
Encumbrance against its property, except any of the foregoing being contested in
good faith and as to which accruals satisfactory to the Bank, in its reasonable
discretion, have been provided.
5.10 MAINTENANCE OF EXISTENCE AND GOOD STANDING. Maintain the
Borrower's corporate existence and good standing in the jurisdiction of its
organization, and maintain the
26
Borrower's qualification and good standing in all other jurisdictions wherein
the property now owned or hereafter acquired or business now or hereafter
conducted by Borrower necessitates same, other than those jurisdictions wherein
the failure to so qualify will not have a material adverse effect on the
Borrower.
5.11 FURTHER ASSURANCES. Promptly cure any defects in the
execution and delivery of this Agreement, the Note, the Security Instruments,
the Transfer Order Letters, or any other instrument referred to herein or
executed in connection with the Note, and upon the reasonable request of the
Bank, promptly execute and deliver to the Bank all such other and further
instruments as may be reasonably required or desired by the Bank from time to
time in compliance with the covenants and agreements made in this Agreement.
5.12 INITIAL EXPENSES OF THE BANK. Pay prior to or at Closing
all documented reasonable fees and expenses of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., the
special legal counsel for the Bank incurred directly and solely in connection
with the preparation of this Agreement, the Note, the Security Instruments, the
Transfer Order Letters, and any other instrument referred to herein or executed
directly and solely in connection with the Note, the satisfaction of the
conditions precedent set forth in Article III of this Agreement and the
consummation of the transactions contemplated in this Agreement.
5.13 SUBSEQUENT EXPENSES OF THE BANK. Upon request, promptly
reimburse the Bank for all documented amounts reasonably expended, advanced or
incurred by the Bank to collect the Note or to enforce the rights of the Bank
under this Agreement, the Note, the Security Instruments, the Transfer Order
Letters, or any other instrument referred to herein or executed in connection
with the Note, which amounts shall be deemed compensatory in nature and
liquidated as to amount upon notice to the Borrower by the Bank and which
amounts will include, but not be limited to, (a) all court costs, (b) reasonable
attorneys' fees, (c) fees of auditors and accountants, (d) investigation
expenses, (e) internal fees of the Bank's in-house legal counsel, (f) fees and
expenses incurred in connection with the Bank's participation as a member of the
creditors committee in a case commenced under Title 11 of the United States Code
or other similar Law of the United States, the State of Texas or any other
jurisdiction, (g) fees and expenses incurred in connection with lifting the
automatic stay prescribed in ss.ss.362 Title 11 of the United States Code, and
(h) fees and expenses incurred in connection with any action pursuant to
ss.ss.1129 Title 11 of the United States Code, reasonably incurred by the Bank
in connection with the collection of any sums due under this Agreement, together
with interest at the Floating Rate per annum, calculated on a basis of a year of
three hundred sixty (360) days on each such amount from the date of notification
to the Borrower that the same was expended, advanced or incurred by the Bank
until, but not including, the date it is repaid to the Bank, with the
obligations under this Section 5.13, surviving the non-assumption of this
Agreement in a case commenced under Title 11 of the United States Code or other
similar Law of the United States, the State of Texas or any other jurisdiction
and being binding upon the Borrower or a trustee, receiver or liquidator of any
such party appointed in any such case.
27
5.14 MAINTENANCE OF TANGIBLE PROPERTY. Maintain all of its
tangible property relating to the Borrowing Base Oil and Gas Properties in good
repair and condition and make all necessary replacements thereof and operate
such property in a good and workmanlike manner in accordance with standard
industry practices, unless the failure to do so would not have a material
adverse effect on the Borrower or the value of any Borrowing Base Oil and Gas
Property.
5.15 MAINTENANCE OF INSURANCE. Continue to maintain, or cause to
be maintained, insurance with respect to the properties and business of the
Borrower against such liabilities, casualties, risks and contingencies and in
such amounts as is customary in the industry and furnish to the Bank annually
after the execution of this Agreement certificates evidencing such insurance.
5.16 INSPECTION OF TANGIBLE ASSETS/RIGHT OF AUDIT. Permit any
authorized representative of the Bank to visit and inspect (at the risk of the
Bank and/or such representative) any tangible asset of the Borrower, and/or to
audit the books and records of the Borrower during normal business hours, at the
expense of the Bank and during normal business hours following reasonable
advance notice.
5.17 PAYMENT OF NOTE AND PERFORMANCE OF OBLIGATIONS. Pay the
Note according to the reading, tenor and effect thereof, as modified hereby, and
do and perform every act and discharge all of the Obligations provided to be
performed and discharged hereunder.
5.18 BORROWING BASE. Maintain a Borrowing Base such that the
amount of the Borrower's outstanding Revolving Loan will not, at any time,
exceed its Borrowing Base.
5.19 COMPLIANCE WITH ENVIRONMENTAL LAWS. Comply in all material
respects with any and all requirements of Law, including, without limitation,
Environmental Laws, (a) applicable to any natural or environmental resource or
media located on, above, within, in the vicinity of, related to or affected by
any Borrowing Base Oil and Gas Properties or any other property of the Borrower,
or (b) applicable to the performance or conduct of is operations, including,
without limitation, all permits, licenses, registrations, approvals and
authorizations, and, in this regard, comply fully and in a timely manner with,
and cause all employees, crew members, agents, contractors and subcontractors
(pursuant to appropriate contractual provisions) and future lessees (pursuant to
appropriate lease provisions) of the Borrower while such Persons are acting
within the scope of their relationship with the Borrower, to so comply with, all
applicable requirements of Law, including, without limitation, applicable
Environmental Laws, and other applicable requirements with respect to the
property of the Borrower, as applicable, and the operation thereof necessary or
appropriate to enable the Borrower, as applicable, to fulfill its obligations
under all applicable requirements of Law, including, without limitation,
Environmental Laws, applicable to the use, generation, handling, storage,
treatment, transport and disposal of any Hazardous Substances now or hereafter
located or present on or under any such property.
5.20 HAZARDOUS SUBSTANCES INDEMNIFICATION. Indemnify and hold
the Bank harmless from and against any and all claims, losses, damages,
liabilities, fines, penalties, charges,
28
administrative and judicial proceedings and orders, judgments, remedial actions,
requirements and enforcement actions of any kind, and all costs and expenses
incurred in connection therewith (including, without limitation, attorneys' fees
and expenses), arising directly or indirectly, in whole or in part, out of (a)
the presence of any Hazardous Substances on, under or from its property, whether
prior to or during the term hereof, or (b) any activity carried on or undertaken
on or off its property, whether prior to or during the term hereof, and whether
by the Borrower, or any predecessor in title or any employees, agents,
contractors or subcontractors of the Borrower, or any predecessor in title, or
any third Persons 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; with the foregoing indemnity
further applying to any residual contamination on or under the property of the
Borrower, or any property of any other Person, or affecting any natural
resources, and to any contamination of any property or natural resources arising
in connection with the generation, use, handling, storage, transportation or
disposal of any Hazardous Substances, irrespective of whether any of such
activities were or will be undertaken in accordance with applicable requirements
of Law, including, without limitation, Environmental Laws, and surviving
satisfaction of all Indebtedness of the Borrower to the Bank and the termination
of this Agreement, unless all such Indebtedness has been satisfied wholly in
cash from the Borrower and not by way of realization against any property or the
conveyance of any property of the Borrower in lieu thereof, PROVIDED that the
claims and other actions of any kind against the Bank which give rise to such
indemnity are not barred by the applicable statute of limitations at the time
such claims or actions are instituted and such indemnity shall not extend to any
act or omission by the Bank with respect to the relevant property subsequent to
the Bank becoming the owner of, taking possession of to the exclusion of the
Borrower or assuming operations of any property previously owned by the Borrower
and with respect to which property such claim, loss, damage, liability, fine,
penalty, charge, proceeding, order, judgment, action or requirement arises
subsequent to the acquisition of title thereto, taking possession thereof or
assumption of operations thereon by the Bank.
5.21 PROPERTIES NOT OPERATED BY THE BORROWER. With regard to all
of the Borrower's covenants in this Article V that relate to Oil and Gas
Properties, if any, for which Borrower is not the operator, to the extent that
the performance of such covenants can only be carried out through the operator,
the Borrower shall exercise reasonable diligence under the terms of the
applicable operating agreements to cause the operators to satisfy such
covenants, but shall not be directly responsible for doing so.
5.22 TRANSACTIONS WITH AFFILIATES. Conduct all transactions with
any Affiliate of the Borrower on an arm's-length basis (provided that such
transactions are otherwise permitted by the terms of this Agreement).
5.23 LEASES. Keep and continue all Leases comprising the
Borrowing Base Oil and Gas Properties and related contracts and agreements
relating thereto in full force and effect in accordance with the terms thereof
and not permit the same to lapse or otherwise become impaired for failure to
comply with the obligations thereof, whether express or implied; PROVIDED,
HOWEVER,
29
that this provision shall not prevent the Borrower from abandoning and releasing
any such Leases upon their termination as the result of the failure of
production in paying quantities that did not result from the Borrower's failure
to maintain such production as a reasonably prudent operator.
5.24 OPERATION OF BORROWING BASE OIL AND GAS PROPERTIES. Operate
or, to the extent that the right of operation is vested in others, exercise all
reasonable efforts to require the operator to operate the Borrowing Base Oil and
Gas Properties and all ▇▇▇▇▇ drilled thereon and that may hereafter be drilled
thereon, continuously and in a good and workmanlike manner as a prudent
operator, and in accordance with all Laws of the State in which the Borrowing
Base Oil and Gas Properties are situated and the United States of America, as
well as all rules, regulations, and Laws of any governmental agency having
jurisdiction to regulate the manner in which the operation of the Borrowing Base
Oil and Gas Properties shall be carried on, and comply with all terms and
conditions of the Leases it now holds, and any assignment or contract obligating
the Borrower in any way with respect to the Borrowing Base Oil and Gas
Properties; but nothing herein shall be construed to empower the Borrower to
bind the Bank to any contract obligation, or render the Bank in any way
responsible or liable for bills or obligations incurred by the Borrower.
5.25 ASSIGNMENTS. Upon request of the Bank, execute and deliver
written notices of assignments to any persons, corporations or other entities
owing or which may in the future owe to the Borrower monies or accounts arising
in connection with any of the following matters: (a) any oil, gas or mineral
production from the Borrowing Base Oil and Gas Properties; (b) any gas
contracts, processing contracts or other contracts relating to the Borrowing
Base Oil and Gas Properties; or (c) the operation of or production from any part
of the Borrowing Base Oil and Gas Properties.
5.26 CHANGE OF PURCHASERS OF PRODUCTION. Along with the delivery
of each Compliance Certificate pursuant to Section 5.05, and at any other time
that the Bank may so request in writing, the Borrower shall notify the Bank in
writing of the identity and address of each then- current purchaser of
production from the Borrowing Base Oil and Gas Properties and, if requested by
the Bank, shall provide the Bank with Transfer Order Letters executed by the
Borrower and addressed to such purchasers of production.
5.27 PAYMENT OF TAXES, ETC. The Borrower and its Subsidiaries
will each pay or cause to be paid when due, all taxes, assessments, and charges
or levies imposed upon it or on any of its property or which it is required to
withhold and pay, except where contested in good faith by appropriate
proceedings with adequate reserves therefor having been set aside on its books,
provided, however, that the Borrower and its Subsidiaries shall each pay or
cause to be paid all such taxes, assessments, charges, or levies forthwith
whenever foreclosure on any lien that may have attached (or security therefor)
appears imminent.
5.28 NOTICE OF LITIGATION. The Borrower and its Subsidiaries
will each give immediate notice to the Bank of: (1) any litigation or proceeding
in which it is a party if an adverse decision therein would require it to pay
more than $50,000.00 or deliver assets the value of which
30
exceeds such sum (whether or not the claim is considered to be covered by
insurance); and (2) the institution of any other suit or proceeding involving
the Borrower that might materially and adversely affect its operations,
financial condition, property, or business prospects.
5.29 NOTICE OF EVENTS OF DEFAULT. The Borrower and its
Subsidiaries will each notify the Bank immediately if it becomes aware of the
occurrence of any Event of Default or of any fact, condition, or event that only
with the giving of notice or passage of time or both, would become an Event of
Default or if it becomes aware of any material adverse change in the business
prospects, financial condition (including, without limitation, proceedings in
bankruptcy, insolvency, reorganization, or the appointment of a receiver or
trustee), or results of operations of the Borrower or any Subsidiary, or of the
failure of the Borrower to observe any of its undertakings hereunder or under
the Security Instruments.
5.30 NOTICE OF CHANGE OF PRINCIPAL OFFICES. The Borrower and its
Subsidiaries will each notify the Bank thirty (30) days in advance of any change
in the location of their principal offices.
5.31 EMPLOYEE BENEFIT PLANS. Fund its Plan(s) in accordance with
no less than the minimum funding standards of 29 U.S.C.A. ▇▇.▇▇. 1082 (Section
302 of ERISA); furnish the Bank, promptly after the filing or receiving of the
same, with copies of any reports or other statements filed with, or notices or
other communications received from, the United States Department of Labor, the
PBGC, or the Internal Revenue Service with respect to any such Plan; promptly
advise the Bank of the occurrence of any Reportable Event or Prohibited
Transaction with respect to any such Plan and the action the Borrower proposes
to take with respect thereto; and promptly advise the Bank when the Borrower
knows or has reason to believe that the PBGC or the Borrower has instituted or
will institute proceedings under Title IV of ERISA to terminate any such Plan
and the action the Borrower proposes to take with respect thereto.
5.32 PRODUCTION REPORTS. On or before the thirtieth (30th) day
after the end of each month prior to the Revolving Loan Termination Date, the
Borrower shall prepare and submit to the Bank a report of Borrower's oil and gas
production during such month, on a field-by-field basis, including all material
details regarding the sale or other disposition of such production, in a form
reasonably acceptable to the Bank.
5.33 OPERATING ACCOUNTS. Maintain its primary operating accounts
with the Bank.
5.34 PAYMENT OF OBLIGATIONS. Promptly pay (or renew and extend)
all of its Indebtedness, as it becomes due (unless such Indebtedness is
contested in good faith by appropriate proceedings).
5.35 AGREEMENTS. On or before December 27, 2001, Borrower shall
enter into Permitted Hedge Agreements that are satisfactory to Bank, in its sole
discretion, which Permitted Hedge Agreements, shall (i) include minimum terms of
six (6) months beginning no later than
31
January 1, 2002, (ii) contain minimum strike prices acceptable to Bank, and
(iii) cover a minimum of 150 barrels per day of oil production and 3,500 MCF per
day of gas production attributable to the Borrowing Base Oil and Gas Properties.
In addition, on or before June 30, 2002, Borrower shall enter into Permitted
Hedge Agreements that are satisfactory to Bank, in its sole discretion, which
Permitted Hedge Agreements, shall (i) include minimum terms of six (6) months
beginning no later than July 1, 2002, (ii) contain minimum strike prices
acceptable to Bank, and (iii) cover a minimum of fifty percent (50%) of
Borrowers then current oil production and fifty percent (50%) of Borrower's then
current gas production attributable to the Borrowing Base Oil and Gas
Properties. For purposes of this Section 5.35, fixed price contracts entered
into between Borrower and any third-party purchaser of either Borrower's current
oil production or Borrower's current gas production attributable to the
Borrowing Base Oil and Gas Properties are acceptable in complying with the
requirements under this Section 5.35.
ARTICLE VI.
NEGATIVE COVENANTS
------------------
Without the prior written consent of the Bank and so long as any
part of the principal or interest on the Note shall remain unpaid or the Bank
remains obligated to make advances hereunder, Borrower covenants that it will
not:
6.01 OTHER INDEBTEDNESS. Incur, create, assume or suffer to
exist any Indebtedness, whether by way of loan or the issuance or sale of
securities, except unsecured debt incurred in the ordinary course of business,
not exceeding at any one time outstanding, the sum of $100,000.00.
6.02 LOANS OR ADVANCES. Make or agree to make or allow to remain
outstanding any loans or advances to any Person, except for loans or advances
that do not exceed $10,000.00 in the aggregate, and except advances or
extensions of credit in the form of accounts receivable incurred in the ordinary
course of business.
6.03 MORTGAGES OR PLEDGES OF ASSETS. Except for Permitted
Encumbrances, create, incur, assume or permit to exist, any mortgage, pledge,
security interest, lien or encumbrance on any of its properties or assets (now
owned or hereafter acquired) including, without limitation, those pipeline
assets and facilities as shown on Schedule 4.24.
6.04 SALES OF ASSETS. Except for Permitted Asset Sales, sell,
lease, assign, transfer or otherwise dispose of, in one or any series of related
transactions, all or any portion of its Oil and Gas Properties, the pipeline
assets and facilities described on Schedule 6.03 or other material assets,
whether now owned or hereafter acquired, including transfers to Subsidiaries,
nor enter into any arrangement, directly or indirectly, with any Person to sell
and rent or lease back as lessee such property or any part thereof which is
intended to be used for substantially the same purpose or purposes as the
property sold or transferred.
32
6.05 DIVIDENDS. Declare or pay any distribution on, or purchase,
redeem or otherwise acquire for value, any interest in the Borrower provided
that Borrower may make preferred dividend payments to the extent that no Event
of Default or Unmatured Event of Default has occurred is continuing or if
payment would result in the occurrence of an Event of Default or Unmatured Event
of Default.
6.06 PAYMENT OF ACCOUNTS PAYABLE. Allow any account payable to
remain unpaid more than sixty (60) days after due date, except such as are (i)
being contested in good faith and as to which adequate provision or accrual has
been made, or (ii) the subject of usual and customary review and evaluation.
6.07 CANCELLATION OF INSURANCE. Allow any insurance policy
required to be carried hereunder to be terminated or lapse or expire without
provision for adequate renewal thereof.
6.08 INVESTMENTS. Make Investments in or purchase or otherwise
acquire all or substantially all of the assets of any Person, or any shares of
stock of, or similar interest in, any other Person, if the result of such action
would impair the ability of the Borrower to perform any of its Obligations
pursuant to this Agreement, including, without limitation, the obligation to
repay the Indebtedness evidenced by the Note, except that the Borrower may
invest in instruments that are investment grade.
6.09 CHANGES IN STRUCTURE OR BUSINESS. Consolidate or merge with
or purchase (for cash or securities) all or a substantial part of the assets or
capital stock of any corporation, firm, association or enterprise, or allow any
such entity to be merged into the Borrower, or change the basic business
operations of the Borrower.
6.10 LIMITATION ON LEASES. Incur or otherwise become obligated
to make payments on operating and capital leases not incurred in the ordinary
course of business.
6.11 POOLING OR UNITIZATION. Voluntarily pool or unitize all or
any part of the Borrowing Base Oil and Gas Properties if such pooling or
unitization would not be done by a prudent operator or would result in the
diminution of the Borrower's net revenue interest in production from the pooled
or unitized lands that is greater than the proportionate reduction that would
result from allocating the pooled or unitized production from the pool or unit
to each tract included therein on a surface acreage basis, without the Bank's
prior consent, which will not be unreasonably withheld. Any unitization, pooling
or communitization or other action or instrument in violation of this Section
6.11 shall be of no force or effect against the Bank.
6.12 HEDGE AGREEMENTS. Except for Permitted Hedge Agreements,
enter into or become obligated under any contract for sale for future delivery
of Hydrocarbons other than normal production contracts entered into in the
Borrower's normal course of business (whether or not the subject Hydrocarbons
are to be delivered), forward contract, Hedging Agreement, futures contract
33
or any other similar agreement, without the prior written consent of the Bank,
acting in its sole discretion.
6.13 CAPITAL STOCK OF BORROWER. Neither the Borrower nor any
Subsidiary will either: (1) redeem, purchase, or retire its capital stock or
purchase or retire any warrant, right, or option pertaining thereto or other
security convertible into any of the foregoing, for an aggregate consideration
exceeding $150,000 paid while this Agreement is in effect; or (2) except for (i)
the issuance of the Borrower's capital stock which does not result in a Change
of Control; and (ii) except in accordance with that certain Loan Agreement dated
November 8, 1998 between Tengasco, Inc. and United Missouri Bank of St. Louis as
Trustee; grant or issue, or permit any transfer, sale, redemption, retirement,
or other change in the ownership of, the outstanding capital stock of the
Borrower or any Subsidiary, without the prior written consent of the Bank,
acting in its sole discretion.
6.14 MARGIN STOCK. Neither the Borrower nor any Subsidiary will
directly or indirectly apply any part of the proceeds of the Loans to the
purchasing or carrying of any "margin stock" within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System, or any regulations,
interpretations or rulings thereunder.
6.15 GENERAL AND ADMINISTRATIVE EXPENSES. Pay, incur, or
otherwise become obligated to pay General and Administrative Expenses which
exceed $750,000 during any fiscal quarter beginning with the fiscal quarter
ending March 31, 2002.
6.16 MINIMUM TANGIBLE NET WORTH. Permit Consolidated Tangible
Net Worth to be less than $18,000,000.00, PLUS fifty percent (50%) of Borrower's
positive quarterly net income, if any, calculated in accordance with GAAP as of
the end of each fiscal quarter of Borrower, without offset or reduction for net
losses incurred during any quarter, beginning with the quarter ending December
31, 2001, and one hundred percent (100%) of any increase in shareholder's equity
resulting from the issuance of stock in Borrower (including any conversion of
Debt to equity) subsequent to the Closing.
6.17 CURRENT RATIO. Permit as of the end of any fiscal quarter
its Current Ratio to be less than 1.00 to 1.00, with the initial calculation of
such ratio to be made as of December 31, 2001.
6.18 DEBT SERVICE COVERAGE RATIO. Permit as of the end of any
fiscal quarter its Debt Service Coverage Ratio to be less than 1.25 to 1.0, with
the initial calculation of such ratio to be made for the quarter ending March
31, 2002.
6.19 CHANGE OF CONTROL. Permit any event to occur that
constitutes or results in a Change of Control.
34
ARTICLE VII.
EVENTS OF DEFAULT
-----------------
7.01 ENUMERATION OF EVENTS OF DEFAULT. Any of the following
events shall be considered an Event of Default as that term is used herein:
(a) Default shall be made by the Borrower in the payment within
two (2) days after such payment was due of any installment of principal
or interest (including, without limitation, any mandatory prepayment
payable pursuant to Section 2.06 of this Agreement) on the Note or any
other monetary obligation payable hereunder when due, including, without
limitation, any fee due to the Bank hereunder;
(b) Default shall be made by the Borrower in the due observance
or performance of any affirmative covenant required in this Agreement,
the Note or the Security Instruments and such default continues for more
than thirty (30) days after the earlier of: (i) Borrower having knowledge
thereof, or (ii) Borrower receiving written notice thereof from the Bank;
(c) Default shall be made by the Borrower in the due observance
or performance of any negative covenant required in this Agreement, the
Note or the Security Instruments;
(d) Any representation or warranty herein made by the Borrower
proves to have been untrue in any material respect, or any
representation, statement (including Financial Statements), certificate
or data furnished or made by the Borrower to the Bank in connection
herewith proves to have been untrue in any respect material to the
Borrower as of the date the facts therein set forth were stated or
certified;
(e) Default shall be made by the Borrower (as principal or
other surety) in payment or performance of any bond, debenture, note or
other evidence of Indebtedness for borrowed money, or under any credit
agreement, loan agreement, indenture, promissory note or similar
agreement or instrument executed in connection with any of the foregoing;
and such default shall remain unremedied for in excess of the period of
grace, if any, with respect thereto, with the effect of accelerating the
maturity of any such material Indebtedness;
(f) The Borrower discontinues its usual business or applies for
or consents to the appointment of a receiver, trustee or liquidator of it
or all or a substantial part of its assets, or (ii) files a voluntary
petition 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, or (iii)
makes a general assignment for the benefit of creditors, or (iv) is
unable, or admits in writing its inability to pay its debts generally as
they become due, or (v) files an answer admitting the material
allegations of a petition filed against it in any case commenced under
Title 11 of the United States Code or any
35
reorganization, insolvency, conservatorship or similar proceeding under
any bankruptcy, insolvency, debtor's relief or other similar Law of the
United States, the State of Texas or any other jurisdiction;
(g) An order, judgment or decree shall be entered against the
Borrower by any court of competent jurisdiction or by any other duly
authorized authority, on the petition of a creditor or otherwise,
granting relief under Title 11 of the United States Code or under any
bankruptcy, insolvency, debtor's relief or other similar Law of the
United States, the State of Texas or any other jurisdiction, approving a
petition seeking reorganization or an arrangement of its debts or
appointing a receiver, trustee, conservator, custodian or liquidator of
it or all or any substantial part of its assets, and the failure to have
such order, judgment or decree dismissed within ten (10) days of its
entry;
(h) the Borrower has concealed, removed, or permitted to be
concealed or removed, any part of its property, with intent to hinder,
delay or defraud its creditors or any of them; or has made or suffered a
transfer of any of its property which may be fraudulent under any the
Bankruptcy, fraudulent conveyance or similar Law; or has made any
transfer of its property to or for the benefit of a creditor at a time
when other creditors similarly situated have not been paid; or has
suffered or permitted, while insolvent, any creditor to obtain a lien
upon any of its property through legal proceedings or distraint which is
not vacated within thirty (30) days from the date thereof; or
(i) the Liens under the Security Instruments cease to be
perfected or cease to be first priority Liens subject to only Permitted
Encumbrances.
7.02 RIGHTS UPON UNMATURED EVENT OF DEFAULT. At any time that
there exists an Unmatured Event of Default, any obligation of the Bank hereunder
to make advances to or for the benefit of the Borrower shall be suspended unless
and until the Bank shall reinstate the same in writing, the Unmatured Event of
Default shall have been waived by the Bank or the relevant Unmatured Event of
Default shall have been remedied prior to ripening into an Event of Default.
7.03 RIGHTS UPON DEFAULT. Upon the happening of an Event of
Default specified in Subsections 7.01 (f) or (g), the entire aggregate principal
amount of all Indebtedness then outstanding hereunder and the interest accrued
thereon shall automatically become immediately due and payable, and upon the
happening of any other Event of Default, the Bank may declare the entire
aggregate principal amount of all Indebtedness then outstanding hereunder and
the interest accrued thereon immediately due and payable. In either case, the
entire principal and interest shall thereupon become immediately due and
payable, without notice (including, without limitation, notice of intent to
accelerate maturity or notice of acceleration of maturity) and without
presentment, demand, protest, notice of protest or other notice of default or
dishonor of any kind, except as provided to the contrary elsewhere herein, all
of which are hereby expressly waived by the Borrower.
36
Upon the happening of any Event of Default, all obligations (if
any) of the Bank hereunder, including specifically, but without limitation, any
obligation to make Loans hereunder, shall at the option of the Bank immediately
cease and terminate.
7.04 REMEDIES. After any acceleration, as provided for in
Section 7.03, the Bank shall have, in addition to the rights and remedies given
them by this Agreement and the Security Instruments, all those allowed by all
applicable Laws, including, but without limitation, the Uniform Commercial Code
as enacted in any jurisdiction in which any Borrowing Base Oil and Gas
Properties may be located. Without limiting the generality of the foregoing, the
Bank may immediately, without demand of performance and without other notice
(except as specifically required by this Agreement or the Security Instruments)
or demand whatsoever to the Borrower, all of which are hereby expressly waived,
and without advertisement, sell at public or private sale or otherwise realize
upon, in ▇▇▇▇▇▇ County, Texas, or in any other place where the Borrowing Base
Oil and Gas Properties may be located, or in such other place or places as the
Bank may designate, the whole or, from time to time, any part of the Borrowing
Base Oil and Gas Properties, or any interest which the Borrower may have
therein. After deducting from the proceeds of sale or other disposition of the
Borrowing Base Oil and Gas Properties all expenses (including all reasonable
expenses for legal services), the Bank shall apply such proceeds toward the
satisfaction of the Obligations. Any remainder of the proceeds after
satisfaction in full of the Obligations shall be distributed as required by
applicable Laws. Notice of any sale or other disposition shall be given to the
Borrower at least five (5) days before the time of any public sale or of the
time after which any intended private sale or other disposition of the Borrowing
Base Oil and Gas Properties is to be made, which the Borrower hereby agrees
shall be reasonable notice of such sale or other disposition. The Borrower
agrees to assemble, or to cause to be assembled, at its own expense, documents
evidencing its ownership of the Borrowing Base Oil and Gas Properties and such
other documents or items as the Bank may reasonably request at such place or
places as the Bank shall designate. At any such sale or other disposition, the
Bank may, to the extent permissible under applicable Laws, purchase the whole or
any part of the Borrowing Base Oil and Gas Properties, free from any right of
redemption on the part of the Borrower, which right is hereby waived and
released. Without limiting the generality of any of the rights and remedies
conferred upon the Bank under this paragraph, the Bank may, to the full extent
permitted by the applicable Laws:
(A) Enter upon the premises of the Borrower (and, to the extent
necessary in the judgment of the Bank, exclude therefrom the
Borrower or any Affiliate thereof) and take immediate possession
of the Borrowing Base Oil and Gas Properties, either personally or
by means of a receiver appointed by a court of competent
jurisdiction, using all necessary force to do so;
(B) At the Bank's option, use, operate, manage, and control the
Borrowing Base Oil and Gas Properties in any lawful manner;
(C) Collect and receive all rents, income, revenue, earnings,
issues, and profits therefrom; and
37
(D) Maintain, repair, renovate, alter, or remove the Borrowing
Base Oil and Gas Properties as the Bank may determine in their
discretion.
7.05 RIGHT OF SET-OFF. Upon the occurrence of any Event of
Default, the Bank may, and is hereby authorized by the Borrower, at any time and
from time to time, to the fullest extent permitted by applicable Laws, without
advance notice to the Borrower (any such notice being expressly waived by the
Borrower), set-off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and any other indebtedness at any
time owing by the Bank to or for the credit or the account of the Borrower
against any or all of the Obligations of the Borrower now or hereafter existing,
whether or not such Obligations have matured and irrespective of whether the
Bank may have exercised any other rights that they have or may have with respect
to such Obligations, including, without limitation, any acceleration rights. The
Bank agrees promptly to notify the Borrower after any such set-off and
application, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Bank under this
Section 7.05 are in addition to the other rights and remedies (including,
without limitation, other rights of set-off) which the Bank may have.
ARTICLE VIII.
MISCELLANEOUS
-------------
8.01 SECURITY INTERESTS IN DEPOSITS AND RIGHT OF OFFSET OR THE
BANKER'S LIEN. The Borrower hereby transfers, assigns and pledges to the Bank
and/or grants to the Bank a security interest (as security for the payment
and/or performance of the Obligations of the Borrower, with such interest of the
Bank to be retransferred, reassigned and/or released by the Bank at the expense
of the Borrower upon payment in full and/or complete performance by the Borrower
of all such Obligations) and the right, exercisable at such time as any
obligation hereunder shall mature, whether by acceleration of maturity or
otherwise, of offset or banker's lien against all funds or other property of the
Borrower now or hereafter or from time to time on deposit with or in the
possession of the Bank, including, without limitation, all certificates of
deposit and other depository accounts.
8.02 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties of the Borrower and all covenants and agreements
herein made shall survive the execution and delivery of the Note and this
Agreement and shall remain in force and effect so long as any debt is
outstanding under the Note, or any renewal or extension of this Agreement or the
Note, or the Bank remains obligated to make advances hereunder.
8.03 NOTICES AND OTHER COMMUNICATIONS. Notices, requests and
communications hereunder shall be in writing and shall be sufficient in all
respects if delivered to the relevant address indicated below (including
delivery by registered or certified United States mail, facsimile, telex,
telegram or hand):
38
(A) If to the
Borrower: c/o TENGASCO, INC.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Mr. M.E. ▇▇▇▇▇▇▇ or
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(B) If to the
Bank: BANK ONE, NA
▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Any party may, by proper written notice hereunder to the other,
change the individuals or addresses to which such notices to it shall thereafter
be sent.
8.04 PARTIES IN INTEREST. All covenants and agreements herein
contained by or on behalf of the Borrower shall be binding upon the Borrower and
its successors and assigns and inure to the benefit of the Bank and its
successors and assigns.
8.05 RENEWALS AND EXTENSIONS. All provisions of this Agreement
relating to the Note shall apply with equal force and effect to each and all
promissory notes hereafter executed which in whole or in part represent a
renewal, extension, amendment, modification or rearrangement of any part of the
Indebtedness originally represented by the Note.
8.06 NO WAIVER BY THE BANK. No course of dealing on the part of
the Bank, its officers or employees, nor any failure or delay by the Bank with
respect to exercising any of its rights, powers or privileges under this
Agreement, the Note, the Security Instruments, or any other instrument referred
to herein or executed in connection with the Note shall operate as a waiver
thereof. The rights and remedies of the Bank under this Agreement, the Note, the
Security Instruments, or any other instrument referred to herein or executed in
connection with the Note shall be cumulative and the exercise or partial
exercise of any such right or remedy shall not preclude the exercise of any
other right or remedy.
No advance of Loan proceeds hereunder shall constitute a waiver of
any of the covenants or warranties of the Borrower contained herein or of any of
the conditions to the Bank's obligation to make further advances hereunder. In
the event that the Borrower is unable to satisfy any such covenant, warranty or
condition, no such advance of Loan proceeds shall have the effect of precluding
the Bank from thereafter declaring such inability to be an Event of Default as
hereinabove provided.
39
8.07 WAIVER, RELEASE, AND INDEMNIFICATION BY THE BORROWER. To
the maximum extent permitted by applicable Laws, the Borrower:
(A) Waives (1) protest of all commercial paper at any time held
by the Bank on which the Borrower is in any way liable; (2) except
as the same may herein be specifically granted, notice of
acceleration and intention to accelerate; and (3) notice and
opportunity to be heard, after acceleration in the manner provided
in Section 7.03, before exercise by the Bank of the remedies of
self-help, set-off, or of other summary procedures permitted by
any applicable Laws or by any agreement with the Borrower, and,
except where required hereby or by any applicable Laws, notice of
any other action taken by the Bank;
(B) Releases the Bank and its officers, employees, directors,
attorneys, and agents (collectively, the "Bank Parties") from all
claims for loss or damage caused by any act or omission on the
part of any of them except willful misconduct or gross negligence;
and
(C) Agrees to indemnify and hold the Bank Parties harmless from
and against all claims, damages, liabilities and expenses, known
or unknown, accrued and unaccrued, unless attributable to the Bank
Parties' own gross negligence or willful misconduct, that may now
or hereafter be asserted against any of the Bank Parties in
connection with or arising out of (i) any investigation,
litigation or proceeding directly or indirectly relating to or
arising out of any of the transactions contemplated by this
Agreement or (ii) the Nishiwaki Note.
8.08 GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL BE DEEMED
TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
8.09 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules attached to this Agreement are incorporated herein for all purposes
and shall be considered a part of this Agreement.
8.10 SURVIVAL UPON UNENFORCEABILITY. In the event any one or
more of the provisions contained in this Agreement, the Note, the Security
Instruments, or in any other instrument referred to herein or executed in
connection with the Note shall, for any reason, be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof or of any other instrument referred
to herein or executed in connection herewith.
8.11 RIGHTS OF THIRD PARTIES. All provisions herein are imposed
solely and exclusively for the benefit of the Bank, the Borrower and no other
Person shall have standing to require satisfaction of such provisions in
accordance with their terms or be entitled to assume that
40
the Bank will refuse to make advances in the absence of strict compliance with
any or all thereof and any or all of such provisions may be freely waived in
whole or in part by the Bank at any time if in its sole discretion it deems it
advisable to do so.
8.12 AMENDMENTS OR MODIFICATIONS. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by the party against whom enforcement of
the change, waiver, discharge or termination is sought.
8.13 AGREEMENT CONSTRUED AS AN ENTIRETY. This Agreement, for
convenience only, has been divided into Articles and Sections and it is
understood that the rights, powers, privileges, duties and other legal relations
of the parties hereto shall be determined from this Agreement as an entirety and
without regard to the aforesaid division into Articles and Sections and without
regard to headings prefixed to said Articles or Sections.
8.14 NUMBER AND GENDER. Whenever the context requires, reference
herein made to the single number shall be understood to include the plural and
likewise the plural shall be understood to include the singular. 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.
8.15 AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS. THIS AGREEMENT,
TOGETHER WITH THE NOTE, THE SECURITY INSTRUMENTS, AND ANY OTHER WRITTEN
INSTRUMENTS EXECUTED PURSUANT TO THIS AGREEMENT REPRESENT, COLLECTIVELY, THE
FINAL AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES AND SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN
THE PARTIES HERETO, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT HEREOF.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
8.16 CONTROLLING PROVISION UPON CONFLICT. In the event of a
conflict between the provisions of this Agreement and those of the Note, the
Security Instruments or any other instrument referred to herein or executed in
connection with the Note, the provisions of this Agreement shall control;
provided if any of the Security Instruments contain any representations,
warranties, or covenants of the Borrower that are in addition to or are more
restrictive on the Borrower than those set forth in this Agreement, such
additional or more restrictive representations, warranties, and covenants shall
control.
8.17 TIME, PLACE AND METHOD OF PAYMENTS. All payments required
pursuant to this Agreement or the Note shall be made in immediately available
funds; shall be deemed received
41
by the Bank on the next Business Day following receipt if such receipt is after
2:00 p.m., on any Business Day, and shall be made at the principal banking
quarters of the Bank.
8.18 TERMINATION. This Agreement and the Revolving Commitment
may be canceled by the Borrower without premium or penalty prior to the
Revolving Loan Termination Date upon at least thirty (30) days' prior written
notice, PROVIDED, that the Obligations are paid and performed in full to the
sole satisfaction of the Bank; PROVIDED, HOWEVER that any such cancellation
hereunder shall not terminate any obligations, representations or warranties of
the Borrower to the Bank hereunder and under other Loan Documents that survive
beyond the Revolving Loan Termination Date. Upon the earlier to occur of the (i)
the Revolving Loan Termination Date, and (ii) cancellation of this Agreement and
the Revolving Commitment prior thereto in accordance with this Section 8.18 and
upon payment and performance in full of the Obligations to the sole satisfaction
of the Bank, the Bank agrees, at the Borrower's request and sole cost and
expense, to execute and deliver any such lien release documents and other
documentation reasonably requested by the Borrower to release or terminate the
Bank's liens and security interests hereunder and under the other Loan
Documents.
8.19 NON-APPLICATION OF CHAPTER 346 OF TEXAS FINANCE CODE. The
provisions of Chapter 346 of the Texas Finance Code are specifically declared by
the parties hereto not to be applicable to this Agreement or any of the other
Security Instruments or to the transactions contemplated hereby.
8.20 COUNTERPART EXECUTION. This Agreement may be executed as
one instrument signed by all parties or in separate counterparts hereof, each of
which counterparts shall be considered an original and all of which shall be
deemed to be one instrument, and any signed counterpart shall be deemed
delivered by the party signing it if sent to any other party hereto by
electronic facsimile transmission.
[the remainder of this page was intentionally left blank]
42
IN WITNESS WHEREOF, this Agreement is executed as of the date
first above written.
BORROWER
TENGASCO, INC.
By: /s/ M.E. ▇▇▇▇▇▇▇
------------------------------------
M.E. ▇▇▇▇▇▇▇,
Chief Executive Officer
TENNESSEE LAND & MINERAL
CORPORATION
By: /s/ M.E. ▇▇▇▇▇▇▇
------------------------------------
M.E. ▇▇▇▇▇▇▇,
Chief Executive Officer
TEGASCO PIPELINE CORPORATION
By: /s/ M.E. ▇▇▇▇▇▇▇
------------------------------------
M.E. ▇▇▇▇▇▇▇,
Chief Executive Officer
BANK
BANK ONE, NA
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Vice President
43
EXHIBIT "A"
BORROWING BASE
OIL AND GAS PROPERTIES
----------------------
This Exhibit sets forth the description of the Borrowing Base Oil
& Gas Properties covered by the Agreement to which this Exhibit is attached. All
of the terms defined in the Agreement are used in this Exhibit with the same
meanings given therein.
This Exhibit and the Agreement cover and include the following:
(a) All of Borrower's right, title and interest in and to the oil, gas
and mineral leases described herein and/or lands described in and subject
to such oil, gas and mineral leases (regardless, as to such leases and/or
lands, of any surface acreage and/or depth limitations set forth in any
description of any of such oil, gas and mineral leases), and all of
Borrower's right, title and interest in and to any of the oil, gas and
minerals in, on or under the lands, if any, described on this Exhibit,
including, without limitation, all contractual rights, fee interests,
leasehold interests, overriding royalty interests, non-participating
royalty interests, mineral interests, production payments, net profits
interests, or any other interest measured by or payable out of production
of oil, gas or other minerals from the oil, gas and mineral leases and/or
lands described herein; and
(b) All of the foregoing interests of the Borrower as such interests
may be enlarged by the discharge of any payments out of production or by
the removal of any charges or encumbrances together with the Borrower's
interests in, to and under or derived from all renewals and extensions of
any oil, gas and mineral leases described herein, it being specifically
intended hereby that any new oil and gas lease (i) in which an interest
is acquired by the Borrower after the termination or expiration of any
oil and gas lease, the interests of the Borrower in, to and under or
derived from which are subject to the lien and security interest hereof,
and (ii) that covers all or any part of the property described in and
covered by such terminated or expired leases, shall, to the extent, and
only to the extent such new oil and gas lease may cover such property, be
considered a renewal or extension of such terminated or expired lease;
and
(c) All right, title and interest of Borrower in, to and under or
derived from any operating, farmout, and bidding agreements, assignments
and subleases, whether or not described in this Exhibit, to the extent,
and only to the extent, that such agreements, assignments and subleases
(i) cover or include any of the Borrower's present right, title and
interest in and to the leases and/or lands described in this Exhibit, or
(ii) cover or include any other undivided interests now or hereafter held
by the Borrower in, to and under the described leases and/or lands,
including, without
1
limitation, any future operating, farmout and bidding agreements,
assignments, subleases and pooling, unitization and communitization
agreements and the units created thereby (including, without limitation
all units formed under orders, regulations, rules or other official acts
of any governmental body or agency having jurisdiction) to the extent and
only to the extent that such agreements, assignments, subleases, or units
cover or include the described leases and/or lands; and
(d) All right, title, and interest of the Borrower in, to and under or
derived from all presently existing and future advance payment
agreements, oil, casinghead gas and gas sales, exchange, and processing
contracts and agreements including, without limitation, those contracts
and agreements that are described on this Exhibit to the extent, and only
to the extent, those contracts and agreements cover or include the
described leases and/or lands herein; and
(e) All right, title and interest of the Borrower in, to and under or
derived from all existing and future permits, licenses, easements and
similar rights and privileges that relate to or are appurtenant to any of
the described leases and/or lands.
Notwithstanding the intention of this Agreement to cover all of
the right, title and interest of Borrower in and to the described leases and/or
lands, except as expressly set forth herein Borrower hereby specifically
warrants and represents that the interests covered by this Exhibit are not
greater than the working interest nor less than the net revenue interest,
overriding royalty interest, net profit interest, production payment interest or
other interest payable out of or measured by production set forth in connection
with each oil and gas well described in this Exhibit. In the event the Borrower
owns any other or greater interest, such additional interest shall also be
covered by and included in this Agreement. The designation "Working Interest" or
"W.I." means an interest owned in an oil, gas, and mineral lease that determines
the cost bearing percentage of the owner of such interest. The designation "Net
Revenue Interest" or "NRI" means net revenue interest, or that portion of the
production attributable to the owner of a working interest after deduction for
all royalty burdens, overriding royalty burdens, or other burdens on production,
except severance, production, windfall profits and other similar taxes. The
designation "Overriding Royalty Interest" or "ORRI" means an interest in
production which is free of any obligation for the expense of exploration,
development and production, bearing only its pro rata share of severance,
production, windfall profits and other similar taxes.
2
EXHIBIT "B"
REVOLVING NOTE
--------------
$35,000,000.00 Houston, Texas November 8, 2000
On the dates hereinafter prescribed, for value received, TENGASCO, INC.,
a Tennessee corporation, TENNESSEE LAND & MINERAL CORPORATION, a Tennessee
corporation, and TENGASCO PIPELINE CORPORATION, a Tennessee corporation (herein
called collectively, the "Borrower"), having an address at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, promises to pay to the order of BANK ONE,
NA (herein called "Bank"), at its principal offices at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, (i) the principal amount of THIRTY-FIVE
MILLION AND NO/100 DOLLARS ($35,000,000.00) or the principal amount advanced
pursuant to the terms of the Credit Agreement (defined herein) as of the date of
maturity hereof, whether by acceleration or otherwise, whichever may be the
lesser, and (ii) interest on the principal balance from time to time advanced
and remaining unpaid from the date of the advance until maturity at a rate of
interest equal to lesser of (a) the "Floating Rate" (as defined in the Credit
Agreement) calculated on the basis of a year of 360 days and for the actual
number of days elapsed (including the first day but excluding the last day), or
(b) the Maximum Rate (as defined in the Credit Agreement). Any increase or
decrease in interest rate resulting from a change in the Maximum Rate shall be
effective immediately when such change becomes effective, without notice to the
Borrower, unless Applicable Law (as defined below) requires that such increase
or decrease not be effective until a later time, in which event such increase or
decrease shall be effective at the earliest time permitted under the provisions
of such law.
Notwithstanding the foregoing, if during any period the Floating Rate
exceeds the applicable Maximum Rate, the rate of interest in effect on this Note
shall be limited to the Maximum Rate during each such period, but at all times
thereafter the rate of interest in effect on this Note shall be the Maximum Rate
until the total amount of interest accrued on this Note equals the total amount
of interest which would have accrued hereon if the Floating Rate had at all
times been in effect.
All payments on this Note shall be applied first to accrued interest and
the balance, if any, to principal.
"Applicable Law" means that law in effect from time to time and
applicable to this Note which lawfully permits the charging and collection of
the highest permissible lawful, non-usurious rate of interest on this Note,
including laws of the State of Texas and laws of the United States of America.
It is intended that Chapter 303 of the Texas Finance Code shall be included in
the laws of the State of Texas in determining Applicable Law; and for the
purpose of applying said Chapter 303 to this Note, the interest ceiling
applicable to this Note under said Chapter 303 shall be the indicated weekly
rate ceiling from time to time in effect. The Borrower and the Bank hereby agree
-------------------
Borrower's Initials
1
that Chapter 346 of the Texas Finance Code, shall not apply to this Note or the
loan transaction evidenced by, and referenced in, the Credit Agreement
(hereinafter defined) in any manner, including without limitation, to any
account or arrangement evidenced or created by, or provided for in, this Note.
This Note is a revolving credit note and it is contemplated that by
reason of prepayments hereon there may be times when no indebtedness is owing
hereunder; but notwithstanding such occurrence, this Note shall remain valid and
in full force and effect as to each principal advance made hereunder subsequent
to each such occurrence. Each principal advance and each payment hereof made
pursuant to this Note shall be reflected by the Bank's records and the aggregate
unpaid amounts reflected by such records shall constitute rebuttably presumptive
evidence of the principal and unpaid, accrued interest remaining outstanding on
this Note.
The principal sum of this Note, after giving credit for unadvanced
principal, if any, remaining at final maturity, shall be due and payable on or
before November 8, 2004; interest to accrue upon the principal sum from time to
time owing and unpaid hereunder shall be due and payable in monthly
installments, as it accrues, with the first such monthly installment of interest
hereon being due and payable on the first day of November, 2001, and with such
subsequent installments of interest being due and payable on the first day of
each succeeding month thereafter; provided, however, the final installment of
interest hereunder shall be due and payable not later than the maturity of the
principal sum hereof, howsoever such maturity may be brought about.
When the first (1st) day of a calendar month falls upon a Saturday,
Sunday or legal holiday, the payment of interest and principal, if any, due upon
such date shall be due and payable upon the next succeeding Business Day.
In no event shall the aggregate of the interest on this Note, plus any
other amounts paid in connection with the loan evidenced by this Note which
would under Applicable Law be deemed "interest," ever exceed the maximum amount
of interest which, under Applicable Law, could be lawfully charged on this Note.
The Bank and the Borrower specifically intend and agree to limit contractually
the interest payable on this Note to not more than an amount determined at the
Maximum Rate. Therefore, none of the terms of this Note or any other instruments
pertaining to or securing this Note shall ever be construed to create a contract
to pay interest at a rate in excess of the Maximum Rate, and neither the
Borrower nor any other party liable herefor shall ever be liable for interest in
excess of that determined at the Maximum Rate, and the provisions of this
paragraph shall control over all provisions of this Note or of any other
instruments pertaining to or securing this Note. If any amount of interest taken
or received by the Bank shall be in excess of the maximum amount of interest
which, under Applicable Law, could lawfully have been collected on this Note,
then the excess shall be deemed to have been the result of a mathematical error
by the parties hereto and shall be refunded promptly to the Borrower. All
amounts paid or agreed to be paid in connection with the indebtedness evidenced
by this Note which would under Applicable Law be deemed
-------------------
Borrower's Initials
2
"Interest" shall, to the extent permitted by Applicable Law, be amortized,
prorated, allocated and spread throughout the full term of this Note.
This Note is secured by all security agreements, collateral assignments,
mortgages and lien instruments executed by the Borrower (or by any other party)
in favor of Bank, including those executed simultaneously herewith, those
executed heretofore and those hereafter executed, and including specifically and
without limitation the Security Instruments described and defined in that
certain Credit Agreement of even date herewith between Borrower and the Bank
(the "Credit Agreement").
This Note is the Revolving Note issued pursuant to the Credit Agreement.
Reference is hereby made to the Credit Agreement for a statement of the rights
and obligations of the holder of this Note and the duties and obligations of the
Borrower in relation thereto; but neither this reference to the Credit Agreement
nor any provisions thereof shall affect or impair the absolute and unconditional
obligation of the Borrower to pay any outstanding and unpaid principal of and
interest on this Note when due, in accordance with the terms of the Credit
Agreement. Each advance and each payment made pursuant to this Note shall be
reflected by notations made by the Bank on its records and the aggregate unpaid
amounts reflected by the notations on the records of the Bank shall be deemed
rebuttably presumptive evidence of the principal amount owing under this Note.
In the event of default in the payment when due of any of the principal
of or any interest on this Note, or in the event of default under the terms of
the Credit Agreement or any of the Security Instruments, or if any event occurs
or condition exists which authorizes the acceleration of the maturity of this
Note under any agreement made by the Borrower, the Bank (or other holder of this
Note) may, at its option, without presentment or demand or any notice to the
Borrower or any other person liable herefor, declare the unpaid principal
balance of and accrued interest on this Note to be immediately due and payable.
If this Note is collected by suit or through the Probate or Bankruptcy
Court, or any judicial proceeding, or if this Note is not paid at maturity,
however such maturity may be brought about, and is placed in the hands of an
attorney for collection, then the Borrower agrees to pay reasonable and
documented attorneys' fees, not to exceed ten percent (10%) of the full amount
of principal and interest owing hereon at the time this Note is placed in the
hands of an attorney.
The Borrower agrees that the obligations of each are joint and several.
The Borrower and all sureties, endorsers and guarantors of this Note waive
demand, presentment for payment, notice of nonpayment, protest, notice of
protest, notice of intent to accelerate maturity, notice of acceleration of
maturity, and all other notices, filing of suit and diligence in collecting this
Note or enforcing any of the security herefor, and agree to any substitution,
exchange or release of any such security or the release of any party primarily
or secondarily liable hereon and further agrees that it will not be necessary
for the Bank, in order to enforce payment of this Note by them, to first
institute
-------------------
Borrower's Initials
3
suit or exhaust its remedies against any Borrower or others liable herefor, or
to enforce its rights against any security herefor, and consent to any one or
more extensions or postponements of time of payment of this Note on any terms or
any other indulgences with respect hereto, without notice thereof to any of
them. The Bank may transfer this Note, and the rights and privileges of the Bank
under this Note shall inure to the benefit of the Bank's representatives,
successors or assigns.
Executed this 8th day of November, 2001.
TENGASCO, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
TENNESSEE LAND & MINERAL
CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
TENGASCO PIPELINE CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
4
EXHIBIT "C"
COMPLIANCE CERTIFICATE
----------------------
We, the undersigned officers of TENGASCO, INC., TENNESSEE LAND &
MINERAL CORPORATION, AND TENGASCO PIPELINE CORPORATION (collectively, the
"Company"), pursuant to Section 5.05 of the Credit Agreement dated as of
November 8, 2001, by and among BANK ONE, NA ("Bank") and the Company (the
"Agreement") do hereby certify, as of the date hereof, that to my knowledge:
1. No Event of Default (as defined in the Agreement) has occurred and
is continuing, and no Unmatured Event of Default (as defined in
the Agreement) has occurred and is continuing [except for the
following events (include actions taken to cure such situations):
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
----------------------------------------------------------------];
2. No material adverse change has occurred in the business,
prospects, financial condition, or the results of operations of
the Company since the date of the previous Financial Statements
(as defined in the Agreement) provided to Bank [except as follows
(include actions taken to address such changes):
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
----------------------------------------------------------------];
3. Except as otherwise stated in the Schedule, if any, attached
hereto, each of the representations and warranties of the Company
contained in Article IV of the Agreement is true and correct in
all respects [except for the following (include actions being
taken to cure such situations):
1
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
----------------------------------------------------------------];
4. The Company's financial condition for the period ending __________
is as follows:
DATE OR REQUIRED ACTUAL
TIME RATIO OR RATIO OR
FINANCIAL COVENANT PERIOD AMOUNT AMOUNT
(a) CONSOLIDATED TANGIBLE Term of Loan not < $18,000,000.00 ________
NET WORTH plus the sum of 50% of
Borrower's positive
quarterly net income,
if any, calculated in
accordance with GAAP
as of the end of each
fiscal quarter
beginning with the
quarter ending
December 31, 2001, and
100% of any increase
in shareholder's
equity from the sale
of stock in Borrower
subsequent to November
8, 2001
(b) Current Ratio for any Term of Loan not < 1.00 to 1.00 ________
fiscal quarter
(c) Debt Service Coverage Term of Loan not < 1.25 to 1.00 ________
Ratio for any fiscal
quarter
(d) General and Term of Loan Not > $750,000 per ________
Administrative fiscal quarter
Expenses
2
This certificate is executed this 8th day of November, 2001.
TENGASCO, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
TENNESSEE LAND & MINERAL
CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
TEGASCO PIPELINE CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
3
EXHIBIT "D"
SECURITY INSTRUMENTS
--------------------
The Security Instruments securing the Borrower's Obligations and
Indebtedness to the Bank shall include the following, each in form and substance
satisfactory to the Bank:
1. ACT OF MORTGAGE, SECURITY AGREEMENT, FIXTURE FILING AND ASSIGNMENT OF
PRODUCTION covering Borrower's Borrowing Base Oil and Gas Properties.
2. SECURITY AGREEMENT granting the Bank a first priority security interest
in all of the Borrower's personal property assets, including its accounts,
equipment, machinery, fixtures, inventory, chattel paper, documents, instruments
and general intangibles, whether now owned or hereafter acquired, and all
products and proceeds thereof.
3. FINANCING STATEMENTS in connection with the Security Instruments
described in the preceding paragraphs, in form and number satisfactory to the
Bank as the Bank, from to time, may specify (including additional or
supplemental financing statements, amendments thereto, and continuation
statements thereof).
4. OTHER SECURITY INSTRUMENTS. Such other instruments as are necessary or
appropriate from time to time, in the good faith opinion of the Bank, to perfect
to the satisfaction of the Bank the Bank's liens, security interests, and other
rights in the Borrowing Base Oil and Gas Properties and in any and all other
collateral covered by or described in (or, as evidenced by the Agreement,
intended to have been covered by) any of the other Security Instruments
described above.
POWER OF ATTORNEY. To the fullest extent permitted by Law and until this
Agreement is terminated in accordance with Section 8.18 therein, the Borrower
hereby appoints the Bank as its attorney-in-fact (without requiring the Bank to
act as such) to execute any Security Instrument in the name of the Borrower, and
to perform all other acts that the Bank deem appropriate to perfect and continue
its liens, security interests, and other rights in, and to protect and preserve,
the Borrowing Base Oil and Gas Properties and other collateral covered by or
described in (or, as evidenced by the Agreement, intended to have been covered
by) any of the Security Instruments described above, but only to the extent
required of Borrower under the terms of this Agreement.
1
SCHEDULE 4.01
STATES IN WHICH BORROWER IS INCORPORATED OR QUALIFIED TO DO BUSINESS
Tengasco, Inc.
Incorporated in Tennessee
Qualified to do Business in Kansas
Subsidiaries of Tengasco, Inc.:
Tengasco Pipeline Corporation
Incorporated in Tennessee
Tennessee Land & Mineral Corporation
Incorporated in Tennessee
ADDRESSES OF ALL PLACES OF BUSINESS
Tengasco, Inc.
In Tennessee:
▇▇▇ ▇▇▇▇ ▇▇▇. ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
P. O. ▇▇▇ ▇▇▇▇
▇▇▇ ▇. ▇▇▇▇ (▇▇▇▇▇▇▇ 31)
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
In Kansas:
▇▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇, ▇▇ ▇▇▇▇▇
Subsidiaries of Tengasco, Inc.:
Tengasco Pipeline Corporation
In Tennessee:
▇▇▇ ▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tennessee Land & Mineral Corporation
In Tennessee:
▇▇▇ ▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
4.10 - LIST OF PURCHASERS
OF
PRODUCTION
▇▇▇▇▇▇▇ Chemical Company
Attn: Accts Payable
P. ▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
BAE Systems Ordnance Systems, Inc.
▇▇▇▇▇▇▇ Army Ammunition Plant
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
South Kentucky Purchasing Company, Inc.
P. O. Box 1547 ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ONEOK Field Services Company
A Subsidiary of ONEOK, Inc.
P. O. ▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
National Cooperative Refinery Association
Attn: Crude Oil Accounting
P. O. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Schedule 4.14 Litigation
Except as described hereafter, the Company is not a party to any
pending material legal proceeding. To the knowledge of management, no federal,
state or local governmental agency is presently contemplating any proceeding
against the Company which would have a result materially adverse to the Company.
To the knowledge of management, no director, executive officer or affiliate of
the Company or owner of record or beneficially of more than 5% of the Company's
common stock is a party adverse to the Company or has a material interest
adverse to the Company in any proceeding.
1. The Company and its wholly owned subsidiary, Tengasco Pipeline
Corporation ("TPC"), were named as defendants in an action commenced on June 4,
2001 by ▇.▇. ▇▇▇▇▇▇▇▇▇▇▇▇ & Associates, Inc. ("Fenstermaker") in the United
States District for the Eastern District of Tennessee entitled ▇.▇. ▇▇▇▇▇▇▇▇▇▇▇▇
& Associates, Inc. v. Tengasco, Inc., No. 3:01-CV-283.
The action seeks to recover approximately $365,000 in fees and charges
billed to TPC for engineering services Fenstermaker claims it performed in
connection with the planning and construction of Phase II of the Company's
pipeline which runs from Rogersville, TN to Kingsport, TN to serve ▇▇▇▇▇▇▇
Chemical Company and ▇▇▇▇▇▇▇ Army Ammunition Plant. On June 25, 2001, the
Company and TPC filed an answer to the complaint denying liability for the
▇▇▇▇▇▇▇▇ claimed, and counterclaiming against Caddum, Inc. ("Caddum"), an
unincorporated division of Fenstermaker. The counterclaim seeks recovery from
Caddum of damages for breach of contract and breach of professional engineering
standards caused by the actions of Caddum, including unauthorized deviations
from the pipeline route that caused the Company to incur significant additional
costs. These costs included substantial fees for concrete capping of the
pipeline as a result of the pipeline being placed to close to the adjoining
highway right of way. The counterclaim further alleges that Caddum damaged the
Company: by causing delays in completing the pipeline by failing to submit
engineering drawings and failing to timely obtain certain x-rays of the pipeline
welds; its unauthorized actions in ordering supplies and materials; and,
overbilling from the agreed contract rate for engineering services. The
counterclaim seeks actual damages from Caddum of approximately $475,000, treble
damages under state law for the overbilling, and damages to the Company arising
from the delay caused by Caddum in the production from the Swan Creek field all
in the aggregate amount of $1.25 million. The District Court has scheduled the
case for a non-jury trial on June 19, 2002 before Judge ▇▇▇▇▇ ▇. ▇▇▇▇▇▇. The
Company believes its counterclaims are meritorious and intends to vigorously
prosecute them and anticipates that, at a minimum, its counterclaims will either
fully offset or substantially reduce exposure to liability for the amounts
claimed by Fenstermaker.
2. TENGASCO PIPELINE CORPORATION V. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ AND ▇▇▇▇▇▇▇▇ ▇. ▇
▇▇▇▇▇▇, No. 4929J in the Circuit Court for ▇▇▇▇▇▇▇ County, Tennessee. This is a
condemnation proceeding brought by Tengasco Pipeline Corporation to acquire a
temporary
construction easement and permanent right of way to maintain and operate a
portion of Phase I of the Company's pipeline in ▇▇▇▇▇▇▇ County, Tennessee. The
court granted an order of possession to the Company in January, 1998 and the
pipeline has been constructed across approximately 3,000 feet of the property
concerned in a rural and very steep locale. The Company has had the right of way
appraised at $4,000. The landowners, ▇▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇ ▇▇▇▇▇▇ who
both live on the property, contest the appraised value of the property and claim
incidental damages to certain fish ponds located on their property. The
landowners, despite a lack of evidence of any fish raising or aquaculture
business actually being or having been operated on the premises or of any actual
losses to such business, have counterclaimed for $867,585 in compensatory
damages and $2.6 million in punitive damages arising from trespass and other
legal theories. The Court required the parties to attempt to mediate this
dispute and the mediation occurred in December, 2000. The parties were unable to
reach a mediated settlement and the matter is expected to go to trial in the
summer or fall of 2001. The discovery conducted to date has not disclosed any
facts that reasonably suggest any likelihood of a substantial adverse result in
this matter, and the Company intends to vigorously defend the allegations of the
counterclaim which appear to be without any credible basis.
3. The Company, its Chief Executive Officer, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and one
of its attorneys, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, have been named as defendants in an action
commenced in the Supreme Court of the State of New York, New York County
entitled ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, VON
GRAFFENRIED A.G. AND VPM VERWATUNGS A.G., PLAINTIFFS V. TENGASCO, INC., ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇ AND ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, DEFENDANTS, INDEX NO. 603009/98. In that
action, the plaintiffs, shareholders of the Company each of which purchased
restricted shares of the Company's Common Stock, allege that although they were
entitled to sell their shares pursuant to SEC Rule 144 in the open market, they
were precluded from doing so by the defendants' purported wrongful refusal to
remove the restrictive legend from their shares. The plaintiffs own in the
aggregate 35,000 shares of the Company's common stock. The plaintiffs are
seeking damages in an amount equal to the difference between the amount they
would have been able to sell their shares if the plaintiffs had acted to remove
the restrictive legends when requested and the amount they will receive on the
sale of their shares. The plaintiffs are also seeking punitive damages in an
amount they claim to be in excess of $500,000 together with interest, costs and
disbursements of bringing the action, including reasonable attorneys fees.
The Company believes that there are several substantial factual and
legal issues as to the date on which the shareholders were entitled to sell
their stock pursuant to Rule 144. Management further believes that the Company
did not wrongfully withhold its approval of the removal of the restrictive
legends at the times such removal was requested by the shareholders. However, in
the event the Company is found to have improperly withheld its permission to
remove the restrictive legends from the shares owned by the shareholders, the
Company may be held liable for damages to the shareholders in an amount equal to
the difference between the actual sale price of such shares and the sales price
they would have realized on the date such restrictive legends
should have been permitted to be removed. As this time it is not possible to
ascertain with any certainty what such damages would be.
4. Tengasco Pipeline Corporation is a party to a binding arbitration
proceeding pursuant to its construction contract with King Pipeline & Utility
Company, Inc. to construct Phase II of its pipeline. The arbitration was held
October 10, 2001 under procedures of and by an arbitrator appointed by the
American Arbitration Association. The ruling of the arbitrator is expected in
the next thirty days. Tengasco's position is that (1) straw matting done by King
on slopes was extra work, and King is entitled to be paid no more than
$14,630.14 for 104,501 square feet of straw matting on slopes, calculated at 14
cents per square foot rather than the two dollars per square foot sought by King
; (2) King should refund to Tengasco the $72,500 mistakenly paid for clearing
and grubbing that was never performed by King because the pipeline took another
route where no clearing and grubbing was required; (3) that a currently retained
sum of $46,585, to which Tengasco makes no claim, remain in escrow pending
outcome of ongoing litigation between King and King's boring subcontractor, (4)
that King is not entitled to receive any of the $94,000 billed by King for
certain alleged extra work in trenching, because a change order seeking this
payment was not submitted until months after all work was completed, and (5)
that Tengasco is entitled to recover its attorney's fees. Tengasco expects in
the aggregate of the rulings on these issues, a favorable outcome of this
arbitration that either results in positive recovery by the Company or a result
that is not materially adverse.
4.15 EXISTING INDEBTEDNESS
ARVEST BANK LOANS
(Information previously provided)
PRINCIPAL AND ACCRUED INTEREST TO NOVEMBER 9, 2001, $1,427,309.25
"DIRECTORS" LOANS (IN AGGREGATE)
Principal: $3,850,000
Maker: Tengasco Pipeline Corporation
Payee: Various (Nishiwaki; ▇▇▇▇; ▇▇▇▇▇▇▇; ▇▇▇▇▇▇▇▇)
Date: Various (August, 2000)
Interest: 10.25%
Maturity Date: 5 years from date of respective notes (August, 2005)
AGGREGATE AMOUNT DUE AS OF NOVEMBER 9, 2001 ON NISHIWAKI, GRAY,
RATLIFF, AND ▇▇▇▇▇▇▇▇ NOTES: $3,895,492.83 BEING PRINCIPAL PLUS
INTEREST THROUGH NOVEMBER 9, 2001
SPOONBILL, INC. NOTE
Principal: $1,000,000
Maker: Tengasco, Inc.
Payee: Spoonbill, Inc.
Date: April 27, 2001
Interest: 15% per annum
Maturity Date: April 26, 2002
AMOUNT DUE AS OF NOVEMBER 9, 2001: $1,080,833.34
($1,000,000 PRINCIPAL PLUS INTEREST OF $80,833.34 THROUGH NOVEMBER 9,
2001)
DRILL RIG NOTE
Principal: $995,000
Maker: Tengasco, Inc.
Payee: M. E. ▇▇▇▇▇▇▇
Date: Nov. 1, 2000
Interest: 8% per annum
Maturity Date: Nov. 1, 2005
AMOUNT DUE AS OF NOVEMBER 9, 2001: $1,003,844.44
($995,000 PRINCIPAL PLUS INTEREST OF $8,844.44 THROUGH NOVEMBER 9,
2001)
▇▇▇▇ LOAN AGREEMENT
Principal: $500,000
Maker: Tengasco, Inc.
Payee: ▇▇▇▇▇▇ ▇. ▇. ▇▇▇▇ III
Date: Dec. 15, 1998
Interest: 8% per annum
Maturity Date: December 31, 2001
CASH AMOUNT DUE AS OF NOVEMBER 9, 2001: $304,444.44
($500,000 PRINCIPAL PLUS UNPAID INTEREST OF $4,444.44 THROUGH NOVEMBER
9, 2001 PAYABLE AS FOLLOWS: $304,444 PAYABLE IN CASH, $200,000 PAID IN
STOCK OF TENGASCO, CONVERTED AT THE CONVERSION RATE SET OUT IN THE
NOTE INTO 42,373 SHARES).
LUTHERAN BROTHERS NOTE
That certain principal and accumulated interest under Loan Agreement dated
October 30, 1998 between Tengasco, Inc. as Borrower and United Missouri Bank of
St. Louis, N.A. as trustee for Lenders, with principal and accumulated interest
of $724,800.00.
SCHEDULE 4.16
MATERIAL COMMITMENTS
NONE
1
SCHEDULE 4.22 INSURANCE CERTIFICATE
------------------------------------------------------------------------------------------------------------------------------------
DATE (MM/DD/YY)
▇▇▇▇▇(TM) CERTIFICATE OF LIABILITY INSURANCE 10-29-01
------------------------------------------------------------------------------------------------------------------------------------
PRODUCER THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS
NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT
VOLUNTEER INSURANCE COMPANY, INC. AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ----------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ INSURERS AFFORDING COVERAGE
------------------------------------------------------------------------------------------------------------------------------------
TENGASCO, INC., TENNESSEE LAND INSURER A: AMERICAN EMPIRE SURPLUS LINES INS.
AND MINERAL, (INC.) AND TENGASCO INSURER B: NATIONAL INDEMITY COMPANY
PIPELINE CORPORATION INSURER C: LIBERTY MUTUAL
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ INSURER D: TRAVELERS INSURANCE COMPANIES
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ INSURER E:
------------------------------------------------------------------------------------------------------------------------------------
COVERAGES
------------------------------------------------------------------------------------------------------------------------------------
THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING
ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY
PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH
POLICIES, AGGREGATE LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
------------------------------------------------------------------------------------------------------------------------------------
POLICY POLICY
EFFECTIVE EXPIRATION
INSERT DATE DATE
LTR TYPE OF INSURANCE POLICY NUMBER MM/DD/YY MM/DD/YY [ILLEGIBLE]
-----------------------------------------------------------------------------------------------------------------------------------
|GENERAL LIABILITY EACH OCCURRENCE $ 1,000,000
|X| COMMERCIAL GENERAL LIABILITY FIRE DAMAGE (ANY ONE TIME) $ 100,000
A | | | CLAIMS MADE |X| OCCUR lEP03124 02-01-01 02-02-02 MED EXP (ANY ONE PERSON) $ 5,000
| | _________________________________ PERSONAL & ADV INJURY $ 1,000,000
| | _________________________________ GENERAL AGGREGATE $ 1,000,000
| GENERAL AGGREGATE LIMIT APPLIES PER PRODUCTS-[ILLEGIBLE] $ 1,000,000
| |POLICY | | PROJECT | | LOC
------------------------------------------------------------------------------------------------------------------------------------
|AUTOMOBILE LIABILITY COMBINED SINGLE LIMIT $ 1,000,000
|X|ANY AUTO (Ea accident)
B |X|ALL OWNED AUTOS 74APN173866 - TN BODILY INJURY $
|X|SCHEDULED AUTOS 70AP367651 - KS 02-01-01 02-01-02 (Per person)
|X|HIRED AUTOS BODILY INJURY $
|X|NON-OWNED AUTOS (per accident)
| |____________________________ PROPERTY DAMAGE $
(Per accident
------------------------------------------------------------------------------------------------------------------------------------
|GARAGE LIABILITY AUTO ONLY - EA ACCIDENT $
| |ANY AUTO OTHER THAN EA. ACC $
| | AUTO ONLY: $
------------------------------------------------------------------------------------------------------------------------------------
|EXCESS LIABILITY EACH OCCURRENCE $14,000,000
| |OCCUR | |CLAIMS MADE AGGREGATE $
A | 1EX03125 02-01-01 02-01-02 $
| |DEDUCTIBLE $
| |DETENTION
------------------------------------------------------------------------------------------------------------------------------------
D |WORKERS COMPENSATION AND KS- 6JOB-69BX789-4-00 WC STATU- ILLEG-
|EMPLOYERS' LIABILITY TORY LIMITS IBLE
| G.L. EACH ACCIDENT $ 1,000,000
C | TN- WC2-355-32S568-010 12-13-00 12-13-01 G.L. [illeg]-EA EMPLOYEE $ 1,000,000
| G.L. [illeg]-POLICY LIMIT $ 1,000,000
------------------------------------------------------------------------------------------------------------------------------------
|OTHER
|
|
------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OPERATIONAL LOCATION VEHICLE/EXCLUSIONS ADDED BY ENDORSEMENT SPECIAL PROVISIONS
"INSURANCE CARRIER WAIVES RIGHT OF SUBROGATION"
------------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL INSURED
CERTIFICATE HOLDER X INSURER LETTER: A CANCELLATION
------------------------------------------------------------------------------------------------------------------------------------
BANK ONE, NA SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE
CANCELLED BEFORE THE EXPIRATION DATE THEREOF, THE ISSUING
INSURER WILL ENDEAVOR TO MAX _10_ DAYS WRITTEN NOTICE TO THE
CERTIFICATE HOLDER NAMED TO THE LEFT, BUT FAILURE TO __ __
_______ IMPOSE NO OBLIGATION OR LIABILITY OF ANY KIND UPON
THE INSURER, ITS AGENTS OR REPRESENTATIVES.
------------------------------------------------------------
AUTHORIZED REPRESENTATIVE [ILLEGIBLE]
------------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ 26-8 (7/97) (C) ▇▇▇▇▇ CORPORATION 19??
SCHEDULE 4.24 - PIPELINE ASSETS
All of Grantor's right, title, and interest in, to, under pursuant to the
following rights-of-way, leases (other than the right to produce oil or gas
under any lease granting pipeline installation and use rights to Grantor),
and/or easements located in ▇▇▇▇▇▇▇ County, ▇▇▇▇▇▇▇ County, and ▇▇▇▇▇▇▇▇ County,
Tennessee:
[PHASE I]: That certain steel pipeline main, 6 inches and 8 inches in diameter,
as it has been installed, together with all associated permits, pipeline
rights-of-way, and pipeline installation rights under oil and gas leases (but
excluding any rights to produce oil and gas leases under any oil and gas lease
granting such pipeline installation rights), from a point at the Big Creek
Missionary Baptist Church at the intersection of Upper Caney Valley Road and Big
Creek Road in ▇▇▇▇▇▇▇ County, Tennessee, extending generally eastward north of
the Clinch River, boring under the Clinch River and proceeding generally
southward along an existing Tennessee Valley Authority powerline easement along
and within rights-of-way thereon, which are incorporated by reference for all
purposes but without limiting the generality of the foregoing description,
proceeding further into ▇▇▇▇▇▇▇ County, Tennessee, to a point of intersection of
the existing installed pipeline with the distribution system of ▇▇▇▇▇▇▇ County
Gas Utility District, a total distance described in this paragraph of
approximately 26.0 miles; together with
[PHASE II]: That certain steel pipeline main 8 inches and 12 inches in diameter
as it has been installed, together with a 4-inch supply line already
constructed, with all associated contracts, permits, agreements, and pipeline
rights-of-way, extending from a point of intersection of the existing installed
Phase I pipeline described above with the distribution system of ▇▇▇▇▇▇▇ County
Gas Utility District and proceeding from that point generally eastward along
rights-of- way along Highway 11-W, and proceeding further along and within the
right-of-way of Highway 11-W in accordance with the permit granted by Tennessee
Department of Transportation to Tengasco Pipeline Corporation dated April 11,
2000, and proceeding generally eastwards to a point located on the grounds of
▇▇▇▇▇▇▇ Army Ammunition Plant in accordance with the Tenant Use Agreement
between Royal Ordinance North America, Inc. (now BAE Systems Ordnance Systems,
Inc.) and Tengasco Pipeline Corporation dated June 16, 2000, which agreement is
incorporated by reference for all purposes, proceeding to a point on the grounds
of the ▇▇▇▇▇▇▇ Army Ammunition Plant known as ▇▇▇▇ Station, proceeding from that
point further both as a 4- inch supply line to ▇▇▇▇▇▇▇ Area A and ending at the
Area A boilers and as a 12-inch main line generally southward, off the grounds
of ▇▇▇▇▇▇▇ Army Ammunition Plant and across rights-of-way to and including
property owned by ▇▇▇▇▇▇▇ Chemical Company, and proceeding to the point of
interconnection with the existing natural gas system owned by ▇▇▇▇▇▇▇ Chemical
Company in Kingsport, ▇▇▇▇▇▇▇▇ County, Tennessee, a total distance described in
this paragraph of approximately 30.4 miles, together with compressors, valves,
stations and metering equipment installed to effect deliveries through the
pipeline.
SCHEDULE 4.25 HOLDINGS OF TENGASCO STOCK
TENGASCO, INC.
DIRECTORS
---------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 52,500
▇▇▇▇▇▇ ▇▇▇▇▇▇ 94,500
▇▇▇▇▇▇ ▇.▇. ▇▇▇▇, III 133,718
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. 52,500
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 42,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 246,898
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ -0-
M.E. ▇▇▇▇▇▇▇ 2,866,862
OFFICERS
--------
M.E. ▇▇▇▇▇▇▇ CEO 2,866,862 (Same As Above)
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. President 55,500
▇▇▇▇ ▇. ▇▇▇▇ Chief Financial Officer 38,587
▇▇▇▇▇ ▇▇▇▇▇▇ Secretary 2,100
▇▇▇▇▇▇ ▇▇▇▇▇ Treasurer 12,600
COMPLIANCE CERTIFICATE
I, the Chief Executive Officer of TENGASCO, INC. on behalf of itself
and TENNESSEE LAND & MINERAL CORPORATION and TENGASCO PIPELINE CORPORATION
(collectively the "Company"), pursuant to Section 5.05 of the Credit Agreement
dated as of November 8, 2001, by and among BANK ONE, NA ("Bank") and the Company
(the "Agreement") do hereby certify, as of the date hereof, that to my
knowledge:
1. No Event of Default (as defined in the Agreement) has occurred and is
continuing, and no Unmatured Event of Default (as defined in the
Agreement) has occurred and is continuing;
2. No material adverse change has occurred in the business, prospects,
financial condition, or the results of operations of the Company since
the date of the previous Financial Statements (as defined in the
Agreement) provided to Bank;
3. Each of the representations and warranties of the Company contained in
Article IV of the Agreement is true and correct in all respects;
Executed this 8th day of November, 2001.
TENGASCO, INC.
Attest:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ By: /s/ M. E. ▇▇▇▇▇▇▇
---------------- ---------------------
▇▇▇▇▇ ▇▇▇▇▇▇ M. E. ▇▇▇▇▇▇▇
Secretary Chief Executive Officer