EXHIBIT 4.1
SECOND
RESTATED LOAN AGREEMENT
BETWEEN
▇▇▇▇▇▇▇ OIL COMPANY,
AS BORROWER
AND
BANK ONE, TEXAS, N.A.,
AS BANK
NOVEMBER 12, 1999
TABLE OF CONTENTS
No.
1. Certain Defined Terms...............................................2
2. Term Commitment of the Bank........................................13
3. Note Evidencing Loan...............................................13
(a) Form of Note .............................................13
(b) Interest Rate.............................................13
(c) Payment of Interest.......................................13
(d) Payment of Principal......................................13
4. Interest Rates.....................................................13
(a) Options...................................................13
(b) Interest Rate Determination...............................14
(c) Conversion Option.........................................14
(d) Continuation Option.......................................15
(e) Recoupment................................................15
(f) Options Upon Default......................................15
5. Special Provisions Relating to Fixed Rate Loans....................16
(a) Unavailability of Funds or Inadequacy of Pricing..........16
(b) Reserve Requirements......................................16
(c) Taxes.....................................................16
(d) Change in Laws............................................17
(e) Option to Fund............................................17
(f) Indemnity.................................................18
(g) Payments Not at End of Interest Period....................18
(h) Maximum Number of Loans...................................18
6. Collateral Securities..............................................18
7. Borrowing Base.....................................................19
(a) Initial Borrowing Base....................................19
(b) Subsequent Determinations of Borrowing Base...............19
8. Prepayments........................................................20
(a) Voluntary Prepayments.....................................20
(b) Mandatory Prepayment For Borrowing Base Deficiency........20
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9. Representations and Warranties......................................21
(a) Creation and Existence.....................................21
(b) Power and Authority........................................21
(c) Binding Obligations........................................21
(d) No Legal Bar or Resultant Lien.............................21
(e) No Consent.................................................21
(f) Financial Condition........................................22
(g) Liabilities................................................22
(h) Litigation.................................................22
(i) Taxes; Governmental Charges................................22
(j) Titles, Etc................................................22
(k) Defaults...................................................22
(l) Casualties; Taking of Properties...........................23
(m) Use of Proceeds; Margin Stock..............................23
(n) Location of Business and Offices...........................23
(o) Compliance with the Law....................................23
(p) No Material Misstatements..................................23
(q) ERISA......................................................24
(r) Public Utility Holding Company Act.........................24
(s) Subsidiaries...............................................24
(t) Environmental Matters......................................24
(u) Liens......................................................24
10. Conditions of Lending...............................................24
11. Affirmative Covenants...............................................26
(a) Financial Statements and Reports...........................26
(b) Certificates of Compliance.................................27
(c) Accountants' Certificate...................................27
(d) Taxes and Other Liens......................................27
(e) Compliance with Laws.......................................28
(f) Further Assurances.........................................28
(g) Performance of Obligations.................................28
(h) Insurance..................................................28
(i) Accounts and Records.......................................29
(j) Right of Inspection........................................29
(k) Notice of Certain Events...................................29
(l) ERISA Information and Compliance...........................29
(m) Environmental Reports and Notices..........................30
(n) Compliance and Maintenance.................................30
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(o) Operation of Properties....................................30
(p) Compliance with Leases and Other Instruments...............31
(q) Certain Additional Assurances Regarding
Maintenance and Operations of Properties...................31
(r) Title Matters..............................................31
(s) Curative Matters...........................................31
(t) Change of Principal Place of Business......................32
12. Negative Covenants..................................................32
(a) Negative Pledge............................................32
(b) Current Ratio..............................................32
(c) Fixed Charge Coverage Ratio................................32
(d) Minimum Net Worth..........................................32
(e) Debt to Worth Ratio........................................32
(f) Consolidations and Mergers.................................32
(g) Debts, Guaranties and Other Obligations....................33
(h) Dividends..................................................33
(i) Loans and Advances.........................................33
(j) Nature of Business.........................................34
(k) Transactions with Affiliates...............................34
(l) Hedging Transaction........................................34
(m) Investment.................................................34
(n) Amendment to Articles of Incorporation or Bylaws...........35
(o) Sale of Assets.............................................35
13. Events of Default...................................................35
14. Exercise of Rights..................................................37
15. Notices.............................................................37
16. Expenses............................................................37
17. Indemnity...........................................................38
18. Governing Law.......................................................38
19. Invalid Provisions..................................................39
20. Maximum Interest Rate...............................................39
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21. Amendments..........................................................39
22. Multiple Counterparts...............................................39
23. Conflict............................................................40
24. Survival............................................................40
25. Parties Bound.......................................................40
26. Participations......................................................40
27. Other Agreements....................................................40
28. Financial Terms.....................................................40
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Exhibits:
Exhibit "A" - Term Note
Exhibit "B" - Conversion/Continuation Notice
Exhibit "C" - Certificate of Compliance
Schedules:
Schedule 1 - Liens
Schedule 2 - Financial Condition
Schedule 3 - Liabilities
Schedule 4 - Litigation
Schedule 5 - Subsidiaries
Schedule 6 - Environmental Matters
Schedule 7 - Title Matters
Schedule 8 - Curative Matters
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SECOND RESTATED LOAN AGREEMENT
THIS SECOND RESTATED LOAN AGREEMENT (hereinafter referred to as the
"Agreement") executed as of the 12th day of November, 1999, by and between
▇▇▇▇▇▇▇ Oil Company, a Delaware corporation ("Borrower") and BANK ONE, TEXAS,
N.A., a national banking association ("Bank").
W I T N E S S E T H:
WHEREAS, Borrower and First City, Texas-Dallas ("First City") entered
into a Credit Agreement dated as of October 1, 1990 (the "Loan Agreement") under
the terms of which Bank agreed to provide a term loan facility in the amount of
$10,000,000.00 to Borrower; and
WHEREAS, Borrower and First City entered into a First Amendment to Loan
Agreement, dated as of November 19, 1991 (the "First Amendment") amending the
Loan Agreement in certain respects as therein set forth; and
WHEREAS, on October 30, 1992, First City was taken over by the Federal
Deposit Insurance Corporation ("FDIC") in the FDIC's capacity as receiver; and
WHEREAS, the FDIC, as receiver of First City, assigned to New First
City, Texas-Dallas, N.A. ("New First City") all of the rights of First City in
and to the Loan Agreement, First Amendment, note and the liens, security
interest and other collateral securing same (the "First City Debt"); and
WHEREAS, as of February 1, 1993, New First City assigned all of its
right, title and interest in and to the First City Debt to Bank; and
WHEREAS, Borrower and Bank entered into a Second Amendment to Loan
Agreement, dated as of February 1, 1993 (the "Second Amendment") amending the
Loan Agreement in certain respects as therein set forth; and
WHEREAS, Borrower and Bank entered into a Third Amendment to Loan
Agreement, dated as of December 22, 1994 (the "Third Amendment") amending the
Loan Agreement in certain respects as therein set forth; and
WHEREAS, Borrower and Bank entered into a Fourth Amendment to Loan
Agreement, dated as of March 29, 1995 (the "Fourth Amendment") amending the Loan
Agreement in certain respects as therein set forth; and
WHEREAS, Borrower and Bank entered into a Restated Loan Agreement dated
as of December 20, 1995 (the "Restated Loan Agreement") which restated the Loan
Agreement in its entirety; and
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WHEREAS, Borrower and Bank have agreed to make certain amendments to
the Restated Loan Agreement and restate the same in its entirety.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. CERTAIN DEFINED TERMS. As used herein, the following terms shall
have the following meanings (all terms defined in this Section 1 or in other
provisions of this Agreement in the singular shall have the same meanings as
when used in the plural and vice versa):
"Affiliate" shall mean any Person which, directly or
indirectly, controls, is controlled by or is under common control with
the relevant Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall
mean a member of the board of directors, a partner or an officer of
such Person, or any other Person with possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of such Person, through the ownership (of
record, as trustee, or by proxy) of voting shares, partnership
interests or voting rights, through a management contract or otherwise.
Any Person owning or controlling directly or indirectly ten percent or
more of the voting shares, partnership interests or voting rights, or
other equity interest of another Person shall be deemed to be an
Affiliate of such Person.
"Agreement" shall mean this Agreement as the same may be
amended, modified or restated from time to time.
"Bank" shall mean Bank One, Texas, N.A.
"Base Rate" shall mean the fluctuating rate of interest per
annum established from time to time by Bank as its Base Rate (which
rate of interest may not be the lowest, best or most favorable rate of
interest which Agent may charge on loans to its customers). Each change
in the Base Rate shall become effective without prior notice to
Borrower automatically as of the opening of business on the date of
such change in the Base Rate.
"Base Rate Interest Period" shall mean with respect to any
Base Rate Loan, the period (i) beginning on the date the Base Rate Loan
is made or the conversion of a CD Loan to a Base Rate Loan or any
reborrowing of a Eurodollar Loan as a Base Rate Loan and (ii) ending on
the date on which Borrower converts such portion to a CD Loan or a
Eurodollar Loan.
"Base Rate Loans" shall mean any loan during any period which
bears interest based upon the Base Rate or which would bear interest
based upon the Base Rate if the Maximum Rate ceiling was not in effect
at that particular time.
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"Borrower" shall mean ▇▇▇▇▇▇▇ Oil Company, a Delaware
corporation.
"Borrowing Base" shall mean the value assigned by the Bank
from time to time to the Oil and Gas Properties pursuant to Section 7
hereof. Until the next determination of the Borrowing Base pursuant to
Section 7(b) hereof the Borrowing Base shall be $38,250,000.00.
"Business Day" shall mean the normal banking hours during any
day (other than Saturdays or Sundays) that banks are legally open for
business in Dallas, Texas.
"CD Interest Period" shall mean with respect to any CD Loan,
(i) initially, the period commencing on the date such CD Loan is made
and ending 30, 60, 90 or 180 days (or 365/366 days, if consented to by
Bank) thereafter as selected by Borrower in its irrevocable
Conversion/Continuation Notice as provided in Sections 4(c) and (d) and
(ii) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such CD Loan and in each case
ending, 30, 60, 90 or 180 days (or 365/366 days, if consented to by
Bank) thereafter, as selected by Borrower in its irrevocable
Continuation/Conversion Notice as provided in Sections 4(c) and (d);
provided, that if CD Interest Period would otherwise end on a day which
is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless the result of such extension would
be to carry such interest period into another calendar month, in which
event such Interest Period shall end on the immediately preceding
Business Day; and provided, further, there shall not at any time be
more than five (5) CD Loans, Base Rate Loans and Eurodollar Tranches,
in the aggregate outstanding. Any CD Interest period pertaining to a CD
Loan that begins on the last Business Day of a calendar month (or on a
day for which there is not numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the
last Business Day of a calendar month, and no CD Interest Period
selected shall end after the Term Maturity Date.
"CD Loans" shall mean those portions of the Loan bearing
interest at the CD Rate, or which would bear interest at such rate if
the Maximum Rate ceiling was not in effect at a particular time.
"CD Margin" shall mean one and seven-eighths percent (1.875%).
"CD Quoted Rate" shall mean with respect to each CD Interest
Period, the rate of interest per annum determined by Bank (in
accordance with its customary general practices) to be the arithmetic
simple average (rounded upwards, if necessary, to the next highest .01
of 1%) of the rates per annum offered to Bank at approximately 9:00
a.m. (Dallas time) on the first day of such CD Interest Period, by
three certificate of deposit dealers of recognized standing, for the
purchase at face value of a domestic certificate of deposit from Bank
in the amount equal or comparable to the principal amount of the
corresponding CD Loan as of such first day, and for a period of time
equal or comparable to the length of such CD Interest Period.
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"CD Rate" shall mean with respect to each CD Loan for each
Interest Period, a rate per annum equal to the following:
[ CD Quoted Rate ] + FDIC Percentage +CD Margin
[1.00 - CD Reserve Requirement]
"CD Reserve Requirement" shall mean on any day, that
percentage (expressed as a decimal) which is in effect on such day, as
provided by the Board of Governors of the Federal Reserve System (or
any successor governmental body) applied for determining the maximum
reserve requirements for Bank (including without limitation, basic,
supplemental, marginal and emergency reserves) under Regulation D
applicable to three-month nonpersonal time deposits in units of
$100,000 or more (issued by member banks of the Federal Reserve Bank of
Dallas having time deposits exceeding one billion dollars) rounded to
the next highest .01% of 1%. Each determination by Bank of the CD
Reserve Requirement shall, in the absence of manifest error, be
conclusive and binding.
"Chief Financial Officer" shall mean the chief financial
officer of Borrower unless stated otherwise.
"Chief Operating Officer" shall mean the chief operating
officer of Borrower unless stated otherwise.
"Collateral" shall mean all present and future tangible or
intangible property or rights in which Bank is to be granted a security
interest (whether perfected or enforceable or not), including without
limitation the items set forth in Section 6, together with any other
collateral now or hereafter securing payment of all or any part of the
Obligations.
"Commitment" shall mean $38,250,000.00.
"Companies" shall mean Borrower and all present and future
Subsidiaries of Borrower.
"Conversion/Continuation Notice" shall have the meaning stated
in Section 4(c).
"Current Assets" shall mean the total of the Borrower's
consolidated current assets determined in accordance with GAAP.
"Current Liabilities" shall mean the total of Borrower's
consolidated current obligations as determined in accordance with GAAP,
excluding therefrom current maturities due on the Funded Debt.
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"Default" shall mean any of the events specified in Section
13, regardless of whether there shall have occurred any passage of time
or giving of notice or both that would be necessary in order to
constitute such event an Event of Default.
"Dry Hole Expense" shall mean all costs incurred by Borrower
in drilling unsuccessful ▇▇▇▇▇ (dry holes) under the successful-efforts
costing method of accounting.
"EBITDA" shall mean for any period Net Income (excluding gains
from asset sales) plus the sum of (i) Interest Expense, plus (ii)
depreciation, depletion and amortization expense, plus (iii) non-cash
write-downs related to impairment of assets, plus (iv) Dry Hole
Expense.
"Effective Date" shall mean the date of this Agreement.
"Environmental Laws" shall mean the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended by the Super Fund Amendments and Reauthorization Act of 1986,
42 U.S.C.A.ss.9601, et seq., the Resource Conservation and Recovery
Act, as amended by the Hazardous Solid Waste Amendment of 1984, 42
U.S.C.A. ss.6901, et seq., the Clean Air Act, 42 U.S.C.A.ss.1251, et
seq., the Toxic Substances Control Act, 15 U.S.C.A.ss.2601, et seq.,
The Oil Pollution Act of 1990, 33 U.S.G.ss.2701, et seq., and all other
laws, statutes, codes, acts, ordinances, orders, judgments, decrees,
injunctions, rules, regulations, order and restrictions of any federal,
state, county, municipal and other governments, departments,
commissions, boards, agencies, courts, authorities, officials and
officers, domestic or foreign, relating to air pollution, water
pollution, noise control and/or the handling, discharge, disposal or
recovery of on-site or off-site asbestos or "hazardous substances" as
defined by 42 U.S.C.ss.9601, et seq., as amended, as each of the
foregoing may be amended from time to time.
"Environmental Liability" shall mean any claim, demand,
obligation, cause of action, order, violation, damage, injury,
judgment, penalty or fine, cost of enforcement, cost of remedial action
or any other costs or expense whatsoever, including reasonable
attorneys' fees and disbursements, resulting from the violation or
alleged violation of any Environmental Law or the imposition of any
Environmental Lien (as hereinafter defined) which could reasonably be
expected to individually or in the aggregate have a Material Adverse
Effect.
"Environmental Lien" shall mean a Lien in favor of any court,
governmental agency or instrumentality or any other Person (i) for any
Environmental Liability or (ii) for damages arising from or cost
incurred by such court or governmental agency or instrumentality or
other person in response to a release or threatened release of asbestos
or "hazardous substance" into the environment, the imposition of which
Lien could reasonably be expected to have a Material Adverse Effect.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
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"Eurodollar Business Day" shall mean a Business Day on which
dealings in U.S. Dollar deposits are carried on in the London interbank
market.
"Eurodollar Interest Period" shall mean with respect to any
Eurodollar Loan (i) initially, the period commencing on the date such
Eurodollar Loan is made and ending one (1), two (2), three (3) or six
(6) months (or twelve (12) months, if consented to by Bank) thereafter
as selected by the Borrower in its irrevocable Conversion/Continuation
Notice as provided in Sections 4(c) and (d), and (ii) thereafter each
period commencing on the day following the last day of the next
preceding Interest Period applicable to such Eurodollar Loan and ending
one (1), two (2), three (3) or six (6) months (or twelve (12) months,
if consented to by Bank) thereafter as selected by Borrower in its
irrevocable Conversion/Continuation Notice as provided in Sections 4(c)
and (d); provided, however, that (i) if any Eurodollar Interest Period
would otherwise expire on a day which is not a Eurodollar Business Day,
such Interest Period shall expire on the next succeeding Eurodollar
Business Day unless the result of such extension would be to extend
such Interest Period into the next calendar month, in which case such
Interest Period shall end on the immediately preceding Eurodollar
Business Day, (ii) if any Eurodollar Interest Period begins on the last
Eurodollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the
end of such Interest Period) such Interest Period shall end on the last
Eurodollar Business Day of a calendar month, and (iii) any Eurodollar
Interest Period which would otherwise expire after the Maturity Date
shall end on such Maturity Date. There shall not at any time be more
than five (5) Eurodollar Loans, CD Loans and Base Rate Loans, in the
aggregate outstanding.
"Eurodollar Loan" shall mean any loan during any period which
bears interest at the Eurodollar Rate, or which would bear interest at
such rate if the Maximum Rate ceiling was not in effect at a particular
time.
"Eurodollar Margin" shall mean one and five-eighths percent
(1.625%).
"Eurodollar Rate" shall mean with respect to each Eurodollar
Interest Period, the rate of interest per annum at which deposits in
immediately available and freely transferable funds in U.S. Dollars are
offered to the Bank (at approximately 10:00 a.m., Dallas, Texas time
three Eurodollar Business Days prior to the first day of each
Eurodollar Interest Period) in the London interbank market for delivery
on the first day of such Eurodollar Interest Period in an amount equal
to or comparable to the principal amount of the Eurodollar Loan to
which such Eurodollar Interest Period relates. Each determination of
the Eurodollar Rate by the Bank shall, in the absence of error, be
conclusive and binding.
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"Facility Fee" shall mean a facility fee due from Borrower to
Bank on the Effective Date in the amount of $120,000.
"FDIC Percentage" shall mean, on any date, the net assessment
rate (expressed as a percentage rounded to the next highest point .01
of 1%) which is in effect on such day (under the regulations of the
Federal Deposit Insurance Corporation or any successor) for determining
the assessments paid by Bank to the Federal Deposit Insurance
Corporation (or any successor) for insuring time deposits made in
dollars at Bank's principal offices in Dallas, Texas.
"Financial Statements" shall mean balance sheets, income
statements, statements of cash flow and appropriate footnotes and
schedules, prepared in accordance with GAAP.
"Fiscal Quarter" and "Fiscal Year" shall mean the fiscal
quarter and fiscal year of Borrower.
"Fixed Charge Coverage Ratio" shall mean the ratio of EBITDA
for the period being measured to the sum of (i) Interest Expense on
Funded Debt for the quarter being measured, plus (ii) principal
payments due on Funded Debt for the period being measured, plus (iii)
cash capital distributions to shareholders for such quarter, plus (iv)
capital lease expenses for such quarter, plus (v) income taxes paid
during such quarter.
"Fixed Rate Loan" shall mean a Eurodollar Loan or a CD Loan or
both.
"Funded Debt" shall mean, as of any date, the sum of the
following (without duplication): (i) the aggregate of all Indebtedness
for borrowed money of the Companies as of such date, other than Current
Liabilities, (ii) all Indebtedness which would be classified as "funded
indebtedness" or "long-term indebtedness" (or other similar
classification) on a consolidated balance sheet of the Companies
prepared as of such date in accordance with GAAP, (iii) all
Indebtedness, whether secured or unsecured, of the Companies, having a
final maturity (or which is renewable or extendable at the option of
the obligor for a period ending) more than one year after the date of
creation thereof, notwithstanding the fact that payments in respect
thereof (whether installment, serial, maturity or sinking fund
payments, or otherwise) are required to be made by the obligor less
than one year after the date of the creation, (iv) the aggregate of all
Indebtedness of the Companies outstanding under any revolving credit or
similar agreement providing for borrowings (and renewals and extensions
thereof) over a period of more than one year, notwithstanding the fact
that any such Indebtedness is created within one year of the expiration
of such agreement and (v) the present value (discounted at the implicit
rate, if known, or 10% per annum otherwise) of all obligations in
respect of Capital Leases of the Companies.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
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"Indebtedness" shall mean, with respect to any Person, all
indebtedness, obligations and liabilities of such Person, including,
without limitation and without duplication (i) all liabilities, except
deferred taxes, which would be reflected on a balance sheet of such
Person, prepared in accordance with GAAP; (ii) all obligations of such
Person in respect of any guaranty or letter of credit; (iii) all
obligations of such Person in respect of any capital lease; and (iv)
all obligations, indebtedness and liabilities secured by any Lien on
any property or assets of any Person; except that, "Indebtedness" shall
not include trade payables incurred in the ordinary course of business
for the purchase of goods or services.
"Interest Expense" shall mean for any period, the consolidated
interest charges paid or accrued by the Companies during such period
(including imputed interest on capital lease obligations and on
Indebtedness of the Companies).
"Interest Payment Date" shall mean the earlier of (i) the last
day of each Interest Period or, (ii) the first day of each calendar
quarter.
"Interest Period" shall mean any Base Rate Interest Period, CD
Interest Period or Eurodollar Interest Period.
"Lien" shall mean any lien, mortgage, deed of trust, pledge,
security interest, assignment, encumbrance, Environmental Lien or other
lien (statutory or otherwise) of every kind and character.
"Loans" shall mean the Loan made to Borrower pursuant to
Section 2 hereof.
"Loan Documents" shall mean this Agreement, the Note, the
Security Instruments and all other documents (and any amendments or
supplements thereto or modifications or restatements thereof) executed
in connection with the transaction described in this Agreement.
"Material Adverse Effect " shall mean any circumstance or
event which (i) could have a material adverse effect on the assets or
properties, liabilities, financial condition, business, operations,
affairs or circumstances of the Borrower from the facts represented or
warranted in this Agreement or any other Security Instrument, or (ii)
could materially impair the ability of the Borrower to carry out its
business as of the date of this Agreement or as proposed at the date of
this Agreement to be conducted or to meet its obligations under the
Note, this Agreement or the other Loan Documents on a timely basis or
(iii) is material and adverse to the financial condition or business
operations of Borrower, or (iv) may result in or cause a Default or
Event of Default.
"Maximum Rate" shall mean at any particular time in question,
the maximum non-usurious rate of interest which under applicable law
may then be charged on the Note. If such Maximum Rate changes after the
date hereof, the Maximum Rate shall be automatically increased or
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decreased, as the case may be, without notice to Borrower from time to
time as the effective date of each change in such Maximum Rate.
"Net Income" shall mean Borrower's consolidated Net Income
before any income tax, calculated in accordance with GAAP.
"Net Worth" shall mean, as of any date, the total
shareholders' equity (including common stock and preferred stock other
than mandatorily redeemable stock) at stated value, additional paid-in
capital and retained earnings (after deducting treasury stock) which
would appear on a consolidated balance sheet of the Companies prepared
as of such date in accordance with GAAP.
"Non-Recourse Debt" shall mean any Indebtedness of Borrower
created after the date hereof, provided that (a) such Indebtedness has
been incurred by borrowing or constitutes an obligation to pay the
deferred purchase price of property; (b) such Indebtedness is secured
only by the assets so purchased; and (c) the creditor to whom such
Indebtedness is owed has no recourse against Borrower, other than
foreclosure of the Liens securing such Indebtedness, to satisfy claims
of such creditor with respect to Borrower, such Indebtedness, the
assets or properties securing such Indebtedness, or any other features
of the transactions in which such Indebtedness was incurred.
"Note" shall mean the $38,250,000.00 Note described in Section
3 hereof, together with all renewals and extensions thereof or any part
thereof.
"Obligations" shall mean all present and future indebtedness,
obligations and liabilities of Borrower to Bank, and all renewals and
extensions thereof, or any part thereof, arising pursuant to this
Agreement or any other Loan Document, or represented by the Note, and
all interest accruing thereon (including, without limitation), interest
which, but for the filing of a petition in bankruptcy with respect to
Borrower, would accrue on such Obligations), and attorneys' fees
incurred in the enforcement or collection thereof, regardless of
whether such indebtedness, obligations and liabilities are direct,
indirect, fixed, contingent, joint, several or joint and several.
"Oil and Gas Properties" shall mean any and all oil, gas and
mineral properties and interests in which Borrower has granted and
hereafter grants to Bank first perfected liens.
"Permitted Dividends and Redemptions" shall mean: (i)
dividends from any Subsidiary of any Company (other than Borrower) to
Borrower or such Company, (ii) dividends from Borrower to holders of
equity securities of Borrower payable solely in common stock or
preferred stock (without mandatory redemption features) of Borrower,
and (iii) redemptions of the common stock of Borrower in an amount not
to exceed $3,000,000.00 in the aggregate for all such Redemptions made
from and after December 22, 1994.
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"Permitted Liens" shall mean (i) royalties, overriding
royalties, reversionary interests, production payments and similar
burdens; (ii) sales contracts or other arrangements for the sale of
production of oil, gas or associated liquid or gaseous hydrocarbons
which would not (when considered cumulatively with the matters
discussed in clause (i) above) deprive Borrower of any material right
in respect of Borrower's assets or properties (except for rights
customarily granted with respect to such contracts and arrangements);
(iii) statutory Liens for taxes or other assessments that are not yet
delinquent (or that, if delinquent, are being contested in good faith
by appropriate proceedings, levy and execution thereon having been
stayed and continue to be stayed and for which Borrower has set aside
on its books adequate reserves in accordance with GAAP); (iv)
easements, rights of way, servitudes, permits, surface leases and other
rights in respect to surface operations, pipelines, grazing, logging,
canals, ditches, reservoirs or the like, conditions, covenants and
other restrictions, and easements of streets, alleys, highways,
pipelines, telephone lines, power lines, railways and other easements
and rights of way on, over or in respect of Borrower's assets or
properties and that do not individually or in the aggregate, cause a
Material Adverse Effect; (v) materialmen's, mechanic's, repairman's,
employee's, warehousemen's, landlord's, carrier's, pipeline's,
contractor's, sub-contractor's, operator's, non-operator's (arising
under operating or joint operating agreements), and other Liens
(including any financing statements filed in respect thereof)
incidental to obligations incurred by Borrower in connection with the
construction, maintenance, development, transportation, storage or
operation of Borrower's assets or properties to the extent not
delinquent (or which, if delinquent, are being contested in good faith
by appropriate proceedings and for which Borrower has set aside on its
books adequate reserves in accordance with GAAP); (vi) all contracts,
agreements and instruments, and all defects and irregularities and
other matters affecting Borrower's assets and properties which were in
existence at the time Borrower's assets and properties were originally
acquired by Borrower and all routine operational agreements entered
into in the ordinary course of business, which contracts, agreements,
instruments, defects, irregularities and other matters and routine
operational agreements are not such as to, individually or in the
aggregate, interfere materially with the operation, value or use of
Borrower's assets and properties, considered in the aggregate; (vii)
liens in connection with workmen's compensation, unemployment insurance
or other social security, old age pension or public liability
obligations; (viii) legal or equitable encumbrances deemed to exist by
reason of the existence of any litigation or other legal proceeding or
arising out of a judgment or award with respect to which an appeal is
being prosecuted in good faith and levy and execution thereon have been
stayed and continue to be stayed; (ix) rights reserved to or vested in
any municipality, governmental, statutory or other public authority to
control or regulate Borrower's assets and properties in any manner, and
all applicable laws, rules and orders from any governmental authority;
(x) landlord's liens; (xi) Liens created by or pursuant to the Security
Instruments; and (xii) Liens existing at the date of this Agreement
which have been disclosed to Bank in the Borrower's September 30, 1999
Financial Statements or identified in Schedule "1" hereto.
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"Permitted Purchase Money Indebtedness" shall mean (i)
purchase money Indebtedness of Borrower created after the date hereof
secured by a Permitted Purchase Money Lien, and (ii) purchase money
indebtedness existing on the date hereof described on Schedule "1".
"Permitted Purchase Money Lien" shall mean any purchase money
Lien on real estate, motor vehicles, equipment and other fixed assets
acquired or built by Borrower (a "Purchase Money Lien"); provided,
however, that: (i) the transaction in which any Purchase Money Lien is
proposed to be created is not then prohibited by this Agreement; (ii)
any Purchase Money Lien shall attach only to the asset acquired or
built in such transaction and shall not extend to or cover any other
assets of Borrower; (iii) the Indebtedness secured or covered by any
Purchase Money Lien shall not exceed the cost to Borrower of the asset
acquired or built; and (iv) such Indebtedness is either (x) incurred
within twelve (12) months following the date of the acquisition or
completion of the property or asset so acquired or (y) incurred for the
purpose of refinancing or refunding of any existing Indebtedness
secured by a Permitted Purchase Money Lien provided the unpaid balance
is not increased.
"Person" shall mean an individual, a corporation, a
partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an
agency or instrumentality thereof.
"Plan" shall mean any plan subject to Title IV of ERISA and
maintained by Borrower, or any such plan to which Borrower is required
to contribute on behalf of its employees.
"Principal Payment Date" shall mean the first day of each
January, April, July and October commencing April 1, 2000.
"Rate Management Transaction" means any transaction (including
an agreement with respect thereto) now existing or hereafter entered
into between Borrowers and Agent or the Lenders which is a rate swap,
basis swap, forward rate transaction, commodity swap, commodity option,
equity or equity index swap, equity or equity index option, bond
option, interest rate option, forward exchange transaction, cap
transaction, floor transaction, collar transaction, forward
transaction, currency swap transaction, cross-currency rate swap
transaction, currency option or any other similar transaction
(including any option with respect to any of these transactions) or any
combination thereof, whether linked to one or more interest rates,
foreign currencies, commodity prices, equity prices or other financial
measures.
"Reborrowing" shall mean the reborrowing of any CD Loan or
Eurodollar Loan upon the expiration of the Interest Period with respect
to each such Loan.
"Redemptions" shall mean, in respect of any corporation, any
and all funds, cash or other payments made in respect of the
redemption, repurchase or acquisition of any class of capital stock
- 11 -
of such corporation, unless such stock is redeemed or acquired through
the exchange of such stock with stock of the same class.
"Security Instruments" shall mean, collectively, this
Agreement, all Deeds of Trust, Mortgages, Security Agreements,
Assignments of Production and Financing Statements, and other
collateral documents covering Borrower's Oil and Gas Properties and
related personal property and interests and the proceeds of the
foregoing, all such documents to be in form and substance satisfactory
to Bank.
"Subsidiary" shall mean any corporation or other entity of
which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly
owned by Borrower or another subsidiary.
"Temporary Cash Investment" shall mean any investment in (i)
direct obligations of the United States or any agency thereof, or
obligations fully guaranteed by the United States or any agency thereof
(including indirect investments in such obligations through repurchase
agreements with commercial banks or nationally recognized investment
banks), provided that such obligations mature within ninety (90) days
of the date of acquisition thereof, (ii) commercial paper rate in the
highest grade by two or more national credit rating agencies and
maturing not more than ninety (90) days from the date of acquisition
thereof, (iii) time deposits with, and certificates of deposit and
bank's acceptances issued by, Bank or any United States commercial bank
having capital, surplus and undivided profits aggregating at least
$250,000,000, (iv) money market funds acceptable to Bank in its sole
and absolute discretion, and (v) commercial paper maturing not more
than ninety (90) days from the acquisition thereof issued by Bank.
"Term Loan" shall mean the loan described in Section 2 hereof.
"Term Maturity Date" shall mean January 1, 2005.
"Total Liabilities" shall mean Funded Debt, plus Current
Liabilities, minus Permitted Purchase Money Indebtedness minus,
Non-Recourse Debt minus deferred taxes plus all other liabilities which
would be reflected in a balance sheet prepared in accordance with GAAP,
of Borrower.
"Unscheduled Redeterminations" shall mean a redetermination of
the Borrowing Base made at any time other than on the dates set for the
regular semi-annual redetermination of the Borrowing Base which are
made (A) at the reasonable request of Borrower, (B) at any time it
appears to the Bank, in the exercise of their reasonable discretion,
that either (i) there has been a decrease in the value of the Oil and
Gas Properties, or (ii) an event has occurred which is reasonably
expected to have a Material Adverse Effect.
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2. TERM COMMITMENT OF THE BANK. As of the Effective Date, there will be
outstanding on the existing Term Loan the principal amount of $6,250,000.00. On
the terms and conditions hereinafter set forth, the Bank agrees on the Effective
Date to advance an additional $32,000,000 on the Term Loan and to renew and
extend the outstanding balance into a new $38,250,000 Term Loan.
3. NOTE EVIDENCING LOAN. The loan described above in Section 2 shall be
evidenced by a promissory note of Borrower as follows:
(a) Form of Note - The Term Loan shall be evidenced by a Note
in the face amount of $38,250,000.00, and shall be in the form of
Exhibit "A" hereto with appropriate insertions.
(b) Interest Rate - The unpaid principal balance of the Note
shall bear interest from time to time as set forth in Section 4 hereof.
(c) Payment of Interest - Interest on the Note shall be
payable on each Interest Payment Date.
(d) Payment of Principal - The unpaid principal balance of the
Note shall be payable in nineteen (19) equal consecutive quarterly
installments of $1,912,500 each due and payable on each Principal
Payment Date, commencing April 1, 2000 and continuing regularly
thereafter, with one (1) final principal installment due and payable on
the Term Maturity Date in an amount equal to the entire remaining
principal balance plus all accrued but unpaid interest.
4. INTEREST RATES.
(a) Options.
(i) Base Rate Loans. Borrower agrees to pay interest
on the Note calculated on the basis of the actual days elapsed
in a year consisting of 365 or, if appropriate, 366 days with
respect to the unpaid principal amount of each Base Rate Loan
from the date the proceeds thereof are made available to
Borrower until maturity (whether by acceleration or
otherwise), at a varying rate per annum equal to the lesser of
(i) the Maximum Rate (defined herein), or (ii) the sum of the
Base Rate. Subject to the provisions of this Agreement as to
prepayment, the principal of the Note representing Base Rate
Loans shall be payable as specified in Section 3(d) hereof and
the interest in respect of each Base Rate Loan shall be
payable on each Interest Payment Date. Past due principal and,
to the extent permitted by law, past due interest in respect
to each Base Rate Loan, shall bear interest, payable on
demand, at a rate per annum equal to the Maximum Rate.
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(ii) Eurodollar Loans. Borrower agrees to pay
interest calculated on the basis of a year consisting of 360
days with respect to the unpaid principal amount of each
Eurodollar Loan from the date the proceeds thereof are made
available to Borrower until maturity (whether by acceleration
or otherwise), at a varying rate per annum equal to the lesser
of (i) the Maximum Rate, or (ii) the Eurodollar Rate plus the
Eurodollar Margin. Subject to the provisions of this Agreement
with respect to prepayment, the principal of the Note shall be
payable as specified in Section 3(d) hereof and the interest
with respect to each Eurodollar Loan shall be payable on each
Interest Payment Date. Past due principal and, to the extent
permitted by law, past due interest shall bear interest,
payable on demand, at a rate per annum equal to the Maximum
Rate. If Bank shall not have received timely notice of a
designation of such Interest Period as herein provided,
Borrower shall be deemed to have elected to convert all
maturing Eurodollar Loans to Base Rate Loans.
(iii) CD Loans. Borrower agrees to pay interest
calculated on the basis of actual days elapsed in a year
consisting of 360 days with respect to the unpaid principal
amount of each CD Loan from the day the proceeds thereof are
made available to Borrower until maturity (whether by
acceleration or otherwise), at a rate per annum equal to the
lesser of (i) the Maximum Rate, or (ii) the CD Rate. Interest
with respect to each CD Loan shall be payable on the
expiration date of each Interest Period applicable to such CD
Loan.
(b) Interest Rate Determination. The Bank shall determine each
interest rate applicable to the Term Loan hereunder. The Bank shall
give prompt notice to the Borrower of each rate of interest so
determined and its determination thereof shall be conclusive absent
error.
(c) Conversion Option. Borrower may elect from time to time
(i) to convert all or any part of its Eurodollar Loans to Base Rate
Loans or CD Loans by giving Bank irrevocable notice of such election at
least two (2) Eurodollar Business Days prior to 10:00 a.m. (Dallas,
Texas time) in the form of Exhibit "B" (the "Conversion/Continuation
Notice") to be received on the conversion date and such conversion
shall be made on the requested conversion date, provided that any such
conversion of Eurodollar Loan shall only be made on the last day of the
Eurodollar Interest Period with respect thereof, (ii) to convert all or
any part of its Base Rate Loans to Eurodollar Loans or CD Loans by
giving the Bank an irrevocable Conversion/Continuation Notice at least
three (3) Eurodollar Business Days (in the case of a conversion to
Eurodollar Loans) or two (2) Business Days (in the case of a conversion
to CD Loans) prior to the proposed conversion, specifying the
Eurodollar Interest Period or the CD Interest Period, as the case may
be therefore, and such conversion shall be made on the requested
conversion date or, if such requested conversion date is not a
Eurodollar Business Day or a Business Day, as the case may be, on the
next succeeding Eurodollar Business Day or Business Day, as the case
may be, and
- 14 -
(iii) to convert all or any part of its CD Loans to Eurodollar Loans or
Base Rate Loans by giving the Bank an irrevocable
Conversion/Continuation Notice at least three (3) Eurodollar Business
Days (in the case of conversion to Eurodollar Loans) or two (2)
Business Days (in the case of conversion to Base Rate Loans) prior to
the proposed conversion, specifying the Eurodollar Interest Period, if
any therefore, and such conversion shall be made on the requested
conversion date or, if such requested conversion date is not a
Eurodollar Business Day or a Business Day, as the case may be, on the
next succeeding Eurodollar Business Day, as the case may be. Each
change in an Interest Option made pursuant to this Section 4(c) shall
be deemed a reborrowing (notwithstanding that the unpaid principal
amount of the Term Loan is not thereby changed) of a CD Loan, a
Eurodollar Loan or a Base Rate Loan into which such change was made on
the date of such change. If no Conversion/Continuation Notice is given
with respect to all or any portion of a Loan, Borrower shall be deemed
to have elected to reborrow such portion of the Loan as a Base Rate
Loan.
(d) Continuation Option. Prior to the termination of each CD
Interest Period or Eurodollar Interest Period, Borrower may give the
Bank a Conversion/Continuation Notice electing to continue all or part
of the loan related thereto as the same type of loan upon the
expiration of such CD Interest Period or Eurodollar Interest Period.
Such Conversion/Continuation Notice shall be given to Bank at least
three (3) Eurodollar Business Days prior to the termination of such
Eurodollar Interest Period and at least two (2) Business Days prior to
the termination of such CD Interest Period and shall specify the length
of the succeeding CD Interest Period or Eurodollar Interest Period, as
the case may be (subject to the provisions of the definitions of such
term), selected by Borrower with respect to such portion. If no
Conversion/Continuation Notice is given with respect to all or any
portion of a Loan, Borrower shall be deemed to have elected to reborrow
such portion of the Loan as a Base Rate Loan.
(e) Recoupment. If at any time the applicable rate of interest
selected pursuant to Sections 4(a)(i), 4(a)(ii) or 4(a)(iii) above
shall exceed the Maximum Rate, thereby causing the interest on the Note
to be limited to the Maximum Rate, then any subsequent reduction in the
interest rate so selected or subsequently selected shall not reduce the
rate of interest on the Note below the Maximum Rate until the total
amount of interest accrued on the Note equals the amount of interest
which would have accrued on the Note if the rate or rates selected
pursuant to Sections 4(a)(i), (ii) or (iii), as the case may be, had at
all times been in effect.
(f) Options Upon Default. Notwithstanding anything in this
Section 4 to the contrary, no CD Loan or Eurodollar Loan may be
continued as such when any Default or Event of Default has occurred,
but each such CD Loan or Eurodollar Loan shall be automatically
converted to a Base Rate Loan on the last day of each Interest Period
applicable to such CD Loan or Eurodollar Loan.
- 15 -
5. SPECIAL PROVISIONS RELATING TO FIXED RATE LOANS.
(a) Unavailability of Funds or Inadequacy of Pricing. In the
event that, in connection with any proposed Fixed Rate Loan, Bank (i)
shall have determined that either (A) that U.S. Dollar deposits of the
relevant amount and for the relevant Eurodollar Interest Period for
Eurodollar Loans are not available to Bank in the London interbank
market, or (B) that no timely quotation of the applicable rate offered
to Bank for Certificates of Deposit for the CD Interest Period is
available; or (ii) in good faith determines that the Eurodollar
Interest Rate or the CD Interest Rate will not adequately reflect the
cost to the Bank of maintaining or funding the Fixed Rate Loans for
such Interest Period, the obligations of the Bank to make the
Eurodollar Loans or CD Loans, as the case may be, shall be suspended
until such time such Bank in its sole discretion reasonably exercised
determines that the event resulting in such suspension has ceased to
exist. If Bank shall make such determination it shall promptly notify
Borrower in writing, and Borrower shall either repay the outstanding
Eurodollar Loans or CD Loans, as the case may be, owed to Bank, without
penalty, on the last day of the current Interest Period or convert the
same to Base Rate or CD Loans in the case of Eurodollar Loans or Base
Rate or Eurodollar Loans in the case of CD Loans on the last day of the
then current Interest Period for such Fixed Rate Loan.
(b) Reserve Requirements. In the event of any change in any
applicable law, treaty or regulation or in the interpretation or
administration thereof, or in the event any central bank or other
fiscal monetary or other authority having jurisdiction over the Bank or
the loans contemplated by this Agreement shall impose, modify or deem
applicable any reserve requirement of the Board of Governors of the
Federal Reserve System on any Fixed Rate Loan or loans, or any other
reserve, special deposit, or some requirements against assets to,
deposits with or for the account of, or credit extended by, the Bank or
shall impose on the Bank or the London interbank market, as the case
may be, any other condition affecting this Agreement or the Fixed Rate
Loans and the result of any of the foregoing is to increase the cost to
the Bank in making or maintaining its Fixed Rate Loans or to reduce any
amount (or the effective return on any amount) received by the Bank
hereunder, then Borrower shall pay to the Bank upon demand of the Bank
as additional interest on the Note evidencing the Fixed Rate Loans such
additional amount or amounts as will reimburse the Bank for such
additional cost or such reduction. The Bank shall give notice to
Borrower upon becoming aware of any such change or imposition which may
result in any such increase or reduction. A certificate of Bank setting
forth the basis for the determination of such amount necessary to
compensate Bank as aforesaid shall be delivered to Borrower and shall
be conclusive as to such determination and such amount, absent error.
(c) Taxes. Both principal and interest on the Note evidencing
the Fixed Rate Loans are payable without withholding or deduction for
or on account of any taxes. If any taxes are levied or imposed on or
with respect to the Note evidencing the Fixed Rate Loans or on any
payment on the Note evidencing the Fixed Rate Loans made to the Bank,
then, and in any such
- 16 -
event, Borrower shall pay to the Bank upon demand of the Bank such
additional amounts as may be necessary so that every net payment of
principal and interest on the Note evidencing the Fixed Rate Loans,
after withholding or deduction for or on account of any such taxes,
will not be less than any amount provided for herein. In addition, if
at any time when the Fixed Rate Loans are outstanding any laws enacted
or promulgated, or any court of law or governmental agency interprets
or administers any law, which, in any such case, materially changes the
basis of taxation of payments to the Bank of principal of or interest
on the Note evidencing the Fixed Rate Loans by reason of subjecting
such payments to double taxation or otherwise (except through an
increase in the rate of tax on the overall net income of Bank) then
Borrower will pay the amount of loss to the extent that such loss is
caused by such a change. The Bank shall give notice to Borrower upon
becoming aware of the amount of any loss incurred by the Bank through
enactment or promulgation of any such law which materially changes the
basis of taxation of payments to the Bank. The Bank shall also give
notice on becoming aware of any such enactment or promulgation which
may result in such payments becoming subject to double taxation or
otherwise. A certificate of any Bank setting forth the basis for the
determination of such loss and the computation of such amounts shall be
delivered to Borrower and shall be conclusive of such determination and
such amount, absent error.
(d) Change in Laws. If at any time any new law or any change
in existing laws or in the interpretation of any new or existing laws
shall make it unlawful for the Bank to maintain or fund any Fixed Rate
Loans hereunder, then the Bank shall promptly notify Borrower in
writing and Borrower shall either repay the outstanding Eurodollar or
CD Loans, as the case may be, owed to the Bank, without penalty, on the
last day of the current Interest Periods (or, if the Bank may not
lawfully continue to maintain and fund such Eurodollar or CD Loans,
immediately), or Borrower may convert such Eurodollar or CD Loans at
such appropriate time to Base Rate Loans.
(e) Option to Fund. The Bank shall have the option if the
Borrower elect a Fixed Rate Loan, to purchase one or more deposits in
order to fund or maintain its funding of the principal balance of the
Note to which such Fixed Rate Loan is applicable during the Interest
Period in question; it being understood that the provisions of this
Agreement relating to such funding are included only for the purpose of
determining the rate of interest to be paid under such Fixed Rate Loan
and any amounts owing hereunder and under the Note. The Bank shall be
entitled to fund and maintain its funding of all or any part of that
portion of the principal balance of the Note in any manner it sees fit,
but all such determinations hereunder shall be made as if the Bank have
actually funded and maintained that portion of the principal balance of
the Note to which a Fixed Rate Loan is applicable during the applicable
Interest Period through the purchase of deposits in an amount equal to
the principal balance of the Note to which such Fixed Rate Loan is
applicable and having a maturity corresponding to such Interest Period.
The Bank may fund the outstanding principal balance of the Note which
is to be subject to any Fixed Rate Loan from any branch or office of
the Bank as the Bank may designate from time to time.
- 17 -
(f) Indemnity. Borrower shall indemnify and hold harmless the
Bank against all reasonable and necessary out-of-pocket costs and
expenses which the Bank may sustain (i) as a consequence of any default
by Borrower under this Agreement, or (ii) as a result of the making of
any loan or loans as a Fixed Rate Loan.
(g) Payments Not at End of Interest Period. If the Borrower
make any payment of principal with respect to any Fixed Rate Loan on
any day other than the last day of the Interest Period applicable to
such Fixed Rate Loan, then Borrower shall reimburse the Bank on demand
for any loss, cost or expense incurred by the Bank as a result of the
timing of such payment or in redepositing such principal amount,
including the sum of (i) the cost of funds to the Bank in respect of
such principal amount so paid, for the remainder of the Interest Period
applicable to such sum, reduced, if the Bank is able to redeposit such
principal amount so paid for the balance of the Interest Period, by the
interest earned by Bank as a result of so redepositing such principal
amount, plus (ii) any expense or penalty incurred by the Bank in
redepositing such principal amount. A certificate of Bank setting forth
the basis for the determination of the amount owed by Borrower pursuant
to this Section 5(g) shall be delivered to the Borrower and shall be
conclusive in the absence of manifest error.
(h) Maximum Number of Loans. The total number of Loans which
may be outstanding at any time hereunder shall never exceed five (5),
whether such Loans are Base Rate Loans, CD Loans, Eurodollar Loans or a
combination thereof.
6. COLLATERAL SECURITIES. To secure the performance by Borrower of its
obligations hereunder, and under the Note and Security Instruments, whether now
or hereafter incurred, matured or unmatured, direct or contingent, joint or
several, or joint and several, including extensions, modifications, renewals and
increases thereof, and substitutions therefore, Borrower has previously granted
and assigned to Bank a first and prior security interest and Lien on certain of
its Oil and Gas Properties, and on certain related equipment, oil and gas
inventory and proceeds of the foregoing. To further secure the performance by
Borrower of the aforesaid obligations, Borrower shall contemporaneously with or
prior to the execution of this Agreement, grant and assign to the Bank a first
and prior security interest and Lien on certain additional Oil and Gas
Properties and on certain additional related equipment, oil and gas inventory
and proceeds of the foregoing. Obligations arising from agreements arising from
Rate Management Transactions between Borrower and the Bank or any Affiliate of
the Bank providing for the hedging, forward sale or swap of crude oil and
natural gas or interest rate protection shall be secured by the Collateral (as
hereinafter defined) on a pari passu basis with the indebtedness and obligations
of the Borrower under the Loan Documents. All Oil and Gas Properties and other
collateral in which Borrower has heretofore granted or hereafter grants to the
Bank a first and prior Lien (to the satisfaction of the Bank) in accordance with
this Section 6, as such properties and interests are from time to time
constituted, are hereinafter collectively called the "Collateral."
- 18 -
The granting and assigning of such security interests and Liens by
Borrower shall be pursuant to Security Instruments in form and substance
reasonably satisfactory to the Bank. Concurrently with the delivery of each of
the Security Instruments, Borrower shall furnish to the Bank mortgage and title
opinions and other title information satisfactory to Bank with respect to the
title and Lien status of Borrower's interests in the Oil and Gas Properties
covered by the Security Instruments as Bank shall have designated. Borrower will
cause to be executed and delivered to the Bank, in the future, additional
Security Instruments if the Bank reasonably deems such are necessary to insure
perfection or maintenance of Bank's security interests and Liens in the Oil and
Gas Properties or any part thereof.
7. BORROWING BASE.
(a) Initial Borrowing Base. During the period from the date
hereof to the first Determination Date (as hereinafter defined), the
Borrowing Base shall be $38,250,000.00.
(b) Subsequent Determinations of Borrowing Base. Subsequent
determinations of the Borrowing Base shall be made by the Bank at least
semi-annually on May 1 and November 1 of each year beginning May 1,
2000 or as Unscheduled Redeterminations. The Borrower shall furnish to
the Bank as soon as possible but in any event no later than April 1 of
each year, beginning April 1, 2000, or within thirty (30) days after
either (i) receipt of notice from Bank that it requires an Unscheduled
Redetermination, or (ii) the Borrower give notice to Bank of their
desire to have an Unscheduled Redetermination performed, with an
engineering report in form and substance satisfactory to Bank prepared
by Borrower and audited by a petroleum engineering firm acceptable to
Bank, valuing the Oil and Gas Properties utilizing economic and pricing
parameters used by Bank as established from time to time, together with
such other information, report and data concerning the value of the Oil
and Gas Properties as Bank shall deem reasonably necessary to determine
the value of such Oil and Gas Properties. Bank shall by notice to the
Borrower no later than May 1 and November 1 of each year, or within a
reasonable time thereafter (herein called the "Determination Date"),
designate a new Borrowing Base for the period beginning on such
Determination Date and continuing until, but not including, the next
Determination Date. If an Unscheduled Redetermination is made by the
Bank, the Bank shall notify the Borrower within a reasonable time after
receipt of all requested information of the new Borrowing Base, and
such new Borrowing Base shall continue until the next Determination
Date. If the Borrower do not furnish all such information, reports and
data by the date specified in this Section 7(b), unless such failure is
of no fault of the Borrower, the Bank may nonetheless designate the
Borrowing Base at any amounts which the Bank determines in its
discretion and may redesignate the Borrowing Base from time to time
thereafter until the Bank receives all such information, reports and
data, whereupon the Bank shall designate a new Borrowing Base as
described above. The Bank shall determine the amount of the Borrowing
Base based upon the loan collateral value which Bank in its discretion
(using such methodology, assumptions and discounts rates as Bank
customarily uses in assigning collateral value to oil and gas
properties, oil and gas gathering systems, gas processing and plant
operations) assigns to such Oil and Gas Properties of the Borrower at
the time in question and
- 19 -
based upon such other credit factors consistently applied (including,
without limitation, the assets, liabilities, cash flow, business,
properties, prospects, management and ownership of the Borrower and its
affiliates) as Bank customarily considers in evaluating similar oil and
gas credits. If at any time any of the Oil and Gas Properties are sold,
the Borrowing Base then in effect shall automatically be reduced by a
sum equal to the loan collateral value of the Oil and Gas Properties
being sold by Borrower which the Bank in its discretion (using such
methodology, assumptions and discount rates as the Bank customarily
uses in assigning collateral value to oil and gas properties) assigned
to such Oil and Gas Properties at the time in question. It is expressly
understood that the Bank has no obligation to designate the Borrowing
Base at any particular amounts, except in the exercise of Bank's
discretion. Provided, however, that Bank shall not have the obligation
to designate a Borrowing Base in an amount in excess of its legal or
internal lending limits.
8. PREPAYMENTS.
(a) Voluntary Prepayments. The Borrower may at any time and
from time to time, without penalty or premium, prepay the Note, in
whole or in part. Each such prepayment shall be made on at least five
(5) Business Days' notice to Bank and shall be in an amount of $500,000
or more in increments of $250,000 or the unpaid balance on the Note,
whichever is less, plus accrued interest thereon to the date of
prepayment. If Borrower shall prepay the principal of any CD Loan or
Eurodollar Loan on any date other than the last day of the Interest
Period applicable thereto, Borrower shall make the payments required by
Section 5(g).
(b) Mandatory Prepayment For Borrowing Base Deficiency. In the
event the outstanding principal balance of the Note ever exceed the
Borrowing Base as determined by Bank pursuant to Section 7(b) hereof,
the Borrower shall, within sixty (60) days thereof, either (A) by
instruments reasonably satisfactory in form and substance to the Bank,
provide the Bank with collateral with value and quality in amounts
satisfactory to the Bank in its discretion in order to increase the
Borrowing Base by an amount at least equal to such excess, or (B)
prepay, without premium or penalty, the principal amount of the Note in
an amount at least equal to such excess plus accrued interest thereon
to the date of prepayment. Each prepayment required to be made pursuant
to this Section 8(b) is subject to the provisions of Section 5(g)
hereof, provided that, if and to the extent the amount required to be
prepaid hereunder exceeds the aggregate principal amount of the Base
Rate Loans then outstanding, Borrower may, at its option, pay the
amount of principal of the CD and/or Eurodollar Loans required to be
prepaid pursuant to this Section 8(b) to Bank for deposit in a special
collateral account to be established for this purpose. Such amount
shall be held by Bank in such collateral account subject to and in
accordance with the provisions of this Section 8(b) until the end of
the relevant Interest Period or Periods for such CD Loans and/or
Eurodollar Loans and thereupon applied to the prepayment of such CD
Loans and/or Eurodollar Loans. Borrower hereby directs Bank to apply,
and Bank shall apply, any amounts so deposited in any such collateral
account to prepay such CD Loans and/or Eurodollar Loans at the end of
such relevant Interest Period or Periods.
- 20 -
9. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to enter
into this Agreement, the Borrower hereby represents and warrants to the Bank
(which representations and warranties will survive the delivery of the Note)
that:
(a) Creation and Existence. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it was formed and is duly qualified in all
jurisdictions wherein failure to qualify may result in a Material
Adverse Effect. Borrower has all power and authority to own its
properties and assets and to transact the business in which it is
engaged.
(b) Power and Authority. Borrower is duly authorized and
empowered to create and issue the Note; and Borrower is duly authorized
and empowered to execute, deliver and perform the Loan Documents,
including this Agreement; and all corporate action on each Borrower's
part requisite for the due creation and issuance of the Note and for
the due execution, delivery and performance of the Loan Documents,
including this Agreement, has been duly and effectively taken.
(c) Binding Obligations. This Agreement does, and the Note and
other Loan Documents upon their creation, issuance, execution and
delivery will, constitute valid and binding obligations of Borrower,
enforceable in accordance with its respective terms (except that
enforcement may be subject to any applicable bankruptcy, insolvency, or
similar debtor relief laws now or hereafter in effect and relating to
or affecting the enforcement of creditors rights generally).
(d) No Legal Bar or Resultant Lien. The Note and the Loan
Documents, including this Agreement, do not and will not, violate any
provisions of any contract, agreement, law, regulation, order,
injunction, judgment, decree or writ to which Borrower is subject, or
result in the creation or imposition of any lien or other encumbrance
upon any assets or properties of Borrower, other than those
contemplated by this Agreement.
(e) No Consent. The execution, delivery and performance by the
Borrower of the Note and the Loan Documents, including this Agreement,
does not require the consent or approval of any other person or entity,
including without limitation any regulatory authority or governmental
body of the United States or any state thereof or any political
subdivision of the United States or any state thereof except for
consents required for federal, state and, in some instances, private
leases, right of ways and other conveyances or encumbrances of oil and
gas leases (all of which consents have been obtained by the Borrower).
(f) Financial Condition. The audited Financial Statements of
Borrower dated December 31, 1998 and the unaudited Financial Statements
of Borrower dated September 30, 1999, which have been delivered to Bank
are complete and correct in all material respects, and fully and
accurately reflect in all material respects the financial condition and
results of the
- 21 -
operations of the Borrower as of the date or dates and for the period
or periods stated. No change has since occurred in the condition,
financial or otherwise, of the Borrower which is reasonably expected to
have a Material Adverse Effect, except as disclosed to the Bank in
Schedule "2" attached hereto.
(g) Liabilities. Borrower does not have any material
(individually or in the aggregate) liability, direct or contingent,
except as disclosed to the Bank in the Financial Statements and on
Schedule "3" attached hereto. No unusual or unduly burdensome
restrictions, restraint, or hazard exists by contract, law or
governmental regulation or otherwise relative to the business, assets
or properties of Borrower which is reasonably expected to have a
Material Adverse Effect.
(h) Litigation. Except as described in the Financial
Statements, or as otherwise disclosed to the Bank in Schedule "4"
attached hereto, there is no litigation, legal or administrative
proceeding, investigation or other action of any nature pending or, to
the knowledge of the officers of Borrower threatened against or
affecting Borrower which involves the possibility of any judgment or
liability not fully covered by insurance, and which is reasonably
expected to have a Material Adverse Effect.
(i) Taxes; Governmental Charges. Borrower has filed all tax
returns and reports required to be filed and has paid all taxes,
assessments, fees and other governmental charges levied upon it or its
assets, properties or income which are due and payable, including
interest and penalties, the failure of which to pay could reasonably be
expected to have a Material Adverse Effect, except such as are being
contested in good faith by appropriate proceedings and for which
adequate reserves for the payment thereof as required by GAAP has been
provided and levy and execution thereon have been stayed and continue
to be stayed.
(j) Titles, Etc. Borrower has good and defensible title to all
of its respective assets, including without limitation, the Oil and Gas
Properties, free and clear of all liens or other encumbrances except
Permitted Liens.
(k) Defaults. Borrower is not in default and no event or
circumstance has occurred which, but for the passage of time or the
giving of notice, or both, would constitute a default under any loan or
credit agreement, indenture, mortgage, deed of trust, security
agreement or other agreement or instrument to which Borrower is a party
in any respect that would be reasonably expected to have a Material
Adverse Effect. No Event of Default hereunder has occurred and is
continuing.
(l) Casualties; Taking of Properties. Since the dates of the
latest Financial Statements of the Borrower delivered to Bank, neither
the business nor the assets or properties of Borrower have been
affected (to the extent it is reasonably likely to cause a Material
Adverse Effect), as a result of any fire, explosion, earthquake, flood,
drought, windstorm, accident, strike or other labor
- 22 -
disturbance, embargo, requisition or taking of property or cancellation
of contracts, permits or concessions by any domestic or foreign
government or any agency thereof, riot, activities of armed forces or
acts of God or of any public enemy.
(m) Use of Proceeds; Margin Stock. The $32,000,000 in new
proceeds of the Loan hereunder will be used by the Borrower for the
purposes of acquiring oil and gas properties from Questar Exploration
and Development Company ("Questar"). 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 any "margin
stock" as defined in Regulation U of the Board of Governors of the
Federal Reserve System (12 C.F.R. Part 221), or for the purpose of
reducing or retiring any indebtedness which was originally incurred to
purchase or carry a margin stock or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of
said Regulation U.
Neither Borrower nor any person or entity acting on behalf of
Borrower has taken or will take any action which might cause the loans
hereunder or any of the Loan Documents, including this Agreement, to
violate Regulation U or any other regulation of the Board of Governors
of the Federal Reserve System or to violate the Securities Exchange Act
of 1934 or any rule or regulation thereunder, in each case as now in
effect or as the same may hereafter be in effect.
(n) Location of Business and Offices. The principal place of
business and chief executive office of the Borrower is located at the
address stated in Section 15 hereof.
(o) Compliance with the Law. To the best of Borrower's
knowledge, Borrower:
(i) is not in violation of any law, judgment, decree,
order, ordinance, or governmental rule or regulation to
which Borrower, or any of its assets or properties are
subject; or
(ii) has not failed to obtain any license, permit,
franchise or other governmental authorization necessary to
the ownership of any of its assets or properties or the
conduct of its business;
which violation or failure is reasonably expected to have a Material
Adverse Effect.
(p) No Material Misstatements. No information, exhibit or
report furnished by Borrower to the Bank in connection with the
negotiation of this Agreement contained any material misstatement of
fact or omitted to state a material fact or any fact necessary to make
the statement contained therein not materially misleading.
- 23 -
(q) ERISA. Borrower is in compliance in all material respects
with the applicable provisions of ERISA, and no "reportable event", as
such term is defined in Section 403 of ERISA, has occurred with respect
to any Plan of Borrower.
(r) Public Utility Holding Company Act. Borrower is not a
"holding company", or "subsidiary company" of a "holding company", or
an "affiliate" of a "holding company" or of a "subsidiary company" of a
"holding company", or a "public utility" within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
(s) Subsidiaries. All of the Borrower's Subsidiaries are
listed on Schedule "5" hereto.
(t) Environmental Matters. Except as disclosed on Schedule
"6", Borrower (i) has not received notice or otherwise learned of any
Environmental Liability which would be reasonably likely to
individually or in the aggregate have a Material Adverse Effect arising
in connection with (A) any non-compliance with or violation of the
requirements of any Environmental Law or (B) the release or threatened
release of any toxic or hazardous waste into the environment, (ii) has
not received notice of any threatened or actual liability in connection
with the release or notice of any threatened release of any toxic or
hazardous waste into the environment which would be reasonably likely
to individually or in the aggregate have a Material Adverse Effect or
(iii) has not received notice or otherwise learned of any federal or
state investigation evaluating whether any remedial action is needed to
respond to a release or threatened release of any toxic or hazardous
waste into the environment for which Borrower is or may be liable which
may reasonably be expected to result in a Material Adverse Effect.
(u) Liens. Except (i) as disclosed on Schedule "1" hereto and
(ii) for Permitted Liens, the assets and properties of the Borrower is
free and clear of all liens and encumbrances.
10. CONDITIONS OF LENDING.
(a) The effectiveness of this Agreement and the obligation of
the Bank to make the additional advances in the Term Loan shall be
subject to the following conditions precedent:
(i) Execution and Delivery. The Borrower shall have
executed and delivered the Note, this Agreement, the
Security Instruments and other required documents, all in
form and substance satisfactory to the Bank;
(ii) Legal Opinion. The Bank shall have received from
Borrower's legal counsel a favorable legal opinion in form
and substance satisfactory to the Bank, generally in the
form of the opinion furnished in connection with the
execution of the Restated Loan Agreement on December 20,
1995;
- 24 -
(iii) Corporate Resolutions. The Bank shall have
received appropriate certified corporate resolutions of
Borrower;
(iv) Good Standing. The Bank shall have received
evidence of existence and good standing for Borrower, except
for the State of Mississippi;
(v) Incumbency. The Bank shall have received a signed
certificate of Borrower, certifying the names of the
officers of Borrower authorized to sign loan documents on
behalf of Borrower, together with the true signatures of
each such officer. The Bank may conclusively rely on such
certificate until the Bank receives a further certificate of
Borrower canceling or amending the prior certificate and
submitting signatures of the officers named in such further
certificate;
(vi) Articles of Incorporation and Bylaws. The Bank
shall have received copies of the Articles of Incorporation
of Borrower and all amendments thereto, certified by the
Secretary of State of the State of Delaware, and a copy of
the bylaws of Borrower and all amendments thereto, certified
by an officer of Borrower as being true, correct and
complete;
(vii) Title. The Bank shall have received satisfactory
evidence to the state of the title to the Oil and Gas
Properties being mortgaged to the Bank contemporaneously
herewith;
(viii) Questar Acquisition. The Bank shall have
received satisfactory evidence that the acquisition of the
Oil and Gas Properties from Questar has closed or is closing
simultaneously with the closing of the loan transaction
described in this Agreement.
(ix) Payment of Facility Fee. The Bank shall have
received payment of the Facility Fee in the amount of
$120,000.
(x) Representation and Warranties. The representations
and warranties of Borrower under this Agreement are true and
correct in all material respects as of such date, as if then
made (except to the extent that such representations and
warranties related solely to an earlier date);
(xi) No Event of Default. No Event of Default shall
have occurred and be continuing nor shall any event have
occurred or failed to occur which, with the passage of time
or service of notice, or both, would constitute an Event of
Default;
(xii) Other Documents. Bank shall have received such
other instruments and documents incidental and appropriate
to the transaction provided for herein as Bank or its
- 25 -
counsel may reasonably request, and all such documents shall
be in form and substance reasonably satisfactory to the
Bank; and
(xiii) Legal Matters Satisfactory. All legal matters
incident to the consummation of the transactions
contemplated hereby shall be reasonably satisfactory to
special counsel for Bank retained at the expense of the
Borrower.
11. AFFIRMATIVE COVENANTS. A deviation from the provisions of this
Section 11 shall not constitute an Event of Default under this Agreement if such
deviation is consented to in writing by Bank. Without the prior written consent
of Bank, the Borrower will at all times comply with the covenants contained in
this Section 11 from the date hereof and for so long as any part of the Term
Loan is outstanding.
(a) Financial Statements and Reports. Borrower shall promptly
furnish to the Bank from time to time upon request such information
regarding the business and affairs and financial condition of Borrower,
as the Bank may reasonably request, and will furnish to the Bank:
(i) Annual Audited Financial Statements. As soon as
available, and in any event within one hundred twenty (120)
days after the close of each fiscal year beginning with the
fiscal year ended December 31, 1999, the annual audited
consolidated and consolidating Financial Statements of
Borrower, prepared in accordance with GAAP accompanied by an
unqualified opinion rendered by an independent accounting
firm reasonably acceptable to the Bank;
(ii) Quarterly Financial Statements. As soon as
available, and in any event within sixty (60) days after the
end of each calendar quarter of each year (except the last
calendar quarter of any fiscal year), beginning with the
fiscal quarter ended March 31, 2000, the quarterly unaudited
consolidated and consolidating Financial Statements of
Borrower prepared in accordance with GAAP, certified to by
the Chief Financial Officer of Borrower as being true and
correct;
(iii) Report on Properties. As soon as available and in
any event on or before April 1 of each calendar year, and at
such other times as Bank, in accordance with Section 7
hereof, may request, the engineering reports required to be
furnished to the Bank under such Section 7 on the Oil and
Gas Properties;
(iv) SEC Reports. As soon as available, and in any
event within five (5) days of filing, copies of all filings
by Borrower with the Securities and Exchange Commission;
- 26 -
(v) Audit Reports. Promptly upon receipt thereof, one
(1) copy of each written report submitted to Borrower by
independent accountants and any annual, quarterly or special
audit, review or examination;
(vi) Additional Information. Promptly upon request of
the Bank from time to time any additional financial
information or other information that the Bank may
reasonably request.
All such reports, information, balance sheets and Financial Statements
referred to in Subsection 11(a) above shall be in such detail as the
Bank may reasonably request and shall be prepared in a manner
consistent with the Financial Statements.
(b) Certificates of Compliance. Concurrently with the
furnishing of the annual audited Financial Statements pursuant to
Subsection 11(a)(i) hereof and the quarterly unaudited Financial
Statements pursuant to Subsection 11(a)(ii) hereof, Borrower will
furnish or cause to be furnished to the Bank a certificate in the form
of Exhibit "C" attached hereto, signed by the Chief Financial Officer
of Borrower, (i) stating that Borrower has fulfilled in all material
respects its obligations under the Note and the Loan Documents,
including this Agreement, and that all representations and warranties
made herein and therein continue (except to the extent they relate
solely to an earlier date) to be true and correct in all material
respects (or specifying the nature of any change), or if an Event of
Default has occurred, specifying the Event of Default and the nature
and status thereof; (ii) to the extent requested from time to time by
the Bank, specifically affirming compliance of Borrower in all material
respects with any of its representations (except to the extent they
relate solely to an earlier date) or obligations under said
instruments; (iii) setting forth the computation, in reasonable detail
as of the end of each period covered by such certificate, of compliance
with Sections 12(b), (c), (d) and (e); and (iv) containing or
accompanied by such financial or other details, information and
material as the Bank may reasonably request to evidence such
compliance.
(c) Accountants' Certificate. Concurrently with the furnishing
of the annual audited Financial Statement pursuant to Section 11(a)(i)
hereof, Borrower will furnish a statement from the firm of independent
public accountants which prepared such Financial Statement to the
effect that nothing has come to their attention to cause them to
believe that there existed on the date of such statements any Event of
Default.
(d) Taxes and Other Liens. The Borrower will pay and discharge
promptly all taxes, assessments and governmental charges or levies
imposed upon the Borrower or upon the income or any assets or property
of Borrower as well as all claims of any kind (including claims for
labor, materials, supplies and rent) which, if unpaid, might become a
Lien or other encumbrance upon any or all of the assets or property of
Borrower and which could reasonably be expected to result in a Material
Adverse Effect; provided, however, that Borrower shall not be required
to pay any such tax, assessment, charge, levy or claim if the amount,
applicability or validity thereof shall currently
- 27 -
be contested in good faith by appropriate proceedings diligently
conducted, levy and execution thereon have been stayed and continue to
be stayed and if Borrower shall have set up adequate reserves therefor,
if required, under GAAP.
(e) Compliance with Laws. Borrower will observe and comply, in
all material respects, with all applicable laws, statutes, codes, acts,
ordinances, orders, judgments, decrees, injunctions, rules,
regulations, orders and restrictions relating to environmental
standards or controls or to energy regulations of all federal, state,
county, municipal and other governments, departments, commissions,
boards, agencies, courts, authorities, officials and officers, domestic
or foreign.
(f) Further Assurances. The Borrower will cure promptly any
defects in the creation and issuance of the Note and the execution and
delivery of the Note and the Loan Documents, including this Agreement.
The Borrower at its sole expense will promptly execute and deliver to
Bank upon its reasonable request all such other and further documents,
agreements and instruments in compliance with or accomplishment of the
covenants and agreements in this Agreement, or to correct any omissions
in the Note or more fully to state the obligations set out herein.
(g) Performance of Obligations. The Borrower will pay the Note
and other obligations incurred by it hereunder according to the
reading, tenor and effect thereof and hereof; and Borrower will do and
perform every act and discharge all of the obligations provided to be
performed and discharged by the Borrower under the Loan Documents,
including this Agreement, at the time or times and in the manner
specified.
(h) Insurance. The Borrower now maintain and will continue to
maintain insurance with financially sound and reputable insurers with
respect to its assets against such liabilities, fires, casualties,
risks and contingencies and in such types and amounts as is customary
in the case of persons engaged in the same or similar businesses and
similarly situated. Upon request of the Bank, the Borrower will furnish
or cause to be furnished to the Bank from time to time a summary of the
respective insurance coverage of each Borrower in form and substance
satisfactory to the Bank, and, if requested, will furnish the Bank
copies of the applicable policies. Upon demand by Bank any insurance
policies covering any such property shall be endorsed (i) to provide
that such policies may not be canceled, reduced or affected in any
manner for any reason without fifteen (15) days prior notice to Bank,
(ii) to provide for insurance against fire, casualty and other hazards
normally insured against, in the amount of the full value (less a
reasonable deductible not to exceed amounts customary in the industry
for similarly situated business and properties) of the property
insured, and (iii) to provide for such other matters as the Bank may
reasonably require. The Borrower shall at all times maintain adequate
insurance with respect to all of their assets, including but not
limited to, the Oil and Gas Properties or any collateral against its
liability for injury to persons or property, which insurance shall be
by financially sound and reputable insurers and shall without
limitation provide the following coverages: comprehensive general
liability (including coverage for damage to underground resources and
equipment, damage caused by blowouts or
- 28 -
cratering, damage caused by explosion, damage to underground minerals
or resources caused by saline substances, broad form property damage
coverage, broad form coverage for contractually assumed liabilities and
broad form coverage for acts of independent contractors), worker's
compensation and automobile liability. Additionally, the Borrower shall
at all times maintain adequate insurance with respect to all of its
other assets and ▇▇▇▇▇ in accordance with prudent business practices.
(i) Accounts and Records. The Borrower will keep books,
records and accounts in which full, true and correct entries will be
made of all dealings or transactions in relation to its business and
activities, prepared in a manner consistent with prior years, subject
to changes suggested by Borrower's auditors.
(j) Right of Inspection. The Borrower will permit any officer,
employee or agent of the Bank to examine Borrower's books, records and
accounts, and take copies and extracts therefrom, all at such
reasonable times during normal business hours and as often as the Bank
may reasonably request. The Bank will keep all such information
confidential and will not without prior written consent disclose or
reveal the information or any part thereof to any person other than the
Bank's officers, employees, legal counsel, regulatory authorities or
advisors to whom it is necessary to reveal such information for the
purpose of effectuating the agreements and undertakings specified
herein or as otherwise required by law or in connection with the
enforcement of Bank's rights and remedies under the Note, this
Agreement and the other Loan Documents.
(k) Notice of Certain Events. The Borrower shall promptly
notify the Bank if Borrower learns of the occurrence of (i) any event
which constitutes an Event of Default together with a detailed
statement by Borrower of the steps being taken to cure the Event of
Default; or (ii) any legal, judicial or regulatory proceedings
affecting Borrower, or any of the assets or properties of Borrower
which, if adversely determined, could reasonably be expected to have a
Material Adverse Effect; or (iii) any dispute between Borrower and any
governmental or regulatory body or any other person or entity which, if
adversely determined, might reasonably be expected to cause a Material
Adverse Effect; or (iv) any other matter which in Borrower's reasonable
opinion could have a Material Adverse Effect.
(l) ERISA Information and Compliance. The Borrower will
promptly furnish to the Bank immediately upon becoming aware of the
occurrence of any "reportable event", as such term is defined in
Section 4043 of ERISA, or of any "prohibited transaction", as such term
is defined in Section 4975 of the Internal Revenue Code of 1954, as
amended, in connection with any Plan or any trust created thereunder, a
written notice signed or the chief financial officer of Borrower
specifying the nature thereof, what action Borrower is taking or
proposes to take with respect thereto, and, when known, any action
taken by the Internal Revenue Service with respect thereto.
- 29 -
(m) Environmental Reports and Notices. The Borrower will
deliver to the Bank (i) promptly upon its becoming available, one copy
of each report sent by Borrower to any court, governmental agency or
instrumentality pursuant to any Environmental Law, (ii) notice, in
writing, promptly upon Borrower's receipt of notice or otherwise
learning of any claim, demand, action, event, condition, report or
investigation indicating any potential or actual liability arising in
connection with (x) the non-compliance with or violation of the
requirements of any Environmental Law which reasonably could be
expected to have a Material Adverse Effect; (y) the release or
threatened release of any toxic or hazardous waste into the environment
which reasonably could be expected to have a Material Adverse Effect or
which release Borrower would have a duty to report to any court or
government agency or instrumentality, or (iii) the existence of any
Environmental Lien on any properties or assets of Borrower, and
Borrower shall immediately deliver a copy of any such notice to Bank.
(n) Compliance and Maintenance. The Borrower will (i) observe
and comply in all material respects with all Environmental Laws; (ii)
except as provided in Subsections 11(o) and 11(p) below, maintain the
Oil and Gas Properties and other assets and properties in good and
workable condition at all times and make all repairs, replacements,
additions, betterments and improvements to the Oil and Gas Properties
and other assets and properties as are needed and proper so that the
business carried on in connection therewith may be conducted properly
and efficiently at all times in the opinion of the Borrower exercised
in good faith; (iii) take or cause to be taken whatever actions are
necessary or desirable to prevent an event or condition of default by
Borrower under the provisions of any gas purchase or sales contract or
any other contract, agreement or lease comprising a part of the Oil and
Gas Properties or other collateral security hereunder which default
could reasonably be expected to result in a Material Adverse Effect;
and (iv) furnish Bank upon request evidence satisfactory to Bank that
there are no Liens, claims or encumbrances on the Oil and Gas
Properties, except laborers', vendors', repairmen's, mechanics',
worker's, or materialmen's liens arising by operation of law or
incident to the construction or improvement of property if the
obligations secured thereby are not yet due or are being contested in
good faith by appropriate legal proceedings or Permitted Liens.
(o) Operation of Properties. Except as provided in Subsection
11(p) and (q) below, the Borrower will operate, or use reasonable
efforts to cause to be operated, all Oil and Gas Properties in a
careful and efficient manner in accordance with the practice of the
industry and in compliance in all material respects with all applicable
laws, rules, and regulations, and in compliance in all material
respects with all applicable proration and conservation laws of the
jurisdiction in which the properties are situated, and all applicable
laws, rules, and regulations, of every other agency and authority from
time to time constituted to regulate the development and operation of
the properties and the production and sale of hydrocarbons and other
minerals therefrom; provided, however, that the Borrower shall have the
right to contest in good faith by appropriate proceedings, the
applicability or lawfulness of any such law, rule or regulation and
- 30 -
pending such contest may defer compliance therewith, as long as such
deferment shall not subject the properties or any part thereof to
foreclosure or loss.
(p) Compliance with Leases and Other Instruments. The Borrower
will pay or cause to be paid and discharge all rentals, delay rentals,
royalties, production payment, and indebtedness required to be paid by
Borrower (or required to keep unimpaired in all material respects the
rights of Borrower in Oil and Gas Properties) accruing under, and
perform or cause to be performed in all material respects each and
every act, matter, or thing required of Borrower by each and all of the
assignments, deeds, leases, subleases, contracts, and agreements in any
way relating to Borrower or any of the Oil and Gas Properties and do
all other things necessary of Borrower to keep unimpaired in all
material respects the rights of Borrower thereunder and to prevent the
forfeiture thereof or default thereunder; provided, however, that
nothing in this Agreement shall be deemed to require Borrower to
perpetuate or renew any oil and gas lease or other lease by payment of
rental or delay rental or by commencement or continuation of operations
nor to prevent Borrower from abandoning or releasing any oil and gas
lease or other lease or well thereon when, in any of such events, in
the opinion of Borrower exercised in good faith, it is not in the best
interest of the Borrower to perpetuate the same.
(q) Certain Additional Assurances Regarding Maintenance and
Operations of Properties. With respect to those Oil and Gas Properties
which are being operated by operators other than the Borrower, the
Borrower shall not be obligated to perform any undertakings
contemplated by the covenants and agreement contained in Subsections
11(o) or 11(p) hereof which are performable only by such operators and
are beyond the control of the Borrower; however, the Borrower agrees to
promptly take all reasonable actions available under any operating
agreements or otherwise to bring about the performance of any such
material undertakings required to be performed thereunder.
(r) Title Matters. Within sixty (60) days after the date
hereof with respect to the Oil and Gas Properties listed on Schedule
"7", and, thereafter, as to any Oil and Gas Properties hereafter
mortgaged to Bank, Borrower will promptly (but in no event more than
sixty (60) days following such mortgaging), furnish Bank with title
opinions and/or title information reasonably satisfactory to Bank
showing good and defensible title of Borrower to such Oil and Gas
Properties subject only to Permitted Liens.
(s) Curative Matters. Within ninety (90) days after the date
hereof with respect to matters listed on Schedule "8" and, thereafter,
within sixty (60) days after receipt by Borrower from Bank or its
counsel of written notice of title defects the Bank reasonably requires
to be cured, Borrower shall either (i) provide such curative
information, in form and substance satisfactory to Bank, or (ii)
substitute Oil and Gas Properties of value and quality satisfactory to
the Bank for all of Oil and Gas Properties for which such title
curative was requested but upon which Borrower elected not to provide
such title curative information, and, within sixty (60) days of such
- 31 -
substitution, provide title opinions or title information satisfactory
to the Bank covering the Oil and Gas Properties so substituted.
(t) Change of Principal Place of Business. Borrower shall give
Bank at least thirty (30) days prior written notice of its intention to
move its principal place of business from the address set forth in
Section 15 hereof.
12. NEGATIVE COVENANTS. A deviation from the provisions of this Section
12 shall not constitute an Event of Default under this Agreement if such
deviation is consented to in writing by Bank. Without the prior written consent
of Bank, the Borrower will at all times comply with the covenants contained in
this Section 12 from the date hereof and for so long as the Term Commitment is
in existence or any part of the Term Loan is outstanding.
(a) Negative Pledge. Borrower will not (i) grant, create,
incur, permit or suffer to exist any Lien upon any of its property or
assets, including, without limitation, the Collateral, now owned or
hereafter acquired, except for Permitted Liens and Liens given to
secure Non Recourse Debt of Borrower, (ii) enter into any
sale-and-lease-back transaction, or (iii) agree with any Person (other
than in the Loan Documents) that Borrower will not grant, create,
incur, permit or suffer to exist any Lien upon any of its property or
assets. Anything of the foregoing or elsewhere in the Loan Documents to
the contrary notwithstanding, it is understood that no Liens, other
than Permitted Liens, are permitted on or with respect to any of the
Collateral.
(b) Current Ratio. The Borrower will not allow its ratio of
Current Assets to Current Liabilities to be less than 1.0 to 1.0 as of
the end of any fiscal quarter.
(c) Fixed Charge Coverage Ratio. Borrower will not allow its
Fixed Charge Coverage Ratio to ever be less than 1.2 to 1.0.
(d) Minimum Net Worth. The Borrower's Net Worth will not ever
be less than the sum of (i) $39,000,000 plus, (ii) after December 31,
1999, fifty percent (50%) of Net Income, if positive, plus (iii)
seventy-five percent (75%) of the net cash proceeds of any equity
offering.
(e) Debt to Worth Ratio. Borrower will not allow its ratio of
(i) the aggregate of Total Liabilities to (ii) Net Worth at any time to
be greater than 1.5 to 1.0.
(f) Consolidations and Mergers. Borrower will not consolidate
or merge with or into any other Person, except that Borrower may merge
with another Person if Borrower is the surviving entity in such merger
and if, after giving effect thereto, no Default or Event of Default
shall have occurred and be continuing.
- 32 -
(g) Debts, Guaranties and Other Obligations. Borrower will not
incur, create, assume or in any manner become or be liable in respect
of any indebtedness, nor will Borrower guarantee or otherwise in any
manner become or be liable in respect of any indebtedness, liabilities
or other obligations of any other Person or Entity, whether by
agreement to purchase the indebtedness of any other Person or Entity or
agreement for the furnishing of funds to any other Person or Entity
through the purchase or lease of goods, supplies or services (or by way
of stock purchase, capital contribution, advance or loan) for the
purpose of paying or discharging the indebtedness of any other Person
or Entity, or otherwise, except that the foregoing restrictions shall
not apply to:
(i) the Note and any renewal or increase thereof, or
other indebtedness of the Borrower heretofore disclosed to
Bank in the Borrower's Financial Statements or on Schedule
"3" hereto; or
(ii) taxes, assessments or other government charges
which are not yet due or are being contested in good faith
by appropriate action promptly initiated and diligently
conducted, if such reserve as shall be required by GAAP
shall have been made therefor and levy and execution thereon
have been stayed and continue to be stayed; or
(iii) indebtedness (other than in connection with a
loan or lending transaction) incurred in the ordinary course
of business, including, but not limited to indebtedness for
drilling, completing, leasing and reworking oil and gas
▇▇▇▇▇; or
(iv) Permitted Purchase Money Indebtedness; or
(v) Non-Recourse Debt.
(h) Dividends. Borrower will not declare or pay any dividend,
purchase, redeem or otherwise acquire for value any of its stock now or
hereafter outstanding, return any capital to its stockholders, or make
any distribution of its assets to its stockholders as such, except
Permitted Dividends and Redemptions, provided, however, that no
Dividend or Redemption which would be a Permitted Dividend and
Redemption may be paid if immediately before and after giving effect
thereto a Default or Event of Default shall exist, unless and until
such Dividend or Redemption is consented to by the Bank.
(i) Loans and Advances. Borrower shall not make or permit to
remain outstanding any loans or advances to or in any Person or Entity,
except that the foregoing restriction shall not apply to:
(i) loans or advances to any Person, the material
details of which have been set forth in the Financial
Statements of the Borrower heretofore furnished to Bank; or
- 33 -
(ii) advances made in the ordinary course of Borrower's
oil and gas business; or
(iii) loans or advances not exceeding in the aggregate
outstanding at any time the amount of $250,000.
(j) Nature of Business. Borrower will not permit any material
change to be made in the character of its business as carried on at the
date hereof.
(k) Transactions with Affiliates. Borrower will not enter into
any transaction with any Affiliate, except transactions upon terms that
are no less favorable to it than would be obtained in a transaction
negotiated at arm's length with an unrelated third party.
(l) Hedging Transaction. Borrower will not enter into any Rate
Management Transactions, except the foregoing prohibition shall not
apply to any Rate Management Transactions (i) designed to hedge,
forward sell or swap crude oil or natural gas or otherwise sell up to
seventy-five percent (75%) of the Borrower's anticipated production
from proved, developed producing reserves of crude oil and/or
seventy-five percent (75%) of the Borrower's anticipated production
from proved, developed producing reserves of natural gas, during the
period from immediately preceding the settlement date (or the
commencement of the term of such hedge transaction if there is no prior
settlement date) to said settlement date, (ii) with a maturity of
eighteen (18) months or less, (iii) with "strike prices" per barrel
greater than the Bank's forecasted price in the most recent engineering
evaluation of Borrower's Oil and Gas Properties, adjusted for the
difference between the forecasted price and the Borrower's actual
production as determined by the Bank, (iv) with counterparties to the
hedging agreement which are approved by the Bank or (v) Rate Management
Transactions otherwise consented to in writing by the Bank.
(m) Investments. Borrower shall not make any investments in
any person or entity, except such restriction shall not apply to:
(i) Temporary Cash Investments;
(ii) investments contemplated or permitted by other
provisions of this Agreement; or
(iii) investments in wholly-owned Subsidiaries which
are such on the Effective Date or which become such after
consent or waiver is granted by the Bank.
(n) Amendment to Articles of Incorporation or Bylaws. Borrower
will not permit any amendment to, or any alteration of, its Articles of
Incorporation or Bylaws.
- 34 -
(o) Sale of Assets. Borrower shall not sell, transfer or
otherwise dispose of any of the Collateral, except for (i) production
from oil, gas and mineral properties and other assets sold in the
ordinary course of Borrower's business, or (ii) during the period
between each Determination Date, Oil and Gas Properties with an
aggregate PW 10 value of $500,000 or less, or (iii) sales or other
dispositions of obsolete equipment which is either no longer needed in
the ordinary course of business of Borrower or is being replaced by
equipment of at least comparable value and utility.
13. EVENTS OF DEFAULT. Any one or more of the following events
shall be considered an "Event of Default" as that term is used herein:
(a) The Borrower shall fail to pay when due or declared due
the principal of, and the interest on, the Note, or any fee or any
other indebtedness of the Borrower incurred pursuant to this Agreement
or any other Loan Document; or
(b) Any representation or warranty made by Borrower under this
Agreement, or in any certificate or statement furnished or made to Bank
pursuant hereto, or in connection herewith, or in connection with any
document furnished hereunder, shall prove to be untrue in any material
respect as of the date on which such representation or warranty is made
(or deemed made), or any representation, statement (including financial
statements), certificate, report or other data furnished or to be
furnished or made by Borrower under any Loan Document, including this
Agreement, proves to have been untrue in any material respect, as of
the date as of which the facts therein set forth were stated or
certified; or
(c) Default shall be made in the due observance or performance
of any of the covenants or agreements of the Borrower contained in the
Loan Documents, including this Agreement (excluding covenants contained
in Section 12 of the Agreement for which there is not cure period), and
such default shall continue for more than thirty (30) days; or
(d) Default shall be made in the due observance or performance
of the covenants of Borrower contained in Section 12 of this Agreement;
or
(e) Default shall be made in respect of any obligation for
borrowed money in excess of $1,000,000, other than the Note, for which
Borrower is liable (directly, by assumption, as guarantor or
otherwise), or any obligations secured by any mortgage, pledge or other
security interest, lien, charge or encumbrance with respect thereto, on
any asset or property of Borrower or in respect of any agreement
relating to any such obligations unless Borrower is not liable for same
(i.e., unless remedies or recourse for failure to pay such obligations
is limited to foreclosure of the collateral security therefor), and if
such default shall continue beyond the applicable grace period, if any;
or
- 35 -
(f) Borrower shall commence a voluntary case or other
proceedings seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking an appointment
of a trustee, receiver, liquidator, custodian or other similar official
of it or any substantial part of its property, or shall consent to any
such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against
it, or shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due, or shall take
any corporate action authorizing the foregoing; or
(g) An involuntary case or other proceeding, shall be
commenced against Borrower seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency
or similar law now or hereafter in effect or seeking the appointment of
a trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, and such involuntary case
or other proceeding shall remain undismissed and unstayed for a period
of sixty (60) days; or an order for relief shall be entered against
Borrower under the federal bankruptcy laws as now or hereinafter in
effect; or
(h) A final judgment or order for the payment of money in
excess of $1,000,000 (or judgments or orders aggregating in excess of
$1,000,000) shall be rendered against Borrower and such judgments or
orders shall continue unsatisfied and unstayed for a period of thirty
(30) days; or
(i) In the event the aggregate principal amount outstanding
under the Note shall at any time exceed the Borrowing Base established
for the Note, and the Borrower shall fail to comply with the provisions
of Section 8(b) hereof; or
Upon occurrence of any Event of Default specified in Subsections 13(f)
and (g) hereof, the entire principal amount due under the Note and all interest
then accrued thereon, and any other liabilities of the Borrower hereunder, shall
become immediately due and payable all without notice and without presentment,
demand, protest, notice of protest or dishonor or any other notice of default of
any kind, all of which are hereby expressly waived by the Borrower. In any other
Event of Default, the Bank shall by notice to the Borrower declare the principal
of, and all interest then accrued on, the Note and any other liabilities
hereunder to be forthwith due and payable, whereupon the same shall forthwith
become due and payable without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other notice of any kind, all of which the
Borrower hereby expressly waive, anything contained herein or in the Note to the
contrary notwithstanding. Nothing contained in this Section 13 shall be
construed to limit or amend in any way the Events of Default enumerated in the
Note, or any other document executed in connection with the transaction
contemplated herein.
Upon the occurrence and during the continuance of any Event of Default,
the Bank are hereby authorized at any time and from time to time, without notice
to the Borrower (any such notice being
- 36 -
expressly waived by the Borrower), to set-off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by any of the Bank to or for the credit or
the account of the Borrower against any and all of the indebtedness of the
Borrower under the Note and the Loan Documents, including this Agreement,
irrespective of whether or not the Bank shall have made any demand under the
Loan Documents, including this Agreement or the Note and although such
indebtedness may be unmatured. Any amount set-off by any of the Bank shall be
applied against the indebtedness owed the Bank by the Borrower pursuant to this
Agreement and the Note. The Bank agrees promptly to notify the Borrower after
any such setoff and application, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of the
Bank under this Section 13 are in addition to other rights and remedies
(including, without limitation, other rights of set- off) which the Bank may
have.
14. EXERCISE OF RIGHTS. No failure to exercise, and no delay in
exercising, on the part of the Bank, any right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right. The rights
of the Bank hereunder shall be in addition to all other rights provided by law.
No modification or waiver of any provision of the Loan Documents, including this
Agreement, or the Note nor consent to departure therefrom, shall be effective
unless in writing, and no such consent or waiver shall extend beyond the
particular case and purpose involved. No notice or demand given in any case
shall constitute a waiver of the right to take other action in the same, similar
or other circumstances without such notice or demand.
15. NOTICES. Any notices or other communications required or permitted
to be given by this Agreement or any other documents and instruments referred to
herein must be given in writing (which may be by facsimile transmission) and
must be personally delivered or mailed by prepaid certified or registered mail
to the party to whom such notice or communication is directed at the address of
such party as follows: (a) BORROWER: ▇▇▇▇▇▇▇ OIL COMPANY, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, President; and (b)
BANK: BANK ONE, TEXAS, N.A., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇-▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, Facsimile No. 214-290-2332, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice
President. Any such notice or other communication shall be deemed to have been
given (whether actually received or not) on the day it is personally delivered
or delivered by facsimile as aforesaid or, if mailed, on the third day after it
is mailed as aforesaid. Any party may change its address for purposes of this
Agreement by giving notice of such change to the other party pursuant to this
Section 15.
16. EXPENSES. The Borrower shall pay (i) all reasonable and necessary
out-of-pocket expenses of the Bank, including reasonable fees and disbursements
of special counsel for the Bank, in connection with the preparation of this
Agreement, any waiver or consent hereunder or any amendment hereof or any
default or Event of Default or alleged default or Event of Default hereunder,
(ii) all reasonable and necessary out-of-pocket expenses of the Bank, including
reasonable fees and disbursements of special counsel for the Bank in connection
with the preparation of any participation agreement for a participant or
participants requested by the Borrower or any amendment thereof and (iii) if a
default or an Event of Default occurs, all reasonable and necessary
out-of-pocket expenses incurred by the Bank, including fees
- 37 -
and disbursements of counsel, in connection with such default and Event of
Default and collection and other enforcement proceedings resulting therefrom.
The Borrower shall indemnify the Bank against any transfer taxes, document
taxes, assessments or charges made by any governmental authority by reason of
the execution, delivery and filing of the Loan Documents.
17. INDEMNITY. The Borrower agrees to indemnify and hold harmless the
Bank and its respective officers, employees, agents, attorneys and
representatives (singularly, an "Indemnified Party", and collectively, the
"Indemnified Parties") from and against any loss, cost, liability, damage or
expense (including the reasonable fees and out-of-pocket expenses of counsel to
the Bank, including all local counsel hired by such counsel) ("Claim") incurred
by the Bank in investigating or preparing for, defending against, or providing
evidence, producing documents or taking any other action in respect of any
commenced or threatened litigation, administrative proceeding or investigation
under any federal securities law, federal or state environmental law, or any
other statute of any jurisdiction, or any regulation, or at common law or
otherwise, which is alleged to arise out of or is based upon any acts, practices
or omissions or alleged acts, practices or omissions of the Borrower or their
agents or arises in connection with the duties, obligations or performance of
the Indemnified Parties in negotiating, preparing, executing, accepting,
keeping, completing, countersigning, issuing, selling, delivering, releasing,
assigning, handling, certifying, processing or receiving or taking any other
action with respect to the Loan Documents and all documents, items and materials
contemplated thereby even if any of the foregoing arises out of an Indemnified
Party's ordinary negligence. The indemnity set forth herein shall be in addition
to any other obligations or liabilities of the Borrower to the Bank hereunder or
at common law or otherwise, and shall survive any termination of this Agreement,
the expiration of the Loan and the payment of all indebtedness of the Borrower
to the Bank hereunder and under the Note, provided that the Borrower shall have
no obligation under this Section to the Bank with respect to any of the
foregoing arising out of the gross negligence or willful misconduct of the Bank.
If any Claim is asserted against any Indemnified Party, the Indemnified Party
shall endeavor to notify the Borrower of such Claim (but failure to do so shall
not affect the indemnification herein made except to the extent of the actual
harm caused by such failure). The Indemnified Party shall have the right to
employ, at the Borrower's expense, counsel of the Indemnified Parties' choosing
and to control the defense of the Claim. The Borrower may at their own expense
also participate in the defense of any Claim. Each Indemnified Party may employ
separate counsel in connection with any Claim to the extent such Indemnified
Party believes it reasonably prudent to protect such Indemnified Party. THE
PARTIES INTEND FOR THE PROVISIONS OF THIS SECTION TO APPLY TO AND PROTECT EACH
INDEMNIFIED PARTY FROM THE CONSEQUENCES OF ITS OWN NEGLIGENCE, WHETHER OR NOT
THAT NEGLIGENCE IS THE SOLE, CONTRIBUTING, OR CONCURRING CAUSE OF ANY CLAIM.
18. GOVERNING LAW. THIS AGREEMENT IS BEING EXECUTED AND DELIVERED, AND
IS INTENDED TO BE PERFORMED, IN DALLAS, DALLAS COUNTY, TEXAS, AND THE
SUBSTANTIVE LAWS OF TEXAS SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT
AND INTERPRETATION OF THIS AGREEMENT AND ALL OTHER DOCUMENTS AND INSTRUMENTS
REFERRED TO HEREIN, UNLESS OTHERWISE SPECIFIED THEREIN.
- 38 -
19. INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws effective
during the term of this Agreement, such provisions shall be fully severable and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement, and the
remaining provisions of the Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement.
20. MAXIMUM INTEREST RATE. Regardless of any provisions contained in
this Agreement or in any other documents and instruments referred to herein, the
Bank shall never be deemed to have contracted for or be entitled to receive,
collect or apply as interest on the Note any amount in excess of the Maximum
Rate, and in the event Bank ever receives, collects or applies as interest any
such excess, of if an acceleration of the maturities of any Note or if any
prepayment by the Borrower result in the Borrower having paid any interest in
excess of the Maximum Rate, such amount which would be excessive interest shall
be applied to the reduction of the unpaid principal balance of the Note for
which such excess was received, collected or applied, and, if the principal
balance of such Note is paid in full, any remaining excess shall forthwith be
paid to the Borrower. All sums paid or agreed to be paid to the Bank for the
use, forbearance or detention of the indebtedness evidenced by the Note and/or
this Agreement shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of such indebtedness
until payment in full so that the rate or amount of interest on account of such
indebtedness does not exceed the Maximum Rate. In determining whether or not the
interest paid or payable under any specific contingency exceeds the Maximum Rate
of interest permitted by law, the Borrower and the Bank shall, to the maximum
extent permitted under applicable law, (i) characterize any non-principal
payment as an expense, fee or premium, rather than as interest; and (ii) exclude
voluntary prepayments and the effect thereof; and (iii) compare the total amount
of interest contracted for, charged or received with the total amount of
interest which could be contracted for, charged or received throughout the
entire contemplated term of the Note at the Maximum Rate.
21. AMENDMENTS. This Agreement may be amended only by an instrument in
writing executed by an authorized officer of the party against whom such
amendment is sought to be enforced.
22. MULTIPLE COUNTERPARTS. This Agreement may be executed in a number
of identical separate counterparts, each of which for all purposes is to be
deemed an original, but all of which shall constitute, collectively, one
agreement. No party to this Agreement shall be bound hereby until a counterpart
of this Agreement has been executed by all parties hereto.
23. CONFLICT. In the event any term or provision hereof is inconsistent
with or conflicts with any provision of the Loan Documents, the terms or
provisions contained in this Agreement shall be controlling.
- 39 -
24. SURVIVAL. All covenants, agreements, undertakings, representations
and warranties made in the Loan Documents, including this Agreement, the Note or
other documents and instruments referred to herein shall survive all closings
hereunder and shall not be affected by any investigation made by any party.
25. PARTIES BOUND. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, assigns,
heirs, legal representatives and estates, provided, however, that the Borrower
may not, without the prior written consent of the Bank, assign any rights,
powers, duties or obligations hereunder.
26. PARTICIPATIONS. The Bank shall have the right at any time and from
time to time to sell one or more participations in the Note or any Advance
thereunder. To the extent of any such participation the provisions of this
Agreement shall inure to the benefit of, and be binding on, each participant,
including, but not limited to, any indemnity from Borrower to the Bank. The
Borrower shall have no obligation or liability to and no obligation to negotiate
or confer with, any participant, and Borrower shall be entitled to treat the
Bank as the sole owners of the Note without regard to notice or actual knowledge
of any such participation. Upon the occurrence of a default or an Event of
Default, each participant will have and is hereby granted the right to setoff
against and to appropriate and apply from time to time, without prior notice to
the Borrower or any other party, any such notice being hereby expressly waived,
any and all deposits (general or special or other indebtedness or claims, direct
or indirect, contingent or otherwise), at any time held or owing by the
participant to or for the credit or account of Borrower against the payment of
the note and any other obligations of the Borrower hereunder, provided, however,
none of the rights granted in this Section 26 shall apply to any deposits held
by any participant constituting trust funds and so identified to such
participant at the time the applicable deposit account is created. Within five
(5) Business Days after such setoff or appropriation by a participant, that
participant shall give Borrower and Bank written notice thereof. However, a
failure to give such notice will not affect the validity of this setoff or
appropriation.
27. OTHER AGREEMENTS. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
28. FINANCIAL TERMS. All accounting terms used in this Agreement which
are not specifically defined herein shall be construed in accordance with GAAP.
- 41 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
BORROWER:
▇▇▇▇▇▇▇ OIL COMPANY,
a Delaware corporation
By:______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇, President
BANK:
BANK ONE, TEXAS, N.A.,
a national banking association
By:______________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President
- 42 -
EXHIBIT "A"
TERM NOTE
$38,250,000.00 Dallas, Texas November 12, 1999
FOR VALUE RECEIVED, the undersigned ▇▇▇▇▇▇▇ OIL COMPANY, a Delaware
corporation (referred to herein as "Borrower") hereby unconditionally promises
to pay to the order of BANK ONE, TEXAS, N.A., a national banking association
(referred to herein as "Bank"), at its banking offices in Dallas County, Texas,
the principal sum of THIRTY-EIGHT MILLION TWO HUNDRED FIFTY THOUSAND AND NO/100
DOLLARS ($38,250,000.00), in lawful money of the United States of America
together with interest from the date hereof until paid at the rates specified in
the Loan Agreement (as hereinafter defined). All payments of principal and
interest due hereunder are payable at the offices of Bank at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇, ▇▇▇-▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, attention: Energy Department, or at
such other address as Bank shall designate in writing to Borrower.
The principal and all accrued interest on this Term Note shall be due
and payable in accordance with the terms and provisions of the Loan Agreement.
This Term Note is executed pursuant to that certain Second Restated
Loan Agreement dated of even date herewith between Borrower and Bank (the "Loan
Agreement"), and is the Term Note referred to therein. This Term Note is secured
by certain Security Instruments (as such term is defined in the Loan Agreement)
of even date herewith between Borrower and Bank. Reference is made to the Loan
Agreement and the Security Instruments for a statement of prepayment, rights and
obligations of Borrower, description of the properties mortgaged and assigned,
the nature and extent of such security and the rights of the parties under the
Security Instruments in respect to such security and for a statement of the
terms and conditions under which the due date of this Term Note may be
accelerated. Upon the occurrence of an Event of Default, as that term is defined
in the Loan Agreement and Security Instruments, the holder hereof (i) may
declare forthwith to be entirely and immediately due and payable the principal
balance hereof and the interest accrued hereon, and (ii) shall have all rights
and remedies of the Bank under the Loan Agreement and Security Instruments. This
Term Note may be prepaid in accordance with the terms and provisions of the Loan
Agreement.
Regardless of any provision contained in this Term Note, the holder
hereof shall never be entitled to receive, collect or apply, as interest on this
Term Note, any amount in excess of the Maximum Rate, and, if the holder hereof
ever receives, collects, or applies as interest, any such amount which would be
excessive interest, it shall be deemed a partial prepayment of principal and
treated hereunder as such; and, if the indebtedness evidenced hereby is paid in
full, any remaining excess shall forthwith be paid to Borrower. In determining
whether or not the interest paid or payable, under any specific contingency,
exceeds the Maximum Rate, Borrower and the holder hereof shall, to the maximum
extent permitted under applicable law (i) characterize any non-principal payment
as an expense, fee or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof, and (iii) spread the total amount of
interest throughout the entire contemplated term of the obligations evidenced by
this Term Note and/or
referred to in the Loan Agreement so that the interest rate is uniform
throughout the entire term of this Term Note; provided that, if this Term Note
is paid and performed in full prior to the end of the full contemplated term
thereof; and if the interest received for the actual period of existence thereof
exceeds the Maximum Rate, the holder hereof shall refund to Borrower the amount
of such excess or credit the amount of such excess against the indebtedness
evidenced hereby, and, in such event, the holder hereof shall not be subject to
any penalties provided by any laws for contracting for, charging, taking,
reserving or receiving interest in excess of the Maximum Rate.
If any payment of principal or interest on this Term Note shall become
due on a Saturday, Sunday or public holiday or while the Bank is not open for
business, such payment shall be made on the next succeeding business day and
such extension of time shall in such case be included in computing interest in
connection with such payment.
If this Term Note is placed in the hands of an attorney for collection,
or if it is collected through any legal proceeding at law or in equity or in
bankruptcy, receivership or other court proceedings, Borrower agrees to pay all
costs of collection, including, but not limited to, court costs and reasonable
attorneys' fees.
Borrower and each surety, endorser, guarantor and other party ever
liable for payment of any sums of money payable on this Term Note, jointly and
severally waive presentment and demand for payment, notice of intention to
accelerate the maturity, notice of acceleration of the maturity, protest, notice
of protest and nonpayment, as to this Term Note and as to each and all
installments hereof, and agree that their liability under this Term Note shall
not be affected by any renewal or extension in the time of payment hereof, or in
any indulgences, or by any release or change in any security for the payment of
this Term Note, and hereby consent to any and all renewals, extensions,
indulgences, releases or changes.
This Term Note shall be governed by and construed in accordance with
the applicable laws of the United States of America and the laws of the State of
Texas.
THIS WRITTEN NOTE, THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
This Term Note is given in renewal, increase and extension of, and not
in extinguishment of, that certain Term Note, in the amount of $26,062,500,
executed by Borrower and payable to the order of Bank, dated December 20, 1995,
which Note renewed, extended and increased, but did not extinguish that certain
Renewal Term Note, in the amount of $16,062,500, executed by Borrower and
payable to the order of Bank, dated March 29, 1995, which Note renewed, extended
and increased, but did not extinguish that certain note dated December 22, 1994,
executed by Borrower and payable to the order of Bank, which December 22, 1994
note renewed and extended but did not extinguish, that certain note
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dated October 1, 1990, executed by Borrower and payable to the order of First
City, Dallas-Texas, which October 1, 1990 note was assigned to Bank on February
1, 1993.
EXECUTED as of the 12th day of November, 1999.
BORROWER:
--------
▇▇▇▇▇▇▇ OIL COMPANY,
a Delaware corporation
By:____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇, President
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EXHIBIT "B"
CONVERSION/CONTINUATION NOTICE
The undersigned hereby certifies that he is the __________ of ▇▇▇▇▇▇▇
Oil Company, a Delaware corporation ("Borrower") and that as such he is
authorized to execute this Conversion/Continuation Notice on behalf of the
Borrower. Pursuant to Section 4 of the Second Restated Loan Agreement dated as
of November 12, 1999 (as same may be amended, modified, increased, supplemented
and/or restated from time to time (the "Agreement") entered into by and between
Borrower and Bank One, Texas, N.A. ("Bank"), this Conversion/Continuation Notice
("Notice") represents Borrower's election to [insert one or more of the
following]:
[1. Use if converting Eurodollar Loans to Base Rate Loans.]
Convert $_______________ in aggregate principal amount of Eurodollar
Loans with a current Eurodollar Interest Period ending on ________,
19__, to Base Rate Loans on ________________, 19__. [and]
[2. Use if converting Eurodollar Loans to CD Loans.]
Convert $_______________ in aggregate principal amount of Eurodollar
Loans with a current Eurodollar Interest Period ending on ________,
19__, to CD Loans on ________________, 19__. The initial CD Interest
Period for such CD Loans is requested to be a [30] [60] [90] [180]
[365/366] day period. [and]
[3. Use if converting Base Rate Loans to Eurodollar Loans.]
Convert $ in aggregate principal amount of Base Rate Loans to
Eurodollar Loans on , 19 . The initial Eurodollar Interest Period for
such Eurodollar Loans is requested to be a [one] [two] [three] [six]
[twelve] month period. [and]
[4. Use if converting Base Rate Loans to CD Loans.]
Convert $_______________ in aggregate principal amount of Base Rate
Loans to CD Loans on ________, 19 . The initial CD Interest Period for
such CD Loans is requested to be a [30] [60] [90] [180] [365/366] day
period. [and]
[5. Use if converting CD Loans to Eurodollar Loans.]
Convert $ in aggregate principal amount of CD Loans with a current CD
Interest Period ending on , 19 , to Eurodollar Loans on , 19__. The
initial Eurodollar Interest Period for such Eurodollar Loans is
requested to be a [one] [two] [three] [six] [twelve] month period.
[and]
[6. Use if converting CD Loans to Base Rate Loans.]
Convert $_______________ in aggregate principal amount of CD Loans with
a current CD Interest Period ending on _________, 19__, to Base Rate
Loans on _________, 19__. [and]
[7.a. Use if continuing CD Loans] or
[7.b. Use with [number 5] and/or [number 6], and [and] if converting a
portion of CD Loans to Eurodollar Loans and/or Base Rate Loans and
continuing the balance as CD Loans.]
Continue as CD Loans $ in aggregate principal amount of CD Loans with a
current CD Interest Period ending , 19__. The succeeding CD Interest
Period is requested to be a [30] [60] [90] [180] [365/366] day period.
[8.a. Use if continuing Eurodollar Loans] or
[8.b. Use with [number 1] and/or [number 2], and [and] if converting a
portion of Eurodollar Loans to Base Rate Loans and/or CD Rate Loans and
continuing the balance as Eurodollar Loans.]
Continue as Eurodollar Loans $ in aggregate principal amount of
Eurodollar Loans with a current Eurodollar Interest Period ending ,
19__. The succeeding Interest Period is requested to be a [one] [two]
[three] [six] [twelve] month period.
[9. Use if converting to or continuing CD Loans and/or Eurodollar Loans.]
Borrower hereby certifies that no Default or Event of Default has
occurred and is continuing under the Credit Agreement.
Unless otherwise defined herein, terms defined in the Agreement shall
have the same meanings in this Notice.
Dated: , 19 .
-------------------- -----
▇▇▇▇▇▇▇ OIL COMPANY
a Delaware corporation
By:________________________________
Name:______________________________
Title:_____________________________
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EXHIBIT "C"
CERTIFICATE OF COMPLIANCE
The undersigned hereby certifies that he is the ______________ of
▇▇▇▇▇▇▇ OIL COMPANY (the "Company") and that as such he is authorized to execute
this Certificate of Compliance on behalf of the Company. With reference to that
certain Second Restated Loan Agreement, dated as of November 12, 1999, (as same
may be amended, modified, increased, supplemented and/or restated from time to
time, the "Agreement") entered into between Company and BANK ONE, TEXAS, N.A.,
the undersigned further certifies, represents and warrants on behalf of the
Company that as of __________________ all of the following statements are true
and correct (each capitalized term used herein having the same meaning given to
it in the Agreement unless otherwise specified):
(a) The Company has fulfilled in all material respects its
obligations under the Note and Loan Documents, including the Agreement,
and all representations and warranties made herein and therein continue
(except to the extent they relate solely to an earlier date) to be true
and correct in all material respects [if the representations and
warranties are not true and correct, the party signing this certificate
shall except from the foregoing statement the matters for which such
representations and warranties are no longer true specifying the nature
of any such change.]
(b) No Event of Default has occurred under the Loan Documents,
including the Agreement [if an Event of Default has occurred, the party
certifying hereto shall specify the facts constituting the Event of
Default and the nature and status thereof].
(c) To the extent requested from time to time by the Bank, the
certifying party shall specifically affirm compliance of the Company in
all material respects with any of its representations and warranties
(except to the extent they relate solely to an earlier date) or
obligations under said instruments.
(d) Financial Computations (provide calculation as of the
most recently ended fiscal quarter):
(i) Current Ratio;
(ii) Fixed Charge Coverage Ratio;
(iii) Net Worth; and
(iv) Debt to Worth Ratio.
EXECUTED, DELIVERED AND CERTIFIED TO this ____ day of __________, 19__.
▇▇▇▇▇▇▇ OIL COMPANY
a Delaware corporation
By:____________________________
Name:__________________________
Title:_________________________
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SCHEDULE "1"
LIENS
-----
NONE
SCHEDULE "2"
FINANCIAL CONDITION
-------------------
NONE
SCHEDULE "3"
LIABILITIES
-----------
NONE
SCHEDULE "4"
LITIGATION
---------
NONE
SCHEDULE "5"
SUBSIDIARIES
------------
MOC Resources, Inc.
SCHEDULE "6"
ENVIRONMENTAL MATTERS
---------------------
NONE
SCHEDULE "7"
TITLE MATTERS
-------------
1. Provide title opinions satisfactory to Bank covering the interests of
Borrower in the following
properties:
▇▇▇▇▇ & ▇▇▇▇ Counties, Texas
----------------------------
▇▇▇▇▇▇ G-1
▇▇▇▇▇▇ G-3
▇▇▇▇▇▇ G-4
▇▇▇▇▇▇ G-5
▇▇▇▇▇▇ G-6
▇▇▇▇▇▇ G-7
▇▇▇▇▇▇ ▇-▇
▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
----------------------
Grange A
Grange D
Eddy County, New Mexico
-----------------------
Roche Federal #1
Roche Federal #2
Roche Federal #4
Lea County, New Mexico
----------------------
▇.▇. ▇▇▇▇▇▇, ▇▇. #1
▇.▇. ▇▇▇▇▇▇, ▇▇. #2
▇.▇. ▇▇▇▇▇▇, ▇▇. #3
▇.▇. ▇▇▇▇▇▇, ▇▇. #4
SCHEDULE "8"
CURATIVE MATTERS
----------------
1. ▇▇▇▇▇ ▇▇▇▇▇▇ Property, Crane County, Texas. Provide Bank with a release
of State Tax Lien encumbering this property pursuant to Comment 4,
Requirement b, on Exhibit "B" to ▇▇▇▇ ▇. ▇▇▇▇▇, Inc. Title Report dated
November 1, 1999.
2. ▇▇▇▇▇▇▇ Property, ▇▇▇▇▇▇ County, Texas. Provide Bank with correction
Deed from PMC Group which effectively conveys the mineral fee under
subject lands to Borrower pursuant to Comment II Requirement on page 2
of ▇▇▇▇ ▇. ▇▇▇▇▇, Inc. Title Report dated November 1, 1999.
3. ▇▇▇▇▇▇ #5U, ▇▇▇▇▇▇ County, Texas. Provide Bank with correction Deed
from PMC Group which effectively conveys the mineral fee under subject
lands to Borrower pursuant to Comment II Requirement on page 2 of ▇▇▇▇
▇. ▇▇▇▇▇, Inc. Title Report dated November 1, 1999.
4. ▇▇▇▇▇▇▇ #▇ & #▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇. Provide Bank with Correction
Deed from PMC Group which effectively conveys the mineral fee under
subject lands to Borrower pursuant to Comment III Requirement on page 2
of ▇▇▇▇ ▇. ▇▇▇▇▇, Inc. Title Report dated November 1, 1999.
5. Wharton Unit 1-A, ▇▇▇▇▇▇ County, Texas. Provide Bank with release of
$70,000,000 production payment from ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Oil Corporation
pursuant to Comment 12 Requirement D on Exhibit "B" to ▇▇▇▇ ▇. ▇▇▇▇▇,
Inc. Title Report dated November 1, 1999.
6. ▇▇▇▇▇▇, ▇.▇. et al. GU #3, ▇▇▇▇ County, Texas. Provide Bank with
Correction Deed from PMC Group which effectively conveys the mineral
fee under subject lands to Borrower pursuant to Comment II Requirement
on page 2 of ▇▇▇▇ ▇. ▇▇▇▇▇, Inc. Title Report dated November 1, 1999.
7. ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ County, Texas. Provide Bank with Correction
Assignment and Conveyance from Petroleum, Inc. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
pursuant to Comments 6, 7 & 9 of T. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Title Report dated
November 1, 1999.
8. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ GU, Terrell County, Texas. Provide Bank with Correction
Deed from the PMC Group which effectively conveys the mineral fee under
subject lands to Borrower pursuant to Comment II Requirement on page 2
of ▇▇▇▇ ▇. ▇▇▇▇▇, Inc. Title Report dated November 1, 1999.
9. Allied Federal ▇▇. ▇ ▇▇▇▇▇ ▇-▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇. Provide Bank
with title materials which satisfy Comment 6 Requirement C, and Comment
10 Requirement E on Exhibit B to T. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Title Report dated
November 1, 1999.
10. ▇▇▇▇▇ ▇▇ Com No. 2, Eddy County, New Mexico. Provide Bank with consent
to assign to ▇▇▇▇▇▇▇ and to encumber the property with Bank One, Texas
Mortgage pursuant to Comment IV
on page 3, and Comment 13 Requirement E on Exhibit "B" of T. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ Title Report dated November 1, 1999.
11. Provide copies of Assignments to ▇▇▇▇▇▇▇ from Questar.
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