SECOND AMENDED AND RESTATED LOAN AGREEMENT dated effective as of October 31, 2007 among GMX RESOURCES INC., as Borrower, AND CAPITAL ONE, NATIONAL ASSOCIATION, as Administrative Agent, AND THE BANKS LISTED ON THE SIGNATURE PAGE, as Banks
EXHIBIT 10.1
SECOND
AMENDED AND RESTATED
dated
effective as of
October
31, 2007
among
as
Borrower,
AND
CAPITAL
ONE, NATIONAL ASSOCIATION,
as
Administrative Agent,
AND
THE
BANKS
LISTED ON THE SIGNATURE PAGE,
as
Banks
SECOND
AMENDED AND RESTATED LOAN AGREEMENT
THIS
SECOND AMENDED AND RESTATED LOAN AGREEMENT (this “Agreement”), dated effective
as of October 31, 2007, is made among GMX RESOURCES INC., an Oklahoma
corporation (the “Borrower”), the BANKS (as defined below), CAPITAL
ONE, NATIONAL ASSOCIATION, a national banking association, as administrative
agent for the Banks (and individually as a Bank), who agree as
follows:
PRELIMINARY
STATEMENT
WHEREAS,
the Borrower and Capital One, National Association (under its former name
Hibernia National Bank, the "Initial Bank"), were parties to the Loan Agreement
dated effective as of July 29, 2000, as amended by the Interim Agreement dated
as of November 3, 2005, and the Second Amendment thereto dated as of December
20, 2005 (as so amended, the “Initial Loan Agreement”).
WHEREAS,
the Borrower and the Initial Bank amended the line of credit under said Initial
Loan Agreement, to provide for the participation by other banks in said line
of
credit on an agented credit basis, to reflect the joinder of Union Bank of
California as a Bank and an increase in the Borrowing Base, and to permit
certain subordinated borrowing by the Borrower, and in connection therewith
amended and restated said Initial Loan Agreement in its entirety as provided
in
the following paragraph.
WHEREAS,
the Borrower, the Agent and the Banks are parties to the Amended and Restated
Loan Agreement dated effective as of June 7, 2006, as amended by the First
Amendment dated as of August 4, 2006, the Second Amendment dated as of August
14, 2006, the Third Amendment dated as of December 21, 2006, the Fourth
Amendment dated as of March 13, 2007 (but effective as of December 31, 2006),
and the Fifth Amendment dated as of July 31, 2007 (as so amended, the “Prior
Loan Agreement”).
WHEREAS,
the Borrower, the Agent and the Banks desire to renew the line of credit under
said Prior Loan Agreement, and in connection therewith to amend and restate
said
Prior Loan Agreement in its entirety.
NOW,
THEREFORE, in consideration of the premises, and the mutual agreements contained
herein, the Borrower, the Agent and the Banks do hereby (i) agree that nothing
in this Second Amended and Restated Loan Agreement shall constitute the
satisfaction or extinguishment of the amount owed under the line of credit
promissory notes issued under said Prior Loan Agreement, nor shall it be a
novation of the amount owed under such line of credit promissory notes, and
(ii)
amend and restate said Prior Loan Agreement in its entirety as
follows:
ARTICLE
1
GENERAL
TERMS
Section
1.1 Terms
Defined Above. As used in this Agreement, the terms “Agreement”, “Borrower”,
"Initial Bank", “Initial Loan Agreement”, and “Prior Loan Agreement” shall have
the meanings indicated above.
Section
1.2 Certain
Definitions. As used in this Agreement, the following terms shall
have the meanings indicated (and as provided in Section 10.14), unless
the context otherwise requires:
“Advances”
shall mean the borrowings on the Closing Date under the Loan and all or any
portion of such borrowings and other or subsequent reborrowings under the Loan
so long as same remain outstanding and unpaid.
“Affiliate”
shall mean, with respect to a specified Person, another Person that directly,
or
indirectly through one or more intermediaries, controls or is controlled by
or
is under common control with the Person specified (and the term “control”
means the possession, directly or indirectly, of the power to direct
or cause
the direction of the management or policies of a Person through the ability
to
exercise voting power) (and the terms “controlling” and
“controlled” have meanings correlative thereto).
“Agent”
shall mean Capital One, National Association in its capacity as administrative
agent of the Banks pursuant to Article 9 and any successor administrative
agent pursuant to Section 9.1.
“Amount”
shall mean one hundred twenty five million ($125,000,000.00)
dollars. Although the aggregate notional amount of the Notes under
this Agreement is the Amount, the Commitment Limit is acknowledged by Borrower
to be a lesser number, subject to one or more future increases by the Banks
in
their sole discretion and the Borrower’s request in conjunction with any future
increases in the Borrowing Base and further bank management approvals, and
subject to the fee payable on the incremental increased portion under Section
2.5.
“Applicable
LIBO Rate Margin” shall have the meaning set forth in the definition of
“LIBO Rate”.
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“Banks”
shall mean the lenders listed on Schedule 1 hereto and on the signature
pages of this Agreement, and their respective successors and assigns in
accordance with Section 9.6.
“Base
Rate” shall mean, for any day, an interest rate per annum equal to the Prime
Rate in effect on such day. Without notice to the Borrower, the Base
Rate shall change automatically from time to time as and in the amount by which
the Prime Rate shall fluctuate, with each such change in the Base Rate to be
effective as of the date of each change in the Prime Rate, adjusted
daily.
“Borrowing
Base” shall mean, at any time, the dollar amount calculated as the maximum
loan value of the Collateral as determined by the Agent, in each case with
the
consent of the Required Banks or all the Banks, as applicable, as provided
below
in this definition, in their sole discretion, but based upon their respective
customary standards and practices from time to time in effect with respect
to
secured oil and gas property lines of credit in determining the discounted
present value of the Collateral’s production and the Borrower’s cash
flows. Any good faith determination by the Agent and the Banks of the
Borrowing Base shall be final and conclusive as to the Borrower. The
Borrowing Base may be revised by Agent and the Banks at any time to reflect
changes in the Collateral or the occurrence of events or economic conditions
or
otherwise pursuant to Agent’s and the Banks' customary standards and practices
as such exist at that particular time, and further will be subject to scheduled
semi-annual redeterminations (approximately April 1 and October 1) during the
term of this Loan. Additionally, the Borrower may request once per
any six month period between scheduled redeterminations that an unscheduled
redetermination be done by Agent and the Banks, subject to Borrower’s payment to
Agent for distribution to the Banks of a fee in accordance with Section
2.5. The Agent shall notify the Borrower of the result of each
Borrowing Base redetermination at least fifteen (15) days before its effective
date. Each determination of the Borrowing Base shall be effective
until redetermined by the Agent in accordance with this Agreement (or until
the
Maturity Date). Such redetermination may lead to increased or decreased credit
availability to the Borrower under the revised Borrowing Base schedule, and
any
increase shall be subject to Banks' credit approval process. The
Borrowing Base after any redetermination may be subject to automatic Periodic
Reductions (with notice to Borrower) as provided and defined in
Subsection
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2.4
(c). Without limiting the foregoing, the Agent may exclude, in
its sole and absolute discretion, any property or portion of production
therefrom from the Borrowing Base, at any time, because title information on,
or
the status of title to, such property is not reasonably satisfactory to Agent,
such property is not Collateral, the Agent’s Lien therein is not first and prior
to all others, such property is subject to contractual agreements or commitments
not reasonably satisfactory to Agent, or such property is not
assignable. The Borrower acknowledges that the determination of the
Borrowing Base contains an equity cushion (market value in excess of loan
value), which is acknowledged by the Borrower to be essential for the adequate
protection of the Agent and the Banks. On the Closing Date, the
Borrowing Base is $90,000,000.00. Thereafter, the Agent shall make a
preliminary redetermination of the Borrowing Base each March 1 and
September 1 of each year (assuming timely delivery of requested information
from
the Borrower), and otherwise at such times as deemed appropriate by the Agent
or
the Required Banks (including as may be provided by Section
3.3). The Agent promptly shall notify the Banks in writing of
each such preliminary redetermination. Each Bank shall notify the
Agent in writing of either its approval or disapproval of any such preliminary
redetermination of the Borrowing Base within ten (10) Business Days after its
receipt of such notice. Each re-determination of the Borrowing Base
which results in an increase shall require the consent of all of the Banks;
each
other redetermination of the Borrowing Base (which results in no change or
a
decrease) shall require the consent of the Required Banks. Upon
approval of all the Banks or the Required Banks, as applicable, of each
redetermination, the Agent shall notify the Borrower as provided
above.
“Business
Day” shall mean (a) for all purposes other than as covered by clause (b) of
this definition, a day other than a Saturday, Sunday or legal holiday for
commercial banks in either New Orleans, Louisiana, or New York, New York, and
(b) with respect to all requests, notices and determinations in connection
with
LIBO Rate Loans, a day which is a Business Day described in clause (a) of this
definition and which is a day for trading by and between banks for dollar
deposits in the London interbank market.
“Closing
Date” shall mean the date on which the Notes are executed and delivered by
the Borrower to the Banks and all the
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other
conditions in Section 7.1 are met or waived (temporarily or
otherwise).
“Code”
shall mean the Internal Revenue Code of 1986, as amended.
“Collateral”
shall mean the properties and property rights described in the Collateral
Documents described in Section 3.1 as primary security for the
Indebtedness.
“Collateral
Documents” shall mean collectively the documents from time to time required
by the Agent and the Banks to obtain the security interest in the Collateral,
or
otherwise guarantee or secure the Indebtedness, or otherwise pertaining to
this
Agreement (including without limitation the letter of credit applications
described in Subsection 2.1(f) below), such documents which exist on the
Closing Date being described in Article 3 hereof, as all such documents are
amended, restated or renewed from time to time.
“Commitment
Limit” shall mean, at any particular date, the lesser of (x) the
Amount (as it may be increased by the Banks from time to time) or (b) the
Borrowing Base as most recently determined and in effect (including the effect
of any Periodic Reductions).
“Commitments”
shall mean the commitments of each of the Banks for the Loan set forth on
Schedule 1 hereto as amended from time to time.
“Companies”
shall mean collectively, on the Closing Date, the Borrower, Endeavor, and
Diamond, and thereafter all such Persons plus any Subsidiary formed or acquired
after the Closing Date, and “Company” shall mean any one of the
Companies.
“Contracts”
shall mean those agreements, contracts and other instruments to which the
Borrower’s interest in the oil, gas and mineral leases comprising the Collateral
are subject.
“Debt”
shall mean any and all amounts and/or liabilities owing from time to time by
a
Company to any Person, including any Secured Party, direct or indirect,
liquidated or contingent, now existing or hereafter arising, including without
limitation (i) indebtedness for borrowed money or the deferred purchase price
of
property; (ii) unfunded portions of commitments for money to be borrowed; (iii)
the amounts of all standby and commercial letters
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of
credit
and bankers acceptances, matured or unmatured, issued on behalf of such Company,
and (without duplication) all drafts drawn thereon; (iv) guaranties of the
obligations of any other Person, whether direct or indirect, whether by
agreement to purchase the indebtedness of any other Person or by agreement
for
the furnishing of funds to any other Person through the purchase or lease of
goods, supplies or services (or by way of stock purchase, capital contribution,
advance or loan) for the purpose of paying or discharging the indebtedness
of
any other Person, or otherwise; (v) indebtedness of the types described above
secured by any Lien on any property owned by such Company, to the extent
attributable to such Company’s interest in such property, even though such
Company has not assumed or become liable for the payment thereof personally;
(vi) the present value of all obligations for the payment of rent or hire of
property of any kind (real or personal) under leases or lease agreements
required to be capitalized under generally accepted accounting principles,
(vii)
trade payables and operating leases incurred in the ordinary course of business
or otherwise; (viii) Hedging Obligations; (ix) obligations of such Company
owing
in respect of redeemable preferred stock; and (x) obligations of such Company
owing in connection with production payments.
“Deed
of Trust” shall mean the Texas Deed of Trust described in Section
3.1(i), as amended, supplemented or restated from time to time.
“Default”
shall mean the occurrence of any of the events specified in Article 8 hereof,
whether or not any requirement for notice or lapse of time or other condition
precedent has been satisfied.
“Default
Rate” shall mean, on any particular date, the Base Rate plus five
(5%) percent per annum, but in no event to exceed the Maximum Rate.
“Diamond”
shall mean Diamond Blue Drilling Co., an Oklahoma corporation and a wholly
owned
Subsidiary of the Borrower.
“EBITDA”
shall mean, for each period of four preceding fiscal quarters, the sum of the
Borrower’s (i) net income for that period, plus (ii) any extraordinary loss and
other expenses not considered to be operating in nature reflected in such net
income, minus (iii) any extraordinary gain, interest income and other
income not
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considered
operating in nature reflected in such net income, plus (iv) depreciation,
depletion, amortization and all other non-cash expenses for that period,
plus (v) all interest, fees, charges and related expenses paid or payable
(without duplication) for that period to a lender in connection with borrowed
money or the deferred purchase price of assets that are considered “interest
expense” under generally accepted accounting principles, together with the
portion of rent paid or payable (without duplication) for that period under
capital lease obligations that should be treated as interest in accordance
with
Financial Accounting Standards Board Statement No. 13, plus (vi) the
aggregate amount of federal and state taxes on or measured by income for that
period (whether or not payable during that period).
“Endeavor”
shall mean Endeavor Pipeline Inc., an Oklahoma corporation, and a wholly owned
Subsidiary of the Borrower.
“ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as
amended.
“Event
of Default” shall mean the occurrence of any of the events specified in
Article 8 hereof, provided that any requirement for notice or lapse of time
or
any other condition precedent has been satisfied.
“Expedition”
shall mean Expedition Natural Resources Inc., an Oklahoma corporation, formerly
a wholly owned Subsidiary of the Borrower, merged into the Borrower on or about
July 29, 2005.
“Hedge
Agreement” shall mean any agreement or arrangement providing for payments
which are related to, or the value of which is dependent upon, fluctuations
of
interest rates, currency exchange rates or forward rates, or fluctuations of
commodity prices, including without limitation any swap agreement, cap, collar,
floor, exchange transaction, forward agreement or exchange or protection
agreement or similar futures contract or swap or other derivative agreement
related to interest rates, currency exchange rates or hydrocarbons or other
commodities, or any option with respect to such transaction.
“Hedging
Obligations” of a Person shall mean any and all obligations of such Person,
whether absolute or contingent and howsoever and whensoever created, arising
or
evidenced (including all renewals, extensions and modifications thereof and
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substitutions
therefor), under any and all Hedge Agreements and any and all cancellations,
buybacks, reversals, terminations or assignments of any Hedge
Agreement.
“Indebtedness”
shall mean any and all amounts, liabilities or obligations owing from time
to
time by the Borrower to the Agent or to all or any of the Banks pursuant to
this
Agreement, the Notes and the Collateral Documents (including attorneys’ fees
incurred in connection with the execution, enforcement or collection of the
Borrower’s obligations hereunder or thereunder or any part thereof and all fees
payable in connection herewith to the Agent or to the Banks), whether such
amounts, liabilities or obligations be liquidated or unliquidated, now existing
or hereafter arising.
“Indemnified
Parties” shall have the meaning provided in Section
5.14.
"Intercreditor
Agreement" shall mean the Intercreditor Agreement among the Agent and the
Banks, on the one hand, and the Subordinated Holders, on the other, setting
forth terms of subordination substantially as set forth on Addendum
II.
“Interest
expense” shall mean, for each period, the sum of all interest, fees, charges
and related expenses payable (without duplication) for that period to a lender
in connection with borrowed money or the deferred purchase price of assets
that
are considered “interest expense” under generally accepted accounting
principles, plus the portion of rent paid or payable (without duplication)
for
that period under capital lease obligations that should be treated as interest
in accordance with Financial Accounting Standards Board Statement No.
13.
“Issuing
Bank” shall mean Capital One, National Association, and any successor
issuing bank pursuant to Section 9.1.
“Letter
of Credit Sublimit” shall mean ten million ($10,000,000.00)
dollars.
“LIBO
Rate” shall mean, during any Interest Period (as defined below) for any
Advance, an interest rate per annum equal to the Reserve Adjusted LIBO Rate
(as
defined below) plus the Applicable LIBO Rate Margin (as defined
below). “Reserve Adjusted LIBO Rate” shall mean with respect
to each Interest Period for a LIBO Rate Advance, an interest rate per annum
equal
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to
the
quotient (converted to a percentage, rounded upward to the nearest whole
multiple of 1/100 of 1% per annum) of (i) the rate per annum as determined
by
the Agent at or about 10:00 a.m. Central Time (or as soon thereafter as
practicable) on the second Business Day prior to the first day of each Interest
Period, to be the annual rate of interest for deposits in United States dollars
for the selected Interest Period as shown on the Dow ▇▇▇▇▇ Telerate Matrix
page
for British Bankers Association Interest Settlement Rates as of two Business
Days prior to the first day of such Interest Period, divided by (ii) the amount
by which 1.00 exceeds the LIBOR Reserve Requirement (as defined below),
expressed as a decimal, for such Interest Period. “LIBOR Reserve
Requirement” shall mean for any day during an Interest Period for any LIBO
Rate Advance, that percentage (expressed as a decimal) which is specified by
the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, but not limited to,
any
marginal reserve requirement) for the Banks with respect to liabilities
consisting of or including “Eurocurrency liabilities” (as defined in Regulation
D of the Board of Governors of the Federal Reserve System) with a maturity
equal
to such Interest Period. In determining this percentage, the Agent
may use any reasonable averaging and attribution method. “Interest
Period” shall mean the period between the Business Day on which the LIBO
Rate shall begin and the day on which the LIBO Rate shall end. The
duration of each Interest Period for a LIBO Rate Advance shall be one (1) month,
two (2) months, or three (3) months, at the Borrower’s election, subject to the
following: (i) no Interest Period shall extend past the Maturity Date; (ii)
whenever the last day of any Interest Period would otherwise occur on a day
other than a Business Day, the last day of such Interest Period shall be
extended to occur on the next succeeding Business Day, except that if the
next succeeding Business Day would occur in the next following calendar month,
the last day of such Interest Period shall be shortened to occur on the next
preceding Business Day; (iii) whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there is no numerically
corresponding day in the calendar month that succeeds such initial calendar
month by the number of months in such Interest Period, such Interest Period
shall end on the last Business Day of such succeeding calendar month; and (iv)
if the Borrower fails to designate an Interest Period, the Interest Period
for a
LIBO Rate Advance (recognizing that under Subsection 2.1(b) below the
Banks are not obligated to make such
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a
LIBO
Rate Advance in the absence of such designation by the Borrower) shall be deemed
to be one month until a different designation is made for a subsequent Interest
Period. No Interest Period for a LIBO Rate Advance shall have a
duration of less than one month, and if any such Interest Period would otherwise
be a shorter period, the relevant Advance shall be a Base Rate Advance during
such period. The “Applicable LIBO Rate Margin” shall mean the
following per annum interest rate from time to time, determined for each fiscal
quarter by reference to the Percentage Outstanding for the immediately prior
fiscal quarter, in accordance with the following schedule:
|
Percentage
Outstanding
|
Applicable
LIBO
Rate
Margin
|
|
|
0
to 50%
|
1.50%
|
|
|
above
50% to 90%
|
1.75%
|
|
|
above
90%
|
2.25%
|
The
Applicable LIBO Rate Margin shall remain fixed during each fiscal quarter of
the
Borrower’s fiscal year, determined on the first day of each fiscal quarter
depending upon the Percentage Outstanding for the immediately prior
quarter. (During the first partial quarter of this Agreement,
commencing on the Closing Date, the Applicable LIBO Rate Margin shall be set
using the Percentage Outstanding under the Prior Loan Agreement for the period
from October 1, 2007, through the Closing Date.) No more than four
(4) LIBO Rate tranches at any one time are permitted for the
Notes. The Borrower will comply with the provisions of Addendum
I hereto, relating to the LIBO Rate, which is an integral part of this
Agreement. The LIBO Rate shall remain fixed for the duration of the
LIBO Rate Interest Period selected. The Borrower shall not have the
right to voluntarily prepay Advances outstanding at the LIBO Rate prior to
the
end of the applicable LIBO Rate Interest Period unless the Borrower includes
payment of amounts, if any, required to be paid pursuant to paragraph 6 of
Addendum I.
“Lien”
shall mean any interest in property securing an obligation owed to, or a claim
by, a Person other than the owner of the property, whether such interest is
based on jurisprudence, statute or contract, and including but not limited
to
the lien or security interest arising from a mortgage, encumbrance, pledge,
security
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agreement,
production payment, conditional sale, bond for deed or trust receipt or a lease,
consignment or bailment for security purposes. The term “Lien” shall
include reservations, exceptions, encroachments, easements, servitudes,
usufructs, rights-of-way, covenants, conditions, restrictions, leases, and
other
title exceptions and encumbrances affecting property. For the
purposes of this Agreement, the Borrower shall be deemed to be the owner of
any
property which it has accrued or holds subject to a conditional sale agreement,
financing lease or other arrangement pursuant to which title to the property
has
been retained by or vested in some other Person for security
purposes.
“Loan”
shall mean the line of credit and standby letters of credit as described in
Article 2 hereof.
“Loan
Excess” shall mean, at any point in time, the amount, if any, by which the
outstanding principal balance of the Advances plus the undisbursed amount of
all
outstanding standby letters of credit issued pursuant to this Agreement exceeds
the Commitment Limit then in effect.
“Maturity
Date” shall mean July 15, 2011, or such earlier date on which the Loan is
accelerated pursuant to Section 8.2 hereof.
"Maximum
Rate" shall mean the maximum nonusurious interest rate permitted under
applicable law (determined under such laws after giving effect to any items
which are required by such laws to be construed as interest in making such
determination, including without limitation if required by such laws, certain
fees and other costs), as such laws are presently in effect, or, to the extent
allowed by applicable law, as such laws may hereafter be in effect and which
allow a higher maximum non-usurious interest rate than such laws now
allow.
“Maximum
Subordinated Amount” shall mean eighty million ($80,000,000.00) dollars,
consisting of fifty million ($50,000,000.00) dollars of Qualified Redeemable
Preferred Equity and thirty million ($30,000,000.00) dollars of Qualified
Subordinated Debt.
“Notes”
shall mean the promissory notes executed by the Borrower, each substantially
in
the form of Exhibit A hereto, initially dated the Closing Date (and
subsequently dated on the date that additional Banks become a party to this
Agreement),
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payable
to the order of each Bank in the amount of the Bank’s Commitment, in
representation of the Advances available to be made under the line of credit
Loan, together with any and all amendments, modifications, extensions, renewals,
increases or rearrangements thereof or therefor. (The Notes dated the
Closing Date payable to the order of each Bank in the amount of the Bank’s
Commitment as shown on Schedule 1 hereto have been given in renewal,
extension and increase of the indebtedness previously evidenced by those certain
two Line of Credit Notes, each dated June 7, 2006, issued under the Prior Loan
Agreement, which were in turn given in renewal, extension and increase of the
Indebtedness previously evidenced by that certain Line of Credit Note
dated July 29, 2005, issued under the Initial Loan
Agreement.)
“Operator”
shall mean each Person which is an operator of any of the Borrower’s
properties.
“Patriot
Act” shall have the meaning set forth in Section 4.22.
“Participation
Agreement” shall mean the Participation Agreement dated December 29, 2003,
by and among Penn Virginia Oil & Gas Corporation, the Borrower, and
Expedition and Endeavor, as amended by the First Amendment dated February 27,
2004, the Second Amendment dated March 9, 2004, the Third Amendment dated April
6, 2004, the Amendment No. 4 dated August 11, 2004, the Amendment No. 5 dated
February 25 and March 2, 2005, the Amendment No. 6 entered January 3 and 13,
2006, and as further amended after the Closing Date in accordance with this
Agreement. PVOG is the successor to Penn Virginia Oil and Gas
Corporation under the Participation Agreement.
“Percentage
Outstanding” shall mean, for any fiscal quarter (or lesser time period as
applicable), the fraction (expressed as a percentage) obtained by dividing
(x)
the average unpaid and outstanding aggregate principal balance of the Advances
under the Notes plus the undisbursed amount of all standby letters of
credit during such quarter, by (y) the average of the Commitment Limit for
such
quarter.
“Periodic
Reduction” shall have the meaning provided in Subsection
2.4(c).
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“Permitted
Commodity Hedge” shall mean non-speculative transactions in futures,
forwards, swaps or option contracts (including both physical and financial
settlement transactions), engaged in by the Borrower or any Subsidiary as part
of its normal business operations with the purpose and effect of hedging prices
as a risk management strategy or hedge against adverse changes in the prices
of
natural gas or oil (including without limitation commodity price ▇▇▇▇▇▇, swaps,
caps, floors, collars and similar agreements designed to protect the Borrower
or
such Subsidiary against fluctuations in commodity prices or any option with
respect to any such transaction) and not intended primarily as a borrowing
of
funds, provided that all times: (1) no such contract fixes a price for a term
of
more than thirty six (36) months without the prior written consent of the
Required Banks; (2) the aggregate monthly production covered by all such
contracts (considered both individually and in the aggregate) by the Borrower
and all its Subsidiaries (determined, in the case of contracts that are not
settled on a monthly basis, by a monthly proration acceptable to the Agent)
for
any single month during the next six (6) month period (on a rolling basis)
does
not exceed (x) for oil, one hundred (100%) percent of the Borrower’s aggregate
Existing Production (as defined below) of oil sold for the immediately preceding
month, and (y) for gas, one hundred (100%) of Borrower’s aggregate Existing
Production of gas sold for the immediately preceding month; (3) the aggregate
production covered by all such contracts (considered both individually and
in
the aggregate) by the Borrower and all its Subsidiaries does not in the
aggregate exceed (x) for oil, eighty (80%) percent of the Borrower’s aggregate
Projected Production (as defined below) of oil anticipated to be sold in the
ordinary course of the Borrower’s business for the time period(s) covered by
such contracts, and (y), for gas, eighty (80%) percent of the Borrower’s
aggregate Projected Production of gas anticipated to be sold in the ordinary
course of the Borrower’s business for the time period(s) covered by such
contracts; (4) no such contract requires the Borrower or such Subsidiary to
put
up money, assets, letters of credit or other security against the event of
its
nonperformance prior to actual default by the Borrower or such Subsidiary in
performing its obligations thereunder, other than letters of credit issued
under
this Agreement; and (5) each such contract shall be either with any Bank or
an
Affiliate of any Bank (without restriction as to rating), or with a counterparty
who (or have a guarantor of the obligation of the counterparty who), at the
time
the contract is made, has
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long-term
obligations rated AA or Aa2 or better, respectively, by Standard & Poor’s
Corporation or ▇▇▇▇▇’▇ Investors Services, Inc. (or a successor credit rating
agency) or with a counterparty otherwise approved in advance by the Required
Banks. As used herein, the term “Existing Production” means the
actual production of oil or gas (measured by volume unit or BTU equivalent,
not
sales price), as applicable, sold in the ordinary course of the Borrower’s
business for a particular month from properties and interests owned by the
Borrower which are Collateral and which have attributable to them proved
developed oil or gas reserves as reflected in the most recent engineering report
delivered pursuant to Subsection 5.2(c), after deducting production from
any properties or interests sold that had been included in such report and
after
adding actual production from any properties or interests owned by the Borrower
which have become Collateral and have not been reflected in such report that
are
reflected in a separate or supplemental report meeting requirements of such
Subsection 5.2(c) or otherwise satisfactory to the Agent. As
used herein, the term “Projected Production” means the projected production of
oil or gas (measured by volume unit or BTU equivalent, not sales price), as
applicable, for the term of the contracts or a particular month, as applicable,
from properties and interests owned by the Borrower which are Collateral and
which have attributable to them proved developed producing oil or gas reserves
as reflected in the most recent engineering report delivered pursuant to
Subsection 5.2(c), after deducting projected production from any
properties or interests sold or under contract for sale that had been included
in such report and after adding projected production from any properties or
interests owned by the Borrower which have become Collateral and had not been
reflected in such report that are reflected in a separate or supplemental report
meeting requirements of such Subsection 5.2(c) and otherwise satisfactory
to the Agent.
“Permitted
Hedge Agreement” shall mean any Hedge Agreement which is a Permitted
Commodity Hedge or a Permitted Interest Hedge.
"Permitted
Hedge Obligations” shall mean any and all present and future amounts,
obligations and liabilities, contingent or otherwise, of the Borrower and its
Subsidiaries under, collectively, all Permitted Commodity ▇▇▇▇▇▇ and all
Permitted Interest ▇▇▇▇▇▇.
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14
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“Permitted
Interest Hedge” shall mean any forward contract, futures contract, swap,
option or other financial agreement or arrangement (including without limitation
caps, floors, collars, puts and similar agreements or any option with respect
to
any such transaction) relating to, or the value of which is dependent upon,
interest rates, entered into by the Borrower with one or more financial
institutions or one or more futures exchanges as part of its normal business
operations (recognizing that Borrower has not done so in the past) with the
purpose and effect of hedging interest rates on a principal amount of the
Borrower’s Debt that is accruing interest at a variable rate as a
risk-management strategy, and not for purposes of speculation and not intended
primarily as a borrowing of funds, and which are designed to protect the
Borrower against fluctuations in interest rates with respect to Debt, provided
that at all times: (1) the aggregate notional amount of such contracts never
exceeds one hundred (100%) percent of the anticipated outstanding principal
balance of the Debt of the Borrower to be hedged by such contracts or an average
of such principal balances calculated using a generally accepted method of
matching interest swap contracts to declining principal balances; (2) the
floating rate index of each such contract generally matches the index used
to
determine the floating rates of interest on the corresponding Debt of the
Borrower to be hedged by such contract; and (3) each such contract shall be
either with any Bank or any Affiliate of any Bank (without restriction as to
rating), or with a counterparty who (or have a guarantor of the obligation
of
the counterparty who), at the time the contract is made, has long-term
obligations rated AA or Aa2 or better, respectively, by Standard & Poors
Corporation or ▇▇▇▇▇’▇ Investors Services, Inc. (or a successor credit rating
agency), or with a counterparty otherwise approved in advance by the Required
Banks.
“Person”
shall mean any individual, corporation, limited liability company, partnership,
joint venture, association, joint stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof, or
any
other form of entity.
“Plan”
shall mean any plan subject to Title IV of ERISA and maintained by the Borrower,
or any such plan to which the Borrower is required to contribute on behalf
of
its employees.
“Prime
Rate” shall mean, at any particular date, the prime or base rate as
reflected in The Wall Street Journal (or if such rate is not
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published
or is no longer available, such other index satisfactory to the
Agent). Without notice to the Borrower, the Prime Rate shall change
automatically from time to time as and in the amount by which said index rate
shall fluctuate, with each such change in the Prime Rate to be effective as
of
the date of each change in such index rate. The Wall Street
Journal index rate is a reference rate and does not necessarily represent
the lowest or best rate actually charged to any customer by the Agent or any
Bank (or by such institutions comprising said index).
“Prior
Loan Agreement” shall have the meaning provided in the Preliminary Statement
of this Agreement.
"Qualified
Redeemable Preferred Equity" shall mean redeemable preferred stock issued by
the Borrower which (i) does not exceed in total consideration paid to or for
the
account of the Borrower in connection therewith, when added to the total
principal amount of all Qualified Subordinated Debt issued by the Borrower,
the
Maximum Subordinated Amount, (ii) is not redeemable in any part earlier than
five (5) years after its issuance date, except only at the voluntary option
of
the Borrower and except for mandatory redemption following a change of ownership
or control or management (as contemplated by Sections 6.13 or
6.12, respectively), (iii) has a stated interest or dividend rate
of less
than ten (10%) percent per annum, except for a default dividend rate not
exceeding twelve (12%) percent per annum, (iv) sets forth covenants that in
the
judgment of the Agent and Agent's counsel are no more restrictive on the
Companies and their operations and affairs than the covenants contained in
this
Agreement, and (v) is unsecured by any Liens.
"Qualified
Subordinated Debt" shall mean Debt of Borrower to any one or more
Subordinated Holders which (i) does not exceed in aggregate principal amount,
when added to the total consideration paid to or for the account of the Borrower
in connection with all Qualified Redeemable Preferred Equity issued by the
Borrower, the Maximum Subordinated Amount, (ii) has a maturity date of greater
than one year after the Maturity Date, (iii) sets forth covenants that in the
judgment of the Agent and Agent's counsel are no more restrictive on the
Companies and their operations and affairs than the covenants contained in
this
Agreement, and (iv) is subordinated to the Indebtedness and the Secured Hedge
Obligations both as to payment and as to liens and
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collateral
pursuant to a written Intercreditor Agreement in favor of and satisfactory
to
the Agent and the Banks duly authorized and executed by each applicable
Subordinated Holder.
“Required
Banks” shall mean Banks in the aggregate holding at least sixty-six and
two-thirds (66 2/3%) percent of the aggregate unpaid principal amount of the
Notes (or if no Advances are outstanding then 66 2/3% of the aggregate
Commitments).
“PVOG”
shall mean Penn Virginia Oil & Gas, L.P., a wholly owned subsidiary of Penn
Virginia Corporation.
“PVOG
Production Payment” shall mean the dollar denominated production payment
purchased by PVOG from the Borrower in the original amount of $2,233,435.76,
repayable solely from 75% of the Borrower’s share of production revenues from
only four certain ▇▇▇▇▇ (▇▇▇▇▇▇ #2, ▇▇▇▇▇▇ #3, ▇▇▇▇▇▇▇▇▇▇ #3 and ▇▇▇▇▇ #1),
without interest. On October 31, 2007, the balance owed was
$1,781,000.00.
“Secured
Hedge Agreements” shall mean all Hedging Agreements, whether now in
existence or hereafter arising, which establish Secured Hedge Obligations by
the
Borrower or any Subsidiary in favor of a Secured Hedge Provider.
“Secured
Hedge Obligations” shall mean any Permitted Hedge Obligations of the
Borrower or any Subsidiary owing to any one or more of the (present and future)
Secured Hedge Providers, and includes the due performance and compliance by
the
Borrower or any Subsidiary with all the terms, conditions and agreements
contained in the Secured Hedge Agreement pertaining thereto.
“Secured
Hedge Provider” shall mean any one or more of the (present and future) Banks
under this Agreement, or any Affiliate of such Bank which is a party to one
or
more Secured Hedge Agreements with the Borrower or any Subsidiary, so long
as
any such Bank is a “Bank” under this Agreement at the time such Secured Hedge
Obligation is entered into with such Bank or Affiliate of such Bank (even if
such Bank subsequently ceases to be a “Bank” under this Agreement for any
reason).
“Secured
Liabilities” shall mean collectively the Indebtedness and the Secured Hedge
Obligations.
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“Secured
Parties” shall mean the Agent, the Banks and the Secured Hedge
Providers.
“Shared
Collateral” shall have the meaning provided in Section
3.4.
"Subordinated
Holder" shall mean each Person which is owed any portion of Qualified
Subordinated Debt.
“Subsidiary”
shall mean each corporation of which the Borrower owns, directly or indirectly,
fifty percent or more of the outstanding capital stock, and each partnership,
limited liability company or other Person of which the Borrower owns, directly
or indirectly, fifty percent (50%) or more of the outstanding partnership,
membership or other ownership or voting interest.
Section
1.3 Accounting
Terms. Unless otherwise specified herein, all accounting terms
used herein shall be interpreted, all accounting determinations hereunder shall
be made, and all financial statements required to be delivered hereunder shall
be prepared in accordance with generally accepted accounting principles as
in
effect from time to time (except for changes in accounting principles or
practice approved by independent certified public accountants for the Borrower)
on a basis consistent with the most recent financial statements of the
Borrower.
ARTICLE
2
THE
CREDIT
Section
2.1 Line
of Credit and Letters of Credit. (a) Line of
Credit. Subject to and upon the terms and conditions contained in
this Agreement, and relying on the representations and warranties contained
in
this Agreement, on the Closing Date each Bank, severally, agrees to make a
revolving line of credit available to the Borrower in the maximum aggregate
principal amount equal to such Bank's Commitment set forth in Schedule I
hereto. The aggregate amount of all Advances, plus the face amount of
all standby letters of credit permitted to be issued under this Agreement,
cannot exceed the Commitment Limit. The line of credit is represented
by the Notes in the aggregate principal amount of one hundred twenty-five
million ($125,000,000.00) dollars, payable to the order of the
Banks. Principal and all accrued and unpaid interest on the line of
credit shall be payable in full on the Maturity Date, after which no further
Advances will be made. Payments may be debited from the Borrower’s
accounts with the Agent as provided in this Agreement.
(b) Interest. The
interest rate applicable to each Loan Advance beginning on the date such Advance
is made shall be either (i) the Base Rate, adjusted daily, or (ii) the LIBO
Rate, adjusted on the first day of each LIBO Rate Interest Period and remaining
fixed for the
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18
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duration
of the LIBO Rate Interest Period, selected at the Borrower’s option by written
notice to Agent in accordance with the terms hereof, but in no event shall
the
interest rate applicable to any Loan Advance exceed the Maximum
Rate. Effective on the first day following the end of any LIBO Rate
Interest Period, the Borrower may from time to time change the interest rate
which is to apply to the Advances or a portion thereof (including any yet to
be
made Advance which is made on the effective date of the interest rate change)
by
notifying the Agent of the Borrower’s desire to change the interest rate not
less than three (3) Business Days prior to the date on which such change shall
be effective. No more than four (4) LIBO Rate tranches and one Base
Rate tranche (all Base Rate Advances constituting one tranche) shall be
permitted for the Notes at any one time. In the absence of any timely
specific interest rate election by the Borrower (as provided above in this
Subsection 2.1(b) and in the definition of LIBO Rate), unless otherwise agreed
by the Agent, an Advance (if outstanding as a LIBO Rate Advance) will be
automatically converted into a Base Rate Advance on the last day of the then
current LIBO Rate Interest Period for such Advance or (if not then
outstanding) an Advance shall bear interest at the Base Rate. The
Borrower further will comply with the provisions of Addendum I hereto,
relating to the LIBO Rate, which is an integral part of this
Agreement. Interest on the Notes shall be payable (x) on Advances
bearing interest at the Base Rate monthly in arrears on the last day of each
month, and (y) on LIBO Rate Advances on the last day of each applicable LIBO
Rate Interest Period for each LIBO Rate Advance. Interest on (i) Base Rate
Advances and all other Indebtedness except for LIBO Rate Advances shall be
calculated on the basis of a 365 (or in a leap year 366) day year and the actual
number of days elapsed, and (ii) on LIBO Rate Advances shall be calculated
on
the basis of a 360-day year by applying the ratio of the annual interest rate
over a year of 360 days, times the applicable principal balance, times the
actual number of days such applicable principal balance is outstanding. Payments
may be debited from the Borrower’s accounts with the Agent as provided in this
Agreement. The Maximum Rate shall be calculated based on a 365-day or
366-day year, as is applicable.
(c) Draw
Requests. In accordance with the provisions in this Section, the
Banks will make Advances to the Borrower from time to time on any Business
Day
on and after the Closing Date until and including the last Business Day before
the Maturity Date in such amounts as the Borrower may request, up to the
Commitment Limit, and the Borrower may make borrowings, repayments and
reborrowings in respect thereof. Requests for Advances must be made
by written notice from the Borrower sent to the Agent by mail, courier or
facsimile in accordance with Section 10.1, specifying the amount of the
Advance, subject to Section 2.12. A request shall be fully
authorized by the Borrower if made by any one of ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. or ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇. or other individual designated by the Borrower as an authorized
person in accordance with resolutions of the Board of Directors of the Borrower
certified to the Agent. The Agent and the Banks may rely fully and
completely upon the authority of the signatory of such request or confirmation
unless such authority is terminated by written notice to the Agent, and any
such
termination shall be effective only prospectively. The request for
any Advance by the Borrower shall constitute a certification by the Borrower
that all of the representations and warranties contained in Article 4
(other than those representations and warranties, if any, that are
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19
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by
their
specific terms limited in application to a specific date) are true and correct
as of the date of such request and also as of the date of the
Advance.
(d) Timing. Requests
for Advances at the Base Rate shall be made on written notice from the Borrower
to the Agent, received by the Agent no later than 10:00 a.m. (Central Time)
on
the first Business Day before such Base Rate Advance specifying the amount
thereof. Request for Advances at the LIBO Rate shall be made on
written notice from the Borrower to the Agent received by the Agent no later
than 11:00 a.m. (Central Time) on the third (3rd) Business Day before such
LIBO
Rate Advance, specifying the amount thereof (including the amount of each
tranche, if more than one) and the LIBO Rate Interest Period (or Interest
Periods, if more than one tranche). Each such written notice by the
Borrower shall be irrevocable by the Borrower. The Agent shall
promptly give each Bank notice of such proposed Advance.
(e) Funding. Not
later than 12:00 noon (Central Time) on the date of any Advance, each of the
Banks shall make available to the Agent, in immediately available funds, the
amount of such Bank’s prorata portion (i.e., the percentage of its Commitment as
compared to the aggregate of the Commitments) of the amount of the requested
Advance. Upon receipt from each Bank of such amount, and upon
fulfillment of the applicable conditions set forth in this Agreement in Article
7, the Agent (on behalf of the Banks) will make available to the Borrower the
aggregate amount of such Advance in accordance with the further terms of this
Section 2.1. The failure or refusal of any Bank to make
available to the Agent at the aforesaid time and place on any date of an Advance
the amount of its portion of the requested Advance shall not relieve any other
Bank from its several obligation hereunder to make available to the Agent the
amount of such other Bank’s portion of any requested Advance (but no Bank shall
be responsible for the failure of any Bank to make available to the Agent such
other Bank’s portion of any requested Advance).
The
Agent
may, unless notified to the contrary by any Bank prior to the date of an
Advance, assume that each Bank has made available to the Agent on such date
of
the applicable Advance the amount of each Bank’s portion of the Advance to be
made on such date, and the Agent shall, in reliance upon such assumption, make
available to Borrower a corresponding amount. If any Bank makes
available to the Agent such amount on a date after the date of the applicable
Advance, such Bank shall pay to the Agent on demand an amount equal to the
product of (i) the average computed for the period referred to in clause (iii)
below, of the weighted average interest rate paid by the Agent for federal
funds
acquired by the Agent during each day included in such period, times (ii) the
amount of such Bank’s portion of such Advance, times (iii) a fraction, the
numerator of which is the number of days that elapse from and including such
date of the Advance to the date on which the amount of such Bank’s portion of
such Advance shall become immediately available to the Agent, and the
denominator of which is 365; provided, that if such Bank has not paid to the
Agent such Bank’s portion of the Advance by 12:00 noon (Central Time) on the
third (3rd) Business Day after the Advance was made to the Borrower, then the
interest rate in clause (i) above shall be the Prime Rate (adjusted daily)
from
and after such second (2nd) Business
Day
after the Advance was made until and including the date such
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20
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Bank
makes available to the Agent such Bank’s portion of the Advance; provided,
further, that if such Bank has not paid to the Agent such Bank’s portion of the
Advance by 12:00 noon (Central Time) on the fifth (5th) Business Day after
the
Advance was made to Borrower, then the interest rate in clause (i) above shall
be the Prime Rate (adjusted daily) plus three (3.0%) percent per annum from
and
after such fifth (5th) Business
Day
after the Advance was made until and including the date such Bank makes
available to the Agent such Bank’s portion of the Advance. A
statement of the Agent submitted to each Bank with respect to any amounts owing
under this paragraph shall be prima facie evidence of the amount due and owing
to the Agent by such Bank. If any Bank fails to pay to Agent its
portion of any Advance within thirty (30) days after an Advance or if any Bank
twice fails to timely make its portion of Advances to be made to the Borrower
available to the Agent before 12:00 noon (Central Time) on the dates Advances
are made to the Borrower (counting failures in reimbursement under Subsection
2.1(g) as a failure hereunder), then, if requested to do so by the Borrower
or any other Bank or the Agent, such Bank shall sell all of its interests,
rights and obligations under this Agreement (including all of its Commitment
and
its portion of the Loan at the time owing to it) and the Note held by it to
another Bank or bank under Section 9.6 hereof, provided such a
willing, qualified assignee is identified by the requesting party.
Not
later
than 3:00 p.m. (Central Time) on the date properly and timely requested for
the
Advance and upon fulfillment of the applicable conditions set forth in Article
7
of this Agreement, the Agent will make such Advance available to the Borrower
in
same day funds in the account maintained by the Borrower with the Agent and
the
credit advice resulting therefrom shall be mailed by the Agent to the
Borrower. The Borrower irrevocably agrees that the
deposit of the proceeds of any Advance in any account of Borrower with the
Agent, or the Agent's copy of any cashier's check representing all or any part
of the proceeds of the disbursements, shall be deemed prima facie evidence
of
the Borrower’s Indebtedness to the Banks under the Loan.
(f) Minimum. Notwithstanding
anything in this Agreement to the contrary, the aggregate principal amount
of
all LIBO Rate Advances having the same LIBO Rate Interest Period shall be at
least equal to $100,000.00; and if any LIBO Rate tranche would otherwise be
in a
lesser principal amount for any period, such tranche shall bear interest at
the
Base Rate during such period.
(g) Letters
of Credit. As a portion of the line of credit availability up to the Letter
of Credit Sublimit (and subject to the Borrowing Base and the other terms and
conditions contained in this Agreement), the Issuing Bank will issue standby
letters of credit for the account of the Borrower (including for the commercial
needs of any one or more of the Borrower’s wholly-owned Subsidiaries from time
to time in existence, so long as such entity is wholly owned directly or
indirectly) from time to time. The expiration of such letters of
credit shall be on a Business Day not later than one year after issuance, and
further shall not extend beyond the Maturity Date of the line of
credit. The expiration date of a letter of credit may not be extended
on or after the Maturity Date and no letter of credit may be renewed, replaced
or increased on or after the Maturity Date. The Borrower shall pay to
the Agent, for disbursement to the Banks in
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accordance
with Subsection 9.1(a) except as provided in the next sentence, a fee for
each standby letter of credit at the per annum rate equal to the Applicable
LIBO
Rate Margin then in effect on the face amount of the letter of credit for the
period from the date of issuance to the expiration date, payable quarterly
in
arrears on each June 30, September 30, December 31 and March 31 (and on the
Maturity Date). From the fee for each standby letter of credit the
Agent shall retain as a fronting fee, for its own account as letter of credit
Issuing Bank, one-quarter of one (0.25%) percent on the face amount (i.e.,
the
first 0.25% of the Applicable LIBO Rate Margin). The Borrower also
shall pay to the Agent, for the account solely of the Issuing Bank, additional
amounts customarily charged by the Issuing Bank for the issuance and processing
of letters of credit. Each letter of credit shall be issued not later
than the close of the Issuing Bank’s business (Central Time) on the third (3rd)
Business Day after receipt (including by facsimile pursuant to Section
10.1 hereof) by the Issuing Bank of the Borrower’s written application in
substantially the form of the Issuing Bank’s then standard Application for
Irrevocable Standby Letter of Credit and Letter of Credit Agreement, executed
by
the Borrower (by any one of the persons designated by the Borrower in writing
to
the Agent in accordance with the terms of Subsection 2.1(d)
below). Such application and agreement shall be Collateral Documents
under this Agreement, supplemental to and not in replacement of this Agreement
and the other Collateral Documents, provided that in the event of a conflict
between such application and agreement and this Agreement then this Agreement
shall prevail (even if such application or agreement is executed
later). In the event such written application is telecopied to the
Issuing Bank, the Issuing Bank may but need not confirm such application before
acting thereupon. The Issuing Bank may rely fully and completely upon
the authority of the signatory of such written application and the contents
thereof unless such authority is terminated by written notice to the Issuing
Bank, and any such termination of authority shall be effective only
prospectively. Such letters of credit will be documented on the
Issuing Bank’s standard forms. No letter of credit will be issued (x)
if the face amount thereof plus the aggregate undisbursed amount of all standby
letters of credit then outstanding would exceed the Letter of Credit Sublimit,
or (y) if the face amount thereof plus the aggregate of all Advances then
outstanding plus the aggregate undisbursed amount of all standby letters of
credit then outstanding would exceed the Commitment Limit. Payment by
the Issuing Bank of a draw on a standby letter of credit, if not reimbursed
in
full on the same day by the Borrower, automatically (notwithstanding the
limitation in Subsection 2.1(a) above) shall be an Advance as a part of
the Loan bearing interest from the date of such draw at the Base
Rate. Upon its issuance of any such letter of credit, the Issuing
Bank shall promptly notify each other Bank of such
issuance. Immediately upon the issuance by the Issuing Bank of any
letter of credit, the Issuing Bank shall be deemed to have sold and transferred
to each other Bank and each such other Bank shall be deemed irrevocably and
unconditionally to have purchased and received from the Issuing Bank, without
recourse or warranty, an undivided interest and participation in such letter
of
credit, each drawing made thereunder and the obligations of the Borrower under
this Agreement with respect thereto, and any security therefor or guaranty
pertaining thereto. The amount of such other Bank’s participation
shall be such other Bank’s prorata portion (i.e., such Bank’s Commitment as
compared to the aggregate of the Commitments).
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In
the
event that the Issuing Bank makes any payment under any letter of credit and
the
Borrower shall not have reimbursed such amount in full to the Issuing Bank
on
the date of such payment, the Issuing Bank shall promptly notify the Agent,
which shall promptly notify each other Bank of such failure, and each other
Bank
shall promptly and unconditionally pay to the Issuing Bank the amount of such
other Bank’s prorata portion (i.e., such Bank’s Commitment as compared to the
aggregate of the Commitments) of such unreimbursed payment in immediately
available funds. If the Agent so notifies, prior to 11:00 a.m.
(Central Time) on any Business Day, each Bank shall make such payment on such
Business Day. The failure or refusal by any Bank to make
reimbursement to the Issuing Bank at the aforesaid time and place in the amount
of its portion of such reimbursement shall not relieve any other Bank from
its
several obligation hereunder to make reimbursement to the Issuing Bank in the
amount of such other Bank’s portion of such requested reimbursement (but no Bank
shall be responsible for the failure of any Bank to make reimbursement to the
Issuing Bank of such other Bank’s portion of such requested
reimbursement). If any Bank makes reimbursement to the Issuing Bank
of such amount on a date after the aforesaid date for reimbursement, such Bank
shall pay to the Issuing Bank on demand an amount computed on the basis set
forth in Subsection 2.1(e) above (substituting such reimbursement due
date for the Advance Date), which Subsection 2.1(e) shall be fully
applicable to such failure.
The
obligations of the other Banks to make reimbursement payments to the Issuing
Bank with respect to letters of credit issued by it shall be irrevocable and
not
subject to any qualification or exception whatsoever. In determining
whether to pay under any letter of credit, the Issuing Bank shall have no
obligation relative to the other Banks other than to confirm that any documents
required to be delivered under such Letter of Credit appear to have been
delivered and that they appear to comply on their face with the requirements
of
such letter of credit. Any action taken or omitted to be taken by the
Issuing Bank under or in connection with any letter of credit if taken or
omitted in the absence of gross negligence or willful misconduct shall not
create for the Issuing Bank any resulting liability to the Borrower or any
Bank.
Letters
of credit issued under the Prior Loan Agreement and still outstanding on the
Closing Date shall hereafter be counted under and governed by this
Agreement.
Section
2.2 Business
Days. If the date for any payment, prepayment, Periodic
Reduction, or fee payment hereunder falls on a day which is not a Business
Day,
then for all purposes of this Agreement (unless otherwise provided herein)
the
same shall be deemed to have fallen on the next following Business Day, and
such
extension of time shall in such case be included in the computation of payments
of interest.
Section
2.3 Payments. The
Borrower shall make each payment hereunder and under the Notes and any
Collateral Documents in lawful money of the United States of America in same
day
funds to the Agent at its main office in New Orleans, Louisiana, not later
than
11:00 a.m. (Central Time) on the day when due, or such other place in the United
States as designated in writing by the Agent. The Agent shall
promptly send to each Bank by federal wire
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transfer
its respective proportionate share of all amounts to which the Banks are
entitled in accordance with Subsection 9.1(a). The Borrower
hereby authorizes the Agent to charge from time to time against the Borrower’s
accounts with the Agent any amount which is then so due, and acknowledges that
such accounts will be established for that purpose (among other purposes) under
Section 5.16 and Section 5.17 and may be so used even in the
absence of an Event of Default.
Section
2.4 Prepayment. (a) Voluntary. The
Borrower may prepay the Loan in full or in part at any time without payment
of
premium or penalty; provided, however, that (i) the Borrower shall give the
Agent notice of each such prepayment of all or any portion of a LIBO Rate
Advance no less than three (3) Business Days prior to prepayment, (ii) any
LIBO
Rate Advance may be prepaid only on the last day of the Interest Period for
such
LIBO Rate Advance, unless the Borrower includes payment of amounts, if any,
required to be paid pursuant to paragraph 6 of Addendum I, (iii) the
Borrower shall give the Agent notice of each such prepayment of all or any
portion of a Base Rate Advance no less than one (1) Business Day prior to
prepayment, (iv) the Borrower shall pay all accrued and unpaid interest on
the
amounts prepaid, and (v) no such prepayment shall serve to postpone the
repayment when due of any other Indebtedness. Each such notice of a
prepayment under this Section shall be irrevocable and the amounts specified
in
each such notice shall be due and payable on the date specified. Upon
receipt of such notice, the Agent shall promptly notify each Bank
thereof. Each partial prepayment shall be in an aggregate principal
amount of (x) $100,000.00 or an integral multiple of $50,000.00 in excess
thereof or (y) if the outstanding principal balance of the Loan is less than
the
minimum amount set forth in the preceding clause (x) of this sentence, then
such
lesser outstanding principal balance, as the case may be.
(b) Mandatory. The
Agent shall notify the Borrower of the result of each Borrowing Base
redetermination in accordance herewith. If at any time the Agent
determines that a Loan Excess exists, then within ninety (90) days of receipt
by
the Borrower of notice of such Loan Excess the Borrower shall (x) prepay the
Advances (together with accrued interest on the amount to be prepaid to the
date
of payment) in an amount sufficient to reduce the Advances plus the face amount
of all standby letters of credit then outstanding to the then Commitment Limit,
and/or (y) execute, deliver and record or cause to be executed and delivered
such additional Collateral Documents pursuant to Section 3.1, sufficient
to induce the Agent and the Banks to make an increased redetermination of the
Borrowing Base to an amount not less than the outstanding principal balance
of
the Advances plus the face amount of all standby letters of credit then
outstanding. The Borrower specifically acknowledges that no
additional grace period (beyond the period stated in the preceding sentence)
is
applicable under this Agreement to any failure to make such mandatory prepayment
before such failure is an Event of Default hereunder.
(c) Periodic
Reductions in Borrowing Base. As part of a Borrowing Base
redetermination, the Agent may include as part of the Borrowing Base an
automatic reduction schedule, monthly or quarterly, in an amount determined
by
the Agent in its sole discretion, but based upon the Agent’s customary standards
and practices from time to time in effect with
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respect
to secured oil and gas property lines of credit, and with the approval of the
Required Banks. Such automatic reductions, each in the amounts so
determined and so scheduled (each a “Periodic Reduction”), shall cause an
automatic reduction to the Borrowing Base on the dates set in the schedule
so
determined by the Agent, which shall be the last day of a month or
quarter. Each reduction to the Borrowing Base by a Periodic Reduction
shall be permanent, subject to any increase agreed to as part of a subsequent
Borrowing Base redetermination. As part of the notification by the
Agent to the Borrower of the result of a Borrowing Base redetermination, the
Agent shall notify the Borrower of the terms and schedule of any Periodic
Reductions included therein. Notwithstanding the foregoing provisions
of Subsection 2.4(b), the Borrower shall pay the amount of any Loan
Excess that results from the application of each Periodic Reduction to the
Borrowing Base on the day that such Periodic Reduction takes
effect. The Borrower specifically acknowledges that the ninety (90)
day grace period set forth in Subsection 2.4(b) pertaining to a Loan
Excess resulting from a Borrowing Base redetermination is not applicable to
any
failure to make such mandatory prepayment triggered by a Loan Excess due to
a
Periodic Reduction as provided in this Subsection
2.4(c). However, any changes in the Periodic Reduction schedule
shall not increase the amount of a Periodic Reduction which is to take effect
sooner than ninety (90) days after the effective date of that Borrowing Base
redetermination which includes such change in the Periodic Reduction schedule
as
a part thereof. On the Closing Date no Periodic Reduction is in
effect, subject to change as part of a subsequent Borrowing Base
redetermination.
Section
2.5 Fees. (a) The
Borrower shall pay on the Closing Date to the Agent, for disbursement pro rata
in accordance with Subsection 9.1(a) hereof to the Banks, an upfront
commitment/origination fee equal to seventy thousand ($70,000.00) dollars,
being
one-quarter of one percent (0.25%) percent of the $28,000,000.00 incremental
increase in the Commitment Limit from the Prior Loan Agreement (i.e., the
increase to the Closing Date’s new Borrowing Base of $90,000,000.00 from the
previous Borrowing Base of $62,000,000.00). Further, the Borrower
shall pay the Agent, for disbursement pro rata to the Banks in accordance with
Subsection 9.1(a) of the Prior Loan Agreement, on the Closing Date an unused
facility fee under the Prior Loan Agreement in an amount equal to one-quarter
of
one percent (0.25%) per annum on (x) the Commitment Limit under the Prior Loan
Agreement less (y) the average outstanding aggregate principal balance under
the
Advances under the Prior Loan Agreement plus the undisbursed amount of all
standby letters of credit outstanding, during the period from October 1, 2007
through the Closing Date.
(b) The
Borrower shall pay the Agent, for disbursement in accordance with Subsection
9.1(a) hereof to the Banks, an unused facility fee quarterly in arrears
beginning December 31, 2007 (for the period from the Closing Date through such
date) and on the last day of each succeeding March, June, September and December
and on the Maturity Date of the Loan, in an amount equal to one-quarter of
one
percent (0.25%) per annum on (x) the Commitment Limit less (y) the average
outstanding aggregate principal balance of the Advances under the Notes plus
the
undisbursed amount of all standby letters of credit then
outstanding during such quarter (or lesser time period, as
applicable.)
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(c) Letter
of credit fees are owed and paid as provided in Subsection
2.1(g).
(d) The
Borrower shall pay to the Agent, for its own account, such fees as are agreed
to
in a separate agreement between the Borrower and the Agent with respect to
the
Agent's services provided hereunder and in connection herewith.
(e) The
Borrower shall pay the Agent, for disbursement to the Banks (equally, not pro
rata), a Borrowing Base redetermination fee in the amount equal to $7,500.00
for
each Bank for each unscheduled redetermination requested by the Borrower at
the
time of such request. (For the avoidance of doubt, the Agent receives
one fee under this subsection in its capacity as a Bank, but not as
Agent.)
(f) The
Borrower acknowledges that any subsequent increases in the Commitment Limit
after the Closing Date (which will require the Borrower’s and the Banks'
unanimous mutual agreement) shall be subject to the payment of an appropriate
upfront commitment fee, not to exceed one-quarter of one percent (0.25%),
determined by the Banks on the incremental increased portion of the new
Commitment Limit in excess of its previous highest level.
(g) All
fees shall be paid on the dates due in immediately available
funds. Fees paid shall not be refundable under any
circumstances.
Section
2.6 Use
of
Proceeds. The Borrower shall use the proceeds of the Loan (i) in
connection with the acquisition and development of oil and gas properties as
well as general corporate and working capital purposes (including letters of
credit hereunder) and (ii) to loan funds to Diamond in accordance with
Subsection 6.3(h).
Section
2.7 Default
Rate. Anything in the Notes or in any other agreement, document
or instrument to the contrary notwithstanding, effective upon an Event of
Default or upon the Maturity Date, the Agent and the Required Banks shall have
the right to prospectively increase the interest rate under the Notes to the
Default Rate until the Notes are paid in full. Upon the acceleration
of the principal amount of the Indebtedness represented by the Notes, the
accelerated principal balance of the Loan shall bear interest from the date
of
acceleration up to the actual payment (as well after as before judgment) at
the
Default Rate. All such interest at the Default Rate shall be payable
upon demand.
Section
2.8 Additional
Regulatory Costs. If any governmental authority, central bank, or
other comparable authority shall at any time impose, modify or deem applicable
any reserve (including without limitation any imposed by the Board of Governors
of the Federal Reserve System), special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, the
Agent
or any Bank, or shall impose on the Agent or any Bank any other condition
affecting an Advance or the obligation of the Agent or any Bank to make an
Advance; and the result of any of the foregoing is to increase the cost to
the
Agent or such Bank of making or maintaining the Advances to the Borrower, or
to
reduce the amount of
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any
sum
received or receivable by the Agent or any Bank under this Agreement or under
the Notes by an amount deemed by the Agent or such Bank to be material, then,
within sixty (60) days after demand by the Agent or such Bank, the Borrower
shall pay to the Agent or such Bank, for its own account, such additional amount
or amounts as will compensate the Agent or such Bank for such increased cost
or
reduction. The Agent or such Bank will promptly notify the Borrower
of any event of which it has knowledge, occurring after the date hereof, which
will entitle the Agent or such Bank to compensation pursuant to this
Section. A certificate of the Agent or such Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error.
Section
2.9 Application
of Payments to Indebtedness. Payments made under this Agreement,
the Notes or the Collateral Documents, whether made when due or after
foreclosure on Collateral, for application to the Indebtedness shall be applied
to the Indebtedness as follows:
(i) To
the Agent, with respect to fees and expenses accrued and outstanding (including
without limitation reasonable attorneys’ fees and expenses);
(ii) To
the Banks, ratably according to their Commitments, with respect to fees,
expenses and late charges accrued and outstanding;
(iii) To
the Banks, ratably according to their Commitments, with respect to interest
accrued and outstanding; and
(iv) To
the Banks, ratably according to their Commitments, with respect to principal
amounts of the Loan due and payable.
Payments
made pursuant to realization under the Collateral Documents are also subject
to
the Section 3.4.
Section
2.10 Sharing
of Payments among Banks. If any Bank, whether by setoff or
otherwise, has payment made to it upon its portion of the Loan, other than
pursuant to Section 2.8 or Addendum 1, in a greater proportion
than that received by any other Bank, such Bank agrees, promptly upon demand,
to
purchase a portion of the Loan held by the other Banks so that after such
purchase each Bank will hold its ratable proportion of the Loan. If
any Bank, whether in connection with setoff or amounts which might be subject
to
setoff or otherwise, receives collateral or other protection for its
Indebtedness or such amounts which may be subject to setoff, such Bank agrees,
promptly upon demand, to take such action necessary such that all Banks share
in
the benefits of such Collateral ratable in proportion to their
Commitment. In case any such payment is disturbed by legal process,
or otherwise, appropriate further adjustment shall be made. However,
nothing in this Section 2.10 is intended, or shall be construed, to amend
the provisions of or alter the application of Section 3.4.
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Section
2.11 Hedge
Agreement Quotes. Upon the Borrower’s request from time to time,
the Agent will provide to Borrower interest rate swap quotes for interest rate
Hedge Agreements pertaining to the Loan, not to exceed the Commitment Limit
or
the Maturity Date.
Section
2.12 Telephonic
or Electronic Notice to Agent. Without in any way limiting the
obligation of the Borrower to confirm in writing any telephonic notice of
borrowing or the like given to the Agent, the Agent may act without liability
upon the basis of telephonic notice of such request believed by the Agent in
good faith to be from an authorized officer of the Borrower prior to receipt
of
written confirmation. In each such case, the Agent’s records with
regard to any such telephone notice shall be presumptive correct, absent
manifest error. Additionally, the Borrower may transmit notices of
borrowing or letter of credit requests or the like by electronic communication,
if arrangements for doing so have been approved by the Agent.
Section
2.13 Lost
Interest Recapture; Usury Savings.
(i) If,
with respect to the Banks, the effective rate of interest contracted for under
this Agreement, the Notes and the Collateral Documents (the “Loan
Documents”), including the stated rates of interest and fees contracted for
hereunder and any other amounts contracted for under the Loan Documents which
are deemed to be interest, at any time exceeds the Maximum Rate, then the
outstanding principal amount of the loans made by the Banks hereunder shall
bear
interest at a rate which would make the effective rate of interest for the
Banks
under the Loan Documents equal the Maximum Rate until the difference between
the
amounts which would have been due at the stated rates and the amounts which
were
due at the Maximum Rate (the "Lost Interest") has been recaptured by the
Banks.
(ii) If,
when the loans made hereunder are repaid in full, the Lost Interest has not
been
fully recaptured by a Bank pursuant to the preceding paragraph, then, to the
extent permitted by law, for the loans made hereunder by such Bank the interest
rates charged under Section 2.1 hereunder shall be retroactively
increased such that the effective rate of interest under the Loan Documents
was
at the Maximum Rate since the effectiveness of this Agreement to the extent
necessary to recapture the Lost Interest not recaptured pursuant to the
preceding sentence and, to the extent allowed by law, the Borrower shall pay
to
such Bank the amount of the Lost Interest remaining to be recaptured by such
Bank.
(iii) NOTWITHSTANDING
THE FOREGOING OR ANY OTHER TERM IN THIS AGREEMENT AND THE LOAN DOCUMENTS TO THE
CONTRARY, IT IS THE INTENTION OF THE BANKS AND THE BORROWER TO CONFORM STRICTLY
TO ANY APPLICABLE USURY LAWS. ACCORDINGLY, IF A BANK CONTRACTS FOR,
CHARGES, OR RECEIVES (INCLUDING WITHOUT LIMITATION FOLLOWING ACCELERATION OR
PREPAYMENT) ANY CONSIDERATION WHICH CONSTITUTES INTEREST IN EXCESS OF THE
MAXIMUM RATE, THEN ANY SUCH EXCESS SHALL BE CANCELED
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AUTOMATICALLY
WITHOUT THE NECESSITY OF THE EXECUTION OF ANY NEW DOCUMENT AND, IF PREVIOUSLY
PAID, SHALL AT SUCH BANK'S OPTION BE APPLIED TO THE OUTSTANDING AMOUNT OF THE
LOAN MADE HEREUNDER BY SUCH BANK OR BE REFUNDED TO THE BORROWER.
(iv) All
sums paid or agreed to be paid to Banks for the use, forbearance or detention
of
the Indebtedness shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of the Indebtedness
until payment in full so that the rate or amount of interest on account of
the
Indebtedness does not exceed the applicable usury limit allowed by applicable
law through the full term hereof.
Section
2.14 Business
Loans. The Borrower warrants and represents that the Loan and
Advances evidenced by the Notes are and shall be for business, commercial,
investment, or other similar purposes and not primarily for personal, family,
household, or agricultural use, as such terms are used in Chapter 306 of the
Texas Finance Code. At all such times, if any, as Chapter 303 of the
Texas Finance Code shall establish a Maximum Rate, the Maximum Rate shall be
determined in accordance with Chapter 303 of the Texas Finance Code based on
the
"weekly ceiling" (as such term is defined in Chapter 303 of the Texas Finance
Code) from time to time in effect.
ARTICLE
3
SECURITY
FOR THE OBLIGATIONS
Section
3.1 Security.
(a) The Loan shall be primarily secured by the
following:
(i) Texas
Deed of Trust, Mortgage, Assignment, Security Agreement and Financing Statement,
executed by the Borrower, granting a first priority mortgage, security interest
and assignment of production in the Borrower’s interests in various oil and gas
properties in North Carthage Field in ▇▇▇▇▇▇▇▇ and Panola Counties, State of
Texas (and after the Closing Date in future locations as Borrower and Agent
and
Required Banks may agree from time to time) and collateral relating thereto,
together with UCC Financing Statements pertaining thereto.
(ii) New
Mexico Line of Credit Mortgage, Assignment, Security Agreement, Fixture Filing
and Financing Statement, executed by the Borrower, granting a first priority
mortgage, security interest and assignment of production in the Borrower’s
interests in various oil and gas properties in Lea and Roosevelt Counties,
New
Mexico, and collateral relating thereto, together with UCC Financing Statements
pertaining thereto.
(iii) Certain
deposit accounts (and funds therein) maintained with the Agent.
(iv) Security
Agreement executed by the Borrower, granting a first priority security interest
in 100% of the outstanding shares of each of Endeavor and of Diamond,
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together
with a UCC financing statement pertaining thereto, and together with the
original stock certificates for the shares of Endeavor and Diamond, each duly
endorsed in blank and delivered to the Agent with an executed stock
power.
(v) Guaranty
Agreement executed by Endeavor.
(vi) Collateral
documents executed by Endeavor, granting a first priority lien and security
interest in its gas gathering system, together with a UCC Financing Statement
pertaining thereto.
(vii) Guaranty
Agreement executed by Diamond.
(viii) Security
Agreement executed by Diamond, granting a first priority lien and security
interest in its personal property, together with a UCC Financing Statement
pertaining thereto.
(ix) Liens
assigned by IBC Bank to the Agent.
(x) Such
additional deeds of trust, mortgage and other collateral documents executed
after the Closing Date encumbering such properties as the Borrower and the
Agent
and Required Banks may agree from time to time.
(xi) Undated
letters (in lieu of division or transfer orders) executed by Borrower, in form
and substance satisfactory to the Agent, to each purchaser of production or
disburser of the proceeds of production from or attributable to the Collateral,
together with additional letters with the addressees left blank, authorizing
and
directing that payment of all production proceeds attributable to the Collateral
and other properties in the Borrowing Base be made directly to the
Agent. Such letters shall be held by Agent and not delivered, as
provided in Subsection 8.2(c), until the occurrence of an Event of
Default.
(b) The
Borrower confirms that the Collateral Documents secure all of the Indebtedness
to the Agent and to each of the Banks. The Borrower, the Agent and
the Banks acknowledge that the Collateral Documents described in Section
3.1 above secure both such Indebtedness and the Secured Hedge
Obligations. The Banks confirm the application of Section 3.4
to govern the Collateral Documents, the Indebtedness and the Secured Hedge
Obligations.
Section
3.2 Confirmation. (a) The
Borrower hereby reaffirms its original intention as stated in the Collateral
Documents executed prior to the Closing Date that said existing Collateral
Documents secure the Indebtedness as extended and renewed from time to time,
including without limitation this Agreement and the Notes executed by the
Borrower pursuant to this Agreement. The Borrower confirms and agrees
that said existing Collateral Documents securing the Indebtedness, this
Agreement and the Notes include without limitation the documents described
in
Section 3.1 above. The Borrower hereby ratifies and confirms
in all respects the existing Collateral Documents executed by it, which remain
in full force and effect
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in
accordance with all of their terms, conditions and provisions in favor of the
Agent, for the ratable benefit of the Banks, and are hereby renewed and carried
forward to secure the Indebtedness under this Agreement. To the
extent necessary, the Borrower hereby grants anew all liens and security
interests set forth in such Collateral Documents executed by it to Agent, for
the ratable benefit of the Banks, as security for the Indebtedness.
(b) The
Borrower will confirm the application of any Intercreditor Agreement to the
Collateral. The Borrower hereby confirms that the Intercreditor
Agreement dated July 31, 2007 continues in full force and effect and application
after this restated Agreement.
Section
3.3 Acquisition
Collateral. (a) After each acquisition by the Borrower
or any Subsidiary of any interest in oil, gas and other mineral properties
(wherever located) involving an expenditure (in money or property) the total
amount of which (whether in one transaction or a series of related transactions)
either (x), when added to the total consideration paid by the Borrower or any
Subsidiary to or for the account of any Person in connection with all such
acquisitions during the six months immediately preceding such acquisition date,
exceeds two million five hundred thousand ($2,500,000.00) dollars, or (y) when
added to the total consideration paid by the Borrower and any Subsidiary to
or
for the account of any Person in connection with all such acquisitions during
the period from the Closing Date through and including such acquisition date,
exceeds five million ($5,000,000.00) dollars, the Borrower at its expense will
promptly, and in no event later than ninety (90) days after such acquisition,
complete the execution and recordation of appropriate Collateral Documents
in
favor of the Agent, for the ratable benefit of the Secured Parties, and the
submission of Title Opinions in favor of the Agent reasonably acceptable to
the
Agent, covering all such acquired properties.
(b) In
connection with and at the time of each redetermination of the Borrowing Base,
the Borrower at its expense will promptly, and in no event later than ninety
(90) days after such redetermination, complete the execution and recordation
of
appropriate Collateral Documents in favor of the Agent, for the ratable benefit
of the Secured Parties, covering all rights of way, easements, surface leases
or
other property rights utilized in the operation of the pipeline and gathering
systems which are material to the operation and sale of the Collateral
(including without limitation the production, transportation or marketing of
Collateral hydrocarbons). As part of the foregoing requirement, the
Borrower shall cause such rights of way and other interests to be recorded
in
the appropriate land title records.
(c) In
connection with and at the time of each redetermination of the Borrowing Base,
the Borrower at its expense will promptly, and in no event later than ninety
(90) days after such redetermination, (i) complete the execution and
recordation of appropriate Collateral Documents in favor of the Agent, for
the ratable benefit of the Secured Parties, covering any
property included within the Borrowing Base which is not already encumbered
as
Collateral, and (ii) submit title opinions in favor of the Agent reasonably
acceptable to the Agent covering any ▇▇▇▇▇ within the Borrowing Base not
previously covered by accepted title opinions, provided that clause (ii) is
subject to the exception set forth in the following sentence. Upon
the
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Borrower’s
request and demonstration of good cause satisfactory to the Agent and the
Required banks (in their sole and absolute discretion, as part of the process
of
the Borrowing Base redetermination), a portion of the property within the
Borrowing Base may be exempted from this covenant for acceptable title
opinions. The continuing justification for each such exemption
shall be reconsidered as part of each redetermination of the Borrowing
Base. Nonetheless, the Borrower expressly
acknowledges that, as provided in the definition of the Borrowing Base, the
Agent may exclude, in its sole and absolute discretion, any property or portion
of production therefrom from the Borrowing Base, at any time, because title
information on, or the status of title to, such property is not reasonably
satisfactory to Agent, such property is not collateral, the Agent’s lien or
security interest therein is not first and prior to all others, or such property
is not assignable.
Section
3.4 Sharing
among Secured Liabilities. (a) The Agent and the
Banks hereby agree that upon the foreclosure, sale, set-off or other realization
against any of the Collateral which secures the Secured Liabilities (and not
securing by its terms just the Indebtedness) (the “Shared Collateral”), the
Secured Parties shall share in all of the proceeds of such Shared Collateral
on
a pari passu basis, ratably according to the Secured Liabilities owing to each
Secured Party as specified in the following sentence. Proceeds from
realization against such Shared Collateral shall be applied by the Agent as
follows:
(i) To
the Agent, with respect to fees and expenses accrued and outstanding (including
without limitation reasonable attorneys’ fees and expenses); and
(ii) To
the Secured Parties, ratably according to the Secured Liabilities owing to
the
Secured Parties.
The
Banks
by unanimous consent may determine from time to time whether any, and which
portions, of the Collateral is to be Shared Collateral beyond the Collateral
described in Section 3.1.
(b) If
any Secured Party has payment made to it of proceeds arising from the
foreclosure, sale, set-off or other realization on any of the Shared Collateral
pursuant to the remedies provided by the Collateral Documents in a greater
proportion than that received by any other Secured Party (except for the Agent
as specified in Subsection (a) above), such Secured Party shall (and each Bank
agrees to cause any of its Affiliates which are such a Secured Party to) take
such action as is necessary such that all Secured Parties shall share in the
benefits of such Shared Collateral ratably in proportion to the Secured
Liabilities owing to each Secured Party. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments shall
be made. The foregoing sharing pertains solely to the realization
against the Shared Collateral and the proceeds therefrom, and is not a general
sharing arrangement regarding the Secured Hedge Providers and the Agent and
the
Banks for other purposes (including without limitation payments by the Borrower
and Subsidiaries from the Borrower’s and Subsidiaries’ general funds, including
funds derived from the Shared Collateral or the other
Collateral). The
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Agent
and
the Banks shall have the right to receive, and the Borrower and Subsidiaries
shall have the right and obligation to pay, all amounts owing as part of the
Indebtedness to be paid by the Borrower and Subsidiaries to the Agent and the
Banks as and when due. The Secured Hedge Providers shall have the
right to receive, and the Borrower and Subsidiaries shall have the right and
obligation to pay, all amounts owing as part of the Secured Hedge Obligations
to
be paid by the Borrower and Subsidiaries to the Secured Hedge Providers as
and
when due. The foregoing sharing arrangement pertains only to the
proceeds arising from the foreclosure, sale, set-off or other realization
pursuant to the remedies provided by the applicable Collateral Documents by
the
Agent, the Banks and the Secured Hedge Providers on any of the Collateral which
secures all the Secured Liabilities.
(c) Should
any payment or distribution from any such realization upon any Shared Collateral
or proceeds thereof (except payments permitted by Subsection (b) above) be
received by any Secured Party before either the Indebtedness has, or the Secured
Hedge Obligations have, as the case may be, been paid and satisfied in full
and
terminated such that no further liabilities will be incurred thereunder, that
Secured Party shall (and each Bank shall cause any of its Affiliates which
is a
Secured Party to) deliver the same to the Agent in precisely the form received
(except for the endorsement, without recourse, or assignment of that Secured
Party where necessary), for application on the Secured Liabilities ratably
as
provided in Subsection (a) above, and, until so delivered, the same shall be
held in trust by that Secured Party as property of the Agent.
(d) The
agreement by the Agent and the Banks to so share the Shared Collateral with
the
Secured Hedge Providers is expressly conditioned upon and limited by (i) the
right of the Agent and the Banks, at any time and from time to time, to enter
into such agreement or agreements with the Borrower and Subsidiaries as the
Agent and the Banks may deem proper extending the time of payment or increasing
or renewing or otherwise altering the terms of all or any of the Indebtedness
without notice to the Secured Hedge Providers and without in any way impairing
or affecting this Agreement, (ii) the right of the Agent to release any portion
or portions of the Collateral (including the Shared Collateral) from to time
as
the Agent and the Banks may agree, and in connection therewith for the Agent
to
have the express power to release any Secured Hedged Provider’s lien on the
Shared Collateral under the Collateral Documents insofar as it secures the
Secured Hedge Obligations, without notice to or such Secured Hedge Provider’s
consent, so long as such Collateral is simultaneously released insofar as it
secures the Indebtedness; and (iii) the right of the Agent and the Banks holding
the Indebtedness to control all decisions and determinations in enforcing the
Collateral Documents so long as any portion of the Indebtedness remains
outstanding, and decisions and determinations of the Required Banks in enforcing
the Collateral Documents and in guiding the Agent in such matters shall be
binding upon the Secured Hedge Providers, including without limitation when
and
whether to realize upon the Collateral (including the Shared Collateral), and
when and whether to authorize the Agent at the pro rata expense of all the
Secured Parties (to the extent not reimbursed by the Borrower) to retain
attorneys to seek judgment on the Collateral Documents. This
Section 3.4 is expressly limited by the requirements and definitions in
this Agreement for the creation of a
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Secured
Hedge Obligation, and notwithstanding any provision in any commodity, interest
rate or currency rate protection agreement to the contrary, liabilities
thereunder which do not meet the requirements and definitions in this Agreement
for the creation of a Secured Hedge Obligations shall not be secured by the
Collateral or otherwise entitled to the benefits of this Section
3.4.
(e) This
sharing of the Shared Collateral with respect to the Secured Liabilities shall
remain in full force and effect not withstanding any filing of a petition for
relief by or against the Borrower under the Federal Bankruptcy Code or similar
laws from time to time in effect and shall apply with full force and effect
with
respect to all such Shared Collateral covered by the Collateral Documents
acquired by the Borrower or any Grantor after the date of such petition and
all
Indebtedness and Secured Hedge Obligations incurred after the date of such
petition. Such sharing shall apply with full force and effect with
respect to all Shared Collateral covered by the Collateral Documents from time
to time, including without limitation pursuant to supplements or amendments
to
the Collateral Documents after the date hereof, subject to the foregoing
preserved right of the Agent and the Banks for partial releases. In
the event of any liquidation, dissolution, receivership, insolvency or
bankruptcy proceeding, any payment or distribution of any kind or character,
either in cash or other property, which shall be payable or deliverable upon
or
with respect to any or all of the Shared Collateral shall be paid or delivered
directly to the Agent for application as provided in Subsection
(a).
(f) Neither
the Agent nor any of its directors, officers, agents or employees shall be
liable to any Secured Hedge Provider for any action taken or omitted to be
taken
by it under or in connection with this Agreement, except for its or their own
gross negligence or willful misconduct. Without limiting the
generality of the foregoing, the Agent (i) may treat a Secured Hedge Provider
as
the payee of its Secured Hedge Obligations until the Agent receives written
notice of the assignment or transfer thereof, signed by such Secured Hedge
Provider in a form satisfactory to the Agent; (ii) may consult with legal
counsel (including counsel for the Borrower), independent public accountants
and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the advice of such
counsel, accountants or experts; (iii) makes no warranty or representation
to
any Secured Hedge Provider and shall not be responsible to any Secured Hedge
Provider for any statements, warranties or representations made in or in
connection with this Agreement or the Collateral Documents; (iv) shall not
have
any duty to ascertain or to inquire as to the performance or observance of
any
of the terms, covenants or conditions of this Agreement or the Collateral
Documents, or to inspect any property (including the books and records) of
the
Borrower and Subsidiaries; (v) shall not be responsible to any Secured Hedge
Provider for the due execution, legality, validity, enforce ability,
genuineness, sufficiency or value of this Agreement or the Collateral Documents;
and (vi) shall incur no liability under or in respect to this Agreement or
the
Collateral Documents by acting upon any notice, consent, certificate or other
instrument or writing (which may be by facsimile, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper party or
parties. The Agent shall not have a fiduciary relationship in respect
of any Secured Hedge Provider by reason of this Agreement. The Agent
shall not have any implied duties to the Secured Hedge Providers, or any
obligation to the Secured Hedge
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Providers
to take any action under this Agreement or the Collateral Documents except
any
actions specifically provided by such documents to be taken by
it. The Agent shall have the same rights and privileges under this
Agreement as any other Secured Hedge Provider and may exercise the same as
though it were not the Agent; and the term “Secured Hedge Provider” shall,
unless otherwise expressly indicated, include the Agent in its individual
capacity when applicable. The granting of benefits under this
Agreement and the Collateral Documents to the Secured Hedge Providers is
expressly conditioned upon the benefits and protections provided to the Agent
under Article 9 of this Agreement applying with each force and effect to the
Secured Hedge Providers.
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES
In
order
to induce the Agent and the Banks to enter into this Agreement, the Borrower
represents and warrants to the Agent and the Banks (which representations and
warranties will survive the extensions of credit under this Agreement)
that:
Section
4.1 Existence. (a) The
Borrower is a corporation duly organized, legally existing, duly registered
and
in good standing under the laws of its state of formation (Oklahoma) and is
duly
qualified in all other jurisdictions wherein the property it owns or the
business it transacts make such qualification necessary and the failure to
so
qualify would have a material adverse effect on its financial condition,
business or operations.
(b) Each
of Endeavor, Diamond and any other Subsidiary is a corporation duly organized,
legally existing and in good standing under the laws of the state of
incorporation (Oklahoma) and is duly qualified as a foreign corporation in
all
other jurisdictions wherein the property it owns or the business it transacts
makes such qualification necessary and the failure to so qualify would have
a
material adverse effect on its financial condition, business or
operations.
Section
4.2 Names,
Numbers and Offices of Borrower. (a) The Borrower is
not doing business under any name (including trade names) other than the exact
name of the Borrower set forth above, and has never done business previously
under any other name. The Borrower’s Subsidiaries do business only
under their exact names as provided in this Agreement.
(b) Each
Company’s location of its state of organization are accurately set forth in the
Collateral Documents. Each Company’s chief executive office has been
continuously located in the State of Oklahoma on and after its respective
formation.
Section
4.3 Power
and Authorization. Each Company is duly authorized and empowered
to execute, deliver and perform this Agreement, the Notes and the Collateral
Documents executed by it. All corporate action on the part of each
Company (including all shareholder action) requisite for the due creation and
execution of the Loan and this Agreement, the Notes and Collateral Documents
have been duly and effectively taken.
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Section
4.4 Review
of Documents; Binding Obligations. Each Company has reviewed this
Agreement, the Notes and the Collateral Documents with counsel for the Companies
and has had the opportunity to discuss the provisions thereof with the Agent
prior to execution. This Agreement, the Notes and the Collateral
Documents constitute valid and binding obligations of the Companies which are
party thereto, enforceable in accordance with their terms (except that
enforcement may be subject to any applicable bankruptcy, insolvency or similar
laws generally affecting the enforcement of creditors’ rights). Each
Company further represents and warrants that it is in compliance with all of
the
affirmative and negative covenants contained in this Agreement and the
Collateral Documents.
Section
4.5 No
Legal Bar or Resultant Lien. This Agreement, the Notes and the
Collateral Documents do not and will not violate any provisions of any Company’s
articles of incorporation or bylaws, will not violate any contract, agreement,
law, regulation, order, injunction, judgment, decree or writ to which any
Company is subject, and will not result in the creation or imposition of any
Lien upon any property of any Company other than as contemplated by this
Agreement.
Section
4.6 No
Consent. The Companies’ execution, delivery and performance of
this Agreement, the Notes and the Collateral Documents do not require the
consent or approval of any other Person, including without limitation any
regulatory authority or governmental body of the United States or any state
thereof or any political subdivision of the United States or any state
thereof.
Section
4.7 Financial
Condition. All financial statements of the Borrower and any
affiliates delivered to the Agent and the Banks fairly and accurately present
the financial condition of the parties for whom such statements are submitted
and the financial statements of the Borrower and any affiliates have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, and there are no
contingent liabilities not disclosed thereby which would adversely affect the
financial condition of Borrower or any affiliates. Since the close of
the period covered by the latest financial statement delivered to the Agent
and
the Banks with respect to Borrower and any affiliates, there has been no
material adverse change in the assets, liabilities, or financial condition
of
Borrower or any affiliates. No event has occurred (including, without
limitation, any litigation or administrative proceedings) and no condition
exists or, to the knowledge of Borrower, is threatened, which (i) might render
Borrower unable to perform its obligations under this Agreement, the Notes
or
the Collateral Documents, or (ii) would constitute a Default hereunder, or
(iii)
might adversely affect the financial condition of the Borrower or any affiliates
or the validity or priority of the Lien of the Collateral Documents. Each
Company is solvent and has the ability to pay its Debts when and as
due.
Section
4.8 Taxes
and Governmental Charges. Each Company has filed all tax returns and reports
required to be filed and have paid all taxes, assessments, fees and other
governmental charges levied upon it or upon its property or income which are
due
and payable,
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including
interest and penalties, or is contesting the same in good faith by appropriate
proceedings and has provided adequate reserves for the payment
thereof.
Section
4.9 Defaults. The
Companies are not in default under any indenture, mortgage, deed of trust,
agreement or other instrument to which such Company is a party or by which
it or
any of its property is bound.
Section
4.10 Liabilities
and Litigation. (a) Except for liabilities incurred in the normal
course of business, the Borrower and its Subsidiaries have no material
(individually or in the aggregate) liabilities, direct or contingent, except
as
disclosed in the most recent financial statements furnished to the
Agent. Except as disclosed in the most recent financial statements
furnished to the Agent, there is no litigation, legal or administrative
proceeding, investigation or other action of any nature pending or, to the
knowledge of Borrower, threatened against or affecting any Company which
involves the possibility of any judgment or liability not fully covered by
insurance which may materially and adversely affect the business or the property
of the Borrower or such Subsidiary or its ability to carry on business as now
conducted.
(b) Without
limiting the foregoing, on the Closing Date there is no litigation, legal or
administrative proceeding, investigation or other action pending or, to the
knowledge of Borrower, threatened against or affecting the Borrower involving
non-compliance by the Borrower or its properties with any Applicable
Environmental Laws (as defined in Section 4.17).
(c) Without
limiting the foregoing, there is no litigation, legal or administrative
proceeding, investigation or other action pending, or to the knowledge of
Borrower, threatened against or affecting the Borrower involving allegations
that Borrower has failed to adequately develop its properties.
Section
4.11 Federal
Regulations. None of the Loan proceeds will be used for the
purpose of, and the Borrower is not engaged in the business of extending credit
for the purpose of, purchasing or carrying any “margin stock” as defined in
Regulation U of the Board of Governors of the Federal Reserve System (12 C.F.R.
Part 221), or for the purpose of reducing or retiring any indebtedness which
was
originally incurred to purchase or carry a margin stock or for any other purpose
which might constitute this transaction a “purpose credit” within the meaning of
said Regulation U. The Borrower is not engaged principally, or as one
of the Borrower’s important activities, in the business of extending credit for
the purpose of purchasing or carrying margin stocks. Neither the
Borrower nor any Person acting on behalf of the Borrower has taken or will
take
any action which might cause this Agreement to violate Regulation U or any
other
regulation of the Board of Governors of the Federal Reserve System or to violate
the Securities Exchange Act of 1934 or any rule or regulation thereunder, in
each case as now in effect or as the same may hereinafter be in
effect. No part of the proceeds of the Loan will be used, directly or
indirectly, to fund a personal loan to or for the benefit of a director or
executive officer of the Borrower or any Subsidiary.
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Section
4.12 Utility
or Investment Company. No Company is engaged in the generation,
transmission, or distribution and sale of electric power; operation of a local
distribution system for the sale of natural or other gas for domestic,
commercial, industrial, or other use; ownership or operation of a pipeline
for
the transmission or sale of natural or other gas, crude oil or petroleum
products (except for ownership of interests in gathering line systems);
provision of telephone or telegraph service to others; production, transmission,
or distribution and sale of steam or water; operation of a railroad; or
provision of sewer service to others; or any other activity which cause such
Company to be subject to regulation as a utility. The Borrower is not
an “investment company” within the meaning of the Investment Company Act of
l940, as amended.
Section
4.13 Compliance
with the Law. Each Company (i) is not in violation of any law,
judgment, decree, order, ordinance, or governmental rule or regulation to which
such Company or any of its property is subject; and (ii) has not failed to
obtain any license, permit, franchise or other governmental authorization
necessary to the ownership of any of its property or the conduct of its
business; in each case, which violation or failure could reasonably be
anticipated to materially and adversely affect the business, prospects, profits,
property or condition (financial or otherwise) of such Company.
Section
4.14 ERISA. The
Borrower is in compliance in all material respects with the applicable
provisions of ERISA, and no “reportable event”, as such term is defined in
Section 4043 of ERISA, has occurred with respect to any Plan of the
Borrower.
Section
4.15 Other
Information. All information, reports, papers and data given to
the Agent and the Banks by the Borrower pursuant to this Agreement
and in connection with the Borrower’s application for the Loan and the Agent’s
commitment letter are accurate and correct in all material respects, and
together constitute a complete and accurate presentation of all facts material
thereto. All financial projections given to the Agent were prepared
in good faith based on facts and circumstances existing at the time of
preparation and were believed by the Borrower to be accurate in all
material respects. No information, exhibit or report furnished by the
Borrower to the Agent in connection with the negotiation of this Agreement
contains any material misstatement of fact or fails to state a material fact
or
any fact necessary to make the statement contained therein not materially
misleading.
Section
4.16 Collateral. (a) Each
of the Borrower, Endeavor and Diamond has good and marketable title to the
Collateral granted by it, and the Collateral Documents constitute the legal,
valid and perfected Liens on the Collateral, free of all Liens except those
permitted by this Agreement in Section 6.2.
(b) The
Borrower has, with respect to the Collateral, the working interests and net
revenue interests therein as reported to the Agent in connection with the
negotiation of this Agreement. Without limiting the preceding
sentence, except as otherwise specifically disclosed to the Agent in writing,
all of the proved reserves (whether producing or not, and whether proved
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developed
or proved undeveloped) included in the reserve reports covering the Borrower’s
properties in the States of Texas and New Mexico most recently delivered to
the
Agent (on the Closing Date, the updated report by MHA Petroleum Consultants,
Inc., dated effective as of October 1, 2007, and the third party engineering
report prepared by MHA Petroleum Consultants, Inc., in association
with ▇▇▇▇▇▇▇ Associates Inc., dated effective as of January 1, 2007) are owned
as so reported, are encumbered Collateral in favor of the Agent, and are
properly described in the Collateral Documents. Except as otherwise
specifically disclosed to the Agent in writing with respect to any particular
part of the Borrower’s properties, (i) the Borrower is not obligated, whether by
virtue of any payment under any contract providing for the sale by the Borrower
of hydrocarbons which contains a “take or pay” clause or under any similar
arrangement or by virtue of any production payment or otherwise, to deliver
hydrocarbons produced or to be produced from the Borrower’s properties at any
time after the Closing Date without then or thereafter receiving full payment
therefor, except for Permitted Hedge Agreements; (ii) none of the Borrower’s
properties is subject to any contractual or other arrangement whereby payment
for production is to be deferred for a substantial period after the month in
which such production is delivered; (iii) none of the Borrower’s properties is
subject to an arrangement or agreement under which any purchaser or other Person
is currently entitled to “make-up” or otherwise receive material deliveries of
hydrocarbons at any time after the Closing Date without paying at such time
the
full contract price therefor; and (iv) no Person is currently entitled to
receive any material portion of the interest of the Borrower in any hydrocarbons
or to receive cash or other payments from the Borrower to “balance” any
disproportionate allocation of hydrocarbons under any operating agreement,
cash
balancing and storage agreement, gas processing or dehydration agreement, or
other similar agreements. For purposes of this paragraph, “material”
shall mean two hundred ($200,000.00) dollars (or more) or an amount of property
with an equivalent value.
(c) None
of the Collateral is subject to any calls on production of hydrocarbons or
any
gathering or transportation dedications or commitments of any kind.
(d) Endeavor
has good and marketable title to the gas gathering system servicing the
Collateral in East Texas.
(e) On
the Closing Date all of the natural gas produced by the Borrower from (and
as)
Collateral in East Texas for which the Borrower is the operator is sold by
the
Borrower to Endeavor at the wellhead.
Section
4.17 Environmental
Matters. No friable asbestos, or any substance containing asbestos deemed
hazardous by federal or state regulations on the date of this Agreement, has
been installed in any Collateral constituting real property. Such
real property and the Companies are not in violation of or subject to any
existing, pending, or threatened investigation or inquiry by any governmental
authority or to any remedial obligations under any applicable laws pertaining
to
health or the environment (hereinafter sometimes collectively called “Applicable
Environmental Laws”), including without limitation the Comprehensive
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Environmental
Response, Compensation, and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986 (as amended, hereinafter called
“CERCLA”), the Resource Conservation and Recovery Act of 1976, as amended by the
Used Oil Recycling Act of 1980, the Solid Waste Disposal Act Amendments of
1980,
and the Hazardous and Solid Waste Amendments of 1984 (as amended, hereinafter
called “RCRA”), and this representation and warranty would continue to be true
and correct following disclosure to the applicable governmental authorities
of
all relevant facts, conditions and circumstances, if any, pertaining to such
property and known to the Borrower. No hazardous substances or solid
wastes have been disposed of or otherwise released on or to such
property. The terms “hazardous substance” and “release” as used in
this Agreement shall have the meanings specified in CERCLA, and the terms “solid
waste” and “disposal” (or “disposed”) shall have the meanings specified in RCRA;
provided, in the event that the laws of any applicable state establish a meaning
for “hazardous substance,” “release,” “solid waste,” or “disposal” which is
broader than that specified in either CERCLA or RCRA, such broader meaning
shall
apply.
Section
4.18 Governmental
Requirements. Any Collateral constituting real (immovable)
property is in compliance with all current governmental requirements affecting
such property, including, without limitation, all current coastal zone
protection, zoning and land use regulations, building codes and all restrictions
and requirements imposed by applicable governmental authorities with respect
to
the construction of any improvements on such property and the contemplated
use
of such property.
Section
4.19 Contracts. (a) The
Contracts when considered as a whole do not materially affect the rights,
benefits or security of the Agent and the Banks under the Collateral Documents
and the Contracts do not contain any provision which would prevent the Agent’s
practical realization of the benefits of the Collateral Documents as to the
Collateral. After giving effect to the Contracts, the net revenue
interests of the Borrower in the Collateral are not less than those set forth
in
the Collateral Documents.
(b) The
Borrower has provided to the Agent true, accurate and complete copies of the
Participation Agreement (including all amendments).
Section
4.20 Affiliates. (a) On
the Closing Date, the Borrower has no Subsidiaries other than Endeavor and
Diamond, and each of those Subsidiaries has no Subsidiary. None of
the Companies has an ownership (direct or beneficial) interest in any Person
(whether stock, partnership interest, membership interest or otherwise) other
than as stated in the preceding sentence or as disclosed to the Agent in writing
. The Borrower owns and controls 100% of the ownership and voting
rights in Endeavor and Diamond. The Borrower has furnished to the
Agent true, accurate and complete copies of the organizational documents
(articles of incorporation and bylaws) of the Companies.
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(b) None
of the Collateral is owned by, or has record title to it in the name of, another
company than Borrower, and as to the gathering system Endeavor, and as to the
drilling rigs and related equipment Diamond.
Section
4.21 Debt
and Preferred Stock. (a) The Borrower has no Debt for
borrowed money from any Person (other than this new Loan), except the PVOG
Production Payment (on the terms described in the definition thereof) and the
Qualified Subordinated Debt (on terms meeting the definition thereof) described
in the Intercreditor Agreement dated as of July 31, 2007, among the Agent,
the
Banks, The Bank of New York Trust Company, N.A., as Noteholder Collateral Agent,
and The Prudential Insurance Company of America. The Borrower has no
material accounts payable more than sixty days old. The only
documents evidencing the PVOG Production Payment are the Participation Agreement
(including all amendments).
(b) On
the Closing Date, the Borrower has no preferred stock issued and outstanding
except the 9.25% Series B Cumulative Preferred Stock issued in August
2006.
Section
4.22 Patriot
Act. To the extent applicable, each Company is in compliance, in
all material respects, with the (i) federal Trading with the Enemy Act, as
amended, and each of the foreign assets control regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other
enabling legislation or executive order relating thereto, and (ii) Federal
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism (USA Patriot Act of 2001) (the “Patriot
Act”). No part of the proceeds of any Loan will be used, directly
or indirectly, for any payments to any governmental official or employee,
political party, official of a political party, candidate for office or any
one
use acting in an official capacity, in order to obtain, retain or direct
business or obtain any improper advantage, in violation of the United States
Foreign Corrupt Practices Act of 1977, as amended.
Section
4.23 Operations. On
the Closing Date, the Operators of the Borrower’s Texas properties are as
follows:
| Operator | Field |
| PVOG | Participation Agreement Areas I and II |
| Borrower | Participation Agreement Area III |
| ▇▇▇▇ Petroleum Corporation | ▇▇▇ ▇▇▇▇▇▇▇▇ Units |
Section
4.24 Continuing
Accuracy. All of the representations and warranties contained in
this Article or elsewhere in this Agreement shall be true through and until
the
date on which all obligations of Borrower under this Agreement, the Notes and
the Collateral Documents and any other documents executed in connection
therewith are fully satisfied.
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ARTICLE
5
AFFIRMATIVE
COVENANTS
Unless
the Agent's and the Required Banks' (or if required by Section 10.4
hereof, all of the Banks') prior written consent to the contrary is obtained,
the Borrower will at all times comply with the covenants contained in this
Article 5 (including where applicable, without the necessity of expressly so
stating in each instance, causing its Subsidiaries to comply with such
covenant), from the date hereof and for so long as any part of the Indebtedness
is outstanding.
Section
5.1 Performance
of Obligations. The Borrower will repay the Indebtedness
according to the reading, tenor and effect of the Notes and this
Agreement. The Borrower will do and perform every act required of it
by this Agreement, the Notes or in the Collateral Documents at the time or
times
and in the manner specified.
Section
5.2 Financial
Statements and Reports. The Borrower will furnish or cause to be
furnished to the Agent from time to time: (and the Agent shall furnish promptly
to each Bank from time to time copies of all such documents received by the
Agent from the Borrower, except that documents under paragraphs (e), (i) and
(n)
below shall be forwarded by Agent only upon request by a Bank).
(a) Borrower’s
Annual Reports - as soon as available and in any event within 120 days after
the close of each fiscal year of the Borrower, the consolidated audited balance
sheet of the Borrower as of the end of such year, the consolidated audited
statement of income of the Borrower for such year, the consolidated audited
statement of changes in shareholder equity of the Borrower for such year, and
the consolidated audited statement of cash flow of Borrower for such year,
setting forth in each case in comparative form the corresponding figures for
the
preceding fiscal year, accompanied by a report of the Borrower’s independent
certified public accountants acceptable to the Agent. Such annual
reports shall be accompanied by the certificates of compliance required by
Section 5.3.
(b) Borrower’s
Quarterly Reports - as soon as available and in any event within 60 days
after the end of each fiscal quarter in each fiscal year of the Borrower, the
unaudited consolidated balance sheet of the Borrower as of the end of such
fiscal quarter, the unaudited consolidated statement of income of the Borrower
for the period from the beginning of the fiscal year to the close of such fiscal
quarter, the unaudited consolidated statement of changes in shareholders equity
of the Borrower for the period from the beginning of the fiscal year to the
close of such fiscal quarter, and the unaudited consolidated statement of cash
flow of Borrower for the period from the beginning of the fiscal year to the
close of such fiscal quarter, setting forth in each case in comparative form
the
corresponding figures for the corresponding period of the preceding fiscal
year
(and showing without limitation any over or under produced imbalances of
production). Such internally prepared quarterly reports shall be
accompanied by the certificates of compliance required by Section
5.3.
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(c) Semi-Annual
Engineering Reports - as soon as available and in any event by April 1 and
October 1 of each year, a semi-annual engineering report covering the Borrowing
Base properties, with an effective date of December 31 for the April 1 report
and no more than 60 days earlier for the October 1 report, in form and substance
acceptable to the Agent. The report for the April 1 determination
shall be reviewed by an independent third party petroleum engineers firm
acceptable to the Agent. The report for the October 1 determination
may be an internal update report furnished by the Borrower with technical review
in a meeting between the Borrower and Agent’s Energy Technical
Services. Without limiting the foregoing sentences, such reports
shall include a discussion of assumptions as to engineering, pricing and
expenses, and an economic evaluation together with the reserve value of each
well of each property in the Borrowing Base, and further categorized as
Collateral or non-Collateral and as Proved Developed Producing Reserves, Proved
Developed Non-Producing Reserves, or Proved Undeveloped
Reserves. (The Borrower acknowledges that the Agent reserves the
right to determine the Borrowing Base based on the provisions hereof and Agent’s
own evaluations of rates, volumes, prices, assumptions and other factors
regardless of this outside engineering data or then market prices.)
(d) Quarterly
Reports - within 60 days after the end of each calendar quarter, three
production and price tracking monthly reports pertaining to the Borrowing Base
properties on a well by well basis in form acceptable to the Agent’s Energy
Technical Services, including production volumes, sales volume, sales revenues,
production taxes, operating expenses, capital expenditures, and revenue and
expense statements. Such report shall include the status of all gas
balancing (if any) affecting any of the Borrowing Base properties.
(e) Periodic
Title Information– periodically as available and in any event no later than
the date for the delivery of the semi-annual engineering reports under
Subsection 5.2(c), copies of drill site title opinions or division order
title opinions covering newly drilled ▇▇▇▇▇ included in the Collateral which
are
not covered by title opinions previously delivered to the Agent (i.e., ▇▇▇▇▇
drilled within the preceding period); and in addition promptly upon the Agent’s
request, detailed information concerning any and all requirements or exceptions
set forth in any title opinions concerning any of the Collateral.
(f) Environmental
- (I) promptly upon receipt thereof, complete documentation pertaining to any
fines levied during the prior year against the Borrower, or to the extent known
and available to the Borrower against an Operator of any Collateral, for
non-compliance with all applicable federal, state and local environmental laws
and regulations; and (II) promptly upon learning thereof, notice of Borrower’s
acquisition of actual knowledge of the presence of any hazardous materials
or
solid waste (as defined elsewhere in this Agreement) on or under any
Collateral.
(g) Notices
- when required by the terms thereof, the notices required under Section
5.11.
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(h) Audit
Reports–promptly upon receipt thereof, one copy of each report (if any)
submitted to the Borrower by independent accountants in connection with any
annual, interim or special audit made by them of the books of the
Borrower.
(i) Insurance
Report - within 30 days after the end of each fiscal year of the Borrower,
an annual insurance coverage report detailing the insurance program maintained
by or for the Borrower.
(j) S.E.C.
Reports–promptly upon becoming available, copies of all (i) regular,
periodic or special reports, schedules and other material which the Borrower
may
be required to file with or deliver to any securities exchange or the Securities
and Exchange Commission (or any other governmental authority succeeding to
the
functions thereof) and (ii) material news releases and annual reports relating
to the Borrower. Such documents shall be deemed to have been
delivered on the date such document is included in materials otherwise filed
with the Securities and Exchange Commission electronically so as to be publicly
available on an internet website to which the Agent has access.
(k) Hedge
Agreements– promptly after entering into such contract if requested by the
Agent but in any event at the end of each fiscal quarter, written notice of
the
fact that the Borrower or a Subsidiary has entered into a Hedge Agreement,
together with a list of all Hedge Agreements of the Borrower and its
Subsidiaries describing the material terms thereof. Absent a specific
request, this information may be provided as part of the Borrower’s Form
10-Q.
(l) Participation
Agreement– promptly after execution thereof, copies of each amendment or
supplement to or replacement of the Participation Agreement.
(m) Other
Information - promptly upon the request of the Agent or any Bank, all
regular budgets and such other financial, technical or other information
regarding the business and affairs and financial condition of the Borrower
as
the Agent or such Bank may reasonably request (for review and
copying).
All
balance sheets and other financial reports referred to above shall be in such
detail as the Agent or the Required Banks may reasonably request and shall
conform to the standards described in Section 1.3.
Section
5.3 Certificates
of Compliance. (a) So long as not contrary to the then
current rules, regulations or recommendations of the American Institute of
Certified Public Accountants or similar body, concurrently with the furnishing
of the annual financial statements described above, the Borrower will cause
to
be furnished to the Agent a certificate from the independent certified public
accountants for the Borrower stating that in the ordinary course of their audit
of the Borrower, insofar as it relates to accounting matters, their audit has
not disclosed the existence of any condition which constitutes a Default, or
if
their audit has disclosed the existence of any such condition, specifying the
nature, period of existence and
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44
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status
thereof; provided, however, that the independent certified public accountants
shall not be liable to the Agent and the Banks for their failure to discover
a
Default.
(b) Concurrently
with the furnishing of the annual and quarterly financial statements described
above, the Borrower will furnish to the Agent, for distribution to the Banks,
a
certificate signed by the principal financial officer of the Borrower, stating
either that no Default occurred during such quarter (or if it did but no longer
exists, the nature and duration thereof) and that no Default then exists, or
if
a Default exists, the nature, period of existence and status thereof, and
specifically setting forth the calculations showing the Borrower’s compliance
with the financial covenants in Section 5.15.
Section
5.4 Taxes
and Other Liens. Each Company will file all tax returns and
reports required to be filed and pay and discharge promptly when due all taxes,
assessments and governmental charges or levies imposed upon it or upon income
or
upon any of its property (including production, severance, windfall profit,
excise and other taxes assessed against or measured by the production of, or
the
value or proceeds of production of, the Collateral) as well as all claims of
any
kind (including claims for labor, materials, supplies and rent) which, if
unpaid, might become a Lien upon any or all of its property; provided, however,
such Company shall not be required to pay any such tax, assessment, charge,
levy
or claim if the amount, applicability or validity thereof shall currently be
contested in good faith by appropriate proceedings diligently conducted and
if
the contesting party shall have set up reserves therefor adequate under
generally accepted accounting principles (provided that such reserves may be
set
up under generally accepted accounting principles) and so long as the payment
of
same is not a condition to be met in order to maintain an oil, gas or mineral
lease in force.
Section
5.5 Maintenance
and Compliance. The Borrower will, and will cause each Subsidiary
to, (i) maintain its corporate existence and rights and its current business
operations; (ii) observe and comply (to the extent necessary so that any failure
will not materially and adversely affect the business of such Person) with
all
valid existing and future laws, statutes, codes, acts, ordinances, orders,
judgments, decrees, injunctions, rules, regulations, certificates, franchises,
permits, licenses, authorizations, directions and requirements (including
without limitation applicable statutes, regulations, orders and restrictions
relating to environmental standards or controls or to energy regulations) of
all
federal, state, county, municipal and other governments, departments,
commissions, boards, courts, authorities, officials and officers, domestic
or
foreign; and (iii) maintain its properties (and any property leased by or
consigned to it or held under title retention or conditional sales contracts)
in
generally good and workable condition at all times and make all repairs,
replacements, additions, betterments and improvements to its properties to
the
extent necessary so that any failure will not materially and adversely affect
the business of such Person.
Section
5.6 Further
Assurances. The Borrower at its expense will, and will cause each
Subsidiary to, promptly (and in no event later than 30 days after written notice
from the Agent is received) cure any defects, errors or omissions in the
creation, execution, delivery or
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contents
of this Agreement, the Notes or the Collateral Documents, and execute and
deliver to the Agent upon request all such other and further documents,
agreements and instruments in compliance with or accomplishment of the covenants
and agreements of the Companies in this Agreement, the Notes or in the
Collateral Documents or to further evidence and more fully describe the
Collateral (including without limitation any renewals, additions, substitutions,
replacements or accessions to the Collateral), or to correct any omissions
in
the Collateral Documents, or more fully state the security obligations set
out
herein or in any of the Collateral Documents, or to perfect, protect or preserve
any Liens and the priority thereof created pursuant to any of the Collateral
Documents, or to make any recordings, to file any notices, or obtain any
consents as may be necessary or appropriate in connection with the transactions
contemplated by this Agreement.
Section
5.7 Reimbursement
of Expenses. The Borrower will pay all reasonable legal fees and
expenses incurred by the Agent and the Banks in connection with the preparation
or administration of this Agreement, the Notes and the Collateral
Documents. The Borrower will upon request promptly reimburse the
Agent and the Banks for all amounts expended, advanced or incurred by the Agent
and the Banks to satisfy any obligation of the Borrower under this Agreement,
or
to protect the property or business of any Company or to collect the Secured
Liabilities, or to enforce the rights of the Agent and the Banks under this
Agreement, the Notes, the Collateral Documents or the Secured Hedge Agreements,
which amounts will include all court costs, attorneys’ fees and expenses, fees
and expenses of engineers, auditors and accountants, travel expenses and
investigation expenses reasonably incurred by the Agent and the Banks in
connection with any such matters, together with interest at the Default Rate
on
each such amount from the date that is thirty (30) days after demand by the
Agent and the Banks therefor until the date of reimbursement to the Agent or
such Bank. The Borrower also agrees to pay, and to hold the Agent and
the Banks harmless from any failure or delay in paying, all recording taxes,
documentary stamp taxes or other similar taxes, if any, which may be payable
or
determined to be payable in connection with the execution and delivery of this
Agreement, the Notes, the Collateral Documents, the Secured Hedge Agreements,
or
any modification or supplement thereof or thereto.
Section
5.8 Insurance. Each
Company will maintain with financially sound and reputable insurers, insurance
with respect to its properties and businesses against such liabilities,
casualties, risks and contingencies and in such types and amounts as are
reasonably satisfactory to the Agent and customary in accordance with standard
industry practice or as more specifically provided in the Collateral
Documents. Upon request of the Agent, the Borrower will furnish or
cause to be furnished to the Agent from time to time a summary of the insurance
coverage of the Companies in form and substance satisfactory to the Agent and
if
requested will furnish the Agent original certificates of insurance and/or
copies of the applicable policies.
Section
5.9 Accounts
and Records. The Borrower will keep books of record and accounts
in which true and correct entries will be made as to all material matters of
all
dealings or transactions in relation to the Companies’ business and
activities.
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Section
5.10 Right
of Inspection. The Borrower will permit any officer, employee or
agent of the Agent or any Bank at such Person’s risk to visit and inspect any of
the property of the Companies, examine the books of record and accounts of
the
Companies, take copies and extracts therefrom, and discuss the affairs, finances
and accounts of the Companies with the Borrower’s officers, accountants and
auditors, and the Borrower will furnish information concerning the Collateral,
including schedules of all internal and third party information identifying
the
Collateral (such as, for example, lease and well names and numbers assigned
by
the Borrower or the Operator of any mineral properties, division orders and
payment names and numbers assigned by purchasers of the hydrocarbons, and
internal identification names and numbers used by the Borrower in accounting
for
revenues, costs and joint interest transactions attributable to the mineral
properties), all on reasonable notice, at such reasonable times without
hindrance or delay and as often as the Agent or any Bank may reasonably
desire. The Borrower will furnish to the Agent promptly upon request
and in the form and content specified by the Agent lists of purchasers of
hydrocarbons and other account debtors, schedules of equipment and other data
concerning the Collateral as the Agent may from time to time
specify.
Section
5.11 Notice
of Certain Events. (a) The Borrower shall promptly notify the
Agent if the Borrower learns of the occurrence of any event which constitutes
a
Default, together with a detailed statement by a responsible officer of the
Borrower of the steps being taken to cure the effect of such
Default.
(b) The
Borrower shall promptly notify the Agent of any change in location of any
Company’s principal place of business or the office where it keeps its records
concerning accounts and contract rights or a change in its name, state of
organization or organizational status.
(c) The
Borrower shall promptly notify the Agent of the arising of any litigation or
dispute threatened against or affecting the Borrower or any Subsidiary which,
if
adversely determined, would have a material adverse effect upon the financial
condition or business of the Borrower or such Subsidiary. In the
event of such litigation, the Borrower will cause such proceedings to be
vigorously contested in good faith and, in the event of any adverse ruling
or
decision, the Borrower shall prosecute all allowable appeals. The
Agent may (but shall not be obligated to), after prior notice to Borrower,
commence, appear in, or defend any action or proceeding purporting to affect
the
Loan, or the respective rights and obligations of Agent and the Banks and
Borrower pursuant to this Agreement, and the Borrower agrees to repay the Agent
upon demand all necessary expenses, including reasonable attorneys’ fees and
expenses, incurred by the Agent in connection with such proceedings or
actions.
(d) The
Borrower shall promptly notify the Agent of the occurrence of any material
adverse change in the value of any oil or gas property or properties which
is or
are included in and in the aggregate represents at least five (5%) percent
of
the Borrowing Base, or from which any Company otherwise derives at least five
(5%) percent of its revenue. Without
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limiting
the foregoing, the Borrower shall promptly notify the Agent of any notice of
default or cancellation from any lessor of any mineral lease in the
Collateral. This paragraph does not apply to changes in value
resulting from market price changes affecting the oil and gas industry
generally.
(e) The
Borrower shall promptly notify the Agent of the creation, incurrence,
assumption, existence or filing of any Lien on any Borrowing Base property
now
owned or hereafter acquired, except for Liens permitted under Section
6.2.
(f) The
Borrower shall promptly notify the Agent of each creation, acquisition,
disposition, dissolution, merger or other change in the status of or addition
or
removal of any Subsidiary, and of each other investment in or acquisition of
any
ownership (direct or beneficial) interest in any Person (whether stock,
partnership interest, membership interest or otherwise by any
Company).
(g) The
Borrower shall promptly notify the Agent (if possible in advance) of any change
in the identity of the Operator of any of the Borrower’s
properties.
(h) The
Borrower shall promptly notify the Agent of any notice of default received
from
or sent to (i) PVOG under the Participation Agreement or (ii) any
Operator.
(i) The
Borrower shall promptly notify the Agent of any event which would render any
of
the representations and warranties set forth in Article 4 untrue or
misleading in any material respect, except as such representations and
warranties relate to matters as are changed as permitted by this
Agreement.
(j) The
Borrower shall promptly notify the Agent of the occurrence of any event which
constitutes a default under the Qualified Subordinated Debt or the Qualified
Redeemable Preferred Equity.
(k) The
Borrower shall promptly furnish the Agent with a copy of any notice of default
or waiver (retroactive or prospective) pertaining to the Qualified Subordinated
Debt or the Qualified Redeemable Preferred Equity.
(l) The
Borrower shall promptly furnish the Agent with copies of each amendment,
modification or waiver pertaining to the Qualified Subordinated Debt or the
Qualified Redeemable Preferred Equity or any new agreement pertaining to
either.
The
foregoing requirements of notice shall not be construed to imply permission
or
consent by the Agent and the Banks as to such events or to waive any
representations, covenants and defaults set forth in this
Agreement.
Section
5.12 ERISA
Information and Compliance. The Borrower will promptly furnish to
the Agent (i) promptly after the filing thereof with the United
States Secretary of
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Labor
or
the Pension Benefit Guaranty Corporation, copies of each annual and other report
with respect to each Plan or any trust created by the Borrower, and (ii)
immediately upon becoming aware of the occurrence of any “reportable event,” as
such term is defined in Section 4043 of ERISA, or of any “prohibited
transaction,” as such term is defined in Section 4975 of the Code, in connection
with any Plan or any trust created by the Borrower, a written notice signed
by
the president or the principal financial officer of the Borrower specifying
the
nature thereof, what action the Borrower is taking or proposes to take with
respect thereto, and, when known, any action taken by the Internal Revenue
Service with respect thereto. The Borrower will comply with all of
the applicable funding and other requirements of ERISA as such requirements
relate to the Plans of the Borrower.
Section
5.13 Indemnification. (a)
The Borrower will indemnify the Agent and the Banks and other Indemnified
Parties and hold the Agent and the Banks and other Indemnified Parties harmless
from claims of brokers with whom the Borrower has contracted in the execution
hereof or the consummation of the transactions contemplated
hereby. The Agent and each Bank, severally, will indemnify the
Borrower and hold the Borrower harmless from claims of brokers with whom the
Agent or such Bank, respectively, has contracted in connection with the
transactions contemplated hereby.
(b) The
Borrower will indemnify the Agent and the Banks and other Indemnified Parties
and hold the Agent and the Banks and other Indemnified Parties harmless from
any
and all liabilities, obligations, losses, damages, penalties, claims, actions,
suits, costs and expenses of whatever kind or nature which may be imposed on,
incurred by or asserted at any time against the Indemnified Parties in any
way
relating to, or arising in connection with, the use or occupancy of any of
the
Collateral or any breach of any representation, warranty or covenant under
the
terms of this Agreement or the Collateral Documents.
Section
5.14 Environmental
Indemnity. The Borrower shall defend, indemnify and hold the
Agent and each Bank and its respective shareholders, directors, officers,
agents, employees, subsidiaries and Affiliates (collectively the "Indemnified
Parties", and each as "Indemnified Party") harmless from and against all claims,
demands, causes of action, liabilities, losses, costs and expenses (including,
without limitation, costs of suit, reasonable attorneys’ fees and fees of expert
witnesses) arising from or in connection with (i) the presence on or under
all
Collateral constituting real (immovable) property of any hazardous substances
or
solid wastes (as defined elsewhere in this Agreement), or any releases or
discharges of any hazardous substances or solid wastes on, under or from such
property, or (ii) any activity carried on or undertaken on or off such property,
whether prior to or during the term of this Agreement, and whether by Borrower
or any predecessor in title or any officers, employees, agents, contractors
or
subcontractors of Borrower or any predecessor in title, or any third persons
at
any time occupying or present on such property, in connection with the handling,
use, generation, manufacture, treatment, removal, storage, decontamination,
clean-up, transport or disposal of any hazardous substances or solid wastes
at
any time located or present on or under such property. The foregoing
indemnity shall further apply to any residual contamination on or under such
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49
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property,
or affecting any natural resources, and to any contamination of any property
or
natural resources arising in connection with the generation, use, handling,
storage, transport or disposal of any such hazardous substances or solid wastes,
and irrespective of whether any of such activities were or will be undertaken
in
accordance with applicable laws, regulations, codes and
ordinances. Without prejudice to the survival of any other agreements
of the Borrower hereunder, the provisions of this Section shall survive the
final payment of all Indebtedness and the termination of this Agreement and
shall continue thereafter in full force and effect.
Section
5.15 Financial
Covenants. The Borrower shall comply with the following financial
covenants (determined in accordance with Section 1.3), except as
specifically stated otherwise:
(a) Minimum
Current Ratio. The Borrower shall maintain, on a quarterly basis
as of the last day of each fiscal quarter, a current ratio in an amount not
less
than 1.00 to 1.00. For purposes of this Section, “current
ratio” shall mean the ratio of (x) current assets plus the unused and
available portion of the Commitment Limit (being the amount, if any, by which
the Commitment Limit then in effect exceeds the sum of the principal balance
of
unpaid and outstanding Advances and the total undisbursed amount of all letters
of credit outstanding as of such date of determination) to (y) current
liabilities (excluding therefrom the outstanding balance on the
Loan). This calculation will not include the effects, if any, of
marking to market Hedging Obligations pursuant to Financial Accounting Standards
Board Statement No. 133.
(b) Minimum
Net Worth. The Borrower shall have a net worth of not less than
the amount established by the next sentence on the Closing Date, and thereafter
shall maintain at all times the minimum net worth requirement as changed
annually on the following basis. During 2007 the Borrower’s minimum
net worth requirement shall be $135,961,144.00. Thereafter, this
minimum net worth requirement shall be changed annually by the Agent after
the
end of each fiscal year as to the amount to be met during the new calendar
year,
with the amount to be met during the new calendar year (tested quarterly as
of
the last day of each fiscal quarter) being increased (but not reduced) by the
sum of (x) fifty (50%) percent of the Borrower’s prior fiscal year’s positive
net income plus (y) one hundred (100%) percent of the net proceeds from
stock or other equity offerings of any nature by the Borrower or any Subsidiary
(including without limitation any Qualified Redeemable Preferred
Equity). For purposes of this covenant, the non-cash effects, if any,
of Hedging Agreements pursuant to Financial Accounting Standards Board Rule
No.
133 (Accounting for Derivative Instruments and Hedging Activities) will not
be
included.
(c) Minimum
EBITDA to Interest Expense. The Borrower shall maintain, on a
quarterly basis as of the last day of each fiscal quarter, a ratio (on a rolling
four fiscal quarter basis) of EBITDA to Interest Expense during the four
preceding fiscal quarters of not less than 3.00 to 1.00.
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(d) Calculation. The
Borrower acknowledges that any outstanding Qualified Subordinated Debt and
any
Qualified Redeemable Preferred Equity shall be counted and included as Debt
for
purposes of the financial covenants in this Section
5.15. Without limiting the foregoing, the dividends payable under
the Qualified Redeemable Preferred Equity shall be counted and included within
Interest Expense for purposes of the financial covenant in Subsection
5.15(c).
Section
5.16 Bank
Accounts. (a) The Borrower shall maintain (and cause
to be maintained) with the Agent the Companies’ primary operating, money
market/treasury management, collection and disbursement accounts, including
without limitation as provided in Section 5.17.
(b) The
Borrower hereby grants to the Agent for the benefit of the Secured Parties
a
continuing security interest in all of Borrower’s deposit accounts now existing
or hereafter maintained with Agent as security for the Secured Liabilities,
and
all funds, investment property and proceeds pertaining thereto.
(c) The
Agent will be granted security interests by the Subsidiaries in all of their
respective deposit accounts (if any) (separate from the Borrower’s deposit
accounts) maintained with Agent as security for the Secured Liabilities, and
all
funds, investment property and proceeds pertaining thereto.
Section
5.17 Revenues. (a) The
Borrower and Endeavor each shall immediately deposit daily all payments for
oil
or natural gas sales from the Borrower’s properties (whether or not such
property is Collateral), or for resales thereof by Endeavor, to a revenue
clearing deposit account with the Agent at all times. All such
deposits shall be made no later than the first Business Day after collection
by
such Company. Without limiting the foregoing, the Borrower shall use
its best efforts to cause all Operators of any Company’s Collateral or
purchasers from the Borrower or any Subsidiary (including Endeavor) which make
payments for oil or natural gas sales or purchases by electronic transfer
payments to change such electronic payments to be made directly to Borrower’s or
such Subsidiary’s accounts with the Agent. (The foregoing covenant is
separate from the Agent’s right after an Event of Default to send letters in
lieu of transfer orders signed by the Borrower under Subsections 3.1(a)(x)
and 8.2(c) below.)
(b) The
Borrower, the Agent and the Banks acknowledge that Collateral is comprised
in
part of the Borrower’s undivided interests in mineral properties for which the
Borrower is operator, and accordingly a portion of the payments made to the
Borrower from the sale of hydrocarbons from such properties may be owed by
the
Borrower to the non-operator working interest owners or to royalty or overriding
royalty owners. In the event that revenues of another Person
attributable to such other Person’s working interest or royalty or overriding
royalty interest (“Other Revenues”) are deposited into the revenue clearing
account at the Agent, then the Agent and the Banks agrees that such Other
Revenues will be released by the Agent to
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such
Persons (even if an Event of Default has occurred and is continuing) upon the
receipt by the Agent of appropriate evidence that such funds are Other Revenues
(i.e., are not the Borrower’s funds). The Agent and the Banks shall
not be liable, however, for any actions by Agent which are taken in compliance
with the terms of this Agreement and the Collateral Documents with respect
to
funds in the revenue clearing account that are Other Revenues and which are
taken before Agent received such evidence that such funds are Other
Revenues.
(c) Upon
the occurrence of any Event of Default, the Borrower shall upon Agent’s or the
Required Banks' request execute such division orders, transfer orders or letters
in lieu thereof as are necessary to direct that all payments of mineral
production due to the Borrower from its properties are paid directly to the
Agent, including as further provided in the Deed of Trust.
Section
5.18 Hedging
Program. At all times when the Percentage Outstanding exceeds
seventy-five (75%), the Borrower shall enter into and maintain in effect a
hedging program (the “Hedging Program”) consisting of Permitted Hedge
Agreements that are mutually satisfactory to the Agent, the Required Banks
and
the Borrower. Without limiting the foregoing, the Borrower
acknowledges the Agent’s and the Banks' general expectation that at such time
the Permitted Hedge Agreements comprising the Hedging Program (i) shall in
no
contract fix a price for a term of more than three (3) years, and (ii) in the
aggregate shall cover no more than eighty (80%) percent of the Borrower’s
projected oil and gas PDP production set forth in the most recent third party
engineering report.
Section
5.19 Payables. The
Companies shall pay all accounts payable for which applicable law grants the
account holder a Lien against any property of such Company within 60 days from
the date such payable is due and owing; provided, however, such Company shall
not be required to pay any such account if the amount or validity thereof shall
currently be contested in good faith by appropriate proceedings diligently
conducted and if such Company shall have set up reserves therefore adequate
under generally accepted accounting principles (provided that such reserves
may
be set up under generally accepted accounting principles) and so long as such
contest proceedings conclusively operate to stay the sale of any property
subject to such Lien to satisfy such account.
Section
5.20 Diamond
Loan. The Borrower shall cause any loan made by the Borrower to
Diamond to be unsecured.
Section
5.21 Diamond
Limitation. The Borrower shall not, and shall not permit Diamond
or any Subsidiary, to own any drilling rig other than the three (3) drilling
rigs owned by Diamond on July 15, 2007. (The Borrower must also
comply with Subsection 6.3(g) below.)
ARTICLE
6
NEGATIVE
COVENANTS
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Unless
the Agent’s and the Required Banks' (or if required by Section 10.4
hereof, all of the Banks) prior written consent to the contrary is obtained,
the
Borrower will at all times comply with the covenants contained in this Article
6
(including where applicable, without the necessity of expressly so stating
in
each instance, causing its Subsidiaries to comply with such covenant), from
the
date hereof and for so long as any part of the Indebtedness is
outstanding.
Section
6.1 Debts,
Guaranties and Other Obligations. Each Company will not incur,
create, assume or in any manner become or be liable in respect of any Debt
direct or contingent, except for:
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|
(a)
|
The
Indebtedness to the Agent and the Banks under this Agreement and
the
Notes.
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|
(b)
|
Customary
trade payables or operating leases, and endorsements of negotiable
instruments for deposit or collection, all from time to time incurred
in
the ordinary course of business.
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(c)
|
Debt
under operating agreements, unitization and pooling agreements and
orders,
farmout agreements and gas balancing agreements, in each case that
are
customary in the oil, gas and mineral production business and that
are
entered into in the ordinary course of business. [For the
avoidance of doubt, it is acknowledged that this covenant is separate
and
independent of the Event of Default under Subsection
8.1(n).]
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|
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(d)
|
Taxes,
assessments or other government charges which are not yet due or
are being
contested in good faith by appropriate action promptly initiated
and
diligently conducted, if such reserve as shall be required by generally
accepted accounting principles shall have been made
therefor.
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(e)
|
Hedging
Obligations incurred under Permitted Hedge
Agreements.
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(f)
|
Debt
owing by a Subsidiary to the
Borrower.
|
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(g)
|
The
PVOG Production Payment; provided, the Borrower shall not (i)
prepay any portion of such Debt before it is due while a Default
has
occurred
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and
is continuing, (ii) allow the amount owing thereunder to exceed
at any one
time $2,050,000.00 outstanding, nor (iii) amend any of the documents
evidencing or pertaining to the PVOG Production Payment as in effect
on
the Closing Date or enter into any new agreements pertaining thereto
which
affect the terms of the PVOG Production Payment adversely to the
Borrower,
in each case without the Agent’s and the Required Banks' prior written
consent.
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(h)
|
Qualified
Subordinated Debt, and Qualified Redeemable Preferred Equity, in
combined
amounts (as provided in the definitions thereof) which do not exceed
the
Maximum Subordinated Amount, provided that the conditions in
Sections 6.10 and 6.11 are
satisfied.
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Section
6.2 Liens. The
Borrower will not, and will not allow or suffer any Subsidiary to, create,
incur, assume or permit to exist any Lien on any of its property now owned
or
hereafter acquired, except for:
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|
(a)
|
Liens
for taxes, assessments, or other governmental charges not yet due
or which
are being contested in good faith by appropriate action promptly
initiated
and diligently conducted, if such reserve as shall be required by
generally accepted accounting principles shall have been made therefor,
and so long as the payment of same is not a condition to be met in
order
to maintain in force such Person’s interest in such property or (if
applicable) the Agent’s first Lien
therein.
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(b)
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Liens
of landlords, vendors, carriers, warehousemen, mechanics, laborers
and
materialmen arising by law in the ordinary course of business for
sums
either not more than 90 days past due or being contested in good
faith by
appropriate action promptly initiated and diligently conducted, if
such
reserve as shall be required by generally accepted accounting principles
shall have been made therefor, and so long as the payment of
same
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is
not a condition to be met in order to maintain in force such Person’s
interest in such property or (if applicable) the Agent’s first Lien
therein.
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(c)
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Inchoate
liens arising under ERISA to secure the contingent liability of the
Borrower permitted by this
Agreement.
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(d)
|
The
pledge of the Collateral and any other Liens in favor of the Agent
to
secure on a paripassu basis, (i) the Indebtedness of the
Borrower to the Agent and the Banks and (ii) (in some or all cases
as
determined by the Banks) the Secured Hedge Obligations permitted
hereby.
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(e)
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Minor
imperfections of title or non-monetary Liens that do not materially
impair
the development, operation or value of property in its intended use
or the
title thereto and which are of a nature commonly existing with respect
to
properties of a similar character as the
Collateral.
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(f)
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Royalties,
overriding royalties, net profits interests, production payments,
reversionary interests, calls on production, preferential purchase
rights
and other burdens on or deductions from the proceeds of production,
that
do not secure Debt for borrowed money and that are taken into account
in
computing the net revenue interests and working interests of the
Borrower
warranted in the Collateral
Documents.
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(g)
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Operating
agreements, unitization and pooling agreements and orders, farmout
agreements, gas balancing agreements and other agreements, in each
case
that are customary in the oil, gas and mineral production business
in the
general area of such property and that are entered into in the ordinary
course of business in good faith. [For the avoidance of doubt,
it is acknowledged that this covenant is separate and independent
of the
Event of Default under Subsection
8.1(n).]
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(h)
|
Judgment
Liens arising in the ordinary course of business (provided the litigation
is actively being contested in good faith and by appropriate proceedings)
and which do not constitute an Event of Default under Subsection
8.1(j).
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(i)
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Liens
resulting from good faith deposits to secure payments of workmen’s
compensation or other social security programs (excluding Liens under
Section 4068 of ERISA) or to secure the performance of bids, tenders,
statutory obligations, surety and appeal bonds, contracts (other
than for
payment of debt) or operating leases, in each case made in the ordinary
course of business.
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(j)
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The
PVOG Production Payment (non-recourse to the Borrower except as provided
in the definition thereof).
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(k)
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Liens
securing Qualified Subordinated Debt, fully subordinated to the Liens
securing the Secured Liabilities under an Intercreditor Agreement
satisfactory to the Agent.
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The
inclusion of this Section 6.2 shall not constitute in any way an acknowledgment
by the Agent and the Banks of the validity, legality, enforceability or binding
effect on the Agent and the Banks of such Liens, the sole purpose of this
provision being to provide that the existence of any such permitted Liens shall
not in and of itself constitute an Event of Default under this
Agreement.
Section
6.3 Investments,
Loans and Advances. The Borrower will not (directly or indirectly
through any Subsidiary), and will not allow or suffer any Subsidiary to, make
or
permit to remain outstanding any loans or advances or extensions of credit
to,
or purchases or other acquisitions of capital stock or ownership (direct or
beneficial) interests or obligations of, or other investments in, any Person
(including without limitation any Subsidiary), except for:
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(a)
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Investments
in readily marketable direct obligations of the United States of
America
or any agency thereof.
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(b)
|
Investments
in either certificates of deposit of maturities less than one year
issued
by the Agent or any Bank, or, if no Bank is substantially
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competitive
(in terms of its certificate of deposit interest rate for comparable
amounts) with other banks (having a credit rating equal or better
than the
Banks), then certificates of deposit of maturities less than one
year
issued by one or more of such other
banks.
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(c)
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Investments
in commercial paper of maturities less than one year with the best
rating
by Standard & Poors, ▇▇▇▇▇’▇ Investors Service, Inc., or any other
rating agency satisfactory to the
Agent.
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(d)
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Routine
advances to employees made in the ordinary course of business, and
that do
not exceed historical levels in a material
manner.
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(e)
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Advances
pursuant to operating agreements, unitization and pooling agreements
and
orders, farmout agreements and gas balancing agreements, in each
case that
are customary in the oil, gas and mineral production business and
that are
entered into in the ordinary course of
business.
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(f)
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Accounts
receivable created or acquired in the ordinary course of business
and upon
terms common in the industry for such
accounts.
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(g)
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The
Borrower’s ownership of equity interest in Endeavor, and in Diamond,
provided further that the Borrower shall not make further
investment (debt or equity) in Diamond after July 15, 2007, except
to the
extent of investment or a loan or advance necessary to fund capital
expenditures by Diamond which are necessary and appropriate to maintain
the existing three (3) drilling rigs in service (including the initial
placement of the third drilling rig in service). For the
avoidance of doubt, the Borrower acknowledges that the foregoing
restriction (and Section 5.21), without limitation, requires the
Agent’s and the Required Bank’s consent to any investment, loan or advance
to permit Diamond to acquire an additional drilling
rig.
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(h)
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Loans
and advances made by the Borrower to its Subsidiaries in the ordinary
course of business to be used in normal business operations of such
Subsidiary, provided that with respect to any loan to Diamond, (i)
such
loans by the Borrower to Diamond shall not violate the limit in paragraph
(g) of this Section, and (ii) such loan is otherwise in compliance
with
Section 5.20.
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For
the
avoidance of doubt, pursuant to the foregoing the Borrower shall not establish,
acquire or otherwise own any new Subsidiary after the Closing Date, without
in
each case the prior written consent of the Agent and the Required
Banks.
Section
6.4 Nature
of Business. The Borrower will not permit any material change to
be made in the character of its business or the business of any Subsidiary
as
carried on at the Closing Date (or as to a Subsidiary established or acquired
after the Closing Date (in compliance with Section 6.3) as carried on at
such time of establishment or acquisition.
Section
6.5 Mergers
and Consolidations. The Borrower will not, and will not allow or
suffer any Subsidiary to, acquire, merge with or consolidate with any Person
or
acquire by purchase, lease or otherwise all or substantially all of the assets
of any Person (whether or not such acquisition, merger or consolidation requires
any capital expenditures on the part of the Borrower).
Section
6.6 ERISA
Compliance. The Borrower will not at any time permit any Plan
maintained by it to engage in any “prohibited transaction” as such term is
defined in Section 4975 of the Code; incur any “accumulated funding deficiency”
as such term is defined in Section 302 of ERISA; or terminate any such Plan
in a
manner which could result in the imposition of a Lien on the property of the
Borrower pursuant to Section 4068 of ERISA.
Section
6.7 Changes. Each
Company will not without 30 days prior notice to the Agent change the location
of any of its Collateral, or change the location of its state of organization
or
chief executive office or change its name.
Section
6.8 Sales. The
Borrower will not, and will not allow or suffer any Subsidiary to, sell, assign,
transfer by bond for deed, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
property (whether now owned or hereafter acquired) to any Person. The
Borrower will not, and will not allow or suffer any Subsidiary to, sell, assign,
transfer by bond for deed, lease or otherwise dispose (including by any
sale-leaseback transaction) of any of its Collateral or any material portion
of
its other property, business, or assets, including without limitation any
producing mineral properties or
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58
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equity
interests in a Subsidiary, except for sales of production (in compliance with
the terms of the Collateral Documents and this Agreement), collection of its
accounts, sales of items of equipment which are obsolete or otherwise no longer
useful for such Person’s operations, and sales of items of equipment to the
extent the proceeds of such sale are promptly reinvested in the acquisition
of
replacement equipment, in each case in the ordinary course of
business. For purposes of the preceding sentence, “material” means
asset sales which exceed in the aggregate $100,000.00 during any one fiscal
year.
Section
6.9 Agreements. Each
Company will not enter into or be a party to any contract or agreement for
the
purchase of materials, supplies or other property or services if such contract
or agreement shall require that such Company make payment for such materials,
supplies or other property irrespective of whether delivery thereof is made
or
whether such services are rendered. Except in the ordinary course of
business, each Company will not enter into any arrangement with any gas pipeline
company or any other purchaser of hydrocarbons regarding the Collateral whereby
the Company agrees that said gas pipeline company or purchaser may set off
any
claim against the Company by withholding payment for any hydrocarbons actually
delivered.
Section
6.10 Distributions
or Redemption. (a) The Borrower will not (i) pay or declare any
dividend on any shares of any class of its stock (other than stock dividends),
(ii) make any other distribution or other shareholder expenditure on account
of
any shares of any class of its stock, nor set aside any funds for such purpose,
nor (iii) otherwise make or agree to pay for or make (except as set forth in
(b)
below), directly or indirectly, any other distribution with respect to any
shares of any class of its stock, or any payment (whether in cash, securities
or
other property), including any sinking fund or similar deposit, on account
of
the purchase, redemption, retirement, acquisition, cancellation or termination
of any such shares or any option, warrants or other right to acquire any such
shares, except that if at the time thereof and immediately after giving
effect thereto no Default or Event of Default shall have occurred and be
continuing (or be created), and no Loan Excess shall then exist, the Borrower
may declare, and agree to declare and pay, dividends (interest expense) in
cash
to the holders of Qualified Redeemable Preferred Equity, and the Borrower may
make and pay such cash dividends so declared within thirty (30) days of such
declaration. For the avoidance of doubt, shares of Qualified
Redeemable Preferred Equity are Borrower's stock for purposes of clauses (i),
(ii) and (iii) above, and the Borrower shall not elect (or agree to elect)
any
option to redeem any Qualified Redeemable Preferred Equity without the prior
written consent of the Required Banks.
(b) The
Qualified Redeemable Preferred Equity issued by Borrower may include (as
provided in clause (ii) of the definition thereof) a provision providing for
a
mandatory redemption of such stock following a change of ownership or control
or
management (as contemplated by Sections 6.13 or 6.12,
respectively). Moreover, the Borrower may make a mandatory redemption
payment on the Qualified Redeemable Preferred Equity solely by reason of a
change of ownership or control or management (as contemplated by Sections
6.13 or 6.12, respectively), and such mandatory redemption payment in itself
is not an Event of Default
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59
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(although
nothing set forth in this Agreement shall subordinate the Secured Parties'
rights to priority of payment). However, the Borrower acknowledges
that nothing set forth in this Section 6.10 (or in the definition of
Qualified Redeemable Preferred Equity or Subsection 8.1(o) below)
modifies or restricts the application of Section 6.12 and Section
6.13, and if a change in management or a change in ownership or control,
respectively, occurs within the meaning of those Sections then an Event of
Default occurs under Subsection 8.1(c) unless the Agent's and the
Required Banks' prior written consent to the contrary is obtained (even though
any mandatory redemption of Qualified Redeemable Preferred Equity which also
may
arise due to such change in management, ownership or control is not itself
a
breach of this Section 6.10 or an Event of Default).
Section
6.11 Subordinated
Financings. (a) The Borrower shall not make any cash
or other payment or transfer of property (i) on account of any Qualified
Subordinated Debt except as expressly permitted under the Intercreditor
Agreement pertaining thereto and (ii) on account of any Qualified Redeemable
Preferred Equity except as expressly permitted under Section 6.10
hereof.
(b) The
Borrower shall not enter into the initial closing and funding of any Qualified
Subordinated Debt or Qualified Redeemable Preferred Equity without the Agent's
prior written approval as to the form and substance of the documentation
pertaining thereto, based upon the Agent's receipt of a certificate of an
officer of the Borrower attaching true, correct and complete copies thereof
(including without limitation a copy of the prospectus for any Qualified
Redeemable Preferred Equity). The Borrower shall not enter into or
agree to any amendment, modification or waiver of any term or condition of,
or
any of its rights under, the documents pertaining to any issued Qualified
Subordinated Debt or any issued Qualified Redeemable Preferred Equity, which
amendment, modification or waiver could, in the reasonable opinion of the Agent,
materially and adversely affect the interests of the Banks.
Section
6.12 Management. The
Borrower will not permit or suffer a change in the key management of the
Borrower and its Affiliates to occur. For purposes of this Section,
key management shall mean the continued active full time employment of each
of
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇. (as CEO and President) and ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. (as CFO and
EVP); provided, however, that the cessation of active employment of one
such officer due to death or disability or the retirement of ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇.
(as CFO and EVP) shall not be a Default hereunder so long as the Borrower hires
or promotes a replacement officer with experience and qualifications reasonably
acceptable to the Agent and the Required Banks within four (4) months of the
former officer’s cessation of activity.
Section
6.13 Change
of Ownership or Control. (a) No Person or group (as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934), other
than
existing management of Borrower as of the Closing Date, shall become the
beneficial owner of more than 33% of the total voting power of the capital
stock
of the Borrower then outstanding.
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60
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(b) A
majority of the members of the Board of Directors of the Borrower shall not
cease to be Continuing Directors. For purposes of this Section, the
term “Continuing Directors” of a Person means any member of such Person’s Board
of Directors who: (x) was a member of such Person’s Board of Directors on the
Closing Date; or (y) was nominated for election or elected with the approval
of
a majority of the Continuing Directors who were then members of such Person’s
Board of Directors (but excluding any such individual whose initial assumption
of office occurs as a result of either an actual or threatened election contest
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Continuing Directors).
Section
6.14 Transactions
with Affiliates. The Borrower will not sell, transfer, lease or
otherwise dispose of (including pursuant to any merger) any property or assets
to, or purchase, lease or otherwise acquire (including pursuant to a merger)
any
property or assets from, or otherwise engage in any other transactions with,
any
Affiliates, except in the ordinary course of business at prices and on terms
and
conditions not less favorable to the Borrower as could be obtained on an
arms-length basis from unrelated third persons in a comparable
transaction.
Section
6.15 Subsidiaries. The
Borrower will not allow or suffer any changes to be made in the ownership
structure of each Subsidiary, and shall not own and control directly or
indirectly less than one hundred (100%) percent of the ownership and voting
rights in each Subsidiary. The Borrower will not create, incur,
assume or permit to exist any Lien on its equity interest in any Subsidiary,
other than in favor of the Agent.
Section
6.16 Restrictive
Agreements. The Borrower will not directly or indirectly enter
into, incur or permit to exist, or permit any Subsidiary so to do, any agreement
or other arrangement that (i) prohibits, restricts or imposes any condition
upon
the ability of a Subsidiary to create, incur or permit to exist any Lien upon
any of its property or assets or (ii) prohibits, restricts or imposes any
condition upon the ability of any Subsidiary to pay dividends or other
distributions with respect to any shares of its equity securities or other
ownership interest or to repay to the Borrower any loans or advances, provided
that (x) the foregoing shall not apply to restrictions and conditions imposed
by
corporate law or by this Agreement, (y) clause (i) of this Section shall not
apply to customary provisions in leases restricting the transfer thereof and
(z)
the foregoing shall not apply to prohibitions, restrictions and conditions
imposed by the documents pertaining to any issued Qualified Subordinated Debt
(as such documents are approved in accordance with Subsection 6.11(b)
above).
ARTICLE
7
CONDITIONS
OF LENDING
Section
7.1 Conditions
of Lending. The obligation of the Banks to make the Loan (or the
Issuing Bank to issue a standby letter of credit) is subject to the accuracy
of
each
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and
every
representation and warranty of the Borrower contained in this Agreement, the
absence of a Default or an Event of Default, and to the receipt of the following
on or before the Closing Date by the Agent (and the receipt by each Bank of
a
counterpart of this Agreement and its respective Note):
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(a)
|
Agreement. A
duly executed counterpart of this Agreement signed by all the parties
hereto.
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(b)
|
Notes. The
duly executed Notes signed by the
Borrower.
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(c)
|
Good
Standing. Certificates of good standing of the Companies
issued by the Secretaries of State of Oklahoma, Texas, Louisiana
and New
Mexico.
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(d)
|
Corporate
Certificates. A certificate of the secretary of each
Company (i) setting forth resolutions of its board of directors in
form
and substance satisfactory to the Agent and Agent's counsel with
respect
to the unanimous authorization of this Agreement, the Notes and the
Collateral Documents to which it is a party, (ii) attaching the articles
of incorporation and bylaws of such Company, and (iii) setting forth
the
officers authorized to sign such
instruments.
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(e)
|
Fees. The
fees required by Subsections 2.5(a) and
(d).
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(f)
|
Updated
Collateral Documents. Duly executed restatements of, or
supplements to, or confirmation of, mortgages or deeds of trust,
security
agreements, and guaranty agreements, and any other reasonably appropriate
Collateral Documents, all in form and substance and in such
number of counterparts as may be reasonably required by the
Agent.
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(g)
|
Stock
Certificates. The original stock certificates held by the
Borrower for its shares in Endeavor and Diamond, each duly endorsed
in
blank and delivered to the Agent with executed stock
powers.
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(h)
|
Lien
Searches. UCC lien searches satisfactory to the Agent from
Oklahoma, Texas and other pertinent states pertaining to the
Companies.
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(i)
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Legal
Opinion. Legal Opinion from the Borrower's counsel (▇▇▇▇▇
& ▇▇▇▇▇▇▇) in form, scope and substance satisfactory to the Agent and
Agent's counsel.
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(j)
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Legal
Fees. Payment of the reasonable legal fees and expenses
incurred by the Agent in accordance with Section
5.7.
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In
the
event that the Agent and the Required Banks in their sole and absolute
discretion waive the receipt of any items set forth above, the Borrower agrees
that it nonetheless will promptly deliver such item to the Agent and the Banks
upon request within the time period reasonably specified by the
Agent. Until such conditions are satisfied, Section 11.3 shall
apply.
Section
7.2 Certification. The
obligation of the Banks to make the Loan is further subject to the certification
by the Borrower, which the Borrower hereby makes, that no Default or Event
of
Default exists, and that no material adverse change (in the Agent’s and the
Required Banks' sole determination) in the Collateral or other assets,
liabilities, financial condition, business operations, affairs or circumstances
of the Companies or other facts, circumstances or conditions (financial or
otherwise) upon which Agent and the Banks has relied or utilized in making
its
decision to make this Loan have occurred from those reflected in the most recent
financial statements furnished to the Agent prior to the Closing Date or
otherwise existing at the time of the issuance of Agent’s commitment
letter.
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Section
7.3 Post-Closing
Items. (a) Reserved.
(b) Certain
properties included within the Borrowing Base from time to time at zero or
low
value may not be covered by title opinions at the time of their inclusion in
the
Borrowing Base. The Borrower acknowledges and agrees that the Agent
has the right under the terms of this Agreement to require title opinions on
such Borrowing Base properties in the future at the time of a material increase
in the value attributed to such property in the Borrowing Base, and Borrower
agrees promptly to deliver such title opinions and acknowledges that in the
absence thereof such properties may be excluded by the Agent from the Borrowing
Base (as provided in the definition of Borrowing Base).
Section
7.4 Each
Additional Advance. The obligation of the Banks to make
additional Advances on the line of credit or the Issuing Bank to issue standby
letters of credit is subject to the satisfaction of each of the following
conditions:
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(a)
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Each
of the representations and warranties of the Companies contained
in this
Agreement and the Collateral Documents shall be true and correct
on and as
of the date of each subsequent Advance or issuance, both before and
after
giving effect to the proposed Advance or issuance and to the application
of the proceeds therefrom, as though made on and as of such date,
except
as such representations and warranties relate to matters that are
changed
as permitted by this Agreement, or except to the extent such
representations and warranties by their terms specifically refer
and
relate to an earlier date, in which case such representations and
warranties shall have been true and correct on and as of such earlier
date.
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(b)
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At
the time of such Advance, no Default shall have occurred and be
continuing.
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(c)
|
There
shall have occurred no material adverse change (in the Agent's and
the
Required Banks' sole determination), either individually or in the
aggregate, in the assets, liabilities, financial condition, business
operations, affairs or circumstances of the Borrower and the Subsidiaries
taken as a whole, except to the extent that such changes are permitted
by
this Agreement.
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(d)
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If
reasonably required by Agent, a bringdown title search report by
a ▇▇▇▇▇▇▇
or land title service in the appropriate states, confirming the absence
of
Lien filings against the Borrower since the effective date of the
preceding bringdown search.
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Section
7.5 Title
Opinions. It is expressly acknowledged by the Borrower that the
waiver by the Borrower (on the basis of the Borrower’s business judgment) of any
title requirements contained in any title opinions delivered to the Agent from
time to time in connection with this Agreement, and funding by the Banks of
Advances, shall not constitute a waiver by the Agent and the Banks of any of
the
representations or warranties of the Borrower contained herein.
ARTICLE
8
DEFAULT
Section
8.1 Events
of Default. Any of the following events shall be considered an
“Event of Default” as that term is used herein:
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(a)
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Principal
and Interest Payments. The Borrower fails to make payment
(x) when due of any principal or interest installment on any Note,
any
unused facility fee, any commitment fee, engineering fee or any other
Indebtedness incurred pursuant to this Agreement to the Agent or
any Bank,
and such failure continues unremedied for a period of three (3) Business
Days after the earlier of (i) notice thereof being given by the Agent
to
the Borrower or (ii) such default otherwise becoming known to the
president or chief financial officer of the Borrower or (y) when
due of
any mandatory prepayment under Subsection 2.4(b) or Subsection
2.4(c).
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(b)
|
Representations
and Warranties. Any representation or warranty made by or
on behalf of any Company contained in this Agreement, the Notes or
any of
the Collateral Documents proves to have been incorrect in any material
respect as of the date thereof; or any representation, statement
(including financial statements), certificate or data furnished or
made to
the Agent and the Banks by any Person under this Agreement, the Notes
or
any of the Collateral
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Documents
proves to have been untrue in any material adverse respect as of
the date
as of which the facts therein set forth were stated or
certified. For purposes of this paragraph, to the extent such
representation or warranty pertains to individual properties, “material”
shall mean two hundred thousand ($200,000.00) dollars or amount
of
property with an equivalent value.
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(c)
|
Specific
Covenants. The Borrower fails to observe or perform at any
time any covenant or agreement contained in Section 5.6, Section
5.8, Section 5.15, Section 5.16, Section 5.17, or
Article 6 of this Agreement.
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(d)
|
Covenants. The
Borrower or other Person (other than the Agent and the Banks) defaults
in
the observance or performance of any of the covenants or agreements
contained in this Agreement, the Notes or any of the Collateral Documents
to be kept or performed by the Borrower or such Person (other than
a
default under Subsections (a) through (c) hereof), and such default
continues unremedied for a period of 30 days after the earlier of
(i)
notice thereof being given by the Agent to the Borrower or such Person,
as
applicable, or (ii) such default (and the fact that it is a default)
otherwise becoming known to the president or chief financial officer
of
the Borrower or other Person, as
applicable.
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(e)
|
Other
Debt to Agent or Bank. The Borrower or any other Company
defaults in the payment of any amounts due to the Agent or any Bank
not
covered under Subsection (a) above or in the observance or performance
of
any of the covenants, or agreements contained in any loan agreements,
notes, leases, collateral or other documents relating to any other
Debt of
the Borrower to the Agent or any Bank (including without limitation
any
Permitted Hedge Obligations or other Hedge Agreements) other than
the
Indebtedness, and any grace period applicable to such default has
elapsed.
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(f)
|
Other
Debt to Other Lenders. The Borrower defaults (x) under the
PVOG Production Payment, (y) under any Qualified Subordinate Debt,
or (z)
in the payment of any amounts due to any Person (other than the Agent
and
the Banks) or in the observance or performance of any of the covenants
or
agreements contained in any credit agreements, notes, leases, collateral
or other documents relating to any Debt of the Borrower to any Person
(other than the Agent or any Bank) which is not Indebtedness (including
without limitation any Hedging Obligations) in excess of $50,000.00,
and
in each case of clause (x), (y) or (z) any grace period applicable
to such
default has elapsed or if the effect of such default is to cause,
or
permit the holder of such obligation to be able to cause (whether
or not
so done), such obligation to become due prior to its stated
maturity.
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(g)
|
Involuntary
Bankruptcy or Receivership Proceedings. A receiver,
conservator, liquidator or trustee of any Company, or of any of its
respective Collateral, is appointed by order or decree of any court
or
agency or supervisory authority having jurisdiction; or an order
for
relief is entered against any Company under the Federal Bankruptcy
Code;
or any Company is adjudicated bankrupt or insolvent; or any material
portion of the property of is sequestered by court order and such
order
remains in effect for more than 30 days after such party obtains
knowledge
thereof; or a petition is filed against any Company under any
reorganization, arrangement, insolvency, readjustment of debt,
dissolution, liquidation or receivership law of any jurisdiction,
whether
now or hereafter in effect, and such petition is not dismissed within
60
days.
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(h)
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Voluntary
Petitions. Any Company files a case under the Federal
Bankruptcy Code or seeking relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution
or liquidation law
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of
any jurisdiction, whether now or hereafter in effect, or consents
to the
filing of any case or petition against it under any such
law.
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(i)
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Assignments
for Benefit of Creditors. Any Company makes an assignment
for the benefit of its creditors, or admits in writing its inability
to
pay its debts generally as they become due, or consents to the appointment
of a receiver, trustee or liquidator of any Company or of all or
any part
of its property.
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(j)
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Undischarged
Judgments. Judgment for the payment of money in excess of
$50,000.00 (which is not covered by insurance) is rendered by any
court or
other governmental body against any Company, and such Company does
not
discharge the same or provide for its discharge in accordance with
its
terms, or procure a stay of execution thereof within 30 days from
the date
of entry thereof, and within said 30-day period or such longer period
during which execution of such judgment shall have been stayed, appeal
therefrom and cause the execution thereof to be stayed during such
appeal
while providing such reserves therefor as may be required under generally
accepted accounting principles.
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(k)
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Attachment. A
writ or warrant of attachment or any similar process shall be issued
by
any court against all or any material portion of the property of
any
Company, and such writ or warrant of attachment or any similar process
is
not released or bonded within 30 days after its
entry.
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(l)
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Condemnation. The
Collateral, or any substantial portion thereof, is condemned or
expropriated under power of eminent domain by any legally constituted
governmental authority.
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(m)
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Invalidity. Any
Company shall assert in writing that any material provision of this
Agreement, any Note or any of the Collateral Documents shall for
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any
reason be or cease to be valid and binding on such Company after
the
Closing Date.
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(n)
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Debt
to Operator. On the last day of any calendar month the
Borrower has owed any Operator (not counting the PVOG Production
Payment)
the cumulative amount of $200,000.00 or greater for more than forty-five
consecutive days without the Agent’s and the Required Banks' written
consent; provided, however, such Debt shall not be an Event of Default
and
such Company shall not be required to pay any such account if the
amount
or validity thereof shall currently be contested in good faith by
appropriate proceedings diligently conducted and if such Company
shall
have set up reserves therefore adequate under generally accepted
accounting principles (provided that such reserves may be set up
under
generally accepted accounting principles) and so long as such contest
proceedings conclusively operate to stay and prevent the set off
or
withholding of monies by such Operator and the sale or seizure of
any
property subject to any Lien held by such Operator to satisfy such
account.
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(o)
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Qualified
Redeemable Preferred Equity. (i) The Borrower defaults in
the payment of any amounts due under or in the observance or performance
of any of the covenants or agreements contained in any documents
pertaining to any Qualified Redeemable Preferred Equity, and any
grace
period applicable to such default has elapsed; or (ii) any shares
of
Qualified Redeemable Preferred Equity shall for any reason become
subject
to mandatory redemption by the Borrower before the fifth anniversary
of
the date on which such shares are issued or if any event or condition
occurs that enables or permits (with or without the giving of notice,
the
lapse of time or both) the holder of any shares of any Qualified
Redeemable Preferred Equity to cause any of such shares to be redeemable
or to require the redemption thereof by the Borrower (in each case
after
giving effect to any applicable cure period), except as to all of
this
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clause
(ii) for a mandatory redemption following a change of ownership or
control
or management (as contemplated by Sections 6.13 or 6.12,
respectively); or (iii) any judgment for redemption of any shares
of
Qualified Redeemable Preferred Equity is rendered by any court or
other
governmental body except to enforce a mandatory redemption following
a
change of ownership or control or management (as contemplated by
Sections 6.13 or 6.12, respectively). For the avoidance
of doubt, nothing in this Subsection modifies or restricts the application
of Section 6.10, Section 6.11, Section 6.12 or Section 6.13,
nor does this Subsection modify or limit Subsection 8.1(c)
above.
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Section
8.2 Remedies. (a)
Upon the happening of any Event of Default specified in the preceding Section
(other than Subsections (g) or (h) thereof), (i) all obligations, if any, of
the
Banks to make Advances to the Borrower or issue letters of credit at the request
of the Borrower shall immediately cease and terminate, and (ii) the Agent shall
at the direction, or may with the consent, of the Required Banks by written
notice to the Borrower declare the entire principal amount of all Indebtedness
then outstanding including interest accrued thereon to be immediately due and
payable without presentment, demand, protest, notice of protest or dishonor
or
other notice of default of any kind, all of which are hereby expressly waived
by
the Borrower.
(b) Upon
the happening of any Event of Default specified in Subsections (g) or (h) of
the
preceding Section, (i) all obligations, if any, of the Banks to make Advances
to
the Borrower or issue letters of credit at the request of the Borrower shall
immediately cease and terminate, and (ii) the entire principal amount of all
obligations then outstanding including interest accrued thereon shall, without
notice or action by the Agent and the Banks, be immediately due and payable
without presentment, demand, protest, notice of protest or dishonor or other
notice of default of any kind, all of which are hereby expressly waived by
the
Borrower.
(c) In
addition to the foregoing, the Agent may exercise any of the rights and remedies
established in the Collateral Documents or avail itself of any other rights
and
remedies provided by applicable law, including without limitation completing
and
sending the letters described in Subsection 3.1(a)(x). In the
event the Agent sends such letters, the Agent agrees that it shall request
such
purchasers of production to remit any proceeds net of lease operating expenses
and production taxes. However, the Agent may accept any gross
payments made despite such requests without liability thereunder.
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(d) In
furtherance of the foregoing, to the extent that any standby letters of credit
are outstanding upon the occurrence of any Event of Default, the Agent may
be
written notice to the Borrower require the Borrower to pay to the Agent
immediately on such demand the full undisbursed amount of such letters of credit
to be held by the Agent as collateral for the payment of such letters of
credit. Such amount shall bear interest from demand until paid at the
Default Rate notwithstanding any interest rate provision to the contrary in
any
letter of credit application or agreement between the Borrower and the Issuing
Bank, even if executed after this Agreement.
Section
8.3 Set-Off. Upon
the occurrence of any Event of Default, the Agent and the Banks shall have
the
right to set-off any funds of the Borrower or any Company in the possession
of
the Agent or such Bank (including without limitation funds in the accounts
provided for in Article 5) against any amounts then due by the Borrower
to the Agent or such Bank pursuant to the Agreement (but the Borrower
acknowledges that the Agent may apply funds in such accounts against any
interest, fee or mandatory principal prepayment amounts then due and payable
by
the Borrower even without the occurrence of an Event of Default). The
Borrower agrees that any holder of a participation in any Note may exercise
any
and all rights of counter-claim, set-off, banker’s lien and other liens with
respect to any and all monies owing by Borrower to such holder as fully as
if
such holder of a participation were a holder of a note in the amount of such
participation.
Section
8.4 Marshaling. The
Companies shall not in any time hereafter assert any right under any law
pertaining to marshaling (whether of assets or liens) and the Borrower expressly
agrees that the Agent may execute or foreclose upon the Collateral Documents
in
such order and manner as the Agent, in its sole discretion, deems
appropriate.
ARTICLE
9
THE
AGENT
Section
9.1 Appointment
and Authorization. (a) Each Bank irrevocably appoints
and authorizes the Agent to receive all payments of principal, interest, fees
and other amounts payable by the Borrower under this Agreement and to remit
same
that is payable to the Banks promptly to the Banks, to disburse the Advances
from the Banks, and to take such action and to exercise such powers under this
Agreement, the Notes, and the Collateral Documents as are delegated to the
Agent
by the Banks from time to time. The Agent shall promptly distribute
to the Banks upon receipt all payments and prepayments of principal, interest,
fees (except for those fees which by their express terms are payable on another
basis) and other amounts paid by the Borrower under this Agreement that are
payable to the Banks, in proportion to the Banks’
Commitments. Similarly, the Banks shall be obligated to fund Advances
in proportion to their Commitments. If the Agent receives a payment
in immediately available funds by 11:00 a.m. (Central Time), the Agent will
make
available to each Bank on the same date, by wire transfer of immediately
available funds, such Bank’s ratable share of such payment, and if such payment
is
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received
after 11:00 a.m. (Central Time) or in other than immediately available funds,
the Agent will make available to each Bank its ratable share of such payment
by
wire transfer of immediately available funds on the next succeeding Business
Day
(or in the case of uncollected funds, as soon as practicable after
collected). If the Agent shall not have made a required distribution
to the Banks as required by the preceding sentence after receiving a payment
for
the account of such Banks, the Agent shall pay to each such Bank, on demand,
its
ratable share of such payment with interest thereon at the Federal Funds Rate
(as defined in the next sentence) for each day from the date such amount was
required to be disbursed by the Agent until the date repaid to such
Bank. The Federal Funds Rate shall mean, for any day, an interest
rate per annum (expressed as a decimal, rounded upwards, if necessary, to the
next higher 1/100 of 1%) equal to the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers on such day, as published for such day (or, if such
day
is not a Business Day, for the immediately preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for
any
day which is a Business Day, the average of the quotations at approximately
10:00 a.m. (Central Time) on such day on such transactions received by the
Agent
from three federal funds brokers of recognized standing selected by the
Agent.
(b) The
Agent or the Issuing Bank may resign at any time by written notice to the Banks
and the Borrower. The Agent or the Issuing Bank may be removed at any
time with or without cause by the Required Banks. The successor Agent
or successor Issuing Bank shall be selected by the Required Banks from among
the
remaining Banks. If no successor Agent or successor Issuing Bank has
been so appointed by the Required Banks (and approved by the Borrower as
provided below) and has accepted such appointment within thirty (30) days after
such notice of resignation or removal, then the retiring Agent or retiring
Issuing Bank may, on behalf of the Banks and the Borrower, appoint a successor
Agent or successor Issuing Bank from among the remaining Banks. Any
successor Agent or successor Issuing Bank must be approved by the Borrower,
which approval will not be unreasonably withheld, delayed or
conditioned. Upon the acceptance of any appointment as Agent or
Issuing Bank by a successor Agent or successor Issuing Bank, such successor
Agent or successor Issuing Bank shall thereupon succeed to and become vested
with all the rights, powers, privileges, and duties of the retiring Agent or
retiring Issuing Bank, and the retiring Agent or retiring Issuing Bank shall
be
discharged from its duties and obligations under this Agreement and the
Collateral Documents, except that the retiring Issuing Bank shall remain the
Issuing Bank with respect to any letters of credit outstanding hereunder on
the
effective date of its resignation or removal and the provisions affecting the
Issuing Bank with respect to such letters of credit shall inure to the benefit
of the retiring Issuing Bank until the termination of all such letters of
credit. After any retiring Agent’s or retiring Issuing Bank’s
resignation or removal hereunder as Agent or Issuing Bank, the provisions of
this Article 9 shall inure to its benefit as to any actions taken or omitted
to
be taken while it was acting as Agent or Issuing Bank.
(c) Each
Bank irrevocably appoints and authorizes the Agent to hold this Agreement and
the Collateral Documents (but not the Notes, which will be held by the
respective
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Banks),
and to take such action and exercise such powers under this Agreement, the
Notes
and the Collateral Documents as are delegated to the Agent by the Banks from
time to time. Any requests by the Borrower for consent by the Banks
or waiver or amendment of provisions of this Agreement shall be delivered by
the
Borrower to the Agent, but favorable action on such requests shall require
the
approval of the Required Banks or all of the Banks, as the case may
be.
Section
9.2 Agent’s
Reliance. Neither the Agent nor any of its directors, officers,
agents or employees shall be liable for any action taken or omitted to be taken
by it under or in connection with this Agreement, the Notes or the Collateral
Documents, except for its or their own gross negligence or willful
misconduct. Without limiting the generality of the foregoing, the
Agent: (i) may treat the payee of any of the Notes as the holder
thereof until the Agent receives written notice of the assignment or transfer
thereof, signed by such payee and in form satisfactory to the Agent; (ii) may
consult with legal counsel (including counsel for the Borrower), independent
public accountants and other experts selected by it and shall not be liable
for
any action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts; (iii) makes no warranty
or
representation to any Bank and shall not be responsible to any Bank for any
statements, warranties or representations made in or in connection with this
Agreement, the Notes and the Collateral Documents; (iv) shall not have any
duty
to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions of this Agreement, the Notes or the Collateral
Documents (except receipt of items expressly required to be delivered to the
Agent hereunder), or to inspect any property (including the books and records)
of the Borrower; (v) shall not be responsible to any Bank for the due execution,
legality, validity, enforce ability, genuineness, sufficiency or value of this
Agreement, the Notes or the Collateral Documents; and (vi) shall incur no
liability under or in respect to this Agreement, the Notes or the Collateral
Documents by acting upon any notice, consent, certificate or other instrument
or
writing (which may be by facsimile, telegram, cable or telex) believed by it
to
be genuine and signed or sent by the proper party or parties. The
Agent shall not have a fiduciary relationship in respect of any Bank by reason
of this Agreement. The Agent shall not have any implied duties to the
Banks, or any obligation to the Banks to take any action under this Agreement,
the Notes, the Collateral Documents or the Intercreditor Agreement except any
actions specifically provided by such documents to be taken by it.
Section
9.3 Acts
by Agent after Default, etc. In the event that the Agent shall
have been notified in writing by any of the Borrower or the Banks of any Event
of Default (or in the event that the officer of the Agent responsible for the
Borrower’ account obtains actual knowledge of an Event of Default), the Agent
(i) shall immediately notify the Banks; (ii) shall take such action and assert
such rights under this Agreement as it is expressly required to do pursuant
to
the terms of this Agreement with the consent of or direction by the Required
Banks; (iii) may take such other actions and assert such other rights as it
deems advisable, in its discretion, for the protection of the interests of
the
Banks pursuant to applicable laws with the consent of the Required Banks; and
(iv) shall inform all the Banks of the taking of action or assertion of rights
pursuant to this Section. Each Bank agrees with the Agent and the
other Banks that the decisions and determinations of the Required Banks in
enforcing this Agreement,
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the
Notes
and the Collateral Documents and guiding the Agent in those matters shall be
binding upon all the Banks, including without limitation authorizing the Agent
at the pro rata expense of all the Banks (to the extent not reimbursed by the
Borrower) to retain attorneys to seek judgment on this Agreement, the Notes
and
the Collateral Documents. Each Bank agrees with the other Banks that it will
not, without the consent of all the other Banks, separately seek to institute
any legal action with respect to the Loan. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder
and
under any Collateral Document or the Intercreditor Agreement in accordance
with
written instructions signed by the Required Banks (or, where required, all
the
Banks), and such instructions and any action taken or failure to act pursuant
thereto shall be binding on all of the Banks and on all of the holders of Notes,
provided, however, that the Agent shall not be required to take any action
which
exposes the Agent to personal liability or which is contrary to this Agreement
or the Intercreditor Agreement or applicable law.
Section
9.4 Bank
Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank and based
on
the financial statements referred to herein and such other documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Bank also acknowledges
that it will, independently and without reliance upon the Agent or any other
Bank and based on such documents and information as it shall deem appropriate
at
the time, continue to make its own credit decisions in taking or not taking
action under this Agreement, the Notes and the Collateral
Documents. No representation or warranty, express or implied, is made
by the Agent as to the accuracy or completeness of information provided by
the
Borrower to the Banks, and the Agent assumes no responsibility for its accuracy
or completeness.
Section
9.5 Agent. The
Agent shall have the same rights and powers under this Agreement, the Notes
and
the Collateral Documents as any other Bank and may exercise the same as though
it were not the Agent; and the term “Bank” or “Banks” shall, unless otherwise
expressly indicated, include Agent in its individual capacity. The
Agent may accept deposits from, lend money to, act as trustee under indentures
of, and generally engage in any kind of business with Borrower and its
Subsidiaries as if the Agent were not the Agent and without any duty to account
therefor to the Banks. The Banks acknowledge that Section 3.4
shall govern the relationship among the Secured Parties with respect to the
Secured Liabilities. The Banks acknowledge that the Intercreditor
Agreement shall govern the relationship between the Agent and the Banks and
the
Subordinated Holders with respect to loans made by the Subordinated Holders
to
the Borrower.
Section
9.6 Assignments
and Participations. (a) No Bank may assign to any other Person
any portion of its interests, rights and obligations under this Agreement
(including, without limitation, any portion of its Commitment or the Loan at
the
time owing to it and Note held by it) unless each of the following conditions
is
or has been satisfied: (i) the Agent has given its prior written
consent (which consent will not be unreasonably withheld), (ii) the Borrower
has
given its prior written consent (which consent will not be unreasonably
withheld,
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and
shall
not be required upon the occurrence and during the continuance of an Event
of
Default), (iii) each such assignment is of a constant, and not a varying,
percentage of all the assigning Bank’s rights and obligations under this
Agreement, (iv) the assignment is for a Commitment of $5,000,000.00 or more,
(v)
the parties to such assignment have executed and delivered to the Agent an
Assignment and Acceptance, substantially in the form of Exhibit B hereto
(the “Assignment and Acceptance”), together with any Note subject to such
assignment, one or more signature pages to this Agreement containing the
signature of the assignee, one or more signature pages to the Intercreditor
Agreement (if in effect) containing the signature of the assignee, and
(following the Effective Date, as defined in the applicable Assignment and
Acceptance) payment by the assignee to the Agent for its own account of an
assignment administration fee in the amount of $3,500.00, (vi) either the
assignor or assignee shall have paid the Agent’s reasonable costs and expenses
(including without limitation attorneys’ fees and expenses) in connection with
the assignment, (vii) the Agent shall have delivered to the Borrower a fully
executed copy of such Assignment and Acceptance, and (viii) the assignee is
(A)
a state or national commercial bank located in the United States or (B) a bank
organized under a jurisdiction other than the United States, provided that
such
foreign bank has provided the Agent and the Borrower with accurate and complete
signed original forms prescribed by the Internal Revenue Service certifying
as
to such Bank’s status for purposes of determining exemption from United States
withholding taxes with respect to all payments to be made to such Bank
hereunder, and provided further that such foreign bank shall not transfer its
interests, rights and obligations under this Agreement to any Affiliate of
such
foreign bank unless such Affiliate provides the Agent and the Borrower with
the
aforesaid tax forms. Upon satisfaction of each of the foregoing
conditions and upon acceptance and notation by the Agent, from and after the
Effective Date specified in each Assignment and Acceptance, which Effective
Date
shall be at least five (5) Business Days after the execution thereof, (x) the
assignee thereunder shall be a party hereto and, to the extent provided in
such
Assignment and Acceptance, have the rights and obligations of a Bank, and (y)
the assigning Bank shall, to the extent provided in such assignment, be released
from its obligations under this Agreement. Notwithstanding the
foregoing, the restrictions contained above in this Subsection 9.6(a) shall
not
apply to assignments to any Federal Reserve Bank, and the conditions set forth
in clauses (i) and (ii) above shall not apply to assignments by any Bank to
any
Person which controls, is controlled by, or is under common control with, or
is
otherwise substantially affiliated with that Bank.
(b) Upon
its receipt of an Assignment and Acceptance executed by the parties to such
assignment together with any Note subject to such assignment and the written
consent of the Agent and the Borrower to such assignment, the Agent shall give
prompt notice thereof to the Borrower and the Banks. Within five (5)
Business Days after receipt of such notice, the Borrower at its own expense,
shall execute and deliver to the Agent, in exchange for the surrendered Note,
a
new Note to the order of such assignee(s) in an amount equal to the amount
assumed by such assignee(s) pursuant to such Assignment and Acceptance and,
if
the assigning Bank has retained some portion of its obligations hereunder,
a new
Note to the order of the assigning Bank in an amount equal to the amount
retained by it hereunder. Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of the
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surrendered
Note, shall be dated the effective date of such Assignment and Acceptance and
shall otherwise be in the form of the assigned Note. The surrendered
Note shall be canceled and returned to the Borrower. The Agent shall
have the right to substitute a revised Schedule 1 hereto to reflect the
respective Commitments following each such assignment.
(c) Each
Bank, without the consent of the Agent or the other Banks but with the prior
written consent of the Borrower (which consent will not be unreasonably
withheld, and shall not be required during the existence and continuance of
an
Event of Default), may sell participations to one or more banks or other
financial institutions (and such bank or banks or financial institution or
financial institutions shall be bound by the terms of this Agreement, including
without limitation this Section 9.6) in all or a portion of the Loan (including
its Commitment) under this Agreement; provided, that the selling Bank shall
retain the sole right and responsibility to enforce the obligations of the
Borrower relating to the Loan and that the only rights granted to the
participant pursuant to such participation arrangements with respect to waivers,
amendments or modifications of this Agreement shall be the right to approve
waivers, amendments, or modifications which require the consent of all of the
Banks as provided in Section 10.4 hereof. Notwithstanding the
foregoing, the Borrower’s consent shall not be required for any participation
granted to any Federal Reserve Bank.
Section
9.7 Indemnification
of the Agent and Issuing Bank. The Banks ratably (computed by
reference to each Bank’s respective Commitment) shall indemnify the Agent, its
respective Affiliates, the Issuing Bank, its respective Affiliates, and the
respective shareholders, directors, officers, employees, agents and counsel
of
the foregoing (each an “Agent Indemnitee”) and hold each Agent Indemnitee
harmless from and against any and all claims (whether groundless or otherwise),
liabilities, losses, damages, costs and expenses of any kind (including, without
limitation, (i) the reasonable fees and disbursements of counsel and (ii) any
expenses for which the Agent has not been reimbursed by the Borrower as required
by this Agreement) which may be incurred by such Agent Indemnitee arising out
of
or related to this Agreement or the transactions contemplated hereby, or the
Agent’s actions taken hereunder (including the Agent Indemnitee’s own
negligence); provided, that no Agent Indemnitee shall have the right to be
indemnified hereunder for such Agent Indemnitee’s own gross negligence or
willful misconduct, as determined by a court of competent jurisdiction, or
to
the extent that such claim relates to the breach by such Agent Indemnitee of
its
obligations under this Agreement. The foregoing shall survive the
termination of this Agreement.
ARTICLE
10
MISCELLANEOUS
Section
10.1 Notices. Any
notice or demand which by provision of this Agreement or any Collateral Document
referencing this provision, is required or permitted to be given by one party
to
the other party hereunder shall be given by (i) deposit, postage prepaid, in
the
mail, registered or certified mail, or (ii) delivery to a recognized express
courier service, or
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(iii)
delivery by hand, or (iv) by facsimile, in each case addressed (until another
address or addresses is given in writing by such party to the other party)
as
follows:
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If
to Borrower:
|
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
Chief Financial Officer
Facsimile
Number: (▇▇▇) ▇▇▇-▇▇▇▇
|
If
to Agent:
|
Capital
One, National Association
|
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇
▇▇▇▇▇▇▇▇▇
Facsimile
Number: (▇▇▇) ▇▇▇-▇▇▇▇
|
If
to Bank:
|
At
the addresses set forth
|
on
Schedule 1 hereto.
All
notices sent by facsimile transmission shall be deemed received by the addressee
upon the transmitter’s receipt of acknowledgment of receipt from the offices of
such addressee (if before 5:00 p.m. on a Business Day; if later, then on the
next Business Day).
Section
10.2 Entire
Agreement. This Agreement, the Notes and the Collateral Documents
together with the letter agreement referred to in Subsection 2.5(d) set
forth the entire agreement between the Borrower and the Agent and the Banks
with
respect to the Indebtedness, and supersede all prior written or oral
understandings with respect thereto; provided, however, that all written
representations, warranties and certifications made by the Borrower to the
Agent
and the Banks with respect to the Indebtedness and the security therefor shall
survive the execution of this Agreement. The Borrower is not relying
on any representation by the Agent or any Bank, and no representation has been
made, that the Agent or any Bank will, at the time of a Default or at any other
time, waive, negotiate, discuss, or take or refrain from taking any action
with
respect to such Default.
Section
10.3 Renewal,
Extension or Rearrangement. All provisions of this Agreement
relating to the Notes shall apply with equal force and effect to each and all
promissory notes or security instruments hereinafter executed which in whole
or
in part represent a renewal, extension for any period, increase or rearrangement
of any part of the Notes.
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Section
10.4 Amendment. No
amendment or waiver of any provision of this Agreement or consent to any
departure therefrom by the Borrower or the Banks shall be effective unless
the
same shall be in writing and signed by the Borrower, the Agent and the Required
Banks; provided, that without the written consent of all of the Banks, no
amendment or waiver to this Agreement, any Note or any Collateral Document
shall
(i) change the scheduled payment dates or maturity of the Loan, or (ii) change
the principal of or decrease the rate or change the time of payment
of interest or fees or decrease any premium payable with respect to any Note,
or
change the currency in which the Loan is to be paid, or (iii) increase the
Commitments, or permit the Borrower to assign its rights hereunder, or add
additional borrowers hereunder, or (iv) release the Borrower, or affect the
time, amount or allocation of any required prepayments, or (v) effect the
release of any Collateral (other than as expressly permitted in the Collateral
Documents or this Agreement) or subordinate the rights of the Agent and the
Banks with respect to Collateral, or (vi) reduce the proportion of the Banks
required to agree on each determination of the Borrowing Base, or on which
portion of the Collateral is Shared Collateral under Section 3.4 or (vii)
reduce the proportion of the Banks or the Required Banks (as applicable)
required with respect to any consent, waiver, determination or change made
hereunder, (viii) change the definition of Required Banks or amend this
Section 10.4, or (ix) change any provisions hereof in a manner that would
alter the pro rata sharing of payments required by Section 2.9 and
Section 2.10. No amendment of any provision of this Agreement
relating to the Agent shall be effective without the written consent of the
Agent, and no amendment of any provision of this Agreement relating to the
Issuing Bank issuing letters of credit shall be effective without the written
consent of such Issuing Bank. However, the Agent may waive or reduce
payment of its own fee required under Section 2.5(d) or clause (v) of
Subsection 9.6(a) without obtaining the consent of any of the
Banks. The Borrower, the Agent and the Banks agree that no Bank will
receive compensation from the Borrower in order to obtain such Bank’s consent to
an amendment or waiver in a greater proportion than that received by any other
Bank for the same matter (but this provision does not restrict fees to the
agents for their services in connection with this Agreement).
Section
10.5 Invalidity. In
the event that any one or more of the provisions contained in this Agreement,
the Notes, or the Collateral Documents shall, for any reason, be held invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, the
Notes or the Collateral Documents.
Section
10.6 Survival
of Agreements. All representations and warranties of the Borrower
herein, and all covenants and agreements herein not fully performed before
the
effective date of this Agreement, shall survive such date.
Section
10.7 Waivers. No
course of dealing on the part of the Agent, any Bank, its respective officers,
employees, consultants or agents, nor any failure or delay by the Agent or
any
Bank with respect to exercising any of its rights, powers or privileges under
this Agreement, the Notes or the Collateral Documents, shall operate as a waiver
thereof.
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Section
10.8 Cumulative
Rights. The rights and remedies of the Agent and the Banks under
this Agreement, the Notes and the Collateral Documents shall be cumulative,
and
the exercise or partial exercise of any such right or remedy shall not preclude
the exercise of any other right or remedy.
Section
10.9 Time
of the Essence. Time shall be deemed of the essence with respect
to the performance of all of the terms, provisions and conditions on the part
of
the Borrower, and the Agent and the Banks to be performed
hereunder.
Section
10.10 Successors
and Assigns; Participants. All covenants and agreements made by
or on behalf of the Borrower in this Agreement, the Notes and the Collateral
Documents shall bind its successors and assigns and shall inure to the benefit
of the Agent and the Banks and their respective successors and
assigns. The Borrower may not assign its rights or obligations under
this Agreement.
Section
10.11 Relationship
Between the Parties. The relationship between the Agent and the
Banks, on the one hand, and the Borrower on the other, shall be solely that
of
lender and borrower, and such relationship shall not, under any circumstances
whatsoever, be construed to be a joint venture, joint adventure, or
partnership. Neither the Agent nor any Bank has a fiduciary
obligation to the Borrower with respect to this Agreement or the transactions
contemplated hereby.
Section
10.12 Limitation
of Liability. This Agreement, the Notes and the Collateral
Documents are executed by officers of the Agent and the Banks, and by acceptance
of the Loan, the Borrower agrees that for the payment of any claim or the
performance of any obligations hereunder resulting from any default by the
Agent
or any of the Banks, resort shall be had solely to the assets and property
of
the Agent or such Bank, and no shareholder, officer, employee or agent of the
defaulting Agent or Bank shall be personally liable therefor.
Section
10.13 Titles
of Articles, Sections and Subsections. All titles or headings to
articles, sections, subsections or other divisions of this Agreement or the
exhibits hereto are only for the convenience of the parties and shall not be
construed to have any effect or meaning with respect to the other content of
such articles, sections, subsections or other divisions, such other content
being controlling as to the agreement between the parties hereto.
Section
10.14 Singular
and Plural. Words used herein in the singular, where the context
so permits, shall be deemed to include the plural and vice versa. The
definitions of words in the singular herein shall apply to such words when
used
in the plural where the context so permits and vice versa.
Section
10.15 GOVERNING
LAW. THIS AGREEMENT IS, AND THE NOTES WILL BE,
CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY
THE LAWS OF THE UNITED STATES OF AMERICA (INCLUDING FEDERAL LAW THAT PERMITS
A
BANK TO CHARGE
-
79
-
INTEREST
AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH BANK IS LOCATED) AND
THE
STATE OF TEXAS. Without limiting the intent of the parties
set forth above, (a) Chapter 346 of the Texas Finance Code, as amended (relating
to revolving loans and revolving tri-party accounts (formerly
Tex. Rev.
Civ. Stat. ▇▇▇. Art. ▇▇▇▇,
▇▇. 15)), shall not apply to this Agreement, the Notes, or the
transactions contemplated hereby and (b) to the extent that a Bank may be
subject to Texas law limiting the amount of interest payable for its account,
such Bank shall utilize the indicated (weekly) rate ceiling from time to time
in
effect, provided that such Bank may also rely, to the extent permitted by
applicable laws including without limitation the laws of the United States,
on
alternative maximum rates of interest under other laws applicable to such Bank
for calculation of the Maximum Rate if the application thereof results in a
greater Maximum Rate.
Section
10.16 Counterparts. This
Agreement may be executed in two or more counterparts, and it shall not be
necessary that the signatures of all parties hereto be contained on any one
counterpart hereof; each counterpart shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section
10.17 WAIVER
OF JURY TRIAL; SUBMISSION TO JURISDICTION. (a) THE
BORROWER, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVE TRIAL BY JURY IN
ANY
ACTION OR PROCEEDING TO WHICH THE BORROWER, THE AGENT AND THE BANKS MAY BE
PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (i) THE NOTES, (ii) THIS
AGREEMENT, (iii) THE COLLATERAL DOCUMENTS OR (iv) THE COLLATERAL. IT
IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY
JURY
OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING
CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. THIS
WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE BORROWER, THE AGENT
AND THE BANKS, AND THE BORROWER, THE AGENT AND THE BANKS HEREBY REPRESENT THAT
NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE
THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS
EFFECT. THE BORROWER, THE AGENT AND THE BANKS EACH FURTHER REPRESENT
THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING
OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL,
AND
THAT IT HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
(b) THE
BORROWER HEREBY IRREVOCABLY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF THE
STATE COURTS OF LOUISIANA AND THE FEDERAL EASTERN DISTRICT COURT IN LOUISIANA,
AND AGREES THAT ANY ACTION OR PROCEEDING ARISING OUT OF OR BROUGHT TO ENFORCE
THE PROVISIONS OF THE NOTES, THIS AGREEMENT AND/OR THE COLLATERAL DOCUMENTS
MAY
BE BROUGHT IN ANY COURT HAVING SUBJECT MATTER JURISDICTION. THE
BORROWER HEREBY IRREVOCABLY WAIVES ANY
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80
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OBJECTIONS
THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT OR THAT ANY SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME. THE
BORROWER AGREES THAT NOTHING HEREIN SHALL LIMIT THE AGENT’S AND THE BANKS' RIGHT
TO ▇▇▇ IN ANY OTHER JURISDICTION.
(c) THE
BORROWER HEREBY AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING
MAY BE EFFECTED BY MAILING A COPY BY REGISTERED OR CERTIFIED MAIL (OR ANY
SUBSTANTIALLY SIMILAR FORM OF MAIL) POSTAGE PREPAID, TO THE BORROWER AT ITS
ADDRESS SET FORTH IN SECTION 10.1 OR AT SUCH OTHER ADDRESS AS TO WHICH
THE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO. THE BORROWER
AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW.
Section
10.18 AGREEMENT
SUPERCEDES ALL PRIOR AGREEMENTS. THIS AGREEMENT,
TOGETHER WITH THE NOTES, THE COLLATERAL DOCUMENTS, AND ANY OTHER WRITTEN
INSTRUMENTS EXECUTED PURSUANT TO THIS AGREEMENT REPRESENT, COLLECTIVELY, THE
FINAL AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES AND SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN
THE PARTIES HEREOF, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT
HEREOF.
THERE
ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section
10.19 Imaging. The
Borrower understands and agrees that the Agent's or a Bank's document retention
policy may involve the imaging of executed loan documents and the destruction
of
the paper originals, and the Borrower waives any right that it may have to
claim
that the imaged copies of this Agreement and the Collateral Documents are not
originals in any court proceedings pertaining thereto.
Section
10.20 Patriot
Act. The Agent and the Banks each hereby notifies the Borrower
that pursuant to the requirements of the Patriot Act, it is required to obtain,
verify and record information that identifies the Borrower and the other
Companies, which information includes the name and address of the Borrower
and
other information that will allow the Agent and the Banks each to identify
the
Borrower in accordance with the Patriot Act.
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ARTICLE
11
RENEWAL
Section
11.1 No
Novation. The Borrower confirms that this Agreement has been
given in renewal and extension of the Indebtedness to the Banks and the Issuing
Bank under the Prior Loan Agreement described in the Preliminary Statement
to
this Agreement, and that nothing in this Agreement shall constitute the
satisfaction or extinguishment of the amount owed thereunder, nor shall it
be a
novation of the amount owed thereunder.
Section
11.2 No
Defenses. The Borrower represents and warrants that there is no
defense, offset, compensation, counterclaim or reconventional demand with
respect to amounts due under, or performance of the terms of, the Prior Loan
Agreement or the prior line of credit promissory notes issued thereunder; and
to
the extent any such defense, offset, compensation, counterclaim or
reconventional demand or other causes of action might exist, known or unknown,
such items are hereby waived by the Borrower.
Section
11.3 Transition. Until
the conditions precedent in Section 7.1 have been met, the terms of the
Prior Loan Agreement shall remain in full force and effect, and the Borrower
may
borrow under the terms established thereunder (but only until and no later
than
October 31, 2007), so long as all of the conditions and requirements otherwise
established in this Agreement are met. The Borrower, the Agent and
the Banks acknowledge that certain provisions of the Prior Loan Agreement shall
remain pertinent for a time after the effectiveness of this Agreement, such
as
the Percentage Outstanding under the Prior Loan Agreement being used for the
determinations of the initial Applicable LIBO Rate Margin, the fee payable
under
Subsection 2.5(a) to the Banks, and pertaining to letters of credit
issued under the Prior Loan Agreement which remain outstanding on and after
the
Closing Date.
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IN
WITNESS WHEREOF, the parties hereto have caused this instrument to be duly
executed as of the date first above written.
SECTIONS
2.8, 5.13 and 5.14 contain AN INDEMNITY.
| BORROWER: | GMX RESOURCES INC. | ||
|
|
By:
|
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇. | |
| Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇. | |||
| Title: Executive Vice President and CFO | |||
| AGENT: | CAPITAL ONE, NATIONAL ASSOCIATION | ||
|
|
By:
|
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | |
| Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | |||
| Title: Senior Vice President | |||
| BANKS: |
CAPITAL
ONE, NATIONAL ASSOCIATION,
|
||
|
as
a Bank
|
|||
|
|
By:
|
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | |
| Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | |||
| Title: Senior Vice President | |||
| UNION BANK OF CALIFORNIA, N.A. | |||
|
|
By:
|
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | |
| Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | |||
| Title: Vice President | |||
LIST
OF
SCHEDULE
1.
Commitments
of the Banks
LIST
OF
ADDENDA
1.
LIBO Rate Provisions
2.
Subordination Terms
LIST
OF
EXHIBITS
A.
Form
of Note
B.
Form
of
Assignment and Acceptance
|
|
SCHEDULE
1
|
|
|
Effective
October 31, 2007
|
|
|
Commitments
of the Banks
|
| Name and Address of Bank |
Commitment
of Bank
|
|
||
| 1. |
Capital
One, National Association
|
$75,000,000.00
|
|
|
|
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
|
||||
|
▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
|
||||
|
Attention: ▇▇.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
|
||||
|
Facsimile
Number: (▇▇▇) ▇▇▇-▇▇▇▇
|
||||
|
Telephone
Number: (▇▇▇) ▇▇▇-▇▇▇▇
|
||||
| 2. |
Union
Bank of California, N.A.
|
$50,000,000.00
|
||
|
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
|
||||
|
▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
|
||||
|
Attention: ▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
|
||||
|
Facsimile
Number: (▇▇▇) ▇▇▇-▇▇▇▇
|
||||
|
Telephone
Number: (▇▇▇) ▇▇▇-▇▇▇▇
|
||||
ADDENDUM
I
LIBO
RATE
PROVISIONS
1. The
Agent shall determine the interest rate applicable to LIBO Rate Advances, and
its determination shall be conclusive in the absence of manifest
error. The Agent shall endeavor to notify the Borrower prior to the
date on which an interest payment is due, provided that the failure of the
Agent
to provide such notice shall not affect the Borrower’s obligation to pay
interest on such date.
2. If
any applicable law or regulation, or the action of any applicable regulatory
requirement increases the reserves or capital required to be maintained by
any
Bank or the Agent with respect to the Loan (including unfunded commitments
and
obligations on letter of credit), such Bank or the Agent shall promptly deliver
a certificate to the Borrower specifying the additional amount as will
compensate such Bank or the Agent for the additional costs, which certificate
shall be conclusive in the absence of manifest error. The Borrower
shall pay the amount specified in such certificate promptly upon
receipt.
3. If
the Agent gives notice to the Borrower that no LIBO bid rate is quoted to the
Agent (or otherwise that adequate and reasonable methods do not exist for
ascertaining the LIBO Rate) for the applicable Interest Period or in the
applicable amounts (which notice shall
be
conclusive and binding on the Borrower and the Banks absent manifest error),
then (A) the obligation of the Agent and the Banks to make a LIBO Rate Advance
and the ability of the Borrower to select the LIBO Rate for an Advance shall
be
suspended, and (B) the Borrower shall either prepay all LIBO Rate Advances
for
which an interest rate is to be determined on such date or the Loan shall
thereafter bear interest at the Base Rate.
4. If
any applicable domestic or foreign law, treaty, rule or regulation (whether
now
in effect or hereinafter enacted or promulgated, including Regulation D of
the
Board of Governors of the Federal Reserve System) or any interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law):
(i) changes
the basis of taxation of payments to any Bank or the Agent or any principal,
interest, or other amounts attributable to any LIBO Rate Advance (other than
taxes imposed on the overall net income of such Bank or the Agent);
(ii) changes,
imposes, modifies, applies or deems applicable any reserve, special deposit
or
similar requirements in respect of any such LIBO Rate Advance (excluding those
for which such Bank or the Agent is fully compensated pursuant to adjustments
made in the definition of LIBO Rate) or against assets of, deposits with or
for
the account of, or credit extended by, any Bank or the Agent;
or
ADDENDUM
I
PAGE
-2-
(iii) imposes
on any Bank or the Agent or the interbank eurocurrency deposit and transfer
market any other condition or requirement affecting any such LIBO Rate
Advance,
and
the
result of any of the foregoing is to increase the cost to such Bank or the
Agent
of funding or maintaining any such LIBO Rate Advance (other than costs for
which
such Bank or the Agent is fully compensated pursuant to adjustments made in
the
definition of LIBO Rate) or to reduce the amount of any sum receivable by such
Bank or the Agent in respect of any such LIBO Rate advance by an amount deemed
by such Bank or the Agent to be material, then such Bank or the Agent shall
promptly notify the Borrower in writing of the happening of such event and
(1)
Borrower shall upon demand pay to such Bank or the Agent such additional amount
or amounts as will compensate such Bank or the Agent for such additional cost
or
reduction and (2) Borrower may elect, by giving to the Agent not less than
three
Business Days’ notice, to change the interest rate applicable to such Advance,
and any other portion of the Loan bearing interest at the LIBO Rate, to the
Base
Rate.
5. Notwithstanding
any other provision hereof, if any change in applicable laws, treaties, rules
or
regulations or in the interpretation or administration thereof of or in any
jurisdiction whatsoever, domestic or foreign, shall make it unlawful or
impracticable for any Bank to maintain Advances bearing interest at the LIBO
Rate, or shall materially restrict the authority of any Bank to purchase, sell
or take certificates of deposit or offshore deposits of dollars, then, upon
notice by such Bank to Borrower and the Agent, such Bank’s portion of all LIBO
Rate Advances which are then outstanding and which cannot lawfully or
practicably be maintained shall immediately cease to bear interest at the LIBO
Rate and shall commence to bear interest at the Base Rate. The
Borrower agrees to indemnify each Bank and hold it harmless against all costs,
expenses, claims, penalties, liabilities and damages which may result from
any
such change in law, treaty, rule, regulation, interpretation or
administration. The Borrower hereby agrees promptly to pay the Agent
for the account of such Bank, upon demand by such Bank, any additional amounts
necessary to compensate such Bank for any costs incurred by such Bank in making
any conversion in accordance with this Paragraph, including any interest or
fees
payable by such Bank to lenders of funds obtained by it in order to make or
maintain hereunder its portion of the Loan accruing interest based on the LIBO
Rate.
6. The
Borrower will indemnify the Agent and each Bank against, and reimburse the
Agent
and each Bank on demand for, any loss or expense incurred or sustained by the
Agent and each Bank (including without limitation, any loss or expense incurred
by reason of the liquidation or reemployment of deposits or other funds acquired
by the Agent and each Bank to fund or maintain LIBO Rate Advances) as a result
of (i) any payment or prepayment (whether authorized or required hereunder
or
otherwise) of all or a portion of any LIBO Rate Advance on a day other than
the
day on which the applicable Interest Period ends, (ii) any payment or
prepayment, whether required hereunder or otherwise, of the LIBO Rate Advances
made after the delivery, but before the effective date, of an election to have
the LIBO Rate apply to LIBO
ADDENDUM
I
PAGE
-3-
Rate
Advance, if such payment or prepayment prevents such election from becoming
fully effective, or (iii) the failure of any LIBO Rate Advance to be made by
the
Agent and each Bank or of any such election to become effective due to any
condition precedent to a LIBO Rate Advance not being satisfied or due to any
other action or inaction of Borrower. For purposes of this section,
funding losses arising by reason of liquidation or reemployment of deposits
or
other funds acquired by the Agent or any Bank to fund or maintain LIBO Rate
Advances shall be calculated as the remainder obtained by
subtracting: (1) the yield (reflecting both stated interest rate and
discount, if any) to maturity of obligations of the United States Treasury
as
determined by the Agent or such Bank in an amount equal or comparable to such
advance for the period of time commencing on the date of the payment, prepayment
or change of rate as provided above and ending on the last day of the subject
Interest Period, from (2) the LIBO Rate of the subject Interest Period,
times the number of days from the date of payment, prepayment or change
of rate to the last day of the subject Interest Period, divided by
360. Any payment due under this paragraph will be paid to the Agent
or such Bank within five days after demand therefor by the Agent or such
Bank.
7. The
Borrower covenants and agrees that:
(i) The
Borrower will pay, within five days after notice thereof from Agent (on behalf
of itself or any Bank) and on an after-tax basis, all present and future income,
stamp and other taxes, levies, costs and charges whatsoever imposed, assessed,
levied or collected on or in respect of any LIBO Rate Advance whether or not
legally or correctly imposed, assessed, levied or collected (excluding taxes,
levies, costs or charges imposed on or measured by the overall net income of
the
Agent or any Bank) (all such non-excluded taxes, levies, costs and charges
being
collectively called “Reimbursable Taxes”). Promptly after the
date on which payment of any Reimbursable Taxes is due pursuant to applicable
law, the Borrower will, at the request of the Agent, furnish to the Agent
evidence in form and substance satisfactory to the Agent that Borrower has
met
its obligation under this paragraph.
(ii) The
Borrower will indemnify the Agent and each Bank against, and reimburse the
Agent
and each Bank on demand for, any Reimbursable Taxes paid by the Agent or such
Bank and any loss, liability, claim or expense, including interest, penalties
and legal fees, that the Agent and each Bank may incur at any time arising
out
of or in connection with the failure of Borrower to make any payment of
Reimbursable Taxes when due, unless such failure is due to Agent or such Bank’s
failure to give notice to Borrower of Borrower’s obligation to pay such
Reimbursable Taxes at least five days prior to the date when they are
due. Any payment due under this subsection will be paid to the Agent
or such Bank within five days after demand therefor by the Agent or such
Bank.
ADDENDUM
I
PAGE
-4-
(iii) All
payments on account of the principal of, and interest on, LIBO Rate Advances
and
all other amounts payable by Borrower to the Agent and the Banks hereunder
shall
be made free and clear of and without reduction by reason of any Reimbursable
Taxes.
(iv) If
Borrower is ever required to pay any Reimbursable Taxes with respect to any
LIBO
Rate Advance, Borrower may elect, by giving to the Agent not less than three
(3)
Business Days’ notice, to change the interest rate applicable to any such
advance from the LIBO Rate to the Base Rate, but such election shall not
diminish Borrower’s obligation to pay all Reimbursable Taxes therefore imposed,
assessed, levied or collected.
ADDENDUM
II
APPROVED
SUBORDINATION TERMS
Reference
is made to the Second Amended and Restated Loan Agreement, dated as of October
31, 2007, by and among GMX Resources Inc., as Borrower, the Banks party thereto,
and Capital One, National Association, as Agent (the "Loan
Agreement"). Capitalized terms used herein and not defined herein
shall have the meanings assigned to such terms in the Loan
Agreement. In the event that the subordination terms are in
connection with a guaranty, the term “Guarantor” shall be substituted for the
term “Borrower”.
Following
are the subordination terms to be applicable to Indebtedness or Guarantees
permitted pursuant to Section 6.1(h) of the Loan Agreement.
DEFINITIONS
“Insolvency
Event” means any event with respect to the Borrower described in Sections
8.1(g), 8.1(h) or 8.1(i) of the Loan Agreement.
“Junior
Creditors” means any holder of, or obligee under or in respect of, any
Junior Obligations.
“Junior
Documents” means (i)[Identify
the
documents creating the subordinated Indebtedness or subordinated
Guarantees], (ii)
each agreement, instrument or other document executed or delivered in connection
with the refinancing of any Junior Obligations, and (iii) each agreement,
instrument or other document executed or delivered in connection with any of
the
foregoing.
"Junior
Liens" means any Liens securing all or any portion of the Junior
Obligations.
"Lien"
means any interest in property securing an obligation owed to, or a claim by,
a
Person other than the owner of the property, whether such interest is based
on
jurisprudence, statute or contract, and including without limitation the lien
or
security interest arising from a mortgage, pledge, security agreement,
production payment, conditional sale, bond for deed or trust receipt or a lease,
consignment or bailment for security purposes. For the purposes of
this definition, the Borrower shall be deemed to be the owner of any property
which it has accrued or holds subject to a conditional sale agreement, financing
lease or other arrangement pursuant to which title to the property has been
retained by or vested in some other Person for security purposes.
“Junior
Obligations” means all of the obligations and liabilities of the Borrower
under the Junior Documents, whether fixed, contingent, now existing or hereafter
arising, created, assumed or incurred, and including any obligation or liability
in respect of any breach of any representation or warranty and in respect of
any
rights of repurchase, redemption or rescission.
ADDENDUM
II
PAGE
-2-
"Remedies"
means, with respect to any debt (including without limitation the Junior
Obligations) (i) the acceleration of the maturity of any such debt, (ii) the
exercise of any put right or other similar right to require the Borrower or
any
Subsidiary to repurchase any such debt prior to the stated maturity thereof,
(iii) the collection or commencement of proceedings against the Borrower, any
Subsidiary or any other Person obligated on such debt or any of their respective
property, to enforce or collect any such debt, (iv) taking possession of or
foreclosing upon (whether by judicial proceedings or otherwise) any Liens,
or
causing a marshaling of any property of the Borrower or any Subsidiary, (v)
the
making of a demand and respect of any guaranty given by any Person of such
debt,
(vi) exercising any other remedies with respect to such debt or any claim with
respect thereto, or (vii) the taking of any action against the Borrower, any
Subsidiary or any other Person obligated on or for such debt, or any of their
respective assets, pertaining to the terms of the agreements governing such
debt
(including documents regarding the Junior Liens).
“Senior
Agent” means the Agent.
“Senior
Creditors” means any holder of, or obligee under or in respect of, any
Senior Obligations.
“Senior
Documents” means (i) the Loan Agreement, (ii) each agreement, instrument or
other document executed or delivered in connection with refinancing of Senior
Obligations, (iii) any Secured Hedge Agreement, and (iv) each agreement,
instrument or other document executed or delivered in connection with any of
the
foregoing.
"Senior
Liens" means any Liens securing all or any portion of the Senior
Obligations.
“Senior
Obligations” means all of the obligations and liabilities of the Borrower
under the Senior Documents, whether fixed, contingent, now existing or hereafter
arising, created, assumed or incurred, and including (i) any obligation or
liability in respect of any breach of any representation or warranty and in
respect of any rights of redemption or rescission and (ii) all post-petition
interest and make-whole premiums, whether or not allowed as a secured claim
or
as an unsecured claim in any proceeding, including any proceeding arising under
Title 11 of the United States Code, arising in connection with an Insolvency
Event.
PAYMENT
PROVISIONS
1. Payment
Defaults. No payment of Junior Obligations may be made by the Borrower in
the event that the principal of, or interest on, or any other amount payable
in
respect of, the Senior Obligations is not paid when due, whether at maturity
or
at a date fixed for prepayment or by declaration or otherwise (a “Payment
Default”), unless and until such Payment Default has been cured or waived or
otherwise has ceased to exist.
ADDENDUM
II
PAGE
-3-
2. Non-Payment
Defaults. No payment of Junior Obligations may be made by the Borrower in
the event that an Event of Default other than a Payment Default (a
“Non-Payment Default”) has occurred, and has not been cured or waived,
provided that the Senior Agent delivers written
notice (a “Blockage Notice”) to the Borrower and to the Junior Creditors
directing the Borrower not to make payment of the Junior obligations. Notwithstanding
the foregoing, unless (i) the Senior Obligations have been declared due and
payable in their entirety within ninety (90) days after the Blockage Notice
is
given as set forth above (the “Blockage Period”) and (ii) such
declaration has not been rescinded or waived upon expiration of the Blockage
Period, the Borrower will be required to pay to the Junior Creditors all sums
not paid to the Junior Creditors during the Blockage Period due to the
prohibitions of this paragraph (and upon the making of such payments any
acceleration of the Borrower’s obligations with regard to the Junior Obligations
which was declared during the Blockage Period because of the Borrower’s failure
to make payments due to the prohibitions in this paragraph will be of no further
force or effect) and to resume all other payments due under the Junior
Obligations as and when they are due. Not more than one Blockage
Notice may be given in any consecutive 365 day period, irrespective of the
number of defaults with respect to Senior Obligations that may occur during
such
period. In no event may the number of days during which any Blockage
Period is, or Blockage Periods are, in effect exceed 180 days in the aggregate
during any consecutive 365 day period.
3. Insolvency
Events. Upon any distribution of assets of the Borrower as a result of any
dissolution, winding up, liquidation or reorganization (including as a result
of
an Insolvency Event), all Senior Obligations must be paid in full in cash before
any payment is made on account of the Junior Obligations.
4. Turn-Over.
If the Junior Creditors receive any payments in respect of the Junior
Obligations which they are not entitled to receive pursuant to the applicable
subordination terms, such payment must be delivered to the Senior Agent on
behalf of the holders of the Senior Obligations as their interests may
appear.
LIEN
PROVISIONS
5. Priority. The
Senior Liens shall be senior and superior to the Junior Liens. The
foregoing priority shall remain irrespective of modifications, amendments,
renewals or extensions of the Senior Obligations, and irrespective of any
advances made by either party to preserve the collateral or the priority of
their Liens in the Collateral.
6. No
Contest. The Junior Creditors shall not contest the validity,
perfection, priority or enforceability of any Lien granted to the Senior
Creditors by the Borrower or its affiliates. The Junior Creditors
shall not contest Remedies actions taken by the Senior Creditors.
7. Standstill. The
Junior Creditors shall not exercise any Remedies in respect of the Junior Liens
until ninety (90) days after the first to occur of (i) the date the Agent
receives
ADDENDUM
II
PAGE
-4-
notice
from the Junior Creditors of the occurrence of an Event of Default under the
Junior Obligations or (ii) the Borrower files or consents by answer or otherwise
to the filing against it of a petition for relief or reorganization or other
partition in bankruptcy.
8. Release
of Collateral. The Junior Creditors shall agree and consent in
advance to the automatic release of the Junior Liens on any collateral upon
a
sale thereof in compliance with the asset sale covenant in the Senior
Documents.
OTHER
PROVISIONS
9. Maturity. The
maturity of the Junior Obligations shall be at least one year after the Maturity
Date.
10. Maximum
Amount. The maximum aggregate principal amount of the Junior
Obligations outstanding at any time and from time to time, when added to the
total amount of Qualified Redeemable Preferred Equity issued by the Borrower,
shall not exceed eighty million ($80,000,000.00) dollars.
11. No
Cross Default. No Default under the Senior Obligations shall
result in a default under the Junior Obligations, except for a Payment Default
on the Maturity Date. [THE FOREGOING SENTENCE IS WAIVED AS TO THE
$30,000,000.00 SENIOR SUBORDINATED SECURED NOTES, SERIES A, ISSUED TO THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA.] Cross acceleration is
permitted.
12. Filing
Claims. The Senior Agent shall be irrevocably authorized to file
any required proof of claim if the Junior Creditors fail to do so in a timely
manner.
13. Bankruptcy. The
Junior Creditors shall agree and give advance consent with respect to any of
the
following actions in any bankruptcy proceedings of the Borrower: (i) any use
of
cash collateral approved by the Senior Creditors, (ii) any court-approved asset
sale that is also approved by the Senior Creditors, so long as the Junior Liens
attach to the proceeds of the sale in accordance with the Lien priorities agreed
to in the Intercreditor Agreement, and (iii) debtor-in-possession financings
under which the Liens securing such debtor-in-possession financing rank prior
or
equal to the Liens securing the Senior Obligations. [THE
FOREGOING SENTENCE IS WAIVED AS TO THE $30,000,000.00 SENIOR SUBORDINATED
SECURED NOTES, SERIES A, ISSUED TO THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA.]
14. Amendments.
No amendment to the subordination provisions is permitted without the consent
of
the Senior Agent.
EXHIBIT
A
FORM
OF NOTE
LINE
OF
CREDIT NOTE
|
Borrower:
|
Bank:
_________________________________
_________________________________
_________________________________
_________________________________
|
| Principal Amount: |
Maturity
Date of Note:
|
Date
of Note
|
| U.S. $ __________________ |
July
15, 2011
|
October,
2007
|
PROMISE
TO PAY. GMX RESOURCES INC. (“Borrower”), an Oklahoma corporation, promises
to pay to the order of (“Bank”) at the main office in New Orleans, Louisiana
(313 Carondelet Street) of Capital One, National Association (“Agent”), in
lawful money of the United States of America, the sum of and 00/100
dollars (U.S. $), or such other or lesser amount as from time to time equals
the
aggregate unpaid principal balance of loan advances made to Borrower by Bank
on
a revolving line of credit basis as provided below, together with simple
interest assessed on the variable rate(s) basis provided below, with interest
being assessed on the unpaid principal balance of this Note as outstanding
from
time to time, commencing on the date hereof and continuing until this Note
is
paid in full. Interest on Base Rate Advances under this Note shall be
calculated on the basis of a 365 (or in a leap year 366) day year and the actual
number of days elapsed, and on LIBO Rate Advances under this Note shall be
calculated on a 365/360 simple interest basis, that is, by applying the ratio
of
the annual interest rate over a year of 360 days, times the outstanding
principal balance, times the actual number of days the principal balance is
outstanding.
LOAN
AGREEMENT. This Note is a Note referred to in and executed
pursuant to that certain second amended and restated loan agreement dated as
of
October 31, 2007 among Borrower, Agent and the banks from time to time party
thereto (as amended, renewed or restated from time to time, the “Loan
Agreement”), and is entitled to the benefits thereof. Unless
otherwise defined herein, each capitalized term used herein shall have the
same
meaning set forth in the Loan Agreement. Reference is made to the
Loan Agreement for provisions for the acceleration of the
EXHIBIT
A
PAGE
-2-
maturity
hereof on the occurrence of certain events specified therein, for mandatory
prepayments required of the Borrower in certain circumstances, and for all
other
pertinent provisions.
LINE
OF CREDIT. This Note evidences revolving line of credit advances
that may be made from time to time to Borrower under the Loan Agreement
(including loan advances arising from draws on standby letters of credit issued
thereunder). Borrower agrees to be liable for all sums either (a)
advanced in accordance with the instructions of an authorized person as
specified in the Loan Agreement or (b) credited pursuant to the Loan Agreement
to any of Borrower’s deposit accounts with Agent. The unpaid
principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Agent’s or Bank’s internal records, including
daily computer print-outs. Advances shall only be made in accordance
with the terms and conditions of the Loan Agreement.
PAYMENT. Borrower
will pay interest on Base Rate Advances at the Base Rate monthly in arrears
on
the last day of each successive calendar month, but in no event greater than
the
Maximum Rate (as such term is defined in the Loan
Agreement). Borrower will pay interest on LIBO Rate Advances at the
applicable LIBO Rate on the last day of each applicable LIBO Rate Interest
Period for each LIBO Rate Advance, but in no event greater than the Maximum
Rate. Borrower will pay the balance of all outstanding principal on
this Note, together with all accrued but unpaid interest, at the Maturity
Date. Borrower will pay Bank at Agent’s address shown above or at
such other place as Bank may designate in writing. All payments and
prepayments made by Borrower hereunder shall be made to Bank, in immediately
available funds, before 11:00 a.m. (Central Time) on the day that such payment
is required, or otherwise is, to be made. Any payment received and
accepted by Bank after such time shall be considered for all purposes (including
the calculation of interest to the extent permitted by law) as having been
made
on the next following Business Day. Whenever any payment to be made
hereunder falls on a day other than a Business Day, then unless otherwise
provided in the Loan Agreement such payment shall be made on the next succeeding
Business Day (without penalty or default), and such extension of time shall
in
each case be included in the calculation of interest. Unless
otherwise agreed or required by applicable law, payments will be applied first
to accrued unpaid interest, then to principal, and any remaining amount to
any
unpaid collection costs and late charges.
VARIABLE
INTEREST RATES. This Note bears interest on and after the date
hereof to and including the Maturity Date at the variable rate(s) per annum
equal to the Base Rate or LIBO Rate, as selected by Borrower in accordance
with
the Loan Agreement, but in no event greater than the Maximum
Rate. The interest rate on this Note is subject to change from time
to time based on changes in the Prime Rate and the LIBO Rate. If the
index rate used in determining the Prime Rate becomes unavailable during the
term of this Note, Agent may designate a substitute index after notice to
Borrower. Agent will tell Borrower the Prime Rate upon Borrower’s
request. Borrower understands that Bank may make loans based on other
rates as well. The interest rate change will not occur more than once
each day. Under no circumstances will the interest rate on this Note
be more than the Maximum Rate allowed by applicable law. The
EXHIBIT
A
PAGE
-3-
unpaid
principal balance of this Note shall bear interest from and after an Event
of
Default or the Maturity Date until paid at the Default Rate from time to time
in
effect.
PREPAYMENT. Borrower
may prepay this Note in full or in part at any time by paying the then unpaid
principal balance of this Note, plus accrued simple interest and any unpaid
late
charges through date of prepayment, subject to restrictions regarding
permitted timing and advance notice set forth in the Loan Agreement, but without
penalty or premium. Borrower may be required to prepay this Note from
time to time in accordance with the Loan Agreement. If Borrower
prepays this Note in full, or if Bank accelerates payment, Borrower understands
that, unless otherwise required by law, any prepaid fees or charges will not
be
subject to rebate and will be earned by Bank at the time this Note is
signed.
LATE
CHARGE. If Borrower fails to pay any payment under this Note in
full within ten (10) days of when due, Borrower agrees to pay Bank a late
payment fee in an amount equal to 5.000% of the delinquent interest
due. Late charges will not be assessed following declaration of
default and acceleration of maturity of this Note.
DEFAULT.
If any Event of Default occurs, Agent and Bank shall have all the rights and
remedies (including acceleration of the Maturity Date of this Note) available
to
them pursuant to the Loan Agreement or applicable law.
ATTORNEYS’
FEES. If Bank refers this Note to an attorney for collection, or
files suit against Borrower to collect this Note, or if Borrower files for
bankruptcy or other relief from creditors, Borrower agrees to pay
Agent’s and Bank’s reasonable attorneys’ fees.
DEPOSIT
ACCOUNTS. As collateral security for repayment of this Note and
all renewals and extensions, as well as to secure any and all Indebtedness
that
Borrower may now or in the future owe to Agent or any Bank in connection with
the Loan Agreement, Borrower hereby grants Agent for itself and the ratable
benefit of the Banks a continuing security interest in any and all funds that
Borrower may now and in the future have on deposit with Agent or in certificates
of deposit or other deposit accounts as to which Borrower is an account holder
(with the exception of ▇▇▇, pension, and other tax-deferred
deposits).
COLLATERAL. This
Note is secured by the Collateral and Collateral Documents as provided in the
Loan Agreement.
WAIVERS. Borrower
and each guarantor of this Note hereby waive presentment for payment, protest,
notice of protest and notice of nonpayment, and all pleas of division and
discussion, and severally agree that their obligations and liabilities to Bank
hereunder shall be on a “solidary” or “joint and several”
basis. Borrower and each guarantor further severally agree that
discharge or release of any party who is or may be liable to Bank for the
indebtedness represented hereby, or the release of any collateral directly
or
indirectly securing repayment hereof, shall not have the effect of releasing
any
other party or parties, who shall remain liable to Bank, or of releasing any
EXHIBIT
A
PAGE
-4-
other
collateral that is not expressly released by Bank. Borrower and each
guarantor additionally agree that Bank’s acceptance of payment other than in
accordance with the terms of this Note, or Bank’s subsequent agreement to extend
or modify such repayment terms, or Bank’s failure or delay in exercising any
rights or remedies granted to Bank, shall likewise not have the effect of
releasing Borrower or any other party or parties from their respective
obligations to Bank, or of releasing any collateral that directly or indirectly
secures repayment hereof. In addition, any failure or delay on the
part of Bank to exercise any of the rights and remedies granted to Bank shall
not have the effect of waiving any of Bank’s rights and remedies. Any
partial exercise of any rights and/or remedies granted to Bank shall furthermore
not be construed as a waiver of any other rights and remedies; it being
Borrower’s intent and agreement that Bank’s rights and remedies shall be
cumulative in nature. A waiver or forbearance on the part of Bank as
to one event of default shall not be construed as a waiver or forbearance as
to
any other default. Borrower and each guarantor of this Note further
agrees that any late charges provided for under this Note will not be charges
for deferral of time for payment and will not and are not intended to compensate
Bank for a grace or cure period, and no such deferral, grace or cure period
has
been or will be granted to Borrower in return for the imposition of any late
charge. Borrower recognizes that Borrower’s failure to make timely
payment of amounts due under this Note will result in damages to Bank, including
but not limited to Bank’s loss of the use of amounts due, and Borrower agrees
that any late charges imposed by Bank hereunder will represent reasonable
compensation to Bank for such damages. Failure to pay in full any
installment or payment timely when due under this Note, whether or
not a late charge is assessed, will remain and shall constitute an event of
default hereunder.
SUCCESSORS
AND ASSIGNS LIABLE. Borrower’s and each guarantor’s obligations
and agreements under this Note shall be binding upon Borrower’s and each
guarantor’s respective successors, heirs, legatees, devisees, administrators,
executors and assigns. The rights and remedies granted to Bank under
this Note shall inure to the benefit of Bank’s successors and assigns, as well
as to any subsequent holder or holders of this Note.
CAPTION
HEADINGS. Caption headings of the sections of this Note are for
convenience purposes only and are not to be used to interpret or to define
their
provisions. In this Note, whenever the context so requires, the
singular includes the plural and the plural also includes the
singular.
WAIVER
OF JURY TRIAL. BANK AND BORROWER HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING,
OR
COUNTERCLAIM BROUGHT BY EITHER BANK OR BORROWER AGAINST THE OTHER.
GOVERNING
LAW. THIS NOTE IS A CONTRACT MADE UNDER AND
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE UNITED
STATES OF AMERICA (INCLUDING FEDERAL
LAW
THAT PERMITS
EXHIBIT
A
PAGE
-5-
BANK
TO CHARGE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE BANK
IS
LOCATED) AND THE STATE OF TEXAS. Without limiting the intent
of the parties set forth above, Chapter 346 of the Texas Finance Code, as
amended (relating to revolving loans and revolving tri-party accounts (formerly
Tex. Rev.
Civ. Stat. ▇▇▇. Art. 5069,
Ch. 15)), shall not apply to this Note, or the transactions
contemplated hereby.
AGREEMENT
SUPERSEDES ALL PRIOR AGREEMENTS. THIS NOTE, AND
THE LOAN AGREEMENT AND THE COLLATERAL DOCUMENTS REPRESENT, COLLECTIVELY, THE
FINAL AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES, AND SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN
THE PARTIES HEREOF, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT
HEREOF.
THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SEVERABILITY. If
any provision of this Note is held to be invalid, illegal or unenforceable
by
any court, that provision shall be deleted from this Note and the balance of
this Note shall be interpreted as if the deleted provision never
existed.
RENEWAL. This
Note is given in renewal of Indebtedness under a prior promissory note, and
nothing in this Note shall constitute the satisfaction or extinguishment of
such
Indebtedness, nor shall it be a novation of the amount owed by Borrower under
the Loan Agreement prior to its restatement; rather this Note merely evidences
a
replacement of the amounts available to be borrowed by Borrower from Bank under
the Loan Agreement.
USURY
SAVINGS. The usury savings provisions set forth in the Loan
Agreement (including the provisions of subparts (iii) and (iv) of Section 2.13
of the Loan Agreement), are hereby incorporated into this Note by this
reference.
PRIOR
TO
SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS
NOTE,
INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE
NOTE.
| BORROWER: |
By:________________________________
Name: ▇▇▇
▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
Title: Executive
Vice President & CFO
|
EXHIBIT
A
PAGE
-6-
| STATE OF OKLAHOMA | ) | |
| ) | ||
| ) SS: | ||
| ) | ||
| COUNTY OF OKLAHOMA | ) |
BEFORE
ME, the undersigned Notary Public duly commissioned qualified and sworn within
and for the State and County written above, personally came and appeared ▇▇▇
▇.
▇▇▇▇▇▇▇▇▇, ▇▇., to me personally known, and who being by me duly sworn, did
say
that he is the authorized Executive Vice President & CFO of GMX Resources
Inc., whose name is subscribed to the foregoing Line of Credit Note and that
he
executed the foregoing Line of Credit Note by authority of said corporation’s
board of directors on behalf of said corporation.
THUS
DONE
AND SIGNED before me and the two undersigned witnesses in the County and State
aforesaid, on this ____ day of October, 2007. Witness my hand and
official seal.
|
WITNESSES:
_____________________
Name:
_____________________
Name: |
__________________________________
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
▇▇.
|
________________________________________
NOTARY
PUBLIC
Seal
My
Commission expires:__________________
Commission
number: ____________________
EXHIBIT
B
FORM
OF
ASSIGNMENT AND ACCEPTANCE
Dated
Effective _____________, 200__
Reference
is made to the Second Amended and Restated Loan Agreement dated effective as
of
October 31, 2007, as the same may be amended, modified or supplemented from
time
to time (as so amended, modified or supplemented from time to time, the
“Agreement”), among GMX Resources Inc., as Borrower, Capital One, National
Association, as Agent, and the banks party thereto
(the “Banks”). Capitalized terms which are used herein
without definition and which are defined in the Agreement shall have the same
meanings herein as in the Agreement.
____________________(the
“Assignor”) and ______________________(the “Assignee”) agree as
follows:
1. Assignment. The
Assignor hereby sells and assigns, without recourse, to the Assignee, and the
Assignee hereby purchases and assumes, without recourse, from the Assignor,
as
of the Effective Date (as hereinafter defined) a ___% interest in and to all
the
Assignor’s rights and obligations under the Agreement (including, without
limitation, its Commitment, the Loan currently owing to it and the Note held
by
it and the related participations in respect of issued letters of
credit).
2. Concerning
the Assignor. The Assignor (i) represents that as of the date
hereof, its Commitment percentage (without giving effect to assignments thereof
which have not yet become effective) is ___%, and the outstanding balance of
its
Loan (unreduced by any assignments thereof which have not yet become effective)
is $_____________; (ii) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Agreement
or
any other instrument or document furnished pursuant thereto, other than that
it
is the legal and beneficial owner of the interest being assigned by it hereunder
and that such interest is free and clear of any adverse claim; (iii) makes
no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under the Agreement, the Note, or any
Collateral Document or any other instrument or document furnished pursuant
thereto; and (iv) attaches the Note delivered to it under the Agreement and
requests that the Borrower exchange such Note for a new Note payable to each
of
the Assignor and the Assignee as follows:
EXHIBIT
B
PAGE
-2-
|
Notes
Payable to
the
Order of :
[Name of Assignor] [Name
of Assignee]
|
Amount
of Note
[Note
($ )]
[Note
($ )]
|
3. Concerning
the Assignee. The Assignee (i) represents and warrants that it is
legally authorized to enter into this Assignment and Acceptance; (ii) confirms
that it has received a copy of the Agreement, together with copies of the
financial statements referred to therein and the most recent financial
statements delivered pursuant thereto and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into this Assignment and Acceptance; (iii) agrees that it will,
independently and without reliance upon the Assignor, the Agent or any other
Banks and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Agreement; (iv) appoints and authorizes the Agent to take
such
action as agent on its behalf and to exercise such powers under the Agreement
and the Note as are delegated to the Agent by the terms thereof, together with
such powers as are reasonably incidental thereto; (v) agrees that it will
perform in accordance with their terms all the obligations which the Agreement,
the Note, and the Collateral Documents require are to be performed by it as
a
Bank; and (vi) attaches any U.S. Internal Revenue Service forms required under
Section 9.6(a)(viii)(B) of the Loan Agreement.
4. Substitution. The
Assignee shall deliver to the Agent one or more signature pages to the Loan
Agreement, and one or more signatures to the Intercreditor Agreement (if in
effect), in each case containing the signature of the Assignee. The
Assignee’s address for notices to be given under the Loan Agreement, and to be
noted on the revised Schedule 1 to the Loan Agreement, is:
|
|
_____________________
|
|
|
_____________________
|
|
|
_____________________
|
|
|
Facsimile
Number:_____________________
|
5. Effective
Date. The effective date for this Assignment and Acceptance shall
be __________________ (the “Effective Date”) (which Effective Date
shall be at least five (5) Business Days after the execution of this Assignment
and Acceptance). Following the execution of this Assignment and
Acceptance, it will be delivered to the Agent for acceptance together with
the
Agent’s fee and reasonable expenses as required by Loan Agreement Section
9.6(a)(v) and (vi).
EXHIBIT
B
PAGE
-3-
6. Obligations. Upon
such acceptance and recording, from and after the Effective Date, (i) the
Assignee shall be a party to the Agreement and, to the extent provided in this
Assignment and Acceptance, have the rights and obligations of a Bank thereunder,
and (ii) the Assignor shall, to the extent provided in this Assignment and
Acceptance, relinquish its rights and be released from its
obligations under the Agreement, other than confidentiality
requirements.
7. Payments. Upon
such acceptance and recording, from and after the Effective Date, the Agent
shall make all payments in respect of the interest assigned hereby (including
payments of principal, interest and other amounts) to the
Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments for periods prior to the Effective Date (such as accrued
interest and fees up to but excluding the Effective Date) or with respect to
the
making of this assignment directly between themselves.
8. GOVERNING
LAW. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
THE
REST
OF THIS PAGE IS LEFT BLANK INTENTIONALLY.
EXHIBIT
B
PAGE
-4-
9. Counterparts. This
Assignment and Acceptance may be executed in any number of counterparts and
by
different parties hereto in separate counterparts, each of which when so
executed taken together shall constitute one and the same
instrument.
|
[NAME
OF ASSIGNOR]
By:___________________________
Name:
Title:
Date:
[NAME
OF ASSIGNEE]
By:___________________________
Name:
Title:
Date:
|
Each
of
the undersigned hereby consents to the assignment contemplated by this
Assignment and Acceptance.
|
GMX
RESOURCES INC.
By:___________________________
Name:
Title:
Date:
CAPITAL
ONE, NATIONAL ASSOCIATION,
as
Agent
By:___________________________
Name:
Title:
Date:
|