FOURTH AMENDED AND RESTATED
REVOLVING CREDIT AND
TERM LOAN AGREEMENT
Dated as of
March 31, 1997
among
EQUITY COMPRESSION SERVICES CORPORATION
and
SUNTERRA ENERGY CORPORATION
and
EQUITY COMPRESSORS, INC.
"Borrowers"
and
BANK OF OKLAHOMA, NATIONAL ASSOCIATION
"BANK"
FOURTH AMENDED AND RESTATED REVOLVING
CREDIT AND TERM LOAN AGREEMENT
THIS FOURTH AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT,
dated as of March 31, 1997 ("Fourth Amended Agreement"), is entered into among
EQUITY COMPRESSION SERVICES CORPORATION, an Oklahoma corporation, formerly known
as ▇▇▇▇▇▇▇ Energy Corporation ("ESC"), SUNTERRA ENERGY CORPORATION, an Oklahoma
corporation ("Sunterra") and EQUITY COMPRESSORS, INC., an Oklahoma corporation
("Equity") (ESC, Sunterra and Equity being collectively referred to as the
"Borrowers") and BANK OF OKLAHOMA, NATIONAL ASSOCIATION, a national banking
association (the "Bank").
W I T N E S S E T H:
A. WHEREAS, the Borrowers have applied to the Bank for a restructure,
extension and modification in the amount of the existing convertible Revolving
Credit Commitment of ECS and Equity, including, without limitation, extension of
the maturity of the Borrowers= Revolving Credit Commitment for a period of two
(2) years until March 31, 1999, to be evidenced by the Revolving Credit Note
hereinafter described and defined with the Borrowers having the right to convert
the outstanding principal balance of the Revolving Credit Note on the Conversion
Date to the sixty (60) month term loan contemplated by this Fourth Amended
Agreement; and
B. WHEREAS, the Borrowers have also applied to the Bank for an increase
in the convertible Revolving Credit Commitment to a maximum principal amount of
$20,000,000, subject to Revolving Credit Borrowing Base limitations herein set
forth, to be evidenced by Borrowers' joint and several Revolving Credit Note
payable to the order of the Bank in the original principal amount of
$20,000,000; and
C. WHEREAS, the Bank is willing to extend, modify and increase the
Revolving Credit Commitment to the Borrowers from the effective date hereof to
the Conversion Date on March 31, 1999, and the Bank is further willing to adjust
the variable annual interest rates applicable during the revolving credit and
term loan periods, respectively, to the adjustable variable annual interest rate
structures described and defined in Section 2.2 hereof below, all subject to the
terms, conditions, uses and provisions hereinafter set forth, all of which are
material to the Bank and without which the Bank would not be willing to extend
such Commitment described and defined herein; and
D. WHEREAS, ECS and Equity, INTER ALIA, and the Bank are parties to that
certain First Amended and Restated Revolving Credit and Term Loan Agreement
dated as of July 14, 1993, as modified by the Modification thereto dated as of
September 24, 1993, the Second Amended and Restated Revolving Credit and Term
Loan Agreement dated as of April 13, 1994, as modified by the Modification
thereto dated
as of December 30, 1994, and the Third Amended and Restated Revolving Credit and
Term Loan Agreement dated as of September 1, 1996, as modified by various
modification agreements thereto dated as of March 31, 1996, October 1, 1996, and
December 16, 1996, respectively (all of the foregoing being collectively
referred to as the "Prior Loan Agreements"), and in connection with the
Borrowers' requested restructure, extension, modification and increase in the
aggregate amount of the Revolving Credit Commitment therein described and
defined from $12,000,000 to $20,000,000, the Borrowers and the Bank desire to
amend, modify and restate the Prior Loan Agreements by the terms of this
Agreement; and
E. WHEREAS, Sunterra, a wholly owned subsidiary of ECS, is the successor
in interest to and record title holder of the Mortgaged Property previously
owned by ECS;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and other good and valuable consideration, receipt
of which is acknowledged by the parties hereto, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
When used herein, the following terms shall have the following meanings:
1.1 "ADJUSTED GROSS PROCEEDS" shall mean (i) all proceeds received by
Sunterra during the applicable period, whether directly or indirectly, from
purchasers of Hydrocarbons produced from the Mortgaged Property, PLUS (ii) all
amounts which Sunterra was entitled to receive during such period but which were
offset by the purchaser of production or an intermediary against obligations
(other than ordinary operating expenses) owing by Sunterra; LESS the amount of
all gathering, severance and windfall profits taxes required to be paid by
Sunterra with respect to said proceeds and all royalty and overriding royalty
payments to third parties and all ordinary and necessary operating expenses paid
by Sunterra with respect to the Mortgaged Property, excluding only such expenses
that (i) qualify as capitalized items under GAAP or (ii) are defined or
described in the energy industry as workover expenses or costs.
1.2 "AFFILIATE" shall mean any Person which, directly or indirectly,
controls, or is controlled by, or is under common control with, another Person
and any partner, officer or employee of any such Persons. For purposes of this
definition, "control" shall mean the power, directly or indirectly, to direct or
in effect cause the direction of the management and policies of such Person
whether by contract or otherwise.
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1.3 "APPLICABLE PRIME RATE" shall mean the annual rate of interest
announced by Chase Manhattan Bank, National Association, New York, New York
("Chase") from time to time as its prime or base rate, which rate shall be the
rate used by Chase as a base or standard for pricing purposes and which shall
not necessarily be its "best" or lowest rate, as adjusted pursuant to the
provisions of Section 2.2 hereof. Should Chase cease to announce a prime or
base rate or should it be merged, consolidated, liquidated or dissolved in such
a manner that it loses its separate corporate identity, then the Applicable
Prime Rate shall be the Prime Rate published by the WALL STREET
JOURNAL(Southwest Edition) in its "Money Rates" column or a similar rate if such
rate ceases to be published. Any changes in the Applicable Prime Rate shall be
effective as of the date of the change.
1.4 "BUSINESS DAY" shall mean a day other than a Saturday, Sunday or a day
upon which banks in the State of Oklahoma are closed to business generally.
1.5 "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, together with all
regulations and rulings promulgated with respect thereto.
1.6 "CLOSING DATE" shall mean the effective date of this Agreement.
1.7 "COLLATERAL" shall have the meaning assigned to that term in Article V
of this Agreement.
1.8 "COMMITMENT" shall mean the Revolving Credit Commitment.
1.9 "COMPRESSOR OPERATING INCOME" shall mean the sum of Equity's
rental/maintenance fees and revenues less the sum of direct compressor rental
and operating expenses per GAAP.
1.10 "COVERAGE RATIO" shall have the meaning ascribed thereto
in Section 2.2 hereof.
1.11 "CURRENT ASSETS" shall mean the value of the current assets determined
in accordance with GAAP on a consolidated basis.
1.12 "CURRENT LIABILITIES" shall mean the amount of current liabilities
determined in accordance with GAAP on a consolidated basis.
1.13 "CURRENT RATIO" shall mean the ratio of Current Assets to Current
Liabilities.
1.14 "DEFAULT RATE" shall mean the Applicable Prime Rate plus four
percentage points (4%).
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1.15 "ENVIRONMENTAL LAWS" shall mean Laws, including without limitation
federal, state or local Laws, ordinances, rules, regulations, interpretations
and orders of courts or administrative agencies or authorities relating to
pollution or protection of the environment (including, without limitation,
ambient air, surface water, groundwater, land surface and subsurface strata),
including without limitation CERCLA, ▇▇▇▇, RCRA, HSWA, OPA, HMTA, TSCA and other
Laws relating to (i) Polluting Substances or (ii) the manufacture, processing,
distribution, use, treatment, handling, storage, disposal or transportation of
Polluting Substances.
1.16 "ERISA" shall mean the Federal Employee Retirement Income Security Act
of 1974, as amended, together with all regulations and rulings promulgated with
respect thereto.
1.17 "EVENT OF DEFAULT" shall mean any of the events specified in Section
9.1 of this Agreement, and "DEFAULT" shall mean any event, which together with
any lapse of time or giving of any notice, or both, would constitute an Event of
Default.
1.18 "FINISHED GOODS" shall mean that portion of the Inventory which
constitutes natural gas compressor units completed for lease or sale by Equity.
1.19 "GAAP" shall mean generally accepted accounting principles applied on
a consistent basis in all material respects to those applied in the preceding
period, unless the Borrowers' outside accountants reasonably determine that
there should be a different application based upon relevant accepted Financial
Accounting Standards. Unless otherwise indicated herein, all accounting terms
will be defined according to GAAP.
1.20 "HEREBY", "HEREIN", "HEREOF", "HEREUNDER" and similar such terms shall
mean and refer to this Agreement as a whole and not merely to the specific
section, paragraph or clause in which the respective word appears.
1.21 "HMTA" shall mean the Hazardous Materials Transportation Act, as
amended, together with all regulations and rulings promulgated with respect
thereto.
1.22 "HSWA" shall mean the Hazardous and Solid Waste Amendments of 1984, as
amended, together with all regulations and rulings promulgated with respect
thereto.
1.23 "HYDROCARBONS" shall have the meaning assigned to that term in the
Mortgage.
1.24 "INDEBTEDNESS" shall mean and include any and all: (i) indebtedness,
obligations and liabilities of the Borrowers to the Bank incurred or which may
be incurred or purportedly incurred hereafter pursuant to the terms of this
Agreement or any of the other Loan Documents, and any replacements, amendments,
extensions,
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renewals, substitutions, amendments and increases in amount thereof, including
such amounts as may be evidenced by the Note and all lawful interest, late
charges, service fees, commitment fees, fees in lieu of balances, letter of
credit fees and other charges, and all reasonable costs and expenses incurred in
connection with the preparation, filing and recording of the Loan Documents,
including attorneys fees and legal expenses; (ii) all reasonable costs and
expenses paid or incurred by the Bank, including attorneys fees, in enforcing or
attempting to enforce collection of any Indebtedness and in enforcing or
realizing upon or attempting to enforce or realize upon any collateral or
security for any Indebtedness, including interest on all sums so expended by the
Bank accruing from the date upon which such expenditures are made until paid, at
an annual rate equal to the Default Rate; and (iii) all sums expended by the
Bank in curing any Event of Default or Default of the Borrowers under the terms
of this Agreement, the other Loan Documents or any other writing evidencing or
securing the payment of the Note together with interest on all sums so expended
by the Bank accruing from the date upon which such expenditures are made until
paid, at an annual rate equal to the Default Rate.
1.25 "INVENTORY" shall mean and include all of Equity's natural gas
compressor units and other goods intended for sale or lease, all Raw Materials,
Work In Process, Finished Goods, packaging, labels, advertising materials and
all supplies of every kind or nature which are used or may be used in
manufacturing, selling, leasing, packing, shipping, advertising, leasing or
furnishing of goods (including natural gas compressor units), whether now owned
or hereafter acquired and wherever located.
1.26 "LAWS" shall mean all statutes, laws, ordinances, regulations, orders,
writs, injunctions, or decrees of the United States, any state or commonwealth,
any municipality, any foreign country, any territory or possession, or any
Tribunal.
1.27 "LETTERS OF CREDIT" shall mean any and all letters of credit issued by
the Bank pursuant to the request of any of the Borrowers in accordance with the
provisions of Section 2.2 hereof which at any time remain outstanding and
subject to draw by the beneficiary, whether in whole or in part.
1.28 "LIEN" shall mean any mortgage, pledge, security interest, assignment,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement or other similar form of public notice under the Laws of any
jurisdiction).
1.29 "LOAN DOCUMENTS" shall mean this Agreement, the Note, the Security
Instruments, the Mortgage and all other documents, instru-
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ments and certificates executed and delivered to the Bank by the Borrowers
pursuant to the terms of this Agreement.
1.30 "LOANS" shall mean all advances made and Letter of Credit draws funded
hereunder pursuant to the Commitment, including all sums evidenced by the Note.
1.31 "MORTGAGE" shall have the meaning assigned to that term in Section
5.1(b) of the Prior Loan Agreements, as amended and restated hereby.
1.32 "MORTGAGED PROPERTY" shall mean the property covered by the Mortgage
defined in Section 5.1(b) of this Agreement.
1.33 "NET WORTH" shall mean, on any date as of which the amount thereof is
to be determined, the sum of the following determined on a consolidated basis in
accordance with GAAP:
(a) The amount of stated capital (less cost of treasury
shares),
PLUS
(b) The amount of surplus and retained earnings (or, in
the case of surplus or retained earnings deficit, minus the
amount of such deficit).
1.34 "NOTE" shall mean the Revolving Credit Note.
1.35 "OBB" shall have the meaning ascribed thereto in Section 2.2 hereof.
1.36 "OPA" shall mean the Oil Pollution Act of 1990, as amended, together
with all regulations and rulings promulgated with respect thereto.
1.37 "PERSON" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, and a
government or any department, agency or political subdivision thereof.
1.38 "POLLUTING SUBSTANCES" shall mean all pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or wastes and shall
include, without limitation, any flammable explosives, radioactive materials,
oil, hazardous materials, hazardous or solid wastes, hazardous or toxic
substances or related materials defined in CERCLA/▇▇▇▇, RCRA/HSWA and in the
HMTA; provided, in the event either CERCLA/▇▇▇▇, RCRA/HSWA or HMTA is amended so
as to broaden the meaning of any term defined thereby, such broader meaning
shall apply subsequent to the effective date of such amendment and, provided
further, to the extent that the Laws of any State or other Tribunal establish a
meaning for
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"hazardous substance, "hazardous waste," "hazardous material," "solid waste" or
"toxic substance" which is broader than that specified in CERCLA/▇▇▇▇,
RCRA/HSWA, or HMTA, such broader meaning shall apply.
1.39 "RAW MATERIALS" shall mean that portion of the Inventory which
constitutes parts, components, accessories and materials to become a part of the
Finished Goods.
1.40 "RCRA" shall mean the Resource Conservation and Recovery Act of 1976,
as amended, together with all regulations and rulings promulgated with respect
thereto.
1.41 "REVOLVING CREDIT BORROWING BASE" shall have the meaning assigned to
that term in Section 2.4 of this Agreement.
1.42 "REVOLVING CREDIT COMMITMENT" shall mean the agreement of the Bank to
make Revolving Credit Loans under Article II of this Agreement, and pursuant to
the terms and conditions hereof, from the Closing Date until March 31, 1999 (the
"CONVERSION DATE"), or such later date as the Bank may extend the commitment to
make Revolving Credit Loans by an extension in writing, unless earlier
terminated pursuant to the terms hereof.
1.43 "REVOLVING CREDIT LOANS" shall mean the advances to the Borrowers
described in Article II of this Agreement, including the sum of unfunded,
outstanding Letters of Credit issued pursuant thereto.
1.44 "REVOLVING CREDIT NOTE" shall mean the Borrowers' joint and several
$20,000,000 replacement revolving credit note in the form of EXHIBIT "A" annexed
to this Agreement, to be delivered to the Bank pursuant to Section 2.2 hereof,
together with any and all extensions, renewals, modifications, substitutions and
changes in form thereof which may be from time to time and for any term or terms
effected.
1.45 "▇▇▇▇" shall mean the Superfund Amendments and Reauthorization Act of
1987, as amended, together with all regulations and rulings promulgated with
respect thereto.
1.46 "SECURITY AGREEMENT" shall have the meaning assigned to that term in
Article V of this Agreement.
1.47 "SECURITY INSTRUMENTS" shall mean the Mortgage, the Security Agreement
and all other financing statements, assignments, security agreements, pledges,
lien entry forms, documents or writings and any and all amendments and
supplements thereto, granting, conveying, assigning, transferring or in any
manner providing the Bank with a security interest in any property as security
for the repayment of all or any part of the Indebtedness.
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1.48 "TANGIBLE NET WORTH" shall mean Net Worth MINUS all assets which would
be classified as intangible assets under GAAP, including (without limitation)
good will, patents, franchises, organization costs, research and development
costs, covenants not to compete and other deferred charges.
1.49 "TAXES" shall mean all taxes, assessments, fees, or other charges or
levies from time to time or at any time imposed by any Laws or by any Tribunal.
1.50 "TOTAL LIABILITIES" shall mean the amount of all liabilities
determined in accordance with GAAP on a consolidated basis.
1.51 "TRIBUNAL" shall mean any municipal, state, commonwealth, Federal,
foreign, territorial or other sovereign, governmental entity, governmental
department, court, commission, board, bureau, agency or instrumentality.
1.52 "TSCA" shall mean the Toxic Substances Control Act, as amended,
together with all regulations and rulings promulgated with respect thereto.
1.53 "WORK IN PROCESS" shall mean that portion of Inventory of Equity,
including natural gas compressors, upon which manufacturing, assembling,
fabricating or processing work has commenced but which does not yet constitute
Finished Goods.
ARTICLE II
REVOLVING CREDIT LOAN
2.1 REVOLVING CREDIT LOANS. The Bank agrees, upon the terms and subject
to the conditions hereinafter set forth, to make Revolving Credit Loans from
time to time, on or after the Closing Date jointly to the Borrowers in an amount
equal to the LESSER of the maximum outstanding principal amount of $20,000,000
or the Revolving Credit Borrowing Base as defined in Section 2.4 hereof, subject
to reduction as hereinafter provided, the unpaid principal balance of which is
convertible to a sixty (60) month term loan on March 31, 1999 (the "Conversion
Date"), amortized pursuant to Section 2.2 hereof.
2.2 REVOLVING CREDIT NOTE. On the Closing Date, the Borrowers shall
execute and deliver to the order of the Bank the Borrowers' joint and several
replacement revolving credit note in the original principal amount of
$20,000,000, the form of which is annexed hereto as EXHIBIT "A" and hereby made
a part hereof (hereinafter referred to as "Revolving Credit Note" or the
"Note"). The Revolving Credit Note shall be dated as of the Closing Date, and
shall bear interest from the Closing Date payable monthly on the last day of
every month commencing April 30, 1997, on unpaid
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balances of principal from time to time outstanding and on any past due interest
at a variable annual rate as follows:
2.2.1. THROUGH MAY 31, 1999. Initially from the Closing Date through
May 31, 1997, at a variable annual rate equal from day to day to Applicable
Prime Rate minus .25% and thereafter equal from day to day to the Applicable
Prime Rate less, if applicable, the percentage set forth below, such variable
annual rate being adjustable quarterly as of the close of the second month after
each calendar quarter (based on the immediately preceding calendar quarter end
financial statement calculations and data) commencing as of May 31, 1997 (for
the calendar quarter ended March 31, 1997) as follows:
OBB RATIO APPLICABLE INTEREST RATE
--------- ------------------------
GREATER THAN OR EQUAL TO 80% Applicable Prime Rate
GREATER THAN 60% but LESS THAN 80% Applicable Prime Rate
minus .25%
LESS THAN OR EQUAL TO 60% Applicable Prime Rate
minus .50%
As used herein "OBB Ratio" shall mean the ratio of the average daily outstanding
borrowings under the Revolving Credit Note from the Closing Date (including
unfunded portions of outstanding Letters of Credit issued hereunder) until the
Conversion Date divided by the average daily Revolving Credit Borrowing Base as
herein established and redetermined from time to time pursuant to Section 3.1
hereof.
2.2.2 AFTER MAY 31, 1999. The unpaid and outstanding principal balance
of the Revolving Credit Note shall be converted on March 31, 1999 to a term loan
("Convertible Term Loan") payable in fifty-nine (59) consecutive monthly
principal payments each equal to one-sixtieth (1/60th) of the LESSER of the
convertible amount or the Revolving Credit Borrowing Base as redetermined as of
December 31, 1998 (the "Redetermined Borrowing Base") payable on the last day of
each calendar month commencing April 30, 1999, with the remaining principal due
and payable at final maturity on March 31, 2004. All payments received shall be
applied first to accrued interest and then to the outstanding principal amount
owing on the Revolving Credit Note. The variable annual rate of interest payable
upon the indebtedness evidenced by the Revolving Credit Note from and including
April 1, 1999, is subject to quarterly adjustment on the close of the second
month after each calendar quarter (based on the immediately preceding calendar
quarter end financial statement calculations and data) commencing as of May 31,
1999 (for the calendar quarter ended March 31, 1999), pursuant to the Coverage
Ratio described below:
COVERAGE RATIO APPLICABLE INTEREST RATE
-------------- ------------------------
LESS THAN OR EQUAL TO 1.30 to 1 Applicable Prime Rate
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GREATER THAN OR EQUAL TO 1.30 to 1
but LESS THAN OR EQUAL TO 1.50 to 1 Applicable Prime Rate
minus .25%
GREATER THAN 1.50 to 1 Applicable Prime Rate
minus .50%
As used herein "Coverage Ratio" shall mean for Borrowers the following:
Previous 6 month Earnings (excluding extraordinary gains or
extraordinary losses) Before Interest, Taxes,
DIVIDED BY DEPRECIATION AND AMORTIZATION (EBITDA) (PER GAAP)
Previous 6 months of Convertible Term (as converted) principal
payments + interest payments for same 6 month period + any other
term indebtedness principal and interest payments for same 6 month
period
2.2.3. QUARTERLY CERTIFICATES. No later than each February 28, May 31,
August 31 and November 30 of each year, commencing as of May 31, 1999, Borrowers
shall submit to the Bank a quarterly certification signed by the Chief Financial
Officer of ECS demonstrating the Borrowers' calculations of such Coverage Ratio
in reasonable detail acceptable to the Bank.
2.2.4. PAYMENTS/ADVANCES. Prior to the Conversion Date, the Borrowers
may from time to time make prepayments of principal without premium or penalty,
provided that on or after April 1, 1999, interest on the amount prepaid, accrued
to the prepayment date, shall be paid on such prepayment date shall accompany
such prepayment. The Borrowers may not reborrow any amounts paid or prepaid on
the Revolving Credit Note on or after March 31, 1999. All payments and
prepayments shall be made in lawful money of the United States of America. All
outstanding principal of and unpaid accrued interest on the Revolving Credit
Note not previously paid hereunder shall be due and payable at final maturity on
March 31, 2004, unless such final maturity shall be extended by the Bank in
writing or accelerated pursuant to the terms hereof. After maturity (whether by
acceleration or otherwise) the Revolving Credit Note shall bear interest at the
Default Rate, payable on demand. Interest shall be calculated on the basis of a
year of 365 days but assessed for the actual number of days elapsed in each
accrual period. The $20,000,000 Revolving Credit Note shall constitute a
replacement, extension and modification of the $12,000,000 Revolving Credit Note
annexed as Exhibit A to the December 16, 1996 Third Modification to the Third
Amendment and that certain interim supplemental note from ECS dated April 1,
1997 in the original principal amount of $500,000 (the "Interim Note"), which
such prior $12,000,000 Revolving Credit Note had an outstanding principal
balance of $8,800,000.00 as of the Closing Date and the Interim Note had an
outstanding principal balance of $430,307.00 as of April 15, 1997.
Notwithstanding the original stated principal amount of the Revolving Credit
Note, in no event shall the outstanding and unpaid principal amount advanced
thereon exceed $13,897,000 until May 31, 1997 (the "Initial Redetermined
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Borrowing Base") without the express prior written consent of the Bank.
2.2.5. LETTERS OF CREDIT. Upon the Borrowers' application from time to
time by use of the Bank's standard form Letter of Credit Application Agreement
and subject to the terms and provisions therein and herein set forth, the Bank
agrees to issue standby letters of credit on behalf of the Borrowers under the
Revolving Credit Commitment in an aggregate unfunded amount not in excess of
$500,000, provided that (i) any letters of credit be issued on behalf of or on
the account of Borrowers with an expiry date later than March 31, 1999 will, at
the Bank's sole option, be fully secured and collateralized by cash or cash
equivalent acceptable to the Bank in its sole discretion and held thereby from
and after conversion on March 31, 1999 until expiration or cancellation of such
letter(s) of credit or payment of all draws thereon on demand of the Bank and
(ii) no letter of credit will be issued on behalf of or for the account of the
Borrowers if at the time of issuance the outstanding amount of all unpaid
Revolving Credit Loans (including the aggregate outstanding and unfunded amount
of unexpired letters of credit then existing) under the Revolving Credit
Commitment as evidenced by the Revolving Credit Note plus the maximum amount of
such Letter of Credit then being requested would exceed the lesser of the
Revolving Credit Borrowing Base or $20,000,000. If any letter of credit is
drawn upon at any time, each amount drawn, whether a full or partial draw
thereon, shall be automatically reflected by the Bank as an advance on the
Revolving Credit Note effective as of the date of the Bank's honoring the sight
draft. In consideration of the Bank's agreement to issue standby letters of
credit hereunder, the Borrowers agree to pay to the Bank letter of credit fees
equal to one and one-half percentage points (1.5%) per annum on the face amount
of each letter of credit, which such fee shall be due and payable to the Bank at
the time of issuance of each applicable letter of credit.
2.3.1. REVOLVING CREDIT ADVANCES. Each Revolving Credit Loan requested
by the Borrowers from the Bank shall (i) be requested telephonically by ECS or
in writing by ECS pursuant to a Loan Advance Request, the form of which is
annexed hereto as EXHIBIT "B-1", no later than 1:00 o'clock P.M. (applicable
current time in Tulsa, Oklahoma) on the date upon which the advance is to be
made; (ii) be in the amount of $10,000 or an integral multiple thereof (unless
the amount then available to borrow is less than $10,000, in which event an
advance may be made in the amount available); (iii) not cause the aggregate
outstanding and unpaid principal amount of the Revolving Credit Note to exceed
the Revolving Credit Borrowing Base; and (iv) be advanced by the Bank on the
applicable date, provided the request is timely made in accordance with Section
2.3(i) hereof and all other conditions of funding are met. Borrowers hereby
jointly and severally irrevocably appoint ECS as the Borrowers' duly authorized
agent and attorney in fact for all purposes hereunder in connection with
Revolving Credit Loans and applications for the issuance of letters
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of credit pursuant to this Article II, including (without limitation) the
execution and delivery to the Bank for and on behalf of the Borrowers of all
Loan Advance Requests and letters of credit applications. In consideration of
Bank permitting telephonic requests for advances, Borrowers state that they
fully understand the risk attendant thereto, agree to accept all such risk and
hold Bank harmless from any loss which any of the Borrowers may incur by reason
of an advance being made in response to a telephonic request whether such is
caused by mistake or negligence of the Bank or otherwise, unless it is
judicially established that such loss was due to the gross negligence and wanton
disregard of the Bank. All advances made by the Bank shall, for mutual
convenience, be deposited to Borrowers' joint general deposit account No.
207937943 with the Bank or a comparable joint general deposit account with an
affiliated financial institution of the Bank acceptable thereto (the "General
Account"), and the Bank shall have no responsibility to monitor the distribution
of such advances in any other respect.
2.3.2. PAYMENTS/VOLUNTARY PREPAYMENTS. All advances made by the Bank on
the Revolving Credit Note and all payments or prepayments of principal and
interest thereon made by the Borrowers shall be recorded by the Bank in its
records, and the aggregate unpaid principal amount so recorded shall be
conclusive evidence of the principal amount owing and unpaid on the Revolving
Credit Note. The failure to so record shall not, however, limit or otherwise
affect the obligations of the Borrowers hereunder or under the Revolving Credit
Note to repay the principal amount of each Revolving Credit Loan together with
all interest accrued thereon. If additional lines or blanks shall be needed for
the purpose of recording advances or payments on the schedule, one or more
additional schedules may be annexed to the Revolving Credit Note and shall
become a part thereof. All payments and prepayments shall be made in lawful
money of the United States of America. Any payments or prepayments on the
Revolving Credit Note received by the Bank after 2:00 o'clock P.M. (applicable
current time in Tulsa, Oklahoma) shall be deemed to have been made on the next
succeeding Business Day. All outstanding principal of and accrued interest on
the Revolving Credit Note not previously paid hereunder shall be converted to
the Convertible Term Loan on the Conversion Date, unless such maturity shall be
extended by the Bank in writing or accelerated pursuant to the terms hereof.
2.4 REVOLVING CREDIT BORROWING BASE. The Borrowers will not request, nor
will they accept, the proceeds of any Revolving Credit Loans or advance under
the Revolving Credit Note at any time when the amount thereof, together with the
unpaid principal amount of the Revolving Credit Note and outstanding but
unfunded letters of credit, exceeds the Revolving Credit Borrowing Base. As
used in this Agreement, the term "Revolving Credit Borrowing Base" shall mean
prior to the Conversion Date (March 31, 1999) an amount equal to the LESSER of
(A) the sum of (x) the LESSER of (i) fifty percent (50%) of Equity's most
recent compressor parts inventory
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book value determined pursuant to GAAP (lower of cost or market value) or (ii)
$1,000,000; plus (y) a multiple equal to five (5) times Equity=s compressor
fleet's most recent six (6) month trailing Compressor Operating Income, adjusted
quarterly as effective of the first day of each March, June, September and
December commencing as of June 1, 1997, based on calendar quarters (initially
the calendar quarter ending March 31, 1997) pursuant to the provisions hereof
but, at the Bank's sole discretion, future fleet acquisitions by Equity may be
included in the Revolving Credit Borrowing Base following due diligence; plus
(z) the Oil and Gas Collateral Borrowing Base (as determined semi-annually in
accordance with Section 4.1 hereof as rolled forward to the next Oil and Gas
Borrowing Base determination date (either May 31 or November 30 as the case may
be); or (B) 20,0000,000. Through May 31, 1997, the Revolving Credit Borrowing
Base shall in no event exceed $13,897,000. The Revolving Credit Borrowing Base
shall be redetermined initially as of the Initial Redetermined Borrowing Base
date (May 31, 1997) and as of any subsequent Redetermined Borrowing Base date
and as of the effective date of any sale pursuant to Section 3.2 hereof.
2.5 VARIANCE FROM REVOLVING CREDIT BORROWING BASE. Any Revolving Credit
Loan shall be conclusively presumed to have been made to the Borrowers by the
Bank under the terms and provisions hereof and shall be secured by all of the
Collateral and security described or referred to herein or in the Security
Instruments, whether or not such loan conforms in all respects to the terms and
provisions hereof. If the Bank should (for the convenience of the Borrowers or
for any other reason) make loans or advances which would cause the unpaid
principal amount of the Revolving Credit Note to exceed the amount of the
applicable Revolving Credit Borrowing Base, no such variance, change or
departure shall prevent any such loan or loans from being secured by the
Collateral and security created or intended to be created herein or in the
Security Instruments. The Revolving Credit Borrowing Base shall not in any
manner limit the extent or scope of the Collateral and security granted for the
repayment of the Revolving Credit Note (or any other Indebtedness) or limit the
amount of indebtedness under the Revolving Credit Note (or any other
Indebtedness) to be secured.
2.6 REVOLVING CREDIT MANDATORY PREPAYMENTS. The Borrowers shall make
mandatory prepayments from time to time on the Revolving Credit Note in an
amount equal to the amount by which the unpaid principal balance outstanding
under the Revolving Credit Note exceeds the Revolving Credit Borrowing Base.
Each such mandatory prepayment shall be paid prior to the earlier of (a) one
Business Day after any of the Borrowers shall have knowledge that the unpaid
principal amount of the Revolving Credit Note exceeds the Revolving Credit
Borrowing Base, or (b) one Business Day after the Bank shall have made demand
that the Borrowers make such a mandatory prepayment.
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2.7 COMMITMENT FEES. From the Closing Date until the earlier of the
Conversion Date or the date the Revolving Credit Commitment is terminated, the
Borrowers shall pay to the Bank, as a commitment fee for its Revolving Credit
Commitment, an amount equal to three-eights of one percentage point (0.375%) per
annum of the amount by which the then applicable Revolving Credit Borrowing Base
exceeds the outstanding unpaid principal balance of the Revolving Credit Note
from time to time computed daily on the basis of a calendar year of 365 days but
assessed for the actual number of days elapsed during each accrual period. Such
fee shall be payable quarterly as the same accrues on the fifteenth (15th) day
after the end of each quarter-annual period ending March 31, June 30, September
30 and December 31, commencing July 15, 1997 (for that portion of the calendar
quarter from the Closing Date through such June 30, 1997 fiscal quarter ending
date), and at the Conversion Date of the Revolving Credit Note, whether by
acceleration or otherwise. The amount of Commitment Fees payable for each such
a quarter shall be paid by a debit to the joint General Account of Borrowers (as
more particularly described in Section 2.3 hereof) in such amount. For the
purposes of this Section 2.7 and Section 10.6 hereof, Borrowers hereby appoint
the Bank their attorney-in-fact for the execution and performance of such debit,
and hereby absolve the Bank of any loss or negligence arising by virtue of its
exercise of such power, except for gross negligence or willful misconduct. Said
power shall be deemed a power coupled with an interest and shall be irrevocable.
2.8 REDUCTIONS OR TERMINATION OF REVOLVING CREDIT COMMITMENT. Borrowers
may at any time permanently reduce the Revolving Credit Commitment upon
Borrowers giving to Bank written or telegraphic notice, before noon (Tulsa,
Oklahoma time) at least three (3) Business Days preceding the date of a proposed
reduction in the Revolving Credit Commitment, which notice shall set forth the
date and amount of the proposed reduction in the Revolving Credit Commitment.
Each reduction shall be in the aggregate principal amount of $1,000,000, or an
integral multiple thereof. Upon Borrowers giving to the Bank written or
telegraphic notice, before noon (Tulsa, Oklahoma time) at least three (3)
Business Days preceding the date of their proposed termination of the Revolving
Credit Commitment, which notice shall set forth the proposed termination date,
Borrowers may at any time so terminate the Revolving Credit Commitment. On the
effective date of a reduction of the Revolving Credit Commitment, Borrowers
shall pay to Bank the Commitment Fees due pursuant to Section 2.7, and shall pay
to Bank such principal payment as may be necessary to cause the principal
outstanding under the Revolving Credit Note to be no greater than the Revolving
Credit Commitment as so reduced. In the event Borrowers elect to terminate the
Revolving Credit Commitment in whole, the Revolving Credit Note shall be paid in
full, including all accrued interest, Commitment Fees and applicable prepayment
premiums, at the time of any such termination in whole, at which time the
Revolving Credit Commitment shall also automatically
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terminate and the Bank shall have no further obligations under the Revolving
Credit Commitment.
ARTICLE III
SALE PROCEEDS/PREPAYMENTS
3.1 PROCEEDS OF SALE OF MORTGAGED PROPERTY. In the event any undivided
interest in any of the Mortgaged Property is sold, the "Sales Proceeds" of any
such sale shall be applied initially to the outstanding principal balance of the
Note as the Bank may select in its sole discretion; PROVIDED, HOWEVER, no such
sale shall occur without the prior written consent of the Bank. Unless
otherwise directed by the Bank, all such amounts shall be applied initially in
reduction of the outstanding principal balance of the Note. For purposes of
this section, "Sales Proceeds" shall mean the GREATER of (i) sixty-five percent
(65%) of the sales price of such Mortgaged Property; or (ii) sixty-five percent
(65%) of the discounted present worth of the Mortgaged Property being sold as
evaluated and determined by the most recent semi-annual engineering reports
required by Section 4.1 hereof. In the event the oil and gas properties sold
were not individually evaluated in the most recent semi-annual Bank
determination, 65% of the sales proceeds thereof shall be applied initially in
reduction of the outstanding principal balance of the Note.
3.2 SALE OF COMPRESSOR UNITS. In the event any of the compressor units of
Equity are sold, the "Sales Proceeds" of any such compressor unit sale shall be
applied initially to the outstanding principal balance of the Revolving Credit
Note; PROVIDED, HOWEVER, no such sale or sales in excess of $500,000 in the
aggregate shall occur without the prior written consent of the Bank. Unless
otherwise directed by the Bank, all such amounts shall be applied to interest
and the outstanding principal balance of principal the Revolving Credit Note.
For purposes of this section, "Sales Proceeds" shall mean the GREATER of (i)
sixty five percent (65%) of the sales price of such compressor units; or (ii)
sixty five percent (65%) of the fair market value thereof stated in the most
recent quarterly compressor appraisal pursuant to Section 4.3 hereof. Such sale
of compressor unit(s) prior to the Conversion Date shall effect an automatic
redetermination of the Revolving Credit Borrowing Base in accordance with the
provisions of Section 2.4 hereof, excluding the unit(s) being sold.
ARTICLE IV
COLLATERAL BORROWING BASE
4.1 SEMI-ANNUAL ENGINEERING REPORTS (OIL AND GAS PROPERTIES).
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(a) The Borrowers shall deliver to the Bank at the Borrowers' cost by each
April 20 and October 20, commencing April 20, 1997 such current data, reports
and engineering information as is necessary or appropriate for the Bank's
engineers or any other independent petroleum engineer acceptable to the Bank to
compile and prepare by each May 31 and November 30 (commencing May 31, 1997) an
engineering report in form and substance satisfactory to the Bank, evaluating
the proven producing oil and gas reserves attributable to Sunterra's aggregate
interest in the Mortgaged Property (as defined in subsection (b) below),
together with the expenses attributable thereto. The engineering data and
information furnished to the Bank by or on behalf of the Borrowers shall be
accompanied by such other information as shall be requested by the Bank in order
for it to make its determination of the Oil and Gas Collateral Borrowing Base,
and by a certificate of the Borrowers certifying that the Borrowers have good
and defensible title to the Mortgaged Properties valued and that payments are
being received from purchasers of production with respect to said interests. At
any time after thirty (30) days of the receipt of such information and in no
event later than each May 31 and November 30 (commencing May 31, 1997) the Bank
shall (i) make a determination of the present worth, using such pricing and
discount factor as it deems appropriate pursuant to the Bank's then applicable
energy lending and engineering policies, procedures and pricing parameters, of
the future net revenue estimated by the Bank to be received by the Borrowers
from production from the Mortgaged Properties so evaluated, multiplied by a
percentage then determined by the Bank to be appropriate on the basis of the
Bank's then applicable energy lending criteria; and (ii) report in writing to
the Borrowers such sum of the evaluation by the Bank of such evaluated oil and
gas properties (the "Oil and Gas Collateral Borrowing Base"). The good faith
determinations of Bank in such respects shall be conclusive.
(b) The term "Mortgaged Property" shall refer only to such properties
covered by the Mortgage (or a supplemental mortgage or deed of trust, duly
executed, acknowledged and delivered by Sunterra to the Bank in form
satisfactory to counsel for the Bank) and which properties are, at the time:
(i) Particularly and adequately described under the Mortgage or
other supplemental mortgage or deed of trust;
(ii) Completed or developed (in the case of oil and gas leases)
to the extent that value is being assigned to them by the Bank in
connection with such evaluation and the Bank has determined that such
properties are capable of producing oil or gas in commercial
quantities; and
(iii) Approved as to title to the satisfaction of the Bank.
- 16 -
(c) Borrowers agree that the Bank shall be entitled at all times to have
the "Mortgaged Property" covered and encumbered by the Mortgage or supplemental
mortgages or deeds of trust constitute at least eighty percent (80%) of the
aggregate value of Borrowers' Proven Reserves determined in accordance with
sub-sections 4.1(a) and (b) above. For the purpose of determining the Oil and
Gas Collateral Borrowing Base and compliance herewith, the term "Proven
Reserves", in addition to properties that qualify as "Mortgaged Property"
pursuant to the criteria hereof and of subsection 4.1(b), shall refer only to
such other oil and gas mining, mineral and/or leasehold interests of Sunterra,
if any, that satisfy the criteria of clauses (ii) and (iii) of subsection 4.1(b)
hereof above in all respects.
4.2 COLLATERAL DEFICIENCY. Should the unpaid outstanding principal
balance of the Note plus the unfunded portion of outstanding Letters of Credit
issued pursuant hereto at any time prior to the Conversion Date be greater than
the Revolving Credit Borrowing Base in effect at such time, the Bank may notify
the Borrowers in writing of the deficiency. Within fifteen (15) days from and
after the date of any such deficiency notice the Borrowers shall notify the Bank
in writing of their election to:
(a) Make a prepayment upon the Note in an amount sufficient
to reduce the unpaid principal amount of the Note to an amount
equal to or less than the amount of the Revolving Credit Borrowing
Base;
(b) Make mandatory equal monthly principal prepayments on
the Note due on the next six (6) successive monthly interest
installment due dates on the Note equal in an aggregate amount that
will reduce the outstanding principal balance of the Note to the
projected Revolving Credit Borrowing Base as of the next immediate
semi-annual redetermination thereof in accordance with the provisions
of Section 4.1(a) hereof; or
(c) Convert the then outstanding principal balance of the
Note to the five (5) year term loan contemplated by Section 2.2
hereof, commencing as of the last day of the next succeeding calendar
month.
If the Borrowers shall have elected to make a prepayment on the Note under
Section 4.2(a) hereof, such prepayment shall be due within fifteen (15) days
after the Borrowers shall have notified the Bank of such election, and the
prepayment shall be applied at the Bank's option, to the principal payments of
the Note in inverse order of maturity. If Borrowers shall elect to execute and
deliver one or more supplemental oil and gas mortgages and deeds of trust
- 17 -
to the Bank under Section 4.2(b) hereof, the Borrowers shall provide the Bank
with descriptions of the additional properties to be mortgaged (together with
any title opinions, current valuations and engineering reports applicable
thereto which may be requested by the Bank) at the time of the Borrowers notice
of such election and shall execute, acknowledge and deliver to the Bank the
appropriate supplemental mortgages and deeds of trust within five (5) Business
Days after such collateral documents shall be tendered to the Borrowers by the
Bank for execution, all in compliance with the provisions of clauses (i), (ii)
and (iii) of subsection 3.1(a) above.
4.3 ANNUAL APPRAISAL OF COMPRESSORS. During December of each calendar
year, commencing as of December, 1997, detailed and comprehensive current annual
orderly liquidation value appraisals of the combined compressor unit lease
fleets of Equity prepared at the sole cost and expense of the Borrowers by an
outside third party appraiser acceptable to the Bank shall be delivered to the
Bank.
ARTICLE V
SECURITY
5.1 COLLATERAL. The repayment of the Indebtedness shall be secured by the
following (the collateral described herein and in the Security Instruments being
collectively referred to as the "Collateral"):
(a) A continuing security interest pertaining thereto of first
priority in, and/or assignment, as security, of:
(i) all of the natural gas compressor units and
fleets of each of the Borrowers, including such compressor
fleets of Equity more particularly described on Schedule 3
annexed to the Security Agreement including all equipment,
machinery, tools, blueprints, plans and fixtures, whether now
owned or hereafter acquired and all spare parts, Raw Materials,
accessories, components, replacements or substitutions thereof
and therefor;
(ii) all of the Equipment and Inventory of each of
the Borrowers, wherever located and whether now owned or
hereafter acquired, including without limitation, all vehicles
and other types of rolling stock and all materials, parts, spare
parts, components and supplies of
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every kind and description, of the Borrowers, including all such
Equipment and Inventory located at (x) the fabrication maintenance
facility in Columbia, Mississippi, (y) the yards and/or storage
areas of Equity as more particularly described on Schedule 4
annexed to the Security Agreement and at all other locations
wherever they may be;
(iii) all accounts, lease receivables, reimbursements,
notes receivable, contracts, contract rights, general intangibles,
chattel paper, documents and instruments arising out of the sale,
lease or management of compressor units or compressor fleets or
services rendered and any and all agreements for the sale or lease
of compressor units or products or furnishing of services pertaining
thereto by Equity, including without limitation, all employment
agreements, lease fleet agreements, sales contracts and purchase
orders;
(iv) all general intangibles of any one, more or all
of the Borrowers, whether now owned or hereafter acquired,
including without limitation the following arising out of, in
connection with or pertaining to the lease, sale, maintenance,
construction or transportation of natural gas compressor units:
(a) all lease and sales contracts, purchase orders and
employee agreements;
(b) all processes, formulae, scientific and/or
technical information, trade secrets, customer lists, plans,
reports, samples, prototypes, know-how, all items in
application, development or other pending status and all
similar items which are used in connection with Equity's conduct
of its natural gas compressor business; and
(c) all of Borrowers' rights, titles, interests, and
benefits under all partnerships and joint venture agreements
between any of the Bor-
- 19 -
rowers and any other Person and under all leases of natural
gas compressors units (whether as lessor or lessee); provided,
however, that the Bank hereby assumes no liabilities,
obligations or responsibilities in connection therewith;
(v) all fixtures, furniture and equipment of Borrowers,
now owned or hereafter acquired, all additions, accessions, and
substitutions thereto and therefor, and all accessories, parts and
equipment now or hereafter affixed or used in connection with
Equity's real property located in Columbia, ▇▇▇▇▇▇ County,
Mississippi, Oklahoma City, Oklahoma County, Oklahoma, and in
or near Kilgore, Texas, respectively, and described on schedules
attached to the Security Agreement, and all goods and other fixtures,
furniture and equipment acquired with the proceeds thereof;
(vi) all cash, money, certificates of deposit, time
deposits and demand deposits of any one, more or all of Borrowers,
at any time in the possession or control of the Bank;
(vii) all ledgers, journals, books, records, vouchers,
shipping tickets, receipts, sales memoranda, contracts,
partnership agreements, joint venture agreements, correspondence
and other writings, data or papers evidencing or relating to the
items or types of collateral described above in subsections (i)
through (viii), inclusive; and
(viii) all products and proceeds of and all replacements,
additions, substitutions, accessories, appurtenances, and parts
for, the items or types of collateral described above in subsections
(i) through (vii), inclusive, whether now owned or hereafter acquired
including, without limitation insurance proceeds.
(b) A first mortgage lien in and to Sunterra's Mortgaged Property as
more particularly described in the Mortgage, Deed of Trust, Security
Agreement, Financing Statement
- 20 -
and Assignment (with power of sale) dated as of June 11, 1993, as amended
by the First Amended and Supplemental Mortgage, Deed of Trust, Security
Agreement, Financing Statement and Assignment (with Power of Sale) dated as
of April 13, 1994, as further amended by the Second Amended and
Supplemental Mortgage, Deed of Trust and Assignment (with Power of Sale)
dated as of September 1, 1995, and as further amended by the Third Amended
and Supplemental Mortgage, Deed of Trust and Assignment (with Power of
Sale) dated as of even date herewith, and which instruments collectively
cover and encumber producing oil, gas and other leasehold and mineral
interests situated in Arkansas, Oklahoma, Texas and Kansas (collectively
the "Mortgage");
The foregoing security interests shall be granted to the Bank, as Secured
Party, pursuant to the terms of (i) the Security Agreement and Assignment
dated as of June 11, 1993, as amended by the First Amended and Restated
Security Agreement and Assignment dated as of July 14, 1993, as further
amended by the Second Amended and Restated Security Agreement dated as of
April 13, 1994, as further amended by the Third Amended and Restated
Security Agreement dated as of September 1, 1995, and as further amended by
the Fourth Amended and Restated Security Agreement dated as of as of even
date herewith and in form and content acceptable to the Bank and its legal
counsel (collectively the "Security Agreement") and (ii) the Mortgage; and
the Borrowers shall execute such financing statements, letters in lieu of
production forms, assignments, notices and other documents and instruments
as shall be necessary or appropriate to perfect the security interests thus
created.
The Borrowers hereby acknowledge that all of the Collateral is granted to the
Bank as security for the repayment of all of the Indebtedness. If the Note is
paid in full or satisfied, but any portion of the Indebtedness remains
unsatisfied, the Bank may retain its security interest in all of the Collateral
until the remaining Indebtedness is paid in full, even if the value of the
Collateral far exceeds the amount of Indebtedness outstanding.
5.2 LOCKBOX. Borrowers shall establish and maintain a joint lockbox in
either the Bank or a Bank affiliated financial institution acceptable to the
Bank (the "Lockbox") pursuant to an agreement in form and substance satisfactory
to Bank which shall provide, in part, that: (a) Borrowers shall deposit all
checks and
- 21 -
other instruments with respect to their accounts and lease receivables,
compressor management, maintenance, sales or rental proceeds and fees as well as
all oil and gas production run checks (including, without limitation, the
Mortgaged Properties) in the form received by them in the Lockbox, concerning
which Lockbox neither of the Borrowers shall have any access or right of
withdrawal, (b) unless otherwise directed by Bank, Borrowers shall direct all of
their account debtors, natural gas compressor fleet/unit lessees, customers and
purchasers of production to make all payments in respect to their accounts
receivable directly to the Lockbox, (c) Bank shall deposit all collected items
received by it to the General Account provided no Default shall have occurred
and be continuing, and (d) if an Event of Default shall have occurred and be
continuing, all such payments may be applied to the Indebtedness, at such times
and in such order as Bank may elect.
ARTICLE VI
CONDITIONS PRECEDENT TO LOANS
6.1 CONDITIONS PRECEDENT TO INITIAL REVOLVING CREDIT LOAN. The obligation
of the Bank to make the initial Revolving Credit Loan under the Revolving Credit
Commitment, as modified, increased, extended and consolidated, is subject to the
satisfaction of all of the following conditions on or prior to the Closing Date
(in addition to the other terms and conditions set forth herein):
(a) NO DEFAULT. There shall exist no Event of Default or Default on
the Closing Date.
(b) REPRESENTATIONS AND WARRANTIES. The representations, warranties
and covenants set forth in Article VIII shall be true and correct on and as
of the Closing Date, with the same effect as though made on and as of the
Closing Date.
(c) BORROWERS' CERTIFICATES. Each of the Borrowers shall have
delivered to the Bank a Certificate, dated as of the Closing Date, and
signed by the President or Vice President and the Secretary of each of the
Borrowers certifying (i) to the matters covered by the conditions specified
in subsections (a) and (b) of this Section 6.1, (ii) that the Borrowers have
performed and complied with all agreements and conditions required to be
performed or complied with by them prior to or on the Closing Date, (iii)
to the name and signature of each officer of each of the Borrowers
authorized to execute and deliver the Loan Documents and any other
documents, certificates or writings and to
- 22 -
borrow under this Agreement, and (iv) to such other matters in connection
with this Agreement which the Bank shall determine to be advisable. The
Bank may conclusively rely on such Certificate until it receives notice in
writing to the contrary.
(d) PROCEEDINGS. On or before the Closing Date, all corporate
proceedings of each of the Borrowers shall be taken in connection with the
transactions contemplated by the Loan Documents and shall be satisfactory
in form and substance to the Bank and its counsel; and the Bank shall have
received certified copies, in form and substance satisfactory to the Bank
and its counsel, of the Articles or Certificate of Incorporation and
By-Laws of each of the Borrowers and the resolutions of the Board of
Directors of each of the Borrowers, as adopted, authorizing the execution
and delivery of the Loan Documents, the borrowings under this Agreement,
and the granting of the security interests in the Collateral pursuant to the
Security Instruments, to secure the payment of the Indebtedness.
(e) SECURITY INSTRUMENTS. The Borrowers shall have delivered to the
Bank the Security Instruments, appropriately executed by all parties,
attested, sealed, witnessed and acknowledged to the satisfaction of the
Bank and dated as of the Closing Date, together with such financing
statements, lien entry forms and other documents as shall be necessary and
appropriate to perfect the Bank's security interests in the Collateral
covered by said Security Instruments.
(f) NOTE. The Borrowers shall have delivered the Note to the order
of the Bank, appropriately executed.
(g) THIRD AMENDED AND SUPPLEMENTAL MORTGAGE. ECS and Sunterra shall
have executed and delivered the Third Amended and Supplemental Mortgage to
the Bank in multiple recordable form counterparts as reasonably required by
the Bank.
(h) TITLE. Borrowers shall have provided the Bank with evidence
satisfactory to the Bank and its legal counsel that Borrowers have valid,
merchantable title to the Collateral, including (without limitation) title
reports, title opinions (division order or otherwise regarding
- 23 -
the Mortgaged Property) and true and complete duly executed assignments (in
recordable form) from the prior record owner(s) thereof pertaining to all
of the Mortgaged Property evidencing transfer of lawful title thereto to
the applicable Borrowers.
(i) OPINION OF BORROWERS' COUNSEL. The Bank shall have received from
Borrowers' counsel, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional Corporation, a
favorable closing opinion, satisfactory in form and substance to the Bank
and its counsel.
(j) SECURITY AGREEMENT. Each of the Borrowers shall execute and
deliver to the Bank the Fourth Amended and Restated Security Agreement.
(k) OTHER INFORMATION. The Bank shall have received such other
information, documents and assurances as shall be reasonably requested by
the Bank, including such other information with respect to the natural gas
compressor fleets/units of Equity as shall be requested by the Bank.
6.2 CONDITIONS PRECEDENT TO ALL REVOLVING CREDIT LOANS. The Bank shall
not be obligated to make any Revolving Credit Loan or convert the Revolving
Credit Note on the Conversion Date as contemplated by Sections 2.1 and 2.2
hereof (i) if at such time any Event of Default shall have occurred or any
Default shall have occurred and be continuing; (ii) if any of the
representations, warranties and covenants contained in Article VIII of this
Agreement shall be false or untrue in any material respect on the date of such
loan, as if made on such date; or (iii) unless the Revolving Credit Borrowing
Base will support the additional Revolving Credit Loan being requested. Each
request by the Borrowers for an additional Revolving Credit Loan shall
constitute a representation by the Borrowers that there is not at the time of
such request an Event of Default or a Default, and that all representations,
warranties and covenants in Article VIII of this Agreement are true and correct
on and as of the date of each such request.
ARTICLE VII
COVENANTS
The Borrowers covenant and agree with the Bank that from the date hereof
and so long as this Agreement is in effect (by extension, amendment or
otherwise) and until payment in full of all
- 24 -
Indebtedness and the performance of all other obligations of the Borrowers under
this Agreement, unless the Bank shall otherwise consent in writing, which
consent will not be unreasonably withheld:
7.1 PAYMENT OF TAXES AND CLAIMS. Each of the Borrowers will pay and
discharge or cause to be paid and discharged all Taxes imposed upon the income
or profits of the Borrowers or upon the property, real, personal or mixed, or
upon any part thereof, belonging to the Borrowers before the same shall be in
default, and all lawful claims for labor, rentals, materials and supplies which,
if unpaid, might become a Lien upon its property or any part thereof; PROVIDED
HOWEVER, that none of the Borrowers shall be required to pay and discharge or
cause to be paid or discharged any such Tax, assessment or claim so long as the
validity thereof shall be contested in good faith by appropriate proceedings,
and adequate book reserves shall be established with respect thereto, and each
of the Borrowers shall pay such Tax, charge or claim before any property subject
thereto shall become subject to execution.
7.2 MAINTENANCE OF CORPORATE EXISTENCE. Each of the Borrowers will do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises and will continue to
conduct and operate its business substantially as being conducted and operated
presently. Each of the Borrowers will become and remain qualified to conduct
business in each jurisdiction where the nature of the business or ownership of
property by such Borrower may require such qualification.
7.3 PRESERVATION OF PROPERTY. Each of the Borrowers will at all times
maintain, preserve and protect all franchises and trade names and keep all the
remainder of its properties which are used or useful in the conduct of its
respective businesses whether owned in fee or otherwise, or leased, in good
repair and operating condition; from time to time make, or cause to be made, all
needful and proper repairs, renewals, replacements, betterments and improvements
thereto so that the business carried on in connection therewith may be properly
and advantageously conducted at all times; and comply with all material leases
to which it is a party or under which it occupies property so as to prevent any
material loss or forfeiture thereunder.
7.4 INSURANCE. Each of the Borrowers will keep or cause to be kept
adequately insured by financially sound and reputable insurers its plants,
equipment, compressor units (whether owned or leased) motor vehicles, and all
other property of a character usually insured by businesses engaged in the same
or similar businesses. Upon demand by the Bank any insurance policies covering
the Collateral shall be endorsed to provide for payment of losses to the Bank as
its interest may appear, to provide that such policies may not be canceled,
reduced or affected in any manner for any reason without thirty days prior
notice to the Bank, and to
- 25 -
provide for any other matters which the Bank may reasonable require; and such
insurance shall be against fire, casualty and any other hazards normally insured
against and shall be in the amount of the full value (less a reasonable
deductible not to exceed amounts customary in the industry for similarly
situated businesses and properties) of the property insured. The Borrowers
shall at all times maintain adequate insurance against damage to persons or
property, which insurance shall be by financially sound and reputable insurers
and shall, without limitation, provide the following coverages: comprehensive
general liability (including, without limitation, coverage, where applicable,
damage caused by explosion, broad form property damage coverage, broad form
coverage for contractually independent contractors), worker's compensation,
products liability and automobile liability.
7.5 COMPLIANCE WITH APPLICABLE LAWS. Each of the Borrowers will comply
with the requirements of all applicable Laws and orders of any Tribunal and
obtain any licenses, permits, franchises or other governmental authorizations
necessary to the ownership of its properties or to the conduct of its business.
7.6 FINANCIAL STATEMENTS AND REPORTS.
(a) QUARTERLY OPERATING STATEMENTS. The Borrowers shall maintain a
standard system of accounting and shall furnish to the Bank as soon as
practicable after the end of the first three quarters of each fiscal year,
commencing with the quarter ending March 31, 1997, and in any event within
forty-five (45) days after the end of each said quarter, consolidated and
consolidating operating statements for ECS which shall be certified on
behalf of ECS by the President or the chief financial officer of ECS to
have been prepared in accordance with GAAP consistently applied and to
fairly present the financial condition of Borrowers for such period (on a
consolidated and consolidating basis), and shall include at least a balance
sheet as at the end of such period, and a statement of income, all in
reasonable detail.
(b) ANNUAL FINANCIAL STATEMENTS. As soon as practicable after the
end of each fiscal year of ECS and in any event within one-hundred twenty
(120) days thereafter, the Borrowers shall furnish to the Bank the
following financial statements (on a consolidated and consolidating basis),
together with a report thereon on and an unqualified opinion, prepared in
accordance with GAAP of reputable independent certified public accountants
of recognized
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standing selected by Borrowers and acceptable to the Bank:
(i) A balance sheet of ECS at the end of such year prepared on
a consolidated and consolidating basis,
(ii) A statement of income of ECS for such year prepared on a
consolidated and consolidating basis, and
(iii) A statement of cash flows of ECS for such year prepared on
a consolidated and consolidating basis,
setting forth in each case in comparative form the figures for the previous
fiscal year, if applicable, all in reasonable detail. The report of the
independent certified public accountants shall contain a certification that
in the course of the audit necessary for the certification of such
financial statements, they have obtained no knowledge of any Event of
Default or Default as defined herein, or, if any Event of Default or
Default existed or exists, specifying the nature and period of existence
thereof; provided, however, that such accountants shall not be liable to
the Bank by reason of their failure to obtain knowledge of any such Event
of Default or Default which would not be disclosed in the course of an
audit conducted in accordance with generally accepted auditing standards.
(c) QUARTERLY CERTIFICATES. As soon as available and in any event
within forty-five (45) days after the end of each of the first three
calendar quarters of each year, concurrently with the furnishing of the
applicable quarterly statements pursuant to subsection 7.6(a), there shall
be furnished to Bank (i) a borrowing base certificate signed by the chief
financial officer of ECS in the form annexed hereto as EXHIBIT "B-2" (the
"Borrowing Base Certificate") and (ii) a certificate signed by the Chief
Financial Officer of ECS detailing such information and data concerning
Equity's compressor fleets as are necessary to provide the calculations
required by Section 2.4(y) hereof and further stating that: (a) the
financial statements were prepared (subject to year end audit adjustments)
in conformity with GAAP, consistently applied; (b) a review of the
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activities of Borrowers for the period covered by the financial statements
has been made under his supervision with a view to determining whether
Borrowers have kept, observed, performed and fulfilled all of their
obligations under this Agreement, the other Loan Documents and every other
document or instrument referred to herein; and (c) no Event of Default or
an event which with the passage of time or notice, or both, could become an
Event of Default has occurred, and is continuing, or a statement describing
the nature, period of existence and status of any such event(s) if
existing. Such certificates shall fully demonstrate the method of all
calculations therein contained insofar as compliance with financial
covenants hereof are concerned but shall not be qualified or limited
because of restricted or limited examination of any material portion of
Borrowers' records by the party preparing such quarterly statements.
(d) ANNUAL/SPECIAL COVENANT CERTIFICATES. Concurrently with the
furnishing of the financial statements pursuant to 7.6(b), there shall be
furnished to Bank a separate certificate signed by the chief financial
officer of ECS stating that: (a) the financial statements were prepared in
conformity with GAAP on a basis consistently applied, and (b) no Event of
Default or an event which with the passage of time or notice, or both,
could become an Event of Default has occurred, and is continuing, and
status of any such event(s) if existing. Such certificate shall not be
qualified or limited because of restricted or limited examination of any
material portion of Borrowers' records by the party preparing such annual
statements. All certificates of Borrowers submitted pursuant to this
Agreement in connection with compliance with certain financial or other
covenants herein contained, including, without limitation, Sections 7.19,
7.20, 7.21 and 7.22 hereof, shall fully demonstrate the method of
calculations therein contained.
(e) SPECIAL AUDITING REPORTS. Promptly upon receipt thereof, the
Borrowers shall deliver to the Bank a copy of each report submitted to any
of the Borrowers, by independent accountants in connection with any annual,
interim or special audit made by them of the books and records of any one,
more or all of the Borrowers, including, without limitation,
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any comment letter submitted by such accountants to management in
connection with their audit.
(f) BUDGETS AND PROJECTIONS. Promptly upon completion thereof on an
annual basis within sixty (60) days following each fiscal year end, the
Borrowers shall deliver to the Bank a copy of each operating budget and
projection of financial performance prepared for the Borrowers.
(g) PERIODIC REPORTS. Promptly upon their becoming available, copies
of all financial statements, reports, notices or proxy statements sent by
any of the Borrowers to their stockholders and all registration statements,
periodic reports and other statements and schedules filed by the Borrowers
with any securities exchange, the Securities and Exchange Commission or any
similar state or federal governmental authority.
7.7 ENVIRONMENTAL COVENANTS. Borrowers will immediately notify the Bank
of and provide the Bank with copies of any notifications of discharges or
releases or threatened releases or discharges of a Polluting Substance on, upon,
into or from the Collateral which are given or required to be given by or on
behalf any of the Borrowers to any federal, state or local Tribunal if any of
the foregoing may materially and adversely affect any of the Borrowers or any
part of the Collateral, and such copies of notifications shall be delivered to
the Bank at the same time as they are delivered to the Tribunal. Borrowers
further agree promptly to undertake and diligently pursue to completion any
appropriate and legally required or authorized remedial containment and cleanup
action in the event of any release or discharge or threatened release or
discharge of a Polluting Substance on, upon, into or from the Collateral. At
all times while owning and operating the Collateral, the Borrowers will maintain
and retain complete and accurate records of all releases, discharges or other
disposal of Polluting Substances on, onto, into or from the Collateral,
including, without limitation, records of the quantity and type of any Polluting
Substances disposed of on or off the Collateral.
7.8 ENVIRONMENTAL INDEMNITIES. Borrowers hereby agree to indemnify,
defend and hold harmless the Bank and each of its officers, directors,
employees, agents, consultants, attorneys, contractors and each of its
affiliates, successors or assigns, or transferees from and against, and
reimburse said Persons in full with respect to, any and all loss, liability,
damage, fines, penalties, costs and expenses, of every kind and character,
including reasonable attorneys' fees and court costs, known or unknown, fixed or
contingent, occasioned by or associated with any
- 29 -
claims, demands, causes of action, suits and/or enforcement actions, including
any administrative or judicial proceedings, and any remedial, removal or
response actions ever asserted, threatened, instituted or requested by any
Persons, including any Tribunal, arising out of or related to: (a) the breach
of any representation or warranty of Borrowers contained in Section 8.16 set
forth herein; (b) the failure of Borrowers to perform any of their covenants
contained in Section 7.7 hereunder; (c) the ownership, construction, occupancy,
operation, use of the Collateral prior to the earlier of the date on which (i)
the Indebtedness and obligations secured hereby have been paid and performed in
full and the Security Instruments have been released, or (ii) the Collateral has
been sold by Bank following Bank's ownership of the Collateral by way of
foreclosure of the Liens granted pursuant hereto, deed in lieu of such
foreclosure or otherwise (the "Release Date"); provided, however, this indemnity
shall not apply with respect to matters caused by or arising solely from the
Bank's activities during any period of time the Bank acquires ownership of the
Collateral.
7.9 SEMI-ANNUAL PRODUCTION REPORTS. At the Bank's request, Sunterra shall
furnish to the Bank as soon as practicable after the end of each calendar
semi-annual period, and in any event within thirty (30) days after the calendar
semi-annual period end, a production report and an expense report for such
quarter, certified by Borrowers' chief financial officer as being true, correct
and complete, showing on a lease by lease basis (i) the gross proceeds from the
sale of Hydrocarbons produced from the Mortgaged Property (including additional
properties mortgaged subsequent to the Closing pursuant to Section 4.2 above)
owned by Sunterra, (ii) the severance, production ad valorem taxes and gathering
taxes deducted from or paid from the Mortgaged Property proceeds, (iii) the
Adjusted Gross Proceeds, (iv) the quantity of Hydrocarbons produced and sold
from the Mortgaged Property and the number and identity of ▇▇▇▇▇ operated,
drilled or abandoned, and (v) for each of the ▇▇▇▇▇ such operating and other
expense and net income information pertaining to the Mortgaged Property owned by
Sunterra as the Bank may request including, without limitation, a listing of
material royalty liabilities and obligations on a lease by lease basis.
7.10 NOTICE OF DEFAULT. Immediately upon the happening of any condition or
event which constitutes an Event of Default or Default or any default or event
of default under any other loan, mortgage, financing or security agreement, the
Borrowers will give the Bank a written notice thereof specifying the nature and
period of existence thereof and what actions, if any, the Borrowers are taking
and propose to take with respect thereto.
7.11 NOTICE OF LITIGATION. Immediately upon becoming aware of the
existence of any action, suit or proceeding at law or in equity before any
Tribunal, an adverse outcome in which would (i) materially impair the ability of
any of the Borrowers to carry on its business substantially as now conducted,
(ii) materially and
- 30 -
adversely affect the condition (financial or otherwise) of any of the Borrowers,
or (iii) result in monetary damages in excess of $100,000, the Borrowers will
give the Bank a written notice specifying the nature thereof and what actions,
if any, the Borrowers are taking and propose to take with respect thereto.
7.12 NOTICE OF CLAIMED DEFAULT. Immediately upon becoming aware that the
holder of any note or any evidence of indebtedness or other security of any of
the Borrowers has given notice or taken any action with respect to a claimed
default or event of default thereunder, if the amount of the note or
indebtedness exceeds $50,000 the Borrowers will give the Bank a written notice
specifying the notice given or action taken by such holder and the nature of the
claimed default or event of default thereunder and what actions, if any, the
Borrowers are taking and propose to take with respect thereto.
7.13 NOTICE OF CHANGE OF MANAGEMENT. Within five (5) days after any change
in management of the Borrowers or any officers of any of the Borrowers holding
an office of President, Chairman or chief financial officer, the Borrowers shall
give written notice thereof to the Bank, together with a description of the
reasons for the change.
7.14 REQUESTED INFORMATION. With reasonable promptness, the Borrowers will
give the Bank such other data and information relating to the Borrowers as from
time to time may be reasonably requested by the Bank.
7.15 FIELD AUDITS. The Bank shall be permitted to conduct, at its own
expense, an annual field audit of the Borrowers' accounts and books and records
relating thereto. Each field audit shall be conducted by agents of the Bank,
whether employees of the Bank or third-party agents selected by the Bank. The
Borrowers shall fully cooperate with the Bank and its agents in connection with
such field audits.
7.16 INSPECTION. The Borrowers will keep complete and accurate books and
records with respect to the Collateral and their other properties, businesses
and operations and will permit employees and representatives of the Bank to
audit, inspect and examine the same and to make copies thereof and extracts
therefrom during normal business hours. All such records shall be at all times
kept and maintained at the offices of the Borrowers in Tulsa, Oklahoma. Upon
any Default or Event of Default, the Borrowers will surrender all of such
records relating to the Collateral to the Bank upon receipt of any request
therefor from the Bank.
7.17 MAINTENANCE OF EMPLOYEE BENEFIT PLANS. The Borrowers will maintain
each employee benefit plan as to which they may have any liability or
responsibility in compliance with ERISA and all other Laws applicable thereto.
- 31 -
7.18 DISPOSITION/NEGATIVE PLEDGE RE ENCUMBRANCE OF COLLATERAL AND OTHER
ASSETS. Except as otherwise permitted by Section 3.2 hereof insofar as the
permitted sale(s) of compressor units of Equity are concerned, Borrowers will
not sell or encumber any of the Collateral and Borrowers will not sell, lease,
transfer, scrap or otherwise dispose of or mortgage, pledge, grant a security
interest in or otherwise encumber any of Borrowers' other oil and gas mining or
mineral properties or assets, whether for replacement or not, unless such sale
or disposition shall be in the ordinary course of business and for a full and
fair consideration, subject to the Borrowers' limited right to sell up to
$100,000 worth in the aggregate of its properties or assets not constituting
Collateral (other than and expressly excluding oil and gas leasehold, mining or
other mineral interests wherever located) in the ordinary course of business
during any calendar year without obtaining the Bank's prior consent. In no
event shall any of the Borrowers cause or permit the voluntary or involuntary
pledge, mortgage or other encumbrance, attachment or levy of or against any of
the properties or assets of whatsoever nature or type to any Person (financial
institution or otherwise).
7.19 MAXIMUM DEBT TO TANGIBLE NET WORTH RATIO. The Borrowers will not at
any time permit the ratio of ECS's consolidated Total Liabilities (less deferred
taxes) to its consolidated Tangible Net Worth during the following fiscal year
periods to be greater than:
FISCAL YEAR MAXIMUM RATIO
----------- -------------
Fiscal Years 1997 and 1998 1.6 to 1
Fiscal Year 1999 1.3 to 1
Fiscal Year 2000 through
Fiscal Year 2004 1.0 to 1
7.20 MINIMUM CURRENT RATIO. The Borrowers will not permit ECS's Current
Ratio to be less than the following during the applicable fiscal year periods:
MINIMUM
FISCAL YEAR CURRENT RATIO
----------- -------------
Fiscal Year 1997 1.2 to 1
Fiscal Year 1998 through
Fiscal Year 2004 .6 to 1
7.21 EBITDA/PRINCIPAL AND INTEREST ON NOTE. From and after the Conversion
Date (March 31, 1999), the minimum ratio of Borrowers' EBITDA (per GAAP) divided
by the sum of the principal and interest on the Note plus other indebtedness of
any one, more or all of the Borrowers shall at all times be 1.2 to 1 or greater.
7.22 CAPITAL EXPENDITURES. The Borrowers agree not to make any capital
expenditures in any fiscal year subsequent to the fiscal year in which the
Conversion Date occurs for the
- 32 -
acquisition, construction, expansion or improvements of capital assets (whether
owned or leased or otherwise) during fiscal year that aggregate in excess of
$2,000,000 for such applicable period or commit for any such capital expenditure
which, if made in the applicable period for delivery and payment for such
applicable period, would result in gross capital expenditures in excess of the
$2,000,000 aggregate limitation herein set forth.
7.23 LIMITATION ON OTHER INDEBTEDNESS. The Borrowers will not create,
incur, assume, become or be liable in any manner in respect of, or suffer to
exist, any indebtedness whether evidenced by a note, bond, debenture, agreement,
letter of credit or similar or other obligation, or accept any deposits or
advances of any kind, except (i) trade payables and current indebtedness (other
than for borrowed money) incurred in, and deposits and advances accepted in, the
ordinary course of business; (ii) indebtedness incurred for the acquisition of
assets secured by purchase money security interests not exceeding $300,000 in
the aggregate during any fiscal year of the Borrower and (iii) the Indebtedness.
7.24 LIMITATION ON LIENS. The Borrowers will not create or suffer to exist
any Lien upon any of their assets, whether real or personal property, except
purchase money security interests securing indebtedness incurred for the
acquisition of assets and Liens in favor of the Bank securing the Indebtedness.
7.25 CONTINGENT LIABILITIES; ADVANCES. Except for the items described on
EXHIBIT "C" attached hereto the Borrowers will not either directly or indirectly
otherwise, (i) guarantee, become surety for, discount, endorse, agree
(contingently or otherwise) to purchase, repurchase or otherwise acquire or
supply or advance funds in respect of, or otherwise become or be contingently
liable upon the indebtedness, obligation or liability of any Person, (ii)
guarantee the payment of any dividends or other distributions upon the stock of
any corporation, (iii) discount or sell with recourse or for less than the face
value thereof, any of its notes receivable, accounts receivable or chattel
paper; (iv) loan, agree to loan, or advance money to any Person; or (v) enter
into any agreement for the purchase or other acquisition of any goods, products,
materials or supplies, or for the making of any shipments or for the payment of
services, if in any such case payment therefor is to be made regardless of the
non-delivery of such goods, products, materials or supplies or the
non-furnishing of the transportation of services; provided, however that the
foregoing shall not be applicable to endorsement of negotiable instruments
presented to or deposited with a bank for collection or deposit in the ordinary
course of business or to amounts not in excess of $200,000 in the aggregate
during any fiscal year.
7.26 MERGER, CONSOLIDATION, ACQUISITION, ETC. The Borrowers will not merge
or consolidate with or into any other Person; or permit any other Person to
consolidate with or merge into any of the Borrowers; or acquire all or
substantially all of the assets or
- 33 -
properties or capital stock of any other Person; or adopt or effect any plan of
reorganization, recapitalization, liquidation or dissolution; or acquire any
properties or assets, other than in the ordinary course of business; provided,
however, Borrowers may enter into letters of intent pertaining to merger,
consolidation or acquisition subject to obtaining the Bank's written consent
thereto prior to consummation of the transactions contemplated by such letter(s)
of credit.
7.27 DIVIDENDS. The Borrowers will not declare, pay or become obligated to
declare or pay any cash or other dividends on any class of their capital stock
now or hereafter outstanding, make any distribution of cash or property to
holders of any shares of such stock, or redeem, retire, purchase or otherwise
acquire, directly or indirectly, any shares of any class of their capital stock
now or hereafter outstanding.
7.28 CHANGE OF FISCAL YEAR. None of the Borrowers will change its fiscal
year from its present fiscal year (fiscal year ending December 31).
7.29 CHANGE OF BUSINESS. None of the Borrowers will engage in any business
activity substantially different from or unrelated to present business
activities and operations.
7.30 ARTICLES OF INCORPORATION; BY-LAWS AND ASSUMED NAMES. The Borrowers
will not amend, alter, modify or restate their Articles or Certificate of
Incorporation or By-Laws in any way which would (i) change the corporate name or
adopt a trade name for any of the Borrowers; or (ii) in any manner adversely
affect the Borrowers' obligations or covenants to the Bank hereunder.
7.31 TRANSACTIONS WITH AFFILIATES. The Borrowers will not enter into any
transaction, including (without limitation) the purchase, sale or exchange of
property or the rendering or furnishing of any service with any Affiliate of any
of the Borrowers, except transactions in the ordinary course of the businesses
of Borrowers and upon fair and reasonable terms no less favorable than Borrowers
would obtain in a transaction for the same purpose with a Person that is not an
Affiliate of any of the Borrowers.
7.32 OTHER AGREEMENTS. The Borrowers will not enter into or permit to
exist any agreement (i) which would cause an Event of Default or a Default
hereunder; or (ii) which contains any provision which would be violated or
breached by the performance of Borrowers' obligations hereunder or under any of
the other Loan Documents.
7.33 PAYMENT OF INDEBTEDNESS. The Borrowers hereby agree to pay, when due
and owing, all Indebtedness, whether or not evidenced by the Note.
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ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement and to make the Revolving
Credit Loans to the Borrowers under the provisions hereof, and in consideration
thereof, the Borrowers represent, warrant and covenant as follows:
8.1 ORGANIZATION AND QUALIFICATION. Each of the Borrowers is duly
organized, validly existing, and in good standing under the Laws of its
respective jurisdiction of incorporation, and is duly licensed and in good
standing as a foreign corporation in each jurisdiction in which the nature of
the business transacted or the property owned is such as to require licensing or
qualification as such. Equity and Sunterra are wholly owned subsidiaries of
ECS.
8.2 LITIGATION. Except for the action described on EXHIBIT "D" attached
hereto, there is no action, suit, investigation or proceeding threatened or
pending before any Tribunal against or affecting any of the Borrowers or any
properties or rights of any of the Borrowers which, if adversely determined,
would result in a liability of greater than $100,000 or would otherwise result
in any material adverse change in the business or condition, financial or
otherwise, of any of the Borrowers. None of the Borrowers is in default with
respect to any judgment, order, writ, injunction, decree, rule or regulation of
any Tribunal.
8.3 FINANCIAL STATEMENTS. The Borrowers' most recent consolidated
unaudited financial statements which have been furnished to the Bank have been
prepared in conformity with GAAP, show all material liabilities, direct and
contingent, and fairly present the consolidated financial condition of the
Borrowers as of the date of such statements and the results of their operations
for the period then ended, and since the date of such statements there has been
no material adverse change in the business, financial condition or operations of
any of the Borrowers.
8.4 CONFLICTING AGREEMENTS AND OTHER MATTERS. None of the Borrowers is in
default in the performance of any obligation, covenant, or condition in any
agreement to which it is a party or by which it is bound. None of the Borrowers
is a party to any contract or agreement or subject to any charter or other
corporate restriction which materially and adversely affects its business,
property or assets, or financial condition. None of the Borrowers is a party to
or otherwise subject to any contract or agreement which restricts or otherwise
affects the right or ability of any of the Borrowers to execute the Loan
Documents or the performance of any of their respective terms. Neither the
execution nor delivery of any of the Loan Documents, nor fulfillment of nor
compliance with their respective terms and provisions will conflict with, or
result in a breach of the terms, conditions or provisions of, or
- 35 -
constitute a default under, or result in any violation of, or result in the
creation of any Lien (except those created by the Loan Documents) upon any of
the properties or assets of any of the Borrowers pursuant to, or require any
consent, approval or other action by or any notice to or filing with any
Tribunal (other than routine filings after the Closing Date with the Securities
and Exchange Commission, any securities exchange and/or state blue sky
authorities) pursuant to, the charter or By-Laws of any of the Borrowers, any
award of any arbitrator, or any agreement, instrument or Law to which any of the
Borrowers is subject.
8.5 CORPORATE AUTHORIZATION. The respective Boards of Directors of the
Borrowers have duly authorized the execution and delivery of each of the Loan
Documents and the performance of their respective terms. No other consent of
any other Person, except for the Bank, is required as a prerequisite to the
validity and enforceability of the Loan Documents.
8.6 PURPOSES. None of the Borrowers is engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System) and no part of the proceeds of
any borrowing hereunder will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock. If requested by the Bank, the Borrowers will furnish to the Bank a
statement in conformity with the requirements of Federal Reserve Form U-1,
referred to in Regulation U, to the foregoing effect. None of the Borrowers or
any agent acting on behalf of any thereof has taken or will take any action
which might cause this Agreement, or the Note to violate any regulation of the
Board of Governors of the Federal Reserve System (including Regulations G, T, U
and X) or to violate any securities laws, state or federal, in each case as in
effect now or as the same may hereafter be in effect.
8.7 COMPLIANCE WITH APPLICABLE LAWS. The Borrowers are in compliance with
all Laws, ordinances, rules, regulations and other legal requirements applicable
to them and the business conducted by them, the violation of which could or
would have a material adverse effect on their business or condition, financial
or otherwise. Neither the ownership of any capital stock of any of the
Borrowers, nor any continued role of any Person in the management or other
affairs of any of the Borrowers (i) will result or could result in the
Borrowers' noncompliance with any Laws, ordinances, rules, regulations and other
legal requirements applicable to the Borrowers, or (ii) could or would have a
material adverse effect on the business or condition, financial or otherwise, of
any one, more or all of the Borrowers.
8.8 POSSESSION OF FRANCHISES, LICENSES. Each of the Borrowers possesses
all franchises, certificates, licenses, permits and other authorizations from
governmental political subdivisions
- 36 -
or regulatory authorities, free from burdensome restrictions, that are necessary
in any material respect for the ownership, maintenance and operation of their
respective properties and assets, and none of the Borrowers is in violation of
any thereof in any material respect.
8.9 LEASES. The Borrowers enjoy peaceful and undisturbed possession of
all leases necessary in any material respect for the operation of their
respective properties and assets, none of which contains any unusual or
burdensome provisions which might materially affect or impair the operation of
such properties and assets. All such leases are valid and subsisting and are in
full force and effect.
8.10 TAXES. The Borrowers have filed all Federal, state and other income
tax returns which are required to be filed and have paid all Taxes, as shown on
said returns, and all Taxes due or payable without returns and all assessments
received to the extent that such Taxes or assessments have become due. All Tax
liabilities of each of the Borrowers are adequately provided for on the books of
the Borrowers, including interest and penalties. No income tax liability of a
material nature has been asserted by taxing authorities for Taxes in excess of
those already paid.
8.11 DISCLOSURE. Neither this Agreement nor any other Loan Document or
writing furnished to the Bank by or on behalf of any of the Borrowers in
connection herewith contains any untrue statement of a material fact nor do such
Loan Documents and writings, taken as a whole, omit to state a material fact
necessary in order to make the statements contained herein and therein not
misleading. There is no fact known to any of the Borrowers and not reflected in
the financial statements or exhibits hereto provided to the Bank which
materially adversely affects or in the future may materially adversely affect
the business, property, or assets, or financial condition of any of the
Borrowers which has not been set forth in this Agreement, in the Loan Documents
or in other documents furnished to the Bank by or on behalf of the Borrowers
prior to the date hereof in connection with the transactions contemplated
hereby.
8.12 INVESTMENT COMPANY ACT REPRESENTATION. None of the Borrowers is an
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
8.13 ERISA. Since the effective date of Title IV of ERISA, no Reportable
Event has occurred with respect to any Plan. For the purposes of this section
the term "Reportable Event" shall mean an event described in Section 4043(b) of
ERISA. For the purposes hereof the term "Plan" shall mean any plan subject to
Title IV of ERISA and maintained for employees of the Borrowers, or of any
member of a controlled group of corporations, as the term "controlled group of
corporations" is defined in Section 1563 of the
- 37 -
Internal Revenue Code of 1986, as amended (the "Code"), of which any of the
Borrowers is a part. Each Plan established or maintained by any of the
Borrowers is in material compliance with the applicable provisions of ERISA, and
the Borrowers have filed all reports required by ERISA and the Code to be filed
with respect to each Plan. The Borrowers have met all requirements with respect
to funding Plans imposed by ERISA or the Code. Since the effective date of
Title IV of ERISA there have not been any nor are there now existing any events
or conditions that would permit any Plan to be terminated under circumstances
which would cause the lien provided under Section 4068 of ERISA to attach to the
assets of the Borrowers. The value of each Plan's benefits guaranteed under
Title IV of ERISA on the date hereof does not exceed the value of such Plan's
assets allocable to such benefits on the date hereof.
8.14 FISCAL YEAR. The fiscal years of the respective Borrowers end as of
December 31 of each year.
8.15 TITLE TO PROPERTIES; AUTHORITY. Borrowers have full power, authority
and legal right to own and operate the properties which they now own and
operate, and to carry on the lines of business in which it is now engaged, and
has good and marketable title to the Mortgaged Property in corporate capacity
subject to no Lien of any kind except Liens permitted by this Agreement.
Sunterra owns a working interest and net revenue interest in the oil and gas
leasehold estate for the Mortgaged Property of not less than the amounts set
forth on a well by well basis on EXHIBIT "E" attached hereto. Borrowers have
full power, authority and legal right to execute and deliver and to perform and
observe the provisions of this Agreement and the other Loan Documents. ECS and
Sunterra further represent to the Bank that any and all after acquired interest
in any one or more of the Mortgaged Property being concurrently or subsequently
assigned of record to Borrowers is and shall be deemed encumbered by the
Mortgage in all respects.
8.16 ENVIRONMENTAL REPRESENTATIONS. To the best of Borrowers' knowledge
and belief, upon reasonable and good faith inquiry exercised with due diligence
and in accordance with normal industry standards:
(a) Borrowers are not subject to any liability or obligation relating
to (i) the environmental conditions on, under or about the Collateral,
including, without limitation, the soil and ground water conditions at the
location of any of the Borrowers' properties, or (ii) the use, management,
handling, transport, treatment, generation, storage, disposal, release or
discharge of any Polluting Substance;
(b) Borrowers have not obtained and are not required to obtain or
make application for any permits, licenses or similar authorizations
- 38 -
to construct, occupy, operate or use any buildings, improvements,
facilities, fixtures and equipment forming a part of the Collateral by
reason of any Environmental Laws;
(c) Borrowers have taken all steps necessary to determine and has
determined that no Polluting Substances have been disposed of or otherwise
released on, onto, into, or from the Collateral (the term "release" shall
have the meanings specified in CERCLA/▇▇▇▇, and the term "disposal" or
"disposed" shall have the meanings specified in RCRA/HSWA; provided, in the
event either CERCLA/▇▇▇▇ or RCRA/HSWA is amended so as to broaden the
meaning of any term defined thereby, such broader meaning shall apply
subsequent to the effective date of such amendment and provided further, to
the extent that the laws of any State or Tribunal establish a meaning for
"release," "disposal" or "disposed" which is broader than that specified in
CERCLA/▇▇▇▇, RCRA/HSWA or other Environmental Laws, such broader meaning
shall apply);
(d) There are no PCB's or asbestos-containing materials, whether in
the nature of thermal insulation products such as pipe boiler or breech
coverings, wraps or blankets or sprayed-on or trowelled-on products in, on
or upon the Collateral; and
(e) There is no urea formaldehyde foam insulation ("UFFI") in, on or
upon the Collateral.
8.17 OIL AND GAS CONTRACTS. All contracts, agreements and leases related
to any of the oil and gas mining, mineral or leasehold properties and all
contracts, agreements, instruments and leases to which any one, more or all of
the Borrowers are a party, are valid and effective in accordance with their
respective terms, and all agreements included in the oil and gas mining, mineral
or leasehold properties in the nature of oil and/or gas purchase agreements, and
oil and/or gas sale agreements are in full force and effect and are valid and
legally binding obligations of the parties thereto and all payments due
thereunder have been made, except for those suspended for reasonable cause in
the ordinary course of business; and, there is not under any such contract,
agreement or lease any existing default by any party thereto or any event which,
with notice or lapse of time, or both, would constitute such default, other than
minor defaults which, in the aggregate, would result in losses or damages of
more than $100,000 to any one, more or all of the Borrowers.
- 39 -
8.18 NATURAL GAS POLICY ACT AND NATURAL GAS ACT COMPLIANCE. To the best of
Borrowers' knowledge, all material filings and approvals under the Natural Gas
Policy Act of 1978, as amended, and the Natural Gas Act, as amended, or with the
Federal Energy Regulatory Commission (the "FERC") or required under any rules or
regulations adopted by the FERC which are necessary for the operation of
Borrowers' businesses or the Collateral in the manner in which they are
presently being operated have been made and the terms of the agreements and
contractual rights included in the Borrowers' businesses or the Collateral do
not conflict with or contravene any such Law, rule or regulation.
8.19 TAKE OR PAY OBLIGATIONS, PREPAYMENTS, BTU ADJUSTMENTS AND BALANCING
PROBLEMS. To the best of the Borrowers' knowledge, after diligent inquiry,
there is no take or pay obligation under any gas purchase agreement comprising a
portion of the Collateral which is not matched by a commensurate and
corresponding pay or take obligation binding upon the purchaser under a
corresponding gas sales agreement such that with respect to the ownership and
operation of the businesses of any of the Borrowers or the Collateral, any such
obligation in favor of any seller under any gas purchase agreement to which any
one, more or all of the Borrowers are a "buyer" is matched by a corresponding
obligation on the part of "purchasers" under corresponding gas sales agreements
pursuant to which any one, more or all the Borrowers are the "seller". None of
the Borrowers nor the Collateral is subject to requirements to make BTU
adjustments or effect gas balancing in favor of third parties which would result
in any one, more or all of the Borrowers being required to (i) deliver gas at a
price below that established in applicable gas sales agreements or on behalf of
and for the benefit of third parties in exchange or to otherwise compensate for
prior above market or above contract purchases of gas from any one, more or all
of the Borrowers or their predecessors in interest, or (ii) balance in kind by
allowing other owners in the Collateral to make up the past imbalances in gas
sales, or (iii) balance in cash by paying other owners of the collateral for the
past gas imbalances except for the matters described on EXHIBIT "F" hereto which
have been disclosed to the Bank.
8.20 GAS PURCHASE OBLIGATIONS IN EXCESS OF GAS SALES RIGHTS. The ownership
and operation of the business operations of Borrowers or the Collateral have not
resulted or will not result in the existence of minimum purchase obligations
under any gas purchase agreement (relating to the volume of gas to be taken
thereunder or the price to be paid with respect thereto for the duration of any
such gas purchase agreement) which are not matched by corresponding and
commensurate rights to sell all such gas under applicable gas sales agreements
at prices in excess of the amount to be paid therefor under gas purchase
agreements (without regard to costs associated with transporting any such gas
and risks of volume "shrinkage" occurring in the transportation process).
- 40 -
8.21 OWNERSHIP OF MORTGAGED PROPERTY. ECS and Sunterra hereby represent,
warrant and covenant that Sunterra owns working interests, royalty interests and
net revenue interests in the oil and gas leasehold estate for the Mortgaged
Property covered by the Mortgage not less than the amounts set forth on a well
by well basis on EXHIBIT "E" attached hereto.
ARTICLE IX
EVENTS OF DEFAULT
9.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an Event of Default hereunder (whether such
occurrence shall be voluntary or involuntary or come about or be effected by
operation of Law or otherwise):
(a) The Borrowers shall fail to make any payment or prepayment of
principal or interest upon the Note, or fail to pay any other Indebtedness
after the same shall become due and payable (whether by extension, renewal,
acceleration or otherwise); or
(b) Any representation or warranty of the Borrowers made herein or in
any writing furnished in connection with or pursuant to any of the Loan
Documents shall have been false or misleading in any material respect on
the date when made and continues to have a material adverse effect on one
or more of the Borrowers or their respective financial capacity or business
operations; or
(c) The Borrowers shall fail to duly observe, perform or comply with
any covenant, agreement or term (other than payment provisions which are
governed by Section 9.1(a) hereof) contained in this Agreement or any of
the Loan Documents and such default or breach shall have not been cured or
remedied within the earlier of thirty (30) days after any of the Borrowers
shall know (or should have known) of its occurrence or twenty (20) days
following receipt of notice thereof from the Bank; or
(d) Any of the Borrowers shall default in the payment of principal or
of interest on any other obligation for money borrowed or received as an
advance (or any obligation under any conditional sale or other title
retention agreement, or any obligation issued or assumed
- 41 -
as full or partial payment for property whether or not secured by purchase
money Lien, or any obligation under notes payable or drafts accepted
representing extensions of credit) beyond any grace period provided with
respect thereto, or shall default in the performance of any other
agreement, term or condition contained in any agreement under which such
obligation is created (or if any other default under any such agreement
shall occur and be continuing beyond any period of grace provided with
respect thereto) if the effect of such default is to cause the holder or
holders of such obligation (or a trustee on behalf of such holder or
holders) to accelerate the due date of such obligation prior to its
scheduled date of maturity; or
(e) Any of the following: (i) any of the Borrowers shall become
insolvent or unable to pay its debts as they mature, make an assignment for
the benefit of creditors or admit in writing its inability to pay its debts
generally as they become due or fail generally to pay its debts as they
mature; or (ii) an order, judgment or decree is entered adjudicating any of
the Borrowers bankrupt or insolvent; or (iii) any of the Borrowers shall
petition or apply to any Tribunal for the appointment of a trustee,
receiver, custodian or liquidator of any of the Borrowers or of any
substantial part of the assets of any of the Borrowers, or shall commence
any proceedings relating to any of the Borrowers under any bankruptcy,
reorganization, compromise, arrangement, insolvency, readjustment of debts,
dissolution, or liquidation Law of any jurisdiction, whether now or
hereafter in effect; or (iv) any such petition or application shall be
filed, or any such proceedings shall be commenced, of a type described in
subsection (iii) above, against any of the Borrowers and any of the
Borrowers by any act shall indicate its approval thereof, consent thereto
or acquiescence therein, or an order, judgment or decree shall be entered
appointing any such trustee, receiver, custodian or liquidator, or
approving the petition in any such proceedings, and such order, judgment or
decree shall remain unstayed and in effect, if being vigorously contested,
for more than sixty (60) days; or (v) any order, judgment or decree shall
be entered in any proceedings against any of the Borrowers decreeing the
dissolution of
- 42 -
any of the Borrowers and such order, judgment or decree shall remain
unstayed and in effect for more than thirty (30) days; or (vi) any order,
judgment or decree shall be entered in any proceedings against any of the
Borrowers decreeing a split-up of any of the Borrowers which requires the
divestiture of a substantial part of the assets of any of the Borrowers,
and such order, judgment or decree shall remain unstayed and in effect for
more than thirty (30) days; or (vii) any of the Borrowers shall fail to
make timely payment or deposit of any amount of tax required to be withheld
by any of the Borrowers and paid to or deposited to or to the credit of the
United States of America pursuant to the provisions of the Internal Revenue
Code of 1986, as amended, in respect of any and all wages and salaries paid
to employees of any of the Borrowers; or
(f) Any final judgment on the merits for the payment of money in an
amount in excess of $100,000 shall be outstanding against any of the
Borrowers, and such judgment shall remain unstayed and in effect and unpaid
for more than thirty (30) days; or
(g) Any Reportable Event described in Section 8.13 hereof which the
Bank determines in good faith might constitute grounds for the termination
of a Plan therein described or for the appointment by the appropriate
United States District Court of a trustee to administer any such Plan shall
have occurred and be continuing thirty (30) days after written notice to
such effect shall have been given to any of the Borrowers by the Bank, or
any such Plan shall be terminated, or a trustee shall be appointed by a
United States District Court to administer any such Plan or the Pension
Benefit Guaranty Corporation shall institute proceedings to terminate any
such Plan or to appoint a trustee to administer any such Plan; or
(h) Any default or event of default occurs under any of the other
Loan Documents.
9.2 REMEDIES. Upon the occurrence of any Event of Default referred to in
Section 9.1(e) the Commitment shall immediately terminate and the Note and all
other Indebtedness shall be immediately due and payable, without notice of any
kind. Upon the occurrence of any other Event of Default, and without prejudice
to any right or remedy of the Bank under this Agreement or the Loan
- 43 -
Documents or under applicable Law of under any other instrument or document
delivered in connection herewith, the Bank may (i) declare the Commitment
terminated or (ii) declare the Commitment terminated and declare the Note and
the other Indebtedness, or any part thereof, to be forthwith due and payable,
whereupon the Note and the other Indebtedness, or such portion as is designated
by the Bank shall forthwith become due and payable, without presentment, demand,
notice or protest of any kind, all of which are hereby expressly waived by all
of the Borrowers. No delay or omission on the part of the Bank in exercising
any power or right hereunder or under the Note, the Loan Documents or under
applicable law shall impair such right or power or be construed to be a waiver
of any default or any acquiescence therein, nor shall any single or partial
exercise by the Bank of any such power or right preclude other or further
exercise thereof or the exercise of any other such power or right by the Bank.
In the event that all or part of the Indebtedness becomes or is declared to be
forthwith due and payable as herein provided, the Bank shall have the right to
set off the amount of all the Indebtedness of the Borrowers owing to the Bank
against, and shall have, and is hereby granted by all of the Borrowers, a lien
upon and security interest in, all property of each of the Borrowers in the
Bank's possession at or subsequent to such default, regardless of the capacity
in which the Bank possesses such property, including but not limited to any
balance or share of any deposit, collection or agency account. After Default
all proceeds received by the Bank may be applied to the Indebtedness in such
order of application and such proportions as the Bank, in its discretion, shall
choose. At any time after the occurrence of any Event of Default, the Bank may,
at its option, cause an audit of any and/or all of the books, records and
documents of all of the Borrowers to be made by auditors satisfactory to the
Bank at the expense of the Borrowers. The Bank also shall have, and may
exercise, each and every right and remedy granted to it for default under the
terms of the Security Instruments and the other Loan Documents.
ARTICLE X
MISCELLANEOUS
10.1 NOTICES. Unless otherwise provided herein, all notices, requests,
consents and demands shall be in writing and shall be either hand-delivered (by
courier or otherwise) or mailed by certified mail, postage prepaid, to the
respective addresses specified below, or, as to any party, to such other address
as may be designated by it in written notice to the other parties:
- 44 -
If to the Borrowers, to:
Equity Compression Services Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Financial Officer
If to the Bank, to:
Bank of Oklahoma, National Association
P. O. Box 2300
Bank of Oklahoma Tower
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Energy Department - 8th Floor
ECS is hereby designated and appointed and shall serve as agent for all of the
Borrowers insofar as notices hereunder are concerned and notice to ECS shall be
deemed notice to each of the Borrowers with the same force and effect as if each
such Borrower were individually notified in accordance herewith. All notices,
requests, consents and demands hereunder will be effective when hand-delivered
to the applicable notice address set forth above or when mailed by certified
mail, postage prepaid, addressed as aforesaid.
10.2 PLACE OF PAYMENT. All sums payable hereunder shall be paid in
immediately available funds to the Bank, at its principal banking offices at
Bank of Oklahoma Tower, One ▇▇▇▇▇▇▇▇ Center in Tulsa, Oklahoma, or at such other
place as the Bank shall notify the Borrowers in writing. If any interest,
principal or other payment falls due on a date other than a Business Day, then
(unless otherwise provided herein) such due date shall be extended to the next
succeeding Business Day, and such extension of time will in such case be
included in computing interest, if any, in connection with such payment.
10.3 SURVIVAL OF AGREEMENTS. All covenants, agreements, representations
and warranties made herein shall survive the execution and the delivery of Loan
Documents. All statements contained in any certificate or other instrument
delivered by any of the Borrowers hereunder shall be deemed to constitute
representations and warranties by all of the Borrowers.
10.4 PARTIES IN INTEREST. All covenants, agreements and obligations
contained in this Agreement shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto, except that the
Borrowers may not assign their rights or obligations hereunder without the prior
written consent of the Bank.
10.5 GOVERNING LAW AND JURISDICTION. This Agreement and the Note shall be
deemed to have been made or incurred under the Laws
- 45 -
of the State of Oklahoma and shall be construed and enforced in accordance with
and governed by the Laws of Oklahoma.
10.6 SUBMISSION TO JURISDICTION. THE BORROWERS HEREBY CONSENT TO THE
JURISDICTION OF ANY OF THE LOCAL, STATE, AND FEDERAL COURTS LOCATED WITHIN TULSA
COUNTY, OKLAHOMA AND WAIVE ANY OBJECTION WHICH BORROWERS MAY HAVE BASED ON
IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY
SUCH COURT AND WAIVE PERSONAL SERVICE OF ANY AND ALL PROCESS UPON ANY OF THEM,
AND CONSENT THAT ALL SUCH SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER
DIRECTED TO ANY OF THEM AT THE ADDRESS SET FORTH IN SUBSECTION 10.1 HEREOF AND
THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL
RECEIPT OR THREE (3) BUSINESS DAYS AFTER MAILED OR DELIVERED BY MESSENGER.
10.7 MAXIMUM INTEREST RATE. Regardless of any provision herein, the Bank
shall never be entitled to receive, collect or apply, as interest on the
Indebtedness any amount in excess of the maximum rate of interest permitted to
be charged by the Bank by applicable Oklahoma Law, and, in the event the Bank
shall ever receive, collect or apply, as interest, any such excess, such amount
which would be excessive interest shall be applied to other Indebtedness and
then to the reduction of principal; and, if all other Indebtedness and principal
are paid in full, then any remaining excess shall forthwith be paid to Equity on
behalf of all of the Borrowers.
10.8 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise, and no delay
in exercising, on the part of the Bank, any right, power or privilege hereunder
or under any other Loan Document or applicable Law shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
of the Bank. The rights and remedies herein provided are cumulative and not
exclusive of any other rights or remedies provided by any other instrument or by
law. No amendment, modification or waiver of any provision of this Agreement or
any other Loan Document shall be effective unless the same shall be in writing
and signed by the Bank. No notice to or demand on the Borrowers in any case
shall entitle the Borrowers to any other or further notice or demand in similar
or other circumstances.
10.9 COSTS. The Borrowers agree to pay to the Bank on demand all
reasonable costs, fees and expenses (including without limitation reasonable
attorneys fees and legal expenses) incurred or accrued by the Bank in connection
with the negotiation, preparation, execution, delivery, filing, recording and
administration of this Agreement, the Security Instruments and the other Loan
Documents, or any amendment, waiver, consent or modification thereto or thereof,
or any enforcement thereof. The Borrowers further agree that all such fees and
expenses shall be paid regardless of whether or not the transactions provided
for in this Agreement are eventually closed and regardless of whether or not any
or all sums evidenced by the Note are advanced to the Borrowers by the Bank.
- 46 -
Upon Borrowers' failure to pay all such costs and expenses within ten (10)
days of the Bank's submission of invoices therefore, the Bank shall pay such
costs and expenses by debit to the joint General Account of Borrowers without
further notice to Borrowers.
10.10 PARTICIPATION. The Borrowers recognize and acknowledge that the Bank
may sell participating interests in the Commitment evidenced by the Note to one
or more financial institutions (the "Participants"). Upon receipt of notice of
the identity and address of each such Participant, all of the Borrowers shall
thereafter supply such Participant with the same information and reports
communicated to the Bank, whether written or oral. The Borrowers hereby
acknowledge that each Participant shall be deemed a holder of the Note to the
extent of its participation, and the Borrowers hereby waive their right, if any,
to offset amounts owing to the Borrowers from the Bank against any Participant's
portion of the Note.
10.11 WAIVER OF JURY. BORROWERS FULLY, VOLUNTARILY AND EXPRESSLY WAIVE ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER THE NOTE, THIS AGREEMENT, THE SECURITY INSTRUMENTS OR UNDER ANY
AMENDMENT, SUPPLEMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED (OR WHICH MAY
IN THE FUTURE BE DELIVERED) IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT. BORROWERS AGREE THAT
ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY.
10.12 FULL AGREEMENT. This Agreement and the other Loan Documents contain
the full agreement of the parties and supersede all negotiations and agreements
prior to the date hereof, including the Prior Agreement which is replaced in its
entirety by this Fourth Amended and Restated Revolving Credit and Term Loan
Agreement.
10.13 HEADINGS. The article and section headings of this Agreement are for
convenience of reference only and shall not constitute a part of the text hereof
nor alter or otherwise affect the meaning hereof.
10.14 SEVERABILITY. The unenforceability or invalidity as determined by a
Tribunal of competent jurisdiction, of any provision or provisions of this
Agreement shall not render unenforceable or invalid any other provision or
provisions hereof.
10.15 EXCEPTIONS TO COVENANTS. The Borrowers shall not be deemed to be
permitted to take any action or fail to take any action which is permitted as an
exception to any of the covenants contained herein or which is within the
permissible limits of any of the covenants contained herein if such action or
omission would result in the breach of any other covenant contained herein.
- 47 -
10.16 CONFIDENTIAL TREATMENT. Under the terms of this Agreement and
certain of the other Loan Documents, the Bank is granted a security interest in,
inspection rights with respect to or other rights in certain data, files,
records and other materials which are proprietary to any or all of the Borrowers
or which constitute or contain confidential information and trade secrets
(collectively referred to as "Confidential Material"). The Bank hereby
covenants and agrees that except upon an Event of Default, and then only to the
extent necessary to protect its interests in such Confidential Material, the
Bank will use its reasonable best efforts to maintain the confidential status
thereof.
10.17 CONFLICT WITH SECURITY INSTRUMENTS. To the extent the terms and
provisions of any of the Security Instruments are in conflict with the terms and
provisions hereof, this Agreement shall be deemed controlling.
10.18 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amended and
Restated Revolving Credit and Term Loan Agreement to be duly executed and
delivered in Tulsa, Oklahoma, effective as of the day and year first above
written.
"Borrowers"
EQUITY COMPRESSION SERVICES
CORPORATION, an Oklahoma
corporation
By
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
"ECS"
SUNTERRA ENERGY CORPORATION,
an Oklahoma corporation
By
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
"Sunterra"
- 48 -
EQUITY COMPRESSORS, INC.,
an Oklahoma corporation
By
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
"Equity"
"Bank"
BANK OF OKLAHOMA, NATIONAL
ASSOCIATION
By
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President
- 49 -
EXHIBIT LIST
Exhibit A - $20,000,000 Revolving Credit Note (Section 2.2)
Exhibit B-1 - Revolving Loan Advance Request (Section 2.3)
Exhibit B-2 - Borrowing Base Certificate (Section 7.6(c))
Exhibit C - Liabilities (Section 7.25)
Exhibit D - Pending Litigation (Section 8.2)
Exhibit E - Title to Properties (Sections 8.15 and 8.21)
Exhibit F - Take or Pay Disputes (Section 8.19)
EXHIBT A
PROMISSORY NOTE
(Revolving Credit Note)
$20,000,000.00 Tulsa, Oklahoma
March 31, 1997
FOR VALUE RECEIVED, EQUITY COMPRESSION SERVICES CORPORATION, an Oklahoma
corporation, formerly known as ▇▇▇▇▇▇▇ Energy Corporation, SUNTERRA ENERGY
CORPORATION, an Oklahoma corporation, and EQUITY COMPRESSORS, INC., an Oklahoma
corporation (collectively the "Borrowers"), hereby jointly and severally promise
to pay to the order of BANK OF OKLAHOMA, NATIONAL ASSOCIATION (the "Bank"), at
the Bank's principal offices in Tulsa, Oklahoma in lawful money of the United
States of America, the principal sum of TWENTY MILLION and NO/100 DOLLARS
($20,000,000.00) or so much thereof as shall have been advanced hereunder and
remains unpaid on March 31, 2004, with the outstanding unpaid balance hereof on
March 31, 1999 ("Conversion Date") being converted to a sixty (60) month term
payout, payable in fifty-nine (59) consecutive monthly installments of principal
each in an amount equal to one-sixtieth (1/60th) of the LESSER of the
outstanding principal balance hereof on March 31, 1999, each due on the last day
of each calendar month commencing April 30, 1999, together with interest thereon
on unpaid balances of principal from time to time outstanding, payable on the
last day of each calendar month commencing April 30, 1997, and a final payment
of all unpaid principal and accrued interest due and payable at final maturity
on March 31, 2004. Interest shall accrue on the unpaid balance of principal
from time to time outstanding and any past due interest at the applicable
variable annual rate of interest hereinafter specified. All payments under this
Note shall be applied first to unpaid accrued interest and then to outstanding
principal.
The rate of interest payable upon the indebtedness evidenced by this Note
(i) from the date hereof through the Conversion Date shall be a variable annual
rate of interest equal from day to day to the Applicable Prime Rate, as
hereinafter defined, subject to adjustment quarterly as of each February 28, May
31, August 31 and November 30, commencing May 31, 1997, pursuant to the OBB
Ratio described and defined in Section 2.2.1 of the Fourth Amended and Restated
Revolving Credit and Term Loan Agreement dated as of even date herewith between
and among the Borrowers and the Bank (the "Loan Agreement") and (ii) from the
first day after the Conversion Date the variable annual rate is subject to
quarterly adjustment pursuant to the Coverage Ratio scale described in Section
2.2.2 of the Loan Agreement as of each February 28, May 31, August 31 and
November 30, commencing May 31, 1999, but in no event at a rate which is greater
than permitted by applicable law. Any change in the Applicable Prime Rate shall
be effective with respect to this Note as of the date upon which any change in
such rate of interest shall occur. Interest shall be computed on the basis of a
year of 365 days but assessed for the actual number of days elapsed.
For the purposes of this Note, "Applicable Prime Rate" shall mean the
annual rate of interest announced by Chase Manhattan Bank, National Association,
New York, New York ("Chase") from time to time as its prime or base rate, which
shall be the rate used by Chase as a base or standard for pricing purposes and
which shall not necessarily be its "best" or lowest rate. Should Chase cease to
announce a prime or base rate, or should it be merged, ▇▇▇▇▇▇▇-
Revolving Credit Note
Page 2
dated, liquidated or dissolved in such a manner that it loses its separate
corporate or banking identity, then the Applicable Prime Rate shall be the Prime
Rate published by the WALL STREET JOURNAL in its "Money Rates" column as the
prime or base rate or a similar rate if such rate ceases to be published. Any
change in the Applicable Prime Rate shall be effective as of the date of the
change.
After default in the payment of any amount of principal or interest owing
hereunder (whether on maturity, acceleration or otherwise) or upon the
occurrence of any Event of Default as described in the Loan Agreement (said Loan
Agreement, as the same may at any time hereafter be amended, supplemented or
modified and in effect, together with the Prior Loan Agreements therein
described and defined, being collectively herein called the "Loan Agreement"),
the entire unpaid principal and accrued and unpaid interest hereunder shall, at
the sole option of the Bank, be accelerated and immediately become due and
payable without notice by the Bank, and the unpaid principal amount hereof shall
bear interest computed at a variable annual rate equal to the Applicable Prime
Rate plus four percentage points (4%) per annum, but in no event at a rate which
is greater than permitted by applicable law. Upon default in the payment of any
amount of interest payable hereunder, such interest shall, to the full extent
permitted by law, bear interest at the same rate as principal.
This Note is made pursuant to the Loan Agreement and is the Revolving
Credit Note described and defined therein. The Loan Agreement, among other
things, contains provisions concerning the maximum Revolving Credit Borrowing
Base and adjustments thereto, for acceleration of the maturity hereof upon the
events, terms and conditions therein specified, commitment and letter of credit
issuance fees, mandatory principal prepayments, including as described in
Section 3.8 of the Loan Agreement, and voluntary prepayments hereof.
This Note is secured by the Collateral described in the Loan Agreement and
the Security Instruments described and defined in the Loan Agreement and in the
Prior Agreements therein defined which have been executed by the Borrowers and
delivered to the Bank. Reference is hereby made to the Security Instruments for
a description of the property, assets and interests thereby mortgaged, conveyed,
pledged and/or assigned, as the case may be, the nature and extent of the
security thereunder and the security interests created thereby, and the rights
of the Bank (or the holder of this Note) and the Borrowers in respect thereof.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity or in bankruptcy, receivership or other court
proceedings or this Note be placed in the hands of attorneys for collection
after default, the Borrowers agree to pay hereunder, in addition to the
principal and interest
Revoling Credit Note
Page 3
due and payable hereon, reasonable attorneys' fees, court
costs and other collection expenses incurred by the holder hereof.
The Borrowers hereby waive presentment for payment, demand, notice of
nonpayment, protest and notice of protest with respect to any payment hereunder
and agree to any extension of time with respect to any payment due hereunder, to
any substitution or release of the security or collateral described in the
Security Instruments and to the addition or release of any party liable
hereunder. No delay on the part of the holder hereof in exercising any rights
hereunder shall operate as a waiver of such rights.
Upon the occurrence of any default hereunder, Bank shall have the right,
immediately and without further action by it, to set off against this Note all
money owed by Bank in any capacity to each or any maker, guarantor, endorser or
other person who is or might be liable for payment hereof, whether or not due,
and also to set off against all other liabilities of each maker to Bank all
money owed by Bank in any capacity to each or any maker; and Bank shall be
deemed to have exercised such right of setoff and to have made a charge against
such money immediately upon the occurrence of such default even though such
charge is made or entered into the books of Bank subsequently thereto.
This Note replaces the indebtedness evidenced by the (i) $12,000,000 joint
and several Revolving Credit Note dated as of December 16, 1996 from the
Borrowers payable to the order of the Bank as more particularly described and
defined in the Prior Loan Agreements and (ii) the $500,000 Interim Note defined
in the Loan Agreement. This Note and the indebtedness evidenced hereby shall be
construed and enforced in accordance with and governed by the laws of the State
of Oklahoma and is delivered to the Bank in Tulsa, Oklahoma, by the undersigned
duly authorized corporate officer of each of the Borrowers.
EQUITY COMPRESSION SERVICES
CORPORATION, an Oklahoma
corporation, formerly known as
▇▇▇▇▇▇▇ Energy Corporation
By
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
SUNTERRA ENERGY CORPORATION
an Oklahoma Corporation
By
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
EQUITY COMPRESSORS, INC., an
Oklahoma corporation
By
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
"Borrowers"
DUE: March 31, 2004
(convertible to term loan
on March 31, 1999 per
Revoling Credit Note
Page 4
Sections 2.1 and 2.2 of Loan Agreement)
EXHIBIT B
LOAN REQUEST, CERTIFICATION AND
CONFIRMATORY SECURITY AGREEMENT
FOR REVOLVING CREDIT NOTE
Bank of Oklahoma, N.A.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Energy Department
Gentlemen:
Pursuant to the provisions of the Fourth Amended and Restated Revolving
Credit and Term Loan Agreement dated as of March 31, 1997 (the "Credit
Agreement"), among the undersigned, Equity Compressors, Inc. and Sunterra Energy
Corporation (collectively the "Borrowers") and you, the undersigned, as agent
for the Borrowers, hereby (i) confirms and ratifies your continuing first and
prior security interest and mortgage lien in and to all of the Collateral
(including proceeds thereof) described or referred to in the Credit Agreement or
in the Security Instruments described therein; (ii) applies to you for a
Revolving Credit Loan on the Revolving Credit Note in the amount shown on Line 7
below; (iii) certifies that no Event of Default or Default under the Credit
Agreement has occurred and is continuing as of the date hereof or exists or
would continue to exist but for the lapse of time or giving of notice, or both;
(iv) represents and warrants to you that the representations, covenants and
warranties set forth or referred to in the Credit Agreement are true and correct
on and as of this date; and (v) certifies to you the accuracy of the following
information concerning the Borrowing Base for the Revolving Credit Note:
1. Revolving Credit Borrowing Base
Before Letters of Credit $
--------------
2. Unfunded Letters of Credit Out-
standing or Requested (Not to
exceed $500,000 in
the aggregate) $
-------------
3. Net Revolving Credit Borrowing Base
(Line 1 minus Line 2) $
-------------
4. Outstanding Revolving Credit
Note Principal Balance $
-------------
5. Advance Requested $
-------------
6. New Revolving Credit Loan Balance
(Line 4 plus Line 5, but
not to exceed Line 3) $
----------
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
day of , 199 .
------ --------------- --
EQUITY COMPRESSION SERVICES CORPORATION, an
Oklahoma corporation
By
------------------------------------------
(Title)
"Agent for Borrowers"
EXHIBIT C
LIABILITIES
There are no long-term liabilities of the Borrowers except the deferred tax
liability as recorded.
EXHIBIT D
PENDING LITIGATION
NONE
EXHIBIT E
TITLE TO PROPERTIES
EXHIBIT F
Take or Pay Disputes
The Borrowers are not involved in any take or pay disputes.