EXHIBIT 4.3
FIRST AMENDMENT AND SUPPLEMENT TO CREDIT AGREEMENT
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THIS FIRST AMENDMENT AND SUPPLEMENT TO CREDIT AGREEMENT (this "First
Amendment") is made and entered into as of the 21st day of June, 1996, but
effective as of June 7, 1996 (the "First Amendment Effective Date"), among EDGE
JOINT VENTURE II, as Borrower ("Borrower"), and COMPASS BANK-HOUSTON, as Lender
("Lender").
W I T N E S S E T H:
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WHEREAS, on July 11, 1995, Borrower and Lender entered into a certain
Credit Agreement (the "Credit Agreement") whereby, upon the terms and conditions
therein stated, Lender agreed to make certain loans and extend certain credit to
Borrower; and
WHEREAS, Borrower and Lender mutually desire to amend certain aspects of
the Credit Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, Borrower and Lender hereby agree that the Credit Agreement
shall be amended as follows:
Section 1. Certain Definitions. As used in this First Amendment, the
terms "Borrower," "Credit Agreement," "First Amendment," "First Amendment
Effective Date," and "Lender," shall have the meanings indicated above; and
unless otherwise defined herein, all terms beginning with a capital letter which
are defined in the Credit Agreement shall have the same meanings herein as
therein, unless the context hereof otherwise requires.
Section 2. Amendments to Credit Agreement.
Section 2.1. Defined Terms. The following terms, which are defined in
Section 1.02 of the Credit Agreement, are hereby amended as follows:
(a) The term "Agreement" is hereby amended to mean the Credit
Agreement, as amended and supplemented by this First Amendment and as
the same may from time to time be further amended or supplemented.
(b) The term "Note" is hereby amended to mean the Note being in
the form of Exhibit A attached to the Credit Agreement, as modified and
extended by the Modification Agreement, together with any and all future
renewals, extensions for any period, increases, rearrangements,
substitutions or modifications thereof.
(c) The term "Revolving Credit Note" is hereby deleted.
(d) The term "Revolving Credit Termination Date" is hereby
amended to mean June 1, 1998.
Section 2.2. Additional Defined Terms. Section 1.02 of the Credit
Agreement is hereby further amended by adding the following new definitions,
which read in their entirety as follows:
"First Amendment" shall mean that certain First Amendment and
Supplement to Credit Agreement dated effective as of June 7, 1996,
between the Borrower and the Lender.
"Modification Agreement" shall mean that certain Note
Modification and Extension Agreement dated effective as of June 7, 1996,
between the Borrower and the Lender.
Section 3. Amendments to the Credit Agreement. The following
provisions of the Credit Agreement shall be amended as follows:
(a) Section 2.04 Fees. Section 2.04 of the Credit Agreement is
hereby amended by adding thereto a new subsection (d) to read as follows:
"(d) Facility Fee. The Borrower shall pay a facility fee of
$7,500 to the Lender on the First Amendment Effective Date."
(b) Section 2.07 Borrowing Base. Pursuant Section 2.07 of the
Credit Agreement, the Borrowing Base shall be $9,500,000 for the period from and
after the First Amendment Effective Date, up to but excluding August 1, 1996.
(c) Section 9.12 Cash Flow to Debt Service Coverage Ratio. Section
9.12 of the Credit Agreement is hereby amended in its entirety to read as
follows:
"Section 9.12 Cash Flow to Debt Service Coverage Ratio.
The Borrower will not permit its Cash Flow to Debt Service Ratio
as at the end of any fiscal quarter of the Borrower to be less than 1.25
to 1.00. For purposes of this Section 9.12, "Cash Flow to Debt Service
Ratio" shall mean the ratio of (i) net income plus depreciation,
depletion, amortization and any other non-cash expenses less non-cash
income for such fiscal quarter ending on such date to (ii) cash payments
made for principal on debt or capital leases for such fiscal quarter of
the Borrower."
3. Default. Any default under this First Amendment shall
constitute a default under the Credit Agreement.
4. Representations and Warranties. The Borrower represents and
warrants to the Lender that:
(i) There exists no default or event of default, or any condition or
act which constitutes, or with notice or lapse of time or both
would constitute, an Event of Default under the Credit
Agreement, as hereby amended;
(ii) The Borrower has performed and complied with all covenants,
agreements and conditions contained in the Credit Agreement, as
hereby amended, required to be performed or complied with by it;
and
(iii) The representations and warranties of the Borrower contained in
the Credit Agreement, as hereby amended, were true and correct
when made and are true and correct in all material respects at
and as of the time of delivery of this First Amendment.
5. Extent of Amendments. Except as expressly herein set forth, all
of the terms, conditions, defined terms, covenants, representations, warranties
and all other provisions of the Credit Agreement are herein ratified and
confirmed and shall remain in full force and effect.
6. Counterparts. This First Amendment may be executed in two or
more counterparts, and it shall not be necessary that the signatures of all
parties hereto be contained on any one counterpart hereof; each counterpart
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
7. References. On and after the First Amendment Effective Date,
the terms "Agreement", "hereof," "herein," "hereunder," and terms of like import
when used in the Credit Agreement shall, except where the context otherwise
requires, refer to the Credit Agreement, as supplemented and amended by this
First Amendment.
NOTICE. THIS WRITTEN FIRST AMENDMENT, THE CREDIT AGREEMENT, AS
SUPPLEMENTED AND AMENDED HEREBY, THE NOTE, AS MODIFIED AND EXTENDED BY THE
MODIFICATION AGREEMENT, AND THE OTHER SECURITY INSTRUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OR PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
This First Amendment shall benefit and bind the parties hereto, as well
as their respective assigns, successors, heirs and legal representatives.
EXECUTED as of the First Amendment Effective Date.
BORROWER:
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EDGE JOINT VENTURE II
By: Edge Petroleum Corporation,
Managing Venturer
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
LENDER:
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COMPASS BANK-HOUSTON
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
____________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Vice President
CREDIT AGREEMENT
DATED AS OF JULY 11, 1995
BETWEEN
EDGE JOINT VENTURE II
AS BORROWER
AND
COMPASS BANK-HOUSTON,
AS LENDER
$20,000,000 Revolving Credit
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Terms Defined Above ................................... 1
Section 1.02 Certain Defined Terms ................................. 1
Section 1.03 Accounting Terms and Determinations ................... 10
ARTICLE II
COMMITMENTS
Section 2.01 Loans ................................................ 11
Section 2.02 Borrowings ........................................... 11
Section 2.03 Changes of Revolving Credit Commitment ............... 11
Section 2.04 Fees ................................................. 12
Section 2.05 Note ................................................. 12
Section 2.06 Prepayments .......................................... 12
Section 2.07 Borrowing Base ....................................... 13
Section 2.08 Nonrecourse Obligations .............................. 14
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Loans ................................... 14
Section 3.02 Interest ............................................. 14
ARTICLE IV
PAYMENTS; COMPUTATIONS; ETC.
Section 4.01 Payments ............................................. 15
Section 4.02 Computations ......................................... 15
Section 4.03 Set-off .............................................. 15
Section 4.04 Disposition of Proceeds .............................. 15
ARTICLE V
Intentionally Left Blank ........................................... 16
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Initial Funding ...................................... 16
Section 6.02 Initial and Subsequent Loans ......................... 17
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.01 Existence ............................................ 18
Section 7.02 Financial Condition .................................. 18
Section 7.03 Litigation ........................................... 19
Section 7.04 No Breach ............................................ 19
Section 7.05 Authority ............................................ 19
Section 7.06 Approvals ............................................ 19
Section 7.07 Use of Loans ......................................... 19
Section 7.08 ERISA ................................................ 20
Section 7.09 Taxes ................................................ 20
Section 7.10 Titles, Etc. ......................................... 20
Section 7.11 No Material Misstatements ............................ 20
Section 7.12 Investment Company Act ............................... 21
Section 7.13 Public Utility Holding Company Act ................... 21
Section 7.14 Subsidiaries and Partnerships ........................ 21
Section 7.15 Location of Business and Offices ..................... 21
Section 7.16 Defaults ............................................. 21
Section 7.17 Environmental Matters ................................ 21
Section 7.18 Compliance with the Law .............................. 22
Section 7.19 Insurance ............................................ 23
Section 7.20 Hedging Agreements ................................... 23
Section 7.21 Restriction on Liens ................................. 24
Section 7.22 Material Agreements .................................. 24
Section 7.23 Gas Imbalances ....................................... 24
Section 7.24 Partnership Agreement ................................ 24
Section 7.25 Remittances .......................................... 24
ARTICLE VIII
AFFIRMATIVE COVENANTS
Section 8.01 Financial Statements ................................. 24
Section 8.02 Litigation ........................................... 25
Section 8.03 Maintenance, Etc. .................................... 26
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Section 8.04 Environmental Matters ................................ 27
Section 8.05 Further Assurances ................................... 27
Section 8.06 Performance of Obligations ........................... 28
Section 8.07 Engineering Reports .................................. 28
Section 8.08 Title Information .................................... 29
Section 8.09 Additional Collateral ................................ 29
Section 8.10 Change in Management ................................. 30
Section 8.12 Operating Accounts ................................... 30
ARTICLE IX
NEGATIVE COVENANTS
Section 9.01 Debt ................................................. 30
Section 9.02 Liens ................................................ 31
Section 9.03 Investments, Loans and Advances ...................... 31
Section 9.04 Dividends, Distributions and Redemptions ............. 32
Section 9.05 Sales and Leasebacks ................................. 33
Section 9.06 Nature of Business ................................... 33
Section 9.07 Limitation on Leases ................................. 33
Section 9.08 Mergers, Etc. ........................................ 33
Section 9.09 Proceeds of Note ..................................... 33
Section 9.10 Sale or Discount of Receivables ...................... 33
Section 9.11 Tangible Venturer's Capital .......................... 33
Section 9.12 Cash Flow to Debt Service Coverage Ratio ............. 34
Section 9.13 Sale of Oil and Gas Properties ....................... 34
Section 9.14 Environmental Matters ................................ 34
Section 9.15 Transactions with Affiliates ......................... 34
Section 9.16 Subsidiaries and Partnerships ........................ 35
Section 9.17 Negative Pledge Agreements ........................... 35
Section 9.18 Gas Imbalances, Take-or-Pay or Other Prepayments ..... 35
Section 9.19 Partnership Agreement ................................ 35
Section 9.20 Subordinated Note .................................... 35
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default ................................... 35
Section 10.02 Remedies ............................................ 37
ARTICLE XI
MISCELLANEOUS
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Section 11.01 Waiver .............................................. 38
Section 11.02 Letters in Lieu ..................................... 38
Section 11.03 Notices ............................................. 38
Section 11.04 Payment of Expenses, Indemnities, Etc. .............. 38
Section 11.05 Amendments, Etc. .................................... 41
Section 11.06 Successors and Assigns .............................. 41
Section 11.07 Assignments and Participations ...................... 41
Section 11.08 Invalidity .......................................... 42
Section 11.09 Counterparts ........................................ 42
Section 11.10 References .......................................... 42
Section 11.11 Survival ............................................ 42
Section 11.12 Captions ............................................ 42
Section 11.13 NO ORAL AGREEMENTS .................................. 42
Section 11.14 GOVERNING LAW; SUBMISSION TO JURISDICTION ........... 43
Section 11.15 Interest ............................................ 43
Section 11.16 Confidentiality ..................................... 44
Section 11.17 Effectiveness ....................................... 45
Section 11.18 EXCULPATION PROVISIONS .............................. 45
Exhibit A - Form of Note
Exhibit B - Form of Borrowing Request
Exhibit C - Form of Compliance Certificate
Exhibit D - Form of Letter in Lieu
Exhibit E - List of Security Instruments
Exhibit F - Copy of Subordinated Note
Schedule 7.02 - Liabilities
Schedule 7.03 - Litigation
Schedule 7.09 - Taxes
Schedule 7.10 - Titles, Etc.
Schedule 7.14 - Subsidiaries and Partnerships
Schedule 7.17 - Environmental Matters
Schedule 7.19 - Insurance
Schedule 7.20 - Hedging Agreements
Schedule 7.22 - Material Agreements
Schedule 7.23 - Gas Imbalances
Schedule 9.01 - Debt
Schedule 9.02 - Liens
Schedule 9.03 - Investments, Loans and Advances
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THIS CREDIT AGREEMENT dated as of July 11, 1995 is between: EDGE JOINT
VENTURE II, a joint venture formed under the laws of the State of Texas, (the
"Borrower") among the Venturers (hereinafter defined) with Edge Petroleum
Corporation as Managing Venturer, and COMPASS BANK-HOUSTON, a Texas State
Chartered Banking Institution (the "Lender").
R E C I T A L S
A. The Borrower has requested that the Lender provide certain loans to the
Borrower.
B. The Lender has agreed to make such loans subject to the terms and
conditions of this Agreement.
C. In consideration of the mutual covenants and agreements herein
contained and of the loans and commitments hereinafter referred to, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Terms Defined Above. As used in this Agreement, the
terms "Borrower" and "Lender" shall have the meanings indicated above.
Section 1.02 Certain Defined Terms. As used herein, when capitalized
the following terms shall have the following meanings (all terms defined in this
Article I or in other provisions of this Agreement in the singular to have the
same meanings when used in the plural and vice versa):
"Affiliate" of any Person shall mean any Person directly or indirectly
controlled by, controlling or under common control with such first Person.
As used in this definition, "control" (including, with its correlative
meanings, "controlled by" and "under common control with") shall mean any
Person, excluding Venturers, which owns directly or indirectly 10% or more
of the securities having ordinary voting power for the election of
directors or other governing body of a corporation or 10% or more of the
partnership or other ownership interests of any other Person (other than as
a limited partner of such other Person) will be deemed to control such
corporation or other Person.
"Agreement" shall mean this Credit Agreement, as the same may from
time to time be amended or supplemented.
"Applicable Margin" shall mean 3/4 of 1% per annum.
"Base Rate" shall mean for any day, the higher of (i) the Federal
Funds Rate for any such day plus 1/2 of 1% or (ii) the Index Rate for such
day. Each change in any interest rate provided for herein based upon the
Base Rate resulting from a change in the Base Rate shall take effect at the
time of such change in the Base Rate.
"Borrowing Base" shall mean at any time an amount equal to the amount
determined in accordance with Section 2.07.
"Business Day" shall mean any day other than a day on which commercial
banks are authorized or required to close in Houston, Texas.
"Closing Date" shall mean July 11, 1995.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and any successor statute.
"Commitment" shall mean the Lender's obligation to make the Loans
pursuant to Section 2.01.
"Debt" shall mean, for any Person the sum of the following (without
duplication): (i) all obligations of such Person for borrowed money or
evidenced by bonds, debentures, notes or other similar instruments
(including principal, interest, fees and charges); (ii) all obligations of
such Person (whether contingent or otherwise) in respect of bankers'
acceptances, letters of credit, surety or other bonds and similar
instruments; (iii) all obligations of such Person to pay the deferred
purchase price of Property or services (other than for borrowed money);
(iv) all obligations under leases which shall have been, or should have
been, in accordance with GAAP, recorded as capital leases in respect of
which such Person is liable (whether contingent or otherwise); (v) all
obligations under leases which require such Person or its Affiliate to make
payments over the term of such lease, including payments at termination,
which are substantially equal to at least eighty percent (80%) of the
purchase price of the Property subject to such lease plus interest as an
imputed rate of interest; (vi) all Debt and other obligations of others
secured by a Lien on any asset of such Person, whether or not such Debt is
assumed by such Person; (vii) all Debt and other obligations of others
guaranteed by such Person or in which such Person otherwise assures a
creditor against loss of the Debtor or obligations of others; (viii) all
obligations or undertakings of such Person to maintain or cause to be
maintained the financial position or covenants of others; (ix) the
undischarged balance of any production payment created by such Person or
for the creation of which such Person directly or indirectly received
payment; (x) all obligations of such Person under Hedging Agreements; and
(xi) obligations to deliver goods or services including Hydrocarbons in
consideration of advance payments.
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"Default" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default, provided that
such definition shall not expand the rights of Lender to declare an Event
of Default without giving notice as required by the Loan Documents.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"Effective Date" shall have the meaning assigned such term in Section
11.17.
"Engineering Reports" shall have the meaning assigned such term in
Section 2.07.
"Environmental Laws" shall mean any and all Governmental Requirements
pertaining to health or the environment in effect in any and all
jurisdictions in which the Borrower is conducting or at any time has
conducted business, or where any Property of the Borrower is located,
including without limitation, the Oil Pollution Act of 1990 ("OPA"), the
Clean Air Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health
Act of 1970, as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Hazardous Materials
Transportation Act, as amended, and other environmental conservation or
protection laws. The term "oil" shall have the meaning specified in OPA,
the terms "hazardous substance" and "release" (or "threatened release")
have the meanings specified in CERCLA, and the terms "solid waste" and
"disposal" (or "disposed") have the meanings specified in RCRA; provided,
however, that (i) in the event either OPA, CERCLA or RCRA 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 (ii) to
the extent the laws of the state in which any Property of the Borrower is
located establish a meaning for "oil," "hazardous substance," "release,"
"solid waste" or "disposal" which is broader than that specified in either
OPA, CERCLA or RCRA, such broader meaning shall apply.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute.
"Event of Default" shall have the meaning assigned such term in
Section 10.01.
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"Excepted Liens" shall mean: (i) Liens for taxes, assessments or
other governmental charges or levies not yet due or which are being
contested in good faith by appropriate action and for which appropriate
reserves have been maintained; (ii) Liens in connection with workers
compensation, unemployment insurance or other social security, old age
pension or public liability obligations not yet due or which are being
contested in good faith by appropriate action and for which appropriate
reserves have been maintained in accordance with GAAP; (iii) operators',
vendors', carriers', warehousemen's, repairmen's, mechanics', workmen's,
materialmen's, construction or other like Liens arising by operation of law
in the ordinary course of business or incident to the exploration,
development, operation and maintenance of Oil and Gas Properties or
statutory landlord's liens, each of which is in respect of obligations that
have not been outstanding more than 90 days or which are being contested in
good faith by appropriate proceedings and for which appropriate reserves
have been maintained in accordance with GAAP; (iv) any Liens reserved in
leases or farmout agreements for rent or royalties and for compliance with
the terms of the farmout agreements or leases in the case of leasehold
estates, to the extent that any such Lien referred to in this clause does
not materially impair the use of the Property covered by such Lien for the
purposes for which such Property is held by the Borrower or materially
impair the value of such Property subject thereto; (v) encumbrances (other
than to secure the payment of borrowed money or the deferred purchase price
of Property or services), easements, restrictions, servitudes, permits,
conditions, covenants, exceptions or reservations in any rights of way or
other Property of the Borrower for the purpose of roads, pipelines,
transmission lines, transportation lines, distribution lines for the
removal of gas, oil, coal or other minerals or timber, and other like
purposes, or for the joint or common use of real estate, rights of way,
facilities and equipment, and defects, irregularities, zoning restrictions
and deficiencies in title of any rights of way or other Property which in
the aggregate do not materially impair the use of such rights of way or
other Property for the purposes of which such rights of way and other
Property are held by the Borrower or materially impair the value of such
Property subject thereto; (vi) deposits of cash or securities to secure the
performance of bids, trade contracts, leases, statutory obligations and
other obligations of a like nature incurred in the ordinary course of
business; and (vii) Liens permitted by the Security Instruments, including
without limitation the Subordinated Note and Liens in favor of the operator
arising under operating agreements.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight federal funds transactions with
a member of the Federal Reserve System arranged by federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the
Business Day next succeeding such day, provided that (i) if the date for
which such rate is to be determined is not a Business Day, the Federal
Funds Rate for such day shall be such rate on such
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transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (ii) if such rate is not so published for any
day, the Federal Funds Rate for such day shall be the average rate charged
to the Lender on such day on such transactions.
"Financial Statements" shall mean the financial statement or
statements of the Borrower described or referred to in Section 7.02.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"Governmental Authority" shall include the country, the state, county,
city and political subdivisions in which any Person or such Person's
Property is located or which exercises valid jurisdiction over any such
Person or such Person's Property, and any court, agency, department,
commission, board, bureau or instrumentality of any of them including
monetary authorities which exercises valid jurisdiction over any such
Person or such Person's Property. Unless otherwise specified, all
references to Governmental Authority herein shall mean a Governmental
Authority having jurisdiction over, where applicable, the Borrower and its
Property or the Lender.
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, determination, rule, regulation, judgment, decree,
injunction, franchise, permit, certificate, license, authorization or other
directive or requirement (whether or not having the force of law),
including, without limitation, Environmental Laws, energy regulations and
occupational, safety and health standards or controls, of any Governmental
Authority.
"Hedging Agreements" shall mean any commodity, interest rate or
currency swap, rate cap, rate floor, rate collar, forward agreement or
other exchange or rate protection agreements or any option with respect to
any such transaction.
"Highest Lawful Rate" shall mean the maximum nonusurious interest
rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received on the Note or on other Indebtedness
under laws applicable to the Lender which are presently in effect or, to
the extent allowed by law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum nonusurious interest rate
than applicable laws now allow.
"Hydrocarbon Interests" shall mean all rights, titles, interests and
estates now or hereafter acquired in and to oil and gas leases, oil, gas
and mineral leases, or other liquid or gaseous hydrocarbon leases, mineral
fee interests, overriding royalty and royalty interests, net profit
interests and production payment interests, including any reserved or
residual interests of whatever nature.
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"Hydrocarbons" shall mean oil, gas, casinghead gas, drip gasoline,
natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons and all products refined or separated therefrom, which
Hydrocarbons are produced from the Mortgaged Property.
"Indebtedness" shall mean any and all amounts owing or to be owing by
the Borrower to the Lender in connection with the Loan Documents and all
renewals, extensions and/or rearrangements of any of the above.
"Indemnified Parties" shall have the meaning assigned such term in
Section 11.04(b).
"Indemnity Matters" shall mean any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), claims, demands
and causes of action made or threatened against a Person and, in connection
therewith, all losses, liabilities, damages (including, without limitation,
consequential damages) or reasonable costs and expenses of any kind or
nature whatsoever incurred by such Person whether caused by the sole or
concurrent negligence of such Person seeking indemnification.
"Index Rate" shall mean, on any day, the prime rate as published in
The Wall Street Journal's "Money Rates" table for such day. If multiple
prime rates are quoted in such table, then the highest prime rate quoted
therein shall be the Index Rate. In the event that a prime rate is not
published in The Wall Street Journal's "Money Rates" table, the Lender will
choose a substitute Index Rate, for purposes of calculating the Base Rate,
which is based on comparable information, until such time as a prime rate
is published in The Wall Street Journal's "Money Rates" tables.
"Initial Funding" shall mean the funding of the initial Loans pursuant
to Section 6.01 hereof.
"Initial Reserve Report" shall mean the report of ▇▇▇▇▇-▇▇▇▇▇ Co.,
dated as of January 1, 1995, as revised in the reports dated April 11, 1995
and May 4, 1995, with respect to the Oil and Gas Properties of the
Borrower, a copy of which has been delivered to the Lender.
"Letter in Lieu" shall mean the letter in lieu referred to on
Exhibit D.
"Lien" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether
such interest is based on the common law, statute or contract, and whether
such obligation or claim is fixed or contingent, and including but not
limited to (i) the lien or security interest arising from a mortgage,
encumbrance, pledge, security agreement,
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conditional sale or trust receipt or a lease, consignment or bailment for
security purposes or (ii) production payments and the like payable out of
Oil and Gas Properties. The term "Lien" shall include reservations,
exceptions, encroachments, easements, rights of way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
Property. For the purposes of this Agreement, the Borrower shall be deemed
to be the owner of any Property which it has acquired or holds subject to a
conditional sale agreement, or leases under a financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person in a transaction intended to create a
financing.
"Loan Documents" shall mean this Agreement, the Note and the Security
Instruments.
"Loans" shall mean the loans as provided for by Section 2.01(a).
"Managing Venturer" shall mean Edge Petroleum Corporation, a Texas
corporation and managing venturer of the Borrower.
"Material Adverse Effect" shall mean any material and adverse effect,
as determined by the Lender, on (i) the assets, liabilities, financial
condition, business, operations, affairs or circumstances of the Borrower
different from those reflected in the Financial Statements or from the
facts represented or warranted in this Agreement or any Security
Instrument, or (ii) the ability of the Borrower to carry out their business
as at the Closing Date or as proposed as of the Closing Date to be
conducted or meet its obligations under the Loan Documents on a timely
basis.
"Maximum Credit Amount" at any time shall equal $20,000,000.
"Mortgaged Property" shall mean the Property owned by the Borrower and
which is subject to the Liens existing and to exist under the terms of the
Security Instruments.
"Note" shall mean the Note provided for by Section 2.05, together with
any and all renewals, extensions for any period, increases, rearrangements,
substitutions or modifications thereof.
"Oil and Gas Properties" shall mean Hydrocarbon Interests; the
Properties now or hereafter pooled or unitized with Hydrocarbon Interests;
all presently existing or future unitization, pooling agreements and
declarations of pooled units and the units created thereby (including
without limitation all units created under orders, regulations and rules of
any Governmental Authority) which may affect all or any portion of the
Hydrocarbon Interests; all operating agreements, contracts
-7-
and other agreements which relate to any of the Hydrocarbon Interests or
the production, sale, purchase, exchange or processing of Hydrocarbons from
or attributable to such Hydrocarbon Interests; all Hydrocarbons in and
under and which may be produced and saved or attributable to the
Hydrocarbon Interests, including all oil in tanks, the lands covered
thereby and all rents, issues, profits, proceeds, products, revenues and
other incomes from or attributable to the Hydrocarbon Interests; all
tenements, hereditaments, appurtenances and Properties in any manner
appertaining, belonging, affixed or incidental to the Hydrocarbon
Interests; and all Properties, rights, titles, interests and estates
described or referred to above, including any and all Property, real or
personal, now owned or hereinafter acquired and situated upon, used, held
for use or useful in connection with the operating, working or development
of any of such Hydrocarbon Interests or Property (excluding drilling rigs,
automotive equipment or other personal property which may be on such
premises for the purpose of drilling a well or for other similar temporary
uses) and including any and all oil ▇▇▇▇▇, gas ▇▇▇▇▇, injection ▇▇▇▇▇ or
other ▇▇▇▇▇, buildings, structures, fuel separators, liquid extraction
plants, plant compressors, pumps, pumping units, field gathering systems,
tanks and tank batteries, fixtures, valves, fittings, machinery and parts,
engines, boilers, meters, apparatus, equipment, appliances, tools,
implements, cables, wires, towers, casing, tubing and rods, surface leases,
rights-of-way, easements and servitudes together with all additions,
substitutions, replacements, accessions and attachments to any and all of
the foregoing.
"Partnership Agreement" shall mean the written Joint Venture Agreement
among the Venturers dated April 8, 1991, as may be amended hereafter.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization
or government or any agency, instrumentality or political subdivision
thereof, or any other form of entity.
"Post-Default Rate" shall mean, in respect of any principal of any
Loan or any other amount payable by the Borrower under this Agreement or
the Note which is not paid when due (whether at stated maturity, by
acceleration or otherwise), a rate per annum during the period commencing
on the due date until such amount is paid in full or the default is cured
or waived equal to 5% per annum above the Base Rate as in effect from time
to time plus the Applicable Margin (if any), but in no event to exceed the
Highest Lawful Rate.
"Principal Office" shall mean the principal office of the Lender,
presently located at ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
-8-
"Quarterly Dates" shall mean the first day of each April, July,
October, and January, in each year, the first of which shall be October 1,
1995; provided, however, that if any such day is not a Business Day, such
Quarterly Date shall be the next succeeding Business Day.
"Redetermination Date" shall have the meaning assigned such term in
Section 2.07(a).
"Reserve Report" shall mean a report, in form and substance
satisfactory to the Lender, setting forth, as of each January 1 (for the
Reserve Report due each April 1 pursuant to Section 8.07(a) and July 1 (for
the Reserve Report due each October 1 pursuant to Section 8.07(b)) (or such
other date in the event of an unscheduled redetermination); (i) the oil and
gas reserves attributable to the Oil and Gas Properties together with a
projection of the rate of production and future net income, taxes,
operating expenses and capital expenditures with respect thereto as of such
date, based upon the pricing assumptions consistent with SEC reporting
requirements at the time and (ii) such other information as the Lender may
reasonably request.
"Responsible Officer" shall mean, as to any Person, the Chief
Executive Officer, the President or any Vice President of such Person and,
with respect to financial matters, the term "Responsible Officer" shall
include the Chief Financial Officer of such Person. Unless otherwise
specified, all references to a Responsible Officer herein shall mean a
Responsible Officer of the Managing Venturer of the Borrower.
"Revolving Credit Commitment" shall mean the obligation of the Lender
to make Loans to the Borrower under Section 2.01 hereof, up to the lesser
of the Borrowing Base or $20,000,000.
"Revolving Credit Loan" shall mean Loans made pursuant to Section 2.01
hereof.
"Revolving Credit Note" shall mean the promissory note or notes
(whether one or more) of the Borrower described in Section 2.05 hereof and
being in the form of Exhibit A hereto.
"Revolving Credit Period" shall mean the period from the Closing Date
to and ending on the Revolving Credit Termination Date.
"Revolving Credit Termination Date" shall mean, unless the Commitment
is sooner terminated pursuant to Sections 10.02 hereof, June 1, 1997.
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"Scheduled Redetermination Dates" shall have the meaning assigned such
term in Section 2.07(d).
"SEC" shall mean the Securities and Exchange Commission or any
successor Governmental Authority.
"Security Instruments" shall mean the agreements or instruments
described or referred to in Exhibit E, and any and all other agreements or
instruments now or hereafter executed and delivered by the Borrower or any
other Person (other than participation or similar agreements between the
Lender and any other lender or creditor with respect to any Indebtedness
pursuant to this Agreement) in connection with, or as security for the
payment or performance of the Note or this Agreement, as such agreements
may be amended, supplemented or restated from time to time.
"Subordinated Note" shall mean the subordinated promissory note dated
January 3, 1995, executed by the Borrower payable to the order of ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇., in the original principal amount of $2,000,000, a copy of
which is attached hereto as Exhibit F.
"Subordination Agreement" shall mean the Subordination Agreement of
even date herewith among the Borrower, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇., and the Lender,
relating to the Subordinated Note.
"Subsidiary" shall mean any corporation of which at least a majority
of the outstanding shares of stock having by the terms thereof ordinary
voting power to elect a majority of the board of directors of such
corporation (irrespective of whether or not at the time stock of any other
class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by the Borrower or one or more of its
Subsidiaries or by the Borrower and one or more of its Subsidiaries.
"Venturers" shall mean Edge Petroleum Corporation, Edge Group II
Limited Partnership, Gulfedge Limited Partnership and Edge Group
Partnership.
Section 1.03 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Lender hereunder shall be prepared, in
accordance with GAAP, applied on a basis consistent with the audited financial
statements of the Borrower referred to in Section 7.02 (except for changes
concurred with by the Borrower's independent public accountants).
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ARTICLE II
COMMITMENTS
Section 2.01 Loans.
Revolving Credit Loans. The Lender agrees, on the terms of this
Agreement, to make Loans to the Borrower during the period from and
including the Closing Date to and up to, but excluding, the Revolving
Credit Termination Date in an aggregate principal amount at any one time
outstanding up to but not exceeding the amount of the Revolving Credit
Commitment as then in effect; provided, however, that the aggregate
principal amount of all such Loans by the Lender hereunder at any one time
outstanding shall not exceed the Revolving Credit Commitment. Subject to
the terms of this Agreement, during the period from the Closing Date to and
up to, but excluding, the Revolving Credit Termination Date, the Borrower
may borrow, repay and reborrow the amount described in this Section 2.01.
Section 2.02 Borrowings.
(a) Borrowings. The Borrower shall give the Lender advance notice as
hereinafter provided of each borrowing hereunder, which shall specify the
aggregate amount of such borrowing, and the date (which shall be a Business
Day) of the Loans to be borrowed.
(b) Minimum Amounts. All borrowings shall be in amounts of at least
$250,000 or the remaining balance of the Revolving Credit Commitment, if
less, or any whole multiple of $50,000 in excess thereof, with such
borrowings to be advanced by Lender and deposited in Borrower's account
maintained with Lender.
(c) Notices. All borrowings shall require written notice, including
via facsimile, to the Lender in the form of Exhibit B hereto by a
Responsible Officer of Borrower, which in each case shall be irrevocable,
from the Borrower to be received by the Lender not later than 10:00 a.m.
Houston, Texas, time on the date of such borrowing.
Section 2.03 Changes of Revolving Credit Commitment.
The Revolving Credit Commitment shall at all times be equal to the
lesser of (i) the Maximum Credit Amount or (ii) the Borrowing Base as
determined from time to time.
Section 2.04 Fees.
(a) Commitment Fee. The Borrower shall pay to the Lender a commitment
fee on the daily average unused amount of the Revolving Credit Commitment
for the period
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from and including the Closing Date up to but excluding the earlier of the
date the Commitment is terminated or the Revolving Credit Termination Date,
at a rate per annum equal to 1/2 of 1%. Accrued commitment fees shall be
payable quarterly in arrears on each Quarterly Date and on the earlier of
the date the Commitment is terminated or the Revolving Credit Termination
Date.
(b) Facility Fee. The Borrower shall pay on the Closing Date to the
Lender a facility fee of $8,750.
(c) Engineering Fee. The Borrower shall pay to the Lender $5,000 for
each regularly scheduled semi-annual redetermination of the Borrowing Base
and for each redetermination made at the Borrower's request.
Section 2.05 Note. The Revolving Credit Loans shall be evidenced by a
single promissory note of the Borrower in substantially the form of Exhibit A
hereto, dated the Closing Date, payable to the order of the Lender in a
principal amount equal to the Revolving Credit Commitment and otherwise duly
completed. The date, amount of each Loan and all payments made on account of the
principal thereof, shall be recorded by the Lender on its books for the Note,
and, prior to any transfer, endorsed by the Lender on the schedule attached to
such Note or any continuation thereof. Such records shall be deemed conclusive
absent manifest error.
Section 2.06 Prepayments.
(a) The Borrower may prepay the Loans upon prior notice to the Lender,
which notice shall specify the prepayment date (which shall be a Business
Day) and the amount of the prepayment (which shall be at least $50,000 or
the remaining principal balance outstanding on the Note) and shall be
irrevocable and effective only upon receipt by the Lender.
(b) Upon any redetermination of the amount of the Borrowing Base in
accordance with Section 2.07, if the redetermined Borrowing Base is less
than the aggregate outstanding principal amount of the Loans, then the
Borrower shall within thirty (30) days of receipt of written notice thereof
prepay the Loans in an aggregate principal amount equal to such excess,
together with interest on the principal amount paid accrued to the date of
such prepayment.
(c) The Borrower shall prepay the Loans, including principal, interest
and all fees outstanding prior to termination of the Borrower.
(d) Prepayments permitted or required under this Section 2.06 shall be
without premium or penalty. Any prepayments on the Revolving Credit Loan
may be reborrowed subject to the then effective Revolving Credit
Commitment.
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Section 2.07 Borrowing Base.
(a) The Borrowing Base shall be determined in accordance with Section
2.07(b) by the Lender and is subject to redetermination in accordance with
Section 2.07(d). Upon any redetermination of the Borrowing Base, such
redetermination shall remain in effect until the next successive
Redetermination Date. "Redetermination Date" shall mean the date that the
redetermined Borrowing Base becomes effective subject to the notice
requirements specified in Section 2.07(e) both for scheduled
redeterminations and unscheduled redeterminations. So long as the
Commitment is in effect or Loans are outstanding hereunder, this facility
shall be governed by the then effective Borrowing Base. During the period
from and after the Closing Date until the Borrowing Base is redetermined
pursuant to Section 2.07(d) or adjusted pursuant to Section 8.08(c), the
amount of the Borrowing Base shall be $3,500,000.
(b) Upon receipt of the reports required by Section 8.07 and such
other reports, data and supplemental information as may from time to time
be reasonably requested by the Lender (the "Engineering Reports"), the
Lender will redetermine the Borrowing Base in its sole and exclusive
judgment. Such redetermination will be in accordance with its normal and
customary procedures for evaluating oil and gas reserves and other related
assets as such exist at that particular time. The Lender may at any time
(regardless of whether or not reports were submitted under Section 8.07),
in it sole discretion, (i) make adjustments to the rates, volumes and
prices and other assumptions set forth therein in accordance with its
normal and customary procedures for evaluating oil and gas reserves and
other related assets as such exist at that particular time and (ii)
redetermine the Borrowing Base.
(c) The Lender may exclude any Oil and Gas Property or portion of
production therefrom or any income from any other Property from the
Borrowing Base, at any time, because title information is not reasonably
satisfactory, such Property is not Mortgaged Property or such Property is
not assignable.
(d) So long as the Commitment is in effect and until payment in full
of all Loans hereunder, on or around the first Business Day of each May and
November, commencing November 1, 1995 (each being a "Scheduled
Redetermination Date"), or more frequently as requested by the Borrower the
Lender shall redetermine the amount of the Borrowing Base in accordance
with Section 2.07(b), provided, however, the Lender will not be obligated
to respond to Borrower's request for a redetermination of the Borrowing
Base more than two (2) times per year and not more than one time per
quarter, including quarters that contain a scheduled Redetermination Date.
In addition, the Lender may initiate a redetermination of the Borrowing
Base at any other time as it elect, provided that such redetermination is
at the cost and expense of Lender, unless such redetermination follows an
Event of Default.
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(e) The Lender shall promptly notify the Borrower orally and confirm
promptly in writing of the new Borrowing Base. Any redetermination of the
Borrowing Base shall be in effect at such time oral notification is
received by the Borrower.
Section 2.08 Nonrecourse Obligations. Notwithstanding any other
document, instrument, or other part of the Loan Documents, any and all
liabilities and obligations created and evidenced hereby and thereby, shall be
nonrecourse to, and without personal liability of, the Venturers, and their
successors, and assigns, for all purposes, except for the amount of damage, if
any, caused by such Venturer's fraud, willful misrepresentation or interference
with foreclosure actions or any exercise of Lender's rights in connection with
this Agreement, the Note, Security Instruments, or any other document,
instrument, or other part of the Loan Documents. The holders of the Note, and
all obligees and beneficiaries under such Loan Documents, their successors and
assigns, agree to look only to the Borrower and its assets for repayment of any
and all amounts at any time owing or due hereunder and thereunder or arising
under any provision of this Agreement or any other Loan Document and not to any
Venturer or their successors and assigns. Nothing in this Section 2.08 shall be
construed so as to prevent Lender from commencing any action, suit or proceeding
with respect to Borrower or causing legal papers to be served upon any Venturer
for the purpose of obtaining jurisdiction over the Borrower. Borrower covenants
and agrees that it will not permit any Venturers to contest any foreclosure
action commenced by the Lender or to interfere with any exercise of Lender's
rights in connection with this Agreement, the Note, Security Instruments, or any
other document, instrument, or other part of the Loan Documents.
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Loans. The Borrower will pay to the
Lender, the principal payments required by this Section 3.01. On the Revolving
Credit Termination Date the Borrower shall repay the outstanding principal
amount of the Note.
Section 3.02 Interest. The Borrower will pay to the Lender interest
on the unpaid principal amount of each Loan for the period commencing on the
date such Loan is made to but excluding the date such Loan shall be paid in
full, at the Base Rate (as in effect from time to time) plus the Applicable
Margin, but in no event to exceed the Highest Lawful Rate.
Notwithstanding the foregoing, the Borrower will pay to the Lender interest
at the applicable Post-Default Rate on any principal of any Loan, and (to the
fullest extent permitted by law) on any other amount payable by the Borrower
hereunder, under any Security Instrument or under the Note which shall not be
paid in full when due (whether at stated maturity, by acceleration or
otherwise), for the period commencing on the due date thereof until the same is
paid in full.
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Accrued interest on the Loans shall be payable monthly commencing on August
1, 1995.
Promptly after the determination of any interest rate provided for herein
or any change therein, the Lender shall notify the Borrower thereof. Each
determination by the Lender of an interest rate or fee hereunder shall, except
in cases of manifest error, be final, conclusive and binding on the parties.
ARTICLE IV
PAYMENTS; COMPUTATIONS; ETC.
Section 4.01 Payments. Except to the extent otherwise provided
herein, all payments of principal, interest and other amounts to be made by the
Borrower under this Agreement and the Note shall be made in Dollars, in
immediately available funds, to the Lender at such account as the Lender shall
specify by notice to the Borrower from time to time, not later than 2:00 p.m.
Houston, Texas, time on the date on which such payments shall become due (each
such payment made after such time on such due date to be deemed to have been
made on the next succeeding Business Day). Such payments shall be made without
(to the fullest extent permitted by applicable law) defense, set-off or
counterclaim. Each payment to be made to the Lender under this Agreement or the
Note shall be paid promptly to the Lender, in immediately available funds. If
the due date of any payment under this Agreement or the Note would otherwise
fall on a day which is not a Business Day such date shall be extended to the
next succeeding Business Day and interest shall be payable for any principal so
extended for the period of such extension.
Section 4.02 Computations. Interest shall be computed on the basis
of a year of 365 or 366 days, as the case may be, and actual days elapsed
(including the first day but excluding the last day) occurring in the period for
which payable.
Section 4.03 Set-off. The Borrower agrees that, in addition to (and
without limitation of) any right of set-off, bankers' lien or counterclaim the
Lender may otherwise have, the Lender shall have the right and be entitled, at
its option, to offset balances held by it or by any of its Affiliates for
account of the Borrower at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of the Loans or any other
amount payable to the Lender hereunder, which is not paid when due (regardless
of whether such balances are then due to the Borrower), in which case it shall
promptly notify the Borrower thereof, provided that Lender's failure to give
such notice shall not affect the validity thereof.
Section 4.04 Disposition of Proceeds. The Security Instruments
contain an assignment by the Borrower unto and in favor of the Lender of all
production and all proceeds attributable thereto which may be produced from or
allocated to the Mortgaged Property, and the Security Instruments further
provide in general for the application of such proceeds to the satisfaction of
the Indebtedness and other obligations described therein and secured thereby.
Notwithstanding the assignment contained in such Security Instruments, until the
occurrence of
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an Event of Default, the Lender agrees that it will neither notify the purchaser
or purchasers of such production nor take any other action to cause such
proceeds to be remitted to the Lender, but the Lender will instead permit such
proceeds to be paid to the Borrower.
ARTICLE V
Intentionally Left Blank.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Initial Funding. The obligation of the Lender to make
the Initial Funding is subject to its receipt by the Lender of all fees payable
pursuant to Section 2.04 on or before the Closing Date and the receipt by the
Lender of the following documents and satisfaction of the other conditions
provided in this Section 6.01, each of which shall be satisfactory to the Lender
in form and substance:
(a) A certificate of the Managing Venturer setting forth (i)
resolutions of its board of directors with respect to the authorization of
the Borrower to execute and deliver the Loan Documents to which it is a
party and to enter into the transactions contemplated in those documents,
(ii) the officers of the Managing Venturer (y) who are authorized to sign
the Loan Documents to which Borrower is a party and (z) who will, until
replaced by another officer or officers duly authorized for that purpose,
act as its representative for the purposes of signing documents and giving
notices and other communications in connection with this Agreement and the
transactions contemplated hereby, (iii) specimen signatures of the
authorized officers, and (iv) the Partnership Agreement, certified as being
true and complete. The Lender may conclusively rely on such certificate
until it receives notice in writing from the Borrower to the contrary.
(b) Certificate issued by the Secretary of State for Louisiana stating
that the Borrower is registered to do business in such state.
(c) A compliance certificate which shall be substantially in the form
of Exhibit C, duly and properly executed by a Responsible Officer and dated
as of the date of the Initial Funding.
(d) The Note, duly completed and executed.
(e) The Security Instruments described on Exhibit E, duly completed
and executed in sufficient number of counterparts for recording, if
necessary.
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(f) An opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇, general counsel of the Borrower, in
form and substance reasonably satisfactory to Lender.
(g) A certificate of insurance coverage of the Borrower evidencing
that the Borrower is carrying insurance in accordance with Section 7.19
hereof.
(h) Copies of the most recent title opinions setting forth the status
of title to the Borrower's interest in the Mortgaged Property.
(i) Letters in Lieu executed in blank by the Borrower which may be
sent by Lender to each of the purchasers of the Hydrocarbons of the
Borrower produced from the Oil and Gas Properties pursuant to Section
11.02.
(j) The Lender shall have been furnished with appropriate UCC search
certificates reflecting the filing of all financing statements required to
perfect the security interests granted by the Security Instruments and
reflecting no prior liens or security interests.
(k) Lender's satisfactory review of (i) title opinions described in
(h) above; (ii) the Borrower's in-house land records as to the Mortgaged
Properties; and (iii) any material contracts, as Lender may require
concerning the title to and operations of the Oil and Gas Properties.
(l) A copy of the Initial Reserve Report.
(m) A list of remitters or purchasers of production from Oil and Gas
Properties, together with addresses of same.
(n) Evidence of consent of Edge Group II Limited Partnership.
(o) Such other documents as the Lender or special counsel to the
Lender may reasonably request.
Upon the Initial Funding, it shall be conclusively presumed that the Borrower
has satisfactorily complied by items (a) through (o) above, except as may be
communicated to Borrower by Lender in writing contemporaneously with the Initial
Funding.
Section 6.02 Initial and Subsequent Loans. The obligation of the
Lender to make Loans to the Borrower upon the occasion of each borrowing
hereunder (including the Initial Funding) is subject to the further conditions
precedent that, as of the date of such Loans and after giving effect thereto:
(i) no Default shall have occurred and be continuing; (ii) no Material Adverse
Effect shall have occurred; and (iii) the representations and warranties made by
the Borrower in Article VII and in the Security Instruments shall be true on and
as of the date of the making of such Loans with the same force and effect as if
made on and as of such date and
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following such new borrowing, except to the extent such representations and
warranties are expressly limited to an earlier date or the Lender may expressly
consent in writing to the contrary. Each request for a borrowing by the Borrower
hereunder shall constitute a certification by the Borrower to the effect set
forth in the preceding sentence (both as of the date of such notice and, unless
the Borrower otherwise notifies the Lender prior to the date of and immediately
following such borrowing as of the date thereof).
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender that (each
representation and warranty herein is given as of the Closing Date and shall be
deemed repeated and reaffirmed on the dates of each borrowing as provided in
Section 6.02):
Section 7.01 Existence. The Borrower: (i) is a partnership duly
organized, legally existing and in good standing under the laws of the
jurisdiction of its formation; (ii) has all requisite power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being or as proposed to be
conducted; and (iii) is qualified to do business in all jurisdictions in which
the nature of the business conducted by it makes such qualification necessary
and where failure so to qualify would have a Material Adverse Effect.
Section 7.02 Financial Condition. The audited balance sheet of the
Borrower as at December 31, 1994, and the related statement of income,
venturer's capital and cash flow of the Borrower for the fiscal year ended on
said date, with the opinion thereon of Deloitte and Touche L.L.P. heretofore
furnished to the Lender and the balance sheet of the Borrower as at March 31,
1995 and the related statements of income, venturer's capital and cash flow of
the Borrower for the three-month period ended on such date heretofore furnished
to the Lender, are complete and correct and fairly present the financial
condition of the Borrower as at said dates and the results of its operations for
the fiscal year and the three-month period on said dates, all in accordance with
GAAP, as applied on a consistent basis (subject, in the case of the interim
financial statements, to normal year-end adjustments). The Borrower does not
have on the Closing Date any material Debt, contingent liabilities, liabilities
for taxes, unusual forward or long-term commitments or unrealized or anticipated
losses from any unfavorable commitments, except as referred to or reflected or
provided for in the Financial Statements or in Schedule 7.02. Since March 31,
1995, there has been no change or event having a Material Adverse Effect. Since
the date of the Financial Statements, neither the business nor the Properties of
the Borrower have been materially and adversely affected as a result of any
fire, explosion, earthquake, flood, drought, windstorm, accident, strike or
other labor disturbance, embargo, requisition or taking of Property or
cancellation of contracts, permits or concessions by any Governmental Authority,
riot, activities of armed forces or acts of God or of any public enemy.
-18-
Section 7.03 Litigation. Except as disclosed to the Lender in
Schedule 7.03 hereto, at the Closing Date there is no litigation, legal,
administrative or arbitral proceeding, investigation or other action of any
nature pending or, to the knowledge of the Borrower threatened against or
affecting the Borrower which involves the possibility of any judgment or
liability against the Borrower not fully covered by insurance (except for normal
deductibles).
Section 7.04 No Breach. Neither the execution and delivery of the
Loan Documents, nor compliance with the terms and provisions hereof will
conflict with or result in a breach of, or require any consent which has not
been obtained as of the Closing Date under, the Partnership Agreement of the
Borrower, or any Governmental Requirement or any agreement or instrument to
which the Borrower is a party or by which it is bound or to which it or its
Properties are subject, or constitute a default under any such agreement or
instrument, or result in the creation or imposition of any Lien upon any of the
revenues or assets of the Borrower pursuant to the terms of any such agreement
or instrument other than the Liens created by the Loan Documents.
Section 7.05 Authority. The Borrower has all necessary power and
authority to execute, deliver and perform its obligations under the Loan
Documents to which it is a party; and the execution, delivery and performance by
the Borrower of the Loan Documents to which it is a party, have been duly
authorized by all necessary action on its part; and the Loan Documents
constitute the legal, valid and binding obligations of the Borrower, enforceable
in accordance with their terms, except as such terms may be subject to
limitations relating to bankruptcy, insolvency, moratorium, equity and other
laws relating to creditors' and debtors' rights.
Section 7.06 Approvals. No authorizations, approvals or consents of,
and no filings or registrations with, any Governmental Authority are necessary
for the execution, delivery or performance by the Borrower of the Loan Documents
to which it is a party or for the validity or enforceability thereof, except for
the recording and filing of the Security Instruments as required by this
Agreement.
Section 7.07 Use of Loans. The proceeds of the Loans shall be used
for general joint venture purposes, including reserve acquisitions, development
drilling, and working capital needs. The Borrower is not engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose, whether immediate, incidental or ultimate, of buying or carrying
margin stock (within the meaning of Regulation G, U or X of the Board of
Governors of the Federal Reserve System) and no part of the proceeds of any Loan
hereunder will be used to buy or carry any margin stock.
Section 7.08 ERISA. The Borrower does not maintain any employee
pension plan as defined in Section 3(2) of ERISA.
Section 7.09 Taxes. Except as set out in Schedule 7.09, the Borrower
has filed all United States Federal income tax returns and all other tax returns
which are required to be filed by them and have paid all material taxes due
pursuant to such returns or pursuant to any
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assessment received by the Borrower. The charges, accruals and reserves on the
books of the Borrower in respect of taxes and other governmental charges are, in
the opinion of the Borrower, adequate. No tax lien has been filed and, to the
knowledge of the Borrower, no claim is being asserted with respect to any such
tax, fee or other charge.
Section 7.10 Titles, Etc.
(a) Except as set out in Schedule 7.10, the Borrower has good and
defensible title to its material (individually or in the aggregate)
Properties, free and clear of all Liens except Liens permitted by Section
9.02. Except as set forth in Schedule 7.10, after giving full effect to the
Excepted Liens, the Borrower owns the net interests in production
attributable to the lands and leases reflected in the most recently
delivered Reserve Report and the ownership of such Properties shall not in
any material respect obligate the Borrower to bear the costs and expenses
relating to the maintenance, development and operations of each such
Property in an amount in excess of the working interest of each Property
set forth in the Initial Reserve Report. Further, upon delivery of each
Reserve Report, the statements made in the preceding sentence shall be true
with respect to such furnished Reserve Reports including the ownership of
the units and ▇▇▇▇▇ set forth therein. All information contained in the
Initial Reserve Report is true and correct in all material respects as of
the date thereof.
(b) All leases and agreements necessary for the conduct of the
business of the Borrower are valid and subsisting, in full force and effect
and there exists no default or event or circumstance which with the giving
of notice or the passage of time or both would give rise to a default under
any such lease or leases, which would affect in any material respect the
conduct of the business of the Borrower.
(c) The rights, properties and other assets presently owned, leased or
licensed by the Borrower including, without limitation, all easements and
rights of way, include all rights, Properties and other assets necessary to
permit the Borrower to conduct their business in all material respects in
the same manner as its business has been conducted prior to the Closing
Date.
(d) All of the assets and Properties of the Borrower which are
reasonably necessary for the operation of its business are in good working
condition and are maintained in accordance with prudent business standards.
Section 7.11 No Material Misstatements. To the best knowledge of the
Borrower, no written information, statement, exhibit, certificate, document or
report furnished to the Lender by the Borrower in connection with the
negotiation of this Agree ment contained any material misstatement of fact or
omitted to state a material fact or any fact necessary to make the statement
contained therein not materially misleading in the light of the circumstances in
which made and with respect to the Borrower. To the best knowledge of the
Borrower, there is no fact peculiar to the Borrower which has a Material Adverse
Effect or in the future is reasonably likely to have
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(so far as the Borrower can now foresee) a Material Adverse Effect and which has
not been set forth in this Agreement or the other documents, certificates and
statements furnished to the Lender by or on behalf of the Borrower prior to, or
on, the Closing Date in connection with the transactions contemplated hereby.
Section 7.12 Investment Company Act. The Borrower is not an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
Section 7.13 Public Utility Holding Company Act. The Borrower is not
a "holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," or a "public utility" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
Section 7.14 Subsidiaries and Partnerships. Except as set forth on
Schedule 7.14, the Borrower has no Subsidiaries and has no interest in any
partnerships, except for special purpose tax partnerships and/or partnerships
created as a result of joint operating agreements.
Section 7.15 Location of Business and Offices. The Borrower's
principal place of business and chief executive offices are located at the
address stated on the signature page of this Agreement.
Section 7.16 Defaults. The Borrower is not in default nor has any
event or circumstance occurred which, but for the expiration of any applicable
grace period or the giving of notice, or both, would constitute a default under
any material agreement or instrument to which the Borrower is a party or by
which the Borrower is bound which default would have a Material Adverse Effect.
No Default under this Agreement has occurred and is continuing.
Section 7.17 Environmental Matters. Except (i) as provided in
Schedule 7.17 or (ii) as would not have a Material Adverse Effect (or with
respect to (c), (d) and (e) below, where the failure to take such actions would
not have a Material Adverse Effect):
(a) To the best knowledge of Borrower, neither any Property of the
Borrower nor the operations conducted thereon violate any order or
requirement of any court or Governmental Authority or any Environmental
Laws;
(b) Without limitation of clause (a) above, no Property of the
Borrower nor the operations currently conducted thereon or, to the best
knowledge of the Borrower, by any prior owner or operator of such Property
or operation, are in violation of or subject to any existing, pending or
threatened action, suit, investigation, inquiry or proceeding by or before
any court or Governmental Authority or to any remedial obligations under
Environmental Laws;
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(c) To the best knowledge of Borrower, all notices, permits, licenses
or similar authorizations, if any, required to be obtained or filed in
connection with the operation or use of any and all Property of the
Borrower, including without limitation past or present treatment, storage,
disposal or release of a hazardous substance or solid waste into the
environment, have been duly obtained or filed, and the Borrower is in
compliance with the terms and conditions of all such notices, permits,
licenses and similar authorizations;
(d) To the best knowledge of Borrower, all hazardous substances, solid
waste, and oil and gas exploration and production wastes, if any, generated
at any and all Property of the Borrower have in the past been transported,
treated and disposed of in accordance with Environmental Laws and so as not
to pose an imminent and substantial endangerment to public health or
welfare or the environment, and, to the best knowledge of the Borrower, all
such transport carriers and treatment and disposal facilities have been and
are operating in compliance with Environmental Laws and so as not to pose
an imminent and substantial endangerment to public health or welfare or the
environment, and are not the subject of any existing, pending or threatened
action, investigation or inquiry by any Governmental Authority in
connection with any Environmental Laws;
(e) The Borrower has taken all steps reasonably necessary to determine
and have determined that no hazardous substances, solid waste, or oil and
gas exploration and production wastes, have been disposed of or otherwise
released and there has been no threatened release of any hazardous
substances on or to any Property of the Borrower except in compliance with
Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or welfare or the environment;
(f) To the extent applicable, all Property of the Borrower currently
satisfies all design, operation, and equipment requirements imposed by the
OPA or scheduled as of the Closing Date to be imposed by OPA during the
term of this Agreement, and the Borrower does not have any reason to
believe that such Property, to the extent subject to OPA, will not be able
to maintain compliance with the OPA requirements during the term of this
Agreement; and
(g) The Borrower does not have any known contingent liability in
connection with any release or threatened release of any oil, hazardous
substance or solid waste into the environment.
Section 7.18 Compliance with the Law. To the best knowledge of
Borrower, the Borrower has not violated any Governmental Requirement or failed
to obtain any license, permit, franchise or other governmental authorization
necessary for the ownership of any of its Properties or the conduct of its
business, which violation or failure would have (in the event such violation or
failure were asserted by any Person through appropriate action) a Material
Adverse Effect. Except for such acts or failures to act as would not have a
Material Adverse Effect to the best knowledge of Borrower, the Oil and Gas
Properties (and properties unitized therewith) have been maintained, operated
and developed in a good and workmanlike manner and in conformity with
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all applicable laws and all rules, regulations and orders of all duly
constituted authorities having jurisdiction and in conformity with the
provisions of all leases, subleases or other contracts comprising a part of the
Hydrocarbon Interests and other contracts and agreements forming a part of the
Oil and Gas Properties; specifically in this connection, (i) after the Closing
Date, no Oil and Gas Property is subject to having allowable production reduced
below the full and regular allowable (including the maximum permissible
tolerance) because of any overproduction (whether or not the same was
permissible at the time) prior to the Closing Date and (ii) none of the ▇▇▇▇▇
comprising a part of the Oil and Gas Properties (or properties unitized
therewith) are deviated from the vertical more than the maximum permitted by
applicable laws, regulations, rules and orders, and such ▇▇▇▇▇ are, in fact,
bottomed under and are producing from, and the well bores are wholly within, the
Oil and Gas Properties (or in the case of ▇▇▇▇▇ located on properties unitized
therewith, such unitized properties).
Section 7.19 Insurance. Schedule 7.19 attached hereto contains an
accurate and complete description of all material policies of fire, liability,
workmen's compensation and other forms of insurance owned or held by the
Borrower. All such policies are in full force and effect, all premiums with
respect thereto covering all periods up to and including the date of the closing
have been paid, and no notice of cancellation or termination has been received
with respect to any such policy. Such policies are sufficient for compliance
with all requirements of law and of all agreements to which the Borrower is a
party; are valid, outstanding and enforceable policies; provide adequate
insurance coverage in at least such amounts and against at least such risks (but
including in any event public liability) as are usually insured against in the
same general area by companies engaged in the same or a similar business for the
assets and operations of the Borrower; will remain in full force and effect
through the respective dates set forth in Schedule 7.19 without the payment of
additional premiums; and will not in any way be affected by, or terminate or
lapse by reason of, the transactions contemplated by this Agreement. Schedule
7.19 identifies all material risks, if any, which the Borrower and its Board of
Directors or officers have designated as being self insured. The Borrower has
not been refused any insurance with respect to its assets or operations, nor has
its coverage been limited below usual and customary policy limits, by an
insurance carrier to which it has applied for any such insurance or with which
it has carried insurance during the last three years.
Section 7.20 Hedging Agreements. Schedule 7.20 sets forth, as of the
Closing Date, a true and complete list of all Hedging Agreements (including
commodity price swap agreements, forward agreements or contracts of sale which
provide for prepayment for deferred shipment or delivery of oil, gas or other
commodities) of the Borrower, the material terms thereof (including the type,
term, effective date, termination date and notional amounts or volumes), the net
▇▇▇▇ to market value thereof, all credit support agreements relating thereto
(including any margin required or supplied), and the counterparty to each such
agreement.
Section 7.21 Restriction on Liens. The Borrower is not a party to
any agreement or arrangement (other than this Agreement and the Security
Instruments), or subject to any order, judgment, writ or decree, which either
restricts or purports to restrict its ability to grant Liens to other Persons on
or in respect of their respective assets of Properties.
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Section 7.22 Material Agreements. Set forth on Schedule 7.22 hereto
is a complete and correct list of all material credit agreements, indentures,
purchase agreements, obligations in respect of letters of credit, guarantees,
joint venture agreements, and other instruments in effect or to be in effect as
of the Closing Date (other than Hedging Agreements) providing for, evidencing,
securing or otherwise relating to any Debt of the Borrower or, and all
obligations of the Borrower to issuers of surety or appeal bonds issued for
account of the Borrower, and such list correctly sets forth the names of the
debtor or lessee and creditor or lessor with respect to the Debt or lease
obligations outstanding or to be outstanding and the property subject to any
Lien securing such Debt or lease obligation.
Section 7.23 Gas Imbalances. As of the Closing Date, except as set
forth on Schedule 7.23 or on the most recent certificate delivered pursuant to
Section 8.07(c), on a net basis there are no gas imbalances, take or pay or
other prepayments with respect to the Oil and Gas Properties which would require
the Borrower to deliver Hydrocarbons produced from the Oil and Gas Properties at
some future time without then or thereafter receiving full payment therefor.
Section 7.24 Partnership Agreement. The Partnership Agreement has
not been terminated, is in full force and effect as of the date hereof and no
default has occurred and is in continuance thereunder which would have a
Material Adverse Effect.
Section 7.25 Remittances. All remittances to Borrower from
purchasers of Hydrocarbons are in the form of a check.
ARTICLE VIII
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, so long as the Commitment is in
effect and until payment in full of all Loans hereunder, all interest thereon
and all other amounts payable by the Borrower hereunder:
Section 8.01 Financial Statements. The Borrower shall deliver, or
shall cause to be delivered, to the Lender:
(a) As soon as available and in any event within 120 days after the
end of each fiscal year of the Borrower, the audited statements of income,
venturer's capital, and cash flow of the Borrower for such fiscal year, and
the related balance sheets of the Borrower and as at the end of such fiscal
year, and setting forth in each case in comparative form the corresponding
figures for the preceding fiscal year, and accompanied by the related
opinion of independent public accountants of recognized national standing
acceptable to the Lender which opinion shall state that said financial
statements fairly present the financial condition and results of operations
of the Borrower as at the end of, and for, such fiscal year and that such
financial statements have been prepared in accordance with GAAP
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except for such changes in such principles with which the independent
public accountants shall have concurred and such opinion shall not contain
a "going concern" or like qualification or exception.
(b) As soon as available and in any event within 45 days after the end
of each of the first three fiscal quarterly periods of each fiscal year of
the Borrower, statements of income, venturer's capital, cash flow of the
Borrower for such period and for the period from the beginning of the
respective fiscal year to the end of such period, and the related balance
sheets as at the end of such period, accompanied by a certificate of a
Responsible Officer which certificate shall state that said financial
statements fairly present the financial condition and results of operations
of the Borrower in accordance with GAAP, as at the end of, and for, such
period (subject to normal year-end audit adjustments).
(c) Promptly after the Borrower knows that any Default or any Material
Adverse Effect has occurred, a notice of such Default or Material Adverse
Effect, describing the same in reasonable detail and the action the
Borrower proposes to take with respect thereto.
(d) Promptly upon receipt thereof, a copy of each other report or
letter submitted to the Borrower by independent accountants in connection
with any annual, interim or special audit made by them of the books of the
Borrower and a copy of any response by the Borrower or the Board of
Directors of the Managing Venturer of the Borrower to such letter or
report.
The Borrower will furnish to the Lender, at the time it furnishes each set
of financial statements pursuant to paragraph (a) or (b) above, a certificate
substantially in the form of Exhibit C hereto executed by a Responsible Officer
(i) certifying as to the matters set forth therein and stating that no Default
has occurred and is continuing (or, if any Default has occurred and is
continuing, describing the same in reasonable detail), and (ii) setting forth in
reasonable detail the computations necessary to determine whether the Borrower
is in compliance with Sections 9.11 and 9.12 as of the end of the respective
fiscal quarter or fiscal year.
Section 8.02 Litigation. The Borrower shall promptly give to the
Lender notice of: (i) all legal or arbitral proceedings, and of all proceedings
before any Governmental Authority affecting the Borrower, except proceedings
which, if adversely determined, would not have a Material Adverse Effect, and
(ii) of any litigation or proceeding affecting the Borrower in which the amount
involved is not covered by insurance, or in which injunctive or similar relief
is sought. The Borrower will promptly notify the Lender of any claim, judgment,
Lien or other encumbrance affecting any Property of the Borrower if the value of
the claim, judgment, Lien, or other encumbrance affecting such Property shall
exceed $250,000.
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Section 8.03 Maintenance, Etc.
(a) The Borrower shall: preserve and maintain its existence and all of
its material rights, privileges and franchises; keep books of record and
account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and activities; comply
with all Governmental Requirements if failure to comply with such
requirements will have a Material Adverse Effect; pay and discharge all
taxes, assessments and governmental charges or levies imposed on it or on
its income or profits or on any of its Property prior to the date on which
penalties attach thereto, except for any such tax, assessment, charge or
levy the payment of which is being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained; upon
reasonable notice, permit representatives of the Lender, during normal
business hours, to examine, copy and make extracts from its books and
records, to inspect its Properties, and to discuss its business and affairs
with its officers, all to the extent reasonably requested by the Lender;
and keep, or cause to be kept, insured by financially sound and reputable
insurers all Property of a character usually insured by Persons engaged in
the same or similar business similarly situated against loss or damage of
the kinds and in the amounts customarily insured against by such Persons
and carry such other insurance as is usually carried by such Persons
including, without limitation, environmental risk insurance to the extent
reasonably available.
(b) Contemporaneously with the delivery of the financial statements
required by Section 8.01(a) to be delivered for each year, the Borrower
will furnish or cause to be furnished to the Lender a certificate of
insurance coverage from the insurer in form and substance satisfactory to
the Lender and, if requested, will furnish the Lender copies of the
applicable policies.
(c) The Borrower will operate its Properties or cause such Properties
to be operated in a careful and efficient manner in accordance with the
practices of the industry and in compliance with all applicable contracts
and agreements and in compliance in all material respects with all
Governmental Requirements.
(d) The Borrower will at its own expense, do or cause to be done all
things reasonably necessary to preserve and keep in good repair, working
order and efficiency all of its Oil and Gas Properties and other material
Properties including, without limitation, all equipment, machinery and
facilities, and from time to time will make all the reasonably necessary
repairs, renewals and replacements so that at all times the state and
condition of its Oil and Gas Properties and other material Properties will
be fully preserved and maintained, except to the extent a portion of such
Properties is no longer capable of producing Hydrocarbons in economically
reasonable amounts. The Borrower will promptly: (i) pay and discharge or
make reasonable and customary efforts to cause to be paid and discharged
all delay rentals, royalties, expenses and indebtedness accruing under the
leases or other agreements affecting or pertaining to its Oil and Gas
Properties, (ii) perform or make reasonable and customary efforts to cause
to be performed in
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accordance with industry standards, the obligations required by each and
all of the assignments, deeds, leases, sub-leases, contracts and agreements
affecting its interests in its Oil and Gas Properties and other material
Properties and (iii) will do all other things necessary to keep unimpaired,
except for Liens described in Section 9.02, its rights with respect thereto
and prevent any forfeiture thereof or a default thereunder, except to the
extent a portion of such Properties is no longer capable of producing
Hydrocarbons in economically reasonable amounts and except for dispositions
permitted by Section 9.14 hereof. The Borrower will operate its Oil and Gas
Properties and other material Properties or cause or make reasonable and
customary efforts to cause such Oil and Gas Properties and other material
Properties to be operated in a careful and efficient manner in accordance
with the practices of the industry and in compliance with all applicable
contracts and agreements and in compliance in all material respects with
all Governmental Requirements.
Section 8.04 Environmental Matters.
(a) The Borrower will establish and implement such procedures as may
be reasonably necessary to continuously determine and assure that any
failure of the following does not have a Material Adverse Effect: (i) all
Property of the Borrower and the operations conducted thereon and other
activities of the Borrower are in compliance with and do not violate the
requirements of any Environmental Laws, (ii) no oil, hazardous substances
or solid wastes are disposed of or otherwise released on or to any Property
owned by any such party except in compliance with Environmental Laws, (iii)
no hazardous substance will be released on or to any such Property in a
quantity equal to or exceeding that quantity which requires reporting
pursuant to Section 103 of CERCLA, and (iv) no oil, oil and gas exploration
and production wastes or hazardous substance is released on or to any such
Property so as to pose an imminent and substantial endangerment to public
health or welfare or the environment.
(b) The Borrower will promptly notify the Lender in writing of any
threatened action, investigation or inquiry by any Governmental Authority
of which the Borrower has knowledge in connection with any Environmental
Laws, excluding routine testing and corrective action.
Section 8.05 Further Assurances. The Borrower will cure promptly any
defects in the creation and issuance of the Note and the execution and delivery
of the Security Instruments and this Agreement. The Borrower at its expense
will promptly execute and deliver to the Lender upon request all such other
documents, agreements and instruments to comply with or accomplish the covenants
and agreements of the Borrower in the Security Instruments and this Agreement,
or to further evidence and more fully describe the collateral intended as
security for the Note, or to correct any omissions in the Security Instruments,
or state more fully the security obligations set out herein or in any of the
Security Instruments, or to perfect, protect or preserve any Liens created
pursuant to any of the Security Instruments, or to make any recordings, to file
any notices, or obtain any consents, all as may be necessary or appropriate in
connection therewith.
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Section 8.06 Performance of Obligations. The Borrower will pay the
Note according to the reading, tenor and effect thereof; and the Borrower will
do and perform every act and discharge all of the obligations provided to be
performed and discharged by them under the Security Instruments and this
Agreement, at the time or times and in the manner specified.
Section 8.07 Engineering Reports.
(a) On or before April 1 of each year, the Borrower shall furnish to
the Lender a Reserve Report prepared by certified independent petroleum
engineers or other independent petroleum consultant(s) acceptable to the
Lender, which Reserve Report shall evaluate the Oil and Gas Properties of
the Borrower as of January 1 of such year.
(b) On or before October 1 of each year, the Borrower shall furnish to
the Lender a Reserve Report prepared by or under the supervision of the
chief engineer of the Borrower who shall certify such Reserve Report to be
true and accurate and to have been furnished pursuant to Section 8.07(a)
which shall evaluate the oil and Gas Properties of the Borrower as
appropriate as of the immediately preceding July 1.
(c) With the delivery of each Reserve Report, the Borrower shall
provide to the Lender, a certificate from the Responsible Officer
certifying that, to the best of his knowledge and in all material respects:
(i) the information contained in the Reserve Report and any other
information delivered in connection therewith is true and correct, (ii) the
Borrower owns good and defensible title to its Oil and Gas Properties
evaluated in such Reserve Report and such Properties are free of all Liens
except for Liens permitted by Section 9.02, (iii) except as set forth on an
exhibit to the certificate, on a net basis there are no gas imbalances,
take or pay or other prepayments with respect to its Oil and Gas Properties
evaluated in such Reserve Report which would require the Borrower to
deliver Hydrocarbons produced from such Oil and Gas Properties at some
future time without then or thereafter receiving full payment therefor,
(iv) none of its Oil and Gas Properties have been sold since the date of
the last Borrowing Base determination except as set forth on an exhibit to
the certificate, which certificate shall list all of its Oil and Gas
Properties sold and in such detail as reasonably required by the Lender,
(v) attached to the certificate is a list of its Oil and Gas Properties
added to and deleted from the immediately prior Reserve Report and a list
of all Persons disbursing proceeds to the Borrower from its Oil and Gas
Properties, (vi) except as set forth on a schedule attached to the
certificate all of the Oil and Gas Properties evaluated by such Reserve
Report are Mortgaged Property and (vii) any change in working interest or
net revenue interest in its Oil and Gas Properties occurring and the reason
for such change.
Section 8.08 Title Information.
(a) On or before the delivery to the Lender of each Reserve Report
required by Section 8.07(a), the Borrower will deliver title information in
form and substance acceptable to the Lender covering enough of the Oil and
Gas Property evaluated by such
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Reserve Report that was not included in the immediately preceding Reserve
Report, so that the Lender shall have received together with title
information previously delivered to the Lender, satisfactory title
information on the Oil and Gas Properties evaluated by such Reserve Report
which are satisfactory to the Lender.
(b) The Borrower shall cure any title defects or exceptions which are
not Excepted Liens raised by such information, or substitute acceptable
Mortgaged Properties with no title defects or exceptions except for
Excepted Liens covering Mortgaged Properties of an equivalent value, within
45 days after a request by the Lender to cure such defects or exceptions.
(c) If the Borrower is unable to cure any title defect requested by
the Lender to be cured within the 45-day period or the Borrower does not
comply with the requirements to provide title information of the Oil and
Gas Properties evaluated in the most recent Reserve Report acceptable to
Lender, such default shall not be a Default or an Event of Default, but
instead the Lender shall have the right to exercise the following remedy in
its sole discretion from time to time, and any failure to so exercise this
remedy at any time shall not be a waiver as to future exercise of the
remedy by the Lender. To the extent that the Lender is not satisfied with
title to any Mortgaged Property after the time period in Section 8.08(b)
has elapsed, such unacceptable Mortgaged Property shall not count towards
the Borrowing Base and the Lender may send a notice to the Borrower that
the then outstanding Borrowing Base shall be reduced by an amount
attributable to such unacceptable Mortgaged Property. This new Borrowing
Base shall become effective immediately after receipt of such notice. At
such time Lender, upon the request of Borrower, shall execute appropriate
documentation to release any lien it may have on such unacceptable
Mortgaged Property. All such releases shall be prepared by Lender at the
reasonable expense of Borrower.
Section 8.09 Additional Collateral.
(a) Should the Borrower acquire any additional Oil and Gas Properties
and desire to add the benefit of the value of same to the Borrowing Base,
the Borrower will grant to the Lender as security for the Indebtedness a
first-priority Lien interest (subject only to Excepted Liens) on the
Borrower's interest in any Oil and Gas Properties not already subject to a
Lien of the Security Instruments, which Lien will be created and perfected
by and in accordance with the provisions of deeds of trust, security
agreements and financing statements, or other Security Instruments, all in
form and substance satisfactory to the Lender in its sole discretion and in
sufficient executed (and acknowledged where necessary or appropriate)
counterparts for recording purposes.
(b) Concurrently with the granting of the Lien or other action
referred to in Section 8.07(a) above, the Borrower will provide to the
Lender title information in form and substance satisfactory to the Lender
in its sole discretion with respect to the Borrower's interests in such Oil
and Gas Properties.
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(c) Also, promptly after the filing of any new Security Instrument,
upon the reasonable request of the Lender, the Borrower will provide to the
Lender an opinion addressed to the Lender in form and substance reasonably
satisfactory to the Lender in its sole discretion from counsel acceptable
to Lender.
Section 8.10 Change in Management. The Borrower shall notify Lender
in the event there is a change in the senior management of the Borrower.
Section 8.12 Operating Accounts. At all times the Borrower shall
maintain all principal operating accounts of the Borrower with the Lender until
all the Indebtedness under this Agreement is paid in full and this Agreement is
terminated.
Section 8.13 Remittances. The Borrower shall notify Lender in the
event purchasers of Hydrocarbons remit payment to Borrower by means of wire
transfer.
ARTICLE IX
NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as the Commitment is in
effect and until payment in full of all Loans hereunder, all interest thereon
and all other amounts payable by the Borrower hereunder, without the prior
written consent of the Lender:
Section 9.01 Debt. The Borrower will not incur, create, assume or
suffer to exist any Debt, except:
(a) the Note or other Indebtedness or any guaranty of or suretyship
arrangement for the Note or other Indebtedness;
(b) Debt of the Borrower existing on the Closing Date which is
reflected in the Financial Statements or is disclosed in Schedule 9.01, and
any renewals or extensions (but not increases) thereof;
(c) accounts payable (for the deferred purchase price of Property or
services) from time to time incurred in the ordinary course of business
which, if greater than 90 days past the invoice or billing date, are being
contested in good faith by appropriate proceedings if reserves adequate
under GAAP shall have been established therefor;
(d) Debt under capital leases (as required to be reported on the
financial statements of the Borrower pursuant to GAAP) not to exceed
$100,000;
(e) Debt of the Borrower under Hedging Agreements provided (i) the
Hedging Agreements do not encompass more than 75% of projected production
from proved,
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developed, producing reserves (ii) the strike price is not less than the
Lender's energy product pricing guidelines and (iii) the Lender has
approved the counterparty;
(f) Bonds or surety obligations required by government agencies in
connection with the operation of the Oil and Gas Properties; and
(g) Debt in connection with the Subordinated Note.
Section 9.02 Liens. The Borrower will not create, incur, assume or
permit to exist any Lien on any of its Properties (now owned or hereafter
acquired), except:
(a) Liens securing the payment of any Indebtedness;
(b) Excepted Liens;
(c) Liens securing leases allowed under Section 9.01(d) but only on
the Property under lease;
(d) Liens disclosed on Schedule 9.02;
(e) Liens on cash or securities of the Borrower securing the Debt
described in Section 9.01(f); and
(f) Liens securing the Subordinated Note to the extent, and only to
the extent, such Liens are permitted pursuant to the Subordination
Agreement.
Section 9.03 Investments, Loans and Advances. The Borrower will not
make or permit to remain outstanding any loans or advances to or investments in
any Person, except that the foregoing restriction shall not apply to:
(a) investments, loans or advances reflected in the Financial
Statements or which are disclosed to the Lender in Schedule 9.03;
(b) accounts receivable arising in the ordinary course of business;
(c) direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof, in each
case maturing within one year from the date of creation thereof and
repurchase agreements with respect to such types of securities contracted
with entities having a net worth of not less than $100,000,000.00 (as of
the date of such bank or trust company's most recent financial reports);
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(d) commercial paper maturing within one year from the date of
creation thereof rated in the highest grade by Standard & Poors Corporation
or ▇▇▇▇▇'▇ Investors Service, Inc.;
(e) deposits maturing within one year from the date of creation
thereof with, including certificates of deposit issued by, the Lender or
any office located in the United States of any other bank or trust company
which is organized under the laws of the United States or any state
thereof, has capital, surplus and undivided profits aggregating at least
$100,000,000.00 (as of the date of the Lender's or bank or trust company's
most recent financial reports) and has a short term deposit rating of no
lower than A2 or P2, as such rating is set forth from time to time, by
Standard & Poors Corporation or ▇▇▇▇▇'▇ Investors Service, Inc.,
respectively;
(f) deposits in money market funds;
(g) investments, loans or advances made by the Borrower in any other
person, company or other entity, not to exceed at any one time outstanding
$10,000 in the aggregate;
(h) investments by the Borrower in direct ownership interests in
additional Oil and Gas Properties and gas gathering systems related
thereto;
(i) investments in Eurodollars purchased through and maintained at
entities having a net worth of not less than $100,000,000.00 (as the date
of such bank or trust company's most recent financial reports); and
(j) banker's acceptances maturing within one year from the date of
creation.
Section 9.04 Dividends, Distributions and Redemptions. The Borrower
will not declare or pay any dividend, purchase, redeem or otherwise acquire for
value any of its partnership interests now or hereafter outstanding, return any
capital to the Venturers or make any distribution of its assets to the
Venturers, except that so long as no Default or Event of Default has occurred
and is continuing or would be caused by any of same, distributions may be made
provided that such distributions are made on a quarterly basis and are not
cumulative; and do not exceed 50% of cash flow in excess of that amount which is
required to comply with Section 9.12.
Section 9.05 Sales and Leasebacks. The Borrower will not enter into
any arrangement, directly or indirectly, with any Person whereby the Borrower
shall sell or transfer any of its Property, whether now owned or hereafter
acquired, and whereby the Borrower shall then or thereafter rent or lease as
lessee such Property or any part thereof or other Property which the Borrower
intends to use for substantially the same purpose or purposes as the Property
sold or transferred.
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Section 9.06 Nature of Business. The Borrower will not allow any
material change to be made in the character of its business as an independent
oil and gas exploration and production company.
Section 9.07 Limitation on Leases. The Borrower will not create,
incur, assume or suffer to exist any obligation for the payment of rent or hire
of Property of any kind whatsoever (real or personal including capital leases
but excluding leases of Hydrocarbon Interests), under leases or lease agreements
which would cause the aggregate amount of all payments made by the Borrower
pursuant to such leases or lease agreements to exceed $300,000 in any period of
twelve consecutive calendar months during the life of such leases.
Section 9.08 Mergers, Etc. The Borrower will not merge into or with
or consolidate with any other Person, or sell, lease or otherwise dispose of
(whether in one transaction or in a series of transactions) all or substantially
all of its Property or assets to any other Person, without the prior written
consent of the Lender, which consent will not be unreasonably withheld.
Section 9.09 Proceeds of Note. The Borrower will not permit the
proceeds of the Note to be used for any purpose other than those permitted by
Section 7.07. Neither the Borrower nor any Person acting on behalf of the
Borrower has taken or will take any action which might cause any of the Loan
Documents to violate Regulation G, U or X or any other regulation of the Board
of Governors of the Federal Reserve System or to violate Section 7 of the
Securities Exchange Act of 1934 or any rule or regulation thereunder, in each
case as now in effect or as the same may hereinafter be in effect.
Section 9.10 Sale or Discount of Receivables. The Borrower will not
discount or sell (with or without recourse) any of its notes receivable or
accounts receivable.
Section 9.11 Tangible Venturer's Capital. The Borrower will not
permit its tangible venturer's capital to be less than $4,000,000 plus 50% of
positive net income and 100% of equity raised for all quarterly periods
subsequent to March 31, 1995, at any time. As used in this Section 9.11,
"tangible venturer's capital" shall mean (i) total assets as would in accordance
with GAAP be reflected on the balance sheet of Borrower exclusive of
intellectual property, experimental or organizational expenses, franchises,
licenses, permits, good will, and other intangible assets minus (ii) total
liabilities as would in accordance with GAAP be reflected in Borrower's balance
sheet.
Section 9.12 Cash Flow to Debt Service Coverage Ratio. The Borrower
will not permit its Cash Flow to Debt Service Ratio as of the end of any fiscal
quarter of the Borrower (calculated on a rolling four-quarter basis) to be less
than 1.25 to 1.00. For purposes of this Section 9.12, "Cash Flow to Debt
Service Ratio" shall mean the ratio of (i) net income plus depreciation,
depletion, amortization and any other non-cash expenses less non-cash income for
the four fiscal quarters ending on such date to (ii) cash payments made for
principal on debt,
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excluding payments to RIMCO, or capital leases other than the Loan for such four
fiscal quarters of the Borrower, plus 1/3rd of the sum of the balance of the
Loans at the end of such quarter.
Section 9.13 Sale of Oil and Gas Properties. The Borrower will not
sell, assign, farm-out, convey or otherwise transfer any Oil and Gas Property or
any interest in any Oil and Gas Property upon which the Lender has a Lien except
(i) the sale of Hydrocarbons in the ordinary course of business and Oil and Gas
Property for which the Borrower has given the Lender at least thirty (30) days
prior written notice of the proposed transfer; (ii) the sale or disposition of
assets which are not material to the operations of Borrower when taken as a
whole; (iii) the sale or disposition of any Oil and Gas Property constituting
not more than 10% of the Borrowing Base, as determined by Lender, in the
aggregate during the term of this Agreement, in which event the Borrowing Base
shall be adjusted by the Lender, and provided that any mandatory prepayment
required as a result thereof is made at the time of such sale or disposition;
and (iv) sale of oil and gas prospects in the normal course of business. So
long as no Event of Default has occurred and is continuing or would be
occasioned by the following, the Borrower may sell, assign, farm-out, convey or
otherwise transfer any Oil and Gas Property, any other interest in any Oil and
Gas Property, and other assets of Borrower which are not subject to a Lien in
favor of Lender.
Section 9.14 Environmental Matters. The Borrower will not cause or
permit any of its Property to be in violation of, or do anything or permit
anything to be done which will subject any such Property to any remedial
obligations under any Environmental Laws, assuming disclosure to the applicable
Governmental Authority of all relevant facts, conditions and circumstances, if
any, pertaining to such Property where such violations or remedial obligations
would have a Material Adverse Effect.
Section 9.15 Transactions with Affiliates. The Borrower will not
enter into any transaction, including, without limitation, any purchase, sale,
lease or exchange of Property or the rendering of any service, with any
Affiliate unless such transactions are otherwise permitted under this Agreement,
are in the ordinary course of its business and are upon fair and reasonable
terms no less favorable to it than it would obtain in a comparable arm's length
transaction with a Person not an Affiliate; provided, however, that the term
Affiliate as used in this Section 9.15 shall also include (i) any member of the
immediate family (including parents, spouse and children) or any director or
officer of any Person directly or indirectly controlled by, controlling or under
common control with such first Person, and (ii) any trust whose principal
beneficiary is one or more members of such immediate family and any Person who
is controlled by any such member or trust.
Section 9.16 Subsidiaries and Partnerships. The Borrower shall not
create any Subsidiaries or additional partnerships except for special purpose
tax partnerships created to explore for oil and gas or partnerships created as a
result of joint operating agreements. The Borrower shall not and shall not
permit any Subsidiary to sell any stock of a Subsidiary or any interest in a
partnership. The Borrower shall not permit any Subsidiary to issue any stock
except to the Borrower and except in compliance with Section 9.03.
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Section 9.17 Negative Pledge Agreements. The Borrower will not
create, incur, assume or suffer to exist any contract, agreement or
understanding (other than this Agreement and the Security Instruments) which in
any way prohibits or restricts the granting, conveying, creation or imposition
of any Lien on any of its Property or which requires the consent of or notice to
other Persons in connection therewith.
Section 9.18 Gas Imbalances, Take-or-Pay or Other Prepayments. The
Borrower will not allow gas imbalances, take-or-pay or other prepayments with
respect to the Oil and Gas Properties of the Borrower which would require the
Borrower to deliver Hydrocarbons produced on Oil and Gas Properties at some
future time without then or thereafter receiving full payment therefor to exceed
10% of deliveries of gas production for the preceding month.
Section 9.19 Partnership Agreement. The Borrower will not amend or
permit to be amended the Partnership Agreement without the prior written consent
of the Lender.
Section 9.20 Subordinated Note. The Borrower will not pay (i) any
interest in connection with the Subordinated Note, except for so long as no
Event of Default has occurred and is continuing or would be caused by the
payment of such interest payment; and (ii) any principal payments except with
Lender's consent.
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default. One or more of the following
events shall constitute an "Event of Default":
(a) the Borrower shall default in the payment or prepayment when due
of any principal of or interest on any Loan or any fees or other amount
payable by it hereunder or under any Security Instrument and such default,
other than a default of a payment or prepayment of principal, shall
continue unremedied for a period of three (3) Business Days; or
(b) the Borrower shall default in the payment when due of any
principal of or interest on any of its other Debt, or any event specified
in any note, agreement, indenture or other document evidencing or relating
to any Debt aggregating $200,000 or more shall occur if the effect of such
event is to cause, or (with the giving of any notice or the lapse of time
or both) to permit the holder or holders of such Debt (or a trustee or
agent on behalf of such holder or holders) to cause, such Debt to become
due prior to its stated maturity; or
(c) any representation, warranty or certification made or deemed made
herein or in any Security Instrument by the Borrower, or any certificate
furnished to the Lender
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pursuant to the provisions hereof or any Security Instrument, shall prove
to have been false or misleading as of the time made or furnished in any
material respect; or
(d) the Borrower shall default in the performance of any of its
obligations under Article IX or any other Article of this Agreement other
than under Article VIII; or the Borrower shall default in the performance
of any of its obligations under Article VIII or any Security Instrument
(other than the payment of amounts due which shall be governed by Section
10.01(a)) and such default shall continue unremedied for a period of thirty
(30) days after the earlier to occur of (i) notice thereof to the Borrower
by the Lender or (ii) the Borrower otherwise becoming aware of such
default; or
(e) the Borrower shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(f) the Borrower shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its property, (ii)
make a general assignment for the benefit of its creditors, (iii) commence
a voluntary case under the Federal Bankruptcy Code (as now or hereafter in
effect), (iv) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely
and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Federal Bankruptcy Code, or
(vi) take any action for the purpose of effecting any of the foregoing; or
(g) a proceeding or case shall be commenced, without the application
or consent of the Borrower, in any court of competent jurisdiction, seeking
(i) its liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of the Borrower of all
or any substantial part of its assets, or (iii) similar relief in respect
of the Borrower under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or
decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 90 days; or (iv) an order
for relief against the Borrower shall be entered in an involuntary case
under the Federal Bankruptcy Code; or
(h) a judgment or judgments for the payment of money in excess of
$250,000 in the aggregate shall be rendered by a court against the Borrower
and the same shall not be discharged (or provision shall not be made for
such discharge), or a stay of execution thereof shall not be procured,
within thirty (30) days from the date of entry thereof and the Borrower
shall not, within said period of 30 days, or such longer period during
which execution of the same shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal; or
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(i) the Security Instruments after delivery thereof shall for any
reason, except to the extent permitted by the terms thereof, cease to be in
full force and effect and valid, binding and enforceable in accordance with
their terms, or cease to create a valid and perfected Lien of the priority
required thereby on any of the collateral purported to be covered thereby,
except to the extent permitted by the terms of this Agreement, or the
Borrower shall so state in writing; or
(j) the Borrower discontinues its usual business or suffers to exist
any material change in its ownership, control or management; provided,
however, Borrower may commence dissolution on or after April 8, 1996, in
accordance with the Partnership Agreement so long as no Event of Default
has occurred and is continuing or would be occasioned by such action.
Section 10.02 Remedies.
(a) In the case of an Event of Default other than one referred to in
clauses (e), (f) or (g) of Section 10.01, the Lender may, by notice to the
Borrower, cancel the Commitment and/or declare the principal amount then
outstanding of, and the accrued interest on, the Loans and all other
amounts payable by the Borrower hereunder and under the Note to be
forthwith due and payable, whereupon such amounts shall be immediately due
and payable without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other formalities of any kind, all of
which are hereby expressly waived by the Borrower, except for the notice
required by line two of this subsection 10.02(a).
(b) In the case of the occurrence of an Event of Default referred to
in clauses (e), (f) or (g) of Section 10.01, the Commitment shall be
automatically cancelled and the principal amount then outstanding of, and
the accrued interest on, the Loans and all other amounts payable by the
Borrower hereunder and under the Note shall become automatically
immediately due and payable without presentment, demand, protest, notice of
intent to accelerate, notice of acceleration or other formalities of any
kind, all of which are hereby expressly waived by the Borrower.
(c) All proceeds received after maturity of the Note, whether by
acceleration or otherwise shall be applied first to reimbursement of
expenses and indemnities provided for in this Agreement and the Security
Instruments; second to accrued interest on the Note; third to fees; fourth
to principal outstanding on the Note; and, to the extent of any excess to
be paid to the Borrower or as otherwise required by any Governmental
Requirement.
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ARTICLE XI
MISCELLANEOUS
Section 11.01 Waiver. No failure on the part of the Lender to exercise
and no delay in exercising, and no course of dealing with respect to, any right,
power or privilege under any of the Loan Documents shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under any of the Loan Documents preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The remedies
provided herein are cumulative and not exclusive of any remedies provided by
law.
Section 11.02 Letters in Lieu. Borrower has executed and left with
Lender numerous Letters in Lieu which Lender is authorized to complete and mail
to purchasers of production in the event that a Event of Default has occurred
and is continuing. Lender shall use reasonable efforts to notify Borrower that
Letters in Lieu have been completed and mailed to purchasers of production;
provided, however, failure to give such notice shall not affect the Lender's
rights to take such action or the validity thereof. In the event the Letters in
Lieu are not used and the indebtedness has been paid in full, Lender shall
return Letters in Lieu to Borrower.
Section 11.03 Notices. All notices and other communications provided
for herein and in the Security Instructions (including, without limitation, any
modifications of, or waivers or consents under, this Agreement or the Security
Instruments) shall be given or made by telex, telecopy, telegraph, cable,
courier or U.S. Mail or in writing and telexed, telecopied, telegraphed, cabled,
mailed or delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof or in the Security
Instruments; or, as to any party, at such other address as shall be designated
by such party in a notice to each other party. Except as otherwise provided in
this Agreement or in the Security Instruments, all such communications shall be
deemed to have been duly given when transmitted by telex or telecopier,
delivered to the telegraph or cable office or personally delivered or, in the
case of a mailed notice, three (3) Business Days after the date deposited in the
mails, postage prepaid, in each case given or addressed as aforesaid.
Section 11.04 Payment of Expenses, Indemnities, etc. The Borrower
agrees:
(a) whether or not the transactions hereby contemplated are
consummated, to pay all reasonable expenses of the Lender in the
administration (both before and after the execution hereof and including
advice of counsel as to the rights and duties of the Lender with respect
thereto) of, and in connection with the negotiation, syndication,
investigation, preparation, execution and delivery of, recording or filing
of, preservation of rights under, enforcement of, and refinancing,
renegotiation or restructuring of, the Loan Documents and any amendment,
waiver or consent relating thereto (including, without limitation, travel,
photocopy, mailing, courier, telephone and other similar expenses of the
Lender, the cost of environmental audits, surveys and appraisals at
reasonable intervals, the reasonable fees and disbursements of counsel for
the Lender and in the case of
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enforcement for the Lender); and promptly reimburse the Lender for all
amounts expended, advanced or incurred by the Lender to satisfy any
obligation of the Borrower under this Agreement or any Security Instrument;
(b) TO INDEMNIFY THE LENDER AND ITS AFFILIATES AND EACH OF THEIR
OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS, ATTORNEYS,
ACCOUNTANTS AND EXPERTS ("INDEMNIFIED PARTIES") FROM, HOLD EACH OF THEM
HARMLESS AGAINST AND PROMPTLY UPON DEMAND PAY OR REIMBURSE EACH OF THEM
FOR, THE INDEMNITY MATTERS WHICH MAY BE INCURRED BY OR ASSERTED AGAINST OR
INVOLVE ANY OF THEM (WHETHER OR NOT ANY OF THEM IS DESIGNATED A PARTY
THERETO) AS A RESULT OF, ARISING OUT OF OR IN ANY WAY RELATED TO (I) ANY
ACTUAL OR PROPOSED USE BY THE BORROWER OF THE PROCEEDS OF ANY OF THE LOANS,
(II) THE EXECUTION, DELIVERY AND PERFORMANCE OF THE LOAN DOCUMENTS, (III)
THE OPERATIONS OF THE BUSINESS OF THE BORROWER, (IV) THE FAILURE OF THE
BORROWER TO COMPLY WITH THE TERMS OF ANY SECURITY INSTRUMENT OR THIS
AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (V) ANY INACCURACY OF ANY
REPRESENTATION OR ANY BREACH OF ANY WARRANTY OF THE BORROWER SET FORTH IN
ANY OF THE LOAN DOCUMENTS, (VI) ANY ASSERTION THAT THE LENDER WAS NOT
ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY
INSTRUMENTS OR (VII) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, INCLUDING,
WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL AND
ALL OTHER EXPENSES INCURRED IN CONNECTION WITH INVESTIGATING, DEFENDING OR
PREPARING TO DEFEND ANY SUCH ACTION, SUIT, PROCEEDING (INCLUDING ANY
INVESTIGATIONS, LITIGATION OR INQUIRIES) OR CLAIM AND INCLUDING ALL
INDEMNITY MATTERS ARISING BY REASON OF THE ORDINARY NEGLIGENCE OF ANY
INDEMNIFIED PARTY, BUT EXCLUDING ALL INDEMNITY MATTERS ARISING SOLELY BY
REASON OF CLAIMS OF THE LENDER'S SHAREHOLDERS AGAINST THE LENDER OR BY
REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART OF THE
INDEMNIFIED PARTY; AND
(c) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE INDEMNIFIED
PARTY FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST RECOVERY ACTIONS,
ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND LIABILITIES TO WHICH ANY
SUCH PERSON MAY BECOME SUBJECT (I) UNDER ANY ENVIRONMENTAL LAW APPLICABLE
TO THE BORROWER OR ANY OF ITS PROPERTIES, INCLUDING WITHOUT LIMITATION, THE
TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES,
(II) AS A RESULT OF THE BREACH OR NON-COMPLIANCE BY THE BORROWER WITH ANY
ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER, (III) DUE TO PAST OWNERSHIP
BY THE BORROWER OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF ITS
PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD
RESULT IN PRESENT LIABILITY, (IV) THE PRESENCE, USE, RELEASE, STORAGE,
TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON OR AT ANY OF THE
PROPERTIES OWNED OR OPERATED BY THE BORROWER, OR (V) ANY OTHER
ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN
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DOCUMENTS, PROVIDED, HOWEVER, NO INDEMNITY SHALL BE AFFORDED UNDER
THIS SECTION 11.03(C) IN RESPECT OF ANY PROPERTY FOR ANY OCCURRENCE ARISING
FROM THE ACTS OR OMISSIONS OF THE LENDER DURING THE PERIOD AFTER WHICH SUCH
PERSON, ITS SUCCESSORS OR ASSIGNS SHALL HAVE OBTAINED POSSESSION OF SUCH
PROPERTY (WHETHER BY FORECLOSURE OR DEED IN LIEU OF FORECLOSURE, AS
MORTGAGEE-IN-POSSESSION OR OTHERWISE).
(d) No Indemnified Party may settle any claim to be indemnified
without the consent of the indemnitor, such consent not to be unreasonably
withheld; provided, that the indemnitor may not reasonably withhold consent
to any settlement that an Indemnified Party proposes, if the indemnitor
does not have the financial ability to pay all its obligations outstanding
and asserted against the indemnitor at that time, including the maximum
potential claims against the Indemnified Party to be indemnified pursuant
to this Section 11.04.
(e) In the case of any indemnification hereunder, the Lender shall
give notice to the Borrower of any such claim or demand being made against
an Indemnified Party and the Borrower shall have the non-exclusive right to
join in the defense against any such claim or demand provided that if the
Borrower provides a defense, the Indemnified Party shall bear its own cost
of defense unless there is a conflict between the Borrower and such
Indemnified Party.
(f) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED PARTIES
NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT
OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT
CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF
THE INDEMNIFIED PARTIES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT
FAULT ON ANY ONE OR MORE OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN
INDEMNIFIED PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL
CONTINUE BUT SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED
TO HAVE OCCURRED BY REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY.
(g) The Borrower's obligations under this Section 11.04 shall survive
any termination of this Agreement and the payment of the Note and shall
continue thereafter in full force and effect.
(h) The Borrower shall pay any amounts due under this Section 11.04
within thirty (30) days of the receipt by the Borrower of notice of the
amount due.
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Section 11.05 Amendments, Etc. Any provision of this Agreement or
any Security Instruments may be amended, modified or waived with the Borrower's
and the Lender's prior written consent.
Section 11.06 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
Section 11.07 Assignments and Participations.
(a) The Borrower may not assign its rights or obligations hereunder or
under the Note without the prior consent of the Lender.
(b) The Lender may transfer, grant or assign participations in all or
any part of its interests hereunder pursuant to this Section 11.07(b) to
any Person, provided that: (i) the Lender shall remain the "Lender" for all
purposes of this Agreement and the transferee of such participation shall
not constitute a "Lender" hereunder; and (ii) no participant under any such
participation shall have rights to approve any amendment to or waiver of
any of the Loan Documents except to the extent such amendment or waiver
would (x) extend the Revolving Credit Termination, (y) reduce the interest
rate (other than as a result of waiving the applicability of any post-
default increases in interest rates) or fees applicable to any of the
Commitment or Loans in which such participant is participating, or postpone
the payment of any thereof, or (z) release all or substantially all of the
collateral (except as expressly provided in the Security Instruments)
supporting any of the Commitment or Loans in which such participant is
participating. In the case of any such participation, the participant shall
not have any rights under this Agreement or any of the Security
Instruments (the participant's rights against the Lender in respect of
such participation to be those set forth in the agreement creating such
participation), and all amounts payable by the Borrower hereunder shall be
determined as if the Lender had not sold such participation, provided that
such participant shall be entitled to be indemnified under Section 11.04 as
if it were a Lender. In addition, each agreement creating any participation
must include an agreement by the participant to be bound by the provisions
of Section 11.16.
(c) The Lender may furnish any information concerning the Borrower in
its possession from time to time to assignees and participants (including
prospective assignees and participants); provided that, such Persons agree
to be bound by the provisions of Section 11.16 hereof.
(d) Notwithstanding anything in this Section 11.07 to the contrary,
the Lender may assign and pledge the Note to any Federal Reserve Bank or
the United States Treasury as collateral security pursuant to Regulation A
of the Board of Governors of the Federal Reserve System and any operating
circular issued by such Federal Reserve System and/or such Federal Reserve
Bank. No such assignment and/or pledge shall release the Lender from its
obligations hereunder.
-41-
(e) Notwithstanding any other provisions of this Section 11.07, no
transfer or assignment of the interests or obligations of the Lender or any
grant of participations therein shall be permitted if such transfer,
assignment or grant would require the Borrower to file a registration
statement with the SEC or to qualify the Loans under the "Blue Sky" laws of
any state.
Section 11.08 Invalidity. In the event that any one or more of the
provisions contained in any of the Loan Documents or shall, for any reason, be
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of any of
the other Loan Documents.
Section 11.09 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
Section 11.10 References. The words "herein," "hereof," "hereunder"
and other words of similar import when used in this Agreement refer to this
Agreement as a whole, and not to any particular article, section or subsection.
Any reference herein to a Section shall be deemed to refer to the applicable
Section of this Agreement unless otherwise stated herein. Any reference herein
to an exhibit or schedule shall be deemed to refer to the applicable exhibit or
schedule attached hereto unless otherwise stated herein.
Section 11.11 Survival. The obligations of the parties under Sections
11.04 and 11.16 shall survive the repayment of the Loans and the termination of
the Commitment. To the extent that any payments on the Indebtedness or proceeds
of any collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law or
equitable cause, then to such extent, the Indebtedness so satisfied shall be
revived and continue as if such payment or proceeds had not been received and
the Lender's Liens, security interests, rights, powers and remedies under this
Agreement and each Security Instrument shall continue in full force and effect.
In such event, each Security Instrument shall be automatically reinstated and
the Borrower shall take such action as may be reasonably requested by the Lender
to effect such reinstatement.
Section 11.12 Captions. Captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
Section 11.13 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY THE
ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER
AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
-42-
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 11.14 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(A) THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS EXCEPT TO THE EXTENT THAT
UNITED STATES FEDERAL LAW PERMITS THE LENDER TO CHARGE INTEREST AT THE RATE
ALLOWED BY THE LAWS OF THE STATE WHERE THE LENDER IS LOCATED. TEX. REV.
CIV. STAT. ▇▇▇. ART. ▇▇▇▇, ▇▇. 15 (WHICH REGULATES CERTAIN REVOLVING CREDIT
LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT APPLY TO THIS
AGREEMENT OR THE NOTES.
(B) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS
SHALL BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF AND (TO
THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE BORROWER
HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO
JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE THE LENDER FROM
OBTAINING JURISDICTION OVER THE BORROWER IN ANY COURT OTHERWISE HAVING
JURISDICTION.
(C) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER OR ANY HOLDER
OF THE NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY
OTHER JURISDICTION.
Section 11.15 Interest. It is the intention of the parties hereto
that Lender shall conform strictly to usury laws applicable to it. Accordingly,
if the transactions contemplated hereby would be usurious as to the Lender under
laws applicable to it (including the laws of the United States of America and
the State of Texas, or any other jurisdiction whose laws may be mandatorily
applicable to the Lender notwithstanding the other provisions of this
Agreement), then, in that event, notwithstanding anything to the contrary in the
Loan Documents or any agreement entered into in connection with or as security
for the Note, it is agreed as follows: (i) the aggregate of all consideration
which constitutes interest under law applicable to the Lender that is contracted
for, taken, reserved, charged or received by the Lender under the Note, this
Agreement or under any of the other aforesaid Security Instruments or agreements
or otherwise in connection with the Note shall under no circumstances exceed the
maximum amount allowed by such applicable law, and any excess shall be cancelled
automatically and if theretofore paid
-43-
shall be credited by the Lender on the principal amount of the Indebtedness (or,
to the extent that the principal amount of the Indebtedness shall have been or
would thereby be paid in full, refunded by the Lender to the Borrower); and (ii)
in the event that the maturity of the Note is accelerated by reason of an
election of the holder thereof resulting from any Event of Default under this
Agreement or otherwise, or in the event of any required or permitted prepayment,
then such consideration that constitutes interest under law applicable to the
Lender may never include more than the maximum amount allowed by such applicable
law, and excess interest, if any, provided for in this Agreement or otherwise
shall be cancelled automatically by the Lender as of the date of such
acceleration or prepayment and, if theretofore paid, shall be credited by the
Lender on the principal amount of the Indebtedness (or, to the extent that the
principal amount of the Indebtedness shall have been or would thereby be paid in
full, refunded by the Lender to the Borrower). All sums paid or agreed to be
paid to the Lender for the use, forbearance or detention of sums due hereunder
shall, to the extent permitted by law applicable to the Lender, be amortized,
prorated, allocated and spread throughout the full term of the Loans evidenced
by the Note until payment in full so that the rate or amount of interest on
account of any Loans hereunder does not exceed the maximum amount allowed by
such applicable law. If at any time and from time to time (i) the amount of
interest payable to the Lender on any date shall be computed at the Highest
Lawful Rate applicable to the Lender pursuant to this Section 11.15 and (ii) in
respect of any subsequent interest computation period the amount of interest
otherwise payable to the Lender would be less than the amount of interest
payable to the Lender computed at the Highest Lawful Rate applicable to the
Lender, then the amount of interest payable to the Lender in respect of such
subsequent interest computation period shall continue to be computed at the
Highest Lawful Rate applicable to the Lender until the total amount of interest
payable to the Lender shall equal the total amount of interest which would have
been payable to the Lender if the total amount of interest had been computed
without giving effect to this Section 11.15. To the extent that Article 5069-
1.04 of the Texas Revised Civil Statutes is relevant for the purpose of
determining the Highest Lawful Rate, the Lender elects to determine the
applicable rate ceiling under such Article by the indicated weekly rate ceiling
from time to time in effect.
Section 11.16 Confidentiality. In the event that the Borrower
provides to the Lender written confidential information belonging to the
Borrower, the Lender shall thereafter maintain such information in confidence in
accordance with the standards of care and diligence that each utilizes in
maintaining its own confidential information. This obligation of confidence
shall not apply to such portions of the information which (i) are in the public
domain, (ii) hereafter become part of the public domain without the Lender
breaching its obligation of confidence to the Borrower, (iii) are previously
known by the Lender from some source other than the Borrower, (iv) are hereafter
developed by the Lender without using the Borrower's information, (v) are
hereafter obtained by or available to the Lender from a third party who owes no
obligation of confidence to the Borrower with respect to such information or
through any other means other than through disclosure by the Borrower, (vi) are
disclosed with the Borrower's consent, (vii) must be disclosed either pursuant
to any Governmental Requirement or to Persons regulating the activities of the
Lender, or (viii) as may be required by law or regulation or order of any
Governmental Authority in any judicial, arbitration or governmental proceeding.
Further, the Lender may disclose any such information to any independent
petroleum engineers or consultants,
-44-
any independent certified public accountants, any legal counsel employed by such
Person in connection with this Agreement or any Security Instrument, including
without limitation, the enforcement or exercise of all rights and remedies
thereunder, or any assignee or participant (including prospective assignees and
participants) in the Loans; provided, however, that the Lender imposes on the
Person to whom such information is disclosed the same obligation to maintain the
confidentiality of such information as is imposed upon it hereunder.
Notwithstanding anything to the contrary provided herein, this obligation of
confidence shall cease three (3) years from the date the information was
furnished, unless the Borrower requests in writing at least thirty (30) days
prior to the expiration of such three year period, to maintain the
confidentiality of such information for an additional three year period. The
Borrower waives any and all other rights it may have to confidentiality as
against the Lender arising by contract, agreement, statute or law except as
expressly stated in this Section 11.16.
Section 11.17 Effectiveness. This Agreement shall be effective on
the Closing Date (the "Effective Date").
Section 11.18 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE SECURITY
INSTRUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS
OF THIS AGREEMENT AND THE SECURITY INSTRUMENTS; THAT IT HAS IN FACT READ THIS
AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING
ITS EXECUTION OF THIS AGREEMENT AND THE SECURITY INSTRUMENTS; AND HAS RECEIVED
THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE SECURITY
INSTRUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT
AND THE SECURITY INSTRUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT
IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION
OF THIS AGREEMENT AND THE SECURITY INSTRUMENTS ON THE BASIS THAT THE PARTY HAD
NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
"CONSPICUOUS."
-45-
The parties hereto have caused this Agreement to be duly executed as
of the day and year first above written.
BORROWER: EDGE JOINT VENTURE II
By: EDGE PETROLEUM
CORPORATION, Managing Venturer
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
Address for Notices:
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
LENDER: COMPASS BANK-HOUSTON
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Vice President
Address for Notices:
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-46-
EXHIBIT A
FORM OF NOTE
$20,000,000.00 July ___, 1995
FOR VALUE RECEIVED, EDGE JOINT VENTURE II, a joint venture formed under the
laws of the State of Texas (the "Borrower") hereby promises to pay to the order
of COMPASS BANK- HOUSTON (the "Lender"), at its Principal Office at ▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇, the principal sum of TWENTY
MILLION AND NO/100 Dollars ($20,000,000.00) (or such lesser amount as shall
equal the aggregate unpaid principal amount of the Loans made by the Lender to
the Borrower under the Credit Agreement, as hereinafter defined), in lawful
money of the United States of America and in immediately available funds, on the
dates and in the principal amounts provided in the Credit Agreement, and to pay
interest on the unpaid principal amount of each such Loan, at such office, in
like money and funds, for the period commencing on the date of such Loan until
such Loan shall be paid in full, at the rates per annum and on the dates
provided in the Credit Agreement.
The date, amount, and maturity of each Loan made by the Lender to the
Borrower, and each payment made on account of the principal thereof, shall be
recorded by the Lender on its books and, prior to any transfer of this Note,
endorsed by the Lender on the schedule attached hereto or any continuation
thereof.
This Note is the Note referred to in the Credit Agreement dated on even date
herewith between the Borrower and the Lender and evidences Loans made by the
Lender thereunder (such Credit Agreement as the same may be amended or
supplemented from time to time, the "Credit Agreement"). Capitalized terms used
in this Note have the respective meanings assigned to them in the Credit
Agreement.
This Note is issued pursuant to the Credit Agreement and is entitled to the
benefits provided for in the Credit Agreement and the Security Instruments. The
Credit Agreement provides for the acceleration of the maturity of this Note upon
the occurrence of certain events, for prepayments of Loans upon the terms and
conditions specified therein and other provisions relevant to this Note.
Notwithstanding any other provision of this Note, the Credit Agreement,
Security Instruments, or any other document, instrument, or other part of the
Loan Documents, any and all liabilities and obligations created and evidenced
hereby and thereby, shall be nonrecourse to, and without personal liability of,
the Venturers, and their successors, and assigns, for all purposes, except for
the amount of damage, if any, caused by such Venturer's fraud, willful
misrepresentation or interference with foreclosure actions or any exercise of
Lender's rights in connection with this Note, the Credit Agreement, Security
Instruments, or any other document,
A-1
instrument, or other part of the Loan Documents. The holders of this Note, and
all obligees and beneficiaries under such Loan Documents, their successors and
assigns, agree to look only to the Borrower and its assets for repayment of any
and all amounts at any time owing or due hereunder and thereunder or arising
under any provision of this Note, the Credit Agreement or any other Loan
Document and not to any Venturer or their successors and assigns. Nothing in
this Note shall be construed so as to prevent Lender from commencing any action,
suit or proceeding with respect to Borrower or causing legal papers to be served
upon any Venturer for the purpose of obtaining jurisdiction over the Borrower.
Borrower covenants and agrees that it will not permit any Venturers to contest
any foreclosure action commenced by the Lender or to interfere with any exercise
of Lender's rights in connection with this Agreement, the Note, Security
Instruments, or any other document, instrument, or other part of the Loan
Documents.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF TEXAS.
EDGE JOINT VENTURE II
By: EDGE PETROLEUM CORPORATION,
Managing Venturer
By: _______________________________
Name:
Title:
A-2
EXHIBIT B
FORM OF BORROWING REQUEST
_____________________, 199__
EDGE JOINT VENTURE II, a joint venture formed under the laws of the State of
Texas (the "Borrower"), pursuant to the Credit Agreement dated as of July ___,
1995, between the Borrower and COMPASS BANK - HOUSTON (the "Lender") (the
"Credit Agreement") hereby requests loans on the date and in the amounts as
follows:
LOANS:
(A) AGGREGATE AMOUNT OF NEW LOANS TO BE $______________________;
(B) REQUESTED FUNDING DATE IS _________________, 199__;
(C) FUNDS SHOULD BE DISTRIBUTED TO THE FOLLOWING ACCOUNT OF BORROWER
MAINTAINED WITH LENDER: ___________________________________.
The undersigned certifies that he is the _____________________ of the
Borrower, and that as such he is authorized to execute this certificate on
behalf of the Borrower. The undersigned further certifies, represents and
warrants on behalf of the Borrower that the Borrower is entitled to receive
the requested borrowing under the terms and conditions of the Credit
Agreement.
EDGE JOINT VENTURE II
By: EDGE PETROLEUM CORPORATION,
Managing Venturer
By: _______________________________
Name:
Title:
B-1
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
The undersigned hereby certifies that he is the ________________ of EDGE
JOINT VENTURE II, a joint venture formed under the laws of the State of Texas
(the "Borrower") and that as such he is authorized to execute this certificate
on behalf of the Borrower. With reference to the Credit Agreement dated as of
July __, 1995 (together with all amendments or supplements thereto being the
"Agreement") between the Borrower and COMPASS BANK - HOUSTON (the "Lender"), the
undersigned represents and warrants as follows (each capitalized term used
herein having the same meaning given to it in the Agreement unless otherwise
specified):
(a) The representations and warranties of the Borrower contained in
Article VII of the Agreement and in the Security Instruments and otherwise
made in writing by or on behalf of the Borrower pursuant to the Agreement
and the Security Instruments were true and correct when made, and are
repeated at and as of the time of delivery hereof and are true and correct
at and as of the time of delivery hereof, except as such representations
and warranties are modified to give effect to the transactions expressly
permitted by the Agreement.
(b) The Borrower has performed and complied with all agreements and
conditions contained in the Agreement and in the Security Instruments
required to be performed or complied with by it prior to or at the time of
delivery hereof.
(c) The Borrower has not incurred any material liabilities, direct or
contingent, since _________________, except those set forth in Schedule
9.01 to the Agreement and except those allowed by the terms of the
Agreement or consented to by the Lender in writing.
(d) Since __________________, no change has occurred, either in any
case or in the aggregate, in the condition, financial or otherwise, of the
Borrower which would have a Material Adverse Effect.
(e) There exists, and, after giving effect to the loan or loans with
respect to which this certificate is being delivered, will exist, no
Default under the Agreement or any event or circumstance which constitutes,
or with notice or lapse of time (or both) would constitute, an event of
default under any loan or credit agreement, indenture, deed of trust,
security agreement or other agreement or
C-1
instrument evidencing or pertaining to any Debt of the Borrower, or under
any material agreement or instrument to which the Borrower is a party or by
which the Borrower is bound.
EXECUTED AND DELIVERED this ____ day of ______________.
EDGE JOINT VENTURE II
By: EDGE PETROLEUM CORPORATION,
Managing Venturer
By: _______________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
C-2
EXHIBIT D
[Letterhead of Borrower]
________________, 19___
[Purchaser of Hydrocarbons] VIA REGISTERED MAIL
RETURN RECEIPT REQUESTED
Re: [Descriptions of Field and Division Order Identification Number]
Gentlemen:
You are currently paying for purchases of hydrocarbons from Edge Joint
Venture II ("Borrower") with respect to the above property. Borrower has
mortgaged its interest in this property to Compass Bank-Houston ("Lender").
Borrower and Lender have agreed that the proceeds from this property shall be
collected through Lender. Henceforth, please have all checks for payment of the
hydrocarbons from these properties paid to the order of Borrower and mail such
checks to:
Compass Bank - Houston
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
D-1
You are directed to continue to make checks payable and to mail checks as
set forth above unless and until you should receive contrary instructions in
writing from Lender or from Borrower and Lender.
EDGE JOINT VENTURE II
By: EDGE PETROLEUM
CORPORATION, Managing Venturer
By: _______________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
COMPASS BANK - HOUSTON
By: ___________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Vice President
D-2
EXHIBIT E
SECURITY INSTRUMENTS
1. Mortgage, Deed of Trust, Assignment of Production, Security Agreement and
Financing Statement from Edge Joint Venture II ("Borrower") covering
property in Texas, Mississippi and Alabama.
2. Financing Statement relating to Document No. 1 for Borrower.
3. Mortgage, Assignment of Production, Security Agreement and Financing
Statement from Borrower covering property in Louisiana.
4. Financing Statement relating to Document No. 4 for Borrower.
5. Subordination Agreement between ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. and Compass Bank -
Houston.
6. Letters in Lieu.