CREDIT AGREEMENT
Among
GMX RESOURCES INC.;
ENDEAVOR PIPELINE INC.;
EXPEDITION NATURAL RESOURCES INC.
And
LOCAL OKLAHOMA BANK, N.A.
Effective as of
October 31, 2000
TABLE OF CONTENTS
ARTICLE I..............................................................................................................1
1. DEFINITIONS..........................................................................................1
1.1 TERMS DEFINED ABOVE.........................................................................1
1.2 ADDITIONAL DEFINED TERMS....................................................................1
1.3 UNDEFINED FINANCIAL ACCOUNTING TERMS.......................................................10
1.4 REFERENCES.................................................................................10
ARTICLE II............................................................................................................11
2. AMOUNT AND TERMS OF CREDIT FACILITY.................................................................11
2.1 THE LOAN...................................................................................11
2.2 THE NOTE...................................................................................11
2.3 USE OF PROCEEDS............................................................................11
2.4 BORROWING PROCEDURES.......................................................................11
2.5 INTEREST RATE..............................................................................12
2.6 SCHEDULED PRINCIPAL AND INTEREST PAYMENTS..................................................12
2.7 MAKING OF PAYMENTS.........................................................................12
2.8 MAXIMUM LAWFUL INTEREST RATE...............................................................12
2.9 BORROWING BASE DETERMINATIONS..............................................................13
2.10 VOLUNTARY PREPAYMENTS......................................................................14
2.11 FEES.......................................................................................15
2.12 ADVANCES TO SATISFY OBLIGATIONS OF BORROWERS...............................................16
2.13 PLEDGE OF AND SECURITY INTEREST IN ACCOUNTS AND RIGHT OF OFFSET OR LIEN....................16
2.14 LETTERS IN LIEU OF TRANSFER ORDERS.........................................................16
2.15 POWER OF ATTORNEY..........................................................................17
ARTICLE III...........................................................................................................17
3. COLLATERAL AND OTHER TYPES OF CREDIT ENHANCEMENT....................................................17
3.1 OIL AND GAS PROPERTIES.....................................................................17
3.2 NEW PROPERTIES.............................................................................17
ARTICLE IV............................................................................................................18
4. CONDITIONS..........................................................................................18
4.1 RECEIPT OF LOAN DOCUMENTS AND OTHER ITEMS..................................................18
4.2 EACH ADVANCE UNDER THE NOTE................................................................20
ARTICLE V.............................................................................................................21
5. REPRESENTATIONS AND WARRANTIES......................................................................21
5.1 DUE AUTHORIZATION AND CORPORATE EXISTENCE..................................................21
5.2 CONSENTS, CONFLICTS AND CREATION OF LIENS..................................................21
5.3 VALID AND BINDING OBLIGATIONS..............................................................21
5.4 TITLE TO ASSETS AND OIL AND GAS PROPERTIES.................................................22
5.5 SCOPE AND ACCURACY OF FINANCIAL STATEMENTS.................................................22
5.6 LIABILITIES, LITIGATION, AND RESTRICTIONS..................................................22
5.7 AUTHORIZATIONS AND CONSENTS................................................................22
5.8 COMPLIANCE WITH LAWS.......................................................................22
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5.9 PROPER FILING OF TAX RETURNS AND PAYMENT OF TAXES DUE......................................23
5.10 ERISA......................................................................................23
5.11 ENVIRONMENTAL LAWS.........................................................................23
5.12 NO MATERIAL MISSTATEMENTS..................................................................23
5.13 CASUALTIES OR TAKING OF PROPERTY...........................................................23
5.14 LOCATIONS OF BUSINESS, OFFICES, AND PROPERTY...............................................24
5.15 SECURITY INSTRUMENTS.......................................................................24
5.16 SUBSIDIARIES...............................................................................24
ARTICLE VI............................................................................................................24
6. AFFIRMATIVE COVENANTS...............................................................................24
6.1 MAINTENANCE AND ACCESS TO RECORDS..........................................................24
6.2 QUARTERLY FINANCIAL STATEMENTS.............................................................24
6.3 ANNUAL FINANCIAL STATEMENTS................................................................25
6.4 RESERVE REPORTS............................................................................25
6.5 PRODUCTION REPORT..........................................................................25
6.6 GAS BALANCING STATUS REPORT................................................................26
6.7 NOTICES OF CERTAIN EVENTS..................................................................26
6.8 LETTERS IN LIEU OF TRANSFER ORDERS.........................................................27
6.9 DIVISION ORDERS............................................................................27
6.10 ADDITIONAL INFORMATION.....................................................................27
6.11 COMPLIANCE WITH LAWS.......................................................................27
6.12 PAYMENT OF ASSESSMENTS AND CHARGES.........................................................28
6.13 HAZARDOUS SUBSTANCES INDEMNIFICATION.......................................................28
6.14 MAINTENANCE OF CORPORATE EXISTENCE AND GOOD STANDING.......................................29
6.15 FURTHER ASSURANCES.........................................................................29
6.16 INITIAL FEES AND EXPENSES OF LENDER AND/OR LEGAL COUNSEL TO LENDER.........................29
6.17 SUBSEQUENT FEES AND EXPENSES...............................................................29
6.18 MAINTENANCE AND INSPECTION OF TANGIBLE PROPERTIES..........................................29
6.19 MAINTENANCE OF INSURANCE AND EVIDENCE THEREOF..............................................29
6.20 PAYMENT OF NOTE AND PERFORMANCE OF OBLIGATIONS.............................................30
6.21 OPERATION OF OIL AND GAS PROPERTIES........................................................30
6.22 DEPOSITORY ACCOUNTS........................................................................30
6.23 EXISTING BUSINESS..........................................................................30
6.24 TITLE MATTERS..............................................................................30
ARTICLE VII...........................................................................................................30
7. FINANCIAL COVENANTS.................................................................................30
7.1 ADJUSTED CURRENT RATIO.....................................................................30
7.2 DEBT SERVICE COVERAGE RATIO................................................................30
7.3 INDEBTEDNESS TO TANGIBLE NET WORTH RATIO...................................................31
ARTICLE VIII..........................................................................................................31
8. NEGATIVE COVENANTS..................................................................................31
8.1 INDEBTEDNESS...............................................................................31
8.2 CONTINGENT OBLIGATIONS.....................................................................31
8.3 LIENS......................................................................................31
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8.4 SALES OF ASSETS............................................................................31
8.5 LOANS OR ADVANCES..........................................................................32
8.6 DIVIDENDS; TREASURY STOCK PURCHASES........................................................32
8.7 CANCELLATION OF INSURANCE..................................................................32
8.8 MERGERS AND CONSOLIDATIONS; CHANGES IN CORPORATE STRUCTURE.................................32
8.9 TRANSACTIONS WITH AFFILIATES...............................................................32
8.10 LINES OF BUSINESS..........................................................................32
8.11 ORGANIZATION OR ACQUISITION OF SUBSIDIARIES................................................32
8.12 SPECULATIVE TRADING........................................................................32
8.13 INVESTMENTS................................................................................32
ARTICLE IX............................................................................................................33
9. EVENTS OF DEFAULT...................................................................................33
9.1 ENUMERATION OF EVENTS OF DEFAULT...........................................................33
9.2 REMEDIES...................................................................................35
ARTICLE X.............................................................................................................36
10. MISCELLANEOUS.......................................................................................36
10.1 TRANSFERS AND PARTICIPATIONS...............................................................36
10.2 SURVIVAL OF REPRESENTATIONS. WARRANTIES AND COVENANTS......................................37
10.3 NOTICES AND OTHER COMMUNICATIONS...........................................................37
10.4 PARTIES IN INTEREST........................................................................37
10.5 RIGHTS OF THIRD PARTIES....................................................................37
10.6 ARTICLES AND SECTIONS......................................................................38
10.7 NUMBER AND GENDER..........................................................................38
10.8 RENEWALS AND EXTENSIONS....................................................................38
10.9 NO WAIVER: RIGHTS CUMULATIVE...............................................................38
10.10 INCORPORATION OF EXHIBITS..................................................................38
10.11 SURVIVAL UPON UNENFORCEABILITY.............................................................38
10.12 AMENDMENTS OR MODIFICATIONS................................................................38
10.13 CONTROLLING PROVISION UPON CONFLICT........................................................39
10.14 TIME, PLACE AND METHOD OF PAYMENTS.........................................................39
10.15 TIME OF ESSENCE............................................................................39
10.16 DISPOSITION OF COLLATERAL..................................................................39
10.17 GOVERNING LAW..............................................................................39
10.18 JURISDICTION AND VENUE.....................................................................39
10.19 WAIVER OF RIGHTS TO JURY TRIAL.............................................................39
10.20 ENTIRE AGREEMENT...........................................................................39
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RESTATED
CREDIT AGREEMENT
THIS RESTATED CREDIT AGREEMENT, made and entered into this ___ day of
May, 2001 to be effective the 31st day of October, 2000 by and between GMX
RESOURCES INC., an Oklahoma corporation ("GMX"), ENDEAVOR PIPELINE INC., an
Oklahoma corporation ("Endeavor") and EXPEDITION NATURAL RESOURCES INC., an
Oklahoma corporation ("Expedition") (collectively, GMX, Endeavor and Expedition
are individually referred to herein as a "Borrower" and collectively as the
"Borrowers"), and LOCAL OKLAHOMA BANK, N.A., a national banking association
("Lender").
W I T N E S S E T H:
WHEREAS, by virtue of that certain Assignment of Loan Documents dated
as of October 31, 2000, Lender acquired: (i) that certain Credit Agreement dated
as of February 18, 1998 by and between GMX and Bank One, Oklahoma, N.A., as such
Credit Agreement has been amended from time to time thereafter and most recently
by that certain Third Amendment to Credit Agreement dated as of April 14, 2000
(the "Former Agreement"), (ii) that certain Amended and Restated Promissory Note
dated as of May 19, 1999 executed by GMX in favor of Bank One, Oklahoma, N.A. in
the amount of $20,000,000.00, and (iii) all other loan and security
documentation by and between GMX and Bank One, Oklahoma, N.A. (collectively, i,
ii, and iii above are referred to herein as the "Bank One Documents").
WHEREAS, Borrowers and Lender desire to enter into a restated credit
agreement in order to restate the Credit Agreement included in the Bank One
documents.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrowers and the Lender
hereby agree as follows:
ARTICLE I
1 DEFINITIONS
1.1 TERMS DEFINED ABOVE. As used in this Credit Agreement, the
terms , "BORROWER", "BORROWERS", and "LENDER" shall have the meaning assigned
to such terms hereinabove. Defined terms used herein in the singular shall
import the plural and VICE VERSA.
1.2 ADDITIONAL DEFINED TERMS. As used in this Agreement, each of
the following terms shall have the meaning assigned thereto in this Section,
unless the context otherwise requires:
"ADVANCE" shall mean an advance of funds made by the Lender
to the Borrowers under this Agreement, including any amounts evidenced by the
Note.
"ADVANCE REQUEST" shall mean a written request from any
Borrower for an Advance under the Loan, substantially in the form of Exhibit
"D" attached hereto.
"AFFILIATE" shall mean any Person, who, directly or
indirectly, controls, is controlled by or is under common control with the
relevant Person. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean a member of the board
of directors, a partner or an officer of such Person, or any other Person with
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
(of record, as trustee, or by proxy) of voting shares, partnership interests
or voting rights, through a management contract or otherwise. Any Person
owning or controlling directly or indirectly ten percent (10%) or more of the
voting shares, partnership interests or voting rights, or other equity
interest of another Person shall be deemed to be an Affiliate of such Person.
"AGREEMENT" shall mean this Credit Agreement and all
exhibits and schedules hereto, as the same may be amended, modified,
supplemented or restated from time to time according to the terms hereof.
"AVAILABLE COMMITMENT" shall mean that amount determined by
subtracting the Loan Balance from the Commitment Amount.
"BASE RATE" shall mean, at any time, that rate of interest
equal to the interest rate then most recently announced or published in the
"Money Rates" section of THE WALL STREET JOURNAL, as the "Prime Rate" which
such rate may not be the lowest interest rate charged by the Bank, and which
Prime Rate shall change upon any change in such announced or published Prime
Rate, all without notice to the Borrowers.
"BORROWING BASE" shall mean, at any time, the maximum amount
of credit that Lender is willing to extend against the Borrowers' Oil and Gas
Properties as determined at the immediately preceding Borrowing Base
Determination in accordance with Section 2.9 and then in effect pursuant to
the terms of Section 2.9, which amount shall not exceed $15,000,000.00.
"BORROWING BASE DETERMINATION" shall mean a calculation or
recalculation of the Borrowing Base, Monthly Commitment Reduction and Half
Life made by the Lender pursuant to Section 2.9.
"BUSINESS DAY" shall mean a day other than a Saturday,
Sunday or legal holiday for commercial banks under the laws of the State of
Oklahoma.
"CLOSING DATE" shall mean the effective date of this
Agreement.
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"CODE" shall mean the United States Internal Revenue Code as
amended from time to time.
"COLLATERAL" shall mean the Mortgaged Properties, and any
other Property of the Borrowers, or any other Person, wherever located and
whether now owned or existing or hereafter acquired or arising, that is now or
at any time used or intended by any Borrower and the Lender to be subject to
the Liens created in the Security Instruments or otherwise as security for the
payment or performance of all or any portion of the Obligations, including,
without limitation, products and proceeds existing in connection with any of
the foregoing.
"COMMITMENT AMOUNT" shall mean the lesser of the amount of:
(A) $15,000,000.00; or (B) the amount of (i) the Borrowing Base, less (ii) the
sum of the Monthly Commitment Reductions with respect to the Loan which have
occurred subsequent to the immediately preceding Borrowing Base Determination.
"COMMITMENT PERIOD" shall mean the period from and including
the Closing Date to, but not including, the Maturity Date.
"COMPLIANCE CERTIFICATE" shall mean each certificate,
substantially in the form attached hereto as Exhibit "B", executed by a
Responsible Officer of GMX on its own behalf and on behalf of each of Endeavor
and Expedition and furnished to the Lender from time to time in accordance
with this Agreement.
"CONTESTED IN GOOD FAITH" shall mean a matter (a) which is
being contested in good faith by or on behalf of any Person, by appropriate
and lawful proceedings diligently conducted, satisfactory to the Lender, and
for which a reserve has been established in an amount determined in accordance
with GAAP, (b) in which foreclosure, distraint, sale, forfeiture, levy,
execution or other similar proceedings have not been initiated or have been
stayed and continue to be stayed, and (c) in which a good faith contest will
not materially detract from the value of the Collateral, materially jeopardize
the rights of the Lender or the Borrowers with respect thereto, materially
interfere with the operation by any Borrower of its business, or otherwise
have a Material Adverse Effect.
"CONTINGENT OBLIGATION" shall mean, as to any Person, any
obligation of such Person guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations of any other Person (for
purposes of this definition, a "PRIMARY OBLIGATION") in any manner, whether
directly or indirectly, including, without limitation, any obligation of such
Person, regardless of whether such obligation is contingent, (a) to purchase
any primary obligation or any Property constituting direct or indirect
security therefore, (b) to advance or supply funds (i) for the purchase or
payment of any primary obligation, or (ii) to maintain working capital or
equity capital of any other Person in respect of any primary obligation, or
otherwise to maintain the net worth or solvency of any other Person, (c) to
purchase Property, securities or services primarily for the purpose of
assuring the owner of any primary obligation of the ability of the Person
primarily liable for such primary obligation to make payment thereof, or (d)
otherwise to assure or hold harmless the owner
3
of any such primary obligation against loss in respect thereof, with the
amount of any Contingent Obligation being deemed to be equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by such
Person in good faith.
"CURRENT ASSETS" and "CURRENT LIABILITIES" shall mean, at
any time, all assets or liabilities, respectively, that should, in accordance
with GAAP, be classified as current assets or current liabilities,
respectively, on the consolidated balance sheet of the Borrowers.
"DEFAULT" shall mean any event or occurrence which with the
lapse of time or the giving of notice or both would become an Event of Default.
"DEFAULT RATE" shall mean a per annum variable interest rate
equal to the Base Rate plUS five percent (5.00%), calculated on the basis of a
year of 360 days and actual number of days elapsed (including the first day
but excluding the last day), but in no event exceeding the Highest Lawful Rate.
"ENVIRONMENTAL COMPLAINT" shall mean any written complaint,
order, directive, claim, citation, notice of environmental report or
investigation or other notice by any Governmental Authority or any other
Person with respect to (a) air emissions, (b) spills, releases or discharges
to soils or any improvements located thereon, surface water, groundwater or
the sewer, septic system or waste treatment, storage or disposal systems
servicing any Property of any Borrower, (c) solid or liquid waste disposal,
(d) either the use, generation, storage, transportation or disposal of any
Hazardous Substance, or (e) other environmental, health or safety matters
affecting any Property of any Borrower or the business conducted thereon.
"ENVIRONMENTAL LAWS" shall mean (a) the following federal
laws as they may be cited, referenced and amended from time to time: the Clean
Air Act, the Clean Water Act, the Safe Drinking Water Act, the Water Pollution
Control Act, the Environmental Pesticides Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Endangered Species Act, the
Resource Conservation and Recovery Act, the Occupational Safety and Health
Act, the Hazardous Materials Transportation Act, the Superfund Amendments and
Reauthorization Act, and the Toxic Substances Control Act; (b) any and all
equivalent environmental statutes of any state in which Property of any
Borrower is situated, as they may be cited, referenced and amended from time
to time; (c) any so-called federal, state or local "Superfund" or "Superlien"
statutes, (d) any rules or regulations promulgated under or adopted pursuant
to the above federal and state laws; and (e) any other equivalent federal,
state or local statute or any requirement, rule, regulation, code, ordinance
or order adopted pursuant thereto, including, without limitation, those
relating to the generation, transportation, treatment, storage, recycling,
disposal, handling or release of Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the regulations thereunder and
interpretations thereof.
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"EVENT OF DEFAULT" shall mean any of the events specified in
Section 9.
"FINANCIAL STATEMENTS" shall mean statements of the
consolidated financial condition of the Borrowers as at the point in time and
for the period indicated and consisting of at least (i) a balance sheet, (ii)
an income statement, (iii) a statement of cash flow, and (iv) such other
financial statements pertaining to the financial condition or operations of
the Borrowers as the Lender may request, all of which shall be certified by
the Borrowers' Responsible Officer as being prepared pursuant to GAAP
consistently applied and when applicable in comparative form with respect to
the corresponding period of the preceding fiscal period or as otherwise
required by Lender.
"GAAP" shall mean generally accepted accounting principles
established by the Financial Accounting Standards Board or the American
Institute of Certified Public Accountants and in effect in the United States
from time to time during the term of this Agreement.
"GOVERNMENTAL AUTHORITY" shall mean any nation, country,
commonwealth, territory, government, state, county, parish, municipality or
other political subdivision and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.
"HALF LIFE" shall be defined as the lesser of: (i) the
duration, in months, as projected by Lender, in its sole discretion, acting
reasonably, during which one-half of the undiscounted future net income, net
of lease operating expenses, production taxes, and capital expenditures will
be realized from the Borrowers' Proved Developed Producing Oil and Gas
Properties, or (ii) eighty-four (84) months.
"HAZARDOUS SUBSTANCES" shall mean flammables, explosives,
radioactive materials, hazardous wastes, asbestos or any material containing
asbestos, polychlorinated biphenyls (PCB's), toxic substances or related
materials, petroleum and petroleum products and associated oil or natural gas
exploration, production and development wastes or any substances defined as
"hazardous substances," "hazardous materials", "hazardous wastes" or "toxic
substances" under the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, the Superfund Amendments and Reauthorization Act,
as amended, the Hazardous Materials Transportation Act, as amended, the
Resource Conservation and Recovery Act, as amended, the Toxic Substances
Control Act, as amended, or any other law or regulation now or hereafter
enacted or promulgated by any Governmental Authority, including, without
limitation, those elements or compounds which are contained in the list of
hazardous substances adopted by the United States Environmental Protection
Agency and the list of toxic pollutants designated by Congress or the
Environmental Protection Agency or under any Environmental Law.
"HIGHEST LAWFUL RATE" shall mean the maximum non-usurious
interest rate permissible under applicable laws of the State of Oklahoma or
those of the United States of America applicable to the Lender, whichever
authorizes the greater rate.
5
"INDEBTEDNESS" shall mean, with respect to any Person,
without duplication, (a) all liabilities which would appear on a balance sheet
of such Person, prepared in accordance with GAAP (b) all obligations of such
Person evidenced by bonds, debentures, promissory notes or such similar
evidences of indebtedness, (c) all other indebtedness of such Person for
borrowed money, and (d) all obligations of others, to the extent any such
obligation is secured by a Lien, except a Permitted Lien, on the assets of
such Person (whether or not such Person has assumed or become liable for the
obligation secured by such Lien).
"INSOLVENCY PROCEEDING" shall mean application (whether
voluntary or instituted by another Person) for or the consent to the
appointment of a receiver, trustee, conservator, custodian or liquidator of
any Person or of all or a substantial part of the Property of such Person, or
the filing of a petition (whether voluntary or instituted by another Person)
commencing a case under Title 11 of the United States Code, seeking
liquidation, reorganization or rearrangement or taking advantage of any
bankruptcy, insolvency, debtor's relief or other similar Law of the United
States, the State of Oklahoma or any other jurisdiction.
"LAW(S)" shall mean all applicable statutes, laws,
ordinances, rules, rulings, interpretations, regulations, judgments,
requirements, governmental authorizations (including licenses, permits,
franchises and other governmental consents necessary for the ownership or
operation of Property), orders, writs, injunctions or decrees (or
interpretations of any of the foregoing) of any Governmental Authority or
Tribunal.
"LETTER OF CREDIT" shall mean any stand-by letter of credit
in a form acceptable to Lender. No Letter of Credit shall be issued with a
maturity in excess of one year.
"LETTER OF CREDIT FEE" shall be a per annum fee equal to the
greater of (i) two percent (2.00%) per annum of the face amount of each Letter
of Credit issued or (ii) $250.00.
"LIEN" shall mean any lien, mortgage, security interest, tax
lien, pledge, conditional sale or title retention arrangement, or any other
interest in or encumbrance upon, property, which is designed to secure the
repayment of Indebtedness, whether arising by agreement, under any Law or
otherwise.
"LITIGATION" shall mean any proceeding, claim, lawsuit,
and/or investigation conducted or threatened by or before any Tribunal.
"LOAN" shall mean the committed revolving loan facility to
be established by Lender in favor of Borrowers pursuant to Section 2.1 hereof.
The term also includes the sum of all advances from time to time outstanding
under the Note together with any obligations outstanding pursuant to Letters
of Credit issued on any Borrower's behalf.
6
"LOAN BALANCE" shall mean, at any time, the outstanding
principal balance of the Note plus the face amount of any Letters of Credit
issued by Lender for the benefit of Borrowers at such time.
"LOAN DOCUMENTS" shall mean this Agreement, the Note, the
Security Instruments and all other documents and instruments now or hereafter
delivered pursuant to the terms of or in connection with this Agreement, the
Note, or the Security Instruments, and all renewals and extensions of, or
amendments or supplements to, or restatements of any or all of the foregoing
from time to time in effect.
"MATERIAL ADVERSE EFFECT" shall mean any set of
circumstances or events which (a) would have any material adverse effect upon
the validity or enforceability of any of the Loan Documents, (b) is or could
reasonably be expected to become material and adverse to the consolidated
business, condition (financial or otherwise), operations or prospects of the
Borrowers, (c) could reasonably be expected to materially impair any
Borrower's ability to fulfill its obligations under the terms of the Loan
Documents, or (d) causes a Default or an Event of Default.
"MATURITY DATE" shall be May 1, 2003.
"MONTHLY COMMITMENT REDUCTION" shall mean those monthly
decreases to the Borrowing Base occurring as of the first (1st) day of each
month during the term hereof as determined by Lender accordance with Section
2.9 below.
"MORTGAGED PROPERTIES" shall mean all Oil and Gas Properties
of each Borrower as evidenced by its working interests, royalty interests, any
other interests of any kind or nature, now existing or hereafter acquired,
subject to perfected first-priority Liens pursuant to the Security Instruments
in favor of the Lender, subject only to Permitted Liens, mortgaged as security
for the Obligations.
"NEW PROPERTIES" shall mean with respect to each Borrowing
Base Determination, those Oil and Gas Properties acquired or developed by any
Borrower which were not included in the most recent prior Borrowing Base
Determination.
"NOTE" shall mean the promissory note of the Borrowers in
the original face amount of $15,000,000.00 in the form attached hereto as
Exhibit "A", together with any and all renewals, extensions for any period,
increases and rearrangements thereof.
"OBLIGATIONS" shall mean, without duplication, (a) all
Indebtedness evidenced by the Note and any Letter of Credit, and (b) all other
obligations and liabilities of the Borrowers to the Lender, now existing or
hereafter incurred, under, arising out of or in connection with any Loan
Document, and with respect to all of the foregoing to the extent that any of
the same includes or refers to the payment of amounts deemed or constituting
interest, only so much thereof as shall have accrued, been earned and remains
unpaid at each relevant time of determination.
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"OIL AND GAS PROPERTIES" shall mean fee, leasehold or other
interests in or under mineral estates or oil, gas and other liquid or gaseous
hydrocarbon leases with respect to Oil and Gas Properties situated in the
United States or offshore from any State of the United States, including,
without limitation, overriding royalty and royalty interests, leasehold estate
interests, net profits interests, production payment interests and mineral fee
interests, together with contracts executed in connection therewith and all
tenements, hereditaments, appurtenances and Oil and Gas Properties
appertaining, belonging, affixed or incidental thereto.
"PERMITTED LIENS" shall mean (a) Liens for Taxes incurred in
the course of business (which are not yet due or are being Contested in Good
Faith); (b) Liens in connection with workers' compensation, unemployment
insurance or other social security (other than Liens created by Section 4068
of ERISA), old-age pension or public liability obligations which are not yet
due or are being Contested in Good Faith; (c) Liens in favor of vendors,
carriers, warehousemen, repairmen, mechanics, workmen, materialmen,
construction or similar Liens arising by operation of Law in the ordinary
course of business in respect of obligations which are not yet due or are
being Contested in Good Faith; (d) Liens of operators and non-operators under
joint operating agreements arising in the ordinary course of the business of
any Borrower to secure amounts owing, which amounts are not yet due and will
be paid in accordance with each of such Borrower's customary business
practices, as same exist on the date hereof or are being Contested in Good
Faith; (e) Liens under production sales agreements, division orders, operating
agreements and other agreements customary in the oil and gas business for
processing, producing and selling hydrocarbons; (f) easements, rights of way,
restrictions and other similar encumbrances, and minor defects in the chain of
title which are customarily accepted in the oil and gas financing industry,
none of which interfere with the ordinary conduct of the business of any
Borrower or materially detract from the value or use of the Property to which
they apply; (g) Liens of record under terms and provisions of the leases, unit
agreements, assignments and other transfer of title documents in the chain of
title under which Borrower acquired the relevant Property; (h) other Liens
existing as of the Closing Date and disclosed on Exhibit "E" attached hereto
under the heading "Permitted Liens"; (i) Liens created in favor of the Lender
and other Liens expressly permitted under the Security Instruments; (j) Liens
arising in the ordinary course of business from pledges or deposits to secure
public or statutory obligations, or deposits to secure (or in lieu of) surety,
stay, appeal or customs bonds; encumbrances consisting of easements, zoning
restrictions, or other restrictions on the use of Property, provided that such
encumbrances do not materially impair the use of such Property for the
purposes intended, and none of which are violated by existing or proposed
structure or land use, and such other material encumbrances as have been
disclosed to and approved by Lender in writing; and (k) good faith deposits in
connection with bids, tenders, contracts or leases, performance or other
similar bonds.
"PERSON" shall mean an individual, corporation, partnership,
trust, unincorporated organization or a government or any agency or political
subdivision thereof.
"PLAN" shall mean, at any time, any employee benefit plan
which is covered by ERISA and in respect of which any Borrower or any Commonly
Controlled Entity is or, if such plan
8
were terminated at such time, would under Section 4069 of ERISA be deemed to
be an "employer" as defined in Section 3(5) of ERISA.
"PRINCIPAL OFFICE" shall mean the office of Lender in
Oklahoma City, Oklahoma County, Oklahoma presently located at 0000 X.X. 00xx
Xxxxxx, Xxxxxxxx Xxxx, Xxxxxxxx 00000.
"PROPERTY" shall mean any interest in any kind of property
or asset, whether real, personal or mixed, tangible or intangible.
"RELEASE OF HAZARDOUS SUBSTANCES" shall mean any emission,
spill, release, disposal or discharge, except in accordance with a valid
permit, license, certificate or approval of the relevant Governmental
Authority, and notice of which is required to be given thereof by the person
responsible for such emission, spill, release, disposal or discharge to a
Governmental Authority of any Hazardous Substance into or upon (a) the air,
(b) soils or any improvements located thereon, (c) surface water or
groundwater, or (d) the sewer, septic system or waste treatment, storage or
disposal system servicing any Property of any Borrower.
"REQUIREMENT OF LAW" shall mean, as to any Person, the
certificate or articles of incorporation and by-laws or other organizational
or governing documents of such Person, and any applicable Law, treaty,
ordinance, order, judgment, rule, decree or regulation or determination of any
Tribunal or other Governmental Authority, including, without limitation,
rules, regulations and orders and requirements for permits, licenses,
registrations, approvals or authorizations, in each case as such now exist or
may be hereafter amended and are applicable to or binding upon such Person or
any of its Property or to which such Person or any of its Property is subject.
"RESERVE REPORT" shall mean each report delivered to the
Lender by the Borrowers pursuant to Section 6.4.
"RESPONSIBLE OFFICER" shall mean, as to the Borrowers, the
President or Chief Executive Officer or Chief Financial Officer of GMX, or
such other officer as shall be designated in writing to the Lender by the
previously mentioned officers.
"SECURITY INSTRUMENTS" shall mean the security instruments
executed and delivered in satisfaction of the condition set forth in
Subsection 4.1, and all other documents and instruments at any time executed
as security for all or any portion of the Obligations, as the same may be
amended from time to time.
"SUBSIDIARY" shall mean, as to any Person, a corporation of
which shares of stock having ordinary voting power (other than stock having
such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation are
at the time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by such
Person.
9
"SUPERFUND SITE" shall mean those sites listed on the
Environmental Protection Agency National Priority List (NPL) and eligible for
remedial action, or any comparable state registry or list in any state of the
United States.
"TANGIBLE NET WORTH" shall mean, on any date as of which the
amount thereof is to be determined the sum of the following for Borrowers
calculated in accordance with GAAP: (i) total shareholder's equity LESS (ii)
Intangible Assets and/or amounts due from any Borrower's Affiliates.
"TAXES" shall mean all taxes, assessments, filing or other
fees, levies, imposts, duties, deductions, withholdings, stamp taxes, interest
equalization taxes, capital transaction taxes, foreign exchange taxes or
charges, or other charges of any nature whatsoever from time to time or at any
time imposed by any Law or Tribunal.
"TRANSFEREE" shall mean any Person to which the Lender has
sold, assigned, transferred or granted a participation in any of the
Obligations, as authorized pursuant to Section 10.1, and any Person acquiring,
by purchase, assignment, transfer or participation, from any such purchaser,
assignee, transferee or participant, any part of such Obligations.
"TRIBUNAL" shall mean any court, governmental department or
authority, commission, board, bureau, agency, arbitrator or instrumentality of
any state, political subdivision, commonwealth, nation, territory, county,
parish, or municipality, whether now or hereafter existing, having
jurisdiction over the Lender, the Borrowers or their respective Property.
"UNSCHEDULED BORROWING BASE DETERMINATION" shall mean a
redetermination of the Borrowing Base made at any time other than on the dates
set for the regular semi-annual redetermination of the Borrowing Base which is
(A) made at the reasonable request of Borrowers, or (B) required by the Lender
in the exercise of its sole and absolute discretion.
1.3 UNDEFINED FINANCIAL ACCOUNTING TERMS. Undefined financial
accounting terms used in this Agreement shall be defined according to GAAP at
the time in effect.
1.4 REFERENCES. References in this Agreement to Exhibit, Article
or Section numbers shall be to Exhibits, Articles or Sections of this
Agreement, unless expressly stated to the contrary. References in this
Agreement to "hereby," "herein," "hereinafter," "hereinabove," "hereinbelow,"
"hereof," "hereunder" and words of similar import shall be to this Agreement
in its entirety and not only to the particular Exhibit, Article or Section in
which such reference appears.
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ARTICLE II
2 AMOUNT AND TERMS OF CREDIT FACILITY
2.1 THE LOAN. Subject to the terms and conditions of this Agreement,
and in reliance upon the representations and warranties made by each Borrower
herein, Lender agrees to make Advances from time to time, on or before the
Maturity Date, in accordance with the borrowing procedures set forth in
paragraph 2.4 hereof; PROVIDED, HOWEVER, that the Loan Balance at any one time
outstanding under the Note shall not exceed the Commitment Amount then in
effect. No individual Advance when combined with all other unpaid and
outstanding Advances shall exceed the Available Commitment. Within the limits
set forth herein, Borrowers may borrow, repay without penalty or premium, and
reborrow as provided in this paragraph 2.1.
2.2 THE NOTE. All Advances made under the Note shall be evidenced by
the Note, which shall be made, executed and delivered by Borrowers to Lender at
the Closing. Notwithstanding the principal amount stated on the face of the
Note, the actual principal amount due from Borrowers on account of the Note
shall be the sum of all Advances made by Lender under the Note, less all
principal payments actually received by Lender in collected funds for
application to the Loan.
2.3 USE OF PROCEEDS. Proceeds of Advances made under the Loan shall be
used to, among other things: (i) refinance existing debt of GMX at Bank One,
Oklahoma, N.A.; (ii) repay indebtedness to shareholders originally incurred to
fund retirement of all issues of Series B preferred stock; (iii) acquire
interests in the Bosh #1 and the Xxxxxxx #1 from Xxxx Energy Partnership, (iv)
finance the future acquisition and development of Oil and Gas Properties; (v)
provide availability to issue letters of credit necessary to meet operating and
hedging requirements; (vi) provide funds to meet working capital requirements;
and (vii) other corporate purposes as may be authorized by the Lender in its
sole discretion.
2.4 BORROWING PROCEDURES. Any Borrower may request an Advance under the
Loan on any Business Day on or before the Maturity Date. Any Borrower shall make
each request by giving Lender written notice (which may be sent via facsimile)
in the form of a properly completed and executed Advance Request stating the
amount of the requested Advance; PROVIDED, HOWEVER, that any such Borrower may
give notice by telephone if confirmed by a written notice (which may be sent via
facsimile) in the form of a properly completed and executed Advance Request
within two (2) Business Days thereafter. Subject to Borrowers' satisfaction of
all other conditions precedent as set forth in Section 4.2 hereof, each Advance
under the Loan will be made on the same Business Day on which Lender receives
the Advance Request, if the Advance Request is received by 2:00 p.m., or on the
following Business Day, if it is received after 2:00 p.m. Lender will make each
Advance under the Loan by crediting the general operating accounts maintained by
Borrowers with Lender. Unless Lender is otherwise instructed by any Borrower,
Advance Requests may be signed and submitted on behalf of each Borrower by the
Responsible Officer.
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2.5 INTEREST RATE. The outstanding unpaid principal balance of the Note
shall bear interest at a fluctuating rate per annum equal to the Base Rate PLUS
one half of one-percent (0.5%). Upon notice from Lender to Borrowers of the
occurrence of any Event of Default, the unpaid principal amount from time to
time outstanding under the Note shall bear interest at a fluctuating rate per
annum equal to the Default Rate (but not less than the Base Rate in effect on
the date of the occurrence of the Event of Default). The interest rate
applicable to the Note shall change as of the effective date of any change in
the Base Rate. Interest shall be computed on the Note for the actual number of
days elapsed on the basis of a year consisting of 360 days.
2.6 SCHEDULED PRINCIPAL AND INTEREST PAYMENTS. Payments of accrued
interest on the outstanding principal balance of the Note shall be due and
payable monthly, beginning on December 1, 2000, and continuing thereafter on the
first (1st) day of each and every month thereafter and on the Maturity Date. If
the Loan Balance exceeds the Commitment Amount as a result of a Monthly
Commitment Reduction with respect to the Loan on the first (1st) day of any
month, the Borrowers shall immediately make such principal payments as may be
necessary to reduce the Loan Balance of the Note to an amount less than or equal
to the Commitment Amount then in effect. The entire outstanding principal
balance of the Note and all unpaid interest accrued thereon shall be due and
payable on the Maturity Date. If any Letter of Credit is called for funding,
repayment thereof shall be due and payable ON DEMAND from Lender but if no
demand is made, it shall be treated as an Advance under the Note.
2.7 MAKING OF PAYMENTS. All payments (including prepayments) made by
Borrowers on account of the Note shall be made to Lender at any office of
Lender, at or before 2:00 p.m., local time, in lawful money of the United States
of America and in immediately available funds. If any payment under the Note
shall be due and payable on a day other than a Business Day, the due date
thereof shall be extended to the next succeeding Business Day and, with respect
to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.
2.8 MAXIMUM LAWFUL INTEREST RATE. It is not the intention of Lender or
Borrowers to violate the laws of any applicable jurisdiction relating to usury
or other restrictions on the maximum lawful interest rate. The Loan Documents
and all other agreements between Borrowers and Lender, whether now existing or
hereafter arising and whether written or oral, are hereby limited so that in no
event shall the interest paid or agreed to be paid to Lender for use,
forbearance or detention of money loaned, or for the payment or performance of
any covenant or obligation contained herein or in any other Loan Document exceed
the maximum amount permissible under applicable law. If from any circumstances
Lender shall ever receive anything of value deemed interest under applicable law
which would exceed interest at the highest lawful rate, such excessive interest
shall be applied to the reduction of the principal amount owing hereunder, and
not to the payment of interest, or if such excessive interest exceeds any unpaid
balance of principal, such excess shall be refunded to Borrowers. All sums paid
or agreed to be paid to Lender for the use, forbearance or detention of loans
evidenced by the Note shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of the Note
until payment in full so that the rate of interest on account of such loans is
uniform throughout the term thereof. This Section 2.8 shall
12
control every other provision of the Loan Documents and all other agreements
between Lender and Borrowers contemplated thereby.
2.9 BORROWING BASE DETERMINATIONS.
2.9.1 The "Borrowing Base" in effect at any time shall be that
amount as established by Lender, in its sole and absolute discretion
and consistent with its general lending policies then in effect, and
based upon its evaluation of the Borrowers' Collateral and such other
credit factors consistently applied (including, without limitation, the
assets, liabilities, cash flow, business, properties, prospects,
management and ownership of the Borrowers) as Lender customarily
considers in evaluating similar oil and gas credits. Borrowers
recognize that decreases in the Borrowing Base may be caused by such
factors as declines in production volumes, other adverse changes in
operating conditions, price decreases, other adverse market or economic
conditions, and increases in interest rates. Lender may, in its sole
and absolute discretion, require additional Borrowing Base
determinations at any time.
2.9.2 The Borrowing Base as of the Closing Date shall be Seven
Million Two Hundred Fifty Thousand and No/100 Dollars ($7,250,000.00)
(subject to the Monthly Commitment Reductions) which such amount shall
remain until the earlier of the next scheduled Borrowing Base
Determination on March 1, 2001 or as may otherwise be required in
accordance with the provisions of Section 2.9.1. The initial Monthly
Commitment Reduction is $105,000.00 per month, which such amount shall
remain until the next Borrowing Base Determination (currently scheduled
for March 1, 2001) and the Half Life is 69 months. Nothing contained in
this Section 2.9.2 shall be construed to imply that the amount of the
Monthly Commitment Reduction cannot be zero (0). Beginning March 1,
2001, a new Borrowing Base, Monthly Commitment Reduction and Half Life
shall be determined by Lender on, at least, a semi-annual basis and in
accordance with the procedures set forth in paragraph 2.9.3 below.
2.9.3 Subsequent Borrowing Base Determinations shall be made
by the Lender at least semi-annually on March 1 and September 1 of each
year beginning March 1, 2001 or as Unscheduled Borrowing Base
Determinations. In connection with, and as of, each new Borrowing Base
Determination, the Lender shall also determine a new Monthly Commitment
Reduction and Half Life. Borrowers shall provide Lender with
engineering information pursuant to the terms of Section 6.4 below.
Lender shall by notice to the Borrowers by March 1 and September 1 of
each year, or within a reasonable time thereafter (herein called the
"Determination Dates"), notify the Borrowers of the designation by the
Lender of the new Borrowing Base, Monthly Commitment Reduction and Half
Life for the period beginning on such Determination Date and continuing
until, but not including, the next Borrowing Base Determination. If an
Unscheduled Borrowing Base Determination is made by the Lender, the
Lender shall notify the Borrowers within a reasonable time after
receipt of all requested information of the new Borrowing Base, Monthly
Commitment
13
Reduction and Half Life, and such new Borrowing Base, Monthly
Commitment Reduction and Half Life shall continue until the next
Borrowing Base Determination. If the Borrowers do not furnish all such
information, reports and data by any date specified in Section 6.4,
the Lender may nonetheless designate the Borrowing Base, Monthly
Commitment Reduction and Half Life at any amounts which the Lender in
its discretion determines and may redesignate the Borrowing Base,
Monthly Commitment Reduction and Half Life from time to time
thereafter until the Lender receives all such information, reports and
data, whereupon the Lender shall designate a new Borrowing Base,
Monthly Commitment Reduction and Half Life as described above. If at
any time the Borrowers' Oil and Gas Properties are sold, the Borrowing
Base then in effect shall automatically be reduced by a sum equal to
the amount of prepayment required to be made pursuant to Section 8.4
hereof. Borrowers recognize that decreases in the Borrowing Base may
be caused by such factors as declines in production volumes, other
adverse market or economic conditions, and increases in interest
rates. It is expressly understood that the Lender has no obligation to
designate the Borrowing Base, the Monthly Commitment Reduction or Half
Life at any particular amounts, except in the exercise of its
discretion, whether in relation to the Commitment Amount or otherwise.
Provided, however, that the Lender shall not have the obligation to
designate a Borrowing Base in an amount in excess of the Commitment
Amount or its legal or internal lending limits.
2.9.4 MANDATORY PREPAYMENTS. If the Loan Balance as of the
date of Lender's redetermination of the Borrowing Base exceeds the
redetermined Borrowing Base (such excess amount being referred to in
this paragraph 2.9.3 as the "Overage Amount"), at Lender's option, one
or more of the following remedies may be required:
(i) Borrowers shall be required to prepay a principal
amount of the Note, without penalty or premium, equal to the Overage
Amount within five (5) Business Days after written notice of the
Overage Amount to Borrowers; or
(ii) within five (5) Business Days after Borrowers'
receipt of such notice, pledge additional collateral of sufficient
value (as acceptable by Lender) as may be required to raise the
Borrowing Base above the outstanding Loan Balance; or
(iii) a combination of (i) and (ii) above.
2.9.5 REDUCTION OF COMMITMENT. Upon Lender's redetermination
of the Borrowing Base, if no Overage Amount exists but its commitment
to make future Advances exceeds the redetermined Borrowing Base, the
Commitment Amount shall be adjusted to an amount consistent with the
redetermined Borrowing Base.
2.10 VOLUNTARY PREPAYMENTS. The Borrowers shall have the right at any
time or from time to time to prepay without premium or penalty, all or any part
of the Loan Balance outstanding on the Note; PROVIDED, HOWEVER, until all
Obligations are fully paid and satisfied, no unscheduled
14
principal reduction shall excuse the payment as it becomes due of any payment
provided for herein. All prepayments made pursuant to this Section shall be
applied first to accrued and unpaid interest and then to the Loan Balance. The
above notwithstanding, Borrowers shall also pay a fee equal to one-half of one
percent (1/2%) of the average Loan Balance over the immediately preceding 12
months (if less than 12 months, then the average Loan Balance since inception)
in the event the Borrowers prepay, in whole or in part, the Loan Balance
directly or indirectly, with the funds provided by, or obtained from, a lender
other than Lender or other than from the sale or offering of any equity
interest whatsoever in any Borrower or Affiliate or other than from the sale of
Property of any Borrower permitted herein.
2.11 FEES.
(a) NON-USE. In addition to interest on the Note as provided
herein, to compensate the Lender for maintaining funds available to the
Borrowers, the Borrowers shall pay to the Lender, in immediately
available funds, on the last Business Day of each calendar quarter
during the Commitment Period (retroactive to the date hereof), an
annual fee in the amount of one-half of one percent (1/2%) per annum,
calculated on the basis of a year of 360 days, but counting the actual
days elapsed (including the first day but excluding the last day), on
the average daily amount of the Available Commitment during the
preceding calendar quarter for which payment is made.
(b) FACILITY FEE. In addition to interest on the Note as
provided herein, in order to compensate Lender for committing to make
the Loan, Borrowers shall pay to the Lender, in immediately available
funds, a fee equal to $10,000.00. A fee equal to .50% shall be assessed
incrementally on future increases to the Commitment Amount in
accordance with scheduled Borrowing Base Determinations. Additional
fees may be negotiated between Lender and Borrowers if Lender is
requested to complete an Unscheduled Borrowing Base Determination.
(c) LETTER OF CREDIT FEES. In addition to interest on the Note
as provided herein, in order to compensate Lender for issuing any
Letter of Credit, Borrowers shall pay to Lender the Letter of Credit
Fee.
(d) ENGINEERING FEE. In addition to the interest on the Note
as provided herein and in order to compensate Lender for engineering
reviews of Borrowers' Oil and Gas Properties, Borrowers shall pay
Lender an initial fee in the amount of $5,000.00 on or before closing
and an additional $2,500.00 on each semi-annual redetermination of the
Borrowing Base and/or on each Unscheduled Redetermination requested by
any Borrower.
(e) OTHER FEES. In addition to interest on the Note and such
other fees as set forth herein, Borrowers shall pay Lender such other
fees as are mutually agreed
15
upon by and between Borrowers and Bank and which such fees may not be
specifically set forth herein.
2.12 ADVANCES TO SATISFY OBLIGATIONS OF BORROWERS. The Lender may, but
shall not be obligated to, make Advances for the benefit of the Borrowers and
apply same to the satisfaction of any condition, warranty, representation or
covenant of the Borrowers contained in this Agreement or any other Loan
Document. However, if no Event of Default exists or is continuing, Lender shall
obtain Borrowers' approval prior to any such Advance. Any funds so advanced and
applied shall be part of the proceeds advanced under and evidenced by the Note
and shall bear interest at a rate of interest determined in accordance with
Section 2.5 above.
2.13 PLEDGE OF AND SECURITY INTEREST IN ACCOUNTS AND RIGHT OF OFFSET OR
LIEN. As security for the payment and/or performance of the Obligations, the
Borrowers hereby transfer, assign and pledge to the Lender and/or grant to the
Lender a security interest in all funds of Borrowers now or hereafter or from
time to time on deposit with the Lender, with such interest of the Lender to be
retransferred, reassigned and/or released by the Lender, as the case may be, at
the expense of the Borrowers upon payment in full and/or complete performance by
the Borrowers of all Obligations. The aforementioned lien shall not apply to
funds contained in any account, including any drilling or escrow account, of any
Borrower held for the benefit of or in trust for any third party including
royalty, overriding royalty, or working interest owners. All remedies as secured
party or assignee of such funds shall be exercisable, subject to applicable
notice and cure periods provided in this Agreement, by the Lender upon the
occurrence of any Event of Default, regardless of whether the exercise of any
such remedy would result in any penalty or loss of interest or profit with
respect to any withdrawal of funds deposited in a time deposit account prior to
the maturity thereof. Furthermore, each Borrower hereby grants to the Lender the
right, exercisable, subject to applicable notice and cure periods provided in
this Agreement, at such time as any Obligation shall mature, whether by
acceleration of maturity or otherwise, of offset or banker's lien against all
funds of any such Borrower now or hereafter or from time to time on deposit with
the Lender, regardless of whether the exercise of any such remedy would result
in any penalty or loss of interest or profit with respect to any withdrawal of
funds deposited in a time deposit account prior to the maturity thereof.
2.14 LETTERS IN LIEU OF TRANSFER ORDERS. Notwithstanding any other term
or provisions hereof to the contrary, the Lender agrees that the letters in lieu
of transfer or division orders provided by the Borrowers pursuant to Subsections
4.1(f)(iii) and 6.8 will not be sent to the addressees thereof prior to the
occurrence of an Event of Default, at which time the Lender may, at its option
and in addition to the exercise of any of its other rights and remedies, send
any or all of such letters, provided however, that upon the occurrence of an
Event of Default other than those specified in Section 9.1(d), (g) or (h), the
Lender shall not send any or all of such letters or division orders until the
applicable period to cure such Default has lapsed without such Default being
cured. In the event Lender exercises the rights set forth in this Section 2.14,
Lender agrees that it shall request such purchasers of production to remit any
proceeds net of lease operating expenses and production taxes. Lender may accept
any gross payments made despite such requests without liability hereunder.
16
2.15 POWER OF ATTORNEY. The Borrowers hereby designate the Lender as
their agent and attorney-in-fact, to act in their name, place and xxxxx
(individually and collectively) for the purpose of completing and delivering any
and all of the letters in lieu of transfer orders delivered by the Borrowers to
the Lender pursuant to Section 2.14 or Section 6.8, including, without
limitation, completing any blanks contained in such letters and attaching
exhibits thereto describing the relevant Collateral. Each Borrower hereby
ratifies and confirms all that the Lender shall lawfully do or cause to be done
by virtue of this power of attorney and the rights granted with respect to such
power of attorney. This power of attorney is coupled with the interests of the
Lender in the Collateral, shall commence and be in full force and effect as of
the Closing Date and shall remain in full force and effect and shall be
irrevocable until the obligations, if any, of the Lender hereunder have
terminated and the full satisfaction of all Obligations. The powers conferred on
the Lender by this appointment may only be exercised by the Lender by execution
by any Person who, at the time of exercise, is an officer of the Lender, and are
solely to protect the interests of the Lender under the Loan Documents and shall
not impose any duty upon the Lender to exercise any such powers. The Lender
shall be accountable only for amounts that it actually receives or has expressly
directed that others receive as a result of the exercise of such powers. Each
Borrower hereby designates GMX and the Responsible Officer of GMX as their agent
and attorney-in-fact to act in their name, place and xxxxx (individually and
collectively) for the purpose of completing and delivering each and all
Compliance Certificates required herein and/or accepting any notices sent
pursuant to the terms hereof.
ARTICLE III
3 COLLATERAL AND OTHER TYPES OF CREDIT ENHANCEMENT
3.1 OIL AND GAS PROPERTIES. Each Borrower shall grant and maintain in
favor of Lender at all times until the Obligations are paid and satisfied in
full, valid first mortgage liens and first, prior and perfected security
interests in and to all their right, title and interest in the Oil and Gas
Properties attached as Exhibit "C" hereto. Borrowers shall execute and deliver,
or cause to be executed and delivered, such oil and gas mortgages, deeds of
trusts, instruments, agreements, assignments, financing statements and other
documents as may be reasonably necessary in the opinion of Lender and Lender's
counsel to grant Lender valid first mortgage liens and first, prior and
perfected security interests in and to such Oil and Gas Properties.
3.2 NEW PROPERTIES. At the time any Advance is used to finance the
acquisition of any Oil and Gas Properties by Borrowers, Borrowers shall, at
Lender's discretion, grant and thereafter shall maintain in favor of Lender at
all times until the Obligations are paid and satisfied in full, valid first
mortgage liens and first, prior and perfected security interests in and to all
of their right, title and interest in such Oil and Gas Properties. Borrowers
shall execute and deliver, or cause to be executed and delivered, such oil and
gas mortgages, deeds of trusts, instruments, agreements, assignments, financing
statements and other documents as may be reasonably necessary in the opinion of
Lender and Lender's counsel to grant Lender valid first mortgage liens and
first, prior and perfected security interests in and to such new Oil and Gas
Properties.
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ARTICLE IV
4 CONDITIONS
The obligations of the Lender to enter into this Agreement and to make
Advances are subject to the satisfaction of the following conditions precedent
unless waived in writing by Lender:
4.1 RECEIPT OF LOAN DOCUMENTS AND OTHER ITEMS. The Lender shall have
no obligation under this Agreement unless and until all matters incident to the
consummation of the transactions contemplated herein, including, without
limitation, the review by the Lender or its counsel of the title of the
applicable Borrower to the Oil and Gas Properties, shall be satisfactory in the
good faith judgment of the Lender, and the Lender shall have received, reviewed
and approved the following documents and other items, appropriately executed
when necessary and, where applicable, acknowledged, all in form and substance
satisfactory in the good faith judgment of the Lender and dated, where
applicable, of even date herewith or a date prior thereto (unless specifically
noted below to the contrary) and acceptable in the good faith judgment of the
Lender:
(a) multiple counterparts of this Agreement, as reasonably
requested by the Lender;
(b) the Note;
(c) copies of each Borrower's Articles of Incorporation and/or
Certificate of Incorporation and all amendments thereto and by-laws and all
amendments thereto, accompanied by a certificate issued by the secretary or an
assistant secretary of the Borrowers, to the effect that each such copy is
correct and complete;
(d) certificates of incumbency and signatures of all of each
Borrower's officers who are authorized to execute Loan Documents on behalf of
such Borrower, executed by the secretary or an assistant secretary of such
Borrower;
(e) copies of corporate resolutions approving the Loan Documents
to be executed by each Borrower and authorizing the transactions contemplated
herein and therein, duly adopted by the board of directors of each of the
Borrowers, accompanied by a certificate of the respective secretary or an
assistant secretary of each Borrower, to the effect that such copies are true
and correct copies of resolutions duly adopted at a meeting or by unanimous
consent of the board of directors of each Borrower and that such resolutions
constitute all the resolutions adopted with respect to such transactions, have
not been amended, modified, or revoked in any respect, and are in full force
and effect as of the date of such certificate;
(f) the following Security Instruments transferring, creating,
evidencing, perfecting and otherwise establishing, as applicable, Liens in
favor of the Lender, in and to the Oil and Gas Properties listed and described
in Exhibit "C" and the Collateral;
18
(i) Mortgage, Security Agreement, Financing Statement and
Assignment of Production and/or Deed of Trust, Security Agreement, Financing
Statement and Assignment of Production from Borrowers covering certain Oil and
Gas Properties located in any and all states in which the Oil and Gas
Properties lie, and all improvements, personal property and fixtures related
thereto;
(ii) Financing Statements from Borrowers, as debtor,
constituent to the document described in clause (i) immediately above;
(iii) Undated letters in lieu of transfer orders, in form
and substance satisfactory to the Lender, from the Borrowers to each purchaser
of production and disburser of the proceeds of production from or attributable
to the Mortgaged Properties, together with additional letters with the
addressees left blank, authorizing and directing the addressees to make future
payments attributable to production from the Mortgaged Properties net of lease
operating expenses and production taxes directly to the Lender; and
(h) Financial Statements (consolidated) of each Borrower dated
as of June 30, 2000;
(i) certificates dated as of a recent date from the Secretary
of State or other appropriate Governmental Authority evidencing the existence or
qualification and good standing of each Borrower in the State of Oklahoma and
all other jurisdictions covered by the Oil and Gas Properties where such
qualification is required and where failure to be qualified or in good standing
could reasonably be expected to have a Material Adverse Effect;
(j) results of searches of the UCC records of the States of
Oklahoma and Texas and any and all other jurisdictions in which Oil and Gas
Properties are located from a source acceptable to the Lender and reflecting no
Liens, other than Permitted Liens, against any of the Collateral as to which
perfection of a Lien is accomplished by the filing of a financing statement;
(k) confirmation and/or evidence, acceptable to the Lender in
Lender's sole discretion, including, without limitation, opinions of counsel
satisfactory to the Lender, of the Borrowers having defensible title to the
initial Mortgaged Properties described on Exhibit "C" attached hereto, free and
clear of Liens other than Permitted Liens;
(l) opinion of Borrowers' counsel substantially in the form
acceptable to Lender;
(m) certificates evidencing the insurance maintained by the
Borrowers in compliance with applicable provisions of this Agreement;
(n) a Request for Advance received by the Lender on or before
11:00 a.m., Central Standard or Daylight Savings Time, as the case may be, on
the day preceding the Closing Date;
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(o) such other agreements, documents, items, instruments,
opinions, certificates, waivers, consents and evidence as the Lender may
reasonably request.; and
(p) the Borrowers and any Affiliate thereof shall have
disclosed any and all pending or threatened litigation matters to Lender, and
Lender shall be satisfied that such litigation matters are not expected to
result in any material impairment of the ownership of the Borrowers in any
Collateral or to have a Material Adverse Effect on either the Borrowers or any
Affiliate; and
4.2 EACH ADVANCE UNDER THE NOTE. In addition to the conditions
precedent stated in Section 4.1 having been fulfilled as of the Closing Date,
the Lender shall not be obligated to make any Advance unless;
(a) the Borrowers shall have delivered to the Lender a Request
for Advance at least the requisite time prior to the requested date for the
relevant Advance; and each statement or certification made in such Request for
Advance shall be true and correct in all material respects on the requested
date for such Advance;
(b) no Event of Default or Default exists or, or by virtue of any
requested Advance, shall exist or will occur;
(c) if requested by the Lender, the Borrowers shall have
delivered evidence satisfactory in the good faith judgment of the Lender
substantiating any of the matters contained in this Agreement which are
necessary to enable the Borrowers to qualify for such Advance;
(d) no event shall have occurred which, in the reasonable opinion
of the Lender, could have a Material Adverse Effect;
(e) each of the representations and warranties contained in this
Agreement shall be true and correct in all material respects and shall be
deemed to be repeated by the Borrowers as if made on the requested date for
such Advance;
(f) the Security Instruments shall be in full force and effect
and provide to the Lender the Liens intended thereby;
(g) to the extent of each Borrower's undivided interest therein,
such Borrower shall hold full legal title to the Collateral and be the sole
beneficial owner thereof, except for Permitted Liens and shall provide
confirmation acceptable to Lender, including without limitation, opinions of
counsel satisfactory to Lender or other acceptable evidence of such Borrower
having marketable title to any New Properties pledged to secure the
Obligations, free and clear of Liens other than Permitted Liens;
(h) the Lender shall have received reimbursement from the
Borrowers, or legal counsel for the Lender shall have received payment from the
Borrowers, for (i) all reasonable fees
20
and expenses of counsel to the Lender for which the Borrowers are responsible
pursuant to applicable provisions of this Agreement and for which invoices have
been presented as of or prior to the date of the relevant Advance, and (ii)
estimated fees charged by filing officers and other public officials incurred
or to be incurred in connection with the filing and recordation of any of the
Security Instruments, for which invoices have been presented as of or prior to
the date of the requested Advance; and
(i) all material matters incident to the consummation of the
transactions hereby contemplated shall be satisfactory in the good faith
judgment of the Lender.
ARTICLE V
5. REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to make the
Advances, the Borrowers represent and warrant to the Lender (which
representations and warranties shall survive the delivery of the Note) that:
5.1 DUE AUTHORIZATION AND CORPORATE EXISTENCE. The execution and
delivery by Borrowers of this Agreement and the borrowings hereunder; the
execution and delivery by the Borrowers of the Note; the repayment of the Note
and interest and fees provided for in the Note and this Agreement; the execution
and delivery of the Security Instruments by Borrowers and the performance of all
obligations of Borrowers under the Loan Documents are within the power of
Borrowers and have been duly authorized by all necessary corporate action of
each Borrower. Each Borrower is a corporation legally existing and in good
standing under the laws of the State of Oklahoma and is duly qualified as a
foreign corporation and is in good standing in all states in which it is doing
business, except where failure to be qualified will not have a Material Adverse
Effect.
5.2 CONSENTS, CONFLICTS AND CREATION OF LIENS. The execution and
delivery by each Borrower of the Loan Documents and the performance (except upon
the occurrence of an Event of Default) of the obligations of each Borrower
thereunder do not and will not (a) require the consent of any Governmental
Authority, (b) contravene or conflict with any Requirement of Law which
contravention or conflict would have a Material Adverse Effect, (c) contravene
or conflict with any indenture, instrument or other agreement to which each
Borrower is a party or by which any Property of any Borrower may be presently
bound or encumbered, or (d) result in or require the creation or imposition of
any Lien in, upon or of any Property of any Borrower under any such indenture,
instrument or other agreement, other than the Loan Documents.
5.3 VALID AND BINDING OBLIGATIONS. All of the Loan Documents, when duly
executed and delivered by Borrowers, will be the legal, valid and binding
obligations of each Borrower, enforceable against each Borrower by the Lender in
accordance with their respective terms, except as limited by equitable
principals and applicable liquidation, conservatorship, bankruptcy,
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moratorium, arrangement, receivership, insolvency, reorganization or similar
laws from time-to-time affecting the rights of creditors generally.
5.4 TITLE TO ASSETS AND OIL AND GAS PROPERTIES. Each Borrower has
defensible title to all of its Properties and Oil and Gas Properties including
the Mortgaged Properties pledged by it and described on Exhibit "C" attached
hereto, free and clear of all Liens and such defects in title that individually
or in the aggregate would not reasonably be expected to have a Material Adverse
Effect except Permitted Liens.
5.5 SCOPE AND ACCURACY OF FINANCIAL STATEMENTS. The Financial
Statements of the Borrowers dated as of the dates set forth in Section 4.1(h)
present fairly the financial position and results of operations of the
Borrowers as at the relevant point in time or for the period indicated. No
event or circumstance has occurred since the dates set forth in Section 4.1(h)
which could reasonably be expected to have a Material Adverse Effect.
5.6 LIABILITIES, LITIGATION, AND RESTRICTIONS. Other than as
disclosed on the Financial Statements of the Borrowers dated as of the dates
set forth in Section 4.1(h), the Borrowers have no liabilities, direct or
contingent, which may materially and adversely affect its business, operations
or ownership of the Collateral. Except as set forth under the heading
"Litigation" on Exhibit "E" hereto, no Litigation of any nature affecting any
Borrower is pending before any Tribunal or, to the best knowledge of any
Borrower, threatened against or affecting such Borrower which might reasonably
be expected to result in any material impairment of its ownership of any
Collateral or to have a Material Adverse Effect. To the best knowledge of
Borrowers, after due inquiry, no unusual or unduly burdensome restriction,
restraint or hazard exists by contract, Requirement of Law, or otherwise
relative to the material business or operations of any Borrower or the
ownership and operation of a material portion of the Collateral other than
such as relate generally to Persons engaged in business activities similar to
those conducted by any Borrower.
5.7 AUTHORIZATIONS AND CONSENTS. No authorization, consent, approval,
exemption, franchise, permit or license of, or filing with, any Governmental
Authority, Tribunal or any other Person is required to authorize or is otherwise
required in connection with the valid execution and delivery by the Borrowers of
the Loan Documents, or any instrument contemplated hereby or thereby, the
repayment by the Borrowers of the Note and the interest and fees provided in the
Note and this Agreement, or the performance (except in the Event of Default) by
the Borrowers of the Obligations.
5.8 COMPLIANCE WITH LAWS. To the best of each Borrower's knowledge,
such Borrower and its Property, including, without limitation, the Mortgage
Properties, are in compliance in all material respects with all applicable
Requirements of Law, including, without limitation, Environmental Laws, the
Natural Gas Policy Act of 1978, as amended, and ERISA, except such noncompliance
that would not reasonably be expected to have a Material Adverse Effect.
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5.9 PROPER FILING OF TAX RETURNS AND PAYMENT OF TAXES DUE. Each
Borrower has duly and properly filed their United States income tax returns
and all other tax returns which are required to be filed by such Borrower.
Each Borrower has paid all taxes due except such as are being Contested in
Good Faith and as to which adequate provisions and disclosures have been made.
The charges and reserves of such Borrower with respect to taxes and other
governmental charges are adequate, and such Borrower has no knowledge of any
deficiency or additional assessment in a material amount in connection with
taxes, assessments, or charges not provided for on its books.
5.10 ERISA. Borrowers neither maintain nor sponsor any Plan
subject to Title IV of ERISA.
5.11 ENVIRONMENTAL LAWS. To the best knowledge and belief of each
Borrower, except as would not have a Material Adverse Effect, or as described
on Exhibit "E" under the heading "Environmental Matters";
(a) no Property of any Borrower is currently on or has
ever been on, or is adjacent to any Property which is on or has ever been on,
any federal or state list of Superfund Sites;
(b) no Hazardous Substances have been generated,
transported and/or disposed of by any Borrower at a site which was, at the
time of such generation, transportation and/or disposal, or has since become,
a Superfund Site;
(c) except in accordance with applicable Requirements of
Law or the terms of a valid permit, license, certificate or approval of the
relevant Governmental Authority, no Release of Hazardous Substances by any
Borrower or from, affecting or related to any Property of such Borrower or
adjacent to any Property of such Borrower has occurred; and
(d) no Environmental Complaint has been received by any
Borrower.
5.12 NO MATERIAL MISSTATEMENTS. To each Borrower's knowledge, no
information, exhibit, statement or report furnished to the Lender by or at the
direction of any Borrower in connection with this Agreement contains any
material misstatement of fact or omits to state a material fact necessary to
make the statements contained therein not misleading as of the date made or
deemed made.
5.13 CASUALTIES OR TAKING OF PROPERTY. Except as disclosed on
Exhibit "E" under the heading "Casualties," since the dates set forth in
Section 4.1(h), neither the business nor any Property of any Borrower has been
materially 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, which, as a result thereof, could reasonably be
expected to have a Material Adverse Effect.
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5.14 LOCATIONS OF BUSINESS, OFFICES, AND PROPERTY. The principal
place of business and chief executive office of the Borrowers is located at
the address of the set forth in Section 10.3 or at such other location as the
Borrowers may have, by proper written notice hereunder, advised the Lender,
PROVIDED that such other location of the Borrowers is within a state in which
appropriate financing statements from the Borrowers, or any one of them, in
favor of the Lender have been filed.
5.15 SECURITY INSTRUMENTS. The provisions of each Security
Instrument are effective to create in favor of the Lender, a legal, valid and
enforceable Lien, except as limited by equitable principles and applicable
liquidation, conservatorship, bankruptcy, moratorium, arrangement,
receivership, insolvency, reorganization or similar laws from time-to-time
affecting the rights of creditors generally, in all right, title and interest
of the Borrowers, or any one of them, in the Collateral described therein,
which Liens, assuming the accomplishment of recording and filing in accordance
with applicable Laws prior to the intervention of rights of other Persons,
shall constitute fully perfected first-priority Liens on all right, title and
interest of the Borrowers in the Collateral described therein, subject to
Permitted Liens.
5.16 SUBSIDIARIES. No Borrower has any Subsidiaries as of the
Closing Date except as may be set forth on Exhibit "E" attached hereto.
ARTICLE VI
6. AFFIRMATIVE COVENANTS
Unless agreed in writing by the Lender to the contrary, so long as any
Obligation remains outstanding or unpaid or any commitment to make Advances
exists all Borrowers shall:
6.1 MAINTENANCE AND ACCESS TO RECORDS. Keep adequate records of
all its transactions so that at any time, and from time to time, its true and
complete financial condition may be readily determined, and promptly following
the reasonable request of the Lender, make such records available during any
Borrower's customary business hours for inspection by the Lender and, at the
expense of the Borrowers, allow the Lender to make copies thereof at the
Borrowers' premises and take same to Lender's place of business.
6.2 QUARTERLY FINANCIAL STATEMENTS. Beginning with the quarter
ending September 30, 2000, deliver to the Lender, (a) on or before the 60th
day after the close of each calendar quarter, a copy of the unaudited
Financial Statements of Borrowers prepared on a consolidated basis as of the
last day of such quarterly period, such Financial Statement to be certified
by a Responsible Officer of the Borrowers as having been prepared in
accordance with GAAP and in a manner consistent with the annual audited
Financial Statements, consistently applied, and as a fair presentation of the
financial condition of the Borrowers, and (b) concurrent with (a) above, a
Compliance Certificate executed by Borrowers' Responsible Officer stating that
such Officers, after due inquiry, has no knowledge of a Default or Event
24
of Default and containing a computation of, and demonstrating compliance with,
each financial covenant set forth in Section 7 herein.
6.3 ANNUAL FINANCIAL STATEMENTS. Deliver to the Lender, (a) on
or before the 90th day after the close of the fiscal year of the Borrowers,
and prepared in accordance with GAAP, a copy of the annual Financial
Statements of the Borrowers prepared on a consolidated basis as of the last
day of such fiscal year end audited by and issued with an "unqualified
opinion" from an independent firm of certified public accountants acceptable
to Lender, and (b) concurrent with (a) above, a Compliance Certificate
executed by the Responsible Officer stating that such Officer, after due
inquiry, has no knowledge of a Default or Event of Default and containing a
computation of, and demonstrating compliance with, each financial covenant set
forth in Section 6 herein.
6.4 RESERVE REPORTS.
(a) Beginning in 2001 and each fiscal year of the
Borrowers thereafter, the Borrowers shall furnish to the Lender as soon as
available but, in any event, no later than February 1 of each year (with an
effective date of the preceding January 1), with an engineering report in form
and substance satisfactory to the Lender prepared by an independent petroleum
engineering firm acceptable to Lender covering the Borrowers' Oil and Gas
Properties utilizing economic and pricing parameters used by Lender as
established from time to time, together with such other information concerning
the value of the Borrowers' Oil and Gas Properties as the Lender shall deem
necessary to determine the value of the Borrowers' Oil and Gas Properties.
(b) Beginning August 1, 2001 and each August 1 thereafter,
or within thirty (30) days after either (i) receipt of notice from Lender that
the Lender requires an Unscheduled Borrowing Base Determination, or (ii) the
Borrowers give notice to Lender of their desire to have an Unscheduled
Borrowing Base Determination performed, the Borrowers shall furnish to the
Lender an engineering report in form and substance satisfactory to Lender
prepared by Borrowers' in-house engineering staff valuing the Borrowers' Oil
and Gas Properties utilizing economic and pricing parameters used by the
Lender as established from time to time, together with such other information,
reports and data concerning the value of the Borrowers' Oil and Gas Properties
as Lender shall deem reasonably necessary to determine the value of such Oil
and Gas Properties.
(c) The reports provided pursuant to this Section shall be
submitted to the Lender together with additional data as the Lender may
reasonably request concerning pricing, quantities of production from the
Borrowers' Oil and Gas Properties, purchasers of production and engineering
and geological data.
6.5 PRODUCTION REPORT. Within sixty (60) days from each calendar
quarter end, furnish Lender a quarterly summary report of oil and gas
production for said period indicating the immediately preceding quarter's
sales volume, sales revenues, production taxes, operating expenses, capital
expenditures and net operating income from or attributable to the Borrowers'
Oil and Gas Properties pledged to secure the
25
Obligations hereunder, with detailed calculations and worksheets, and, in the
case of take or pay or prepayment agreements during such quarter, provide
copies of same.
6.6 GAS BALANCING STATUS REPORT. Together with each engineering
report required pursuant to Section 6.4, Borrowers shall furnish Lender with a
report on the status of all gas balancing (if any) affecting any of the
Borrowers' Oil and Gas Properties.
6.7 NOTICES OF CERTAIN EVENTS. Deliver to the Lender,
immediately upon a Responsible Officer's having knowledge of the occurrence of
any of the following events or circumstances, a written statement with respect
thereto, signed by the Responsible Officer and setting forth the relevant
event or circumstance and the steps being taken by the Borrowers with respect
to such event or circumstance:
(a) any Default or Event of Default;
(b) any Default or Event of Default under any material
contractual obligation of any Borrower or any material Litigation, affecting
any Borrower before any Governmental Authority or Tribunal;
(c) any Litigation involving Borrowers as defendants or in
which any Property of Borrowers is subject to a claim (i) in which the amount
involved is $250,000 or more and which is not covered by insurance, (ii) in
which, together with any other outstanding litigation or proceeding (whether
or not previously disclosed hereunder), the aggregate amount involved in all
such litigation is $250,000 or more and which is not covered by insurance, or
(iii) in which injunctive or similar relief is sought which affects a Property
having a fair market value (net to the Borrowers' interest therein) of more
than $250,000 or could reasonably be expected to result in an expenditure by
Borrowers of more than $250,000;
(d) any existing or asserted Lien on any of the Properties
of Borrowers, personal or real, tangible or intangible, including without
limitation the Mortgaged Properties, excluding Permitted Liens;
(e) the receipt by Borrowers of any Environmental
Complaint or any formal request from any Governmental Authority or other
Person for information (other than requirements for compliance reports)
regarding any Release of Hazardous Substances by Borrowers from, affecting or
related to any Property of Borrowers or adjacent to any Property of the
Borrowers which Environmental Complaint or request could reasonably be
expected to have a Material Adverse Effect;
(f) any actual, proposed or threatened testing or other
investigation by any Governmental Authority or other Person concerning the
environmental condition of, or relating to, any Property of the Borrowers or
adjacent to any Property of Borrowers following any allegation of a violation
of any Environmental Law which testing or investigation could reasonably be
expected to have a Material Adverse Effect;
26
(g) any Release of Hazardous Substances by Borrowers from,
affecting or related to any Property of Borrowers or adjacent to any Property
of Borrowers except in accordance with applicable Environmental Law or the
terms of a valid permit, license, certificate or approval of the relevant
Governmental Authority, or the violation of any Environmental Law, or the
revocation, suspension or forfeiture of or failure to renew, any permit,
license, registration, approval or authorization, which Release, violation,
revocation, suspension, forfeiture or failure could reasonably be expected to
have a Material Adverse Effect; and
(h) any change in Borrowers' accounting practices and
procedures, including a change in its fiscal year; and
(i) any Material Adverse Effect.
6.8 LETTERS IN LIEU OF TRANSFER ORDERS. Promptly upon a
reasonable request by the Lender at any time and from time to time and without
limitation on the rights of the Lender in accordance with Sections 2.14 and
2.15, execute such letters in lieu of transfer orders, in addition to the
letters signed by the Borrowers and delivered to the Lender in satisfaction of
the conditions set forth in Subsection 4.1(f)(iii), as are necessary or
appropriate to cover any additional, material purchasers of production;
provided, however, that such letters shall only be delivered to the addressees
thereof in accordance with Subsection 2.14 of this Agreement.
6.9 DIVISION ORDERS. Promptly upon request by the Lender at any
time and from time to time following the occurrence of any Event of Default
and without limitation on the rights of the Lender in accordance with Sections
2.14 and 2.15, execute such division and/or transfer orders as are necessary
or appropriate to transfer and deliver to the Lender proceeds from the sale of
hydrocarbon production from or attributable to any Mortgaged Property,
provided, however, that such letters shall only be delivered to the addressees
thereof in accordance with Subsection 2.14 of this Agreement.
6.10 ADDITIONAL INFORMATION. Furnish to the Lender, promptly upon
the reasonable request of the Lender, such additional financial, title,
engineering, production or other information concerning the assets,
liabilities, operations and transactions of the Borrowers as the Lender may
from time to time reasonably request; and notify the Lender not less than ten
Business Days prior to the occurrence of any condition or event that may
change the proper location for the filing of any financing statement or other
public notice or recording for the purpose of perfecting a Lien in any
Collateral, including, without limitation, any change in name or the location
of any principal place of business or chief executive office of the Borrowers;
and upon the reasonable request of the Lender, the Borrowers shall execute
such additional Security Instruments as may be necessary or appropriate in
connection therewith.
6.11 COMPLIANCE WITH LAWS. In all reasonable and in all material
respects, comply with all applicable Requirements of Law, including, without
limitation, (a) the Natural Gas Policy Act of 1978, as amended, (b) the
minimum funding requirements of ERISA so as not to give rise to any material
liability or reportable event, as defined by ERISA, thereunder, (c)
Environmental Laws (i) related to any natural or environmental resource or
media located on, above, within, in the vicinity of, related to or
27
affected by any Property of the Borrowers, (ii) required for the performance
or conduct of the operations of the Borrowers, including, without limitation,
all permits, licenses, registrations, approvals and authorizations, or (iii)
applicable to the use, generation, handling, storage, treatment, transport or
disposal of any Hazardous Substances, the resulting non-compliance of which
could have a Material Adverse Effect; and (d) securities laws and cause all
operators, employees, crew members, agents, contractors, subcontractors and
future lessees (pursuant to appropriate lease provisions) of the Borrowers,
while such Persons are acting within the scope of their relationship with the
Borrowers, to comply with all such Requirements of Law as may be necessary or
appropriate to enable the Borrowers to so comply. Notwithstanding the
reasonable efforts of the Borrowers to comply with its obligations under this
Section 6.11, should any non-compliance with any Requirement of Law cause or
could reasonably be expected to cause a Material Adverse Effect, the Lender
shall be notified of such event pursuant to Section 6.9 and the Lender shall
be entitled to exercise its rights and remedies pursuant to Subsection 9.1 and
Section 9.2.
6.12 PAYMENT OF ASSESSMENTS AND CHARGES. Pay all taxes,
assessments, governmental charges, rent and other Indebtedness which, if
unpaid, might become a Lien, other than a Permitted Lien, against the Property
of the Borrowers, except any of the foregoing being Contested in Good Faith.
6.13 HAZARDOUS SUBSTANCES INDEMNIFICATION. Indemnify and hold the
Lender harmless from and against any and all claims, losses, damages,
liabilities, fines, penalties, charges, administrative and judicial
proceedings and orders, judgments, remedial actions, requirements and
enforcement actions of any kind, and all costs and expenses incurred in
connection therewith (including, without limitation, reasonable attorneys'
fees and expenses), arising directly or indirectly, in whole or in part, from
(a) the presence of any Hazardous Substances on, under or from any Property of
the Borrowers, whether prior to or during the term hereof, (b) any activity
carried on or undertaken on or off any Property of the Borrowers, whether
prior to or during the term hereof, and whether by the Borrowers, or any
predecessor in title, employee, agent, contractor or subcontractor of the
Borrowers, or any other Person at any time occupying or present on such
Property, in connection with the handling, treatment, removal, storage,
decontamination, cleanup, transportation or disposal of any Hazardous
Substances at any time located or present on or under such Property, (c) any
residual contamination on or under any Property of the Borrowers, or (d) any
contamination of any Property or natural resources of the Borrowers arising in
connection with the generation, use, handling, storage, transportation or
disposal of any Hazardous Substances by Borrowers, or any employee, agent,
contractor or subcontractor of Borrowers, while such Persons are acting within
the scope of their relationship with the Borrowers, irrespective of whether
any of such activities were or will be undertaken in accordance with
applicable Requirements of Law, including, without limitation, any of the
foregoing arising from negligence, whether sole or concurrent, on the part of
the Lender; with the foregoing indemnity surviving satisfaction of all
Obligations and the termination of this Agreement, unless all such Obligations
have been satisfied wholly in cash from the Borrowers and not by way of
realization against any Collateral or the conveyance of any Property in lieu
thereof, PROVIDED that such indemnity shall not extend to any of the foregoing
resulting from the Lender's gross negligence or willful conduct or any act or
omission by the Lender with respect to any Property subsequent to the Lender
becoming the owner of such Property and with respect to which Property such
claim, loss, damage, liability, fine, penalty, charge, proceeding, order,
judgment, action or requirement arises subsequent to the acquisition of title
thereto by the Lender.
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6.14 MAINTENANCE OF CORPORATE EXISTENCE AND GOOD STANDING.
Maintain its corporate existence or qualification and good standing in all
states in which it is doing business, except where failure to do so will not
have a Material Adverse Effect.
6.15 FURTHER ASSURANCES. Promptly cure any defects in the
execution and delivery of any of the Loan Documents and all agreements
contemplated thereby, and execute, acknowledge and deliver such other
assurances and instruments as shall, in the good faith and reasonable opinion
of the Lender, be necessary to fulfill the terms of the Loan Documents.
6.16 INITIAL FEES AND EXPENSES OF LENDER AND/OR LEGAL COUNSEL TO
LENDER. Promptly reimburse the Lender for all reasonable and customary
out-of-pocket expenses of the Lender in connection with this Agreement and all
documentation contemplated hereby, the satisfaction of the conditions
precedent set forth herein and the consummation of the transactions
contemplated in this Agreement (including, without limitation, all recording
expenses and all filing fees and all title review and title due diligence fees
and including legal fees).
6.17 SUBSEQUENT FEES AND EXPENSES. Promptly reimburse the Lender
(after the Borrowers' receipt of the Lender's request for reimbursement) for
all amounts reasonably expended, advanced or incurred by the Lender, together
with interest thereon as provided in this Subsection 6.17 (i) to satisfy any
of the Obligations, (ii) to protect or enforce the Lender's rights under any
of the Loan Documents or (iii) to protect the Collateral or business of the
Borrowers. The amount so reimbursable pursuant to this Subsection 6.17 shall
bear interest at the per annum interest rate equal to the Base Rate plus
one-half of one percent, calculated on a basis of a calendar year of 360 days,
but counting the actual number of days elapsed, on each such amount from the
date of notification that the same was expended, advanced or incurred by the
Lender until the date that it is repaid to the Lender, with the obligations
under this Subsection 6.17 surviving the non-assumption of this Agreement in a
case commenced under any Insolvency Proceeding and being binding upon the
Borrowers and/or a trustee, receiver, custodian or liquidator of Borrowers
appointed in any such case.
6.18 MAINTENANCE AND INSPECTION OF TANGIBLE PROPERTIES. Maintain
all of its material tangible Properties in good repair and condition, ordinary
wear and tear excepted; make all necessary replacements thereof and operate,
if operated by Borrowers, such Properties in a good and workmanlike manner;
and permit any authorized representative or representatives of the Lender to
reasonably visit and inspect any tangible Property of Borrowers.
6.19 MAINTENANCE OF INSURANCE AND EVIDENCE THEREOF. Continue to
maintain or continue to be maintained, insurance with respect to its
Properties and businesses against such liabilities, casualties, risks and
contingencies as is customary in the relevant industry and sufficient to
prevent a Material Adverse Effect, all such insurance to be in amounts and
from insurers reasonably acceptable to the Lender, and, on the Closing Date or
upon any renewal of any such insurance and at other times upon the reasonable
request by the Lender, furnish to the Lender evidence, satisfactory in the
good faith judgment of the Lender of the maintenance of such insurance.
29
6.20 PAYMENT OF NOTE AND PERFORMANCE OF OBLIGATIONS. Pay the Note
according to the reading, tenor and effect thereof, as modified hereby, and do
and perform every act as required in the Loan Documents and discharge all
other Obligations.
6.21 OPERATION OF OIL AND GAS PROPERTIES. Develop, maintain and
operate, if Borrowers are designated as operator thereof, the Mortgaged
Properties in a prudent and workmanlike manner in accordance with industry
standards.
6.22 DEPOSITORY ACCOUNTS. Maintain its primary depository
accounts with Lender.
6.23 EXISTING BUSINESS. Maintain their line of business as
engaged in as of the Closing Date unless otherwise consented to by Lender in
writing.
6.24 TITLE MATTERS. Within ninety (90) days after the date hereof
with respect to its Oil and Gas Properties, Borrower shall furnish Lender with
title opinions and/or title information reasonably satisfactory to Lender
showing defensible title of the Borrower to such Oil and Gas Properties
subject only to the Permitted Liens. As to any Oil and Gas Properties
hereafter mortgaged to Lender, Borrower will promptly (but in no event more
than thirty (30) days following such mortgaging), furnish Lender with title
opinions and/or title information reasonably satisfactory to Lender covering a
sufficient value of such Oil and Gas Properties. Said title information shall
show defensible title of Borrower to such Oil and Gas Properties subject only
to Permitted Liens.
ARTICLE VII
7. FINANCIAL COVENANTS.
Unless agreed in writing by the Lender to the contrary, so
long as any Obligation remains outstanding or unpaid or any commitment to make
Advances exists, the Borrowers shall:
7.1 ADJUSTED CURRENT RATIO. Maintain a minimum Adjusted Current
Ratio, calculated and submitted on a quarterly basis of, at least, .80:1.00
for the quarterly reporting period ending September 30, 2000 and 1.00:1.00 for
the quarterly reporting period ending December 31, 2000 and each quarterly
reporting period thereafter. The "Adjusted Current Ratio" is defined as
Current Assets plus the Available Commitment divided by Current Liabilities,
minus any balance outstanding on this credit facility that would otherwise be
accounted for as a Current Liability.
7.2 DEBT SERVICE COVERAGE RATIO. Beginning with the quarter
ending December 31, 2000, maintain a Debt Service Coverage Ratio, calculated
and submitted on a quarterly basis, of not less than 1.10:1.00 For purposes of
this calculation, the Debt Service Coverage Ratio is defined as the quotient
of:
30
the sum of consolidated Net Income, MINUS dividends, PLUS
interest, depletion, depreciation, and amortization expenses
(for the quarter then ended),
DIVIDED BY
the sum of the quarterly principal reductions required to
amortize the Loan Balance (as of quarter end) over the Half
Life of the Borrowers' Oil and Gas Properties (not to exceed
84 months), PLUS interest expense for the quarter then ended,
plus any other current maturities of long term debt (including
Capital Lease Obligations) realized during the quarter then
ended.
7.3 INDEBTEDNESS TO TANGIBLE NET WORTH RATIO. Beginning with the
quarterly reporting period ending March 31, 2001 and calculated and submitted
on a quarterly basis thereafter, maintain a a ratio of Indebtedness to
Tangible Net Worth of not more than 1.50:1.00.
ARTICLE VIII
8. NEGATIVE COVENANTS
Unless agreed in writing by the Lender to the contrary, so long as any
Obligation remains outstanding or unpaid or any Commitment Amount exists,
neither the Borrowers nor any Subsidiary of Borrowers shall:
8.1 INDEBTEDNESS. Create, incur, assume or suffer to exist any
Indebtedness, whether by way of loan or otherwise which exceeds, in the
aggregate, the sum of $100,000.00; PROVIDED HOWEVER, the foregoing
restriction shall not apply to (a) the Obligations, or (b) current accounts
payable incurred in the ordinary course of business.
8.2 CONTINGENT OBLIGATIONS. Create, incur, assume or suffer to
exist any Contingent Obligation in excess of, in the aggregate, $100,000.00 on
or after the Closing Date; PROVIDED HOWEVER, the foregoing restriction shall
not apply to (a) performance guarantees and performance surety or other bonds
provided in the ordinary course of business, or (b) trade credit incurred or
operating leases entered into in the ordinary course of business.
8.3 LIENS. Create, incur, assume or suffer to exist any Lien on
any of its Oil and Gas Properties or any other Property of the Borrowers,
whether now owned or hereafter acquired; PROVIDED HOWEVER, the foregoing
restrictions shall not apply to Permitted Liens. For the purposes of this
Section 8.3, and only Section 8.3, the term "Permitted Liens" shall also
include purchase money security interests within the dollar limitation set
forth in Section 8.1 above.
8.4 SALES OF ASSETS. Sell, transfer or otherwise dispose of all
or a substantial portion of the assets of Borrowers or any Subsidiaries
thereof, now owned or hereafter acquired, whether pursuant to
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a single transaction or a series of transactions. The phrase "substantial
portion of its assets" shall mean asset sales which exceed $100,000.00 during
any one fiscal year. Notwithstanding anything contained in this Section 8.4 to
the contrary, any asset sales during any one fiscal year aggregating less than
$100,000.00 and involving Oil and Gas Properties included in the then most
recent Borrowing Base review shall require a corresponding principal reduction
and/or a reduction to the Commitment Amount proportionate to the value of the
Oil and Gas Properties sold.
8.5 LOANS OR ADVANCES. Make or agree to make or allow to remain
outstanding any loans or Advances to any Person or Affiliate in excess of
$100,000.00 in the aggregate; PROVIDED HOWEVER, the foregoing restrictions
shall not apply to Advances or extensions of credit in the form of accounts
receivable incurred in the ordinary course of business and upon terms common
in the industry for such accounts receivable.
8.6 DIVIDENDS; TREASURY STOCK PURCHASES. Set aside or apply any
money or assets, directly or indirectly, to purchase, redeem or otherwise
retire any shares nor pay any dividends.
8.7 CANCELLATION OF INSURANCE. Allow any insurance policy
required to be carried hereunder to be terminated or lapse or expire without
provision for adequate renewal or comparable substitution.
8.8 MERGERS AND CONSOLIDATIONS; CHANGES IN CORPORATE STRUCTURE.
Will not (i) merge or consolidate with any Person, or permit any such merger
or consolidation with Borrowers or their subsidiaries in which Borrowers or
their subsidiary does not survive to be the controlling entity; (ii)
discontinue business; (iii) make any material change in the nature of or
manner in which it conducts its business; (iv) form any Plan which is subject
to Title IV of ERISA; (v) liquidate, wind-up or dissolve; or (vi) incur any
material change in the current senior and/or executive management (Chief
Executive or Chief Financial Officer) of Borrowers.
8.9 TRANSACTIONS WITH AFFILIATES. Directly or indirectly, enter
into any sale, lease or exchange of Property or any contract for the rendering
of goods or services with any Affiliate other than upon fair and reasonable
terms no less favorable than could be obtained in an arm's length transaction
with a Person which is not an Affiliate.
8.10 LINES OF BUSINESS. Expand, on its own or through any
Subsidiary or Affiliate, into any line of business other than those in which
it is engaged as of the Closing Date if such an expansion could have a
Material Adverse Effect.
8.11 ORGANIZATION OR ACQUISITION OF SUBSIDIARIES. Organize or
acquire any Subsidiary in addition to those existing as of the Closing Date,
if any such organization or acquisition would have a Material Adverse Effect.
8.12 SPECULATIVE TRADING. Enter into any transaction providing
(i) for the hedging, forward sale, swap or any derivation thereof of crude oil
or natural gas or other commodities; or (ii) for a swap, collar, floor, cap,
option, corridor or other contract which is intended to reduce or eliminate
risk of fluctuation
32
of interest rates, as such terms are referred in the capital markets, except
the foregoing prohibitions shall not apply to: (a) transactions consented to
in writing by the Lender.
8.13 INVESTMENTS. Purchase or otherwise acquire any capital
stock, assets, obligations, or other securities of, make any capital
contribution to, or otherwise invest in, or acquire any interest in, any
person or entity. Provided, however, this Section 8.13 shall not apply to
Borrowers' investment in the acquisition or development of Oil and Gas
Properties or in any company whose principal activity is oil and gas
exploration and production in which Borrowers have controlling interest,
direct obligations of the United States or any agency thereof, certificates of
deposit issued by any commercial bank or any mutual fund consisting of
obligations of the United States or any agency thereof.
ARTICLE IX
9. EVENTS OF DEFAULT
9.1 ENUMERATION OF EVENTS OF DEFAULT. Any of the following
events shall constitute an Event of Default as that term is used herein:
(a) default shall be made in the payment when due of any
installment of principal or interest under this Agreement, the Note or any Fee
provided for herein;
(b) an Event of Default as defined in any Loan Document
shall have occurred;
(c) default shall be made by Borrowers in the due
observance or performance of any of its obligations, covenants or agreements
contained in any of the Loan Documents and such default could be expected to
have a Material Adverse Effect;
(d) any representation or warranty made by Borrowers in
any of the Loan Documents, including, without limitation, in a Request for
Advance, proves to have been untrue in any material respect or any
representation, statement (including Financial Statements), certificate or
data furnished or made to the Lender in connection herewith proves to have
been untrue in any material respect as of the date the facts therein set forth
were stated or certified and such misrepresentation or breach of warranty has
a Material Adverse Effect;
(e) default shall be made by Borrowers (as principal or
guarantor or other surety) in the payment or performance of any bond,
debenture, note or other evidence of indebtedness or under any credit
agreement, loan agreement, indenture, promissory note or similar agreement or
instrument executed in connection with any of the foregoing, and such default
shall remain unremedied in excess of the period of grace, if any, with respect
thereto and such default is not being Contested in Good Faith by the Borrowers;
33
(f) the Borrowers shall be unable to satisfy any condition
or cure any circumstance specified in Articles IV, V, VII and VIII unless the
failure to so satisfy would not have a Material Adverse Effect, the
satisfaction or curing of which is precedent to the right of the Borrowers to
receive an Advance hereunder, and such inability shall continue for a period
in excess of 30 days;
(g) Any of the Borrowers shall (i) apply for or consent to
the appointment of a receiver, trustee or liquidator of it or all or a
substantial part of its assets, (ii) file a voluntary petition commencing an
Insolvency Proceeding concerning such Borrower, (iii) make a general
assignment for the benefit of creditors, (iv) be unable, or admit in writing
its inability, to pay its debts generally as they become due, or (v) file an
answer admitting the material allegations of a petition filed against it in
any Insolvency Proceeding;
(h) an order, judgment or decree shall be entered against
any Borrower by any court of competent jurisdiction or by any other duly
authorized authority, on the petition of a creditor or otherwise, granting
relief in any Insolvency Proceeding or approving a petition seeking
reorganization or an arrangement of its debts or appointing a receiver,
trustee, conservator, custodian or liquidator of it or all or any substantial
part of its assets and such order, judgment or decree shall not be dismissed
or stayed within 30 days after the issuance and entry thereof;
(i) the levy against any significant portion of the
Property of Borrowers, or any execution, garnishment, attachment,
sequestration or other writ or similar proceeding which is not permanently
dismissed or discharged within 30 days after the levy and which has a Material
Adverse Effect;
(j) a final and non-appealable order, judgment or decree
shall be entered against any Borrower for money damages and/or Indebtedness
due in an amount in excess of $250,000.00 which is not otherwise covered by
insurance for 100% of the judgment and such order, judgment or decree shall
not be dismissed or the execution thereof stayed within 30 days;
(k) any Person shall engage in any Prohibited Transaction
involving any Plan; any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall exist with respect to any
Plan for which an excise tax is due or would be due in the absence of a
waiver; a Reportable Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Single Employer Plan, which Reportable Event
or commencement of proceedings or appointment of a trustee is, in the
reasonable opinion of the Lender, likely to result in the termination of such
Plan for purposes of Title IV of ERISA; any Single Employer Plan shall
terminate for purposes of Title IV of ERISA; the Borrowers or any Commonly
Controlled Entity (as such term is defined in ERISA) shall incur, or in the
reasonable opinion of the Lender, be likely to incur any liability in
connection with a withdrawal from, or the Insolvency or Reorganization (as
such term is defined in ERISA) of, a Multi-Employer Plan (as such term is
defined in ERISA); or any other event or condition shall occur or exist with
respect to a Plan and the result of such events or conditions referred to in
this Section 9.1(k) could subject the Borrowers or any of them, or any
Commonly Controlled Entity to any tax (other than an excise tax under Section
4980 of the Code),
34
penalty or other liabilities which taken in the aggregate would have a
Material Adverse Effect and any such circumstance shall exist for in excess of
30 days;
(l) any charges are filed or any other action or
proceeding is instituted by any Governmental Authority against either
Borrowers under the Racketeering Influence and Corrupt Organizations Statute
(18 U.S.C. Section 1961 ET SEQ.), the result of which could be the forfeiture or
transfer of any material Property of the Borrowers subject to a Lien in favor
of the Lender without (i) satisfaction or provision for satisfaction of such
Lien, or (ii) such forfeiture or transfer of such Property being expressly
made subject to such Lien, or (iii) the Borrowers paying to the Lender the
amount of the resultant decrease in the Borrowing Base, as a result thereof;
(m) Either of the Borrowers shall have (i) concealed,
removed or diverted, or permitted to be concealed, removed or diverted, any
part of its Property, with intent to hinder, delay or defraud its creditors or
any of them; (ii) made or suffered a transfer of any of its Property which may
be fraudulent under any bankruptcy, fraudulent conveyance or similar Law;
(iii) made any transfer of its Property to or for the benefit of a creditor at
a time when other creditors similarly situated have not been paid with the
intent to hinder, delay or defraud its creditors or any of them; or (iv) shall
have suffered or permitted, while insolvent, any creditor to obtain a Lien
upon any of its Property through legal proceedings or distraint which is not
vacated within 30 days from the date thereof;
(n) any Security Instrument shall for any reason not, or
cease to, create valid and perfected first-priority Liens against the
Collateral purportedly covered thereby and such occurrence would have a
Material Adverse Effect;
(o) the good faith determination by the Lender that a
Material Adverse Effect has occurred or will occur.
9.2 REMEDIES.
(a) Upon the occurrence of an Event of Default specified
in Subsections 9.1(d),(g), or (h) immediately and without notice, (i) all
Obligations shall automatically become immediately due and payable, without
presentment, demand, protest, notice of protest, default or dishonor, notice
of intent to accelerate maturity, notice of acceleration of maturity or other
notice of any kind, except as may be provided to the contrary elsewhere
herein, all of which are hereby expressly waived by the Borrowers, and (ii)
any obligation to make an Advance shall immediately cease and terminate unless
and until reinstated by the Lender in writing, and in such event, the Lender
is hereby authorized at any time and from time to time, without notice to the
Borrowers (any such notice being expressly waived by the Borrowers), to
set-off and apply any and all deposits of the Borrowers (general or special,
time or demand, provisional or final) held by the Lender, except to the extent
any such deposits contain funds of persons other than Borrowers or Borrowers'
Subsidiaries, and any and all other indebtedness at any time owing by the
Lender to or for the credit or account of the Borrowers against any and all of
the Obligations.
35
(b) Upon the occurrence of the Event of Default specified
in Subsection 9.1(a) above, Borrowers shall have ten (10) days after receiving
written notification of the Event of Default to cure such Default but, during
such cure period, the Lender will not, as a result of such Default, accelerate
the Note or exercise any of its rights pursuant to the Loan Documents, and
notwithstanding Subsection 9.1, such Default will not constitute an "Event of
Default", unless such Default is not remedied to the reasonable satisfaction
of Lender within 10 days after Borrowers' receipt of such written
notification. In the event Borrowers shall fail to effectuate such a cure
Lender may declare all Obligations immediately due and payable, without
presentment, demand, protest, notice of protest, default or dishonor, notice
of intent to accelerate maturity, notice of acceleration of maturity or other
notice of any kind, except as may be provided to the contrary elsewhere
herein, all of which are hereby expressly waived by the Borrowers, and any
obligation to make an Advance shall immediately cease and terminate unless and
until reinstated by the Lender in writing, and in such event, the Lender is
hereby authorized at any time and from time to time, without notice to the
Borrowers (any such notice being expressly waived by the Borrowers), to
set-off and apply any and all deposits containing funds of the Borrowers
(general or special, time or demand, provisional or final) held by the Lender,
except to the extent any such deposits contain funds of persons other than
Borrowers or Borrowers' Subsidiaries, and any and all other indebtedness at
any time owing by the Lender to or for the credit or account of the Borrowers
against any and all of the Obligations although such Obligations may be
unmatured.
(c) Upon the occurrence of any Event of Default other than
those specified in Subsections 9.1(a), (d), (g), or (h), Borrowers shall have
thirty (30) days after receiving written notification of the Event of Default
to cure such Default but, during such cure period, the Lender will not, as a
result of such Default, accelerate the Note or exercise any of its rights
pursuant to the Loan Documents, and notwithstanding Subsection 9.1, such
Default will not constitute an "Event of Default", unless such Default is not
remedied to the reasonable satisfaction of Lender within 30 days after
Borrowers' receipt of such written notification. In the event Borrowers shall
fail to effectuate such a cure Lender may declare all Obligations immediately
due and payable, without presentment, demand, protest, notice of protest,
default or dishonor, notice of intent to accelerate maturity, notice of
acceleration of maturity or other notice of any kind, except as may be
provided to the contrary elsewhere herein, all of which are hereby expressly
waived by the Borrowers, and any obligation to make an Advance shall
immediately cease and terminate unless and until reinstated by the Lender in
writing, and in such event, the Lender is hereby authorized at any time and
from time to time, without notice to the Borrowers (any such notice being
expressly waived by the Borrowers), to set-off and apply any and all deposits
containing funds of the Borrowers (general or special, time or demand,
provisional or final) held by the Lender, except to the extent any such
deposits contain funds of persons other than Borrowers or Borrowers'
Subsidiaries, and any and all other indebtedness at any time owing by the
Lender to or for the credit or account of the Borrowers against any and all of
the Obligations although such Obligations may be unmatured.
(d) Subject to the provisions of this Agreement, upon the
occurrence of any Event of Default the Lender may, in addition to the
foregoing, exercise any or all of its rights and remedies provided by law or
pursuant to the Loan Documents.
36
ARTICLE X
10 MISCELLANEOUS
10.1 TRANSFERS AND PARTICIPATIONS. The Lender may, at any time,
sell, transfer, assign or grant participations in the Obligations or any
portion thereof; and the Lender may forward to each Transferee and each
prospective Transferee all documents and information relating to such
obligations, whether furnished by the Borrowers or otherwise obtained, as the
Lender determines necessary or desirable. The Borrowers agree that each
Transferee, regardless of the nature of any transfer to it, may exercise all
rights (including, without limitation, rights of set-off) with respect to the
Obligations held by it as fully as if such Transferee were the direct holder
thereof, subject to any agreements between such Transferee and the transferor
to such Transferee. The Lender agrees that each such Transferee shall assume
all of the obligations of the Lender pursuant to the Loan Documents.
10.2 SURVIVAL OF REPRESENTATIONS. WARRANTIES AND COVENANTS. All
representations and warranties of the Borrowers and all covenants and
agreements herein made shall survive the execution and delivery of the Note
and the Security Instruments and shall remain in force and effect so long as
any Obligation is outstanding or any obligation to make an Advance exists.
10.3 NOTICES AND OTHER COMMUNICATIONS. Except as to verbal
notices expressly authorized herein, which verbal notices shall be confirmed
in writing, all notices, requests and communications hereunder shall be in
writing (including by telegraph or telecopy). Unless otherwise expressly
provided herein, any such notice, request, demand or other communication shall
be deemed to have been duly given or made when delivered by hand, or, in the
case of delivery by mail, deposited in the mail, certified mail, return
receipt requested, postage prepaid, or, in the case of telegraphic notice,
when delivered to the telegraph company, or, in the case of telecopy notice,
when receipt thereof is acknowledged orally, addressed as follows:
(a) if to the Lender, to:
LOCAL OKLAHOMA BANK, N.A.
0000 X.X. 00xx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxx, Xx., Sr. Vice President
(b) if to Borrowers, to:
GMX RESOURCES INC.
One Xxxxxx Place, Ste. 600
0000 X. Xxxxxxxx
Xxxxxxxx Xxxx, XX 00000
Attention: Xxx X. Xxxxxxxxx, Xx., Chief Executive
Officer
37
Any party may, by proper written notice hereunder to the other, change
the individuals or addresses to which such notices to it shall thereafter be
sent.
10.4 PARTIES IN INTEREST. Subject to applicable restrictions
contained herein, all covenants and agreements herein contained by or on
behalf of the Borrowers or the Lender shall be binding upon and inure to the
benefit of the Borrowers or the Lender, as the case may be, and their
respective heirs, legal representatives, successors and assigns.
10.5 RIGHTS OF THIRD PARTIES. All provisions herein are imposed
solely and exclusively for the benefit of the Lender and the Borrowers. No
other Person shall have any right, benefit, priority or interest hereunder or
as a result hereof or have standing to require satisfaction of provisions
hereof in accordance with their terms, and any or all of such provisions may
be freely waived in whole or in part by the Lender at any time if in its sole
discretion it deems it advisable to do so.
10.6 ARTICLES AND SECTIONS. This Agreement, for convenience only,
has been divided into Articles and Sections and it is understood that the
rights and other legal relations of the parties hereto shall be determined
from this instrument as an entirety and without regard to the aforesaid
division into Articles and Sections and without regard to headings prefixed to
such Articles or Sections.
10.7 NUMBER AND GENDER. Whenever the context requires, reference
herein made to the single number shall be understood to include the plural;
and likewise, the plural shall be understood to include the singular.
Definitions of terms defined in the singular or plural shall be equally
applicable to the plural or singular, as the case may be, unless otherwise
indicated. Words denoting sex shall be construed to include the masculine,
feminine and neuter, when such construction is appropriate; and specific
enumeration shall not exclude the general but shall be construed as cumulative.
10.8 RENEWALS AND EXTENSIONS. All provisions of this Agreement
relating to the Note shall apply with equal force and effect to each
promissory note hereafter executed or issued which in whole or in part
represents a renewal or extension of any part of the Indebtedness of the
Borrowers under this Agreement, the Note, or any other Loan Document.
10.9 NO WAIVER: RIGHTS CUMULATIVE. No course of dealing on the
part of the Lender, its officers or employees, nor any failure or delay by the
Lender with respect to exercising any of its rights under any Loan Document
shall operate as a waiver thereof. The rights of the Lender under the Loan
Documents shall be cumulative and the exercise or partial exercise of any such
right shall not preclude the exercise of any other right. No Advance hereunder
shall constitute a waiver of any of the covenants, warranties or conditions of
the Borrowers contained herein. In the event the Borrowers are unable to
satisfy any such covenant, warranty or condition, no such Advance shall have
the effect of precluding the Lender from thereafter declaring such inability
to be an Event of Default if same constitutes an Event of Default under the
terms of this Agreement as hereinabove provided.
10.10 INCORPORATION OF EXHIBITS. The Exhibits attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for all purposes.
38
10.11 SURVIVAL UPON UNENFORCEABILITY. In the event any one or more
of the provisions contained in any of the Loan Documents or in any other
instrument referred to herein or executed in connection with the Obligations
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of any Loan Document or of any other instrument referred to
herein or executed in connection with such Obligations.
10.12 AMENDMENTS OR MODIFICATIONS. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by the party against whom enforcement
of the change, waiver, discharge or termination is sought.
10.13 CONTROLLING PROVISION UPON CONFLICT. In the event of a
conflict between the provisions of this Agreement and those of any other Loan
Document, the provisions of this Agreement shall control.
10.14 TIME, PLACE AND METHOD OF PAYMENTS. All payments required
pursuant to this Agreement or the Note shall be made in lawful money of the
United States of America and in immediately available funds; shall be deemed
received by the Lender on the next Business Day following receipt if such
receipt is after 2:00 p.m. Central Standard or Daylight Savings Time, as the
case may be, on any Business Day; and shall be made at the Principal Office of
the Lender. Except as provided to the contrary herein, if the due date of any
payment hereunder or under 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.
10.15 TIME OF ESSENCE. Time is of the essence of this Agreement
and of each provision hereof.
10.16 DISPOSITION OF COLLATERAL. Notwithstanding any term or
provision, express or implied, in any of the Security Instruments, the
realization, liquidation, foreclosure or any other disposition on or of any or
all of the Collateral shall be in the order and manner and determined in the
sole discretion of the Lender; PROVIDED HOWEVER, that in no event shall the
Lender violate applicable Law or exercise rights and remedies other than those
provided in such Security Instruments or otherwise existing at law or in
equity.
10.17 GOVERNING LAW. THIS AGREEMENT, THE NOTE, AND THE GUARANTY
SHALL BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF OKLAHOMA.
10.18 JURISDICTION AND VENUE. All actions or proceedings with
respect to, arising directly or indirectly in connection with, out of, related
to or from this Agreement or any other loan document may be litigated, at the
sole discretion and election of the Lender, in courts having situs in Oklahoma
City, Oklahoma County, Oklahoma. The Borrowers hereby submit to the
jurisdiction of any local, state or federal court located in Oklahoma City,
Oklahoma County, Oklahoma and hereby waives any rights it may have to transfer
or change the jurisdiction or venue of any litigation brought against it by
the Lender in accordance with this section.
39
10.19 WAIVER OF RIGHTS TO JURY TRIAL. The Borrowers and the Lender
hereby knowingly, voluntarily, intentionally, irrevocably and unconditionally
waive all rights to trial by jury in any action, suit, proceeding,
counterclaim or other litigation that relates to or arises out of this
Agreement or any other loan document or otherwise with respect thereto. The
provisions of this section are a material inducement for the Lender entering
into this Agreement.
10.20 ENTIRE AGREEMENT. This Agreement constitutes the entire
Agreement among the parties hereto with respect to the parties hereof and
shall supersede any prior agreement between the parties hereto, whether
written or oral, relating to the subject hereof. Furthermore, in this regard,
this written Agreement and the other written loan documents represent,
collectively, the final agreement between the parties and may not be
contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties. There are no unwritten oral agreements between the
parties.
IN WITNESS WHEREOF, this Agreement is deemed executed effective as of
the date first above written.
BORROWER:
GMX RESOURCES INC.
---------------------------------------------
By: Xxx X. Xxxxxxxxx, Xx.
Title: Chief Executive Officer
ENDEAVOR PIPELINE, INC.
---------------------------------------------
By: Xxx X. Xxxxxxxxx, Xx.
Title: President and Chief Executive Officer
EXPEDITION NATURAL RESOURCES INC.
---------------------------------------------
By: Xxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
40
LENDER:
LOCAL OKLAHOMA BANK, N.A.
---------------------------------------------
By: Xxxx X. Xxxx, Xx.
Title: Senior Vice President
41
