CREDIT AGREEMENT
BETWEEN
PLAYA MINERALS & ENERGY, INC.
AND
BANK ONE, TEXAS, NATIONAL ASSOCIATION
November 14, 2000
REDUCING REVOLVING LINE OF CREDIT OF UP TO $25,000,000
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made and entered into this 14th day of November,
2000, by and between PLAYA MINERALS & ENERGY, INC., a Texas corporation (the
"Borrower"), and BANK ONE, TEXAS, NATIONAL ASSOCIATION, national banking
association (the "Lender").
W I T N E S S E T H:
- - - - - - - - - -
In consideration of the mutual covenants and agreements herein contained,
the Borrower and the Lender hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above. As used in this Credit Agreement, the terms
"Borrower" and "Lender" shall have the meaning assigned to them hereinabove.
1.2 Additional Defined Terms. As used in this Credit Agreement, each of
the following terms shall have the meaning assigned thereto in this Section,
unless the context otherwise requires:
"Affiliate" shall mean any Person directly or indirectly controlling,
or under common control with, the Borrower and includes any Subsidiary of
the Borrower and any "affiliate" of the Borrower within the meaning of Reg.
ss.240.12b-2 of the Securities Exchange Act of 1934, as amended, with
"control," as used in this definition, meaning possession, directly or
indirectly, of the power to direct or cause the direction of management,
policies or action through ownership of voting securities, contract, voting
trust, or membership in management or in the group appointing or electing
management or otherwise through formal or informal arrangements or business
relationships.
"Agreement" shall mean this Credit Agreement, as it may be amended,
supplemented, or restated from time to time.
"Available Commitment" shall mean, at any time, an amount equal to the
remainder, if any, of (a) the Borrowing Base in effect at such time minus
(b) the Loan Balance at such time.
"Borrowing Base" shall mean, at any time, the amount determined by the
Lender in accordance with Section and then in effect.
"Borrowing Request" shall mean each written request, in substantially
the form attached hereto as Exhibit , by the Borrower to the Lender for a
borrowing or prepayment pursuant to Sections or , each of which shall:
(a) be signed by a Responsible Officer of the Borrower;
(b) specify the amount requested or prepaid and the date of the
borrowing or prepayment (which shall be a Business Day); and
(c) be delivered to the Lender no later than 11:00 a.m., Central
Standard or Daylight Savings Time, as the case may be, on
the Business Day of the requested borrowing or prepayment.
"Business Day" shall mean a day other than a Saturday, Sunday, legal
holiday for commercial banks under the laws of the State of Texas, or any
other day when banking is suspended in the State of Texas.
"Closing Date" shall mean the effective date of this Agreement.
"Collateral" shall mean the Mortgaged Properties and any other
Property now or at any time used or intended as security for the payment or
performance of all or any portion of the Obligations.
"Commitment" shall mean the obligation of the Lender, subject to
applicable provisions of this Agreement, to make Loans to or for the
benefit of the Borrower pursuant to Section .
"Commitment Fee" shall mean each fee payable to the Lender by the
Borrower pursuant to Section 2.1.
"Commitment Period" shall mean the period from and including the
Closing Date to but not including the Commitment Termination Date.
"Commitment Termination Date" shall mean September 30, 2003.
"Commodity Hedge Agreement" shall mean any crude oil, natural gas, or
other hydrocarbon floor, collar, cap, price protection, or swap agreement,
in form and substance with a Person acceptable to the Lender.
"Commonly Controlled Entity" shall mean any Person which is under
common control with the Borrower within the meaning of Section 4001 of
ERISA.
"Compliance Certificate" shall mean each certificate, substantially in
the form attached hereto as Exhibit , executed by a Responsible Officer of
the Borrower and furnished to the Lender from time to time in accordance
with Sections and 5.3.
"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 therefor, (b) to advance or supply funds (i) for the
purchase or payment of any primary obligation, or (ii) to maintain working
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 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" shall mean all assets which would, in accordance with
GAAP, be included as current assets on a balance sheet of the Borrower as
of the date of calculation, plus unused availability under this facility.
"Current Liabilities" shall mean all liabilities which would, in
accordance with GAAP, be included as current liabilities on a balance sheet
of the Borrower as of the date of calculation, but excluding the current
maturities of long term debt.
"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 interest rate equal to the Prime
Rate plus five percent (5%), but in no event exceeding the Highest Lawful
Rate.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"EBITDA" shall mean, for any period, net income for such period plus
interest expense, federal and state income taxes, depreciation,
amortization, and other non-cash expenses, plus scheduled Borrowing Base
reductions for such period deducted in the determination of net income for
such period.
"Engineering Fee" shall mean each fee payable to the Lender by the
Borrower pursuant to Section 2.11.
"Environmental Complaint" shall mean any written or oral 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, any improvements located thereon, surface water,
groundwater, or the sewer, septic, waste treatment, storage, or disposal
systems servicing any Property of the Borrower, (c) solid or liquid waste
disposal, (d) the use, generation, storage, transportation, or disposal of
any Hazardous Substance, or (e) other environmental, health, or safety
matters affecting any Property of the 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 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 the Borrower is situated, as they may be cited,
referenced and amended from time to time; (c) any rules or regulations
promulgated under or adopted pursuant to the above federal and state laws;
and (d) 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.
"Equiva Subordinated Debt" shall mean the obligations set forth in the
Credit Agreement dated November 10, 2000, by and between the Borrower and
Equiva Trading Company.
"Equiva Subordination Agreement" shall mean the Subordination
Agreement dated effective November 14, 2000, by and between Equiva Trading
Company, Lender and the Borrower.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations thereunder and
interpretations thereof.
"Event of Default" shall mean any of the events specified in Section
7.1.
"Facility Fee" shall mean the fee payable to the Lender by the
Borrower pursuant to Section 2.12.
"Final Maturity" shall mean September 30, 2003.
"Financial Statements" shall mean statements of the financial
condition of the Borrower as at the point in time and for the period
indicated and consisting of at least a balance sheet and related statements
of operations, common stock and other stockholders' equity, and cash flows
for the Borrower and, when required by applicable provisions of this
Agreement to be audited, accompanied by the unqualified certification of a
nationally-recognized firm of independent certified public accountants or
other independent certified public accountants acceptable to the Lender and
footnotes to any of the foregoing, all of which shall be prepared in
accordance with GAAP consistently applied and in comparative form with
respect to the corresponding period of the preceding fiscal period.
"Floating Rate" shall mean an interest rate per annum equal to the
Prime Rate from time to time in effect plus one percent (1%), but in no
event exceeding the Highest Lawful Rate.
"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.
"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.
"Hazardous Substances" shall mean flammables, explosives, radioactive
materials, hazardous wastes, asbestos, or any material containing asbestos,
polychlorinated biphenyls (PCBs), toxic substances or related materials,
petroleum, petroleum products, 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.
"Highest Lawful Rate" shall mean the maximum non-usurious interest
rate, if any (or, if the context so requires, an amount calculated at such
rate), that at any time or from time to time may be contracted for, taken,
reserved, charged, or received under applicable laws of the State of Texas
or the United States of America, whichever authorizes the greater rate, as
such laws are presently in effect or, to the extent allowed by applicable
law, as such laws may hereafter be in effect and which allow a higher
maximum non-usurious interest rate than such laws now allow.
"Indebtedness" shall mean, as to any Person, without duplication, (a)
all liabilities (excluding reserves for deferred income taxes, deferred
compensation liabilities, and other deferred liabilities and credits) which
in accordance with GAAP would be included in determining total liabilities
as shown on the liability side of a balance sheet, (b) all obligations of
such Person evidenced by bonds, debentures, promissory notes, or 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 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 Texas, or any other jurisdiction.
"Intellectual Property" shall mean patents, patent applications,
trademarks, tradenames, copyrights, technology, know-how, and processes.
"Investment" in any Person shall mean any stock, bond, note, or other
evidence of Indebtedness, or any other security (other than current trade
and customer accounts) of, investment or partnership interest in or loan
to, such Person.
"Lien" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of such Property, whether
such interest is based on common law, statute, or contract, and including,
but not limited to, the lien or security interest arising from a mortgage,
ship mortgage, encumbrance, pledge, security agreement, conditional sale or
trust receipt, or a lease, consignment, or bailment for security purposes
(other than true leases or true consignments), liens of mechanics,
materialmen, and artisans, maritime liens and reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting
Property which secure an obligation owed to, or a claim by, a Person other
than the owner of such Property (for the purpose of this Agreement, the
Borrower shall be deemed to be the owner of any Property which it has
acquired or holds subject to a conditional sale agreement, financing lease,
or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes), and the
filing or recording of any financing statement or other security instrument
in any public office.
"Limitation Period" shall mean any period while any amount remains
owing on the Note and interest on such amount, calculated at the applicable
interest rate, plus any fees or other sums payable under any Loan Document
and deemed to be interest under applicable law, would exceed the amount of
interest which would accrue at the Highest Lawful Rate.
"Loan" shall mean any loan made by the Lender to or for the benefit of
the Borrower pursuant to this Agreement.
"Loan Balance" shall mean, at any time, the outstanding principal
balance of the Note 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,
amendments and supplements to, and restatements of, any or all of the
foregoing from time to time in effect.
"Material Adverse Effect" shall mean (a) any adverse effect on the
business, operations, properties, condition (financial or otherwise), or
prospects of the Borrower, which materially increases the risk that any of
the Obligations will not be repaid as and when due, or (b) any material
adverse effect upon the Collateral.
"Mortgaged Properties" shall mean all Oil and Gas Properties of the
Borrower subject to a perfected first-priority Lien in favor of the Lender,
subject only to Permitted Liens, as security for the Obligations.
"Note" shall mean the promissory note of the Borrower, in the form
attached hereto as Exhibit , together with all renewals, extensions for any
period, increases, and rearrangements thereof.
"Obligations" shall mean, without duplication, (a) all Indebtedness
evidenced by the Note, (b) the obligation of the Borrower for the payment
of Commitment Fees, Facility Fees, and Engineering Fees, (e) all
obligations and liabilities whether now existing or hereafter arising of
the Borrower to the Lender in connection with any Commodity Hedge Agreement
or Rate Management Transaction, and (f) all other obligations and
liabilities of the Borrower to the Lender, now existing or hereafter
incurred, under, arising out of or in connection with any Loan Document,
and to the extent that any of the foregoing includes or refers to the
payment of amounts deemed or constituting interest, only so much thereof as
shall have accrued, been earned and which remains unpaid at each relevant
time of determination.
"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 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 Properties appertaining,
belonging, affixed, or incidental thereto.
"Parawon Subordinated Debt" shall mean the obligations set
forth in the note dated April 4, 2000, executed by the Borrower and
payable to Parawon Corporation.
"Parawon Subordination Agreement" shall mean the Subordination
Agreement dated effective November 14, 2000, by and between Parawon
Corporation, Lender and the Borrower.
"Permitted Liens" shall mean (a) Liens for taxes, assessments, or
other governmental charges or levies not yet due or which (if foreclosure,
distraint, sale, or other similar proceedings shall not have been
initiated) are being contested in good faith by appropriate proceedings,
and such reserve as may be required by GAAP shall have been made therefor,
(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 which are being contested in good faith by appropriate proceedings,
if such reserve as may be required by GAAP shall have been made therefor,
(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 which are being contested in good
faith by appropriate proceedings, if such reserve as may be required by
GAAP shall have been made therefor, (d) Liens in favor of operators and
non-operators under joint operating agreements or similar contractual
arrangements arising in the ordinary course of the business of the Borrower
to secure amounts owing, which amounts are not yet due or are being
contested in good faith by appropriate proceedings, if such reserve as may
be required by GAAP shall have been made therefor, (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 securing obligations not constituting
Indebtedness and provided that such Liens do not secure obligations to
deliver hydrocarbons at some future date without receiving full payment
therefor within 90 days of delivery, (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 the Borrower or materially detract from the value or use of the Property
to which they apply, and (g) Liens in favor of the Lender and other Liens
expressly permitted under the Security Instruments.
"Person" shall mean an individual, corporation, partnership, trust,
unincorporated organization, government, any agency or political
subdivision of any government, or any other form of entity.
"Plan" shall mean, at any time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or any Commonly
Controlled Entity is (or, if such plan 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.
"Prime Rate" shall mean a rate per annum equal to the prime rate of
interest announced from time to time by Lender or its parent (which is not
necessarily the lowest rate charged to any customer), changing when and as
said prime rate changes.
"Principal Office" shall mean the principal office of the Lender in
Houston, Texas, presently located at 000 Xxxxxx Xxxxxx, Xxxxxxx, Xxxxx
00000.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
"Rate Management Transaction" shall mean any transaction (including an
agreement with respect thereto) now existing or hereafter entered into
between Borrower and Lenders which is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar
transaction, forward transaction, currency swap transaction, cross-currency
rate swap transaction, currency option or any other similar transaction
(including any option with respect to any of these transactions) or any
combination thereof, whether linked to on or more interest rates, foreign
currencies, commodity prices, equity prices or other financial measures.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System, as the same may be amended or supplemented from
time to time.
"Regulatory Change" shall mean the passage, adoption, institution, or
amendment of any federal, state, local, or foreign Requirement of Law
(including, without limitation, Regulation D), or any interpretation,
directive, or request (whether or not having the force of law) of any
Governmental Authority or monetary authority charged with the enforcement,
interpretation, or administration thereof, occurring after the Closing Date
and applying to a class of banks including the Lender.
"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,
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 or septic system, or the waste treatment, storage, or disposal system
servicing any Property of the 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, regulation, or determination of an arbitrator,
court, or other Governmental Authority, including, without limitation,
rules, regulations, 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
pursuant to Section 5.4.
"Responsible Officer" shall mean, as to any Person, its President
Chief Executive Officer or any Vice President.
"Security Instruments" shall mean the security instruments executed
and delivered in satisfaction of the condition set forth in Section 3.1(f),
and all other documents and instruments at any time executed as security
for all or any portion of the Obligations, as such instruments may be
amended, restated, or supplemented 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.
"Superfund Site" shall mean those sites listed on the Environmental
Protection Agency National Priority List and eligible for remedial action
or any comparable state registries or list in any state of the United
States.
"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 , and any Person acquiring,
by purchase, assignment, transfer, or participation, from any such
purchaser, assignee, transferee, or participant, any part of such
Obligations.
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the State of Texas.
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.
1.5 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.
1.6 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.
1.7 Incorporation of Exhibits. The Exhibits attached to this Agreement are
incorporated herein and shall be considered a part of this Agreement for all
purposes.
ARTICLE II
TERMS OF FACILITY
(a) Revolving Line of Credit. Upon the terms and conditions
(including, without limitation, the right of the Lender to decline to make
any Loan so long as any Default or Event of Default exists) and relying on
the representations and warranties contained in this Agreement, the Lender
agrees, during the Commitment Period, to make Loans, in immediately
available funds at the Principal Office, to or for the benefit of the
Borrower, from time to time on any Business Day designated by the Borrower
following receipt by the Lender of a Borrowing Request; provided, however,
no Loan shall exceed the then existing Available Commitment.
(b) Subject to the terms of this Agreement, during the Commitment
Period, the Borrower may borrow, repay, and reborrow such funds. Except for
prepayments made pursuant to Section , each borrowing and prepayment of
principal of Loans shall be in an amount at least equal to $100,000. Each
borrowing or prepayment shall be deemed a separate borrowing or prepayment
for purposes of the foregoing.
(c) The Loans shall be made and maintained at the Principal Office and
shall be evidenced by the Note.
2.2 Use of Loan Proceeds. Proceeds of all Loans shall be used solely to
finance acquisition and development of Oil and Gas Properties and for general
corporate purposes.
2.3 Interest. Subject to the terms of this Agreement (including, without
limitation, Section ), interest on the Loans shall accrue and be payable at a
rate per annum equal to the Floating Rate. Interest on all Loans shall be
computed on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed (including the first day but excluding the last day) during
the period for which payable. Interest provided for herein shall be calculated
on unpaid sums actually advanced and outstanding pursuant to the terms of this
Agreement and only for the period from the date or dates of such advances until
repayment. Notwithstanding the foregoing, interest on past-due principal and, to
the extent permitted by applicable law, past-due interest, shall accrue at the
Default Rate, computed on the basis of a year of 365 or 366 days, as the case
may be, and actual days elapsed (including the first day but excluding the last
day) during the period for which payable, and shall be payable upon demand by
the Lender at any time as to all or any portion of such interest.
2.4 Repayment of Loans and Interest. Accrued and unpaid interest on the
aggregate outstanding Loan Balance shall be due and payable monthly commencing
on the first day of November, 2000, and continuing on the first day of each
calendar month thereafter while any amount of the Loan Balance remains
outstanding, the payment in each instance to be the amount of interest which has
accrued and remains unpaid in respect of the Loan Balance. The Loan Balance,
together with all accrued and unpaid interest thereon, shall be due and payable
on the Commitment Termination Date.
2.5 Outstanding Amounts. The outstanding principal balance of the Note
reflected by the notations by the Lender on its records shall be deemed
rebuttably presumptive evidence of the principal amount owing on the Note. The
liability for payment of principal and interest evidenced by the Note shall be
limited to principal amounts actually advanced and outstanding pursuant to this
Agreement and interest on such amounts calculated in accordance with this
Agreement.
2.6 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. 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.
2.7 Borrowing Base Determinations. (a) The Borrowing Base as of the Closing
Date is acknowledged by the Borrower and the Lender to be $6,000,000. Commencing
on December 1, 2000, and continuing thereafter on the first day of each calendar
month through the Commitment Termination Date, the amount of the Borrowing Base
shall be reduced by $175,000 subject to the provisions of the last sentence of
Section 2.7(b).
(b) The Borrowing Base shall be redetermined semi-annually on the
basis of information supplied by the Borrower in compliance with the
provisions of this Agreement, including, without limitation, Reserve
Reports, and all other information available to the Lender. In addition,
the Lender shall, in the normal course of business following a request of
the Borrower, redetermine the Borrowing Base; provided, however, the Lender
shall not be obligated to respond to more than two such requests during any
calendar year, and in no event shall the Lender be required to redetermine
the Borrowing Base more than once in any three-month period, including,
without limitation, each scheduled semi-annual redetermination provided for
above. Notwithstanding the foregoing, the Lender may at its discretion
redetermine the Borrowing Base and the amount by which the Borrowing Base
shall be reduced each calendar month as set forth in Section (a) at any
time and from time to time.
(c) Upon each determination of the Borrowing Base by the Lender, the
Lender shall notify the Borrower orally (confirming such notice promptly in
writing) of such determination, and the Borrowing Base and the amount by
which the Borrowing Base shall be reduced so communicated to the Borrower
shall become effective upon such written notification and shall remain in
effect until the next subsequent determination of the Borrowing Base and
the amount by which the Borrowing Base shall be reduced.
(d) The Borrowing Base shall represent the determination by the
Lender, in accordance with the applicable definitions and provisions herein
contained and its customary lending practices for loans of this nature, of
the value, for loan purposes, of the Mortgaged Properties, subject, in the
case of any increase in the Borrowing Base, to the credit approval process
of the Lender. Furthermore, the Borrower acknowledges that the
determination of the Borrowing Base contains an equity cushion (market
value in excess of loan value), which is acknowledged by the Borrower to be
essential for the adequate protection of the Lender.
2.8 Mandatory Prepayments. If at any time the Loan Balance exceeds the
Borrowing Base then in effect, the Borrower shall, within 30 days of notice from
the Lender of such occurrence, (a) prepay, or make arrangements acceptable to
the Lender for the prepayment of, the amount of such excess for application on
the Loan Balance, (b) provide additional collateral, of character and value
satisfactory to the Lender in its sole discretion, to secure the Obligations by
the execution and delivery to the Lender of security instruments in form and
substance satisfactory to the Lender, or (c) effect any combination of the
alternatives described in clauses (a) and (b) of this Section and acceptable to
the Lender in its sole discretion.
2.9 Voluntary Prepayments of Loans. Subject to applicable provisions of
this Agreement, the Borrower shall have the right at any time or from time to
time to prepay Loans without prepayment penalty provided, however, (a) the
Borrower shall pay all accrued and unpaid interest on the amounts prepaid, and
(b) no such prepayment shall serve to postpone the repayment when due of any
Obligation.
2.10 Commitment Fee. In addition to interest on the Note as provided herein
and all other fees payable hereunder and to compensate the Lender for
maintaining funds available, the Borrower shall pay to the Lender, in
immediately available funds, on the first day of January, 2001, and on the first
day of each third calendar month thereafter during the Commitment Period, a fee
in the amount of one-half percent (1/2%) per annum, calculated on the basis of a
year of 365 or 366 days, as the case may be, and actual days elapsed (including
the first day but excluding the last day), on the average daily amount of the
Available Commitment during the preceding quarterly period.
2.11 Engineering Fee. In addition to interest on the Note as provided
herein and all other fees payable hereunder and to compensate the Lender for the
costs of evaluating the Mortgaged Properties and reviewing the Reserve Reports,
the Borrower shall pay to the Lender, in immediately available funds, on the
date of each redetermination of the Borrowing Base, an engineering fee in the
amount of $5,000.
2.12 Facility Fee. In addition to interest on the Note as provided herein
and all other fees payable hereunder and to compensate the Lender for the costs
of the extension of credit hereunder, the Borrower shall pay to the Lender on
the Closing Date, in immediately available funds, a facility fee equal to one
percent (1%) of the initial Borrowing Base and one percent (1%) of any
incremental increase in the Borrowing Base thereafter.
2.13 Loans to Satisfy Obligations of Borrower. The Lender may, but shall
not be obligated to, make Loans for the benefit of the Borrower and apply
proceeds thereof to the satisfaction of any condition, warranty, representation,
or covenant of the Borrower contained in this Agreement or any other Loan
Document. Any such Loan shall be evidenced by the Note and shall be made at the
Floating Rate.
2.14 Security Interest in Accounts; Right of Offset. As security for the
payment and performance of the Obligations, the Borrower hereby transfers,
assigns, and pledges to the Lender and grants to the Lender a security interest
in all funds of the Borrower 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 Borrower upon payment in full and complete performance by the Borrower of
all Obligations. All remedies as secured party or assignee of such funds shall
be exercisable 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,
the Borrower hereby grants to the Lender the right, exercisable 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 the 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.
2.15 General Provisions Relating to Interest. It is the intention of the
parties hereto to comply strictly with the usury laws of the State of Texas and
the United States of America. In this connection, there shall never be
collected, charged, or received on the sums advanced hereunder interest in
excess of that which would accrue at the Highest Lawful Rate. For purposes of
Chapter 303 of the Texas Finance Code (Vernon's 1999), the Borrower agrees that
the Highest Lawful Rate shall be the "weekly ceiling" as defined in such
Section, provided that the Lender may also rely, to the extent permitted by
applicable laws of the State of Texas or the United States of America, on
alternative maximum rates of interest under other laws of the State of Texas or
the United States of America applicable to the Lender, if greater.
(b) Notwithstanding anything herein or in the Note to the contrary,
during any Limitation Period, the interest rate to be charged on amounts
evidenced by the Note shall be the Highest Lawful Rate, and the obligation,
if any, of the Borrower for the payment of fees or other charges deemed to
be interest under applicable law shall be suspended. During any period or
periods of time following a Limitation Period, to the extent permitted by
applicable laws of the State of Texas or the United States of America, the
interest rate to be charged hereunder shall remain at the Highest Lawful
Rate until such time as there has been paid to the Lender (i) the amount of
interest in excess of that accruing at the Highest Lawful Rate that the
Lender would have received during the Limitation Period had the interest
rate remained at the otherwise applicable rate, and (ii) all interest and
fees otherwise payable to the Lender but for the effect of such Limitation
Period.
(c) If, under any circumstances, the aggregate amounts paid on the
Note or under this Agreement or any other Loan Document include amounts
which by law are deemed interest and which would exceed the amount
permitted if the Highest Lawful Rate were in effect, the Borrower
stipulates that such payment and collection will have been and will be
deemed to have been, to the extent permitted by applicable laws of the
State of Texas or the United States of America, the result of mathematical
error on the part of the Borrower and the Lender; and the Lender shall
promptly refund the amount of such excess (to the extent only of such
interest payments in excess of that which would have accrued and been
payable on the basis of the Highest Lawful Rate) upon discovery of such
error by the Lender or notice thereof from the Borrower. In the event that
the maturity of any Obligation is accelerated, by reason of an election by
the Lender or otherwise, or in the event of any required or permitted
prepayment, then the consideration constituting interest under applicable
laws may never exceed the Highest Lawful Rate; and excess amounts paid
which by law are deemed interest, if any, shall be credited by the Lender
on the principal amount of the Obligations, or if the principal amount of
the Obligations shall have been paid in full, refunded to the Borrower.
(d) All sums paid, or agreed to be paid, to the Lender for the use,
forbearance and detention of the proceeds of any advance hereunder shall,
to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full term hereof until paid in full so
that the actual rate of interest is uniform but does not exceed the Highest
Lawful Rate throughout the full term hereof.
2.16 Letters in Lieu of Transfer Orders. The Lender agrees that none of the
letters in lieu of transfer or division orders provided by the Borrower pursuant
to Section 3.1(f)(iii) or Section will 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.
2.17 Power of Attorney. The Borrower hereby designates the Lender as its
agent and attorney-in-fact, to act in its name, place, and stead for the purpose
of completing and, upon the occurrence of an Event of Default, delivering any
and all of the letters in lieu of transfer orders delivered by the Borrower to
the Lender pursuant to Section 3.1(f)(iii) or Section , including, without
limitation, completing any blanks contained in such letters and attaching
exhibits thereto describing the relevant Collateral. The 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 so long as any Obligation remains outstanding or unpaid or any
Commitment exists. The powers conferred on the Lender by this appointment 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 as a result of
the exercise of such powers and shall not be responsible to the Borrower or any
other Person for any act or failure to act with respect to such powers, except
for gross negligence or willful misconduct.
ARTICLE III
CONDITIONS
The obligations of the Lender to enter into this Agreement and to make
Loans are subject to the satisfaction of the following conditions precedent:
3.1 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 Borrower
to its Oil and Gas Properties, shall be satisfactory to 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 by one or more authorized officers of the Borrower, all in form and
substance satisfactory to the Lender and dated, where applicable, of even date
herewith or a date prior thereto and acceptable to the Lender:
(a) multiple counterparts of this Agreement, as requested by the
Lender;
(b) the Note;
(c) copies of the Articles of Incorporation or Certificate of
Incorporation and all amendments thereto and the bylaws and all amendments
thereto of the Borrower, accompanied by a certificate issued by the
secretary or an assistant secretary of the Borrower, to the effect that
each such copy is correct and complete;
(d) certificates of incumbency and signatures of all officers of the
Borrower who are authorized to execute Loan Documents on behalf of the
Borrower, each such certificate being executed by the secretary or an
assistant secretary of the Borrower;
(e) copies of corporate resolutions approving the Loan Documents and
authorizing the transactions contemplated herein and therein, duly adopted
by the boards of directors of the Borrower, accompanied by certificates of
the secretary or an assistant secretary of the 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 the 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) multiple counterparts, as requested by the Lender, of the
following Security Instruments creating, evidencing, perfecting, and
otherwise establishing Liens in favor of the Lender in and to the
Collateral:
(i) Mortgage, Deed of Trust, Indenture, Security Agreement,
Assignment of Production, and Financing Statement from the
Borrower covering all Oil and Gas Properties of the Borrower
and all improvements, personal property, and fixtures
related thereto;
(ii) Financing Statements from the Borrower, as debtor,
constituent to the instrument described in clause (i) above;
(iii)Security Agreement from the Borrower pledging contracts
rights, etc.;
(iv) Financing Statement from the Borrower, as debtor,
constituent to the instrument described in (iii) above;
(v) abundated letters, in form and substance satisfactory to the
Lender, from the Borrower 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 directly to the Lender;
(g) unaudited Financial Statements of the Borrower as of June 30,
2000;
(h) 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 the Borrower in its jurisdiction of
incorporation and in any other jurisdictions where it does business;
(i) results of searches of the UCC Records of the Secretary of State
of the State of Texas from a source acceptable to the Lender and reflecting
no Liens against any of the Collateral as to which perfection of a Lien is
accomplished by the filing of a financing statement other than in favor of
the Lender;
(j) confirmation, acceptable to the Lender, of the title of the
Borrower to the Mortgaged Properties, free and clear of Liens other than
Permitted Liens;
(k) all operating, lease, sublease, royalty, sales, exchange,
processing, farmout, bidding, pooling, unitization, communitization, and
other agreements relating to the Mortgaged Properties requested by the
Lender;
(l) engineering reports covering the Mortgaged Properties;
(m) the opinion of Chamberlain, Hrdlicka, White, Xxxxxxxx & Xxxxxx,
counsel to the Borrower, in the form attached hereto as Exhibit , with such
changes thereto as may be approved by the Lender;
(n) certificates evidencing the insurance coverage required pursuant
to Section ;
(o) Letter of Credit dated November 9, 2000, from Xxxxxxx Xxxxx Bank
U.S.A. to the Lender in the amount of $800,000;
(p) Equiva Subordination Agreement;
(q) Parawon Subordination Agreement;
(r) Notice of Final Agreement between Lender and Borrower; and
(s) such other agreements, documents, instruments, opinions,
certificates, waivers, consents, and evidence as the Lender may reasonably
request.
3.2 Each Loan. In addition to the conditions precedent stated elsewhere
herein, the Lender shall not be obligated to make any Loan unless:
(a) the Borrower shall have delivered to the Lender a Borrowing
Request at least the requisite time prior to the requested date for the
relevant Loan and each statement or certification made in such Borrowing
Request shall be true and correct in all material respects on the requested
date for such Loan;
(b) no Event of Default or Default shall exist or will occur as a
result of the making of the requested Loan;
(c) if requested by the Lender, the Borrower shall have delivered
evidence satisfactory to the Lender substantiating any of the matters
contained in this Agreement which are necessary to enable the Borrower to
qualify for such Loan;
(d) the Lender shall have received, reviewed, and approved such
additional documents and items as described in Section as may be requested
by the Lender with respect to such Loan;
(e) no event shall have occurred which, in the reasonable opinion of
the Lender, could have a Material Adverse Effect;
(f) each of the representations and warranties contained in this
Agreement shall be true and correct and shall be deemed to be repeated by
the Borrower as if made on the requested date for such Loan;
(g) all of the Security Instruments shall be in full force and effect
and provide to the Lender the security intended thereby;
(h) neither the consummation of the transactions contemplated hereby
nor the making of such Loan shall contravene, violate, or conflict with any
Requirement of Law;
(i) the Borrower shall hold full legal title to the Collateral and be
the sole beneficial owner thereof;
(j) the Lender shall have received the payment of all Engineering
Fees, Facility Fees, and other fees payable to the Lender hereunder and
reimbursement from the Borrower, or special legal counsel for the Lender
shall have received payment from the Borrower, for (i) all reasonable fees
and expenses of counsel to the Lender for which the Borrower is 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 Loan, 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 Security Instruments, for which invoices have been presented as of or
prior to the date of the requested Loan; and
(k) all matters incident to the consummation of the transactions
hereby contemplated shall be satisfactory to the Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to make the Loans,
the Borrower represents and warrants to the Lender (which representations and
warranties shall survive the delivery of the Note) that:
4.1 Due Authorization. The execution and delivery by the Borrower of this
Agreement and the borrowings hereunder, the execution and delivery by the
Borrower 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 the Borrower and the performance of all obligations of the
Borrower under the Loan Documents are within the power of the Borrower, have
been duly authorized by all necessary corporate action by the Borrower, and do
not and will not (a) require the consent of any Governmental Authority, (b)
contravene or conflict with any Requirement of Law, (c) contravene or conflict
with any indenture, instrument, or other agreement to which the Borrower is a
party or by which any Property of the 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 the Borrower under any such indenture,
instrument, or other agreement, other than the Loan Documents.
4.2 Corporate Existence. The Borrower is a corporation duly organized,
legally existing, and in good standing under the laws of its state of
incorporation and is duly qualified as a foreign corporation and is in good
standing in all jurisdictions wherein the ownership of Property or the operation
of its business necessitates same, other than those jurisdictions wherein the
failure to so qualify will not have a Material Adverse Effect.
4.3 Valid and Binding Obligations. All Loan Documents, when duly executed
and delivered by the Borrower, will be the legal, valid, and binding obligations
of the Borrower, enforceable against the Borrower in accordance with their
respective terms.
4.4 Security Instruments. The provisions of each Security Instrument are
effective to create in favor of the Lender, a legal, valid, and enforceable Lien
in all right, title, and interest of the Borrower 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 Borrower in the Collateral described therein.
4.5 Title to Assets. The Borrower has good and indefeasible title to all of
its Properties, free and clear of all Liens except Permitted Liens.
4.6 Scope and Accuracy of Financial Statements. The Financial Statements of
the Borrower as of June 30, 2000, present fairly the financial position and
results of operations and cash flows of the Borrower in accordance with GAAP as
at the relevant point in time or for the period indicated, as applicable. No
event or circumstance has occurred since June 30, 2000, which could reasonably
be expected to have a Material Adverse Effect.
4.7 No Material Misstatements. No information, exhibit, statement, or
report furnished to the Lender by or at the direction of the Borrower in
connection with this Agreement contains any material misstatement of fact or
omits to state a material fact or any fact necessary to make the statements
contained therein not misleading as of the date made or deemed made.
4.8 Liabilities, Litigation, and Restrictions. Other than as listed under
the heading "Liabilities" on Exhibit attached hereto, the Borrower has no
liabilities, direct, or contingent, which may materially and adversely affect
its business or operations or its ownership of the Collateral. Except as set
forth under the heading "Litigation" on Exhibit hereto, no litigation or other
action of any nature affecting the Borrower is pending before any Governmental
Authority or, to the best knowledge of the Borrower, threatened against or
affecting the Borrower. No unusual or unduly burdensome restriction, restraint
or hazard exists by contract, Requirement of Law, or otherwise relative to the
business or operations of the Borrower or the ownership and operation of the
Collateral other than such as relate generally to Persons engaged in business
activities similar to those conducted by the Borrower.
4.9 Authorizations; Consents. Except as expressly contemplated by this
Agreement, no authorization, consent, approval, exemption, franchise, permit, or
license of, or filing with, any Governmental Authority or any other Person is
required to authorize or is otherwise required in connection with the valid
execution and delivery by the Borrower of the Loan Documents or any instrument
contemplated hereby, the repayment by the Borrower of the Note and interest and
fees provided in the Note and this Agreement, or the performance by the Borrower
of the Obligations.
4.10 Compliance with Laws. The Borrower and its Property, including,
without limitation, the Mortgaged Property, are in compliance with all
applicable Requirements of Law, including, without limitation, Environmental
Laws, the Natural Gas Policy Act of 1978, as amended, and ERISA, except to the
extent non-compliance with any such Requirements of Law could not reasonably be
expected to have a Material Adverse Effect.
4.11 ERISA. The Borrower does not maintain nor has it maintained any Plan.
The Borrower does not currently contribute to or have any obligation to
contribute to or otherwise have any liability with respect to any Plan.
4.12 Environmental Laws. To the best knowledge and belief of the Borrower,
except as would not have a Material Adverse Effect, or as described on Exhibit
under the heading "Environmental Matters:"
(a) no Property of the 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 the 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 the Borrower or from, affecting, or related to any
Property of the Borrower or adjacent to any Property of the
Borrower has occurred; and
(d) no Environmental Complaint has been received by the Borrower.
4.13 Compliance with Federal Reserve Regulations. No transaction
contemplated by the Loan Documents is in violation of any regulations
promulgated by the Board of Governors of the Federal Reserve System, including,
without limitation, Regulations T, U, or X.
4.14 Investment Company Act Compliance. The Borrower is not, nor is the
Borrower directly or indirectly controlled by or acting on behalf of any Person
which is, an "investment company" or an "affiliated person" of an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
4.15 Public Utility Holding Company Act Compliance. The Borrower is not a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
4.16 Proper Filing of Tax Returns; Payment of Taxes Due. The Borrower has
duly and properly filed its United States income tax return and all other tax
returns which are required to be filed and 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 respective charges and reserves on the books of
the Borrower with respect to taxes and other governmental charges are adequate.
4.17 Refunds. Except as described on Exhibit under the heading "Refunds,"
no orders of, proceedings pending before, or other requirements of, the Federal
Energy Regulatory Commission, the Texas Railroad Commission, or any Governmental
Authority exist which could result in the Borrower being required to refund any
material portion of the proceeds received or to be received from the sale of
hydrocarbons constituting part of the Mortgaged Property.
4.18 Gas Contracts. Except as described on Exhibit under the heading "Gas
Contracts," the Borrower (a) is not obligated in any material respect by virtue
of any prepayment made under any contract containing a "take-or-pay" or
"prepayment" provision or under any similar agreement to deliver hydrocarbons
produced from or allocated to any of the Mortgaged Property at some future date
without receiving full payment therefor within 90 days of delivery, and (b) has
not produced gas, in any material amount, subject to, and neither the Borrower
nor any of the Mortgaged Properties is subject to, balancing rights of third
parties or subject to balancing duties under governmental requirements, except
as to such matters for which the Borrower has established monetary reserves
adequate in amount to satisfy such obligations and has segregated such reserves
from other accounts.
4.19 Intellectual Property. The Borrower owns or is licensed to use all
Intellectual Property necessary to conduct all business material to its
condition (financial or otherwise), business, or operations as such business is
currently conducted. No claim has been asserted or is pending by any Person with
the respect to the use of any such Intellectual Property or challenging or
questioning the validity or effectiveness of any such Intellectual Property; and
the Borrower knows of no valid basis for any such claim. The use of such
Intellectual Property by the Borrower does not infringe on the rights of any
Person, except for such claims and infringements as do not, in the aggregate,
give rise to any material liability on the part of the Borrower.
4.20 Casualties or Taking of Property. Except as disclosed on Exhibit under
the heading "Casualties," since June 30, 2000, neither the business nor any
Property of the 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.
4.21 Locations of Borrower. The principal place of business and chief
executive office of the Borrower is located at the address of the Borrower set
forth in Section or at such other location as the Borrower may have, by proper
written notice hereunder, advised the Lender, provided that such other location
is within a state in which appropriate financing statements from the Borrower in
favor of the Lender have been filed.
4.22 Subsidiaries. The Borrower has no Subsidiaries except those described
on Exhibit under the heading "Subsidiaries".
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any Commitment
exists, the Borrower shall:
5.1 Maintenance and Access to Records. Keep adequate records, in accordance
with GAAP, 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 for inspection by the Lender and, at the expense of the Borrower,
allow the Lender to make and take away copies thereof.
5.2 Quarterly Financial Statements; Compliance Certificates. Deliver to
the Lender, (a) on or before the 45th day after the close of each of the first
three quarterly periods of each fiscal year of the Borrower, a copy of the
unaudited Financial Statements of the Borrower as at the close of such quarterly
period and from the beginning of such fiscal year to the end of such period,
such Financial Statements to be certified by a Responsible Officer of the
Borrower as having been prepared in accordance with GAAP consistently applied
and as a fair presentation of the condition of the Borrower, subject to changes
resulting from normal year-end audit adjustments, and (b) on or before the 45th
day after the close of each fiscal quarter, with the exception of the last
fiscal quarter, a Compliance Certificate.
5.3 Annual Financial Statements. Deliver to the Lender, on or before the
120th day after the close of each fiscal year of the Borrower, a copy of the
annual audited Financial Statements of the Borrower and a Compliance
Certificate.
(a) Oil and Gas Reserve Reports. Deliver to the Lender no later than
April 1 of each year during the term of this Agreement, engineering reports
in form and substance satisfactory to the Lender certified by any
nationally- or regionally-recognized independent consulting petroleum
engineers acceptable to the Lender as fairly and accurately setting forth
(i) the proven and producing, shut-in, behind-pipe, and undeveloped oil and
gas reserves (separately classified as such) attributable to the Mortgaged
Properties as of January 1 of the year for which such reserve reports are
furnished, (ii) the aggregate present value of the future net income with
respect to such Mortgaged Properties, discounted at a stated per annum
discount rate of proven and producing reserves, (iii) projections of the
annual rate of production, gross income, and net income with respect to
such proven and producing reserves, and (iv) information with respect to
the "take-or-pay," "prepayment," and gas-balancing liabilities of the
Borrower.
(b) Deliver to the Lender no later than October 1 of each year during
the term of this Agreement, engineering reports in form and substance
satisfactory to the Lender prepared by or under the supervision of the
chief petroleum engineer of the Borrower evaluating the Mortgaged
Properties as of July 1 of the year for which such reserve reports are
furnished and updating the information provided in the reports pursuant to
Section 5.4(a).
(c) Each of the reports provided pursuant to this Section shall be
submitted to the Lender together with additional data concerning pricing,
quantities of production from the Mortgaged Properties, volumes of
production sold, purchasers of production, gross revenues, expenses, and
such other information and engineering and geological data with respect
thereto as the Lender may reasonably request.
5.5 Title Opinions; Title Defects. Promptly upon the request of the Lender,
furnish to the Lender title opinions, in form and substance and by counsel
satisfactory to the Lender, or other confirmation of title acceptable to the
Lender, covering Oil and Gas Properties constituting not less than 81% of the
value, determined by the Lender in its sole discretion, of the Mortgaged
Properties; and promptly, but in any event within 60 days after notice by the
Lender of any defect, material in the opinion of the Lender in value, in the
title of the Borrower to any of its Oil and Gas Properties, clear such title
defects, and, in the event any such title defects are not cured in a timely
manner, pay all related costs and fees incurred by the Lender to do so.
5.6 Notices of Certain Events. Deliver to the Lender, immediately upon
having knowledge of the occurrence of any of the following events or
circumstances, a written statement with respect thereto, signed by a Responsible
Officer of the Borrower and setting forth the relevant event or circumstance and
the steps being taken by the Borrower with respect to such event or
circumstance:
(a) any Default or Event of Default;
(b) any default or event of default under any contractual obligation
of the Borrower or any litigation, investigation, or proceeding
between the Borrower and any Governmental Authority which, in
either case, if not cured or if adversely determined, as the case
may be, could reasonably be expected to have a Material Adverse
Effect;
(c) any litigation or proceeding involving the Borrower as a
defendant or in which any Property of the Borrower is subject to
a claim and in which the amount involved is $200,000 or more and
which is not covered by insurance or in which injunctive or
similar relief is sought;
(d) the receipt by the Borrower of any Environmental Complaint;
(e) 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 Borrower or adjacent to any Property of the
Borrower following any allegation of a violation of any
Requirement of Law;
(f) any Release of Hazardous Substances by the Borrower or from,
affecting, or related to any Property of the Borrower or adjacent
to any Property of the Borrower except in accordance with
applicable Requirements of 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
could reasonably be expected to have a Material Adverse Effect;
(g) the change in identity or address of any Person remitting to the
Borrower proceeds from the sale of hydrocarbon production from or
attributable to any Mortgaged Property;
(h) any change in the senior management of the Borrower; and
(i) any other event or condition which could reasonably be expected
to have a Material Adverse Effect.
5.7 Letters in Lieu of Transfer Orders; Division Orders. Promptly upon
request by the Lender at any time and from time to time, and without limitation
on the rights of the Lender pursuant to Sections and , execute such letters in
lieu of transfer orders, in addition to the letters signed by the Borrower and
delivered to the Lender in satisfaction of the condition set forth in Section
3.1(f)(iii) and/or division and/or transfer orders as are necessary or
appropriate to transfer and deliver to the Lender proceeds from or attributable
to any Mortgaged Property.
5.8 Additional Information. Furnish to the Lender, promptly upon the
request of the Lender, such additional financial or other information concerning
the assets, liabilities, operations, and transactions of the Borrower as the
Lender may from time to time 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 its name or the location of its
principal place of business or chief executive office; and upon the request of
the Lender, execute such additional Security Instruments as may be necessary or
appropriate in connection therewith.
5.9 Compliance with Laws. Except to the extent the failure to comply or
cause compliance would not have a Material Adverse Effect, comply with all
applicable Requirements of Law, including, without limitation, (a) the Natural
Gas Policy Act of 1978, as amended, (b) ERISA, (c) Environmental Laws, and (d)
all permits, licenses, registrations, approvals, and authorizations (i) related
to any natural or environmental resource or media located on, above, within, in
the vicinity of, related to or affected by any Property of the Borrower, (ii)
required for the performance of the operations of the Borrower, or (iii)
applicable to the use, generation, handling, storage, treatment, transport, or
disposal of any Hazardous Substances; and cause all employees, crew members,
agents, contractors, subcontractors, and future lessees (pursuant to appropriate
lease provisions) of the Borrower, while such Persons are acting within the
scope of their relationship with the Borrower, to comply with all such
Requirements of Law as may be necessary or appropriate to enable the Borrower to
so comply.
5.10 Payment of Assessments and Charges. Pay all taxes, assessments,
governmental charges, rent, and other Indebtedness which, if unpaid, might
become a Lien against the Property of the Borrower, except any of the foregoing
being contested in good faith and as to which adequate reserve in accordance
with GAAP has been established or unless failure to pay would not have a
Material Adverse Effect.
5.11 Maintenance of Corporate Existence and Good Standing. Maintain its
corporate existence or qualification and good standing in its jurisdictions of
incorporation and in all jurisdictions wherein the Property now owned or
hereafter acquired or business now or hereafter conducted necessitates same,
unless the failure to do so would not have a Material Adverse Effect.
5.12 Payment of Notes; Performance of Obligations. Pay the Note according
to the reading, tenor, and effect thereof, as modified hereby, and do and
perform every act and discharge all of its other Obligations.
5.13 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 opinion of the Lender, be necessary to fulfill the terms of the
Loan Documents.
5.14 Initial Fees and Expenses of Counsel to Lender. Upon request by the
Lender, promptly reimburse the Lender for all reasonable fees and expenses of
Xxxxxxx Xxxxxx L.L.P., special counsel to the Lender, in connection with the
preparation of this Agreement and all documentation contemplated hereby, the
satisfaction of the conditions precedent set forth herein, the filing and
recordation of Security Instruments, and the consummation of the transactions
contemplated in this Agreement.
5.15 Subsequent Fees and Expenses of Lender. Upon request by the Lender,
promptly reimburse the Lender (to the fullest extent permitted by law) for all
amounts reasonably expended, advanced, or incurred by or on behalf of the Lender
to satisfy any obligation of the Borrower under any of the Loan Documents; to
collect the Obligations; to ratify, amend, restate, or prepare additional Loan
Documents, as the case may be; for the filing and recordation of Security
Instruments; to enforce the rights of the Lender under any of the Loan
Documents; and to protect the Properties or business of the Borrower, including,
without limitation, the Collateral, which amounts shall be deemed compensatory
in nature and liquidated as to amount upon notice to the Borrower by the Lender
and which amounts shall include, but not be limited to (a) all court costs, (b)
reasonable attorneys' fees, (c) reasonable fees and expenses of auditors and
accountants incurred to protect the interests of the Lender, (d) fees and
expenses incurred in connection with the participation by the Lender as a member
of the creditors' committee in a case commenced under any Insolvency Proceeding,
(e) fees and expenses incurred in connection with lifting the automatic stay
prescribed in ss.362 Title 11 of the United States Code, and (f) fees and
expenses incurred in connection with any action pursuant to ss.1129 Title 11 of
the United States Code all reasonably incurred by the Lender in connection with
the collection of any sums due under the Loan Documents, together with interest
at the per annum interest rate equal to the Floating Rate, calculated on a basis
of a calendar year of 365 or 366 days, as the case may be, 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 it is
repaid to the Lender, with the obligations under this Section surviving the
non-assumption of this Agreement in a case commenced under any Insolvency
Proceeding and being binding upon the Borrower and/or a trustee, receiver,
custodian, or liquidator of the Borrower appointed in any such case.
5.16 Operation of Oil and Gas Properties. Develop, maintain, and operate
its Oil and Gas Properties in a prudent and workmanlike manner in accordance
with industry standards.
5.17 Maintenance and Inspection of Properties. Maintain all of its tangible
Properties in good repair and condition, ordinary wear and tear excepted; make
all necessary replacements thereof and operate such Properties in a good and
workmanlike manner; and permit any authorized representative of the Lender to
visit and inspect, at the expense of the Borrower, any tangible Property of the
Borrower.
5.18 Maintenance of Insurance. Maintain 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
acceptable to the Lender, maintained by Borrower, naming the Lender as loss
payee, and, upon any renewal of any such insurance and at other times upon
request by the Lender, furnish to the Lender evidence, satisfactory to the
Lender, within 30 days of the Closing Date of the maintenance of such insurance.
The Lender shall have the right to collect, and the Borrower hereby assigns to
the Lender, any and all monies that may become payable under any policies of
insurance relating to business interruption or by reason of damage, loss, or
destruction of any of the Collateral. In the event of any damage, loss, or
destruction for which insurance proceeds relating to business interruption or
Collateral exceed $100,000, the Lender may, at its option, apply all such sums
or any part thereof received by it toward the payment of the Obligations,
whether matured or unmatured, application to be made first to interest and then
to principal, and shall deliver to the Borrower the balance, if any, after such
application has been made. In the event of any such damage, loss, or destruction
for which insurance proceeds are $100,000 or less, provided that no Default or
Event of Default has occurred and is continuing, the Lender shall deliver any
such proceeds received by it to the Borrower. In the event the Lender receives
insurance proceeds not attributable to Collateral or business interruption, the
Lender shall deliver any such proceeds to the Borrower.
5.19 INDEMNIFICATION. INDEMNIFY AND HOLD THE LENDER AND ITS SHAREHOLDERS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, AND AFFILIATES AND
EACH TRUSTEE FOR THE BENEFIT OF THE LENDER UNDER ANY SECURITY INSTRUMENT
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, 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 BORROWER, WHETHER PRIOR TO OR DURING THE TERM
HEREOF, (B) ANY ACTIVITY CARRIED ON OR UNDERTAKEN ON OR OFF ANY PROPERTY OF THE
BORROWER, WHETHER PRIOR TO OR DURING THE TERM HEREOF, AND WHETHER BY THE
BORROWER OR ANY PREDECESSOR IN TITLE, EMPLOYEE, AGENT, CONTRACTOR, OR
SUBCONTRACTOR OF THE BORROWER 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 BORROWER, (D) ANY
CONTAMINATION OF ANY PROPERTY OR NATURAL RESOURCES ARISING IN CONNECTION WITH
THE GENERATION, USE, HANDLING, STORAGE, TRANSPORTATION OR DISPOSAL OF ANY
HAZARDOUS SUBSTANCES BY THE BORROWER OR ANY EMPLOYEE, AGENT, CONTRACTOR, OR
SUBCONTRACTOR OF THE BORROWER WHILE SUCH PERSONS ARE ACTING WITHIN THE SCOPE OF
THEIR RELATIONSHIP WITH THE BORROWER, IRRESPECTIVE OF WHETHER ANY OF SUCH
ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH APPLICABLE REQUIREMENTS
OF LAW, OR (E) THE PERFORMANCE AND ENFORCEMENT OF ANY LOAN DOCUMENT OR ANY OTHER
ACT OR OMISSION IN CONNECTION WITH OR RELATED TO ANY LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING, WITHOUT LIMITATION, ANY OF THE
FOREGOING IN THIS SECTION ARISING FROM NEGLIGENCE, WHETHER SOLE OR CONCURRENT,
ON THE PART OF THE LENDER OR ANY OF ITS SHAREHOLDERS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, OR AFFILIATES OR ANY TRUSTEE FOR THE
BENEFIT OF THE LENDER UNDER ANY SECURITY INSTRUMENT; 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 BORROWER 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 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.
5.20 Hedging. Hedge a portion of its proven developed producing Mortgage
Property, the amount to be communicated in a letter from Lender to Borrower.
ARTICLE VI
NEGATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any Commitment
exists, the Borrower will not:
6.1 Indebtedness. Create, incur, assume, or suffer to exist any
Indebtedness, whether by way of loan or otherwise; provided, however, the
foregoing restriction shall not apply to (a) the Obligations, (b) unsecured
accounts payable incurred in the ordinary course of business, which are not
unpaid in excess of 60 days beyond invoice date or are being contested in good
faith and as to which such reserve as is required by GAAP has been made, (c)
crude oil, natural gas, or other hydrocarbon floor, collar, cap, price
protection, or swap agreements, in form and substance and with a Person
acceptable to the Lender, provided that (i) each commitment issued under such
agreement must also be approved by the Lender, (ii) such agreements shall not be
entered into with respect to Mortgaged Properties constituting more than 80% of
the present value of estimated future net revenues, computed using a discount
factor of 10%, of all proved developed producing Mortgaged Properties, and (iii)
that the floor prices in such agreements are not less than the prices used by
the Lender in its most recent Borrowing Base determination, or (d) Rate
Management Transactions, in form and substance and with a Person acceptable to
the Lender.
6.2 Contingent Obligations. Create, incur, assume, or suffer to exist any
Contingent Obligation; 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.
6.3 Liens. Create, incur, assume, or suffer to exist any Lien on any of its
Oil and Gas Properties or any other Property, whether now owned or hereafter
acquired; provided, however, the foregoing restrictions shall not apply to
Permitted Liens.
6.4 Sales of Assets. Without the prior written consent of the Lender, sell,
transfer, or otherwise dispose of, in one or any series of transactions, assets,
whether now owned or hereafter acquired.
6.5 Leasebacks. Enter into any agreement to sell or transfer any Property
and thereafter rent or lease as lessee such Property or other Property intended
for the same use or purpose as the Property sold or transferred.
6.6 Loans or Advances. Make or agree to make or allow to remain outstanding
any loans or advances to any Person; provided, however, the foregoing
restrictions shall not apply to (a) 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 receiveable, or (b) advances to
employees of the Borrower for the payment of expenses in the ordinary course of
business.
6.7 Investments. Acquire Investments in, or purchase or otherwise acquire
all or substantially all of the assets of, any Person; provided, however, the
foregoing restriction shall not apply to the purchase or acquisition of (a) Oil
and Gas Properties, (b) Investments in the form of (i) debt securities issued or
directly and fully guaranteed or insured by the United States or any agency or
instrumentality thereof, with maturities of no more than one year, (ii)
commercial paper of a domestic issuer rated at the date of acquisition at least
P-2 by Xxxxx'x Investor Service, Inc. or A-2 by Standard & Poor's Corporation
and with maturities of no more than one year from the date of acquisition, or
(iii) repurchase agreements covering debt securities or commercial paper of the
type permitted in this Section, certificates of deposit, demand deposits,
eurodollar time deposits, overnight bank deposits and bankers' acceptances, with
maturities of no more than one year from the date of acquisition, issued by or
acquired from or through the Lender or any bank or trust company organized under
the laws of the United States or any state thereof and having capital surplus
and undivided profits aggregating at least $100,000,000, (c) other short-term
Investments similar in nature and degree of risk to those described in clause
(b) of this Section, or (d) money-market funds.
6.8 Dividends and Distributions. Declare, pay, or make, whether in cash or
Property of the Borrower, any dividend or distribution on, or purchase, redeem,
or otherwise acquire for value, any share of any class of its capital stock;
provided, however, the foregoing restriction shall not apply to dividends paid
in capital stock of the Borrower.
6.9 Changes in Corporate Structure. Enter into any transaction of
consolidation, merger, or amalgamation; liquidate, wind up, or dissolve (or
suffer any liquidation or dissolution).
6.10 Transactions with Affiliates. Directly or indirectly, enter into any
transaction (including the sale, lease, or exchange of Property or the rendering
of service) with any of its Affiliates, other than upon fair and reasonable
terms no less favorable than could be obtained in an arm's length transaction
with a Person which was not an Affiliate.
6.11 Lines of Business. Expand, on its own or through any Subsidiary, into
any line of business other than those in which the Borrower is engaged as of the
date hereof.
6.12 Plan Obligations. Assume or otherwise become subject to an obligation
to contribute to or maintain any Plan or acquire any Person which has at any
time had an obligation to contribute to or maintain any Plan.
6.13 Current Ratio. Permit the ratio of Current Assets to Current
Liabilities to be less than 1.00 to 1.00 at any time.
6.14 Debt Coverage Ratio. Permit, as of the close of any fiscal quarter,
the ratio of (a) EBITDA to (b) the sum of monthly Borrowing Base reductions plus
interest to be less than 1.0 to 1.0.
ARTICLE VII
EVENTS OF DEFAULT
7.1 Enumeration of Events of Default. Any of the following events shall
constitute an Event of Default:
(a) default shall be made in the payment when due of any installment
of principal or interest under this Agreement or the Note or in the payment
when due of any fee or other sum payable under any Loan Document and such
default as to interest or fees only shall have continued for three days;
(b) default shall be made by the Borrower in the due observance or
performance of any of its obligations under the Loan Documents, and such
default shall continue for 30 days after the earlier of notice thereof to
the Borrower by the Lender or knowledge thereof by the Borrower;
(c) any representation or warranty made by the Borrower in any of the
Loan Documents 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;
(d) default shall be made by the Borrower (as principal or guarantor
or other surety) in the payment or performance of any bond, debenture,
note, Commodity Hedge Agreement or other 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 for in excess of the period of grace, if
any, with respect thereto;
(e) the Borrower shall be unable to satisfy any condition or cure any
circumstance specified in Article , the satisfaction or curing of which is
precedent to the right of the Borrower to obtain a Loan and such inability
shall continue for a period in excess of 30 days;
(f) the Borrower 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, (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;
(g) an order, judgment, or decree shall be entered against the
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 60 days;
(h) the levy against any significant portion of the Property of the
Borrower, or any execution, garnishment, attachment, sequestration, or
other writ or similar proceeding which is not permanently dismissed or
discharged within 60 days after the levy;
(i) a final and non-appealable order, judgment, or decree shall be
entered against the Borrower for money damages and/or Indebtedness due in
an amount in excess of $200,000, and such order, judgment, or decree shall
not be dismissed or stayed within 60 days;
(j) any charges are filed or any other action or proceeding is
instituted by any Governmental Authority against the Borrower under the
Racketeering Influence and Corrupt Organizations Statute (18 U.S.C. ss.1961
et seq.), the result of which could be the forfeiture or transfer of any
material Property of the Borrower 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;
(k) the Borrower 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, 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;
(l) any Security Instrument shall for any reason not, or cease to,
create valid and perfected first-priority Liens against the Collateral
purportedly covered thereby;
(m) Xxxx X. Xxxxxx ceases to be the chief executive officer of the
Borrower;
(n) if the issuing bank of the Letter of Credit described in Section
3.1(o) gives notice to the Lender of its intent not to extend such Letter
of Credit; or
(o) the occurrence of a Material Adverse Effect and the same shall
remain unremedied for in excess of 30 days after notice given by the
Lender.
7.2 Remedies. Upon the occurrence of an Event of Default specified in
Sections 7.1(f) or 7.1(g), 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 Borrower; (ii) the Commitment shall
immediately cease and terminate unless and until reinstated by the Lender in
writing; and (iii) the Lender is hereby authorized at any time and from time to
time, without notice to the Borrower (any such notice being expressly waived by
the Borrower), to set-off and apply any and all deposits (general or special,
time or demand, provisional or final) held by the Lender and any and all other
indebtedness at any time owing by the Lender to or for the credit or account of
the Borrower against any and all of the Obligations although such Obligations
may be unmatured.
(b) Upon the occurrence of any Event of Default other than those
specified in Sections 7.1(f) or 7.1(g), (i) the Lender may, by notice to
the Borrower, 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
Borrower; (ii) the Commitment shall immediately cease and terminate unless
and until reinstated by the Lender in writing; and (iii) the Lender is
hereby authorized at any time and from time to time, without notice to the
Borrower (any such notice being expressly waived by the Borrower), to
set-off and apply any and all deposits (general or special, time or demand,
provisional or final) held by the Lender and any and all other indebtedness
at any time owing by the Lender to or for the credit or account of the
Borrower against any and all of the Obligations although such Obligations
may be unmatured.
(c) Upon the occurrence of any Event of Default, the Lender may, in
addition to the foregoing in this Section, exercise any or all of its
rights and remedies provided by law or pursuant to the Loan Documents.
ARTICLE VIII
MISCELLANEOUS
8.1 Transfers; 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 prospective Transferee all
documents and information relating to such Obligations, whether furnished by the
Borrower or otherwise obtained, as the Lender determines necessary or desirable.
The Borrower agrees 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 portion of 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.
8.2 Survival of Representations, Warranties, and Covenants. All
representations and warranties of the Borrower 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 Commitment exists.
8.3 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 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, when
deposited in the mail, certified mail, return receipt requested, postage
prepaid, or, in the case of telecopy notice, when receipt thereof is
acknowledged orally or by written confirmation report, addressed as follows:
(a) if to the Lender, to:
Bank One, Texas, National Association 000 Xxxxxx
Xxxxxx Xxxxxxx, Xxxxx 00000 Attention: Energy Group,
6th Floor (or for notice by mail, to:
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Energy Group, 6th Floor
Telecopy: (000) 000-0000
(b) if to the Borrower, to:
Playa Minerals & Energy, Inc.
000 Xxxxx Xxx Xxxxxxx Xxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxxx Xxxxxx
Telecopy: (000) 000-0000
Any party may, by proper written notice hereunder to the others,
change the individuals or addresses to which such notices to it shall
thereafter be sent.
8.4 Parties in Interest. Subject to the restrictions on changes in
corporate structure set forth in Section and other applicable restrictions
contained herein, all covenants and agreements herein contained by or on behalf
of the Borrower or the Lender shall be binding upon and inure to the benefit of
the Borrower or the Lender, as the case may be, and their respective legal
representatives, successors, and assigns.
8.5 Rights of Third Parties. All provisions herein are imposed solely and
exclusively for the benefit of the Lender and the Borrower. 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.
8.6 Renewals; Extensions. All provisions of this Agreement relating to the
Note shall apply with equal force and effect to each promissory note hereafter
executed which in whole or in part represents a renewal or extension of any part
of the Indebtedness of the Borrower under this Agreement, the Note, or any other
Loan Document.
8.7 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. The making of any Loan shall not
constitute a waiver of any of the covenants, warranties, or conditions of the
Borrower contained herein. In the event the Borrower is unable to satisfy any
such covenant, warranty, or condition, the making of any Loan shall not have the
effect of precluding the Lender from thereafter declaring such inability to be
an Event of Default as hereinabove provided.
8.8 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.
8.9 Amendments; Waivers. Neither this Agreement nor any provision hereof
may be amended, waived, discharged, or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
amendment, waiver, discharge, or termination is sought.
8.10 Controlling Agreement. 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.
8.11 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.
8.12 GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL BE DEEMED TO BE
CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF
RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS
FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND
REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY.
8.13 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 HOUSTON, XXXXXX
COUNTY, TEXAS. THE BORROWER HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL,
STATE, OR FEDERAL COURT LOCATED IN HOUSTON, XXXXXX COUNTY, TEXAS, 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.
8.14 WAIVER OF RIGHTS TO JURY TRIAL. THE BORROWER 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 ANY OF THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE LENDER IN THE ENFORCEMENT OF
ANY OF THE TERMS OR PROVISIONS 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.
8.15 ENTIRE AGREEMENT. THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT
BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL
SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER WRITTEN OR
ORAL, RELATING TO THE SUBJECT HEREOF, INCLUDING, WITHOUT LIMITATION, THE
CORRESPONDENCE DATED SEPTEMBER 7, 2000, FROM THE LENDER TO THE BORROWER AND THE
TERM SHEET ENCLOSED THEREWITH. FURTHERMORE, IN THIS REGARD, THIS AGREEMENT AND
THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT
AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.
8.16 Counterparts. For the convenience of the parties, this Agreement may
be executed in multiple counterparts, each of which for all purposes shall be
deemed to be an original, and all such counterparts shall together constitute
but one and the same Agreement.
IN WITNESS WHEREOF, this Agreement is deemed executed effective as of the
date first above written.
BORROWER:
PLAYA MINERALS & ENERGY, INC.
By:
--------------------------
Xxxx X. Xxxxxx
President and Chief Executive Officer
LENDER:
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By:
---------------------------
Xxxxxxx X. Xxxxxx
First Vice President
