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FIRST AMENDED AND RESTATED LOAN AGREEMENT
This First Amended and Restated Loan Agreement, dated as of
May 26, 1998, is made by and between TMBR/SHARP DRILLING, INC., a
Texas corporation (the "Borrower"), and NORWEST BANK TEXAS, N.A.,
a national banking association (the "Bank").
RECITALS
WHEREAS, the Borrower and the Bank are parties to that
certain Loan Agreement, dated as of January 16, 1996, providing
for the loans and the other matters set forth therein (the "Prior
Loan Agreement").
WHEREAS, the Borrower has issued and delivered to the Bank
(i) that certain Revolving Line of Credit Promissory Note, dated
January 16, 1996, in the original principal amount of $3,000,000
and having a maturity date of January 16, 1998, and (ii) that
certain Promissory Note, dated August 15, 1996, in the original
principal amount of $2,000,000 and having a maturity date, as
extended, of April 15, 1998 (collectively, the "Prior Notes").
WHEREAS, the payment and performance of the Borrower s
obligations under the Prior Loan Agreement and the Prior Notes
are secured by that certain Security Agreement, dated as of
January 16, 1996, between the Borrower and the Bank and the
related financing statements filed with the Secretary of State of
Texas and the Secretary of State of New Mexico (the "Prior
Security Instruments").
WHEREAS, the Prior Notes have matured and all amounts
outstanding thereunder have been repaid in their entirety.
WHEREAS, the Borrower has requested that the Bank (i) renew
and reinstate the lending commitments of the Bank under the Prior
Loan Agreement, (ii) renew, extend and consolidate the Prior
Notes and (iii) make additional loans to the Borrower.
WHEREAS, the Bank is agreeable to the Borrower's requests
but only upon and subject to the terms and provisions which are
hereinafter specified.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto hereby
agree as follows:
ARTICLE 1
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DEFINITIONS
Section 1.01 Certain Definitions. As used in this
Agreement, terms defined in the preamble and recitals shall have
the meanings set forth therein and the following terms shall have
the following meanings:
"Affiliate" as to any Person, shall mean any other
Person (other than a Subsidiary) which, directly or
indirectly, is in "control" of, is controlled by, or is
under common control with, such Person. For purposes
of this definition, control of a Person means the
power, directly or indirectly, either to (i) vote 10%
or more of the securities having ordinary voting power
for the election of directors of such Person or (ii)
direct or cause the direction of the management and
policies of such Person, whether by contract or
otherwise.
"Agreement" shall mean this First Amended and
Restated Loan Agreement, as amended, supplemented or
otherwise modified from time to time.
"Base Rate" shall mean that variable rate of
interest per annum established by the Bank from time to
time as its "base rate". Such rate is set by the Bank
as a general reference rate of interest, taking into
account such factors as the Bank may deem appropriate,
it being understood that many of the Bank s commercial
or other loans are priced in relation to such rate,
that it is not necessarily the lowest or best rate
actually charged to any customer and that the Bank may
make various commercial or other loans at rates of
interest having no relationship to such rate.
"Borrowing Base Amount" shall mean at any date,
the amount determined pursuant to Section 2.04 under
this Agreement at such date.
"Borrowing Base Assets" shall mean the Borrower's
accounts receivable, drilling in progress, inventory,
equipment, drill pipe, drilling rigs and related
equipment which is subject to the Liens, privileges,
priorities and security interests existing and to exist
under the terms of the Security Instruments from the
Borrower or any other Person to or in favor of the
Bank.
"Borrowing Base Report" shall have the meaning set
forth in Section 2.04(b).
"Borrowing Date" shall mean any Business Day
specified in a notice pursuant to Section 2.03 as a
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date on which the Borrower requests the Bank to make
Revolving Credit Loans hereunder.
"Business Day" shall mean a day other than a
Saturday, Sunday or legal holiday for commercial banks
under the laws of the State of Texas.
"EBITDA" shall mean, with respect to any period of
calculation thereof, the sum of (i) the net income (or
loss) from continuing operations of Borrower during
such period (excluding extraordinary income but
including extraordinary expenses), plus (ii) interest
expense, income taxes, depreciation, depletion and
amortization expenses of Borrower during such period.
"Change in Control" shall mean the occurrence
after the date of this Agreement of any circumstance or
event in which (i) a Person shall cause or bring about
(through solicitation of proxies or otherwise) the
removal or resignation of a majority of the members of
the Board of Directors of the Borrower serving in such
capacity on the date of this Agreement or a Person
causes or brings about (through solicitation of proxies
or otherwise) an increase in the size of the existing
Board of Directors of the Borrower such that the
existing members of the Board of Directors thereafter
represent a minority of the total number of persons
comprising the entire Board; or (ii) a Person,
including a "group" as defined in Section 13(d)(3) of
the Securities Exchange Act of 1934, becomes the
beneficial owner of shares of any class of stock of the
Borrower having twenty percent (20%) or more of the
total number of votes that may be cast for the election
of directors of the Borrower.
"Closing Date" shall mean the date on which the
conditions precedent set forth in Section 7.01 shall be
satisfied.
"Commitment" shall mean the obligation of the Bank
to make Revolving Credit Loans to the Borrower
hereunder in an aggregate principal amount at any one
time outstanding not to exceed the amount provided for
in accordance with the provisions of this Agreement,
including, without limitation, Section 2.01 of this
Agreement.
"Commitment Period" shall mean the period from and
including the date hereof to but not including the
Termination Date or such earlier date on which the
Commitments shall terminate as provided herein.
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"Contractual Obligation" shall mean, as to any
Person, any provision of any security issued by such
Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which
it or any of its property is bound.
"Current Ratio" shall mean the ratio of (i) the
sum of the current assets of Borrower to (ii) the sum
of the current liabilities (excluding, however, current
liabilities attributable to the Note) of Borrower.
"Debt to Worth Ratio" shall mean the ratio of (i)
the sum of the total liabilities of the Borrower to
(ii) the sum of the Borrower's Net Worth.
"Environmental Laws" shall mean any and all
foreign, Federal, state, local or municipal laws,
rules, orders, regulations, statutes, ordinances,
codes, decrees, requirements of any Governmental
Authority or other Requirements of Law (including
common law) regulating, relating to or imposing
liability or standards of conduct concerning protection
of human health or the environment, as now or may at
any time hereafter be in effect.
"Environmental Complaint" shall mean any written
complaint, order, citation, notice or other written
communication from any Person with respect to the
existence or alleged existence of a violation of any
Environmental Law in connection with or with respect to
any air emission, water discharge, noise emission,
asbestos, hazardous substance or any other
environmental matter regulated under Environmental Laws
at, upon, under or within any of the property owned,
leased or used by the Borrower.
"Event of Default" shall mean the occurrence of
any of the events specified in Section 6.01 hereof.
"Excepted Liens" shall mean (i) Liens for taxes,
assessments or other governmental charges or levies not
yet due or which are being contested in good faith by
appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the
books of Borrower in conformity with GAAP; (ii) pledges
or deposits in connection with workers' compensation,
unemployment insurance or other social security
legislation, old age pension or public liability
obligations; (iii) vendors', carriers', warehousemen's,
repairmen's, mechanics', workmen's, materialmen's or
other like Liens arising in the ordinary course of
business which are not overdue for a period of more
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than 60 days or which are being contested in good faith
by appropriate proceedings; (iv) Liens arising under
customary oil and gas operating agreements entered into
in the ordinary course of business with respect to
obligations which are not overdue for a period of more
than 60 days or which are being contested in good faith
by appropriate proceedings; (v) restrictions,
easements, reservations, exceptions, encroachments,
rights-of-way, and other similar encumbrances incurred
in the ordinary course of business and other similar
irregularities in title which, in the aggregate, are
not substantial in amount and which do not in any case
materially detract from the value of the property
subject thereto or materially interfere with the
conduct of the business of Borrower; and (vi) deposits
to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature incurred in the
ordinary course of business.
"GAAP" shall mean generally accepted accounting
principles in the United States of America in effect
from time to time.
"Governmental Authority" shall mean any nation or
government, any state or other political subdivision
thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Highest Lawful Rate" shall mean the maximum
nonusurious interest rate, if any, that at any time or
from time to time may be contracted for, taken,
reserved, charged or received on the Note or on other
Indebtedness owing to the Bank, as the case may be,
under laws applicable to the Note or other Indebtedness
owing to the Bank which are presently in effect or, to
the extent allowed by applicable law, under such
applicable laws which may hereafter be in effect and
which allow a higher maximum nonusurious interest rate
than applicable laws now allow.
"Indebtedness" of any Person at any date shall
mean (i) all obligations, liabilities and indebtedness
of such Person for borrowed money or for the deferred
purchase price of property or services (other than
current trade liabilities incurred in the ordinary
course of business and which are not in excess of 90
days past the invoice or billing date) for which such
Person is liable, contingently or otherwise, as
obligor, guarantor, surety or otherwise, or in respect
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of which such Person otherwise assures a creditor
against loss; (ii) any other indebtedness of such
Person which is evidenced by a note, bond, debenture or
similar instrument; (iii) all obligations of such
Person under leases which shall have been, or should
have been, in accordance with GAAP, recorded as capital
leases for which such Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or in
respect of which such Person otherwise assures a
creditor against loss; and (iv) unfunded vested
benefits under each employee benefit plan.
"Intangible Assets" shall mean all assets of the
Borrower that would be classified as intangible assets,
but in any event including, without limitation, (i)
deferred assets, other than prepaid insurance and
prepaid taxes; (ii) patents, copyrights, trademarks,
tradenames, franchises, goodwill, experimental expenses
and other similar assets which would be classified as
intangible assets on a balance sheet of such Person;
(iii) unamortized debt discount and expense; and (iv)
assets located, and notes and receivables due from
obligors domiciled, outside of the United States.
"Lien" shall mean any mortgage, encumbrance,
pledge, hypothecation, assignment, charge, security
agreement, lien (statutory or other), deposit
agreement, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes,
and reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances
affecting property. For purposes of this Agreement,
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.
"Loan Documents" shall mean, collectively, this
Agreement, the Note, the Security Instruments, and all
other agreements, documents, certificates, letters and
instruments of whatever nature ever delivered or
executed pursuant to, or in connection with, this
Agreement, whether existing on the date hereof or
thereafter created, as any of the same may hereafter be
amended, supplemented, extended or restated.
"Material Adverse Effect" shall mean a material
adverse effect on (i) the business, operations,
property, condition (financial or otherwise), results
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of operations, assets, liabilities or prospects of the
Borrower, (ii) the ability of the Borrower to perform
any of its obligations under the Loan Documents or
(iii) the validity or enforceability of this or any of
the other Loan Documents or the rights or remedies of
the Bank hereunder or thereunder.
"Material Environmental Amount" shall mean an
amount not otherwise covered by insurance payable by
the Borrower in excess of $75,000.00 for remedial
costs, compliance costs, compensatory damages, punitive
damages, fines, penalties or any combination thereof.
"Materials of Environmental Concern" shall mean
any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any
Environmental Law, including, without limitation,
petroleum and its derivatives and polychlorinated
biphenyls.
"Net Worth" shall mean as of the date of
determination all amounts included under stockholders'
equity on a balance sheet of the Borrower at such date.
"Note" shall have the meaning set forth in Section
2.02.
"Person" shall mean any individual, corporation,
partnership, joint venture, joint stock company,
business trust, trust, unincorporated association,
Governmental Authority, or any other form of entity of
whatever nature.
"Properties" shall have the meaning set forth in
Section 3.11(a).
"Requirement of Law" shall mean, as to any Person,
the certificate or articles of incorporation and bylaws
or other organizational or governing documents of such
Person, and any law, statute, code, ordinance, order,
treaty, rule, regulation or determination of an
arbitrator or a court or other Governmental Authority,
in each case applicable to or binding upon such Person
or any of its property or to which such Person or any
of its property is subject.
"Revolving Credit Loan" or "Revolving Credit
Loans" shall have the meaning set forth in Section
2.01.
"Security Instruments" shall mean, without
limitation, the agreements or instruments described or
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referenced in Section 7.01(a) hereof and any and all
other instruments heretofore, now or hereafter executed
and delivered by the Borrower or any other Person to
secure or guarantee the payment or performance of the
Note or this Agreement, as any such agreement or
instrument may be amended or supplemented from time to
time.
"Subsidiary" shall mean, as to any Person, a
corporation, partnership or other entity of which
shares of stock or other ownership interests having
ordinary voting power (other than stock or such other
ownership interests 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, partnership or other entity 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. Unless
otherwise qualified, all references to "Subsidiary" or
to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of Borrower.
"Tangible Net Worth" shall mean at a particular
date (i) the sum of the stockholders' equity of
Borrower, less (ii) the sum of the aggregate book value
of the Intangible Assets of Borrower.
"Termination Date" shall mean May 26, 2000.
Section 1.02 Other Definitional Provisions. (a) Unless
otherwise specified therein, all terms defined in this Agreement
shall have the defined meanings when used in the Note or the
Security Instruments or any certificate or other Loan Document
made or delivered pursuant hereto.
(b) As used herein and in the Note, and any
certificate or other document made or delivered pursuant hereto,
accounting terms relating to the Borrower not defined in Section
1.01 and accounting terms partly defined in Section 1.01, to the
extent not defined, shall have the respective meanings given to
them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision
of this Agreement, and Section, subsection, Schedule and Exhibit
references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall
be equally applicable to both the singular and plural forms of
such terms.
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Section 1.03 Accounting Principles. Where the character
or amount of any asset or liability or item of income or expense
is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of
this Agreement, such determination, consolidation or computation
shall be made in accordance with GAAP consistently applied,
except where such principles are inconsistent with the
requirements of this Agreement.
ARTICLE 2
AMOUNT AND TERMS OF COMMITMENTS
Section 2.01 Revolving Credit Loans. Subject to the terms
and conditions hereof, the Bank agrees to make revolving credit
loans (individually, a "Revolving Credit Loan"; collectively, the
"Revolving Credit Loans") to the Borrower from time to time
during the Commitment Period in an aggregate principal amount at
any one time outstanding not to exceed the lesser of (i)
$5,000,000.00 or (ii) one-third (1/3) of the Borrowing Base
Amount. During the Commitment Period, the Borrower may use the
Commitment by borrowing, prepaying the Revolving Credit Loans in
whole or in part, and reborrowing, all in accordance with the
terms and conditions hereof.
Section 2.02 Revolving Credit Note. The Revolving Credit
Loans made by the Bank shall be evidenced by a promissory note of
the Borrower, substantially in the form of Exhibit A (the
"Note"). The Bank shall maintain in accordance with its usual
practice an account or other record evidencing the Indebtedness
of the Borrower to the Bank resulting from each Revolving Credit
Loan made by the Bank from time to time, including the amounts of
principal and interest payable and paid to the Bank from time to
time under this Agreement and the Note. The entries made in such
account or record of the Bank shall be prima facie evidence of
the existence and amounts of the obligations of the Borrower
therein recorded; provided, however, that the failure of the Bank
to maintain any such account or record, or any error therein,
shall not in any manner affect the absolute and unconditional
obligation of the Borrower to repay (with applicable interest)
the Revolving Credit Loans made to the Borrower in accordance
with the terms of this Agreement. The Note shall (x) be dated
the Closing Date, (y) be stated to mature two years from the
Closing Date and (z) bear interest on the unpaid principal amount
thereof from time to time outstanding at the applicable interest
rate per annum as provided in the Note. Interest on the Note
shall be payable on the dates specified in the Note.
Section 2.03 Procedure for Revolving Credit Borrowing.
The Borrower may borrow under the Commitment during the
Commitment Period on any Business Day, provided that the Borrower
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shall give the Bank irrevocable notice specifying (A) the amount
to be borrowed and (B) the requested Borrowing Date; provided,
that such notice shall be waived by the Bank in the case of, and
only in the case of, the initial Revolving Credit Loan made on
the Closing Date. Each borrowing pursuant to the Commitment
shall be in an aggregate principal amount of the lesser of (i)
$50,000.00 or a whole multiple thereof, or (ii) the then
remaining unadvanced portion of the available Commitment.
Section 2.04 Borrowing Base Amount. The Borrowing Base
Amount shall be determined as follows:
(a) Initial Borrowing Base Amount. The Borrowing Base
Amount shall be $25,445,743 during the period from the date
hereof to the date on which the Borrower receives notice of the
first determination of the Borrowing Base Amount by the Bank
pursuant to Section 2.04(b) and thereafter the Borrowing Base
Amount shall be the Borrowing Base Amount most recently
determined pursuant to Section 2.04(b).
(b) Determinations of the Borrowing Base Amount. (i)
No later than 45 days after the end of each fiscal quarter of the
Borrower throughout the Commitment Period, the Borrower shall, at
its own expense, furnish to the Bank a borrowing base report
("Borrowing Base Report"), in the form attached hereto as Exhibit
B, which Borrowing Base Report shall be dated as of the end of
each such quarter and shall set forth, by category, the Borrowing
Base Assets and the Borrowing Base Amount as therein provided.
(ii) Within 15 days after it receives each
Borrowing Base Report, the Bank shall make a determination of the
Borrowing Base Amount, and shall notify the Borrower of the new
Borrowing Base Amount, if any; provided, that if the Bank does
not so notify the Borrower of a new Borrowing Base Amount, then
the Borrowing Base Amount set forth in the Borrowing Base Report
furnished to the Bank by the Borrower pursuant to Section
2.04(b)(i) shall be deemed to be the Borrowing Base Amount until
a new Borrowing Base Amount is determined by the Bank and notice
of such new Borrowing Base Amount is given to the Borrower. Each
determination of the Borrowing Base Amount shall be made by the
Bank in the exercise of its sole discretion in accordance with
the then current standards and practices of the Bank for similar
oil and gas/contract drilling equipment loans, taking into
account such factors as the Bank may deem appropriate, including,
without limitation the nature and extent of the Borrower's
interest in the Borrowing Base Assets and the anticipated timing
and extent of net operating income therefrom. The Bank may in
its sole discretion discount the value of any Borrowing Base
Asset set forth in a Borrowing Base Report by the same factors
utilized by it in discounting the value of comparable borrowing
base assets in comparable transactions for comparable borrowers.
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(iii) The Borrower agrees to pay or reimburse
the Bank for all reasonable out-of-pocket costs and expenses
incurred by the Bank in connection with (a) the examination of
each Borrowing Base Report furnished to the Bank by the Borrower,
(b) any redetermination by the Bank of the Borrowing Base Amount
pursuant to such Borrowing Base Report (including independent
appraisals of the Borrowing Base Assets which the Bank may, but
shall not be required to, obtain in connection with any
redetermination of the Borrowing Base Amount by the Bank), and
(c) the notification of the Borrower of such redetermined
Borrowing Base Amount.
(iv) Each delivery by the Borrower to the Bank of
a Borrowing Base Report shall be deemed to constitute a
representation and warranty by the Borrower to the Bank that the
Borrower has good and marketable title to the Borrowing Base
Assets and any other property rights or interests described in
such report, and that none of such Borrowing Base Assets or other
property rights or interests is subject to any Lien other than as
permitted by Section 5.02.
Section 2.05 Optional and Mandatory Prepayments. (a) The
Borrower may at any time and from time to time prepay the
Revolving Credit Loans, in whole or in part, without premium or
penalty, upon at least four Business Days' irrevocable notice to
the Bank, specifying the date and amount of prepayment. If any
such notice is given, the amount specified in such notice shall
be due and payable on the date specified therein. Partial
prepayments shall be in an aggregate principal amount of
$50,000.00 or a whole multiple thereof.
(b) If the aggregate unpaid principal amount of the
Revolving Credit Loans shall at any time exceed one-third (1/3)
of the Borrowing Base Amount at such time, the Bank shall so
notify the Borrower, and the Borrower shall, within 30 days after
such notification, prepay the principal of the Revolving Credit
Loans in an aggregate amount at least equal to such excess,
together with accrued interest on the amount prepaid to the date
of such prepayment.
Section 2.06 Payment Procedure. All payments and
prepayments made by the Borrower under the Note or this Agreement
shall be made without setoff or counterclaim to the Bank at its
office at 000 Xxxx Xxxxx Xxxxxx, Xxxxxxx, Xxxxx 00000, and shall
be made in immediately available funds, prior to 1:00 p.m.,
Midland, Texas time, on the date that such payment is required or
permitted to be made. Any payment received by the Bank after
1:00 p.m. on any date shall be considered for all purposes
(including the calculation of interest, to the extent permitted
by applicable law) as having been made on the next following
Business Day. If the date of any payment or prepayment of the
Note falls on a day which is not a Business Day, then for all
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purposes of the Note and this Agreement such date shall be deemed
to have fallen on the next following Business Day, and such
extension of time shall in such case be included in the
computation of payment of interest.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement and to make
the Revolving Credit Loans, the Borrower hereby represents and
warrants to the Bank (which representations and warranties will
survive the delivery of the Note and the making of the Revolving
Credit Loans hereunder) that:
Section 3.01 Corporate Existence; Compliance with Law.
Borrower (i) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization,
(ii) has the corporate power and authority, and the legal right,
to own and operate its property (including, without limitation,
the Borrowing Base Assets), to lease the property it operates as
lessee and to conduct the business in which it is currently
engaged, (iii) is duly qualified as a foreign corporation and in
good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its
business requires such qualification and (iv) is in compliance
with all Requirements of Law except to the extent that the
failure to comply therewith could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section 3.02 Corporate Power; Authorization; Enforceable
Obligations. Borrower has the corporate power and authority, and
the legal right, to make, deliver and perform the Loan Documents
to which it is a party and to borrow hereunder and has taken all
necessary corporate action to authorize the borrowings on the
terms and conditions of this Agreement and the Note and to
authorize the execution, delivery and performance of the Loan
Documents to which it is a party. No consent or authorization
of, filing with, notice to or other act by or in respect of, any
Governmental Authority or any other Person is required in
connection with the borrowings hereunder or with the execution,
delivery, performance, validity or enforceability of the Loan
Documents to which the Borrower is a party. This Agreement has
been, and each other Loan Document to which it is a party will
be, duly executed and delivered on behalf of the Borrower. This
Agreement constitutes, and each other Loan Document to which it
is a party when executed and delivered will constitute, a legal,
valid and binding obligation of Borrower enforceable against
Borrower in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
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Section 3.03 No Legal Bar. The execution, delivery and
performance of the Loan Documents to which the Borrower is a
party, the borrowings hereunder and the use of the proceeds
thereof will not violate any Requirement of Law or Contractual
Obligation of the Borrower and will not result in, or require,
the creation or imposition of any Lien (other than as permitted
hereby) on any of Borrower's properties or revenues pursuant to
any such Requirement of Law or Contractual Obligation.
Section 3.04 No Default. Borrower is not in default under
or with respect to any of its Contractual Obligations in any
respect which could have a Material Adverse Effect. No Event of
Default has occurred and is continuing.
Section 3.05 Ownership of Property; Liens. Borrower has
good record and marketable title in fee simple to, or a valid
leasehold interest in, all its real property and good title to,
or a valid leasehold interest in, all its other property
(including, without limitation, the Borrowing Base Assets), and
none of such property is subject to any Lien except as permitted
by Section 5.02.
Section 3.06 No Burdensome Restrictions. No Requirement
of Law or Contractual Obligation of Borrower could reasonably be
expected to have a Material Adverse Effect.
Section 3.07 Taxes. Borrower has filed or caused to be
filed all tax returns which, to the knowledge of the Borrower,
are required to be filed and has paid all taxes shown to be due
and payable on said returns or on any assessments made against it
or any of its property and all other taxes, fees or other charges
imposed on it or any of its property by any Governmental
Authority (other than any the amount or validity of which are
currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of the Borrower); no tax
Lien has been filed, and, to the knowledge of the Borrower, no
claim is being asserted, with respect to any such tax, fee or
other charge.
Section 3.08 Federal Regulations. No part of the proceeds
of any Revolving Credit Loan will be used for "purchasing" or
"carrying" any "margin stock" within the respective meanings of
each of the quoted terms under Regulation G or Regulation U of
the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. If requested by the Bank,
the Borrower will furnish to the Bank a statement to the
foregoing effect in conformity with the requirements of FR Form
G-1 or FR Form U-1 referred to in said Regulation G or Regulation
U, as the case may be.
Section 3.09 Investment Company Act; Public Utility
Holding Company Act; Other Regulations. Borrower is not (a) an
"investment company", or a company "controlled" by an "investment
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company", within the meaning of the Investment Company Act of
1940, as amended or (b) a "holding company" as defined in, or
otherwise subject to regulation under, the Public Utility Holding
Company Act of 1935. Borrower has not made an election to be
treated as a utility (as defined in subdivision (2) of subsection
(a) of Section 35.01 of the Texas Business and Commerce Code.
Borrower is not primarily engaged in the transmission of goods or
gas by pipeline, and does not hold itself out to the public as
having facilities for the transmission of goods or gas by
pipeline which are available for hire by the general public.
Section 3.10 Purpose of Loan. The proceeds of the
Revolving Credit Loans shall be used by the Borrower to purchase
drill pipe and related equipment necessary for the drilling of
oil and gas xxxxx, for purchases of undeveloped and developed oil
and gas properties and for general corporate purposes.
Section 3.11 Environmental Matters. Except for
environmental matters which, in the aggregate, could not
reasonably be expected to either (i) result in the existence of
an unsatisfied liability in excess of a Material Environmental
Amount or (ii) have a Material Adverse Effect:
(a) to the best of the Borrower's knowledge, the
facilities and properties (real or personal) owned, leased
or operated by the Borrower (the "Properties") do not
contain, and have not previously contained, any Materials of
Environmental Concern in amounts or concentrations which (i)
constitute or constituted a violation of, or (ii) could give
rise to liability under, any Environmental Law;
(b) to the best of the Borrower's knowledge, the
Properties and all operations at the Properties are in
compliance, and have in the last five years been in
compliance, with all applicable Environmental Laws, and
there is no contamination at, under or about the Properties
or violation of any Environmental Law with respect to the
Properties or the business operated by Borrower;
(c) Borrower has not received any notice of violation,
alleged violation, non-compliance, liability or potential
liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Properties or
the business of the Borrower, nor does the Borrower have
knowledge or reason to believe that any such notice will be
received or is being threatened;
(d) to the best of the Borrower's knowledge, materials
of Environmental Concern have not been transported or
disposed of from the Properties in violation of, or in a
manner or to a location which could reasonably be expected
to give rise to liability under, any Environmental Law, nor
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have any Materials of Environmental Concern been generated,
treated, stored or disposed of at, on or under any of the
Properties in violation of, or in a manner that could give
rise to liability under, any applicable Environmental Law;
(e) no judicial proceeding or governmental or
administrative action is pending or, to the knowledge of the
Borrower, threatened, under any Environmental Law to which
Borrower is or will be named as a party with respect to the
Properties or the business of Borrower, nor are there any
consent decrees or other decrees, consent orders,
administrative orders or other orders, or other
administrative or judicial requirements outstanding under
any Environmental Law with respect to the Properties or the
business of Borrower; and
(f) to the best of the Borrower's knowledge, there has
been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising
from or related to the operations of the Borrower in
connection with the Properties or otherwise in connection
with the business of the Borrower, in violation of or in
amounts or in a manner that could give rise to liability
under Environmental Laws.
Section 3.12 Insurance. The Borrower maintains with
financially sound and reputable insurance companies insurance in
at least such amounts and against at least such risks (but
including in any event public liability) as are usually insured
against in the same general area by companies engaged in the same
or a similar business and such insurance is otherwise in
compliance with the Loan Documents.
Section 3.13 Financial Condition. The balance sheet of
the Borrower as of December 31, 1997 and the related statements
of income and of cash flows for the nine-month period then ended,
copies of which have been delivered to the Bank, are true and
correct in all material respects and present fairly the financial
condition of Borrower as at such date and the results of its
operations and cash flows for the periods stated (subject to
normal year-end audit adjustments). Borrower did not have, at
the date of the most recent balance sheet referred to above, any
guaranty obligation, contingent liability or liability for taxes,
or any long-term lease or unusual forward or long-term
commitment, which is not reflected in the foregoing financial
statements or in the notes thereto. During the period from
December 31, 1997 to and including the date hereof there has been
no sale, transfer or other disposition by Borrower of any
material part of its business or property and no purchase or
other acquisition of any business or property (including any
capital stock of any other Person) material in relation to the
financial condition of Borrower at December 31, 1997. Since
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16
December 31, 1997, no change, either in any case or in the
aggregate, has occurred in the condition, financial or otherwise,
of Borrower which would have a Material Adverse Effect.
Section 3.14 Investments and Guaranties. At the date of
this Agreement, Borrower has not made any material investments
in, advances to or guaranties of the obligations of any Person.
Section 3.15 No Litigation. There is no litigation,
legal, administrative or arbitral proceeding, investigation or
other action of any nature pending or, to the knowledge of the
Borrower, threatened against or affecting Borrower which involves
the possibility of any judgment or liability not fully covered by
insurance, and which would have a Material Adverse Effect; and,
to the best of Borrower's knowledge, since December 31, 1997,
Borrower has not committed any act, or failed to take any action,
in connection with the conduct of its business or with respect to
any Contractual Obligation which is likely to result in the
assertion of any adverse claim of any nature whatsoever by any
Person against Borrower or its properties, revenues or assets.
Section 3.16 Licenses and Permits. Borrower has not
failed to obtain any license, permit, franchise or other
governmental authorization necessary to the ownership of any of
its properties or the conduct of its business, which violation or
failure would have (in the event that such violation or failure
were asserted by any Person through appropriate action) a
Material Adverse Effect.
Section 3.17 ERISA. Each employee benefit plan which
Borrower has sponsored, maintained or contributed to has complied
in all material respects with the applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended, and
the Internal Revenue Code of 1986, as amended.
Section 3.18 No Material Misstatements. No information,
exhibit, schedule or report furnished to the Bank by the Borrower
in connection with this Agreement contains any untrue statement
of a material fact or omits to state any material fact necessary
to make the statements contained therein not misleading.
ARTICLE 4
AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitment
remains in effect or any Indebtedness is owing to the Bank
hereunder or under the Note or any other Loan Document, the
Borrower shall:
Section 4.01 Financial Statements and Reports. Furnish or
cause to be furnished to the Bank from time to time (i) such
information regarding the business and affairs and financial
condition of the Borrower as the Bank may reasonably request, and
(ii) without request, the following:
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(a) Annual Financial Statements - promptly after
becoming available, but in any event within 90 days
after March 31 of each year, a copy of the audited
balance sheet of the Borrower as at the end of such
year, and the related statements of income and retained
earnings and of cash flows of the Borrower for such
year, setting forth in each case in comparative form
the corresponding figures for the preceding year,
accompanied by the report of the Borrower's independent
certified public accountants;
(b) Quarterly Financial Statements - promptly
after becoming available, but in any event within 45
days after the end of each of the first three fiscal
quarters of the Borrower, the unaudited balance sheet
of the Borrower as at the end of such quarter, and the
related unaudited statements of income and retained
earnings and of cash flows of the Borrower for such
quarter and for the period from the beginning of the
most recent fiscal year to the end of such quarter,
setting forth in each case in comparative form the
corresponding figures for the corresponding period of
the preceding year, accompanied by the report of the
principal financial officer of the Borrower, which
report shall be to the effect that such statements are
true and correct in all material respects necessary for
a fair presentation (subject to normal year-end
adjustments);
(c) Accounts Receivable Reports - promptly after
becoming available, but in any event within 45 days
after the end of each fiscal quarter of the Borrower, a
list of accounts receivable of Borrower, and an aging
of all such receivables on the basis of 30-60-90 and
over 90 days from date of invoice;
(d) Calculation of Ratios - promptly after
becoming available, but in any event within 45 days
after the end of each fiscal quarter of the Borrower,
the calculations of Current Ratio, Tangible Net Worth,
Interest Expense Coverage and Debt to Worth Ratio
pursuant to Sections 5.16, 5.17, 5.18 and 5.19,
respectively, hereof; and
(e) Shareholder Communications; Regulatory
Filings - promptly after their availability, but in any
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event within five Business Days after the same are
sent, copies of all financial statements, reports and
other communications furnished by Borrower to its
shareholders, and within five Business Days after the
same are filed, copies of all forms, reports and other
filings made by the Borrower with the Securities and
Exchange Commission.
Section 4.02 Certificates of Compliance. Concurrently
with the furnishing of the annual financial statements pursuant
to Section 4.01(a) hereof and the calculation of the ratios
pursuant to Section 4.01(d) hereof, furnish or cause to be
furnished to the Bank certificates in the form attached hereto as
Exhibit C and Exhibit D, respectively, signed by the principal
financial officer of the Borrower to the effect (i) that a review
of the activities of the Borrower has been made under such
officer's supervision with a view to determining whether the
Borrower has fulfilled all of its obligations under this
Agreement, the Note and the Security Instruments; (ii) that the
Borrower has fulfilled its obligations under such instruments and
that all representations made herein or therein continue to be
true and correct in all material respects except as otherwise
stated therein, or if there is then in existence an Event of
Default, specifying such Event of Default and the nature and
status thereof; and (iii) to the extent requested from time to
time by the Bank, specifically affirming compliance by the
Borrower with any covenants under this Agreement or any Security
Instrument and accompanied by such financial or other details,
information and material as the Bank may reasonably request to
evidence such compliance.
Section 4.03 Payment of Taxes and Other Charges. Pay and
discharge or cause to be paid and discharged promptly all taxes,
assessments and governmental charges or levies, other than any
the amount or validity of which are currently being contested in
good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided on the books
of the Borrower.
Section 4.04 Maintenance of Existence; Conduct of
Business. (i) Maintain its separate corporate existence, rights
and franchises; (ii) observe and comply (to the extent necessary
so that any failure would not have a Material Adverse Effect)
with all Contractual Obligations and Requirements of Law; (iii)
maintain its properties in good and workable condition at all
times and make all repairs, replacements, additions, betterments
and improvements to its properties as are needful and proper so
that the business carried on in connection therewith may be
conducted properly and efficiently at all times; and (iv) take
all reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the normal course of its
business.
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Section 4.05 Further Assurances. Cure promptly any
defects in the creation and issuance of the Note and the
execution and delivery of this Agreement, any Security Instrument
or other Loan Document to which the Borrower is a party, and
promptly execute and deliver to the Bank upon request all such
other and further documents, agreements and instruments in
compliance with or accomplishment of the covenants and agreements
of the Borrower in this Agreement and the Security Instruments or
to further evidence and more fully describe the collateral
intended as security for the Note, or to correct any omissions in
any Security Instrument, or more fully to state the security
obligations set out herein or in any Security Instrument, or to
perfect, protect or preserve any Liens created pursuant to any
Security Instrument, or to make any recordings, to file any
notices, or obtain any consents, all as may be necessary or
appropriate in connection therewith as determined by the Bank.
Section 4.06 Performance of Obligations. Perform every
act and discharge all of its obligations provided to be performed
and discharged by it under this Agreement and under the Security
Instruments and other Loan Documents at the time or times and in
the manner specified.
Section 4.07 Reimbursement of Expenses. Pay all
reasonable legal fees and out-of-pocket expenses incurred by the
Bank in connection with the negotiation, preparation and
administration of this Agreement, the Note, the Security
Instruments and any and all other Loan Documents (including any
amendments hereto or thereto or consents or waivers hereunder or
thereunder) and all reasonable fees, charges or taxes for the
recording or filing of the Security Instruments, and promptly
reimburse the Bank for all amounts expended, advanced or incurred
by the Bank to satisfy any obligation of the Borrower under this
Agreement or any other Person under any Security Instrument, or
to collect the Note, or to enforce the rights of the Bank under
this Agreement or any Security Instrument, which amounts will
include all court costs, reasonable attorneys' fees (including,
without limitation, for trial, appeal or other proceedings),
reasonable fees of auditors and accountants, and investigation
expenses reasonably incurred in connection with any such matters.
Section 4.08 Insurance. Maintain with financially sound
and reputable insurance companies insurance against such
liabilities, casualties, risks and contingencies and in such
types and amounts as is customary in the case of Persons engaged
in the same or similar businesses and similarly situated; and
furnish or cause to be furnished to the Bank, upon request, full
information as to the insurance carried, including copies of the
applicable policies; and apply the proceeds of such policies, if
any, to the prepayment of the Indebtedness then owing to the
Bank. Notwithstanding anything in this Section 4.08 to the
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contrary, Borrower shall not be required to maintain insurance on
its drilling rigs.
Section 4.09 Accounts and Records. Keep proper books of
record and account in which full, true and correct entries will
be made of all dealings or transactions in relation to its
business and activities.
Section 4.10 Right of Inspection. Permit any officer,
employee, agent or representative of the Bank to visit and
inspect any of the properties of the Borrower, examine its books
of record and accounts, take copies and extracts therefrom, and
to discuss the business, operations, properties, finances and
accounts of the Borrower with the Borrower's officers, employees,
engineers, accountants and auditors, all at such reasonable times
and as often as the Bank may reasonably desire.
Section 4.11 Notice of Certain Events. Promptly notify
the Bank of the occurrence of (i) any event which constitutes an
Event of Default, together with a detailed statement by the Chief
Executive Officer of the Borrower of the steps being taken to
cure such Event of Default; (ii) the receipt of any notice from,
or the taking of any other action by, the holder of any
promissory note, debenture or other evidence of indebtedness with
respect to a claimed default, together with a detailed statement
specifying the notice given or other action taken by such holder
and the nature of the claimed default and what action the
Borrower is taking or proposes to take with respect thereto;
(iii) any legal, judicial or regulatory proceedings affecting
Borrower or any of its properties in which the amount involved is
material and is not covered by insurance or which, if adversely
determined, would have a Material Adverse Effect; (iv) any
dispute between the Borrower and any Governmental Authority or
any other Person which, if adversely determined, would have a
Material Adverse Effect; (v) any event or condition having a
Material Adverse Effect; and (vi) each Environmental Complaint.
Section 4.12 Borrowing Base Reports. Provide the Bank
with Borrowing Base Reports required by and in accordance with
Section 2.04(b)(i) of this Agreement.
Section 4.13. Pledge of Additional Collateral. If
Revolving Credit Loans in excess of $500,000.00 are used by the
Borrower for the purpose of acquiring oil and gas properties, and
interests therein, whether developed or undeveloped, and whether
in one transaction or a series of transactions, the Borrower
shall, upon written request by the Bank, promptly execute and
deliver to the Bank such deeds of trust, mortgages, assignments,
security agreements, financing statements and other security
documents and instruments as may be requested by the Bank, in
form and substance satisfactory to the Bank, granting and
conveying to the Bank first and prior security interests and
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Liens in and to all oil and gas properties purchased by the
Borrower with proceeds of Revolving Credit Loans.
ARTICLE 5
NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitment
remains in effect or any Indebtedness is owing to the Bank
hereunder or under the Note or any other Loan Document, the
Borrower shall not, directly or indirectly:
Section 5.01 Limitation on Indebtedness. Incur, create,
assume or suffer to exist any Indebtedness, except:
(a) Indebtedness of the Borrower to the Bank;
(b) Indebtedness existing on the date of this
Agreement which is set forth in the financial
statements referred to in Section 3.13 of this
Agreement, but not any increases thereof;
(c) obligations for the payment of rent or hire
of property under leases or lease agreements which
would not cause the aggregate amount of all payments
made by the Borrower pursuant to such leases or lease
agreements to exceed $250,000.00 during the terms
thereof; and
(d) additional Indebtedness of the Borrower not
to exceed $250,000.00 in aggregate principal amount at
any one time outstanding.
Section 5.02 Limitation on Liens. Create, incur, assume
or permit to exist any Lien on any of its property, assets or
revenues, whether now owned or hereafter acquired, except for:
(a) Liens securing the payment of any
Indebtedness of the Borrower to the Bank; and
(b) Excepted Liens.
Section 5.03 Limitation on Investments, Acquisitions,
Loans and Advances. Make any loan, advance, extension of credit
or capital contribution to, or purchase any stock, bonds, notes,
debentures or other securities of or any assets constituting a
business unit of, or make any other investments in, any Person,
except:
(a) the outstanding investments, loans or
advances set forth in the financial statements referred
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to in Section 3.13 of this Agreement, but not any
increases thereof;
(b) investments in (i) direct obligations of the
United States of America or any agency thereof; (ii)
certificates of deposit of the Bank of maturities less
than one year, or issued by other commercial banks in
the United States of America having capital and surplus
in excess of $50,000,000; or (iii) commercial paper of
maturities less than six months if at the time of
purchase such paper is rated in either of the two
highest rating categories of Standard & Poors
Corporation, Xxxxx'x Investors Service, Inc. or any
other rating agency satisfactory to the Bank;
(c) extensions of trade credit in the ordinary
course of business;
(d) investments in and acquisitions of oil and
gas properties and related assets, provided that such
investments or acquisitions are made in the ordinary
course of Borrower's business and not otherwise
prohibited by this Agreement;
(e) other investments, capital contributions,
loans or advances not to exceed the aggregate amount of
$250,000.00 at any one time outstanding; and
(f) loans and advances to employees of the
Borrower for travel, entertainment and similar expenses
in the ordinary course of business.
Section 5.04 Limitation on Dividends, Distributions and
Redemptions. Declare or pay any dividend (other than dividends
payable solely in common stock of the Borrower) on, or purchase,
redeem, retire or otherwise acquire for value, any shares of any
class of Borrower's capital stock now or hereafter outstanding,
or return any capital to its shareholders, or make any other
distribution in respect thereof, whether in cash or property on
in obligations of the Borrower or any Subsidiary.
Section 5.05 Limitation on Sales and Leasebacks. Enter
into any arrangement with any Person whereby it shall sell or
transfer any property, whether now owned or hereafter acquired,
and whereby it shall then or thereafter rent or lease as lessee
such property or any part thereof or other property which it
intends to use for substantially the same purpose or purposes as
the property sold or transferred.
Section 5.06 Limitation on Fundamental Changes. Enter
into any merger, consolidation or amalgamation, or liquidate,
wind up or dissolve itself (or suffer any liquidation or
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dissolution), or convey, sell, lease, assign, transfer or
otherwise dispose of (whether in one transaction or in a series
of related transactions), all or substantially all of its
property, business or assets (whether now owned or hereafter
acquired), or make any material change in its present method of
conducting business.
Section 5.07 Limitation on Leases. Create, incur, assume
or suffer to exist any obligation for the payment of rent or hire
of property of any kind whatsoever (real or personal), under
leases or lease agreements (other than leases or lease agreements
which constitute Indebtedness and which are permitted by Section
5.01(c) of this Agreement, or oil and gas leases) which would
cause the aggregate amount of all payments made by the Borrower
pursuant to such leases or lease agreements to exceed $75,000 in
any period of twelve consecutive calendar months.
Section 5.08 Limitation on Negative Pledge Clauses. Enter
into with any Person any agreement, other than (a) this Agreement
and (b) the Loan Documents, which prohibits or limits the ability
of the Borrower to create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now
owned or hereafter acquired.
Section 5.09 Limitation on Use of Proceeds. Permit the
proceeds of the Note to be used for any purpose other than as
permitted by Section 3.10 hereof.
Section 5.10 Limitation on Lines of Business. Enter into
any business, either directly or through any Subsidiary, except
for those businesses in which the Borrower is engaged on the date
of this Agreement or which are directly related thereto.
Section 5.11 Limitation on Sale of Assets. Convey, sell,
lease, assign, transfer or otherwise dispose of any of its
property, business or assets (including, without limitation,
receivables and leasehold interests), whether now owned or
hereafter acquired, except:
(a) obsolete, worn out, depleted or "uneconomic"
property disposed of in the ordinary course of
business;
(b) the sale of petroleum produced by the
Borrower in the ordinary course of Borrower's business;
(c) undeveloped, undrilled leasehold acreage held
in inventory, provided that in any fiscal year of the
Borrower the gross proceeds of such property so
disposed of shall not exceed $250,000.00; and
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(d) the sale of any other assets or properties of
the Borrower, provided that in any fiscal year of the
Borrower the gross proceeds of such property so
disposed of shall not exceed $250,000.00.
Section 5.12 Limitation on Changes in Fiscal Year. Permit
its fiscal year to end on a day other than March 31.
Section 5.13 Limitation on Transactions with Affiliates.
Enter into any transaction, including, without limitation, any
purchase, sale, lease or exchange of property or the rendering of
any service, with any Affiliate unless such transaction is (a)
not otherwise prohibited under this Agreement, (b) in the
ordinary course of business and (c) upon fair and reasonable
terms no less favorable to the Borrower than it could obtain in a
comparable arm's length transaction with a Person which is not an
Affiliate.
Section 5.14 No Change in Control. Permit any Change in
Control of Borrower.
Section 5.15 Limitation on Issuance of Stock. Issue or
sell any shares of capital stock or other equity security (or any
options, warrants, rights or other convertible securities
entitling the holder thereof to acquire any such capital stock or
equity security) of any kind or class, except:
(a) the issuance and sale of capital stock or
other equity security, the proceeds of which will be
used to repay the Note in its entirety, and
(b) the issuance and sale of capital stock
pursuant to the Borrower's stock option plans and stock
options in existence on the date of this Agreement.
Section 5.16 Current Ratio. Permit the Current Ratio, as
defined herein and calculated pursuant to Exhibit E hereto, to be
less than .80 to 1.0 at the end of any fiscal quarter of the
Borrower.
Section 5.17 Tangible Net Worth. Permit the Tangible Net
Worth, as defined herein and calculated pursuant to Exhibit F
hereto, to be less than $4,500,000.00 as of the end of each
fiscal quarter of the Borrower.
Section 5.18 Interest Expense Coverage. Permit for any
fiscal quarter the ratio of (i) EBITDA (as calculated pursuant to
Exhibit G hereto) to (ii) total interest expense paid or accrued
on all Indebtedness to be less than 3.00 to 1.00.
Section 5.19 Debt to Worth Ratio. Permit the Debt to
Worth Ratio, as defined herein and calculated pursuant to Exhibit
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H hereto, to be greater than 2.0 to 1.0 at the end of any fiscal
quarter of the Borrower.
ARTICLE 6
EVENTS OF DEFAULT
Section 6.01 Events. Any of the following events shall
constitute and be considered an "Event of Default" as that term
is used herein:
(a) Payments - default shall be made in the
payment when due of any installment of principal or
interest on the Note or any other Indebtedness owing by
the Borrower to the Bank; or
(b) Representations and Warranties - any
representation or warranty made by the Borrower herein,
or by the Borrower or any other Person in any Security
Instrument, or in any other Loan Document furnished to
the Bank pursuant to or under this Agreement, any
Security Instrument or any other Loan Document, proves
to have been incorrect in any material respect as of
the date when made or deemed made and shall continue
unremedied for a period of 30 days after the earlier of
(i) the Borrower becoming aware of such default or (ii)
the Bank giving notice thereof to the Borrower; or
(c) Loan Agreement Covenants - default shall be
made by the Borrower in the due observance or
performance of any of the covenants or agreements
contained in Articles 4 and 5 of this Agreement, and in
the case of default under Article 4 such default
continues unremedied for a period of 30 days after the
earlier of (i) the Borrower becoming aware of such
default or (ii) the Bank giving notice thereof to the
Borrower; or
(d) Security Instrument Covenants - default is
made in the due observance or performance by Borrower
of any covenant, condition or agreement contained in
any Security Instrument, and such default continues
unremedied beyond the expiration of any applicable
grace period which may be expressly allowed under such
Security Instrument; or
(e) Involuntary Bankruptcy or Other Proceedings -
an involuntary case or other proceeding shall be
commenced against Borrower which seeks liquidation,
reorganization or other relief with respect to it or
its debts or other liabilities under any bankruptcy,
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insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar
official of it or any substantial part of its property,
and such involuntary case or other proceeding shall
remain undismissed or unstayed for a period of 60 days;
or an order for relief against Borrower shall be
entered in any such case under the Federal Bankruptcy
Code; or
(f) Voluntary Petitions, Etc. - Borrower shall
commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with
respect to itself or its debts or other liabilities
under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its
property, or shall consent to any such relief or to the
appointment of or taking possession by any such
official in an involuntary case or other proceeding
commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail
generally to, or shall admit in writing its inability
to pay its debts generally as they become due, or shall
take any corporate action to authorize or effect any of
the foregoing; or
(g) Discontinuance of Business - Borrower
discontinues its usual business; or
(h) Default on Other Indebtedness - Borrower
shall default in any payment of principal of or
interest on any Indebtedness (other than to the Bank)
in excess of $250,000.00 in outstanding principal
amount beyond any period of grace provided with respect
thereto, or in the performance of any other agreement,
term or condition contained in any agreement or
instrument under or by which any such Indebtedness is
created, evidenced or secured if the effect of such
default is to cause such obligation to become due
before its stated maturity or to permit the holder(s)
of such obligation or the trustee(s) under any such
agreement or instrument to cause such obligation to
become due prior to its stated maturity, whether or not
such default or failure to perform should be waived by
the holder(s) of such obligation or such trustee(s); or
(i) Undischarged Judgments - Borrower shall fail
within 30 days after date of entry to pay, bond or
otherwise discharge any judgment or order for the
payment of money in excess of $250,000.00 that is not
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otherwise being satisfied in accordance with its terms
and is not stayed on appeal or otherwise being
appropriately contested in good faith; or
(j) Security Instruments - any Security
Instrument after delivery thereof shall for any reason
cease to be in full force and effect and valid, binding
and enforceable in accordance with its terms, or cease
to create a valid and perfected Lien of the priority
required thereby on any of the collateral purported to
be covered thereby, or Borrower or any other Person who
may have granted or purported to grant such Lien shall
so state in writing; or
(k) Material Adverse Effect - the occurrence of
any change or event which has a Material Adverse
Effect.
Section 6.02 Remedies. (a) Upon the occurrence of any
Event of Default described in Subsection 6.01(e) or (f) hereof,
the lending obligations of the Bank hereunder shall immediately
terminate, and the entire principal amount of all Indebtedness
then outstanding and owing to the Bank together with interest
then accrued and unpaid thereon shall become immediately due and
payable, all without demand and presentment for payment, notice
of nonpayment, protest, notice of protest, notice of dishonor,
notice of intention to accelerate maturity or notice of
acceleration of maturity, or any other notice of default of any
kind, all of which are hereby expressly waived by the Borrower.
(b) Upon the occurrence and at any time during the
continuance of any other Event of Default specified in Section
6.01 hereof, the Bank may, by written notice to the Borrower, (i)
declare the entire principal amount of all Indebtedness then
outstanding and owing to the Bank together with interest then
accrued and unpaid thereon to be immediately due and payable
without demand and presentment for payment, notice of nonpayment,
protest, notice of protest, notice of dishonor, notice of
intention to accelerate maturity or notice of acceleration of
maturity, or any other notice of default of any kind, all of
which are hereby expressly waived by the Borrower, and/or (ii)
terminate the lending obligations of the Bank hereunder unless
and until the Bank shall reinstate same in writing.
Section 6.03 Right of Setoff. Upon the occurrence and
during the continuance of any Event of Default, or if Borrower
becomes insolvent, however evidenced, the Bank is hereby
authorized at any time and from time to time, without prior
notice to the Borrower (any such notice being expressly waived by
the Borrower), to setoff and apply any and all deposits (general
or special, time or demand, provisional or final) at any time
held and other Indebtedness at any time owing by the Bank to or
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for the credit or the account of Borrower against any and all of
the Indebtedness owing to the Bank, irrespective of whether or
not the Bank shall have made any demand under this Agreement or
the Note and although such obligations may be unmatured. The
Bank agrees promptly to notify the Borrower after any such setoff
and application, provided that the failure to give such notice
shall not affect the validity of such setoff and application.
The rights of the Bank under this Section 6.03 are in addition to
other rights and remedies (including, without limitation, other
rights of setoff) which the Bank may have.
ARTICLE 7
CONDITIONS PRECEDENT
Section 7.01 Conditions to Initial Revolving Credit Loan.
The obligation of the Bank to make the initial Revolving Credit
Loan is subject to the satisfaction, prior to or concurrently
with the making of such Revolving Credit Loan on the Closing
Date, of the following conditions precedent.
(a) Loan Documents - the Bank shall have received
this Agreement, the Note and the Security Instruments
described in Schedule 7.01, in each case duly executed
and delivered by a duly authorized officer of the
Borrower.
(b) Closing Certificate - the Bank shall have
received a certificate of the Chairman of the Board of
Directors of Borrower, dated the Closing Date,
substantially in the form of Exhibit I, with
appropriate insertions and attachments.
(c) Corporate Proceedings of the Borrower - the
Bank shall have received a copy of the resolutions, in
form and substance satisfactory to the Bank, of the
Board of Directors of the Borrower authorizing (i) the
execution, delivery and performance of this Agreement
and the other Loan Documents to which it is a party and
(ii) the borrowings contemplated hereunder, certified
by the Chairman of the Board of Directors of Borrower
as of the Closing Date, which certificate shall be in
form and substance satisfactory to the Bank and shall
state that the resolutions thereby certified have not
been amended, modified, revoked or rescinded.
(d) Borrower Incumbency Certificate - the Bank
shall have received a certificate of the Borrower,
dated the Closing Date, as to the incumbency and
signature of the officers of the Borrower executing any
Loan Document in substantially the form of Exhibit J,
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executed by the Chairman of the Board of Directors and
the Secretary or any Assistant Secretary of the
Borrower.
(e) Corporate Documents - the Bank shall have
received true and complete copies of the articles of
incorporation and bylaws of the Borrower, certified as
of the Closing Date as complete and correct copies
thereof by the Chairman of the Board of Directors of
the Borrower.
(f) Consents, Licenses and Approvals - the Bank
shall have received a certificate of the Chairman of
the Board of Directors of the Borrower (i) attaching
copies of all consents, authorizations and filings
referred to in Section 3.02, and (ii) stating that such
consents, licenses and filings are in full force and
effect, and such certificate and each such consent,
authorization and filing shall be in form and substance
satisfactory to the Bank.
(g) Other - the Bank shall have received such
other documents as it may reasonably have requested at
any time at or prior to the Closing Date, including,
without limitation, a schedule of all insurance
presently maintained by the Borrower and an appraisal
of the Borrower's drilling rigs and related equipment
prepared by an independent appraiser acceptable to the
Bank and being in form and substance satisfactory to
the Bank.
Section 7.02 Conditions to Each Revolving Credit Loan.
The obligation of the Bank to make any Revolving Credit Loan
requested to be made by Borrower on any date (including, without
limitation, its initial Revolving Credit Loan) is subject to the
satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by the Borrower in
or pursuant to the Loan Documents shall be true and
correct in all material respects on and as of such date
as if made on and as of such date.
(b) No Event of Default. No Event of Default
shall have occurred and be continuing on such date or
after giving effect to the Revolving Credit Loans
requested to be made on such date.
(c) Maintenance of Borrowing Base.
Notwithstanding Section 2.05(b), after giving effect to
the Revolving Credit Loans requested to be made on any
date, the aggregate principal amount of the Revolving
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Credit Loans then outstanding shall not exceed the
lesser of (i) $5,000,000.00 or (ii) one-third (1/3) of
the Borrowing Base Amount then in effect.
(d) No Material Litigation. No litigation,
investigation or proceeding of or before any arbitrator
or Governmental Authority shall be pending or, to the
knowledge of the Borrower, threatened by or against the
Borrower or the Bank with respect to any of the Loan
Documents or any of the transactions contemplated
hereby or thereby.
(e) Borrowing Base Reports. The Bank shall have
received all Borrowing Base Reports required to be
delivered by Borrower pursuant to Section 2.04(b).
(f) Additional Matters. All corporate and other
proceedings, and all documents, instruments and other
legal matters in connection with the transactions
contemplated by this Agreement and the other Loan
Documents shall be satisfactory in form and substance
to the Bank, and the Bank shall have received such
other documents and legal opinions in respect of any
aspect or consequence of the transactions contemplated
hereby or thereby as it shall reasonably request.
Each borrowing by the Borrower hereunder shall constitute a
representation and warranty by the Borrower as of the date
thereof that the conditions contained in this subsection have
been satisfied.
ARTICLE 8
MISCELLANEOUS
Section 8.01 Notices. Any notice required or permitted to
be given under or in connection with this Agreement, the Note or
the Security Instruments (except as may otherwise be expressly
required herein or therein) shall be in writing and shall be
mailed by first class or express mail, postage prepaid, or sent
by telex, telegram, telecopy or other similar form of rapid
transmission confirmed by mailing (by first class or express
mail, postage prepaid) written confirmation at substantially the
same time as such rapid transmission, or personally delivered to
any officer of the receiving party. All such communications
shall be mailed, sent or delivered,
(a) if to the Borrower: TMBR/Sharp Drilling, Inc.
0000 Xxxx Xxxxxxxxxx Xxxx.
Xxxxxxx, Xxxxx 00000
(b) if to the Bank: Norwest Bank Texas, N.A.
000 X. Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
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or to such other address or individual's or department's
attention as a party may furnish to the other party in writing.
Any communication so addressed and mailed shall be deemed to be
given when so mailed. Any notice so sent by rapid transmission
shall be deemed to be given when receipt of such transmission is
acknowledged. Any communication so delivered in person shall be
deemed to be given when receipted for by, or actually received
by, an authorized officer of the Borrower or the Bank, as the
case may be.
Section 8.02 Amendments and Waivers. Any provision of
this Agreement, the Note, the Security Instruments or the other
Loan Documents may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by each Person
which is a party to the Loan Document being amended (or with
respect to which a waiver is being obtained) and the Bank.
Section 8.03 Indemnity by Borrower. The Borrower agrees
to indemnify, save and hold harmless the Bank and its Affiliates,
directors, officers, agents, attorneys and employees
(collectively, the "Indemnitees") from and against: (a) any and
all claims, demands, actions or causes of action that are
asserted against any Indemnitee by any Person (other than the
Borrower) if the claim, demand, action or cause of action
directly or indirectly relates to a claim, demand, action or
cause of action that such Person asserts or may assert against
the Borrower, any Affiliate of the Borrower or any officer,
director or shareholder of the Borrower; (b) any and all claims,
demands, actions or causes of action that are asserted against
any Indemnitee by any Person (other than the Borrower) if the
claim, demand, action or cause of action arises out of or relates
to the Revolving Credit Loans, the use or contemplated use of
proceeds of the Revolving Credit Loans or the relationship of the
Borrower and the Bank under this Agreement; (c) any
administrative or investigative proceeding by any Governmental
Authority arising out of or related to a claim, demand, action or
cause of action described in clauses (a) or (b) above; and (d)
any and all liabilities, losses, costs or expenses (including
reasonable attorneys' fees and disbursements) that any Indemnitee
suffers or incurs as a result of any of the foregoing; provided,
that no Indemnitee shall be entitled to indemnification for any
liability, loss, cost or expense caused by its own gross
negligence or willful misconduct. If any claim, demand, action
or cause of action is asserted against any Indemnitee and such
Indemnitee intends to claim indemnification from the Borrower
under this Section 8.03, such Indemnitee shall promptly notify
the Borrower, but the failure to so promptly notify the Borrower
shall not affect the obligations of the Borrower under this
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Section 8.03 unless such failure materially prejudices the
Borrower's right to participate, or the Borrower's rights, if
any, in the contest of such claim, demand, action or cause of
action, as hereinafter provided. Each Indemnitee may, and if
requested by the Borrower in writing shall, in good faith contest
the validity, applicability and amount of such claim, demand,
action or cause of action with counsel selected by such
Indemnitee and reasonably acceptable to the Borrower, and shall
permit the Borrower to participate in such contest. Any
Indemnitee that proposes to settle or compromise any claim or
proceeding for which the Borrower may be liable for payment of
indemnity hereunder shall give the Borrower written notice of the
terms of such proposed settlement or compromise reasonably in
advance of settling or compromising such claim or proceeding and
shall obtain the Borrower's prior written consent, which consent
shall not be unreasonably withheld. In connection with any
claim, demand, action or cause of action covered by this Section
8.03 against more than one Indemnitee, all such Indemnitees shall
be represented by the same legal counsel selected by the
Indemnitees and reasonably acceptable to the Borrower; provided,
that if such legal counsel determines in good faith and advises
the Borrower in writing that representing all such Indemnitees
would or could result in a conflict of interest under legal
requirements or ethical principles applicable to such legal
counsel or that a defense or counterclaim is available to an
Indemnitee that is not available to all such Indemnitees, then to
the extent reasonably necessary to avoid such a conflict of
interest or to permit unqualified assertion of such a defense or
counterclaim, each Indemnitee shall be entitled to separate
representation by legal counsel selected by that Indemnitee and
reasonably acceptable to the Borrower. Any obligation or
liability of the Borrower to any Indemnitee under this Section
8.03 shall survive the expiration or termination of this
Agreement and the repayment of the Revolving Credit Loans and the
payment of all other Indebtedness owing to the Bank for the
statute of limitations period applicable to such claim or
contest.
Section 8.04 Invalidity. In the event that any one or more
of the provisions contained in this Agreement, the Note, any
Security Instrument or any other Loan Document shall, for any
reason, be held invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect
any other provisions of this Agreement, the Note or such Security
Instrument or other Loan Document.
Section 8.05 Survival of Agreements. All representations
and warranties of the Borrower herein or in the Security
Instruments, and all covenants and agreements herein or therein
not fully performed before the effective date or dates of this
Agreement and of the Security Instruments, shall survive such
date or dates.
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Section 8.06 Successors and Assigns. All covenants and
agreements contained by or on behalf of the Borrower in this
Agreement, the Note and the Security Instruments and other Loan
Documents shall bind its successors and assigns and shall inure
to the benefit of the Bank and its successors and assigns.
Borrower shall not, however, have the right to assign its rights
hereunder or any interest herein, without the prior written
consent of the Bank. In the event that the Bank sells
participations in or assigns the Note or other Indebtedness owing
to the Bank to other lenders (which the Bank may undertake to do
in its sole discretion), each of such other lenders shall have
the rights to setoff against such Indebtedness and similar rights
or Liens to the same extent as may be available to the Bank.
Section 8.07 Renewal, Extension or Rearrangement. All
provisions of this Agreement and of any Security Instrument or
other Loan Document relating to the Note or other Indebtedness
owing to the Bank shall apply with equal force and effect to each
and all promissory notes hereinafter executed which in whole or
in part represent a renewal, extension for any period, increase
or rearrangement of any part of the Indebtedness originally
represented by the Note or of any part of such other
Indebtedness.
Section 8.08 Waivers. No course of dealing on the part of
the Bank, its officers, employees, consultants or agents, nor any
failure or delay by the Bank with respect to exercising any
right, power or privilege of the Bank under this Agreement, the
Note or any Security Instrument or other Loan Document shall
operate as a waiver thereof, except as otherwise provided in
Section 8.02 hereof.
Section 8.09 Cumulative Rights. Rights and remedies of
the Bank under this Agreement, the Note and the Security
Instruments and the other Loan Documents shall be cumulative, and
the exercise or partial exercise of any such right or remedy
shall not preclude the exercise of any other right or remedy.
Section 8.10 Construction. THIS AGREEMENT IS, AND THE
NOTE WILL BE, A CONTRACT MADE UNDER AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE UNITED STATES OF
AMERICA AND THE STATE OF TEXAS, AS SUCH LAWS ARE NOW IN EFFECT
AND, WITH RESPECT TO USURY LAWS, IF ANY, APPLICABLE TO THE BANK
AND TO THE EXTENT ALLOWED THEREBY, AS SUCH LAWS MAY HEREAFTER BE
IN EFFECT WHICH ALLOW A HIGHER MAXIMUM NONUSURIOUS INTEREST RATE
THAN SUCH LAWS NOW ALLOW.
Section 8.11 Taxes, Etc. Any taxes (excluding income
taxes) payable or ruled payable by any Governmental Authority in
respect of this Agreement, the Note, any Security Instrument or
any other Loan Document shall be paid by the Borrower, together
with interest and penalties, if any.
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Section 8.12 Governmental Regulation. Anything contained
herein to the contrary notwithstanding, the Bank shall not be
obligated to extend credit to the Borrower in an amount in
violation of any limitation or prohibition provided by any
applicable statute or regulation.
Section 8.13 Counterparts. This Agreement may be executed
in one or more counterparts, and it shall not be necessary that
the signatures of all parties hereto be contained on any one
counterpart hereof. Each counterpart shall be deemed an
original, but all counterparts together shall constitute one and
the same instrument.
Section 8.14 Conflicts. If there is ever a conflict
between the terms, conditions, representations, warranties and
covenants contained in this Agreement and the terms, conditions,
representations, warranties or covenants in any of the other Loan
Documents executed by the Borrower, the provisions of this
Agreement shall control; provided, however, the fact that any
term, condition, representation, warranty or covenant contained
in such other Loan Document is not contained herein shall not be,
or be deemed to be, a conflict.
Section 8.15 Exhibits. The exhibits, annexes and
schedules attached to this Agreement are incorporated herein and
shall be considered a part of this Agreement for the purposes
stated herein, except that in the event of any conflict between
any of the provisions of such exhibits, annexes and schedules and
the provisions of this Agreement, the provisions of this
Agreement shall prevail.
Section 8.16 Acknowledgment by Borrower. As a material
inducement to the Bank to execute and deliver this Agreement and
to make the Revolving Credit Loans, the Borrower hereby
acknowledges, agrees and represents that (i) the Prior Notes are
renewed, extended and consolidated, but not extinguished, by the
Note; (ii) the Liens, security interests and assignments created
and evidenced by the Prior Security Instruments are,
respectively, valid and subsisting Liens, security interests and
assignments of the respective dignity and priority recited in the
Prior Security Instruments; (iii) there are no claims or offsets
against, or defenses or counterclaims to, the terms or provisions
of the Prior Security Instruments, and the other obligations
created or evidenced by the Prior Security Instruments; (iv)
Borrower has no claims, offsets, defenses or counterclaims
arising from any of the Bank s acts or omissions with respect to
any collateral, the Prior Security Instruments or the Bank s
performance under the Prior Security Instruments; and (v) the
Bank is not in default and no event has occurred which, with the
passage of time, giving of notice, or both, would constitute a
default by the Bank of its obligations under the terms and
provisions of the Prior Security Instruments.
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Section 8.17 Titles of Articles, Sections and Subsections.
All titles or headings to articles, sections, subsections or
other divisions of this Agreement or the exhibits and schedules
hereto are only for the convenience of the parties and shall not
be construed to have any effect or meaning with respect to the
other content of such articles, sections, subsections or other
divisions, such other content being controlling as to the
agreement between the parties hereto.
Section 8.18 Entire Agreement. THIS AGREEMENT, THE NOTE,
THE SECURITY INSTRUMENTS AND THE OTHER LOAN DOCUMENTS CONSTITUTE
A "LOAN AGREEMENT" AS DEFINED IN SECTION 26.02(a) OF THE TEXAS
BUSINESS AND COMMERCE CODE AND REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN OR ORAL AGREEMENTS BETWEEN THE
PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be duly executed as of the date first above
written.
TMBR/SHARP DRILLING, INC.
By:__________________________________
Xxxxxx X. Xxxxx, Chairman of the
Board of Directors and Chief
Executive Officer
NORWEST BANK TEXAS, N.A.
By:__________________________________
Xxxx X. XxXxxxxx, Senior Vice
President
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EXHIBIT A
REVOLVING LINE OF CREDIT PROMISSORY NOTE
$5,000,000.00 May 26, 1998
FOR VALUE RECEIVED, in the manner, on the dates and in the
amounts herein stipulated, TMBR/SHARP DRILLING, INC., a Texas
corporation (the "Borrower"), promises and agrees to pay to the
order of Norwest Bank Texas, N.A., a national banking association
(the "Bank"), in Midland, Midland County, Texas, the principal
sum of Five Million and No/100 Dollars ($5,000,000.00) or, if
less, the aggregate unpaid balance of all advances hereunder, in
lawful money of the United States of America, which shall be
legal tender in payment of all debts and dues, public and
private, at the time of payment, and to pay interest thereon from
the date of advance until maturity at a rate per annum which
shall from day to day be equal to the lesser of (a) the Base Rate
in effect from day to day (calculated on the basis of actual days
elapsed, but computed as if each calendar year consisted of 360
days) or (b) the Highest Lawful Rate. Each change in the rate of
interest charged under this Revolving Line of Credit Promissory
Note (this "Note") shall, subject to the terms hereof, become
effective, without notice to the Borrower, upon the effective
date of each change in the Base Rate or the Highest Lawful Rate,
as the case may be. Notwithstanding the foregoing, if at any
time the Base Rate exceeds the Highest Lawful Rate, the rate of
interest on this Note shall be limited to the Highest Lawful
Rate, but any subsequent reductions in the Base Rate shall not
reduce the rate of interest hereon below the Highest Lawful Rate
until the total amount of interest accrued hereon approximately
equals the amount of interest which would have accrued hereon if
the Base Rate had at all times been in effect. In the event that
at maturity (stated or by acceleration), or at final payment of
this Note, the total amount of interest paid or accrued hereon is
less than the amount of interest which would have accrued if the
Base Rate had at all times been in effect, then, at such time and
to the extent permitted by applicable laws, Borrower shall pay to
the Bank an amount equal to the difference between (a) the lesser
of the amount of interest which would have accrued if the Base
Rate had at all times been in effect or the amount of interest
which would have accrued if the Highest Lawful Rate had at all
times been in effect, and (b) the amount of interest actually
paid or accrued on this Note. All of the past due principal and
accrued interest hereunder shall, at the option of the Bank, bear
interest from maturity (stated or by acceleration) until paid at
a rate per annum equal to the Highest Lawful Rate. Interest
calculations may be made ten days prior to any interest
installment due date under this Note, in which event, if there is
an adjustment in the interest rate in accordance with the terms
hereof during such ten-day period, then the Borrower shall
subsequently, on demand, pay to the Bank any underpayment, or the
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Bank shall pay to the Borrower, any overpayment, as the case may
be, as a result of any adjustment during such ten-day period.
This Note (a) is the Revolving Line of Credit Note referred
to in the First Amended and Restated Loan Agreement, dated as of
the date hereof (as the same may be amended, supplemented or
otherwise modified from time to time, the "Loan Agreement"),
between the Borrower and the Bank, (b) is subject to the terms
and conditions thereof, and (c) is subject to optional and
mandatory prepayments in whole or in part as provided in the Loan
Agreement. Reference is made to the Loan Agreement for a further
statement of the rights, remedies, powers, privileges, benefits,
duties and obligations of the Borrower and the Bank under the
Loan Agreement and this Note. Capitalized terms used herein
which are defined in the Loan Agreement shall have such defined
meanings unless otherwise defined herein.
This Note represents the renewal, extension, and
consolidation, but not the extinguishment, of the Prior Notes.
This Note is secured as provided in the Loan Agreement and
in the other Loan Documents, to which reference is hereby made
for a description of the properties and assets in which a Lien
and security interest has been granted, the nature and extent of
the security, the terms and conditions upon which the Liens and
security interests were granted and the rights of the holder of
this Note with respect thereto.
Each borrowing under this Note shall be in the minimum
amount of $50,000.00 (or the unadvanced portion hereof, whichever
is less) and shall be made only in accordance with the provisions
of the Loan Agreement. Subject to the terms hereof and of the
Loan Agreement, Borrower may borrow, repay and reborrow at any
time and from time to time under this Note.
Interest on the outstanding principal balance of this Note
shall be due and payable monthly on the fifteenth day of each
month, commencing June 15, 1998. The then outstanding principal
balance of this Note and all accrued and unpaid interest shall be
due and payable on May 26, 2000.
Time is of the essence of this Note. Upon the occurrence of
any one or more of the Events of Default specified in the Loan
Agreement, all amounts then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable,
all as provided therein.
It is the intention of the Borrower and the Bank that the
Bank shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated by the Loan
Agreement and this Note would be usurious as to the Bank under
laws applicable to it (including the laws of the United States of
America and the State of Texas or any other jurisdiction whose
laws may be mandatorily applicable to the Bank notwithstanding
the other provisions of the Loan Agreement and this Note), then,
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in that event, notwithstanding anything to the contrary in this
Note, the Loan Agreement or any other Loan Document or other
agreement entered into in connection with or as security for this
Note, (i) the aggregate of all consideration which is contracted
for, taken, reserved, charged or received by the Bank under this
Note, the Loan Agreement or any other Loan Document or agreement
entered into in connection with or as security for this Note
shall under no circumstances exceed the maximum amount allowed by
such applicable law, and any excess shall be credited by the Bank
on the principal amount of the Indebtedness to the Bank (or, to
the extent that the principal amount of the Indebtedness shall
have been or would thereby be paid in full, refunded by the Bank
to the Borrower); and (ii) in the event that the maturity of this
Note is accelerated by reason of an Event of Default under the
Loan Agreement or otherwise, or in the event of any prepayment,
then such consideration that constitutes interest under law
applicable to the Bank may never include more than the maximum
amount allowed by such applicable law, and excess interest, if
any, provided for in this Note, the Loan Agreement or otherwise
shall be canceled automatically by the Bank as of the date of
such acceleration of prepayment and, if theretofore paid, shall
be credited by the Bank on the principal amount of the
Indebtedness (or, to the extent that the principal amount of such
Indebtedness shall have been or would thereby be paid in full,
refunded by the Bank to the Borrower).
To the extent that Texas Finance Code Section 303.201, as
supplemented by Article 5069-ID.002 of the Texas Revised Civil
Statutes (Texas Credit Title), is relevant to the Bank for the
purposes of determining the Highest Lawful Rate, the applicable
rate ceiling under such provisions shall be determined by the
indicated (weekly) rate ceiling from time to time in effect,
subject to the Bank's right subsequently to change such method in
accordance with applicable law.
All parties now or hereafter liable with respect to this
Note, whether maker, principal, surety, guarantor, endorser or
otherwise, hereby waive presentment, demand, protest and all
other notices of any kind.
THIS NOTE IS PERFORMABLE AND PAYABLE IN THE COUNTY OF
MIDLAND, STATE OF TEXAS, AND SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF TEXAS; PROVIDED,
HOWEVER, THAT THE LAWS PERTAINING TO ALLOWABLE RATES OF INTEREST
MAY, FROM TIME TO TIME, BE GOVERNED BY THE LAWS OF THE UNITED
STATES OF AMERICA.
TMBR/SHARP DRILLING, INC.
By:__________________________________
Xxxxxx X. Xxxxx, Chairman of the
Board of Directors and Chief
Executive Officer
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