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EXHIBIT 99.1
LOAN AGREEMENT
AMONG
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
as Lender,
XXXXXXXXX DRILLING COMPANY,
as Borrower
and
XXXXXXXXX ENERGY, INC.,
as Guarantor
Dated as of September 27, 1996
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TABLE OF CONTENTS
R E C I T A L S : . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I.
THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.01 Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.02 Short-Term Loan Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.03 Long-Term Loan Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.04 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.05 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.06 Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(a) Mandatory Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(b) Voluntary Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.07 Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.08 Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.09 Short-Term Loan Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE II.
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.01 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.02 Conditions to Subsequent Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.03 Waiver of Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE III.
REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.01 Representations of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.02 Covenants of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.03 Covenants of the Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV.
EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(i)
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ARTICLE V.
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.01 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.02 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.03 Applicable Law and Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.04 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.05 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.06 Assignment and Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.07 Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.08 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.09 Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.10 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Schedule 1 to Loan Agreement - DESCRIPTION OF RIGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Exhibit A - Promissory Note
Exhibit B - Security Agreement
Exhibit C - Notice of Drawing
Exhibit D - Guaranty
(ii)
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THIS LOAN AGREEMENT dated as of September 27, 1996 among XXXXXXXXX
DRILLING COMPANY, a Delaware corporation (the "Borrower"), XXXXXXXXX ENERGY,
INC., a Delaware corporation (the "Guarantor"), and THE CIT GROUP/EQUIPMENT
FINANCING, INC., a New York corporation (the "Lender"). Capitalized terms used
herein and not otherwise defined herein are used with the meanings ascribed
thereto in the Definitions Section of this Agreement.
R E C I T A L S :
1. The Borrower is the owner or part owner of the forty (40) land
drilling rigs referred to in Schedule 1 attached hereto (each a "Rig" and
collectively, the "Rigs", which terms shall also include within the definition
thereof, for purposes of this Agreement, any drilling equipment, drill pipe and
related equipment, and additional drilling rigs and/or drilling equipment from
such time as any such rigs and/or equipment have been purchased with the
proceeds of the Loan).
2. The Borrower has requested a loan from the Lender in the principal
amount of up to Twenty-Two Million United States Dollars (USD 22,000,000) (as
more specifically described in Section 1.01 hereof, the "Loan") in order to (i)
facilitate the purchase of additional drilling rigs by the Borrower, and (ii)
refinance certain indebtedness of the Borrower and the Guarantor upon the terms
and conditions contained herein and in the Note.
3. The Loan shall be evidenced by a secured promissory note made by
the Borrower to the Lender (the "Note") substantially in form and substance of
Exhibit A annexed hereto and made a part hereof.
4. In order to secure its obligations hereunder and under the Note,
the Borrower has agreed to grant to the Lender a first priority security
interest in all of its right, title and interest in the Rigs and any additional
rigs or drilling equipment purchased with the proceeds of the Loan.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
DEFINITIONS
The following terms shall have the following meanings for all purposes
of this Agreement and shall be equally applicable to both the singular and the
plural forms of the terms herein defined.
"Agreement", "this Agreement", "herein", "hereunder"' or other like
words mean this Loan Agreement as originally executed or as modified, amended
or supplemented from time to time pursuant to the provisions hereof.
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"Advance" means a loan by the Lender to the Borrower pursuant to
Section 1.01 of this Agreement.
"Borrower" means Xxxxxxxxx Drilling Company and its successors and
permitted assigns.
"Business Day" means a day other than a Saturday or a Sunday or a day
on which commercial banks are authorized to be closed in the State of New York
or the State of Texas.
"Cash Flow Coverage Ratio" means the sum of the Guarantor's net income
on a consolidated basis, plus depletion, depreciation and amortization, plus
for the twelve (12) month period from July 1, 1996 through June 30, 1997 only,
the costs of acquiring Xxxxxx Drilling Company of up to USD 1,600,000, less
dividends paid and extraordinary items of income (as determined in accordance
with generally accepted United States accounting principles) in the prior four
quarters; divided by the sum of the current portion of long term debt and
capitalized lease obligations coming due in the following four quarters.
"Closing Date" has the meaning set forth in Section 1.02(b) hereof.
"Collateral Value" has the meaning set forth in Section 1.06(a)(iii)
hereof.
"Dollars" or "USD" means lawful currency of the United States of
America.
"Event of Default" has the meaning set forth in Article IV hereof.
"Excluded Income Taxes" has the meaning set forth in Section 1.05(a)
hereof.
"Fair Market Value" has the meaning set forth in Section 1.06(a)(iv)
hereof.
"Governmental Agencies" means any government or any state, department
or other political subdivision thereof or governmental body, agency, authority,
department or commission having jurisdiction over the Borrower or its
properties (including without limitation any court or tribunal) exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any corporation, partnership or other entity
directly or indirectly owned by the foregoing.
"Guarantor" means Xxxxxxxxx Energy, Inc. and its successors and
permitted assigns.
"Guaranty" means the Guaranty dated the date hereof by the Guarantor
in favor of the Lender, substantially in the form of Exhibit D hereto.
"Hazardous Substances" means petroleum and used oil, or any other
pollutant or contaminant, hazardous, dangerous or toxic (waste, substance or
material as defined in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. Sec. 9601, et seq.
(hereinafter called "CERCLA"); the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Sec. 6901, et seq. (hereinafter called "RCRA"); the
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Toxic Substances Control Act, as amended, 15 U.S.C. Sec. 2601, et seq.
(hereinafter called "TSCA"); the Hazardous Materials Transportation Act, as
amended, 49 U.S.C. Sec. 1801, et seq. (hereinafter called "HMTA"); the Oil
Pollution Act of 1990, Pub.L. No. 101-380, 104 Stat. 484 (1990) (hereinafter
called "OPA"); or any other statute, law, ordinance, code or regulation of any
Governmental Agency relating to or imposing liability or standards of conduct
concerning the use, production, generation, treatment, storage, recycling,
handling, transportation, release, threatened release or disposal of any
hazardous, dangerous or toxic waste, substance or material, currently in effect
or at any time hereafter adopted.
"Interest Period" has the meaning set forth in Section 1.04(b) hereof.
"Interest Rate" has the meaning set forth in Section 1.04(b) hereof.
"LIBOR Rate" means with respect to any Interest Period, the one-month
rate of interest per annum at which deposits in U.S. dollars are offered to
major banks in the London interbank market at approximately 11:00 a.m. (London
time), as reported by the Telerate System page 3750 (or such other page as may
replace such page 3750 on such system for the purpose of reporting London
Interbank Offered Rates of major banks) under the heading for British Bankers
Association Interest Settlement Rates in the column designated "USD" (U.S.
Dollar) two (2) Business Days before the first day of an Interest Period.
"Loan" has the meaning set forth in Section 1.01 hereof.
"Loan Documents" means the Note, this Loan Agreement, the Guaranty and
the Security Agreement.
"Long-Term Loan Period" means the period of time beginning on the
Long-Term Loan Conversion Date and ending on the Maturity Date.
"Long-Term Loan Conversion Date" means August 31, 1997.
"Maturity Date" means August 31, 2002.
"Note" has the meaning set forth in paragraph 3 of the Recitals
hereof.
"Notice of Drawing" means the notice of drawing given by the Borrower
pursuant to Section 1.02(b), substantially in the form of Exhibit C attached
hereto.
"Payment Date" has the meaning set forth in Section 1.04(a) hereof.
"Prepayment Premium" has the meaning set forth in Section 1.06(b)
hereof.
"Prime Rate" means with respect to any Interest Period, the rate
publicly announced in New York, New York from time to time as the prime rate of
The Chase Manhattan Bank, National Association (or any successor thereof)
("Chase"). The Prime Rate shall be determined
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by the Lender at the close of business two (2) Business Days before the first
day of each Interest Period. The Prime Rate is not intended to be the lowest
rate of interest charged by Chase in connection with extensions of credit to
debtors.
"Responsible Officer" means, as to the Borrower or the Guarantor, its
chief executive officer, chief financial officer or any other officer having
principal responsibility for the financial affairs of such company.
"Security Agreement" means the agreement between the Lender and the
Borrower creating a security interest in favor of the Lender in the Rigs and
related drilling equipment substantially in the form of Exhibit B hereto.
"Short-Term Loan Period" means the period of time beginning on the
Closing Date and ending on August 31, 1997.
"Tangible Net Worth" means, at a particular date, the sum of the
Guarantor's capital stock (excluding treasury stock) and surplus (including
earned surplus, capital surplus and the balance of the current profit and loss
account not transferred to surplus) accounted on a consolidated basis appearing
on a consolidated balance sheet prepared in accordance with generally accepted
United States accounting principles as of the date of determination, excluding,
however, from the determination, all inter-company transactions and after
deducting therefrom the net book value of all assets (after deducting any
reserves applicable thereto) which would be treated as intangibles under
generally accepted United States accounting principles, including, without
limitation, such items as good will, trademarks, trade names, patents and
licenses, franchises and operating rights).
"Taxes" has the meaning set forth in Section 1.05(a) of this
Agreement.
"Total Liabilities" means indebtedness of the Guarantor on a
consolidated basis which would in accordance with generally accepted United
States accounting principles be classified as current and long term liabilities
of a corporation conducting a business the same as or similar to the Guarantor;
provided however, that all deferred charges shall be taken into account.
"Total Loss" has the meaning set forth in Section 1.06(a) of this
Agreement.
ARTICLE I.
THE LOAN
Section 1.01 Amount. Subject to the terms and conditions of Section
2.01 of this Agreement, the Lender agrees to make Advances to the Borrower in
an aggregate principal amount equal to the lesser of (1) 68% of the Collateral
Value determined in accordance with Section 1.06(a)(iii) and as substantiated
by the appraisal to be delivered to the Lender pursuant to Section 2.01(n)
hereof and (2) USD 22,000,000 (the "Loan").
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Section 1.02 Short-Term Loan Period. (a) During the Short-Term Loan
Period, the Lender agrees to make Advances to the Borrower from time to time on
any Business Day in the aggregate not to exceed the amount of the Loan
available to the Borrower referred to in Section 1.01 hereof. All Advances
shall be used by the Borrower for (i) the purchase of additional drilling rigs
and equipment, (ii) repayment of the Guarantor's indebtedness to the Lender,
and (iii) repayment of the Guarantor's indebtedness to U.S. Bancorp. Each
Advance shall be in an amount of at least Five Hundred Thousand United States
Dollars (USD 500,000) and no more than one Advance shall be made by the Lender
during any thirty (30) calendar days. At least seventy-five percent (75%) of
any Advance hereunder of USD 2,000,000 or greater must be used to purchase a
Rig, Rigs or related drilling equipment.
(b) The Borrower shall make a request for an Advance by sending to
the Lender a written Notice of Drawing not later than 11:00 a.m., New York
Time, three (3) Business Days prior to the date such Advance is requested
setting forth the date the Advance is required, the amount of the requested
Advance, and the bank account or accounts to which the Advance is to be
remitted. The first Notice of Drawing shall be received by the Lender no later
than three (3) Business Days immediately preceding the Closing Date. All
Notices of Drawing shall be irrevocable. As used in this Agreement, the term
"Closing Date" shall mean any Business Day occurring on or prior to September
27, 1996 which shall be the day on which the first Advance is to be made as
designated by the Borrower in its Notice of Drawing.
(c) During the Short-Term Loan Period, the Borrower shall repay
all amounts outstanding under this Agreement monthly in arrears in installments
of USD 50,000 plus accrued interest through January 31, 1997, and installments
of USD 100,000 plus accrued interest thereafter until the Long-Term Loan
Conversion Date. Each such installment shall be paid on a Payment Date
commencing October 31, 1996.
Section 1.03 Long-Term Loan Period. (a) On the Long-Term Loan
Conversion Date, all amounts outstanding under the Loan will be converted to a
sixty (60) month term loan. During the Long-Term Loan Period, the Lender shall
make no further Advances to the Borrower hereunder.
(b) The Borrower shall repay the principal amount of the Note in
sixty (60) consecutive monthly installments, each such installment to be paid
by the Borrower to the Lender on a Payment Date commencing September 30, 1997
and ending on the Maturity Date. The amount of principal to be repaid on each
Payment Date shall be the amount necessary to amortize (over sixty equal
monthly installments) seventy five percent (75%) of the balance of the Loan
outstanding on the Long-Term Loan Conversion Date, provided, however, that the
final installment shall include a balloon amount sufficient to discharge all
accrued and unpaid interest, unpaid principal and unpaid premium outstanding
under this Agreement and the Note.
(c) The Loan shall be evidenced by and repayable in accordance
with the terms hereof and of the Note.
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Section 1.04 Interest.
(a) The Borrower shall pay interest, in arrears, on the unpaid
principal amount of the Loan from the Closing Date until the principal amount
of the Loan is paid in full on the first day succeeding the last day of each
Interest Period up to and including the Maturity Date (each such date a
"Payment Date") at a rate of interest per annum (computed on the basis of a
365-day year and actual days elapsed) equal to the Interest Rate; provided,
however, that all interest accrued on the Loan and unpaid on the Maturity Date
shall be paid on the Maturity Date.
(b) The term "Interest Rate" shall mean, for an Interest Period
(as hereinafter defined), an interest rate per annum certified by the Lender to
be the LIBOR Rate, plus two and three quarters percent (2.75%). If at any time
the Lender shall determine that by reason of circumstances affecting the London
interbank market adequate and reasonable means do not exist for ascertaining
the Interest Rate based on the LIBOR Rate for the succeeding Interest Period or
the making or continuance of the Loan at an Interest Rate based on the LIBOR
Rate has become impracticable as a result of a contingency occurring after the
date of this Agreement which materially and adversely affects the London
interbank market, the Lender shall notify the Borrower that the Interest Rate
shall be the Prime Rate, plus one percent (1%). As used in this Agreement,
"Interest Period" shall mean each respective and successive monthly period
commencing on the Closing Date or the Payment Date in respect of the
immediately preceding Interest Period, as the case may be, provided, however,
that no Interest Period shall commence or extend past the Maturity Date.
(c) Any amount of principal or any other amount due hereunder
which is not paid when due, whether at stated maturity, by acceleration or
otherwise, shall bear interest from the date when due until such amount is paid
in full, payable on demand, at a rate per annum equal at all times to two
percent (2%) above the Interest Rate.
(d) In no event shall any interest rate provided for in this
Agreement or the Note exceed the maximum rate permitted by the then applicable
law. It is the intention of the parties hereto to strictly comply with
applicable usury laws; accordingly, it is agreed that, notwithstanding any
provision to the contrary in this Agreement, in the Note, or in the other Loan
Documents, in no event shall this Agreement, the Note, or the other Loan
Documents be construed to charge, contract for or require the payment or permit
the collection of interest in excess of the maximum amount permitted by
applicable law. If any such excess interest is contracted for, charged or
received under this Agreement, the Note or the other Loan Documents, or in the
event that all of the principal balance shall be prepaid, so that under any of
such circumstances the amount of interest contracted for, charged or received
on the principal balance shall exceed the maximum amount of interest permitted
by applicable law, then in such event (i) the provisions of this Section
1.04(d) shall govern and control, (ii) neither the Borrower nor any other
person or entity now or hereafter liable for the payment thereof shall be
obligated to pay the amount of such interest to the extent that it is in excess
of the maximum amount of interest permitted by applicable law, (iii) any such
excess which may have been collected shall be either applied as a credit
against the then unpaid principal balance or refunded to the Borrower, at the
option of the Lender, and (iv) the effective rate of interest shall be
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automatically reduced to the maximum lawful contract rate allowed under
applicable law as now or hereafter construed by the courts having jurisdiction
thereof. It is further agreed that without limitation of the foregoing, all
calculations of the rate of interest contracted for, charged or received under
this Agreement, the Note and the other Loan Documents which are made for the
purpose of determining whether such rate exceeds the maximum lawful contract
rate, shall be made, to the extent permitted by applicable law, by amortizing,
prorating, allocating and spreading in equal parts during the period of the
full stated term of the indebtedness evidenced hereby, all interest at any time
contracted for, charged or received from the Borrower or otherwise by the
Lender in connection with such indebtedness; provided, however, that if any
applicable state law is amended or the law of the United States of America
preempts any applicable state law, so that it becomes lawful for the Lender to
receive a greater simple interest per annum rate than is presently allowed, the
Borrower agrees that, on the effective date of such amendment or preemption as
the case may be, the lawful maximum hereunder shall be increased to the maximum
simple interest per annum rate allowed by the higher of the amended state law
or the law of the United States of America.
Section 1.05 Payments.
(a) The payment obligations of the Borrower under the Note and all
other amounts payable under this Agreement to the Lender shall be paid to the
Lender at the address set forth for the Lender in Section 5.01 of this
Agreement or at such other place as the Lender may designate (not less than one
(1) Business Day prior to the due date therefor), not later than the close of
business on the due date thereof, in lawful money of the United States. All
payments shall be made (i) without set-off, counterclaim or condition and (ii)
free and clear of, and without deduction for or on account of, any present or
future taxes, levies, duties, imposts, charges, fees, deductions or
withholdings of any nature ("Taxes"), unless the Borrower is required by law or
regulation to make payment subject to any Taxes. In the event that the Borrower
is required by law or regulation to make any deduction or withholding on
account of any Taxes from any payment due under this Agreement, then: (a) the
Borrower shall notify the Lender promptly as soon as it becomes aware of such
requirement and shall remit promptly the amount of such Taxes to the
appropriate taxation authority, and in any event prior to the date on which
penalties attach thereto; and (b) such payment shall be increased by such
amount as may be necessary to ensure that the Lender receives a net amount,
free and clear of all Taxes, equal to the full amount which the Lender would
have received had such payment not been subject to such Taxes (other than
Excluded Income Taxes as such term is defined below). Notwithstanding the
foregoing, the Borrower shall not be liable for, or required to pay, any Taxes
which are overall income or franchise taxes imposed at any time on the Lender
in the United States of America or any state or local government or taxing
authority in any state in which the Lender conducts business ("Excluded Income
Taxes"). Each such payment or reimbursement by the Borrower shall be net of any
credit or the value of any deduction received by the Lender thereon to the
extent that the same can be determined by the Lender (as certified by the
Lender to the Borrower, such certificate to be conclusive absent manifest
error). The Borrower shall indemnify the Lender against any liability of the
Lender in respect of such Taxes and shall supply copies of applicable tax
receipts.
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(b) If any payment to be made by the Borrower shall become due on
a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day.
(c) Each payment to be made on a Payment Date and all prepayments
and other payments shall be applied first to the payment of accrued and unpaid
interest on the Note, then to the payment of all other amounts due under this
Agreement and the other Loan Documents, and the balance shall be applied to the
payment of principal due under the Note.
(d) The Borrower shall indemnify the Lender on demand against all
costs, expenses, liabilities and losses (including funding losses) sustained or
incurred by the Lender as a result of or in connection with: (a) the occurrence
and/or continuance of any Event of Default (or event which, with the giving of
notice and/or lapse of time or other applicable condition might constitute an
Event of Default); and/or (b) any judgment or order which relates to any sum
due hereunder being expressed in a currency other than the currency expressed
to be due hereunder and as a result of a variation in rates of exchange between
the rate at which such amount is converted into such other currency for the
purposes of such judgment or order and the rate prevailing on the date of
actual payment of such amount pursuant thereto; and/or (c) any postponement of
the Closing Date or any Advance occurring because of one or more of the
conditions precedent set forth in Article II shall not have been satisfied or
waived; and/or (d) any payment of principal of or interest on the Note made on
a date which is not a Payment Date. The above indemnities are separate and
independent obligations of the Borrower and apply irrespective of any
indulgence granted by the Lender.
Section 1.06 Prepayment.
(a) Mandatory Prepayment.
(i) Total Loss. If there shall have occurred a Total
Loss as herein defined, on the earlier of (x) the date insurance
proceeds are received or (y) seventy five (75) days after the date of
occurrence of the Total Loss, the Borrower shall (A) prepay the
outstanding principal balance under the Note in an amount equal to the
outstanding principal amount of the Loan on the date of prepayment
(without counting any amount being prepaid on such date), multiplied
by a fraction, the numerator of which is the Fair Market Value of the
lost Rig as most recently determined under Section 1.06(a)(iv) and the
denominator of which is the Collateral Value most recently determined
under Section 1.06(a)(iii) (including the lost Rig), and (B) pay
accrued interest thereon to the date of such prepayment together with
any other amount due hereunder or under any Loan Document. The Lender
shall apply payments received pursuant to this Section 1.06(a)(i) in
accordance with Section 1.05(c) hereof, provided, however, that the
principal repayments shall be applied so that the remaining
installments of principal, if any, are reduced on a pro rata basis,
such reduction to be confirmed by the Lender in a certificate
delivered to the Borrower which certificate shall be conclusive absent
manifest error. No Prepayment Premium shall be payable with respect to
any Mandatory Prepayments made by the Borrower pursuant to this
Section 1.06(a).
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(ii) "Total Loss" means in respect of a Rig (i) the actual
or constructive or compromised or arranged total loss of such Rig; or
(ii) the requisition for title or other compulsory acquisition of such
Rig otherwise than by requisition for rental; or (iii) the seizure,
attachment, detention or confiscation of such Rig by any government or
by persons acting or purporting to act on behalf of any government
unless such Rig is released from such seizure, attachment, detention
or confiscation within thirty (30) days of the occurrence thereof. A
Total Loss shall be deemed to have occurred (a) in the event of an
actual total loss of a Rig, on the date of such loss, (b) in the event
of damage to a Rig which results in a constructive or compromised or
arranged total loss of such Rig, on the date of the occurrence of the
event giving rise to such damage, or (c) in the case of any event
referred to in clauses (ii) or (iii) above, on the date of the
occurrence of such event. In the event of any Total Loss or
requisition of a Rig, the Borrower shall give written or telegraphic
notice to the Lender not later than ten (10) days after a Responsible
Officer of the Borrower has actual knowledge of such occurrence.
(iii) Collateral Value. On or before the Closing Date and
again on the Long-Term Loan Conversion Date, the Lender shall arrange
to have the Fair Market Value of each of the Rigs determined at the
Borrower's expense by an independent appraisal firm nominated by the
Borrower from a list of three independent appraisal firms compiled by
the Lender. Each such valuation shall be based on the Fair Market
Value of each Rig and the oil field tubulars or drill pipe
attributable to such Rig. The aggregate of the most recent valuations
of each Rig wholly owned by the Borrower is hereinafter referred to as
the "Collateral Value". If, on the Long-Term Loan Conversion Date,
the outstanding principal amount of the Loan shall exceed sixty-eight
percent (68%) of Collateral Value, then the Borrower shall either
prepay within five days of Lender's demand the amount of the Loan
necessary to restore the ratio referred to herein together with
payment of accrued interest thereon and the Prepayment Premium or
provide additional security for the Loan which shall be acceptable in
the sole opinion of the Lender for these purposes. The Lender shall
apply payments received under this Section 1.06(a)(iii) in accordance
with Section 1.05(c) hereof, provided, however, that the principal
repayments shall be applied so that the remaining installments of
principal, if any, shall be reduced on a pro rata basis, such
reduction to be confirmed by the Lender in a certificate delivered to
the Borrower which certificate shall be conclusive absent manifest
error.
(iv) Fair Market Value. The "Fair Market Value" of any
Rig shall be the value determined by an independent appraisal firm
chosen by the Borrower in accordance with clause (ii) above on the
basis of an arms-length purchase by a willing buyer from a willing
seller and without consideration of any drilling contract, or other
rig employment contract. The appraisal firm's valuation shall be made
without physical inspection, unless otherwise required by the Lender.
(b) Voluntary Prepayment. (i) The Borrower may prepay in full or
in part in amounts of not less than USD 500,000, its indebtedness under the
Note on the next Payment Date after giving at least thirty (30) Business Days
prior notice of such prepayment. During the first twenty-four (24) months,
prepayments which, in the aggregate, exceed three- fourths (3/4) of the amount
of the Loan outstanding shall include a premium (the "Prepayment Premium") in
an amount equal to two percent (2%) of the aggregate principal amount prepaid.
Prepayments made during the first twenty-four months which, in the aggregate,
are less than three-fourths (3/4) of the
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amount of the Loan outstanding shall include a premium (the "Prepayment
Premium") in an amount equal to two percent (2%) of the aggregate principal
amount prepaid. Prepayments made during the first twenty-four months which, in
the aggregate, are less than three-fourths (3/4) of the amount of the Loan
outstanding shall include a Prepayment Premium in an amount equal to one-half
of one percent (0.5%) of the aggregate principal amount prepaid. Any
prepayments made hereunder more than twenty-four (24) months after the Closing
Date shall not include a Prepayment Premium.
(ii) The Lender shall apply payments received pursuant to this
Section 1.06(b) in accordance with Section 1.05(c) hereof, provided, however,
that the principal repayments shall be applied so that the remaining
installments of principal, if any, shall be reduced on a pro rata basis, such
reduction to be confirmed by the Lender in a certificate delivered to the
Borrower which certificate shall be conclusive absent manifest error.
Section 1.07 Security. All amounts due hereunder and under the Note
shall be secured by the Security Agreement in form and substance satisfactory
to the Lender.
Section 1.08 Commitment Fee. The Borrower shall pay to the Lender a
commitment fee in an amount of USD 20,000 which Lender acknowledges has been
paid to the Lender before the Closing Date.
Section 1.09 Short-Term Loan Fee. The Borrower shall pay to the
Lender a short-term loan fee of one quarter of one percent (.25%) per annum on
the unused portion of the Loan during the Short-Term Loan Period, computed on
the difference between USD 22,000,000 and the average daily outstanding balance
of the Loan, payable quarterly in arrears on the last Business Day of each
calendar quarter, beginning December 31, 1996.
ARTICLE II.
CONDITIONS PRECEDENT
Section 2.01 Conditions Precedent. The Lender's execution and
delivery of this Agreement and the making of the Loan is subject to the
following conditions having been satisfied in the opinion of the Lender on or
prior to the Closing Date:
(a) Each of this Agreement and the other Loan Documents shall have
been duly authorized and executed with original counterparts thereof delivered
to the Lender.
(b) The Borrower and Guarantor shall have delivered to Lender
evidence of good standing, certificates of incumbency and duly certified
resolutions of their respective Boards of Directors and all such other
corporate documentation authorizing each to enter into the transactions
contemplated by this Agreement and the other Loan Documents.
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(c) The Lender shall have received opinions from Xxxxx &
Xxxxxxxxx, counsel to the Borrower and the Guarantor, and an opinion of its
special counsel, Gardere Xxxxx Xxxxxx & Xxxxx, L.L.P., each in form and
substance satisfactory to the Lender.
(d) The representations and warranties contained in Article III of
this Agreement and in each other Loan Document shall be true on the Closing
Date with the same effect as though such representations and warranties had
been made on and as of such date, and no Event of Default specified in Article
IV hereof and no event which, with the lapse of time or the notice and lapse of
time specified in Article IV hereof, would become such an Event of Default,
shall have occurred and be continuing or shall have occurred at the completion
of the making of the Loan, and the Lender shall have received satisfactory
certificates signed by a Responsible Officer of the Borrower or the Guarantor,
as to all questions of fact involved in this condition.
(e) The Lender shall have received, reviewed and accepted the
audited consolidated financial statements of the Guarantor dated as of the
period ending on December 31, 1995, prepared in accordance with generally
accepted United States accounting principles.
(f) There shall have been no material adverse change in the
business, financial condition or operations of the Borrower or the Guarantor
since December 31, 1995.
(g) The Lender shall have received evidence that the person
specified to act as agent for service of process for the Borrower, pursuant to
Section 5.03 has agreed to so act.
(h) The Lender shall have received a certificate of Borrower
signed by an officer in charge of environmental affairs and safety as to
compliance by the Borrower with all environmental, safety and public health
laws and regulations applicable to the Borrower, without limitation of the
foregoing, all other laws and regulations affecting or relating to the Rigs,
the non-compliance with which would have a material adverse effect on the
business, properties or condition (financial or otherwise) of any thereof.
(i) The Lender shall have received evidence satisfactory to it
that the Borrower has good title to all of the Rigs, including, but not limited
to, the Rigs previously owned by the Guarantor and covered by the Security
Agreement dated as of March 14, 1995, as amended.
(j) The Borrower shall have provided evidence of insurance
maintained by the Borrower and approved by the Lender on the Rigs as required
by Article 5 of the Security Agreement.
(k) The Lender shall have received banking references respecting
the Borrower's affairs which, in the sole discretion of the Lender, are
satisfactory to the Lender.
(l) The Security Agreement shall have been duly executed and
delivered and shall create a first priority lien on the Rigs under the laws of
the State of Texas.
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(m) Financing statements or other documents necessary to perfect
the Lender's security interests under the Security Agreement in the State of
Texas or any other relevant jurisdiction shall have been filed.
(n) The Lender shall have received a report appraising the Fair
Market Value and Collateral Value of the Rigs prepared by X.X.X. Valuations,
Inc. in form and substance satisfactory to the Lender.
(o) The Rigs shall not have been the subject of a Total Loss and
shall not have sustained any material damage to their condition since the date
of the inspection and survey reports therefor delivered to the Lender pursuant
to Section 2.01(n), or materially decreased in value from the value attributed
thereto as set forth in the appraisal report therefor delivered to the Lender
pursuant to Section 2.01(n).
(p) The Guarantor shall have executed and delivered to the Lender
all documents necessary to terminate the Loan Agreement and Security Agreement
dated as of March 14, 1995.
(q) The Lender shall have received such other documents and
instruments it may reasonably request, in each case in form and substance
reasonably satisfactory to it.
Section 2.02 Conditions to Subsequent Advances. The Lender's
obligation to make Advances subsequent to the first Advance is subject to the
following conditions having been satisfied in the opinion of the Lender on or
prior to the date of each such subsequent Advance:
(a) Certification by a Responsible Officer that no Event of
Default has occurred and is continuing.
(b) If the proceeds of any such subsequent Advance shall be used
by the Borrower for the acquisition of additional land drilling rigs and/or
drilling equipment, then due provision shall have been made for (i) the
Borrower becoming the legal owner of all right, title and interest in such
drilling rigs and/or drilling equipment, (ii) the Lender becoming the holder of
a perfected, first priority security interest in such drilling rigs and/or
drilling equipment, and (iii) insurance being placed on such drilling rigs
and/or drilling equipment as required by Section 5 of the Security Agreement.
(c) There shall not have occurred, in the sole judgment of the
Lender, a material adverse change in the business, financial condition or
operation of the Borrower or the Guarantor.
Section 2.03 Waiver of Conditions Precedent. All of the conditions
precedent contained in this Article II are for the sole benefit of the Lender
and the Lender may waive any or all of them in its absolute discretion.
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ARTICLE III.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01 Representations of the Borrower. The Borrower represents
and warrants that:
(a) The Borrower is a corporation, duly organized and validly
existing, in good standing under the laws of the State of Delaware and has the
requisite power and authority (i) to carry on its business as presently
conducted, (ii) to enter into and perform its obligations under each Loan
Document to which it is a party, (iii) to borrow moneys, and (iv) to grant a
security interest on the Rigs and give the security provided in the Security
Agreement.
(b) The execution, delivery and performance by the Borrower of
each Loan Document, and any other instrument or agreement provided for by this
Agreement, have been duly authorized by all necessary corporate action, do not
require stockholder approval other than such as has been duly obtained or
given, do not or will not contravene any of the terms of its articles of
incorporation or by-laws, and will not violate any provision of law or of any
order of any court or governmental agency or constitute (with or without notice
or lapse of time or both) a default under, or result (except as contemplated by
this Agreement) in the creation of any security interest, lien, charge or
encumbrance upon any of its properties or assets pursuant to, any agreement,
indenture or other instrument to which it is a party or by which it may be
bound; this Agreement and each Loan Document to which it is a party has been
duly executed and delivered by the Borrower and constitutes its legal, valid
and binding agreement or instrument, enforceable in accordance with the
respective terms thereof.
(c) There are no suits or proceedings pending or to its knowledge
threatened against or affecting the Borrower which if adversely determined
would have a material adverse effect upon its financial condition, operations
or business taken as a whole.
(d) The registered place of business of the Borrower is 0000
Xxxxxx Xxxxxxx, Xxxxxx, Xxxxx 00000. The principal place of business of the
Borrower and the place where all records relating to the transactions
contemplated hereby, including records relating to the operations of the Rigs
are kept is 0000 Xxxxxx Xxxxxxx, Xxxxxx, Xxxxx 00000.
(e) Other than such as have been obtained, no license, consent,
approval of or filing or registration with any Governmental Agency or other
regulatory authority is required for the execution, delivery and performance of
this Agreement or any Loan Document or any instrument contemplated herein or
therein. The Borrower is the holder of all certificates and authorizations of
governmental authorities required by law to enable it to engage in the business
transacted by it.
(f) No part of the proceeds of the Loan will be used for any
purpose that violates the provisions of any of Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System or any other regulation of
such Board of Governors. The Borrower is not engaged in the
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business of extending credit to others for the purpose of purchasing or
carrying margin stock within the meaning of Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System. If requested by the Lender,
the Borrower will furnish to the Lender in connection with the Loan hereunder a
statement in conformity with the requirements of Federal Reserve Form U-1
referred to in said Regulation U. The Borrower is not an "investment company"
or a company "controlled" by an "investment company" (as each of such terms is
defined or used in the Investment Company Act of 1940, as amended). No proceeds
of the Loan will be used to acquire any security in any transaction which is
subject to Sections 13 and 14 of the Securities Exchange Act of 1934, as
amended.
(g) The Rigs are and will be on the Closing Date: (a) owned by the
Borrower, free and clear of all liens, charges and rights of others except as
provided in the Security Agreement; and (b) in good condition, working order
and repair.
(h) The Borrower has filed or caused to be filed all tax returns
required by any applicable jurisdiction which are required to be filed and has
paid or caused to be paid all taxes as shown on such returns or on any
assessment received by it to the extent that such taxes have become due and
except as to such taxes being contested in good faith by appropriate
proceedings for which adequate reserves are being maintained. The Borrower has
established reserves to the extent believed by it to be adequate for the
payment of additional taxes for years which have not been audited by the
respective tax authorities.
(i) The Borrower has no subsidiaries. The Guarantor is the holder
of all of the issued and outstanding shares of the Borrower.
(j) (i) The Borrower has duly complied with, and the Rigs and
its other properties and operations are in compliance with, the
provisions of all applicable environmental, health and safety laws,
codes and ordinances and all rules and regulations promulgated
thereunder of all Governmental Agencies unless such compliance would
violate the laws or regulations of the jurisdiction in which the Rigs
are operating.
(ii) As of the date of this Agreement, the Borrower has
received no notice from any Governmental Agency, and has no knowledge,
of any fact(s) which constitute a violation of any applicable
environmental, health or safety laws, codes or ordinances, and any
rules or regulations promulgated thereunder of all Governmental
Agencies, which relate to the use or ownership of the Rigs or other
properties owned or operated by the Borrower.
(iii) The Borrower has been issued all required permits,
licenses, certificates and approvals of all Governmental Agencies
relating to (a) air emissions, (b) discharges to surface water or
ground water, (c) noise emissions, (d) solid or liquid waste disposal,
(e) the use, generation, storage, transportation, treatment, recycling
or disposal of Hazardous Substances or (f) other environmental, health
or safety matters which are material and necessary for the ownership
or operation of the Rigs or other properties
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owned or operated by the Borrower and such permits, licenses,
certificates and approvals are in full force and effect on the date of
this Agreement.
(iv) Except as disclosed to the Lender in writing, to the
best of the Borrower's knowledge, except in accordance with a valid
governmental permit, license, certificate or approval, there has been
no spill or unauthorized discharge or release of any Hazardous
Substance to the environment at, from, or as a result of any
operations on the Rigs or other properties and operations owned or
operated by the Borrower required to be reported to any Governmental
Agency.
(v) Except as disclosed to the Lender in writing, there
has been no material complaint, compliance order, compliance schedule,
notice letter, notice of citation or other similar notice from any
applicable environmental agency which concerns the operations of the
Rigs or other properties owned or operated by the Borrower.
(k) All representations and warranties made by the Borrower herein
or pursuant to any Loan Document or made in any certificate or written
statement delivered pursuant hereto or thereto (i) do not contain any untrue
statement of or omit to state a material fact necessary to make the statements
contained herein or therein not misleading and (ii) shall survive the making of
the Loan hereunder and the execution and delivery to the Lender of the Note and
any other Loan Document.
Section 3.02 Covenants of the Borrower. After the date of execution
of this Agreement and until payment in full of the Note and performance by the
Borrower of its obligations under this Agreement and the other Loan Documents,
the Borrower agrees that it will:
(a) promptly inform the Lender of any event which constitutes or
will constitute, by giving of notice or lapse of time, or both, an Event of
Default or adversely affect its ability to fully perform its obligations under
this Agreement and the Loan Documents to which it is a party;
(b) pay and discharge, or cause to be paid and discharged, any
taxes, assessments and governmental charges or levies that may be imposed upon
the Borrower or upon its income or profits or upon any of its properties prior
to the date on which penalties attach thereto and all lawful claims which, if
unpaid, might become a lien or charge upon its properties; provided, however,
that this provision shall not be deemed to require payment of any taxes,
assessments, governmental charges, levies or claims while the Borrower contests
the validity thereof by appropriate proceedings in good faith and so long as it
shall have set aside on its books adequate reserves with respect thereto;
(c) preserve and maintain, or cause to be preserved or maintained,
(i) its existence in good standing in the State of Delaware and in all
jurisdictions where it is currently conducting business, and (ii) all its
rights, privileges and franchises thereunder;
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(d) file or cause to be filed in such offices as shall be required
or appropriate under any applicable Uniform Commercial Code of any State or any
other statute of any other jurisdiction, and in such manner and form as the
Lender may require or as may be reasonably necessary or appropriate under
applicable law, any financing statement or statements or other instruments that
may be reasonably necessary or desirable or that the Lender may request in
order to create, perfect, preserve, continue, validate or satisfy the Lender's
liens on and security interests and rights in collateral arising out of or
related to this Agreement and any Loan Document;
(e) promptly notify the Lender of any proposed change in its name
or its assumed name, location of its registered place of business or the office
where its records are kept or any principal place of business stated in Section
3.01(d) hereof;
(f) promptly obtain and upon the reasonable request, deliver to
the Lender all authorizations, approvals, consents and licenses and renewals
thereof required under any applicable law or regulation with respect to this
Agreement, the Loan Documents, and the Rigs and it shall comply with the terms
of the same;
(g) promptly notify the Lender of any suit or proceedings brought
against the Borrower or, to the knowledge of the Borrower, threatened against
or affecting it which, if adversely determined, would have a material adverse
effect upon the financial condition, operations or business of the Borrower
taken as a whole;
(h) upon the request of the Lender, give the Lender or any
representative of the Lender access during normal business hours to, and permit
the Lender or such representative to inspect, all properties belonging to the
Borrower and permit such representative to examine, copy and make extracts from
such books, records and documents in the possession of the Borrower, relating
to the affairs of the Borrower, as such representative may reasonably request.
If requested by the Borrower, the Lender will enter into the Lender's standard
confidentiality agreement respecting the affairs of the Borrower;
(i) comply with and use its best efforts to cause its agents,
contractors and sub-contractors (while such persons are acting within the scope
of their contractual relationship with the Borrower) to so comply with all
material, applicable environmental, health and safety laws, codes and
ordinances, and all rules and regulations promulgated thereunder of all
Governmental Agencies; and with the terms and conditions of all applicable
permits, licenses, certificates and approvals of all Governmental Agencies now
or hereafter granted or obtained with respect to the Rigs or other properties
owned or operated by the Borrower unless such compliance would violate the laws
or regulations of the jurisdictions in which the Rigs are operating.
(i) The Borrower will use its best efforts and safety
practices to prevent the unauthorized release, discharge, disposal,
escape or spill of Hazardous Substances on or about the Rigs or other
properties owned or operated by the Borrower.
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(ii) The Borrower shall notify the Lender, in writing,
within five (5) Business Days of any of the following events occurring
after the date of this Agreement:
A. Any written notification made by the Borrower
to any federal, state or local environmental agency required
under any federal, state or local environmental statute,
regulation or ordinance relating to a spill or unauthorized
discharge or release of any Hazardous Substance to the
environment at, from, or as a result of any operations on, the
Rigs or other properties and operations owned or operated by
the Borrower;
B. Knowledge by a Responsible Officer of the
Borrower of receipt of service by the Borrower of any
complaint, compliance order, compliance schedule, notice
letter, notice of violation, citation or other similar notice
or any judicial demand by any court, federal, state or local
environmental agency, alleging (i) any spill, unauthorized
discharge or release of any Hazardous Substance to the
environment from, or as a result of the operations on, the
Rigs or other properties owned or operated by the Borrower or
(ii) violations of applicable laws, regulations or permits
regarding the generation, storage, handling, treatment,
transportation, recycling, release or disposal of Hazardous
Substances on or as a result of operations on the Rigs or
other properties and operations owned or operated by the
Borrower.
C. It is understood by the parties hereto that
the aforementioned notices are solely for the Lender's
information, may not otherwise be required by any federal,
state or local environmental laws, regulations or ordinances,
and are to be considered confidential information by the
Lender.
D. The term "environmental agency" as used
herein shall include, but not be limited to, the United States
Environmental Protection Agency, the Texas Railroad
Commission, the United States Minerals Management Service, the
United States Department of Transportation (in its
administration of the Hazardous Materials Transportation Act,
49 U.S.C. Sec. 1801, et seq.) and other analogous or similar
Governmental Agencies regulating or administering statutes,
regulations or ordinances relating to or imposing liability or
standards of conduct concerning the generation, storage, use,
production, transportation, handling, treatment, recycling,
release or disposal of any Hazardous Substance.
(iii) The Borrower hereby agrees to indemnify and hold the
Lender harmless from and against any and all claims, losses,
liability, damages and injuries of any kind whatsoever asserted
against the Lender with respect to or as a direct result of the
presence, escape, seepage, spillage, release, leaking, discharge or
migration from any Rig or other properties owned or operated by the
Borrower of any Hazardous Substance, including without limitation, any
claims asserted or arising under any applicable environmental, health
and safety laws, codes and ordinances, and all rules and
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regulations promulgated thereunder of all Governmental Agencies,
regardless of whether or not caused by or within the control of the
Borrower subject to the following:
A. It is the parties' understanding that the
Lender does not now, has never and does not intend in the
future to exercise any operational control or maintenance over
the Rigs or any other properties and operations owned or
operated by the Borrower, nor has it in the past, presently,
or intend in the future to, maintain an ownership interest in
the Rigs or any other properties owned or operated by the
Borrower except as may arise upon enforcement of the Lender's
rights under the Security Agreement.
B. Should, however, the Lender hereafter
exercise any ownership interest in or operational control over
the Rigs or any other properties owned or operated by the
Borrower, e.g., including but not limited to, through
foreclosure, then the above stated indemnity and hold harmless
shall be limited with respect to any actions or failures to
act by the Lender subsequent to exercising such interest or
operational control, to the extent such action or inaction by
the Lender is found by a court or Governmental Agency with
competent jurisdiction to have caused or made worse any
condition for which liability is asserted, including but not
limited to, the presence, escape, seepage, spillage, leaking,
discharge or migration on or from the Rigs or other properties
owned or operated by the Borrower of any Hazardous Substance.
C. The indemnity and hold harmless contained in
this Subsection (i) shall not extend to the Lender in its
capacity as an equity investor in the Borrower or as an owner
of any property or interest as to which the Borrower is also
owner but only to its capacity as a lender, a holder of
security interests, or a beneficiary of security interests.
(j) not, without the prior written consent of the Lender, (i)
sell, transfer, lend, lease or otherwise dispose of the Rigs, the whole or, in
the opinion of the Lender, any substantial part of its business, property or
other assets, whether by a single transaction or by a series of transactions,
(related or not), (ii) materially change or permit to change the management or
ownership of the Borrower, (iii) commit any Rig to a drilling contract for a
period longer than twelve (12) months (including any committed extensions or
renewals) with an entity not an affiliate of Borrower; or (iv) transfer the
management or operation of its property, assets or business, or in the opinion
of the Lender, any substantial part of its property, assets or business to any
other person, firm or corporation.
(k) not, other than pursuant to or permitted by the Loan Documents
create, assume or permit to exist any encumbrance upon the Rigs, or any of its
property or assets described in the Security Agreement (whether now owned or
hereafter acquired);
(l) not, without the prior written consent of the Lender (which
consent shall not be unreasonably withheld): (i) conduct or manage any business
or activity other than as presently
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conducted or managed or as is contemplated by this Agreement and the Loan
Documents; or (ii) liquidate or dissolve or consolidate or amalgamate with, or
merge into, any other entity;
(m) not, without the prior written consent of the Lender repay any
stockholders' loan nor make any loans or advances to any other person (except
pursuant to operating agreements and then only in an aggregate amount not
exceeding USD 4,000,000 at any one time);
(n) forthwith upon demand by the Lender and at the Borrower's sole
cost and expense, execute and provide all such assurances and do all acts and
things as the Lender or any receiver in its absolute discretion may reasonably
require for: (i) perfecting or protecting the security created (or intended to
be created) by any of the Loan Documents, including, without limitation,
granting in favor of the Lender a security interest covering the security
created (or intended to be created) by any of the Loan Documents with respect
to any obligations of the Borrower hereafter owing to the Lender; or (ii)
preserving or protecting any of the rights of the Lender under any of the Loan
Documents; or (iii) facilitating the appropriation or realization of any of the
collateral assigned or granted to the Lender under any of the Loan Documents
and enforcing the security constituted by any of the Loan Documents on or at
any time after the same shall have become enforceable; or (iv) the exercise of
any power, authority or discretion vested in the Lender under any of the Loan
Documents;
(o) deliver to the Lender such financial or other information
relating to it, any of the transactions contemplated by this Agreement or any
of the Loan Documents, as may be reasonably requested by the Lender;
(p) upon the request of the Lender, give the Lender or any
representative of the Lender at any reasonable time, access to the Rigs and
permit the Lender or such representative to inspect the Rigs and any part
thereof, as the Lender or such representative may reasonably request;
(q) obtain an agreement in form and substance reasonably
satisfactory to the Lender from any person retained by or for the benefit of
the Borrower relating to the management of the Rigs that any indebtedness
incurred by such person for the benefit of the Rigs and any fees and expenses
paid to such manager shall be subject and subordinate to the lien created by
the Security Agreement; and
(r) maintain all permits and certificates which are material and
necessary under all applicable environmental, safety and public health laws and
regulations applicable to the Borrower and the Rigs, and all other laws and
regulations affecting or relating to the Rigs.
Section 3.03 Covenants of the Guarantor. After the date of execution
of this Agreement and until payment in full of the Note and performance by the
Guarantor of its obligations under this Agreement and the other Loan Documents,
the Guarantor agrees that it will:
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(a) promptly inform the Lender of any event which constitutes or
will constitute, by giving of notice or lapse of time, or both, an Event of
Default or adversely affect its ability to fully perform its obligations under
this Agreement and the Loan Documents to which it is a party;
(b) preserve and maintain, or cause to be preserved or maintained,
(i) its existence in good standing in the State of Delaware and in all
jurisdictions where it is currently conducting business, and (ii) all its
rights, privileges and franchises thereunder;
(c) not, without the prior written consent of the Lender, (i)
sell, transfer, lend, lease or otherwise dispose of the whole or, in the
opinion of the Lender, any substantial part of its business, property or other
assets, whether by a single transaction or by a series of transactions,
(related or not), or (ii) materially change the management of the Guarantor;
(d) not, without the prior written consent of the Lender (which
consent shall not be unreasonably withheld): (i) conduct or manage any business
or activity other than as presently conducted or managed or as is contemplated
by this Agreement and the Loan Documents; or (ii) liquidate or dissolve or
consolidate or amalgamate with, or merge into, any other entity;
(e) not, without the prior written consent of the Lender repay any
stockholders' loan nor make any loans or advances to any other person (except
pursuant to operating agreements and then only in an aggregate amount not
exceeding USD 4,000,000 at any one time);
(f) deliver to the Lender such financial or other information
relating to it, any of the transactions contemplated by this Agreement or any
of the Loan Documents, as may be reasonably requested by the Lender;
(g) deliver, or shall cause to be delivered, to the Lender at
least two copies and as many additional copies as the Lender may reasonably
require from time to time of, (i) its audited annual consolidated financial
statements (including the balance sheet and income statement of the Borrower),
in a form consistent with generally accepted United States accounting
principles and practices consistently applied, as soon as is practicable after
the same have been issued but in any case within one hundred twenty (120) days
of the end of its fiscal year certified by Coopers and Xxxxxxx or other
auditors as may be acceptable to the Lender that the consolidated financial
statements present fairly, in all material respects, the financial position of
the Guarantor as of the date thereof, (ii) its quarterly consolidated and
consolidating financial statements (including the balance sheet and income
statement of the Borrower) in a form consistent with generally accepted United
States accounting principles and practices consistently applied, as soon as is
practicable after the end of each financial quarter but in any case within
sixty (60) days of the end of its financial quarter certified by one of its
Responsible Officers that the consolidated financial statements present fairly,
in all material respects, the financial position of the Guarantor and the
Borrower as of the date thereof, (iii) such financial or other information
relating to it, any of the transactions contemplated by this Agreement or any
of the other Loan Documents, as may reasonably be requested by the Lender or
generally made available to its other creditors, its shareholders and to any
governmental authorities;
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(h) maintain, on a quarterly basis, a consolidated Cash Flow
Coverage Ratio of at least 2.0:1.0;
(i) maintain, on a consolidated basis, Tangible Net Worth of at
least USD 36,000,000;
(j) maintain, on a consolidated basis, a ratio of Total
Liabilities to Tangible Net Worth not greater than 1.25:1.0;
(k) maintain and cause the Borrower to maintain all permits and
certificates which are material and necessary under all applicable
environmental, safety and public health laws and regulations applicable to the
Guarantor, the Borrower and the Rigs, and all other laws and regulations
affecting or relating to the Rigs; and
(l) deliver to the Lender, contemporaneously with the delivery to
the Lender of the annual and quarterly financial statements specified in
Section 3.03(g) above, its certificate (in form and substance satisfactory to
the Lender), signed by one of its Responsible Officers, (i) stating that such
officer has reviewed the relevant terms of this Agreement, the other Loan
Documents and all other agreements of the Guarantor and the Borrower which
evidence indebtedness for borrowed money, lease or other financial obligations
(the "Financial Obligation Agreements") and has made or caused to be made under
his supervision, a review of the transactions and condition of the Guarantor
and the Borrower during the relevant fiscal quarter or year, as the case may
be, and that such review has not disclosed the existence during such period,
nor does such Responsible Officer have knowledge of the existence as at the
date of such certificate, of any condition or event which constitutes an event
of default under any of the Loan Documents or Financial Obligation Agreements,
or which, after notice or lapse of time or both would constitute an event of
default under any of the Loan Documents or Financial Obligation Agreements, or
if any such condition or event existed or exists, specifying the nature and
period of existence thereof and what action the Guarantor or the Borrower has
taken or proposes to take with respect thereto, (ii) setting forth in form and
detail satisfactory to the Lender the calculations respecting compliance with
the financial covenants of this Agreement and (iii) for purposes of the annual
certificate only, attaching and certifying as true and correct a certificate
evidencing the insurance in place with respect to the Rigs and their operation
by the Borrower.
ARTICLE IV.
EVENTS OF DEFAULT
If any of the following events shall occur and be continuing, (each an
"Event of Default"):
A. the Borrower shall fail to pay any principal of or interest on
the Note, which failure shall continue for five (5) days after the date when
due;
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B. any representation or warranty made by either the Borrower or
the Guarantor herein or made in any certificate or financial statement
furnished to the Lender hereunder or under any of the Loan Documents shall
prove to have been incorrect in any material respect;
C. default in the performance of any agreement, covenant, term or
condition contained herein or in any Loan Document to be performed by the
Borrower or the Guarantor;
D. an event of default under any loan agreement, credit
agreement, security agreement, guaranty agreement, lease agreement or other
agreement now existing or hereafter entered into by the Borrower or the
Guarantor shall not have been remedied within any stated grace periods during
such time as USD 1,000,000 or more is outstanding under such agreement;
E. any license, consent or approval of any governmental body or
other regulatory authority required for the making and performance of this
Agreement or any instrument contemplated hereby or thereby shall have been
revoked, withdrawn, materially modified or withheld or shall otherwise fail to
remain in full force and effect;
F. Any of the following events shall occur:
(i) the Borrower or the Guarantor commences a voluntary
case under Title 11 of the United States Code as now or hereafter in
effect, or any successor thereto (the "Bankruptcy Code"); or
(ii) an involuntary case is commenced against the Borrower
or the Guarantor under the Bankruptcy Code and relief is ordered
against the Borrower or the Guarantor or the petition is controverted
but is not dismissed or stayed within sixty (60) days after the
commencement of the case; or
(iii) a custodian (as defined in the Bankruptcy Code) or a
similar official is appointed for, or takes charge of, all or
substantially all of the property of the Borrower or the Guarantor and
such appointment is not terminated within ninety (90) days; or
(iv) the Borrower or the Guarantor commences any other
proceeding under any reorganization, arrangement, readjustment of
debt, relief of debtors, dissolution, insolvency, liquidation or
similar law of any jurisdiction relating to the Borrower or the
Guarantor (whether now or hereafter in effect), or there is commenced
against the Borrower or the Guarantor any such proceeding which
remains undismissed or unstayed for a period of sixty (60) days or the
Borrower or the Guarantor is adjudicated insolvent or bankrupt; or the
Borrower or the Guarantor fails to controvert in a timely manner any
such case under the Bankruptcy Code or any such proceeding, or any
order of relief or other order approving any such case or proceeding
is entered; or
(v) the Borrower or the Guarantor by any act or failure
to act indicates its consent to, approval of or acquiescence in any
such case or proceeding or in the appointment of any custodian of or
for it or any substantial part of its property or suffers
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any such appointment to continue undischarged or unstayed for a period
of sixty (60) days; or
(vi) the Borrower or the Guarantor makes a general
assignment for the benefit of creditors; or
(vii) any corporate action is taken by either the Borrower
or the Guarantor for the purpose of effecting any of the foregoing.
G. an order, judgment or decree shall be entered, without the
application, approval or consent of the Borrower or the Guarantor by any court
of competent jurisdiction, approving a petition seeking reorganization of the
Borrower or the Guarantor seizure or attachment of all or a substantial part of
the Borrower's or the Guarantor's assets, and such order, judgment or decree
shall continue unstayed and in effect for any period of sixty (60) consecutive
days; or
H. judgments or orders for the payment of monies in excess of USD
750,000 in aggregate shall be rendered against the Borrower or the Guarantor
and such judgments or orders shall continue unsatisfied, unstayed or unhanded
for a period of thirty (30) days;
then the Lender may by written notice to the Borrower (1) immediately terminate
the commitment of the Lender hereunder; (2) declare the principal of, and
interest accrued to the date of such declaration on, the Note together with all
other amounts due hereunder or under any of the Loan Documents, to be forthwith
due and payable, whereupon the same shall become forthwith due and payable
(provided, however, no notice or declaration shall be required and such amounts
shall be immediately due and payable upon the occurrence of an event described
in Article IV(F) or (G) hereof) and (3) exercise any remedies to which it may
be entitled by any Loan Document or by applicable law.
ARTICLE V.
MISCELLANEOUS
Section 5.01 Notices. All notices, requests and demands shall be in
writing (including telecopier transmission) given to or made upon the
respective parties hereto as follows:
In the case of the Borrower, at
0000 Xxxxxx Xxxxxxx
Xxxxxx, Xxxxx 00000
Attention: Chief Financial Officer
Telecopier: (000) 000-0000
In the case of the Guarantor, at
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0000 Xxxxxx Xxxxxxx
Xxxxxx, Xxxxx 00000
Attention: Chief Financial Officer
Telecopier: (000) 000-0000
In the case of Lender, at
The CIT Group/Equipment Financing, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: (a) Senior Vice President - Credit
Telecopier: (000) 000-0000
(b) Legal Department
Telecopier: (000) 000-0000
with a copy to
The CIT Group/Equipment Financing, Inc.
000 Xxxxx Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: (a) Vice President - Credit
Telecopier: (000) 000-0000
(b) Vice President - Legal
Telecopier: (000) 000-0000
or in such other manner as any party hereto shall designate by written notice
to the other parties hereto. All such notices shall be effective upon delivery
or 3 days after being deposited in the United States mail with postage prepaid
certified, return receipt requested in a correctly addressed wrapper, or upon
receipt if delivered to Federal Express or similar courier company or
transmitted by telefax during normal business hours, except that all notices,
requests and demands to the Lender shall not be effective until received by the
Lender. All notices, demands, requests, communications and other documents
delivered hereunder or under the Loan Documents, unless submitted in the
English language, shall be accompanied by certified English translation
thereof.
Section 5.02 No Waiver. No failure on the part of the Lender to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Lender of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right.
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Section 5.03 Applicable Law and Jurisdiction. (a) THIS AGREEMENT AND
THE LOAN DOCUMENTS PROVIDED FOR HEREIN (INCLUDING, BUT NOT LIMITED TO, THE
VALIDITY AND ENFORCEABILITY HEREOF AND THEREOF) SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, OTHER THAN
CONFLICT OF LAWS RULES THEREOF. Any legal action or proceeding against the
Borrower or the Guarantor with respect to this Agreement or any Loan Document
may be brought in the courts of the State of New York, the U.S. Federal Courts
in such state, sitting in the County of New York, or in the courts of any other
jurisdiction where such action or proceeding may be properly brought, and the
Borrower and the Guarantor hereby irrevocably accept the jurisdiction of such
courts for the purpose of any action or proceeding. The Borrower and the
Guarantor hereby designate and irrevocably appoint and empower C T Corporation
System (the "Process Agent"), currently located at 0000 Xxxxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 in each case as its authorized agent to accept, receive and
acknowledge for and on behalf of each and its property service of any and all
process which may be served but only in any action, suit or proceeding of the
nature referred to above in the State of New York and further agree that
failure of such firm to give the Borrower or the Guarantor any notice of any
such service shall not impair or affect the validity of such service or of any
judgment rendered in any action or proceeding based thereon. The Borrower and
the Guarantor hereby irrevocably authorize and direct the Process Agent to
accept such service on its behalf. The Borrower and the Guarantor further
irrevocably consent to the service of process out of said courts by the mailing
thereof by the Lender by U.S. registered or certified mail postage prepaid to
the party to be served at its address designated in Section 5.01. The Borrower
and the Guarantor agree that a final judgment in any action or proceeding shall
be conclusive and may be enforced in any other jurisdiction by suit on the
judgment or in any other manner provided by law. Nothing in this Section 5.03
shall affect the right of the Lender to serve legal process in any other manner
permitted by law or affect the right of the Lender to bring any action or
proceeding against the Borrower and the Guarantor or their respective
properties in the courts of any other jurisdiction. To the extent that the
Borrower or the Guarantor has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service of
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to either itself or its property, the Borrower and
the Guarantor hereby irrevocably waive such immunity in respect of their
obligations under this Agreement and the other Loan Documents. The Borrower and
the Guarantor hereby irrevocably waives any objection which they may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or any Loan Document brought in the
Supreme Court of the State of New York, County of New York or the U.S. District
Court for the Southern District of New York, and hereby further irrevocably
waive any claim that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum.
(b) THE LENDER, THE BORROWER AND THE GUARANTOR IRREVOCABLY WAIVE ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
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Section 5.04 Severability. In the event that any provision of this
Agreement is held to be void or unenforceable in any jurisdiction, all other
provisions shall remain unaffected and be enforceable in accordance with their
terms in such jurisdiction, and all provisions of this Agreement shall remain
unaffected and shall be enforceable in accordance with their terms in all other
jurisdictions.
Section 5.05 Amendment. Neither this Agreement nor any provision
hereof, including without limitation this Section 5.05, may be amended,
modified, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the amendment,
modification, waiver, discharge or termination is sought. This Agreement shall
be binding upon and inure to the benefit of the Borrower, the Guarantor and the
Lender, and their respective successors and assigns, except that the Borrower
shall not have the right to assign its rights hereunder or any interest herein
without the prior written consent of the Lender.
Section 5.06 Assignment and Participation. The Lender shall have the
right, provided it complies with all applicable state and federal securities
laws, to assign or grant participations in all or any portion of the Loan
outstanding under this Agreement or the Note to any affiliate of the Lender or
to any foreign, federal or state banking institution, savings and loan
institution or finance company upon thirty (30) days written notice to the
Borrower of such assignment or participation.
Section 5.07 Costs, Expenses and Taxes. The Borrower agrees to pay on
demand all reasonable fees, costs and expenses in connection (i) with the
preparation, execution, delivery, administration, amendment and enforcement of
this Agreement, the Note, the other Loan Documents and any other documents to
be delivered hereunder and thereunder (including, without limitation, the
appraisal and inspection reports required hereunder) and any amendment,
modification or supplement hereto or thereto, including, without limitation,
the reasonable fees and out-of-pocket expenses of counsel for the Lender, and
any special counsel associated with them, and with respect thereto and the
filing of any document or instrument in connection with any of the foregoing,
(ii) with respect to reasonable fees and out of pocket expenses of counsel for
advising the Lender as to its rights and responsibilities under this Agreement
and the transactions contemplated thereby after an Event of Default or an event
which, with the giving of notice or lapse of time, or both, shall have
occurred, and (iii) with any filing or recording of any document or instrument.
In addition, the Borrower shall pay any and all stamp and other taxes
(including, without limitation penalties and interest assessed thereon) other
than Excluded Taxes payable or determined to be payable in connection with the
execution, delivery or performance of this Agreement and the Loan Documents and
any other documents to be delivered hereunder and thereunder and agrees to save
the Lender harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes.
Section 5.08 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument.
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Section 5.09 Section Headings. The headings of the various Sections
and subsections of this Agreement are for convenience of reference only and
shall not define or limit any of the terms or provisions hereof.
Section 5.11 Merger. THIS AGREEMENT AND THE LOAN DOCUMENTS EMBODY THE
ENTIRE AGREEMENT AMONG THE BORROWER AND THE GUARANTOR ON THE ONE HAND AND THE
LENDER ON THE OTHER HAND AND SUPERSEDE ALL PRIOR AGREEMENTS, REPRESENTATIONS
AND UNDERSTANDINGS, IF ANY, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
XXXXXXXXX DRILLING COMPANY
By: /s/ Xxxxx X. Xxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxx
---------------------------------------
Title: Vice President-Finance
--------------------------------------
XXXXXXXXX ENERGY, INC.
By: /s/ Xxxxx X. Xxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxx
---------------------------------------
Title: Vice President-Finance
--------------------------------------
THE CIT GROUP/EQUIPMENT FINANCING,
INC.
By: /s/ Xxxxxx X. Pitch
-----------------------------------------
Name: Xxxxxx X. Pitch
---------------------------------------
Title: Vice President
--------------------------------------
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