Exhibit 10.22
CREDIT AGREEMENT
BETWEEN
PRIMEENERGY CORPORATION
PRIMEENERGY MANAGEMENT CORPORATION
PRIME OPERATING COMPANY
EASTERN OIL WELL SERVICE COMPANY
SOUTHWEST OILFIELD CONSTRUCTION COMPANY
EOWS MIDLAND COMPANY
AND
GUARANTY BANK, FSB
AS AGENT AND LENDER
DECEMBER 19, 2002
REDUCING REVOLVING LINE OF CREDIT OF UP TO $50,000,000
TERM LOAN OF $4,000,000
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS AND INTERPRETATION 1
1.1 Terms Defined Above 1
1.2 Additional Defined Terms 1
1.3 Undefined Financial Accounting Terms 15
1.4 References 15
1.5 Articles and Sections 16
1.6 Number and Gender 16
1.7 Incorporation of Exhibits 16
ARTICLE II TERMS OF FACILITY 16
2.1A. Revolving Line of Credit 16
2.2 Letter of Credit Facility 17
2.3 Use of Loan Proceeds and Letters of Credit 19
2.4 Interest 19
2.5 Repayment of Loans and Interest 20
2.6 Outstanding Amounts 20
2.7 Time, Place, and Method of Payments 20
2.8 Pro Rata Treatment; Adjustments 21
2.9 Borrowing Base Determinations 21
2.10 Mandatory Prepayments 22
2.11 Voluntary Prepayments and Conversions of Loans 23
2.12 Commitment Fee 23
2.13 Facility Fee 23
2.14 Letter of Credit Fee 23
2.15 Loans to Satisfy Obligations of Borrower 23
2.16 Security Interest in Accounts; Right of Offset 24
2.17 General Provisions Relating to Interest 24
2.18 Yield Protection 25
2.19 Limitation on Types of Loans 27
2.20 Illegality 28
2.21 Regulatory Change 28
2.22 Limitations on Interest Periods 28
2.23 Letters in Lieu of Transfer Orders 29
2.24 Power of Attorney 29
ARTICLE III CONDITIONS 29
3.1 Receipt of Loan Documents and Other Items 29
3.2 Each Loan and Letter of Credit 32
ARTICLE IV REPRESENTATIONS AND WARRANTIES 34
4.1 Due Authorization 34
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4.2 Corporate Existence 34
4.3 Valid and Binding Obligations 34
4.4 Security Instruments 34
4.5 Title to Assets 35
4.6 No Material Misstatements 35
4.7 Liabilities, Litigation, and Restrictions 35
4.8 Authorizations; Consents 35
4.9 Compliance with Laws 35
4.10 ERISA 35
4.11 Environmental Laws 36
4.12 Compliance with Federal Reserve Regulations 36
4.13 Investment Company Act Compliance 36
4.14 Public Utility Holding Company Act Compliance 36
4.15 Proper Filing of Tax Returns; Payment of Taxes Due 37
4.16 Refunds 37
4.17 Gas Contracts 37
4.18 Intellectual Property 37
4.19 Casualties or Taking of Property 37
4.20 Locations of Borrower 37
4.21 Subsidiaries 38
ARTICLE V AFFIRMATIVE COVENANTS 38
5.1 Maintenance and Access to Records 38
5.2 Quarterly Financial Statements; Compliance Certificates 38
5.3 Annual Financial Statements 38
5.4 Oil and Gas Reserve Reports 38
5.5 Title Opinions; Title Defects 39
5.6 Notices of Certain Events 39
5.7 Letters in Lieu of Transfer Orders; Division Orders 40
5.8 Additional Information 40
5.9 Compliance with Laws 41
5.10 Payment of Assessments and Charges 41
5.11 Maintenance of Corporate Existence and Good Standing 41
5.12 Payment of Notes; Performance of Obligations 41
5.13 Further Assurances 41
5.14 Initial Fees and Expenses of Counsel to Lender 41
5.15 Subsequent Fees and Expenses of Lender 42
5.16 Operation of Oil and Gas Properties 42
5.17 Maintenance and Inspection of Properties 42
5.18 Maintenance of Insurance 42
5.19 INDEMNIFICATION 43
ARTICLE VI NEGATIVE COVENANTS 44
6.1 Indebtedness 44
6.2 Contingent Obligations 44
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6.3 Liens 45
6.4 Sales of Assets 45
6.5 Leasebacks 45
6.6 Loans or Advances 45
6.7 Investments 45
6.8 Dividends and Distributions 46
6.9 Issuance of Stock; Changes in Corporate Structure 46
6.10 Transactions with Affiliates 46
6.11 Lines of Business 46
6.12 ERISA Compliance 46
6.13 Interest Coverage Ratio 46
6.14 Current Ratio 46
6.15 Tangible Net Worth 46
6.16 Bank Debt Coverage Ratio 46
ARTICLE VII EVENTS OF DEFAULT 47
7.1 Enumeration of Events of Default 47
7.2 Remedies 49
ARTICLE VIII THE AGENT 49
8.1 Appointment 49
8.2 Waivers, Amendments 50
8.3 Delegation of Duties 50
8.4 Exculpatory Provisions 50
8.5 Reliance by Agent 51
8.6 Notice of Default 51
8.7 Non-Reliance on Agent and Other Lenders 51
8.8 Indemnification 52
8.9 Restitution 52
8.10 Agent in Its Individual Capacity 53
8.11 Successor Agent 53
8.12 Applicable Parties 53
ARTICLE IX MISCELLANEOUS 54
9.1 Assignments; Participations 54
9.2 Survival of Representations, Warranties, and Covenants 55
9.3 Notices and Other Communications 55
9.4 Parties in Interest 56
9.5 Rights of Third Parties 56
9.6 Renewals; Extensions 56
9.7 No Waiver; Rights Cumulative 57
9.8 Survival Upon Unenforceability 57
9.9 Amendments; Waivers 57
9.10 Controlling Agreement 57
9.11 Disposition of Collateral 57
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9.12 GOVERNING LAW 57
9.13 JURISDICTION AND VENUE 57
9.14 WAIVER OF RIGHTS TO JURY TRIAL 58
9.15 ENTIRE AGREEMENT 58
9.16 Counterparts 58
LIST OF EXHIBITS
Exhibit I - Form of Note
Exhibit II - Form of Borrowing Request
Exhibit III - Form of Compliance Certificate
Exhibit IV - Form of Opinion of Counsel
Exhibit V - Facility Amounts
Exhibit VI - Disclosures
Exhibit VII - Form of Assignment Agreement
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made and entered into this 19th day of December,
2002, by and between PRIMEENERGY CORPORATION, a Delaware corporation ("PEC"),
PRIMEENERGY MANAGEMENT CORPORATION, a New York corporation, PRIME OPERATING
COMPANY, a Texas corporation, EASTERN OIL WELL SERVICE COMPANY, a West Virginia
corporation, SOUTHWEST OILFIELD CONSTRUCTION COMPANY, an Oklahoma corporation,
and EOWS MIDLAND COMPANY, a Texas corporation (collectively, the "Borrower"),
with each other lender that is a signatory hereto or becomes a signatory hereto
as provided in Section 9.1, (individually, together with its successors and
assigns, a "Lender" and collectively together, with their respective successors
and assigns, the "Lenders") and GUARANTY BANK, FSB, a federal savings bank, as
agent for the Lenders (in such capacity, together with its successors in such
capacity pursuant to the terms hereof, the "Agent").
W I T N E S S E T H:
In consideration of the mutual covenants and agreements herein contained,
the Borrower and the Lender hereby agree as follows amending and restating in
its entirety, the Credit Agreement dated April 26, 1995 by and between
PrimeEnergy Corporation and PrimeEnergy Management Corporation and Bank One,
N.A. (the "Existing Lender"), as heretofore amended, restated, or supplemented
(the "Existing Credit Agreement"):
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above. As used in this Credit Agreement, the terms
"Borrower" and "Lender" shall have the meaning assigned to them hereinabove.
1.2 Additional Defined Terms. As used in this Credit Agreement, each of
the following terms shall have the meaning assigned thereto in this Section,
unless the context otherwise requires:
"Additional Costs" shall mean costs which the Lenders determine are
attributable to its obligation to make or its making or maintaining any
LIBO Rate Loan, or any reduction in any amount receivable by the Lenders
in respect of any such obligation or any LIBO Rate Loan, resulting from
any Regulatory Change which (a) changes the basis of taxation of any
amounts payable to the Lenders under this Agreement or the Note in respect
of any LIBO Rate Loan (other than taxes imposed on the overall net income
of the Lenders), (b) imposes or modifies any reserve, special deposit,
minimum capital, capital rates, or similar requirements relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, the Lender (including LIBO Rate Loans and Dollar deposits
in the London interbank market in connection with LIBO Rate Loans), or any
commitments of the Lenders hereunder, (c) increases the Assessment Rate,
or (d) imposes any other condition affecting this Agreement or any of such
extensions of credit, liabilities, or commitments.
"Adjusted LIBO Rate" shall mean, for any LIBO Rate Loan, an interest
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
determined by the Lenders to be equal to the sum of the LIBO Rate for such
Loan plus the Applicable Margin, but in no event exceeding the Highest
Lawful Rate.
"Affiliate" shall mean any Person directly or indirectly
controlling, or under common control with, the Borrower and includes any
Subsidiary of the Borrower and any "affiliate" of the Borrower within the
meaning of Reg. Section 240.12b-2 of the Securities Exchange Act of 1934,
as amended, with "control," as used in this definition, meaning
possession, directly or indirectly, of the power to direct or cause the
direction of management, policies or action through ownership of voting
securities, contract, voting trust, or membership in management or in the
group appointing or electing management or otherwise through formal or
informal arrangements or business relationships.
"Agreement" shall mean this Credit Agreement, as it may be amended,
supplemented, or restated from time to time.
"Applicable Lending Office" shall mean, for each type of Loan, the
lending office of the Lender (or an affiliate of the Lender) designated
for such type of Loan on the signature pages hereof or such other office
of the Lender (or an affiliate of the Lender) as the Lender may from time
to time specify to the Borrower as the office by which Loans of such type
are to be made and maintained.
"Applicable Margin" shall mean as to each LIBO Rate Loan the LIBO
Rate plus 2.00% on the revolving line of credit and the LIBO Rate plus
2.50% on the Term Loan.
"Assignment" shall mean the Assignment of Notes, Liens, Security
Interests, and Other Rights, in form and substance satisfactory to the
Lender, executed by the Existing Lender, assigning to the Lender the
Existing Note, the indebtedness evidenced thereby, the Liens securing the
Existing Note, and the rights of the Existing Lender under the Existing
Loan Documents, and financing statement changes constituent thereto.
"Assessment Rate" shall mean, for any Interest Period, the average
rate (rounded upwards if necessary to the nearest 1/100 of 1%) charged by
the Federal Deposit Insurance Corporation (or any successor thereto) to
the Lender for deposit insurance for Dollar time deposits with the Lender
at the Principal Office during such Interest Period, as determined by the
Lender.
"Assignment Agreement" shall mean an Assignment Agreement,
substantially in the form of Exhibit VII, with appropriate insertions.
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"Available Commitment" shall mean, at any time, an amount equal to
the remainder, if any, of (a) the Borrowing Base in effect at such time
minus (b) the sum of the Loan Balance at such time plus the L/C Exposure
at such time.
"Bank Debt" shall mean the amount owed under this Agreement by the
Borrower to the Lenders.
"Base Rate" shall mean, at any time, the rate of interest per annum
then most recently established by the Lender as its base rate, which rate
may not be the lowest rate of interest charged by the Lender to its
borrowers. Each change in any interest rate provided for herein based upon
the Base Rate resulting from a change in the Base Rate shall take effect
without notice to the Borrower at the time of such change in the Base
Rate.
"Benefitted Lender" shall have the meaning assigned to such term in
Section 2.8(c).
"Borrowing Base" shall mean, at any time, the amount determined by
the Lender in accordance with Section 2.9 and then in effect.
"Borrowing Request" shall mean each written request, in
substantially the form attached hereto as Exhibit II, by the Borrower to
the Agent for a borrowing, conversion, or prepayment pursuant to Sections
2.1 or 2.11, each of which shall:
(a) be signed by a Responsible Officer of the Borrower;
(b) when requesting a borrowing, be accompanied by a
Compliance Certificate;
(c) specify the amount and type of Loan requested, and, as
applicable, the Loan to be converted or prepaid and the date of the
borrowing, conversion, or prepayment (which shall be a Business
Day);
(d) when requesting a Floating Rate Loan, be delivered to the
Agent no later than 5:00 p.m., Central Standard or Daylight Savings
Time, as the case may be, on the Business Day preceding the day of
the requested borrowing, conversion, or prepayment;
(e) when requesting a LIBO Rate Loan, be delivered to the
Agent no later than 10:00 a.m., Central Standard or Daylight Savings
Time, as the case may be, three Business Days preceding the
requested borrowing, conversion, or prepayment and designate the
Interest Period requested with respect to such Loan.
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"Business Day" shall mean (a) for all purposes other than as covered
by clause (b) of this definition, a day other than a Saturday, Sunday,
legal holiday for commercial banks under the laws of the State of Texas,
or any other day when banking is suspended in the State of Texas, and (b)
with respect to all requests, notices, and determinations in connection
with, and payments of principal and interest on, LIBO Rate Loans, a day
which is a Business Day described in clause (a) of this definition and
which is a day for trading by and between banks for Dollar deposits in the
London interbank market.
"Closing Date" shall mean the effective date of this Agreement.
"Code" shall mean the United States Internal Revenue Code of 1986,
as amended from time to time.
"Collateral" shall mean the Mortgaged Properties and any other
Property now or at any time used or intended as security for the payment
or performance of all or any portion of the Obligations.
"Commitment" shall mean the obligation of the Lenders, subject to
applicable provisions of this Agreement, to make Loans to or for the
benefit of the Borrower pursuant to Section 2.1 and to issue Letters of
Credit pursuant to Section 2.2
"Commitment Amount" shall mean, subject to the applicable provisions
of this Agreement, at any time, the lesser of (a) the sum of the Facility
Amounts of the Lenders, or (b) the Borrowing Base in effect at such time.
"Commitment Fee" shall mean each fee payable to the Lender by the
Borrower pursuant to Section 2.12.
"Commitment Period" shall mean the period from and including the
Closing Date to but not including the Commitment Termination Date.
"Commitment Termination Date" shall mean December 19, 2004.
"Commodity Hedge Agreement" shall mean any crude oil, natural gas,
or other hydrocarbon floor, collar, cap, price protection, or swap
agreement, in form and substance with a Person acceptable to the Lender.
"Commonly Controlled Entity" shall mean any Person which is under
common control with the Borrower within the meaning of Section 4001 of
ERISA.
"Compliance Certificate" shall mean each certificate, substantially
in the form attached hereto as Exhibit III, executed by a Responsible
Officer of the
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Borrower and furnished to the Agent from time to time in accordance with
Sections 5.2 and 5.3.
"Contingent Obligation" shall mean, as to any Person, without
duplication, any obligation of such Person guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends, or other obligations of
any other Person (for purposes of this definition, a "primary obligation")
in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, regardless of whether such
obligation is contingent, (a) to purchase any primary obligation or any
Property constituting direct or indirect security therefore, (b) to
advance or supply funds (i) for the purchase or payment of any primary
obligation, or (ii) to maintain working or equity capital of any other
Person in respect of any primary obligation, or otherwise to maintain the
net worth or solvency of any other Person, (c) to purchase Property,
securities or services primarily for the purpose of assuring the owner of
any primary obligation of the ability of the Person primarily liable for
such primary obligation to make payment thereof, or (d) otherwise to
assure or hold harmless the owner of any such primary obligation against
loss in respect thereof, with the amount of any Contingent Obligation
being deemed to be equal to the stated or determinable amount of the
primary obligation in respect of which such Contingent Obligation is made
or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by such Person in good faith.
"Current Assets" shall mean all assets which would, in accordance
with GAAP, be included as current assets on a balance sheet of the
Borrower as of the date of calculation, plus availability under this
facility.
"Current Liabilities" shall mean all liabilities which would, in
accordance with GAAP, be included as current liabilities on a balance
sheet of the Borrower as of the date of calculation, but excluding the
current maturities in respect of the Obligations, both principal and
interest.
"Default" shall mean any event or occurrence which with the lapse of
time or the giving of notice or both would become an Event of Default.
"Default Rate" shall mean a per annum interest rate equal to the
Prime Rate plus five percent (5%), but in no event exceeding the Highest
Lawful Rate.
"Dollars" and "$" shall mean dollars in lawful currency of the
United States of America.
"EBITDA" shall mean, for any period, net income for such period plus
interest expense, federal and state income taxes, depreciation,
amortization, and other non-cash expenses, less non-cash gains for such
period deducted in the determination of net income for such period.
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"Environmental Complaint" shall mean any written or oral complaint,
order, directive, claim, citation, notice of environmental report or
investigation, or other notice by any Governmental Authority or any other
Person with respect to (a) air emissions, (b) spills, releases, or
discharges to soils, any improvements located thereon, surface water,
groundwater, or the sewer, septic, waste treatment, storage, or disposal
systems servicing any Property of the Borrower, (c) solid or liquid waste
disposal, (d) the use, generation, storage, transportation, or disposal of
any Hazardous Substance, or (e) other environmental, health, or safety
matters affecting any Property of the Borrower or the business conducted
thereon.
"Environmental Laws" shall mean (a) the following federal laws as
they may be cited, referenced, and amended from time to time: the Clean
Air Act, the Clean Water Act, the Safe Drinking Water Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the
Endangered Species Act, the Resource Conservation and Recovery Act, the
Hazardous Materials Transportation Act, the Superfund Amendments and
Reauthorization Act, and the Toxic Substances Control Act; (b) any and all
equivalent environmental statutes of any state in which Property of the
Borrower is situated, as they may be cited, referenced and amended from
time to time; (c) any rules or regulations promulgated under or adopted
pursuant to the above federal and state laws; and (d) any other equivalent
federal, state, or local statute or any requirement, rule, regulation,
code, ordinance, or order adopted pursuant thereto, including, without
limitation, those relating to the generation, transportation, treatment,
storage, recycling, disposal, handling, or release of Hazardous
Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations thereunder and
interpretations thereof.
"Event of Default" shall mean any of the events specified in Section
7.1.
"Existing Loan Documents" shall mean the Loan Documents, as such
term is defined in the Existing Credit Agreement, in existence on the
Closing Date immediately prior to the Assignment.
"Existing Note" shall mean the Note, as such term is defined in the
Existing Credit Agreement, in existence on the Closing Date immediately
prior to the Assignment.
"Existing Security Instruments" shall mean the Security Documents,
as such term is defined in the Existing Credit Agreement, in existence on
the Closing Date immediately prior to the Assignment.
"Facility Amount" shall mean, for each Lender, the amount set forth
opposite the name of such Lender on Exhibit V under the caption "Facility
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Amounts," as modified from time to time to reflect assignments permitted
by Section 9.1 or otherwise pursuant to the terms hereof and to give
effect to any written request of the Borrower (any such request being
irrevocable, absent written agreement of the Agent and the Required
Lenders, which written agreement may be expressly conditioned on the
payment of a fee (other than with respect to a reduction) by the Borrower
to the Agent, for the account of the Lenders) to a reduction in the sum of
the then existing Facility Amounts of the Lenders.
"Facility Fee" shall mean the fee payable to the Lender by the
Borrower pursuant to Section 2.13.
"Final Maturity" shall mean December 19, 2004.
"Financial Statements" shall mean statements of the financial
condition of the Borrower as at the point in time and for the period
indicated and consisting of at least a balance sheet and related
statements of operations, common stock and other stockholders' equity, and
cash flows for the Borrower and, when required by applicable provisions of
this Agreement to be audited, accompanied by the unqualified certification
of an independent certified public accountants or other independent
certified public accountants acceptable to the Agent and footnotes to any
of the foregoing, all of which shall be prepared in accordance with GAAP
consistently applied and in comparative form with respect to the
corresponding period of the preceding fiscal period.
"Fixed Rate Loan" shall mean any LIBO Rate Loan.
"Floating Rate" shall mean an interest rate per annum equal to the
Base Rate from time to time in effect plus one-half of one percent (1/2 of
1%), on the revolver and Base Rate plus one percent (1%) on the Term Loan,
but in no event exceeding the Highest Lawful Rate.
"Floating Rate Loan" shall mean any Loan and any portion of the Loan
Balance which the Borrower has requested, in the initial Borrowing Request
for such Loan or a subsequent Borrowing Request for such portion of the
Loan Balance, bearing interest at the Floating Rate, or which pursuant to
the terms hereof is otherwise required to bear interest at the Floating
Rate.
"GAAP" shall mean generally accepted accounting principles
established by the Financial Accounting Standards Board or the American
Institute of Certified Public Accountants and in effect in the United
States from time to time.
"Governmental Authority" shall mean any nation, country,
commonwealth, territory, government, state, county, parish, municipality,
or other political subdivision and any entity exercising executive,
legislative, judicial, regulatory, or administrative functions of or
pertaining to government.
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"Hazardous Substances" shall mean flammables, explosives,
radioactive materials, hazardous wastes, asbestos, or any material
containing asbestos, polychlorinated biphenyls (PCBs), toxic substances or
related materials, petroleum, petroleum products, associated oil or
natural gas exploration, production, and development wastes, or any
substances defined as "hazardous substances," "hazardous materials,"
"hazardous wastes," or "toxic substances" under the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, the
Superfund Amendments and Reauthorization Act, as amended, the Hazardous
Materials Transportation Act, as amended, the Resource Conservation and
Recovery Act, as amended, the Toxic Substances Control Act, as amended, or
any other law or regulation now or hereafter enacted or promulgated by any
Governmental Authority.
"Highest Lawful Rate" shall mean the maximum non-usurious interest
rate, if any (or, if the context so requires, an amount calculated at such
rate), that at any time or from time to time may be contracted for, taken,
reserved, charged, or received under applicable laws of the State of Texas
or the United States of America, whichever authorizes the greater rate, as
such laws are presently in effect or, to the extent allowed by applicable
law, as such laws may hereafter be in effect and which allow a higher
maximum non-usurious interest rate than such laws now allow.
"Indebtedness" shall mean, as to any Person, without duplication,
(a) all liabilities (excluding reserves for deferred income taxes,
deferred compensation liabilities, and other deferred liabilities and
credits) which in accordance with GAAP would be included in determining
total liabilities as shown on the liability side of a balance sheet, (b)
all obligations of such Person evidenced by bonds, debentures, promissory
notes, or similar evidences of indebtedness, (c) all other indebtedness of
such Person for borrowed money, and (d) all obligations of others, to the
extent any such obligation is secured by a Lien on the assets of such
Person (whether or not such Person has assumed or become liable for the
obligation secured by such Lien). (Provided, however, Indebtedness shall
not include preferred stock).
"Insolvency Proceeding" shall mean application (whether voluntary or
instituted by another Person) for or the consent to the appointment of a
receiver, trustee, conservator, custodian, or liquidator of any Person or
of all or a substantial part of the Property of such Person, or the filing
of a petition (whether voluntary or instituted by another Person)
commencing a case under Title 11 of the United States Code, seeking
liquidation, reorganization, or rearrangement or taking advantage of any
bankruptcy, insolvency, debtor's relief, or other similar law of the
United States, the State of Texas, or any other jurisdiction.
"Intellectual Property" shall mean patents, patent applications,
trademarks, tradenames, copyrights, technology, know-how, and processes.
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"Interest Expense" shall mean, for any period, the total interest
expense (including, without limitation, interest expense attributable to
capitalized leases) of the Borrower for such period, determined in
accordance with GAAP.
"Interest Period" shall mean, subject to the limitations set forth
in Section 2.22, with respect to any LIBO Rate Loan, a period commencing
on the date such Loan is made or converted from a Loan of another type
pursuant to this Agreement or the last day of the next preceding Interest
Period with respect to such Loan and ending on the numerically
corresponding day in the calendar month that is one, two, or three months
thereafter, as the Borrower may request in the Borrowing Request for such
Loan.
"Investment" in any Person shall mean any stock, bond, note, or
other evidence of Indebtedness, or any other security (other than current
trade and customer accounts) of, investment or partnership interest in or
loan to, such Person.
"L/C Exposure" shall mean, at any time, the aggregate maximum amount
available to be drawn under outstanding Letters of Credit at such time.
"Letter of Credit" shall mean any standby letter of credit issued by
the Lender for the account of the Borrower pursuant to Section 2.2.
"Letter of Credit Application" shall mean the standard letter of
credit application employed by the Lender from time to time in connection
with letters of credit, provided that in the event of a conflict between
the terms of each Letter of Credit Application and this Agreement, this
Agreement shall control.
"Letter of Credit Fee" shall mean each fee payable to the Lender by
the Borrower pursuant to Section 2.14 upon or in connection with the
issuance of a Letter of Credit.
"LIBO Rate" shall mean, with respect to any Interest Period for any
LIBO Rate Loan, the lesser of (a) the rate per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) equal to the average of the offered
quotations appearing on Telerate Page 3750 (or if such Telerate Page shall
not be available, any successor or similar service selected by the Lender
and the Borrower) as of approximately 10:00 a.m., Central Standard or
Daylight Savings Time, as the case may be, on the day two Business Days
prior to the first day of such Interest Period for Dollar deposits in an
amount comparable to the principal amount of such LIBO Rate Loan and
having a term comparable to the Interest Period for such LIBO Rate Loan,
or (b) the Highest Lawful Rate. If neither such Telerate Page 3750 nor any
successor or similar service is available, the term "LIBO Rate" shall
mean, with respect to any Interest Period for any LIBO Rate Loan, the
lesser of (a) the rate per annum (rounded upwards if necessary, to the
nearest 1/16 of 1%) quoted by the Lender at approximately 11:00 a.m.,
London time (or as soon
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thereafter as practicable) two Business Days prior to the first day of the
Interest Period for such LIBO Rate Loan for the offering by the Lender to
leading banks in the London interbank market of Dollar deposits in an
amount comparable to the principal amount of such LIBO Rate Loan and
having a term comparable to the Interest Period for such LIBO Rate Loan,
or (b) the Highest Lawful Rate.
"LIBO Rate Loan" shall mean any Loan and any portion of the Loan
Balance which the Borrower has requested, in the initial Borrowing Request
for such Loan or a subsequent Borrowing Request for such portion of the
Loan Balance, bearing interest at the Adjusted LIBO Rate and which is
permitted by the terms hereof to bear interest at the Adjusted LIBO Rate.
"Lien" shall mean any interest in Property securing an obligation
owed to, or a claim by, a Person other than the owner of such Property,
whether such interest is based on common law, statute, or contract, and
including, but not limited to, the lien or security interest arising from
a mortgage, ship mortgage, encumbrance, pledge, security agreement,
conditional sale or trust receipt, or a lease, consignment, or bailment
for security purposes (other than true leases or true consignments), liens
of mechanics, materialmen, and artisans, maritime liens and reservations,
exceptions, encroachments, easements, rights of way, covenants,
conditions, restrictions, leases, and other title exceptions and
encumbrances affecting Property which secure an obligation owed to, or a
claim by, a Person other than the owner of such Property (for the purpose
of this Agreement, the Borrower shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale
agreement, financing lease, or other arrangement pursuant to which title
to the Property has been retained by or vested in some other Person for
security purposes), and the filing or recording of any financing statement
or other security instrument in any public office.
"Limitation Period" shall mean, with respect to any Lender, any
period while any amount remains owing on the Note payable to such Lender
and interest on such amount, calculated at the applicable interest rate,
plus any fees or other sums payable to such Lender under any Loan Document
and deemed to be interest under applicable law, would exceed the amount of
interest which would accrue at the Highest Lawful Rate.
"Loan" shall mean any loan made by any Lender to or for the benefit
of the Borrower pursuant to this Agreement and any payment made by the
Lender under a Letter of Credit.
"Loan Balance" shall mean, at any time, the outstanding principal
balance of the Notes at such time plus the L/C Exposure at such time.
"Loan Documents" shall mean this Agreement, the Note, the Letter of
Credit Applications, the Letters of Credit, the Security Instruments, and
all other documents and instruments now or hereafter delivered pursuant to
the terms of or
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in connection with this Agreement, the Note, the Letter of Credit
Applications, the Letters of Credit, or the Security Instruments, and all
renewals and extensions of, amendments and supplements to, and
restatements of, any or all of the foregoing from time to time in effect.
"Material Adverse Effect" shall mean (a) any adverse effect on the
business, operations, properties, condition (financial or otherwise), or
prospects of the Borrower, which substantially increases the risk that any
of the Obligations will not be repaid as and when due, or (b) any
substantially adverse effect upon the Collateral.
"Mortgaged Properties" shall mean all Oil and Gas Properties of the
Borrower subject to a perfected first-priority Lien in favor of the Agent
for the benefit of the Lenders, subject only to Permitted Liens, as
security for the Obligations.
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan
as defined in Section 4001(a)(3) of ERISA.
"Net Income" shall mean, for any period, the net income (or loss) of
the Borrower for such period, determined in accordance with GAAP.
"Notes" shall mean, collectively, each of the promissory notes of
the Borrower payable to a Lender in the amount of the Facility Amount of
such Lender in the form attached hereto as Exhibit I with all blanks in
such form completed appropriately, together with all renewals, extensions
for any period, increases, and rearrangements thereof.
"Obligations" shall mean, without duplication, (a) all Indebtedness
evidenced by the Note, (b) the Reimbursement Obligations, (c) the undrawn,
unexpired amount of all outstanding Letters of Credit, (d) the obligation
of the Borrower for the payment of Commitment Fees, Facility Fees, Letter
of Credit Fees, and Engineering Fees, (e) all obligations and liabilities
whether now existing or hereafter arising of the Borrower to the Lender in
connection with any Commodity Hedge Agreement or Rate Management
Transaction, and (f) all other obligations and liabilities of the Borrower
to the Lender, now existing or hereafter incurred, under, arising out of
or in connection with any Loan Document, and to the extent that any of the
foregoing includes or refers to the payment of amounts deemed or
constituting interest, only so much thereof as shall have accrued, been
earned and which remains unpaid at each relevant time of determination.
"Oil and Gas Properties" shall mean fee, leasehold, or other
interests in or under mineral estates or oil, gas, and other liquid or
gaseous hydrocarbon leases with respect to Properties situated in the
United States or offshore from any State of the United States, including,
without limitation, overriding royalty and royalty interests, leasehold
estate interests, net profits interests, production payment
- 11 -
interests, and mineral fee interests, together with contracts executed in
connection therewith and all tenements, hereditaments, appurtenances and
Properties appertaining, belonging, affixed, or incidental thereto.
"Percentage Share" shall mean, as to each Lender, the percentage
such Lender's Facility Amount constitutes of the sum of the Facility
Amounts of all Lenders.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Liens" shall mean (a) Liens for taxes, assessments, or
other governmental charges or levies not yet due or which (if foreclosure,
distraint, sale, or other similar proceedings shall not have been
initiated) are being contested in good faith by appropriate proceedings,
and such reserve as may be required by GAAP shall have been made therefor,
(b) Liens in connection with workers' compensation, unemployment insurance
or other social security (other than Liens created by Section 4068 of
ERISA), old-age pension, or public liability obligations which are not yet
due or which are being contested in good faith by appropriate proceedings,
if such reserve as may be required by GAAP shall have been made therefore,
(c) Liens in favor of vendors, carriers, warehousemen, repairmen,
mechanics, workmen, materialmen, construction, or similar Liens arising by
operation of law in the ordinary course of business in respect of
obligations which are not yet due or which are being contested in good
faith by appropriate proceedings, if such reserve as may be required by
GAAP shall have been made therefore, (d) Liens in favor of operators and
non-operators under joint operating agreements or similar contractual
arrangements arising in the ordinary course of the business of the
Borrower to secure amounts owing, which amounts are not yet due or are
being contested in good faith by appropriate proceedings, if such reserve
as may be required by GAAP shall have been made therefore, (e) Liens under
production sales agreements, division orders, operating agreements, and
other agreements customary in the oil and gas business for processing,
producing, and selling hydrocarbons securing obligations not constituting
Indebtedness and provided that such Liens do not secure obligations to
deliver hydrocarbons at some future date without receiving full payment
therefore within 90 days of delivery, (f) easements, rights of way,
restrictions, and other similar encumbrances, and minor defects in the
chain of title which are customarily accepted in the oil and gas financing
industry, none of which interfere with the ordinary conduct of the
business of the Borrower or materially detract from the value or use of
the Property to which they apply, (h) Liens in favor of the Agent and
other Liens expressly permitted under the Security Instruments, and (i)
the lien shown on Exhibit VI as a Permitted Lien.
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"Person" shall mean an individual, corporation, partnership, trust,
unincorporated organization, limited liability company, government, any
agency or political subdivision of any government, or any other form of
entity.
"Plan" shall mean, at any time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or any Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Principal Office" shall mean the principal office of the Lender in
Houston, Texas, presently located at 000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxx 00000.
"Prohibited Transaction" shall have the meaning assigned to such
term in Section 4975 of the Code.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
"Rate Management Transaction" shall mean any transaction (including
an agreement with respect thereto) now existing or hereafter entered into
between Borrower and Lenders which is a rate swap, basis swap, forward
rate transaction, commodity swap, commodity option, equity or equity index
swap, equity or equity index option, bond option, interest rate option,
foreign exchange transaction, cap transaction, floor transaction, collar
transaction, forward transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any other similar
transaction (including any option with respect to any of these
transactions) or any combination thereof, whether linked to on or more
interest rates, foreign currencies, commodity prices, equity prices or
other financial measures.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System, as the same may be amended or supplemented
from time to time.
"Regulatory Change" shall mean the passage, adoption, institution,
or amendment of any federal, state, local, or foreign Requirement of Law
(including, without limitation, Regulation D), or any interpretation,
directive, or request (whether or not having the force of law) of any
Governmental Authority or monetary authority charged with the enforcement,
interpretation, or administration thereof, occurring after the Closing
Date and applying to a class of banks including the Lender.
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"Reimbursement Obligation" shall mean the obligation of the Borrower
to provide to the Lenders or reimburse the Lenders for any amounts
payable, paid, or incurred by the Lenders with respect to Letters of
Credit.
"Release of Hazardous Substances" shall mean any emission, spill,
release, disposal, or discharge, except in accordance with a valid permit,
license, certificate, or approval of the relevant Governmental Authority,
of any Hazardous Substance into or upon (a) the air, (b) soils or any
improvements located thereon, (c) surface water or groundwater, or (d) the
sewer or septic system, or the waste treatment, storage, or disposal
system servicing any Property of the Borrower.
"Reorganization" shall mean, with respect to any Multiemployer Plan,
that such Plan is in reorganization within the meaning of such term in
Section 4241 of ERISA.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty-day
notice period is waived under subsections .13, .14, .16, .18, .19 or .20
of PBGC Reg. Section 2615.
"Required Lenders" shall mean, Lenders (including the Agent) holding
more than 66 2/3% of the then Loan Balance, or, if there is no Loan
Balance, Lenders (including the Agent) having more than 66 2/3% of the
aggregate amount of the Commitments.
"Requirement of Law" shall mean, as to any Person, the certificate
or articles of incorporation and by-laws or other organizational or
governing documents of such Person, and any applicable law, treaty,
ordinance, order, judgment, rule, decree, regulation, or determination of
an arbitrator, court, or other Governmental Authority, including, without
limitation, rules, regulations, orders, and requirements for permits,
licenses, registrations, approvals, or authorizations, in each case as
such now exist or may be hereafter amended and are applicable to or
binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.
"Reserve Report" shall mean each report delivered to the Agent and
each Lender pursuant to Section 5.4, provided that Borrower shall not be
required to deliver more than three reports.
"Responsible Officer" shall mean, as to any Person, its President,
Chief Executive Officer or any Vice President.
"Security Instruments" shall mean the security instruments executed
and delivered in satisfaction of the condition set forth in Section
3.1(g), and all other documents and instruments at any time executed as
security for all or any portion
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of the Obligations, as such instruments may be amended, restated, or
supplemented from time to time.
"Single Employer Plan" shall mean any Plan which is covered by Title
IV of ERISA, but which is not a Multiemployer Plan.
"Subsidiary" shall mean, as to any Person, a corporation of which
shares of stock having ordinary voting power (other than stock having such
power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation
are at the time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by
such Person.
"Superfund Site" shall mean those sites listed on the Environmental
Protection Agency National Priority List and eligible for remedial action
or any comparable state registries or list in any state of the United
States.
"Tangible Net Worth" shall mean (a) total assets, as would be
reflected on a balance sheet of the Borrower prepared in accordance with
GAAP, exclusive of Intellectual Property, experimental or organization
expenses, franchises, licenses, permits, and other intangible assets,
treasury stock, unamortized underwriters' debt discount and expenses, and
goodwill minus (b) total liabilities, as would be reflected on a balance
sheet of the Borrower prepared in accordance with GAAP.
"Term Loan" shall mean the Term Loan described in Section 2.1.B.
"Term Notes" shall mean, collectively, each of the promissory notes
of the Borrower payable to a Lender in the amount of Term Loan Facility
Amount of such Lender in the form attached hereto as Exhibit I(a) with all
blanks in such form completed appropriately, together with all renewals,
extensions for any period, increases, and rearrangements thereof.
"Transferee" shall mean any Person to which any Lender has sold,
assigned, transferred, or granted a participation in any of the
Obligations, as authorized pursuant to Section 9.1, and any Person
acquiring, by purchase, assignment, transfer, or participation, from any
such purchaser, assignee, transferee, or participant, any part of such
Obligations.
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the State of Texas.
1.3 Undefined Financial Accounting Terms. Undefined financial accounting
terms used in this Agreement shall be defined according to GAAP at the time in
effect.
1.4 References. References in this Agreement to Exhibit, Article, or
Section numbers shall be to Exhibits, Articles, or Sections of this Agreement,
unless expressly stated to the
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contrary. References in this Agreement to "hereby," "herein," "hereinafter,"
"hereinabove," "hereinbelow," "hereof," "hereunder" and words of similar import
shall be to this Agreement in its entirety and not only to the particular
Exhibit, Article, or Section in which such reference appears.
1.5 Articles and Sections. This Agreement, for convenience only, has been
divided into Articles and Sections; and it is understood that the rights and
other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
1.6 Number and Gender. Whenever the context requires, reference herein
made to the single number shall be understood to include the plural; and
likewise, the plural shall be understood to include the singular. Definitions of
terms defined in the singular or plural shall be equally applicable to the
plural or singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine, feminine and neuter,
when such construction is appropriate; and specific enumeration shall not
exclude the general but shall be construed as cumulative.
1.7 Incorporation of Exhibits. The Exhibits attached to this Agreement are
incorporated herein and shall be considered a part of this Agreement for all
purposes.
ARTICLE II
TERMS OF FACILITY
2.1 A. Revolving Line of Credit. Upon the terms and conditions (including,
without limitation, the right of the Lenders to decline to make any Loan so long
as any Default or Event of Default exists) and relying on the representations
and warranties contained in this Agreement, each Lender severally agrees, during
the Commitment Period, to make Loans, in immediately available funds at the
Applicable Lending Office or the Principal Office, to or for the benefit of the
Borrower in an aggregate principal amount not to exceed at any time outstanding
the lessor of the Facility Amount of such Lender or the Percentage Share of such
Lender of the Borrowing Base then in effect. Loans shall be made from time to
time on any Business Day designated by the Borrower following receipt by the
Agent of a Borrowing Request.
(b) Subject to the terms of this Agreement, during the Commitment
Period, the Borrower may borrow, repay, and reborrow and convert Loans of one
type or with one Interest Period into Loans of another type or with a different
Interest Period. Except for prepayments made pursuant to Section 2.10, each
borrowing, conversion, and prepayment of principal of Loans shall be in an
amount at least equal to $100,000. Each borrowing, prepayment, or conversion of
or into a Loan of a different type or, in the case of a LIBO Rate Loan, having a
different Interest Period, shall be deemed a separate borrowing, conversion, and
prepayment for purposes of the foregoing, one for each type of Loan or Interest
Period. Anything in this Agreement to the contrary notwithstanding, the
aggregate principal amount of LIBO Rate Loans having the same Interest Period
shall be at least equal to $100,000; and if any
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LIBO Rate Loan would otherwise be in a lesser principal amount for any period,
such Loan shall be a Floating Rate Loan during such period.
(c) The Loans shall be made and maintained at the Applicable Lending
Office or the Principal Office and shall be evidenced by the Notes.
(d) Not later than 2:00 p.m., Central Standard or Daylight Savings
Time, as the case may be, on the date specified for each borrowing, each Lender
shall make available an amount equal to its Percentage Share of the borrowing to
be made on such date to the Agent, at an account designated by the Agent, in
immediately available funds, for the account of the Borrower. The amount so
received by the Agent shall, subject to the terms and conditions hereof, be made
available to the Borrower in immediately available funds at the Principal Office
by the end of that Business Day. All Loans by each Lender shall be maintained at
the Applicable Lending Office of such Lender and shall be evidenced by the Note
of such Lender.
(e) The failure of any Lender to make any Loan required to be made
by it hereunder shall not relieve any other Lender of its obligation to make any
Loan required to be made by it, and no Lender shall be responsible for the
failure of any other Lender to make any Loan.
(f) The face amounts of the Notes have been established as an
administrative convenience and do not commit any Lender to advance funds
hereunder in excess of the then current Borrowing Base.
A. Term Loan.
(a) The Term Loan shall be in the total amount of $4,000,000, with
interest payable monthly by the Borrower to the Lenders beginning on January 1,
2003, and continuing on the first day of each calendar month thereafter until
such Term Loan is fully paid.
(b) The Borrower shall pay to the Lenders principal payments on such
Term Loan in the amount of $66,667 per month beginning January 1, 2003, and
continuing on the first day of each calendar month thereafter until December 19,
2004, when such Term Loan shall be paid in full.
(c) The terms of Section 2.1.A.(c), (d), (e) and (f) are applicable
to the Term Loan.
2.2 Letter of Credit Facility. (a) Upon the terms and conditions and
relying on the representations and warranties contained in this Agreement, the
Agent, as issuing bank for the Lenders, agrees from the date of this Agreement
until the date which is thirty days prior to the Commitment Termination Date, to
issue on behalf of the Lenders in their respective Percentage Shares Letters of
Credit for the account of the Borrower and/or the benefit of any Subsidiary of
the Borrower and to renew and extend such Letters of Credit. Letters of Credit
shall be issued, renewed, or extended from time to time on any Business Day
designated by the Borrower following the receipt in accordance with the terms
hereof by the Agent of the written (or oral,
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confirmed promptly in writing) request by a Responsible Officer of the Borrower
and a Letter of Credit Application. Letters of Credit shall be issued in such
amounts as the Borrower may request; provided, however, that (i) no Letter of
Credit shall have an expiration date which is more than 365 days after the
issuance thereof or subsequent to Final Maturity, (ii) each automatically
renewable Letter of Credit shall provide that it may be terminated by the Agent
at its then current expiry date by not less than 30 days' written notice by the
Agent to the beneficiary of such Letter of Credit, and (iii) the Agent shall not
be obligated to issue any Letter of Credit if (A) the face amount thereof would
exceed the Available Commitment, or (B) after giving effect to the issuance
thereof, (B) the L/C Exposure, when added to the Loan Balance then outstanding,
would exceed the Commitment Amount, or (C) the L/C Exposure would exceed
$3,000,000.
(b) Prior to any payment in respect of any Letter of Credit, each
Lender shall be deemed to be a participant through the Agent with respect to the
relevant Letter of Credit in the obligation of the Agent, as the issuer of such
Letter of Credit, in an amount equal to the Percentage Share of such Lender of
the maximum amount which is or at any time may become available to be drawn
thereunder. Upon delivery by such Lender of funds requested pursuant to Section
2.2(c), such Lender shall be treated as having purchased a participating
interest in an amount equal to such funds delivered by such Lender to the Agent
in the obligation of the Borrower to reimburse the Agent, as the issuer of such
Letter of Credit, for any amounts payable, paid, or incurred by the Agent, as
the issuer of such Letter of Credit, with respect to such Letter of Credit.
(c) Each Lender shall be unconditionally and irrevocably liable,
without regard to the occurrence of any Default or Event of Default, to the
extent of the Percentage Share of such Lender at the time of issuance of each
Letter of Credit, to reimburse, on demand, the Agent, as the issuer of such
Letter of Credit, for the amount of each Letter of Credit Payment under such
Letter of Credit. Each payment in respect of any Letter of Credit shall be
deemed to be a Floating Rate Loan by each Lender to the extent of funds
delivered by such Lender to the Agent with respect to such payment and shall to
such extent be deemed a Floating Rate Loan under and shall be evidenced by the
Note of such Lender.
(d) EACH LENDER AGREES TO SEVERALLY INDEMNIFY THE AGENT, AS THE
ISSUER OF EACH LETTER OF CREDIT, AND THE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT AND AFFILIATES OF THE AGENT (TO THE EXTENT NOT REIMBURSED BY
THE BORROWER AND WITHOUT LIMITING THE OBLIGATION OF THE BORROWER TO DO SO),
RATABLY ACCORDING TO THE PERCENTAGE SHARE OF SUCH LENDER AT THE TIME OF ISSUANCE
OF SUCH LETTER OF CREDIT, FROM AND AGAINST ANY AND ALL LIABILITIES, CLAIMS,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES AND DISBURSEMENTS OF ANY KIND WHATSOEVER WHICH MAY AT ANY TIME
(INCLUDING, WITHOUT LIMITATION, ANY TIME FOLLOWING THE PAYMENT AND PERFORMANCE
OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT) BE IMPOSED ON,
INCURRED BY OR ASSERTED AGAINST THE
- 18 -
AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES IN ANY WAY RELATING TO OR
ARISING OUT OF THIS AGREEMENT OR SUCH LETTER OF CREDIT OR ANY ACTION TAKEN OR
OMITTED BY THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES UNDER OR
IN CONNECTION WITH ANY OF THE FOREGOING, INCLUDING, WITHOUT LIMITATION, ANY
LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS IMPOSED, INCURRED OR
ASSERTED AS A RESULT OF THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT
AS THE ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES; PROVIDED THAT NO LENDER
(OTHER THAN THE AGENT AS THE ISSUER OF A LETTER OF CREDIT) SHALL BE LIABLE FOR
THE PAYMENT OF ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING
FROM THE GROSS NEGLIGENCE WHETHER SOLE OR CONCURRENT OR WILLFUL MISCONDUCT OF
THE AGENT AS THE ISSUER OF A LETTER OF CREDIT. THE AGREEMENTS IN THIS SECTION
2.2(D) SHALL SURVIVE THE PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND THE
TERMINATION OF THIS AGREEMENT.
2.3 Use of Loan Proceeds and Letters of Credit. (a) As of the date hereof,
indebtedness in the amount of $20,076,885.43 is outstanding under the Existing
Note. The Lender shall use proceeds of the initial Loan to purchase such
indebtedness. Such indebtedness shall be renewed, extended, and rearranged
pursuant to the terms of this Agreement, the Note, and the relevant Borrowing
Request and shall for all purposes be deemed a borrowing hereunder. Proceeds of
all subsequent Loans shall be used solely for acquisitions and development of
Oil and Gas Properties and for general corporate purposes.
(b) Letters of Credit shall be used solely for other general
corporate purposes and to support Commodity Hedge Agreements and Rate Management
Transactions.
2.4 Interest. Subject to the terms of this Agreement (including, without
limitation, Section 2.17), interest on the Loans shall accrue and be payable at
a rate per annum equal to the Floating Rate for each Floating Rate Loan and the
Adjusted LIBO Rate for each LIBO Rate Loan. Interest on all Floating Rate Loans
shall be computed on the basis of a year of 365 or 366 days, as applicable, for
the actual days elapsed (including the first day but excluding the last day)
during the period for which payable. Interest on all LIBO Rate Loans shall be
computed on the basis of a year of 360 days for the actual days elapsed
(including the first day but excluding the last day) during the period for which
payable. Notwithstanding the foregoing, interest on past-due principal and, to
the extent permitted by applicable law, past-due interest, shall accrue at the
Default Rate, computed on the basis of a year of 365 or 366 days, as the case
may be, for the actual days elapsed (including the first day but excluding the
last day) during the period for
- 19 -
which payable, and shall be payable upon demand by the Lender at any time as to
all or any portion of such interest. In the event that the Borrower fails to
select the duration of any Interest Period for any LIBO Rate Loan within the
time period and otherwise as provided herein, such Loan (if outstanding as a
LIBO Rate Loan) will be automatically converted into a Floating Rate Loan on the
last day of the then current Interest Period for such Loan or (if outstanding as
a Floating Rate Loan) will remain as, or (if not then outstanding) will be made
as, a Floating Rate Loan. Interest provided for herein shall be calculated on
unpaid sums actually advanced and outstanding pursuant to the terms of this
Agreement and only for the period from the date or dates of such advances until
repayment.
2.5 Repayment of Loans and Interest. Accrued and unpaid interest on each
outstanding Floating Rate Loan shall be due and payable monthly commencing on
the first day of January 1, 2003, and continuing on the first day of each
calendar month thereafter while any Floating Rate Loan remains outstanding, the
payment in each instance to be the amount of interest which has accrued and
remains unpaid in respect of the relevant Loan. Accrued and unpaid interest on
each outstanding LIBO Rate Loan shall be due and payable on the last day of the
Interest Period for such LIBO Rate Loan and, in the case of any Interest Period
in excess of three months, on the day of the third calendar month following the
commencement of such Interest Period corresponding to the day of the calendar
month on which such Interest Period commenced, the payment in each instance to
be the amount of interest which has accrued and remains unpaid in respect of the
relevant Loan. The Loan Balance, together with all accrued and unpaid interest
thereon, shall be due and payable at Final Maturity. At the time of making each
payment hereunder or under the Note, the Borrower shall specify to the Lender
the Loans or other amounts payable by the Borrower hereunder to which such
payment is to be applied. In the event the Borrower fails to so specify, or if
an Event of Default has occurred and is continuing, the Lender may apply such
payment as it may elect in its sole discretion.
2.6 Outstanding Amounts. The outstanding principal balance of the Notes
reflected by the notations by the Lenders on their records shall be deemed
rebuttably presumptive evidence of the principal amount owing on the Notes. The
liability for payment of principal and interest evidenced by the Notes shall be
limited to principal amounts actually advanced and outstanding pursuant to this
Agreement and interest on such amounts calculated in accordance with this
Agreement.
2.7 Time, Place, and Method of Payments. All payments required pursuant to
this Agreement or the Notes shall be made in lawful money of the United States
of America and in immediately available funds, shall be deemed received by the
Agent on the Business Day received, or on the next Business Day following
receipt if such receipt is after 2:00 p.m., Central Standard or Daylight Savings
Time, as the case may be, on any Business Day, and shall be made at the
Principal Office. Except as provided to the contrary herein, if the due date of
any payment hereunder or under the Notes would otherwise fall on a day which is
not a Business Day, such date shall be extended to the next succeeding Business
Day, and interest shall be payable for any principal so extended for the period
of such extension.
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2.8 Pro Rata Treatment; Adjustments. (a) Except to the extent otherwise
expressly provided herein, (i) each borrowing pursuant to this Agreement shall
be made from the Lenders pro rata in accordance with their respective Percentage
Shares, (ii) each reduction of the sum of the Facility Amounts of the Lenders at
the request of the Borrower, as well as any subsequent increase in the sum of
the Facility Amounts of the Lenders at the request of the Borrower and with
written agreement of the Agent and the Required Lenders shall serve to adjust
the Facility Amounts of the Lenders pro rata in accordance with the Facility
Amounts of the Lenders in effect immediately prior to any such adjustment, (iii)
each payment by the Borrower of fees shall be made for the account of the
Lenders pro rata in accordance with their respective Percentage Shares, (iv)
each payment of principal of Loans shall be made for the account of the Lenders
pro rata in accordance with their respective shares of the Loan Balance, and (v)
each payment of interest on Loans shall be made for the account of the Lenders
pro rata in accordance with their respective shares of the aggregate amount of
interest due and payable to the Lenders.
(b) The Agent shall distribute all payments with respect to the
Obligations to the Lenders promptly upon receipt in like funds as received. In
the event that any payments made hereunder by the Borrower at any particular
time are insufficient to satisfy in full the Obligations due and payable at such
time, such payments shall be applied (i) first, to fees and expenses due
pursuant to the terms of this Agreement or any other Loan Document, (ii) second,
to accrued interest, (iii) third, to the Loan Balance, and (iv) last, to any
other Obligations.
(c) If any Lender (for purposes of this Section, a "Benefitted
Lender") shall at any time receive any payment of all or part of its portion of
the Obligations, or receive any Collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or proceedings of
the nature referred to in Section 7.1(f) or Section 7.1(g), or otherwise) in an
amount greater than such Lender was entitled to receive pursuant to the terms
hereof, such Benefitted Lender shall purchase for cash from the other Lenders
such portion of the Obligations of such other Lenders, or shall provide such
other Lenders with the benefits of any such Collateral or the proceeds thereof,
as shall be necessary to cause such Benefitted Lender to share the excess
payment or benefits of such Collateral or proceeds with each of the Lenders
according to the terms hereof. If all or any portion of such excess payment or
benefits is thereafter recovered from such Benefitted Lender, such purchase
shall be rescinded and the purchase price and benefits returned by such Lender,
to the extent of such recovery, but without interest. The Borrower agrees that
each such Lender so purchasing a portion of the Obligations of another Lender
may exercise all rights of payment (including rights of set-off) with respect to
such portion as fully as if such Lender were the direct holder of such portion.
If any Lender ever receives, by voluntary payment, exercise of rights of set-off
or banker's lien, counterclaim, cross-action or otherwise, any funds of the
Borrower to be applied to the Obligations, or receives any proceeds by
realization on or with respect to any Collateral, all such funds and proceeds
shall be forwarded immediately to the Agent for distribution in accordance with
the terms of this Agreement.
2.9 Borrowing Base Determinations. (a) The Borrowing Base as of the
Closing Date, is acknowledged by the Borrower and the Lenders to be $21,000,000.
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(b) The Borrowing Base shall be redetermined semi-annually on the
basis of information supplied by the Borrower in compliance with the provisions
of this Agreement, including, without limitation, Reserve Reports, and all other
relevant information available to the Lenders. In addition, the Lenders shall,
in the normal course of business following a request of the Borrower,
redetermine the Borrowing Base; provided, however, the Lenders shall not be
obligated to respond to more than four such requests during any calendar year,
and in no event shall the Lenders be required to redetermine the Borrowing Base
more than once in any two-month period, including, without limitation, each
scheduled semi-annual redetermination provided for above. Notwithstanding the
foregoing, the Lenders may at their discretion redetermine the Borrowing Base
and the amount by which the Borrowing Base shall be reduced each calendar month
as set forth in Section 2.9(a) at any time and from time to time.
(c) Upon each determination of the Borrowing Base by the Lenders,
the Agent shall notify the Borrower orally (confirming such notice promptly in
writing) of such determination, and the Borrowing Base and the monthly amount by
which the Borrowing Base shall be reduced so communicated to the Borrower shall
become effective upon such written notification and shall remain in effect until
the next subsequent determination of the Borrowing Base and the monthly amount
by which the Borrowing Base shall be reduced.
(d) The Borrowing Base shall represent the determination by the
Lenders, in accordance with the applicable definitions and provisions herein
contained and their customary lending practices for loans of this nature, of the
value, for loan purposes, of the Mortgaged Properties, subject, in the case of
any increase in the Borrowing Base, to the credit approval process of the
Lenders. Furthermore, the Borrower acknowledges that the determination of the
Borrowing Base contains an equity cushion (market value in excess of loan
value), which is acknowledged by the Borrower to be essential for the adequate
protection of the Lenders.
2.10 Mandatory Prepayments. If at any time the sum of the Loan Balance and
the L/C Exposure exceeds the Borrowing Base then in effect, the Borrower shall,
within 60 days of notice from the Agent of such occurrence, (a) prepay, or make
arrangements acceptable to the Lenders for the prepayment of, the amount of such
excess for application on the Loan Balance, (b) provide additional collateral,
of character and value satisfactory to the Lenders in their reasonable
discretion, to secure the Obligations by the execution and delivery to the
Lenders of security instruments in form and substance satisfactory to the
Lenders in the exercise of their reasonable discretion, or (c) effect any
combination of the alternatives described in clauses (a) and (b) of this Section
and acceptable to the Lenders in their reasonable discretion. In the event that
a mandatory prepayment is required under this Section and the Loan Balance is
less than the amount required to be prepaid, the Borrower shall repay the entire
Loan Balance and, in accordance with the provisions of the relevant Letter of
Credit Applications executed by the Borrower or otherwise to the reasonable
satisfaction of the Lenders, deposit with the Lenders, as additional collateral
securing the Obligations, an amount of cash, in immediately available funds,
equal to the L/C Exposure minus the Borrowing Base. The cash deposited with the
Lenders in satisfaction of the requirement provided in this Section may be
invested, at the reasonable discretion of the Lenders and then only at the
express direction of the Borrower as to investment vehicle and maturity (which
shall be no later than the latest expiry date of any then outstanding
- 22 -
Letter of Credit), for the account of the Borrower in cash or cash equivalent
investments offered by or through the Lenders.
2.11 Voluntary Prepayments and Conversions of Loans. Subject to applicable
provisions of this Agreement, the Borrower shall have the right at any time or
from time to time to prepay Loans and to convert Loans of one type or with one
Interest Period into Loans of another type or with a different Interest Period;
provided, however, that (a) the Borrower shall give the Agent notice of each
such prepayment or conversion of all or any portion of a LIBO Rate Loan no less
than two Business Days prior to prepayment or conversion, (b) any LIBO Rate Loan
may be prepaid or converted only on the last day of an Interest Period for such
Loan, (c) the Borrower shall pay all accrued and unpaid interest on the amounts
prepaid or converted, and (d) no such prepayment or conversion shall serve to
postpone the repayment when due of any Obligation.
2.12 Commitment Fee. In addition to interest on the Note as provided
herein and all other fees payable hereunder and to compensate the Lender for
maintaining funds available, the Borrower shall pay to the Agent for the account
of the Lenders, in immediately available funds, on the first day of April, 2003,
and on the first day of each third calendar month thereafter during the
Commitment Period, a fee in the amount of .375% per annum, calculated on the
basis of a year of 365 or 366 days, as the case may be, for the actual days
elapsed (including the first day but excluding the last day), on the average
daily amount of the Available Commitment during the preceding quarterly period.
2.13 Facility Fee. In addition to interest on the Note as provided herein
and all other fees payable hereunder and to compensate the Lenders for the costs
of the extension of credit hereunder, the Borrower shall pay to the Agent for
the account of the Lenders, in immediately available funds, a facility fee in
the amount of $100,000 which is due on the Closing Date and one-half of one
percent (1/2 of 1%) of any future increase in the Borrowing Base then in effect.
2.14 Letter of Credit Fee. In addition to interest on the Note as provided
herein and all other fees payable hereunder, the Borrower agrees to pay to the
Lender, on the date of issuance of each Letter of Credit, a fee equal to the
greater of $500 or the Applicable Margin, calculated on the basis of a year of
365 or 366 days, as the case may be, for the actual days elapsed (including the
first day but excluding the last day), on the face amount of such Letter of
Credit during the period for which such Letter of Credit is issued; provided,
however, in the event such Letter of Credit is canceled prior to its original
expiry date or a payment is made by the Lender with respect to such Letter of
Credit, the Lender shall, within 30 days after such cancellation or the making
of such payment, rebate to the Borrower the unearned portion of such fee. The
Borrower also agrees to pay to the Lender on demand its customary letter of
credit transactional fees, including, without limitation, amendment fees,
payable with respect to each Letter of Credit.
2.15 Loans to Satisfy Obligations of Borrower. The Lenders may, but shall
not be obligated to, but only if an Event of Default exists, make Loans for the
benefit of the Borrower and apply proceeds thereof to the satisfaction of any
condition, warranty, representation, or
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covenant of the Borrower contained in this Agreement or any other Loan Document.
Any such Loan shall be evidenced by the Note and shall be made as a Floating
Rate Loan.
2.16 Security Interest in Accounts; Right of Offset. As security for the
payment and performance of the Obligations, the Borrower hereby transfers,
assigns, and pledges to the Agent for the benefit of the Lenders and grants to
the Agent for the benefit of the Lenders a security interest in all funds of the
Borrower now or hereafter or from time to time on deposit with the Agent and
such Lender, with such interest of the Lender to be retransferred, reassigned,
and/or released by the Agent and each Lender, as the case may be, at the expense
of the Borrower upon payment in full and complete performance by the Borrower of
all Obligations. All remedies as secured party or assignee of such funds shall
be exercisable by the Lender during the existence of the occurrence of any Event
of Default, regardless of whether the exercise of any such remedy would result
in any penalty or loss of interest or profit with respect to any withdrawal of
funds deposited in a time deposit account prior to the maturity thereof.
Furthermore, the Borrower hereby grants to the Agent and each Lender the right,
exercisable during the existence of an Event of Default, of offset or banker's
lien against all funds of the Borrower now or hereafter or from time to time on
deposit with the Agent and each Lender, regardless of whether the exercise of
any such remedy would result in any penalty or loss of interest or profit with
respect to any withdrawal of funds deposited in a time deposit account prior to
the maturity thereof, provided that such Obligation shall have matured, whether
by acceleration of maturity or otherwise.
2.17 General Provisions Relating to Interest. (a) It is the intention of
the parties hereto to comply strictly with the usury laws of the State of Texas
and the United States of America. In this connection, there shall never be
collected, charged, or received on the sums advanced hereunder interest in
excess of that which would accrue at the Highest Lawful Rate. For purposes of
Chapter 303 of the Texas Finance Code (Vernon's 1999), the Borrower agrees that
the Highest Lawful Rate shall be the "weekly ceiling" as defined in such
Section, provided that the Lenders may also rely, to the extent permitted by
applicable laws of the State of Texas or the United States of America, on
alternative maximum rates of interest under other laws of the State of Texas or
the United States of America applicable to the Lenders, if greater.
(b) Notwithstanding anything herein or in the Notes to the contrary,
during any Limitation Period, the interest rate to be charged on amounts
evidenced by the Notes shall be the Highest Lawful Rate, and the obligation, if
any, of the Borrower for the payment of fees or other charges deemed to be
interest under applicable law shall be suspended. During any period or periods
of time following a Limitation Period, to the extent permitted by applicable
laws of the State of Texas or the United States of America, the interest rate to
be charged hereunder shall remain at the Highest Lawful Rate until such time as
there has been paid to the Lenders (i) the amount of interest in excess of that
accruing at the Highest Lawful Rate that the Lenders would have received during
the Limitation Period had the interest rate remained at the otherwise applicable
rate, and (ii) all interest and fees otherwise payable to the Lenders but for
the effect of such Limitation Period.
(c) If, under any circumstances, the aggregate amounts paid on the
Note or under this Agreement or any other Loan Document include amounts which by
law are deemed
- 24 -
interest and which would exceed the amount permitted if the Highest Lawful Rate
were in effect, the Borrower stipulates that such payment and collection will
have been and will be deemed to have been, to the extent permitted by applicable
laws of the State of Texas or the United States of America, the result of
mathematical error on the part of the Borrower and the Lenders; and the Lenders
shall promptly refund the amount of such excess (to the extent only of such
interest payments in excess of that which would have accrued and been payable on
the basis of the Highest Lawful Rate) upon discovery of such error by the
Lenders or notice thereof from the Borrower. In the event that the maturity of
any Obligation is accelerated, by reason of an election by the Lenders or
otherwise, or in the event of any required or permitted prepayment, then the
consideration constituting interest under applicable laws may never exceed the
Highest Lawful Rate; and excess amounts paid which by law are deemed interest,
if any, shall be credited by the Lenders on the principal amount of the
Obligations, or if the principal amount of the Obligations shall have been paid
in full, refunded to the Borrower.
(d) All sums paid, or agreed to be paid, to the Lenders for the use,
forbearance and detention of the proceeds of any advance hereunder shall, to the
extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full term hereof until paid in full so that the actual
rate of interest is uniform but does not exceed the Highest Lawful Rate
throughout the full term hereof.
2.18 Yield Protection. (a) Without limiting the effect of the other
provisions of this Section (but without duplication), the Borrower shall pay to
the Lenders from time to time such amounts as the Lenders may determine are
necessary to compensate it for any Additional Costs incurred by the Lenders.
(b) Without limiting the effect of the other provisions of this
Section (but without duplication), the Borrower shall pay to the Lenders from
time to time on request such amounts as the Lenders may determine are necessary
to compensate the Lenders for any costs attributable to the maintenance by the
Lenders (or any Applicable Lending Office), pursuant to any Regulatory Change,
of capital in respect of the Commitment, such compensation to include, without
limitation, an amount equal to any reduction of the rate of return on assets or
equity of the Lenders (or any Applicable Lending Office) to a level below that
which the Lenders (or any Applicable Lending Office) could have achieved but for
such Regulatory Change.
(c) Without limiting the effect of the other provisions of this
Section (but without duplication), in the event that any Requirement of Law or
Regulatory Change or the compliance by the Lenders therewith shall (i) impose,
modify, or hold applicable any reserve, special deposit, or similar requirement
against any Letter of Credit or obligation to issue Letters of Credit, or (ii)
impose upon the Lenders any other condition regarding any Letter of Credit or
obligation to issue Letters of Credit, and the result of any such event shall be
to increase the cost to the Lenders of issuing or maintaining any Letter of
Credit or obligation to issue Letters of Credit or any liability with respect to
payments by the Lender under Letters of Credit, or to reduce any amount
receivable in connection therewith, then within 15 days of demand by the
Lenders, the Borrower shall pay to the Lenders, from time to time as specified
by the Lender,
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additional amounts which shall be sufficient to compensate the Lenders for such
increased cost or reduced amount receivable.
(d) Without limiting the effect of the other provisions of this
Section (but without duplication), the Borrower shall pay to the Lenders such
amounts as shall be sufficient in the reasonable opinion of the Lenders to
compensate them for any loss, cost, or expense incurred by and as a result of:
(i) any payment, prepayment, or conversion by the Borrower of
a LIBO Rate Loan on a date other than the last day of an Interest
Period for such Loan; or
(ii) any failure by the Borrower to borrow a LIBO Rate Loan
from the Lender on the date for such borrowing specified in the
relevant Borrowing Request;
such compensation to include, without limitation, with respect to any LIBO Rate
Loan, an amount equal to the excess, if any, of (A) the amount of interest which
would have accrued on the principal amount so paid, prepaid, converted, or not
borrowed for the period from the date of such payment, prepayment, conversion,
or failure to borrow to the last day of the then current Interest Period for
such Loan (or, in the case of a failure to borrow, the Interest Period for such
Loan which would have commenced on the date of such failure to borrow) at the
applicable rate of interest for such Loan provided for herein over (B) the
interest component (as reasonably determined by the Lenders) of the amount (as
reasonably determined by the Lenders) the Lenders would have bid in the London
interbank market for Dollar deposits of amounts comparable to such principal
amount and maturities comparable to such period; provided, however, that the
Lenders shall be limited to recover their actual losses and not anticipated
profits.
(e) Determinations by the Lenders for purposes of this Section of
the effect of any Regulatory Change on capital maintained, their costs or rate
of return, maintaining Loans, issuing Letters of Credit, its obligation to make
Loans and issue Letters of Credit, or on amounts receivable by it in respect of
Loans, Letters of Credit, or such obligations, and the additional amounts
required to compensate the Lenders under this Section shall be rebuttable
presumptions of the additional amounts due, provided that such determinations
are made on a reasonable basis. The Lenders shall furnish the Borrower with a
certificate setting forth in reasonable detail the basis and amount of increased
costs incurred or reduced amounts receivable as a result of any such event, and
the statements set forth therein shall be rebuttable presumptions of the
additional amounts due. The Lenders shall (i) notify the Borrower, as promptly
as practicable after the Lender obtains knowledge of any Additional Costs or
other sums payable pursuant to this Section and determines to request
compensation therefore, of any event occurring after the Closing Date which will
entitle the Lenders to compensation pursuant to this Section; provided that the
Borrower shall not be obligated for the payment of any Additional Costs or other
sums payable pursuant to this Section after the earlier of (A) the Final
Maturity (provided that the
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Obligations have been paid in full) and (B) the expiration of the Commitment
(provided that the Obligations have been paid in full) to the extent such
Additional Costs or other sums accrued more than 90 days prior to the date upon
which the Borrower was given such notice; and (ii) designate a different
Applicable Lending Office for the Loans of the Lenders affected by such event if
such designation will avoid the need for or reduce the amount of such
compensation and will not, in the sole opinion of the Lenders, be materially
disadvantageous to the Lenders. If the Lenders request compensation from the
Borrower under this Section, the Borrower may, by notice to the Lenders, require
that the Loans by the Lenders of the type with respect to which such
compensation is requested be converted into Floating Rate Loans in accordance
with Section 2.11. Any compensation requested by the Lenders pursuant to this
Section shall be due and payable to the Lender within fifteen days of delivery
of any such notice by the Lenders to the Borrower.
(f) The Lenders agree that they shall not request, and the Borrower
shall not be obligated to pay, any Additional Costs or other sums payable
pursuant to this Section unless similar additional costs and other sums payable
are also generally assessed by the Lenders against other customers of the
Lenders similarly situated where such customers are subject to documents
providing for such assessment.
(g) Upon the receipt by the Borrower from any Lender (an "Affected
Bank") of a claim for compensation under this Section 2.17, the Borrower may (i)
request the Affected Bank to use its best efforts to obtain a replacement bank
or financial institution satisfactory to the Borrower to acquire and assume all
or a ratable part of all of such Affected Bank's Loans and Commitment (a
"Replacement Bank"); (ii) request one or more of the other Lenders to acquire
and assume all or part of such Affected Bank's Loans and Commitment; or (iii)
designate a Replacement Bank under clause (i) or (iii) shall be subject to the
prior written consent of the Agent (which consent will not be unreasonably
withheld).
2.19 Limitation on Types of Loans. Anything herein to the contrary
notwithstanding, no more than 5 separate Loans shall be outstanding at any one
time, with, for purposes of this Section, all Floating Rate Loans constituting
one Loan and all LIBO Rate Loans for the same Interest Period constituting one
Loan. Anything herein to the contrary notwithstanding, if, on or prior to the
determination of any interest rate for any LIBO Rate Loan for any Interest
Period therefor:
(a) the Lenders determine (which determination shall be conclusive)
that quotations of interest rates for the deposits referred to in the
definition of "LIBO Rate" in Section 1.2 are not being provided in the
relevant amounts or for the relevant maturities for purposes of
determining the rate of interest for such Loan as provided in this
Agreement; or
(b) the Lenders determine (which determination shall be conclusive)
that the rates of interest referred to in the definition of "LIBO Rate" in
Section 1.2 upon the basis of which the rate of interest for such Loan for
such Interest Period is to be determined do not accurately reflect the
cost to the Lenders of making or maintaining such Loan for such Interest
Period,
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then the Lenders shall give the Borrower prompt notice thereof; and so long as
such condition remains in effect, the Lenders shall be under no obligation to
make LIBO Rate Loans or to convert Loans of any other type into LIBO Rate Loans,
and the Borrower shall, on the last day of the then current Interest Period for
each outstanding LIBO Rate Loan, either prepay such LIBO Rate Loan or convert
such Loan into another type of Loan in accordance with Section 2.11. Before
giving such notice pursuant to this Section, the Lenders will designate a
different available Applicable Lending Office for LIBO Rate Loans or take such
other action as the Borrower may request if such designation or action will
avoid the need to suspend the obligation of the Lender to make LIBO Rate Loans
hereunder and will not, in the opinion of the Lenders, be materially
disadvantageous to the Lenders.
2.20 Illegality. Notwithstanding any other provision of this Agreement, in
the event that it becomes unlawful for the Lenders or their Applicable Lending
Office to (a) honor its obligation to make any type of LIBO Rate Loans
hereunder, or (b) maintain any type of LIBO Rate Loans hereunder, then the
Lenders shall promptly notify the Borrower thereof; and the obligation of the
Lenders hereunder to make such type of LIBO Rate Loans and to convert other
types of Loans into LIBO Rate Loans of such type shall be suspended until such
time as the Lenders may again make and maintain LIBO Rate Loans of such type,
and the outstanding LIBO Rate Loans of such type shall be converted into
Floating Rate Loans in accordance with Section 2.11. Before giving such notice
pursuant to this Section, the Lenders will designate a different available
Applicable Lending Office for LIBO Rate Loans or take such other action as the
Borrower may request if such designation or action will avoid the need to
suspend the obligation of the Lenders to make LIBO Rate Loans and will not, in
the opinion of the Lenders, be disadvantageous to the Lenders.
2.21 Regulatory Change. In the event that by reason of any Regulatory
Change, the Lenders (a) incur Additional Costs based on or measured by the
excess above a specified level of the amount of a category of deposits or other
liabilities of the Lenders which includes deposits by reference to which the
interest rate on any LIBO Rate Loan is determined as provided in this Agreement
or a category of extensions of credit or other assets of such Lenders which
includes any LIBO Rate Loan, or (b) becomes subject to restrictions on the
amount of such a category of liabilities or assets which it may hold, then, at
the election of the Lenders with notice to the Borrower, the obligation of the
Lenders to make such LIBO Rate Loans and to convert Floating Rate Loans into
such LIBO Rate Loans shall be suspended until such time as such Regulatory
Change ceases to be in effect, and all such outstanding LIBO Rate Loans shall be
converted into Floating Rate Loans in accordance with Section 2.11.
2.22 Limitations on Interest Periods. Each Interest Period selected by the
Borrower (a) which commences on the last Business Day of a calendar month (or,
with respect to any LIBO Rate Loan, any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end on the
last Business Day of the appropriate subsequent calendar month, (b) which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or, with respect to any LIBO Rate Loan, if such next
succeeding Business Day falls in the next succeeding calendar month, on the next
preceding Business Day), (c) which would otherwise commence before and end after
Final Maturity shall
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end on Final Maturity, and (d) shall have a duration of not less than one month,
as to any LIBO Rate Loan, and, if any Interest Period would otherwise be a
shorter period, the relevant Loan shall be a Floating Rate Loan during such
period.
2.23 Letters in Lieu of Transfer Orders. The Lender agrees that none of
the letters in lieu of transfer or division orders provided by the Borrower
pursuant to Section 3.1(g)(iii) or Section 5.7 will be sent to the addressees
thereof prior to the occurrence of an Event of Default, at which time the Lender
may, at its option and in addition to the exercise of any of its other rights
and remedies, send any or all of such letters.
2.24 Power of Attorney. The Borrower hereby designates the Lender as its
agent and attorney-in-fact, to act in its name, place, and stead for the purpose
of completing and, upon the occurrence of an Event of Default, delivering any
and all of the letters in lieu of transfer orders delivered by the Borrower to
the Lender pursuant to Section 3.1(g)(iii) or Section 5.7, including, without
limitation, completing any blanks contained in such letters and attaching
exhibits thereto describing the relevant Collateral. The Borrower hereby
ratifies and confirms all that the Lender shall lawfully do or cause to be done
by virtue of this power of attorney and the rights granted with respect to such
power of attorney. This power of attorney is coupled with the interests of the
Lender in the Collateral, shall commence and be in full force and effect as of
the Closing Date and shall remain in full force and effect and shall be
irrevocable so long as any Obligation remains outstanding or unpaid or any
Commitment exists. The powers conferred on the Lender by this appointment are
solely to protect the interests of the Lender under the Loan Documents and shall
not impose any duty upon the Lender to exercise any such powers. The Lender
shall be accountable only for amounts that it actually receives as a result of
the exercise of such powers and shall not be responsible to the Borrower or any
other Person for any act or failure to act with respect to such powers, except
for gross negligence or willful misconduct.
ARTICLE III
CONDITIONS
The obligations of the Agent and the Lenders to enter into this Agreement
and to make Loans and issue Letters of Credit are subject to the satisfaction of
the following conditions precedent:
3.1 Receipt of Loan Documents and Other Items. The Lenders shall have no
obligation under this Agreement unless and until all matters incident to the
consummation of the transactions contemplated herein, including, without
limitation, the review by the Agent or its counsel of the title of the Borrower
to its Oil and Gas Properties, shall be satisfactory to the Agent, and the Agent
shall have received, reviewed, and approved the following documents and other
items, appropriately executed when necessary and, where applicable, acknowledged
by one or more authorized officers of the Borrower, all in form and substance
satisfactory to the Agent and dated, where applicable, of even date herewith or
a date prior thereto and acceptable to the Agent:
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(a) multiple counterparts of this Agreement, as requested by the
Agent;
(b) the Existing Notes, endorsed payable to the Agent;
(c) the Note and the Term Note;
(d) copies of the Articles of Incorporation of the Borrower and all
amendments thereto, accompanied by a certificate dated the Closing Date
issued by the secretary or an assistant secretary or another authorized
representative of the Borrower to the effect that each such copy is
correct and complete;
(e) a certificate of incumbency dated the Closing Date, including
specimen signatures of all officers or other representatives of the
Borrower who are authorized to execute Loan Documents on behalf of the
Borrower, such certificate being executed by the manager or another
authorized representative of the Borrower;
(f) copies of resolutions of the Borrower, adopted by the board of
directors of the Borrower approving the Loan Documents to which the
Borrower is a party and authorizing the transactions contemplated herein
and therein, accompanied by a certificate dated the Closing Date issued by
the manager or another authorized representative of the Borrower to the
effect that such copies are true and correct copies of resolutions duly
adopted and that such resolutions constitute all the resolutions adopted
with respect to such transactions, have not been amended, modified, or
rescinded in any respect, and are in full force and effect as of the date
of such certificate;
(g) multiple counterparts, as requested by the Lender, of the
following Security Instruments creating, evidencing, perfecting, and
otherwise establishing Liens in favor of the Lender in and to the
Collateral:
(i) Ratification of Mortgage and Deed of Trust, Indenture,
Security Agreement, Assignment of Production, and Financing
Statement from the Borrower covering all Oil and Gas Properties of
the Borrower and all improvements, personal property, and fixtures
related thereto;
(ii) Financing Statements from the Borrower, as debtor,
constituent to the instrument described in clause (i) above;
(iii) undated letters, in form and substance satisfactory to
the Agent, from the Borrower to each purchaser of production and
disburser of the proceeds of production from or attributable to the
Mortgaged Properties, together with additional letters with the
addressees left blank, authorizing and directing the addressees to
- 30 -
make future payments attributable to production from the Mortgaged
Properties directly to the Agent;
(iv) Security Agreement from the Borrower pledging contract
rights, etc.;
(v) Financing Statements from the Borrower, as debtor,
constituent to the instrument described in clause (iv) above;
(vi) Assignment of Partnership Interest (Security Agreement)
from the Borrower pledging certain partnership interest;
(vii) Financing Statement from the Borrower, as debtor,
constituent to the instrument described in Clause (vi) above;
(h) certificates dated as of a recent date from the Secretary of
State or other appropriate Governmental Authority evidencing the existence
or qualification and good standing of the Borrower in its jurisdictions of
formation and in any other jurisdictions where it does business;
(i) unaudited Financial Statements of the Borrower as of September
30, 2002;
(j) schedule of Shareholder advances for the next 12 months;
(k) results of searches of the UCC Records of the Secretary of State
of the States of Texas, New York, Delaware, West Virginia and the County
Clerk of Oklahoma County, Oklahoma, from a source acceptable to the Agent
and reflecting no Liens against any of the Collateral as to which
perfection of a Lien is accomplished by the filing of a financing
statement other than in favor of the Agent for the benefit of the Lenders;
(l) confirmation, acceptable to the Agent, of the title of the
Borrower to the Mortgaged Properties, free and clear of Liens other than
Permitted Liens;
(m) all operating, lease, sublease, royalty, sales, exchange,
processing, farm-out, bidding, pooling, unitization, communitization, and
other material agreements relating to the Mortgaged Properties reasonably
requested by the Lender;
(n) engineering reports covering the Mortgaged Properties;
(o) the opinion of Xxxxx X. Xxxxxxx, counsel to the Borrower, in the
form attached hereto as Exhibit IV, with such changes thereto as may be
approved by the Agent;
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(p) certificates evidencing the insurance coverage required pursuant
to Section 5.18;
(q) payment of the Facility Fee as described in Section 2.13 and
Agency Fee;
(r) payment of the fees described in Section 5.14;
(s) such other agreements, documents, instruments, opinions,
certificates, waivers, consents, and evidence as the Agent may reasonably
request; and
(t) the Borrower shall furnish to the Agent on or before 30 days
after the Closing Date, the necessary descriptions of the property listed
on Exhibit VIII so that a Security Agreement and Certificate of Title may
be prepared granting the Agent a first lien on such property. The Borrower
agrees to execute the documents necessary to grant the Agent a first lien
on such properties.
3.2 Each Loan and Letter of Credit. In addition to the conditions
precedent stated elsewhere herein, the Lender shall not be obligated to make any
Loan or issue any Letter of Credit unless:
(a) the Borrower shall have delivered to the Agent a Borrowing
Request at least the requisite time prior to the requested date for the
relevant Loan, or a Letter of Credit Application at least three Business
Days prior to the requested issuance date for the relevant Letter of
Credit; and each statement or certification made in such Borrowing Request
or Letter of Credit Application, as the case may be, shall be true and
correct in all material respects on the requested date for such Loan or
the issuance of such Letter of Credit;
(b) no Event of Default or Default shall exist or will occur as a
result of the making of the requested Loan or the issuance of the
requested Letter of Credit;
(c) if requested by the Agent, the Borrower shall have delivered
evidence satisfactory to the Agent substantiating any of the material
matters contained in this Agreement which are necessary to enable the
Borrower to qualify for such Loan or the issuance of such Letter of
Credit;
(d) no event shall have occurred which, in the reasonable opinion of
the Agent or any of the Lenders, would have a Material Adverse Effect;
(e) each of the representations and warranties contained in this
Agreement shall be true and correct and shall be deemed to be repeated by
the Borrower as if made on the requested date for such Loan or the
issuance of such Letter of Credit (except to the extent such
representations and warranties
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expressly refer to an earlier date, in which case, they shall be true and
correct as of such earlier date) provided, however, for purposes of this
Section 3.2, in each representation and warranty in Article IV that makes
reference to an Exhibit, the representation under this Section 3.2 that
such representation and warranty in Article IV is true on and as of the
date of the making of such Loan or the issuance of such Letter of Credit
shall take into account (i) any subsequent amendments to any Exhibit
referred to therein, (ii) any exception contained in a written notice
received by the Agent which makes specific reference to the applicable
Exhibit, or (iii) any written disclosure made by the Borrower or any of
its Subsidiaries prior to the date as of which such representation or
warranty is made, provided that such amendment, exception or disclosure
has been consented to by the Required Banks if such amendment, exception
or disclosure amends or waives provisions of this Agreement or is
otherwise required under the terms of this Agreement.
(f) all of the Security Instruments shall be in full force and
effect and provide to the Lenders the security intended thereby;
(g) neither the consummation of the transactions contemplated hereby
nor the making of such Loan or the issuance of such Letter of Credit shall
contravene, violate, or conflict with any Requirement of Law;
(h) the Borrower shall hold full legal title to the Collateral and
be the sole beneficial owner thereof;
(i) the Agent and the Lenders shall have received the payment of all
fees payable to the Agent and the Lenders hereunder and reimbursement from
the Borrower, or special legal counsel for the Agent shall have received
payment from the Borrower, for (i) all reasonable fees and expenses of
counsel to the Agent for which the Borrower is responsible pursuant to
applicable provisions of this Agreement and for which invoices have been
presented at least 15 days prior to the date of the relevant Loan or
Letter of Credit Application (otherwise the initial Borrowing which must
be presented at least five days prior to the Closing Date), and (ii)
estimated fees charged by filing officers and other public officials
incurred or to be incurred in connection with the filing and recordation
of any Security Instruments, for which invoices have been presented as of
or prior to the date of the requested Loan or Letter of Credit Application
(otherwise the initial Borrowing which must be presented at least five
days prior to the Closing Date); and
(j) all matters incident to the consummation of the transactions
hereby contemplated shall be satisfactory to the Agent and each Lender.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this Agreement and to
make the Loans and issue Letters of Credit, the Borrower represents and warrants
to the Agent and each Lender (which representations and warranties shall survive
the delivery of the Notes) that:
4.1 Due Authorization. The execution and delivery by the Borrower of this
Agreement and the borrowings hereunder, the execution and delivery by the
Borrower of the Notes, the repayment of the Notes and interest and fees provided
for in the Notes and this Agreement, the execution and delivery of the Security
Instruments by the Borrower and the performance of all obligations of the
Borrower under the Loan Documents are within the power of the Borrower, have
been duly authorized by all necessary corporate action by the Borrower, and do
not and will not (a) require the consent of any Governmental Authority, (b)
contravene or conflict with any Requirement of Law, (c) except as shown on
Exhibit VI, contravene or conflict with any indenture, instrument, or other
agreement to which the Borrower is a party or by which any Property of the
Borrower may be presently bound or encumbered, except where such contravention
or conflict would not individually or in the aggregate result in a Material
Adverse Effect, or (d) result in or require the creation or imposition of any
Lien in, upon or of any Property of the Borrower under any such indenture,
instrument, or other agreement, other than the Loan Documents.
4.2 Corporate Existence. The Borrowers are corporations duly organized,
legally existing, and in good standing under the laws of their state of
incorporation and are duly qualified as foreign corporations and are in good
standing in all jurisdictions wherein the ownership of Property or the operation
of their business necessitates same, other than those jurisdictions wherein the
failure to so qualify will not have a Material Adverse Effect.
4.3 Valid and Binding Obligations. All Loan Documents, when duly executed
and delivered by the Borrower, will be the legal, valid, and binding obligations
of the Borrower, enforceable against the Borrower in accordance with their
respective terms except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relative to enforceability.
4.4 Security Instruments. The provisions of each Security Instrument are
effective to create in favor of the Agent for the benefit of the Lender, a
legal, valid, and enforceable Lien in all right, title, and interest of the
Borrower in the Collateral described therein, except as enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors' rights generally or by equitable principles relative
to enforceability, which Liens, assuming the accomplishment of recording and
filing in accordance with applicable laws prior to the intervention of rights of
other Persons, shall constitute fully perfected first-priority Liens on all
right, title, and interest of the Borrower in the Collateral described therein
subject to Permitted Liens.
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4.5 Title to Assets. The Borrower has good and indefeasible title to all
of its interests in its Properties then owned by it, free and clear of all Liens
except Permitted Liens.
4.6 No Material Misstatements. As of the Closing Date, no information,
exhibit, statement, or report furnished to the Agent by or at the direction of
the Borrower in connection with this Agreement contains any material
misstatement of fact or omits to state a material fact or any fact necessary to
make the statements contained therein not misleading as of the date made or
deemed made.
4.7 Liabilities, Litigation, and Restrictions. As of the Closing Date,
other than as listed under the heading "Liabilities" on Exhibit VI attached
hereto, the Borrower has no liabilities, direct, or contingent, which would
result in a Material Adverse Effect, except as set forth under the heading
"Litigation" on Exhibit VI hereto, no litigation or other action of any nature
affecting the Borrower is pending before any Governmental Authority or, to the
best knowledge of the Borrower, threatened against or affecting the Borrower
which might reasonably be expected to result in any material impairment of its
ownership of any Collateral or have a Material Adverse Effect. To the best
knowledge of the Borrower, after due inquiry, no unusual or unduly burdensome
restriction, restraint or hazard exists by contract, Requirement of Law, or
otherwise relative to the business or operations of the Borrower or the
ownership and operation of the Collateral would result in a Material Adverse
Effect, other than such as relate generally to Persons engaged in business
activities similar to those conducted by the Borrower.
4.8 Authorizations; Consents. Except as expressly contemplated by this
Agreement, no authorization, consent, approval, exemption, franchise, permit, or
license of, or filing with, any Governmental Authority or any other Person is
required to authorize or is otherwise required in connection with the valid
execution and delivery by the Borrower of the Loan Documents or any instrument
contemplated hereby, the repayment by the Borrower of the Note and interest and
fees provided in the Note and this Agreement, or the performance by the Borrower
of the Obligations.
4.9 Compliance with Laws. The Borrower and its Property, including,
without limitation, the Mortgaged Property, are in compliance with all material
applicable Requirements of Law, including, without limitation, Environmental
Laws, the Natural Gas Policy Act of 1978, as amended, and ERISA, except to the
extent non-compliance with any such Requirements of Law could not reasonably be
expected to have a Material Adverse Effect.
4.10 ERISA. No Reportable Event has occurred with respect to any Single
Employer Plan, and each Single Employer Plan has complied with and been
administered in all material respects in accordance with applicable provisions
of ERISA and the Code. To the best knowledge of the Borrower, (a) no Reportable
Event has occurred with respect to any Multiemployer Plan, and (b) each
Multiemployer Plan has complied with and been administered in all material
respects with applicable provisions of ERISA and the Code. The present value of
all benefits vested under each Single Employer Plan maintained by the Borrower
or any Commonly Controlled Entity (based on the assumptions used to fund such
Plan) did not, as of the last annual valuation date applicable thereto, exceed
the value of the assets of such Plan
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allocable to such vested benefits. Neither the Borrower nor any Commonly
Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan for which there is any withdrawal liability. As of the most
recent valuation date applicable to any Multiemployer Plan, neither the Borrower
nor any Commonly Controlled Entity would become subject to any liability under
ERISA if the Borrower or such Commonly Controlled Entity were to withdraw
completely from such Multiemployer Plan. Neither the Borrower nor any Commonly
Controlled Entity has received notice that any Multiemployer Plan is Insolvent
or in Reorganization. To the best knowledge of the Borrower, no such Insolvency
or Reorganization is reasonably likely to occur. Based upon GAAP existing as of
the date of this Agreement and current factual circumstances, the Borrower has
no reason to believe that the annual cost during the term of this Agreement to
the Borrower and all Commonly Controlled Entities for post-retirement benefits
to be provided to the current and former employees of the Borrower and all
Commonly Controlled Entities under Plans which are welfare benefit plans (as
defined in Section 3(1) of ERISA) will, in the aggregate, have a Material
Adverse Effect.
4.11 Environmental Laws. To the best knowledge and belief of the Borrower,
except as would not have a Material Adverse Effect, or as described on Exhibit
VI under the heading "Environmental Matters:"
(a) no Property of the Borrower is currently on or has ever been on,
or is adjacent to any Property which is on or has ever been on, any
federal or state list of Superfund Sites;
(b) no Hazardous Substances have been generated, transported, and/or
disposed of by the Borrower at a site which was, at the time of such
generation, transportation, and/or disposal, or has since become, a
Superfund Site;
(c) except in accordance with applicable Requirements of Law or the
terms of a valid permit, license, certificate, or approval of the relevant
Governmental Authority, no Release of Hazardous Substances by the Borrower
or from, affecting, or related to any Property of the Borrower or adjacent
to any Property of the Borrower has occurred; and
(d) no Environmental Complaint has been received by the Borrower.
4.12 Compliance with Federal Reserve Regulations. No transaction
contemplated by the Loan Documents is in violation of any regulations
promulgated by the Board of Governors of the Federal Reserve System, including,
without limitation, Regulations G, T, U, or X.
4.13 Investment Company Act Compliance. The Borrower is not, nor is the
Borrower directly or indirectly controlled by or acting on behalf of any Person
which is, an "investment company" or an "affiliated person" of an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
4.14 Public Utility Holding Company Act Compliance. The Borrower is not a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a
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"holding company," within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
4.15 Proper Filing of Tax Returns; Payment of Taxes Due. The Borrower has
duly and properly filed its United States income tax return and all other tax
returns which are required to be filed and has paid all taxes due except such as
are being contested in good faith and as to which adequate provisions and
disclosures have been made. The respective charges and reserves on the books of
the Borrower with respect to taxes and other governmental charges are adequate.
4.16 Refunds. Except as described on Exhibit VI under the heading
"Refunds," no orders of, proceedings pending before, or other requirements of,
the Federal Energy Regulatory Commission, the Texas Railroad Commission, or any
Governmental Authority exist which could result in the Borrower being required
to refund any material portion of the proceeds received or to be received from
the sale of hydrocarbons constituting part of the Mortgaged Property.
4.17 Gas Contracts. Except as described on Exhibit VI under the heading
"Gas Contracts," the Borrower (a) is not obligated in any material respect by
virtue of any prepayment made under any contract containing a "take-or-pay" or
"prepayment" provision or under any similar agreement to deliver hydrocarbons
produced from or allocated to any of the Mortgaged Property at some future date
without receiving full payment therefor within 90 days of delivery, and (b) has
not produced gas, in any material amount, subject to, and neither the Borrower
nor any of the Mortgaged Properties is subject to, balancing rights of third
parties or subject to balancing duties under governmental requirements, except
as to such matters for which the Borrower has reflected in the most recent
engineering report or established monetary reserves adequate in amount to
satisfy such obligations and has segregated such reserves from other accounts.
4.18 Intellectual Property. The Borrower owns or is licensed to use all
Intellectual Property necessary to conduct all business material to its
condition (financial or otherwise), business, or operations as such business is
currently conducted. No claim has been asserted or is pending by any Person with
the respect to the use of any such Intellectual Property or challenging or
questioning the validity or effectiveness of any such Intellectual Property; and
the Borrower knows of no valid basis for any such claim. The use of such
Intellectual Property by the Borrower does not infringe on the rights of any
Person, except for such claims and infringements as do not, in the aggregate,
give rise to any material liability on the part of the Borrower.
4.19 Casualties or Taking of Property. Except as disclosed on Exhibit VI
under the heading "Casualties," except as would not result in a Material Adverse
Effect, neither the business nor any Property of the Borrower has been
materially adversely affected as a result of any fire, explosion, earthquake,
flood, drought, windstorm, accident, strike or other labor disturbance, embargo,
requisition or taking of Property, or cancellation of contracts, permits, or
concessions by any Governmental Authority, riot, activities of armed forces, or
acts of God.
4.20 Locations of Borrower. The principal place of business and chief
executive office of the Borrower is located at the address of the Borrower set
forth in Section 9.3 or at such other
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location as the Borrower may have, by proper written notice hereunder, advised
the Lender, provided that such other location is within a state in which
appropriate financing statements from the Borrower in favor of the Lender have
been filed.
4.21 Subsidiaries. As of the Closing Date, the Borrower has no
Subsidiaries except those described on Exhibit VI under the heading
"Subsidiaries".
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any Commitment
exists, the Borrower shall:
5.1 Maintenance and Access to Records. Keep adequate records, in
accordance with GAAP, of all its transactions so that at any time, and from time
to time, its true and complete financial condition may be readily determined,
and promptly following the reasonable request of the Agent, make such records
available for inspection by the Agent and, at the expense of the Borrower, allow
the Agent to make and take away copies thereof.
5.2 Quarterly Financial Statements; Compliance Certificates. Deliver to
the Agent, (a) on or before the 45th day after the close of each of the first
three quarterly periods of each fiscal year of the Borrower, a copy of the
unaudited consolidated Financial Statements of PEC and its Subsidiaries as at
the close of such quarterly period and from the beginning of such fiscal year to
the end of such period, such Financial Statements to be certified by a
Responsible Officer of the Borrower as having been prepared in accordance with
GAAP consistently applied and as a fair presentation of the condition of the
Borrower, subject to changes resulting from normal year-end audit adjustments,
and (b) on or before the 60th day after the close of each fiscal quarter, with
the exception of the last fiscal quarter, a Compliance Certificate.
5.3 Annual Financial Statements. Deliver to the Agent, on or before the
90th day after the close of each fiscal year of the Borrower, a copy of the
annual audited consolidated Financial Statements of PEC and its Subsidiaries and
a Compliance Certificate on the 105th day after the close of each fiscal year.
5.4 Oil and Gas Reserve Reports. (a) Deliver to the Agent no later than
May 1of each year during the term of this Agreement, engineering reports in form
and substance satisfactory to the Agent, certified by any nationally or
regionally-recognized independent consulting petroleum engineers acceptable to
the Lender, as fairly and accurately setting forth (i) the proven and producing,
shut-in, behind-pipe, and undeveloped oil and gas reserves (separately
classified as such) attributable to the Mortgaged Properties as of January 1 of
the year for which such reserve reports are furnished, (ii) the aggregate
present value of the future net income with respect to such Mortgaged
Properties, discounted at a stated per annum discount rate of proven and
producing reserves, (iii) projections of the annual rate of production, gross
income, and net income with respect to such proven and producing reserves, and
(iv) information with respect to the "take-or-pay," "prepayment," and
gas-balancing liabilities of the Borrower.
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(b) Deliver to the Agent no later than November 1 of each year
during the term of this Agreement, engineering reports in form and substance
satisfactory to the Agent prepared by or under the supervision of any nationally
or regionally-recognized independent consulting petroleum engineer evaluating
the Mortgaged Properties as of July 1 of the year for which such reserve reports
are furnished and updating the information provided in the reports pursuant to
Section 5.4(a).
(c) Each of the reports provided pursuant to this Section shall be
submitted to the Agent together with additional data concerning pricing,
quantities of production from the Mortgaged Properties, volumes of production
sold, purchasers of production, gross revenues, expenses, and such other
information and engineering and geological data with respect thereto as the
Lender may reasonably request.
5.5 Title Opinions; Title Defects. Promptly upon the request of the Agent,
furnish to the Agent title opinions, in form and substance and by counsel
satisfactory to the Lender, or other confirmation of title acceptable to the
Agent, covering Oil and Gas Properties constituting not less than 90% of the
value, determined by the Agent in its sole discretion, of the Mortgaged
Properties; and promptly, but in any event within 60 days after notice by the
Agent of any defect, material in the opinion of the Agent in value, in the title
of the Borrower to any of its Oil and Gas Properties, clear such title defects,
and, in the event any such title defects are not cured in a timely manner, pay
all related costs and fees incurred by the Agent to do so.
5.6 Notices of Certain Events. Deliver to the Agent, immediately upon
having knowledge of the occurrence of any of the following events or
circumstances, a written statement with respect thereto, signed by a Responsible
Officer of the Borrower and setting forth the relevant event or circumstance and
the steps being taken by the Borrower with respect to such event or
circumstance:
(a) any Default or Event of Default;
(b) any default or event of default under any contractual obligation
of the Borrower, or any litigation, investigation, or proceeding between
the Borrower and any Governmental Authority which, in either case, if not
cured or if adversely determined, as the case may be, could reasonably be
expected to have a Material Adverse Effect;
(c) any litigation or proceeding involving the Borrower as a
defendant or in which any Property of the Borrower is subject to a claim
and in which the amount involved is $500,000 or more and which is not
covered by insurance or in which injunctive or similar relief is sought;
(d) the receipt by the Borrower of any Environmental Complaint;
(e) any actual, proposed, or threatened testing or other
investigation by any Governmental Authority or other Person concerning the
environmental condition of, or relating to, any Property of the Borrower
or adjacent to any
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Property of the Borrower following any allegation of a violation of any
Requirement of Law;
(f) any Release of Hazardous Substances by the Borrower or from,
affecting, or related to any Property of the Borrower or adjacent to any
Property of the Borrower except in accordance with applicable Requirements
of Law or the terms of a valid permit, license, certificate, or approval
of the relevant Governmental Authority, or the violation of any
Environmental Law, or the revocation, suspension, or forfeiture of or
failure to renew, any permit, license, registration, approval, or
authorization which could reasonably be expected to have a Material
Adverse Effect;
(g) the change in identity or address of any Person remitting to the
Borrower proceeds from the sale of hydrocarbon production from or
attributable to any Mortgaged Property;
(h) any change in the senior management of the Borrower;
(i) any Reportable Event or imminently expected Reportable Event
with respect to any Plan; any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan; the institution
of proceedings or the taking of any other action by the PBGC, the Borrower
or any Commonly Controlled Entity or Multiemployer Plan with respect to
the withdrawal from, or the termination, Reorganization or Insolvency of,
any Single Employer Plan or Multiemployer Plan; or any Prohibited
Transaction in connection with any Plan or any trust created thereunder
and the action being taken by the Internal Revenue Service with respect
thereto;
(j) any pledge of Oil and Gas Property by the partnerships listed on
Exhibit A to the document listed in Section 3.1(g)(vi); and
(k) any other event or condition which could reasonably be expected
to have a Material Adverse Effect.
5.7 Letters in Lieu of Transfer Orders; Division Orders. Promptly upon
request by the Agent at any time and from time to time, execute such letters in
lieu of transfer orders, in addition to the letters signed by the Borrower and
delivered to the Lender in satisfaction of the condition set forth in Section
3.1(g)(iii) and/or division and/or transfer orders as are necessary or
appropriate to transfer and deliver to the Lender proceeds from or attributable
to any Mortgaged Property.
5.8 Additional Information. Furnish to the Agent, promptly upon the
request of the Agent, such additional financial or other information concerning
the assets, liabilities, operations, and transactions of the Borrower as the
Agent may from time to time request; and notify the Agent not less than ten
Business Days prior to the occurrence of any condition or event that may change
the proper location for the filing of any financing statement or other
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public notice or recording for the purpose of perfecting a Lien in any
Collateral, including, without limitation, any change in its name or the
location of its principal place of business or chief executive office; and upon
the request of the Agent, execute such additional Security Instruments as may be
necessary or appropriate in connection therewith.
5.9 Compliance with Laws. Except to the extent the failure to comply or
cause compliance would not have a Material Adverse Effect, comply with all
applicable Requirements of Law, including, without limitation, (a) the Natural
Gas Policy Act of 1978, as amended, (b) ERISA, (c) Environmental Laws, and (d)
all permits, licenses, registrations, approvals, and authorizations (i) related
to any natural or environmental resource or media located on, above, within, in
the vicinity of, related to or affected by any Property of the Borrower, (ii)
required for the performance of the operations of the Borrower, or (iii)
applicable to the use, generation, handling, storage, treatment, transport, or
disposal of any Hazardous Substances; and cause all employees, crew members,
agents, contractors, subcontractors, and future lessees (pursuant to appropriate
lease provisions) of the Borrower, while such Persons are acting within the
scope of their relationship with the Borrower, to comply with all such
Requirements of Law as may be necessary or appropriate to enable the Borrower to
so comply.
5.10 Payment of Assessments and Charges. Pay all taxes, assessments,
governmental charges, rent, and other Indebtedness which, if unpaid, might
become a Lien against the Property of the Borrower, except any of the foregoing
being contested in good faith and as to which adequate reserve in accordance
with GAAP has been established or unless failure to pay would not have a
Material Adverse Effect.
5.11 Maintenance of Corporate Existence and Good Standing. Maintain its
corporate existence or qualification and good standing in its jurisdictions of
incorporation or formation and in all jurisdictions wherein the Property now
owned or hereafter acquired or business now or hereafter conducted necessitates
same, unless the failure to do so would not have a Material Adverse Effect.
5.12 Payment of Notes; Performance of Obligations. Pay the Notes and the
Term Note according to the reading, tenor, and effect thereof, as modified
hereby, and do and perform every act and discharge all of its other Obligations.
5.13 Further Assurances. Promptly cure any defects in the execution and
delivery of any of the Loan Documents and all agreements contemplated thereby,
and execute, acknowledge, and deliver such other assurances and instruments as
shall, in the opinion of the Lender, be necessary to fulfill the terms of the
Loan Documents.
5.14 Initial Fees and Expenses of Counsel to Lender. Upon request by the
Agent, promptly reimburse the Agent for all reasonable fees and expenses of
Xxxxxxx Xxxxxx L.L.P., special counsel to the Agent, in connection with the
preparation of this Agreement and all documentation contemplated hereby, the
satisfaction of the conditions precedent set forth herein, the filing and
recordation of Security Instruments, and the consummation of the transactions
contemplated in this Agreement.
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5.15 Subsequent Fees and Expenses of Lender. Upon request by the Agent,
promptly reimburse the Agent (to the fullest extent permitted by law) for all
amounts reasonably expended, advanced, or incurred by or on behalf of the Agent
to satisfy any obligation of the Borrower under any of the Loan Documents; to
collect the Obligations; to ratify, amend, restate, or prepare additional Loan
Documents, as the case may be; for the filing and recordation of Security
Instruments; to enforce the rights of the Agent under any of the Loan Documents;
and to protect the Properties or business of the Borrower, including, without
limitation, the Collateral, which amounts shall be deemed compensatory in nature
and liquidated as to amount upon notice to the Borrower by the Agent and which
amounts shall include, but not be limited to (a) all court costs, (b) reasonable
attorneys' fees, (c) reasonable fees and expenses of auditors and accountants
incurred to protect the interests of the Agent, (d) fees and expenses incurred
in connection with the participation by the Agent as a member of the creditors'
committee in a case commenced under any Insolvency Proceeding, (e) fees and
expenses incurred in connection with lifting the automatic stay prescribed in
Section 362 Title 11 of the United States Code, and (f) fees and expenses
incurred in connection with any action pursuant to Section 1129 Title 11 of the
United States Code all reasonably incurred by the Agent in connection with the
collection of any sums due under the Loan Documents, together with interest at
the per annum interest rate equal to the Floating Rate, calculated on a basis of
a calendar year of 365 or 366 days, as the case may be, counting the actual
number of days elapsed, on each such amount from the date of notification that
the same was expended, advanced, or incurred by the Agent until the date it is
repaid to the Agent, with the obligations under this Section surviving the
non-assumption of this Agreement in a case commenced under any Insolvency
Proceeding and being binding upon the Borrower and/or a trustee, receiver,
custodian, or liquidator of the Borrower appointed in any such case.
5.16 Operation of Oil and Gas Properties. Develop, maintain, and operate
its Oil and Gas Properties in a prudent and workmanlike manner in accordance
with industry standards.
5.17 Maintenance and Inspection of Properties. Maintain all of its
tangible Properties in good repair and condition, ordinary wear and tear
excepted; make all necessary replacements thereof and operate such Properties in
a good and workmanlike manner; and permit any authorized representative of the
Lender to visit and inspect, at the expense of the Borrower, any tangible
Property of the Borrower.
5.18 Maintenance of Insurance. Maintain insurance with respect to its
Properties and businesses against such liabilities, casualties, risks, and
contingencies as is customary in the relevant industry and sufficient to prevent
a Material Adverse Effect, all such insurance to be in amounts and from insurers
acceptable to the Agent, maintained by Borrower, naming the Agent as loss payee,
and, upon any renewal of any such insurance and at other times upon request by
the Agent, furnish to the Agent evidence, satisfactory to the Agent, within 30
days of the Closing Date of the maintenance of such insurance. The Agent shall
have the right to collect, and the Borrower hereby assigns to the Agent, any and
all monies that may become payable under any policies of insurance relating to
business interruption, if any, or by reason of damage, loss, or destruction of
any of the Collateral. In the event of any damage, loss, or destruction for
which insurance proceeds relating to business interruption, if any, or
Collateral exceed $500,000, the Agent may, at its option, apply all such sums or
any part thereof received by it toward the
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payment of the Obligations, whether matured or unmatured, application to be made
first to interest and then to principal, and shall deliver to the Borrower the
balance, if any, after such application has been made. In the event of any such
damage, loss, or destruction for which insurance proceeds are $500,000 or less,
provided that no Default or Event of Default has occurred and is continuing, the
Agent shall deliver any such proceeds received by it to the Borrower. In the
event the Agent receives insurance proceeds not attributable to Collateral or
business interruption, the Agent shall deliver any such proceeds to the
Borrower.
5.19 INDEMNIFICATION. INDEMNIFY AND HOLD THE AGENT AND EACH LENDER AND
THEIR SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT,
AND AFFILIATES AND EACH TRUSTEE FOR THE BENEFIT OF THE AGENT AND EACH LENDER
UNDER ANY SECURITY INSTRUMENT HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS,
LOSSES, DAMAGES, LIABILITIES, FINES, PENALTIES, CHARGES, ADMINISTRATIVE AND
JUDICIAL PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS, REQUIREMENTS AND
ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND EXPENSES INCURRED IN
CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND
EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, FROM (A) THE
PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER, OR FROM ANY PROPERTY OF THE
BORROWER, WHETHER PRIOR TO OR DURING THE TERM HEREOF, (B) ANY ACTIVITY CARRIED
ON OR UNDERTAKEN ON OR OFF ANY PROPERTY OF THE BORROWER, WHETHER PRIOR TO OR
DURING THE TERM HEREOF, AND WHETHER BY THE BORROWER OR ANY PREDECESSOR IN TITLE,
EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER OR ANY OTHER
PERSON AT ANY TIME OCCUPYING OR PRESENT ON SUCH PROPERTY, IN CONNECTION WITH THE
HANDLING, TREATMENT, REMOVAL, STORAGE, DECONTAMINATION, CLEANUP, TRANSPORTATION,
OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES AT ANY TIME LOCATED OR PRESENT ON OR
UNDER SUCH PROPERTY, (C) ANY RESIDUAL CONTAMINATION ON OR UNDER ANY PROPERTY OF
THE BORROWER, (D) ANY CONTAMINATION OF ANY PROPERTY OR NATURAL RESOURCES ARISING
IN CONNECTION WITH THE GENERATION, USE, HANDLING, STORAGE, TRANSPORTATION OR
DISPOSAL OF ANY HAZARDOUS SUBSTANCES BY THE BORROWER OR ANY EMPLOYEE, AGENT,
CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER WHILE SUCH PERSONS ARE ACTING
WITHIN THE SCOPE OF THEIR RELATIONSHIP WITH THE BORROWER, IRRESPECTIVE OF
WHETHER ANY OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH
APPLICABLE REQUIREMENTS OF LAW, OR (E) THE PERFORMANCE AND ENFORCEMENT OF ANY
LOAN DOCUMENT OR ANY OTHER ACT OR OMISSION IN CONNECTION WITH OR RELATED TO ANY
LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING, WITHOUT
LIMITATION, ANY OF THE FOREGOING IN THIS SECTION ARISING FROM NEGLIGENCE,
WHETHER SOLE OR CONCURRENT, ON THE PART OF THE AGENT AND EACH LENDER OR ANY OF
ITS SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, OR
AFFILIATES OR ANY TRUSTEE FOR THE
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BENEFIT OF THE AGENT AND EACH LENDER UNDER ANY SECURITY INSTRUMENT; WITH THE
FOREGOING INDEMNITY SURVIVING SATISFACTION OF ALL OBLIGATIONS AND THE
TERMINATION OF THIS AGREEMENT.
5.20 Partnership Debt. No Oil and Gas Properties of the partnerships in
which PrimeEnergy Corporation and PrimeEnergy Management Corporation own general
or limited partnership interest and which have been pledged to the Agent by the
document described in Section 3.1(g)(vi) have been mortgaged. The partnerships
have no debt except that PrimeEnergy Asset & Income Fund LP AA-4 which owes
PrimeEnergy Management Corporation and/or Prime Operating Company the sum of
$153,280.37 and the Borrower agrees that if any payment is made on such debt at
a time the Borrower is in Default under this Agreement, such funds shall be paid
to the Agent for the benefit of the Lenders.
ARTICLE VI
NEGATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any Commitment
exists, the Borrower will not:
6.1 Indebtedness. Create, incur, assume, or suffer to exist any
Indebtedness in excess of $1,500,000, whether by way of loan or otherwise;
provided, however, the foregoing restriction shall not apply to (a) the
Obligations, (b) unsecured accounts payable incurred in the ordinary course of
business, which are not unpaid in excess of 60 days beyond invoice date or are
being contested in good faith and as to which such reserve as is required by
GAAP has been made , (c) crude oil, natural gas, or other hydrocarbon floor,
collar, cap, price protection, or swap agreements ("Commodity Hedge
Agreements"), in form and substance and with a Person acceptable to the Lender,
provided that (i) each commitment issued under such agreement must also be
approved by the Lender, (ii) such agreements shall not be entered into with
respect to Mortgaged Properties constituting more than 70% of monthly production
of proven producing reserves as forecast in Lender's most recent engineering
evaluation, (iii) that the strike prices in such agreements are not less than
the prices used by the Lender in its most recent Borrowing Base determination,
and (iv) the Lender shall receive a security interest in the Commodity Hedge
Agreements, (d) Rate Management Transactions, in form and substance and with a
Person acceptable to the Lender, or (e) indebtedness with respect to payments to
sellers of Oil and Gas Properties acquired subsequent to the date of this
Agreement of a portion of the cash flow attributable to such properties that is
acceptable to the Agent and the Lenders in their sole good faith discretion.
6.2 Contingent Obligations. Create, incur, assume, or suffer to exist any
Contingent Obligation; provided, however, the foregoing restriction shall not
apply to (a) performance guarantees and performance surety or other bonds
provided in the ordinary course of business, or (b) trade credit incurred or
operating leases entered into in the ordinary course of business.
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6.3 Liens. Create, incur, assume, or suffer to exist any Lien on any of
its Oil and Gas Properties or any other Property, whether now owned or hereafter
acquired; provided, however, the foregoing restrictions shall not apply to
Permitted Liens.
6.4 Sales of Assets. Without the prior written consent of the Lenders,
sell, transfer, or otherwise dispose of, in one or any series of transactions
within any 12-month period, assets, whether now owned or hereafter acquired, the
book value of which exceeds $250,000 in the aggregate for both Borrowers, or
enter into any agreement to do so; provided, however, the foregoing restriction
shall not apply to the sale of hydrocarbons or inventory in the ordinary course
of business or the sale or other disposition of Property destroyed, lost, worn
out, damaged or having only salvage value or no longer used or useful in the
business of either Borrower.
6.5 Leasebacks. Enter into any agreement to sell or transfer any Property
and thereafter rent or lease as lessee such Property or other Property intended
for the same use or purpose as the Property sold or transferred.
6.6 Loans or Advances. Make or agree to make or allow to remain
outstanding any loans or advances to any Person; provided, however, the
foregoing restrictions shall not apply to (a) advances or extensions of credit
in the form of accounts receivable incurred in the ordinary course of business
and upon terms common in the industry for such accounts receivable, or (b)
advances to employees of the Borrower for the payment of expenses in the
ordinary course of business, (c) the outstanding Guarantee in the amount of
$1,000,000 to Alabama Shopping Center Associates, and (d) loans or advances to
PrimeEnergy asset and Income Fund L.P. A-1, PrimeEnergy Asset and Income Fund
L.P. A-2, PrimeEnergy Asset and Income Fund L.P. A-3, PrimeEnergy Asset and
Income Fund L.P. AA-1, PrimeEnergy Asset and Income Fund L.P. AA-2, PrimeEnergy
Asset and Income Fund L.P. AA-3, PrimeEnergy Asset and Income Fund L.P. AA-4,
PrimeEnergy Asset and Income Trust A-1, PrimeEnergy Asset and Income Trust A02
and any other oil and gas limited partnership for which either Borrower is the
managing general partner and any business trust formed in the ordinary course of
business of the Borrowers for which either Borrower is the managing trustee,
provided that no default or event of default exists under any material
contractual obligation of such partnership or trust.
6.7 Investments. Acquire Investments in, or purchase or otherwise acquire
all or substantially all of the assets of, any Person; provided, however, the
foregoing restriction shall not apply to the purchase or acquisition of (a) Oil
and Gas Properties, (b) Investments in the form of (i) debt securities issued or
directly and fully guaranteed or insured by the United States Government or any
agency or instrumentality thereof, with maturities of no more than one year,
(ii) commercial paper of a domestic issuer rated at the date of acquisition at
least P-2 by Xxxxx'x Investor Service, Inc. or A-2 by Standard & Poor's
Corporation and with maturities of no more than one year from the date of
acquisition, or (iii) repurchase agreements covering debt securities or
commercial paper of the type permitted in this Section, certificates of deposit,
demand deposits, eurodollar time deposits, overnight bank deposits and bankers'
acceptances, with maturities of no more than one year from the date of
acquisition, issued by or acquired from or through the Lender or any bank or
trust company organized under the laws of the United States or any state thereof
and having capital surplus and undivided profits aggregating at least
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$100,000,000, (c) other short-term Investments similar in nature and degree of
risk to those described in clause (b) of this Section, or (d) money-market
funds.
6.8 Dividends and Distributions. Declare, pay, or make, whether in cash or
Property of the Borrower, any dividend or distribution on, or purchase, redeem,
or otherwise acquire for value, any share of any class of its capital stock,
except that the foregoing restriction shall not apply to dividends paid in
capital stock of the Borrower other than the purchase of capital stock of PEC
for an amount not exceeding $1,000,000 in any fiscal year provided that no
Default or Event of Default exists or will occur as the result of such purchase.
6.9 Issuance of Stock; Changes in Corporate Structure. Issue or agree to
issue additional shares of capital stock, in one or any series of transactions;
enter into any transaction of consolidation, merger, or amalgamation; liquidate,
wind up, or dissolve (or suffer any liquidation or dissolution).
6.10 Transactions with Affiliates. Directly or indirectly, enter into any
transaction (including the sale, lease, or exchange of Property or the rendering
of service) with any of its Affiliates, other than upon fair and reasonable
terms no less favorable than could be obtained in an arm's length transaction
with a Person which was not an Affiliate.
6.11 Lines of Business. Expand, on its own or through any Subsidiary, into
any line of business other than those in which the Borrower is engaged as of the
date hereof.
6.12 ERISA Compliance. Permit any Plan maintained by it or any Commonly
Controlled Entity to (a) engage in any Prohibited Transaction, (b) incur any
"accumulated funding deficiency," as such term is defined in Section 302 of
ERISA, or (c) terminate in a manner which could result in the imposition of a
Lien on any Property of the Borrower pursuant to Section 4068 of ERISA; or
assume an obligation to contribute to any Multiemployer Plan; or acquire any
Person or the assets of any Person which has now or has had at any time an
obligation to contribute to any Multiemployer Plan.
6.13 Interest Coverage Ratio. Permit, as of the close of any fiscal
quarter, the ratio of (a) quarterly EBITDA on a trailing four-quarter basis to
(b) Interest Expense to be less than 3.00 to 1.00, measured on a trailing four
quarter basis.
6.14 Current Ratio. Permit, as of the close of any fiscal quarter, the
ratio of Current Assets to Current Liabilities to be less than 1.00 to 1.00,
measured on a trailing four-quarter basis.
6.15 Tangible Net Worth. Permit Tangible Net Worth, as of the close of any
fiscal quarter, to be less than $6,000,000 at December 31, 2002, plus 75% of
positive quarterly net income thereafter.
6.16 Bank Debt Coverage Ratio. Permit, as of the close of any fiscal
quarter, the ratio of (a) Bank Debt to (b) EBITDA to be greater than 4.00 to
1.00, measured on a trailing four quarter basis.
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ARTICLE VII
EVENTS OF DEFAULT
7.1 Enumeration of Events of Default. Any of the following events shall
constitute an Event of Default:
(a) default shall be made in the payment when due of any installment
of principal or interest under this Agreement or the Notes or in the
payment when due of any fee or other sum payable under any Loan Document
and such default as to interest or fees only shall have continued for
three days;
(b) default shall be made by the Borrower in the due observance or
performance of any of their respective obligations under the Loan
Documents, and such default shall continue for 30 days after the earlier
of notice thereof to the Borrower by the Lender or knowledge thereof by
the Borrower;
(c) any representation or warranty made by the Borrower in any of
the Loan Documents proves to have been untrue in any material respect or
any representation, statement (including Financial Statements),
certificate, or data furnished or made to the Lender in connection
herewith proves to have been untrue in any material respect as of the date
the facts therein set forth were stated or certified;
(d) default shall be made by the Borrower (as principal or guarantor
or other surety) in the payment or performance of any bond, debenture,
note, or other Indebtedness or under any credit agreement, loan agreement,
indenture, promissory note, or similar agreement or instrument executed in
connection with any of the foregoing, and such default shall remain
unremedied for in excess of the period of grace, if any, with respect
thereto;
(e) the Borrower shall be unable to satisfy any condition or cure
any circumstance specified in Article III, the satisfaction or curing of
which is precedent to the right of the Borrower to obtain a Loan or the
issuance of a Letter of Credit and such inability shall continue for a
period in excess of 30 days;
(f) either the Borrower shall (i) apply for or consent to the
appointment of a receiver, trustee, or liquidator of it or all or a
substantial part of its assets, (ii) file a voluntary petition commencing
an Insolvency Proceeding, (iii) make a general assignment for the benefit
of creditors, (iv) be unable, or admit in writing its inability, to pay
its debts generally as they become due, or (v) file an answer admitting
the material allegations of a petition filed against it in any Insolvency
Proceeding;
(g) an order, judgment, or decree shall be entered against either
the Borrower by any court of competent jurisdiction or by any other duly
authorized
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authority, on the petition of a creditor or otherwise, granting relief in
any Insolvency Proceeding or approving a petition seeking reorganization
or an arrangement of its debts or appointing a receiver, trustee,
conservator, custodian, or liquidator of it or all or any substantial part
of its assets, and such order, judgment, or decree shall not be dismissed
or stayed within 60 days;
(h) the levy against any significant portion of the Property of the
Borrower, or any execution, garnishment, attachment, sequestration, or
other writ or similar proceeding which is not permanently dismissed or
discharged within 30 days after the levy;
(i) a final and non-appealable order, judgment, or decree shall be
entered against the Borrower for money damages and/or Indebtedness due in
an amount in excess of $500,000, except as disclosed on the Closing Date
in Exhibit V and such order, judgment, or decree shall not be paid in
full, dismissed, or stayed within 60 days;
(j) any charges are filed or any other action or proceeding is
instituted by any Governmental Authority against either the Borrower under
the Racketeering Influence and Corrupt Organizations Statute (18 U.S.C.
Section 1961 et seq.), the result of which could be the forfeiture or
transfer of any material Property of the Borrower subject to a Lien in
favor of the Agent and/or the Lenders without (i) satisfaction or
provision for satisfaction of such Lien, or (ii) such forfeiture or
transfer of such Property being expressly made subject to such Lien;
(k) the Borrower shall have (i) concealed, removed, or diverted, or
permitted to be concealed, removed, or diverted, any part of its Property,
with intent to hinder, delay, or defraud its creditors or any of them,
(ii) made or suffered a transfer of any of its Property which may be
fraudulent under any bankruptcy, fraudulent conveyance, or similar law,
(iii) made any transfer of its Property to or for the benefit of a
creditor at a time when other creditors similarly situated have not been
paid, or (iv) shall have suffered or permitted, while insolvent, any
creditor to obtain a Lien upon any of its Property through legal
proceedings or distraint which is not vacated within 30 days from the date
thereof;
(l) any Security Instrument shall for any reason not, or cease to,
create valid and perfected first-priority Liens against the Collateral
purportedly covered thereby;
(m) the Borrower shall cease to be owned by its presently existing
shareholders;
(n) the occurrence of a Material Adverse Effect and the same shall
remain unremedied for in excess of 30 days after notice given by the
Lender;
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(o) the failure to furnish the information required by Section
3.1(t) or execute the Security Agreements and/or Certificate of Title
necessary to grant to the Agent a first lien on the property listed on
Exhibit VIII.
7.2 Remedies. (a) Upon the occurrence of an Event of Default specified in
Sections 7.1(f) or 7.1(g), immediately and without notice, (i) all Obligations
shall automatically become immediately due and payable, without presentment,
demand, protest, notice of protest, default, or dishonor, notice of intent to
accelerate maturity, notice of acceleration of maturity, or other notice of any
kind, except as may be provided to the contrary elsewhere herein, all of which
are hereby expressly waived by the Borrower; (ii) the Commitment shall
immediately cease and terminate unless and until reinstated by the Lenders in
writing; and (iii) the Lenders are hereby authorized at any time and from time
to time, without notice to the Borrower (any such notice being expressly waived
by the Borrower), to set-off and apply any and all deposits (general or special,
time or demand, provisional or final) held by the Lenders and any and all other
indebtedness at any time owing by the Lender to or for the credit or account of
the Borrower against any and all of the Obligations although such Obligations
may be unmatured.
(b) Upon the occurrence of any Event of Default other than those
specified in Sections 7.1(f) or 7.1(g), (i) the Required Lenders may, by notice
to the Borrower, declare all Obligations immediately due and payable, without
presentment, demand, protest, notice of protest, default, or dishonor, notice of
intent to accelerate maturity, notice of acceleration of maturity, or other
notice of any kind, except as may be provided to the contrary elsewhere herein,
all of which are hereby expressly waived by the Borrower; (ii) the Commitment
shall immediately cease and terminate unless and until reinstated by the Lenders
in writing; and (iii) the Lenders are hereby authorized at any time and from
time to time, without notice to the Borrower (any such notice being expressly
waived by the Borrower), to set-off and apply any and all deposits (general or
special, time or demand, provisional or final) held by the Lenders and any and
all other indebtedness at any time owing by the Lenders to or for the credit or
account of the Borrower against any and all of the Obligations although such
Obligations may be unmatured.
(c) Upon the occurrence of any Event of Default, the Lenders and the
Agent may, in addition to the foregoing in this Section, exercise any or all of
its rights and remedies provided by law or pursuant to the Loan Documents.
ARTICLE VIII
THE AGENT
8.1 Appointment. Each Lender hereby designates and appoints the Agent as
the agent of such Lender under this Agreement and the other Loan Documents. Each
Lender authorizes the Agent, as the agent for such Lender, to take such action
on behalf of such Lender under the provisions of this Agreement and the other
Loan Documents and to exercise such powers and perform such duties as are
expressly delegated to the Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably incidental
thereto.
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Notwithstanding any provision to the contrary elsewhere in this Agreement or in
any other Loan Document, the Agent shall not have any duties or responsibilities
except those expressly set forth herein or in any other Loan Document or any
fiduciary relationship with any Lender; and no implied covenants, functions,
responsibilities, duties, obligations, or liabilities on the part of the Agent
shall be read into this Agreement or any other Loan Document or otherwise exist
against the Agent.
8.2 Waivers, Amendments. The provisions of this Agreement and of each
other Loan Document may from time to time be amended, modified or waived, if
such amendment, modification, or waiver is in writing and consented to by the
Borrower and the Required Lenders; provided, however, that no such amendment,
modification or waiver would: (a) modify any requirement hereunder that any
particular action be taken by all of the Lenders or by the Required Lenders
unless consented to by each Lender; (b) modify this Section 8.2, change the
definition of "Required Lenders", or change the Commitment Amount or Percentage
Share of any Lender, reduce the fees described in Article II, extend the
Commitment Termination Date or Final Maturity, release any Security Instrument
or Lien, or initiate any foreclosure, enforcement or collection procedure
without the consent of each Lender; (c) extend the due date for, (or reduce the
amount of any scheduled repayment or prepayment of principal of or interest on
any Loan) without the consent of the holder of that Note evidencing such Loan;
(d) affect, adversely the interests, rights, or obligations of the Agent without
the consent of the Agent; or (e) to modify the Borrowing Base or modify the
monthly amount by which the Borrowing Base shall be reduced.
8.3 Delegation of Duties. The Agent may execute any of its duties under
this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible to any
Lender for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
8.4 Exculpatory Provisions. Neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates shall be (a)
required to initiate or conduct any litigation or collection proceedings
hereunder, except with the concurrence of the Required Lenders and contribution
by each Lender of its Percentage Share of costs reasonably expected by the Agent
to be incurred in connection therewith, (b) liable for any action lawfully taken
or omitted to be taken by it or such Person under or in connection with this
Agreement or any other Loan Document (except for gross negligence or willful
misconduct of the Agent or such Person), or (c) responsible in any manner to any
Lender for any recitals, statements, representations or warranties made by the
Borrower or any officer thereof contained in this Agreement or any other Loan
Document or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under or in connection with, this
Agreement or any other Loan Document, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of the Borrower to perform its obligations hereunder
or thereunder. The Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained
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in, or conditions of, this Agreement or any other Loan Document, or to inspect
the properties, books or records of the Borrower.
8.5 Reliance by Agent. The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any Note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including counsel to
the Borrower), independent accountants and other experts selected by the Agent.
The Agent may deem and treat the payee of any Note as the owner thereof for all
purposes unless and until a written notice of assignment, negotiation, or
transfer thereof shall have been received by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or concurrence of
the Required Lenders as it deems appropriate and contribution by each Lender of
its Percentage Share of costs reasonably expected by the Agent to be incurred in
connection therewith. The Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Agreement and the other Loan Documents
in accordance with a request of the Required Lenders. Such request and any
action taken or failure to act pursuant thereto shall be binding upon the
Lenders and all future holders of the Notes. In no event shall the Agent be
required to take any action that exposes the Agent to personal liability or that
is contrary to any Loan Document or applicable Requirement of Law.
8.6 Notice of Default. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default unless the Agent has
received notice from a Lender or the Borrower referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default." In the event that the Agent receives such a notice, the
Agent shall promptly give notice thereof to the Lenders. The Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders; provided that unless and until the
Agent shall have received such directions, subject to the provisions of Section
7.2, the Agent may (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Lenders. In the event that the
officer of the Agent primarily responsible for the lending relationship with the
Borrower or the officer of any Lender primarily responsible for the lending
relationship with the Borrower becomes aware that a Default or Event of Default
has occurred and is continuing, the Agent or such Lender, as the case may be,
shall use its good faith efforts to inform the other Lenders and/or the Agent,
as the case may be, promptly of such occurrence. Notwithstanding the preceding
sentence, failure to comply with the preceding sentence shall not result in any
liability to the Agent or any Lender.
8.7 Non-Reliance on Agent and Other Lenders. Each Lender expressly
acknowledges that neither the Agent nor any other Lender nor any of their
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representation or warranty to such Lender and that no
act by the Agent or any other Lender hereafter taken, including any review of
the affairs of the Borrower, shall be deemed to constitute any representation or
warranty by the Agent or any Lender to any other Lender. Each Lender represents
to the Agent that it has,
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independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
condition (financial and otherwise) and creditworthiness of the Borrower and the
value of the Collateral and other Properties of the Borrower and has made its
own decision to enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, condition (financial and otherwise) and
creditworthiness of the Borrower and the value of the Collateral and other
Properties of the Borrower. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, operations, property,
condition (financial and otherwise), or creditworthiness of the Borrower or the
value of the Collateral or other Properties of the Borrower which may come into
the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates.
8.8 Indemnification. EACH LENDER AGREES TO INDEMNIFY THE AGENT AND ITS
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES (TO THE
EXTENT NOT REIMBURSED BY THE BORROWER AND WITHOUT LIMITING THE OBLIGATION OF THE
BORROWER TO DO SO), RATABLY ACCORDING TO THE PERCENTAGE SHARE OF SUCH LENDER,
FROM AND AGAINST ANY AND ALL LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY
KIND WHATSOEVER WHICH MAY AT ANY TIME (INCLUDING ANY TIME FOLLOWING THE PAYMENT
AND PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT) BE
IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES IN ANY WAY
RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY
OTHER DOCUMENT CONTEMPLATED OR REFERRED TO HEREIN OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR ANY ACTION TAKEN OR OMITTED BY THE AGENT OR ANY OF ITS
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES UNDER OR
IN CONNECTION WITH ANY OF THE FOREGOING, INCLUDING ANY LIABILITIES, CLAIMS,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES AND DISBURSEMENTS IMPOSED, INCURRED OR ASSERTED AS A RESULT OF THE
NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES; PROVIDED THAT NO
LENDER SHALL BE LIABLE FOR THE PAYMENT OF ANY PORTION OF SUCH LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES OR DISBURSEMENTS RESULTING SOLELY FROM THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE AGENT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT OR AFFILIATES. THE AGREEMENTS IN THIS SECTION SHALL SURVIVE
THE PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF THIS
AGREEMENT.
8.9 Restitution. Should the right of the Agent or any Lender to realize
funds with respect to the Obligations be challenged and any application of such
funds to the Obligations be reversed, whether by Governmental Authority or
otherwise, or should the Borrower otherwise be entitled to a refund or return of
funds distributed to the Lenders in connection with the
- 52 -
Obligations, the Agent or such Lender, as the case may be, shall promptly notify
the Lenders of such fact. Not later than Noon, Central Standard or Central
Daylight Savings Time, as the case may be, of the Business Day following such
notice, each Lender shall pay to the Agent an amount equal to the ratable share
of such Lender of the funds required to be returned to the Borrower. The ratable
share of each Lender shall be determined on the basis of the percentage of the
payment all or a portion of which is required to be refunded originally
distributed to such Lender, if such percentage can be determined, or, if such
percentage cannot be determined, on the basis of the Percentage Share of such
Lender. The Agent shall forward such funds to the Borrower or to the Lender
required to return such funds. If any such amount due to the Agent is made
available by any Lender after Noon, Central Standard or Central Daylight Savings
Time, as the case may be, of the Business Day following such notice, such Lender
shall pay to the Agent (or the Lender required to return funds to the Borrower,
as the case may be) for its own account interest on such amount at a rate equal
to the Federal Funds Rate for the period from and including the date on which
restitution to the Borrower is made by the Agent (or the Lender required to
return funds to the Borrower, as the case may be) to but not including the date
on which such Lender failing to timely forward its share of funds required to be
returned to the Borrower shall have made its ratable share of such funds
available.
8.10 Agent in Its Individual Capacity. The Agent and its affiliates may
make loans to, accept deposits from and generally engage in any kind of business
with the Borrower as though the Agent were not the agent hereunder. With respect
to any Note issued to the Lender serving as the Agent, the Agent shall have the
same rights and powers under this Agreement as a Lender and may exercise such
rights and powers as though it were not the Agent. The terms "Lender" and
"Lenders" shall include the Agent in its individual capacity.
8.11 Successor Agent. The Agent may resign as Agent upon ten days' notice
to the Lenders and the Borrower. If the Agent shall resign as Agent under this
Agreement and the other Loan Documents, Lenders for which the Percentage Shares
aggregate at least fifty-one percent (51%) shall appoint from among the Lenders
a successor agent for the Lenders, subject to the reasonable consent of the
Borrower, whereupon such successor agent shall succeed to the rights, powers and
duties of the Agent. The term "Agent" shall mean such successor agent effective
upon its appointment. The rights, powers, and duties of the former Agent as
Agent shall be terminated, without any other or further act or deed on the part
of such former Agent or any of the parties to this Agreement or any holders of
the Notes. After the removal or resignation of any Agent hereunder as Agent, the
provisions of this Article VIII and those of any Section hereof relating to the
Agent, including Section 5.14, Section 5.15 and Section 5.19 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement and the other Loan Documents.
8.12 Applicable Parties. The provisions of this Article are solely for the
benefit of the Agent and the Lenders, and the Borrower shall not have any rights
as a third party beneficiary or otherwise under any of the provisions of this
Article. In performing functions and duties hereunder and under the other Loan
Documents, the Agent shall act solely as the agent of the Lenders and does not
assume, nor shall it be deemed to have assumed, any obligation or
- 53 -
relationship of trust or agency with or for the Borrower or any legal
representative, successor, and assign of the Borrower.
ARTICLE IX
MISCELLANEOUS
9.1 Assignments; Participations. Each Lender may assign or sell
participations in its Loans and Commitments to one or more other Persons in
accordance with this Section 9.1.
(a) Assignments. Any Lender,
(i) with the written consent of the Borrower and the Agent
(which consent shall not be unreasonably delayed or withheld), may
at any time, assign and delegate to one or more commercial banks or
other financial institutions, and
(ii) with notice to the Borrower and the Agent, but without
the consent of the Borrower or the Agent, may assign and delegate to
any of its Affiliates or to any other Lender
(each Person described in (i) or (ii) above as being the Person to whom such
assignment and delegation is to be made, being hereinafter referred to as an
"Assignee Lender"), all or any fraction of such Lender's total Loans and
Commitments (which assignment and delegation shall be of a constant, and not a
varying percentage, of all the assigning Lender's Loans and Commitments), in a
minimum aggregate amount of $1,000,000 of such Lender's Percentage Share of the
Maximum Commitment Amount, if less; provided, however, that such Assignee Lender
will comply with all the provisions of this Agreement, and further, provided,
however, that the Borrower and Agent shall be entitled to continue to deal
solely and directly with such assigning Lender in connection with the interests
so assigned and delegated to an Assignee Lender until:
(iii) written notice of such assignment and delegation
together with payment instructions, addresses and related
information with respect to such Assignee Lender, shall have been
given to the Borrower and the Agent by such Lender and such Assignee
Lender,
(iv) such Assignee Lender shall have executed and delivered to
the Borrower and the Agent a Lender Assignment Agreement, accepted
by the Borrower and the Agent and attached hereto as Exhibit VII,
and
(v) the processing fees described below shall have been paid.
- 54 -
From and after the date that the Borrower and the Agent accept such Lender
Assignment Agreement, (a) the Assignee Lender thereunder shall be deemed
automatically to have become a party hereto and to the extent that rights and
obligations hereunder have been assigned and delegated to such Assignee Lender
in connection with such Lender Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and under the other Loan Documents, and (b)
the Assignor Lender, to the extent that rights and obligations hereunder have
been assigned and delegated by it in connection with such Lender Assignment
Agreement, shall be released from its obligations hereunder and under the other
Loan Documents. Within five Business Days after its receipt of notice that the
Agent has received an executed Lender Assignment Agreement, the Borrower shall
execute and deliver to the Agent (for delivery to the relevant Assignee Lender)
new Notes evidencing such Assignee Lender's assigned Loans and Commitments and,
if the assignor Lender has retained Loans and Commitments hereunder, replacement
Notes in the principal amount of the Loans and Commitments retained by the
assignor Lender hereunder (such Notes to be in exchange for, but not in payment
of, those Notes then held by such assignor Lender). Each such Note shall be
dated the date of the predecessor Notes. The assignor Lender shall xxxx the
predecessor Notes "exchanged" and deliver them to the Borrower. Accrued interest
on that part of the predecessor Notes evidenced by the new Notes, and accrued
fees, shall be paid as provided in the Lender Assignment Agreement. Accrued
interest on that part of the predecessor Notes evidenced by the replacement
Notes shall be paid to the assignor Lender. Accrued interest and accrued fees
shall be paid at the same time or times provided in the predecessor Notes and in
this Agreement. Such assignor Lender or such assignee Lender must also pay a
processing fee to the Agent upon delivery of any Lender Assignment Agreement in
the amount of $3,000. Any attempted assignment and delegation not made in
accordance with this Section 9.1 shall be null and void.
(b) Participations. Any Lender, with the prior written consent of
the Borrower in its sole discretion, may at any time sell to one or more
commercial banks (each of such commercial banks being herein called a
"Participant") participating interests in any of the Loans, Commitments, or
other interests of such Lender hereunder; provided, however, that (a) no
participation contemplated in this Section 9.1 shall relieve such Lender from
its Commitments or its other obligations hereunder or under any other Loan
Document, (b) such Lender shall remain solely responsible for the performance of
its Commitments and such other obligations, (c) the Borrower and the Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and each of the other Loan
Documents, (d) no Participant shall be entitled to require such Lender to take
or refrain from taking any action hereunder or under any other Loan Document.
9.2 Survival of Representations, Warranties, and Covenants. All
representations and warranties of the Borrower and all covenants and agreements
herein made shall survive the execution and delivery of the Notes and the
Security Instruments and shall remain in force and effect so long as any
Obligation is outstanding or any Commitment exists.
9.3 Notices and Other Communications. Except as to oral notices expressly
authorized herein, which oral notices shall be confirmed in writing, all
notices, requests, and communications hereunder shall be in writing (including
by telecopy). Unless otherwise
- 55 -
expressly provided herein, any such notice, request, demand, or other
communication shall be deemed to have been duly given or made when delivered by
hand, or, in the case of delivery by mail, when deposited in the mail, certified
mail, return receipt requested, postage prepaid, or, in the case of telecopy
notice, when receipt thereof is acknowledged orally or by written confirmation
report, addressed as follows:
(a) if to the Agent and Lender, to:
Guaranty Bank, FSB
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
(b) if to the Borrower, to:
PrimeEnergy Corporation
PrimeEnergy Management Corporation
Prime Operating Company
Eastern Oil Well Service Company
Southwest Oilfield Construction Company
EOWS Midland Company
Xxx Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
Any party may, by proper written notice hereunder to the others, change
the individuals or addresses to which such notices to it shall thereafter be
sent.
9.4 Parties in Interest. Subject to applicable restrictions contained
herein, all covenants and agreements herein contained by or on behalf of the
Borrower, the Agent or the Lenders shall be binding upon and inure to the
benefit of the Borrower, the Agent or the Lenders, as the case may be, and their
respective legal representatives, successors, and assigns.
9.5 Rights of Third Parties. All provisions herein are imposed solely and
exclusively for the benefit of the Agent, Lenders and the Borrower. No other
Person shall have any right, benefit, priority, or interest hereunder or as a
result hereof or have standing to require satisfaction of provisions hereof in
accordance with their terms.
9.6 Renewals; Extensions. All provisions of this Agreement relating to the
Notes shall apply with equal force and effect to each promissory note hereafter
executed which in whole or in part represents a renewal or extension of any part
of the Indebtedness of the Borrower under this Agreement, the Notes, or any
other Loan Document.
- 56 -
9.7 No Waiver; Rights Cumulative. No course of dealing on the part of the
Agent or the Lender, its officers or employees, nor any failure or delay by the
Agent or the Lender with respect to exercising any of its rights under any Loan
Document shall operate as a waiver thereof. The rights of the Agent or the
Lender under the Loan Documents shall be cumulative and the exercise or partial
exercise of any such right shall not preclude the exercise of any other right.
Neither the making of any Loan nor the issuance of a Letter of Credit shall
constitute a waiver of any of the covenants, warranties, or conditions of the
Borrower contained herein. In the event the Borrower is unable to satisfy any
such covenant, warranty, or condition, neither the making of any Loan nor the
issuance of a Letter of Credit shall have the effect of precluding the Lender
from thereafter declaring such inability to be an Event of Default as
hereinabove provided.
9.8 Survival Upon Unenforceability. In the event any one or more of the
provisions contained in any of the Loan Documents or in any other instrument
referred to herein or executed in connection with the Obligations shall, for any
reason, be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provision
of any Loan Document or of any other instrument referred to herein or executed
in connection with such Obligations.
9.9 Amendments; Waivers. Neither this Agreement nor any provision hereof
may be amended, waived, discharged, or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
amendment, waiver, discharge, or termination is sought.
9.10 Controlling Agreement. In the event of a conflict between the
provisions of this Agreement and those of any other Loan Document, the
provisions of this Agreement shall control.
9.11 Disposition of Collateral. Notwithstanding any term or provision,
express or implied, in any of the Security Instruments, the realization,
liquidation, foreclosure, or any other disposition on or of any or all of the
Collateral shall be in the order and manner and determined in the sole
discretion of the Lender; provided, however, that in no event shall the Lender
violate applicable law or exercise rights and remedies other than those provided
in such Security Instruments or otherwise existing at law or in equity.
9.12 GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE DEEMED TO BE
CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF
RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS
FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND
REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY.
9.13 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO,
ARISING DIRECTLY OR INDIRECTLY IN CONNECTION
- 57 -
WITH, OUT OF, RELATED TO, OR FROM THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY
BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE LENDER, IN COURTS
HAVING SITUS IN HOUSTON, XXXXXX COUNTY, TEXAS. THE BORROWER HEREBY SUBMITS TO
THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON,
XXXXXX COUNTY, TEXAS, AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR
CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY THE
LENDER IN ACCORDANCE WITH THIS SECTION.
9.14 WAIVER OF RIGHTS TO JURY TRIAL. THE BORROWER, AGENT AND THE LENDERS
HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM,
OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF ANY OF THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE LENDER IN THE
ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO. THE PROVISIONS OF THIS SECTION
ARE A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS AGREEMENT.
9.15 ENTIRE AGREEMENT. THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT
BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL
SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER WRITTEN OR
ORAL, RELATING TO THE SUBJECT HEREOF. FURTHERMORE, IN THIS REGARD, THIS
AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE
FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.
9.16 Counterparts. For the convenience of the parties, this Agreement may
be executed in multiple counterparts, each of which for all purposes shall be
deemed to be an original, and all such counterparts shall together constitute
but one and the same Agreement.
- 58 -
IN WITNESS WHEREOF, this Agreement is deemed executed effective as of the
date first above written.
BORROWER:
PRIMEENERGY CORPORATION
PRIMEENERGY MANAGEMENT
CORPORATION, PRIME OPERATING
COMPANY, EASTERN OIL WELL SERVICE
COMPANY, SOUTHWEST OILFIELD
CONSTRUCTION COMPANY
EOWS MIDLAND COMPANY
By:__________________________________________
Xxxxxxx X. Xxxxxxxx
Executive Vice President, Treasurer, and
Chief Financial Officer
- 59 -
AGENT AND LENDER:
GUARANTY BANK, FSB
By:___________________________________
Xxxxxxx X. Xxxxxxxx
Vice President
- 60 -
EXHIBIT I
[FORM OF NOTE]
PROMISSORY NOTE
$50,000,000 Houston, Texas December 19, 2002
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned ("Maker") promises
to pay to the order of GUARANTY BANK, FSB ("Payee"), at its banking quarters in
Houston, Xxxxxx County, Texas, the sum of FIFTY MILLION DOLLARS ($50,000,000),
or so much thereof as may be advanced against this Note pursuant to the Credit
Agreement dated of even date herewith by and between Maker and Payee (as
amended, restated, or supplemented from time to time, the "Credit Agreement"),
together with interest at the rates and calculated as provided in the Credit
Agreement.
Reference is hereby made to the Credit Agreement for matters governed
thereby, including, without limitation, certain events which will entitle the
holder hereof to accelerate the maturity of all amounts due hereunder.
Capitalized terms used but not defined in this Note shall have the meanings
assigned to such terms in the Credit Agreement.
This Note is issued pursuant to, is the "Note" under, and is payable as
provided in the Credit Agreement. Subject to compliance with applicable
provisions of the Credit Agreement, Maker may at any time pay the full amount or
any part of this Note without the payment of any premium or fee, but such
payment shall not, until this Note is fully paid and satisfied, excuse the
payment as it becomes due of any payment on this Note provided for in the Credit
Agreement.
Without being limited thereto or thereby, this Note is secured by the
Security Instruments.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF
TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW;
PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS FINANCE CODE (WHICH REGULATES
CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL
NOT APPLY TO THIS NOTE.
(Page One of Two Page Note)
I-i
PRIMEENERGY CORPORATION
PRIMEENERGY MANAGEMENT
CORPORATION, PRIME OPERATING
COMPANY, EASTERN OIL WELL SERVICE
COMPANY, SOUTHWEST OILFIELD
CONSTRUCTION COMPANY
EOWS MIDLAND COMPANY
By:_________________________________________
Xxxxxxx X. Xxxxxxxx
Executive Vice President, Treasurer, and
Chief Financial Officer
I-ii
EXHIBIT I(A)
[FORM OF TERM NOTE]
TERM
PROMISSORY NOTE
$4,000,000 Houston, Texas December 19, 2002
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned ("Maker") promises
to pay to the order of GUARANTY BANK, FSB ("Payee"), at its banking quarters in
Houston, Xxxxxx County, Texas, the sum of FOUR MILLION DOLLARS ($4,000,000), or
so much thereof as may be advanced against this Note pursuant to the Credit
Agreement dated of even date herewith by and between Maker and Payee (as
amended, restated, or supplemented from time to time, the "Credit Agreement"),
together with interest at the rates and calculated as provided in the Credit
Agreement.
Reference is hereby made to the Credit Agreement for matters governed
thereby, including, without limitation, certain events which will entitle the
holder hereof to accelerate the maturity of all amounts due hereunder.
Capitalized terms used but not defined in this Note shall have the meanings
assigned to such terms in the Credit Agreement.
This Note is issued pursuant to, is the "Note" under, and is payable as
provided in the Credit Agreement. Subject to compliance with applicable
provisions of the Credit Agreement, Maker may at any time pay the full amount or
any part of this Note without the payment of any premium or fee, but such
payment shall not, until this Note is fully paid and satisfied, excuse the
payment as it becomes due of any payment on this Note provided for in the Credit
Agreement.
Without being limited thereto or thereby, this Note is secured by the
Security Instruments.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF
TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW;
PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS FINANCE CODE (WHICH REGULATES
CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL
NOT APPLY TO THIS NOTE.
(PAGE ONE OF TWO PAGE NOTE)
I(A)-i
PRIMEENERGY CORPORATION
PRIMEENERGY MANAGEMENT
CORPORATION, PRIME OPERATING
COMPANY, EASTERN OIL WELL SERVICE
COMPANY, SOUTHWEST OILFIELD
CONSTRUCTION COMPANY
EOWS MIDLAND COMPANY
By:_____________________________________________
Xxxxxxx X. Xxxxxxxx
Executive Vice President, Treasurer, and
Chief Financial Officer
I(A)-ii
EXHIBIT II
[FORM OF BORROWING REQUEST]
GUARANTY BANK, FSB
000 XXXX XXXXXX, XXXXX 0000
XXXXXXX, XXXXX 00000
Attention: Xxxxxxx X. Xxxxxxxx
Re: Credit Agreement dated as of December 19, 2002, by and between
PRIMEENERGY CORPORATION, PRIMEENERGY MANAGEMENT CORPORATION, PRIME
OPERATING COMPANY, EASTERN OIL WELL SERVICE COMPANY, SOUTHWEST
OILFIELD CONSTRUCTION COMPANY, EOWS MIDLAND COMPANY and GUARANTY
BANK, FSB, as Agent, and the Lenders signatory thereto from time to
time (as amended, restated, or supplemented from time to time, the
"Credit Agreement")
Ladies and Gentlemen:
Pursuant to the Credit Agreement, the Borrower hereby makes the requests
indicated below:
1. Loans
(a) Amount of new Loan: $
(b) Requested funding date: , 20
(c) $________________ of such Loan is to be a Floating Rate Loan;
$________________ of such Loan is to be a LIBO Rate Loan.
Requested Interest Period for LIBO Rate Loan: ____ months.
2. Continuation or conversion of LIBO Rate Loan maturing on :
(a) Amount to be continued as a LIBO Rate Loan is $ , with an
Interest Period of months;
(b) Amount to be converted to a Floating Rate Loan is $ ; and
3. Conversion of Floating Rate Loan:
(a) Requested conversion date: , 20 .
II-i
(b) Amount to be converted to a LIBO Rate Loan is $ , with an
Interest Period of _____ months.
The undersigned certifies that she/he is the ____________ of the Borrower,
has obtained all consents necessary, and as such she/he is authorized to execute
this request on behalf of the Borrower. The undersigned further certifies,
represents, and warrants on behalf of the Borrower that the Borrower is entitled
to receive the requested borrowing, continuation, or conversion under the terms
and conditions of the Credit Agreement and are in full compliance with all the
terms and conditions of the Credit Agreement. Each capitalized term used but not
defined herein shall have the meaning assigned to such term in the Credit
Agreement.
BORROWER:
PRIMEENERGY CORPORATION
PRIMEENERGY MANAGEMENT
CORPORATION, PRIME OPERATING
COMPANY, EASTERN OIL WELL SERVICE
COMPANY, SOUTHWEST OILFIELD
CONSTRUCTION COMPANY
EOWS MIDLAND COMPANY
By:__________________________________________
Xxxxxxx X. Xxxxxxxx
Executive Vice President, Treasurer, and
Chief Financial Officer
II-ii
EXHIBIT III
[FORM OF COMPLIANCE CERTIFICATE]
________, 2002
GUARANTY BANK, FSB
000 XXXX XXXXXX, XXXXX 0000
XXXXXXX, XXXXX 00000
Attention: Xxxxxxx X. Xxxxxxxx
Re: Credit Agreement dated as of December 19, 2002, by and between
PRIMEENERGY CORPORATION, PRIMEENERGY MANAGEMENT CORPORATION, PRIME
OPERATING COMPANY, EASTERN OIL WELL SERVICE COMPANY, SOUTHWEST
OILFIELD CONSTRUCTION COMPANY, EOWS MIDLAND COMPANY and GUARANTY
BANK, FSB, as Agent, and the Lenders signatory thereto from time to
time (as amended, restated, or supplemented from time to time, the
"Credit Agreement")
Ladies and Gentlemen:
Pursuant to applicable requirements of the Credit Agreement, the
undersigned, as a Responsible Officer of the Borrower, hereby certifies to you
the following information as true and correct as of the date hereof or for the
period indicated, as the case may be:
1. To the best of the knowledge of the undersigned, no Default or Event of
Default exists as of the date hereof or has occurred since the date of our
previous certification to you, if any.
1. To the best of the knowledge of the undersigned, the following Defaults
or Events of Default exist as of the date hereof or have occurred since
the date of our previous certification to you, if any, and the actions set
forth below are being taken to remedy such circumstances:
2. The compliance of the Borrower with the financial covenants of the
Credit Agreement, as of the close of business on __________ , is evidenced
by the following:
(a) Section 6.13: Interest Coverage Ratio. Permit, as of the close of
any fiscal quarter, the ratio of (a) quarterly EBITDA on a tailing
four-quarter basis to (b) Interest Expense to be less than 3.00 to
1.00, measured on a trailing four quarter basis.
Actual
------
_____ to 1.0
III-i
(b) Section 6.14: Current Ratio. Permit, as of the close of any fiscal
quarter, the ratio of Current Assets to Current Liabilities to be
less than 1.00 to 1.00 measured on a trailing four quarter basis.
Actual
------
_____ to 1.0
(c) Section 6.15: Tangible Net Worth. Permit Tangible Net Worth, as of
the close of any fiscal quarter, to be less than $6,000,000, plus
75% of positive quarterly net income thereafter.
Actual
------
(d) Section 6.16: Bank Debt Coverage Ratio. Permit, as of the close of
any fiscal quarter, the ratio of (a) Bank Debt to (b) EBITDA to be
greater than 4.00 to 1.00, measured on a trailing four quarter
basis.
Actual
------
_____ to 1.0
3. No Material Adverse Effect has occurred since the date of the Financial
Statements dated as of __________.
III-ii
Each capitalized term used but not defined herein shall have the meaning
assigned to such term in the Credit Agreement.
Very truly yours,
PRIMEENERGY CORPORATION
PRIMEENERGY MANAGEMENT
CORPORATION, PRIME OPERATING
COMPANY, EASTERN OIL WELL SERVICE
COMPANY, SOUTHWEST OILFIELD
CONSTRUCTION COMPANY
EOWS MIDLAND COMPANY
By:_____________________________________________
Xxxxxxx X. Xxxxxxxx
Executive Vice President, Treasurer, and
Chief Financial Officer
III-iii
EXHIBIT IV
[FORM OF OPINION OF COUNSEL]
[Closing Date]
GUARANTY BANK, FSB
000 XXXX XXXXXX, XXXXX 0000
XXXXXXX, XXXXX 00000
Attention: Xxxxxxx X. Xxxxxxxx
Re: Credit Agreement dated as of December 19, 2002, by and between
PRIMEENERGY CORPORATION, PRIMEENERGY MANAGEMENT CORPORATION, PRIME
OPERATING COMPANY, EASTERN OIL WELL SERVICE COMPANY, SOUTHWEST
OILFIELD CONSTRUCTION COMPANY, EOWS MIDLAND COMPANY and GUARANTY
BANK, FSB, as Agent, and the Lenders signatory thereto from time to
time (as amended, restated, or supplemented from time to time, the
"Credit Agreement")
Ladies and Gentlemen:
We have acted as counsel to PRIMEENERGY CORPORATION, PRIMEENERGY
MANAGEMENT CORPORATION, PRIME OPERATING COMPANY, EASTERN OIL WELL SERVICE
COMPANY, SOUTHWEST OILFIELD CONSTRUCTION COMPANY, EOWS MIDLAND COMPANY
(collectively, the "Borrower") in connection with the transactions contemplated
in the Credit Agreement. This Opinion is delivered pursuant to Section 3.1(m) of
the Credit Agreement, and the Lender is hereby authorized to rely upon this
Opinion in connection with the transactions contemplated in the Credit
Agreement. Each capitalized term used but not defined herein shall have the
meaning assigned to such term in the Credit Agreement.
In our representation of the Borrower, we have examined an executed
counterpart of each of the following (the "Loan Documents"):
(a) the Credit Agreement;
(b) the Note and the Term Note;
(c) Mortgage, Deed of Trust, Indenture, Security Agreement,
Assignment of Production, and Financing Statement dated of even date
herewith from the Borrower in favor of the Lender (the "Mortgage"); and
(d) Financing Statements from the Borrower, as debtors, constituent
to the Mortgage (the "Financing Statement").
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(e) a certificate of incumbency dated the Closing Date, including
specimen signatures of all officers or other representatives of the
Borrower who are authorized to execute Loan Documents on behalf of the
Borrower, such certificate being executed by the manager or another
authorized representative of the Borrower;
(f) copies of resolutions, to the extent required under the
Operating Agreement of the Borrower, adopted by the board of directors of
the Borrower approving the Loan Documents to which the Borrower is a party
and authorizing the transactions contemplated herein and therein,
accompanied by a certificate dated the Closing Date issued by the manager
or another authorized representative of the Borrower to the effect that
such copies are true and correct copies of resolutions duly adopted and
that such resolutions constitute all the resolutions adopted with respect
to such transactions, have not been amended, modified, or rescinded in any
respect, and are in full force and effect as of the date of such
certificate;
(g) multiple counterparts, as requested by the Lender, of the
following Security Instruments creating, evidencing, perfecting, and
otherwise establishing Liens in favor of the Lender in and to the
Collateral:
(i) Ratification of Mortgage and Deed of Trust, Indenture,
Security Agreement, Assignment of Production, and Financing
Statement from the Borrower covering all Oil and Gas Properties of
the Borrower and all improvements, personal property, and fixtures
related thereto;
(ii) Financing Statements from the Borrower, as debtor,
constituent to the instrument described in clause (i) above;
(iii) undated letters, in form and substance satisfactory to
the Agent, from the Borrower to each purchaser of production and
disburser of the proceeds of production from or attributable to the
Mortgaged Properties, together with additional letters with the
addressees left blank, authorizing and directing the addressees to
make future payments attributable to production from the Mortgaged
Properties directly to the Agent;
(iv) Security Agreement from the Borrower pledging contract
rights, etc.;
(v) Financing Statements from the Borrower, as debtor,
constituent to the instrument described in clause (iv) above;
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(vi) Assignment of Partnership Interest (Security Agreement)
from the Borrower pledging certain partnership interest;
(vii) Financing Statement from the Borrower, as debtor,
constituent to the instrument described in Clause (vi) above;
(h) certificates dated as of a recent date from the Secretary of
State or other appropriate Governmental Authority evidencing the existence
or qualification and good standing of the Borrower in its jurisdictions of
formation and in any other jurisdictions where it does business;
We have also examined the originals, or copies certified to our
satisfaction, of such other records of the Borrower, certificates of public
officials and officers of the Borrower, agreements, instruments, and documents
as we have deemed necessary as a basis for the opinions hereinafter expressed.
In making such examinations, we have, with your permission, assumed:
(a) the genuineness of all signatures to the Loan Documents other
than those of the Borrower;
(b) the authenticity of all documents submitted to us as originals
and the conformity with the originals of all documents submitted to us as
copies;
(c) the Lender is authorized and has the power to enter into and
perform its obligations under the Credit Agreement;
(d) the due authorization, execution, and delivery of all Loan
Documents by each party thereto other than the Borrower; and
(e) the Borrower has title to all Property covered or affected by
the Mortgage.
Based upon the foregoing and subject to the qualifications set forth
herein, we are of the opinion that:
1. The Borrower is a corporation or limited liability companies duly
organized, legally existing, and in good standing under the laws of their
respective states of incorporation and are duly qualified as foreign
corporations or limited liability companies and are in good standing in
all jurisdictions wherein the ownership of their respective Property or
the operation of their respective businesses necessitates same.
2. The execution and delivery by the Borrower of the Credit
Agreement and the borrowings thereunder, the execution and delivery by the
Borrower of the other Loan Documents to which the Borrower is a party, and
the payment and performance of all Obligations of the Borrower thereunder
are within the power of the Borrower, have been
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duly authorized by all necessary corporate action, and do not (a) require
the consent of any Governmental Authority, (b) contravene or conflict with
any Requirement of Law, (c) to our knowledge after due inquiry, contravene
or conflict with any indenture, instrument, or other agreement to which
the Borrower is a party or by which any Property of the Borrower may be
presently bound or encumbered, or (d) result in or require the creation or
imposition of any Lien upon any Property of the Borrower other than as
contemplated by the Loan Documents.
3. The Loan Documents to which the Borrower is a party constitute
legal, valid, and binding obligations of the Borrower, enforceable against
the Borrower in accordance with their respective terms.
4. The forms of the Mortgage and the Financing Statement and the
description of the Mortgaged Property (as such term is defined in the
Mortgage and so used herein) situated in the State of Texas (the "State")
satisfy all applicable Requirements of Law of the State and are legally
sufficient under the laws of the State to enable the Lender to realize the
practical benefits purported to be afforded by the Mortgage.
5. The Mortgage creates a valid lien upon and security interest in
all Mortgaged Property situated in the State to secure the Indebtedness
(as such term is defined in the Mortgage and so used herein).
6. The Mortgage and the Financing Statement are in satisfactory form
for filing and recording in the offices described below.
7. The filing and/or recording, as the case may be, of (a) the
Mortgage in the office of the county clerk of each county in the State in
which any portion of the Mortgaged Property is located, and as a financing
statement and utility security instrument in the office of the Secretary
of State of the State, and (b) the Financing Statement in the Uniform
Commercial Code records in each county in the State in which any portion
of the Mortgaged Property is located are the only recordings or filings in
the State necessary to perfect the liens and security interests in the
Mortgaged Property created by the Mortgage or to permit the Lender to
enforce in the State its rights under the Mortgage. No subsequent filing,
re-filing, recording, or re-recording will be required in the State in
order to continue the perfection of the liens and security interests
created by the Mortgage except that (a) a continuation statement must be
filed with respect to the Mortgage filed as a financing statement in the
office of the Secretary of State of the State and with respect to the
Financing Statement in the Uniform Commercial Code records in each county
in the State in which any portion of the Mortgaged Property is located,
each within six months prior to the expiration of five years from the date
of the relevant initial financing statement filing, (b) a subsequent
continuation statement must be filed within six months prior to the
expiration of each subsequent five-year period from the date of each
initial financing statement filing, and (c) amendments or supplements to
the Mortgage filed as a financing statement and the Financing Statement
and/or additional
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financing statements may be required to be filed in the event of a change
in the name, identity, or structure of the Borrower or in the event the
financing statement filing otherwise becomes inaccurate or incomplete.
8. To our knowledge after due inquiry, except as disclosed in
Exhibit VI to the Credit Agreement, no litigation or other action of any
nature affecting the Borrower is pending before any Governmental Authority
or threatened against the Borrower. To our knowledge after due inquiry, no
unusual or unduly burdensome restriction, restraint, or hazard exists by
contract, Requirement of Law, or otherwise relative to the business or
operations of the Borrower or the ownership and operation of any
Properties of the Borrower other than such as relate generally to Persons
engaged in business activities similar to those conducted by the Borrower,
as the case may be.
9. No authorization, consent, approval, exemption, franchise, permit
or license of, or filing (other than filing of Security Instruments in
appropriate filing offices) with, any Governmental Authority or any other
Person is required to authorize or is otherwise required in connection
with the valid execution and delivery by the Borrower of the Loan
Documents or any instrument contemplated thereby, or the payment
performance by the Borrower of the Obligations.
10. No transaction contemplated by the Loan Documents is in
violation of any regulations promulgated by the Board of Governors of the
Federal Reserve System, including, without limitation, Regulations G, T,
U, or X.
11. The Borrower is not, nor is the Borrower directly or indirectly
controlled by or acting on behalf of any Person which is, an "investment
company" or an "affiliated person" of an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
12. The Borrower is not a "holding company," or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company,"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
The opinions expressed herein are subject to the following qualifications
and limitations:
A. We are licensed to practice law only in the State and other
jurisdictions whose laws are not applicable to the opinions expressed
herein; accordingly, the foregoing opinions are limited solely to the laws
of the State, applicable United States federal law.
B. The validity, binding effect, and enforceability of the Loan
Documents may be limited or affected by bankruptcy, insolvency,
moratorium, reorganization, or other similar laws affecting rights of
creditors generally, including, without limitation, statutes or rules of
law which limit the effect of waivers of rights by a debtor or grantor;
provided, however, that the limitations and other effects of such statutes
or rules of law upon the validity and binding effect of the Loan Documents
should not differ materially
IV-v
from the limitations and other effects of such statutes or rules of law
upon the validity and binding effect of credit agreements, promissory
notes, guaranties, and security instruments generally.
C. The enforceability of the respective obligations of the Borrower
under the Loan Documents is subject to general principles of equity
(whether such enforceability is considered in a suit in equity or at law).
This Opinion is furnished by us solely for the benefit of the Lender in
connection with the transactions contemplated by the Loan Documents and is not
to be quoted in whole or in part or otherwise referred to or disclosed in any
other transaction.
Very truly yours,
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EXHIBIT V
FACILITY AMOUNTS
1. Revolving Line of Credit
Facility
Name of Lender Amount
-------------- ------
Guaranty Bank, FSB $50,000,000
Total $50,000,000
2. Term Loan
Facility
Name of Lender Amount
-------------- ------
Guaranty Bank, FSB $4,000,000
Total $4,000,000
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EXHIBIT VI
DISCLOSURES
Section 1.2 Permitted Liens
Liens in favor the "Xxxxxxx Group" composed of
Xxxxx X. Xxxxxxx, Inc., Pangaea Properties, Inc.
and Xxxxxxx X. Xxxxxxx by PrimeEnergy
Corporation, Sterling Asset and Income Funds X-0,
X-0, XX-0 xxx XX-0 (now PrimeEnergy Asset and
Income Funds X-0, X-0, XX-0 and AA-2) to secure
the payment to the Xxxxxxx Group of the "JPN
Fee", being an amount of certain of the proceeds
and accounts arising from the sale of oil and gas
from certain properties located in Xxxxxx County,
Oklahoma, as determined pursuant to the terms of
that certain Memorandum of Agreement dated
October 1, 1990, and as evidenced by Financing
Statement filed January 23, 1991, Volume 1295,
Page 58, Xxxxxx County, Oklahoma, and Financing
Statement filed January 28, 1991, N-00844,
Central Filing Office, Oklahoma County Clerk.
Section 4.7 Liabilities
None
Litigation
None
Section 4.12 Environmental Matters
None
Section 4.17 Refunds
None
Section 4.18 Gas Contracts
None
Section 4.20 Casualties
None
Section 4.22 Subsidiaries
None except those listed as Borrowers
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VI-ii
EXHIBIT VII
[FORM OF ASSIGNMENT AGREEMENT]
ASSIGNMENT AGREEMENT
This ASSIGNMENT AGREEMENT (as amended, supplemented, restated or otherwise
modified from time to time, this "Agreement") is dated as of ________,_____, by
and between __________ (the "Assignor") and _____________ (the "Assignee").
RECITALS
WHEREAS, the Assignor is a party to the Credit Agreement dated as of
December 19, 2002, (as amended, supplemented or restated from time to time, the
"Credit Agreement") by and among PRIMEENERGY CORPORATION, PRIMEENERGY MANAGEMENT
CORPORATION, PRIME OPERATING COMPANY, EASTERN OIL WELL SERVICE COMPANY,
SOUTHWEST OILFIELD CONSTRUCTION COMPANY, EOWS MIDLAND COMPANY (collectively, the
"Borrower"), each of the lenders that is or becomes a party thereto as provided
in Section 9.1(b) of the Credit Agreement (individually, together with its
successors and assigns, a "Lender", and collectively, together with their
successors and assigns, the "Lenders"), and Guaranty Bank, FSB, a federal
savings bank, as a Lender (in such capacity, "Guaranty") and as agent for the
Lenders (in such capacity, together with its successors in such capacity, the
"Agent"); and
WHEREAS, the Assignor proposes to sell, assign and transfer to the
Assignee, and the Assignee proposes to purchase and assume from the Assignor,
[ALL][A PORTION] of the Assignor's Facility Amount and its outstanding Loans,
all on the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Definitions from Credit Agreement. All capitalized terms used but not
defined herein have the respective meanings given to such terms in the Credit
Agreement.
1.2 Additional Defined Terms. As used herein, the following terms have the
following respective meanings:
"Assigned Interest" shall mean all of Assignor's (in its capacity as
a "Lender") rights and obligations (i) under the Credit Agreement and the
other Loan Documents in respect of [ALL OF] [THE PORTION OF THE] Facility
Amount of the Assignor in the principal amount equal to $______ and (ii)
to make Loans under its Commitment up to such
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amount referenced above and any right to receive payments for the Loans
currently outstanding under its Commitment in the principal amount of
$_______ (the "Loan Balance"), plus the interest and fees which will
accrue with respect thereto from and after the Assignment Date.
"Assignment Date" shall mean , .
1.3 References. References in this Agreement to Schedule, Exhibit,
Article, or Section numbers shall be to Schedules, Exhibits, Articles, or
Sections of this Agreement, unless expressly stated to the contrary. References
in this Agreement to "hereby," "herein," "hereinafter," "hereinabove,"
"hereinbelow," "hereof," "hereunder" and words of similar import shall be to
this Agreement in its entirety and not only to the particular Schedule, Exhibit,
Article, or Section in which such reference appears. Except as otherwise
indicated, references in this Agreement to statutes, sections, or regulations
are to be construed as including all statutory or regulatory provisions
consolidating, amending, replacing, succeeding, or supplementing the statute,
section, or regulation referred to. References in this Agreement to "writing"
include printing, typing, lithography, facsimile reproduction, and other means
of reproducing words in a tangible visible form. References in this Agreement to
agreements and other contractual instruments shall be deemed to include all
exhibits and appendices attached thereto and all subsequent amendments and other
modifications to such instruments, but only to the extent such amendments and
other modifications are not prohibited by the terms of this Agreement.
References in this Agreement to Persons include their respective successors and
permitted assigns.
1.4 Articles and Sections. This Agreement, for convenience only, has been
divided into Articles and Sections; and it is understood that the rights and
other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
1.5 Number and Gender. Whenever the context requires, reference herein
made to the single number shall be understood to include the plural; and
likewise, the plural shall be understood to include the singular. Definitions of
terms defined in the singular or plural shall be equally applicable to the
plural or singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine, feminine and neuter,
when such construction is appropriate; and specific enumeration shall not
exclude the general but shall be construed as cumulative.
1.6 Negotiated Transaction. Each party to this Agreement affirms to the
other that it has had the opportunity to consult, and discuss the provisions of
this Agreement with, independent counsel and fully understands the legal effect
of each provision.
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ARTICLE II
SALE AND ASSIGNMENT
2.1 Sale and Assignment. On the terms and conditions set forth herein,
effective on and as of the Assignment Date, the Assignor hereby sells, assigns
and transfers to the Assignee, and the Assignee hereby purchases and assumes
from the Assignor, all of the right, title and interest of the Assignor in and
to, and all of the obligations of the Assignor in respect of, the Assigned
Interest. Such sale, assignment and transfer is without recourse and, except as
expressly provided in this Agreement, without representation or warranty.
2.2 Assumption of Obligations. The Assignee agrees with the Assignor (for
the express benefit of the Assignor and the Borrower) that the Assignee will,
from and after the Assignment Date, assume and perform all of the obligations of
the Assignor in respect of the Assigned Interest. From and after the Assignment
Date: (a) the Assignor shall be released from the Assignor's obligations in
respect of the Assigned Interest, and (b) the Assignee shall be entitled to all
of the Assignor's rights, powers and privileges under the Credit Agreement and
the other Loan Documents in respect of the Assigned Interest.
2.3 Consent by Agent. By executing this Agreement as provided below, in
accordance with Section 9.1(b) of the Credit Agreement, the Agent hereby
acknowledges notice of the transactions contemplated by this Agreement and
consents to such transactions.
ARTICLE III
PAYMENTS
3.1 Payments. As consideration for the sale, assignment and transfer
contemplated by Section 2.1, the Assignee shall, on the Assignment Date, assume
Assignor's obligations in respect of the Assigned Interest and pay to the
Assignor an amount equal to the Loan Balance, if any, all accrued and unpaid
interest and fees with respect to the Assigned Interest as of the Assignment
Date. Except as otherwise provided in this Agreement, all payments hereunder
shall be made in Dollars and in immediately available funds, without setoff,
deduction or counterclaim.
3.2 Allocation of Payments. The Assignor and the Assignee agree that (i)
the Assignor shall be entitled to any payments of principal with respect to the
Assigned Interest made prior to the Assignment Date, together with any interest
and fees with respect to the Assigned Interest accrued prior to the Assignment
Date, (ii) the Assignee shall be entitled to any payments of principal with
respect to the Assigned Interest made from and after the Assignment Date,
together with any and all interest and fees with respect to the Assigned
Interest accruing from and after the Assignment Date, and (iii) the Agent is
authorized and instructed to allocate payments received by it for the account of
the Assignor and the Assignee as provided in the foregoing clauses. Each party
hereto agrees that it will hold any interest, fees or other amounts that it may
receive to which the other party hereto shall be entitled pursuant to the
VI-iii
preceding sentence for account of such other party and pay, in like money and
funds, any such amounts that it may receive to such other party promptly upon
receipt.
3.3 Delivery of Notes. Promptly following the receipt by the Assignor of
the consideration required to be paid under Section 3.1 hereof, the Assignor
shall, in the manner contemplated by Section 9.1(b) of the Credit Agreement, (i)
deliver to the Agent (or its counsel) the Note held by the Assignor and (ii)
notify the Agent to request that the Borrower execute and deliver new Notes to
the Assignor, if Assignor continues to be a Lender, and the Assignee, dated the
Assignment Date in respective principal amounts equal to the respective Facility
Amounts of the Assignor (if appropriate) and the Assignee after giving effect to
the sale, assignment and transfer contemplated hereby.
3.4 Further Assurances. The Assignor and the Assignee hereby agree to
execute and deliver such other instruments, and take such other actions, as
either party may reasonably request in connection with the transactions
contemplated by this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
The effectiveness of the sale, assignment and transfer contemplated hereby
is subject to the satisfaction of each of the following conditions precedent:
(a) the execution and delivery of this Agreement by the Assignor and
the Assignee;
(b) the receipt by the Assignor of the payments required to be made
under Section 3.1; and
(c) the acknowledgment and consent by the Agent contemplated by
Section 2.3.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of Assignor. The Assignor represents
and warrants to the Assignee as follows:
(a) it has all requisite power and authority, and has taken all
action necessary to execute and deliver this Agreement and to fulfill its
obligations under, and consummate the transactions contemplated by, this
Agreement;
(b) the execution, delivery and compliance with the terms hereof by
the Assignor and the delivery of all instruments required to be delivered
by it hereunder do not and will not violate any Requirement of Law
applicable to it;
VI-iv
(c) this Agreement has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignor,
enforceable against it in accordance with its terms;
(d) all approvals and authorizations of, all filings with and all
actions by any Governmental Authority necessary for the validity or
enforceability of its obligations under this Agreement have been obtained;
(e) the Assignor has good title to, and is the sole legal and
beneficial owner of, the Assigned Interest, free and clear of all Liens,
claims, participations or other charges of any nature whatsoever; and
(f) the transactions contemplated by this Agreement are commercial
banking transactions entered into in the ordinary course of the banking
business of the Assignor.
5.2 Disclaimer. Except as expressly provided in Section 5.1 hereof, the
Assignor does not make any representation or warranty, nor shall it have any
responsibility to the Assignee, with respect to the accuracy of any recitals,
statements, representations or warranties contained in the Credit Agreement or
in any other Loan Document or for the value, validity, effectiveness,
genuineness, execution, legality, enforceability or sufficiency of the Credit
Agreement, the Notes or any other Loan Document or for any failure by the
Borrower or any other Person (other than Assignor) to perform any of its
obligations thereunder or for the existence, value, perfection or priority of
any collateral security or the financial or other condition of the Borrower or
any other Person, or any other matter relating to the Credit Agreement or any
other Loan Document or any extension of credit thereunder.
5.3 Representations and Warranties of Assignee. The Assignee represents
and warrants to the Assignor as follows:
(a) it has all requisite power and authority, and has taken all
action necessary to execute and deliver this Agreement and to fulfill its
obligations under, and consummate the transactions contemplated by, this
Agreement;
(b) the execution, delivery and compliance with the terms hereof by
the Assignee and the delivery of all instruments required to be delivered
by it hereunder do not and will not violate any Requirement of Law
applicable to it;
(c) this Agreement has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignee,
enforceable against it in accordance with its terms;
(d) all approvals and authorizations of, all filings with and all
actions by any Governmental Authority necessary for the validity or
enforceability of its obligations under this Agreement have been obtained;
VI-v
(e) the Assignee has received copies of the Credit Agreement and the
other Loan Documents, as well as copies of all Financial Statements
previously provided by the Borrower in satisfaction of obligations under
the Credit Agreement.
(f) the Assignee has fully reviewed the terms of the Credit
Agreement and the other Loan Documents and has independently and without
reliance upon the Assignor, and based on such information as the Assignee
has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement;
(g) if the Assignee is not incorporated under the laws of the United
Sates of America or a state thereof, the Assignee has contemporaneously
herewith delivered to the Agent and the Borrower such documents as are
required by Section 2.25(b) of the Credit Agreement; and
(h) the transactions contemplated by this Agreement are commercial
banking transactions entered into in the ordinary course of the banking
business of the Assignee.
ARTICLE VI
MISCELLANEOUS
6.1 Notices. All notices and other communications provided for herein
(including any modifications of, or waivers, requests or consents under, this
Agreement) shall be given or made in writing (including by telecopy) to the
intended recipient at its "Address for Notices" specified below its name on the
signature pages hereof or, as to either party, at such other address as shall be
designated by such party in a notice to the other party.
6.2 Amendment, Modification or Waiver. No provision of this Agreement may
be amended, modified or waived except by an instrument in writing signed by the
Assignor and the Assignee, and consented to by the Agent.
6.3 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. The representations and warranties made herein by the
Assignee are also made for the benefit of the Agent, and the Assignee agrees
that the Agent is entitled to rely upon such representations and warranties.
6.4 Assignments. Neither party hereto may assign any of its rights or
obligations hereunder except in accordance with the terms of the Credit
Agreement.
6.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be identical and all of which, taken together,
shall constitute one and the
VI-vi
same instrument, and each of the parties hereto may execute this Agreement by
signing any such counterpart.
6.6 Governing Law. This Agreement (including the validity and
enforceability hereof) shall be governed by, and construed in accordance with,
the laws of the State of Texas, other than the conflict of laws rules thereof.
6.7 Expenses. To the extent not paid by the Borrower pursuant to the terms
of the Credit Agreement, each party hereto shall bear its own expenses in
connection with the execution, delivery and performance of this Agreement.
6.8 Waiver of Jury Trial. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
VI-vii
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed and delivered as of the date first above written.
ASSIGNOR
By:____________________________________
Name:__________________________________
Title:_________________________________
Address for Notices:
Telecopier No.:_________________________
Telephone No.:__________________________
Attention:______________________________
ASSIGNEE
By:____________________________________
Name:__________________________________
Title:_________________________________
Address for Notices:
Telecopier No.:_________________________
Telephone No.:__________________________
Attention:______________________________
ACKNOWLEDGED AND CONSENTED TO:
GUARANTY BANK, FSB
as Agent
By:____________________________________
Name:__________________________________
Title:_________________________________
VI-viii
EXHIBIT VIII
PERSONAL PROPERTY AND EQUIPMENT OF
EASTERN OILWELL SERVICE COMPANY AND
SOUTHWEST OILFIELD CONSTRUCTION COMPANY
APPRAISAL SUMMARY
FOR
PRIME ENERGY MANAGEMENT CORPORATION
(EASTERN OILWELL SERVICE COMPANY - TEXAS GULF COAST DIVISION)
Rig No. 1 - 1984 XXXXXX XXX ENGINEERING Well Service Rig w/Tools 310,000.00
Rig Xx. 0 - 0000 XXXXXX 0000/000 XXX-XX Xxxx Service Rig w/Tools 215,000.00
Rig Xx. 0 - 0000 XXXXXX 0000/000 Xxxx Service Rig w/Tools 212,000.00
Rig Xx. 0 - 0000 XXXXXX Xxxxx 42 Well Service Rig w/Tools 129,000.00
Rig No. 7 - IDECO H35K5C Swabbing Unit w/Tools 57,500.00
Trucks 253,500.00
Trailers 180,700.00
Pickups 319,500.00
Construction Equipment 145,200.00
Well Servicing Pumps 120,500.00
Well Service Related Equipment 60,525.00
Related Equipment 13,100.00
Cementing Equipment 15,750.00
TOTAL TEXAS GULF COAST DIVISION: $2,032,275.00
VIII-i
APPRAISAL SUMMARY
FOR
PRIME ENERGY MANAGEMENT CORPORATION
(EASTERN OILWELL SERVICE COMPANY - CARRIZO SPRINGS, TEXAS DIVISION)
Compressor Packages/Instruments 138,250.00
TOTAL CARRIZO SPRINGS, TEXAS DIVISION: $138,250.00
VIII-ii
APPRAISAL SUMMARY
FOR
PRIME ENERGY MANAGEMENT CORPORATION
(EASTERN OILWELL SERVICE COMPANY - MIDLAND, TEXAS DIVISION)
Rig Xx. 0 - 0000 XXXXXX Xxxxx 42-B Well Service Rig w/Tools 286,000.00
Rig Xx. 0 - 0000 XXXXXX Xxxxx 42-B Well Service Rig w/Tools 291,000.00
Rig Xx. 0 - 0000 XXXXXX 0000 Xxxx Service Rig w/Tools 385,000.00
Rig Xx. 0 - 0000 XXXXXX 0000 Xxxx Service Rig w/Tools 165,000.00
Trucks 59,000.00
Trailers 19,200.00
Pickups 186,500.00
Construction Equipment 14,500.00
Related Equipment 113,050.00
TOTAL MIDLAND, TEXAS DIVISION: $1,519,250.00
VIII-iii
APPRAISAL SUMMARY
FOR
PRIME ENERGY MANAGEMENT CORPORATION
(EASTERN OILWELL SERVICE COMPANY - XXXXXXX, OKLAHOMA DIVISION)
Rig No. 126 - XXXX X. XXXXXX Well Service Rig w/Tools 15,900.00
Rig No. 196 - XXXXXX 658 Well Service Rig w/Tools 64,000.00
Trucks 35,000.00
Trailers 13,000.00
Pickups 108,000.00
Related Equipment 4,100.00
TOTAL PERNELL, OKLAHOMA DIVISION: $240,000.00
VIII-iv
APPRAISAL SUMMARY
FOR
PRIME ENERGY MANAGEMENT CORPORATION
(EASTERN OILWELL SERVICE COMPANY - WEST VIRGINIA DIVISION)
Rig Xx. 0 - 0000 XXXXXXXXX XX00X0000 Xxxx Service Rig w/Tools 109,000.00
Rig No. 2 - 1982 XXXXXX-XXXX C25A Well Service Rig w/Tools 91,500.00
Rig No. 6 - 1982 XXXXXX-XXXX C25A Well Service Rig w/Tools 96,000.00
Rig No. 8 - XXXXXX-XXXX P13A Swabbing Unit w/Tools 33,400.00
Trucks 61,250.00
Trailers 7,500.00
Pickups 323,000.00
Construction Equipment 77,500.00
All-Terrain Vehicles 34,150.00
Cable Tools 4,500.00
Related Equipment 5,900.00
Handling Equipment/Related 14,570.00
Shop Equipment 5,200.00
TOTAL WEST VIRGINIA DIVISION: $863,470.00
VIII-v
APPRAISAL SUMMARY
FOR
PRIME ENERGY MANAGEMENT CORPORATION
(SOUTHWEST OILFIELD CONSTRUCTION COMPANY - KINGFISHER, OKLAHOMA)
Rig No. 127 - 1979 IDECO H35KD Well Service Rig w/Tools 236,000.00
Rig Xx. 000 - 0000 XXXXXX 0000-000 XXX-XX Xxxx Service Rig w/Tools 251,000.00
Rig Xx. 000 - 0000 XXXXXX 0000/000 Xxxx Service Rig w/Tools 175,750.00
Rig No. 180/8697 - XXXXXXXX KB200A Swabbing Unit w/Tools 32,000.00
Trucks 120,000.00
Trailers 62,000.00
Pickups 279,000.00
Construction Equipment 135,500.00
Related Equipment 30,400.00
Shop Equipment 17,500.00
TOTAL SOUTHWEST OILFIELD CONSTRUCTION COMPANY: $1,339,150.00
VIII-vi
