EXHIBIT 10.1
SECOND AMENDMENT TO CREDIT AGREEMENT
BY AND BETWEEN GMX RESOURCES, INC.
AND LOCAL OKLAHOMA BANK, N.A.
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Amendment") is executed to
be effective as of the 28th day of May, 2002 by and between GMX RESOURCES INC.,
an Oklahoma corporation, ENDEAVOR PIPELINE INC., an Oklahoma corporation, and
EXPEDITION NATURAL RESOURCES INC., an Oklahoma corporation (the "Borrowers") and
LOCAL OKLAHOMA BANK, N.A. (the "Bank").
W I T N E S S E T H:
WHEREAS, effective October 31, 2000 Borrowers and Bank entered into that
certain Credit Agreement (the "Original Agreement") whereby Bank provided
Borrowers with a revolving line of credit in an amount governed by a Borrowing
Base which shall not exceed $15,000,000.00, as evidenced by reducing revolving
promissory note with a stated like amount of even date with the Original
Agreement (the "Original Note").
WHEREAS, as of June 18, 2001, Borrowers and Bank amended the Original
Agreement for the first time (the "First Amendment") in order to permit certain
preferred stock dividends and to evidence certain other changes as set forth
therein (the Original Agreement as amended by the First Amendment is referred to
herein as the "Agreement").
WHEREAS, the obligations described in the Agreement are secured by, among
other things not specifically set forth herein, certain oil and gas properties
and other properties as set forth in the Agreement; and
WHEREAS, all capitalized terms not otherwise defined herein shall have
those meanings assigned to such terms in the Agreement;
WHEREAS, Borrowers and Bank desire to amend the Agreement for the second
time in order to evidence such changes to the Agreement as more particularly set
forth herein;
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrowers and the Bank hereby
agree to amend the Agreement as follows:
A. CHANGES TO THE AGREEMENT
1. The definition of "Collateral" set forth at Section 1.2 of the
Agreement, Additional Defined Terms, is hereby amended and restated in its
entirety as follows:
" "Collateral" shall mean the Oil and Gas Properties, and any other
Property of the Borrowers wherever located and whether now owned or
existing or hereafter acquired or arising, including, without limitation,
products and proceeds existing in connection with any of the foregoing.
2. The definition of "Oil and Gas Properties" set forth at Section
1.2 of the Agreement, Additional Defined Terms, is hereby amended and restated
in its entirety as follows:
Oil and Gas Properties" shall mean fee, leasehold or other
interests in or under mineral estates or oil, gas and other liquid or
gaseous hydrocarbon leases with respect to oil and gas properties
situated in the United States or offshore from any State of the United
States, including, without limitation, overriding royalty and royalty
interests, leasehold estate interests, net profits interests,
production payment interests and mineral fee interests, and any or all
gas plants or gas gathering systems owned by any Borrower together
with contracts executed in connection therewith and all tenements,
hereditaments, appurtenances and Oil and Gas Properties appertaining,
belonging, affixed or incidental thereto.
3. Section 2.5 of the Agreement, Interest Rate, is hereby amended and
restated in its entirety in order to increase the rate of interest to the Base
Rate plus one percent (1%) as follows:
Interest Rate. The outstanding unpaid principal balance of the Note
shall bear interest at a fluctuating rate per annum equal to the Base Rate
plus one-percent (1.0%). Upon notice from Lender to Borrowers of the
occurrence of any Event of Default, the unpaid principal amount from time
to time outstanding under the Note shall bear interest at a fluctuating
rate per annum equal to the Default Rate (but not less than the Base Rate
in effect on the date of the occurrence of the Event of Default). The
interest rate applicable to the Note shall change as of the effective date
of any change in the Base Rate. Interest shall be computed on the Note for
the actual number of days elapsed on the basis of a year consisting of 360
days.
4. Section 2.10 of the Agreement, Voluntary Prepayments, is hereby
amended and restated in its entirety to include a termination fee as follows:
The Borrowers shall have the right at any time or from time to time to
prepay without premium or penalty, all or any part of the Loan Balance
outstanding on the Note; provided, however, until all Obligations are fully
paid and satisfied, no unscheduled principal reduction shall excuse the
payment as it becomes due of any payment provided for herein. All
prepayments made pursuant to this Section shall be applied first to accrued
and unpaid interest and then to the Loan Balance. The above
notwithstanding, Borrowers shall also pay a fee equal to one-half of one
percent (1/2%) of the average Loan Balance over the immediately preceding
12 months in the event that (A) the Borrowers prepay, in whole or in part,
the Loan Balance directly or indirectly, with the funds provided by, or
obtained from, a lender other than Lender or other than from the sale or
offering of any equity interest whatsoever in any Borrower or Affiliate or
other than from the sale of Property of any Borrower permitted herein or
(B) the Borrowers cancel or terminate this facility or if, for any reason,
this facility ceases to exist prior to the Maturity Date.
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5. Section 6.2 of the Agreement, Quarterly Financial Statements, is
hereby amended and restated and re-captioned in its entirety in order to change
the reporting requirement from quarterly to monthly as follows:
6.2 Monthly Financial Statements. Beginning with the month ending
June 30, 2002, deliver to the Lender, (a) on or before the 45th day after
the close of each calendar month, a copy of the unaudited Financial
Statements of Borrowers prepared on a consolidated basis as of the last day
of such monthly period , such Financial Statement to be certified by a
Responsible Officer of the Borrowers as having been prepared in accordance
with GAAP and in a manner consistent with the annual audited Financial
Statements, consistently applied, and as a fair presentation of the
financial condition of the Borrowers , and (b) concurrent with (a) above, a
Compliance Certificate executed by Borrowers' Responsible Officer stating
that such Officers, after due inquiry, has no knowledge of a Default or
Event of Default and containing a computation of, and demonstrating
compliance with, each financial covenant set forth in Section 7 herein.
6. Section 6.5 of the Agreement, Production Reports, is hereby amended
and restated and re-captioned in its entirety in order to change the reporting
requirement from quarterly to monthly as follows:
6.5 Production Reports. Within forty-five (45) days from each
calendar month end, furnish Lender a monthly summary report of oil and gas
production for said period indicating the immediately preceding quarter's
sales volume, sales revenues, production taxes, operating expenses, capital
expenditures and net operating income from or attributable to the
Borrowers' Oil and Gas Properties pledged to secure the Obligations
hereunder, with detailed calculations and worksheets, and, in the case of
take or pay or prepayment agreements during such quarter, provide copies of
same.
7. A new affirmative covenant shall be added to ARTICLE IV of the
Agreement, AFFIRMATIVE COVENANTS, as Section 6.25 and shall be entitled "Trade
Payables" and shall state as follows:
6.25 Payables. In addition to those obligations described in Section
6.12 of this Agreement, Payment of Assessments and Charges, Borrowers shall
pay all accounts payable for which a statutory mechanism is in place
permitting the account holder to file a lien against the Collateral within
90 days from the date such payable is due and owing.
B. REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represents and warrants to Bank that:
1. Each Borrower is a corporation, duly organized, legally existing,
and in good standing under the laws of the State of Oklahoma, and is duly
qualified as a foreign
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corporation and in good standing in all other states wherein the nature of its
business or its assets make such qualification necessary.
2. Each Borrower's execution and delivery of this Amendment and
performance of its obligations hereunder: (a) are and will be within its powers;
(b) are duly authorized by its board of directors; (c) are not and will not be
in contravention of any law, statute, rule or regulation, the terms of its
articles or incorporation and bylaws, nor of any agreement or undertaking to
which any Borrower or any of its properties are bound; (d) do not require any
consent or approval (including governmental) which has not been given; and (e)
will not result in the imposition of liens, charges or encumbrances on any of
its properties or assets, except those in favor of Bank hereunder.
3. This Amendment, when duly executed and delivered, will constitute
the legal, valid and binding obligations of Borrowers, enforceable in accordance
with its terms.
4. All financial statements, balance sheets, income statements and
other financial data which have been or are hereafter furnished to Bank by
Borrowers to induce Bank to make the loans hereunder due, and as to subsequent
financial statements will, fairly represent each Borrower's financial condition
as of the dates for which the same are furnished. All such financial statements,
reports, papers and other data furnished to Bank are and will be, when
furnished: prepared in accordance with generally accepted accounting principles
consistently applied; accurate and correct in all material respects; and
complete insofar as completeness may be necessary to give Bank a true and
accurate knowledge of the subject matter. Since the date of the last such
financial statements, no material adverse change has occurred in the operations
or condition, financial or otherwise and other financial data provided to Bank;
of any Borrower, nor, to the best of their knowledge, has any Borrower incurred,
any material liabilities or made any material investment or guarantees, direct
or contingent, in any single case or in the aggregate, which has not been
disclosed to Bank.
5. The Borrowers are the sole and lawful owner of the Collateral,
pledged, mortgaged or assigned by it, and Borrowers have, and as to after
acquired property or new properties will have, good right to cause the
Collateral to be hypothecated to Bank as security for the obligations described
in the Agreement, as amended hereby. Further, the ownership interests set forth
in that certain Engineering Report dated March 19, 2002 from Xxxxxxx Associates,
Inc. purported to be owned by Borrowers, or any one of them, are true and
correct and Borrowers do, in fact, own such interests in such Collateral.
6. The Collateral set forth on that certain Engineering Report dated
March 19, 2002 from Xxxxxxx Associates, Inc. are free and clear of all
mortgages, liens and encumbrances, except for Permitted Liens and liens in favor
of Xxxx Pressure Control, Inc. and Xxxxxx Drilling USA, LP which will be paid
with proceeds of the Loan. Further, Borrowers have no invoices for labor related
to such properties or materials provided to such properties which have not been
paid within90 days from the date such invoice is due and payable.
7. All of each Borrower's other representations and warranties set
forth in Section 8 of the Agreement, Representations and Warranties, are true
and correct on and as of the
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date hereof with the same effect as though made and repeated by such Borrower as
of the date hereof.
C. CONDITIONS
Bank's obligations under the Agreement, as hereby amended, are subject to
the following conditions:
1. Bank and Borrowers shall have executed and delivered this
Amendment.
2. Borrowers shall, or will from time to time, have executed such
additional mortgages, deeds of trust, financing statement and such other
documents as are deemed necessary by Bank in order to perfect a lien in
favor of Bank in and to those Oil and Gas Properties necessary to achieve
the percentages required by the covenants set forth herein.
3. Each Borrower's representations and warranties set forth in
Section B hereof shall be true and correct on and as of the date hereof,
and the date of any subsequent advance with the same effect as though such
representation and warranty had been on and as of such date.
4. Borrowers shall have satisfied all conditions set forth in the
Agreement.
5. As of the date hereof, and the date of any subsequent Advance, no
Event of Default nor any event which, with the giving of notice or lapse of
time, would constitute an Event of Default shall have occurred and be
continuing.
6. Borrowers shall have provided Bank with a copy of any settlement
with Xxxxxx Drilling USA, L.P.
7. Borrowers shall have paid Bank a fee equal to one percent (1%) of
the increase to the Borrowing Base which such amount equals $25,000. The
parties understand and agree that this amount is in excess of the amount of
such fee provided for in the Agreement due to the increase to the Borrowing
Base plus the waivers contained herein.
8. Borrowers shall have provided to Bank and Bank shall have
approved of the form of the releases of those liens filed by Xxxxxx
Drilling USA, LP and Xxxx Pressure Control, Inc. against any Borrower's Oil
and Gas Properties.
D. OTHER COVENANTS AND MISCELLANEOUS TERMS
1. This Amendment shall serve as notification to Borrowers that the
Borrowing Base shall be increased to $12,500,000.00 which such amount shall
remain in effect, subject to the Monthly Commitment Reductions, until the next
Borrowing Base Determination.
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Until June 1, 2002, the Monthly Commitment Reduction shall be $0.00. On June 1,
2002 and July 1, 2002, the Monthly Commitment Reduction shall be $172,000.00.
Beginning August 1, 2002 and continuing until the next Borrowing Base
Determination, the Monthly Commitment Reduction shall be $172,000 plus any
positive difference between $172,000.00 and 80% of the Net Cash Flow reported
for the second month preceding the first day of each month. For the purposes of
this definition, the term "Net Cash Flow" shall be defined as Net Income, as
determined by GAAP, before income taxes plus non-cash expenses (depreciation,
depletion, and amortization).
2. Borrowers hereby agree that notwithstanding any other purpose
permitted by the Agreement, proceeds of this $2,500,000.00 increase to the
Borrowing Base shall only be used to reduce outstanding accounts payable to
include $801,051.18 owed to Xxxxxx Drilling USA, L.P and $324,184.63 owed to
Xxxx Pressure Control, Inc.
3. Borrowers shall provide Bank with file stamped copies of those
releases described in that certain letter agreement by and between Xxxxxx
Drilling USA, L.P. and GMX Resources, Inc. dated June 3, 2002 within thirty (30)
days of the date hereof; furthermore, Borrowers shall provide Bank with file
stamped copies of those releases filed by Xxxx Pressure Control, Inc.
4. Bank hereby expressly waives, on a one-time basis, that default
created by Borrowers' failure to comply with the Adjusted Current Ratio set
forth at Section 7.1 of the Agreement for the quarterly periods ending December
31, 2001 and March 31, 2002, thereby creating a default pursuant to Section
9.1(f) of the Agreement. Further, Bank hereby expressly waives, on a one time
basis, that default created by those certain Liens filed by Xxxxxx Drilling USA,
L.P. and Xxxx Pressure Control, Inc. against certain of Borrowers' Oil and Gas
Properties in violation of the covenant set forth at Section 8.3 of the
Agreement, thereby creating a default pursuant to Section 9.1(f) of the
Agreement. It is expressly intended that these waivers are provided on a
one-time basis and are not meant to be continuing. This waiver does not waive
any default not specifically listed above nor does it waive further violations
of Sections 7.1, 8.3 or any other provision of the Agreement.
5. Bank hereby expressly waives, on a one-time basis that default
created by Borrowers' incurrence of additional indebtedness in violation of
Section 8.1 of the Agreement by virtue of its settlement agreement with Xxxxxx
Drilling USA, L.P. which creates an Event of Default pursuant to Section 9.1(c).
It is expressly intended that these waivers are provided on a one-time basis and
are not meant to be continuing. This waiver does not waive any default not
specifically listed above nor does it waive further violations of Sections 7.1,
8.3 or any other provision of the Agreement.
6. Borrowers hereby agree to provide such additional mortgages and
title work pertaining to the Oil and Gas Properties to Bank's satisfaction
within thirty (30) days of any such request by Bank.
7. Except as expressly amended and supplemented hereby, the
Agreement shall remain unchanged and in full force and effect, and the same is
hereby ratified and extended.
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8. The obligations described in the Agreement, as amended hereby,
including but not limited to the indebtedness evidenced by the Note executed in
conjunction with the Agreement, shall continue to be secured by the Collateral,
without interruption or impairment of any kind.
9. Borrowers agree to execute such additional mortgages, deeds of
trust and/or amendments to such documents already in place as Bank deems
necessary to adequately secure the loan at any time and from time to time
hereafter.
10. The Borrowers hereby agree to pay all reasonable attorney fees
and legal expenses incurred by Bank in preparation, execution and implementation
of this Amendment and any mortgages, guaranty agreements, subordination
agreements, deeds of trust, security agreements, pledge agreements or any
amendments thereto.
11. This Amendment shall be construed in accordance with and governed
by the laws of the State of Oklahoma, and shall be binding on and inure to the
benefit of the Borrower and Bank, and their respective successors and assigns.
All obligations of the Borrowers under the Agreement and all rights of Bank and
any other holder of the Note, whether expressed herein or in any Note, shall be
in addition to and not in limitation of those provided by applicable law.
Borrowers irrevocably agree that, subject to Bank's sole election, all suits or
proceedings arising from or related to the Agreement, as amended, or the Note
may be litigated in courts (whether State or Federal) sitting in Oklahoma City,
Oklahoma, and the Borrowers hereby irrevocably waives any objection to such
jurisdiction and venue.
12. This Amendment may be executed in as many counterparts as are
deemed necessary or convenient, and it shall not be necessary for the signature
of more than any one party to appear on any single counterpart. Each counterpart
shall be deemed an original, but all shall be construed together as one and the
same instrument. The failure of any party to sign shall not affect or limit the
liability of any party executing any such counterpart.
BORROWERS:
GMX RESOURCES INC.,
an Oklahoma corporation
/s/ Xxx X. Xxxxxxxxx, Xx.
----------------------------------------
By: Xxx X. Xxxxxxxxx, Xx.
Title: Chief Financial Officer
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ENDEAVOR PIPELINE INC.,
an Oklahoma corporation
/s/ Xxx X. Xxxxxxxxx, Xx.
----------------------------------------
By: Xxx X. Xxxxxxxxx, Xx.
Title: Chief Financial Officer
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EXPEDITION NATURAL RESOURCES INC.,
an Oklahoma corporation
/s/ Xxx X. Xxxxxxxxx, Xx.
-----------------------------------------
By: Xxx X. Xxxxxxxxx, Xx.
Title: Chief Financial Officer
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BANK:
LOCAL OKLAHOMA BANK, N.A.
/s/ Xxxx X. Xxxx, Xx.
-----------------------------------------
By: Xxxx X. Xxxx, Xx.
Title: Senior Vice President
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