AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
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This Amended and Restated Revolving Credit Agreement (this "Amended RCA")
is made effective as of ________________ , 2005 ("Effective Date"), by and
between PETROSEARCH ENERGY CORPORATION, A NEVADA CORPORATION [SUCCESSOR BY
MERGER TO PETROSEARCH CORPORATION, A TEXAS CORPORATION] ("Borrower"), ANADARKO
PETROSEARCH, L.L.C., A TEXAS LIMITED LIABILITY COMPANY ("Anadarko Petrosearch"),
GUIDANCE PETROSEARCH, L.L.C., A TEXAS LIMITED LIABILITY COMPANY ("Guidance
Petrosearch") and FORTUNA ENERGY, L.P., A CALIFORNIA LIMITED PARTNERSHIP
("Lender").
RECITALS:
A. Effective October 1, 2004, Lender, Borrower, Anadarko Petrosearch,
TK Petrosearch, and Guidance Petrosearch entered into a certain Revolving Credit
Agreement (the "Original Credit Agreement") creating an $18,000,000.00 credit
facility available to Borrower and its subsidiaries to fund acquisitions and
development of its oil and gas leases in several states, including, Texas,
Oklahoma, North Dakota, Montana and Mississippi.
B. Borrower, with the consent of Lender, sold the assets of its TK
Petrosearch subsidiary to a third party effective July 1, 2005.
C. Borrower has proposed to acquire and/or participate in ownership and
development of eight (8) new prospects (the "Eight Prospect Package") with an
initial capital budget of $10,000,000.00 (the "Eight Prospect Capital Budget")
which has been submitted to Lender for review and consideration. Lender,
Borrower, Anadarko Petrosearch and Guidance Petrosearch desire to amend and
restate the Original Credit Agreement to address the repayment terms for the
current outstanding indebtedness, the proposed funding of the Eight Prospect
Capital Budget, and the future advances, if any, under the credit facility for
other future prospects made available to Borrower.
TERMS OF AMENDMENT:
NOW, THEREFORE, FOR VALUE RECEIVED, the sufficiency of which is
acknowledged by the parties, the parties hereby amend and restate the Original
Credit Agreement as follows:
ARTICLE I
COMMITMENT USE OF PROCEEDS AND COLLATERAL
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Section 1.1. COMMITMENT/ADVANCES. Subject to the terms and conditions
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of this Amended RCA and beginning on the Effective Date, until the earlier of
the maturity of the revolving loan, as amended, Lender will make a loan to
Borrower by making advances of good funds by wire transfer to Borrower's
designated bank or such designated third party recipient as the parties may
mutually agree upon (the "Advances"), from time to time as limited by Section
1.5 hereinbelow, in such amounts as the Borrower may request up to the funding
limits described in this Amended RCA, up to the maximum aggregate principal
amount outstanding at any time during the term of the loan of TEN MILLION AND
NO/100 DOLLARS ($10,000,000.00)[the "Amended and Restated Credit Line"].
Attached hereto as Schedule 1 is the schedule of anticipated Advances (the
"Schedule of Advances") pursuant to the Eight Prospect Capital Budget.
Section 1.2 USE OF PROCEEDS. Proceeds of the Amended and Restated
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Credit Line shall be used only to finance:
(a) Past, present, or future acquisitions of oil and gas leases
(collectively, if acquired in whole or in part with Lender funds, the
"Leases"), including all title and land work in Anadarko Petrosearch, all
title and land work related to the Eight Prospect Package (irrespective of
the entity holding title) all fees paid to governmental entities (i.e.
filing fees and/or tax stamps), bonus consideration, surface damage
payments, prospect acquisition costs such as Xxxxxx costs which accrue
under the Prospect Generation Agreement between Borrower and Xxxxxxx
Xxxxxx, associated title, geological, and engineering review, fees and
payments to maintain such leases such as delay rentals;
(b) oil and gas drilling, reworking, production, transportation,
marketing and plugging activities under the Leases, and
(c) All Lender charges and fees, including fees and expenses of
legal counsel to Lender.
Section 1.3 OUTSTANDING LOAN BALANCE/REVOLVING CREDIT NOTE AMENDMENTS.
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All Advances to date under the Original Credit Agreement have been made under
the original Revolving Credit Note of the Borrower dated as of October 15, 2004,
payable to the order of Lender, and providing for interest on the outstanding
principal balance as advanced, from time to time, at the rate of six percent
(6%) per annum. The parties stipulate and agree that as of and through the
Effective Date above, the outstanding and unpaid principal balance under the
original Revolving Credit Note is as follows: $825,000.00, and that the accrued
interest through said Effective Date which has accrued under the original
Revolving Credit Note will be paid upon execution of this Amended RCA. The
parties hereby amend and restate the Note terms as follows and as set forth in
Sections 1.4, 1.5, 1.6, 1.7, 1.8 and 1.9 below, which shall be evidenced by the
form of Amended and Restated Note attached hereto and made a part hereof as
Exhibit "A" (the "Amended and Restated Note") and the current principal and
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interest balance under the original Revolving Credit Note described in this
Section shall be hereafter deemed to be principal and interest outstanding under
the Amended and Restated Note:
(a) INTEREST RATE. The Note interest rate is amended as of the
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Effective Date above to Wall Street Journal Prime Rate, as same may change
from time to time, plus three percent (3%) per annum.
(b) MATURITY. The Note maturity is hereby extended to April 1, 2008.
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For purposes
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hereof, the term "Maturity" shall likewise refer to the date, if ever, upon
which Lender, after any applicable cure period, accelerates the Amended and
Restated Note as a result of a Borrower Event of Default as defined in this
Amended RCA and in the Amended and Restated Note.
(c) ADVANCE CUTOFF DATE. Subject to the provisions of Section 1.5
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below, Borrower shall not request an Advance under the Amended and Restated
Note after October 1, 2007.
(d) AMORTIZATION/PAYMENT OF INTEREST AND PRINCIPAL. From and after the
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Effective Date, each respective Advance shall be treated as a separate loan
for repayment purposes and each such Advance together with accrued interest
thereon at the rate stated in the Amended and Restated Note shall be paid
by Borrower to Lender as follows:
(1) As to each specific principal Advance drawn by Borrower hereunder,
Borrower shall pay interest-only installments monthly to Lender commencing
on the first day of the calendar month following the date of the specific
Advance and continuing on the same calendar day of each succeeding month
thereafter for a total of six (6) monthly interest payments if the specific
Advance by Lender is made between the first (1st) and fifteenth (15th)
calendar day of a month, and for a total of seven (7) monthly interest
payments if the specific Advance is made after the fifteenth (15th)
calendar day of a month and prior to the first (1st) calendar day of the
following month.
(2) As to each specific principal Advance drawn by Borrower, commencing
on the first day of the calendar month following the last scheduled
interest-only payment (whether the interest only period is six (6) months
or seven (7) months as set forth above and unless Maturity occurs on or
prior to such date) and continuing on the same calendar day of each
succeeding month thereafter until Maturity (as defined above), Borrower
shall pay monthly installments of principal based upon a 30-month
amortization of that specific Advance (i.e. 1/30th of the specific
principal Advance shall be paid monthly), together with the monthly accrued
interest on that specific Advance as of the installment due date for that
specific Advance for twenty-four (24) months or until Maturity (as defined
above), whichever shall be the earlier to occur, at which time the entire
balance of the specific Advance shall become due and payable.
(3) At Maturity (as defined above), all outstanding and unpaid
principal and accrued interest shall be paid by Borrower to Lender.
A scheduled payment date which falls on a Saturday, Sunday or holiday shall
be due on the next business day. [EXAMPLE: A principal Advance eight (8)
months prior to Maturity would be repayable as interest only for six (6)
months, then one month of principal based upon a 30-month amortization plus
interest, and then on the 8-month anniversary the entire Advance plus
accrued interest (plus all other outstanding Advances) would be repayable
due to Maturity of the Amended and Restated Note].
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(a) BALLOON AT MATURITY. On April 1, 2008, the Amended and Restated
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Note shall mature and Borrower shall pay to Lender the entire outstanding
and unpaid principal balance of the Note and all accrued, unpaid interest
thereon.
(b) PAYMENTS AND PREPAYMENTS. Borrower may prepay the Loan in
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increments of not less than $100,000.00 or more each. Any prepayments shall
be applied first to those fees and expenses incurred by Lender in
enforcement of the Amended and Restated Note, the Deed(s) of Trust, the
Pledge Agreement(s), the ORRI assignment(s) or any other document
evidencing or securing the obligations of Borrower and/or its subsidiaries
under this Amended RCA or under such documents, then to accrued interest
and then to the principal balance outstanding. All principal prepayments
shall be applied to the last ensuing installment due under the Note without
reamortization of the Note.
(c) PUT AND CALL PROVISIONS. The Amended and Restated Note shall have
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NO put or call rights vested in either Lender or Borrower.
Section 1.4 COLLATERAL FOR AMENDED AND RESTATED CREDIT LINE. The
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collateral for the Amended and Restated Credit Line evidenced by this Amended
RCA shall be (a) subject to Sections 6.1 and 6.2 herein, first and prior
lien(s) on the oil and gas leases, xxxxx, downhole and surface equipment and
storage tanks and stored equipment on such leases as to which Lender's funds
have been utilized for acquisition and/or drilling costs referenced above in
Sections 1.2(a) and (b), including all existing lease interests in the State of
Oklahoma and existing lease interests in North Dakota (regardless of whether
Lender funds are used for acquisition and/or drilling in North Dakota), which
lien(s) are and shall be evidenced by the form(s) of Master Deed of Trust,
Assignment of Production, Security Agreement, and Financing Statement attached
hereto and made a part hereof as EXHIBIT "B" or, as to Texas, North Dakota and
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Oklahoma where existing Master Deed(s) of Trust and applicable supplements
thereto are of record, evidenced by the form of Modification and Extension of
Master Deed of Trust, Assignment of Production, Security Agreement, and
Financing Statement attached hereto and made a part hereof as EXHIBIT "B-1" and
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(b) first and prior lien(s) on Borrower's one hundred percent (100%) membership
interest (subject to the after-payout back-in interests of the subsidiary
directors of project development (formerly presidents), where applicable) in
Anadarko Petrosearch and any other subsidiary holding legal title to a Lease
acquired with Lender's funds, which lien(s) shall be evidenced by the form of
Pledge Agreement attached hereto and made a part hereof as EXHIBIT "C" (the
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"Pledge Agreement"). To the extent that the jurisdiction where future acquired
properties are situated requires a document which is different than the forms
attached hereto as EXHIBITS "B" or "B-1" to create a first and prior lien and
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security interest in favor of Lender, then Borrower shall execute and deliver
the form of document prescribed by Lender as necessary to conform to the lien
laws of the applicable jurisdiction where the newly acquired properties are
situated. The Borrower anticipates that a new or existing subsidiary shall be
created or dedicated to hold legal title to acquired Leases funded in whole or
in part with Lender funds. Borrower further covenants and agrees to execute
and deliver and/or cause the applicable subsidiary to execute and deliver
documentation sufficient to create and perfect first and prior lien(s) over and
upon any
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additional oil and gas lease(s) now existing or hereafter acquired and/or
drilled using Lender funds. In the event that the title review and/or
examination for newly acquired oil and gas lease(s) or interests therein
reflects any mortgage, deeds of trust, tax lien or other apparent encumbrance
("encumbrance") which, if valid and existing, could impair the first and prior
status of Lender's lien(s) and security interest(s) therein, then Borrower shall
cause such encumbrance, whether valid or otherwise, to be released of record or
shall lawfully bond around in accordance with applicable state or local law
requirements the apparent encumbrance within sixty (60) days of the request date
for any Lender advance which will be used to either acquire the encumbered oil
and gas lease(s) or reimburse Borrower or its subsidiaries for the costs of its
acquisition. In the event Borrower fails to cure such title encumbrance within
the time period provided above, Lender may, but shall not be obligated to, cure
such title encumbrance and to charge the cost and expense incurred in such
curative action to Borrower as an increase in the principal balance under the
Note in addition to all other rights of Lender herein and under any of the other
Loan Documents. Such curative expenses so advanced shall thereafter bear
interest at the rate of eighteen (18%) per annum from the date incurred until
paid.
Section 1.5. DRAW PERIOD AND AVAILABILITY OF LENDER FUNDS.
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(a) DRAW REQUEST PROCEDURE. The principal of the Amended and
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Restated Credit Line may be drawn by Borrower in accordance with the
Schedule of Advances over a twenty-four (24) month period which shall begin
on the Effective Date and end on October 1, 2007 (the "Draw Period") in a
lump sum or partial sums pursuant to the Schedule of Advances, in
Borrower's discretion, subject to the Minimum Collateral Coverage
Requirements described in Section 1.6 below. Principal repaid during any
Draw Period may be redrawn subject to the Minimum Collateral Coverage
limitations. Each draw by Borrower other than the initial draw request
shall be preceded by a 20-day written request (accompanied by a statement
of the proposed use of proceeds) to Lender and shall be funded by Lender on
the twenty-first (21st) day following the request. In the event that the
twenty-first (21st) day falls on a Saturday, Sunday or public holiday, then
the funding date shall be the next business day of Lender. Unless otherwise
agreed in writing by Lender, draw requests shall be funded utilizing this
notice procedure and no more frequently than monthly in amounts which
conform to the Schedule of Advances, unless otherwise reasonably requested
by Borrower (e.g. a request for expedited funding due to an impending
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deadline or strong competition for a Lease) and unless otherwise agreed by
Lender and Borrower.
(b) FUNDS AVAILABILITY DISCLOSURE. Borrower acknowledges,
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understands and agrees that Lender is a private, non-public, entity. As
such, Lender obtains its funds from the private capital markets and/or
individuals who desire to participate in Lenders investment banking
activities, thus Lender does not have a guaranteed source of money in which
to fund this transaction with Borrower. Borrower acknowledges that the
volatility of the capital markets, the nature of Borrower's business
activities and/or other events which may come into existence may impact
Lender's ability to raise and procure sufficient capital in order to fund
all or substantially all of the Loan described in this Amended RCA. While
Lender will use its best efforts to raise all necessary capital to
5
complete the funding obligations described in this Amended RCA, the Note
and as Amended and Restated Credit Line, Lender cannot and will not
guaranty to Borrow that all proposed funding required herein, will be
available as, if and when Borrower elects to make draw requests under the
terms of this Amended RCA and/or the Note. Borrower acknowledges and agrees
that the inability of Lender to obtain funds to complete the funding of
this Amended and Restated Credit Line will not constitute a breach or
violation of this Amended RCA and/or the Amended and Restated Note and/or
any other Loan document as defined herein on the part of Lender; provided,
however, that in the event of Lender's failure to fully fund the entirety
of the Amended and Restated Credit Line in accordance with the Schedule of
Advances for reasons other than a Borrower default or a Collateral
deficiency relative to the Minimum Collateral Coverage Requirements
described in Section 1.6 below, the provisions of Section 1.5 below shall
be applicable.
(c) EFFECT OF FAILURE TO FUND EIGHT PROSPECT PACKAGE. Lender and
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Borrower stipulate and agree that the credit facility as amended by the
Amended and Restated Note is intended to cover the initial capital needs of
Borrower for the Eight Prospect Package as depicted in the Eight Prospect
Capital Budget. It is further anticipated that Borrower will pursue
additional prospect acquisition opportunities in the future for which
Lender funding participation may be desirable. Other than a refusal to fund
due to Borrower's inability to conform to the Minimum Collateral Coverage
Requirements described in Section 1.6, in the event that Lender is unable
or refuses to fund the Amended and Restated Credit Line in accordance with
the Schedule of Advances, then (i) Borrower shall not be obligated to
afford Lender the participation rights in future prospects described in
Section 2.2 herein (except to the extent such future prospects have already
been funded by Lender), and (ii) Lender's overriding royalty interests
described in Section 2.1(b) herein shall apply only to Lease acquisitions
in the Eight Prospect Package funded by Lender. As an additional
consequence of Lender's failure or refusal to fund the Amended and Restated
Credit Line (except in the case of Borrower default or failure to meet the
Minimum Collateral Coverage Requirements), Borrower shall have the option
to terminate this Amended RCA without affecting the payment schedule for
the Amended and Restated Note Balance and without affecting Lender's ORRI's
earned through the date of termination.
Section 1.6. COLLATERAL COVERAGE REQUIREMENTS. Unless otherwise agreed
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in writing by Lender, unused available funds under the Amended and Restated
Credit Line, shall only be available for draw by Borrower if at all times
Borrower's Proved Developed Reserves (as defined herein) equal or exceed
twenty-five percent (25%) of the outstanding principal and interest indebtedness
under the Amended and Restated Note, and if the principal balance of the Note
outstanding after the requested draw will be less than the following sum,
to-wit: a) the actual costs of the oil and gas lease(s) purchased and/or
reimbursed through the date of the requested draw with funds advanced under this
Amended RCA, and b) the sum of 75% of Borrower's Proved Developed Reserves (as
defined herein) and 50% of Borrower's Proved Undeveloped Reserves (as defined
herein) from all sources pledged as collateral by the Borrower, including
6
subsidiaries of Borrower, as such Proved Reserves are reflected in a reserve
report prepared by an independent petroleum engineer engaged by Borrower,
acceptable to Lender and otherwise qualified to calculate Proved Reserves
acceptable under Securities and Exchange Commission ("SEC") standards, and which
reserve report is a "Current Reserve Report" as required by Lender under this
Section 1.6. The foregoing requirements shall be collectively referred to as the
"Minimum Collateral Coverage Requirements". Borrower shall be obligated to
update reserve reports on the earlier to occur of the passage of six (6) months
from the date of the previous report or upon a 15% decline in the hydrocarbon
pricing model utilized in preparation of the current report under which the
parties are operating. All reserve reports must be updated in a timely fashion
to conform to these two (2) conditions in order to be deemed a "Current Reserve
Report". Lender reserves the right to engage its own engineer for preparation
of a reserve report and if a separate engineer is so engaged by Lender, Borrower
shall in all respects cooperate with Lender's engineer and provide all
information requested by said engineer to assist in preparation and generation
of a report. Said engineer engaged by Lender must be qualified in all respects
to deliver a reserve report which meets SEC standards. If for any reason the
Minimum Collateral Coverage Requirements fall below the minimum threshold amount
described in this Section 1.6, then, within fifteen (15) days of Lender's notice
to Borrower of the deficiency, Borrower and its subsidiaries shall cause
additional collateral which strictly conforms to the collateral coverage
requirements of this Section 1.6 to be secured, pledged and encumbered by
Lender's first and prior lien(s) and security interest(s), all at Borrower's
expense, or the Borrower may prepay a portion of the outstanding loan in an
amount sufficient to bring the balance into compliance with the requirements set
forth above. For purposes of this Section 1.6, the terms "Proved Developed" and
"Proved Undeveloped" Reserves shall have the meanings set forth in Regulation
S-X ("Accounting Rules Form and Content of Financial Statements"), Rule 4-10
("Financial Accounting and Reporting for Oil and Gas Producing Activities
Pursuant to the Federal Securities Laws and the Energy Policy and Conservation
Act of 1975") as follows:
PROVED DEVELOPED OIL AND GAS RESERVES. Proved developed oil and
gas reserves are reserves that can be expected to be recovered
through existing xxxxx with existing equipment and operating
methods. Additional oil and gas expected to be obtained through
the application of fluid injection or other improved recovery
techniques for supplementing the natural forces and mechanisms of
primary recovery should be included as proved developed reserves
only after testing by a pilot project or after the operation of
an installed program has confirmed through production response
that increased recovery will be achieved.
PROVED UNDEVELOPED RESERVES. Proved undeveloped oil and gas
reserves are reserves that are expected to be recovered from new
xxxxx on undrilled acreage, or from existing xxxxx where a
relatively major expenditure is required for recompletion.
Reserves on undrilled acreage shall be limited to those drilling
units offsetting productive units that are reasonably certain of
production when drilled. Proved reserves for other undrilled
units can be claimed only where it can be demonstrated with
certainty that there is continuity of production from the
existing productive formation. Under no circumstances should
estimates for
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proved undeveloped reserves be attributable to any acreage for
which an application of fluid injection or other improved
recovery technique is contemplated, unless such techniques have
been proved effective by actual tests in the area and in the same
reservoir.
Section 1.7. LENDER STANDBY FEES FOR UNDRAWN PRINCIPAL. Lender shall
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charge quarter-annually to Borrower and Borrower shall pay to Lender, as
invoiced, a standby fee equal to one quarter of one percent (0.25%) [i.e. 1%
annually] of the funds available to be drawn under the Schedule of Advances in
effect at the time which are not drawn by Borrower. Funds which are not
available to be drawn either because of (i) limitations imposed by Lender due to
deficiency in the Minimum Collateral Coverage Requirements, or (ii) Lender's
inability to fund pursuant to timely request for funding by Borrower, shall not
be included in the calculation of the standby fee. The standby fee shall be
calculated using the average daily balance of the unused available funds for the
quarter. Attached hereto as Schedule 2 are the anticipated scheduled payments
and commitments under the Amended and Restated Credit Line.
Section 1.8 EVENTS UPON REPAYMENT OF LOAN. Upon the full repayment and
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discharge by Borrower of all of the obligations under this Amended RCA and the
corresponding loan documents, Lender shall, promptly after such repayment and
termination have occurred, release all of its liens and security interests under
the Deed(s) of Trust and the Pledge Agreement(s) and any amendments or
supplements thereto, if applicable, or other document(s) executed by Borrower
and/or its subsidiaries to evidence or secure the indebtedness of Borrower
and/or its subsidiaries under this Amended and Restated Credit Line.
Section 1.9. PARTIAL RELEASES OF DEED(S) OF TRUST AND/OR PLEDGE
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AGREEMENT(S). With regard to the lien(s) and security agreement(s) created and
evidenced by the Deed(s) of Trust, any amendments or supplements thereto, if
applicable, and any other document executed by Borrower and/or its subsidiaries,
Borrower and its subsidiaries who are parties to the Deed(s) of Trust shall be
entitled to obtain from Lender, upon written request to Lender from time to time
and for any business reason, so long as Borrower and/or its subsidiaries is/are
not then in default under this Amended RCA or any other document evidencing or
securing the obligations of Borrower and/or its subsidiaries under this Amended
RCA or under such documents, a partial release of the specific Deed of Trust so
long as the written request is signed by the chief financial officer of Borrower
and contains a certification by said chief financial officer that the Minimum
Collateral Coverage Requirements set forth in Section 1.6 above shall continue
to be satisfied after such partial release is executed and delivered by Lender.
The request must be supported by a Current Reserve Report as that term is
defined in Section 1.6 above which reflects a level of Proved Developed and/or
Proved Undeveloped Reserves which, after the requested partial release, will
continue to provide the Minimum Collateral Coverage described in Section 1.6.
In like fashion, Borrower shall be entitled to obtain from Lender upon written
request to Lender from time to time, so long as Borrower and/or its subsidiaries
is/are not then in default under this Amended RCA or any other document
evidencing or securing the obligations of Borrower and/or its subsidiaries under
this Amended RCA or under such documents, a release of the Pledge
8
Agreement(s) as to any specified subsidiary which no longer holds a Lease which
is subject to Lender's Deed of Trust lien(s), either due to sale of the Lease(s)
or due to expiration or termination of the Lease(s) by their terms.
ARTICLE II
LENDER'S OVERRIDING ROYALTY INTEREST AND RIGHT TO PARTICIPATE IN FUTURE PROSPECT
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ACQUISITIONS
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Section 2.1 LENDER'S OVERRIDING ROYALTY INTERESTS.
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(a) EXISTING OVERRIDE IN ANADARKO AND FORT BEND LEASES. As
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additional consideration from Borrower to Lender to make the original loan,
Borrower caused Anadarko Petrosearch and TK Petrosearch to deliver to
Lender a one percent (1% of 8/8ths) overriding royalty interest ("ORRI") in
all existing Oklahoma Leases (the "Existing Oklahoma ORRI") and in certain
Fort Bend County, Texas Leases (the "Existing Fort Bend County ORRI"),
which Existing Oklahoma ORRI and Fort Bend County ORRI shall remain in
effect as to the Leases acquired prior to the Effective Date unchanged by
this Amended RCA. Since Borrower has divested the Fort Bend Leases,
Borrower shall have no liability or responsibility with regard to the Fort
Bend County XXXXx held by Lender except for warranties of title contained
in the assignment conveying such Fort Bend County XXXXx.
(b) EIGHT PROSPECT PACKAGE LENDER ORRI. As to each Lease in the
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Eight Prospect Package funded with Lender funds in accordance with the
Eight Prospect Capital Budget submitted by Borrower to Lender (assuming
100% funding of Borrower's acquired interest by direct payment or
reimbursement), Borrower shall cause the acquiring subsidiary or
subsidiaries (if more than one subsidiary holds legal title) to deliver to
Lender an ORRI equal to two percent (2%) of the net revenue interest
actually acquired by Borrower's subsidiary. [EXAMPLE: Should Borrower's
subsidiary acquire a 50% net revenue interest in a prospect included within
the Eight Prospect Package which is funded by Lender in its entirety
pursuant to the Eight Prospect Capital Budget, then Lender's ORRI shall be
adjusted by multiplying: 2% (ORRI) X 50% (Borrower's interest), resulting
in an adjusted ORRI of 1.0%].
(c) FUTURE LENDER ORRI IN OTHER PROSPECTS. Subject to the
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provisions of Section 2.2 below, as to future Leases acquired by Borrower
with Lender funds outside of the Eight Prospect Package, Borrower shall
cause the acquiring subsidiary or subsidiaries (if more than one subsidiary
holds legal title) to deliver to Lender a two percent (2%) ORRI, which ORRI
shall be proportionately adjusted, where applicable, to BOTH the net
revenue interest owned by Borrower's subsidiaries and to the percentage of
Lender's funds utilized relative to Borrower's funds actually utilized to
acquire that net revenue interest. [EXAMPLE: Should Borrower's subsidiary
acquire a 50% net revenue interest in a prospect for $1,000,000, one half
of which funds are provided by Lender, then Lender's ORRI shall be adjusted
by multiplying: 2% (ORRI) X 50% (Borrower's
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interest) X 50% (Percentage of Lender's funds relative to Borrower's
funds), resulting in an adjusted ORRI of 0.50%].
(d) The XXXXx are in all respects absolutely and irrevocably
earned when Lender funds are utilized by Borrower for direct and/or
indirect acquisition expenses, drilling expenses or reimbursement to
Borrower for such activities related to an oil and gas lease as described
in Sections 1.2(a) and (b) hereof, and the earned XXXXx shall not be
subject to reversion or reassignment upon repayment of the loan or
termination (by passage of time, early termination or acceleration by
Lender upon Borrower's default) of this credit facility. Additionally, all
earned XXXXx which have been earned but not assigned upon termination of
the credit facility shall be immediately assigned, in recordable form, upon
the termination event.
(e) For purposes of determining relative percentage funding by
Lender and Borrower in any acquisition covered by this Amended RCA, Lender
and Borrower stipulate and agree that acquisitions by Borrower from bona
fide third party entities based upon arms length negotiations which involve
issuance of Borrower's capital stock or assumption of existing indebtedness
by Borrower either in lieu of or in addition to payment of cash funds, that
the issued stock or assumed indebtedness shall be treated as a cash
equivalent. Issued stock shall be on the basis of the stated value of the
issued stock in the acquisition agreement (e.g. which may not be the public
market trading value) or, if no value is stated in an acquisition
agreement, then the closing quoted market value of the stock on the date of
issuance. If there is no stated value for the stock and no quoted public
market value for the class of stock, then the value shall be based upon par
value. Assumed indebtedness shall be on the basis of the balance due of the
indebtedness so assumed on the date of assumption.
(f) The form of Assignment of Overriding Royalty Interest which
will be used for each assignment is attached hereto and made a part hereof
as EXHIBIT "D". Borrower shall record each Lease acquired in the
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appropriate public records office wherein the leasehold interest is located
within five (5) business days from receipt of the executed Lease and shall
deliver to Lender Lender's ORRI within five (5) business days of receipt of
the recorded Lease from the public recording official together with a copy
of the recorded Lease and which ORRI shall be effective as of the date of
the recorded Lease.
- Section 2.2. LENDER RIGHTS TO PARTICIPATE IN FUTURE PROSPECTS.
------------------------------------------------
Conditioned upon Lender having funded on a timely basis as requested the
capital outlay proposed by Borrower in its Eight Prospect Capital Budget,
as Advances are actually requested by Borrower, subject to compliance with
Section 1.6 above and providing that the Borrower was not otherwise in
default, then as to any proposed future prospect during the 24-month period
from the Effective Date through October 1, 2007, which Borrower expects or
intends to fund with third party full recourse (to Borrower) debt
financing, in whole or in part, Borrower shall afford Lender the right and
opportunity to fund a minimum of thirty-three and one third percent
(33.33%) of Borrower's third party full recourse debt-financed
10
interests acquired in the new prospect, other than the Eight Prospect
Package. Borrower shall accompany each request for funding with information
regarding the project Borrower intends to finance with the borrowed funds.
Borrower, in its sole discretion, will determine the percentage of funding
requested from Lender which will range from a minimum of 33.33% up to 100%
funding of Borrower's interests. Each Financing Package (as defined below)
will exclude the interest of third party drilling co-venturers and cover
only the particular interest proposed to be acquired by Borrower's
subsidiary. Other than the Eight Prospect Package, Lender shall have the
right to voluntarily decline to participate in the particular prospect and
shall notify Borrower of its election within fifteen (15) days of receipt
of Borrower's Financing Package, but Lender shall NOT have the right to
adjust the percentage of participation proposed by Borrower in its funding
request. A failure to respond in writing by certified mail or overnight
courier within the fifteen- (15) day period shall be deemed to be an
election NOT to participate. Lender shall be entitled to receive its
proportionate ORRI described in Section 2.1 above only as to prospects
which it funds and only to the proportionate extent funded as described in
Section 2.1. For purposes hereof, the parties stipulate that a Borrower
Financing Package need not conform to any particular format or minimum set
of materials, as some prospect proposals may have more informational
materials available than others. Accordingly, a "Financing Package" shall
be defined as those materials which Borrower, in its sole discretion, and
in good faith, believes are sufficient to identify the target acquisition
area for which funds are being requested and are sufficiently complete for
Borrower to obligate itself to incur debt as to the Leases therein
described, and which shall include the following:
- Type of deal - Acquisition with development drilling, development
drilling, exploitation drilling, enhanced recovery, etc.
- Location - State, County, S-T-R or survey and abstract (TX) -
regional and local maps
- Ownership - Gross and net acres, depth limitation, WI, NRI (BPO and
APO, before Fortuna)
- Potential number of xxxxx to be drilled, depth, name of zone, gas or
oil target
- Dry hole and completion cost per well
- Total capital requirement expected from Fortuna
- Proved, probable and possible reserve estimates
- Expected project cash flow and benchmarks - ROI, ROR, time to payout,
UCF, PV10
The rights of Lender under this Section 2.2 shall not be available to Lender
upon and after a completed "change in control" of Borrower due to acquisition,
merger, business combination or otherwise, notwithstanding the fact that such
change in control results in Borrower's default
11
under this Amended RCA, the Amended and Restated Note and the security documents
executed in connection with this Amended RCA, save and except as to projects
already offered to Lender, accepted by Lender and as to which the loan documents
have been amended to include the project at the time of the change in control.
In the event that the completed change of control occurs after Lender's decision
to participate but before execution of amendments to the loan documents, then
Lender shall not be entitled to participate but Lender shall be reimbursed all
of its reasonable out of pocket expenses related to evaluation of the prospect
and/or preparation of any loan documents, including attorneys fees. Lender's
right to participate in any proposed acquisition under this Section 2.2 shall be
limited to projects which Lender can fund to the full extent requested by
Borrower under the funding limitations set forth in Section 1.6 herein, unless
Lender and Borrower mutually agree to modify the funding limitations so as to
permit a funding by Lender in accordance with Borrower's request.
ARTICLE III
LENDER'S CONDITIONS TO ADVANCES
-------------------------------
The obligation of Lender to fund the Advances shall be subject to the prior
or concurrent satisfaction (or in Lender's discretion, the waiver) of each of
the conditions precedent set forth in this Section.
Section 3.1. RESOLUTION. Lender shall have received from Borrower a
----------
certificate of its Secretary or Assistant Secretary, member, manager, general
partner or other appropriate officer, as applicable, as to (a) resolutions of
its Board of Directors or Managers, as the case may be, then in full force and
effect authorizing the execution, delivery and performance of this Amended RCA,
the Amended and Restated Note, the Modification and Extension of Master Deed of
Trust, Mortgage, Assignment of Production, Security Agreement and Financing
Statement (the "Modification of Deed of Trust") and each other loan document to
be executed by it; (b) the incumbency and signatures of those of its officers
and/or managers authorized to act with respect to this Amended RCA, and (c) that
Borrower and its subsidiaries are in compliance with all of the covenants and
Amended RCAs contained in this Amended RCA.
Section 3.2. DELIVERY OF NOTE. Lender shall have received the Amended
----------------
and Restated Note duly executed and delivered by Borrower.
Section 3.3 DELIVERY OF MODIFICATION AND EXTENSION OF DEED OF TRUST.
---------------------------------------------------------
Lender shall have received the Modification of Deed of Trust duly executed in
recordable form on behalf of the Borrower, Anadarko Petrosearch and Guidance
Petrosearch.
Section 3.4. COMPLIANCE WITH LOAN DOCUMENTS. Borrower shall have
---------------------------------
performed all Amended RCAs and covenants required by this Amended RCA and all
representations and warranties herein and in the other loan documents made by
Borrower or any of its subsidiaries shall be true and correct as of the date of
the Advance.
12
Section 3.5 NO DEFAULT. No default, or event which could become a
-----------
default if uncured, shall have occurred and be continuing on the date of funding
of the requested Advance.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce Lender to enter into this Amended RCA and to make the
Advances hereunder, Borrower represents and warrants unto Lender as follows:
Section 4.1 ORGANIZATION, ETC. Borrower is a corporation validly
------------------
organized and existing and in good standing under the laws of the State of
Texas, is duly qualified to do business and is in good standing in the State of
Texas and all jurisdictions where the nature of its business requires such
qualification, and has full power and authority and holds all requisite
governmental licenses, permits and other approvals to enter into and perform its
obligations under this Amended RCA, the Amended and Restated Note, the
Modification of Deed of Trust, the Pledge Agreement and each other loan document
and to own and hold under lease its property and to conduct its business
substantially as currently conducted by it.
Section 4.2 DUE AUTHORIZATION, NON-CONTRAVENTION, ETC. Borrower has
-------------------------------------------
the full legal power, right and capacity to enter into and perform this Amended
RCA and the other loan documents to which it is party. Each obligor has the
full legal power, right and capacity to enter into and perform the Loan
Documents to which it is a party. The execution, delivery and performance by
Borrower of this Amended RCA, the Amended and Restated Note, the Modification of
Deed of Trust, the Pledge Agreement and each other loan document executed or to
be executed by it, and the execution, delivery and performance by each other
obligor of each loan document executed or to be executed by it are within
Borrower's and each such obligor's company, corporate or partnership powers,
respectively, have been duly authorized by all necessary corporate action, and
do not (a) contravene Borrower's or any such obligor's organizational documents,
(b) contravene any contractual restriction, law or governmental regulation or
court decree or order binding on or affecting Borrower or any such obligor, (c)
result in, or require the creation or imposition of, any lien on any of any
obligor's properties, or (d) require the consent or approval of any other
person.
Section 4.3 GOVERNMENT APPROVAL, REGULATION, ETC. No authorization or
------------------------------------
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other person is required for the due execution,
delivery or performance by Borrower or any other obligor of this Amended RCA,
the Amended and Restated Note, the Modification of Deed of Trust, the Pledge
Agreement or any other loan document to which it is a party. Neither Borrower
nor any of its subsidiaries or any other obligor is an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, or a
"holding company," or a "subsidiary company" of 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.
13
Section 4.4 VALIDITY, ETC. This Amended RCA constitutes, and the
--------------
Amended and Restated Note, the Modification of Deed of Trust, and each other
loan document executed by Borrower and/or Anadarko Petrosearch and/or Guidance
Petrosearch will, on the due execution and delivery thereof, constitute, the
legal, valid and binding obligations of the party executing same enforceable in
accordance with their respective terms. Each document executed pursuant hereto
by each named obligor will, on the due execution and delivery thereof by such
obligor, be the legal, valid and binding obligation of such obligor enforceable
in accordance with its terms.
Section 4.5. NO MATERIAL ADVERSE CHANGE. Since the date of Borrower's
--------------------------
most recent audited financial statements, there has not been any material
adverse change.
Section 4.6. LITIGATION, LABOR CONTROVERSIES, ETC. There is no pending
------------------------------------
or, to the knowledge of Borrower, threatened litigation, action, proceeding or
labor controversy affecting Borrower or any of its subsidiaries or any other
obligor, or any of their properties, assets or revenues, or the Leases, which
has caused or may cause a material adverse effect or which purports to affect
the legality, validity or enforceability of this Amended RCA, the Amended and
Restated Note, the Modification of Deed of Trust or any other loan document.
Section 4.7. BROKER'S FEES. Borrower has not incurred any obligation,
-------------
contingent or otherwise, for brokers' or finders' fees in respect of the
transactions contemplated by this Amended RCA.
Section 4.8. TAXES. Borrower, each of its subsidiaries and any other
-----
obligor has filed all tax returns and reports required by law to have been filed
by it and has paid all taxes and governmental charges thereby shown to be owing,
except any such taxes or charges which are being diligently contested in good
faith by appropriate proceedings in accordance with the requirements of the
jurisdiction where such contest is pending and for which adequate reserves in
accordance with GAAP shall have been set aside on its books. Borrower has not
been audited by any state, federal, or other governmental or other body having
taxing authority.
Section 4.9. PENSION AND WELFARE PLANS; EMPLOYEES. Borrower has no
---------------------------------------
pension plans or employee benefit plans within the meaning of ERISA.
Section 4.10. COMPLIANCE WITH LAWS. Borrower and its subsidiaries have
--------------------
complied with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof, having jurisdiction over the Leases. Neither Borrower nor any
of its Subsidiaries has received any notice to the effect that the operations of
Borrower or such subsidiary relating to the Leases are not in compliance with
any of the requirements of applicable environmental laws, or are the subject of
any federal or state investigations evaluating whether any remedial action is
needed to respond to a release of any hazardous material (as defined in the
environmental laws) involving the Leases.
Section 4.11. ENVIRONMENTAL WARRANTIES. Except as reasonably could be
------------------------
expected to cause a material adverse effect (i) all of the Leases and associated
facilities operated by Borrower or any of its subsidiaries have been, and
continue to be, owned, leased or operated by Borrower,
14
such subsidiary in compliance with all environmental laws; (ii) there have been
no past, and there are no pending or threatened claims, complaints, notices or
inquiries to, or requests for information received by, or known to, Borrower or
any of its subsidiaries with respect to, any alleged violation of any
environmental law with respect to the oil and gas leases or associated
facilities operated by Borrower, such Subsidiary or such Obligor; (iii) there
are no pending or threatened claims, complaints, notices or inquiries to, or
requests for information received by, or known to, Borrower or any of its
subsidiaries for potential liability under any environmental law or under any
common law theories relating to operations or the condition of any of the lands
comprising the Leases (including underlying groundwater); and (iv) Borrower and
its subsidiaries have been issued and are in compliance with all permits,
certificates, approvals, licenses and other authorizations relating to
environmental matters and necessary or desirable for its business and the
operation of each of the Leases.
Section 4.12. SEC REQUIREMENTS. Borrower represents that it has made and
----------------
will continue to make all periodic filings required of it by the Securities and
Exchange Commission on a timely basis. Neither Borrower nor any of its
subsidiaries has received notice from the Securities and Exchange Commission or
any state securities agency that Borrower or any subsidiary is not in compliance
with applicable Securities and Exchange Commission or state securities rules and
regulations or is under investigation regarding the potential violation of any
such rule or regulation.
Section 4.13. MONTHLY STATUS REPORT. Borrower represents that commencing
---------------------
on the last day of the calendar month following the month in which the initial
Advance is made by Lender and continuing on the last day of each month
thereafter, Borrower will prepare and deliver to Lender a written status report
indicating the status of all oil and gas leases acquired with Lender's funds,
expenditures utilizing Lender's funds, and overriding royalty interest
assignments due to Lender through the end of the month preceding the due date,
pursuant to Section 2.1(f) above.
ARTICLE V
AFFIRMATIVE COVENANTS
---------------------
Borrower agrees with Lender that during the Term of this credit facility,
Borrower will, and will cause its subsidiaries to perform, the obligations set
forth in this Section.
Section 5.1. ALLOCATION AND BUDGETING OF LOAN PROCEEDS FOR DRILLING.
--------------------------------------------------------
Borrower shall, in good faith exercising sound commercial judgment and, where
applicable, acting within reasonably prudent operator standards, endeavor to
budget and allocate the requested advances under this Amended and Restated
Credit Line in such a manner that sufficient funds shall be available to
Borrower in the near term, from third party venturers, the Amended and Restated
Credit Line, projected cash flow or set asides to drill and test the oil and gas
lease(s) acquired with or reimbursed by Amended and Restated Credit Line funds
within the primary term of such oil and gas lease(s) and shall have determined
that appropriate and sufficient drilling rigs and/or
15
equipment are available in the geographic area where such drilling activity is
to occur within such time period.
Section 5.2. FINANCIAL INFORMATION, REPORTS, NOTICES, ETC. Borrower
----------------------------------------------
will furnish to Lender upon request, or will cause to be furnished at Borrower's
cost to Lender upon request, copies of (i) fiscal quarter unaudited and annual
audited financial statements prepared by Borrower's accountants in accordance
with GAAP; (ii) Current Reserve Reports as defined in Section 1.6 above, and
(iii) all filings with the Securities and Exchange Commission.
Section 5.3. COMPLIANCE WITH LAWS, ETC. Borrower shall comply in all
--------------------------
material respects with all applicable laws, rules, regulations, orders,
licenses, contracts, and permits, such compliance to include, without
limitation: (i) compliance with all environmental laws; (ii) the maintenance
and preservation of its existence and qualification as a corporation and/or as a
foreign corporation in all jurisdictions where the nature of its business
requires such qualification; (iii) compliance with all SEC rules and
regulations; and (iv) the payment, before the same become delinquent, of all
taxes, assessments and governmental charges imposed upon it or upon its property
except to the extent being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books.
Section 5.4. TAXES. Borrower will make all required federal income tax
-----
filings prior to any applicable filing deadlines. Borrower shall pay, promptly
when due, and in any event within thirty (30) days of its payment due date,
except as contested in good faith and by appropriate proceedings in compliance
with the laws and procedures of the taxing jurisdiction under which the contest
is filed and for which adequate reserves in accordance with GAAP shall have been
set aside on its books, together with interest and penalties thereon, if any,
all taxes, including severance taxes and other taxes, duties, imposts, charges,
levies and assessments of any kind or nature whatsoever, imposed upon or
assessed with respect to or charged against the Leases or production therefrom.
In the event that a jurisdiction or applicable laws require payment at the time
of a tax protest, Borrower shall make such required payment at the time of any
tax protest asserted by Borrower.
Section 5.5. INSURANCE. Borrower will maintain (or will cause to be
---------
maintained) bonding and liability insurance in coverages and amounts customary
and usual in the North American exploration and production industry and in
compliance with the laws, rules and regulations of the jurisdiction in which
such operations and/or property is located. At Lender's request, Borrower shall
cause Lender to be named on any policy or policies of insurance as an additional
insured or loss payee to the extent of its interest, as applicable.
Section 5.6. BOOKS AND RECORDS. Borrower and its subsidiaries will
-------------------
keep and maintain in Xxxxxx County, Texas, books and records which accurately
reflect all of their business affairs and transactions, or relate to the
Leases, and permit Lender or any of its representatives, at reasonable times and
intervals, to visit all of its offices and the Leases, to discuss such affairs
and transactions with their respective officers and independent public
accountants (and Lender is hereby authorized to have such independent public
accountants discuss the financial matters of
16
Borrower and its subsidiaries) and to examine (and, at the expense of Borrower,
photocopy extracts from) any of its books or other corporate records. Borrower
shall pay any fees incurred in connection with Lender's exercise of its rights
pursuant to this Section.
Section 5.7. ENVIRONMENTAL COVENANT. Borrower will (i) use and operate
----------------------
all of its facilities and properties (including the Leases) in compliance with
all environmental laws, keep all necessary permits, approvals, certificates,
licenses and other authorizations relating to environmental matters in effect
and remain in material compliance therewith, and handle all hazardous materials
in compliance with all applicable environmental laws, (ii) immediately notify
Lender and provide copies upon receipt of all written claims, complaints,
notices or inquiries relating to the condition of its facilities and properties
or compliance with environmental laws, and shall promptly cure and have
dismissed with prejudice to the satisfaction of Lender any actions and
proceedings relating to compliance with environmental laws, and (iii) provide
such information and certifications which Lender may reasonably request from
time to time to evidence compliance with this Section.
Section 5.8. FURTHER ASSURANCES. Borrower will execute and deliver all
------------------
such other and additional instruments, notices, releases and other documents and
will do all such other acts and things as may be reasonably necessary or
appropriate to more fully secure Lender or its successors or assigns all of the
respective rights and interests herein and hereby or pursuant to any of the
other loan documents granted or intended so to be.
Section 5.9. PUNCTUAL PAYMENT. Borrower shall timely and punctually
-----------------
pay all interest, principal and all other amounts when due under this Amended
RCA, the Amended and Restated Note, the Modification of Deed of Trust, or any
other document executed by Borrower and/or its subsidiaries to evidence or
secure the indebtedness of Borrower and/or its subsidiaries under this Amended
and Restated Credit Line.
Section 5.10 PUNCTUAL DELIVERY OF ORRI ASSIGNMENTS. Borrower shall
----------------------------------------
record and deliver the Lender ORRI assignments which accrue under this Amended
RCA in accordance with Section 2.1(f) above.
ARTICLE VI
----------
NEGATIVE COVENANTS
------------------
Borrower agrees with Lender that during the Term of this Amended and
Restated Credit Line, Borrower will, and will cause its subsidiaries to perform,
the obligations set forth in this Section.
Section 6.1. NO SENIOR OR PARI PASSU INDEBTEDNESS. Borrower, Anadarko
---------------------------------------
Petrosearch, Guidance Petrosearch and other subsidiaries formed either now or in
the future in which the Lender has Collateral at the time of request for relief
under this Section shall not, without Lender's consent, which shall not be
unreasonably withheld, incur any indebtedness which is senior to or in pari
passu to this credit facility as to the Lease assets on which Lender holds a
17
deed of trust lien while any part of the principal advanced by Lender under the
Note is outstanding and unpaid. This provision shall not be deemed to preclude
joint venture partners in Borrower's drilling operations nor Borrower's ability
to xxxxx x xxxx, security interest or participation interest in a Lease or
fractional undivided interest therein on which Lender does NOT hold a lien or
security interest (e.g. due to a partial funding rather than a 100% funding by
Lender). Borrower shall within fifteen (15) days after execution of any pari
passu lender documentation provide Lender with the name, address, telephone and
facsimile numbers of each pari passu lender, a copy of such lender's loan
documents and, if applicable, notice of any default under or attempted
enforcement of said pari passu lender's documents. [EXAMPLE: Should Lender
fund the acquisition of a 50% working interest in a Lease and Borrower fund the
remaining 50% of the working interest, then Borrower shall be entitled to create
senior or pari passu indebtedness as to, and to grant liens, security interests
or participation interests as to, the 50% interest which was not funded by
Lender and which is not subject to Lender's liens and security interests.]
Section 6.2. LIENS OF DEED OF TRUST AND PLEDGE AGREEMENT. Except for
--------------------------------------------
the back-in interests of the subsidiary President, if applicable, as to a
particular subsidiary, and except as to interests which are released by Lender
pursuant to Section 1.9 above, the Deed(s) of Trust (as modified by the
Modification of Deed of Trust) and the Pledge Agreement(s) are, and always will
be kept, a direct first perfected lien and security interest upon the Leases of
Borrower and its subsidiaries which are covered by the Deed(s) of Trust, and
100% of the membership interests of the subsidiaries of Borrower covered by the
Pledge Agreement(s).
Section 6.3. BUSINESS ACTIVITIES. Borrower is a corporation and will
--------------------
not engage, or permit any of its subsidiaries to engage, in any business
activity, except the owning, operating, producing, processing and marketing of
hydrocarbons and such activities as may be incidental or related thereto,
without the prior written consent of Lender, in its discretion.
Section 6.4. CONSOLIDATION, MERGER, ETC. Borrower will not liquidate
---------------------------
or dissolve, consolidate with, or merge into or with, any other person or entity
without the prior written consent of Lender, which consent shall not be
unreasonably withheld. Any proposed business combination under this Section
shall not trigger a Lender option to participate save and except as set forth in
Section 2.2 herein.
Section 6.5. NO CHANGE IN NAME, LOCATION, ETC. Borrower will not
------------------------------------
change its name or identity, or change the location of its chief executive
office or its chief place of business or the place where Borrower keeps its
books and records concerning the Leases without the prior written consent of
Lender, which consent shall not be unreasonably withheld.
ARTICLE VII
-----------
EVENTS OF DEFAULT/REMEDIES OF LENDER
------------------------------------
Each of the following events or occurrences described in this Section shall
constitute an "Event of Default."
18
Section 7.1. NON-PAYMENT OF OBLIGATIONS. Borrower shall default in the
--------------------------
payment or prepayment when due of any principal of or interest under the Amended
and Restated Note, or Borrower or any other obligor shall default in the payment
when due of any other monetary obligation.
Section 7.2. BREACH OF WARRANTY. Any representation or warranty of
--------------------
Borrower made or deemed to be made hereunder or in the Amended and Restated
Note, the Deed(s) of Trust (as modified by the Modification of Deed of Trust),
any supplemental Deed of Trust, the Pledge Agreement(s) or any ORRI assignment
executed by Borrower and/or its subsidiaries or any other writing or certificate
furnished by or on behalf of Borrower or any of its subsidiaries for the
purposes of or in connection with this Amended RCA or any such other loan
document is false in any material respect.
Section 7.3. NON-PERFORMANCE OF CERTAIN COVENANTS AND OBLIGATIONS. A
-----------------------------------------------------
default in the due performance by Borrower or any of its subsidiaries of any
covenant or express Amended RCA contained in this Amended RCA, the Note, the
Deed(s) of Trust (as modified by the Modification of Deed of Trust), any
supplemental Deed(s) of Trust, the Pledge Agreement(s) or any ORRI assignment(s)
and continuation of such default beyond the applicable grace period expressly
granted, if any, with respect thereto.
Section 7.4. JUDGMENTS. Any injunction or administrative stay for a
---------
period of thirty (30) consecutive days against Borrower's operation of those
properties which are covered by Lender's liens and security interests and
represent ten percent (10%) or more of Lender's collateral as described in
Section 1.6 of this Amended RCA, or any judgment or order for the payment of
money in excess of $250,000.00 shall be rendered against Borrower or any of its
collateral subsidiaries hereunder and either (a) enforcement proceedings shall
have been commenced by any creditor upon such judgment or order, (b) there shall
be any period of ten (10) consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect, (c) the judgment has not been superseded by the filing of a bond
prescribed under the laws of the jurisdiction where the judgment originated or
where the judgment is sought to be enforced
Section 7.5. BANKRUPTCY, INSOLVENCY, ETC. Borrower shall (a) become
-----------------------------
insolvent, be declared bankrupt (involuntary or voluntary) or generally be
unable to pay, or admit in writing its inability or unwillingness to pay its
debts as they become due, (b) apply for, consent to, or acquiesce in, the
appointment of a trustee, receiver, sequestrator or other custodian for
Borrower, the Leases or any other property of any thereof, or make a general
assignment for the benefit of creditors, (c) in the absence of such application,
consent or acquiescence, permit or suffer to exist the appointment of a trustee,
receiver, sequestrator or other custodian for Borrower, any of its Subsidiaries
or for the Leases or any part thereof, and such trustee, receiver, sequestrator
or other custodian shall not be discharged within sixty (60) days or an action
commenced within such period seeking such discharge and prosecuted in good faith
to conclusion.
Section 7.6 REMEDIES OF LENDER. Upon an event of default described
--------------------
above in this Article, Lender shall, prior to exercising the remedies described
herein, provide Borrower with
19
written notice specifying in reasonable detail the event of default which has
occurred and stating that it intends to exercise remedies provided in this
Section. Borrower shall then have five (5) days in the case of a monetary
default, and twenty (20) days in the case of a non-monetary default, after
receipt of such notice to cure or cause to be cured such default and to provide
Lender with notice and reasonable documentation that it has cured or cause to be
cured such Event of Default. If Borrower does not provide such proper notice
and evidence, then Lender may immediately by notice to Borrower declare all or
any portion of the outstanding principal amount under the Note and other
obligations to be due and payable whereupon the full unpaid amount under the
Note and other obligations which shall be so declared due and payable shall be
and become immediately due and payable, without further notice, demand or
presentment. Lender is further authorized, after the passage of the particular
cure period, to perform or cause to be performed such act or take such action,
=
or pay such money that Lender deems necessary or desirable to cure such Event of
Default, and any expenses so incurred by Lender and any money so paid by the
Lender shall be a demand obligation owing by Borrower to the Lender and the
Lender, upon making such payment, shall be subrogated to all of the rights of
the Person receiving such payment. Each amount due and owing by Borrower to the
Lender pursuant to this Amended RCA or any other loan document shall bear
interest from the date of notice to Borrower of such expenditure or payment or
other occurrence which gives rise to such amount being owed to the Lender until
paid at the Note interest rate (as the same may change from time to time as a
variable rate) plus nine percent (9%) per annum, and all such amounts together
with such interest thereon shall become part of the obligations evidenced by the
Note and deemed secured by the Deed(s) of Trust and all other documents
described or contemplated by this Amended RCA as security for the obligations of
Borrower and its subsidiaries. Upon demand, after the occurrence of an event of
default, Borrower shall reimburse Lender for all reasonable amounts expended
(including the fees and out-of-pocket expenses of counsel) in connection
therewith, as a result of or in connection with its exercise of remedies,
together with interest on such amounts at the Note interest rate (as the same
may change from time to time) from the date incurred until reimbursed.
ARTICLE VIII
MISCELLANEOUS
-------------
Section 8.1. EXPENSES; INDEMNIFICATION. Borrower agrees to pay on
--------------------------
demand all costs and expenses incurred by Lender in connection with the
preparation, negotiation, and execution of this Amended RCA and any and all
amendments, modifications, and supplements hereto. Borrower agrees to pay and
to hold Lender harmless from and against all excise, sales, stamp, or other
taxes (but not Federal or State income taxes) and all fees payable in connection
with this Amended RCA or the transactions contemplated hereby, and agree to hold
Lender harmless from and against any and all present or future claims or
liabilities with respect to or resulting from Borrower performing or delaying in
performing their obligations under this Amended RCA.
Section 8.2. NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of
------------------------------
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power, or
20
privilege under this Amended RCA shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power, or privilege under this
Amended RCA preclude any other or further exercise thereof or the exercise of
any other right, power, or privilege. The rights and remedies provided for in
this Amended RCA are cumulative and not exclusive of any rights and remedies
provided by law.
Section 8.3. SUCCESSORS AND ASSIGNS. This Amended RCA shall be binding
----------------------
upon and inure to the benefit of Borrower, Anadarko Petrosearch, Guidance
Petrosearch, and Lender and their respective successors, and assigns, except
that Borrower, Anadarko Petrosearch and Guidance Petrosearch may not assign any
of its rights or obligations under this Amended RCA without the prior written
consent of Lender, which consent shall not be unreasonably withheld.
Section 8.4. AMENDMENT; ENTIRE AMENDED RCA. This Agreement together
-------------------------------
with all documents described or referenced in this Agreement embodies the entire
Amended RCA among the parties hereto and supersedes all prior Amended RCAs and
understandings, if any, relating to the subject matter hereof. The provisions
of this Amended RCA may be amended or waived only by an instrument in writing
signed by the parties hereto.
Section 8.5. NOTICES. Any notice, consent, or other communication
-------
required or permitted to be given under this Amended RCA to Lender or Borrower
must be in writing and delivered in person or mailed by registered or certified
mail, return receipt requested, postage prepaid, as follows:
To Lender: Fortuna Asset Management, LLC
0000 Xxxxxxx Xxxxxx
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxx Xxxx Xxxxxxx, Managing Member
FAX: (000) 000-0000
(if by mail) X.X. Xxx 0000
Xxxxxxx Xxxxx, XX 00000
With Copy To: Xxxxx X. Xxxxxxx, P.C.
Xxxxxxx & Xxxxxx, L.L.P.
3100 Phoenix Tower
0000 Xxxxxxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
FAX: (000) 000-0000
With Copy To: X. X. Xxxxxxxx
Northamerican Sureties, Ltd.
0000 Xxxx Xxxx, Xxxxx 000
Xxxx, Xxxxxx 00000
FAX: (000) 000-0000
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To Borrower, Anadarko,
or Guidance Petrosearch: Petrosearch Energy Corporation
000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: President
FAX: (000) 000-0000
Any such notice, consent, or other communication shall be deemed given when
delivered in person or, if mailed, when duly deposited in the mails.
SECTION 8.6. APPLICABLE LAW. THIS AMENDED RCA SHALL BE GOVERNED BY AND
--------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
Section 8.7. HEADINGS. The headings, captions, and arrangements used
--------
in this Amended RCA are for convenience only and shall not affect the
interpretation of this Amended RCA.
Section 8.8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
----------------------------------------------
representations and warranties made in this Amended RCA or in any certificate
delivered pursuant hereto shall survive the execution and delivery of this
Amended RCA, and no investigation by Lender shall affect the representations
and warranties or the right of Lender to rely upon them.
Section 8.9. COUNTERPARTS. This Amended RCA may be executed in any
------------
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instruments.
Section 8.10. SEVERABILITY. Any provision of this Amended RCA which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Amended RCA, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 8.11. USA PATRIOT ACT COMPLIANCE. This Amended RCA is expressly
---------------------------
subject to the provisions of the USA Patriot Act, PublicLaw107-56, signed into
law October 26, 2001, and the resulting amendments to the various and sundry
federal statutes resulting from its provisions.
Section 8.12. NO ORAL AMENDED RCAS. THIS AMENDED RCA TOGETHER WITH THE
----------------------
DOCUMENTS DESCRIBED OR REFERENCED HEREIN REPRESENT THE FINAL AMENDED RCA BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AMENDED RCAS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AMENDED RCAS BETWEEN THE PARTIES.
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Executed as of the Effective Date above written.
SIGNATURES APPEAR ON FOLLOWING PAGE
23
"Borrower"
PETROSEARCH ENERGY CORPORATION
By:
------------------------------------
Xxxxxxx X. Xxxx, President and CEO
"Anadarko Petrosearch"
ANADARKO PETROSEARCH, L.L.C.
By:
------------------------------------
Xxxxxxx X. Xxxx, Manager
"Guidance Petrosearch"
GUIDANCE PETROSEARCH, L.L.C.
By:
------------------------------------
Xxxxxxx X. Xxxx, Manager
"Lender"
FORTUNA ENERGY, L.P.
BY: FORTUNA ASSET MANAGEMENT, LLC
Its General Partner
By:
------------------------------------
Xxxxx Xxxx Xxxxxxx, Managing Member
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SCHEDULE OF ADVANCES
The following table outlines the expected schedule of advances
Available for Total Expected
Date Existing Balance New Draws Advances
-------------- ----------------- -------------- ---------------
Effective Date $ 825,000 $ 2,700,000 $ 3,525,000
1/1/06 $ 2,300,000 $ 5,825 ,000
4/1/06 $ 2,200,000 $ 8,025,000
7/1/06 $ 1,975,000 $ 10,000,000
SCHEDULE OF PROPERTIES IN EIGHT PROSPECT PACKAGE:
AKG Burleson, Xxxxxxxx County, Texas
ADG Xxxx, Colorado County, Texas
Xxxxxx Island, Tensas Parish, Louisiana
Xxxxxx, Xxxxx County, North Dakota
Dome Xxxxxxx - Orig., Yazoo County, Mississippi
Dome Xxxxxxx-Xxxx., Yazoo County, Mississippi
XX Xxxxxxx, Madison and Yazoo Counties, Mississippi
Xxxxxx, Madison and Yazoo Counties, Mississippi
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