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EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (this "Agreement") dated December 21,
1999 is entered into by and among XXXXXXXXX DRILLING COMPANY (the "Borrower"), a
Delaware corporation having its principal place of business and chief executive
office at 0000 Xxxxxx Xxxxxxx, Xxxxxx, Xxxxx 00000, with a mailing address of
X.X. Xxxxxx 0000, Xxxxxx, Xxxxx 00000; TRANSAMERICA EQUIPMENT FINANCIAL SERVICES
CORPORATION, a Delaware corporation (the "Lender"), having its principal office
at Riverway II, West Office Tower, 0000 Xxxx Xxxxxxx Xxxx, Xxxxxxxx, Xxxxxxxx
00000; and the undersigned GUARANTORS.
WHEREAS, Borrower has requested that Lender enter into certain
financing arrangements with Borrower pursuant to which Lender may make loans to
Borrower; and
WHEREAS, Lender is willing to make such loans and advances on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS.
All terms used herein which are defined in Article 1 or Article 9 of
the Uniform Commercial Code shall have the meanings given therein unless
otherwise defined in this Agreement. All references to the plural herein shall
also mean the singular and to the singular shall also mean the plural. All
references to Lender pursuant to the definitions set forth in the recitals
hereto, or to any other person herein, shall include their respective successors
and assigns. The words, "hereof," "herein," "hereunder," "this Agreement" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced. The word "including" when used in this
Agreement shall mean "including, without limitation." An Event of Default shall
exist or continue or be continuing until such Event of Default is waived in
accordance with Section 11.4 or is cured in a manner satisfactory to Lender if
such Event of Default is capable of being cured as determined by Lender. Any
accounting term used herein unless otherwise defined in this Agreement shall
have the meanings customarily given to such term in accordance with GAAP. For
purposes of this Agreement, the following terms shall have the respective
meanings given to them below:
1.1 "Affiliate" shall mean, with respect to a specified Person, a
partnership, corporation or any other person which directly or indirectly,
through one or more intermediaries, controls or is controlled by or is under
common control with such Person, and without limiting the generality of the
foregoing, includes (a) any Person which beneficially owns or holds five percent
(5%) or more of any class of voting securities of such Person or other equity
interests in such Person; (b) any Person of which such Person beneficially owns
or hold five percent (5%) or more of any class of voting securities or in which
such Person beneficially owns or holds five percent (5%) or more of the equity
interests; and (c) any director, officer or employee of such Person. For the
purposes of this definition, the term "control" (including with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting security or by contact or
otherwise.
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1.2 "Applicable Law" shall mean the laws of the State of Illinois (or
any other jurisdiction whose laws are mandatorily applicable notwithstanding the
parties' choice of Illinois law) or the laws of the United States of America,
whichever laws allow the greater interest, as such laws now exist or may be
changed or amended or come into effect in the future.
1.3 "Business Day" shall mean any day other than a Saturday, Sunday or
public holiday or the equivalent for banks in New York City.
1.4 "Collateral" shall have the meaning set forth in Section 4 hereof.
1.5 "EBITDA" shall mean, for any period, the Net Income of the Borrower
and the Guarantors on a combined basis determined before deduction for Interest
Charges and before deduction of income taxes, plus depreciation, depletion and
amortization expenses of Borrower and each Guarantor all as determined in
accordance with GAAP.
1.6 "Eligible New Equipment" shall mean Equipment owned by Borrower
acquired after the date hereof, which Equipment is in good order, repair,
running and marketable condition, and acceptable to Lender in all respects. In
general, Eligible New Equipment shall not include: (a) Equipment subject to a
security interest or lien in favor of any person other than Lender except those
permitted in this Agreement; (b) Equipment which is not located in the
continental United States of America; (c) Equipment which is not subject to the
first priority, valid and perfected security interest of Lender; (d) worn-out
obsolete, damaged or defective Equipment or Equipment not used or usable in the
ordinary course of Borrower's business as presently conducted. Any Equipment
which is not Eligible New Equipment shall nevertheless be part of the
Collateral.
1.7 "Environmental Laws" shall mean all foreign, Federal, State and
local laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, binding judicial or
administrative decision, injunction or agreements between Borrower and any
governmental authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, groundwater, drinking water, drinking water supply, surface land,
subsurface land, plant and animal life or any other nature resource), or to
human health or safety, (b) relating to the exposure to, or the use, storage
recycling, treatment, generation, manufacture, processing, distribution,
transportation, handling, labeling, production, release or disposal, or
threatened release, of Hazardous Materials, or (c) relating to all laws with
regard to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Materials. The term "Environmental Laws" includes any
common law or equitable doctrine that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Materials.
1.8 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment including all machinery, tools, rolling stock consisting of
trucks and trailers, drilling rigs (together with engines, hoists, derricks,
pumps, blowout preventers, pipe and any other equipment related thereto) and all
other equipment, together with all improvements, warranties, contracts, parts,
repairs, attachments, appurtenances, substitutions and replacements thereof and
thereto.
1.9 "Equipment Purchase Loans" shall mean the secured term loans
hereafter made by Lender to Borrower as provided for in Section 2.2, such loans
being from time to time referred to herein individually as an "Equipment
Purchase Loan."
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1.10 "Equipment Purchase Loans Limit" shall mean the lower of (i) the
aggregate amount of one hundred percent (100%) of the Hard Costs of all Eligible
New Equipment purchased by Borrower pursuant hereto, or (ii) Ten Million and
No/00 Dollars ($10,000,000).
1.11 "Equipment Purchase Notes" shall mean, collectively, the Equipment
Purchase Notes, in the form attached hereto as Exhibit A, which may at any time
hereafter be issued by Borrower to Lender pursuant to Section 2.2 hereof to
evidence an Equipment Purchase Loan, such notes being from time to time referred
to herein individually as an "Equipment Purchase Note."
1.12 "Event of Default" shall mean any event specified in Section 8 of
this Agreement.
1.13 "Existing Equipment Loan" shall mean the secured term loan made by
Lender to Borrower as provided in Section 2.1 hereof and evidenced by the
Existing Equipment Note.
1.14 "Existing Equipment Note" shall mean the promissory note, in the
form attached hereto as Exhibit B, issued by Borrower to Lender pursuant to
Section 2.1 hereof to evidence the Existing Equipment Loan.
1.15 "Fiscal Year" shall mean the Fiscal Year of Borrower and
Guarantors running from January 1 to December 31.
1.16 "Fixed Charges" shall mean the sum, without duplication, of (a)
Interest paid or payable during such Fisca1 Year, plus (b) all payments of
principal or other sums paid or payable during such Fiscal Year on Long Term
Debt (which shall not include payments of principal on any revolving credit
loans outstanding provided that the revolving loan arrangement is not in
default), plus (c) all debt discount and expense amortized or required to
amortized during such Fiscal Year, plus (d) all obligations of the Borrower or
Guarantor in respect of any interest rate or currency swap, rate cap or similar
transaction paid or required to be paid during such Fiscal Year, plus (e) the
maximum amount of al1 rents and other payments exclusive of property taxes,
property and liability insurance premiums, maintenance costs and residual
payments required by the terminal rental adjustment clause set forth in leases
of tractors and trailers paid or required to be paid by Borrower or any
Guarantor during such Fiscal Year under any lease of personal property in
respect of which Borrower or such Guarantor is obligated as a lessee or user,
plus (f) all dividends and other distributions paid or payable or otherwise
accumulating in cash during such period on any capital stock.
1.17 "Fixed Charge Coverage" shall mean the sum of (i) Borrower's and
Guarantors' EBITDA on a combined basis, plus (ii) the maximum amount of all
rents and other payments (exclusive of property taxes, property and liability
insurance premiums, maintenance costs, and residual payments required by the
terminal rental adjustment clause set forth in leases of tractors and trailers)
paid or required to personal property in respect of which the Borrower or
Guarantor is obligated as a lessee or user, divided by the sum of (a) Fixed
Charges; plus (b) unfinanced cost of Capital Expenditures paid or payable by
Borrower and Guarantors on a combined basis.
1.18 "GAAP" shall mean generally accepted accounting principles in the
United States of America, as in effect from time to time.
1.19 "Hard Costs" shall mean, with respect to the purchase by Borrower
of any item of Eligible New Equipment, the net cash amount actually paid to
acquire title to such item, net of all incentives, discounts and rebates, and
exclusive of freight, delivery charges, installation costs and charges, trade-in
allowances, software costs, charges and fees, warranty costs, taxes, insurance
and other incidental costs or expenses and all indirect costs or expenses of any
kind.
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1.20 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials, and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, radioactive materials, biological substances, and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified ahs hazardous or
toxic under any Environmental Law.
1.21 "LIBOR Rate" shall mean an interest rate per annum equal to the
London Interbank Offered Rate published in the Money Rates section of The Wall
Street Journal as the average of Interbank offered rates for U.S. dollar
deposits for ninety (90) days in the London market based upon quotations from
the majority of banks in the London interbank market effective as to contracts
entered into two days prior to publication by The Wall Street Journal. In the
event the LIBOR Rate as published in The Wall Street Journal ceases to exist or
The Wall Street Journal ceases publishing the LIBOR Rate, the holder hereof will
substitute a comparable index which is outside the control of the holder. In the
event of an error by The Wall Street Journal, the LIBOR Rate will be based upon
the LIBOR Rate as corrected.
1.22 "Loan Documents" shall mean, collectively, this Loan and Security
Agreement, all Notes contemplated hereunder and all other documents, agreements,
certificates, instruments and opinions executed and delivered in connection
herewith and therewith, as the same may be modified, extended, restated or
supplemented from time to time.
1.23 "Loan Parties" shall mean the Borrower and any Guarantor of all
the Obligations.
1.24 "Loan Term" shall mean the date seventy two (72) months after the
date of this Agreement as indicated on the first page of this Agreement, unless
earlier terminated in accordance with this Agreement or the other Loan
Documents.
1.25 "Material Adverse Change" shall mean, with respect to any Person,
a material adverse change in the business, results of operations, assets,
liabilities or condition (financial or otherwise) of such Person taken as a
whole.
1.26 "Material Adverse Effect" shall mean, with respect to any Person,
a material adverse effect on the business, results of operations, assets,
liabilities or condition (financial or otherwise) of such Person taken as a
whole.
1.27 "Maximum Credit" shall mean Sixty Million and No/00 Dollars
($60,000,000), including the amount defined as the Equipment Purchase Loans
Limit.
1.28 "Notes" shall mean the Existing Equipment Note together with the
Equipment Purchase Notes sometimes referred to herein collectively as the
"Note."
1.29 "Obligations" shall mean all indebtedness, obligations and
liabilities of the Borrower under the Note and under this Agreement, whether on
account of principal, interest, indemnities, fees (including, without
limitation, attorneys' fees, remarketing fees, origination fees, collection fees
and all other professionals' fees), costs, expenses, taxes or otherwise.
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1.30 "Person" shall mean any individual, sole proprietorship,
partnership, corporation, limited liability company, limited liability
partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.31 "Restructure" shall have the meaning set forth in Section 7.1
hereof.
1.32 "Tangible Net Worth" shall mean, (a) the amount of any capital
stock, paid in capital and similar equity accounts plus (or minus in the case of
deficit) the capital surplus and retained earnings of Borrower or Guarantor and
the amount of any foreign currency translation adjustment account shown as a
capital account of Borrower or Guarantor, less (b) the net book value of all
items of the following character which are included in the assets of Borrower or
Guarantor; (I) goodwill, including without limitation, the excess of cost over
book value of any asset, (ii) organization or experimental expenses, (iii)
unamortized debt discount and expense, (iv) patents, trademarks, trade names and
copyrights, (v) treasury stock, (vi) deferred taxes and deferred charges (vii)
franchises, licenses and permits (excluding amounts prepaid for vehicle licenses
and permits), and (viii) other Intangible Assets as determined in accordance
with GAAP.
1.33 "Total Liabilities" means all current and non-current liabilities
including, without limitation, subordinated indebtedness, in accordance with
GAAP.
SECTION 2. CREDIT FACILITIES
2.1 Existing Equipment Loan. Lender is making an Existing Equipment
Loan to Borrower in the original principal amount of Fifty Million and No/00
Dollars ($50,000,000.00). The Existing Equipment Loan is (a) evidenced by the
Existing Equipment Note, dated the date hereof, in such original principal
amount and duly executed and delivered by Borrower to Lender concurrently
herewith; (b) to be repaid, together with interest and other amounts, in
accordance with this Agreement, the promissory note, and the other Loan
Documents; and (c) secured by all of the Collateral. The Existing Equipment Loan
may be prepaid in full by Borrower at any time without premium or penalty,
subject only to the early termination fee provided for in Section 10.4 hereof.
The principal amount of the Existing Equipment Loan repaid may not be reborrowed
under this Agreement.
2.2 Equipment Purchase Loans.
(a) Subject to and upon the terms and conditions contained
herein, Lender shall make Equipment Purchase Loans to Borrower, from
time to time, at the request of Borrower of up to one hundred percent
(100%) of the Hard Costs of Eligible New Equipment to be purchased by
Borrower after the date hereof with the proceeds of such Equipment
Purchase Loans. Each Equipment Purchase Loan shall be in a minimum
amount equal to the lesser of (i) One Million Dollars ($1,000,000) (and
in integral multiples of $100,000 greater than such amount), or (ii)
the amount equal to the excess, if any, of (A) $10,000,000 over (B) the
aggregate unpaid principal amount of all outstanding Equipment Purchase
Loans. All of the proceeds of each Equipment Purchase Loan shall be
used solely for the payment of the purchase price of the Eligible New
Equipment specified in the notice required to be delivered to Lender
pursuant to Section 2.2(d)(i) below.
(b) The outstanding aggregate principal amount of the
Equipment Purchase Loans shall not exceed, at any time, the Equipment
Purchase Loan Limit. If at any time the outstanding aggregate principal
amount of all Equipment Purchase Loans shall exceed the Equipment
Purchase Loan Limit, Borrower shall, upon demand by Lender, which may
be made at any time and from time to time, repay to Lender the entire
amount of such excess. The principal amounts of Equipment Purchase
Loans repaid may not be reborrowed under this Agreement.
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(c) Each Equipment Purchase Loan shall be (i) evidenced by an
Equipment Purchase Note executed and delivered by Borrower to Lender
concurrently with each Equipment Purchase Loan, (ii) repaid, together
with interest and other amounts payable thereunder, in accordance with
the provision of the applicable Equipment Purchase Note, this Agreement
and the other Loan Documents, and (iii) secured by all of the
Collateral.
(d) In addition to the other conditions precedent set forth in
this Agreement, the making of each Equipment Purchase Loan shall be
subject to the satisfaction of each of the following additional
conditions precedent, as determined by Lender:
(i) Lender shall have received from Borrower not less
than ten (10) Business Days prior written notice of the
proposed Equipment Purchase Loan, which notice shall specify
the following: (A) the proposed date and amount of the
Equipment Purchase Loan, (B) a list and description of the
Eligible New Equipment (by model, make, manufacturer, serial
no. and/or such other identifying information as may be
appropriate, as determined by Lender), (C) the Hard Costs and
the total purchase price of the Eligible New Equipment to be
purchased with the proceeds of such Equipment Purchase Loan
(and the terms of payment of such purchase price), and (D)
such other information and documents as Lender may form time
to time require related thereto;
(ii) Lender shall have a valid and perfected first
security interest in and lien upon the Eligible New Equipment
to be purchased with the proceeds of the Equipment Purchase
Loan and the Eligible New Equipment shall be free and clear of
all other liens, security interests, claims or other
interests, and Borrower shall have delivered to Lender such
evidence thereof, as Lender may from time to time require;
(iii) The amount of the Equipment Purchase Loan shall
not exceed one hundred percent (100%) of the Hard Costs of the
Eligible New Equipment to be purchased by Borrower with the
proceeds of such Equipment Purchase Loan;
(iv) As of the date of such Equipment Purchase Loan
and after giving effect thereto, the aggregate principal
amount of all Equipment Purchase Loans outstanding at such
time shall not exceed $10,000,000;
(v) Lender shall have received copies, or upon
Lender's request, the originals, of all agreements, documents
and instruments relating to the sale of the Eligible New
Equipment to the Borrower, including any purchase orders,
invoices, bills of sale or similar documents;
(vi) Borrower shall duly authorize, execute and
deliver to Lender a single original Equipment Purchase Note,
as completed to reflect the date and amount of each such loan
and with the number of monthly installments of principal
payable thereunder and the amount of each such monthly
installment completed in accordance with Sections 2.2(e) and
2.2(f) below, as the case may be, which Note shall evidence a
valid and legally enforceable indebtedness of Borrower
unconditionally owing to Lender, without offset, defense or
counterclaim of any kind, nature of description whatsoever;
and
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(vii) No Event of Default, or act, condition or event
which with notice or passage of time or both would constitute
an Event of Default, shall exist or have occurred and be
continuing.
(e) The principal amount of each Equipment Purchase Loan
requested hereunder shall by payable (subject to earlier payment to the
extent required hereunder or under each Equipment Purchase Note) in,
consecutive monthly installments of principal, each in an amount
calculated as set forth below, provided, however, no principal amount
shall be due under the Existing Equipment Note or any Equipment
Purchase Note during the first twelve months after the date of this
Agreement. Interest and other amounts as provided herein and in the
Equipment Purchase Note shall accrue commencing on the first day of the
month after the date of the making of an Equipment Purchase Loan, with
the last installment of all amounts due under such Note due and payable
on the date of expiration of the Loan Term. The amount of each monthly
installment of principal in respect of each such Equipment Purchase
Loan (other than the last installment, which shall be due and payable
on the date of expiration of the Loan Term in an amount equal to the
entire unpaid balance of such Equipment Purchase Note) shall equal: (i)
the principal amount of the proposed Equipment Purchase Loan divided by
(ii) the number of months in the period commencing on the due date of
the first principal payment pursuant to an Equipment Purchase Note and
ending on date of expiration of the Loan Term.
SECTION 3. INTEREST, FEES AND PAYMENTS
3.1 Interest.
(a) Borrower shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations at the rate of 3.51%
above the LIBOR Rate as determined from time to time. All interest
accruing hereunder on and after the date of any Event of Default or
termination or non-renewal hereof shall be payable on demand.
(b) Interest shall be payable by Borrower to Lender monthly in
arrears not later than the first day of each calendar month and shall
be calculated on the basis of a three hundred sixty five (365) day year
and actual days elapsed. The interest rate on non-contingent
Obligations shall increase or decrease by an amount equal to each
increase or decrease in the LIBOR Rate effective on the first day of
the month after any change in such LIBOR Rate is announced based on the
LIBOR Rate in effect on the last day of the month in which any such
change occurs. In no event shall charges constituting interest payable
by Borrower to Lender exceed the maximum amount or the rate permitted
under any applicable law or regulation, and if any such part or
provision of this Agreement is in contravention of any such law or
regulation, such part or provision shall be deemed amended to conform
thereto.
3.2 Closing Fee. Borrower shall pay to Lender as a closing fee the
amount of $250,000, which shall be fully earned and payable by Borrower as of
the date hereof.
3.3 Payments. All Obligations shall be payable to Lender as to such
account or place as Lender may designate in writing from time to time. Lender
may apply payments received or collected from Borrower or for the account of
Borrower (including, the monetary proceeds of collection or of realization upon
any Collateral) to such of the Obligations, whether or not then due, in such
order and manner as Lender determines, provided, that, all such payments shall
be applied to Obligations which are then due and payable before being applied to
pay any Obligations which are not then due and payable (and unless and until an
Event of Default occurs and is continuing, such payments shall not be applied to
make prepayments of principal, except as requested by Borrower). Borrower shall
make all payments to Lender on the Obligations free and clear of, and without
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deduction or withholding for or on account of, any setoff, counterclaim,
defense, duties, taxes, levies, imposts, fees, deductions, withholding,
restriction or conditions of any kind. If after receipt of any payment of, or
proceeds of Collateral applied to the payment of, any of the Obligations, Lender
is required to surrender or return such payment or proceeds to any Person for
any reason, then the Obligations intended to be satisfied by such payment or
proceeds shall be reinstated and continue and this Agreement shall continue in
full force and effect as if such payment or proceeds has not been received by
Lender. Borrower shall be liable to pay to Lender, and does hereby indemnify and
hold Lender harmless for, the amount of any payments or proceeds surrendered or
returned. This Section shall remain effective notwithstanding any contrary
action with may be taken by Lender in reliance upon such payment or proceeds.
This Section shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
3.4 Use of Proceeds. Borrower shall use the proceeds of the Existing
Equipment Loan provided by Lender to Borrower hereunder only for: (a) payments
to the Persons listed in the disbursement direction letter furnished by Borrower
to Lender on or about the date hereof and (b) costs, expenses, and fees in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Loan Documents. Equipment Purchase Loans made to
Borrower pursuant to the provisions hereof shall be used by Borrower to acquire
Eligible New Equipment.
SECTION 4. CREATION OF SECURITY INTEREST; COLLATERAL.
4.1 To secure payment and performance of all Obligations, Borrower
hereby assigns and grants to the Lender a continuing general, first priority
lien on and security interest in, all the Borrower's right, title and interest
in and to the Equipment, together with all present and future additions, parts,
accessories, attachments, substitutions, repairs, improvements and replacements
thereof or thereto, and any and all proceeds thereof, including, without
limitation, proceeds of insurance (the "Collateral"). The Borrower's accounts
receivable are expressly excluded from the Collateral hereunder except any
account which is proceeds from the sale or other disposition of Equipment.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions Precedent to Initial Advance. Each of the following is a
condition precedent to Lender making the initial advance:
(a) Lender shall have received, in form and substance
satisfactory to Lender, all releases, terminations and such other
documents as Lender may request to evidence and effectuate the
termination by any existing lenders or other creditors to Borrower of
their respective financing arrangements with Borrower and the
termination and release by it or them, as the case may be, of any
interest in and to the Collateral, duly authorized, executed and
delivered by it or each of them, including (i) UCC termination
statements for all UCC financing statements previously filed by it or
any of them or their predecessors, as secured party and Borrower, as
debtor; and (ii) appropriate certificate of title lien releases
acceptable to Lender;
(b) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first
priority security interests in and liens upon the Collateral and any
other property which is intended to be security for the Obligations or
the liability of any obligor in respect thereof;
(c) All requisite corporate action and proceedings in
connection with this Agreement and the other Loan Documents shall be
satisfactory in form and substance to Lender, and Lender shall have
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received all information and copies of all documents, including,
without limitation, records of requisite corporate action and
proceedings which Lender may have requested in connection therewith,
such documents where requested by Lender or its counsel to be certified
by appropriate corporate officers or governmental authorities;
(d) No Material Adverse Change shall have occurred in the
assets, business or financial condition of Borrower since the date of
October 20, 1999 and no change or event shall have occurred which would
impair the ability of Borrower or any obligor to perform its
obligations hereunder or under any of the other Loan Documents to which
it is a party or of Lender to enforce the Obligations or realize upon
the Collateral;
(e) Lender shall have completed a review of any records and
such other information with respect to the Collateral and business of
Borrower as Lender may require (including, without limitation, such
supporting documentation as may be necessary or appropriate, and other
documents and information that will enable Lender to accurately
identify and verify the Collateral), the results of which each case
shall be satisfactory to Lender;
(f) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgements and
other agreements from third persons which Lender may deem necessary or
desirable in order to permit, protect and perfect its security
interests in and liens upon the Collateral or to effectuate the
provisions or purposes of this Agreement and the other Loan Documents;
(g) Borrower shall have current liabilities currently paid and
a minimum of Ten Million and No/00 Dollars ($10,000,000) available in
any combination of cash and availability under a line of credit other
than the credit contemplated hereunder;
(h) Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Loan
Documents, in form and substance satisfactory to Lender, and
certificates of insurance policies and/or endorsements naming Lender as
loss payee;
(i) Lender shall have received, in form and substance
satisfactory to Lender any subordination and intercreditor agreements,
deemed necessary by Lender with other third parties providing for inter
alia, the subordination of such parties' relative rights with respect
to the Collateral prior to indefeasible payment and satisfaction in
full of the Obligations;
(j) Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel(s) to Borrower
and Guarantors with respect to the Loan Documents and the security
interests and liens of Lender with respect to the Collateral and such
other matters as Lender may request; and
(k) The Loan Documents and all instruments and documents
contemplated or required thereunder shall have been duly executed and
delivered to Lender, in form and substance satisfactory to Lender.
5.2 Conditions Precedent to All Advances. Each of the following is an
additional condition precedent to Lender making advances to Borrower hereunder,
including the initial advances future advances:
(a) All representations and warranties contained herein and in
the other Loan Documents shall be true and correct in all material
respects with the same effect as though such representations and
warranties had been made on and as of the date of the making of each
such advance and after giving
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effect thereto, except to the extent that such representations and
warranties relate solely to an earlier date (in which case such
representations and warranties shall have been true and accurate as of
the earlier date);
(b) No law, regulation, order, judgment or decree of any
governmental authority shall exist, and no action, suit, investigation,
litigation or proceeding shall be pending or threatened in any court or
before any arbitrator or governmental authority, which (i) purports to
enjoin, prohibit, restrain or otherwise affect (A) the making of the
loans or advances, or (B) the consummation of the transactions
contemplated pursuant to the terms hereof or the other Loan Documents;
or (ii) has or could reasonably be expected to have a Material Adverse
Effect on the assets, business or financial condition of Borrower or
any Guarantor or would materially impair the ability of Borrower or any
Guarantor to perform its obligations hereunder or under any of the
other Loan Documents or of Lender to enforce any Obligations or realize
upon any of the Collateral; and
(c) No Event of Default and no act, condition or event which,
with notice or passage of time or both, would constitute an Event of
Default, shall exist or have occurred and be continuing on and as of
the date of the making of such advance and after giving effect thereto.
SECTION 6. BORROWER'S AND GUARANTORS' REPRESENTATIONS AND
WARRANTIES. The Borrower and Guarantors hereby jointly and severally represent
and warrant to Lender the following (which shall survive the execution and
delivery of this Agreement), the truth and accuracy of which are a continuing
condition of the making of advances hereunder by Lender to Borrower:
6.1 Good Standing; Qualified to do Business. Borrower is a corporation,
is duly organized, validly existing and in good standing under the laws of its
State of incorporation or formation and in good standing in all states or other
jurisdictions where the nature and extent of the business transacted by it or
the ownership of assets makes such qualification necessary and where the failure
to so qualify would have a Material Adverse Effect on Borrower's or any
Guarantor's financial condition, results of operation or business or the rights
of Lender hereunder or under any of the other Loan Documents or the rights of
Lender in or to any of the Collateral. Borrower and each Guarantor has the power
and authority to own its properties and assets and to transact the businesses in
which it is presently, or proposes to be, engaged.
6.2 Due Execution. The execution, delivery and performance by the
Borrower and each Guarantor of each of the Loan Documents to which it is a party
are within the powers of the Borrower and each Guarantor, do not contravene the
organizational documents, if any, of the Borrower or each Guarantor, and do not
(i) materially violate any law or regulation, or any order or decree of any
court or governmental authority, (ii) conflict with or result in a breach of, or
constitute a default under, any material indenture, mortgage or deed of trust or
any material lease, agreement or other instrument binding on the Borrower or
Guarantor or any of their respective properties, or (iii) require the consent,
authorization by or approval of or notice to or filing or registration with any
governmental authority or other Person. This Agreement is, and each of the other
Loan Documents to which the Borrower or Guarantor is or will be a party, when
delivered hereunder or thereunder, will be, the legal, valid and binding
obligation of the Borrower or Guarantor enforceable against the Borrower or
Guarantor in accordance with its terms.
6.3 Solvency; No Liens. The Borrower and each Guarantor is solvent, is
paying its debts as they become due and has sufficient capital to conduct its
business; the fair salable value of the Borrower's and each Guarantor's assets
is in excess of the total amount of its liabilities (including contingent
liabilities) as they become absolute and matured; the security interests granted
herein constitute and shall at all times constitute the first and only liens on
the Collateral; and the Borrower is, or will be at the time additional
Collateral is acquired by it, the
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absolute owner of the Collateral with full right to pledge, sell, consign,
transfer and create a security interest therein, free and clear of any and all
claims or liens in favor of any other Person. For purposes of this provision,
the term "Collateral" includes those items of Equipment listed on the attached
Exhibit D with certificates of title currently reflecting Xxxxxxxxx Energy, Inc.
as owner. Borrower and Guarantors represent that Borrower is or should be the
true owner of such equipment and Borrower and Guarantors will do everything
necessary, or will provide reasonable assistance to Lender, in whatever manner
necessary in order to obtain new certificates of title for the equipment listed
on the attached Exhibit D showing the owner of such equipment as Borrower and
the Lender as first lienholder.
6.4 No Judgments, Litigation. No judgments are outstanding against the
Borrower or any Guarantor nor is there now pending or, to the best of the
Borrower's or Guarantor's knowledge after diligent inquiry, threatened any
litigation, contested claim, or governmental proceeding by or against the
Borrower or any Guarantor except judgments and pending or threatened litigation,
contested claims and governmental proceedings which would not, in the aggregate,
have a Material Adverse Effect on the Borrower or any Guarantor on a combined
basis.
6.5 No Defaults. Neither the Borrower nor any Guarantor is in default
under any material contract, lease, or commitment to which it is a party or by
which it is bound. Neither the Borrower nor any Guarantor knows of any dispute
regarding any contract, lease, or commitment which could have a Material Adverse
Effect on the Borrower or any Guarantor on a combined basis.
6.6 Collateral Locations. On the date hereof, the Collateral is located
at the locations specified in Schedule A hereto.
6.7 No Events of Default. No Event of Default has occurred and is
continuing nor has any event occurred which, with the giving of notice or the
passage of time, or both, would constitute an Event of Default.
6.8 No Limitation on Lender's Rights. Except as permitted herein, none
of the Collateral is subject to contractual obligations that may restrict or
inhibit the Lender's rights or abilities to sell or dispose of the Collateral or
any part thereof after the occurrence of an Event of Default.
6.9 Perfection and Priority of Security Interest. This Agreement
creates a valid and, upon completion of all required filings of financing
statements or other applicable lien notices, perfected and, first priority and
exclusive security interest in the Collateral, securing the payment of all the
Obligations.
6.10 Model and Serial Numbers. Schedule A hereto sets forth the model
number and serial number of each item of Equipment listed on Schedule A on the
date of this Agreement. Schedule A is true and correct in all material respects.
6.11 Environmental Compliance.
(a) Neither Borrower nor any Guarantor, or any subsidiary, has
generated, used, stored, treated, transported, manufactured, handled,
produced or disposed of any Hazardous Materials, on or off its premises
(whether or not owned by it) in any manner in material violation of any
applicable Environmental Law or any license, permit, certificate,
approval or similar authorization thereunder the operations of Borrower
and each Guarantor complies in all material respects with all
Environmental Laws and all licenses, permits, certificates, approvals
and similar authorizations thereunder.
(b) There has been no investigation, proceeding, complaint,
order, directive, claim, citation or notice by any governmental agency
or any other Person nor is any pending or to the best of Borrower's
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and each Guarantor's knowledge threatened, with respect to (i) any
non-compliance with or violation of the requirements of any
Environmental Law by Borrower or any Guarantor (or any subsidiary),
(ii) the release, spill or discharge threatened or actual, of any
Hazardous Material or (iii) the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any
Hazardous Materials or any other environmental, health or safety
matter, which, as to each of clauses (i), (ii) or (iii) to the best of
Borrower's or any Guarantor's knowledge, materially affects Borrower or
any Guarantor or their respective businesses, operation, or assets or
any properties at which Borrower or any Guarantor has developed,
transported, stored or disposed of any Hazardous Materials.
(c) Neither Borrower nor any Guarantor has any material
liability (contingent or otherwise) in connection with a release, spill
or discharge, threatened or actual, of any hazardous Materials or the
generation, use, storage, treatment, transportation, manufacture,
handling, production or disposal of any Hazardous Materials.
(d) Borrower and each Guarantor has all material licenses,
permits, certificates, approvals or similar authorizations required to
be obtained or filed in connection with the operation of Borrower and
each Guarantor under any Environmental Law and all of such licenses,
permits, certificates, approvals or similar authorizations are valid
and in full force and effect.
SECTION 7. COVENANTS OF THE BORROWER.
7.1 Existence. Subject to the potential restructuring described in the
November 24, 1999 memorandum drafted by PricewaterhouseCoopers LLP, a copy of
which is attached hereto as Exhibit C (the "Restructure"), the Borrower and each
Guarantor will maintain its existence, its current yearly accounting cycle, and
shall maintain in full force and effect all licenses, bonds, franchises, leases,
trademarks, patents, contracts and other rights necessary or desirable to the
profitable conduct of its business, shall continue in, and limit its operations
to, the same general lines of business as those presently conducted by it and
shall comply with all applicable laws and regulations of any federal, state or
local governmental authority, except for such laws and regulations the
violations of which would not, in the aggregate, have a Material Adverse Effect
on the Borrower or Guarantor. Xxxxxxxxx Drilling Programs, Inc. ("Drilling
Programs") and Xxxxxxxxx Onshore Drilling Company ("Onshore Drilling"), both
Texas corporations are Affiliates of the Borrower and Guarantors. Neither
Drilling Programs or Onshore Drilling has any material assets. Both entities
will be merged into either the Borrower or another Affiliate of the Borrower
pursuant to the Restructure. If either Drilling Programs or Onshore Drilling are
not merged and/or dissolved or otherwise maintain legal existence, neither
Borrower nor any Guarantor will transfer any assets to Drilling Programs or
Onshore Drilling without prior written notice to Lender.
7.2 Notice to the Lender. As soon as possible, and in any event within
five (5) Business Days after the Borrower learns of the following, the Borrower
will give written notice to the Lender of (i) any proceeding instituted or
threatened to be instituted by or against the Borrower or any Guarantor in any
federal, state, local or foreign court or before any commission or other
regulatory body (federal, state, local or foreign), (ii) the occurrence of any
Material Adverse Change with respect to the Borrower or any Guarantor on a
combined basis and (iii) the occurrence of any Event of Default or event or
condition which, with notice or lapse of time or both, would constitute an Event
of Default, together with a statement of the action which the Borrower has taken
or proposes to take with respect thereto.
7.3 Maintenance of Records and Lender's Right to Inspect. The Borrower
will maintain books and records pertaining to the Collateral in such detail,
form and scope as the Lender shall require in its commercially reasonable
judgment. The Borrower agrees that the Lender or its agents may enter upon the
Borrower's premises or any location where the Collateral may be found at any
time and from time to time during normal business
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hours, and at any time on and after the occurrence of an Event of Default, for
the purpose of inspecting the Collateral and any and all records pertaining
thereto.
7.4 Insurance.
a) The Borrower will maintain insurance on the Collateral under such
policies of insurance, with such insurance companies, in such amounts and
covering such risks as are at all times reasonably satisfactory to the Lender.
All such policies shall be made payable to the Lender, in case of loss, under a
standard non-contributory "lender" or "secured party" clause and are to contain
such other provisions as the Lender may reasonably require to protect the
Lender's interests in the Collateral and to any payments to be made under such
policies. True copies of all original insurance policies are to be delivered to
the Lender, premium prepaid, with the loss payable endorsement in the Lender's
favor, and shall provide for not less than thirty (30) days prior written notice
to the Lender, of any alteration or cancellation of coverage. If the Borrower
fails to maintain such insurance, the Lender may arrange for (at the Borrower's
expense and without any responsibility on the Lender's part for) obtaining the
insurance. Unless the Lender shall otherwise agree with the Borrower in writing,
the Lender shall have the sole right, in the name of the Lender or the Borrower
and Borrower hereby appoints Lender as Borrower's attorney-in-fact to file
claims under any insurance policies, to receive and give acquittance for any
payments that may be payable thereunder, and to execute any endorsements,
receipts, releases, assignments, reassignments or other documents that may be
necessary to effect the collection, compromise or settlement of any claims under
any such insurance policies.
b) Notwithstanding anything in this section 7.4(a) to the contrary,
Borrower may self-insure with respect to fire, theft, comprehensive or collision
risks on the Equipment consisting of trucks and trailers provided that none of
the following (a "Violation") shall occur: (1) any Event of Default (as such
term is defined in the Agreement) shall have occurred under this Agreement or
any other agreement or instrument executed between Lender and Borrower, or (2)
Borrower shall fail to obtain and maintain (during the term and any renewal term
of the Agreement) public liability insurance in form and amount and with
companies satisfactory to Lender. The occurrence of any Violation shall render
immediately null and void the provisions of this section 7.4(b) and Borrower
agrees that it will, immediately thereupon, provide insurance in accordance with
the terms and conditions of section 7.4(a) above. Borrower agrees that at such
time, if ever, that the total loss or damage to Borrower's trucks and trailers
(collectively "Vehicles") exceeds $250,000 (the "Threshold Amount") it will
within 10 Business Days of the occurrence of that event so notify the Lender in
writing. The value of the Vehicles included in the Threshold Amount shall be
computed based on the value of such Vehicles prior to the loss or damage of such
Vehicles. Borrower further agrees to notify Lender of any loss or damage to any
of its Vehicles following reaching the Threshold Amount in each instance where
the damage or loss exceeds $10,000 per vehicle. Such notice shall be give 10
Business Days after Borrower either knew of should have known, through the
exercise of reasonable care and diligence, of such loss or damage. If any such
Vehicle is lost, stolen, or is, in the opinion of Lender, damaged beyond repair,
then Borrower shall either (1) promptly pay to Lender the full amount that would
be payable under a policy of insurance (covering such Vehicle for its full
insurance value), or (2) replace such lost or damaged Vehicle with like
equipment of equal or greater value. If, after incurring damage, a Vehicle is,
in the opinion of Lender, still repairable, Borrower shall repair, at its own
expense and to the satisfaction of Lender, all damage to such Vehicle within 60
days from the date the damage is incurred.
7.5 Taxes. The Borrower will pay, when due, all taxes, assessments,
claims and other charges (herein "taxes") lawfully levied or assessed against
the Borrower or the Collateral other than taxes that are being diligently
contested in good faith by the Borrower by appropriate proceedings promptly
instituted and for which an adequate reserve is being maintained by the Borrower
in accordance with GAAP. If any taxes remain unpaid after the date fixed for the
payment thereof, or if any lien shall be claimed therefor, then, without notice
to the
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Borrower, but on the Borrower's behalf, the Lender may pay such taxes, and the
amount thereof shall be included in the Obligations.
7.6 Borrower to Defend Collateral Against Claims; Fees on Collateral.
The Borrower will defend the Collateral against all claims and demands of all
Persons at any time claiming the same or any interest therein. The Borrower will
not permit any notice creating or otherwise relating to liens on the Collateral
or any portion thereof to exist or be on file in any public office. The Borrower
shall promptly pay, when due, all transportation, storage and warehousing
charges and license fees, registration fees, assessments, charges, permit fees
and taxes (municipal, state and federal) which may now or hereafter be imposed
upon the ownership, leasing, renting, possession, sale or use of the Collateral,
excluding however, all taxes on or measured by the Lender's income.
7.7 No Change of Location, Structure or Identity. The Borrower will not
(i) change the location of its chief executive office; or (ii) move or permit
the movement of any Collateral from the States specified in Schedule A hereto,
except that the Borrower may change its chief executive office and keep
Collateral at other locations within the United States provided that the
Borrower has delivered to the Lender (A) prior written notice thereof and (B)
duly executed financing statements and other agreements and instruments (all in
form and substance reasonably satisfactory to the Lender) necessary or, in the
opinion of the Lender, desirable to perfect and maintain in favor of the Lender
a first priority security interest in the Collateral. Notwithstanding anything
to the contrary in the immediately preceding sentence, the Borrower may keep any
Collateral consisting of motor vehicles or rolling stock at any location in the
United States provided that the Lender's security interest in any such
Collateral is conspicuously marked on the certificate of title thereof.
7.8 Use and Maintenance of Collateral; Licenses. The Collateral shall
be operated by competent, qualified personnel in connection with the Borrower's
business purposes, in a careful and proper manner, for the purpose for which the
Collateral was designed and in accordance with applicable operating
instructions, laws and government regulations, and shall not permanently
discontinue use of the Equipment. The Borrower shall use every reasonable
precaution to prevent loss or damage to the Collateral from fire and other
hazards. Borrower shall operate, maintain, service and repair the Equipment, and
maintain all records and other materials relating thereto in accordance and
consistent with all maintenance and operating manuals or service agreements, as
applicable, and in conformance with industry standards and manufacturer's
recommendations, or in any event within reasonable standards for comparable
equipment, so as to cause each item of Equipment to remain in good mechanical
condition and running order, and in at least the same condition as on the date
of this Agreement, reasonable wear and tear excepted. The Collateral shall not
be used or operated for personal, family or household purposes. The Borrower
shall procure and maintain in effect all orders, licenses, certificates,
permits, approvals and consents required by federal, state or local laws or by
any governmental body, agency or authority in connection with the delivery,
installation, use and operation of the Collateral. Borrower will replace any
parts of the Equipment which become worn out, lost destroyed, damaged beyond
repair or otherwise permanently rendered unfit for use, by new or reconditioned
parts which are free and clear of all liens, encumbrances or rights of others
and have a value, utility and remaining useful life at lease equal to the parts
replaced. Borrower shall not make any material alterations to the Equipment
without the prior written consent of Lender.
7.9 Further Assurances. The Borrower will, promptly upon request by the
Lender, execute and deliver or use its best efforts to obtain any document
required by the Lender (including mortgagee waivers, landlord disclaimers, or
subordination agreements with respect to the Obligations and the Collateral),
give any notices, execute and file any financing statements, mortgages or other
documents (all in form and substance satisfactory to the Lender), xxxx any
chattel paper, deliver any chattel paper or instruments to the Lender, and take
any other actions that are necessary or, in the opinion of the Lender, desirable
to perfect or continue the perfection and the first priority of the Lender's
security interest in the Collateral, to protect the Collateral against the
rights, claims, or interests of any Persons, or to effect the purposes of this
Agreement. The Borrower hereby authorizes the
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Lender to file one or more financing or continuation statements, and amendments
thereto, relating to all or any part of the Collateral without the signature of
the Borrower where permitted by law. A carbon, photographic or other
reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law. To the extent required under this Agreement, the
Borrower will pay all costs incurred in connection with any of the foregoing.
7.10 No Disposition of Collateral. The Borrower will not in any way
hypothecate or create or permit to exist any lien, security interest, charge or
encumbrance on or other interest in any of the Collateral, except for the lien
and security interest granted hereby, and the Borrower will not sell, transfer,
assign, pledge, collaterally assign, exchange or otherwise dispose of any of the
Collateral. Notwithstanding the foregoing, during each twelve month period
following the effective date of this Agreement, Borrower may sell, transfer,
exchange or otherwise dispose of items of Collateral (excluding drilling rigs)
with a cumulative value not exceeding Five Hundred Thousand Dollars
($500,000.00). In the event the Collateral, or any part thereof, is sold,
transferred, assigned, exchanged, or otherwise disposed of in violation of these
provisions, the security interest of the Lender shall continue in such
Collateral or part thereof notwithstanding such sale, transfer, assignment,
exchange or other disposition, and the Borrower will hold the proceeds thereof
in a separate account for the benefit of the Lender. Following such a sale, the
Borrower will transfer such proceeds to the Lender in kind within five (5)
Business Days by wire transfer to such bank account of Lender, as Lender may, in
its discretion, designate to Borrower for such purpose.
7.11 No Limitation on Lender's Rights. The Borrower will not enter into
any contractual obligations which may restrict or inhibit the Lender's rights or
ability to sell or otherwise dispose of the Collateral or any part thereof.
7.12 Protection of Collateral. The Lender shall have the right at any
time to make any payments and do any other acts the Lender may deem necessary to
protect its security interests in the Collateral, including, without limitation,
the rights to satisfy, purchase, contest or compromise any encumbrance, charge
or lien which, in the reasonable judgment of the Lender, appears to be prior to
or superior to the security interests granted hereunder, and appear in and
defend any action or proceeding purporting to affect its security interests in,
or the value of, any of the Collateral. The Borrower hereby agrees to reimburse
the Lender for all payments made and expenses incurred under this Agreement
including the reasonable fees, expenses and disbursements of attorneys and
paralegals (including the allocated costs of in-house counsel) acting for the
Lender, including any of the foregoing payments under, or acts taken to protect
its security interests in, any of the Collateral, which amounts shall be secured
under this Agreement, and agrees it shall be bound by any payment made or act
taken by the Lender hereunder absent the Lender's gross negligence or willful
misconduct. The Lender shall have no obligation to make any of the foregoing
payments or perform any of the foregoing acts.
7.13 Delivery of Items. The Borrower will promptly (but in no event
later than ten Business Days) after its receipt thereof, deliver to the Lender
any documents or certificates of title issued with respect to any property
included in the Collateral, and any promissory notes, letters of credit or
instruments related to or otherwise in connection with any property included in
the Collateral, which in any such case come into the possession of the Borrower,
or shall cause the issuer thereof to deliver any of the same directly to the
Lender, in each case with any necessary endorsements in favor of the Lender.
7.14 Merger, Consolidation and other Fundamental Changes. Without the
prior written consent of the Lender, not to be unreasonably withheld, and
subject to the potential restructure described in Exhibit C hereto, neither the
Borrower nor any Guarantor shall merge or consolidate with or into any other
Person, or amend or modify its name, capital structure, status or existence, or
sell or otherwise dispose of all or substantially all of its assets. Upon
Restructure, Borrower and Guarantor agree to the execution of formal assumption
documents and
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other requirements of Lender as follows: (a) assumption agreement; (b) guaranty
agreements from the limited liability companies; (c) amendments to the Notes to
correct the Borrower's name; (d) amendments to the Guaranties correcting the
entity names and ratifying the Guaranties; (e) appropriate amendments to UCC-1
financing statements and/or new UCC-1 financing statements with correct entity
names; (f) confirmation that no assets have been transferred from Guarantors to
non-guarantors, and (g) a supplemental opinion from Borrower's counsel as to
merger, due authorization of assumption and related amendment documents and
continuing enforceability of Loan Documents (subject to the assumptions and
exceptions contained in the opinion of Borrower's counsel delivered in
connection with this Agreement), all of the foregoing in form and substance
satisfactory to Lender. Notwithstanding the foregoing and provided both
immediately before and after giving effect to the merger or consolidation, no
Event of Default or an event which with the passage of time or notice or both
would be an Event of Default has occurred and is continuing, (i) any Guarantor,
with notice to Lender, may merge with Borrower and/or another Guarantor, and
(ii) the Borrower or any Guarantor, with notice to Lender, may merge or
consolidate with any other Person as long as the Borrower or any Guarantor is
the surviving entity.
7.15 Indebtedness. Borrower and each Guarantor shall not incur, create,
assume, become or be liable in any manner with respect to, or permit to exist
any debt obligations, including capitalized lease obligations, excluding,
however, unsecured trade debt; a line of credit secured solely by the Borrower's
or Guarantors' accounts receivable, which Lender acknowledges may also be
unconditionally guaranteed by Xxxxxxxxx Energy, Inc.; and the Obligations
hereunder.
7.16 Loans, Investments, Guarantees, Etc. Borrower and each Guarantor
shall not directly or indirectly, make any loans or advance money or property to
any Person, or invest in (by capital contribution, dividend or otherwise) or
purchase or repurchase the capital stock or indebtedness or all or a substantial
part of the assets or property of any Person, or guarantee, assume endorse, or
otherwise become responsible for (directly or indirectly) the Indebtedness,
performance, obligations or dividends of any Person or form or acquire any
subsidiaries or agree to do any of the foregoing, except, however, as otherwise
provided in this Agreement or in the normal course of business.
7.17 Dividends and Redemptions. Borrower and each Guarantor shall not
make, pay, declare or authorize any dividend, payment or other distribution in
respect of any class of its capital stock or any dividend, payment or
distribution in connection with the redemption, purchase, retirement or other
acquisition, directly or indirectly, of any shares of its capital stock other
than such dividends, payments or other distributions to the extent payable
solely in shares of the capital stock of Borrower or Guarantors, except, the
redemption of 300,000 shares of common stock of Borrower paid to Padre
Industries and callable by Padre Industries at $5.50 per share.
7.18 Financial Statements. Until the payment and satisfaction in full
of all Obligations, the Borrower shall deliver to the Lender the following
financial information:
(a) Annual Financial Statements. As soon as available, but not
later than 120 days after the end of each Fiscal Year of the Borrower
and its consolidated Affiliates, the consolidated balance sheet, income
statement and statements of cash flows and shareholders equity for the
Borrower and its consolidated Affiliates (the "Financial Statements")
for such year, reported on by independent certified public accountants
without an adverse qualification and in accordance with GAAP; and
(b) Quarterly Financial Statements. As soon as available, but
not later than 60 days after the end of each of the first three fiscal
quarters in any Fiscal Year of the Borrower and its consolidated
Affiliates, the Financial Statements for such fiscal quarter, together
with a certification duly executed by
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a responsible officer of the Borrower that such Financial Statements
have been prepared in accordance with GAAP and are fairly stated in all
material respects (subject to normal year-end audit adjustments).
(c) Monthly Financial Statements. As soon as available, but
not later than 30 days after the end of each month, the Financial
Statements for such month, together with a certification duly executed
by a responsible officer of the Borrower that such Financial Statements
have been prepared in accordance with GAAP and are fairly stated in all
material respects (subject to normal year-end audit adjustments).
7.19 Financial Covenants. Borrower and each Guarantor shall furnish,
within 120 days of the end of each Fiscal Year, a Compliance Certificate
acceptable to Lender certified by Borrower's and Guarantor's chief financial
officer, as to the compliance in accordance with its most recent SEC filing,
with the following financial covenants:
(a) Borrower and Guarantors, on a combined basis, shall
maintain Fixed Charge Coverage of not less than 1.20 to 1, determined
on a quarterly basis. The measurement period shall commence with
January 1, 2000 and shall be on a cumulative basis until December 31,
2000. Thereafter, the covenant test shall be measured on a rolling two
(2) historical quarter basis.
(b) Borrower's and Guarantors' combined minimum Tangible Net
Worth at the end of each Fiscal Year shall be not less than Eighty
Million Dollars ($80,000,000).
(c) Borrower's and Guarantors' combined ratio of Total
Liabilities to Tangible Net Worth at the end of each Fiscal Year shall
be not more than 3.0 to 1.
SECTION 8. EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an Event of Default hereunder:
(a) failure of the Borrower to pay any principal or interest
payment hereunder within five (5) Business Days of their respective due
dates, whether at stated maturity, by acceleration, or otherwise;
(b) failure of Borrower or any Guarantor to pay any other
payment Obligations due hereunder or to perform, comply with or observe
any term, covenant or agreement applicable to it contained in any of
the Loan Documents within fifteen (15) Business Days of its receipt of
written notice or demand from Lender;
(c) any representation or warranty made or deemed made by the
Borrower or any Guarantor hereunder, under or in connection with the
Financial Statements, under any other Loan Document or under any other
agreement between the Borrower and any Guarantor and the Lender, or
under any document, instrument or certificate executed by the Borrower
or any Guarantor in favor of the Lender, shall prove to have been false
or incorrect in any material respect when made;
(d) any material provision of any Loan Document to which the
Borrower or any Guarantor is a party shall for any reason cease to be
valid and binding on such Borrower or Guarantor, or the Borrower or any
Guarantor shall so assert in writing;
(e) dissolution, liquidation, winding up or cessation of any
of the Loan Parties' business other than by way of merger or
consolidation permitted under this Agreement, or the failure of any of
the Loan Parties to pay its debts as they mature; or the admission in
writing by any of the Loan Parties of its
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inability to pay its debts as they mature; or the calling of a meeting
of any of the Loan Parties' creditors for purposes of compromising any
of the Loan Parties' debts;
(f) the commencement by or against any of the Loan Parties of
any bankruptcy, insolvency, arrangement, reorganization, receivership
or similar proceedings under any federal or state law and, in the case
of any such involuntary proceeding, such proceeding remains undismissed
or unstayed for forty-five (45) days following the commencement
thereof, or any action by any of the Loan Parties is taken authorizing
any such proceedings;
(g) the Loan Parties, on a combined basis, suffer or sustain a
Material Adverse Change;
(h) an assignment for the benefit of creditors is made by any
of the Loan Parties, whether voluntary or involuntary, or any of the
Loan Parties consents to the appointment of a trustee or receiver, or
if a trustee or receiver is appointed for any of the Loan Parties or
for a substantial part of its property;
(i) any of the Loan Parties shall (A) default in the payment
of principal of or interest on any indebtedness for borrowed money in
an aggregate principal amount exceeding $250,000.00 beyond the period
of grace, if any, provided in the instrument or agreement under which
such indebtedness was created; or (B) default in the observance or
performance of any other agreement or condition relating to any such
indebtedness or contained in any instrument or agreement relating
thereto, or any other event shall occur or condition exist, the effect
of which default or other event or condition is to cause, or to permit
the holder or holders of such indebtedness to cause, with the giving of
notice if required, such indebtedness to become due prior to its stated
maturity;
(j) any material Federal tax lien is filed of record against
any of the Loan Parties and is not bonded or discharged within five
Business Days;
(k) any judgment in excess of $250,000.00 shall be rendered
against any of the Loan Parties which shall not be stayed, vacated,
bonded or discharged within sixty days;
(l) any material covenant, agreement or obligation of any of
the Loan Parties contained in or evidenced by any of the Loan Documents
shall cease to be enforceable, or shall be determined to be
unenforceable, in accordance with its terms; or any liens granted on
any material item or, collectively, items of the Collateral shall be
determined to be void, voidable or invalid, are subordinated or are not
given the priority contemplated by this Agreement;
(m) this Agreement shall for any reason (other than pursuant
to the terms hereof) cease to create a valid and perfected first
priority lien on the Collateral purported to be covered hereby; or
(n) there is a change in the ownership of any equity interests
of the Borrower; or the ownership of any equity interests of the Loan
Parties becomes subject to any contractual, judicial or statutory lien,
charge, security interest or encumbrance.
SECTION 9. REMEDIES. If any Event of Default shall have occurred and be
continuing:
(a) the Lender may, without prejudice to any of its other
rights under any Loan Document or applicable law, declare all
Obligations to be immediately due and payable (except with respect to
any Event of Default set forth in Section 8(f) hereof, in which case
all Obligations shall automatically become
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immediately due and payable without necessity of any declaration)
without presentment, representation, demand of payment or protest,
which are hereby expressly waived;
(b) the Lender may take possession of the Collateral and, for
that purpose may enter, with the aid and assistance of any person or
persons, any premises where the Collateral or any part hereof is, or
may be placed, and remove the same;
(c) the obligation of the Lender, if any, to give additional
(or to continue) financial accommodations of any kind to the Borrower
shall immediately terminate;
(d) the Lender may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein (or in any
Loan Document) or otherwise available to it, all the rights and
remedies of a secured party under the Uniform Commercial Code (the
"Code") whether or not the Code applies to the affected Collateral and
also may (i) require the Borrower to, and the Borrower hereby agrees
that it will at its expense and upon request of the Lender forthwith,
assemble all or part of the Collateral as directed by the Lender and
make it available to the Lender at a place to be designated by the
Lender that is reasonably convenient to both parties and (ii) without
notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the
Lender's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Lender may deem commercially
reasonable. The Borrower agrees that, to the extent notice of sale
shall be required by law, at least ten days' notice to the Borrower of
the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification.
The Lender shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Lender may adjourn
any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned;
(e) all cash proceeds received by the Lender in respect of any
sale of, collection from, or other realization upon all or any part of
the Collateral may, in the discretion of the Lender, be held by the
Lender as collateral for, or then or at any time thereafter applied in
whole or in part by the Lender against, all or any part of the
Obligations in such order as the Lender shall elect. Any surplus of
such cash or cash proceeds held by the Lender and remaining after the
full and final payment of all the Obligations shall be paid over to the
Borrower or to such other Person to which the Lender may be required
under applicable law, or directed by a court of competent jurisdiction,
to make payment of such surplus.
SECTION 10. TERM
10.1 Expiration Date. This Agreement and the other Loan Documents shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the date of expiration of
the Loan Term.
10.2 Obligations Due. Upon the effective date of termination, either by
expiration of the term, acceleration, or otherwise, Borrower shall pay Lender,
in full, all outstanding and unpaid Obligations and shall furnish cash
collateral to Lender in such amounts as Lender determines are reasonably
necessary to secure Lender form loss, cost, damage or expense, including
attorneys' fees and legal expenses, in connection with any contingent
Obligations, including checks or other payments provisionally credited to the
Obligations and/or as to which Lender has not yet received final and
indefeasible payment. Such payments in respect of the Obligations and cash
collateral shall be remitted by wire transfer to such bank account of Lender, as
Lender may, in its discretion, designate to Borrower for such purpose. Interest
shall be due until and include the next Business Day,
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if the amounts so paid by Borrower to the bank account designated by Lender are
received in such bank account later than 12:00 noon Central Standard Time.
10.3 No Relief from Duties. No termination of this Agreement or the
other Loan Documents shall relieve or discharge Borrower of its respective
duties, obligations and covenants under this Agreement or the other Loan
Documents until all Obligations have been fully and finally discharged and paid,
and Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Loan Documents and applicable law,
shall remain in effect until all such Obligations have been fully and finally
discharged and paid.
10.4 Early Payment. If for any reason, voluntarily or involuntarily,
this Agreement is terminated prior to the end of six years from the date of this
Agreement, or the principal amounts owing hereunder are otherwise paid before
they are due, then in view of the impracticality and extreme difficulty of
ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of Lender's lost profits as a result thereof, Borrower
agrees to pay to Lender, upon the effective date of such termination or early
payment, an early payment fee in the amount set forth below if such termination
or early payment is effective in the period indicated:
Amount Period
------ ------
(i) 0.5% of first $40,000,000 of Entire term
principal amount owing
(ii) 5.0% of principal balance above From the date hereof to and including
$40,000,000 eighteenth (18th) month hereafter
(iii) 2.0% of the principal balance From the nineteenth (19th) month from
above $40,000,000 the date hereof to and including the
thirtieth (30th) month hereafter
(iv) 1.0% of the principal balance From the thirty first (31st) month
above $40,000,000 from the date hereof to the end of
the Loan Term.
Such early payment fee shall be presumed to be the amount of damages sustained
by Lender as a result of such early termination or early payment and Borrower
agrees that it is reasonable under the circumstances currently existing.
SECTION 11. MISCELLANEOUS PROVISIONS.
11.1 Notices. Except as otherwise provided herein, all notices,
approvals, consents, correspondence or other communications required or desired
to be given hereunder shall be given in writing and shall be delivered by
overnight courier, hand delivery or certified or registered mail, postage
prepaid, if to the Lender, then to 0000 Xxxxxxxx Xxxxx, Xxxxx 0000 Xxxx, Xxxxxx,
Xxxxx 00000, Attention: Division Operations Manager, with a copy to the Lender
at Riverway II, West Office Tower, 0000 Xxxx Xxxxxxx Xxxx, Xxxxxxxx, Xxxxxxxx
00000, Attention: Legal Department or such other address as shall be designated
by the Lender to the Borrower. All such notices and correspondence shall be
effective when received.
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11.2 Headings. The headings in this Agreement are for purposes of
reference only and shall not affect the meaning or construction of any provision
of this Agreement.
11.3 Assignments and Participation. The Borrower shall not have the
right to assign the Notes or this Agreement or any interest therein, provided,
however, this provision shall not apply to any merger or consolidation
authorized in Paragraph 7.14 of this Agreement. The Lender may assign its rights
and delegate its obligations under the Notes or this Agreement, or may resell
(through syndication, assignment, participation or placements), provided Lender
agrees with Borrower that any such resale would be made in material compliance
with applicable state and federal securities laws, an interest in the Notes,
this Agreement, the Loan Documents and/or the Collateral. Borrower agrees to
confirm in writing receipt of any such notice of assignment, syndication,
participation or placements, as may be reasonably requested by Lender or any
such assignee or participant. Borrower hereby agrees that any assignee or
participant shall have, to the extent of such assignment or participation, the
same rights and benefits as it would have if it were the Lender hereunder,
except as otherwise provided by the terms of such assignment or participation.
Borrower will provide reasonable assistance to Lender, at Lender's expense, in
whatever manner necessary in order to permit Lender to complete any resale,
syndication, assignment, participation or placement of the transaction
contemplated by this Agreement, including the execution and delivery of such
other documents, instruments, notices, opinions, certificates and
acknowledgements, as reasonably may be required by Lender or any Assignee.
11.4 Amendments, Waivers and Consents. Any amendment or waiver of any
provision of this Agreement and any other Loan Document and any consent to any
departure by the Borrower from any provision of this Agreement or other Loan
Document shall be effective only by a writing signed by the Lender and shall
bind and benefit the Borrower and the Lender and their respective successors and
assigns, subject, in the case of the Borrower, to the first sentence of Section
11.3.
11.5 Interpretation of Agreement. Time is of the essence in each
provision of this Agreement of which time is an element. To the extent a term or
provision of this Agreement conflicts with the Note and is not dealt with herein
with more specificity, this Agreement shall control with respect to the subject
matter of such term or provision. Acceptance of or acquiescence in a course of
performance rendered under this Agreement shall not be relevant in determining
the meaning of this Agreement even though the accepting or acquiescing party had
knowledge of the nature of the performance and opportunity for objection.
11.6 Continuing Security Interest. This Agreement shall create a
continuing security interest in the Collateral and shall (i) remain in full
force and effect until the indefeasible payment in full of the Obligations, (ii)
be binding upon the Borrower and its successors and assigns and (iii) inure,
together with the rights and remedies of the Lender hereunder, to the benefit of
the Lender and its successors, transferees and assigns.
11.7 Reinstatement. To the extent permitted by law, this Agreement and
the rights and powers granted to the Lender hereunder and under the Loan
Documents shall continue to be effective or be reinstated if at any time any
amount received by the Lender in respect of the Obligations is rescinded or must
otherwise be restored or returned by the Lender upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Borrower or upon the
appointment of any receiver, intervenor, conservator, trustee or similar
official for the Borrower or any substantial part of its assets, or otherwise,
all as though such payments had not been made.
11.8 Survival of Provisions. All representations, warranties and
covenants of the Borrower contained herein shall survive the execution and
delivery of this Agreement, and shall terminate only upon the full and final
payment and performance by the Borrower of the Obligations secured hereby.
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11.9 Indemnification. The Borrower agrees to indemnify and hold
harmless the Lender and its directors, officers, agents, employees and counsel
from and against any and all costs, expenses, claims, or liability incurred by
the Lender or such Person hereunder and under any other Loan Document or in
connection herewith or therewith, unless such claim or liability shall be due to
willful misconduct or gross negligence on the part of the Lender or such Person.
11.10 GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
11.11 Delays; Partial Exercise of Remedies. No delay or omission of the
Lender to exercise any right or remedy hereunder, whether before or after the
happening of any Event of Default, shall impair any such right or shall operate
as a waiver thereof or as a waiver of any such Event of Default. No single or
partial exercise by the Lender of any right or remedy shall preclude any other
or further exercise thereof, or preclude any other right or remedy.
11.12 WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER IRREVOCABLY
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
11.13 Entire Agreement. The Borrower and the Lender agree that this
Agreement and the other Loan Documents related thereto are the complete and
exclusive statement and agreement between the parties with respect to the
subject matter hereof, superseding all proposals and prior agreements, oral or
written, and all other communications between the parties with respect to the
subject matter hereof.
IN WITNESS WHEREOF, the undersigned Borrower and each Guarantor has
caused this Agreement to be duly executed and delivered by its proper and duly
authorized officer as of the date first set forth above.
LENDER: BORROWER:
TRANSAMERICA EQUIPMENT XXXXXXXXX DRILLING COMPANY
FINANCIAL SERVICES CORPORATION
By: /s/ XXXXX XXXXXXX By: /s/ XXXXXX X. XXXXXXX
---------------------------------- ----------------------------------
Printed Name: Xxxxx Xxxxxxx Printed Name: Xxxxxx X. Xxxxxxx
------------------------ ------------------------
Title: Senior Vice President Title: CEO
------------------------------- -------------------------------
GUARANTORS:
XXXXXXXXX ENERGY, INC.
By: /s/ XXXXXX X. XXXXXXX
----------------------------------
Printed Name: Xxxxxx X. Xxxxxxx
------------------------
Title: CEO
-------------------------------
LONE STAR MUD, INC.
By: /s/ XXXXXX X. XXXXXXX
----------------------------------
Printed Name: Xxxxxx X. Xxxxxxx
------------------------
Title: CEO
-------------------------------
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