EXHIBIT 10.1
LOAN AGREEMENT
AMONG
GOTHIC PRODUCTION CORPORATION, AS BORROWER,
AND GOTHIC ENERGY CORPORATION,
AS GUARANTOR
AND
BANK ONE, TEXAS, N.A.
AND THE INSTITUTIONS NAMED HEREIN
AS BANKS
AND
BANK ONE, TEXAS, N.A.,
AS AGENT
APRIL 27, 1998
TABLE OF CONTENTS
Page No.
1. Definitions................................................ 1
2. Commitments of the Bank.................................... 11
(a) Terms of Revolving Commitment....................... 11
(b) Procedure for Borrowing............................. 11
(c) Letters of Credit................................... 12
(d) Procedure for Obtaining Letters of Credit........... 13
(e) Voluntary Reduction of Revolving Commitment......... 14
(f) Mandatory Commitment Reductions..................... 14
(g) Several Obligations................................. 14
3. Notes Evidencing Loans..................................... 14
(a) Form of Revolving Notes............................. 15
(b) Issuance of Additional Notes........................ 15
(c) Interest Rate....................................... 15
(d) Payment of Interest................................. 15
(e) Payment of Principal................................ 15
(f) Payment to Banks.................................... 15
(g) Sharing of Payments, Etc............................ 16
(h) Non-Receipt of Funds by the Agent................... 16
(i) Capital Adequacy.................................... 16
4. Interest Rates............................................. 17
(a) Options............................................. 17
(b) Interest Rate Determination......................... 18
(c) Conversion Option................................... 18
(d) Recoupment.......................................... 18
5. Special Provisions Relating to Loans....................... 19
(a) Unavailability of Funds or Inadequacy of Pricing.... 19
(b) Reserve Requirements................................ 19
(c) Taxes............................................... 19
(d) Change in Laws...................................... 20
(e) Option to Fund...................................... 20
(f) Indemnity........................................... 21
(g) Payments Not at End of Interest Period.............. 21
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6. Collateral Security........................................ 21
7. Borrowing Base............................................. 22
(a) Initial Borrowing Base.............................. 22
(b) Subsequent Determinations of Borrowing Base......... 22
8. Fees....................................................... 24
(a) Unused Commitment Fee............................... 24
(b) Borrowing Base Increase Fee......................... 24
(c) The Letter of Credit Fee............................ 24
(d) Agency Fees......................................... 24
9. Prepayments................................................ 24
(a) Voluntary Prepayments............................... 24
(b) Mandatory Prepayment For Borrowing Base Deficiency.. 25
10. Representations and Warranties............................. 25
(a) Creation and Existence.............................. 25
(b) Power and Authority................................. 25
(c) Binding Obligations................................. 25
(d) No Legal Bar or Resultant Lien...................... 25
(e) No Consent.......................................... 26
(f) Financial Condition................................. 26
(g) Liabilities......................................... 26
(h) Litigation.......................................... 26
(i) Taxes; Governmental Charges......................... 26
(j) Titles, Etc......................................... 27
(k) Defaults............................................ 27
(l) Casualties; Taking of Properties.................... 27
(m) Use of Proceeds; Margin Stock....................... 27
(n) Location of Business and Offices.................... 28
(o) Compliance with the Law............................. 28
(p) No Material Misstatements........................... 28
(q) Not A Utility....................................... 28
(r) ERISA............................................... 28
(s) Public Utility Holding Company Act.................. 28
(t) Subsidiaries........................................ 29
(u) Environmental Matters............................... 29
(v) Liens............................................... 29
11. Conditions of Lending...................................... 29
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12. Affirmative Covenants...................................... 32
(a) Financial Statements and Reports.................... 32
(b) Certificates of Compliance.......................... 33
(c) Accountants' Certificate............................ 34
(d) Taxes and Other Liens............................... 34
(e) Compliance with Laws................................ 34
(f) Further Assurances.................................. 34
(g) Performance of Obligations.......................... 34
(h) Insurance........................................... 35
(i) Accounts and Records................................ 35
(j) Right of Inspection................................. 36
(k) Notice of Certain Events............................ 36
(l) ERISA Information and Compliance.................... 36
(m) Environmental Reports and Notices................... 37
(n) Compliance and Maintenance.......................... 37
(o) Operation of Properties............................. 37
(p) Compliance with Leases and Other Instruments........ 38
(q) Certain Additional Assurances Regarding Maintenance
and Operations of Properties........................ 38
(r) Sale of Certain Assets/Prepayment of Proceeds....... 38
(s) Title Matters....................................... 39
(t) Curative Matters.................................... 39
(u) Change of Principal Place of Business............... 39
(v) Cash Collateral Accounts............................ 39
(w) Escrow of Interest Payments......................... 40
(x) Year 2000 Compatibility............................. 40
13. Negative Covenants......................................... 40
(a) Negative Pledge..................................... 41
(b) Current Ratio....................................... 41
(c) Minimum Interest Coverage Ratio..................... 41
(e) Debts, Guaranties and Other Obligations............. 41
(f) Dividends........................................... 42
(g) Loans and Advances.................................. 42
(h) Sale or Discount of Receivables..................... 43
(i) Nature of Business.................................. 43
(j) Transactions with Affiliates........................ 43
(k) Hedging Transactions................................ 43
(l) Investments......................................... 43
(m) Amendment to Articles of Incorporation or Bylaws.... 44
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(n) Proceeds of Production.............................. 44
(o) Issuance of Preferred Stock........................ 44
(p) Amendments, etc. of Indentures...................... 44
(q) Amendments to and Redemption of Preferred Stock or
Other Equity........................................ 44
(r) Payment or Pre-Payment of Other Indebtedness........ 44
14. Events of Default.......................................... 45
15. The Agent and the Banks.................................... 47
(a) Appointment and Authorization....................... 47
(b) Note Holders........................................ 48
(c) Consultation with Counsel........................... 48
(d) Documents........................................... 48
(e) Resignation or Removal of Agent..................... 48
(f) Responsibility of Agent............................. 49
(g) Independent Investigation........................... 50
(h) Indemnification..................................... 51
(i) Benefit of Section 15............................... 51
(j) Pro Rata Treatment.................................. 51
(k) Assumption as to Payments........................... 52
(l) Other Financings.................................... 52
(m) Interests of Banks.................................. 52
(n) Investments......................................... 53
16. Exercise of Rights......................................... 53
17. Notices.................................................... 53
18. Expenses................................................... 53
19. Indemnity.................................................. 54
20. Governing Law.............................................. 55
21. Invalid Provisions......................................... 55
22. Maximum Interest Rate...................................... 55
23. Amendments................................................. 56
24. Multiple Counterparts...................................... 56
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25. Conflict................................................... 56
26. Survival................................................... 56
27. Parties Bound.............................................. 56
28. Assignments and Participations............................. 56
29. Choice of Forum: Consent to Service of Process and
Jurisdiction............................................... 58
30. Waiver of Jury Trial....................................... 58
31. Other Agreements........................................... 59
32. Financial Terms............................................ 59
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EXHIBITS
--------
Exhibit "A" - Notice of Borrowing
Exhibit "B" - Revolving Note
Exhibit "C" - Unconditional Guaranty
Exhibit "D" - Certificate of Compliance
Exhibit "E" - Form of Assignment and Acceptance Agreement
SCHEDULES
---------
Schedule 1 - Liens
Schedule 2 - Financial Condition
Schedule 3 - Liabilities
Schedule 4 - Litigation
Schedule 5 - Subsidiaries
Schedule 6 - Environmental Matters
Schedule 7 - Title Matters
Schedule 8 - Curative Matters
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LOAN AGREEMENT
THIS LOAN AGREEMENT (hereinafter referred to as the "Agreement") executed
as of the 27th day of April, 1998, by and between GOTHIC PRODUCTION CORPORATION,
an Oklahoma corporation (hereinafter referred to as "Borrower") and GOTHIC
ENERGY CORPORATION, an Oklahoma corporation (hereinafter referred to as
"Guarantor") and BANK ONE, TEXAS, N.A., a national banking association ("Bank
One"), and each of the financial institutions which is a party hereto (as
evidenced by the signature pages to this Agreement) or which may from time to
time become a party hereto pursuant to the provisions of Section 28 hereof or
any successor or assignee thereof (hereinafter collectively referred to as
"Banks", and individually, "Bank") and Bank One, as Agent.
W I T N E S S E T H:
WHEREAS, Borrower has requested the Banks make available to it a revolving
loan facility in amounts of up to $25,000,000.00; and
WHEREAS, the Banks have agreed to make such facility available to Borrower.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereby agree to restate the Loan Agreement as
follows:
1. DEFINITIONS. When used herein the terms "Agent", "Agreement ",
"Bank", "Banks", "Bank One", "Borrower" and "Guarantor" shall have the meanings
indicated above. When used herein the following terms shall have the following
meanings:
(a) Advance or Advances - A loan or loans hereunder.
(b) Adjusted Consolidated Net Tangible Assets - The term "Adjusted
Consolidated Net Tangible Assets" is used herein as defined in the Senior
Secured Notes Indenture.
(c) Affiliate - Any Person which, directly or indirectly, controls, is
controlled by or is under common control with the relevant Person. For the
purposes of this definition, "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with"), as
used with respect to any Person, shall mean a member of the board of
directors, a partner or an officer of such Person, or any other Person with
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the
ownership (of record, as trustee, or by proxy) of voting shares,
partnership interests or voting rights, through a management contract or
otherwise. Any Person owning or controlling directly or indirectly ten
percent or more of the voting shares, partnership interests or voting
rights, or other equity interest of another Person shall be deemed to be an
Affiliate of such Person.
(d) Assignment and Acceptance - A document substantially in the form
of Exhibit "E" hereto.
(e) Borrowing Base - The value assigned by the Banks from time to time
to the Oil and Gas Properties pursuant to Section 7 hereof. Until the next
determination of the Borrowing Base pursuant to Section 7(b) hereof, the
Borrowing Base shall be $25,000,000.
(f) Borrowing Date - The date elected by Borrower pursuant to Section
2(b) hereof for an Advance on the Revolving Loan.
(g) Business Day - The normal banking hours during any day (other than
Saturdays or Sundays) that banks are legally open for business in Dallas,
Texas.
(h) Change of Control - A Change of Control shall occur if any Person
(or syndicate or group of Persons which is deemed a Person for the purposes
of Sections 13(d) or 14(d)(ii) of the Securities Act of 1934, as amended)
shall acquire, directly or indirectly an amount of issued and outstanding
voting stock of Borrower or Guarantor (including the acquisition of
newly-issued stock) sufficient to change the control of such Borrower or
Guarantor by causing the election or change of a majority of the directors
of such Borrower or Guarantor.
(i) Change of Management - A Change of Management shall occur if
Xxxxxxx Xxxxx ever ceases to act as President of Borrower or Guarantor and
a replacement for such officer, acceptable to Agent, is not appointed
within thirty (30) days thereafter.
(j) Chesapeake Transactions - The transactions between Guarantor and
Chesapeake Energy Corporation "(Chesapeake") pursuant to which Guarantor
agreed to (i) execute a participation agreement granting a 50% interest in
substantially all of Guarantor's undeveloped acreage pursuant to a Sale and
Participation Agreement dated as of Xxxxx 00, 0000, (xx) sell for
$20,000,000 (subject to closing adjustments) a 50% interest in Guarantor's
oil and gas properties located in the Arkoma basin pursuant to an Oil and
Gas Purchase Agreement dated as of January 1, 1998, and (iii) sell 50,000
shares of Series B Preferred Stock, having a liquidation value of
$50,000,000 and a ten-year warrant to purchase, at an exercise price of
$0.01 per share, 2,439,246 shares of Guarantor's common stock pursuant to
as Securities Purchase Agreement dated as of March 31, 1998.
(k) Commitment - The Revolving Commitment.
(l) Current Assets - The total of the Guarantor's consolidated current
assets determined in accordance with GAAP, plus, as of any date, the
current unused availability on the Revolving Commitment.
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(m) Current Liabilities - The total of Guarantor's consolidated
current obligations as determined in accordance with GAAP, excluding
therefrom current maturities due on the Revolving Loan.
(n) Defaulting Bank - The term "Defaulting Bank" is used herein as
defined in Section 3(g) hereof.
(o) Discount Notes -The Notes issued by Guarantor pursuant to the
Discount Notes Indenture.
(p) Discount Notes Indenture - That certain Indenture dated as of
April 27, 1998 by and among Guarantor, as Issuer, and Bank of New York, as
Trustee, pursuant to which the Discount Notes were to be issued.
(q) EBITDA - Earnings for any period before provision for interest
expense, income taxes, depreciation, depletion and amortization for such
period, as determined in accordance with GAAP.
(r) Effective Date - The date of this Agreement.
(s) Eligible Assignee - Any of (i) a Bank or any Affiliate of a Bank;
(ii) a commercial bank organized under the laws of the United States, or
any state thereof, and having a combined capital and surplus of at least
$100,000,000; (iii) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development, or a political subdivision of any such country, and having a
combined capital and surplus of at least $100,000,000.00, provided that
such bank is acting through a branch or agency located in the United
States; (iv) a Person that is primarily engaged in the business of
commercial banking and that (A) is a subsidiary of a Bank, (B) a subsidiary
of a Person of which a Bank is a subsidiary, or (C) a Person of which a
Bank is a subsidiary; (v) any other entity (other than a natural person)
which is an "accredited investor" (as defined in Regulation D under the
Securities Act) which extends credit or buys loans as one of its
businesses, including, but not limited to, insurance companies, mutual
funds, investments funds and lease financing companies; and (vi) with
respect to any Bank that is a fund that invests in loans, any other fund
that invests in loans and is managed by the same investment advisor of such
Bank or by an Affiliate of such investment advisor (and treating all such
funds so managed as a single Eligible Assignee); provided, however, that no
Affiliate of Borrower or Guarantor shall be an Eligible Assignee.
(t) Environmental Laws - The Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Super Fund
Amendments and Reauthorization Act of 1986, 42 U.S.C.A. (S)9601, et seq.,
the Resource Conservation and
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Recovery Act, as amended by the Hazardous Solid Waste Amendment of 1984, 42
U.S.C.A. (S)6901, et seq., the Clean Air Act, 42 U.S.C.A. (S)1251, et seq.,
the Toxic Substances Control Act, 15 U.S.C.A. (S)2601, et seq., The Oil
Pollution Act of 1990, 33 X.X.X. (X)0000, et seq., and all other laws,
statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions,
rules, regulations, order and restrictions of any federal, state, county,
municipal and other governments, departments, commissions, boards,
agencies, courts, authorities, officials and officers, domestic or foreign,
relating to air pollution, water pollution, noise control and/or the
handling, discharge, disposal or recovery of on-site or off-site asbestos
or "hazardous substances" as defined by 42 U.S.C. (S)9601, et seq., as
amended, as each of the foregoing may be amended from time to time.
(u) Environmental Liability - Any claim, demand, obligation, cause of
action, order, violation, damage, injury, judgment, penalty or fine, cost
of enforcement, cost of remedial action or any other costs or expense
whatsoever, including reasonable attorneys' fees and disbursements,
resulting from the violation or alleged violation of any Environmental Law
or the imposition of any Environmental Lien (as hereinafter defined) which
could reasonably be expected to individually or in the aggregate have a
Material Adverse Effect.
(v) Environmental Lien - A Lien in favor of any court, governmental
agency or instrumentality or any other Person (i) for any Environmental
Liability or (ii) for damages arising from or cost incurred by such court
or governmental agency or instrumentality or other person in response to a
release or threatened release of asbestos or "hazardous substance" into the
environment, the imposition of which Lien could reasonably be expected to
have a Material Adverse Effect.
(w) ERISA - The Employee Retirement Income Security Act of 1974, as
amended.
(x) Eurodollar Business Day - A Business Day on which dealings in U.S.
Dollar deposits are carried on in the London interbank market.
(y) Eurodollar Interest Period - With respect to any Eurodollar Loan
(i) initially, the period commencing on the date such Eurodollar Loan is
made and ending one (1), two (2), three (3) or six (6) months thereafter as
selected by the Borrower pursuant to Section 4(a)(ii), and (ii) thereafter,
each period commencing on the day following the last day of the next
preceding Interest Period applicable to such Eurodollar Loan and ending one
(1), two (2), three (3) or six (6) months thereafter, as selected by the
Borrower pursuant to Section 4(a)(ii); provided, however, that (i) if any
Eurodollar Interest Period would otherwise expire on a day which is not a
Eurodollar Business Day, such Interest Period shall expire on the next
succeeding Eurodollar Business Day unless the result of such extension
would be to
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extend such Interest Period into the next calendar month, in which case
such Interest Period shall end on the immediately preceding Eurodollar
Business Day, (ii) if any Eurodollar Interest Period begins on the last
Eurodollar Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end of such
Interest Period) such Interest Period shall end on the last Eurodollar
Business Day of a calendar month, and (iii) any Eurodollar Interest Period
which would otherwise expire after the Maturity Date shall end on such
Maturity Date.
(z) Eurodollar Loan - Any loan during any period which bears interest
at the Eurodollar Rate, or which would bear interest at such rate if the
Maximum Rate ceiling was not in effect at a particular time.
(aa) Eurodollar Margin - The Eurodollar Margin on the Revolving Loan
in effect from day to day shall be:
(i) two percent (2%) per annum whenever the Total Outstandings
are greater than 75% of the Borrowing Base in effect at the time in
question;
(ii) one and three-quarters percent (1.75%) per annum whenever
the Total Outstandings are greater than 50%, but less than or equal to
75%, of the Borrowing Base in effect at the time in question; or
(iii) one and one-half percent (1.50%) per annum whenever the
Total Outstandings are 50% or less of the Borrowing Base in effect at
the time in question; and
(bb) Eurodollar Rate - With respect to any Eurodollar Interest Period,
the offered rate for U.S. Dollar deposits of not less than $1,000,000 as of
11:00 A.M. City of London, England time two (2) Eurodollar Business Days
prior to the first date of each Eurodollar Interest Period as shown on the
display designated as "British Bankers Assoc. Interest Settlement Rates"
on the Telerate system ("Telerate"), Page 3750 or Page 3740, or such other
page or pages as may replace such pages on Telerate for the purpose of
displaying such rate. Provided, however, that if such rate is not
available on Telerate then such offered rate shall be otherwise
independently obtained by Agent from an alternate, substantially similar
independent source available to Agent or shall be calculated by Agent by
substantially similar methodology as that theretofore used to determine
such offered rate in Telerate.
(cc) Financial Statements - Balance sheets, income statements,
statements of cash flow and appropriate footnotes and schedules, prepared
in accordance with GAAP.
(dd) GAAP - Generally accepted accounting principles, consistently
applied.
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(ee) Indentures - The Senior Secured Notes Indenture and the Discount
Notes Indenture.
(ff) Interest Payment Date - The earlier of (i) the last day of each
Interest Period or (ii) the last day of each calendar month.
(gg) Interest Period - Any Prime Rate Interest Period, or Eurodollar
Interest Period.
(hh) Letters of Credit - The term "Letters of Credit" is used herein
as defined in Section 2(c) hereof.
(ii) Lien - Any mortgage, deed of trust, pledge, security interest,
assignment, encumbrance or lien (statutory or otherwise) of every kind and
character.
(jj) Loan - The Revolving Loan.
(kk) Loan Documents - This Agreement, the Notes, the Guaranty, the
Security Instruments and all other documents executed in connection with
the transaction described in this Agreement.
(ll) Majority Xxxxx - Xxxxx holding 66-2/3% or more of the Commitments
or if the Commitments have been terminated, Banks holding 66-2/3% of the
outstanding Loans.
(mm) Material Adverse Effect - Any circumstance or event which could
have a material adverse effect on (i) the assets or properties,
liabilities, financial condition, business, operations, affairs or
circumstances of the Borrower or Guarantor, or (ii) the ability of the
Borrower or Guarantor to carry out their respective businesses as of the
date of this Agreement or as proposed at the date of this Agreement to be
conducted or to meet their obligations under the Notes, this Agreement or
the other Loan Documents on a timely basis.
(nn) Maximum Rate - At any particular time in question, the maximum
non-usurious rate of interest which under applicable law may then be
charged on the Note. If such Maximum Rate changes after the date hereof,
the Maximum Rate shall be automatically increased or decreased, as the case
may be, without notice to Borrower from time to time as the effective date
of each change in such Maximum Rate.
(oo) Minimum Interest Coverage Ratio - The ratio of EBITDA to the sum
of Total Interest Expense plus any preferred stock dividends paid in cash
during the period being measured.
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(pp) Monthly Commitment Reduction - The term "Monthly Commitment
Reduction" is used herein, as defined in Section 2(f) hereof.
(qq) Net Income - Guarantor's consolidated net income after income
taxes calculated in accordance with GAAP.
(rr) Notes - The Revolving Notes, substantially in the form of Exhibit
"B" hereto issued or to be issued hereunder to each Bank, respectively, to
evidence the indebtedness to such Bank arising by reason of the Advances on
the Revolving Loan, together with all modifications, renewals and
extensions thereof or any part thereof.
(ss) Oil and Gas Properties - All oil, gas and mineral properties and
interests, related personal properties, in which Borrower grants to the
Banks either a first and prior lien and security interest pursuant to
Section 6 hereof.
(tt) Other Financing - The term "Other Financing" is used herein as
defined in Section 15(l) hereof.
(uu) Payor - The term "Payor" is used herein as defined in Section
3(h)hereof.
(vv) Permitted Liens - The term Permitted Lien shall mean (i)
royalties, overriding royalties, reversionary interests, production
payments and similar burdens; (ii) sales contracts or other arrangements
for the sale of production of oil, gas or associated liquid or gaseous
hydrocarbons which would not (when considered cumulatively with the matters
discussed in clause (i) above) deprive Borrower or Guarantor of any
material right in respect of any such Borrower's or Guarantor's assets or
properties (except for rights customarily granted with respect to such
contracts and arrangements); (iii) statutory Liens for taxes or other
assessments that are not yet delinquent (or that, if delinquent, are being
contested in good faith by appropriate proceedings, levy and execution
thereon having been stayed and continue to be stayed and for which such
Borrower or Guarantor has set aside on its books adequate reserves in
accordance with GAAP); (iv) easements, rights of way, servitudes, permits,
surface leases and other rights in respect to surface operations,
pipelines, grazing, logging, canals, ditches, reservoirs or the like,
conditions, covenants and other restrictions, and easements of streets,
alleys, highways, pipelines, telephone lines, power lines, railways and
other easements and rights of way on, over or in respect of Borrower's or
Guarantor's assets or properties and that do not individually or in the
aggregate, cause a Material Adverse Effect; (v) materialmen's, mechanic's,
repairman's, employee's, warehousemen's, landlord's, carrier's, pipeline's,
contractor's, sub-contractor's, operator's, non-operator's (arising under
operating or joint operating agreements), and other Liens (including any
financing statements filed in respect thereof) incidental to obligations
incurred by Borrower in connection with the construction, maintenance,
development, transportation, storage or operation of
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Borrower's or Guarantor's assets or properties to the extent not delinquent
(or which, if delinquent, are being contested in good faith by appropriate
proceedings and for which Borrower or Guarantor has set aside on its books
adequate reserves in accordance with GAAP); (vi) all contracts, agreements
and instruments, and all defects and irregularities and other matters
affecting Borrower's or Guarantor's assets and properties which were in
existence at the time Borrower's or Guarantor's assets and properties were
originally acquired by Borrower or Guarantor and all routine operational
agreements entered into in the ordinary course of business, which
contracts, agreements, instruments, defects, irregularities and other
matters and routine operational agreements are not such as to, individually
or in the aggregate, interfere materially with the operation, value or use
of Borrower's or Guarantor's assets and properties, considered in the
aggregate; (vii) liens in connection with workmen's compensation,
unemployment insurance or other social security, old age pension or public
liability obligations; (viii) legal or equitable encumbrances deemed to
exist by reason of the existence of any litigation or other legal
proceeding or arising out of a judgment or award with respect to which an
appeal is being prosecuted in good faith and levy and execution thereon
have been stayed and continue to be stayed; (ix) rights reserved to or
vested in any municipality, governmental, statutory or other public
authority to control or regulate Borrower's or Guarantor's assets and
properties in any manner, and all applicable laws, rules and orders from
any governmental authority; (x) landlord's liens; (xi) Liens incurred
pursuant to the Security Instruments; and (xii) Liens existing at the date
of this Agreement which have been disclosed to Banks in the Guarantor's
December 31, 1997 Financial Statements or identified in Schedule "1"
hereto, (xiii) Liens granted to the trustee of the Senior Secured Notes
Indenture to secure obligations owed by Borrower on the Senior Secured
Notes, which Liens are second and inferior to the Liens granted to the
Banks and (xiv) Liens granted to the trustee of the Discount Notes
Indenture to secure obligations owed by Guarantor on the Discount Notes.
(ww) Person - An individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality
thereof.
(xx) Plan - Any plan subject to Title IV of ERISA and maintained by
Borrower, or any such plan to which Borrower is required to contribute on
behalf of its employees.
(yy) Preferred Stock - The Series B Preferred Stock, issued by
Guarantor on the date of the Recapitalization.
(zz) Prime Rate - As of any date, the fluctuating rate of interest per
annum established from time to time by Agent as its Prime Rate (which rate
of interest may not be the lowest, best or most favorable rate of interest
which Agent may charge on loans to its customers). Each change in the
Prime Rate shall become effective without prior notice to
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Borrower automatically as of the opening of business on the date of such
change in the Prime Rate.
(aaa) Prime Rate Interest Period - With respect to any Prime Rate
Loan, the period ending on the last day of each month, provided, however,
that (i) if any Prime Rate Interest Period would end on a day which is not
a Business Day, such Interest Period shall be extended to the next
succeeding Business Day, and (ii) if any Prime Rate Interest Period would
otherwise end after the Maturity Date such Interest Period shall end on the
Maturity Date.
(bbb) Prime Rate Loans - Any loan during any period which bears
interest based upon the Prime Rate or which would bear interest based upon
the Prime Rate if the Maximum Rate ceiling was not in effect at that
particular time.
(ccc) Prime Rate Margin - The Prime Rate Margin in effect from day to
day shall be zero percent (0%).
(ddd) Pro Rata or Pro Rata Part - For each Bank, (i) for all purposes
where no Loan is outstanding, such Bank's Revolving Commitment Percentage
and (ii) otherwise, the proportion which the portion of the outstanding
Loans owed to such Bank bears to the aggregate outstanding Loans owed to
all Banks at the time in question.
(eee) Recapitalization - The (i) successful sale and receipt of
proceeds from the issuance of the Senior Secured Notes and the Discount
Notes, (ii) the successful closing and receipt of proceeds from the
Chesapeake Transaction, (iii) the redemption of the existing 12-1/4% Series
A Senior Notes of Guarantor, (iv) the redemption of the Series A Preferred
Stock of Guarantor, and (v) repayment in full of all obligations owed to
Bank One and the financial institutions participating in the Third Restated
Loan Agreement dated March 30, 1998.
(fff) Reimbursement Obligations - At any time, the obligations of the
Borrower in respect of all Letters of Credit then outstanding to reimburse
amounts paid by any Bank in respect of any drawing or drawings under a
Letter of Credit.
(ggg) Required Payment - The term "Required Payment" is used herein
as defined in Section 3(h) hereof.
(hhh) Revolving Commitment - (A) For all Banks, the lesser of (i)
$25,000,000 or (ii) the Borrowing Base, in each case as reduced from time
to time pursuant to Sections 2 and 7 hereof, and (B) as to any Bank, its
obligation to make Advances hereunder on the Revolving Loan and purchase
participations in Letters of Credit issued hereunder by the
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Agent in amounts not exceeding, in the aggregate, an amount equal to such
Bank's Revolving Loan Commitment Percentage times the total Revolving
Commitment as of any date. The Revolving Commitment of each Bank hereunder
shall be adjusted from time to time to reflect assignments made by such
Bank pursuant to Section 28 hereof. Each reduction in the Revolving
Commitment shall result in a Pro Rata reduction in each Bank's Revolving
Commitment.
(iii) Revolving Commitment Percentage - For each Bank the percentage
derived by dividing its Revolving Commitment at the time of the
determination by the Revolving Commitments of all Banks at the time of
determination. The Revolving Commitment Percentage of each Bank hereunder
shall be adjusted from time to time to reflect assignments made by such
Bank pursuant to Section 28 hereof.
(jjj) Revolving Loan - Loan or loans made under the Revolving
Commitment pursuant to Section 2 hereof.
(kkk) Revolving Maturity Date - April 30, 2001.
(lll) Revolving Notes - The Revolving Notes described in Section 3
hereof.
(mmm) Security Instruments - The term Security Instruments is used
collectively herein to mean this Agreement, all Deeds of Trust, Mortgages,
Security Agreements, Assignments of Production and Financing Statements and
other collateral documents covering the Oil and Gas Properties and related
personal property, equipment, oil and gas inventory and proceeds of the
foregoing, all such documents to be in form and substance satisfactory to
Agent.
(nnn) Senior Secured Notes - The Notes issued by Borrower pursuant to
the Senior Secured Notes Indenture.
(ooo) Senior Secured Notes Indenture - That certain Indenture dated
April 27, 1998, by and among Borrower, as Issuer and Bank of New York, as
Trustee, pursuant to which the Senior Secured Notes were to be issued.
(ppp) Subsidiary - Any corporation or other entity of which
securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by Borrower
or another subsidiary.
(qqq) Tangible Net Worth - An amount equal to the Guarantor's
consolidated stockholders equity, as determined in accordance with GAAP.
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(rrr) Total Interest Expense - Borrower's total interest expense for
any period, as determined in accordance with GAAP, excluding non-cash
interest items such as amortization of loan costs.
(sss) Total Outstandings - As of any date, the sum of (i) the total
principal balance outstanding on the Revolving Notes, plus (ii) the total
face amount of all outstanding Letters of Credit, plus (iii) the total
amount of all unpaid Reimbursement Obligations.
(ttt) Tranche - A Eurodollar Loan or a Prime Rate Loan.
(uuu) Unscheduled Redeterminations - A redetermination of the
Borrowing Base made at any time other than on the dates set for the regular
semi-annual redetermination of the Borrowing Base which are made (A) at the
reasonable request of Borrower, (B) at any time it appears to Agent or
Majority Banks, in the exercise of their reasonable discretion, that either
(i) there has been a decrease in the value of the Oil and Gas Properties,
or (ii) an event has occurred which is reasonably expected to have a
Material Adverse Effect.
2. COMMITMENTS OF THE BANK.
(a) Terms of Revolving Commitment. On the terms and conditions
hereinafter set forth, each Bank agrees severally to make Advances to the
Borrower from time to time during the period beginning on the Effective
Date and ending on the Revolving Maturity Date in such amounts as the
Borrower may request up to an amount not to exceed, in the aggregate
principal amount outstanding at any time, the Revolving Commitment. The
obligation of the Borrower hereunder shall be evidenced by this Agreement
and the Revolving Notes issued in connection herewith, said Revolving Notes
to be as described in Section 3 hereof. Notwithstanding any other
provision of this Agreement, no Advance shall be required to be made
hereunder if any Event of Default (as hereinafter defined) has occurred and
is continuing or if any event or condition has occurred or failed to occur
which with the passage of time or service of notice, or both, would
constitute an Event of Default. Each Advance under the Revolving
Commitment shall be an aggregate amount of at least $100,000 or a whole
number multiple thereof. Irrespective of the face amount of the Revolving
Note or Notes, the Banks shall never have the obligation to Advance any
amount or amounts in excess of the Revolving Commitment or to increase the
Revolving Commitment. The total number of Tranches under the Revolving
Commitment which may be outstanding at any time hereunder shall never
exceed five (5), whether such Tranches are Prime Rate Loans, Eurodollar
Loans, or a combination thereof.
(b) Procedure for Borrowing. Whenever the Borrower desires an
Advance hereunder, they shall give Agent telegraphic, telex, facsimile or
telephonic notice ("Notice of Borrowing") of such requested Advance, which
in the case of telephonic notice, shall be
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promptly confirmed in writing. Each Notice of Borrowing shall be in the
form of Exhibit "A" attached hereto and shall be received by Agent not
later than 11:00 a.m. Dallas, Texas time, (i) one Business Day prior to the
Borrowing Date in the case of the Prime Rate Loan, or (ii) three Eurodollar
Business Days prior to any proposed Borrowing Date in the case of
Eurodollar Loans. Each Notice of Borrowing shall specify (i) the Borrowing
Date (which, if at Prime Rate Loan, shall be a Business Day and if a
Eurodollar Loan, a Eurodollar Business Day), (ii) the principal amount to
be borrowed, (iii) the portion of the Advance constituting Prime Rate Loans
and/or Eurodollar Loans, (iv) if any portion of the proposed Advance is to
constitute Eurodollar Loans, the initial Interest Period selected by
Borrower pursuant to Section 4 hereof to be applicable thereto, and (v) the
date upon which such Advance is required. Upon receipt of such Notice,
Agent shall advise each Bank thereof; provided, that if the Banks have
received at least one (1) day's notice of such Advance prior to funding of
a Prime Rate Loan, or at least three (3) days' notice of each Advance prior
to funding in the case of a Eurodollar Loan, each Bank shall provide Agent
at its office at 0000 Xxxx Xxxxxx, Xxxxxx, Xxxxx 00000, not later than 1:00
p.m., Dallas, Texas time, on the Borrowing Date, in immediately available
funds, its pro rata share of the requested Advance, but the aggregate of
all such fundings by each Bank shall never exceed such Bank's Revolving
Commitment. Not later than 2:00 p.m., Dallas, Texas time, on the Borrowing
Date, Agent shall make available to the Borrower at the same office, in
like funds, the aggregate amount of such requested Advance. Neither Agent
nor any Bank shall incur any liability to the Borrower in acting upon any
Notice referred to above which Agent or such Bank believes in good faith to
have been given by a duly authorized officer or other person authorized to
borrow on behalf of Borrower or for otherwise acting in good faith under
this Section 2(b). Upon funding of Advances by Banks in accordance with
this Agreement, pursuant to any such Notice, the Borrower shall have
effected Advances hereunder.
(c) Letters of Credit. On the terms and conditions hereinafter set
forth, the Agent shall from time to time during the period beginning on the
Effective Date and ending on the Revolving Maturity Date upon request of
Borrower issue standby and/or commercial Letters of Credit for the account
of Borrower (the "Letters of Credit") in such face amounts as Borrower may
request, but not to exceed in the aggregate face amount at any time
outstanding the sum of One Million Dollars ($1,000,000.00). The face
amount of all Letters of Credit issued and outstanding hereunder shall be
considered as Advances for Borrowing Base purposes and all payments made by
the Agent on such Letters of Credit shall be considered as Advances under
the Revolving Notes. Each Letter of Credit issued for the account of
Borrower hereunder shall (i) be in favor of such beneficiaries as
specifically requested by Borrower, (ii) have an expiration date not
exceeding the earlier of (a) one year or (b) the Revolving Maturity Date,
and (iii) contain such other terms and provisions as may be required by
Bank. Each Bank (other than Agent) agrees that, upon issuance of any
Letter of Credit hereunder, it shall automatically acquire a participation
in the Agent's liability under such Letter of Credit in an amount equal to
such Bank's Revolving Commitment
-12-
Percentage of such liability, and each Bank (other than Agent) thereby
shall absolutely, unconditionally and irrevocably assume, as primary
obligor and not as surety, and shall be unconditionally obligated to Agent
to pay and discharge when due, its Revolving Commitment Percentage of
Agent's liability under such Letter of Credit. The Borrower hereby
unconditionally agrees to pay and reimburse the Agent for the amount of
each demand for payment under any Letter of Credit that is in substantial
compliance with the provisions of any such Letter of Credit at or prior to
the date on which payment is to be made by the Agent to the beneficiary
thereunder, without presentment, demand, protest or other formalities of
any kind. Upon receipt from any beneficiary of any Letter of Credit of any
demand for payment under such Letter of Credit, the Agent shall promptly
notify the Borrower of the demand and the date upon which such payment is
to be made by the Agent to such beneficiary in respect of such demand.
Forthwith upon receipt of such notice from the Agent, Borrower shall advise
the Agent whether or not they intend to borrow hereunder to finance their
obligations to reimburse the Agent, and if so, submit a Notice of Borrowing
as provided in Section 2(b) hereof. If Borrower fails to so advise Agent
and thereafter fail to reimburse Agent, the Agent shall notify each Bank of
the demand and the failure of the Borrower to reimburse the Agent, and each
Bank shall reimburse the Agent for its Revolving Commitment Percentage of
each such draw paid by the Agent and unreimbursed by the Borrower. All such
amounts paid by Agent and/or reimbursed by the Banks shall be treated as an
Advance or Advances under the Revolving Commitment, which Advances shall be
immediately due and payable and shall bear interest at the Maximum Rate.
(d) Procedure for Obtaining Letters of Credit. The amount and date
of issuance, renewal, extension or reissuance of a Letter of Credit
pursuant to the Banks' commitment above in Section 2(c) shall be designated
by Borrower's written request delivered to Agent at least three (3)
Business Days prior to the date of such issuance, renewal, extension or
reissuance. Concurrently with or promptly following the delivery of the
request for a Letter of Credit, Borrower shall execute and deliver to the
Agent an application and agreement with respect to the Letters of Credit,
said application and agreement to be in the form used by the Agent. The
Agent shall not be obligated to issue, renew, extend or reissue such
Letters of Credit if (A) the amount thereon when added to the face amount
of the outstanding Letters of Credit plus any Reimbursement Obligations
exceeds One Million Dollars ($1,000,000.00) or (B) the amount thereof when
added to the Total Outstandings would exceed the Revolving Commitment.
Borrower agrees to pay the Agent for the benefit of the Banks commissions
for issuing the Letters of Credit (calculated separately for each Letter of
Credit) in an amount equal to the greater of (i) one percent (1%) per annum
on the maximum face amount of the Letter of Credit or (ii) $500.00.
Borrower further agrees to pay Agent an additional fronting fee equal to
one-eighth of one percent (.125%) per annum on the maximum face amount of
each Letter of Credit. Such commissions shall be payable prior to the
issuance of each Letter of Credit and thereafter on each anniversary date
of such issuance while such Letter of Credit is outstanding.
-13-
(e) Voluntary Reduction of Revolving Commitment. The Borrower may
at any time, or from time to time, upon not less than three (3) Business
Days' prior written notice to Agent, reduce or terminate the Revolving
Commitment; provided, however, that (i) each reduction in the Revolving
Commitment must be in the amount of $500,000 or more, in increments of
$100,000 and (ii) each reduction must be accompanied by a prepayment of the
Revolving Notes in the amount by which the outstanding principal balance of
the Revolving Notes exceeds the Revolving Commitment as reduced pursuant to
this Section 2.
(f) Mandatory Commitment Reductions -
(i) Monthly Commitment Reduction. The Borrowing Base and the
Revolving Commitment shall be reduced as of the first day of each
month by an amount determined by the Banks pursuant to Section 7(b)
hereof (the "Monthly Commitment Reduction"). The Monthly Commitment
Reduction shall be $0 beginning on May 1, 1998, with like reductions
continuing on the first day of each month thereafter until
redetermined pursuant to Section 7(b) hereof. If as a result of any
such Monthly Commitment Reduction, the Total Outstandings ever exceed
the Revolving Commitment then in effect, the Borrower shall make the
mandatory prepayment of principal required pursuant to Section 9(b)
hereof.
(ii) Other Reductions. The Borrowing Base shall be reduced from
time to time by the amount of any prepayment required by Section 12(r)
hereof upon the sale of assets, provided, however, that such reduction
shall only remain in effect until the next redetermination of the
Borrowing Base is made pursuant to Section 7(b) hereof. Such
temporary reduction of the Borrowing Base shall not result in a
reduction of the Revolving Commitment unless the Borrower elects to
permanently reduce the Revolving Commitment pursuant to the provisions
of Section 2(e) hereof. If, as a result of any such reduction in the
Borrowing Base, the Total Outstandings ever exceed the Borrowing Base
then in effect, the Borrower shall make the mandatory prepayment of
principal required pursuant to Section 9(b) hereof.
(g) Several Obligations. The obligations of the Banks under the
Commitments are several and not joint. The failure of any Bank to make an
Advance required to be made by it shall not relieve any other Bank of its
obligation to make its Advance, and no Bank shall be responsible for the
failure of any other Bank to make the Advance to be made by such other
Bank. No Bank shall be required to lend hereunder any amount in excess of
its legal lending limit.
3. NOTES EVIDENCING LOANS. The loans described above in Section 2 shall
be evidenced by promissory notes of Borrower as follows:
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(a) Form of Revolving Notes - The Revolving Loan shall be evidenced
by a Note or Notes in the aggregate face amount of $25,000,000, and shall
be in the form of Exhibit "B" hereto with appropriate insertions (each a
"Revolving Note"). Notwithstanding the face amount of the Revolving Notes,
the actual principal amount due from the Borrower to Banks on account of
the Revolving Notes, as of any date of computation, shall be the sum of
Advances then and theretofore made on account thereof, less all principal
payments actually received by Banks in collected funds with respect
thereto. Although the Revolving Notes may be dated as of the Effective
Date, interest in respect thereof shall be payable only for the period
during which the loans evidenced thereby are outstanding and, although the
stated amount of the Revolving Notes may be higher, the Revolving Notes
shall be enforceable, with respect to Borrower's obligation to pay the
principal amount thereof, only to the extent of the unpaid principal amount
of the loans. Irrespective of the face amount of the Revolving Notes, no
Bank shall ever be obligated to advance on the Revolving Commitment any
amount in excess of its Revolving Commitment then in effect.
(b) Issuance of Additional Notes - At the Effective Date there
shall be outstanding one Revolving Note in the aggregate face amount of
$25,000,000 payable to the order of Bank One. From time to time new Notes
may issued to other Banks as such Banks become parties to this Agreement.
Upon request from Agent, the Borrower shall execute and deliver to Agent
any such new or additional Notes. From time to time as new Notes are
issued the Agent shall require that each Bank exchange their Notes for
newly issued Notes to better reflect the extent of each Bank's Commitments
hereunder.
(c) Interest Rates - The unpaid principal balance of the Notes
shall bear interest from time to time as set forth in Section 4 hereof.
(d) Payment of Interest - Interest on the Notes shall be payable on
each Interest Payment Date.
(e) Payment of Principal - Principal of the Revolving Note or Notes
shall be due and payable to the Agent for the ratable benefit of the Banks
on the Revolving Maturity Date unless earlier due in whole or in part as a
result of an acceleration of the amount due or pursuant to the mandatory
prepayment provisions of Section 9(b) hereof.
(f) Payment to Banks - Each Bank's Pro Rata Part of payment or
prepayment of the Loans shall be directed by wire transfer to such Bank by
the Agent at the address provided to the Agent for such Bank for payments
no later than 2:00 p.m., Dallas, Texas, time on the Business Day such
payments or prepayments are deemed hereunder to have been received by
Agent; provided, however, in the event that any Bank shall have failed to
make an Advance as contemplated under Section 2 hereof (a "Defaulting
Bank") and the Agent or
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another Bank or Banks shall have made such Advance, payment received by
Agent for the account of such Defaulting Bank or Banks shall not be
distributed to such Defaulting Bank or Banks until such Advance or Advances
shall have been repaid in full to the Bank or Banks who funded such Advance
or Advances. Any payment or prepayment received by Agent at any time after
12:00 noon, Dallas, Texas, time on a Business Day shall be deemed to have
been received on the next Business Day. Interest shall cease to accrue on
any principal as of the end of the day preceding the Business Day on which
any such payment or prepayment is deemed hereunder to have been received by
Agent. If Agent fails to transfer any principal amount to any Bank as
provided above, then Agent shall promptly direct such principal amount by
wire transfer to such Bank.
(g) Sharing of Payments, Etc. - If any Bank shall obtain any
payment (whether voluntary, involuntary, or otherwise) on account of the
Loans, (including, without limitation, any set-off) which is in excess of
its Pro Rata Part of payments on either of the Loans, as the case may be,
obtained by all Banks, such Bank shall purchase from the other Banks such
participation as shall be necessary to cause such purchasing Bank to share
the excess payment pro rata with each of them; provided that, if all or any
portion of such excess payment is thereafter recovered from such purchasing
Bank, the purchase shall be rescinded and the purchase price restored to
the extent of the recovery. The Borrower agrees that any Bank so
purchasing a participation from another Bank pursuant to this Section may,
to the fullest extent permitted by law, exercise all of its rights of
payment (including the right of offset) with respect to such participation
as fully as if such Bank were the direct creditor of the Borrower in the
amount of such participation.
(h) Non-Receipt of Funds by the Agent - Unless the Agent shall have
been notified by a Bank or the Borrower (the "Payor") prior to the date on
which such Bank is to make payment to the Agent of the proceeds of a Loan
to be made by it hereunder or the Borrower is to make a payment to the
Agent for the account of one or more of the Banks, as the case may be (such
payment being herein called the "Required Payment"), which notice shall be
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Agent, the Agent may assume that the Required Payment has
been made and may, in reliance upon such assumption (but shall not be
required to), make the amount thereof available to the intended recipient
on such date and, if the Payor has not in fact made the Required Payment to
the Agent, the recipient of such payment shall, on demand, pay to the Agent
the amount made available to it together with interest thereon in respect
of the period commencing on the date such amount was made available by the
Agent until the date the Agent recovers such amount at the rate applicable
to such portion of the applicable Loan.
(i) Capital Adequacy - If either (i) the introduction or
implementation of or the compliance with or any change in or in the
interpretation of any law, rule or regulation or (ii) the introduction or
implementation of or the compliance with any mandatory request,
-16-
directive or guideline from any central bank or other governmental
authority (whether or not having the force of law) affects or would affect
the amount of capital required or expected to be maintained by any Bank or
any corporation controlling any Bank as a result of maintaining its Pro
Rata Part of the Commitments, then within fifteen (15) days after demand by
such Bank, the Borrower will pay to such Bank, from time to time as
specified by such Bank, such additional amount or amounts which such Bank
shall reasonably determine to be appropriate to compensate such Bank or any
corporation controlling such Bank in light of such circumstances, to the
extent that such Bank reasonably determines that the amount of any such
capital would be increased, or the rate of return on any such capital would
be reduced in whole or in part, based on the existence of the amount of the
Loans or such Bank's Commitment under this Agreement.
4. INTEREST RATES.
(a) Options.
(i) Prime Rate Loans. On Prime Rate Loans the Borrower agrees
to pay interest on the Notes calculated on the basis of the actual
days elapsed in a year consisting of 365 or, if appropriate, 366 days
with respect to the unpaid principal amount of each Prime Rate Loan
from the date the proceeds thereof are made available to Borrower
until maturity (whether by acceleration or otherwise), at a varying
rate per annum equal to the lesser of (i) the Maximum Rate (defined
herein), or (ii) the sum of the Prime Rate plus the Prime Rate Margin.
Subject to the provisions of this Agreement as to prepayment, the
principal of the Notes representing Prime Rate Loans shall be payable
as specified in Section 3(e) hereof and the interest in respect of
each Prime Rate Loan shall be payable on each Interest Payment Date.
Past due principal and, to the extent permitted by law, past due
interest in respect to each Prime Rate Loan, shall bear interest,
payable on demand, at a rate per annum equal to the Maximum Rate.
(ii) Eurodollar Loans. On Eurodollar Loans the Borrower agrees
to pay interest calculated on the basis of a year consisting of 360
days with respect to the unpaid principal amount of each Eurodollar
Loan from the date the proceeds thereof are made available to Borrower
until maturity (whether by acceleration or otherwise), at a varying
rate per annum equal to the lesser of (i) the Maximum Rate, or (ii)
the Eurodollar Rate plus the Eurodollar Margin. Subject to the
provisions of this Agreement with respect to prepayment, the principal
of the Notes shall be payable as specified in Section 3(e) hereof and
the interest with respect to each Eurodollar Loan shall be payable on
each Interest Payment Date. Past due principal and, to the
-17-
extent permitted by law, past due interest shall bear interest,
payable on demand, at a rate per annum equal to the Maximum Rate. Upon
three (3) Eurodollar Business Days' written notice prior to the making
by the Banks of any Eurodollar Loan (in the case of the initial
Interest Period therefor) or the expiration date of each succeeding
Interest Period (in the case of subsequent Interest Periods therefor),
Borrower shall have the option, subject to compliance by Borrower with
all of the provisions of this Agreement, as long as no Event of
Default exists, to specify whether the Interest Period commencing on
any such date shall be a one (1), two (2), three (3) or six (6) month
period. If Agent shall not have received timely notice of a
designation of such Interest Period as herein provided, Borrower shall
be deemed to have elected to convert all maturing Eurodollar Loans to
Prime Rate Loans.
(b) Interest Rate Determination. The Agent shall determine each
interest rate applicable to the Loans hereunder. The Agent shall give
prompt notice to the Borrower and the Banks of each rate of interest so
determined and its determination thereof shall be conclusive absent error.
(c) Conversion Option. Borrower may elect from time to time (i) to
convert all or any part of its Eurodollar Loans to Prime Rate Loans by
giving Agent irrevocable notice of such election in writing prior to 10:00
a.m. (Dallas, Texas time) on the conversion date and such conversion shall
be made on the requested conversion date, provided that any such conversion
of Eurodollar Loan shall only be made on the last day of the Eurodollar
Interest Period with respect thereof, (ii) to convert all or any part of
its Prime Rate Loans (other than the Bridge Loans) to Eurodollar Loans by
giving the Agent irrevocable written notice of such election three (3)
Eurodollar Business Days prior to the proposed conversion and such
conversion shall be made on the requested conversion date or, if such
requested conversion date is not a Eurodollar Business Day or a Business
Day, as the case may be, on the next succeeding Eurodollar Business Day or
Business Day, as the case may be. Any such conversion shall not be deemed
to be a prepayment of any of the loans for purposes of this Agreement on
the Notes.
(d) Recoupment. If at any time the applicable rate of interest
selected pursuant to Sections 4(a)(i) or 4(a)(ii) above shall exceed the
Maximum Rate, thereby causing the interest on the Notes to be limited to
the Maximum Rate, then any subsequent reduction in the interest rate so
selected or subsequently selected shall not reduce the rate of interest on
the Notes below the Maximum Rate until the total amount of interest accrued
on the Note equals the amount of interest which would have accrued on the
Notes if the rate or rates selected pursuant to Sections 4(a)(i) or (ii),
as the case may be, had at all times been in effect.
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5. SPECIAL PROVISIONS RELATING TO LOANS.
(a) Unavailability of Funds or Inadequacy of Pricing. In the event
that, in connection with any proposed Eurodollar Loan, any Bank (i) shall
have determined that U.S. Dollar deposits of the relevant amount and for
the relevant Eurodollar Interest Period for Eurodollar Loans are not
available to such Bank in the London interbank market; or (ii) in good
faith determines that the Eurodollar Interest Rate will not adequately
reflect the cost to such Bank of maintaining or funding the Eurodollar
Loans for such Interest Period, the obligations of the Banks to make the
Eurodollar Loans, as the case may be, shall be suspended until such time
such Bank in its sole discretion reasonably exercised determines that the
event resulting in such suspension has ceased to exist. If any Bank shall
make such determination it shall promptly notify the Agent in writing, and
Agent shall promptly notify Borrower in writing, and Borrower shall either
repay the outstanding Eurodollar Loans, as the case may be, owed to Banks,
without penalty, on the last day of the current Interest Period or convert
the same to Prime Rate Loans in the case of Eurodollar Loans on the last
day of the then current Interest Period for such Eurodollar Loan.
(b) Reserve Requirements. In the event of any change in any
applicable law, treaty or regulation or in the interpretation or
administration thereof, or in the event any central bank or other fiscal
monetary or other authority having jurisdiction over any Bank or the loans
contemplated by this Agreement shall impose, modify or deem applicable any
reserve requirement of the Board of Governors of the Federal Reserve System
on any Eurodollar Loan or loans, or any other reserve, special deposit, or
similar requirements against assets to, deposits with or for the account
of, or credit extended by, the Banks or shall impose on any Bank or the
London interbank market, as the case may be, any other condition affecting
this Agreement or the Eurodollar Loans and the result of any of the
foregoing is to increase the cost to any Bank in making or maintaining its
Eurodollar Loans or to reduce any amount (or the effective return on any
amount) received by any Bank hereunder, then Borrower shall pay to the
Banks upon demand of any Bank as additional interest on the Notes
evidencing the Eurodollar Loans such additional amount or amounts as will
reimburse the Banks for such additional cost or such reduction. The Banks
shall give notice to Borrower upon becoming aware of any such change or
imposition which may result in any such increase or reduction. A
certificate of any Bank setting forth the basis for the determination of
such amount necessary to compensate Banks as aforesaid shall be delivered
to Borrower and shall be conclusive as to such determination and such
amount, absent error.
(c) Taxes. Both principal and interest on the Notes evidencing the
Loans are payable without withholding or deduction for or on account of any
taxes. If any taxes are levied or imposed on or with respect to the Notes
evidencing the Loans or on any payment on the Notes evidencing the Loans
made to any Bank, then, and in any such event, Borrower shall pay to the
Banks upon demand of any Bank such additional amounts as may be
-19-
necessary so that every net payment of principal and interest on the Notes
evidencing the Loans, after withholding or deduction for or on account of
any such taxes, will not be less than any amount provided for herein. In
addition, if at any time when the Loans are outstanding any laws enacted or
promulgated, or any court of law or governmental agency interprets or
administers any law, which, in any such case, materially changes the basis
of taxation of payments to any Bank of principal of or interest on the
Notes evidencing the Loans by reason of subjecting such payments to double
taxation or otherwise (except through an increase in the rate of tax on the
overall net income of such Bank or Banks) then Borrower will pay the amount
of loss to the extent that such loss is caused by such a change. The Banks
shall give notice to Borrower upon becoming aware of the amount of any loss
incurred by any Bank through enactment or promulgation of any such law
which materially changes the basis of taxation of payments to one or more
of the Banks. The Banks shall also give notice on becoming aware of any
such enactment or promulgation which may result in such payments becoming
subject to double taxation or otherwise. A certificate of any Bank setting
forth the basis for the determination of such loss and the computation of
such amounts shall be delivered to Borrower and shall be conclusive of such
determination and such amount, absent error.
(d) Change in Laws. If at any time any new law or any change in
existing laws or in the interpretation of any new or existing laws shall
make it unlawful for the Banks to maintain or fund its Eurodollar Loans
hereunder, then the Banks shall promptly notify Borrower in writing and
Borrower shall either repay the outstanding Eurodollar Loans owed to the
Banks, without penalty, on the last day of the current Interest Periods
(or, if any Bank may not lawfully continue to maintain and fund such
Eurodollar Loans, immediately), or Borrower may convert such Eurodollar
Loans at such appropriate time to Prime Rate Loans.
(e) Option to Fund. The Banks shall each have the option if the
Borrower elects a Eurodollar Loan, to purchase one or more deposits in
order to fund or maintain its funding of the principal balance of its Note
to which such Eurodollar Loan is applicable during the Interest Period in
question; it being understood that the provisions of this Agreement
relating to such funding are included only for the purpose of determining
the rate of interest to be paid under such Eurodollar Loan and any amounts
owing hereunder and under the Notes. Any Bank shall be entitled to fund
and maintain its funding of all or any part of that portion of the
principal balance of the Notes in any manner it sees fit, but all such
determinations hereunder shall be made as if such Bank have actually funded
and maintained that portion of the principal balance of the Notes to which
a Eurodollar Loan is applicable during the applicable Interest Period
through the purchase of deposits in an amount equal to the principal
balance of the Notes to which such Eurodollar Loan is applicable and having
a maturity corresponding to such Interest Period. Any Bank may fund the
outstanding principal balance of the Notes which is to be subject to any
Eurodollar Loan from any branch or office of such Bank as any Bank may
designate from time to time.
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(f) Indemnity. Borrower shall indemnify and hold harmless the
Banks against all reasonable and necessary out-of-pocket costs and expenses
which the Banks may sustain (i) as a consequence of any default by Borrower
under this Agreement, or (ii) as a result of the making of any loan or
loans as a Eurodollar Loan under this Agreement.
(g) Payments Not at End of Interest Period. If the Borrower makes
any payment of principal with respect to any Eurodollar Loan on any day
other than the last day of the Interest Period applicable to such
Eurodollar Loan or fail to make, borrow or convert a Eurodollar Loan on the
date requested, then Borrower shall reimburse the Banks on demand for any
loss, cost or expense incurred by the Banks as a result of the timing of
such payment or in redepositing such principal amount, including the sum of
(i) the cost of funds to the Banks in respect of such principal amount so
paid, for the remainder of the Interest Period applicable to such sum,
reduced, if any Bank is able to redeposit such principal amount so paid for
the balance of the Interest Period, by the interest earned by such Bank as
a result of so redepositing such principal amount, plus (ii) any expense or
penalty incurred by the Bank in redepositing such principal amount. A
certificate of any Bank setting forth the basis for the determination of
the amount owed by Borrower pursuant to this Section 5(g) shall be
delivered to the Borrower and shall be conclusive in the absence of
manifest error.
6. COLLATERAL SECURITY. To secure the performance by Borrower of its
obligations hereunder, and under the Notes and Security Instruments, whether now
or hereafter incurred, matured or unmatured, direct or contingent, joint or
several, or joint and several, including extensions, modifications, renewals and
increases thereof, and substitutions therefore, Borrower shall grant and assign
to Agent for the ratable benefit of the Banks a first and prior Lien on certain
of its Oil and Gas Properties, certain related equipment, oil and gas inventory,
certain bank accounts, escrow accounts and proceeds of the foregoing. The Oil
and Gas Properties herewith mortgaged to the Agent shall represent not less than
90% of the Engineered Value (as hereinafter defined) of Borrower's Oil and Gas
Properties as of the Effective Date. All Oil and Gas Properties and other
collateral in which Borrower herewith granted or hereafter grants to Agent for
the ratable benefit of the Banks a first and prior Lien (to the satisfaction of
the Agent) in accordance with this Section 6, as such properties and interests
are from time to time constituted, are hereinafter collectively called the
"Collateral".
The granting and assigning of such security interests and Liens by Borrower
shall be pursuant to Security Instruments in form and substance reasonably
satisfactory to the Agent. Concurrently with the delivery of each of the
Security Instruments or within a reasonable time thereafter, Borrower shall
furnish to the Agent mortgage and title opinions and other title information
satisfactory to Agent with respect to the title and Lien status of Borrower's
interests in not less than 90% of the Engineered Value of the Oil and Gas
Properties covered by the Security Instruments as Agent shall have designated.
"Engineered Value" for this purpose shall mean future net revenues discounted at
the discount rate being used by the Agent as of the date of any such
determination utilizing the
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pricing parameters used in the engineering report furnished to the Agent for the
ratable benefit of the Banks, pursuant to Sections 7 and 12 hereof. Borrower
will cause to be executed and delivered to the Agent, in the future, additional
Security Instruments if the Agent reasonably deems such are necessary to insure
perfection or maintenance of Banks' security interests and Liens in the Oil and
Gas Properties or any part thereof.
7. BORROWING BASE.
(a) Initial Borrowing Base. At the Effective Date, the Borrowing
Base shall be $25,000,000.
(b) Subsequent Determinations of Borrowing Base. Subsequent
determinations of the Borrowing Base shall and October 1 of each year
beginning October 1, 1998 or as Unscheduled Redeterminations. In connection
with, and as of, each determination of the Borrowing Base, the Banks shall
also redetermine the Monthly Commitment Reduction. The Borrower shall
furnish to the Banks as soon as possible but in any event no later than
March 1 of each year, beginning March 1, 1999, with an Engineering Report
in form and substance satisfactory to the Agent prepared by an independent
petroleum engineering acceptable to Agent covering the Oil and Gas
Properties utilizing economic and pricing parameters used by Agent as
established from time to time, together with such other information
concerning the value of the Oil and Gas Properties as the Agent shall deem
necessary to determine the value of the Oil and Gas Properties. By
September 1 of each year, or within thirty (30) days after either (i)
receipt of notice from Agent that the Banks require an Unscheduled
Redetermination, or (ii) the Borrower give notice to Agent of their desire
to have an Unscheduled Redetermination performed, the Borrower shall
furnish to the Banks an engineering report in form and substance
satisfactory to Agent prepared by Borrower's in-house engineering staff
valuing the Oil and Gas Properties utilizing economic and pricing
parameters used by the Agent as established from time to time, together
with such other information, reports and data concerning the value of the
Oil and Gas Properties as Agent shall deem reasonably necessary to
determine the value of such Oil and Gas Properties. Agent shall by notice
to the Borrower no later than April 1 and October 1 of each year, or within
a reasonable time thereafter (herein called the "Determination Date"),
notify the Borrower of the designation by the Banks of the new Borrowing
Base and Monthly Commitment Reduction for the period beginning on such
Determination Date and continuing until, but not including, the next
Determination Date. If an Unscheduled Redetermination is made by the Banks,
the Agent shall notify the Borrower within a reasonable time after receipt
of all requested information of the new Borrowing Base and Monthly
Commitment Reduction, and such new Borrowing Base and Monthly Commitment
Reduction shall continue until the next Determination Date. If the Borrower
does not furnish all such information, reports and data by any date
specified in this Section 7(b), unless such failure is of no fault of the
Borrower, the Banks may
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nonetheless designate the Borrowing Base and Monthly Commitment Reduction
at any amounts which the Banks in their discretion determine and may
redesignate the Borrowing Base and Monthly Commitment Reduction from time
to time thereafter until the Banks receive all such information, reports
and data, whereupon the Banks shall designate a new Borrowing Base and
Monthly Commitment Reduction as described above. Each Bank shall determine
the amount of the Borrowing Base and Monthly Commitment Reduction based
upon the loan collateral value which such Bank in its discretion (using
such methodology, assumptions and discounts rates as such Bank customarily
uses in assigning collateral value to oil and gas properties, oil and gas
gathering systems, gas processing and plant operations) assigns to such Oil
and Gas Properties of the Borrower at the time in question and based upon
such other credit factors consistently applied (including, without
limitation, the assets, liabilities, cash flow, business, properties,
prospects, management and ownership of the Borrower and its affiliates) as
such Bank customarily considers in evaluating similar oil and gas credits,
but such Bank in its discretion shall not be required to give any
additional positive value to any Oil and Gas Property over the current
economic and pricing parameters used by such Bank for such Determination
Date which additional value is derived directly from a hedging, forward
sale or swap agreement covering such Oil and Gas Property as of the date of
such determination. All determinations or Unscheduled Redeterminations of
the Borrowing Base and the Monthly Commitment Reduction require the
approval of Majority Banks; provided, however, that notwithstanding
anything to the contrary herein, the amount of the Borrowing Base may not
be increased, nor may the Monthly Commitment Reduction be reduced, without
the approval of all Banks. If the Banks cannot otherwise agree on the
Borrowing Base or the Monthly Commitment Reduction, each Bank shall submit
in writing to the Agent its proposed Borrowing Base and Monthly Commitment
Reduction and the Borrowing Base and Monthly Commitment Reduction shall be
set on the basis of the lowest Borrowing Base and the highest Monthly
Commitment Reduction proposed by any Bank. If at any time any of the Oil
and Gas Properties are sold, the Borrowing Base then in effect shall
automatically be reduced by a sum equal to the amount of prepayment
required to be made pursuant to Section 12(r) hereof. The Borrowing Base
shall be additionally reduced from time to time pursuant to the provisions
of Sections 2(e) and 2(f) hereof. It is expressly understood that the Banks
have no obligation to designate the Borrowing Base or the Monthly
Commitment Reduction at any particular amounts, except in the exercise of
their discretion, whether in relation to the Revolving Commitment or
otherwise. Provided, however, that the Banks shall not have the obligation
to designate a Borrowing Base in an amount in excess of the Revolving
Commitment or its legal or internal lending limits. Provided, however, that
in no event shall the Borrowing Base ever exceed 10% of the Adjusted
Consolidated Tangible Net Assets.
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8. FEES.
(a) Unused Commitment Fee. The Borrower shall pay to Agent for the
ratable benefit of the Banks an unused commitment fee (the "Unused
Commitment Fee") equivalent to one-half of one percent (1/2%) per annum on
the daily average of the unadvanced amount of the Revolving Commitment.
The Unused Commitment Fee shall be payable in arrears on the last Business
Day of each calendar quarter beginning June 30, 1998 with the final fee
payment due on the Maturity Date for any period then ending for which the
Unused Commitment Fee shall not have been theretofore paid. In the event
the Revolving Commitment terminates on any date prior to the end of any
such monthly period, the Borrower shall pay to the Agent for the ratable
benefit of the Banks, on the date of such termination, the total Unused
Commitment Fee due for the period in which such termination occurs.
(b) Borrowing Base Increase Fee. From and after the Effective
Date, Borrower shall pay to the Agent for the ratable benefit of the Banks
a Borrowing Base increase fee (the "Borrowing Base Increase Fee") equal to
one-fourth of one percent (1/4%) of the amount of any increase in the
Borrowing Base from the amount of the Borrowing Base set as of the most
recent determination (whether on a Determination Date or on the date of an
Unscheduled Redetermination), said fee to be payable upon notice to
Borrower of such increase. No Borrowing Base Increase Fee shall be due in
connection with the execution of this Agreement and the closing of the
transactions described herein.
(c) The Letter of Credit Fee. Borrower shall pay to the Agent the
Letter of Credit fees required above in Section 2(d).
(d) Agency Fees. The Borrower shall pay to the Agent certain fees
for acting as Agent hereunder in amounts to be negotiated between the
Borrower and the Agent.
(e) Facility Fee. The Borrower shall pay to the Agent a Facility Fee
of $100,000, said fee to be payable on the Effective Date.
9. PREPAYMENTS.
(a) Voluntary Prepayments. Subject to the provisions of Section
5(g) hereof, the Borrower may at any time and from time to time, without
penalty or premium, prepay the Notes, in whole or in part. Each such
prepayment shall be made on at least three (3) Eurodollar Business Days'
notice to Agent in the case of Eurodollar Loan Tranches and without notice
in the case of Prime Rate Loan Tranches and shall be in a minimum amount of
$500,000 or any larger multiple thereof or the unpaid balance on the Notes,
whichever is less, plus accrued interest thereon to the date of prepayment.
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(b) Mandatory Prepayment For Borrowing Base Deficiency. In the
event the Total Outstandings ever exceed the Borrowing Base as determined
by Banks pursuant to Section 7(b) hereof, the Borrower shall, within thirty
(30) days after notification from the Agent, either (A) by instruments
reasonably satisfactory in form and substance to the Bank, provide the
Agent with collateral with value and quality in amounts satisfactory to all
of the Banks in their discretion in order to increase the Borrowing Base by
an amount at least equal to such excess, or (B) prepay, without premium or
penalty, the principal amount of the Revolving Notes in an amount at least
equal to such excess plus accrued interest thereon to the date of
prepayment. If the Total Outstandings ever exceed the Revolving Commitment
as a result of a Monthly Commitment Reduction or any other required
reduction in the Revolving Commitment, then in such event, Borrower shall
immediately prepay the principal amount of the Revolving Notes in an amount
at least equal to such excess plus accrued interest to the date of
prepayment.
10. REPRESENTATIONS AND WARRANTIES. In order to induce the Banks to
enter into this Agreement, the Borrower and Guarantor hereby, jointly and
severally, represent and warrant to the Banks (which representations and
warranties will survive the delivery of the Notes) that:
(a) Creation and Existence. Borrower and Guarantor are each a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it was formed and is duly qualified in
all jurisdictions wherein failure to qualify may result in a Material
Adverse Effect. Borrower and Guarantor each has all power and authority to
own its properties and assets and to transact the business in which it is
engaged.
(b) Power and Authority. Borrower and Guarantor are each duly
authorized and empowered to create and issue the Notes; and Borrower is
duly authorized and empowered to execute, deliver and perform their
respective Loan Documents, including this Agreement; and all corporation
action on Borrower's and Guarantor's part requisite for the due creation
and issuance of the Notes and for the due execution, delivery and
performance of the Loan Documents, including this Agreement, has been duly
and effectively taken.
(c) Binding Obligations. This Agreement does, and the Notes and
other Loan Documents upon their creation, issuance, execution and delivery
will, constitute valid and binding obligations of Borrower and Guarantor,
enforceable in accordance with its respective terms (except that
enforcement may be subject to any applicable bankruptcy, insolvency, or
similar debtor relief laws now or hereafter in effect and relating to or
affecting the enforcement of creditors' rights generally).
(d) No Legal Bar or Resultant Lien. The Notes and the Loan
Documents, including this Agreement, do not and will not, to the best of
the Borrower's and each Guarantor's knowledge violate any provisions of
any contract, agreement, law, regulation,
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order, injunction, judgment, decree or writ to which Borrower or Guarantor
is subject, or result in the creation or imposition of any lien or other
encumbrance upon any assets or properties of Borrower or Guarantor, other
than those contemplated by this Agreement.
(e) No Consent. The execution, delivery and performance by
Borrower and Guarantor of the Notes and their respective Loan Documents,
including this Agreement, does not require the consent or approval of any
other person or entity, including without limitation any regulatory
authority or governmental body of the United States or any state thereof or
any political subdivision of the United States or any state thereof except
for (i) consents required for federal, state and, in some instances,
private leases, right of ways and other conveyances or encumbrances of oil
and gas leases, and (ii) consents required by the Indentures, if any, all
of which consents have been obtained by the Borrower or Guarantor.
(f) Financial Condition. The audited Financial Statements of
Guarantor dated December 31, 1997, which have been delivered to Banks are
complete and correct in all material respects, and fully and accurately
reflect in all material respects the financial condition and results of the
operations of the Borrower and Guarantor on a consolidated basis as of the
date or dates and for the period or periods stated. No change has since
occurred in the condition, financial or otherwise, of the Borrower or
Guarantor which is reasonably expected to have a Material Adverse Effect,
except as disclosed to the Banks in Schedule "2" attached hereto.
(g) Liabilities. Neither Borrower nor the Guarantor have any
material (individually or in the aggregate) liability, direct or
contingent, except as disclosed to the Banks in the Financial Statements
and on Schedule "3" attached hereto. No unusual or unduly burdensome
restrictions, restraint, or hazard exists by contract, law or governmental
regulation or otherwise relative to the business, assets or properties of
Borrower or Guarantor which is reasonably expected to have a Material
Adverse Effect.
(h) Litigation. Except as described in the Financial Statements,
or as otherwise disclosed to the Banks in Schedule "4" attached hereto,
there is no litigation, legal or administrative proceeding, investigation
or other action of any nature pending or, to the knowledge of the officers
of Borrower or Guarantor threatened against or affecting Borrower or
Guarantor which involves the possibility of any judgment or liability not
fully covered by insurance, and which is reasonably expected to have a
Material Adverse Effect.
(i) Taxes; Governmental Charges. Borrower and Guarantor have each
filed all tax returns and reports required to be filed and has paid all
taxes, assessments, fees and other governmental charges levied upon them or
their assets, properties or income which are due and payable, including
interest and penalties, the failure of which to pay could reasonably be
expected to have a Material Adverse Effect, except such as are being
contested in good
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faith by appropriate proceedings and for which adequate reserves for the
payment thereof as required by GAAP has been provided and levy and
execution thereon have been stayed and continue to be stayed.
(j) Titles, Etc. Borrower and Guarantor each have good and
defensible title to all of its respective assets, including without
limitation, the Oil and Gas Properties, free and clear of all liens or
other encumbrances except Permitted Liens.
(k) Defaults. Neither Borrower nor the Guarantor is in default and
no event or circumstance has occurred which, but for the passage of time or
the giving of notice, or both, would constitute a default under any loan or
credit agreement, indenture, mortgage, deed of trust, security agreement or
other agreement or instrument to which Borrower or Guarantor is a party in
any respect that would be reasonably expected to have a Material Adverse
Effect. No Event of Default hereunder has occurred and is continuing.
(l) Casualties; Taking of Properties. Since the dates of the
latest Financial Statements of the Borrower and Guarantor delivered to
Banks, neither the business nor the assets or properties of Borrower or
Guarantor have been affected (to the extent it is reasonably likely to
cause a Material Adverse Effect), as a result of any fire, explosion,
earthquake, flood, drought, windstorm, accident, strike or other labor
disturbance, embargo, requisition or taking of property or cancellation of
contracts, permits or concessions by any domestic or foreign government or
any agency thereof, riot, activities of armed forces or acts of God or of
any public enemy.
(m) Use of Proceeds; Margin Stock. The proceeds of the Revolving
Commitment may be used by the Borrower for the purposes of (i) acquisition
and development of oil and gas properties, (ii) Letters of Credit, and
(iii) general corporate purposes. Borrower is not engaged principally or
as one of their important activities in the business of extending credit
for the purpose of purchasing or carrying any "margin stock " as defined in
Regulation U of the Board of Governors of the Federal Reserve System (12
C.F.R. Part 221), or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry a margin
stock or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of said Regulation G or U.
Neither Borrower nor any person or entity acting on behalf of
Borrower has taken or will take any action which might cause the loans
hereunder or any of the Loan Documents, including this Agreement, to
violate Regulation G or U or any other regulation of the Board of Governors
of the Federal Reserve System or to violate the Securities Exchange Act of
1934 or any rule or regulation thereunder, in each case as now in effect or
as the same may hereafter be in effect.
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(n) Location of Business and Offices. The principal place of
business and chief executive offices of the Borrower and Guarantor are
located at the address stated in Section 17 hereof.
(o) Compliance with the Law. To the best of Borrower's and
Guarantor's knowledge, neither Borrower nor any Guarantor:
(i) is in violation of any law, judgment, decree, order,
ordinance, or governmental rule or regulation to which Borrower or
Guarantor, or any of its assets or properties are subject; or
(ii) has failed to obtain any license, permit, franchise or other
governmental authorization necessary to the ownership of any of its
assets or properties or the conduct of its business;
which violation or failure is reasonably expected to have a Material
Adverse Effect.
(p) No Material Misstatements. No information, exhibit or report
furnished by Borrower or Guarantor to the Banks in connection with the
negotiation of this Agreement or in the preparation of the offering memo
contained any material misstatement of fact or omitted to state a material
fact or any fact necessary to make the statement contained therein not
materially misleading.
(q) Not A Utility. Neither Borrower nor Guarantor is an entity
engaged in the State of Texas in the (i) generation, transmission, or
distribution and sale of electric power; (ii) transportation, distribution
and sale through a local distribution system of natural or other gas for
domestic, commercial, industrial, or other use; (iii) provision of
telephone or telegraph service to others; (iv) production, transmission, or
distribution and sale of steam or water; (v) operation of a railroad; or
(vii) provision of sewer service to others.
(r) ERISA. Borrower and Guarantor are each in compliance in all
material respects with the applicable provisions of ERISA, and no
"reportable event", as such term is defined in Section 403 of ERISA, has
occurred with respect to any Plan of Borrower or Guarantor.
(s) Public Utility Holding Company Act. Neither Borrower nor
Guarantor is a "holding company", or "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a"subsidiary
company" of a "holding company", or a "public utility" within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
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(t) Subsidiaries. All of the Borrower's Subsidiaries are listed on
Schedule "5" hereto. Borrower is a wholly-owned Subsidiary of Guarantor.
(u) Environmental Matters. Except as disclosed on Schedule "6",
neither Borrower nor Guarantor (i) has received notice or otherwise learned
of any Environmental Liability which would be reasonably likely to
individually or in the aggregate have a Material Adverse Effect arising in
connection with (A) any non-compliance with or violation of the
requirements of any Environmental Law or (B) the release or threatened
release of any toxic or hazardous waste into the environment, (ii) has
received notice of any threatened or actual liability in connection with
the release or notice of any threatened release of any toxic or hazardous
waste into the environment which would be reasonably likely to individually
or in the aggregate have a Material Adverse Effect or (iii) has received
notice or otherwise learned of any federal or state investigation
evaluating whether any remedial action is needed to respond to a release or
threatened release of any toxic or hazardous waste into the environment for
which Borrower or Guarantor is or may be liable which may reasonably be
expected to result in a Material Adverse Effect.
(v) Liens. Except (i) as disclosed on Schedule "1" hereto and (ii)
for Permitted Liens, the assets and properties of the Borrower and
Guarantor are free and clear of all liens and encumbrances.
11. CONDITIONS OF LENDING.
(a) The effectiveness of this Agreement, and the obligation to make
the initial Advance or issue any initial Letter of Credit under the
Revolving Commitment shall be subject to satisfaction of the following
conditions precedent:
(i) Execution and Delivery. The Borrower and Guarantor shall
each have executed and delivered the Agreement, the Notes and other
required Loan Documents, including, without limitation, the Guaranty
in the form of Exhibit "C" hereto and the other Security Instruments,
all in form and substance satisfactory to the Agent;
(ii) Legal Opinion. The Agent shall have received from
Borrower's and Guarantor's legal counsel a favorable legal opinion in
form and substance satisfactory to it (i) as to the matters set forth
in Subsections 10(a), (b), (c), (d), (e) and (h) hereof and (ii) as to
such other matters as Agent or its counsel may reasonably request;
(iii) Corporate Resolutions. The Agent shall have received
appropriate certified corporate resolutions of Borrower and Guarantor;
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(iv) Good Standing. The Agent shall have received evidence of
existence and good standing for Borrower and Guarantor;
(v) Incumbency. The Agent shall have received a signed
certificate of Borrower and Guarantor, certifying the names of the
officers of Borrower and Guarantor authorized to sign loan documents
on behalf of Borrower and Guarantor, together with the true signatures
of each such officer. The Agent may conclusively rely on such
certificate until the Agent receives a further certificate of Borrower
or Guarantor canceling or amending the prior certificate and
submitting signatures of the officers named in such further
certificate;
(vi) Articles of Incorporation and Bylaws. The Agent shall
have received copies of the Articles of Incorporation of Borrower and
Guarantor and all amendments thereto, certified by the Secretary of
State of the State of its incorporation, and a copy of the bylaws of
Borrower and Guarantor and all amendments thereto, certified by
Borrower and Guarantor as being true, correct and complete;
(vii) Recapitalization - The Agent shall have received
satisfactory evidence of the completion of the Recapitalization.
(viii) Payment of Certain Obligations. All amounts due to Bank
One and the other financial institutions participating in the Third
Restated Loan Agreement dated March 30, 1998 shall have been paid in
full;
(ix) Transfer of Oil and Gas Properties. The Agent shall have
received satisfactory evidence of the assignment of all of Guarantor's
Oil and Gas Properties into Borrower;
(x) Priority of Liens. The Agent shall have received
satisfactory evidence of the first lien status of the Liens granted by
Borrower to the Banks;
(xi) Execution of the Intercreditor Agreement. The
Intercreditor Agreement between Borrower, the Banks and the trustee of
the Senior Secured Notes Indenture shall be in form and substance
satisfactory to Agent and shall have been executed by all parties
thereto;
(xii) Merger. The Agent shall have received satisfactory
evidence of the completion of the merger of Gothic Energy of Texas,
Inc. into Borrower;
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(xiii) No Default under the Discount Notes. The Agent shall have
received satisfactory evidence that Guarantor is not in default under
the provisions of the Discount Notes Indenture;
(xiv) No Default Under the Senior Secured Notes. The Agent
shall have received satisfactory evidence that the Borrower and
Guarantor is not in default under the provisions of the Indenture;
(xv) Representation and Warranties. The representations and
warranties of Borrower under this Agreement are true and correct in
all material respects as of such date, as if then made (except to the
extent that such representations and warranties related solely to an
earlier date);
(xvi) No Event of Default. No Event of Default shall have
occurred and be continuing nor shall any event have occurred or failed
to occur which, with the passage of time or service of notice, or
both, would constitute an Event of Default;
(xvii) Other Documents. Agent shall have received such other
instruments and documents incidental and appropriate to the
transaction provided for herein as Agent or its counsel may reasonably
request, and all such documents shall be in form and substance
reasonably satisfactory to the Agent; and
(xviii) Legal Matters Satisfactory. All legal matters incident
to the consummation of the transactions contemplated hereby shall be
reasonably satisfactory to special counsel for Agent retained at the
expense of the Borrower and Guarantor.
(b) The obligation of the Banks to make any Advance or issue any
Letter of Credit under the Revolving Commitment (including the initial
Advance) shall be subject to the following additional conditions precedent
that, at the date of making each such Advance and after giving effect
thereto:
(i) Representation and Warranties. The representations and
warranties of Borrower and Guarantor under this Agreement are true and
correct in all material respects as of such date, as if then made
(except to the extent that such representations and warranties related
solely to an earlier date);
(ii) No Event of Default. No Event of Default shall have
occurred and be continuing nor shall any event have occurred or failed
to occur which, with the passage of time or service of notice, or
both, would constitute an Event of Default;
-31-
(iii) Other Documents. Agent shall have received such other
instruments and documents incidental and appropriate to the
transaction provided for herein as Agent or its counsel may reasonably
request, and all such documents shall be in form and substance
reasonably satisfactory to the Agent; and
(iv) Legal Matters Satisfactory. All legal matters incident
to the consummation of the transactions contemplated hereby shall be
reasonably satisfactory to special counsel for Agent retained at the
expense of Borrower and Guarantor.
12. AFFIRMATIVE COVENANTS. A deviation from the provisions of this
Section 12 shall not constitute an Event of Default under this Agreement if such
deviation is consented to in writing by the required percentage of the Banks
prior to the date of deviation. The Borrower and Guarantor will at all times
comply with the covenants contained in this Section 12 from the date hereof and
for so long as the Commitments are in existence or any amount is owed to the
Agent or the Banks under this Agreement or the other Loan Documents.
(a) Financial Statements and Reports. Borrower and Guarantor shall
promptly furnish to the Agent from time to time upon request such
information regarding the business and affairs and financial condition of
Borrower and Guarantor, as the Agent may reasonably request, and will
furnish to the Agent:
(i) Annual Audited Financial Statements. As soon as
available, and in any event within ninety (90) days after the close of
each fiscal year beginning with the fiscal year ended December 31,
1998, the annual audited consolidated and consolidating Financial
Statements of Guarantor, prepared in accordance with GAAP accompanied
by an unqualified opinion rendered by an independent accounting firm
reasonably acceptable to the Agent;
(ii) Quarterly Financial Statements. As soon as available,
and in any event within forty-five (45) days after the end of each
calendar quarter of each year (except the last calendar quarter of any
fiscal year), beginning with the fiscal quarter ended March 31, 1998,
the quarterly unaudited consolidated and consolidating Financial
Statements of Guarantor prepared in accordance with GAAP;
(iii) Report on Properties. As soon as available and in any
event on or before March 1 and September 1 of each calendar year, and
at such other times as any Bank, in accordance with Section 7 hereof,
may request, the engineering reports required to be furnished to the
Agent under such Section 7 on the Oil and Gas Properties;
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(iv) Monthly Production Reports. Within 30 days after the
end of each month, a monthly report, in form and substance
satisfactory to the Agent, indicating the next preceding month's sales
volume, sales revenues, production taxes, operating expense and net
operating income from the Oil and Gas Properties, with detailed
calculations and worksheets, all in form and substance satisfactory to
Agent;
(v) SEC Reports. As soon as available, and in any event
within five (5) days of filing, copies of all filings by Guarantor
with the Securities and Exchange Commission;
(vi) Report on Adjusted Consolidated Net Tangible Assets. On or
before March 1 and September 1 of each calendar year, provide the
Agent with a detailed calculation of Adjusted Consolidated Net
Tangible Assets of Borrower, said calculation to be made as of the
preceding December 31 and June 30, respectively, and shall be in form
and substance satisfactory to Agent;
(vii) Additional Information. Promptly upon request of the
Agent from time to time any additional financial information or other
information that the Agent may reasonably request.
All such reports, information, balance sheets and Financial Statements
referred to in Subsection 12(a) above shall be in such detail as the Agent
may reasonably request and shall be prepared in a manner consistent with
the Financial Statements.
(b) Certificates of Compliance. Concurrently with the furnishing
of the annual audited Financial Statements pursuant to Subsection 12(a)(i)
hereof and the quarterly unaudited Financial Statements pursuant to
Subsection 12(a)(ii) hereof for the months coinciding with the end of each
calendar quarter, Borrower and Guarantor will furnish or cause to be
furnished to the Agent a certificate in the form of Exhibit "D" attached
hereto, signed by the President or Chief Financial Officer of Borrower and
Guarantor, (i) stating that Borrower and Guarantor have fulfilled in all
material respects their obligations under the Notes and the Loan Documents,
including this Agreement, and that all representations and warranties made
herein and therein continue (except to the extent they relate solely to an
earlier date) to be true and correct in all material respects (or
specifying the nature of any change), or if a Default has occurred,
specifying the Default and the nature and status thereof; (ii) to the
extent requested from time to time by the Agent, specifically affirming
compliance of Borrower and Guarantor in all material respects with any of
their representations (except to the extent they relate solely to an
earlier date) or obligations under said instruments; (iii) setting forth
the computation, in reasonable detail as of the end of each period covered
by such certificate, of compliance with Sections 13(b), (c) and (d); and
(iv)
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containing or accompanied by such financial or other details, information
and material as the Agent may reasonably request to evidence such
compliance.
(c) Accountants' Certificate. Concurrently with the furnishing of
the annual audited Financial Statement pursuant to Section 12(a)(i) hereof,
Borrower and Guarantor will furnish a statement from the firm of
independent public accountants which prepared such Financial Statement to
the effect that nothing has come to their attention to cause them to
believe that there existed on the date of such statements any Event of
Default and specifically calculating Borrower's and Guarantor's compliance
with Sections 13(b), (c) and (d) of this Agreement.
(d) Taxes and Other Liens. The Borrower or Guarantor will pay and
discharge promptly all taxes, assessments and governmental charges or
levies imposed upon the Borrower and Guarantor, or upon the income or any
assets or property of Borrower or Guarantor, as well as all claims of any
kind (including claims for labor, materials, supplies and rent) which, if
unpaid, might become a Lien or other encumbrance upon any or all of the
assets or property of Borrower or Guarantor and which could reasonably be
expected to result in a Material Adverse Effect; provided, however, that
neither Borrower nor Guarantor shall be required to pay any such tax,
assessment, charge, levy or claim if the amount, applicability or validity
thereof shall currently be contested in good faith by appropriate
proceedings diligently conducted, levy and execution thereon have been
stayed and continue to be stayed and if Borrower or Guarantor shall have
set up adequate reserves therefor, if required, under GAAP.
(e) Compliance with Laws. Borrower and Guarantor will observe and
comply, in all material respects, with all applicable laws, statutes,
codes, acts, ordinances, orders, judgments, decrees, injunctions, rules,
regulations, orders and restrictions relating to environmental standards or
controls or to energy regulations of all federal, state, county, municipal
and other governments, departments, commissions, boards, agencies, courts,
authorities, officials and officers, domestic or foreign.
(f) Further Assurances. The Borrower will cure promptly any
defects in the creation and issuance of the Notes and the execution and
delivery of the Notes and the Loan Documents, including this Agreement.
The Borrower and Guarantor at their sole expense will promptly execute and
deliver to Agent upon its reasonable request all such other and further
documents, agreements and instruments in compliance with or accomplishment
of the covenants and agreements in this Agreement, or to correct any
omissions in the Notes or more fully to state the obligations set out
herein.
(g) Performance of Obligations. The Borrower will pay the Notes
and other obligations incurred by it hereunder according to the reading,
tenor and effect thereof and
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hereof; and Borrower and Guarantor will do and perform every act and
discharge all of the obligations provided to be performed and discharged by
the Borrower and Guarantor under the Loan Documents, including this
Agreement, at the time or times and in the manner specified.
(h) Insurance. The Borrower and Guarantor now maintain and will
continue to maintain insurance with financially sound and reputable
insurers with respect to its assets against such liabilities, fires,
casualties, risks and contingencies and in such types and amounts as is
customary in the case of persons engaged in the same or similar businesses
and similarly situated. Upon request of the Agent, the Borrower will
furnish or cause to be furnished to the Agent from time to time a summary
of the respective insurance coverage of Borrower and Guarantor in form and
substance satisfactory to the Agent, and, if requested, will furnish the
Agent copies of the applicable policies. Upon demand by Agent any
insurance policies covering any such property shall be endorsed (i) to
provide that such policies may not be canceled, reduced or affected in any
manner for any reason without fifteen (15) days prior notice to Agent, (ii)
to provide for insurance against fire, casualty and other hazards normally
insured against, in the amount of the full value (less a reasonable
deductible not to exceed amounts customary in the industry for similarly
situated business and properties) of the property insured, and (iii) to
provide for such other matters as the Agent may reasonably require. The
Borrower and Guarantor shall at all times maintain adequate insurance with
respect to all of their assets, including but not limited to, the Oil and
Gas Properties or any collateral against its liability for injury to
persons or property, which insurance shall be by financially sound and
reputable insurers and shall without limitation provide the following
coverages: comprehensive general liability (including coverage for damage
to underground resources and equipment, damage caused by blowouts or
cratering, damage caused by explosion, damage to underground minerals or
resources caused by saline substances, broad form property damage coverage,
broad form coverage for contractually assumed liabilities and broad form
coverage for acts of independent contractors), worker's compensation and
automobile liability. The Borrower shall at all times maintain cost of
control of well insurance with respect to the Oil and Gas Properties which
shall insure the Borrower against seepage and pollution expense; redrilling
expense; and cost of control of well; fires, blowouts, etc., if deemed
economical in the reasonable discretion of the Borrower. Additionally, the
Borrower shall at all times maintain adequate insurance with respect to all
of its other assets and xxxxx in accordance with prudent business
practices.
(i) Accounts and Records. Borrower and Guarantor will keep books,
records and accounts in which full, true and correct entries will be made
of all dealings or transactions in relation to its business and activities,
prepared in a manner consistent with prior years, subject to changes
suggested by such Borrower's and Guarantor's auditors.
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(j) Right of Inspection. Borrower and Guarantor will permit any
officer, employee or agent of the Banks to examine Borrower's and
Guarantor's books, records and accounts, and take copies and extracts
therefrom, all at such reasonable times during normal business hours and as
often as the Banks may reasonably request. The Banks will use best efforts
to keep all Confidential Information (as herein defined) confidential and
will not disclose or reveal the Confidential Information or any part
thereof other than (i) as required by law, and (ii) to the Banks', and the
Banks' subsidiaries', Affiliates, officers, employees, legal counsel and
regulatory authorities or advisors to whom it is necessary to reveal such
information for the purpose of effectuating the agreements and undertakings
specified herein or as otherwise required in connection with the
enforcement of the Banks' and the Agent's rights and remedies under the
Notes, this Agreement and the other Loan Documents. As used herein,
"Confidential Information" means information about the Borrower and
Guarantor furnished by the Borrower and Guarantor to the Banks, but does
not include information (i) which was publicly known, or otherwise known to
the Banks, at the time of the disclosure, (ii) which subsequently becomes
publicly known through no act or omission by the Banks, or (iii) which
otherwise becomes known to the Banks, other than through disclosure by the
Borrower and Guarantor.
(k) Notice of Certain Events. The Borrower and Guarantor shall
promptly notify the Agent if Borrower or Guarantor learns of the occurrence
of (i) any event which constitutes an Event of Default together with a
detailed statement by Borrower and Guarantor of the steps being taken to
cure such Event of Default; (ii) any legal, judicial or regulatory
proceedings affecting Borrower or Guarantor, or any of the assets or
properties of Borrower or Guarantor which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect; (iii) any dispute
between Borrower or Guarantor and any governmental or regulatory body or
any other Person or entity which, if adversely determined, might reasonably
be expected to cause a Material Adverse Effect; (iv) any event or
circumstance which requires the prepayment, purchase or redemption of any
of the Senior Secured Notes, the Discount Notes or any Preferred Stock, any
default or event of default that occurs under the Indentures or under any
subsequent indenture executed by Borrower or Guarantor in connection with
the issuance of additional notes which are approved by the Banks, with a
detailed statement of steps being taken to cure such default or event of
default, or (v) any other matter which in Borrower's or Guarantor's
reasonable opinion could have a Material Adverse Effect.
(l) ERISA Information and Compliance. The Borrower and Guarantor
will promptly furnish to the Agent immediately upon becoming aware of the
occurrence of any "reportable event", as such term is defined in Section
4043 of ERISA, or of any "prohibited transaction", as such term is defined
in Section 4975 of the Internal Revenue Code of 1954, as amended, in
connection with any Plan or any trust created thereunder, a written notice
signed by the chief financial officer of Borrower or Guarantor specifying
the nature thereof,
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what action Borrower or Guarantor is taking or proposes to take with
respect thereto, and, when known, any action taken by the Internal Revenue
Service with respect thereto.
(m) Environmental Reports and Notices. The Borrower and Guarantor
will deliver to the Agent (i) promptly upon its becoming available, one
copy of each report sent by Borrower or Guarantor to any court,
governmental agency or instrumentality pursuant to any Environmental Law,
(ii) notice, in writing, promptly upon Borrower's or Guarantor's receipt of
notice or otherwise learning of any claim, demand, action, event,
condition, report or investigation indicating any potential or actual
liability arising in connection with (x) the non-compliance with or
violation of the requirements of any Environmental Law which reasonably
could be expected to have a Material Adverse Effect; (y) the release or
threatened release of any toxic or hazardous waste into the environment
which reasonably could be expected to have a Material Adverse Effect or
which release Borrower or Guarantor would have a duty to report to any
court or government agency or instrumentality, or (iii) the existence of
any Environmental Lien on any properties or assets of Borrower or
Guarantor, and Borrower or Guarantor shall immediately deliver a copy of
any such notice to Agent.
(n) Compliance and Maintenance. The Borrower and Guarantor will
(i) observe and comply in all material respects with all Environmental
Laws; (ii) except as provided in Subsections 12(o) and 12(p) below,
maintain the Oil and Gas Properties and other assets and properties in good
and workable condition at all times and make all repairs, replacements,
additions, betterments and improvements to the Oil and Gas Properties and
other assets and properties as are needed and proper so that the business
carried on in connection therewith may be conducted properly and
efficiently at all times in the opinion of the Borrower or Guarantor
exercised in good faith; (iii) take or cause to be taken whatever actions
are necessary or desirable to prevent an event or condition of default by
Borrower or Guarantor under the provisions of any gas purchase or sales
contract or any other contract, agreement or lease comprising a part of the
Oil and Gas Properties or other collateral security hereunder which default
could reasonably be expected to result in a Material Adverse Effect; and
(iv) furnish Agent upon request evidence satisfactory to Agent that there
are no Liens, claims or encumbrances on the Oil and Gas Properties, except
laborers', vendors', repairmen's, mechanics', worker's, or materialmen's
liens arising by operation of law or incident to the construction or
improvement of property if the obligations secured thereby are not yet due
or are being contested in good faith by appropriate legal proceedings or
Permitted Liens.
(o) Operation of Properties. Except as provided in Subsection
12(p) and (q) below, the Borrower and Guarantor will operate, or use
reasonable efforts to cause to be operated, all Oil and Gas Properties in a
careful and efficient manner in accordance with the practice of the
industry and in compliance in all material respects with all applicable
laws, rules, and regulations, and in compliance in all material respects
with all applicable proration and conservation laws of the jurisdiction in
which the properties are situated, and all
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applicable laws, rules, and regulations, of every other agency and
authority from time to time constituted to regulate the development and
operation of the properties and the production and sale of hydrocarbons and
other minerals therefrom; provided, however, that the Borrower and
Guarantor shall have the right to contest in good faith by appropriate
proceedings, the applicability or lawfulness of any such law, rule or
regulation and pending such contest may defer compliance therewith, as long
as such deferment shall not subject the properties or any part thereof to
foreclosure or loss.
(p) Compliance with Leases and Other Instruments. The Borrower
will pay or cause to be paid and discharge all rentals, delay rentals,
royalties, production payment, and indebtedness required to be paid by
Borrower (or required to keep unimpaired in all material respects the
rights of Borrower in Oil and Gas Properties) accruing under, and perform
or cause to be performed in all material respects each and every act,
matter, or thing required of Borrower by each and all of the assignments,
deeds, leases, subleases, contracts, and agreements in any way relating to
Borrower or any of the Oil and Gas Properties and do all other things
necessary of Borrower to keep unimpaired in all material respects the
rights of Borrower thereunder and to prevent the forfeiture thereof or
default thereunder; provided, however, that nothing in this Agreement shall
be deemed to require Borrower to perpetuate or renew any oil and gas lease
or other lease by payment of rental or delay rental or by commencement or
continuation of operations nor to prevent Borrower from abandoning or
releasing any oil and gas lease or other lease or well thereon when, in any
of such events, in the opinion of Borrower exercised in good faith, it is
not in the best interest of the Borrower to perpetuate the same.
(q) Certain Additional Assurances Regarding Maintenance and
Operations of Properties. With respect to those Oil and Gas Properties
which are being operated by operators other than the Borrower, the Borrower
shall not be obligated to perform any undertakings contemplated by the
covenants and agreement contained in Subsections 12(o) or 12(p) hereof
which are performable only by such operators and are beyond the control of
the Borrower; however, the Borrower agrees to promptly take all reasonable
actions available under any operating agreements or otherwise to bring
about the performance of any such material undertakings required to be
performed thereunder.
(r) Sale of Certain Assets/Prepayment of Proceeds. The Borrower
will immediately pay over to the Agent for the ratable benefit of the Banks
as a prepayment of principal on the Revolving Notes, an amount equal to
100% of the Release Price received by Borrower from the sale of the Oil and
Gas Properties, which sale has been approved in advance by the Majority
Banks. Provided, however, that the foregoing sentence shall not apply to
asset sales with proceeds valued at up to $1,000,000 between each Borrowing
Base Determination Date. The term "Release Price" as used herein shall mean
a price determined by the Majority Banks in their discretion based upon the
loan collateral value which such
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Banks in their discretion (using such methodology, assumptions and
discounts rates as such Banks customarily use in assigning collateral value
to oil and gas properties, oil and gas gathering systems, gas processing
and plant operations) assign to such Oil and Gas Properties at the time in
question. Any such prepayment of principal on the Revolving Notes required
by this Section 12(r), shall not be in lieu of, but shall be in addition
to, any Monthly Commitment Reduction or any mandatory prepayment of
principal required to be paid pursuant to Section 9(b) hereof.
(s) Title Matters. Within ninety (90) days after the Effective
Date with respect to the Oil and Gas Properties listed on Schedule "7"
hereto, furnish Agent with title opinions and/or title information
reasonably satisfactory to Agent showing good and defensible title of
Borrower to such Oil and Gas Properties subject only to the Permitted
Liens. As to any Oil and Gas Properties hereafter mortgaged to Agent,
Borrower will promptly (but in no event more than thirty (30) days
following such mortgaging), furnish Agent with title opinions and/or title
information reasonably satisfactory to Agent showing good and defensible
title of Borrower to such Oil and Gas Properties subject only to Permitted
Liens.
(t) Curative Matters. Within sixty (60) days after the Effective
Date with respect to matters listed on Schedule "8" and, thereafter, within
sixty (60) days after receipt by Borrower from Agent or its counsel of
written notice of title defects the Agent reasonably requires to be cured,
Borrower shall either (i) provide such curative information, in form and
substance satisfactory to Agent, or (ii) substitute Oil and Gas Properties
of value and quality satisfactory to the Agent for all of Oil and Gas
Properties for which such title curative was requested but upon which
Borrower elected not to provide such title curative information, and,
within sixty (60) days of such substitution, provide title opinions or
title information satisfactory to the Agent covering the Oil and Gas
Properties so substituted.
(u) Change of Principal Place of Business. Borrower and Guarantor
shall give Agent at least thirty (30) days prior written notice of its
intention to move its principal place of business from the address set
forth in Section 17 hereof.
(v) Cash Collateral Accounts. Borrower and Guarantor shall
establish and maintain with Agent one or more operating accounts for
Borrower and Guarantor (the "Operating Accounts") and lockbox accounts for
Borrower ("Lockbox Accounts"), the maintenance of each of which shall be
subject to such rules and regulations as the Agent shall from time to time
specify. Such accounts shall be maintained with the Agent until all
amounts due hereunder and under the Notes have been paid in full. To the
extent not already so instructed, Borrower and Guarantor shall within ten
(10) days of the Effective Date instruct and cause all monetary proceeds of
production from the Oil and Gas Properties to be remitted to their
respective Lockbox Accounts. Such proceeds of production shall not be
redirected without the prior written consent of the Agent until such time
as all indebtedness
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due Banks by Borrower has been paid in full and the Commitments have been
terminated. If no Event of Default (and no event which, with notice or
lapse of time or both, would become an Event of Default) has occurred and
is continuing, the full balance of the Lockbox Accounts each day will be
deposited into the Operating Accounts. The Borrower and Guarantor hereby
grant a security interest to Banks in and to the Lockbox Accounts and the
Operating Accounts (collectively, the "Cash Collateral Accounts") and all
checks, drafts and other items ever received by any Bank for deposit
therein. If any Event of Default shall occur and be continuing, Agent shall
have the immediate right, without prior notice or demand, to take and apply
against the Borrower's and Guarantor's obligations hereunder any and all
funds legally and beneficially owned by the Borrower or Guarantor then or
thereafter on deposit in the Cash Collateral Accounts for the ratable
benefit of the Banks.
(w) Escrow of Interest Payments. At any time that the Total
Outstandings are equal to or greater than 75% of the Revolving Commitment,
Borrower shall, on or before the tenth (10th) day of each succeeding month,
escrow with Agent an amount equal to one-sixth (1/6th) of the next semi-
annual interest payment due on any senior notes, including, without
limitation, the Senior Secured Notes. Provided, however, that Borrower
shall make any such required escrow payment to the Agent on or before the
first (1st) day of any month in which an interest payment is due on such
Senior Secured Notes. The Borrower hereby grants a security interest to
Banks in such escrow account and all checks, drafts and other items ever
received by any Bank for deposit therein. If any Event of Default shall
occur and be continuing, Agent shall have the immediate right, without
prior notice or demand, to take and apply against the Borrower's
obligations hereunder any and all funds then or thereafter on deposit in
such escrow accounts for the ratable benefit of the Banks. Assuming (i)
compliance with the provisions hereof and (ii) that no Event of Default
(and no event which, with notice or lapse of time, or both, would become an
Event of Default) has occurred and is continuing or would occur as a result
of taking the action described in this sentence,, the amount so escrowed
may be released for payment of the accrued semi-annual interest payments on
the Senior Secured Notes on their due dates. Notwithstanding any other
provision hereof, any amendment, modification or waiver of compliance with
this covenant shall require the consent of Majority Banks.
(x) Year 2000 Compatibility. Borrower and Guarantor shall take all
actions reasonably necessary to assure that Borrower's and Guarantor's
computer-based systems are able to operate and effectively process data
which include dates on or after January 1, 2000.
13. NEGATIVE COVENANTS. A deviation from the provisions of this Section
13 shall not constitute an Event of Default under this Agreement if such
deviation is consented to in writing by the required percentage of the Banks
prior to the date of deviation. The Borrower and Guarantor will at all times
comply with the covenants contained in this Section 13 from the date hereof and
for so
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long as the Revolving Commitment is in existence or any amount is owed to the
Agent or the Banks under this Agreement or the other Loan Documents.
(a) Negative Pledge. Neither Borrower nor Guarantor shall without
the prior written consent of the Banks:
(i) create, incur, assume or permit to exist any Lien,
security interest or other encumbrance on any of its assets or
properties except Permitted Liens; or
(ii) sell, lease, transfer or otherwise dispose of, in any
fiscal year, any of its assets except for (A) sales, leases, transfers
or other dispositions made in the ordinary course of Borrower's and
Guarantor's oil and gas businesses, (B) sales made with the consent of
Majority Banks which are made pursuant to, and in full compliance
with, Section 12(r) hereof; and (C) sales, leases or transfers or
other dispositions made by Borrower between Borrowing Base
Determination Dates which do not exceed $1,000,000 in the aggregate;
(b) Current Ratio. Guarantor shall not allow its ratio of
consolidated Current Assets to consolidated Current Liabilities to be less
than 1.0 to 1.0 as of the end of any fiscal quarter.
(c) Minimum Interest Coverage Ratio. The Borrower will not allow
its consolidated Minimum Interest Coverage Ratio to be less than (i) 1.5 to
1.0 as of the end of each calendar quarter beginning with the quarter
ending June 30, 1998 and (ii) 2.0 to 1.0 as of the end of each calendar
quarter beginning with the quarter ending March 31, 1999.
(d) Consolidations and Mergers. Neither Borrower nor the Guarantor
will consolidate or merge with or into any other Person, except that
Borrower or Guarantor may merge with another Person if Borrower or
Guarantor is the surviving entity in such merger and if, after giving
effect thereto, no Default or Event of Default shall have occurred and be
continuing.
(e) Debts, Guaranties and Other Obligations. Without the consent
of Majority Banks, neither Borrower nor Guarantor will incur, create,
assume or in any manner become or be liable in respect of any indebtedness,
nor will Borrower or Guarantor guarantee or otherwise in any manner become
or be liable in respect of any indebtedness, liabilities or other
obligations of any other person or entity, whether by agreement to purchase
the indebtedness of any other person or entity or agreement for the
furnishing of funds to any other person or entity through the purchase or
lease of goods, supplies or services (or by way of stock purchase, capital
contribution, advance or loan) for the purpose of paying or
-41-
discharging the indebtedness of any other person or entity, or otherwise,
except that the foregoing restrictions shall not apply to:
(i) the Notes and any renewal or increase thereof, or other
indebtedness of the Borrower heretofore disclosed to Banks in the
Borrower's Financial Statements or on Schedule "4" hereto; or
(ii) taxes, assessments or other government charges which are
not yet due or are being contested in good faith by appropriate action
promptly initiated and diligently conducted, if such reserve as shall
be required by GAAP shall have been made therefor and levy and
execution thereon have been stayed and continue to be stayed; or
(iii) indebtedness (other than in connection with a loan or
lending transaction) incurred in the ordinary course of business,
including, but not limited to indebtedness for drilling, completing,
leasing and reworking oil and gas xxxxx; or
(iv) indebtedness owed by Borrower to Guarantor by Guarantor to
Borrower as a result of intercompany loans or advances; or
(v) indebtedness evidenced by the Senior Unsecured Notes; or
(vi) indebtedness evidenced by the Discount Notes; or
(vii) letter of credit issued to Xxxx Production Services in the
amount of $275,000 to expire October 31, 1998; or
(viii) any renewals or extensions of (but not increases in) any
of the foregoing.
(f) Dividends. Neither Borrower nor Guarantor will declare or pay
any cash dividend, purchase, redeem or otherwise acquire for value any of
its stock now or hereafter outstanding, return any capital to its
stockholders, or make any distribution of its assets to its stockholders as
such, except the foregoing shall not apply to cash dividends paid by
Borrower to Guarantor; provided, however, that immediately before and after
giving effect thereto no (i) Default or Event of Default or (ii) Borrowing
Base deficiency or requirement to make any mandatory prepayment of
principal pursuant to Section 9(b) hereof, shall exist.
(g) Loans and Advances. Neither Borrower nor the Guarantor shall
make or permit to remain outstanding any loans or advances to or in any
person or entity, except that the foregoing restriction shall not apply to:
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(i) loans or advances to any person, the material details of
which have been set forth in the Financial Statements of the Borrower
and Guarantor heretofore furnished to Banks; or
(ii) advances made in the ordinary course of Borrower's and the
Guarantor's oil and gas business; or
(iii) loans or advances among Borrower and Guarantor.
(h) Sale or Discount of Receivables. Neither Borrower nor
Guarantor will discount or sell with recourse, or sell for less than the
greater of the face or market value thereof, any of its notes receivable or
accounts receivable.
(i) Nature of Business. Neither Borrower nor Guarantor will permit
any material change to be made in the character of its business as carried
on at the date hereof.
(j) Transactions with Affiliates. Neither Borrower nor Guarantor
will enter into any transaction with any Affiliate (other than Borrower or
Guarantor), except transactions upon terms that are no less favorable to it
than would be obtained in a transaction negotiated at arm's length with an
unrelated third party.
(k) Hedging Transactions. Neither Borrower nor Guarantor will
enter into any transaction providing (i) for the hedging, forward sale,
swap or any deviation thereof of crude oil or natural gas or other
commodities, or (ii) for a swap, collar, floor, cap, option, corridor, or
other contract which is intended to reduce or eliminate the risk of
fluctuation in interest rates, as such terms are referred to in the capital
markets, except the foregoing prohibitions shall not apply to (x)
transactions consented to in writing by the Banks which are on terms
acceptable to the Banks, or (y) Pre-Approved Contracts. The term
"Pre-Approved Contracts" as used herein shall mean any contract or
agreement (i) to hedge, forward, sell or swap crude oil or natural gas or
otherwise sell up to 75% of the Borrower's monthly production forecast for
all of Borrower's or Guarantor's, as the case may be, proved and producing
oil and gas properties for the period covered by the proposed hedging
transaction, (ii) with a maturity of twelve (12) months or less, (iii) with
"strike prices" per barrel greater than the Agent's forecasted price in the
most recent engineering evaluation of the Borrower's and Guarantor's, as
the case may be, oil and gas properties, adjusted for the difference
between the forecasted price and the Borrower's and Guarantor's, as the
case may be, actual product price as determined by Agent, and (iv) with
counter-parties to the hedging agreement which are approved by Agent.
(l) Investments. Neither Borrower nor the Guarantor shall make any
investments in any person or entity, except such restriction shall not
apply to:
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(i) investments and direct obligations of the United States of
America or any agency thereof;
(ii) investments in certificates of deposit issued by the Banks
or certificates of deposit with maturities of less than one year,
issued by other commercial banks in the United States having capital
and surplus in excess of $500,000,000 and which have a rating of (A)
50 or above by Sheshunoff and (B) "B" or above by Xxxx-Xxxxxx; or
(iii) investments in insured money market funds, Eurodollar
investment accounts and other similar accounts at Agent or such
investment with maturities of less than ninety (90) days at other
commercial banks having capital and surplus in excess of $500,000,000
and which have a rating of (A) 50 or above by Sheshunoff and (B) "B"
or above by Xxxx-Xxxxxx.
(m) Amendment to Articles of Incorporation or Bylaws. Neither
Borrower nor Guarantor will permit any amendment to, or any alteration of,
its Articles of Incorporation or Bylaws.
(n) Proceeds of Production. Neither Borrower nor Guarantor shall
redirect the payment of the proceeds of production from the Oil and Gas
Properties to anyone or any place other than to the Lockbox Account at the
Agent.
(o) Issuance of Preferred Stock. Neither Borrower nor Guarantor
shall not issue any preferred stock after the Effective Date without the
consent of Majority Banks.
(p) Amendments, etc. of Indentures. Except as specifically
permitted hereby, neither Borrower nor Guarantor shall make or allow to be
made (a) any amendments or modifications to the Indentures or any indenture
executed in connection with the issuance of any Senior Secured Notes or the
Discount Notes, or (ii) any prepayments or redemptions of the Senior
Secured Notes or the Discount Notes, unless any such action is approved by
Majority Banks.
(q) Amendments to and Redemption of Preferred Stock or Other Equity.
Neither Borrower nor Guarantor shall (i) amend any outstanding equity
issue after the Effective Date without the consent of Majority Banks, or
(ii) redeem any preferred stock without the consent of all Banks.
(r) Payment or Pre-Payment of Other Indebtedness. Except as
otherwise provided for in this Agreement is outstanding, neither Borrower
nor Guarantor shall make any unscheduled principal payments on or redeem
any of their indebtedness, including,
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without limitation, the Senior Secured Notes and the Discount Notes (other
than indebtedness owed the Banks hereunder) or purchase or redeem any of
their equity unless such payment, pre-payment or redemption is approved by
Majority Banks.
14. EVENTS OF DEFAULT. Any one or more of the following events shall be
considered an "Event of Default" as that term is used herein:
(a) The Borrower shall fail to pay when due or declared due the
principal of, and the interest on, the Notes, or any fee or any other
indebtedness of the Borrower incurred pursuant to this Agreement or any
other Loan Document; or
(b) Any representation or warranty made by Borrower or Guarantor under
this Agreement, or in any certificate or statement furnished or made to the
Banks pursuant hereto, or in connection herewith, or in connection with any
document furnished hereunder, shall prove to be untrue in any material
respect as of the date on which such representation or warranty is made (or
deemed made), or any representation, statement (including financial
statements), certificate, report or other data furnished or to be furnished
or made by Borrower or Guarantor under any Loan Document, including this
Agreement, proves to have been untrue in any material respect, as of the
date as of which the facts therein set forth were stated or certified; or
(c) Default shall be made in the due observance or performance of any
of the covenants or agreements of the Borrower and Guarantor contained in
the Loan Documents, including this Agreement (excluding covenants contained
in Section 12(w) and Section 13 of the Agreement for which there is no cure
period), and such default shall continue for more than thirty (30) days; or
(d) Default shall be made in the due observance or performance of the
covenants of Borrower and Guarantor contained in Section 12(w) or Section
13 of this Agreement; or
(e) Default shall be made in respect of any obligation for borrowed
money, other than the Notes, for which Borrower or Guarantor is liable
(directly, by assumption, as guarantor or otherwise), or any obligations
secured by any mortgage, pledge or other security interest, lien, charge or
encumbrance with respect thereto, on any asset or property of Borrower or
Guarantor or in respect of any agreement relating to any such obligations
unless such Borrower or Guarantor is not liable for same (i.e., unless
remedies or recourse for failure to pay such obligations is limited to
foreclosure of the collateral security therefor), and if such default shall
continue beyond the applicable grace period, if any; or
(f) Borrower or Guarantor shall commence a voluntary case or other
proceedings seeking liquidation, reorganization or other relief with
respect to itself or its debts under any
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bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking an appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due, or
shall take any corporate action authorizing the foregoing; or
(g) An involuntary case or other proceeding, shall be commenced
against Borrower or Guarantor seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of sixty (60)
days; or an order for relief shall be entered against Borrower or Guarantor
under the federal bankruptcy laws as now or hereinafter in effect; or
(h) A final judgment or order for the payment of money in excess of
$100,000 (or judgments or orders aggregating in excess of $100,000) shall
be rendered against Borrower or Guarantor and such judgments or orders
shall continue unsatisfied and unstayed for a period of thirty (30) days;
or
(i) In the event the Total Outstandings shall at any time exceed the
Borrowing Base established for the Revolving Notes, and the Borrower shall
fail to comply with the provisions of Section 9(b) hereof; or
(j) A Change of Control shall occur; or
(k) A Change of Management shall occur; or
(l) A default or event of default shall occur under the Indentures or
any other indenture or similar agreement executed by Borrower or Guarantor,
or any of them, in connection with the issuance of additional debt as
permitted by Sections 13(f)(v) and (vi) hereof.
Upon occurrence of any Event of Default specified in Subsections 14(f) and
(g) hereof, the entire principal amount due under the Notes and all interest
then accrued thereon, and any other liabilities of the Borrower or Guarantor
hereunder, shall become immediately due and payable all without notice and
without presentment, demand, protest, notice of protest or dishonor or any other
notice of default of any kind, all of which are hereby expressly waived by the
Borrower. In any other Event of Default, the Agent, upon request of Majority
Banks, shall by notice to the Borrower
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declare the principal of, and all interest then accrued on, the Notes and any
other liabilities hereunder to be forthwith due and payable, whereupon the same
shall forthwith become due and payable without presentment, demand, protest,
notice of intent to accelerate, notice of acceleration or other notice of any
kind, all of which the Borrower and Guarantor hereby expressly waive, anything
contained herein or in the Note to the contrary notwithstanding. Nothing
contained in this Section 14 shall be construed to limit or amend in any way the
Events of Default enumerated in the Note, or any other document executed in
connection with the transaction contemplated herein.
Upon the occurrence and during the continuance of any Event of Default, the
Banks are hereby authorized at any time and from time to time, without notice to
the Borrower or Guarantor (any such notice being expressly waived by the
Borrower and Guarantor), to set-off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by any of the Banks to or for the credit or the
account of the Borrower or Guarantor against any and all of the indebtedness of
the Borrower under the Notes and the Loan Documents, including this Agreement,
irrespective of whether or not the Banks shall have made any demand under the
Loan Documents, including this Agreement or the Notes and although such
indebtedness may be unmatured. Any amount set-off by any of the Banks shall be
applied against the indebtedness owed the Banks by the Borrower pursuant to this
Agreement and the Notes. The Banks agree promptly to notify the Borrower or, if
applicable, Guarantor, after any such setoff and application, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Bank under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which the Banks may have.
15. THE AGENT AND THE BANKS.
(a) Appointment and Authorization. Each Bank hereby appoints Agent
as its nominee and agent, in its name and on its behalf: (i) to act as
nominee for and on behalf of such Bank in and under all Loan Documents;
(ii) to arrange the means whereby the funds of Banks are to be made
available to the Borrower under the Loan Documents; (iii) to take such
action as may be requested by any Bank under the Loan Documents (when such
Bank is entitled to make such request under the Loan Documents); (iv) to
receive all documents and items to be furnished to Banks under the Loan
Documents; (v) to be the secured party, mortgagee, beneficiary, and similar
party in respect of, and to receive, as the case may be, any collateral for
the benefit of Banks; (vi) to promptly distribute to each Bank all material
information, requests, documents and items received from the Borrower under
the Loan Documents; (vii) to promptly distribute to each Bank such Bank's
Pro Rata Part of each payment or prepayment (whether voluntary, as proceeds
of insurance thereon, or otherwise) in accordance with the terms of the
Loan Documents and (viii) to deliver to the appropriate Persons requests,
demands, approvals and consents received from Banks. Each Bank hereby
authorizes Agent to take all actions and to exercise such powers under the
Loan Documents as are specifically delegated to Agent by the terms hereof
or thereof, together with all other
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powers reasonably incidental thereto. With respect to its commitments
hereunder and the Notes issued to it, Agent and any successor Agent shall
have the same rights under the Loan Documents as any other Bank and may
exercise the same as though it were not the Agent; and the term "Bank" or
"Banks" shall, unless otherwise expressly indicated, include Agent and any
successor Agent in its capacity as a Bank. Agent and any successor Agent
and its Affiliates may accept deposits from, lend money to, act as trustee
under indentures of and generally engage in any kind of business with the
Borrower or the Guarantor, and any person which may do business with the
Borrower or the Guarantor, all as if Agent and any successor Agent was not
Agent hereunder and without any duty to account therefor to the Banks;
provided that, if any payments in respect of any property (or the proceeds
thereof) now or hereafter in the possession or control of Agent which may
be or become security for the obligations of the Borrower or the Guarantor
arising under the Loan Documents by reason of the general description of
indebtedness secured or of property contained in any other agreements,
documents or instruments related to any such other business shall be
applied to reduction of the obligations of the Borrower arising under the
Loan Documents, then each Bank shall be entitled to share in such
application according to its pro rata part thereof. Each Bank, upon request
of any other Bank, shall disclose to all other Banks all indebtedness and
liabilities, direct and contingent, of the Borrower to such Bank as of the
time of such request.
(b) Note Holders. From time to time as other Banks become a party
to this Agreement, Agent shall obtain execution by the Borrower of
additional Notes in amounts representing the Commitment of each such new
Bank, up to an aggregate face amount of all Revolving Notes not exceeding
$25,000,000. The obligation of such Bank shall be governed by the
provisions of this Agreement, including but not limited to, the obligations
specified in Section 2 hereof. From time to time, Agent may require that
the Banks exchange their Notes for newly issued Notes to better reflect the
Commitments of the Banks. Agent may treat the payee of any Note as the
holder thereof until written notice of transfer has been filed with it,
signed by such payee and in form satisfactory to Agent.
(c) Consultation with Counsel. Banks agree that Agent may consult
with legal counsel selected by Agent and shall not be liable for any action
taken or suffered in good faith by it in accordance with the advice of such
counsel.
(d) Documents. Agent shall not be under a duty to examine or pass
upon the validity, effectiveness, enforceability, genuineness or value of
any of the Loan Documents or any other instrument or document furnished
pursuant thereto or in connection therewith, and Agent shall be entitled to
assume that the same are valid, effective, enforceable and genuine and what
they purport to be.
(e) Resignation or Removal of Agent. Subject to the appointment
and acceptance of a successor Agent as provided below, Agent may resign at
any time by giving written
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notice thereof to Banks and the Borrower, and Agent may be removed at any
time with or without cause by all Banks. If no successor Agent has been so
appointed by all Banks (and approved by the Borrower) and has accepted such
appointment within 30 days after the retiring Agent's giving of notice of
resignation or removal of the retiring Agent, then the retiring Agent may,
on behalf of Banks, appoint a successor Agent. Any successor Agent must be
approved by Borrower, which approval will not be unreasonably withheld.
Upon the acceptance of any appointment as Agent hereunder by a successor
Agent, such successor Agent shall thereupon succeed to and become vested
with all the rights and duties of the retiring Agent, and the retiring
Agent, shall be discharged from its duties and obligations hereunder. After
any retiring Agent's resignation or removal hereunder as Agent, the
provisions of this Section 15 shall continue in effect for its benefit in
respect to any actions taken or omitted to be taken by it while it was
acting as Agent. To be eligible to be an Agent hereunder the party serving,
or to serve, in such capacity must own a Pro Rata Part of the Commitments
equal to the level of Commitment required to be held by any Bank pursuant
to Section 28 hereof.
(f) Responsibility of Agent. It is expressly understood and agreed
that the obligations of Agent under the Loan Documents are only those
expressly set forth in the Loan Documents as to each and that Agent, shall
be entitled to assume that no Default or Event of Default has occurred and
is continuing, unless Agent has actual knowledge of such fact or has
received notice from a Bank or the Borrower that such Bank or the Borrower
considers that a Default or an Event of Default has occurred and is
continuing and specifying the nature thereof. Neither Agent nor any of its
directors, officers, attorneys or employees shall be liable for any action
taken or omitted to be taken by them under or in connection with the Loan
Documents, except for its or their own gross negligence or willful
misconduct. Agent shall not incur liability under or in respect of any of
the Loan Documents by acting upon any notice, consent, certificate,
warranty or other paper or instrument believed by it to be genuine or
authentic or to be signed by the proper party or parties, or with respect
to anything which it may do or refrain from doing in the reasonable
exercise of its judgment, or which may seem to it to be necessary or
desirable.
Agent shall not be responsible to Banks for any of the Borrower's
recitals, statements, representations or warranties contained in any of the
Loan Documents, or in any certificate or other document referred to or
provided for in, or received by any Bank under, the Loan Documents, or for
the value, validity, effectiveness, genuineness, enforceability or
sufficiency of or any of the Loan Documents or for any failure by the
Borrower to perform any of its obligations hereunder or thereunder. Agent
may employ agents and attorneys-in-fact and shall not be answerable, except
as to money or securities received by it or its authorized agents, for the
negligence or misconduct of any such agents or attorneys-in-fact selected
by it with reasonable care.
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The relationship between Agent and each Bank is only that of agent and
principal and has no fiduciary aspects. Nothing in the Loan Documents or
elsewhere shall be construed to impose on Agent any duties or
responsibilities other than those for which express provision is therein
made. In performing its duties and functions hereunder, Agent does not
assume and shall not be deemed to have assumed, and hereby expressly
disclaims, any obligation or responsibility toward or any relationship of
agency or trust with or for the Borrower or any of its beneficiaries or
other creditors. As to any matters not expressly provided for by the Loan
Documents, Agent shall not be required to exercise any discretion or take
any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of all Banks and such instructions shall be binding upon all
Banks and all holders of the Notes; provided, however, that Agent shall not
be required to take any action which is contrary to the Loan Documents or
applicable law.
Agent shall have the right to exercise or refrain from exercising,
without notice or liability to the Banks, any and all rights afforded to
Agent by the Loan Documents or which Agent may have as a matter of law;
provided, however, Agent shall not (i) except as provided in Section 7(b)
hereof, without the consent of Majority Banks designate the amount of the
Borrowing Base or the Monthly Commitment Reduction or (ii) without the
consent of all Banks, take any other action with regard to amending the
Loan Documents, waiving any default under the Loan Documents or taking any
other action with respect to the Loan Documents which requires consent of
all Banks. Provided further, however, that no amendment, waiver, or other
action shall be effected pursuant to the preceding clause (ii) without the
consent of all Banks which: (i) would increase the Borrowing Base or
decrease the Monthly Commitment Reduction, (ii) would reduce any fees
hereunder, or the principal of, or the interest on, any Bank's Note or
Notes, (iii) would postpone any date fixed for any payment of any fees
hereunder, or any principal or interest of any Bank's Note or Notes, (iv)
would materially increase any Bank's obligations hereunder or would
materially alter Agent's obligations to any Bank hereunder, (v) would
release Borrower from its obligation to pay any Bank's Note or Notes, (vi)
release any of the Collateral, (vii) would change the definition of all
Banks, (viii) would amend, modify or change any provision of this Agreement
requiring the consent of all the Banks, (ix) would waive any of the
conditions precedent to the Effective Date or the making of any Loan or
issuance of any Letter of Credit or (x) would extend the Revolving Maturity
Date or (xi) would amend this sentence or the previous sentence. Agent
shall not have liability to Banks for failure or delay in exercising any
right or power possessed by Agent pursuant to the Loan Documents or
otherwise unless such failure or delay is caused by the gross negligence of
the Agent, in which case only the Agent responsible for such gross
negligence shall have liability therefor to the Banks.
(g) Independent Investigation. Each Bank severally represents and
warrants to Agent that it has made its own independent investigation and
assessment of the financial
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condition and affairs of the Borrower in connection with the making and
continuation of its participation hereunder and has not relied exclusively
on any information provided to such Bank by Agent in connection herewith,
and each Bank represents, warrants and undertakes to Agent that it shall
continue to make its own independent appraisal of the credit worthiness of
the Borrower while the Notes are outstanding or its commitments hereunder
are in force. Agent shall not be required to keep itself informed as to the
performance or observance by the Borrower of this Agreement or any other
document referred to or provided for herein or to inspect the properties or
books of the Borrower. Other than as provided in this Agreement, Agent
shall not have any duty, responsibility or liability to provide any Bank
with any credit or other information concerning the affairs, financial
condition or business of the Borrower which may come into the possession of
Agent.
(h) Indemnification. Banks agree to indemnify Agent, ratably
according to their respective Commitments on a Pro Rata basis, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any proper
and reasonable kind or nature whatsoever which may be imposed on, incurred
by or asserted against Agent in any way relating to or arising out of the
Loan Documents or any action taken or omitted by Agent under the Loan
Documents, provided that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from Agent's gross
negligence or willful misconduct. Each Bank shall be entitled to be
reimbursed by the Agent for any amount such Bank paid to Agent under this
Section 15(h) to the extent the Agent has been reimbursed for such payments
by the Borrower or any other Person. THE PARTIES INTEND FOR THE PROVISIONS
OF THIS SECTION TO APPLY TO AND PROTECT THE AGENT FROM THE CONSEQUENCES OF
ANY LIABILITY INCLUDING STRICT LIABILITY IMPOSED OR THREATENED TO BE
IMPOSED ON AGENT AS WELL AS FROM THE CONSEQUENCES OF ITS OWN NEGLIGENCE,
WHETHER OR NOT THAT NEGLIGENCE IS THE SOLE, CONTRIBUTING OR CONCURRING
CAUSE OF ANY SUCH LIABILITY.
(i) Benefit of Section 15. The agreements contained in this
Section 15 are solely for the benefit of Agent and the Banks and are not
for the benefit of, or to be relied upon by, the Borrower, any affiliate of
the Borrower or any other person.
(j) Pro Rata Treatment. Subject to the provisions of this
Agreement, each payment (including each prepayment) by the Borrower and
collection by Banks (including offsets) on account of the principal of and
interest on the Notes and fees provided for in this Agreement, payable by
the Borrower shall be made Pro Rata; provided, however, in the event that
any Defaulting Bank shall have failed to make an Advance as contemplated
under Section 3 hereof and Agent or another Bank or Banks shall have made
such Advance, payment received by Agent for the account of such Defaulting
Bank or Banks shall not be
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distributed to such Defaulting Bank or Banks until such Advance or Advances
shall have been repaid in full to the Bank or Banks who funded such Advance
or Advances.
(k) Assumption as to Payments. Except as specifically provided
herein, unless Agent shall have received notice from the Borrower prior to
the date on which any payment is due to Banks hereunder that the Borrower
will not make such payment in full, Agent may, but shall not be required
to, assume that the Borrower has made such payment in full to Agent on such
date and Agent may, in reliance upon such assumption, cause to be
distributed to each Bank on such due date an amount equal to the amount
then due such Bank. If and to the extent the Borrower shall not have so
made such payment in full to Agent, each Bank shall repay to Agent
forthwith on demand such amount distributed to such Bank together with
interest thereon, for each day from the date such amount is distributed to
such Bank until the date such Bank repays such amount to Agent, at the
interest rate applicable to such portion of the Revolving Loan.
(l) Other Financings. Without limiting the rights to which any
Bank otherwise is or may become entitled, such Bank shall have no interest,
by virtue of this Agreement or the Loan Documents, in (a) any present or
future loans from, letters of credit issued by, or leasing or other
financial transactions by, any other Bank to, on behalf of, or with the
Borrower or the Guarantor (collectively referred to herein as "Other
Financings") other than the obligations hereunder; (b) any present or
future guarantees by or for the account of the Borrower or the Guarantor
which are not contemplated by the Loan Documents; (c) any present or future
property taken as security for any such Other Financings; or (d) any
property now or hereafter in the possession or control of any other Bank
which may be or become security for the obligations of the Borrower or the
Guarantor arising under any loan document by reason of the general
description of indebtedness secured or property contained in any other
agreements, documents or instruments relating to any such Other Financings.
(m) Interests of Banks. Nothing in this Agreement shall be
construed to create a partnership or joint venture between Banks for any
purpose. Agent, Banks and the Borrower recognize that the respective
obligations of Banks under the Commitments shall be several and not joint
and that neither Agent nor any of Banks shall be responsible or liable to
perform any of the obligations of the other under this Agreement. Each
Bank is deemed to be the owner of an undivided interest in and to all
rights, titles, benefits and interests belonging and accruing to Agent
under the Security Instruments, including, without limitation, liens and
security interests in any collateral, fees and payments of principal and
interest by the Borrower under the Commitments on a Pro Rata basis. Each
Bank shall perform all duties and obligations of Banks under this Agreement
in the same proportion as its ownership interest in the Loans outstanding
at the date of determination thereof.
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(n) Investments. Whenever Agent in good faith determines that it
is uncertain about how to distribute to Banks any funds which it has
received, or whenever Agent in good faith determines that there is any
dispute among the Banks about how such funds should be distributed, Agent
may choose to defer distribution of the funds which are the subject of such
uncertainty or dispute. If Agent in good faith believes that the
uncertainty or dispute will not be promptly resolved, or if Agent is
otherwise required to invest funds pending distribution to the Banks, Agent
may invest such funds pending distribution (at the risk of the Borrower).
All interest on any such investment shall be distributed upon the
distribution of such investment and in the same proportions and to the same
Persons as such investment. All monies received by Agent for distribution
to the Banks (other than to the Person who is Agent in its separate
capacity as a Bank) shall be held by the Agent pending such distribution
solely as Agent for such Banks, and Agent shall have no equitable title to
any portion thereof.
16. EXERCISE OF RIGHTS. No failure to exercise, and no delay in
exercising, on the part of the Agent or the Banks, any right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right. The rights of the Agent and the Banks hereunder shall be in addition to
all other rights provided by law. No modification or waiver of any provision of
the Loan Documents, including this Agreement, or the Note nor consent to
departure therefrom, shall be effective unless in writing, and no such consent
or waiver shall extend beyond the particular case and purpose involved. No
notice or demand given in any case shall constitute a waiver of the right to
take other action in the same, similar or other circumstances without such
notice or demand.
17. NOTICES. Any notices or other communications required or permitted
to be given by this Agreement or any other documents and instruments referred to
herein must be given in writing (which may be by facsimile transmission) and
must be personally delivered or mailed by prepaid certified or registered mail
to the party to whom such notice or communication is directed at the address of
such party as follows: (a) BORROWER and GUARANTOR: c/o GOTHIC ENERGY
CORPORATION, 0000 Xxxxx Xxxxx, Xxxxx 000, Xxxxx, Xxxxxxxx 00000-0000, Attention:
Xxxxxxx Xxxxx, President; (b) AGENT: BANK ONE, TEXAS, N.A., 0000 Xxxx Xxxxxx,
Xxxxxx, Xxxxx 00000, Facsimile No. 000-000-0000, Attention: Xxxxx X. Xxxxxxx,
Vice President. Any such notice or other communication shall be deemed to have
been given (whether actually received or not) on the day it is personally
delivered or delivered by facsimile as aforesaid or, if mailed, on the third day
after it is mailed as aforesaid. Any party may change its address for purposes
of this Agreement by giving notice of such change to the other party pursuant to
this Section 17. Any notice required to be given to the Banks shall be given to
the Agent and distributed to all Banks by the Agent.
18. EXPENSES. The Borrower shall pay (i) all reasonable and necessary
out-of-pocket expenses of the Banks, including reasonable fees and disbursements
of special counsel for the Agent, in connection with the preparation of this
Agreement, any waiver or consent hereunder or any
-53-
amendment hereof or any default or Event of Default or alleged default or Event
of Default hereunder, (ii) all reasonable and necessary out-of-pocket expenses
of the Agent, including reasonable fees and disbursements of special counsel for
the Agent in connection with the preparation of any participation agreement for
a participant or participants requested by the Borrower or any amendment thereof
and (iii) if a default or an Event of Default occurs, all reasonable and
necessary out-of-pocket expenses incurred by the Banks, including fees and
disbursements of counsel, in connection with such default and Event of Default
and collection and other enforcement proceedings resulting therefrom. The
Borrower shall indemnify the Banks against any transfer taxes, document taxes,
assessments or charges made by any governmental authority by reason of the
execution, delivery and filing of the Loan Documents. The obligations of this
Section 18 shall survive any termination of this Agreement, the expiration of
the Loans and the payment of all indebtedness of the Borrower to the Banks
hereunder and under the Notes.
19. INDEMNITY. The Borrower and Guarantor agree to indemnify and hold
harmless the Banks and their respective officers, employees, agents, attorneys
and representatives (singularly, an "Indemnified Party", and collectively, the
"Indemnified Parties") from and against any loss, cost, liability, damage or
expense (including the reasonable fees and out-of-pocket expenses of counsel to
the Banks, including all local counsel hired by such counsel) ("Claim") incurred
by the Banks in investigating or preparing for, defending against, or providing
evidence, producing documents or taking any other action in respect of any
commenced or threatened litigation, administrative proceeding or investigation
under any federal securities law, federal or state environmental law, or any
other statute of any jurisdiction, or any regulation, or at common law or
otherwise, which is alleged to arise out of or is based upon any acts, practices
or omissions or alleged acts, practices or omissions of the Borrower or
Guarantor or their agents or arises in connection with the duties, obligations
or performance of the Indemnified Parties in negotiating, preparing, executing,
accepting, keeping, completing, countersigning, issuing, selling, delivering,
releasing, assigning, handling, certifying, processing or receiving or taking
any other action with respect to the Loan Documents and all documents, items and
materials contemplated thereby even if any of the foregoing arises out of an
Indemnified Party's ordinary negligence. The indemnity set forth herein shall
be in addition to any other obligations or liabilities of the Borrower and
Guarantor to the Banks hereunder or at common law or otherwise, and shall
survive any termination of this Agreement, the expiration of the Loans and the
payment of all indebtedness of the Borrower and Guarantor to the Banks hereunder
and under the Notes, provided that the Borrower and Guarantor shall have no
obligation under this Section to the Bank with respect to any of the foregoing
arising out of the gross negligence or willful misconduct of the Bank. If any
Claim is asserted against any Indemnified Party, the Indemnified Party shall
endeavor to notify the Borrower and Guarantor of such Claim (but failure to do
so shall not affect the indemnification herein made except to the extent of the
actual harm caused by such failure). The Indemnified Party shall have the right
to employ, at the Borrower's and Guarantor's expense, counsel of the Indemnified
Parties' choosing and to control the defense of the Claim. The Borrower and
Guarantor may at their own expense also participate in the defense of any Claim.
Each Indemnified Party may employ separate counsel in connection with any
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Claim to the extent such Indemnified Party believes it reasonably prudent to
protect such Indemnified Party. THE PARTIES INTEND FOR THE PROVISIONS OF THIS
SECTION TO APPLY TO AND PROTECT EACH INDEMNIFIED PARTY FROM THE CONSEQUENCES OF
ANY LIABILITY INCLUDING STRICT LIABILITY IMPOSED OR THREATENED TO BE IMPOSED ON
AGENT AS WELL AS FROM THE CONSEQUENCES OF ITS OWN NEGLIGENCE, WHETHER OR NOT
THAT NEGLIGENCE IS THE SOLE, CONTRIBUTING, OR CONCURRING CAUSE OF ANY CLAIM.
20. GOVERNING LAW. THIS AGREEMENT IS BEING EXECUTED AND DELIVERED, AND
IS INTENDED TO BE PERFORMED, IN DALLAS, DALLAS COUNTY, TEXAS, AND THE
SUBSTANTIVE LAWS OF TEXAS SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT
AND INTERPRETATION OF THIS AGREEMENT AND ALL OTHER DOCUMENTS AND INSTRUMENTS
REFERRED TO HEREIN, UNLESS OTHERWISE SPECIFIED THEREIN.
21. INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws effective
during the term of this Agreement, such provisions shall be fully severable and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement, and the
remaining provisions of the Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement.
22. MAXIMUM INTEREST RATE. Regardless of any provisions contained in
this Agreement or in any other documents and instruments referred to herein, the
Banks shall never be deemed to have contracted for or be entitled to receive,
collect or apply as interest on the Notes any amount in excess of the Maximum
Rate, and in the event any Bank ever receives, collects or applies as interest
any such excess, or if an acceleration of the maturities of any Notes or if any
prepayment by the Borrower results in the Borrower having paid any interest in
excess of the Maximum Rate, such amount which would be excessive interest shall
be applied to the reduction of the unpaid principal balance of the Notes for
which such excess was received, collected or applied, and, if the principal
balance of such Note is paid in full, any remaining excess shall forthwith be
paid to the Borrower. All sums paid or agreed to be paid to the Banks for the
use, forbearance or detention of the indebtedness evidenced by the Notes and/or
this Agreement shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of such indebtedness
until payment in full so that the rate or amount of interest on account of such
indebtedness does not exceed the Maximum Rate. In determining whether or not
the interest paid or payable under any specific contingency exceeds the Maximum
Rate of interest permitted by law, the Borrower and the Banks shall, to the
maximum extent permitted under applicable law, (i) characterize any non-
principal payment as an expense, fee or premium, rather than as interest; and
(ii) exclude voluntary prepayments and the effect thereof; and (iii) compare the
total amount of interest contracted for, charged or received with the total
amount of interest which could be contracted for, charged or received throughout
the entire contemplated term of the Note at the Maximum Rate.
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23. AMENDMENTS. This Agreement may be amended only by an instrument in
writing executed by an authorized officer of the party against whom such
amendment is sought to be enforced.
24. MULTIPLE COUNTERPARTS. This Agreement may be executed in a number
of identical separate counterparts, each of which for all purposes is to be
deemed an original, but all of which shall constitute, collectively, one
agreement. No party to this Agreement shall be bound hereby until a counterpart
of this Agreement has been executed by all parties hereto.
25. CONFLICT. In the event any term or provision hereof is inconsistent
with or conflicts with any provision of the Loan Documents, the terms or
provisions contained in this Agreement shall be controlling.
26. SURVIVAL. All covenants, agreements, undertakings, representations
and warranties made in the Loan Documents, including this Agreement, the Notes
or other documents and instruments referred to herein shall survive all closings
hereunder and shall not be affected by any investigation made by any party.
27. PARTIES BOUND. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, assigns,
heirs, legal representatives and estates, provided, however, that the Borrower
may not, without the prior written consent of all of the Banks, assign any
rights, powers, duties or obligations hereunder.
28. ASSIGNMENTS AND PARTICIPATIONS.
(a) Each Bank shall have the right to sell, assign or transfer all or
any part of its Note or Notes, its Commitments and its rights and
obligations hereunder to one or more Affiliates, Banks, financial
institutions, pension plans, insurance companies, investment funds, or
similar Persons who are Eligible Assignees or to a Federal Reserve Bank;
provided, that in connection with each sale, assignment or transfer (other
than to an Affiliate, a Bank or a Federal Reserve Bank), the applicable
Bank will consider the opinion and recommendation of Borrower, which
opinion and recommendation shall in no way be binding upon such Bank, and
each such sale, assignment, or transfer (other than to an Affiliate, a Bank
or a Federal Reserve Bank), shall require the consent of Agent, which
consent will not be unreasonably withheld, and the assignee, transferee or
recipient shall have, to the extent of such sale, assignment, or transfer,
the same rights, benefits and obligations as it would if it were such Bank
and a holder of such Note, Commitments and rights and obligations,
including, without limitation, the right to vote on decisions requiring
consent or approval of all Banks or Majority Banks and the obligation to
fund its Commitments; provided, further, that (1) each such sale,
assignment, or transfer (other than to an Affiliate, a Bank or a Federal
Reserve Bank) shall be in an aggregate principal amount
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not less than $5,000,000, (2) each remaining Bank shall at all times
maintain Commitments then outstanding in an aggregate principal amount at
least equal to $5,000,000; (3) each such sale, assignment or transfer shall
be of a Pro Rata portion of such Bank's Revolving Commitment and its Bridge
Loan Commitment, (4) no Bank may offer to sell its Note or Notes,
Commitments, rights and obligations or interests therein in violation of
any securities laws; and (5) no such assignments (other than to a Federal
Reserve Bank) shall become effective until the assigning Bank and its
assignee delivers to Agent and Borrower an Assignment and Acceptance and
the Note or Notes subject to such assignment and other documents evidencing
any such assignment. An assignment fee in the amount of $3,500 for each
such assignment (other than to an Affiliate, a Bank or the Federal Reserve
Bank) will be payable to Agent by assignor or assignee. Within five (5)
Business Days after its receipt of copies of the Assignment and Acceptance
and the other documents relating thereto and the Note or Notes, the
Borrower shall execute and deliver to Agent (for delivery to the relevant
assignee) a new Note or Notes evidencing such assignee's assigned
Commitments and if the assignor Bank has retained a portion of its
Commitments, a replacement Note in the principal amount of the Commitments
retained by the assignor (except as provided in the last sentence of this
paragraph (a) such Note or Notes to be in exchange for, but not in payment
of, the Note or Notes held by such Bank). On and after the effective date
of an assignment hereunder, the assignee shall for all purposes be a Bank,
party to this Agreement and any other Loan Document executed by the Banks
and shall have all the rights and obligations of a Bank under the Loan
Documents, to the same extent as if it were an original party thereto, and
no further consent or action by Borrower, Banks or the Agent shall be
required to release the transferor Bank with respect to its Commitments
assigned to such assignee and the transferor Bank shall henceforth be so
released.
(b) Each Bank shall have the right to grant participations in all or
any part of such Bank's Notes and Commitments hereunder to one or more
pension plans, investment funds, insurance companies, financial
institutions or other Persons, provided, that:
(i) each Bank granting a participation shall retain the right to
vote hereunder, and no participant shall be entitled to vote hereunder
on decisions requiring consent or approval of Bank or Majority Banks
(except as set forth in (iii) below);
(ii) in the event any Bank grants a participation hereunder, such
Bank's obligations under the Loan Documents shall remain unchanged,
such Bank shall remain solely responsible to the other parties hereto
for the performance of such obligations, such Bank shall remain the
holder of any such Note or Notes for all purposes under the Loan
Documents, and Agent, each Bank and Borrower shall be entitled to deal
with the Bank granting a participation in the same manner as if no
participation had been granted; and
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(iii) no participant shall ever have any right by reason of its
participation to exercise any of the rights of Banks hereunder, except
that any Bank may agree with any participant that such Bank will not,
without the consent of such participant (which consent may not be
unreasonably withheld) consent to any amendment or waiver requiring
approval of all Banks.
(c) It is understood and agreed that any Bank may provide to assignees
and participants and prospective assignees and participants financial
information and reports and data concerning Borrower's properties and
operations which was provided to such Bank pursuant to this Agreement.
(d) Upon the reasonable request of either Agent or Borrower, each Bank
will identify those to whom it has assigned or participated any part of its
Notes and Commitment, and provide the amounts so assigned or participated.
29. CHOICE OF FORUM: CONSENT TO SERVICE OF PROCESS AND JURISDICTION.
THE OBLIGATIONS OF BORROWER UNDER THE LOAN DOCUMENTS ARE PERFORMABLE IN DALLAS
COUNTY, TEXAS. ANY SUIT, ACTION OR PROCEEDING AGAINST THE BORROWER WITH RESPECT
TO THE LOAN DOCUMENTS OR ANY JUDGMENT ENTERED BY ANY COURT IN RESPECT THEREOF,
MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS, COUNTY OF DALLAS, OR IN THE
UNITED STATES COURTS LOCATED IN DALLAS COUNTY, TEXAS AND THE BORROWER HEREBY
SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS FOR THE PURPOSE OF ANY
SUCH SUIT, ACTION OR PROCEEDING. THE BORROWER HEREBY IRREVOCABLY CONSENT TO
SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING IN SAID COURT BY THE
MAILING THEREOF BY BANK BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
BORROWER, AS APPLICABLE, AT THE ADDRESS FOR NOTICES AS PROVIDED IN SECTION 17.
THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO ANY LOAN DOCUMENT BROUGHT IN THE COURTS LOCATED IN THE
STATE OF TEXAS, COUNTY OF DALLAS, AND HEREBY FURTHER IRREVOCABLY WAIVES ANY
CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
30. WAIVER OF JURY TRIAL. THE BORROWER HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
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31. OTHER AGREEMENTS. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
32. FINANCIAL TERMS. All accounting terms used in this Agreement which
are not specifically defined herein shall be construed in accordance with GAAP.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
BORROWER:
GOTHIC PRODUCTION CORPORATION
an Oklahoma corporation
By:
------------------------------------
Xxxxxxx Xxxxx, President
GUARANTOR:
GOTHIC ENERGY CORPORATION
an Oklahoma corporation
By:
------------------------------------
Xxxxxxx Xxxxx, President
BANKS:
BANK ONE, TEXAS, N.A.,
a national banking association
By:
------------------------------------
Xxxxx X. Xxxxxxx, Vice President
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AGENT:
BANK ONE, TEXAS, N.A.,
a national banking association
By:
------------------------------------
Xxxxx X. Xxxxxxx, Vice President
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