TERM LOAN AGREEMENT
THIS TERM LOAN AGREEMENT, as of November 29, 2001, is by and between
KESTREL ENERGY, INC., a Colorado corporation ("Borrower"), and XXXXX FARGO
BANK, N.A., a national banking association ("Xxxxx Fargo").
RECITAL
A. Borrower and Xxxxx Fargo desire that this Term Loan Agreement be
executed and delivered in order to provide for the terms upon which Xxxxx Fargo
will make a term loan to Borrower and by which such term loan will be governed
and repaid.
B. The proceeds of the above-described term loan will be used by Borrower
exclusively to pay in full any and all amounts outstanding in connection with
Borrower's existing indebtedness to Xxxxx Fargo (and any and all related costs
and expenses), and, upon such payment in full, the letter agreement dated
February 21, 2000 (the "Prior Credit Agreement") shall be superseded hereby and
terminated.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND REFERENCES
Section 1.1 DEFINED TERMS. As used in this Agreement, each of the
following terms has the meaning given it in this Section 1.1 or in the sections
and subsections referred to below:
"AFFILIATE" means, as to any Person, each Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person; provided that, for
the purposes of this definition, a Person shall be deemed to control another
entity if the controlling Person possesses, directly or indirectly, the power to
direct or control the direction of the management and policies of such entity,
whether through the ownership of stock, membership interests or other interests
therein, by contract or otherwise, and shall include without limitation any
controlling shareholder, member or owner thereof.
"AGREEMENT" means this Term Loan Agreement.
"BORROWER" means Kestrel Energy, Inc., a Colorado corporation.
"BORROWING BASE" means, at any time prior to the Maturity Date, the
aggregate loan value of all Oil and Gas Interests, as determined by Xxxxx Fargo
in its sole and absolute discretion, using such assumptions as to pricing,
discount factors, discount rates, expenses and other factors as Xxxxx Fargo
customarily uses as to borrowing-base oil and gas loans at the time such
determination is made; provided that the Borrowing Base shall be $1,396,000 for
the time period
from the date of this Agreement until the first redetermination of the Borrowing
Base pursuant to Section 2.7 below.
"BORROWING BASE NOTICE" means a written notice sent to Borrower by Xxxxx
Fargo notifying Borrower of the Borrowing Base determined by Xxxxx Fargo for the
upcoming Borrowing Base Period or other period.
"BORROWING BASE PERIOD" means: (a) the time period from the date of this
Agreement through April 30, 2002; and (b) the time period from May 1, 2002
through the Maturity Date.
"BUSINESS DAY" means any day which is not a Saturday, a Sunday or a legal
holiday on which commercial banks are authorized or required to be closed in
Denver, Colorado.
"COLLATERAL" means the Oil and Gas Interests and any and all other
tangible or intangible real or personal property which, at any time or from time
to time hereafter, has been (or is purported to have been) mortgaged, pledged,
encumbered or otherwise dedicated to Xxxxx Fargo in connection with any of the
Obligations.
"CONSOLIDATED" means, as to any Person, the combined financial statements,
financial position, financial condition, net income, assets, liabilities and
other financial data of such Person and of any and all Affiliates of such Person
that would be considered consolidated Affiliates under GAAP.
"CUMULATIVE NET INCOME" means, with respect to Borrower, the sum of
Borrower's Consolidated net income, determined in accordance with GAAP or with
another accounting system approved in writing by Xxxxx Fargo, for each completed
Fiscal Quarter after the date from which such calculation is being made;
provided that if Borrower's Consolidated net income is negative for any such
Fiscal Quarter, in computing Cumulative Net Income, Borrower's Consolidated net
income shall be deemed to be zero for that Fiscal Quarter.
"CURRENT RATIO" means, at any time and from time to time, the ratio of:
(a) Borrower's Consolidated current assets; to (b) Borrower's Consolidated
current liabilities (excluding current maturities of the Loan), all determined
in accordance with GAAP or with another accounting system approved in writing by
Xxxxx Fargo.
"DEBT" means, as to any Person, all indebtedness, liabilities and
obligations of such Person, whether primary or secondary, direct or indirect,
absolute or contingent, including without limitation capital lease obligations.
"DEFAULT" means any Event of Default and any default, event or condition
which would, with the giving of any requisite notice and/or the passage of time,
constitute an Event of Default.
"DISTRIBUTION" means any distribution payable in cash or property to any
shareholder of Borrower, or any purchase, redemption or retirement of, or other
payment with respect to, any capital stock in Borrower.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
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"ERISA PLAN" means any pension benefit plan subject to Title IV of ERISA
maintained by Borrower or any Affiliate of Borrower to which Borrower is
required to contribute.
"EVENT OF DEFAULT" has the meaning given such term in Section 7.1 below.
"FISCAL QUARTER" means a three-month period ending on the last day of
March, June, September or December of any year.
"FISCAL YEAR" means a twelve-month period ending on December 11 of any
year.
"GAAP" means those generally accepted accounting principles and practices
which are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor) and which, in the case of Borrower: (a) are
applied for all periods after the date hereof in a manner consistent with the
manner in which such principles and practices were applied to the Initial
Financial Statements, and (b) are consistently applied for all periods after the
date hereof so as to properly reflect the financial condition, and the results
of operations and changes in financial position, of Borrower.
"HEDGING OBLIGATIONS" means, with respect to any Person, all liabilities
of such Person under commodity hedge, commodity swap, exchange, collar or cap
agreements, fixed price agreements and all other agreements and arrangements
designed to protect such Person against changes in interest rates and currency
exchange rates and fluctuations in the price of oil, gas, hydrocarbons or other
commodities.
"INITIAL ENGINEERING REPORT" means the report or reports covering the Oil
and Gas Interests dated July 1, 2001, prepared by Xxxxxxx Associates, a true and
correct copy of which has been furnished by Borrower to Xxxxx Fargo.
"INITIAL FINANCIAL STATEMENTS" means the audited annual financial
statements of Borrower dated as of December 31, 2000, and the quarterly
financial statements of Borrower dated as of March 31, 2001 and June 30, 2001,
copies of which Initial Financial Statements have heretofore been delivered by
Borrower to Wells-Fargo.
"LIEN" means, with respect to any property or assets, any right or
interest therein of a creditor to secure Debt owed to him or any other
arrangement with such creditor which provides for the payment of such Debt out
of such property or assets or which allows him to have such Debt satisfied out
of such property or assets prior to the general creditors of any owner thereof,
including without limitation any lien, mortgage, security interest, pledge,
deposit, production payment, rights of a vendor under any title retention or
conditional sale agreement or lease substantially equivalent thereto, or any
other charge or encumbrance for security purposes, whether arising by law or
agreement or otherwise, but excluding any right of offset which arises without
agreement in the ordinary course of business.
"LOAN" means the amortizing term loan to be made by Xxxxx Fargo to
Borrower as described in Section 2.1 below.
"LOAN DOCUMENTS" means this Agreement, the Security Documents, the Note,
agreements under which Borrower, at any time or from time to time, has incurred
or may incur
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Hedging Obligations to Xxxxx Fargo (or any Affiliate of Xxxxx Fargo) and all
other agreements, certificates, legal opinions and other documents, instruments
and writings heretofore or hereafter delivered in connection herewith or
therewith.
"MATURITY DATE" means the earlier of: (a) November 1, 2002, or (b) such
date on which the Loan is due and payable in full by reason of the occurrence of
an Event of Default, as established pursuant to Section 7.1 below.
"NOTE" means a Promissory Note in the form of Exhibit A attached hereto
and made a part hereof, duly executed and delivered by Borrower.
"OBLIGATED PERSON" means Borrower or any other Person hereafter becoming
liable to Xxxxx Fargo for the repayment of all or any part of the Loan.
"OBLIGATIONS" means all Debt, including without limitation Hedging
Obligations, from time to time owing by Borrower to Xxxxx Fargo (or any
Affiliate of Xxxxx Fargo) under or pursuant to any of the Loan Documents.
"OBLIGATION" means any part of the obligations.
"OIL AND GAS INTERESTS" means any and all interests of Borrower, whether
now owned or hereafter acquired, in any and all oil and/or gas xxxxx, reserves
and other interests (including without limitation coalbed methane xxxxx,
reserves and other interests), leases, facilities and other related rights and
assets which Xxxxx Fargo now or hereafter evaluates in connection with the Loan.
"PAYMENT DATE" means the last day of each calendar month, commencing
November 30, 2001, until the Maturity Date, and the Maturity Date.
"PERMITTED INVESTMENT" means:
(a) Any evidence of indebtedness issued or guaranteed by the United States
Government, maturing not more than one year after the date of acquisition by
Borrower; or
(b) Commercial paper, maturing not more than nine months from the date of
issuance thereof, which is issued by a corporation (other than an Affiliate of
Borrower) organized under the laws of any state of the United States or of the
District of Columbia and carrying one of the two highest ratings by Standard &
Poor's Corporation or Xxxxx'x Investors Service, Inc.; or
(c) Any certificate of deposit, maturing not more than 90 days from the
date of issuance thereof, which is issued by a commercial banking institution
that is a member of the Federal Reserve System and has a combined capital and
surplus and undivided profits of not less than U.S. $250,000,000; or
(d) Any deposit account at a commercial banking institution that is a
member of the Federal Reserve System and has a combined capital and surplus and
undivided profits of not less than U.S. $250,000,000; or
(e) Hedging Obligations of Borrower.
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"PERSON" means an individual, corporation, partnership, association,
joint-stock company, trust or trustee thereof, estate or executor thereof,
limited liability company, unincorporated organization or joint venture, court
or governmental unit or any agency or subdivision thereof, or any other legally
recognizable entity.
"PRIME RATE" means a fluctuating index rate which Xxxxx Fargo establishes
and quotes from time to time for pricing certain of its loans. Information on
the index rate currently in effect is announced publicly and can be obtained by
contacting Xxxxx Fargo. The Prime Rate is not necessarily the lowest rate
charged to customers of Xxxxx Fargo, and Xxxxx Fargo may make loans at, above or
below this stated index rate.
"PRINCIPAL PAYMENT AMOUNT" means: (a) as to any Payment Date prior to the
Maturity Date, the amount shown on Exhibit C attached hereto and made a part
hereof for that date; and (b) as to the Maturity Date, the entire outstanding
principal balance of the Loan.
"SECURITY DOCUMENTS" means all security agreements, deeds of trust,
mortgages, chattel mortgages, pledges, guaranties, financing statements,
continuation statements, extension agreements and other agreements or
instruments now, heretofore, or hereafter delivered by any or all of the
Obligated Persons or any other person to Xxxxx Fargo in connection with this
Agreement or any transaction contemplated hereby, to secure or guaranty the
payment of any part of the Obligations or the performance of any other duties
and obligations of any or all of the Obligated Persons under the Loan Documents,
whenever made or delivered.
"SHAREHOLDERS' EQUITY" means, as to any Person, the equity in such Person
owned by the shareholders, partners, members or other owners of such Person,
determined in accordance with GAAP or with another accounting system approved in
writing by Xxxxx Fargo.
"TANGIBLE NET WORTH" means, at any time, as to any Person: (a) the
Shareholders' Equity owned in such Person by the shareholders, partners, members
or other owners of such Person at that time, less (b) goodwill and any and all
other intangible assets of such Person, determined in accordance with GAAP or
with another accounting system approved in writing by Xxxxx Fargo.
"TERMINATION EVENT" means: (a) the occurrence with respect to any ERISA
Plan of (1) a reportable event described in Section 4043(b)(5) of ERISA or (2)
any other reportable event described in Section 4043 of ERISA other than a
reportable event not subject to the provision for 30-day notice to the Pension
Benefit Guaranty Corporation under such regulations, or (b) the withdrawal of
Borrower or of any Affiliate of Borrower from an ERISA Plan during a plan year
in which it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA or (c) the filing of a notice of intent to terminate any ERISA Plan or the
treatment of any ERISA Plan amendment as a termination under Section 4041 of
ERISA, or (d) the institution of proceedings to terminate any ERISA Plan by the
Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (e) any
other event or condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
ERISA Plan.
Section 1.2 INCORPORATION OF EXHIBITS. All Exhibits attached to this
Agreement are a part hereof for all purposes.
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Section 1.3 AMENDMENT OF DEFINED INSTRUMENTS. Unless the context otherwise
requires or unless otherwise provided herein, the terms defined in this
Agreement which refer to a particular agreement, instrument or document also
refer to and include all renewals, extensions and modifications of such
agreement, instrument or document, provided that nothing contained in this
section shall be construed to authorize any such renewal, extension or
modification.
Section 1.4 REFERENCES AND TITLES. All references in this Agreement to
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and do
not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" has the inclusive
meaning frequently identified by the phrase "and/or". Pronouns in masculine,
feminine and neuter genders shall be construed to include any other gender, and
words in the singular form shall be construed to include the plural and vice
versa, unless the context otherwise requires.
Section 1.5 CALCULATIONS AND DETERMINATIONS. All interest and fees accruing
under the Loan Documents shall be calculated on the basis of actual days elapsed
(including the first day but excluding the last) and a year of 360 days. Unless
otherwise expressly provided herein or unless Xxxxx Fargo otherwise consents,
all financial statements and reports furnished to Xxxxx Fargo hereunder shall be
prepared and all financial computations and determinations pursuant hereto shall
be made in accordance either with GAAP or with another accounting system agreed
to in writing by Xxxxx Fargo.
ARTICLE II
THE LOAN
Section 2.1 THE LOAN. Subject to the other terms and conditions of this
Agreement, Xxxxx Fargo agrees to make a $1,396,000 term loan to Borrower on or
about November 30, 2001 for the purpose of repaying any and all amounts payable
under or in connection with the Prior Credit Agreement.
Section 2.2 THE NOTE; INTEREST.
(a) Borrower's obligation to repay the Loan, with interest thereon,
shall be evidenced by the Note. In the event any provision contained in the Note
conflicts with a provision contained in this Agreement, the provisions of this
Agreement shall control.
(b) Except as otherwise provided in (2) below, interest on the Loan
shall accrue at a fluctuating annual rate equal to the Prime Rate plus one and
three-quarters percentage points per annum.
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(2) From and after the occurrence, and during the continuance,
of any Event of Default hereunder (including without limitation
any failure by Borrower to pay the entire outstanding principal
balance of the Loan, together with all accrued interest, fees and
other amounts payable in connection therewith on or before the
Maturity Date), interest on the Loan shall accrue, from the date
of occurrence of the Event of Default until the date the Event of
Default is cured, at a fluctuating annual rate equal to the Prime
Rate plus four percentage points per annum.
(c) Interest accrued on the Loan shall be due and payable on each
Payment Date. All accrued and unpaid interest shall be due and payable not later
than the Maturity Date.
(d) Xxxxx Fargo shall have no obligation to make any advance on the
Loan other than the initial advance hereunder, and amounts borrowed and repaid
hereunder may not be re-borrowed.
Section 2.3 MANDATORY PRINCIPAL PAYMENTS.
(a) On each Payment Date, Borrower shall make a principal payment
to Xxxxx Fargo in an amount equal to the Principal Payment Amount for that
Payment Date.
(b) If, by reason of any redetermination of the Borrowing Base
pursuant to Section 2.7 below or for any other reason, the aggregate outstanding
principal balance of the Loan shall at any time exceed the Borrowing Base,
Borrower shall, not later than 30 days after written notice thereof from Xxxxx
Fargo, pay the excess to Xxxxx Fargo in a lump sum.
(c) The entire outstanding principal balance of the Loan, together
with all accrued interest and other amounts payable to Xxxxx Fargo hereunder,
shall be due and payable, if not previously paid, on the Maturity Date.
Section 2.4 VOLUNTARY PREPAYMENTS. Borrower shall have the right to prepay
the Loan at any time, in whole or in part, without penalty or premium. Any
voluntary principal prepayment shall be applied first against the next
installment then due and next against future installments in the inverse order
of approaching maturities.
Section 2.5 PAYMENTS TO XXXXX FARGO. Borrower will pay to Xxxxx Fargo each
payment which Borrower owes under the Loan Documents not later than 12:00 noon,
Denver time, on the due date, in lawful money of the United States of America
and in immediately available funds. Any payment received after such time will be
deemed to have been made on the next following Business Day. Should any such
payment become due and payable on a day other than a Business Day, the maturity
of such payment shall be extended to the next succeeding Business Day, and, in
the case of a payment of principal or past due interest, interest shall accrue
and be due and payable thereon for the period of such extension. Each payment
under a Loan Document shall be due and payable at the place provided therein or,
if no specific place of payment is provided, shall be due and payable at the
place of payment of the Note. With respect to any regularly scheduled payment of
principal, interest, fees or other amounts due and payable hereunder, Borrower
hereby authorizes Xxxxx Fargo to debit any deposit account of Borrower with
Xxxxx Fargo in the amount of the payment then due. If there are insufficient
funds in such
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deposit accounts to pay in full the amounts then due, such debits
will be reversed (in whole or in part, at Xxxxx Fargo's sole discretion) and
such amount not debited shall be deemed to be unpaid. No such debit under this
Section 2.5 shall be deemed a setoff.
Section 2.6 USE OF PROCEEDS. In no event shall the Loan proceeds be used
directly or indirectly for the purpose, whether immediate, incidental or
ultimate, of purchasing, acquiring or carrying any "margin stock" (as such term
is defined in Regulation U promulgated by the Board of Governors of the Federal
Reserve System) or to extend credit to others directly or indirectly for the
purpose of purchasing or carrying any such margin stock or margin securities.
Borrower represents and warrants to Xxxxx Fargo that Borrower is not engaged
principally, or as one of its important activities, in the business of extending
credit to others for the purpose of purchasing or carrying such margin stock.
Borrower will use the Loan proceeds solely for the purpose of repaying any and
all amounts payable under or in connection with the Prior Credit Agreement.
Section 2.7 BORROWING BASE PROCEDURES. The Borrowing Base will be
redetermined by Xxxxx Fargo as of May 1, 2002, and at such other times as Xxxxx
Fargo may determine, based upon such information and data as Xxxxx Fargo deems
relevant. Xxxxx Fargo shall advise Borrower of the redetermination of the
Borrowing Base by providing to Borrower a Borrowing Base Notice approximately
five days prior to the effectiveness of the redetermined Borrowing Base;
provided that if, due to any failure by Borrower to submit in a timely manner
any information required to be submitted by Borrower hereunder or, if requested
by Xxxxx Fargo, any additional information or data needed in connection with a
redetermination of the Borrowing Base or due to any other reason beyond the
control of Xxxxx Fargo, Xxxxx Fargo does not provide a Borrowing Base Notice at
the time described above, then, unless Xxxxx Fargo gives notice to the contrary
to Borrower, the Borrowing Base from the previous period shall be carried over
into the new period until a Borrowing Base Notice has been sent to Borrower by
Xxxxx Fargo.
ARTICLE III
SECURITY; FEE
Section 3.1 THE SECURITY. The Obligations will be secured by the Security
Documents and any additional Security Documents hereafter delivered by any
Obligated Person and accepted by Xxxxx Fargo.
Section 3.2 PERFECTION AND PROTECTION OF SECURITY INTERESTS AND LIENS.
Borrower will from time to time deliver to Xxxxx Fargo any amendments, financing
statements, continuation statements, extension agreements and other documents,
properly completed and executed (and acknowledged when required) by Borrower, in
form and substance reasonably satisfactory to Xxxxx Fargo, which Xxxxx Fargo may
request for the purpose of perfecting, confirming or protecting Xxxxx Fargo's
Liens and other rights in the Collateral.
Section 3.3 BANK ACCOUNTS AND OFFSET. To secure the repayment of the
Obligations, Borrower hereby grants to Xxxxx Fargo (and each Affiliate of Xxxxx
Fargo) a security interest, a lien, and a right of offset, each of which shall
be upon and against: (a) any and all moneys, securities or other property (and
the proceeds therefrom) of Borrower now or hereafter held or received by or in
transit to Xxxxx Fargo (or any Affiliate of Xxxxx Fargo) from or for the account
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of Borrower, whether for safekeeping, custody, pledge, transmission, collection
or otherwise, (b) any and all deposits (general or special, time or demand,
provisional or final) of Borrower with Xxxxx Fargo (or any Affiliate of Xxxxx
Fargo), and (c) any other credits and claims of Borrower at any time existing
against Xxxxx Fargo (or any Affiliate of Xxxxx Fargo), including without
limitation claims under certificates of deposit. Upon the occurrence of any
Event of Default, Xxxxx Fargo and each Affiliate of Xxxxx Fargo are hereby
authorized to foreclose upon, offset, appropriate, and apply, at any time and
from time to time, without notice to Borrower, any and all items hereinabove
referred to against the Obligations (whether or not such obligations are then
due and payable).
Section 3.4 FEE. Borrower shall pay to Xxxxx Fargo, upon the execution and
delivery of this Agreement, a loan fee in the amount of $5,000 and an
engineering fee in the amount of $1,500.
ARTICLE IV
CONDITIONS PRECEDENT TO LOAN
Section 4.1 CONDITIONS PRECEDENT TO THE LOAN. Xxxxx Fargo shall have no
obligation to make the Loan unless Xxxxx Fargo shall have received all of the
following at its office in Denver, Colorado, duly executed and delivered and in
form, substance and date satisfactory to Xxxxx Fargo:
(a) The Note.
(b) An "Omnibus Certificate" of an officer of Borrower, which shall
contain the names and signatures of the officers of Borrower authorized to
execute Loan Documents and which shall certify to the truth, correctness and
completeness of the following exhibits attached thereto: (1) a copy of the
articles of incorporation of Borrower and all amendments thereto, (2) a copy of
the bylaws of Borrower and all amendments thereto, and (3) a copy of the
resolutions of the Board of Directors of Borrower, if necessary, authorizing
this Agreement and the transactions contemplated hereby.
(c) A "Compliance Certificate" of an officer of Borrower in which
such person certifies to the satisfaction of the conditions set out in
subsections (a), (b), and (c) of Section 4.2. below.
(d) The Security Documents.
(e) Such title opinions, supplemental title opinions, UCC searches
and other title information concerning Borrower's title to the Oil and Gas
Interests or any portions thereof as may be satisfactory to Xxxxx Fargo.
(f) Evidence satisfactory to Xxxxx Fargo that Xxxxx Fargo has been
named as a beneficiary and an additional loss payee on Borrower's insurance
policies as required by Section 6.1(h) below.
(g) The loan fees described in Section 3.4 above.
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(h) Any and all other Loan Documents.
Section 4.2 ADDITIONAL CONDITIONS PRECEDENT. Xxxxx Fargo shall have no
obligation to make the Loan unless the following conditions precedent have been
satisfied:
(a) All representations and warranties made by any Obligated
Person in any Loan Document shall be true on and as of the date of the Loan as
if such representations and warranties had been made as of the date hereof.
(b) No Default shall exist as of the date of the Loan.
(c) Each Obligated Person shall have performed and complied with
all agreements and conditions herein required to be performed or complied with
by it on or prior to the date of the Loan.
(d) The making of the Loan shall not be prohibited by any law or
any regulation or order of any court or governmental agency or authority and
shall not subject Xxxxx Fargo to any penalty or other onerous condition under or
pursuant to any such law, regulation or order.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.1 BORROWER'S REPRESENTATIONS AND WARRANTIES. To induce Xxxxx
Fargo to enter into this Agreement and to make the Loan, Borrower represents and
warrants to Xxxxx Fargo (which representations and warranties shall survive the
delivery of the Note and shall be deemed to be continuing representations and
warranties until repayment in full of the Note) that:
(a) NO DEFAULT. Borrower is not in default in any material respect
in the performance of any of the covenants and agreements contained herein. No
event has occurred and is continuing which constitutes a Default.
(b) ORGANIZATION AND GOOD STANDING. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado, having all powers required to carry on its business and enter into and
carry out the transactions contemplated hereby. Borrower is duly qualified, in
good standing, and authorized to do business in all other jurisdictions wherein
the character of the properties owned or held by it or the nature of the
business transacted by it makes such qualification necessary.
(c) AUTHORIZATION. Borrower has duly taken all action necessary to
authorize the execution and delivery by it of the Loan Documents and to
authorize the consummation of the transactions contemplated thereby and the
performance of its obligations thereunder.
(d) NO CONFLICTS OR CONSENTS. The execution and delivery by the
various Obligated Persons of the Loan Documents to which each is a party, the
performance by each of its obligations under such Loan Documents, and the
consummation of the transactions contemplated by the various Loan Documents, do
not and will not: (1) conflict with any
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provision of: (A) any domestic or foreign law, statute, rule or regulation, (B)
the governing documents of Borrower, or (C) any agreement, judgment, license,
order or permit applicable to or binding upon any Obligated Person, (2) result
in the acceleration of any Debt owed by any Obligated Person, or (3) result in
or require the creation of any Lien upon any assets or properties of any
Obligated Person except as expressly contemplated in the Loan Documents. Except
as expressly contemplated in the Loan Documents, no consent, approval,
authorization or order of, and no notice to or filing with, any court or
governmental authority or third party is required in connection with the
execution, delivery or performance by any Obligated Person of any Loan Document
or to consummate any transactions contemplated by the Loan Documents.
(e) ENFORCEABLE OBLIGATIONS. This Agreement is, and the other Loan
Documents when duly executed and delivered will be, legal and binding
obligations of each Obligated Person which is a party hereto or thereto,
enforceable in accordance with their respective terms, except as limited by
bankruptcy, insolvency or similar laws of general application relating to the
enforcement of creditors' rights and as limited by general equitable principles.
(f) INITIAL FINANCIAL STATEMENTS. The Initial Financial Statements
fairly present Borrower's financial position at the date thereof. Since the date
of the Initial Financial Statements, no material adverse change has occurred in
Borrower's financial condition or business. All Initial Financial Statements
were prepared in accordance either with GAAP or with another accounting system
agreed to in writing by Xxxxx Fargo.
(g) OTHER OBLIGATIONS. Borrower has no outstanding Debt of any kind
(including contingent obligations, tax assessments, and unusual forward or
long-term commitments) which is not shown in the Initial Financial Statements or
which has not been previously disclosed in writing to Xxxxx Fargo.
(h) FULL DISCLOSURE. No certificate, statement or other information
delivered herewith or heretofore by Borrower to Xxxxx Fargo in connection with
the negotiation of this Agreement or in connection with any transaction
contemplated hereby contains any untrue statement of a material fact or omits to
state any material fact known to Borrower necessary to make the statements
contained herein or therein not misleading in any material respect as of the
date made or deemed made. At the date of this Agreement, Borrower is not aware
of any material fact that has not been disclosed to Xxxxx Fargo in writing which
could materially and adversely affect Borrower's properties, businesses,
prospects or condition (financial or otherwise). To the best of Borrower's
knowledge, the Initial Engineering Report is based upon complete and accurate
factual information in all material respects.
(i) LITIGATION. Except as disclosed in the Initial Financial
Statements or as otherwise previously disclosed in writing by Borrower to Xxxxx
Fargo: (1) there are no actions, suits or legal, equitable, arbitrative or
administrative proceedings pending, or to the knowledge of Borrower threatened,
against any Obligated Person before any federal, state, municipal other court,
department, commission, body, board, bureau, agency, or instrumentality,
domestic or foreign, which do or may materially and adversely affect any
Obligated Person, any Affiliate controlled by Borrower, any Obligated Person's
ownership or use of any of its assets or properties, its business or financial
condition or prospects, or the right or ability of any Obligated
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Person to enter into the Loan Documents or perform its obligations thereunder
and (2) there are no outstanding judgments, injunctions, writs, rulings or
orders by any such governmental entity against any Obligated Person which have
or may have any such effect.
(j) TITLE TO PROPERTIES. Borrower has good and defensible title to
the Oil and Gas Interests, free and clear of all liens, encumbrances and defects
of title, except for covenants, restrictions, rights, easements, liens,
encumbrances and minor irregularities in title which do not materially interfere
with the occupation, use and enjoyment of such Oil and Gas Interests in the
normal course of business as presently conducted or materially impair the value
thereof for such business. Borrower enjoys peaceful and undisturbed possession
under all material leases under which it operates, and all such leases are valid
and subsisting, with no material default existing thereunder.
(k) TAXES. All tax returns required to be filed by Borrower in any
jurisdiction prior to the date hereof have been filed; all taxes, assessments,
fees and other governmental charges upon Borrower or upon any of its properties,
income or franchises, which are due and payable have been paid, or adequate
reserves have been provided for payment thereof.
ARTICLE VI
COVENANTS OF BORROWER
Section 6.1 AFFIRMATIVE COVENANTS. Borrower warrants, covenants and agrees
that until the full and final payment of the Obligations and the termination of
this Agreement, unless Xxxxx Fargo has previously agreed otherwise in writing:
(a) PAYMENT AND PERFORMANCE. Borrower will pay all amounts due
under the Loan Documents in accordance with the terms thereof and will in all
material respects observe, perform and comply with every covenant, term and
condition express or implied in the Loan Documents.
(b) BOOKS, FINANCIAL STATEMENTS AND RECORDS. Borrower will at all
times maintain full and accurate books of account and records, will maintain a
standard system of accounting and will furnish the following statements and
reports to Xxxxx Fargo at Borrower's expense:
(1) As soon as available, and in any event within 90 days after
the end of each Fiscal Year, complete audited Consolidated
financial statements of Borrower, prepared in reasonable detail
and in accordance with GAAP or with another accounting system
approved in writing by Xxxxx Fargo. These financial statements
shall contain at least a balance sheet as of the end of such
Fiscal Year and a statement of earnings and cash flow, setting
forth in comparative form the corresponding figures for the
preceding Fiscal Year and shall be accompanied by an opinion of a
firm of independent certified public accountants chosen by
Borrower and reasonably acceptable to Xxxxx Fargo, which opinion
shall be unqualified and shall state that said financial
statements have been prepared in accordance with GAAP or with
another accounting system approved in writing by
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Xxxxx Fargo and fairly present in all material respects the
financial positions and the results of operations of Borrower as of
the end of and for such Fiscal Year;
(2) As soon as available and in any event within 60 days after
the end of each Fiscal Quarter (except the last Fiscal Quarter of
each Fiscal Year), complete Consolidated financial statements of
Borrower for such Fiscal Quarter and for the then-current Fiscal
Year, prepared in reasonable detail and in accordance with GAAP
or with another accounting system approved in writing by Xxxxx
Fargo. These financial statements shall contain at least a
balance sheet as of the end of such Fiscal Quarter and a
statement of earnings and cash flow for the Fiscal Quarter and
for the Fiscal Year to date, setting forth in comparative form
the corresponding figures for comparable periods during the
preceding Fiscal Year;
(3) At the time of submission of any and all financial
statements furnished pursuant to clause (1) or (2) above, a
Compliance Certificate signed by the president or chief financial
officer of Borrower, in the form of Exhibit B attached hereto and
made a part hereof; and
(4) As soon as available, and in any event within.60 days after
the end of each Fiscal Quarter, commencing with the Fiscal
Quarter ending December 31, 2001, a report describing, for each
calendar month during such Fiscal Quarter, the gross volume of
production and sales attributable to production (and the prices
at which such sales were made and the revenues derived from such
sales) for each such calendar month from the Oil and Gas
Interests, and describing the related ad valorem, severance and
production taxes and lease operating expenses attributable
thereto and incurred for each such calendar month.
(c) OTHER INFORMATION AND INSPECTIONS. Each Obligated Person will
furnish to Xxxxx Fargo any information which Xxxxx Fargo may from time to time
request concerning any covenant, provision or condition of the Loan Documents or
any matter in connection with the Obligated Persons' businesses and operations.
Each Obligated Person will permit representatives appointed by Xxxxx Fargo,
including independent accountants, agents, attorneys, appraisers and any other
persons, to visit and inspect, at their sole risk, any of such Obligated
Person's property, including its books of account, other books and records, and
any facilities or other business assets, and to make extra copies therefrom and
photocopies and photographs thereof, and to write down and record any
information such representatives obtain, and each Obligated Person shall permit
Xxxxx Fargo or its representatives to investigate and verify the accuracy of the
information furnished to Xxxxx Fargo in connection with the Loan Documents and
to discuss all such matters with its officers, managers, employees and
representatives.
(d) NOTICE OF MATERIAL EVENTS. Borrower will promptly notify Xxxxx
Fargo: (1) of any material adverse change in the financial condition of any
Obligated Person, (2) of the occurrence of any Default, (3) of the acceleration
of the maturity of any Debt owed by any Obligated Person or of any default by
any Obligated Person under any indenture, mortgage, agreement, contract or other
instrument to which any of them is a party or by which any of them or any of
their properties is bound, (4) of any uninsured claim of $100,000 or more
asserted
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against any Obligated Person or any of its properties, (5) of the filing of any
suit or proceeding against any Obligated Person (or the occurrence of any
material development in any such suit or proceeding) in which an adverse
decision could have a material adverse effect upon any Obligated Person's
financial condition, business or operations (or could result in a judgment not
covered by insurance of $100,000 or more against any Obligated Person), (6) of
the merger or consolidation of Borrower with any other business entity, and (7)
of the sale, transfer, lease, exchange or disposal by Borrower of any material
assets or properties or any assets or properties with a value in excess of
$100,000, except sales of already-severed hydrocarbons and other products in the
ordinary course of Borrower's business. Borrower will also notify Xxxxx Fargo in
writing at least twenty Business Days prior to the date that Borrower changes
its name, furnishing with such notice any necessary financing statement
amendments or requesting Xxxxx Fargo and its counsel to prepare the same.
(e) MAINTENANCE OF EXISTENCE AND QUALIFICATIONS. Borrower will
maintain and preserve its existence and its rights and franchises in full force
and effect and will qualify to do business in all states or jurisdictions where
required by applicable law, except where the failure so to qualify will not have
any material adverse effect on Borrower.
(f) MAINTENANCE OF PROPERTIES. Borrower will in all material
respects maintain, preserve, protect and keep all property used or useful in the
conduct of its business in accordance with the standards of a reasonable and
prudent operator.
(g) PAYMENT OF TRADE DEBT, TAXES, ETC. Each Obligated Person will:
(1) timely file all required tax returns; (2) timely pay all taxes, assessments,
and other governmental charges or levies imposed upon it or upon its income,
profits or property; (3) pay all Debt owed by it on ordinary trade terms to
vendors, suppliers and other Persons providing goods and services used by it in
the ordinary course of its business; and (4) maintain appropriate accruals and
reserves for all of the foregoing Debt in accordance with its present system of
accounting. Each Obligated Person will pay and discharge in all material
respects, when due, all other Debt, taxes or assessments now or hereafter owed
by it. Each Obligated Person may, however, delay paying or discharging any such
Debt so long as it is in good faith contesting the validity thereof by
appropriate proceedings and has set aside on its books adequate reserves
therefor.
(h) INSURANCE. Borrower will maintain with financially sound and
reputable insurance companies, insurance with respect to its business,
operations and properties in at least such amounts and against at least such
risks as are usually insured against in the same general area by companies of
established repute engaged in the same or a similar business. Borrower will
cause Xxxxx Fargo to be named as a beneficiary and an additional loss payee on
all such insurance policies.
(i) PAYMENT OF EXPENSES. Borrower will promptly (and in any event
within 30 days after any invoice or other statement or notice) pay all
reasonable costs and expenses incurred by or on behalf of Xxxxx Fargo (including
attorneys' fees) in connection with: (1) the preparation, execution and delivery
of the Loan Documents (including without limitation this Agreement, the Security
Documents and any and all future amendments or supplements thereto or
restatements thereof), and any and all consents, waivers or other documents or
instruments
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relating thereto, (2) the filing, recording, refiling and re-recording of any
Security Documents and any other documents or instruments or further assurances
required to be filed or recorded or refiled or re-recorded by the terms of any
Loan Document, (3) the examination of Borrower's title to the Collateral, and
(4) the enforcement, after the occurrence of a Default or an Event of Default,
of the Loan Documents.
(j) PERFORMANCE ON BORROWER'S BEHALF. If any Obligated Person fails
to pay any taxes, insurance premiums or other amounts it is required to pay
under any Loan Document, Xxxxx Fargo may pay the same. Borrower shall
immediately reimburse Xxxxx Fargo for any such payments and each amount paid
shall constitute a part of the Obligations, shall be secured by the Security
Documents and shall bear interest at the rate described in Section 2.2(b)(2)
above, from the date such amount is paid by Xxxxx Fargo until the date such
amount is repaid to Xxxxx Fargo.
(k) COMPLIANCE WITH AGREEMENTS AND LAW. Borrower will perform all
material obligations it is required to perform under the terms of each
indenture, mortgage, deed of trust, security agreement, lease, franchise,
agreement, contract or other instrument or obligation to which it is a party or
by which it or any of its properties is bound in such a way that they result in
no material adverse effect upon the Oil and Gas Interests or Borrower's ability
to perform its obligations under this Agreement. Borrower will in all material
respects conduct its business and affairs in compliance with all laws,
regulations, and orders applicable thereto (including those relating to
pollution and other environmental matters).
(l) ADDITIONAL SECURITY DOCUMENTS. Promptly after a request
therefor by Xxxxx Fargo at any time and from time to time, Borrower will execute
and deliver to Xxxxx Fargo such additional Security Documents and/or amendments
to existing Security Documents as Xxxxx Fargo may deem necessary or appropriate
in order to grant to Xxxxx Fargo a perfected lien on and security interest in
any or all oil and/or gas interests owned by Borrower.
(m) ERISA LIABILITIES. Borrower shall comply with ERISA in all
material respects. Borrower shall continue not to be required to contribute to,
nor to have any other absolute or contingent liability in respect of, any
"multiemployer plan" as defined in Section 4001 of ERISA.
Section 6.2 NEGATIVE COVENANTS. Borrower warrants, covenants and agrees
that until the full and final payment of the Obligations and the termination of
this Agreement, unless Xxxxx Fargo has previously agreed otherwise in writing:
(a) FINANCIAL COVENANTS.
(1) The Consolidated Current Ratio of Borrower will not, at any
time after the date hereof, be less than 1.0:1.0.
(2) The Consolidated Tangible Net Worth of Borrower will not,
at any time after the date hereof, be less than: (A) $10,000,000,
plus (B) 50 percent of the Cumulative Net Income of Borrower for
all Fiscal Quarters ending after June 30, 2001.
- 15 -
(b) LIMITATION ON LIENS. No Obligated Person will create, assume or
permit to exist any mortgage, deed of trust, pledge, encumbrance, lien or charge
of any kind (including any security interest in or vendor's lien on property
purchased under conditional sales or other title retention agreements and
including any lease intended as security or in the nature of a title retention
agreement) upon any of such Obligated Person's properties or assets, whether now
owned or hereafter acquired, except:
(1) Liens at any time existing in favor of Xxxxx Fargo;
(2) statutory Liens for taxes, statutory or contractual
mechanics' and materialmen's Liens incurred in the ordinary
course of business, and other similar Liens incurred in the
ordinary course of business, provided such Liens secure only Debt
which is not delinquent or which is being contested as provided
in Section 6.1(g) above; and
(3) purchase-money security interests granted by any obligated
Person on office equipment, vehicles and other personal property
acquired by such Obligated Person in the ordinary course of
business; provided that the aggregate amount secured by all such
security interests outstanding at any one time shall not exceed
$50,000.
(c) ADDITIONAL DEBT. No Obligated Person will create, incur, assume
or permit to exist Debt except: (1) the Loan, (2) trade debt owed to suppliers,
pumpers, mechanics, materialmen and others furnishing goods or services to such
Obligated Person in the ordinary course of such Obligated Person's business, (3)
Hedging Obligations of any Obligated Person to the extent permitted pursuant to
Section 6.2(m) below, (4) Debt of the types permitted to be secured by the
security interests described in Section 6.2(b)(4) above (provided that the
amount of such Debt does not exceed the limits set forth in said Section), and
(5) other unsecured Debt in an aggregate amount not in excess of $100,000.
(d) LIMITATION ON SALES OF PROPERTY. No Obligated Person will sell,
transfer, lease, exchange, alienate or dispose of any of the Oil and Gas
Interests except as follows (and the following exceptions shall be subject to
any limitations contained in the Security Documents):
(1) equipment which is worthless or obsolete, which is replaced
by equipment of equal suitability and value or which is salvaged
from xxxxx which have been plugged and abandoned by or on behalf
of such Obligated Person;
(2) inventory (including oil and gas sold as produced) which is
sold in the ordinary course of business; and
(3) personal property located on oil and gas properties
operated by third parties, the sale of which personal property
cannot be prevented by such Obligated Person.
(e) LIMITATION ON CREDIT EXTENSIONS. No Obligated Person will
extend credit, make advances or make loans other than normal and prudent
extensions of credit to customers buying goods and services in the ordinary
course of business, which extensions shall not be for
- 16 -
longer periods than those extended by similar businesses operated in a normal
and prudent manner.
(f) FISCAL YEAR. No Obligated Person will change its fiscal year.
(g) AMENDMENT OF CONTRACTS. No Obligated Person will amend or
permit any amendment to any contract which could reasonably be foreseen to
release, qualify, limit, make contingent or otherwise detrimentally affect, in
any material way, the rights and benefits of Xxxxx Fargo under or acquired
pursuant to any of the Security Documents.
(h) LIMITATION ON GUARANTIES. No Obligated Person will assume,
guaranty, endorse or be or become secondarily liable for any Debt which is the
primary obligation of any other Person.
(i) ERISA PLANS. No Obligated Person will incur any obligation to
contribute to any "multiemployer plan" as defined in Section 4001 of ERISA.
(j) DISTRIBUTIONS. No Obligated Person will make any Distribution.
(k) REORGANIZATIONS; COMBINATIONS. No Obligated Person will change
its name or the nature of its business, reorganize, liquidate, dissolve or enter
into any merger, joint venture, partnership or other combination.
(l) INVESTMENTS. No Obligated Person will purchase, acquire, hold
or otherwise invest in, or deposit any money into, any stock, bond, evidence of
indebtedness, deposit account or other security or investment other than any
Permitted Investment and investments in the capital stock of Victoria Petroleum,
NL in existence on the date of this Agreement.
(m) HEDGING TRANSACTIONS. No Obligated Person will at any time
enter into or become a party to any one or more hedging transactions with
respect to its oil and gas production: (1) covering in excess of 70 percent of
the volume of such obligated Person's proved, developed, producing reserves
expected to be produced in the succeeding two-year period, according to the then
most recent engineering report submitted pursuant to Section 6.1(b) above, or
(2) applicable to any time period occurring later than two years from the date
of measurement.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 EVENTS OF DEFAULT. Each of the following events constitutes an
Event of Default under this Agreement:
(a) Borrower fails to pay any Obligation when due and payable,
whether at a date for the payment of a fixed installment or contingent or other
payment to Xxxxx Fargo or as a result of acceleration or otherwise; or
- 17 -
(b) Any "default" or "event of default" occurs under any Loan
Document which defines either term; or
(c) Any Obligated Person fails to duly observe, perform or comply
with any covenant, agreement, condition or provision of any Loan Document; or
(d) Any representation or warranty previously, presently or
hereafter made in writing by or on behalf of any Obligated Person in connection
with any Loan Document shall prove to have been false or incorrect in any
material respect on any date on or as of which made; or
(e) Any Obligated Person:
(1) suffers the entry against it of a judgment, decree or order
for relief by a court of competent jurisdiction in an involuntary
proceeding commenced under any applicable bankruptcy, insolvency or
other similar law of any jurisdiction now or hereafter in effect,
including the federal Bankruptcy Code, as from time to time amended,
or has any such proceeding commenced against it which remains
undismissed for a period of 60 days; or
(2) suffers the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official
for a substantial part of its assets or for any part of the Oil
and Gas Interests in a proceeding brought against or initiated by
it, and such appointment is neither made ineffective nor
discharged within 30 days after the making thereof, or such
appointment is consented to, requested by, or acquiesced to by
it; or
(3) commences a voluntary case under any applicable bankruptcy,
insolvency or similar law now or hereafter in effect, including
the federal Bankruptcy Code, as from time to time amended; or
applies for or consents to the entry of an order for relief in an
involuntary case under any such law or to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator or other similar official of all or any
part of the Oil and Gas Interests; or makes general assignment
for the of benefit of creditors; or fails generally to pay (or
admits in writing its inability to pay) its debts as such debts
become due; or takes action in furtherance of any of the
foregoing; or
(4) suffers the entry against it of a final judgment for the
payment of money in excess of $100,000 (not covered by
insurance), unless the same is discharged within 30 days after
the date of entry thereof or an appeal or appropriate proceeding
for review thereof is taken within such period and a stay of
execution pending such appeal is obtained; or
(5) suffers the entry of an order issued by any court or
tribunal taking, seizing or apprehending all or any part of the
Oil and Gas Interests and bringing the same into the custody of
such Court or tribunal, and such order is not stayed or released
within thirty days after the entry thereof; or
- 18 -
(f) Either: (1) any "accumulated funding deficiency" (as defined
in Section 412(a) of the Internal Revenue Code of 1986, as amended) in excess of
$10,000 exists with respect to any ERISA Plan, whether or not waived by the
Secretary of the Treasury or his delegate, or (2) any Termination Event occurs
with respect to any ERISA Plan and the then current value of such ERISA Plan's
benefits guaranteed under Title IV of ERISA exceeds the then current value of
such ERISA Plan's assets available for the payment of such benefits by more than
$10,000 (or in the case of a Termination Event involving the withdrawal of a
substantial employer, the withdrawing employer's proportionate share of such
excess exceeds such amount); or
(g) Any default, including the expiration of any applicable period
of grace, occurs with respect to any other indebtedness owed by any Obligated
Person to any Person.
Upon the occurrence of an Event of Default described in subsection (e)(1),
(e)(2) or (e)(3) of this section, all of the Obligations shall thereupon be
immediately due and payable, without presentment, demand, protest, notice of
protest, declaration or notice of acceleration or intention to accelerate, or
any other notice or declaration of any kind, all of which are hereby expressly
waived by Borrower. During the continuance of any other Event of Default, Xxxxx
Fargo at any time and from time to time (unless all Events of Default have
theretofore been remedied) may declare any or all of the Obligations immediately
due and payable, and all such Obligations shall thereupon be immediately due and
payable.
Section 7.2 REMEDIES. If any Event of Default shall occur, Xxxxx Fargo may
protect and enforce its rights under the Loan Documents by any appropriate
proceedings, including proceedings for specific performance of any covenant or
agreement contained in any Loan Document, and Xxxxx Fargo may enforce the
payment of any Obligations due or enforce any other legal or equitable right.
All rights, remedies and powers conferred upon Xxxxx Fargo under the Loan
Documents shall be deemed cumulative and not exclusive of any other rights,
remedies or powers available under the Loan Documents or at law or in equity.
Section 7.3 INDEMNITY. Borrower hereby agrees to indemnify, defend and hold
harmless Xxxxx Fargo and its agents, affiliates, officers, directors, and
employees from and against any and all claims, losses, demands, actions, causes
of action, and liabilities whatsoever (including without limitation reasonable
attorney's fees and expenses, and costs and expenses reasonably incurred in
investigating, preparing or defending against any litigation or claim, action,
suit, proceeding or demand of any kind or character) arising out of or resulting
from: (a) the Loan Documents (including without limitation the enforcement
thereof), except to the extent such claims, losses, and liabilities are
proximately caused by a Xxxxx Fargo's gross negligence or willful misconduct,
(b) the contamination of any of the Oil and Gas Interests by any hazardous
substance or environmental pollutant, or (c) the violation of any federal, state
or local environmental statute, rule, regulation or ordinance, including without
limitation violation of the Comprehensive Environmental Response, Compensation
and Liability Act, as amended from time to time, or of the Resource Conservation
and Recovery Act, as amended from time to time. The indemnity forth in this
Section 7.3 shall survive the termination of this Agreement.
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ARTICLE VIII
MISCELLANEOUS
Section 8.1 WAIVER AND AMENDMENT. No failure or delay by Xxxxx Fargo in
exercising any right, power or remedy which it may have under any of the Loan
Documents shall operate as a waiver thereof or of any other right, power or
remedy, nor shall any single or partial exercise by Xxxxx Fargo of any such
right, power or remedy preclude any other or further exercise thereof or of any
other right, power or remedy. No waiver of any provision of any Loan Document
and no consent to any departure therefrom shall ever be effective unless it is
in writing and signed by Xxxxx Fargo, and then such waiver or consent shall be
effective only in the specific instances and for the purposes for which given
and to the extent specified in such writing. No notice to or demand on any
Obligated Person shall in any case of itself entitle any Obligated Person to any
other or further notice or demand in similar or other circumstances. No
modification or amendment of or supplement to this Agreement or the other Loan
Documents shall be valid or effective unless the same is in writing and signed
by the party against whom it is sought to be enforced.
Section 8.2 SURVIVAL OF AGREEMENTS; CUMULATIVE NATURE. All of the Obligated
Persons' various representations, warranties, covenants and agreements in the
Loan Documents shall survive the execution and delivery of this Agreement and
the other Loan Documents and the performance hereof and thereof, including
without limitation the making or granting of the Loan and the delivery of the
Note and the other Loan Documents, and shall further survive until all of the
Obligations are paid in full to Xxxxx Fargo and all of Xxxxx Fargo's obligations
to Borrower are terminated. All statements and agreements contained in any
certificate or other instrument delivered to Xxxxx Fargo under any Loan Document
shall be deemed representations and warranties by Borrower to Xxxxx Fargo and/or
agreements and covenants of Borrower under this Agreement. The representations,
warranties, and covenants made by the Obligated Persons in the Loan Documents,
and the rights, powers, and privileges granted to Xxxxx Fargo in the Loan
Documents, are cumulative, and no Loan Document shall be construed in the
context of another to diminish, nullify, or otherwise reduce the benefit to
Xxxxx Fargo of any such representation, warranty, covenant, right, power or
privilege. In particular and without limitation, no exception set out in this
Agreement to any representation, warranty or covenant herein contained shall
apply to any similar representation, warranty or covenant contained in any other
Loan Document, and each such similar representation, warranty or covenant shall
be subject only to those exceptions which are expressly made applicable to it by
the terms of the various Loan Documents.
- 20 -
Section 8.3 NOTICES. All notices, requests, consents, demands and other
communications required or permitted under any Loan Document shall be in writing
and, unless otherwise specifically provided in such Loan Document, shall be
deemed sufficiently given or furnished if delivered by personal delivery, by
expedited delivery service with proof of delivery, or by registered or certified
United States mail, return receipt requested, postage prepaid, at the addresses
specified below (unless changed by similar notice in writing given by the
particular Person whose address is to be changed). Any such notice or
communication shall be deemed to have been given upon receipt:
Borrower's address: 000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Xxxxx Fargo's address: MAC #C7301-046
0000 Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Denver Energy Group
Section 8.4 JOINT AND SEVERAL LIABILITY; PARTIES IN INTEREST. All
obligations of the Obligated Persons hereunder shall be the joint and several,
and not merely joint, obligations of each Obligated Person. All grants,
covenants and agreements contained in the Loan Documents shall bind and inure to
the benefit of the parties thereto and their respective successors and assigns;
provided, however, that no Obligated Person may assign or transfer any of its
rights or delegate any of its duties or obligations under any Loan Document
without the prior consent of Xxxxx Fargo.
Section 8.5 GOVERNING LAW. The Loan Documents shall be deemed contracts and
instruments made under the laws of the State of Colorado and shall be construed
and enforced in accordance with and governed by the laws of the State of
Colorado and the laws of the United States of America, except (a) to the extent
that the law of another jurisdiction is expressly elected in a Loan Document,
and (b) with respect to specific Liens, or the perfection thereof, evidenced by
Security Documents covering real or personal property which by the laws
applicable thereto are required to be construed under the laws of another
jurisdiction. Borrower hereby irrevocably submits itself to the non-exclusive
jurisdiction of the state and federal courts of the State of Colorado.
Section 8.6 LIMITATION ON INTEREST. Xxxxx Fargo and the Obligated Persons
intend to contract in strict compliance with applicable usury law from time to
time in effect. In furtherance thereof such persons stipulate and agree that
none of the terms and provisions contained in the Loan Documents shall ever be
construed to create a contract to pay, for the use, forbearance or detention of
money, interest in excess of the maximum amount of interest permitted to be
charged by applicable law from time to time in effect. Neither any Obligated
Person nor any present or future guarantors, endorsers, or other Persons
hereafter becoming liable for payment of any Obligation shall ever be liable for
unearned interest thereon or shall ever be required to pay interest thereon in
excess of the maximum amount that may be lawfully charged under applicable law
from time to time in effect. and the provisions of this section shall control
over all other provisions of the Loan Documents which may be in conflict or
apparent
- 21 -
conflict herewith. Xxxxx Fargo expressly disavows any intention to charge or
collect excessive unearned interest or finance charges in the event the maturity
of any Obligation is accelerated. If (a) the maturity of any obligation is
accelerated for any reason, (b) any Obligation is prepaid and as a result any
amounts held to constitute interest are determined to be in excess of the legal
maximum, or (c) Xxxxx Fargo or any other holder of any or all of the Obligations
shall otherwise collect moneys which are determined to constitute interest which
would otherwise increase the interest on any or all of the Obligations to an
amount in excess of that permitted to be charged by applicable law then in
effect, then all such sums determined to constitute interest in excess of such
legal limit shall, without penalty, be promptly applied to reduce the then
outstanding principal of the related Obligations or, at Xxxxx Fargo's option,
promptly returned to Borrower or the other payor thereof upon such
determination.
Section 8.7 SEVERABILITY. If any term or provision of any Loan Document
shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable law.
Section 8.8 COUNTERPARTS. This Agreement may be separately executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to constitute one and the same
Agreement.
Section 8.9 CONFLICTS. To the extent of any irreconcilable conflicts
between the provisions of this Agreement and the provisions of any of the Loan
Documents, the provisions of this Agreement shall prevail.
Section 8.10 ENTIRE AGREEMENT. This Agreement, the Note, the Security
Documents and the other Loan Documents from time to time executed in connection
herewith state the entire agreement between the parties with respect to the
subject matter hereof.
Section 8.11 WAIVER OF JURY TRIAL. EACH OBLIGATED PERSON AND XXXXX FARGO
HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION: (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR (B) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM IN RESPECT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
EACH OBLIGATED PERSON AND XXXXX FARGO HEREBY AGREE THAT THE OTHER MAY FILE A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHTS TO TRIAL BY JURY.
Section 8.12 ARBITRATION.
(a) Subject to the provisions of Section 8.12(b) below, Xxxxx Fargo
and Borrower agree to submit to binding arbitration any and all claims, disputes
and controversies between them (and their respective employees, officers,
directors, attorneys and other agents), whether in tort, contract or otherwise,
arising out of or in any way relating to this Agreement, the Note, the Security
Documents, the other Loan Documents, the Loan and the negotiation,
- 22 -
execution, administration, collateralization, repayment, modification,
extension, collection, enforcement, default or termination thereof. Such
arbitration shall proceed in Denver, Colorado, shall be governed by Colorado law
(including without limitation the provisions of CRS 13-21-102(5) and all
applicable statutes of limitation) and shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (the
"AAA"). Any award entered in an arbitration, whether on motions or at a hearing,
with or without testimony from witnesses, shall be made by a written opinion
stating the reasons for the award made. The decision of any arbitration pursuant
to this Agreement shall be made based upon Colorado law without reference to any
choice of law rules. Judgment on any award hereunder may be entered in any court
having jurisdiction.
(b) Nothing in the preceding paragraph, nor the exercise of any
right to arbitrate thereunder, shall limit the right of any party hereto: (1) to
foreclose against any real or personal property collateral by the exercise of
the power of sale under a deed of trust, mortgage, or other security agreement
or instrument or applicable law; (2) to exercise self-help remedies such as
setoff or repossession; or (3) to obtain provisional or ancillary remedies such
as replevin, injunctive relief, attachment or appointment of a receiver from a
court having jurisdiction, before, during or after the pendency of any
arbitration proceeding. The institution and maintenance of any action for such
judicial relief, or pursuit of provisional or ancillary remedies, or exercise of
self-help remedies shall not constitute a waiver of the right or obligation of
any party to submit any claim or dispute to arbitration, including those claims
or disputes arising from exercise of any judicial relief, or pursuit of
provisional or ancillary remedies or exercise of self-help remedies.
(c) If the amount in dispute is $500,000 or more, arbitration
hereunder shall be before a three-person panel of neutral arbitrators,
consisting of one person from each of the following categories: (1) an attorney
who has practiced in the area of commercial law for at least eight years or a
retired judge at the Colorado or United States District Court or an appellate
court level, (2) a person with at least eight years experience in commercial
lending, and (3) a person with at least eight years experience in the petroleum
industry. The parties to the dispute or their representatives shall obtain from
the AAA a list of persons meeting the criteria outlined above for each category
of arbitrator, and the parties shall select one person from each category in the
manner established by the AAA.
(d) If the amount in dispute is less than $500,000, the arbitration
shall be conducted before one arbitrator, who shall be an attorney who has
practiced in the area of commercial law for at least eight years or a retired
judge at the Colorado or United States District Court or an appellate court
level. The parties to the dispute or their representatives shall obtain from the
AAA a list of persons meeting the criteria outlined above, and the parties shall
select the person in the manner established by the AAA.
(e) In any arbitration hereunder: (1) the arbitrator(s) shall
decide (by documents only or with a hearing, at the arbitrators' discretion) any
pre-hearing motions which are substantially similar to pre-hearing motions to
dismiss for failure to state a claim or motions for summary adjudication; (2)
discovery shall be permitted, but shall be limited as provided in Rule 26.1(o)
of the Colorado Rules of Civil Procedure, and shall be subject to the scheduling
by the
- 23 -
arbitrator(s), and any discovery disputes shall be subject to final
determination by the arbitrator(s); and (3) the arbitrator(s) shall award costs
and expenses of the arbitration proceeding in accordance with the provisions of
this Agreement, the Note and/or the other Loan Documents.
Section 8.13 SUPERSESSION. Upon the repayment of all amounts due under or
in connection with the Prior Credit Agreement, the terms and provisions of this
Agreement shall be deemed to supersede the terms and provisions of the Prior
Credit Agreement in their entirety.
IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
KESTREL ENERGY, INC.
By: /s/Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx,
President
XXXXX FARGO BANK, N.A.
By: /s/Xxx Xxxxx
Xxx Xxxxx,
Assistant Vice President
- 24 -
EXHIBIT A
PROMISSORY NOTE
$1,396,000 November 29, 0000
Xxxxxx, Xxxxxxxx
FOR VALUE RECEIVED, KESTREL ENERGY, INC., a Colorado corporation
("Borrower"), promises to pay to the order of XXXXX FARGO BANK, N.A. ("Payee"),
the principal sum of $1,396,000 (or so much thereof as may be borrowed
hereunder), together with interest on the outstanding unpaid balance of such
principal amount at the rates-provided below.
This Note is issued pursuant to, and is subject to the terms and
provisions of, the Term Loan Agreement of even date herewith, between Borrower
and Payee, as now in effect or as the same may hereafter be amended, restated,
extended, renewed or otherwise modified (the "Term Loan Agreement"). Except as
otherwise defined herein, terms defined in the Term Loan Agreement shall have
the same meanings when used herein.
The outstanding principal amount of this Note shall be due and payable as
provided in the Term Loan Agreement. Any then-unpaid principal balance of this
Note shall be due and payable on the Maturity Date (unless due and payable
sooner pursuant to the terms of the Term Loan Agreement).
Interest shall accrue daily on the unpaid principal balance of this Note
as described in the Term Loan Agreement, shall be due and payable at, such times
as may be provided in the Term Loan Agreement and at the maturity of this Note,
and shall be calculated on the basis of a 360-day year, and the actual number of
days elapsed.
All payments of principal and interest hereon shall be made at Payee's
offices at 0000 Xxxxxxxx, Xxxxxx, Xxxxxxxx 00000 (or at such other place as
Payee shall have designated to Borrower in writing) on the date due in
immediately available funds and without set-off or counterclaim or deduction of
any kind. All payments received hereunder shall be applied first to costs of
collection, second to accrued interest as of the-date of payment and third to
the outstanding principal balance of this Note, in accordance with the terms of
the Term Loan Agreement.
Notwithstanding anything to the contrary contained in this Note, from and
after the expiration of any applicable period of grace provided for in the Term
Loan Agreement, overdue principal, and (to the extent permitted under applicable
law) overdue interest, whether caused by acceleration of maturity or otherwise,
shall bear interest at a fluctuating rate, adjustable the day of any change in
such rate, equal to four percentage points above the Prime Rate, until paid, and
shall be due and payable monthly or, at the option of the holder hereof, on
demand.
This Note is secured by, and the holder of this Note is entitled to the
benefits of, the Security Documents. Reference is made to the Security Documents
for a description of the property covered thereby and the rights, remedies and
obligations of the holder hereof in respect thereto.
A-1
Subject to the expiration of any applicable period of grace provided for
in the Term Loan Agreement, in the event of: (a) any default in any payment of
the principal of or interest on this Note when due and payable, or (b) any other
Event of Default (as defined in the Term Loan Agreement), then the whole
principal sum of this Note plus accrued interest and all other obligations of
Borrower to holder, direct or indirect, absolute or contingent, now existing or
hereafter arising, shall, at the option of Payee, become immediately due and
payable, and any or all of the rights and remedies provided herein and in the
Term Loan Agreement and the Security Documents, as they may be amended, modified
or supplemented from time to time may be exercised by Payee.
If Borrower fails to pay any amount due under this Note and Payee has to
take any action to collect the amount due or to exercise its rights under the
Security Documents, including without limitation retaining attorneys for
collection of this Note, or if any suit or proceeding is brought for the
recovery of all or any part of or for protection of the indebtedness or to
foreclose the Security Documents or to enforce Payee's rights under the Security
Documents, then Borrower agrees to pay on demand all reasonable costs and
expenses of any such action to collect, suit or proceeding, or any appeal of any
such suit or proceeding, incurred by Payee, including without limitation the
reasonable fees and disbursements of Payee's attorneys and their staff.
Borrower waives presentment, notice of dishonor and protest, and assents
to any extension of time with respect to any payment due under this Note, to any
substitution or release of collateral and to the addition or release of any
party, except as provided in the Term Loan Agreement. No waiver of any payment
or other right under this Note shall operate as a waiver of any other payment or
right.
If any provision in this Note shall be held invalid, illegal or
unenforceable in any jurisdiction, the validity, legality or enforceability of
any defective provisions shall not be in any way affected or impaired in any
other jurisdiction.
No delay or failure of the holder of this Note in the exercise of any
right or remedy provided for hereunder shall be deemed a waiver of such right by
the holder hereof, and no exercise of any right or remedy shall be deemed a
waiver of any other right or remedy that the holder may have.
All notices given hereunder shall be given as provided in the Term Loan
Agreement.
At the option of the holder hereof, an action may be brought to enforce
this Note-in the District Court in and for the City and County of Denver, State
of Colorado, in the United States District Court for the District of Colorado or
in any other court in which venue and jurisdiction are proper. Borrower and all
signers or endorsers hereof consent to venue and jurisdiction in the District
Court in and for the City and County of Denver, State of Colorado and in the
United States District Court for the District of Colorado and to service of
process under Sections 13-1-124(l)(a) and 13-1-125, Colorado Revised Statutes
(1992), as amended, in any action commenced to enforce this Note.
A-2
This Note is to be governed by and construed according to the laws of the
state of Colorado.
KESTREL ENERGY, INC.
By:
----------------------------------
Xxxxx X. Xxxxxx,
President
A-3
EXHIBIT B
COMPLIANCE CERTIFICATE
Xxxxx Fargo Bank, N.A.
MAC #C7301-046
0000 Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Denver Energy Group
Gentlemen:
This Compliance Certificate is submitted pursuant to the Term Loan
Agreement dated as of November 29, 2001 (the "Term Loan Agreement"), between
Kestrel Energy, Inc. and Xxxxx Fargo Bank, N.A. Capitalized terms used herein
without definition shall have the same meanings as provided in the Term Loan
Agreement.
THE UNDERSIGNED OFFICER CERTIFIES AS FOLLOWS:
1. Enclosed herewith are the [annual/quarterly] financial statements of
Borrower, required to be submitted to Xxxxx Fargo not later than _____________,
20_, pursuant to Section [6.1(b)(1)][6.1(b)(2)] of the Term Loan Agreement.
2. The following computations show Borrower's compliance or non-compliance,
as of ______________, 20_, with the financial tests referred to below:
(a) Current Ratio:
Actual
Current Assets of Borrower: $
------------
Current Liabilities of Borrower: $
------------
Current Maturities of Loan: - $
------------
Difference: $
------------
Current Ratio: ___:1.0
Minimum Per Agreement: 1.0:1.0
(b) Tangible Net Worth:
Actual
Net Worth of Borrower: $
------------
Intangible Assets of Borrower: - $
------------
Difference: $
------------
Minimum Per Agreement:
Initial Minimum: $ 10,000,000
50 percent of Cumulative
Net Income after 06/30/01: + $
------------
Total: $
------------
B-1
3. The enclosed financial statements are true, correct and complete in all
material respects, to the best knowledge of the undersigned.
4. The undersigned has read the Term Loan Agreement and the Security
Documents; this Certificate is based upon an examination of the Term Loan
Agreement and the Security Documents and of the accounts and other pertinent
records of Borrower.
5. In the opinion of the undersigned, the undersigned has made such examination
and investigation as is necessary to enable the undersigned to express an
informed opinion as to whether or not the covenants and conditions of the Term
Loan Agreement and the Security Documents as to which this Certificate relates
have been complied with, and, to the best knowledge of the undersigned: CHECK
EITHER (a) or (b)):
(____) (a) There exists no condition or event
at the end of the subject reporting
period or at the time of the execution
of this Certificate which constituted
or constitutes a Default or an Event of
Default.
(____) (b) In the opinion of the undersigned,
a condition or event did exist or
does exist that constituted or
constitutes a Default or an Event of
Default. In conjunction with the
execution of this Certificate, the
undersigned have transmitted, under
separate cover, a letter detailing the
nature and period of existence of any
such condition or event.
6. The most recent quarterly production report, required to be submitted to
Xxxxx Fargo not later than __________, 20__, pursuant to Section 6.1(b)(4) of
the Term Loan Agreement, was submitted to Xxxxx Fargo on ____________, 20__.
7. The following is a list of any and all developed oil and Gas Interests
sold, disposed of by exchange or otherwise transferred by Borrower to date
during the calendar year which will end on December 31, 20__, and the price
received by Borrower in connection with any such transfer:
Property Name County, State Price Received
------------- ------------- --------------
SIGNED AND CERTIFIED:
KESTREL ENERGY, INC.
By:
------------------------------
-----------------------
B-2
EXHIBIT C
PRINCIPAL PAYMENT AMOUNTS
Principal
Payment Date Payment Amount
------------ --------------
11/30/01 $20,000
12/31/01 $20,000
01/31/02 $340,000
02/28/02 $40,000
03/31/02 $40,000
04/30/02 $340,000
05/31/02 $40,000
06/30/02 $40,000
07/31/02 $340,000
08/31/02 $40,000
09/30/02 $40,000
10/31/02 $40,000
C-1
