dated as of
November 30, 2000
BETWEEN
GULFWEST DEVELOPMENT COMPANY,
as Borrower
AND
TEXAS CAPITAL BANK, N.A.,
as Lender
TABLE OF CONTENTS
ARTICLE I DEFINITIONS 1
1.1 Definitions 1
1.2 Accounting Terms and Determinations; Changes in Accounting 13
1.3 References 13
ARTICLE II COMMITMENT TO LEND AND ISSUE LETTERS OF CREDIT 14
2.1 Commitment. 14
2.2 Method of Borrowing and Obtaining Letters of Credit. 15
2.3 Note. 15
2.4 Certain Payments and Prepayments of Principal 15
2.5 Interest.16
2.6 Unused Available Commitment Fees; Engineering Fees; Facility Fees; Letter of
Credit Fees; Authorized Payments by Lender. 16
2.7 Termination of Commitment;
Maturity of Loans. 17
2.8 Determination of Borrowing Base,. Automatic Reductions
in Borrowing Base; Borrowing Base Deficiency; Notice of Redeterminations;
Requests for Reductions in Borrowing Base. 17
2.9 RequestforExtension of
Maturity 18
ARTICLE III GENERAL PROVISIONS 18
3.1 General Provisions as to
Payments and Loans. 18
3.2 Computation of Interest. 19
3.3 Default Interest. 19
3.4 Prepayments Permitted 19
ARTICLE IV COLLATERAL 19
4.1 Security. 19
4.2 Grant of Security Interests. 20
4.3 Notification of Account Debtors
and Other Obligors 20
4.4 Assignment of Insurance. 20
4.5 Financing Statement. 20
ARTICLE V CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT 21
5.1 All Loans and Letters of Credit 21
5.2 Initial Loan. 21
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BORROWER 23
6.1 Existence and Power. 23
6.2 Authorization;
Contravention. 24
6.3 BindingEffect 24
6.4 Subsidiaries; Ownership. 24
6.5 Disclosure. 25
i
6.6 Financial Information 25
6.7 Litigation 25
6.8 ERISA Plans 25
6.9 Taxes and Filing of Tax Returns 26
6.10 Title to Properties; Liens; Environmental Liability. 26
6.11 Business; Compliance. 27
6.12 Licenses, Permits, Etc. 27
6.13 Compliance with Law. 27
6.14 Governmental Consent 27
6.15 Investment CompanyAct 27
6.16 Public Utili.ty Holding Company Act; State Utility 27
6.17 Refunds; Certain Contracts. 27
6.18 No Default 28
ARTICLE VII COVENANTS 28
7.1 Use of Proceeds and Letters of Credit. 28
7.2 Financial Statements; Reserve
and Other Reports; Certain Required Notices from Borrower; Additional
Information 28
7.3 Inspection of Properties and Books, 31
7.4 Maintenance of
Security; Insurance,Operating Accounts; Transfer Orders. 31
7.5 Payment of Taxes
and Claims 32
7.6 Payment of Debt,'Additional Debt; Payment of .Accounts 32
7.7 Liens. 32
7.8 Loans and Advances to Others; Investments; Restricted Payments,'
Subsidiaries; G&A Expenses. 32
7.9 Consolidation, Merger, Maintenance, Change of
Control,. Disposition of Property; Restrictive Agreements; Hedging Agreements;
Modification of Organizational Documents; Issuance of Equity Interests. 33
7.10 Primary Business; Location of Borrower's Office; Ownership of Assets. 34
7.11 Operation of Properties and Equipment; Compliance with and Maintenance of
Contracts,' Duties as Nonoperator 34
7.12 Transactions with Affiliates. 35
7.13 Plans. 35
7.14 Compliance with Laws and Documents. 35
7.15 Certain Financial
Covenants. 36
7.16 Additional- Documents,' Quantity of Documents,' Title Data,'
Additional Information. 36
7.17 ENVIRONMENTAL INDEMNIFICATION. 37
7.18 Exceptions to Covenants. 38
7.19 Guarantor Promissory Note. 38
ARTICLE VIII DEFAULTS; REMEDIES 39
8.1 Events of Default; Acceleration of Maturity 39
8.2 Suits for Enforcement 41
8.3 Remedies Cumulative 41
8.4 Remedies Not Waived. 41
ii
ARTICLE IX MISCELLANEOUS 41
9.1 Amendments and Waivers. 41
9.2 Highest Lawful Interest Rate. 42
9.3 INDEMNIT 42
9.4 Expenses 43
9.5 Taxes. 44
9.6 Notices 44
9.7 Rights of Set-Off. 44
9.8 Survival. 45
9.9 Successors and Assigns:Rights of Other Holders. 45
9.10 ApplicableLaw; Venue; Waiver of Jury Trial 45
9.11 Headings. 46
9.12 Counterparts. 46
9.13 Invalid Provisions, Severability.46
9.14 Revolving Loan. 47
9.15 Preclusion of Oral Agreements. 48
FORM OF PROMISSORY NOTE 1
FORM OF NOTICE OF BORROWING 1
FORM OF COMPLIANCE CERTIFICATE 1
iii
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is entered into as of November 30, 2000, by and between
GulfWest Development Company, a Texas corporation, and Texas Capital Bank, N.A.,
a national banking association. Certain terms used herein are defined in Section
1.1.
RECITALS:
A. The Borrower desires to borrow funds from the Lender; and
B. The Borrower desires to acquire Oil and Gas Properties and to provide
for additional credit facilities;
NOW, THEREFORE, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the following
meanings:
"Accounts" of a Person means all of the accounts of such Person, as such
term is defined in the UCC, including without limitation the aggregate unpaid
obligations of customers and other account debtors to such Person arising out of
the sale or lease of goods or rendition of services by such Person on an open
account or deferred payment basis.
"Acceptable Commodity Hedging Agreements" means Commodity Hedging
Agreements meeting all the following criteria:
(i) The quantity of gas and liquid hydrocarbons owned by the Borrower
subject to Commodity Hedging Agreements shall not be greater than (i) for gas
hydrocarbons, 75% of the monthly production of gas hydrocarbons from the Oil and
Gas Properties of the Borrower used in determining the Borrowing Base and (ii)
for liquid hydrocarbons, 75% of the monthly production of liquid hydrocarbons
from the Oil and Gas Properties of the Borrower used in determining the
Borrowing Base; in either case, as forecast in the Lender's most recent
engineering evaluation delivered to the Borrower, without the prior written
approval of the Lender;
(ii) The "strike prices" under any Commodity Hedging Agreements shall not
be less than the lowest prices utilized in the Lender's most recent base case
evaluation of the Oil and Gas Properties of the Borrower used in determining the
Borrowing Base, as reported to the Borrower, e.xcept that under certain downside
conditions such lower strike price as the Lender may approve in writing
following a written request by the Borrower;
(iii) The Lender must have given its written consent to the counter-parties
under the Commodity Hedging Agreements; and
1
(iv) The Lender shall have received first and prior perfected securIty
interests pursuant to security agreements in fonn and substance reasonably
satisfactory to the Lender in and to the Commodity Hedging Agreements.
"Acceptable Hedging Agreements" means Acceptable Commodity Hedging Agreements
and Acceptable Rate Management Transactions. "Acceptable Rate Management
Transactions" means any Rate Management Transaction meeting all of the following
criteria:
(v) The tenus thereof are satisfactory to the Lender; and
(vi) The Persons with whom such Transactions are effected are satisfactory
to the Lender.
"Affiliate" means, with respect to a Person, (a) any Person owning,
Controlling or holding with power to vote 1 0% or more of the outstanding voting
interests of the referenced Person, (b) any Person 1 0% or more of whose
outstanding voting interests are directly or indirectly owned, Controlled or
held with power to vote by the referenced Person, (c) any Person directly or
indirectly Controlling, Controlled by or under common Control with the
referenced Person, (d) any relative within the third degree of kindred of the
referenced Person, or (e) any officer, director, limited liability company
manager, trustee, beneficiary, employee or general partner of the referenced
Person or of any Person referred to in clauses ( a). (b). (c) or (d) of this
definition. The tenn "Affiliate" shall include Affiliates of Affiliates (and so
on).
"Agreement" means this Credit Agreement, as the same may hereafter be
modified or amended from time to time.
" Available Commitment" means, at any time, an amount equal to the lesser
of the Commitment Amount or the Borrowing Base.
"Borrower" means GultWest Development Company, a Texas corporation.
"Borrowing Base" means the amount most recently detennined and designated
by the Lender as the Borrowing Base in accordance with Section 2.8.1, but in no
event in excess of the Commitment Amount, as such Borrowing Base is reduced in
accordance with Section 2.8.2. The Borrowing Base ~der Section 2.8.1 is deemed
to be $2,100,000 as of the Closing Date.
"Borrowing Base Deficiency" means, as of the date of detennination of a new
Borrowing Base under Section 2.8.1, the amount, if any, by which the outstanding
principal balance of the Loans plus the UC Exposure exceeds the Borrowing Base.
"Business Day" means any day (other than Saturdays and Sundays) on which
the Lender is open for general banking business in Dallas, Texas.
"Change of Control Event" means the failure of the Guarantor to own and
control at least 100% of every class of Equity Interests of the Borrower.
2
"Closing" means the consummation of the transactions contemplated herein.
"Closing Date" means the date of this Agreement.
"Collateral" means the Property pledged to the Lender as security for the
Note.
"Collateral Value" means, with respect to any Oil and Gas Property, the
positive dollar amount which such Oil and Gas Property contributed to the most
recently determined Borrowing Base.
"Commitment" means the commitment of the Lender to make Loans and issue
letters of credit not exceeding at any time outstanding the Available
Commitment.
"Commitment Amount" means the amount of $10,000,000.
"Commodity Hedging Agreements" means any swap agreement, cap, floor,
collar, exchange transaction, forward agreement, or other exchange or protection
agreement relating to hydrocarbons or any option with respect to any such
transaction.
"Commonly Controlled Entity" means any Person which is under common control
with the Borrower within the meaning of Section 4001 of ERISA.
"Compliance Certificate" means a certificate, substantially in the form
attached hereto entitled "Form of Compliance Certificate", executed by a
Responsible Officer and furnished to the Lender from time to time in accordance
with Section 7.2.1.
"Control," "Controlling" and "Controlled by" mean the ability (directly or indirectly through one or more
intermediaries) to direct or cause the direction of the management or affairs of a Person, whether through the
ownership of voting interests, by contract or otherwise.
"Debt" of any Person means at any date, without duplication:
(i) all obligations of such Person for money borrowed, including, without
limitation, (a) the obligations of such Person for money borrowed by a
partnership of which such Person is a general partner, (b) obligations which are
secured in whole or in part by the Property of such Person, and (c) any
obligations of such Person in respect of letters of credit and repurchase
agreements;
(ii) all obligations of such Person evidenced by notes, debentures, bonds
or similar instruments;
(iii) all obligations of such Person to pay the deferred purchase price of
Property or services;
(iv) all obligations of such Person as lessee under capital leases, other
than usual and customary oil and gas leases;
(v) all liabilities which in accordance with GAAP would be included in
deteffilining total liabilities as shown on the liability side of a balance sheet;
3
(vi) all obligations of such Person under Hedging Agreements; and
(vii) all Guarantees by such Person of Debt of another Person.
"Default" means the occurrence of an Event of Default or any event which
with notice, lapse of time or both would, unless cured or waived, become an
Event of Default.
"Default Rate" means a per annum interest rate equal to five percent (5.0%)
plus the TCB Rate from time to-time in effect, but in no event exceeding the
Highest Lawful Rate.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"Environmental Complaint" shall mean any written or oral complaint, order,
directive, claim, citation, notice of environmental report or investigation, or
other notice by any Governmental Authority or any other Person with respect to
(a) air emissions, (b) spills, releases, or discharges to soils, any
improvements located thereon, surface water, groundwater, or the sewer, septic,
waste treatment, storage, or disposal systems servicing any Property of the
Borrower, (c) solid or liquid waste disposal, (d) the use, generation, storage,
transportation, or disposal of any Hazardous Substance, or (e) other
environmental, health, or safety matters affecting any Property of the Borrower
or the business conducted thereon.
"Environmental Laws" means any law, statute, regulation, order or rule
promulgated by any Governmental Authority, whether local, state or federal
relating to air pollution, water pollution, noise control and/or transporting,
storing, handling, discharge, disposal or recovery of on-site or off- site
hazardous substances or materials, as each of the foregoing may be amended from
time to time.
"Environmental Liability" means any claim, demand, obligation, cause of
action, accusation, allegation, order, violation, damage, injury, judgment,
penalty or fine, cost of enforcement, cost of remedial action or any other cost
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.
"Environmental Lien" means a Lien in favor of a Tribunal or other Person
(i) for any liability under an Environmental Law or (ii) for damages arising
from or costs incurred by such Tribunal or other Person in response to a release
or threatened release of hazardous or toxic waste, substance or constituent into
the environment.
"Equipment" of a Person means all of such Person's equipment, as such
teffil is defined in the UCC, whether now owned or hereafter acquired, including
but not limited to all present and future machinery, vehicles, furniture,
fixtures, manufacturing equipment, shop equipment, office and recordkeeping
equipment, parts, tools, supplies, and including specifically (without
limitation) the goods described in any equipment schedule or list herewith or
hereafter furnished to the Lender by such Person.
4
"Equity Interests" means, with respect to any Person, ownership and other
~equity interests in such Person and rights to convert into ownership or equity
interests in such Person or to otherwise acquire ownership or other equity
interests in such Person.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, together with all presently effective and future regulations issued
pursuant thereto.
"Event of Default" has the meaning stated in Section 8.1 hereof.
"Final Maturity Date" or "Final Maturity" means November 1, 2003, as such
date may be accelerated as her~~n provided.
"Floating Rate" means a per annum interest rate equal to the sum of one
percent (1.00%) plus the TCB Rate from time to time in effect, but in no event
exceeding the Highest Lawful Rate.
"GAAP" means those generally accepted accounting principles and practices
which are recognized as such by the American Institute of Certified Public
Accountants acting through its Accounting Principles Board or by the Financial
Accounting Standards Board or through other appropriate boards or committees
thereof. Any accounting principle or practice required to be changed by the
Accounting Principles Board or Financial Accounting Standards Board (or other
appropriate board or committee of such Boards) in order to continue as a
generally accepted accounting principle or practice may be so changed. In the
event of a change in GAAP, the Loan Documents shall continue to be construed in
accordance with GAAP as in existence on the date hereof.
"General Intangibles" of a Person means all of such Person's general
intangibles, as such term is defined in the UCC, whether now owned or hereafter
acquired, including (without limitation) all present and future patents, patent
applications, copyrights, trademarks, trade names, trade secrets, customer or
supplier lists and contracts, manuals, operating instructions, permits,
franchises, licenses, rights to use bonds, rights to call on letters of credit,
such Person's causes of actions, claims, rights under indemnity agreements,
rights to tax refunds, rights to the proceeds of litigation, the right to use
such Person's name, and the goodwill of such Person's business.
"Governmental Authority" means any nation, country, commonwealth,
territory, government, state,. county, parish, municipality, or other political
subdivision and any entity exercising executive, legislative, judicial,
regulatory, or administrative functions of or pertaining to government.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing or in effect guaranteeing any
Debt of any other Person and, without limiting the generality of the foregoing,
any obligation, direct or indirect, contingent or otherwise, of such Person (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt or other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods, securities
or services, to take-or-pay, to make reimbursement in connection with any
letter-of-credit or to maintain financial statement conditions, by "comfort
letter" or other similar undertaking of support or
5
otherwise) or (ii) entered into for the purpose of assuring in any other
manner the obligee of such Debt or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part). The
teml "Guarantee" includes the pledging or other encumbrance of assets by a
Person to secure the obligations of another Person and restrictions or
limitations on a Person or its assets agreed to in connection with the
obligations of another Person, but does not include endorsements for collection
or deposit in the ordinary course of business; and "Guaranteed" by a Person
shall mean the act or condition of providing a Guarantee by such Person or
pemlitting a Guarantee of such Person to exist.
"Guarantor" means GulfWest Oil Company, a Texas corporation.
"Guaranty.; means the unconditional and unlimited guaranty of the Guarantor
in favor of the Lender guarantying the Obligations of the Borrower to the
Lender, in foml and substance satisfactory to the Lender and the Guarantor.
"Hazardous Substances" shall mean flammables, explosives, radioactive
materials, hazardous wastes, asbestos, or any material containing asbestos,
polychlorinated biphenyls (PCBs), toxic substances or related materials,
petroleum, petroleum products, associated oil or natural gas exploration,
production, and development wastes, or any substances defined as "hazardous
substances," "hazardous materials," "hazardous wastes," or "toxic substances"
under the Comprehensive Environmental Response, Compensation and Liability Act,
as amended, the Superfund Amendments and Reauthorization Act, as amended, the
Hazardous Materials Transportation Act, as amended, the Resource Conservation
and Recovery Act, as amended, the Toxic Substances Control Act, as amended, or
any other law or regulation now or hereafter enacted or promulgated by any
Governmental Authority.
"Hedging Agreement" means a Commodity Hedging Agreement and a Rate
Management Transaction.
"Highest Lawful Rate" means the maximum non-usurious interest rate, if any
(or, if the context so requires, an amount calculated at such rate), that at any
time or from time to time may be contracted for, taken, reserved, charged, or
received under applicable laws of the State of Texas or the United States of
America, whichever authorizes the greater rate, as such laws are presently in
effect or, to the extent allowed by applicable law, as such laws may hereafter
be in effect and which allow a higher maximum non-usurious interest rate than
such laws now allow. To the extent the laws of the State of Texas are applicable
for the purpose of detemlining the "Highest Lawful Rate", such teml shall mean
the "weekly ceiling" from time to time in effect as referred to and defined in
Chapter 303 of the Finance Code of Texas, as amended. The determination of the
Highest Lawful Rate shall, to the extent required by applicable law, take into
account as interest paid or contracted for any and all relevant payments or
charges under the Loan Documents.
"Insolvency Proceeding" of any Person means application (whether voluntary
or instituted by another Person) for or the consent to the appointment of a
receiver, trustee, conservator, custodian, or liquidator of such Person or of
all or a substantial part of the Property of such Person, or the filing of a
petition (whether voluntary or instituted by another Person) commencing a case
under Title 11 of the United States Code, seeking liquidation, reorganization,
6
or rearrangement or taking advantage of any bankruptcy, insolvency, debtor's relief, or other similar law of the United States, the
State of Texas, or any other jurisdiction.
"Inventory" of a Person means all of such Person's inventory, as such term
is defined in the UCC, whether now owned or hereafter acquired, whether
consisting of whole goods, spare parts or components, supplies or materials,
whether acquired, held or furnished for sale, for lease or under service
contracts or for manufacture or processing, and wherever located.
"Investment" in any Person shall mean any stock, bond, note, or other
evidence of Debt, or any other security (other than current trade and customer
accounts) of, investment or partnership intere~t in or loan or advance to, such
Person.
"Investment Property" of a Person means all of such Person's investment
property, as such term is defined in the UCC, whether now owned or hereafter
acquired, including but not limited to all securities, security entitlements,
securities accounts, commodity contracts, commodity accounts, stocks, bonds,
mutual fund shares, money market shares and U.S. Government securities.
"Lender" means Texas Capital Bank, N.A., a national banking association,
and its successors and assigns.
"L/C Exposure" shall mean, at any time, the aggregate maximum amount
available to be drawn under outstanding Letters of Credit at such time.
"Letter of Credit" means any letter of credit issued pursuant to this
Agreement.
"Letter of Credit Application" shall mean the standard letter of credit
application employed by the Lender from time to time in connection with letters
of credit.
"Letter of Credit Fee" shall mean each fee payable to the Lender by the
Borrower in connection with the issuance of a Letter of Credit.
"Letter of Credit Limit" has the meaning given such term in Section 2.1.1
(ii).
"Lien" means, as to any Person, any mortgage, lien, pledge, adverse claim,
charge, security interest, negative pledge or other encumbrance in or on, or any
interest or title of any vendor, lessor, lender or other secured party to or of
the Person under any conditional sale or other title retention agreement or
capital lease with respect to, any property or asset of the Person, or the
signing or filing of a financing statement which names the Person as debtor, or
the signing of any security agreement authorizing any other Person as the
secured party thereunder to file any financing statement.
"Loan" means a loan made, deemed made in connection with the payment by the
Lender on any Letter of Credit or to be made by the Lender to the Borrower
pursuant to this Agreement or the aggregate outstanding amount of all such
loans, as the context may require.
"Loan Documents" or "Loan Papers" shall mean this Agreement, the Note, the
Letter of Credit Applications, the Security Documents, and all other documents
and instruments now or
7
hereafter delivered pursuant to the tenus of or in connection with this
Agreement, the Note, the Letter of Credit Applications, or the Security
Documents, and all renewals and extensions of, amendments and supplements to,
and restatements of, any or all of the foregoing from time to time in effect.
"Material Adverse Effect" shall mean for any Person (i) any material
adverse effect on the business, operations, properties, results of operations or
condition (financial or otherwise) of such Person, (ii) any material adverse
effect upon the business operations, properties, results of operations or
condition (financial or otherwise) of such Person which increases the risk that
any of the Debt of such Person will not be repaid as and when due, or (iii) any
material adverse effect upon the Collateral or the priority or enforceability of
the Liens securing the Note; if under any of the circumstances described in
clauses (i). (ii) and(iii) preceding, the material adverse effect could
reasonably be anticipated to involve damage, loss or Debt of$25,000 or more.
"Material Agreement" means, with respect to any Person, any material
written or oral agreement, contract, commitment, or understanding to which such
Person is a party, by which such Person is directly or indirectly bound, or to
which any Property of such Person may be subject, which is not cancelable by
such Person upon notice of 90 days or less without (i) liability for further
payment in excess of $25,000 or (ii) forfeiture of Property having an aggregate
value in excess of $25,000.
"Material Debt" means Debt aggregating in excess of $25,000.
"Margin Regulations" means Regulations T, U and X of the Board of Governors
of the Federal Reserve System, as in effect from time to time.
"Mortgages" mean deeds of trust, mortgages, assignments of production,
security agreements, collateral mortgages, and acts of pledge in fonD and
substance acceptable to the Lender to be executed by the appropriate Person
pursuant to which the Lender is granted a first and prior Lien on the
Collateral, subject only to Pennitted Liens.
"Note" means the promissory note of the Borrower (and any renewal or
extension thereof) evidencing the obligation of the Borrower to repay the Loans,
substantially in the ..fonn attached hereto entitled "Fonn of Promissory Note",
with appropriate insertions.
"Notice of Borrowing" means the notice referred to in Section 2.2, which
shall be substantially in the. fonD of the attachment hereto entitled "Fonn of
Notice of Borrowing."
"Obligations" shall mean, without duplication, (i) all Debt evidenced by
the Note, (ii) the Reimbursement Obligations, (iii) the undrawn, unexpired
amount of all outstanding Letters of Credit, (iv) the obligation of the Borrower
for the payment of the fees payable hereunder or under the other Loan Documents,
and (v) all other obligations and liabilities of the Borrower to the Lender, now
existing or hereafter incurred, under, arising out of or in connection with any
Loan Document, and to the extent that any of the foregoing includes or refers to
the payment of amounts deemed or constituting interest, only so much thereof as
shall have accrued, been earned and which remains unpaid at each relevant time
of detennination.
"Officer's Certificate" means a certificate signed by a Responsible
Officer.
8
"Oil and Gas Properties" shall mean fee, leasehold, or other interests in
or under mineral estates or oil, gas, and other liquid or gaseous hydrocarbon
leases with respect to Properties situated in the United States or offshore from
any State of the United States, including, without limitation, overriding
royalty and royalty interests, leasehold estate interests, net profits
interest.s, production payment interests, and mineral fee interests, together
with contracts executed. III connection therewith and all tenements,
hereditaments, appurtenances and PropertIes appertaining, belonging, affixed, or
incidental thereto.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Indebtedness" means (i) the Obligations, (ii) unsecured accounts
payable incurred in the ordinary course of business, which are not unpaid in
excess of 90 days beyond the invoice date therefor or are being contested in
good faith and as to which such reserve as is required by GAAP has been made and
on which interest charges are not paid or accrued, (iii) unsecured accounts
payable owed to insurance companies for insurance contracts maintained by
Borrower in its ordinary course of business and (iv) if the Lender has given its
prior written consent thereto, Subordinated Debt.
"Permitted Investments" means investments in (i) indebtedness, evidenced by
notes maturing not more than 180 days after the date of issue, issued or
guaranteed by the government of the United States of America, (ii) certificates
of deposit maturing not more than 180 days after the date of issue, issued by
the Lender or by commercial banking institutions each of which is a member of
the Federal Reserve System and which has combined capital and surplus and
undivided profits of not less than $50,000,000, (iii) commercial paper, maturing
not more than 90 days after the date of issue, issued by (a) the Lender (or any
parent corporation of the Lender) or (b) a corporation (other than an Affiliate
of the Borrower) with a rating of "P 1" (or its then equivalent) according to
Xxxxx'x Investors Service, Inc., "A-I" (or its then equivalent) according to
Standard & Poor's Corporation or "F-l" (or its then equivalent) according to
Fitch's Investors Services, Inc. or (iv) such other instruments, evidences of
indebtedness or investment securities as the Lender may approve.
"Permitted Liens" means, with respect to any Property,
(i) Liens in favor of the Lender;
(ii) .the following, if the validity and amount thereof are being
contested in good faith and by appropriate legal proceedings and so long as
(a) levy and execution thereon have been stayed and continue to be stayed,
(b) they do not in the aggregate materially detract from or threaten the
value of the asset, or materially impair the use thereof in the operation
of the Borrower's business, and (c) a reserve therefor, if appropriate, has
been established: claims and Liens for Taxes due and payable; claims and
Liens upon and defects of title to real and personal property, including
any attachment of personal or real property or other legal process prior to
adjudication of a dispute on the merits; claims and Liens of mechanics,
materialmen, warehousemen, or carriers, or similar Liens; and adverse
judgments on appeal;
(iii) Liens for Taxes not past due;
9
(iv) mechanics' and materialmen's Liens for services or material~
forwhich payment is not past due;
(v) o?erators' Liens incurred pursuant to operating agreements entered
into by the Borrower m the ordInary course of business which secure
obligations not past due; and
(vi) Liens in favor of the lessor on the Property being leased under
any capital lease permitted hereunder.
"Permitted Loans and Investments" means (i) loans by the Borrower to
or the acquisition of Investments by- ~he Borrower in any Person not
exceeding in the aggregate outstanding at any time the amount of $25,000
and not otherwise permitted under this Agreement and (ii) Permitted
Investments.
"Person" means a corporation, an association, a joint venture, an
organization, a business, an individual or a government or political
subdivision thereof or any governmental agency.
"Personal Property Collateral" with respect to a Borrower means all of
such Borrower's Equipment, General Intangibles, Inventory, Receivables,
Accounts, Investment Property, all sums on deposit at the Lender, and any
items in any lockbox maintained at the Lender; together with (i) all
substitutions and replacement for and products of any of the foregoing;
(ii) proceeds of any and all of the foregoing; (iii) in the case of all
tangible goods, all accessions; (iv) all accessories, attachments, parts,
equipment and repairs now or hereafter attached or affixed to or used in
connection with any tangible goods; and (v) all warehouse receipts, bills
of lading and other documents of title now or hereafter covering such
goods.
"Plan" means, at any time, any employee benefit plan which is covered
by ERISA and in respect of which the Borrower or any Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section
3(5) of ERISA.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
"Rate Management Transaction" shall mean any transaction (including an
agreement with respect thereto) now existing or hereafter entered into by
the Borrower which is a rate swap, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index swap, equity or
equity index option, bond option, interest rate option, foreign exchange
transaction, cap transaction, floor transaction, collar transaction,
forward transaction, currency swap transaction, cross-currency rate swap
transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions) or any combination
thereof, whether linked to one or more interest rates, foreign currencies,
commodity prices, equity prices or other financial measures.
"Receivables" of the Borrower means each and every right of the
Borrower to the payment of money, whether such right to payment now exists
or hereafter arises, whether such right to payment arises out of a sale,
lease or other disposition of goods or other property, out of a rendering
of services, out of a loan, out of the overpayment of taxes or other
liabilities, or
10
otherwise arises under any contract or agreement, whether such right
to payment-is created, generated or earned by the Borrower or by some other
person who subsequently transfers its interest to the Borrower, whether
such right to payment is or is not already earned by performance, and
howsoever such right to payment may be evidenced, together with all other
rights and interests (including all liens and security interests) which the
Borrower may at any time have by law or agreement against any account
debtor or other obligor obligated to make any such payment or against any
property of such account debtor or other obligor; all including but not
limited to all present and future accounts, contract rights, loans and
obligations receivable, chattel papers, bonds, notes and other debt
instruments, tax refunds and rights to payment in the nature of General
Intangibles.
"Reimbursement Obligation" means the obligation of the Borrower to
provide to the Lender or reimburse the Lender for any amounts payable,
paid, or incurred by the Lender with respect to Letters of Credit.
"Requirement of Law" means, as to any Person, the certificate or
articles of incorporation and by-laws or other organizational or governing
documents of such Person, and any applicable law, treaty, ordinance, order,
judgment, rule, decree, regulation, or determination of an arbitrator,
court, or other Governmental Authority, including, without limitation,
rules, regulations, orders, and requirements for permits, licenses,
registrations, approvals, or authorizations, in each case as such now exist
or may be hereafter amended and are applicable to or binding upon such
Person or any of its Property or to which such Person or any of its
Property is subject. Unless otherwise specified, the "Person" referred to
in this definition shall be deemed to be the Borrower.
"Responsible Officer" means, Xxxxxx X. Xxxxxxx, President, and Xxxxxxx
X. Xxxxx, Vice President, of the Borrower.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Release of Hazardous Substances" shall mean any emission, spill,
release, disposal, or discharge, except in accordance with a valid permit,
license, certificate, or approval of the relevant Governmental Authority,
of any Hazardous Substance into or upon (a) the air, (b) soils or any
improvements located thereon, (c) surface water or groundwater, or (d) the
sewer or septic system, or the waste treatment, storage, or disposal system
servicing any Property of the Borrower.
"Restricted Payment" means:
(i) the declaration or payment of any dividend on, or the
incurrence of any liability to make any other payment or distribution
in respect of, any shares of or other ownership interests in the
Borrower without the prior written consent of the Lender;
(ii) any payment or distribution on account of the purchase,
redemption or other retirement of any shares of or other ownership
interests in the Borrower, or of any warrant, option or other right to
acquire such shares or such other ownership interests, or any other
payment or distribution made in respect thereof, either directly or
indirectly;
11
(iii) the repayment by the Borrower of any Debt owed to an
Affiliate, unless such Debt constitutes Subordinated Debt and such
repayment is peflllitted by the subordination agreement executed by
such Affiliate in connection therewith; or
(iv) any repayment by the Borrower of a loan or extension of
credit from any Affiliate.
The amount of any Restricted Payment in Property shall be deemed to be the
greater of its fair market value or its net book value ("fair market value" will
be deteflllined by the mutual agreement of the Borrower and the Lender or by an
appraisal in foflll, and prepared by an appraiser, selecte4 by the Borrower and
acceptable to the Lender).
"Revolving Credit Period" means the period commencing on the Closing Date
and ending on the Final Maturity Date.
"Security Documents" or "Security Instruments" means the security
instruments executed and delivered in satisfaction of the condition set forth in
Section 5.2.3, and all other documents and instruments at any time executed as
security for all or any ----------------- portion of the Obligations, as such
instruments may be amended, restated, or supplemented from time to time.
"Setex" means Setex Oil and Gas Company, a Texas corporation.
"Single Employer Plan" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"Subordinated Debt" means Debt of the Borrower evidenced by promissory
notes which by their tefllls, and by separate written subordination agreements
among the payee thereof, the Borrower and the Lender, have been subordinated to
the Note and other Obligations on tefllls satisfactory to the Lender.
"Subsidiary" means for any Person, 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 perfofllling similar
functions are at the time directly or indirectly owned, collectively, by such
Person and any Subsidiaries of such Person. The teflll Subsidiary shall include
Subsidiaries of Subsidiaries (and so on).
"Superfun~ Site" shall mean those sites listed on the Environmental
Protection Agency National Priority List and eligible for remedial action or any
comparable state registries or list in any state of the United States.
"Taxes" means all taxes, assessments, filing or other fees, levies,
imposts, duties, deductions, withholdings, stamp taxes, interest equalization
taxes, capital transaction taxes, foreign exchange taxes or charges, or other
charges of any nature whatsoever from time to time or at any time imposed by any
law or Tribunal.
"TCB Rate" means, on any day, the prime rate as published in The Wall
Street Journal's "Money Rates" table for such day. If multiple prime rates are
quoted in such table, then the highest prime rate quoted therein shall be the
TCB Rate. In the event that a prime rate is not
12
published in The Wall Street Journal's "Money Rates" table for any reason
or The WaIl-Street Journal is not --------------------------- published that
day, the Lender will choose a substitute TCB Rate, for purposes of calculating
the interest rate applicable hereunder, which is based on comparable
information, until such time as a prime rate is published in The ---- Wall
Street Journal's "Money Rates" table. In this connection, such prime rate for
each Saturday, Sunday or day for ---------------------- which banks are
authorized to be closed in the state of Texas shall be the most recent prime
rate so published if published no more than three days prior to such date. Each
change in the TCB Rate shall become effective without notice to the Borrower on
the effective date of each such change.
"Transferee" means any Person to which the Lender has sold, assigned,
transferred, or granted a participation in any of the Obligations, as authorized
hereunder, and any Person acquiring, by purchase, assignment, transfer, or
participation, from any such purchaser, assignee, transferee, or participant,
any part of such Obligations.
"Tribunal" means any court, tribunal, governmental body, agency,
arbitration panel, or instrumentality.
"UCC" shall mean the Uniform Commercial Code as from time to time in effect
in the State of Texas.
"Unused Available Commitment" means, at any time, an amount (not less than
zero) equal to the remainder, if any, of the (a) Available Commitment in effect
at such time minus (b) the outstanding principal amount of all Loans at such
time minus (c) the UC Exposure at such time.
1.2 Accounting Terms and Determinations; Changes in Accounting.
1.2.1 Unless otherwise specified herein, all accounting terms used herein
shall be interpreted, all accounting determinations hereunder shall be made, and
all financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP, applied on a basis consistent (except for changes
concurred in by the independent public accountants and with respect to which the
Borrower shall have promptly notified the Lender on becoming aware thereof) with
the most recent financial statements of the Borrower delivered to the Lender.
1.2.2 The Borrower will not change its method of accounting, other than
immaterial changes in methods, changes permitted by GAAP in which the Borrower's
independent public accountants concur and changes required by a change in GAAP,
without the prior written consent of the Lender.
1.3 References. References in this Agreement to Exhibits, Schedules,
Annexes, Appendixes, Attachments, Articles, Sections or clauses shall be to
exhibits, schedules, annexes, appendixes, attachments, articles, sections or
clauses of this Agreement, unless expressly stated to the contrary. References
in this Agreement to "hereby," "herein," "hereinafter," "hereinabove,"
"hereinbelow," "hereof," "hereunder" and words of similar import shall be to
this Agreement in its entirety and not only to the particular Exhibit, Schedule,
Annex, Appendix, Attachment, Article, or Section in which such reference
appears. This Agreement, for convenience only, has been divided into Articles
and Sections; and it is understood that the rights and other legal relations of
the parties hereto shall be determined from this instrument as an
13
entirety and without regard to the aforesaid division into Articles and
Sections and wit~out regard to headings prefixed to such Articles or Sections.
Whenever the context requIres, reference herein made to the single number shall
be understood to include the plural; and likewise, the plural shall be
understood to include the singular. Definitions of terms defined in the singular
or plural shall be equally applicable to the plural or singular, as the case may
be, unless otherwise indicated. Words denoting sex shall be construed to include
the masculine, feminine and neuter, when such construction is appropriate; and
specific enumeration shall not exclude the general but shall be construed as
cumulative. The Exhibits, Schedules, Annexes, Appendixes and Attachments
attached to this Agreement and items referenced as being attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for all purposes. --
ARTICLE II
COMMITMENT TO LEND AND ISSUE LETTERS OF CREDIT
2.1 Commitment.
2.1.1 During the Revolving Credit Period and so long as no Default exists,
the Lender agrees, subject to the other terms and conditions of this Agreement:
(i) To lend to the Borrower from time to time amounts not to exceed in
the aggregate at anyone time outstanding an amount equal to the Available
Commitment as in effect from time to time.
(ii) To issue letters of credit or renew Letters of Credit for the
account of the Borrower from time to time in amounts not to exceed in the
aggregate at anyone time outstanding the lesser of the amount of (a)
$500,000 or (b) the Borrowing Base in effect at such time (such lesser
amount being herein referred to as the "Letter of Credit Limit"), it being
understood that outstanding funding obligations under Letters of Credit
shall reduce the Unused Available Commitment hereunder.
(iii) Notwithstanding any other provision of this Agreement, under no
circumstances shall the Lender ever be obligated to lend to the Borrower
any amount or to issue any letter of credit on behalf of the Borrower which
would cause the Lender to violate any lending limits or restrictions now
existing or hereafter imposed on the Lender by any Governmental Authority,
nor shall the Lender have an implied duty to sell or participate a portion
of the Note or other Obligations to any other Person in order to permit the
Lender to lend to the Borrower additional amounts or to issue any letter of
credit on behalf of the Borrower.
2.1.2 The Lender shall not be obligated to lend to the Borrower, and the
Borrower shall not be entitled to borrow hereunder, any amount which would cause
the sum of the outstanding principal amount of all Loans made by the Lender and
the undrawn amount of all outstanding Letters of Credit to exceed the Available
Commitment of the Lender then in effect.
2.1.3 The Lender shall not be obligated to issue a letter of credit
pursuant to Section -------- :f.1-:.Lor to renew a Letter of Credit, and the
Borrower shall not be entitled to have a letter of credit issued pursuant to
such Section or to have a Letter of Credit renewed, if the issuance of the
14
requested letter of credit or the renewal of an existing Letter of Credit
would cause the Letter of Credit Limit to be exceeded, after taking into account
the mandatory reductions in the Borrowing Base required during the proposed term
of such requested letter of credit or renewal Letter of Credit.
2.2 Method of Borrowing and Obtaining Letters of Credit.
2.2.1 The Borrower shall give the Lender a Notice of Borrowing prior to
12:00 noon (Dallas time) of the day of the requested Loan under Section 2.1.
2.2.2 Unless the Lender determines that any applicable condition specified
in Article V or elsewhere herein has not been satisfied, the Lender will make
the funds available to the Borrower at the Lender's address referred to in
Section 9.6.
2.2.3 The Borrower shall give the Lender a request for letter of credit
prior to 12:00 noon (Dallas time) at least three (3) Business Days before each
requested letter of credit under Section 2.1, by completing and delivering a
Notice of Borrowing together with a completed Letter of Credit Application. The
expiry date of such requested letter of credit cannot be later than the earlier
of (a) one (1) year from the date of issuance or (b) the last date before which
the Borrowing Base is scheduled to reduce to an amount less than the aggregate
undrawn amount of the requested letter of credit and the outstanding Letters of
Credit which, by their terms, might be outstanding on such reduction date or (c)
the date which is 30 days prior to the Final Maturity Date. The Letter of Credit
Application must be completed in a manner and shall use such wording as is
acceptable to the Lender.
2.2.4 Upon receipt of the Letter of Credit Application, the Lender shall
issue such letter of credit if the conditions of Article V or elsewhere herein
have been satisfied. -------------
2.2.5 Subject to the terms hereof, in the event that any beneficiary of a
Letter of Credit shall have taken the steps necessary to obligate the Lender to
make a payment under such Letter of Credit, the Borrower shall be deemed to have
delivered to the Lender an irrevocable Notice of Borrowing under Section 2.2 for
a Loan in the amount of such payment amount, regardless of any ------------
limitations set forth herein. The Lender shall pay over the proceeds of such
Loan to itself as reimbursement for amounts paid under such Letter of Credit.
2.Note. The Loans shall be evidenced by the Note issued by the Borrower,
payable to the order of the Lender in the Commitment Amount.
2.4 Certain Payments and Prepayments of Principal .
2.4.1 If at any time the aggregate principal of the Loans outstanding and
the undrawn amount of the outstanding Letters of Credit exceed the Borrowing
Base then in effect, the Borrower shall within one (1) Business Day after such
occurrence, repay the principal of the Loans in an amount equal to such excess,
except that if the circumstances described in this Section are the direct result
of a new determination of the Borrowing Base under Section 2.8.1, then the
provisions of Section 2.8.3 shall apply.
15
2.4.2 In the event that a prepayment is required under this Section or
Section 2.8.3 and the outstanding Loans are less than the amount required to be
prepaid, the Borrower shall repay the entire balance of the Loans and, in
accordance with the provisions of the relevant Letter of Credit Application
executed by the Borrower or otherwise to the satisfaction of the Lender, deposit
with the Lender as additional collateral securing the Obligations, an amount of
cash, in immediately available funds, equal to the L/C Exposure minus the
Borrowing Base.
2.5 Interest.
2.5.1 The unpaid principal balance of the Loans shall bear interest from
the date hereof, payable as it accrues on December 1, 2000, and on the first day
of each month thereafter and at maturity (stated or by acceleration), at a rate
per annum equal to the lesser of the (i) the Floating Rate or such higher rate
as is specified in Section 3.3 or (ii) the Highest Lawful Rate.
2.5.2 Each change in the rate of interest charged hereunder shall become
effective automatically and without notice to the Borrower upon the effective
date of each change in the Floating Rate or the Highest Lawful Rate, as the case
may be.
2.6 Unused Available Commitment Fees; Engineering Fees; Facility Fees;
Letter of Credit Fees; Authorized Payments by Lender.
2.6.1 The Borrower shall pay to the Lender a commitment fee of one-half of
one percent (1/2 of 1 %) per annum, calculated daily on the actual number of
days the Commitment is outstanding on the amount of the Unused Available
Commitment in effect from time to time, such commitment fee to be payable
quarterly as it accrues on each January 1, April 1, July 1, and October 1 and
upon termination of the Available Commitment.
2.6.2 The Borrower shall pay to the Lender on the Closing Date an
engineering fee in the amount of $3,000 and thereafter shall pay an engineering
fee in the amount of$3,000 if the Lender's internal engineers perform the
engineering review of the Collateral or the actual fees and expenses of any
third-party engineers retained by the Lender to prepare an engineering report,
payable at the time of the scheduled or Borrower requested determination of the
Borrowing Base referred to in Section 2.8.1 or at the time of a redetermination
of the Borrowing Base required under Section 7.9.2.
2.6.3 To compensate the Lender for the costs of the extension of credit
hereunder, the Borrower shall pay to the Lender (i) on the Closing Date, a
facility fee in the amount of $21,000 and (ii) thereafter upon each
determination of an increase in the Borrowing Base pursuant to Section 2.8.1, a
facility fee in the amount of one percent (1.00%) of the amount by which the
Borrowing Base is increased over that in effect on the date of such
determination.
2.6.4 The Borrower shall pay to the Lender at the time of each issuance of
a letter of credit hereunder and at the time of each renewal or extension of a
Letter of Credit, (i) a letter of credit fee equal to the greater of (a) one and
one-half percent (1.5%) per annum of the face amount of such Letter of Credit
for the maximum number of days which such Letter of Credit, by its terms, could
remain outstanding or (b) $500, and (ii) the normal and standard charges of the
Lender for the issuance, delivery and confirmation of such Letter of Credit.
16
2.6.5 The Lender is irrevocably authorized to make Loans for the paymeni-
of the fees and expenses of the Lender required to be paid by the Borrower
hereunder. The Lender shall pay over such Loan proceeds to itself or directly to
such other Person entitled to payment hereunder.
2.7 Termination of Commitment,' Maturity of Loans.
2.7.1 The Commitment shall terminate no later than the Final Maturity
Date, and any Loans then outstanding (together with accrued interest
thereon) shall be due and payable in full on such date.
2.7.2 -The Borrower shall have the right upon payment in full of the
Obligations and the cancellation of all outstanding Letters of Credit, to cancel
in full (but not in part) the Commitment, with no right of reinstatement.
2.8 Determination of Borrowing Base,' Automatic Reductions in Borrowing
Base,' Borrowing Base Deficiency,' Notice of Redeterminations; Requests for
Reductions in Borrowing Base.
2.8.1 On the basis of the information furnished to the Lender hereunder and
such other reports, appraisals and information as the Lender may deem
appropriate, the Lender shall have the right to determine a new Borrowing Base
as of June 1,2001, and each December 1 and June 1 occurring thereafter during
the Revolving Credit Period (the "scheduled determinations"), or at such other
or additional times during the Revolving Credit Period as the Lender in its
reasonable discretion and at its sole cost may elect (the "discretionary
determinations"), and the Lender shall determine a new Borrowing Base at such
additional times, but no more often than one (1) time in any 12-month period
without the Lender's consent, as the Borrower may request (the "Borrower
requested determinations"). Such determinations, if made, shall be in accordance
with the Lender's customary practices and standards for loans of a similar
nature as in effect at the time such determinations are made and shall be
conclusive, and any increases in the Borrowing Base shall be subject to the
Lender's complete credit approval process. Any new Borrowing Base determined
under this Section shall be effective immediately upon its communication to the
Borrower regardless of any Notice of Borrowing the Lender might have received.
2.8.2 The Borrowing Base shall be automatically reduced monthly, commencing
January 1, 2001, and on the rust day of each month thereafter until the Final
Maturity Date. Such reduction in the Borrowing Base each month shall be in the
amount of $15,000 unless redetermined as herein permitted. At the time of each
new Borrowing Base determination under Section 2.8.1, the Lender in its sole
discretion may increase or decrease the amount of such monthly reductions and
any decreases in the monthly reductions shall be subject to the Lender's
complete credit approval process.
2.8.3 Upon the occurrence of a Borrowing Base Deficiency, the Borrower
shall, within thirty (30) days following notice by the Lender of the existence
of such Borrowing Base Deficiency, do anyone or more of the following in an
aggregate amount at least equal to such Borrowing Base Deficiency: (i) prepay
the principal of the outstanding Loans or (ii) cause to be
17
created first and prior perfected Liens (subject only to Peffilitted Liens)
in favor of the Lender, by instruments satisfactory to the Lender, on producing
Oil and Gas Properties (or cash if the circumstances described in Section 2.4.2
are applicable) which in the opinion of the Lender would increase
the Borrowing Base by an amount sufficient, in combination with clause (i)
preceding, to eliminate such Borrowing Base Deficiency.
2.8.4 Upon each redeteffilination of the Borrowing Base, the Lender may
notify the Borrower orally (confiffiling such notice promptly in writing) of
such deteffilination, and the Borrowing Base and the amount by which the
Borrowing Base shall be reduced so communicated to the Borrower shall become
effective upon such oral notification and shall remain in effect utltil the next
subsequent redetermination of the Borrowing Base.
2.8.5 The Borrower may at any time by written notice to the Lender request
that the Borrowing Base be reduced (with no right of reinstatement) by an amount
specified by the Borrower in such reduction notice, and the Borrowing Base shall
be deemed so reduced upon receipt by the Lender of such reduction notice.
Further, in the event the Borrower is advised of any increase in the Borrowing
Base, the Borrower may decline to utilize the increased borrowing availability
created thereby and by written notice to the Lender irrevocably refuse to accept
all or a portion of such increase, but any such refusal notice received by the
Lender more than three (3) Business Days following such increase in the
Borrowing Base shall be treated as a Borrowing Base reduction notice under the
immediately preceding sentence.
2.9 Request for Extension of Maturity
2.9.1 Following receipt by the Lender of a written request from the
Borrower, given by the Borrower no earlier than 15 months prior to the Final
Maturity Date, the Lender agrees to consider, in accordance with the customs and
standards of the Lender in effect at such time for loans of a similar nature to
the Loan and subject to the Lender's complete approval process, a request by the
Borrower to extend the Final Maturity Date. The Lender may charge the Borrower
fees in connection with any such request or extension.
ARTICLE ill
GENERAL PROVISIONS
3.1 General Provisions as to Payments and Loans.
3.1.1 All payments of principal and interest on the Loans and of fees
hereunder shall be made by 12:00 noon (Dallas, Texas time) on the date such
payments are due in federal or other funds immediately available at the
principal office of the Lender referred to in Section M and, if not made by such
time or in immediately available funds, then such payment shall be deemed made
when such funds are available to the Lender for its full and unrestricted use.
Whenever any payment of principal of or interest on the Loans or of fees
hereunder shall be due on a day which is not a Business Day, the date for
payment thereof shall be extended to the next succeeding Business Day. If the
date for any payment is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
18
3.1.2 All payments made by the Borrower on the Loans shall be made free xxx
clear of, and without reduction by reason of, any Taxes.
3.1.3 All requests for Loans and letters of credit shall be made on a
Business Day.
3.1.4 All Loans shall be made available to the Borrower on a Business Day
at the Lender's address referred to in Section 9.6.
3.1.5 All payments and fundings shall be denominated in United States of
America dollars.
3.2 Computation of Interest. Each determination hereunder of interest on
the Loans and fees based on per annum calculations shall be computed on the
basis of a year of 360 days and paid for the actual number of days elapsed
(including the first day but excluding the last day), subject to the limitations
of the Highest Lawful Rate.
3.3 Default Interest. Unless waived by the Lender, the principal of the
Note shall bear interest at the Default Rate at any time an Event of Default
exists and, to the extent permitted by law, overdue interest on the Loans shall
bear interest at the Default Rate.
3.4 Prepayments Permitted. The Loans and accrued interest thereon may be
prepaid by the Borrower in whole or in part at any time without premium or
penalty.
ARTICLE IV
COLLATERAL
4.1 Security.
4.1.1 To secure full and complete payment and performance of the
obligations of the Borrower to the Lender, the Borrower will cause the
appropriate Person to execute and deliver to the Lender the following documents
and instruments:
(i) the Mortgages granting the Lender a first and prior Lien on no
less than 90% by Collateral Value of the Oil and Gas Properties utilized in
determining the Borrowing Base, together with financing statements relating
thereto, subject only to Permitted Liens;
(ii)' the limited recourse Guaranty of the Guarantor;
(iii) stock pledge agreement from the Guarantor to the Lender covering
100% of the Equity Interests in the Borrower; and
(iv) the financing statement related to the Personal Property
Collateral.
4.1.2 All documents delivered or to be delivered hereunder shall be in form
and substance reasonably satisfactory to the Lender and its counsel and shall be
supported by such legal opinions as the Lender or its counsel may reasonably
request.
19
4.1.3 All Liens to be created by delivery of the documents referred to in
this Section shall be first and prior perfected Liens in favor of the Lender,
subject only to Permitted Liens.
4.2 Grant of Security Interests. The Borrower, as debtor, hereby pledges,
assigns and grants to the Lender, as secured party, a security interest
(collectively referred to as the "Security Interest") in the Personal Property
Collateral of the Borrower, as security for the payment and performance of the
Obligations.
4.3 Notification of Account Debtors and Other Obligors. The Lender may at
any time while a Default exists notify any account debtor or other person
obligated to pay the amount due that such right to payment has been assigned or
transferred to the Lender for security and shall be paid directly to the Lender.
The Borrower will join in giving such notice if the Lender so requests. At any
time after the Borrower or the Lender gives such notice to an account debtor or
other obligor, the Lender may, but need not, in the Lender's name or in the
Borrower's name (i) demand, xxx for, collect or receive any money or property at
any time payable or receivable on account of, or securing, any such right to
payment, or grant any extension to, make any compromise or settlement with or
otherwise agree to waive, modify, amend or change the obligations (including
collateral obligations) of any such account debtor or other obligor; and (ii) as
the Borrower's agent and attorney-in-fact, notify the United States Postal
Service to change the address for delivery of the Borrower's mail to any address
designated by the Lender, otherwise intercept the Borrower's mail, and receive,
open and dispose of the Borrower's mail, applying all Collateral as permitted
under this Agreement and holding all other mail for the Borrower's account or
forwarding such mail to the Borrower's last known address.
4.4 Assignment of Insurance. As additional security for the payment and
performance of the Obligations, the Borrower hereby assigns to the Lender any
and all monies (including, without limitation, proceeds of insurance and refunds
of unearned premiums) due or to become due under, and all other rights of the
Borrower with respect to, any and all policies of insurance now or at any time
hereafter covering the Collateral or any evidence thereof or any business
records or valuable papers pertaining thereto, and the Borrower hereby directs
the issuer of any such policy to pay all such monies directly to the Lender. At
any time, whether or not a Default exists, the Lender may (but need not), in the
Lender's name or in the Borrower's name, execute and deliver proof of claim,
receive all such monies, endorse checks and other instruments representing
payment of such monies, and adjust, litigate, compromise or release any claim
against the issuer of any such policy.
4.5 Financing Statement. A carbon, photographic or other reproduction of
this Agreement or of any financing statements signed by the Borrower is
sufficient as a financing statement and may be filed as a financing statement in
any state to perfect the security interests granted hereby. For the purpose, the
following information is set forth:
Name and address of Borrower (debtor):
GulfW est Development Company
000 X. Xxx Xxxxxxx Xxxxxxx Xxxx, Xxxxx
000 Xxxxxxx, Xxxxx 00000
Federal Tax id No.: 00-0000000
20
Name and address of Lender(secured party):
Texas Capital Bank, N.A. 0000
XxXxxxxx Xxxxxx, Xxxxx 000 Xxxxxx,
Xxxxx 00000
Attn:Energy Group Federal Tax id No.: 00-0000000
ARTICLE V
CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT
The obligation of the Lender to make Loans or issue letters of credit
hereunder shall be subject to the satisfaction of each of the following
conditions:
5.1 All Loans and Letters of Credit. In the case of each Loan or
letter of credit to be issued hereunder (except the initial Loan issued
hereunder):
5.1.1 timely receipt by the Lender of a Notice of Borrowing or Letter
of Credit Application;
5.1.2 the fact that, immediately before such requested Loan or Letter
of Credit, no Default shall have occurred and be continuing and that the
making of any such Loan will not cause a Default; and
5.1.3 the fact that the representations and warranties of the Borrower
contained in this Agreement (except the representations set forth in
Sections 6.7 and ~) shall be true on and as of the date of such Loan.
5.1.4 Each request for a Loan hereunder shall be deemed to be a
representation and warranty by the Borrower on the date of such request, as
to the facts specified in Sections 5.1.2 and
5.2 Initial Loan. In the case of the initial Loan or Letter of Credit:
5.2.1 receipt by the Lender of the following:
(i) copies of the Articles or Certificates of Incorporation (or
Articles of Organization or similar documents), and all amendments thereto,
of the Borrower and the Guarantor, accompanied by certificates that such
copies are correct and complete, one issued by the Secretary of State of
the state of incorporation or formation of the Borrower, dated a current
date, and one executed by the President or a Vice President and the
Secretary or an Assistant Secretary (or other authorized representatives)
of the Borrower, dated the Closing Date;
(ii) copies of the Bylaws (or Regulations or similar documents), and
all amendments thereto, of the Borrower and the Guarantor, accompanied by
certificates that such copies are correct and complete of the President or
a Vice President and the Secretary or an Assistant Secretary (or other
authorized representatives) of the Borrower, dated the Closing Date;
21
(iii) certificates of the appropriate Tribunals of each jurisdiction in
which the Borrower or the Guarantor has an executive office or principal place
of business, the Borrower or the Guarantor was fonned or in which any Collateral
is located (if the Borrower or the Guarantor is required to qualify to do
business in such state), each dated a current date, to the effect that the
Borrower or the Guarantor, as applicable, is in good standing with respect to
the payment of franchise and/or other Taxes and, if required by law, are duly
qualified to transact business in such jurisdictions, accompanied by the
certificate of the President or a Vice President and the Secretary or an
Assistant Secretary (or other authorized representatives) of the Borrower or the
Guarantor, as applicable, that such Tribunal certificates are true and correct
as of the Closing Date;
(iv) certificates of incumbencies and signatures of all officers of the
Borrower and the Guarantor who will be authorized to execute or attest any of
the Loan Documents on behalf of the Borrower or the Guarantor, as applicable,
executed by the President or a Vice President and the Secretary or an Assistant
Secretary (or other authorized representatives) of the Borrower, or the
Guarantor, as applicable, dated the Closing Date;
(v) copies of resolutions approving the Loan Documents and authorizing the
transactions contemplated therein, duly adopted by the Board of Directors (or
authorized body serving a similar function) of the Borrower and the Guarantor,
accompanied by certificates of the Secretary or an Assistant Secretary (or other
authorized representative) of the Borrower or the Guarantor, as applicable, that
such copies are true and correct copies of resolutions duly adopted at the
meeting of, or by the unanimous written consent of, the Board of Directors (or
authorized body serving a similar function) of the Borrower or the Guarantor, as
applicable, and that such resolutions constitute all the resolutions adopted
with respect to such transactions, have not been amended, modified or revoked in
any respect, and are in full force and effect as of the Closing Date;
5.2.2 receipt by the Lender of the duly executed Note in the Commitment
Amount, dated the Closing Date;
5.2.3 receipt by the Lender of the documents described in Section 4.1.1,
each duly executed and delivered by the appropriate Person;
5.2.4 receipt by the Lender of such title opinions as the Lender may
request, in fonn and substance and from attorneys acceptable to the Lender,
covering such portions of the Collateral as the Lender may specify and such
other documentation and infonnation required by the Lender to satisfy the Lender
of the status of the title of the Collateral;
5.2.5 receipt by the Lender of a certificate of ownership interests in fonn
and substance satisfactory to the Lender, certifying as to the ownership
interests of the Borrower in its Oil and Gas Properties;
5.2.6 receipt by the Lender of a certificate from the President or a Vice
President and the Secretary or an Assistant Secretary (or other authorized
representatives) of the Borrower certifying as to the truth and correctness of
each representation and warranty contained in Article YI hereof as of the
Closing Date;
22
5.2.7 receipt by the Lender of satis.factory evidence that prior Liens, if
any,-on the Collateral are being released or assigned to the Lender concurrently
with the Closing;
5.2.8 receipt by the Lender of the opinions of counsel to the Borrower in
foffil and substance satisfactory to the Lender and its counsel;
5.2.9 receipt by the Lender of the results of searches of the UCC records
of the Secretary of State of the State of Texas from a source acceptable to the
Lender reflecting no Liens against any of the intended Collateral other than in
favor or the Lender, or Liens being released or assigned to the Lender
concurrently with the Closing;
5.2.10- receipt by the Lender of evidence satisfactory to it that
Acceptable Commodity Hedging Agreement are in place covering at least 150
barrels per day for the 12- month period commencing January 1, 2001, and
providing a floor of no less than $22.00 per barrel;
5.2.11 receipt by the Lender of a copy of the $150,000 promissory note from
the Guarantor to the Borrower dated November 30, 2000 (the "Guarantor Promissory
Note"); and
5.2.12 receipt by the Lender of such additional infoffilation and
documentation as the Lender may reasonably require relating to the Loan
Documents and the transactions contemplated hereby and thereby.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
The Borrower hereby represents and warrants to the Lender as follows:
6.1 Existence and Power. The Borrower:
6.1.1 is a corporation, duly organized, validly existing and in good
standing under
the laws of the State of Texas;
6.1.2 has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted;
6.1.3 is duly qualified to transact business as a foreign entity in each
jurisdiction where the nature of its business requires the same, except where
the failure to so qualify could not reasonably be expected to have a material
adverse effect on its business or financial condition; and
6.1.4 owns, both beneficially and of record, all of its assets reflected in
its financial statements delivered to the Lender.
23
The Guarantor:
6.1.5 is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Texas;
6.1.6 has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carryon its business as now
conducted;
6.1.7 is duly qualified to transact business as a foreign entity in each
jurisdiction where the nature of its business requires the same, except where
the failure to so qualify could not reasonably be expected to have a material
adverse effect on its business or fmancial condition; and -.
6.1.8 owns, both beneficially and of record, all of its assets reflected in
its financial statements delivered to the Lender.
6.2 Authorization; Contravention. The execution, delivery and performance
by each Person (other than the Lender) purporting to execute this Agreement or
the other Loan Documents are within such Person's power, have been duly
authorized by all necessary action, require no action by or in respect of, or
filing with, any governmental body, agency or official (except that the
perfection of Liens created by certain of the Security Documents may require the
filing of financing statements, mortgages or similar instruments in the
appropriate recordation offices), and do not contravene, or constitute a default
under, any provision of applicable law or regulation (including, without
limitation, the Margin Regulations) or any agreement creating or governing such
Person or any agreement, judgment, injunction, order, decree or other instrument
binding upon such Person or result in the creation or imposition of any Lien on
any Property of the Borrower, except Liens securing the Obligations.
6.3 Binding Effect.
6.3.1 This Agreement constitutes a valid and binding agreement of the
Borrower; the Note, when executed and delivered in accordance with this
Agreement, will constitute the valid and binding obligation of the Borrower; the
Security Documents, when executed and delivered in accordance with this
Agreement, will constitute valid and binding obligations of each Person
purporting to execute the same;
6.3.2 .Each Loan Document is enforceable in accordance with its terms
except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii) rights
of acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability.
6.4 Subsidiaries; Ownership.
6.4.1 The Borrower has no Subsidiaries.
6.4.2 All of each class of Equity Interests in the Borrower is owned
legally and beneficially by the Guarantor.
24
6.5 Disclosure. No document, certificate or statement delivered to the
Lender by or on behalf of the Borrower in connection with the transactions
contemplated hereby contains any untrue statement of a material fact. All
information heretofore furnished by the Borrower to the Lender for purposes of
or in connection with this Agreement or any transaction contemplated hereby is,
and all such information hereafter furnished by the Borrower to the Lender will
be, true and accurate in every material respect or based on reasonable estimates
on the date as of which such information is stated or certified. The Borrower
has disclosed to the Lender in writing any and all facts (except facts of
general public knowledge) which materially and adversely affect or may affect
(to the extent the Borrower can now reasonably foresee) the business,
operations, prospects or condition, financial or otherwise, of the Borrower or
the ability of the Borrower tQ .perform its obligations under this Agreement.
6.6 Financial Information.
6.6.1 The financial information of the Borrower delivered to the Lender in
connection with the request for this credit facility fairly present, in
conformity with GAAP, the financial position of the Borrower.
6.6.2 Except as disclosed in a writing delivered by the Borrower to the
Lender prior to the execution and delivery of this Agreement, since the dates
referenced the financial information referred to in Section 6.6.1 above, there
has been no material adverse change in the business, financial position, results
of operations or prospects of the Borrower.
6. 7 Litigation. There is no action, suit or proceeding pending against, or
to the knowledge of the Borrower threatened against or affecting the Borrower or
any Guarantor before any Tribunal or arbitrator in which there is a reasonable
possibility of an adverse decision which could materially and adversely affect
the business, financial position or results of operations of the Borrower or any
Guarantor, or which could in any manner draw into question the validity of this
Agreement or any other Loan Documents.
6.8 ERISA Plans.
6.8.1 The Borrower and each of its ERISA affiliates is in compliance in all
material respects with any applicable provisions of ERISA and the final
regulations and published interpretations thereunder with respect to all Single
Employer Plans and Multiemployer Plans.
6.8.2 No Termination Event has occurred or is reasonably expected to occur
with respect to any Single Employer Plan which would reasonably be expected to
have a Material Adverse Effect.
6.8.3 The aggregate fair market value of the assets of all Single Employer
Plans was at least equal to the actuarial present value of all vested
nonforfeitable benefits under such Single Employer Plans as of the most recent
valuation date.
6.8.4 Neither the Borrower nor any of its ERISA affiliates has incurred any
unpaid withdrawal liability, or reasonably expects to incur any unpaid
withdrawal liability, under ERISA to any Multiemployer Plan, which unpaid
withdrawal liability would reasonably be expected to have a Material Adverse
Effect.
25
6.9 Taxes and Filing of Tax Returns.
6.9.1 The Borrower and the Guarantor have, respectively, filed or properly
extended all returns required to have been filed or extended with respect to
Taxes and has paid all Taxes shown to be due and payable by it on such returns,
including interest and penalties, and all other Taxes which are payable by it,
to the extent the same have become due and payable (unless, with respect to such
other Taxes, the criteria set forth in Section 7.5 are being met). The Borrower
does not know of any proposed assessment of Taxes of a material amount against
it and all liabilities for Taxes of the Borrower are adequately provided for.
6.1 0 TitJ~ to Properties; Liens; Environmental Liability.
6.10.1 The Borrower and the Guarantor have, respectively, good and
indefeasible record title to all Property purported to be owned by it (except
for Permitted Liens, minor defects in title and minor encumbrances not in any
case materially detracting from the value of the assets affected thereby). All
Property of the Borrower is free and clear of all Liens other than Permitted
Liens. Upon the recordation of the Security Documents in the appropriate
recordation offices, the Liens covering the Collateral will be valid,
enforceable, first and prior, perfected Liens in favor of the Lender, except for
Permitted Liens.
6.10.2 Neither the Borrower nor the Guarantor has (i) received notice or
otherwise learned of any Environmental Liability which could individually or in
the aggregate have a Material Adverse Effect on the Borrower arising in
connection with (a) any non-compliance with or violation of the requirements of
~y Environmental Law or (b) the release or threatened release of any toxic or
hazardous waste, substance or constituent, or other substance into the
environment, or (ii) 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, substance or
constituent into the environment for which the Borrower is or may be liable
which would individually or in the aggregate have a Material Adverse Effect on
the Borrower.
6.10.3
(i) No Property of the Borrower is currently on or has ever been on,
or is adjacent to any Property which is on or has ever been on, any federal
or state list of Superfund Sites;
(ii) No Hazardous Substances have been generated, transported, and/or
disposed of by the Borrower at a site which was, at the time of such
generation, transportation, and/or disposal, or has since become, a
Superfund Site;
(iii) Except in accordance with applicable Requirements of Law or the
terms of a valid permit, license, certificate, or approval of the relevant
Governmental Authority, no Release of Hazardous Substances by the Borrower
from, affecting, or related to any Property of the Borrower or adjacent to
any Property of the Borrower has occurred; and
(iv) No Environmental Complaint has been received by the Borrower.
26
..
6.11 Business; Compliance. The Borrower and the Guarantor have,
respectively perfonned and abided by all obligations required to be
perfonned by it to the extent it could be materially and adversely affected
under any license, pennit, order, authorization, grant, contract,
agreement, or regulation to which it is a party or by which it or any of
its Property is bound.
6.12 Licenses, Permits, Etc. The Borrower and the Guarantor possess,
respectively, such valid franchises, certificates of convenience and
necessity, operating rights, licenses, pennits, consents, authorizations,
exemptions and orders of Tribunals as are necessary to carry on their
respective businesses as now being conducted and to own their Properties.
6.13 CQmpliance with Law. The business and operations of the Borrower
and the Guarantor have been and are being conducted in accordance with all
applicable laws, rules and regulations of all Tribunals, other than
violations which could not (either individually or collectively) have a
Material Adverse Effect on the Borrower.
6.14 Governmental Consent. No consent, approval or authorization of,
or declaration or filing with, any governmental authority is required for
the valid execution, delivery and perfonnance of this Agreement or any
other Loan Documents by the Borrower or the Guarantor.
6.15 Investment Company Act. Neither the Borrower nor the Guarantor is
an "investment company," or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as
amended.
6.16 Public Utility Holding Company Act,' State Utility.
6.16.1 Neither the Borrower nor the Guarantor is a "holding company,"
or a "subsidiary company" of a "holding company," or an "affiliate" of a
"holding company," or of a "subsidiary company" of a "holding company," as
such tenns are defined in the Public Utility Holding Company Act of 1935,
as amended.
6.16.2 Neither the Borrower nor the Guarantor is defined as a
"utility" under the laws of the State of Texas or any other jurisdiction
wherein the Borrower or the Guarantor is required to qualify to do
business.
6.17 Refunds; Certain Contracts.
6.17.1 ,No orders of, proceedings pending before, or other
requirements of, the Federal Energy Regulatory Commission, the Texas
Railroad Commission, or any Governmental Authority exist which could result
in the Borrower or the Guarantor being required to refund any material
portion of the proceeds received or to be received from the sale of
hydrocarbons constituting part of the Collateral.
6.17.2 Neither the Borrower nor the Guarantor is obligated in any
material respect by virtue of any prepayment made under any contract
containing a "take-or-pay" or "prepayment" provision or under any similar
agreement to deliver hydrocarbons produced from or allocated to any of the
Collateral at some future date without receiving full payment therefor
within 90 days of delivery.
27
6.17.3 Neither the Borrower nor the Guarantor has produced gas, in any
material amount, subject to, and neither the Borrower, the Guarantor nor
any of the Collateral is subject to, balancing rights of third parties or
subject to balancing duties under governmental requirements.
6.18 No Default. No Default has occurred which is continuing as of the
Closing Date.
ARTICLE VII
COVENANTS
During the'Revolving Credit Period, and thereafter so long as any
principal of or interest on the Note shall remain unpaid or any Letter of
Credit remains outstanding, the Borrower will duly perform and observe each
and all of the covenants and agreements hereinafter set forth:
7.1 Use of Proceeds and Letters of Credit.
7.1.1 The Borrower will use the proceeds of the Loans solely to
finance the acquisition of Oil and Gas Properties, to develop its Oil and
Gas Properties and for working capital purposes.
7.1.2 Letters of Credit shall be used for the support of oil and gas
operations; provided, however, no Letter of credit may be used in lieu or
in support of stay or appeal bonds.
7.1.3 The Borrower will not, directly or indirectly, use any of the
proceeds of the Loans for the purpose of purchasing or carrying any "margin
stock" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System (12 C. F. R. 221, as amended), or any "security that
is publicly-held" within the meaning of Regulation T of such Board of
Governors (12 C.F.R. 220, as amended), or otherwise take or permit any
action which would involve a violation of such Regulation U, Regulation T
or Regulation X (12 C.F.R. 224, as amended) or any other regulation of such
Board of Governors. The Loans are not secured, directly or indirectly, in
whole or in part, by collateral that includes any "margin stock" within the
meaning of Regulation U. The Borrower will not engage principally, or as
one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying any "margin stock" within the meaning
of such Regulation U.
7.2 Financial Statements; Reserve and Other Reports; Certain Required
Notices from Borrower; Additional Information. The Borrower will furnish to
the Lender:
7.2.1 (i) as soon as available and in any event within 120 days after
the end of each fiscal year of the Borrower, copies of the consolidated and
consolidating statements of assets and liabilities of the Guarantor and its
consolidated Subsidiaries as of the end of such fiscal year, and copies of
the related statements of revenues and expenses, operations, changes in
stockholders' equity and cash flow for such fiscal year, setting forth in
each case in comparative form the figures for the previous fiscal year, all
in reasonable detail, prepared in accordance with GAAP; such financial
statements to be audited by a firm of independent certified public
accountants selected by the Guarantor and acceptable to the Lender and
accompanied by the unqualified opinion of such accountants.
28
(ii) on or before the 60th day after the last day of each fiscal quarter, a
copy of (a) the unaudited statement of assets and liabilities of the Borrower as
at the close of such quarter and from the beginning of such fiscal year to the
end of such quarter and (b) the related statements of revenues and expenses,
operations, changes in stockholders' equity and cash flows for the quarter just
ended and for that portion of the year ending on such date, all in reasonable
detail and prepared on a basis consistent with the financial statements
previously delivered by the Borrower under this Section.
(iii) simultaneously with the delivery of each set of financial statements
pursuant to the preceding clauses of this Section, a Compliance Certificate
stating that such financial statements fairly and accurately reflect the
financial condition and results of operation of the Borrower for the periods and
as of the dates set forth therein, and that the signers have reviewed the terms
of this Agreement and the other Loan Documents, and have made, or caused to be
made under their supervision, a review of the transactions and financial
condition of the Borrower during the fiscal period covered by such financial
statements, and that such review has not disclosed the existence during such
period, and that the signers do not have knowledge of the existence as of the
date of such certificate, of any condition or event which constitutes a Default,
or, if any such condition or event existed or exists, specifying the nature and
period of existence thereof and what action the Borrower has taken or is taking
or proposes to take with respect thereto.
(iv) within 30 days after each filing thereof with any Governmental
Authority, complete copies of (a) the federal and state income tax returns of
the Borrower and the Guarantor so filed and (b) each Form 10-K, Form 10-Q and
proxy statement filed by the Guarantor with the Securities and Exchange
Commission after the Closing Date.
7.2.2 (i) as soon as available, and in any event on or before March 31 of
each year during the term of this Agreement, engineering reports in form and
substance satisfactory to the Lender in its reasonable judgment, certified by
any nationally -or regionally- recognized independent consulting petroleum
engineers selected by the Borrower and acceptable to the Lender as fairly and
accurately setting forth (a) the proven and producing, shut-in, behind-pipe, and
undeveloped oil and gas reserves (separately classified as such) attributable to
the Oil and Gas Properties of the Borrower as of January 1 of such year, (b) the
aggregate present value of the future net income with respect to such
Properties, discounted at a stated per annum discount rate of proven and
producing reserves, (c) projections of the annual rate of production, gross
income, and net income with respect to such proven and producing reserves, and
(d) information with respect to the "take-or-pay," "prepayment," and
gas-balancing liabilities of the Borrower and other Persons with respect to such
Properties.
(ii) within 60 days following each January 1 and July 1, production reports
in form and substance satisfactory to the Lender in its reasonable judgment,
prepared by the Borrower containing data concerning pricing, quantities of
production from the oil and gas Properties of the Borrower, volumes of
production sold, purchasers of production, gross revenues, expenses, production
taxes, engineering and geological data, and such other information with respect
thereto as the Lender may reasonably request for use by the Lender to prepare
for its own exclusive use, internally generated engineering reports.
29
(iii) within 60 days following each month end, a report setting forth oil,
gas and liquids production volumes by major field from the Borrower's Properties
for such month ended, and the total oil, gas and liquids production of all
fields of the Borrower and the prices received therefor and such other
information as the Lender shall request.
(iv) within 60 days following each quarter end, a report setting forth all
accounts receivable and accounts payable of the Borrower as of such quarter end,
such report to show the age of such accounts and such other information as the
Lender shall request.
(v) simultaneously with the delivery of such engineering, production and
other reports undyr clauses (i) through (iv) above, an Officer's Certificate
certifying that such engineering, production and other reports are true,
accurate and complete for the periods covered in such reports.
(vi) within 15 days after any material change in insurance coverage by the
Borrower, a report describing such change, and, within 30 days after the end of
each fiscal year, a report describing the insurance coverage of the Borrower.
7.2.3 (i) immediately after any Responsible Officer becomes aware of the
occurrence of any condition or event which constitutes a Default, an Officer's
Certificate specifying the nature of such condition or event, the period of
existence thereof, what action the Borrower has taken or is taking and proposes
to take with respect thereto and the date, if any, on which it is estimated the
same will be remedied.
(ii) if and when the-Borrower or the Guarantor (a) gives or is required to
give notice to the PBGC of any "reportable event" (as defined in Section 4043 of
ERISA) with respect to any Plan which might constitute grounds for a termination
of such Plan under Title IV of ERISA, or knows that the plan administrator of
any Plan has given or is required to give notice of any such reportable event, a
copy of the notice of such reportable event given or required to be given to the
PBGC; (b) receives notice of complete or partial withdrawal liability under
Title IV of ERISA, a copy of such notice; or (c) receives notice from the PBGC
under Title IV of ERISA of an intent to terminate or appoint a trustee to
administer any Plan, a copy of such notice.
(iii) promptly upon the Borrower's learning that it has received notice or
otherwise learned of any claim, demand, action, event, condition, report or
investigation indicating any potential or actual liability of the Borrower
arising in connection with (a) the non-compliance with or violation of the
requirements of any Environmental Law,(b) the release or threatened release of
any toxic or hazardous waste, substance or constituent into the environment, or
(c) the existence of any Environmental Lien on any Properties of the Borrower,
notice thereof.
(iv) promptly upon the Borrower's learning of any litigation or other event
or circumstance which could have a Material Adverse Effect on the Borrower or
the Guarantor, notice thereof.
(v) the change in identity or address of any Person remitting to the
Borrower proceeds from the sale of hydrocarbon production from or attributable
to any Collateral.
30
(vi) any change in the senior management of the Borrower.
(vii) promptly after the delivery of the same to any lender of any report
required to be delivered pursuant to any debt instrument to which the Guarantor
is a party and not otherwise required to be delivered hereunder, a copy of such
report.
7.2.4 with reasonable promptness, such other information relating directly
or indirectly to the financial condition, business, results of operations or
Properties of the Borrower as from time to time may reasonably be requested by
the Lender.
7.3 Inspection of Properties and Books. The Borrower and the Guarantor,
respectively will permit any officer, employee or agent of the Lender to visit
and inspect any of its Properties, to examine its books of account (and to make
copies thereof and take extracts therefrom) and to discuss its affairs, finances
and accounts (including transactions, agreements and other relations with any
shareholders) with, and to be advised as to the same by, its officers and
independent public accountants, all at such reasonable times and intervals as
the Lender may desire and, if a Default has occurred and is continuing, at the
expense of the Borrower.
7.4 Maintenance of Security; Insurance; Operating Accounts; Transfer
Orders.
7.4.1 (i) The Borrower shall execute and deliver, or cause the appropriate
Person to execute and deliver, to the Lender all mortgages, deeds of trust,
security agreements, financing statements, assignments and such other documents
and instruments (including division and transfer orders), and supplements and
amendments thereto, and take such other actions as the Lender deems necessary or
desirable in order to (a) maintain as valid, enforceable, first-priority,
perfected Liens (subject only to the Permitted Liens), all Liens granted to the
Lender to secure the Note or (b) monitor or control the proceeds therefrom.
(ii) The Borrower shall maintain, or cause to be in effect at all
times, first and prior Liens in favor of the Lender by instruments properly
recorded in the applicable jurisdictions on at least 90% by Collateral
Value of the Oil and Gas Properties included in the most recent
determination of the Borrowing Base.
(iii) The Borrower will at all times maintain or cause to be
maintained insurance covering such risks as are customarily carried by
businesses similarly situated.
7.4.2 .The Borrower will maintain its primary operating accounts with the
Lender, although such requirement shall not be construed as requiring the
Borrower to maintain deposit balances with the Lender, and will deposit all
revenues of the Borrower in such accounts.
7.4.3 The Borrower shall upon request of the Lender, execute such transfer
orders, letters- in-lieu of transfer orders or division orders as the Lender may
from time to time request in respect of the Collateral to effect a transfer and
delivery to the Lender of the proceeds of production attributable to the
Collateral.
7.5 Payment of Taxes and Claims. The Borrower will pay (i) all Taxes
imposed upon it or any of its assets or with respect to any of its franchises,
business, income or profits before any material penalty or interest accrues
thereon and (ii) all material claims (including, without
31
limitation, claims for labor, services, materials and supplies) for sums
which have become due and payable and which have or might become a Lien (other
than a Permitted Lien) on any of its assets; provided, however, that no payment
of such Taxes or claims shall be required if (a) the amount, applicability or
validity thereof is currently being contested in good faith by appropriate
action promptly initiated and diligently conducted, (b) the Borrower shall have
set aside on its books reserves (segregated to the extent required by GAAP)
reasonably deemed by it to be adequate with respect thereto, and (c) the
Borrower has notified the Lender of such circumstances, in detail satisfactory
to the Lender.
7.6 Payment of Debt; Additional Debt; Payment of Accounts.
7.6.1 -The Borrower will (i) pay, renew or extend or cause to be paid,
renewed or extended the principal of, and the prepayment charge, if any, and
interest on all Debt heretofore or hereafter incurred or assumed by it when and
as the same shall become due and payable unless such payment is prohibited by
the Loan Documents; (ii) faithfully perform, observe and discharge all unwaived
covenants, conditions and obligations imposed on it by any instrument evidencing
such Debt or by any indenture or other agreement securing such Debt or pursuant
to which such Debt is issued unless such performance, observance or discharge
would cause a Default hereunder; and (iii) not permit the occurrence of any act
or omission which would constitute a default under any such instrument,
indenture or agreement.
7.6.2 The Borrower will not create, incur or suffer to exist any Debt,
except without duplication (i) Debt to the Lender and (ii) Permitted
Indebtedness.
7.6.3 The Borrower shall-pay all of its trade and other accounts payable
within 90 days after the invoice date therefor, unless such payables are being
contested in good faith by appropriate proceedings.
7.7 Liens. The Borrower will not create, suffer to exist or otherwise allow
any Liens to be on or otherwise to affect any of its Property whether now owned
or hereafter acquired, except Permitted Liens.
7.8 Loans and Advances to Others; Investments,. Restricted Payments,.
Subsidiaries,. G&A Expenses.
7.8.1 The Borrower will not make or suffer to exist any loan, advance or
extension of credit to any Person except (i) current trade and customer accounts
receivable which are for goods furnished or services rendered in the ordinary
course of business and which are payable in accordance with customary trade
terms and (ii) Permitted Loans and Investments.
7.8.2 the Borrower will not make any capital contribution to or acquire any
Investment in, or to purchase or make a commitment to purchase any interest in,
any Person except as permitted in clauses (i) and (it) of
Section 7.8.1.
7.8.3 The Borrower will not, directly or indirectly, make any Restricted
Payment without the prior written consent of the Lender except as specifically
permitted in the definition of such defined term.
32
7.8.4 The Borrower shall not form or acquire any Subsidiaries without the
prior written consent of the Lender.
7.8.5 The general and administrative expenses of the Borrower shall not
exceed $150,000 during any twelve-month period, determined on the basis of a
rolling twelve months, but excluding out-of-pocket costs directly related to the
Closing of this credit facility.
7.9 Consolidation, Merger, Maintenance, Change of Control; Disposition of
Property; Restrictive Agreements; Hedging Agreements; Modification of
Organizational Documents; Issuance of Equity Interests.
7.9.1 -The Borrower will not (i) consolidate or merge with or into any
other Person (unless the Borrower is the surviving entity and no Default has
occurred and is continuing or will result from such merger or consolidation)
without the prior written consent of the Lender, (ii) sell, lease or otherwise
transfer all or substantially all of its Property to any other Person, (iii)
terminate, or fail to maintain, its existence as a corporation in its state of
incorporation represented in Section 6.1.1 or (iv) terminate, or fail to
maintain, its good standing and qualification to transact business in all
jurisdictions where the nature of its business requires the same (except where
the failure to maintain its good standing or qualification could not reasonably
be expected to have a material adverse effect on its business or financial
condition) or (v) permit a Change of Control Event to occur.
7.9.2 The Borrower will not sell, encumber, or otherwise transfer all or
any portion of the Collateral, any Property having Collateral Value, or any of
its other Property without the consent of the Lender, except for (i) sales of
oil and gas after severance in the ordinary course of business provided that no
contract for the sale of hydrocarbons shall obligate the Borrower to deliver
hydrocarbons produced from any of the Collateral at some future date without
receiving full payment therefor within 90 days of delivery, (ii) the sale or
other disposition of its personal Property destroyed, worn out, damaged, or
having only salvage value or no longer used or useful in the business of the
Borrower, or (iii) undeveloped leasehold acreage not constituting Collateral.
Any consent by the Lender to the sale of Collateral or other Property of the
Borrower may include a requirement (to be treated as a Borrower requested
determination) that a new Borrowing Base be determined under Section 2.8.1 and
that the proceeds of such sale plus such additional amounts as the Lender deems
necessary to avoid the occurrence of a Borrowing Base Deficiency be applied to
the Obligations. In this connection, the Lender will not unreasonably withhold
its consent to sales during any 12-month period of Property of the Borrower, in
the aggregate, having- Collateral Value of up to 10% of all Property of the
Borrower having Collateral Value.
7.9.3 The Borrower will not be or become party to or bound by any agreement
(including, without limitation, any undertaking in connection with the
incurrence of Debt or issuance of securities) which imposes any limitation on
the disposition of the Collateral more restrictive than those set forth above or
which in any way would be contravened by the Borrower's performance of its
obligations hereunder or under the other Loan Documents or which contains any
negative pledge on all or any portion of the Borrower's Property (except in
favor of the Lender).
33
7.9.4 The Borrower will not enter into any Hedging Agreement, other than
Acceptable Hedging Agreements.
7.9.5 The Borrower will not amend its articles of incorporation, under
which it was created, or its bylaws in any respect.
7.9.6 The Borrower will not issue any Equity Interests or rights, options
or warrants to purchase any of the Borrower's Equity Interests.
7.10 Primary Business; Location of Borrower's Office; Ownership of Assets.
7.10.1- The primary business of the Borrower shall be and remain the oil
and gas exploration, development and production business.
7.10.2 The location of the Borrower's principal place of business and
executive office shall remain at the address for the Borrower set forth on the
signature page hereof, unless at least 10 days prior to any change in such
address the Borrower provides the Lender with written notice of such pending
change.
7.10.3 The Borrower will at all times own, both beneficially and of record,
all assets reflected in its fmancial statements delivered to the Lender from
time to time.
7.11 Operation of Properties and Equipment; Compliance with and Maintenance
of Contracts; Duties as Nonoperator.
7.11.1 (i) The Borrower shall maintain, develop and operate its Oil and Gas
Properties in a good and workmanlike manner and will observe and comply with all
of the terms and provisions, express or implied, of all oil and gas leases
relating to such Properties so long as such oil and gas leases are capable of
producing hydrocarbons in commercial quantities, to the extent that the failure
to so observe and comply could have a Material Adverse Effect on the Borrower.
(ii) Setex shall remain as the named operator for each oil or gas well in
which the Borrower now or hereafter owns an interest ifSetex is the operator
thereof on the date hereof or becomes the operator thereof subsequent hereto.
(iii) The Borrower shall at all times, maintain, preserve and keep all
operating equipment used or useful with respect to the Oil and Gas Properties of
the Borrower in proper repair, working order and condition, and make all
necessary or appropriate repairs, renewals, replacements, additions and
improvements thereto so that the efficiency of such operating equipment shall at
all times be properly preserved and maintained, provided that no item of
operating equipment need be so repaired, renewed, replaced, added to or
improved, if the Borrower shall in good faith determine that such action is not
necessary or desirable for the continued efficient and profitable operation of
the business of the Borrower.
7.11.2 The Borrower shall comply in all material respects with all
agreements applicable to or relating to its Oil and Gas Properties or the
production and sale of hydrocarbons therefrom and all applicable proration and
conservation laws of the jurisdictions in which such
34
..
Properties are located, to the extent that the failure to so comply with
such laws or agreements could expose the Borrower to any material penalty or
forfeiture.
7.11.3 With respect to the Oil and Gas Properties referred to in this
Section which are operated by operators other than the Borrower, the Borrower
shall not be obligated itself to perform any undertakings contemplated by the
covenants and agreements contained in this Section which are performable only by
such operators and are beyond the control of the Borrower, but the Borrower
shall use its best efforts to cause such operators to perform such undertakings.
7.11.4 -(i) The Borrower will not amend, alter or change in any material
respect which could reasonably be expected to be adverse to the interests of the
Borrower or the Lender any agreements relating to the operations or business
arrangements of the Borrower or the compression, gathering, sale or
transportation of oil and gas without the prior written consent of the Lender.
(ii) The Borrower will neither amend any operating agreement applicable to
any of its Oil and Gas Properties operated by Setex nor permit Setex, directly
or indirectly (whether by action or inaction), to vary its obligations and
duties to the Borrower under any such operating agreements.
7.12 Transactions with Affiliates. The Borrower will not engage in any
transaction with an Affiliate unless (i) such transaction is at least as
favorable to the Borrower as could be obtained in an arm's length transaction
with an unaffiliated third party, (ii) such transaction is not disadvantageous
to the Lender as holder of the Note and (iii) the Lender is advised in writing
of the terms of such transaction prior to the consummation thereof.
7.13 Plans. The Borrower will not assume or otherwise become subject to an
obligation to contribute to or maintain any Plan or acquire any Person which has
at any time had an obligation to contribute to or maintain any Plan.
7.14 Compliance with Laws and Documents. The Borrower will not, directly or
indirectly, violate the provisions of any laws, its certificate of incorporation
(or similar organizational documents) or bylaws (or similar regulatory
documents) or any Material Agreement, if such violation, alone or when combined
with all other such violations, could have a Material Adverse Effect on the
Borrower.
7.15 Certain Financial Covenants.
7.15.1 Cash Flow to Debt Service Ratio. The Borrower will not permit the
ratio of EBITDA to Debt Service to be less than 1.25 to 1.00, determined as of
the end of each fiscal quarter of the Borrower ending on or after March 31,
2001.
"EBITDA" means, for any fiscal quarter of the Borrower, the net income of
the Borrower for such quarter plus (without duplication and only to the extent
deducted in determining such net income), interest expense of the Borrower for
such quarter, intangible drilling expenses, depreciation, amortization,
depletion, write-down of Oil and Gas Properties and other non- cash expenses of
the Borrower for such quarter less gains on sales of assets and other non-
35
cash income for such quarter included in the determination of net income of
the Borrower. EBITDA is a quarter-by-quarter calculation.
"Debt Service" means with respect to any fiscal quarter of the Borrower,
the actual principal and interest payments on the Debt of the Borrower during
such quarter other than for the Note plus required principal and interest
payments on the Note during such quarter.
7.15.2 Current Ratio. The Borrower will not permit its ratio of Current
Assets to its Current Liabilities to be less than 1.25 to 1.00, determined as of
the end of each fiscal quarter of the Borrower ending on or after March 31,
2001.
"Current Assets" means the current assets of the Borrower plus the Unused
Available Commitment, but excluding amounts due from officers, directors and
shareholders of the Borrower.
"Current Liabilities" means the current liabilities of the Borrower,
exclusive of the current portion of the Note and the current portion of
Subordinated Debt.
7.16 Additional Documents; Quantity of Documents; Title Data; Additional
Information.
7.16.1 The Borrower shall execute and deliver or cause to be executed and
delivered such other and further instruments or documents as in the judgment of
the Lender may be required to better effectuate the transactions contemplated
herein and in the other Loan Documents.
7.16.2 The Borrower will deliver all certificates, opinions, reports and
documents hereunder in such number of counterparts as the Lender may reasonably
request.
7.16.3 Promptly, but in any event within 30 days following a written
request therefor from the Lender, the Borrower shall cause to be delivered to
the Lender title opinions, in form and substance and from attorneys acceptable
to the Lender, or other confirmation of title acceptable to the Lender, covering
Oil and Gas Properties constituting not less than 90% by Collateral Value of the
Oil and Gas Properties utilized in the most recent determination of the
Borrowing Base; and promptly, but in any event within 60 days following notice
from the Lender of any defect, material in the opinion of the Lender, in the
title of the mortgagor under any Mortgage to ~y Oil and Gas Property covered
thereby, clear such title defect, and in the event any such title defects are
not cured in a timely manner, pay all related costs and fees incurred by the
Lender in attempting to do so.
7.16.4 The Borrower shall furnish to the Lender, promptly upon the request
of the Lender, such additional financial or other information concerning the
assets, liabilities, operations, and transactions of the Borrower as the Lender
may from time to time reasonably request; and notify the Lender not less than
ten Business Days prior to the occurrence of any condition or event that may
change the proper location for the filing of any financing statement or other
public notice or recording for the purpose of perfecting a Lien in any
Collateral, including, without limitation, any change in its name or the
location of its principal place of
36
business or chief executive office; and upon the request of the Lender,
execute such additional Security Documents as may be necessary or appropriate in
connection therewith.
7.17 ENVIRONMENTAL INDEMNIFICATION. THE BORROWER SHALL INDEMNIFY, DEFEND
AND HOLD THE LENDER AND ITS SHAREHOLDERS , OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS, ATTORNEYS-IN-FACT, AND AFFILIATES AND EACH TRUSTEE FOR THE BENEFIT OF
THE LENDER UNDER ANY SECURITY DOCUMENT (COLLECTIVELY, THE "INDEMNIFIED PARTIES")
HARMLESS ON A CURRENT BASIS FROM AND AGAINST ANY AND ALL CLAIMS , LOSSES,
DAMAGES, LIABILITIES, FINES, PENALTIES, CHARGES, ADMINISTRATIVE AND JUDICIAL-
PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS, REQUIREMENTS AND
ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND EXPENSES INCURRED IN
CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES
AND EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, FROM (A) THE
PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER, OR FROM ANY PROPERTY OF THE
BORROWER, WHETHER PRIOR TO OR DURING THE TERM HEREOF, (B) ANY ACTIVITY CARRIED
ON OR UNDERTAKEN ON OR OFF ANY PROPERTY OF THE BORROWER, WHETHER PRIOR TO OR
DURING THE TERM HEREOF, AND WHETHER BY THE BORROWER OR ANY PREDECESSOR IN TITLE,
EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER OR ANY OTHER
PERSON AT ANY TIME OCCUPYING OR PRESENT ON SUCH PROPERTY, IN CONNECTION WITH THE
HANDLING, TREATMENT, REMOVAL, STORAGE, DECONTAMINATION, CLEANUP, TRANSPORTATION,
OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES AT ANY TIME LOCATED OR PRESENT ON OR
UNDER SUCH PROPERTY, (C) ANY RESIDUAL CONTAMINATION ON OR UNDER ANY PROPERTY OF
THE BORROWER, OR (D) ANY CONTAMINATION OF ANY PROPERTY OR NATURAL RESOURCES
ARISING IN CONNECTION WITH THE GENERATION, USE, HANDLING, STORAGE,
TRANSPORTATION OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES BY THE BORROWER OR ANY
EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER WHILE SUCH PERSONS
ARE ACTING WITHIN THE SCOPE OF THEIR RELATIONSHIP WITH THE BORROWER,
IRRESPECTIVE OF WHETHER ANY OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN
ACCORDANCE WITH APPLICABLE REQUIREMENTS OF LAW, INCLUDING ANY OF THE FOREGOING
IN THIS SECTION ARISING FROM THE SOLE NEGLIGENCE, COMPARATIVE NEGLIGENCE OR
CONCURRENT NEGLIGENCE OF ANY OF THE INDEMNIFIED PARTIES OR THE SOLE OR
CONCURRENT STRICT LIABILITY IMPOSED ON ANY OF THE INDEMNIFIED PARTIES, BUT NOT
ANY OF THE FOREGOING IN THIS SECTION ARISING FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT ON THE PART OF THE INDEMNIFIED PARTY SEEKING INDEMNIFICATION
UNDER THIS SECTION; WITH THE FOREGOING INDEMNITY SURVIVING SATISFACTION OF ALL
OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
7. 18 Exceptions to Covenants. The Borrower shall not be permitted to take
any action which is permitted by any of the covenants contained in this
Agreement if such action is in breach of any other covenant contained in this
Agreement.
37
7.19 Guarantor Promissory Note. The Borrower shall not, directly or-
indirectly, amend or modify the Guarantor Promissory Note or fail to vigorously
pursue the collection thereof following the maturity thereof.
ARTICLE vm
DEFAULTS; REMEDIES
8.1 Events of Default; Acceleration of Maturity. If anyone or more of the
following events (each an "Event of Default") shall have occurred and be
continuing (whatever the reason for such Event of Default and whether it shall
be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body or otherwise):
8.1.1 the Borrower shall fail to pay, when due, any principal of, or
interest on, the Note or any fees or any other amount payable hereunder; or
8.1.2 the Borrower shall fail to observe or perform any covenant or
agreement contained in Sections 7.1. 7.6.2. 7.7. 7.8. 7.9 or 7.15; or
8.1.3 the Borrower or any other Person (other than the Lender) shall fail
to observe or perform any covenant or agreement contained in this Agreement or
the other Loan Documents (other than those covered by Sections 8.1.1 or ~), for
a period of fifteen (15) days after the earlier of (i) any Responsible Officer
shall become aware or reasonably should have become aware (regardless of the
source of such awareness) of such default or (ii) written notice specifying such
default has been given to the Borrower by the Lender; or
8.1.4 the Borrower or the Guarantor shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other 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, 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 or other action to authorize any of the
foregoing; or
8.1.5 an involuntary case or other proceeding shall be commenced against
the Borrower or the Guarantor seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
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 or unstayed for a period of 30 days; or an order for
relief shall be entered against the Borrower or the Guarantor under the federal
bankruptcy laws as now or hereafter in effect; or
8.1.6 the Borrower or the Guarantor shall fail to pay, when due, any amount
which it shall have become liable to pay to the PBGC or to a Plan under Title IV
of ERISA; or the PBGC shall institute proceedings under Title IV of ERISA to
terminate or to cause a trustee to be
38
appointed to administer any Plan or a proceeding shall be instituted by a
fiduciary of any Plan against the Borrower to enforce Section 515 of ERISA; or a
condition shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any such Plan must be terminated; or
8.1.7 the Borrower or the Guarantor (i) shall default in the payment of any
of their respective Material Debts (other than the Note) and such default shall
continue beyond any applicable cure period, (ii) shall default in the
performance or observance of any other provision contained in any agreements or
instruments evidencing or governing such Material Debt and such default is not
waived and continues beyond any applicable cure period, or (iii) any other event
or conditioll pccurs which results in the acceleration of such Material Debt; or
8.1.8 one or more judgments or orders for the payment of money aggregating
in excess of $50,000 shall be rendered against the Borrower or the Guarantor and
such judgment or order (i) shall continue unsatisfied or unstayed (unless bonded
with a supersedeas bond at least equal to such judgment or order) for a period
of 30 days, or (ii) is not fully paid and satisfied at least ten (10) days prior
to the date on which any of its Property may be lawfully sold to satisfy such
judgment or order; or
8.1.9 any representation, warranty, certification or statement made or
deemed to have been made by or on behalf of the Borrower in this Agreement or by
the Borrower or any other Person in any certificate, financial statement or
other document delivered pursuant to this Agreement shall prove to have been
incorrect in any respect when made if such incorrect representation, warranty,
certification ~r statement (i) could reasonably be expected to have any adverse
effect whatsoever upon the validity, performance or enforceability of any Loan
Document, (ii) is or might reasonably be expected to be material and adverse to
the financial condition or business operations of any Person or to the prospects
of any Person, (iii) could reasonably be expected to impair the Borrower's
ability to fulfill its obligations under the terms and conditions of the Loan
Documents, or (iv) could reasonably be expected to impair the Lender's ability
to receive full and timely payment of the Note; or
8.1.10 if any default shall have occurred and be continuing under any
Security Document; or
8.1.11 any material license, franchise, permit, or authorization issued to
the Borrower by any Tribunal is forfeited, revoked, or not renewed; or any
proceeding with respect to such forfeiture or revocation is instituted and is
not resolved or dismissed within one year of the date of the publication of the
order instituting such proceeding; or
8.1.12 a default shall occur under any Material Agreement, other than this
Agreement, to which the Borrower is a party or by which any of its Property is
bound; or
8.1.13 a Change of Control Event shall occur;
then, and in every such event, the Lender may, at its option, (i) declare
the outstanding principal balance of and accrued interest on the Note to be, and
the same shall thereupon 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 are hereby waived by the
39
Borrower, (ii) proceed to foreclose the Liens securing the Note, and (iii)
take such other actions as are pennitted by law; provided that in the case of
any of the Events of Default specified in Sections 8.1.4 and ~ with respect to
the Borrower, without
any notice to the Borrower or any other act by the Lender, the Commitment
shall tenninate and the Note (together with accrued interest thereon) shall
become immediately due and payable without presentment, demand, protest, notice
of intent to accelerate, notice of acceleration or other notice of any kind, all
of which are hereby waived by the Borrower. Upon the occurrence and continuance
of an Event of Default, the Lender may tenninate its commitment to lend and
issue letters of credit under this Agreement and the Commitment shall thereupon
tenninate.
8.2 Suits fQf Enforcement. In case anyone or more of the Events of Default
specified in Section 8.1 shall have occurred and be continuing, the Lender may,
at its option, proceed to protect and enforce its rights either by suit in
equity or by action of law, or both, whether for the specific perfonnance of any
covenant or agreement contained in this Agreement or in aid of the exercise of
any power granted in this Agreement.
8.3 Remedies Cumulative. No remedy herein conferred upon the Lender is
intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
8.4 Remedies Not Waived. No course of dealing and no delay in exercising
any rights under this Agreement or under the other Loan Documents shall operate
as a waiver of any rights hereunder or thereunder of the Lender.
ARTICLE IX
MISCELLANEOUS
9.1 Amendments and Waivers.
9.1.1 Any tenn, covenant, agreement or condition of this Agreement or any
othe1 Loan Document may be amended, or compliance therewith may be waived
(either generally or ir a particular instance and either retroactively or
prospectively) by a written instrument signed b) the Borrower and the Lender.
9.1.2 No failure or delay by the Lender in exercising any right, power or
privileg( under thIS Agreement or any other Loan Document shall operate as a
waiver thereof nor sha1 any single or partial exercise thereof preclude any
other or further exercise thereof or th( exercise of any other right, power or
privilege. The rights and remedies herein provided shall b( cumulative and not
exclusive of any rights or remedies provided by law or in equity or in any 0 the
other Loan Documents.
9.2 Highest Lawful Interest Rate. Regardless of any provision contained in
any of thc Loan Documents, the Lender shall never be entitled to receive,
collect, or apply as interest on al or any p~ of the Loans, any amount in excess
of the Highest Lawful Rate in effect from day to day, and, III the event the
Lender ever receives, collects, or applies as interest any such excess such
amount which would be deemed excessive interest shall be deemed a partial
prepayment 0 the pnncipal of the Loans and treated hereunder as such; and, if
the entire principal amount of 40
the Loans owed to the Lender is paid in full, any remaining excess shall be
repaid-to the Borrower. In determining whether the interest paid or payable,
under any specific contingency, exceeds the Highest Lawful Rate in effect from
day to day, the Borrower and the Lender shall, to the maximum extent permitted
under applicable law, (i) characterize any nonprincipal payment as an expense,
fee, or premium rather than as interest, (ii) exclude voluntary prepayments and
the effects thereof, and (iii) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the Loans so that
the interest rate is uniform throughout the entire term of the Loans; provided
that, if the interest received by the Lender for the actual period of existence
thereof exceeds the Highest Lawful Rate in effect from day to day, the Lender
shall apply or refund to the Borrower the amount of such excess as provided in
this Section, and, in such event, the Lender shall not be subject to any
penalties provided by any laws for contracting for, charging, taking, reserving,
or receiving interest in excess of the Highest Lawful Rate in effect from day to
day.
9.3 INDEMNITY
9.3.1 WHETHER OR NOT ANY LOANS ARE EVER FUNDED OR ANY LETTER OF CREDIT IS
EVER ISSUED HEREUNDER, AND IN ADDITION TO ANY OTHER INDEMNIFICATIONS CONTAINED
HEREIN OR IN ANY OF THE OTHER LOAN DOCUMENTS, THE BORROWER AGREES TO INDEMNIFY
AND DEFEND AND HOLD HARMLESS ON A CURRENT BASIS THE LENDER AND ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS AND ATTORNEYS, AND EACH OF THEM (THE "INDEMNIFIED
PARTIES"), FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, COSTS,
INTEREST, CHARGES, COUNSEL FEES AND OTHER EXPENSES AND PENALTIES OF ANY KIND
WHICH ANY OF THE INDEMNIFIED PARTIES MAY SUSTAIN OR INCUR IN CONNECTION WITH ANY
INVESTIGATIVE, ADMINISTRATIVE OR JUDICIAL PROCEEDING (WHETHER OR NOT THE LENDER
SHALL BE DESIGNATED A PARTY THERETO) OR OTHERWISE BY REASON OF OR ARISING OUT OF
THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS
AND/OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE
INDEMNIFICATION PROVISIONS IN THIS SECTION SHALL BE ENFORCEABLE REGARDLESS OF
WHETHER THE LIABILITY IS BASED ON PAST, PRESENT OR FUTURE ACTS, CLAIMS OR LEGAL
REQUIREMENTS (INCLUDING ANY PAST, PRESENT OR FUTURE BULK SALES LAW,
ENVIRONMENTAL LAW, FRAUDULENT TRANSFER ACT, OCCUPATIONAL SAFETY AND HEALTH LAW,
OR PRODUCTS LIABILITY, SECURITIES OR OTHER LEGAL REQUIREMENT), AND REGARDLESS OF
WHETHER ANY PERSON (INCLUDING THE PERSON FROM WHOM INDEMNIFICATION IS SOUGHT)
ALLEGES OR PROVES THE SOLE, CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE
OF THE PERSON SEEKING INDEMNIFICATION OR OF ANY OTHER INDEMNIFIED PARTY, OR THE
SOLE OR CONCURRENT STRICT LIABILITY IMPOSED ON THE PERSON SEEKING
INDEMNIFICATION OR ON ANY OTHER INDEMNIFIED PARTY, BUT NOT ANY OF THE FOREGOING
IN THIS SECTION ARISING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE
PART OF THE INDEMNIFIED PARTY SEEKING INDEMNIFICATION UNDER THIS SECTION; WITH
THE FOREGOING INDEMNITY
41
SURVIVING SATISFACTION OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
9.3.2 Any amount to be paid under this Section to the Lender shall be a
demand obligation owing by the Borrower and if not-paid within ten days of
demand shall bear interest from the date of expenditure by the Lender until paid
at a per annum rate equal to the lesser of (i) the Default Rate or (ii) the
Highest Lawful Rate. The obligations of the Borrower under this Section shall
survive payment of the Note and the assignment of any right hereunder.
9.4 Expenses.
9.4.1 -Whether or not anyone or more of the Loans are ever funded, the
Borrower shall pay (i) all out-of-pocket expenses of the Lender, including,
without limitation, fees and disbursements of counsel for the Lender in
connection with the preparation of this Agreement and the other Loan Documents
(including, without limitation, the furnishing of any written or oral' opinions
or advice incident to this transaction) and, if appropriate, the recordation of
the Loan Documents, any waiver or consent hereunder or any amendment hereof or
any Default or alleged Default hereunder, and (ii) if an Event of Default
occurs, all out-of-pocket expenses incurred by the Lender, including, without
limitation, fees and disbursements of counsel in connection with such Event of
Default and collection and other enforcement proceedings resulting therefrom,
fees of auditors, consultants, engineers and other Persons incurred in
connection therewith (including, without limitation, the supervision,
maintenance or disposition of the Collateral) and investigative expenses
incurred by the Lender in connection therewith, which amounts shall be deemed
compensatory in nature and liquidated as to amount upon notice to the Borrower
by the Lender and which amounts shall include, but not be limited to (a) all
court costs, (b) reasonable attorneys' fees, (c) reasonable fees and expenses of
auditors and accountants incurred to protect the interests of the Lender, (d)
fees and expenses incurred in connection with the participation by the Lender as
a member of the creditors' committee in a case commenced under any Insolvency
Proceeding, (e) fees and expenses incurred in connection with lifting the
automatic stay prescribed inss.362 Title 11 of the United States Code, and (f)
fees and expenses incurred in connection with any action pursuant toss.1129
Title 11 of the United States Code all reasonably incurred by the Lender in
connection with the collection of any sums due under the Loan Documents,
together with interest at the per annum interest rate equal to the Floating
Rate, calculated on a basis of a calendar year of 365 or 366 days, as the case
may be, counting the actual number of days elapsed, on each such amount from the
date of notification that the same was expended, advanced, or incurred by the
Lender until the date it is repaid to the Lender, with the obligations under
this Section surviving the non-assumption of this Agreement in a case commenced
under any Insolvency Proceeding and being binding upon the Borrower and/or a
trustee, receiver, custodian, or liquidator of the Borrower appointed in any
such case.
9.4.2 THE BORROWER SHALL INDEMNIFY THE LENDER AGAINST ANY TRANSFER TAXES,
DOCUMENTARY TAXES, ASSESSMENTS OR CHARGES MADE BY ANY GOVERNMENTAL AUTHORITY BY
REASON OF THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS.
9.4.3 Any amount to be paid under this Section to the Lender shall be a
demand obligation owing by the Borrower and if not paid within ten days of
demand shall bear interest
42
from the date of expenditure by the Lender until paid at a per annum rate
equal to the lessor of the Default Rate or the Highest Lawful Rate. The
obligations of the Borrower under this Section shall survive payment of the Note
and the assignment of any right hereunder.
9.5 Ta.xes. The Borrower will, to the extent they may lawfully do so, pay
all Taxes (including interest and penalties but expressly excluding federal or
state income taxes) which may be payable in respect of the execution and
delivery of this Agreement or the other Loan Documents, or in respect of any
amendment of or waiver under or with respect to the foregoing, and will save the
Lender harmless against any loss or liability resulting from nonpayment or delay
in payment of any such Taxes (as limited above). The obligations of the Borrower
under this Section shall ~urvive the payment of the Note and the assignment of
any right hereunder.
9.6 Notices. Except as specifically provided otherwise herein, all notices,
requests and other communications to any party hereunder shall be in writing
(including by telecopy or similar writing) and shall be given to such party at
its address and to the attention of the Person set forth on the signature pages
hereof (or in the case of notices to the Borrower, to the attention of any
officer, or other Person holding a similar position, of the Borrower) or such
other address or telecopy number or Person as such party may hereafter specify
for such purpose by notice to the other party. Each such notice, request or
other communication shall be effective (i) if given by telecopy, when such
telecopy is transmitted to the telecopier number specified in this Section and
the receipt thereof is acknowledged, (ii) if given by mail, 72 hours after such
communication is deposited in the mails postage prepaid (certified, return
receipt requested) addressed as aforesaid or (iii) if given by any other means,
when delivered at the address specified in this Section or, in the case of the
Borrower.) when otherwise delivered to the Borrower or any officer of the
Borrower, provided that notice to the Lender under Section 2.2 ------------
shall not be effective until received, and provided further that, oral notices
to the Borrower of decreases in the Borrowing Base shall be effective when
communicated to the Borrower.
9.7 Rights of Set-Off
9.7.1 Upon the occurrence and during the continuance of any Event of
Default, the Lender is hereby authorized at any time and from time to time, to
the fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or dem~d, provisional or final) at any time held and
other indebtedness at any time owing by the Lender to or for the credit or the
account of the Borrower against the obligations of the Borrower to the Lender,
irrespective of whether or not the Lender shall have made any demand under this
Agreement or any other Loan Document and although such obligations may be
unmatured. The Lender agrees promptly to notify the Borrower after any such
set-off and application made by the Lender, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Lender under this Section are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Lender may have.
9.7.2 The Borrower agrees, to the fullest extent it may effectively do so
under applicable law, that any holder of a participation in the Loans may
exercise rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of the Borrower in the amount of such participation.
43
9.8 Survival. All representations, warranties and covenants made by or on
behalf of the Borrower in this Agreement or the other Loan Documents herein or
in any certificate or other instrument delivered by it or in its behalf under
the Loan Documents shall be considered to have been relied upon by the Lender
and shall survive the delivery to the Lender of such Loan Documents or the
extension of the Loans (or any part thereof), regardless of any investigation
made by or on behalf of the Lender.
9.9 Successors and Assigns: Rights of Other Holders.
9.9.1 This Agreement shall be binding on the parties hereto and their
respective successors and inure to the benefit of and be enforceable by the
Lender, its legal representatives, successors and aSsigns. With respect to the
Borrower, this Agreement and the other Loan Documents and the rights of the
Borrower hereunder and thereunder shall not be assignable in any respect.
9.9.2 The Lender may at any time sell, transfer, assign, or grant
participations in the Obligations or any portion thereof with or without the
consent of the Borrower; and the Lender may forward to each Transferee and
prospective Transferee all documents and information relating to such
Obligations, whether furnished by the Borrower or otherwise obtained, as the
Lender determines necessary or desirable. The Borrower agre~s that each
Transferee, regardless of the nature of any transfer to it, may exercise all
rights (including, without limitation, rights of set-off) with respect to the
portion of the Obligations held by it as fully as if such Transferee were the
direct holder thereof, subject to any agreements between such Transferee and the
transferor to such Transferee.
9.10 Applicable Law; Venue; Waiver of Ju ry Trial.
9.10.1 THIS AGREEMENT HAS BEEN NEGOTIATED, IS BEING EXECUTED AND DELIVERED,
AND WILL BE PERFORMED IN WHOLE OR IN PART, IN THE STATE OF TEXAS, AND THE
SUBSTANTIVE LAWS OF SUCH STATE AND THE APPLICABLE FEDERAL LAWS OF THE UNITED
STATES OF AMERICA SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND
INTERPRETATION OF THE LOAN DOCUMENTS, EXCEPT TO THE EXTENT THE LAWS OF ANY
JURISDICTION WHERE COLLATERAL IS LOCATED REQUIRE APPLICATION OF SUCH LAWS WITH
RESPECT TO SUCH COLLATERAL.
9.10.2 THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR TEXAS STATE COURT SITTING IN
DALLAS, DALLAS COUNTY, TEXAS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER
HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT
44
THE RIGHT OF THE LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE
COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER
AGAINST THE LENDER OR ANY AFFILIATE OF THE LENDER INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN DALLAS, DALLAS COUNTY,
TEXAS.
9.10.3 THE BORROWER AND THE LENDER HEREBY KNOWINGLY, VOLUNT ARIL Y,
INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVE ALL R{(;HTS TO TRIAL BY
JURY IN ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT
RELATES TO OR ARISES OUT OF ANY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR
THE ACTS OR OMISSIONS OF THE LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR
PROVISIONS OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH
RESPECT THERETO. THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR
THE LENDER ENTERING INTO THIS AGREEMENT.
9.11 Headings. The headings in this Agreement are for purposes of reference
only and shall not limit or othelWise affect the meaning hereof and words such
as "hereunder" or " herein" shall refer to the entirety of this Agreement unless
specifically indicated otherwise.
9.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument. This Agreement shall become effective at
such time as the counterparts hereof which, when taken together, bear the
signature of the Borrower and the Lender, shall be delivered to the Lender.
9.13 Invalid Provisions, Severability. If any provision of this Agreement
or the other Loan Documents is held to be illegal, invalid, or unenforceable
under present or future laws effective during the term hereof or thereof, such
provision shall be fully severable, this Agreement and the other Loan Documents
shall be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part thereof, and the remaining provisions
hereof and thereof shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its severance
therefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision there shall be added automatically as a part of this Agreement or the
other Loan Documents a provision as similar in terms to such illegal, invalid,
or unenforceable provision as may be possible and be legal, valid and
enforceable.
9.14 Revolving Loan. Pursuant to Section 346.004 of the Finance Code of
Texas, the Borrower agrees that Chapter 346 of such Finance Code shall not
govern or in any manner apply to the Loans.
45
9.15 Preclusion of Oral 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 UN~TTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
In witness whereof, the undersigned have executed this Agreement as of the
day and year first above written.
--BORROWER:
000 X. Xxx Xxxxxxx Xxxxxxx Xxxx By:
Suite 375 Houston, Name:Xxxxxx X. Xxxxxxx
Xxxxx 00000 Title:President
Facsimile: 713/974-0617
LENDER:
TEXAS CAPITAL BANK, N .A.
0000 Xx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Energy Group
Facsimile: 214/932-6704
46
FORM OF PROMISSORY NOTE
$10,000,000 Dallas, Texas November 30,2000
FOR V ALUE RECEIVED and WITHOUT GRACE, the undersigned ("Borrower")
promises to pay to the order of TEXAS CAPITAL BANK, N.A. ("Lender"), at its
banking quarters in Dallas, Dallas County, Texas, the amount of $10,000,000, or
so much thereof as may be advanced against this Note pursuant to the Credit
Agreement dated of even date herewith by and between Borrower and Lender (as
amended, restated, or supplemented from time to time, the "Credit AgreemelJ~"),
together with interest at the rates and calculated as provided in the Credit
Agreement.
Reference is hereby made to the Credit Agreement for matters governed
thereby, including, without limitation, certain events which will entitle the
holder hereof to accelerate the maturity of all amounts due hereunder.
Capitalized terms used but not defined in this Note shall have the meanings
assigned to such terms in the Credit Agreement.
This Note is issued pursuant to and shall be governed by the Credit
Agreement and the holder of the Note shall be entitled to the benefits of the
Credit Agreement. This Note shall finally mature on the Final Maturity Date.
Without being limited thereto or thereby, this Note is secured by the
Security Documents.
Borrower, and each surety, endorser, guarantor, and other party ever liable
for payment of any sums of money payable on this note, jointly and severally
waive presentment and demand for payment, protest, notice of protest and
nonpayment, and notice of the intention to accelerate, and agree that their
liability on this note shall not be affected by any renewal or extension in the
time of payment hereof, by any indulgences, or by any release or change in any
security for the payment of this note, and hereby consent to any and all
renewals, extensions, indulgences, releases, or changes, regardless of the
number of such renewals, extensions, indulgences, releases, or changes.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF
TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW;
PROVIDED, HOWEVER, THAT CHAPTER 346 OF THE FINANCE CODE OF TEXAS (WHICH
REGULATES CERTAIN CREDIT LOAN ACCOUNTS AND TRIP ARTY ACCOUNTS) SHALL NOT APPLY
TO THIS NOTE.
GULFWEST DEVELOPMENT COMPANY
By:
Xxxxxx X. Xxxxxxx, President
1
FORM OF NOTICE OF BORROWING -
Texas Capital Bank, N.A.
0000 XxXxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Energy Group
Re: Credit Agreement dated November 30, 2000, by and between
Texas Capital Bank, N.A. and GultWest Development Company (the
"Borrower") (as amended, restated, or supplemented from time to time,
the "Credit Agreement")
Ladies and Gentlemen:
Pursuant to the Credit Agreement, the Borrower hereby makes the requests
indicated below:
1. Loans
(a) Amount of new Loan: $ -
(b) Requested funding date: , 200
2. Included herewith is a completed Letter of Credit
Application.
The undersigned certifies that _[s]he is a Responsible Officer, has
obtained all consents necessary, and as such [s]he is authorized to execute this
request on behalf of the Borrower. The undersigned further certifies,
represents, and warrants on behalf of the Borrower that the Borrower is entitled
to receive the requested borrowing or letter of credit under the terms and
conditions of the Credit Agreement.
Each capitalized term used but not defined herein shall have the meaning
assigned to such term in the Credit Agreement.
Very truly yours,
GULFWEST DEVELOPMENT COMPANY
By. .
Xxxxxx X. Xxxxxxx, President
1
FORM OF COMPLIANCE CERTIFICATE
Texas Capital Bank, N.A.
0000 XxXxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Energy Group
Re: Credit Agreement dated November 30, 2000, by and between Texas
Capital Bank, N.A. (the "Lender") and GulfWest Development Company
(the "Borrower") (as amended, restated, or supplemented from time to
time, the "Credit Agreement")
Ladies and Gentlemen:
Pursuant to applicable requirements of the Credit Agreement, the
undersigned, as a Responsible Officer of the Borrower, hereby certifies to you
the following information as true and correct as of the date hereof or for the
period indicated, as the case may be:
[1. To the best of the knowledge of the undersigned, no Default exists
as of the date hereof or has occurred since the date of our previous
certification to you, if any.]
[1. To the best of the knowledge of the undersigned, the following
Defaults exist as of the date hereof or have occurred since the date
of our previous certification to you, if any, and the actions set
forth below are being taken to remedy such circumstances:]
2. The compliance of the Borrower with certain financial covenants of
the Credit Agreement, as of the close of business on (the
"Determination Date"), is evidenced by the following:
(a) Section 7.8.5: G&A Expenses.
Actual For the prior [twelve] months on a month-by-month basis
[or insert lesser number of months for quarterly periods ending
prior to December 31,2001], listed month-by-month as follows:
[list each month and the G&A for each month] $ - [etc.]
(b) Section 7.15.1: Cash Flow to Debt Service. Reguired Actual
Not less than 1.25 to 1.00 to
1
(c) Section 7.15.2: Current Ratio
Reguired Actual
Not less than 1.25 to 1.00
3. The financial statements being delivered to the Lender concurrently
herewith pursuant to the Credit Agreement fairly and accurately
reflect the financial condition and results of operation of the
Borrower for the periods and as of the dates set forth therein, and
the undersigned has reviewed the terms of the Credit Agreement and the
other Loan Documents~ and has made, or caused to be made under my
supervision, a review of the transactions and financial condition of
the Borrower during the fiscal period covered by such financial
statements.
Each capitalized term used but not defined herein shall have the
meaning assigned to such term in the Credit Agreement.
Very truly yours,
of GulfWest Development Company
1
