LOAN AGREEMENT (LINE OF CREDIT)
THIS LOAN AGREEMENT ("Agreement"), dated as of July 6, 2001,
is made between VENUS EXPLORATION, INC., a Delaware corporation ("Borrower"),
and HIBERNIA NATIONAL BANK, a national banking association ("Lender"), who
agree as follows:
ARTICLE 1
GENERAL TERMS
Section 1.1 Terms Defined Above. As used in this Agreement,
the terms "Agreement", "Borrower", and "Lender", shall have the meanings
indicated above.
Section 1.2 Certain Definitions. As used in this Agreement,
the following terms shall have the meanings indicated (and as provided in
Section 9.14), unless the context otherwise requires:
"Advances" shall mean the borrowings on the Closing Date
under the Loan and all or any portion of such borrowings and
other or subsequent reborrowings under the Loan so long as
same remain outstanding and unpaid.
"Amount" shall mean five million ($5,000,000.00) dollars.
"Base Rate" shall mean, for any day, an interest rate per
annum equal to the Prime Rate in effect on such day plus the
Applicable Prime Rate Margin (as defined below). The
"Applicable Prime Rate Margin" shall mean the following per
annum interest rate from time to time, determined for each
fiscal quarter by reference to the Percentage Outstanding for
the immediately prior fiscal quarter, in accordance with the
following schedule:
Applicable Prime
Percentage Outstanding Rate Margin
less than 1/3 0%
1/3 to 2/3 0%
above 2/3 0.25%
The Applicable Prime Rate Margin shall remain fixed during
each fiscal quarter of the Borrower's fiscal year, determined
on the first day of each fiscal quarter depending upon the
Percentage Outstanding for the immediately prior quarter.
(During the first
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quarter of this Agreement, commencing July 1, 2001, the
Applicable Prime Rate Margin shall be zero (0%). Without
notice to the Borrower, the Base Rate shall change
automatically from time to time as and in the amount by which
the Prime Rate shall fluctuate, with each such change in the
Base Rate to be effective as of the date of each change in
the Prime Rate, adjusted daily.
"Borrowing Base" shall mean, at any time, the dollar amount
calculated as the maximum loan value of the Collateral as
determined by the Lender in its sole discretion, but based
upon the Lender's customary standards and practices from time
to time in effect with respect to secured oil and gas
property lines of credit. The Borrowing Base shall be subject
to automatic Monthly Borrowing Base Reductions as provided in
Subsection 2.4(c). Any good faith determination by the Lender
of the Borrowing Base shall be final and conclusive. The
Borrowing Base may be revised by Lender at any time to
reflect changes in the Collateral or the occurrence of events
or economic conditions or otherwise pursuant to Lender's
customary standards and practices as such exist at that
particular time, and further will be subject to scheduled
semi-annual re-determinations during the term of this Loan.
Additionally, the Borrower may request once per year
(commencing 90 days after the Closing Date) that an
unscheduled redetermination be done by Lender. The Lender
shall notify the Borrower of the result of each Borrowing
Base redetermination by the Lender. Each determination of the
Monthly Borrowing Base Reductions, and of the Borrowing Base
(subject to such monthly Borrowing Base Reductions), shall be
effective until redetermined by the Lender in accordance with
this Agreement. Such redetermination by the Lender may lead
to increased or decreased credit availability to the Borrower
under the revised Borrowing Base schedule. Without limiting
the foregoing, the Lender may exclude, in its sole and
absolute discretion, any property or portion of production
therefrom from the Borrowing Base, at any time, because title
information on, or the status of title to, such property is
not reasonably satisfactory to Lender, such property is not
Collateral, the Lender's Lien therein is not first and prior
to all others, such property is subject to contractual
agreements or commitments not reasonably satisfactory to
Lender, or such property is not assignable. On the Closing
Date, the Borrowing Base is $2,500,000.00.
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"Business Day" shall mean (a) for all purposes other than as
covered by clause (b) of this definition, a day other than a
Saturday, Sunday or legal holiday for commercial banks in
either New Orleans, Louisiana, or New York, New York, and (b)
with respect to all requests, notices and determinations in
connection with LIBO Rate Loans, a day which is a Business
Day described in clause (a) of this definition and which is a
day for trading by and between banks for dollar deposits in
the London interbank market.
"Closing Date" shall mean the date on which the Note is
executed and delivered by the Borrower to the Lender.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Collateral" shall mean the properties and property rights
described in the Collateral Documents described in Section
3.1 as primary security for the Indebtedness.
"Collateral Documents" shall mean collectively the documents
from time to time required by the Lender to obtain the
security interest in the Collateral, or otherwise guarantee
or secure the Indebtedness, such documents which exist on the
Closing Date being described in Article 3 hereof, as all such
documents are amended, restated or renewed from time to time.
"Commitment Limit" shall mean, at any particular date, the
lesser of (x) the Amount or (b) the Borrowing Base as most
recently determined and in effect.
"Contracts" shall mean those agreements, contracts and other
instruments to which the Borrower's interest in the oil, gas
and mineral leases comprising the Collateral are subject.
"Debt" shall mean any and all amounts and/or liabilities
owing from time to time by the Borrower to any Person,
including the Lender, direct or indirect, liquidated or
contingent, now existing or hereafter arising, including
without limitation (i) indebtedness for borrowed money or the
deferred purchase price of property; (ii) unfunded portions
of commitments for money to be borrowed; (iii) the amounts of
all standby and commercial letters of credit and bankers
acceptances, matured or unmatured, issued on behalf of the
Borrower, and (without duplication) all drafts drawn thereon;
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(iv) guaranties of the obligations of any other Person,
whether direct or indirect, whether by agreement to purchase
the indebtedness of any other Person or by agreement for the
furnishing of funds to any other Person through the purchase
or lease of goods, supplies or services (or by way of stock
purchase, capital contribution, advance or loan) for the
purpose of paying or discharging the indebtedness of any
other Person, or otherwise; (v) indebtedness of the types
described above secured by any Lien on any property owned by
the Borrower, to the extent attributable to the Borrower's
interest in such property, even though the Borrower has not
assumed or become liable for the payment thereof personally;
(vi) the present value of all obligations for the payment of
rent or hire of property of any kind (real or personal) under
leases or lease agreements required to be capitalized under
generally accepted accounting principles, (vii) trade
payables and operating leases incurred in the ordinary course
of business or otherwise; and (viii) Hedging Obligations.
"Default" shall mean the occurrence of any of the events
specified in Article 8 hereof, whether or not any requirement
for notice or lapse of time or other condition precedent has
been satisfied.
"Default Rate" shall mean, on any particular date, the Prime
Rate plus five (5%) percent per annum.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"Event of Default" shall mean the occurrence of any of the
events specified in Article 8 hereof, provided that any
requirement for notice or lapse of time or any other
condition precedent has been satisfied.
"Hedge Agreement" means any agreement or arrangement
providing for payments which are related to, or the value of
which is dependent upon, fluctuations of interest rates,
currency exchange rates or forward rates, or fluctuations of
commodity prices, including without limitation any swap
agreement, cap, collar, floor, exchange transaction, forward
agreement or exchange or protection agreement or similar
futures contract or swap or other derivative agreement
related to interest rates, currency exchange rates or
hydrocarbons or other commodities, or any option with respect
to such transaction.
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"Hedging Obligations" of a Person means any and all
obligations of such Person, whether absolute or contingent
and howsoever and whensoever created, arising or evidenced
(including all renewals, extensions and modifications thereof
and substitutions therefor), under any and all Hedge
Agreements and any and all cancellations, buybacks,
reversals, terminations or assignments of any Hedge
Agreement.
"Indebtedness" shall mean any and all amounts, liabilities or
obligations owing from time to time by the Borrower to the
Lender (or any transferee of the Loan), including without
limitation any such amounts, liabilities or obligations
pursuant to this Agreement, the Note and the Collateral
Documents (including attorneys' fees incurred in connection
with the execution, enforcement or collection of the
Borrower's obligations hereunder or thereunder or any part
thereof), and whether such amounts, liabilities or
obligations be liquidated or unliquidated, now existing or
hereafter arising.
"LIBO Rate" shall mean, during any Interest Period (as
defined below) for any Advance, an interest rate per annum
equal to the Reserve Adjusted LIBO Rate (as defined below)
plus the Applicable LIBO Rate Margin (as defined below).
"Reserve Adjusted LIBO Rate" shall mean with respect to each
Interest Period for a LIBO Rate Advance, an interest rate per
annum equal to the quotient (converted to a percentage,
rounded upward to the nearest whole multiple of 1/100 of 1%
per annum) of (i) the rate per annum as determined by the
Lender at or about 10:00 a.m. Central Time (or as soon
thereafter as practicable) on the second Business Day prior
to the first day of each Interest Period, to be the annual
rate of interest for deposits in United States dollars for
the selected Interest Period as shown on the Dow Xxxxx
Telerate Matrix page for British Bankers Association Interest
Settlement Rates as of two Business Days prior to the first
day of such Interest Period, divided by (ii) the remainder of
1.00 minus the LIBOR Reserve Requirement (as defined below),
expressed as a decimal, for such Interest Period. "LIBOR
Reserve Requirement" shall mean for any day during an
Interest Period for any LIBO Rate Advance, that percentage
which is specified by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum
reserve requirement (including, but not limited to, any
marginal reserve requirement) for the Lender with respect to
liabilities consisting of or including "Eurocurrency
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liabilities" (as defined in Regulation D of the Board of
Governors of the Federal Reserve System) with a maturity
equal to such Interest Period. In determining this
percentage, the Lender may use any reasonable averaging and
attribution method. "Interest Period" shall mean the period
between the Business Day on which the LIBO Rate shall begin
and the day on which the LIBO Rate shall end. The duration of
each Interest Period for a LIBO Rate Advance shall be one (1)
month, two (2) months or three (3) months, at the Borrower's
election, subject to the following: (i) no Interest Period
shall extend past the Maturity Date; (ii) whenever the last
day of any Interest Period would otherwise occur on a day
other than a Business Day, the last day of such Interest
Period shall be extended to occur on the next succeeding
Business Day, except that if the next succeeding Business Day
would occur in the next following calendar month, the last
day of such Interest Period shall be shortened to occur on
the next preceding Business Day; (iii) whenever the first day
of any Interest Period occurs on a day of an initial calendar
month for which there is no numerically corresponding day in
the calendar month that succeeds such initial calendar month
by the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month; and (iv) if the Borrower fails to
designate an Interest Period, the Interest Period for a LIBO
Rate Advance (recognizing that under Subsection 2.1(b) below
the Lender is not obligated to make such a LIBO Rate Advance
in the absence of such designation by the Borrower) shall be
deemed to be one month until a different designation is made
for a subsequent Interest Period. No Interest Period for a
LIBO Rate Advance shall have a duration of less than one
month, and if any such Interest Period would otherwise be a
shorter period, the relevant Advance shall be a Base Rate
Advance during such period. The "Applicable LIBO Rate Margin"
shall mean the following per annum interest rate from time to
time, determined for each fiscal quarter by reference to the
Percentage Outstanding for the immediately prior fiscal
quarter, in accordance with the following schedule:
Applicable LIBO
Percentage Outstanding Rate Margin
less than 1/3 2.25%
1/3 to 2/3 2.50%
above 2/3 2.75%
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The Applicable LIBO Rate Margin shall remain fixed during
each fiscal quarter of the Borrower's fiscal year, determined
on the first day of each fiscal quarter depending upon the
Percentage Outstanding for the immediately prior quarter.
(During the first quarter of this Agreement, commencing July
1, 2001, the Applicable LIBO Rate Margin shall be 2.50%.) No
more than four (4) LIBO Rate tranches at any one time are
permitted for the Note. The Borrower will comply with the
provisions of Addendum I hereto, relating to the LIBO Rate,
which is an integral part of this Agreement. The LIBO Rate
shall remain fixed for the duration of the LIBO Rate Interest
Period selected and the Borrower shall not have the right to
voluntarily prepay Advances outstanding at the LIBO Rate
prior to the end of the applicable LIBO Rate Interest Period.
"Lien" shall mean any interest in property securing an
obligation owed to, or a claim by, a Person other than the
owner of the property, whether such interest is based on
jurisprudence, statute or contract, and including but not
limited to the lien or security interest arising from a
mortgage, encumbrance, pledge, security agreement, production
payment, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. The term
"Lien" shall include reservations, exceptions, encroachments,
easements, servitudes, usufructs, rights-of-way, covenants,
conditions, restrictions, leases, and other title exceptions
and encumbrances affecting property. For the purposes of this
Agreement, the Borrower shall be deemed to be the owner of
any property which it has accrued or holds subject to a
conditional sale agreement, financing lease or other
arrangement pursuant to which title to the property has been
retained by or vested in some other Person for security
purposes.
"Loan" shall mean the line of credit as described in Article
2 hereof.
"Loan Excess" shall mean, at any point in time, the amount,
if any, by which the outstanding principal balance of the
Advances plus the face amount of all outstanding standby
letters of credit issued pursuant to this Agreement exceeds
the Commitment Limit then in effect.
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"Maturity Date" shall mean the second anniversary of the
Closing Date, or such earlier date on which the Loan is
accelerated pursuant to Section 8.2 hereof.
"Monthly Borrowing Base Reduction" shall mean the amount of
the automatic monthly reduction to the Borrowing Base, as
determined by the Lender from time to time in accordance with
this Agreement. The Monthly Borrowing Base Reduction may be
revised by Lender at any time, and from time to time. The
Lender shall notify the Borrower of each Monthly Borrowing
Base Reduction redetermination by the Lender, which
redetermination shall become effective upon written
notification from the Lender to the Borrower and shall remain
in effect until redetermined by the Lender in accordance with
this Agreement. Without limiting the foregoing, the Lender
shall redetermine the Monthly Borrowing Base Reduction as
part of each redetermination of the Borrowing Base under this
Agreement. On the Closing Date, the Monthly Borrowing Base
Reduction is established at $50,000.00.
"Note" shall mean the note described in Section 2.1(a)
hereof.
"Percentage Outstanding" shall mean, for any fiscal quarter
(or lesser time period as applicable), the fraction obtained
by dividing (x) the average unpaid and outstanding principal
balance of the Note during such quarter, by (y) the average
of the Commitment Limit for such quarter.
"Permitted Hedge Agreement" shall mean any Hedge Agreement
related to hydrocarbons which the Borrower enters into with
any Person reasonably acceptable to the Lender, which is in
compliance with Section 5.19.
"Person" shall mean any individual, corporation, limited
liability company, partnership, joint venture, association,
joint stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof, or
any other form of entity.
"Plan" shall mean any plan subject to Title IV of ERISA and
maintained by the Borrower, or any such plan to which the
Borrower is required to contribute on behalf of its
employees.
"Prime Rate" shall mean, at any particular date, the prime or
base rate as reflected in The Wall Street Journal (or if such
rate is not
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published or is no longer available, such other index
satisfactory to Lender). Without notice to the Borrower, the
Prime Rate shall change automatically from time to time as
and in the amount by which said index rate shall fluctuate,
with each such change in the Prime Rate to be effective as of
the date of each change in such index rate. The Wall Street
Journal index rate is a reference rate and does not
necessarily represent the lowest or best rate actually
charged to any customer by Lender (or by such institutions
comprising said index).
"Subsidiary" shall mean each corporation of which the
Borrower owns, directly or indirectly, fifty percent or more
of the outstanding capital stock, and each partnership,
limited liability company or other Person of which the
Borrower owns, direct or indirect, fifty percent (50%) or
more of the outstanding partnership, membership or other
ownership or voting interest.
Section 1.3 Accounting Terms. 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 generally
accepted accounting principles as in effect from time to time on a basis
consistent (except for changes in accounting principles or practice approved by
independent public accountants for the Borrower) with the most recent financial
statements of the Borrower.
ARTICLE 2
THE CREDIT
Section 2.1 Line of Credit and Letters of Credit. (a) Line of
Credit. Subject to and upon the terms and conditions contained in this
Agreement, and relying on the representations and warranties contained in this
Agreement, on the Closing Date the Lender agrees to make a revolving line of
credit available to the Borrower, including the face amount of all standby
letters of credit permitted to be issued under this Agreement, in the maximum
aggregate principal amount equal to the Commitment Limit. The line of credit is
represented by a promissory note in the principal amount of the Amount, payable
to the order of the Lender. Principal and all accrued and unpaid interest on
the line of credit shall be payable in full on the Maturity Date, after which
no further Advances will be made. Payments may be debited from the Borrower's
accounts at the Lender as provided in this Agreement.
(b) Interest. The interest rate applicable to each Loan
Advance beginning on the date such Advance is made shall be either (i) the Base
Rate, adjusted daily, or (ii) the LIBO Rate, adjusted on the first day of each
LIBO Rate Interest Period and remaining fixed for the
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duration of the LIBO Rate Interest Period, selected at the Borrower's option by
written notice to Lender in accordance with the terms hereof. Effective on the
first day following the end of any LIBO Rate Interest Period, the Borrower may
from time to time change the interest rate which is to apply to the Advances or
a portion thereof (including any yet to be made Advance which is made on the
effective date of the interest rate change) by notifying the Lender of the
Borrower's desire to change the interest rate not less than three (3) Business
Days prior to the date on which such change shall be effective. No more than
four (4) LIBO Rate tranches and one Base Rate tranche (all Base Rate Advances
constituting one tranche) shall be permitted for the Note at any one time. In
the absence of any timely specific interest rate election by the Borrower (as
provided above in this Subsection 2.1(b) and in the definition of LIBO Rate),
unless otherwise agreed by the Lender, an Advance (if outstanding as a LIBO
Rate Advance) will be automatically converted into a Base Rate Advance on the
last day of the then current LIBO Rate Interest Period for such Advance or (if
not then outstanding) an Advance shall bear interest at the Base Rate. The
Borrower further will comply with the provisions of Addendum I hereto, relating
to the LIBO Rate, which is an integral part of this Agreement. Interest on the
Note shall be payable (x) on Advances bearing interest at the Base Rate monthly
in arrears on the last day of each month, beginning July 31, 2001, and (y) on
LIBO Rate Advances on the last day of each applicable LIBO Rate Interest Period
for each LIBO Rate Advance. Interest on (i) Base Rate Advances and all other
Indebtedness except for LIBO Rate Advances shall be calculated on the basis of
a 365 (or in a leap year 366) day year and the actual number of days elapsed,
and (ii) on LIBO Rate Advances shall be calculated on the basis of a 360-day
year by applying the ratio of the annual interest rate over a year of 360 days,
times the applicable principal balance, times the actual number of days such
applicable principal balance is outstanding. Payments may be debited from the
Borrower's accounts at the Lender as provided in this Agreement.
(c) Draw Requests. In accordance with the provisions in this
Section, the Lender will make Advances to the Borrower from time to time on any
Business Day on and after the Closing Date until and including the last
Business Day before the Maturity Date in such amounts as the Borrower may
request, up to the Commitment Limit, and the Borrower may make borrowings,
repayments and reborrowings in respect thereof. Requests for Advances must be
made by written notice from the Borrower sent to the Lender by mail, courier or
facsimile in accordance with Section 9.1, specifying the amount of the Advance.
A request shall be fully authorized by the Borrower if made by any one of the
Persons hereby designated by the Borrower as an authorized person in accordance
with resolutions of the Board of Directors (or its Executive Committee) of the
Borrower certified to the Lender. The Lender may rely fully and completely upon
the authority of the signatory of such request or confirmation unless such
authority is terminated by written notice to the Lender, and any such
termination shall be effective only prospectively. The request for any Advance
by the Borrower shall constitute a certification by the Borrower that all of
the representations and warranties contained in Article 4 (other than those
representations and warranties, if any, that are by their specific terms
limited in application to a specific date) are true and correct as of the date
of such request and also as of the date of the Advance.
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(d) Timing After the Lender's receipt of an authorized
request for Advance, the Lender will make such Advance for the benefit of the
Borrower in same day funds as provided below upon fulfillment of the applicable
conditions set forth in this Agreement. Requests for Advances at the Base Rate
shall be made on written notice from the Borrower to the Lender, received by
the Lender no later than 11:00 a.m. (Central Time) on the first Business Day
before such Base Rate Advance specifying the amount thereof. Request for
Advances at the LIBO Rate shall be made on written notice from the Borrower to
the Lender received by the Lender no later than 11:00 a.m. (Central Time) on
the third (3rd) Business Day before such LIBO Rate Advance, specifying the
amount thereof (including the amount of each tranche, if more than one) and the
LIBO Rate Interest Period (or Interest Periods, if more than one tranche). Each
such written notice by the Borrower shall be irrevocable by the Borrower. Not
later than 3:00 p.m. (Central Time) on the date properly and timely requested
for the Advance and upon fulfillment of the applicable conditions set forth in
Article 7 of this Agreement, the Lender will make such Advance available to the
Borrower in same day funds in the deposit account maintained by the Borrower
with the Lender. The Borrower irrevocably agrees in favor of the Lender that
the deposit of the proceeds of any Advance in the Borrower's account with the
Lender shall be deemed prima facie evidence of the Borrower's Indebtedness to
the Lender under the Loan.
(e) Minimum. Notwithstanding anything in this Agreement to
the contrary, the aggregate principal amount of all LIBO Rate Advances having
the same LIBO Rate Interest Period shall be at least equal to $100,000.00; and
if any LIBO Rate tranche would otherwise be in a lesser principal amount for
any period, such tranche shall bear interest at the Base Rate during such
period.
(f) Letters of Credit. As a portion of the line of credit
availability (and subject to the Commitment Limit and the other terms and
conditions of this Agreement), the Lender will issue standby letters of credit
for the account of the Borrower. The expiration of such letters of credit shall
not extend beyond the Maturity Date of the line of credit. The fee for a
standby letter of credit shall be at the per annum rate equal to the Applicable
LIBO Rate Margin then in effect on the face amount of the letter of credit for
the period from the letter of credit's issuance to the expiration date, paid
quarterly in arrears on each September 30, December 31, March 31 and June 30,
plus additional amounts customarily charged by the Lender for the issuance and
processing of letters of credit. The Borrower shall submit an application for
each letter of credit on the Lender's standard form. Such letters of credit
will be documented on the Lender's standard form. No letter of credit will be
issued if the face amount thereof plus the aggregate of all Advances then
outstanding plus the face amount of all standby letters of credit then
outstanding would exceed the Commitment Amount. Payment by the Lender of a draw
on a standby letter of credit shall be an Advance as part of the Loan bearing
interest from the date of such draw, notwithstanding the Commitment Limit.
Section 2.2 Business Days. If the date for any payment,
prepayment or fee payment hereunder falls on a day which is not a Business Day,
then for all purposes of this Agreement (unless otherwise provided herein) the
same shall be deemed to have fallen on the
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next following Business Day, and such extension of time shall in such case be
included in the computation of payments of interest.
Section 2.3 Payments. The Borrower shall make each payment
hereunder and under the Note and any Collateral Documents in lawful money of
the United States of America in same day funds to the Lender at its main office
in New Orleans, Louisiana, not later than 11:00 a.m. (Central Time) on the day
when due, or such other place in the United States as designated in writing by
the Lender. The Borrower hereby authorizes the Lender to charge from time to
time against the Borrower's accounts with the Lender any amount so due, and
acknowledges that the revenue distribution account (Section 5.17) is
established for that purpose and may be so used even in the absence of an Event
of Default.
Section 2.4 Prepayment. (a) Voluntary. The Borrower may
prepay the Loan in full or in part at any time without payment of premium or
penalty; provided, however, that (i) the Borrower shall give the Lender notice
of each such prepayment of all or any portion of a LIBO Rate Advance no less
than three (3) Business Days prior to prepayment, (ii) any LIBO Rate Advance
may be prepaid only on the last day of the Interest Period for such LIBO Rate
Advance, (iii) the Borrower shall give the Lender notice of each such
prepayment of all or any portion of a Base Rate Advance no less than one (1)
Business Day prior to prepayment, (iv) the Borrower shall pay all accrued and
unpaid interest on the amounts prepaid, and (v) no such prepayment shall serve
to postpone the repayment when due of any other Indebtedness.
(b) Mandatory. The Lender shall notify the Borrower of the
result of each Borrowing Base redetermination by the Lender. If at any time the
Lender determines that a Loan Excess exists, then within thirty (30) days of
receipt by the Borrower of notice of such Loan Excess the Borrower shall (x)
prepay the Advances (together with accrued interest on the amount to be prepaid
to the date of payment) in an amount sufficient to reduce the Advances plus the
face amount of all standby letters of credit then outstanding to the then
Commitment Limit, and/or (y) execute, deliver and record or cause to be
executed and delivered such additional Collateral Documents pursuant to Section
2.1, sufficient to induce the Lender to make an increased redetermination of
the Borrowing Base to an amount not less than the outstanding principal balance
of the Advances plus the face amount of all standby letters of credit then
outstanding. The Borrower specifically acknowledges that no additional grace
period (beyond the period stated in the preceding sentence) is applicable under
this Agreement to any failure to make such mandatory prepayment before such
failure is an Event of Default hereunder.
(c) Monthly Borrowing Base Reductions. Subject to the other provisions
of this Agreement, the Borrowing Base shall be automatically reduced by the
Monthly Borrowing Base Reduction commencing on July 31, 2001, and continuing on
the last day of each successive month. Notwithstanding the foregoing provisions
in Subsection 2.4(b), the Borrower shall pay the amount of any Loan Excess that
would result from the application of each Monthly Borrowing Base Reduction on
or before the day that such Monthly Borrowing Base Reduction becomes
applicable.
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Section 2.5 Fees. (a) The Borrower shall pay the Lender a
commitment fee in the amount equal to $25,000.00 (0.50% of the Amount of
$5,000,000.00) in two equal installments. The first payment of $12,500.00 shall
be paid on or before the Closing Date, and the second payment of $12,500.00
shall be paid by the Borrower to the Lender on the Closing Date.
(b) The Borrower shall pay the Lender an unused facility fee
quarterly in arrears beginning September 30, 2001 (for the period from the
Closing Date through such date) and on the last day of each succeeding
December, March, June and September and on the Maturity Date of the Loan, in an
amount equal to one-half of one percent (0.50%) per annum on (x) the Amount
less (y) the average outstanding principal balance of the Note plus the face
amount of all standby letters of credit then outstanding during such quarter
(or lesser time period, as applicable.)
(c) The Borrower agrees to reimburse Lender quarterly in
arrears on the last day of each fiscal quarter for Lender's actual costs, if
any, incurred during that quarter for Lender's compliance with its
environmental verification process in obtaining environmental status reports or
similar information from governmental agencies such as the Utah Department of
Natural Resources.
(d) Letter of Credit fees are paid as provided in
Subsection 2.1(f).
Section 2.6 Use of Proceeds. The Borrower shall use the
proceeds of the Loan in connection with the acquisition of oil and gas
properties as well as general working capital purposes (including letters of
credit hereunder) and development and drilling activities and the refinancing
of the Debt existing on the Closing Date.
Section 2.7 Default Rate. Anything in the Note or in any
other agreement, document or instrument to the contrary notwithstanding,
effective upon an Event of Default or upon the Maturity Date, the Lender shall
have the right to prospectively increase the interest rate under the Note to
the Default Rate until the Note is paid in full. Upon the acceleration of the
principal amount of the Indebtedness represented by the Note, the accelerated
principal balance of the Loan shall bear interest from the date of acceleration
up to the actual payment (as well after as before judgment) at the Default
Rate. All such interest at the Default Rate shall be payable upon demand.
Section 2.8 Additional Regulatory Costs. If any governmental
authority, central bank, or other comparable authority shall at any time
impose, modify or deem applicable any reserve (including without limitation any
imposed by the Board of Governors of the Federal Reserve System), special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended by, the Lender, or shall impose on the Lender
any other condition affecting an Advance or the obligation of the Lender to
make an Advance; and the result of any of the foregoing is to increase the cost
to the Lender of making or maintaining the Advances to the Borrower, or to
reduce the amount of any sum received or receivable by the Lender under this
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Agreement or under the Note by an amount deemed by the Lender to be material,
then, within sixty (60) days after demand by the Lender, the Borrower shall pay
to the Lender such additional amount or amounts as will compensate the Lender
for such increased cost or reduction. The Lender will promptly notify the
Borrower of any event of which it has knowledge, occurring after the date
hereof, which will entitle the Lender to compensation pursuant to this Section.
A certificate of the Lender claiming compensation under this Section and
setting forth the additional amount or amounts to be paid to it hereunder shall
be conclusive in the absence of manifest error.
ARTICLE 3
SECURITY FOR THE OBLIGATIONS
Section 3.1 Security. The Loan shall be primarily secured
by the following:
(i) Mortgage, Deed of Trust, Assignment, Security Agreement
and Financing Statement executed by the Borrower, granting a first priority
mortgage, security interest and assignment of production in the Borrower's
interests in various oil and gas properties in the States of Texas, Utah and
Oklahoma (and after the Closing Date in future locations as Borrower and Lender
may agree from time to time).
(ii) Revenue AccountAgreement executed by the Borrower and
the Lender, establishing a revenue distribution account at the Lender for the
direct deposit of payments on all production proceeds from the Collateral, from
which interest and other payments on the Loan may be debited.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement,
the Borrower represents and warrants to the Lender (which representations and
warranties will survive the extensions of credit under this Agreement) that:
Section 4.1 Existence. The Borrower is a corporation duly
organized, legally existing and in good standing under the laws of its state of
incorporation (Delaware) and is duly qualified as foreign corporation in Texas,
Utah and Oklahoma and all other jurisdictions wherein the property it owns or
the business it transacts make such qualification necessary and the failure to
so qualify would have a material adverse effect on its financial condition,
business or operations.
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Section 4.2 Names of Borrower. The Borrower has never done
business under any name (including trade names) other than the name of the
Borrower set forth above and the former name "Xplor Corporation" changed in May
1997. The Borrower's federal employer identification number and secretary of
state registration number and locations of its state of incorporation and chief
executive office are accurately set forth in the Collateral Documents.
Section 4.3 Borrower's Power and Authorization. The Borrower
is duly authorized and empowered to execute, deliver and perform this
Agreement, the Note and the Collateral Documents executed by it. All corporate
action on the part of the Borrower (including all shareholder action) requisite
for the due creation and execution of the Loan and this Agreement, the Note and
Collateral Documents have been duly and effectively taken.
Section 4.4 Review of Documents; Binding Obligations. The
Borrower has reviewed this Agreement, the Note and the Collateral Documents
with counsel for the Borrower and has had the opportunity to discuss the
provisions thereof with the Lender prior to execution. This Agreement, the Note
and the Collateral Documents constitute valid and binding obligations of the
Borrower, enforceable in accordance with their terms (except that enforcement
may be subject to any applicable bankruptcy, insolvency or similar laws
generally affecting the enforcement of creditors' rights).
Section 4.5 No Legal Bar or Resultant Lien. This Agreement,
the Note and the Collateral Documents do not and will not violate any
provisions of the Borrower's articles of incorporation or bylaws, will not
violate any contract, agreement, law, regulation, order, injunction, judgment,
decree or writ to which the Borrower is subject, and will not result in the
creation or imposition of any Lien upon any property of the Borrower other than
as contemplated by this Agreement.
Section 4.6 No Consent. The Borrower's execution, delivery
and performance of this Agreement, the Note and the Collateral Documents do not
require the consent or approval of any other Person, including without
limitation any regulatory authority or governmental body of the United States
or any state thereof or any political subdivision of the United States or any
state thereof (including without limitation the federal Bureau of Land
Management, the Utah School and Institutional Trust Lands Administration and
the Utah Board of State Lands and Forestry).
Section 4.7 Financial Condition. All financial statements of
the Borrower and any affiliates delivered to Lender fairly present the
financial condition of the parties for whom such statements are submitted and
the financial statements of the Borrower and any affiliates have been prepared
in accordance with generally accepted accounting principles consistently
applied throughout the periods involved, and there are no contingent
liabilities not disclosed thereby which would adversely affect the financial
condition of Borrower or any affiliates. Since the close of the period covered
by the latest financial statement delivered to Lender with respect to Borrower
and any affiliates, there has been no material adverse change in the assets,
liabilities, or financial condition of Borrower or any affiliates. No event has
occurred (including, without
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limitation, any litigation or administrative proceedings) and no condition
exists or, to the knowledge of Borrower, is threatened, which (i) might render
Borrower unable to perform its obligations under this Agreement, the Note or
the Collateral Documents, or (ii) would constitute a Default hereunder, or
(iii) might adversely affect the financial condition of the Borrower or any
affiliates or the validity or priority of the Lien of the Collateral Documents.
The Borrower is solvent and with this Agreement has the ability to pay its
Debts when and as due.
Section 4.8 Taxes and Governmental Charges. The Borrower has
filed all tax returns and reports required to be filed and have paid all taxes,
assessments, fees and other governmental charges levied upon it or upon its
property or income which are due and payable, including interest and penalties,
or is contesting the same in good faith by appropriate proceedings and has
provided adequate reserves for the payment thereof.
Section 4.9 Defaults. The Borrower is not in default under
any indenture, mortgage, deed of trust, agreement or other instrument to which
the Borrower is a party or by which it or any of its property is bound, except
for the default existing under the Bank One credit facility (which has been
disclosed to Lender).
Section 4.10 Liabilities and Litigation. Except for
liabilities incurred in the normal course of business, the Borrower has no
material (individually or in the aggregate) liabilities, direct or contingent,
except as disclosed in the most recent financial statements furnished to the
Lender. Except as disclosed in the most recent financial statements furnished
to the Lender, there is no litigation, legal or administrative proceeding,
investigation or other action of any nature pending or, to the knowledge of
Borrower, threatened against or affecting the Borrower which involves the
possibility of any judgment or liability not fully covered by insurance which
may materially and adversely affect the business or the property of the
Borrower or its ability to carry on business as now conducted.
Section 4.11 Margin Stock. None of the Loan proceeds will be
used for the purpose of, and the Borrower is not engaged in the business of
extending credit for the purpose of, purchasing or carrying any "margin stock"
as defined in Regulation U of the Board of Governors of the Federal Reserve
System (12 C.F.R. Part 221), or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry a margin stock
or for any other purpose which might constitute this transaction a "purpose
credit" within the meaning of said Regulation U. The Borrower is not engaged
principally, or as one of the Borrower's important activities, in the business
of extending credit for the purpose of purchasing or carrying margin stocks.
Neither the Borrower nor any Person acting on behalf of the Borrower has taken
or will take any action which might cause this Agreement to violate Regulation
U or any other regulation of the Board of Governors of the Federal Reserve
System or to violate the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect.
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Section 4.12 Utility or Investment Company. The Borrower is
not engaged in the generation, transmission, or distribution and sale of
electric power; operation of a local distribution system for the sale of
natural or other gas for domestic, commercial, industrial, or other use;
ownership or operation of a pipeline for the transmission or sale of natural or
other gas, crude oil or petroleum products (except for ownership of interests
in gathering line systems); provision of telephone or telegraph service to
others; production, transmission, or distribution and sale of steam or water;
operation of a railroad; or provision of sewer service to others; or any other
activity which cause the Borrower to be subject to regulation as a utility. The
Borrower is not an "investment company" within the meaning of the Investment
Company Act of l940, as amended.
Section 4.13 Compliance with the Law. The Borrower (i) is not
in violation of any law, judgment, decree, order, ordinance, or governmental
rule or regulation to which the Borrower or any of its property is subject; and
(ii) has not failed to obtain any license, permit, franchise or other
governmental authorization necessary to the ownership of any of its property or
the conduct of its business; in each case, which violation or failure could
reasonably be anticipated to materially and adversely affect the business,
prospects, profits, property or condition (financial or otherwise) of the
Borrower.
Section 4.14 ERISA. The Borrower is in compliance in all
material respects with the applicable provisions of ERISA, and no "reportable
event", as such term is defined in Section 4043 of ERISA, has occurred with
respect to any Plan of the Borrower.
Section 4.15 Other Information. All information, reports,
papers and data given to the Lender by the Borrower pursuant to this Agreement
and in connection with the Borrower's application for the Loan and the Lender's
commitment letter are accurate and correct in all material respects, and
together constitute a complete and fair presentation of all facts material
thereto. All financial projections given to the Lender were prepared in good
faith based on facts and circumstances existing at the time of preparation and
were believed by the Borrower to be accurate in all material respects. No
information, exhibit or report furnished by the Borrower to the Lender in
connection with the negotiation of this Agreement contains any material
misstatement of fact or fails to state a material fact or any fact necessary to
make the statement contained therein not materially misleading.
Section 4.16 Title to Collateral. (a) The Borrower has good
and marketable title to the Collateral, and the Collateral Documents constitute
the legal, valid and perfected Liens on the Collateral, free of all Liens
except those permitted by this Agreement in Section 6.2.
(b) The Borrower has, with respect to the Collateral, the
working interests and net revenue interests therein as reported to the Lender
in connection with the negotiation of this Agreement. Except as otherwise
specifically disclosed to the Lender in writing with respect to any particular
part of the Borrower's properties, (i) the Borrower is not obligated, whether
by virtue of any payment under any contract providing for the sale by the
Borrower of hydrocarbons
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which contains a "take or pay" clause or under any similar arrangement or by
virtue of any production payment or otherwise, to deliver hydrocarbons produced
or to be produced from the Borrower's properties at any time after the Closing
Date without then or thereafter receiving full payment therefor, except for
Permitted Hedge Agreements; (ii) none of the Borrower's properties is subject
to any contractual or other arrangement whereby payment for production is to be
deferred for a substantial period after the month in which such production is
delivered; (iii) none of the Borrower's properties is subject to an arrangement
or agreement under which any purchaser or other Person is currently entitled to
"make-up" or otherwise receive material deliveries of hydrocarbons at any time
after the Closing Date without paying at such time the full contract price
therefor; and (iv) no Person is currently entitled to receive any material
portion of the interest of the Borrower in any hydrocarbons or to receive cash
or other payments from the Borrower to "balance" any disproportionate
allocation of hydrocarbons under any operating agreement, cash balancing and
storage agreement, gas processing or dehydration agreement, or other similar
agreements. For purposes of this paragraph, "material" shall mean ten thousand
($10,000.00) dollars (or more) or an amount of property with an equivalent
value.
(c) None of the Collateral is subject to any calls on
production of hydrocarbons or any gathering or transportation dedications or
commitments of any kind.
(d) As of June 30, 2001, the amount of unpaid royalties owing
by Borrower does not exceed $515,000.00 dollars.
Section 4.17 Environmental Matters. No friable asbestos, or
any substance containing asbestos deemed hazardous by federal or state
regulations on the date of this Agreement, has been installed in any Collateral
constituting real property. Such real property and the Borrower are not in
violation of or subject to any existing, pending, or threatened investigation
or inquiry by any governmental authority or to any remedial obligations under
any applicable laws pertaining to health or the environment (hereinafter
sometimes collectively called "Applicable Environmental Laws"), including
without limitation the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986 (as amended, hereinafter called "CERCLA"), the
Resource Conservation and Recovery Act of 1976, as amended by the Used Oil
Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980, and the
Hazardous and Solid Waste Amendments of 1984 (as amended, hereinafter called
"RCRA"), and this representation and warranty would continue to be true and
correct following disclosure to the applicable governmental authorities of all
relevant facts, conditions and circumstances, if any, pertaining to such
property and known to the Borrower. No hazardous substances or solid wastes
have been disposed of or otherwise released on or to such property. The terms
"hazardous substance" and "release" as used in this Agreement shall have the
meanings specified in CERCLA, and the terms "solid waste" and "disposal" (or
"disposed") shall have the meanings specified in RCRA; provided, in the event
that the laws of any applicable state establish a meaning for "hazardous
substance," "release," "solid waste," or "disposal" which is broader than that
specified in either CERCLA or RCRA, such broader meaning shall apply.
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Section 4.18 Governmental Requirements. Any Collateral
constituting real (immovable) property is in compliance with all current
governmental requirements affecting such property, including, without
limitation, all current coastal zone protection, zoning and land use
regulations, building codes and all restrictions and requirements imposed by
applicable governmental authorities with respect to the construction of any
improvements on such property and the contemplated use of such property.
Section 4.19 Contracts. The Contracts when considered as a
whole do not materially affect the rights, benefits or security of the Lender
under the Collateral Documents and the Contracts do not contain any provision
which would prevent the Lender's practical realization of the benefits of the
Collateral Documents as to the Collateral. After giving effect to the
Contracts, the net revenue interests of the Borrower in the Collateral are not
less than those set forth in the Collateral Documents.
Section 4.20 Affiliates. The Borrower has no Subsidiaries,
other than Texplor T&T Corporation. None of the Collateral is owned by, or has
record title in the name of, such Subsidiary. The Borrower has no ownership
(direct or beneficial) interest in any other Person (whether stock, partnership
interest, membership interest or otherwise).
Section 4.21 Subordinated Debt. On the Closing Date, the
Borrower has no subordinated Debt of the type permitted by Section 6.1(f). On
the Closing Date, the Borrower has no preferred stock issued or outstanding.
Section 4.22 Year 2000 Compliant. All material systems used
in the conduct of the Borrower's business will have appropriate capabilities
and compatibility to handle calendar dates falling on or after January 1, 2000,
and all information pertaining to such calendar dates.
Section 4.23 Continuing Accuracy. All of the representations
and warranties contained in this Article or elsewhere in this Agreement shall
be true in all material respects through and until the date on which all
obligations of Borrower under this Agreement, the Note and the Collateral
Documents and any other documents executed in connection therewith are fully
satisfied, and Borrower shall promptly notify Lender of any event which would
render any of said representations and warranties materially untrue or
misleading.
ARTICLE 5
AFFIRMATIVE COVENANTS
Unless the Lender's prior written consent to the contrary is
obtained, the Borrower will at all times comply with the covenants contained in
this Article 5, from the date hereof and for so long as any part of the
Indebtedness is outstanding.
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Section 5.1 Performance of Obligations. The Borrower will
repay the Indebtedness according to the reading, tenor and effect of the Note
and this Agreement. The Borrower will do and perform every act required of it
by this Agreement, the Note or in the Collateral Documents at the time or times
and in the manner specified.
Section 5.2 Financial Statements and Reports. The Borrower
will furnish or cause to be furnished to the Lender from time to time:
(a) Borrower's Annual Reports - as soon as available and in
any event within 120 days after the close of each
fiscal year of the Borrower, the audited balance sheet
of the Borrower as of the end of such year, the
audited statement of income of the Borrower for such
year, the audited statement of reconciliation of
capital accounts of the Borrower for such year, and
the audited statement of cash flow of Borrower for
such year, setting forth in each case in comparative
form the corresponding figures for the preceding
fiscal year, accompanied by the unqualified opinions
of an independent certified public accountant
acceptable to the Lender.
(b) Borrower's Quarterly Reports - as soon as available and
in any event within 60 days after the end of each
fiscal quarter in each fiscal year of the Borrower,
the unaudited balance sheet of the Borrower as of the
end of such fiscal quarter, the unaudited statement of
income of the Borrower for the period from the
beginning of the fiscal year to the close of such
fiscal quarter, the unaudited statement of
reconciliation of capital accounts of the Borrower for
the period from the beginning of the fiscal year to
the close of such fiscal quarter, and the unaudited
statement of cash flow of Borrower for such fiscal
quarter and for the period from the beginning of the
fiscal year to the close of such fiscal quarter,
setting forth in each case in comparative form the
corresponding figures for the corresponding period of
the preceding fiscal year (and showing without
limitation any over or under produced imbalances of
production). Such internally prepared quarterly
reports shall be accompanied by the certificates of
compliance required by Section 5.3.
(c) Engineering Report - as soon as available and in any
event by March 31 of each year, an annual independent
third party engineering report covering the Borrowing
Base properties, with an effective date of January 1
of the current year, in form and substance acceptable
to the Lender prepared by an independent firm
acceptable to the Lender. Without limiting the
foregoing sentence, such reports shall include a
discussion of assumptions as to engineering, pricing
and expenses, and an economic evaluation together with
the reserve value of each well of each property in the
Borrowing Base, and further categorized as Collateral
or non-Collateral
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and as Proved Developed Producing Reserves, Proved
Developed Non- Producing Reserves, or Proved
Undeveloped Reserves. (The Borrower acknowledges
that the Lender reserves the right to determine the
Borrowing Base based on the provisions hereof and
Lender's own evaluations of rates, volumes, prices,
assumptions and other factors regardless of this
outside engineering data or then market prices.)
(d) Monthly Reports - within 30 days after the end of
each month, a monthly production tracking report
pertaining to the Borrowing Base properties on a
well by well basis in form acceptable to the
Lender's Oil and Gas Appraisal Department, including
production volumes and revenue and expense
statements.
(e) Title Information - promptly upon the Lender's
request, detailed information concerning any and all
requirements or exceptions set forth in any title
opinions concerning any of the Collateral.
(f) Environmental - (I) promptly upon receipt thereof,
complete documentation pertaining to any fines levied
during the prior year against the Borrower, or to the
extent known and available to the Borrower against an
operator of any Collateral, for non-compliance with
all applicable federal, state and local environmental
laws and regulations; and (II) promptly upon learning
thereof, notice of Borrower's acquisition of actual
knowledge of the presence of any hazardous materials
or solid waste (as defined elsewhere in this
Agreement) on or under any Collateral.
(g) Notices - when required by the terms thereof, the
notices required under Section 5.11.
(h) Audit Reports - promptly upon receipt thereof, one
copy of each report submitted to the Borrower by
independent accountants in connection with any
annual, interim or special audit made by them of the
books of the Borrower.
(i) Insurance Report - within 30 days after the end of
each fiscal year of the Borrower, an annual
insurance coverage report detailing Borrower's
insurance program.
(j) S.E.C. Reports - promptly upon becoming available,
copies of all (i) regular, periodic or special
reports, schedules and other material which the
Borrower may be required to file with or deliver to
any securities exchange or the Securities and
Exchange Commission (or any other governmental
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authority succeeding to the functions thereof) and
(ii) material news releases and annual reports
relating to the Borrower.
(k) Other Information - promptly upon the request of the
Lender, all regular budgets and such other
financial, technical or other information regarding
the business and affairs and financial condition of
the Borrower as the Lender may reasonably request.
All balance sheets and other financial reports referred to above shall be in
such detail as the Lender may reasonably request and shall conform to the
standards described in Section 1.3.
Section 5.3 Certificates of Compliance. Concurrently with the
furnishing of the annual and quarterly financial statements described above,
the Borrower will furnish to the Lender a certificate signed by the principal
financial officer of the Borrower, stating either that no Default occurred
during such quarter (or if it did but no longer exists, the nature and duration
thereof) and that no Default then exists, or if a Default exists, the nature,
period of existence and status thereof, and specifically setting forth the
calculations showing the Borrower's compliance with the financial covenants in
Section 5.15.
Section 5.4 Taxes and Other Liens. The Borrower will file all
tax returns and reports required to be filed and pay and discharge promptly
when due all taxes, assessments and governmental charges or levies imposed upon
it or upon income or upon any of its property (including production, severance,
windfall profit, excise and other taxes assessed against or measured by the
production of, or the value or proceeds of production of, the Collateral) as
well as all claims of any kind (including claims for labor, materials, supplies
and rent) which, if unpaid, might become a Lien upon any or all of its
property; provided, however, the Borrower shall not be required to pay any such
tax, assessment, charge, levy or claim if the amount, applicability or validity
thereof shall currently be contested in good faith by appropriate proceedings
diligently conducted and if the contesting party shall have set up reserves
therefor adequate under generally accepted accounting principles (provided that
such reserves may be set up under generally accepted accounting principles) and
so long as the payment of same is not a condition to be met in order to
maintain an oil, gas or mineral lease in force.
Section 5.5 Maintenance and Compliance. The Borrower will (i)
maintain its corporate existence and rights and its current business
operations; (ii) observe and comply (to the extent necessary so that any
failure will not materially and adversely affect the business of such Person)
with all valid existing and future laws, statutes, codes, acts, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, certificates,
franchises, permits, licenses, authorizations, directions and requirements
(including without limitation applicable statutes, regulations, orders and
restrictions relating to environmental standards or controls or to energy
regulations) of all federal, state, county, municipal and other governments,
departments, commissions, boards, courts, authorities, officials and officers,
domestic or foreign; and (iii) maintain its properties (and any property leased
by or consigned to it or held under title retention
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or conditional sales contracts) in generally good and workable condition at all
times and make all repairs, replacements, additions, betterments and
improvements to its properties to the extent necessary so that any failure will
not materially and adversely affect the business of such Person.
Section 5.6 Further Assurances. The Borrower at its expense
will promptly (and in no event later than 30 days after written notice from the
Lender is received) cure any defects, errors or omissions in the creation,
execution, delivery or contents of this Agreement, the Note or the Collateral
Documents, and execute and deliver to the Lender upon request all such other
and further documents, agreements and instruments in compliance with or
accomplishment of the covenants and agreements of the Borrower in this
Agreement, the Note or in the Collateral Documents or to further evidence and
more fully describe the Collateral (including without limitation any renewals,
additions, substitutions, replacements or accessions to the Collateral), or to
correct any omissions in the Collateral Documents, or more fully state the
security obligations set out herein or in any of the Collateral Documents, or
to perfect, protect or preserve any Liens and the priority thereof created
pursuant to any of the Collateral Documents, or to make any recordings, to file
any notices, or obtain any consents as may be necessary or appropriate in
connection with the transactions contemplated by this Agreement.
Section 5.7 Reimbursement of Expenses. The Borrower will pay
all reasonable legal fees and expenses incurred by the Lender in connection
with the preparation of this Agreement, the Note and the Collateral Documents.
The Borrower will, upon request promptly reimburse the Lender for all amounts
expended, advanced or incurred by the Lender to satisfy any obligation of the
Borrower under this Agreement, or to protect the property or business of the
Borrower or to collect the Indebtedness, or to enforce the rights of the Lender
under this Agreement or the Note or the Collateral Documents, which amounts
will include all court costs, attorneys' fees and expenses, fees and expenses
of engineers, auditors and accountants, travel expenses and investigation
expenses reasonably incurred by the Lender in connection with any such matters,
together with interest at the Default Rate on each such amount from the date
that the same is expended, advanced or incurred by the Lender until the date of
reimbursement to the Lender. The Borrower also agrees to pay, and to hold the
Lender harmless from any failure or delay in paying, all recording taxes,
documentary stamp taxes or other similar taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of this
Agreement, the Note, the Collateral Documents, or any modification or
supplement thereof or thereto.
Section 5.8 Insurance. The Borrower will maintain with
financially sound and reputable insurers, insurance with respect to its
properties and businesses against such liabilities, casualties, risks and
contingencies and in such types and amounts as are reasonably satisfactory to
the Lender and customary in accordance with standard industry practice or as
more specifically provided in the Collateral Documents. Upon request of the
Lender, the Borrower will furnish or cause to be furnished to the Lender from
time to time a summary of the insurance coverage of the Borrower in form and
substance satisfactory to the Lender and if requested will furnish the Lender
original certificates of insurance and/or copies of the applicable policies.
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Section 5.9 Accounts and Records. The Borrower will keep
books of record and accounts in which true and correct entries will be made as
to all material matters of all dealings or transactions in relation to its
business and activities.
Section 5.10 Right of Inspection. The Borrower will permit
any officer, employee or agent of the Lender at their risk to visit and inspect
any of the property of the Borrower, examine the books of record and accounts
of the Borrower, take copies and extracts therefrom, and discuss the affairs,
finances and accounts of the Borrower with the Borrower's officers, accountants
and auditors, and the Borrower will furnish information concerning the
Collateral, including schedules of all internal and third party information
identifying the Collateral (such as, for example, lease and well names and
numbers assigned by the Borrower or the operator of any mineral properties,
division orders and payment names and numbers assigned by purchasers of the
hydrocarbons, and internal identification names and numbers used by the
Borrower in accounting for revenues, costs and joint interest transactions
attributable to the mineral properties), all on reasonable notice, at such
reasonable times without hindrance or delay and as often as the Lender may
reasonably desire. The Borrower will furnish to the Lender promptly upon
request and in the form and content specified by the Lender lists of purchasers
of hydrocarbons and other account debtors, schedules of equipment and other
data concerning the Collateral as the Lender may from time to time specify.
Section 5.11 Notice of Certain Events. (a) The Borrower shall
promptly notify the Lender if the Borrower learns of the occurrence of any
event which constitutes a Default, together with a detailed statement by a
responsible officer of the Borrower of the steps being taken to cure the effect
of such Default.
(b) The Borrower shall promptly notify the Lender of any
change in location of the Borrower's principal place of business or the office
where it keeps its records concerning accounts and contract rights or a change
in its name, state of organization, federal taxpayer identification number or
organizational status.
(c) The Borrower shall promptly notify the Lender of the
arising of any litigation or dispute threatened against or affecting the
Borrower which, if adversely determined, would have a material adverse effect
upon the financial condition or business of the Borrower. In the event of such
litigation, the Borrower will cause such proceedings to be vigorously contested
in good faith and, in the event of any adverse ruling or decision, the Borrower
shall prosecute all allowable appeals. The Lender may (but shall not be
obligated to), without prior notice to Borrower, commence, appear in, or defend
any action or proceeding purporting to affect the Loan, or the respective
rights and obligations of Lender and Borrower pursuant to this Agreement. The
Lender may (but shall not be obligated to) pay all necessary expenses,
including reasonable attorneys' fees and expenses incurred in connection with
such proceedings or actions, which Borrower agrees to repay to Lender upon
demand.
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(d) The Borrower shall promptly notify the Lender of the
occurrence of any material adverse change in the value of any oil or gas
property which is included in the Borrowing Base, or from which the Borrower
otherwise derives material revenue. Without limiting the foregoing, the
Borrower shall promptly notify the Lender of any notice of default or
cancellation from any lessor of any mineral lease in the Collateral, including
without limitation the Bureau of Indian Affairs, the Bureau of Land Management
or the State of Oklahoma.
(e) The Borrower shall promptly notify the Lender of the
creation, incurrence, assumption or existence of any Lien on any Borrowing Base
property now owned or hereafter acquired, except for Liens permitted under
Section 6.2.
(f) The Borrower shall promptly notify the Lender of each
creation, acquisition, disposition, dissolution, merger or other change in the
status of or addition or removal of any Subsidiary.
The foregoing requirements of notice shall not be construed to imply permission
or consent by the Lender as to such events or to waive any representations,
covenants and defaults set forth in this Agreement.
Section 5.12 ERISA Information and Compliance. The Borrower
will promptly furnish to the Lender (i) promptly after the filing thereof with
the United States Secretary of Labor or the Pension Benefit Guaranty
Corporation, copies of each annual and other report with respect to each Plan
or any trust created by the Borrower, and (ii) immediately upon becoming aware
of the occurrence of any "reportable event," as such term is defined in Section
4043 of ERISA, or of any "prohibited transaction," as such term is defined in
Section 4975 of the Code, in connection with any Plan or any trust created by
the Borrower, a written notice signed by the president or the principal
financial officer of the Borrower specifying the nature thereof, what action
the Borrower is taking or proposes to take with respect thereto, and, when
known, any action taken by the Internal Revenue Service with respect thereto.
The Borrower will comply with all of the applicable funding and other
requirements of ERISA as such requirements relate to the Plans of the Borrower.
Section 5.13 Indemnification. (a) The Borrower will indemnify
the Lender and hold the Lender harmless from claims of brokers with whom the
Borrower has contracted in the execution hereof or the consummation of the
transactions contemplated hereby. The Lender will indemnify the Borrower from
claims of brokers with whom the Lender has contracted in connection with the
transactions contemplated hereby.
(b) The Borrower will indemnify the Lender and hold the
Lender harmless from any and all liabilities, obligations, losses, damages,
penalties, claims, actions, suits, costs and expenses of whatever kind or
nature which may be imposed on, incurred by or asserted at any time against the
Lender in any way relating to, or arising in connection with, the use or
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occupancy of any of the Collateral or any breach of any representation,
warranty or covenant under the terms of this Agreement or the Collateral
Documents.
Section 5.14 Environmental Indemnity. The Borrower shall
defend, indemnify and hold Lender and its directors, officers, agents and
employees harmless from and against all claims, demands, causes of action,
liabilities, losses, costs and expenses (including, without limitation, costs
of suit, reasonable attorneys' fees and fees of expert witnesses) arising from
or in connection with (i) the presence on or under all Collateral constituting
immovable (real) property of any hazardous substances or solid wastes (as
defined elsewhere in this Agreement), or any releases or discharges of any
hazardous substances or solid wastes on, under or from such property, or (ii)
any activity carried on or undertaken on or off such property, whether prior to
or during the term of this Agreement, and whether by Borrower or any
predecessor in title or any officers, employees, agents, contractors or
subcontractors of Borrower or any predecessor in title, or any third persons at
any time occupying or present on such property, in connection with the
handling, use, generation, manufacture, treatment, removal, storage,
decontamination, clean-up, transport or disposal of any hazardous substances or
solid wastes at any time located or present on or under such property. The
foregoing indemnity shall further apply to any residual contamination on or
under such property, or affecting any natural resources, and to any
contamination of any property or natural resources arising in connection with
the generation, use, handling, storage, transport or disposal of any such
hazardous substances or solid wastes, and irrespective of whether any of such
activities were or will be undertaken in accordance with applicable laws,
regulations, codes and ordinances. Without prejudice to the survival of any
other agreements of the Borrower hereunder, the provisions of this Section
shall survive the final payment of all Indebtedness and the termination of this
Agreement and shall continue thereafter in full force and effect.
Section 5.15 Financial Covenants. The Borrower shall comply
with the following financial covenants (determined in accordance with Section
1.3), except as specifically stated otherwise:
(a) Minimum Current Ratio. Commencing on the ninety
first (91st) day after the Closing Date, the Borrower
shall maintain, on a quarterly basis as of the last
day of each fiscal quarter, a current ratio in an
amount not less than 1.00 to 1.00. For purposes of
this Section, "current ratio" shall mean the ratio of
(x) current assets plus the unused and available
portion of the Commitment Limit (being the amount, if
any, by which the Commitment Limit then in effect
exceeds the outstanding principal balance of the
Advances plus the face amount of all outstanding
standby letters of credit issued hereunder), to (y)
current liabilities. Unpaid royalties are to be
classified as current liabilities and included in this
calculation.
(b) Minimum Net Worth. The Borrower shall have a net
worth of not less than $1,866,600.00 on the Closing
Date, and thereafter shall maintain, on
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a quarterly basis as of the last day of each fiscal
quarter, the minimum net worth requirement as re-set
annually on the following basis: This minimum net
worth requirement shall be re-set annually after the
end of each fiscal year as to the amount to be met
as of the end of each quarter during the new fiscal
year, with the amount for the new fiscal year being
increased (but not reduced) by (x) fifty (50%)
percent of the Borrower's and all Subsidiaries'
prior fiscal year's positive net income on a
consolidated basis plus (y) one hundred (100%)
percent of the net proceeds from stock or other
equity offerings of any nature by the Borrower or
any Subsidiary. For purposes of this covenant, such
number shall be adjusted to exclude non-cash items,
including unrealized gains and losses, arising from
the effects, if any, of the xxxx to market of those
Hedging Obligations which are classified as cash
flow xxxxxx and determined "effective" pursuant to
Financial Accounting Standards Board Rule No. 133
(Accounting for Derivative Instruments and Hedging
Activities), or of other rules pertaining to other
comprehensive income.
(c) Minimum EBITDAX to Interest. The Borrower shall
maintain, on a quarterly basis as of the last day of
each fiscal quarter, a ratio (on a rolling four fiscal
quarter basis) of EBITDAX to interest expense of not
less than 2.00 to 1.00 through December 31, 2001, and
of not less than 2.50 to 1.00 thereafter. For purposes
of this Subsection, interest expense shall mean, for
each period, the sum of all interest, fees, charges
and related expenses payable (without duplication) for
that period to a lender in connection with borrowed
money or the deferred purchase price of assets that
are considered "interest expense" under generally
accepted accounting principles, plus the portion of
rent paid or payable (without duplication) for that
period under capital lease obligations that should be
treated as interest in accordance with Financial
Accounting Standards Board Statement No. 13. "EBITDAX"
shall be calculated for purposes of this Subsection as
EBITDA, but adjusted as if the Borrower were to use
the full cost method of accounting (under which all
exploration expenses are capitalized) to capitalize
exploration and dry hole costs rather than the
Borrower's successful efforts accounting method of
expensing intangible drilling costs (such as seismic
and geological expenses), dry hole costs and other
costs. For purposes of this Subsection, "EBITDA" shall
mean, for each period of four preceding fiscal
quarters, the sum of the Borrower's (i) net income for
that period, plus (i) any extraordinary loss and other
expenses not considered to be operating in nature
reflected in such net income, minus (iii) any
extraordinary gain, interest income and other income
not considered operating in nature reflected in such
net income, plus (iv) depreciation, depletion,
amortization and all other non-cash expenses for that
period, plus (v) all interest, fees, charges and
related
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expenses paid or payable (without duplication) for
that period to a lender in connection with borrowed
money or the deferred purchase price of assets that
are considered "interest expense" under generally
accepted accounting principles, together with the
portion of rent paid or payable (without
duplication) for that period under capital lease
obligations that should be treated as interest in
accordance with Financial Accounting Standards Board
Statement No. 13, plus (vi) the aggregate amount of
federal and state taxes on or measured by income for
that period (whether or not payable during that
period).
Section 5.16 Bank Accounts. (a) The Borrower shall maintain
its primary operating, collection and disbursement accounts pertaining to the
Collateral at the Lender, including without limitation as provided in Section
5.17.
(b) The Borrower hereby grants to the Lender a continuing
security interest in all of Borrower's deposit accounts now existing or
hereafter maintained at Lender as security for the Indebtedness, and all funds,
investment property and proceeds pertaining thereto.
Section 5.17 Revenue Distribution Account and Transfer
Orders. (a) The Borrower shall execute such division orders, transfer orders or
letters in lieu thereof as are necessary to direct that payments of production
from the Collateral are paid directly to the Lender into the revenue
distribution account (Section 3.1(ii)) at all times. Without limiting the
foregoing, the Borrower shall cause all purchasers from or agents of Borrower
to make all payments for oil or natural gas purchases from the Collateral to be
paid directly to such revenue distribution account at the Lender. The Borrower
shall maintain the revenue distribution account and an lockbox operating
agreement in effect with the Lender at all times. If no Default has occurred
and is continuing, proceeds in the revenue distribution account exceeding the
next monthly payment amount may be transferred or withdrawn by the Borrower.
(b) The Borrower and the Lender acknowledge that Collateral
is comprised in part of the Borrower's undivided interests in mineral
properties for which the Borrower is operator, and accordingly a portion of the
payments made to the Borrower from the sale of hydrocarbons from such
properties may be owed by the Borrower to the non-operator working interest
owners. In the event that revenues of another Person attributable to such other
Person's working interest ("Other Revenues") are deposited into the revenue
distribution account, then the Lender agrees that such Other Revenues will be
released by the Lender to such Persons (even if an Event of Default has
occurred and is continuing) upon the receipt by the Lender of appropriate
evidence that such funds are Other Revenues (i.e., are not the Borrower's
funds). The Lender shall not be liable, however, for any actions by Lender
which are taken in compliance with the terms of this Agreement and the
Collateral Documents with respect to funds in the revenue distribution account
that are Other Revenues and which are taken before Lender received such
evidence that such funds are Other Revenues.
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Section 5.18 Year 2000. Upon reasonable request, the Borrower
agrees to provide to the Lender documentation satisfactory to Lender to
establish that the Borrower's systems and software are Year 2000 compliant.
Section 5.19 Hedging. The Borrower shall enter into and
maintain in effect Hedge Agreements that are satisfactory to the Lender in its
sole discretion, which Hedge Agreements shall have a term (or in combination
have a total duration) of at least twelve (12) months and shall cover at least
twenty-five (25%) percent of the Borrower's current daily oil and gas
production for an average strike price acceptable to the Lender.
ARTICLE 6
NEGATIVE COVENANTS
Unless the Lender's prior written consent to the contrary is
obtained, the Borrower will at all times comply with the covenants contained in
this Article 6, from the date hereof and for so long as any part of the
Indebtedness is outstanding.
Section 6.1 Debts, Guaranties and Other Obligations. The
Borrower will not incur, create, assume or in any manner become or be liable in
respect of any Debt direct or contingent, except for:
(a) The Indebtedness to the Lender.
(b) Customary trade payables or operating leases from
time to time incurred in the ordinary course of
business.
(c) Debt under operating agreements, unitization and
pooling agreements and orders, farmout agreements
and gas balancing agreements, in each case that are
customary in the oil, gas and mineral production
business and that are entered into in the ordinary
course of business.
(d) Taxes, assessments or other government charges which
are not yet due or are being contested in good faith
by appropriate action promptly initiated and
diligently conducted, if such reserve as shall be
required by generally accepted accounting principles
shall have been made therefor.
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(e) Obligations incurred in the ordinary course of
business under Permitted Hedge Agreements.
(f) Debt fully subordinated to the Indebtedness, entered
into after Lender's prior written consent, and with
a subordination in favor of Lender of such Debt on
terms and conditions satisfactory to Lender in its
sole discretion.
Section 6.2 Liens. The Borrower will not create, incur,
assume or permit to exist any Lien on any of its property now owned or
hereafter acquired, except for:
(a) Liens for taxes, assessments, or other governmental
charges not yet due or which are being contested in
good faith by appropriate action promptly initiated
and diligently conducted, if such reserve as shall be
required by generally accepted accounting principles
shall have been made therefor, and so long as the
payment of same is not a condition to be met in
order to maintain in force the Borrower's interest in
such property or the Lender's first Lien therein.
(b) Liens of landlords, vendors, carriers,
warehousemen, mechanics, laborers and
materialmen arising by law in the ordinary course of
business for sums either not more than 90 days past
due or being contested in good faith by appropriate
action promptly initiated and diligently conducted,
if such reserve as shall be required by generally
accepted accounting principles shall have been
made therefor, and so long as the payment of same
is not a condition to be met in order to maintain in
force the Borrower's interest in such property or the
Lender's first Lien therein.
(c) Inchoate liens arising under ERISA to secure the
contingent liability of the Borrower permitted by
this Agreement.
(d) The pledge of the Collateral and any other liens in
favor of the Lender to secure the Indebtedness of the
Borrower to the Lender.
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(e) Minor imperfections of title or non-monetary Liens
that do not materially impair the development,
operation or value of property in its intended use
or the title thereto and which are of a nature
commonly existing with respect to properties of a
similar character as the Collateral.
(f) Royalties, overriding royalties, net profits
interests, production payments, reversionary
interests, calls on production, preferential purchase
rights and other burdens on or deductions from the
proceeds of production, that do not secure Debt for
borrowed money and that are taken into account in
computing the net revenue interests and working
interests of the Borrower warranted in the Collateral
Documents.
(g) Operating agreements, unitization and pooling
agreements and orders, farmout agreements, gas
balancing agreements and other agreements, in each
case that are customary in the oil, gas and mineral
production business and that are entered into in the
ordinary course of business.
(h) Liens fully subordinated to Lender's Liens, securing
subordinated Debt permitted by Section 6.1(f),
granted after Lender's prior written consent, and
with a subordination in favor of Lender of such
Liens on terms and conditions satisfactory to Lender
in its sole discretion.
The inclusion of this Section 6.2 shall not constitute in any way an
acknowledgment by the Lender of the validity, legality, enforceability or
binding effect on the Lender of such Liens, the sole purpose of this provision
being to provide that the existence of any such permitted Liens shall not in
and of itself constitute an Event of Default under this Agreement.
Section 6.3 Investments, Loans and Advances. The Borrower
will not make or permit to remain outstanding any loans or advances to or
investments in or acquisitions of capital stock or ownership (direct or
beneficial) interests or obligations of any Person (including without
limitation any Subsidiary), except for:
(a) Investments in direct obligations of the United
States of America or any agency thereof.
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(b) Investments in either certificates of deposit of
maturities less than one year issued by the Lender,
or, if the Lender is not substantially competitive
(in terms of its certificate of deposit interest rate
for comparable amounts) with other banks (having a
credit rating equal or better than the Lender's),
certificates of deposit of maturities less than one
year issued by one or more of such other banks.
(c) Investments in commercial paper of maturities less
than one year with the best rating by Standard &
Poors, Xxxxx'x Investors Service, Inc., or any other
rating agency satisfactory to the Lender.
(d) Routine advances to employees made in the
ordinary course of business.
(e) Advances pursuant to operating agreements,
unitization and pooling agreements and orders,
farmout agreements and gas balancing agreements, in
each case that are customary in the oil, gas and
mineral production business and that are entered
into in the ordinary course of business.
Section 6.4 Nature of Business. The Borrower will not permit
any material change to be made in the character of its business as carried on
at the date hereof.
Section 6.5 Mergers and Consolidations. The Borrower will not
acquire, merge with or consolidate with any Person (whether or not such
acquisition, merger or consolidation requires any capital expenditures on the
part of the Borrower).
Section 6.6 ERISA Compliance. The Borrower will not at any
time permit any Plan maintained by it to engage in any "prohibited transaction"
as such term is defined in Section 4975 of the Code; incur any "accumulated
funding deficiency" as such term is defined in Section 302 of ERISA; or
terminate any such Plan in a manner which could result in the imposition of a
Lien on the property of the Borrower pursuant to Section 4068 of ERISA.
Section 6.7 Changes. The Borrower will not without 30 days
prior notice to the Lender change the location of any of its Collateral, or
change the location of its state of organization or chief executive office or
change its name or taxpayer identification number.
Section 6.8 Sales. The Borrower will not sell, assign,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its property
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(whether now owned or hereafter acquired) to any Person. The Borrower will not
sell, lease or otherwise dispose of any of its Collateral, except for sales of
production, collection of its accounts, and sales of items of equipment which
are obsolete or otherwise no longer useful for Borrower's operations, in each
case in the ordinary course of business.
Section 6.9 Agreements. The Borrower will not enter into or
be a party to any contract or agreement for the purchase of materials, supplies
or other property or services if such contract or agreement shall require that
the Borrower make payment for such materials, supplies or other property
irrespective of whether delivery thereof is made or whether such services are
rendered. Except in the ordinary course of business, the Borrower will not
enter into any arrangement with any gas pipeline company or any other purchaser
of hydrocarbons regarding the Collateral whereby the Borrower agrees that said
gas pipeline company or purchaser may set off any claim against the Borrower by
withholding payment for any hydrocarbons actually delivered.
Section 6.10 Dividends or Redemption of Shares. The Borrower
will not (i) pay or declare any dividend on any class of its stock (other than
stock dividends), (ii) make any other distribution or other shareholder
expenditure on account of any class of its stock, nor set aside any funds for
such purpose, nor (iii) otherwise make or agree to pay for or make, directly or
indirectly, any other distribution with respect to any shares of any class of
its stock, or any payment (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any such
shares or any option, warrants or other right to acquire any such shares,
except that dividends may be declared and paid limited in an amount not to
exceed fifty (50%) percent of the Borrower's prior year's fiscal year end net
income on an annual basis.
Section 6.11 Compensation. The Borrower will not pay
compensation to its employees, officers or directors in excess of reasonable
salaries, bonuses and other benefits that are incurred in the ordinary course
of business and do not exceed historical levels in a material manner (and,
without limiting the foregoing, are not paid with the purpose or effect of
avoiding the limitation established in Section 6.10 above).
Section 6.12 Management. The Borrower will not permit or
suffer a change in the key management of the Borrower to occur. For purposes of
this Section, key management shall mean the continued active employment of each
of Xxxxxx X. Xxxx, Xx., Xxxx X. Xxxx, P. Xxxx Xxxxx, Xxxxxx Xxxxx and Xxxxxx
Xxxxx.
Section 6.13 Change of Ownership or Control. (a) No Person or
group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934),
other than existing management and owners of capital stock of Borrower as of
the Closing Date, shall become the beneficial owner of more than 33% of the
total voting power of the capital stock of the Borrower then outstanding.
(b) A majority of the members of the Board of Directors
of the Borrower shall not cease to be Continuing Directors. For purposes of
this Section, the term "Continuing
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Directors" of a Person means any member of such Person's Board of Directors
who: (x) was a member of such Person's Board of Directors on the Closing Date;
or (y) was nominated for election or elected with the approval of a majority of
the Continuing Directors who were then members of such Person's Board of
Directors (but excluding any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Continuing Directors).
Section 6.14 Transactions with Affiliates. The Borrower will
not sell, transfer, lease or otherwise dispose of (including pursuant to any
merger) any property or assets to, or purchase, lease or otherwise acquire
(including pursuant to a merger) any property or assets from, or otherwise
engage in any other transactions with, any affiliates, except in the ordinary
course of business at prices and on terms and conditions not less favorable to
the Borrower as could be obtained on an arms-length basis from unrelated third
persons in a comparable transaction.
ARTICLE 7
CONDITIONS OF LENDING
Section 7.1 Conditions of Lending. The obligation of the
Lender to make the Loan (or issue a standby letter of credit) is subject to the
accuracy of each and every representation and warranty of the Borrower
contained in this Agreement, the absence of a Default or an Event of Default,
and to the receipt of the following on or before the Closing Date:
(a) Agreement. A duly executed counterpart of this
Agreement signed by all the parties hereto.
(b) Note. The duly executed Note signed by the
Borrower.
(c) Good Standing. Certificates of good standing of the
Borrower issued by the Secretaries of State of
Delaware, Texas, Utah and Oklahoma.
(d) Corporate Certificate. A certificate of the secretary
of the Borrower (i) setting forth resolutions of its
board of directors (or its Executive Committee) in
form and substance satisfactory to the Lender with
respect to the unanimous authorization of this
Agreement, the Note and the Collateral Documents,
(ii) attaching the articles of incorporation and
bylaws of the Borrower, (iii) stating its Federal tax
identification number and Delaware corporate
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registration number, and (iv) setting forth the
officers authorized to sign such instruments.
(e) Fee. The second installment of the commitment fee
required by Section 2.5.
(f) Collateral Documents. Duly executed and recorded
mortgages or deeds of trust and filed financing
statements covering the Collateral.
(g) Lien Searches. UCC lien searches satisfactory to
the Lender from Delaware, Texas, Utah and
Oklahoma pertaining to the Borrower.
(h) Title Opinions. Preliminary title opinions with
respect to the Collateral (other than Utah
properties), in form, scope and substance
satisfactory to the Lender and Lender's counsel,
which indicate that the Borrower has good and
marketable title to the interests in the Collateral
in amounts not less than those specified in the
Collateral Documents or otherwise represented to
Lender, subject to no Liens other than the Collateral
Documents and those accepted by the Lender in
writing.
(i) Legal Opinion. Legal opinion in form, scope and
substance satisfactory to the Lender and Lender's
counsel.
(j) Insurance. Satisfactory evidence of all insurance
coverages relating to the Collateral and the
Borrower.
(k) Environmental. Complete documentation pertaining to
any previous fines levied against the Borrower or
any current operator of the Collateral for
non-compliance with applicable federal, state and
local environmental laws and regulations.
(l) Transfer Orders. Executed division orders, transfer
orders or letters in lieu thereof directing that
payment of all production proceeds attributable to
-35-
the Collateral and other properties in the Borrowing
Base be made directly to the Lender into the lockbox
cash collateral account provided for in Section
5.17.
(m) Payout Letter. A letter from Bank One to Lender,
confirming that such bank will release all its Liens
on the Collateral and other property of the Borrower
upon payment of Borrower's loan in full, and stating
said payment amount as of the Closing Date.
In the event that the Lender in its sole and absolute discretion waives the
receipt of any items set forth above, the Borrower agrees that it nonetheless
will promptly deliver such item to the Lender upon request within the time
period reasonably specified by the Lender.
Section 7.2 Certification. The obligation of the Lender to
make the Loan is further subject to the certification by the Borrower, which
the Borrower hereby makes, that no Default or Event of Default exists, and that
no material adverse changes (in the Lender's sole determination) in the
Collateral or other assets, liabilities, financial conditions, business
operations, affairs or circumstances of the Borrower or other facts,
circumstances or conditions (financial or otherwise) upon which Lender has
relied or utilized in making its decision to make this Loan have occurred from
those reflected in the most recent financial statements furnished to the Lender
prior to the Closing Date or otherwise existing at the time of the issuance of
Lender's commitment letter.
Section 7.3 Post-Closing Items. (a) The Borrower will furnish
the Lender with updated title opinions by August 22 , 2001, on the Collateral
(i) updating title and confirming the recordation of the Lender's Collateral
Documents and the Lender's first priority Lien, and (ii) as to the Borrower's
interest in Utah properties, covering the absence of liens or encumbrances in
the name of or conveyances by Borrower.
(b) Certain properties included within the Borrowing Base
from time to time at zero or low value may not be covered by title opinions at
the time of their inclusion in the Borrowing Base. The Borrower acknowledges
and agrees that the Lender has the right under the terms of this Agreement to
require title opinions on such properties in the future, whether at the time of
an increase in the value attributed to such property in the Borrowing Base or
otherwise, and Borrower agrees promptly to deliver such title opinions and
acknowledges that in the absence thereof such properties may be excluded by the
Lender from the Borrowing Base (as provided in the definition of Borrowing
Base).
Section 7.4 Each Additional Advance. The obligation of the
Lender to make additional Advances on the line of credit or issue standby
letters of credit is subject to the satisfaction of each of the following
conditions:
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(a) Each of the representations and warranties of the
Borrower contained in this Agreement shall be true
and correct on and as of the date of each subsequent
Advance, except as such representations and
warranties relate to matters that are permitted by
this Agreement.
(b) At the time of such Advance, no Default shall have
occurred and be continuing.
(c) There shall have occurred no material adverse
changes (in the Lender's sole determination), either
individually or in the aggregate, in the assets,
liabilities, financial condition, business operation,
affairs or circumstances of the Borrower, from those
reflected in the most recent financial statements
furnished to the Lender prior to the Closing Date,
except to the extent that such changes are permitted
by this Agreement.
(d) If reasonably required by Lender, a bringdown title
search in the appropriate states, confirming the
absence of Lien filings against the Borrower since
the effective date of the preceding bringdown
search.
Section 7.5 Title Opinions. It is expressly acknowledged by
the Borrower that the waiver by the Borrower (on the basis of the Borrower's
business judgment) of any title requirements contained in any title opinions
delivered to the Lender from time to time in connection with this Agreement,
and funding by the Lender of Advances, shall not constitute a waiver by the
Lender of any of the representations or warranties of the Borrower contained
herein.
ARTICLE 8
DEFAULT
Section 8.1 Events of Default. Any of the following events
shall be considered an "Event of Default" as that term is used herein:
(a) Principal and Interest Payments. The Borrower fails
to make payment (x) when due of any principal or
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interest installment on the Note, any unused
facility fee, any commitment fee, engineering fee or
any other Indebtedness incurred pursuant to this
Agreement to the Lender, and such failure continues
unremedied for a period of three (3) Business Days
after the earlier of (i) notice thereof being given
by the Lender to the Borrower or (ii) such default
otherwise becoming known to the president or chief
financial officer of the Borrower or (y) when due of
any mandatory prepayment under Subsection 2.4(b).
(b) Representations and Warranties. Any
representation or warranty made by or on behalf of
the Borrower contained in this Agreement, the Note
or any of the Collateral Documents proves to have
been incorrect in any material respect as of the date
thereof; or any representation, statement (including
financial statements), certificate or data furnished
or made to the Lender by any Person under this
Agreement, the Note or any of the Collateral
Documents proves to have been untrue in any
material adverse respect as of the date as of which
the facts therein set forth were stated or certified.
(c) Specific Covenants. The Borrower fails to observe or
perform at any time any covenant or agreement
contained in Section 5.6, Section 5.8, Section 5.15,
Section 5.16, Section 5.17, or Article 6 of this
Agreement.
(d) Covenants. The Borrower or other Person (other
than the Lender) defaults in the observance or
performance of any of the covenants or agreements
contained in this Agreement, the Note or any of the
Collateral Documents to be kept or performed by
the Borrower or such Person (other than a default
under Subsections (a) through (c) hereof), and such
default continues unremedied for a period of 30
days after the earlier of (i) notice thereof being
given by the Lender to the Borrower or such Person,
as applicable, or (ii) such default (and the fact
that it is a default) otherwise becoming known to the
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president or chief financial officer of the Borrower
or other Person, as applicable.
(e) Other Debt to Lender. The Borrower defaults in the
payment of any amounts due to the Lender or in the
observance or performance of any of the covenants,
or agreements contained in any loan agreements,
notes, leases, collateral or other documents relating
to any Debt of the Borrower to the Lender other
than the Indebtedness, and any grace period
applicable to such default has elapsed.
(f) Other Debt to Other Lenders. The Borrower
defaults in the payment of any amounts due to any
Person (other than the Lender) or in the observance
or performance of any of the covenants or
agreements contained in any credit agreements,
notes, leases, collateral or other documents relating
to any Debt of the Borrower to any Person (other
than the Lender) in excess of $20,000.00, and any
grace period applicable to such default has elapsed.
(g) Involuntary Bankruptcy or Receivership
Proceedings. A receiver, conservator, liquidator or
trustee of the Borrower, or of any of its property,
is appointed by order or decree of any court or
agency or supervisory authority having jurisdiction;
or an order for relief is entered against the
Borrower under the Federal Bankruptcy Code; or the
Borrower is adjudicated bankrupt or insolvent; or
any material portion of the property of the Borrower
is sequestered by court order and such order remains
in effect for more than 30 days after such party
obtains knowledge thereof; or a petition is filed
against the Borrower under any reorganization,
arrangement, insolvency, readjustment of debt,
dissolution, liquidation or receivership law of any
jurisdiction, whether now or hereafter in effect, and
such petition is not dismissed within 60 days.
(h) Voluntary Petitions. The Borrower files a case
under the Federal Bankruptcy Code or seeking relief
under any provision of any bankruptcy,
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reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law
of any jurisdiction, whether now or hereafter in
effect, or consents to the filing of any case or
petition against it under any such law.
(i) Assignments for Benefit of Creditors. The Borrower
makes an assignment for the benefit of its
creditors, or admits in writing its inability to pay
its debts generally as they become due, or consents
to the appointment of a receiver, trustee or
liquidator of the Borrower or of all or any part of
its property.
(j) Undischarged Judgments. Judgment for the
payment of money in excess of $20,000.00 (which
is not covered by insurance) is rendered by any
court or other governmental body against the
Borrower, and the Borrower does not discharge the
same or provide for its discharge in accordance with
its terms, or procure a stay of execution thereof
within 30 days from the date of entry thereof, and
within said 30-day period or such longer period
during which execution of such judgment shall have
been stayed, appeal therefrom and cause the
execution thereof to be stayed during such appeal
while providing such reserves therefor as may be
required under generally accepted accounting
principles.
(k) Attachment. A writ or warrant of attachment or any
similar process shall be issued by any court against
all or any material portion of the property of the
Borrower, and such writ or warrant of attachment or
any similar process is not released or bonded within
30 days after its entry.
(l) Condemnation. The Collateral, or any substantial
portion thereof, is condemned or expropriated under
power of eminent domain by any legally constituted
governmental authority.
(m) Invalidity. Any material provision of this
Agreement, the Note or any of the Collateral
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Documents shall for any reason cease to be valid and
binding on the Borrower after the Closing Date, or
the Borrower shall so assert in writing.
Section 8.2 Remedies. (a) Upon the happening of any Event of
Default specified in the preceding Section (other than Subsections (g) or (h)
thereof), (i) all obligations, if any, of the Lender to make Advances to the
Borrower shall immediately cease and terminate, and (ii) the Lender may by
written notice to the Borrower declare the entire principal amount of all
Indebtedness then outstanding including interest accrued thereon to be
immediately due and payable without presentment, demand, protest, notice of
protest or dishonor or other notice of default of any kind, all of which are
hereby expressly waived by the Borrower.
(b) Upon the happening of any Event of Default specified in
Subsections (g) or (h) of the preceding Section, (i) all obligations, if any,
of the Lender to make Advances to the Borrower shall immediately cease and
terminate, and (ii) the entire principal amount of all obligations then
outstanding including interest accrued thereon shall, without notice or action
by the Lender, be immediately due and payable without presentment, demand,
protest, notice of protest or dishonor or other notice of default of any kind,
all of which are hereby expressly waived by the Borrower.
(c) In addition to the foregoing, the Lender may exercise any
of the rights and remedies established in the Collateral Documents or avail
itself of any other rights and remedies provided by applicable law.
(d) In furtherance of the foregoing, to the extent that any
standby letters of credit are outstanding upon the occurrence of any Event of
Default, the Lender may be written notice to the Borrower require the Borrower
to pay to the Lender immediately on such demand the full face amount of such
letters of credit to be held by the Lender as collateral for the payment of
such letters of credit.
Section 8.3 Set-Off. Upon the occurrence of any Event of
Default, the Lender shall have the right to set-off any funds of the Borrower
in the possession of the Lender (including without limitation funds in the
accounts provided for in Article 5) against any amounts then due by the
Borrower to the Lender pursuant to the Agreement (but the Borrower acknowledges
that the Lender may apply funds in the revenue distribution account (Section
5.17) against any amounts due and payable by the Borrower even without the
occurrence of an Event of Default). The Borrower agrees that any holder of a
participation in the Note may exercise any and all rights of counter-claim,
set-off, banker's lien and other liens with respect to any and all monies owing
by Borrower to such holder as fully as if such holder of a participation were a
holder of a note in the amount of such participation.
Section 8.4 Marshaling. The Borrower shall not in any time
hereafter assert any right under any law pertaining to marshaling (whether of
assets or liens) and the Borrower
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expressly agrees that the Lender may execute or foreclose upon the Collateral
Documents in such order and manner as the Lender, in its sole discretion, deems
appropriate.
ARTICLE 9
MISCELLANEOUS
Section 9.1 Notices. Any notice or demand which, by provision
of this Agreement, is required or permitted to be given by one party to the
other party hereunder shall be given by (i) deposit, postage prepaid, in the
mail, registered or certified mail, or (ii) delivery to a recognized express
courier service, or (iii) delivery by hand, or (iv) by facsimile, in each case
addressed (until another address or addresses is given in writing by such party
to the other party) as follows:
If to Borrower: Venus Exploration, Inc.
0000 X.X. Xxxx 000, Xxxxx 000
Xxx Xxxxxxx, Xxxxx 00000
Attention: Chief Financial Officer
Facsimile Number: (000) 000-0000
If to Lender: Hibernia National Bank
P. O. Xxx 00000
Xxx Xxxxxxx, Xxxxxxxxx 00000
or
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxx 00000
Attention: Manager
Energy/Maritime Department
Facsimile Number: (000) 000-0000
All notices sent by facsimile transmission shall be deemed received by the
addressee upon the transmitter's receipt of acknowledgment of receipt from the
offices of such addresses (if before 5:00 p.m. on a Business Day; if later,
than on the next Business Day).
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Section 9.2 Entire Agreement. This Agreement, the Note and
the Collateral Documents set forth the entire agreement of the Lender and the
Borrower with respect to the Indebtedness, and supersede all prior written or
oral understandings with respect thereto; provided, however, that all written
representations, warranties and certifications made by the Borrower to the
Lender with respect to the Indebtedness and the security therefor shall survive
the execution of this Agreement. The Borrower is not relying on any
representation by the Lender, and no representation has been made, that the
Lender will, at the time of a Default or at any other time, waive, negotiate,
discuss, or take or refrain from taking any action with respect to such
Default.
Section 9.3 Renewal, Extension or Rearrangement. All
provisions of this Agreement relating to the Note shall apply with equal force
and effect to each and all promissory notes or security instruments hereinafter
executed which in whole or in part represent a renewal, extension for any
period, increase or rearrangement of any part of the Note.
Section 9.4 Amendment. Neither this Agreement nor any
provisions hereof may be changed, waived, discharged or terminated orally or in
any manner other than by an instrument in writing signed by the party against
whom enforcement of the change, waiver, discharge or termination is sought.
Section 9.5 Invalidity. In the event that any one or more of
the provisions contained in this Agreement, the Note, or the Collateral
Documents shall, for any reason, be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement, the Note or the Collateral Documents.
Section 9.6 Survival of Agreements. All representations and
warranties of the Borrower herein, and all covenants and agreements herein not
fully performed before the effective date of this Agreement, shall survive such
date.
Section 9.7 Waivers. No course of dealing on the part of the
Lender, its officers, employees, consultants or agents, nor any failure or
delay by the Lender with respect to exercising any of its rights, powers or
privileges under this Agreement, the Note or the Collateral Documents, shall
operate as a waiver thereof.
Section 9.8 Cumulative Rights. The rights and remedies of the
Lender under this Agreement, the Note and the Collateral Documents shall be
cumulative, and the exercise or partial exercise of any such right or remedy
shall not preclude the exercise of any other right or remedy.
Section 9.9 Time of the Essence. Time shall be deemed of the
essence with respect to the performance of all of the terms, provisions and
conditions on the part of the Borrower and the Lender to be performed
hereunder.
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Section 9.10 Successors and Assigns; Participants. (a) All
covenants and agreements made by or on behalf of the Borrower in this
Agreement, the Note and the Collateral Documents shall bind its successors and
assigns and shall inure to the benefit of the Lender and its successors and
assigns. The Borrower may not assign its rights or obligations under this
Agreement.
(b) This Agreement is for the benefit of the Lender and for
such other Person or Persons as may from time to time become or be the holders
of any of the Indebtedness, and this Agreement shall be transferrable and
negotiable, with the same force and effect and to the same extent as the
Indebtedness may be transferrable, it being understood that, upon the transfer
or assignment by the Lender of any of the Indebtedness, the legal holder of
such Indebtedness shall have all of the rights granted to the Lender under this
Agreement.
(c) The Borrower hereby recognizes and agrees that the Lender
may, from time to time, one or more times, transfer all or any portion of the
Indebtedness to one or more third parties. Such transfers may include, but are
not limited to, sales of participation interests in such Indebtedness in favor
of one or more third party lenders. Borrower specifically (i) consents to all
such transfers and assignments, waives any subsequent notice of and right to
consent to any such transfers and assignments as may be provided under
applicable Louisiana law; (ii) agrees that the purchaser of a participation
interest in the Indebtedness will be considered as the absolute owner of a
percentage interest of such Indebtedness and that such a purchaser will have
all of the rights granted to the purchaser under any participation agreement
governing the sale of such a participation interest; (iii) waives any right of
offset that Borrower may have against the Lender, and/or any purchaser of such
a participation interest in the Indebtedness, and unconditionally agrees that
either the Lender or such a purchaser may enforce Borrower's Indebtedness under
this Agreement, irrespective of the failure or insolvency of the Lender or any
such purchaser; (iv) agrees that any purchaser of a participation interest in
the Indebtedness may exercise any and all rights of counter-claim, set-off,
banker's lien and other liens with respect to any and all monies owing to the
Borrower; and (v) agrees that, upon any transfer of all or any portion of the
Indebtedness, the Lender may transfer and deliver any and all collateral
securing repayment of such Indebtedness to the transferee of such Indebtedness
and such collateral shall secure any and all of the Indebtedness in favor of
such a transferee, and after any such transfer has taken place, the Lender
shall be fully discharged from any and all future liability and responsibility
to Borrower with respect to such collateral, and the transferee thereafter
shall be vested with all the powers, rights and duties with respect to such
collateral.
Section 9.11 Relationship Between the Parties. The
relationship between the Lender and the Borrower shall be solely that of lender
and borrower, and such relationship shall not, under any circumstances
whatsoever, be construed to be a joint venture, joint adventure, or
partnership. The Lender has no fiduciary obligation to the Borrower with
respect to this Agreement or the transactions contemplated hereby.
-44-
Section 9.12 Limitation of Liability. This Agreement, the
Note and the Collateral Documents are executed by an officer of the Lender, and
by acceptance of the Loan, the Borrower agrees that for the payment of any
claim or the performance of any obligations hereunder resulting from any
default by the Lender, resort shall be had solely to the assets and property of
the Lender, and no shareholder, officer, employee or agent of the Lender shall
be personally liable therefor.
Section 9.13 Titles of Articles, Sections and Subsections.
All titles or headings to articles, sections, subsections or other divisions of
this Agreement or the exhibits hereto are only for the convenience of the
parties and shall not be construed to have any effect or meaning with respect
to the other content of such articles, sections, subsections or other
divisions, such other content being controlling as to the agreement between the
parties hereto.
Section 9.14 Singular and Plural. Words used herein in the
singular, where the context so permits, shall be deemed to include the plural
and vice versa. The definitions of words in the singular herein shall apply to
such words when used in the plural where the context so permits and vice versa.
SECTION 9.15 GOVERNING LAW. THIS AGREEMENT IS, AND THE NOTE
WILL BE, CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE UNITED STATES OF AMERICA AND THE STATE OF
LOUISIANA.
Section 9.16 Counterparts. This Agreement may be executed in
two or more counterparts, and it shall not be necessary that the signatures of
all parties hereto be contained on any one counterpart hereof; each counterpart
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
SECTION 9.17 WAIVER OF JURY TRIAL; SUBMISSION TO
JURISDICTION. (a) THE BORROWER AND THE LENDER HEREBY WAIVE TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO WHICH THE BORROWER AND THE LENDER MAY BE PARTIES,
ARISING OUT OF OR IN ANY WAY PERTAINING TO (i) THE NOTE, (ii) THIS AGREEMENT,
(iii) THE COLLATERAL DOCUMENTS OR (iv) THE COLLATERAL. IT IS AGREED AND
UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS
AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST
PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. THIS WAIVER IS KNOWINGLY,
WILLINGLY AND VOLUNTARILY MADE BY THE BORROWER AND THE LENDER, AND THE BORROWER
AND THE LENDER HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE
BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY
WAY MODIFY OR NULLIFY ITS EFFECT. THE BORROWER AND THE LENDER FURTHER REPRESENT
THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING
OF THIS WAIVER BY INDEPENDENT LEGAL
-45-
COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAD THE OPPORTUNITY TO
DISCUSS THIS WAIVER WITH COUNSEL.
(b) THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE
NON-EXCLUSIVE JURISDICTION OF THE STATE COURTS OF LOUISIANA AND THE FEDERAL
EASTERN DISTRICT COURT IN LOUISIANA, AND AGREES THAT ANY ACTION OR PROCEEDING
ARISING OUT OF OR BROUGHT TO ENFORCE THE PROVISIONS OF THE NOTE, THIS AGREEMENT
AND/OR THE COLLATERAL DOCUMENTS MAY BE BROUGHT IN ANY COURT HAVING SUBJECT
MATTER JURISDICTION. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTIONS THAT
IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN
ANY SUCH COURT OR THAT ANY SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME. THE BORROWER
AGREES THAT NOTHING HEREIN SHALL LIMIT THE LENDER'S RIGHT TO XXX IN ANY OTHER
JURISDICTION.
(c) THE BORROWER HEREBY AGREES THAT SERVICE OF PROCESS IN ANY
SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY BY REGISTERED OR
CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL) POSTAGE PREPAID, TO
THE BORROWER AT ITS ADDRESS SET FORTH IN SECTION 9.1 OR AT SUCH OTHER ADDRESS
AS TO WHICH THE LENDER SHALL HAVE BEEN NOTIFIED PURSUANT THERETO. THE BORROWER
AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 9.18 AGREEMENT SUPERCEDES ALL PRIOR AGREEMENTS. THIS
AGREEMENT, TOGETHER WITH THE NOTE, THE COLLATERAL DOCUMENTS, AND ANY OTHER
WRITTEN INSTRUMENTS EXECUTED PURSUANT TO THIS AGREEMENT REPRESENT,
COLLECTIVELY, THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO
THE SUBJECT HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES AND SHALL
SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HEREOF, WHETHER WRITTEN OR
ORAL, RELATING TO THE SUBJECT HEREOF. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
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IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be duly executed as of the date first above written.
BORROWER: VENUS EXPLORATION, INC.
By:
--------------------------------
Name: Xxxx X. Xxxx
Title: President
LENDER: HIBERNIA NATIONAL BANK
By:
--------------------------------
Name: Xxxxx Xxxxxxx
Title: Vice President
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ADDENDUM I
Page -1-
ADDENDUM I
LIBO RATE PROVISIONS
1. The Lender shall determine the interest rate applicable to LIBO
Rate Advances, and its determination shall be conclusive in the absence of
manifest error. The Lender shall endeavor to notify the Borrower prior to the
date on which an interest payment is due, provided that the failure of the
Lender to provide such notice shall not affect the Borrower's obligation to pay
interest on such date.
2. If any applicable law or regulation, or the action of any
applicable regulatory requirement increases the reserves or capital required to
be maintained by the Lender with respect to the Loan (including unfunded
commitments and obligations on letter of credit), the Lender shall promptly
deliver a certificate to the Borrower specifying the additional amount as will
compensate the Lender for the additional costs, which certificate shall be
conclusive in the absence of manifest error. The Borrower shall pay the amount
specified in such certificate promptly upon receipt.
3. If the Lender gives notice to the Borrower that no LIBO bid rate is
quoted to the Lender (or otherwise that adequate and reasonable methods do not
exist for ascertaining the LIBO Rate) for the applicable Interest Period or in
the applicable amounts (which notice shall be conclusive and binding on the
Borrower absent manifest error), then (A) the obligation of the Lender to make
a LIBO Rate Advance and the ability of the Borrower to select the LIBO Rate for
an Advance shall be suspended, and (B) the Borrower shall either prepay all
LIBO Rate Advances for which an interest rate is to be determined on such date
or the Loan shall thereafter bear interest at the Base Rate.
4. If any applicable domestic or foreign law, treaty, rule or
regulation (whether now in effect or hereinafter enacted or promulgated,
including Regulation D of the Board of Governors of the Federal Reserve System)
or any interpretation or administration thereof by any governmental authority
charged with the interpretation or administration thereof (whether or not
having the force of law):
(i) changes the basis of taxation of payments to the Lender
or any principal, interest, or other amounts attributable to any LIBO
Rate Advance (other than taxes imposed on the overall net income of
the Lender);
(ii) changes, imposes, modifies, applies or deems applicable
any reserve, special deposit or similar requirements in respect of any
such LIBO Rate Advance (excluding those for which the Lender is fully
compensated pursuant to adjustments made in the definition of LIBO
Rate) or against assets of, deposits with or for the account of, or
credit extended by, the Lender; or
ADDENDUM I
Page -2-
(iii) imposes on the Lender or the interbank eurocurrency
deposit and transfer market any other condition or requirement
affecting any such LIBO Rate Advance,
and the result of any of the foregoing is to increase the cost to the Lender of
funding or maintaining any such LIBO Rate Advance (other than costs for which
the Lender is fully compensated pursuant to adjustments made in the definition
of LIBO Rate) or to reduce the amount of any sum receivable by the Lender in
respect of any such LIBO Rate advance by an amount deemed by the Lender to be
material, then or the Lender shall promptly notify the Borrower in writing of
the happening of such event and (1) Borrower shall upon demand pay to the
Lender such additional amount or amounts as will compensate the Lender for such
additional cost or reduction and (2) Borrower may elect, by giving to the
Lender not less than three Business Days' notice, to change the interest rate
applicable to such Advance, and any other portion of the Loan bearing interest
at the LIBO Rate, to the Base Rate.
5. Notwithstanding any other provision hereof, if any change in
applicable laws, treaties, rules or regulations or in the interpretation or
administration thereof of or in any jurisdiction whatsoever, domestic or
foreign, shall make it unlawful or impracticable for the Lender to maintain
Advances bearing interest at the LIBO Rate, or shall materially restrict the
authority of the Lender to purchase, sell or take certificates of deposit or
offshore deposits of dollars, then, upon notice by the Lender to Borrower, the
Lender's portion of all LIBO Rate Advances which are then outstanding and which
cannot lawfully or practicably be maintained shall immediately cease to bear
interest at the LIBO Rate and shall commence to bear interest at the Base Rate.
The Borrower agrees to indemnify the Lender and hold it harmless against all
costs, expenses, claims, penalties, liabilities and damages which may result
from any such change in law, treaty, rule, regulation, interpretation or
administration. The Borrower hereby agrees promptly to pay the Lender, upon
demand by the Lender, any additional amounts necessary to compensate the Lender
for any costs incurred by the Lender in making any conversation in accordance
with this Paragraph, including any interest or fees payable by the Lender to
lenders of funds obtained by it in order to make or maintain hereunder its
portion of the Loan accruing interest based on the LIBO Rate.
6. The Borrower will indemnify the Lender against, and reimburse the
Lender on demand for, any loss or expense incurred or sustained by the Lender
(including without limitation, any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by the Lender
to fund or maintain LIBO Rate Advances) as a result of (i) any payment or
prepayment (whether authorized or required hereunder or otherwise, including
without limitation a mandatory prepayment when required under Section 2.4(b) of
the Agreement) of all or a portion of any LIBO Rate Advance on a day other than
the day on which the applicable Interest Period ends, (ii) any payment or
prepayment, whether required hereunder
ADDENDUM I
Page -3-
or otherwise, of the LIBO Rate Advances made after the delivery, but before the
effective date, of an election to have the LIBO Rate apply to LIBO Rate
Advance, if such payment or prepayment prevents such election from becoming
fully effective, or (iii) the failure of any LIBO Rate Advance to be made by
the Lender or of any such election to become effective due to any condition
precedent to a LIBO Rate Advance not being satisfied or due to any other action
or inaction of Borrower. For purposes of this section, funding losses arising
by reason of liquidation or reemployment of deposits or other funds acquired by
the Lender to fund or maintain LIBO Rate Advances shall be calculated as the
remainder obtained by subtracting: (1) the yield (reflecting both stated
interest rate and discount, if any) to maturity of obligations of the United
States Treasury as determined by the Lender in an amount equal or comparable to
such advance for the period of time commencing on the date of the payment,
prepayment or change of rate as provided above and ending on the last day of
the subject Interest Period, from (2) the LIBO Rate of the subject Interest
Period, times the number of days from the date of payment, prepayment or change
of rate to the last day of the subject Interest Period, divided by 360. Any
payment due under this paragraph will be paid to the Lender within five days
after demand therefor by the Lender.
7. The Borrower covenants and agrees that:
(i) The Borrower will pay, within five days after notice
thereof from Lender and on an after-tax basis, all present and future
income, stamp and other taxes, levies, costs and charges whatsoever
imposed, assessed, levied or collected on or in respect of any LIBO
Rate Advance whether or not legally or correctly imposed, assessed,
levied or collected (excluding taxes, levies, costs or charges imposed
on or measured by the overall net income of the Lender) (all such
non-excluded taxes, levies, costs and charges being collectively
called "Reimbursable Taxes"). Promptly after the date on which payment
of any Reimbursable Taxes is due pursuant to applicable law, the
Borrower will, at the request of the Lender, furnish to the Lender
evidence in form and substance satisfactory to the Lender that
Borrower has met its obligation under this paragraph.
(ii) The Borrower will indemnify the Lender against, and
reimburse the Lender on demand for, any Reimbursable Taxes paid by the
Lender and any loss, liability, claim or expense, including interest,
penalties and legal fees, that the Lender may incur at any time
arising out of or in connection with the failure of Borrower to make
any payment of Reimbursable Taxes when due, unless such failure is due
to the Lender's failure to give notice to Borrower of Borrower's
obligation to pay such Reimbursable Taxes at least five days prior to
the date when they are due. Any payment due under this subsection will
be paid to the Lender within five days after demand therefor by the
Lender.
ADDENDUM I
Page -4-
(iii) All payments on account of the principal of, and
interest on, LIBO Rate Advances and all other amounts payable by
Borrower to the Lender hereunder shall be made free and clear of and
without reduction by reason of any Reimbursable Taxes.
(iv) If Borrower is ever required to pay any Reimbursable
Taxes with respect to any LIBO Rate Advance, Borrower may elect, by
giving to the Lender not less than three (3) Business Days' notice, to
change the interest rate applicable to any such advance from the LIBO
Rate to the Base Rate, but such election shall not diminish Borrower's
obligation to pay all Reimbursable Taxes therefore imposed, assessed,
levied or collected.
