AMENDED AND RESTATED CREDIT AGREEMENT
Between
PONTOTOC PRODUCTION, INC.
PONTOTOC PRODUCTION COMPANY, INC.,
OKLAHOMA BASIC ECONOMY CORPORATION
And
LOCAL OKLAHOMA BANK, N.A.
June 1, 2000
TABLE OF CONTENTS
ARTICLE I 1
1 DEFINITIONS 1
1.1 Terms Defined Above 1
1.2 Additional Defined Terms 2
1.3 Undefined Financial Accounting Terms 11
1.4 References 11
ARTICLE II 11
2 AMOUNT AND TERMS OF CREDIT FACILITY 11
2.1 The Loan 11
2.2 The Note 11
2.3 Use of Proceeds 11
2.4 Borrowing Procedures 12
2.5 Interest Rate 12
2.6 Letter of Credit Fees 12
2.7 Scheduled Principal and Interest Payments 12
2.8 Making of Payments 13
2.9 Maximum Lawful Interest Rate 13
2.10 Borrowing Base Determinations 13
2.11 Voluntary Prepayments 15
2.12 Fees 15
2.13 Advances to Satisfy Obligations of Borrower 15
2.14 Pledge of and Security Interest in Accounts and
Right of Offset or Lien 15
2.15 Letters in Lieu of Transfer Orders 16
2.16 Power of Attorney 16
ARTICLE III 17
3 COLLATERAL AND OTHER TYPES OF CREDIT ENHANCEMENT 17
3.1 Oil and Gas Properties 17
3.2 New Properties 17
ARTICLE IV 17
4 CONDITIONS 17
4.1 Receipt of Loan Documents and Other Items 17
4.2 Each Advance Under the Revolving Note 19
ARTICLE V 21
5 REPRESENTATIONS AND WARRANTIES 21
5.1 Due Authorization and Corporate Existence 21
5.2 Consents, Conflicts and Creation of Liens 21
5.3 Valid and Binding Obligations 21
5.4 Title to Assets and Oil and Gas Properties 21
5.5 Scope and Accuracy of Financial Statements 21
5.6 Liabilities, Litigation, and Restrictions 22
5.7 Authorizations and Consents 22
5.8 Compliance with Laws 22
5.9 Proper Filing of Tax Returns and Payment of Taxes Due 22
5.10 ERISA 22
5.11 Environmental Laws 23
5.12 No Material Misstatements 23
5.13 Casualties or Taking of Property 23
5.14 Locations of Business, Offices, and Property 23
5.15 Security Instruments 23
5.16 Subsidiaries 24
ARTICLE VI 24
6 AFFIRMATIVE COVENANTS 24
6.1 Maintenance and Access to Records 24
6.2 Quarterly Financial Statements 24
6.3 Annual Financial Statements 24
6.4 Reserve Reports 25
6.5 Production Report 25
6.6 Take or Pay Agreements 25
6.7 Gas Balancing Status Report 25
6.8 Notices of Certain Events 25
6.9 Letters in Lieu of Transfer Orders 27
6.10 Division Orders 27
6.11 Additional Information 27
6.12 Compliance with Laws 27
6.13 Payment of Assessments and Charges 28
6.14 Hazardous Substances Indemnification 28
6.15 Maintenance of Corporate Existence and Good Standing 29
6.16 Further Assurances 29
6.17 Initial Fees and Expenses of Lender and/or Legal
Counsel to Lender 29
6.18 Subsequent Fees and Expenses 29
6.19 Maintenance and Inspection of Tangible Properties 29
6.20 Maintenance of Insurance and Evidence Thereof 29
6.21 Payment of Note and Performance of Obligations 30
6.22 Operation of Oil and Gas Properties 30
6.23 Depository Accounts 30
6.24 Existing Business 30
6.25 SEC Filings 30
ARTICLE VII 30
7 FINANCIAL COVENANTS 30
7.1 Adjusted Current Ratio 30
7.2 Debt Service Coverage Ratio 30
7.3 Tangible Net Worth 31
ARTICLE VIII 31
8 NEGATIVE COVENANTS 31
8.1 Indebtedness 31
8.2 Contingent Obligations 31
8.3 Liens 31
8.4 Sales of Assets 31
8.5 Loans or Advances 31
8.6 Dividends and Distributions 32
8.7 Cancellation of Insurance 32
8.9 Transactions with Affiliates 32
8.10 Lines of Business 32
8.11 Organization or Acquisition of Subsidiaries 32
8.12 Hedging Activities 32
ARTICLE IX 33
9 EVENTS OF DEFAULT 33
9.1 Enumeration of Events of Default 33
9.2 Remedies 35
ARTICLE X 36
10 MISCELLANEOUS 36
10.1 Transfers and Participations 36
10.2 Survival of Representations, Warranties and Covenants 37
10.3 Notices and Other Communications 37
10.4 Parties in Interest 37
10.5 Rights of Third Parties 38
10.6 Articles and Sections 38
10.7 Number and Gender 38
10.8 Renewals and Extensions 38
10.9 No Waiver: Rights Cumulative 38
10.10 Incorporation of Exhibits 38
10.11 Survival Upon Unenforceability 38
10.12 Amendments or Modifications 39
10.13 Controlling Provision Upon Conflict 39
10.14 Time, Place and Method of Payments 39
10.15 Time of Essence 39
10.16 Disposition of Collateral 39
10.17 GOVERNING LAW 39
10.18 JURISDICTION AND VENUE 39
10.19 WAIVER OF RIGHTS TO JURY TRIAL 40
10.20 ENTIRE AGREEMENT 40
AMENDED AND RESTATED
CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, made and entered into this 1st
day of June, 2000, by and between PONTOTOC PRODUCTION COMPANY, INC., a Texas
corporation ("PPC"), Oklahoma Basic Economy Corporation, an Oklahoma
corporation ("OBEC"), and PONTOTOC PRODUCTION, INC., a Nevada corporation (the
"PPI") and LOCAL OKLAHOMA BANK, N.A., a national banking association
("Lender").
W I T N E S S E T H:
WHEREAS, PPC and PPI formerly entered into that certain loan transaction
with Bank One, Oklahoma, N.A. ("Bank One") whereby PPC and PPI, as primary
obligors, borrowed amounts up to $7,500,000.00 from Bank One to be used for
the purposes set forth in that certain Credit Agreement dated as of February
23, 1998 as amended from time to time thereafter, and most recently by that
certain Second Amendment to Credit Agreement dated as of November 1, 1999 (the
"Bank One Agreement");
WHEREAS, pursuant to the Bank One Agreement, PPC and PPI, as primary
obligors, executed and delivered their promissory note in the amount of
$7,500,000.00 (the "Bank One Note");
WHEREAS, on June 1, 2000, Bank One assigned the Bank One Agreement, the
Bank One Note and all other loan and security documents executed in
conjunction therewith to Lender;
WHEREAS, PPC, PPI and Lender desire to amend and restate the Bank One
Agreement in order to add OBEC as a borrower of funds thereunder, and for the
other modifications set forth herein;
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, PPC, PPI, OBEC and the Lender
hereby agree as follows:
ARTICLE I
1 DEFINITIONS
1.1 Terms Defined Above. As used in this Credit Agreement, the terms
"Bank One", "Bank One Agreement", "Bank One Note", "Lender", "OBEC", "PPC",
and "PPI"shall have the meaning assigned to such terms hereinabove. Defined
terms used herein in the singular shall import the plural and vice versa.
1.2 Additional Defined Terms. As used in this Agreement, each of the
following terms shall have the meaning assigned thereto in this Section,
unless the context otherwise requires:
"Advance" shall mean an advance of funds made by the Lender to the
Borrowers under this Agreement, including any amounts evidenced by the Note.
"Advance Request" shall mean a written request from Borrowers, or
any Borrower, for an Advance under the Loan, substantially in the form of
Exhibit "E" attached hereto.
"Affiliate" shall mean any Person directly or indirectly
controlling, or under common control with, the Borrower and includes any
"affiliate" of the Borrowers within the meaning of the regulations
promulgated pursuant to the Securities Act of 1933, as amended, with
"control," as used in this definition (including, with correlative meanings,
the terms "controlled by" and "under common control with"), and as used with
respect to any Person, meaning a member of the board of directors, a partner
or an officer of such Person, or any other Person with possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of such Person, through the ownership (of record, as trustee, or
by proxy) of voting shares, partnership interests or voting rights, through a
management contract or otherwise. Any Person owning or controlling directly
or indirectly ten percent (10%) or more of the voting shares, partnership
interests or voting rights, or other equity interest of another Person shall
be deemed to be an Affiliate of such Person.
"Agreement" shall mean this Amended and Restated Credit Agreement
and all exhibits and schedules hereto, as the same may be amended, modified,
supplemented or restated from time to time according to the terms hereof.
"Applicable LIBOR Rate" shall mean , at any time, that rate of
interest equal to the interest rate announced or published in the Money Rates
section of The Wall Street Journal (Southwest Edition), as the One Month
London Interbank Offered Rate on the first Business Day of the current month,
so as to reflect such rate as of the close of business on the last Business
Day of the preceding month.
"Available Commitment" shall mean that amount determined by
subtracting the Loan Balance from the Commitment Amount.
"Base Rate" shall mean, at any time, that rate of interest equal
to the interest rate then most recently announced or published in the "Money
Rates" section of The Wall Street Journal (Southwest Edition), as the "Prime
Rate" which such rate may not be the lowest interest rate charged by the Bank,
and which Prime Rate shall change upon any change in such announced or
published Prime Rate of the Bank, all without notice to the Borrowers.
"Borrower" shall individually refer to each of PPC, PPI and OBEC
and the term "Borrowers" shall collectively refer to PPC, PPI and OBEC.
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"Borrowing Base" shall mean, at any time, the maximum amount of
credit that Lender is willing to extend against the Borrowers' Oil and Gas
Properties, as determined at the immediately preceding Borrowing Base
Determination in accordance with Section 2.10 at then in effect pursuant to
the terms of Section 2.10 which amount shall not exceed $15,000,000.00.
"Borrowing Base Determination" shall mean a determination of the
Borrowing Base, Monthly Commitment Reduction, and Half Life made by the Lender
pursuant to Section 2.10.
"Business Day" shall mean a day other than a Saturday, Sunday or
legal holiday for commercial banks under the laws of the State of Oklahoma.
"Closing Date" shall mean the effective date of this Agreement.
"Code" shall mean the United States Internal Revenue Code as
amended from time to time.
"Collateral" shall mean the Mortgaged Properties, and any other
Property of the Borrowers, or any other Person, wherever located and whether
now owned or existing or hereafter acquired or arising, that is now or at any
time used or intended by the Borrowers and the Lender to be subject to the
Liens created in the Security Instruments or otherwise as security for the
payment or performance of all or any portion of the Obligations, including,
without limitation, products and proceeds existing in connection with any of
the foregoing.
"Commitment Amount" shall mean the lesser of the amount of (i)
$15,000,000.00 or (ii) the amount of (A) the Borrowing Base less (B) the sum
of the Monthly Commitment Reductions with respect to the Loan which have
occurred subsequent to the immediately preceding Borrowing Base Determination.
"Commitment Period" shall mean the period from and including the
Closing Date to but not including the Maturity Date.
"Compliance Certificate" shall mean each certificate,
substantially in the form attached hereto as Exhibit "B", executed by a
Responsible Officer of the Borrowers and furnished to the Lender from time to
time in accordance with this Agreement.
"Contested in Good Faith" shall mean a matter (a) which is being
contested in good faith by or on behalf of any Person, by appropriate and
lawful proceedings diligently conducted, satisfactory to the Lender, and for
which a reserve has been established in an amount determined in accordance
with GAAP, (b) in which foreclosure, distraint, sale, forfeiture, levy,
execution or other similar proceedings have not been initiated or have been
stayed and continue to be stayed, and (c) in which a good faith contest will
not materially detract from the value of the Collateral, materially jeopardize
the rights of the Lender or the Borrowers with respect thereto, materially
interfere with the operation by the Borrowers of their businesses, or
otherwise have a Material Adverse Effect.
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"Contingent Obligation" shall mean, as to any Person, any
obligation of such Person guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations of any other Person (for
purposes of this definition, a "primary obligation") in any manner, whether
directly or indirectly, including, without limitation, any obligation of such
Person, regardless of whether such obligation is contingent, (a) to purchase
any primary obligation or any Property constituting direct or indirect
security therefore, (b) to advance or supply funds (i) for the purchase or
payment of any primary obligation, or (ii) to maintain working capital or
equity capital of any other Person in respect of any primary obligation, or
otherwise to maintain the net worth or solvency of any other Person, (c) to
purchase Property, securities or services primarily for the purpose of
assuring the owner of any primary obligation of the ability of the Person
primarily liable for such primary obligation to make payment thereof, or (d)
otherwise to assure or hold harmless the owner of any such primary obligation
against loss in respect thereof, with the amount of any Contingent Obligation
being deemed to be equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in
respect thereof as determined by such Person in good faith.
"Current Assets" and "Current Liabilities" shall mean, at any
time, all assets or liabilities, respectively, that should, in accordance
with GAAP, be classified as current assets or current liabilities,
respectively, on a balance sheet of the Borrowers.
"Default" shall mean any event or occurrence which with the lapse
of time or the giving of notice or both would become an Event of Default.
"Default Rate" shall mean a per annum variable interest rate equal
to the Base Rate plus "three" percent (3%), calculated on the basis of a year
of 360 days and actual number of days elapsed (including the first day but
excluding the last day), but in no event exceeding the Highest Lawful Rate.
"Environmental Complaint" shall mean any written or oral
complaint, order, directive, claim, citation, notice of environmental report
or investigation or other notice by any Governmental Authority or any other
Person with respect to (a) air emissions, (b) spills, releases or discharges
to soils or any improvements located thereon, surface water, groundwater or
the sewer, septic system or waste treatment, storage or disposal systems
servicing any Property of the Borrowers, (c) solid or liquid waste disposal,
(d) either the use, generation, storage, transportation or disposal of any
Hazardous Substance, or (e) other environmental, health or safety matters
affecting any Property of the Borrower or the business conducted thereon.
"Environmental Laws" shall mean (a) the following federal laws as
they may be cited, referenced and amended from time to time: the Clean Air
Act, the Clean Water Act, the Safe Drinking Water Act, the Water Pollution
Control Act, the Environmental Pesticides Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Endangered Species Act, the
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Resource Conservation and Recovery Act, the Occupational Safety and Health
Act, the Hazardous Materials Transportation Act, the Superfund Amendments and
Reauthorization Act, and the Toxic Substances Control Act; (b) any and all
equivalent environmental statutes of any state in which Property of the
Borrower is situated, as they may be cited, referenced and amended from time
to time; (c) any so-called federal, state or local "Superfund" or "Superlien"
statutes, (d) any rules or regulations promulgated under or adopted pursuant
to the above federal and state laws; and (e) any other equivalent federal,
state or local statute or any requirement, rule, regulation, code, ordinance
or order adopted pursuant thereto, including, without limitation, those
relating to the generation, transportation, treatment, storage, recycling,
disposal, handling or release of Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations thereunder and
interpretations thereof.
"Event of Default" shall mean any of the events specified in
Section 9.
"Financial Statements" shall mean statements of the financial
condition of the Borrowers as at the point in time and for the period
indicated and consisting of at least a balance sheet, statement of income,
statement of cash flow and related statements of operations, common stock and
other stockholders' equity all of which shall be certified by each (and/or the
applicable) Borrower's Responsible Officer as being prepared pursuant to
accounting principles acceptable to Lender consistently applied and when
applicable in comparative form with respect to the corresponding period of the
preceding fiscal period or as otherwise required by Lender.
"GAAP" shall mean generally accepted accounting principles
established by the Financial Accounting Standards Board or the American
Institute of Certified Public Accountants and in effect in the United States
from time to time during the term of this Agreement.
"Governmental Authority" shall mean any nation, country,
commonwealth, territory, government, state, county, parish, municipality or
other political subdivision and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.
"Half Life" shall be defined as the lesser of: (i) the duration,
in months, as projected by Lender, in its sole discretion, acting reasonably,
during which one-half of the undiscounted future net income, net of lease
operating expenses, production taxes, and capital expenditures will be
realized from the Borrowers' Oil and Gas Properties, or (ii) eighty four (84)
months.
"Hazardous Substances" shall mean flammables, explosives,
radioactive materials, hazardous wastes, asbestos or any material containing
asbestos, polychlorinated biphenyls (PCB's), toxic substances or related
materials, petroleum and petroleum products and associated oil or natural gas
exploration, production and development wastes or any substances defined as
"hazardous substances," "hazardous materials", "hazardous wastes" or "toxic
substances" under the Comprehensive Environmental Response, Compensation and
5
Liability Act, as amended, the Superfund Amendments and Reauthorization Act,
as amended, the Hazardous Materials Transportation Act, as amended, the
Resource Conservation and Recovery Act, as amended, the Toxic Substances
Control Act, as amended, or any other law or regulation now or hereafter
enacted or promulgated by any Governmental Authority, including, without
limitation, those elements or compounds which are contained in the list of
hazardous substances adopted by the United States Environmental Protection
Agency and the list of toxic pollutants designated by Congress or the
Environmental Protection Agency or under any Environmental Law.
"Highest Lawful Rate" shall mean the maximum non-usurious interest
rate permissible under applicable laws of the State of Oklahoma or those of
the United States of America applicable to the Lender, whichever authorizes
the greater rate.
"Indebtedness" shall mean, with respect to any Person, without
duplication, (a) all liabilities which would appear on a balance sheet of such
Person, prepared in accordance with GAAP (b) all obligations of such Person
evidenced by bonds, debentures, promissory notes or such similar evidences of
indebtedness, (c) all other indebtedness of such Person for borrowed money,
and (d) all obligations of others, to the extent any such obligation is
secured by a Lien, except a Permitted Lien, on the assets of such Person
(whether or not such Person has assumed or become liable for the obligation
secured by such Lien).
"Insolvency Proceeding" shall mean application (whether voluntary
or instituted by another Person) for or the consent to the appointment of a
receiver, trustee, conservator, custodian or liquidator of any Person or of
all or a substantial part of the Property of such Person, or the filing of a
petition (whether voluntary or instituted by another Person) commencing a case
under Title 11 of the United States Code, seeking liquidation, reorganization
or rearrangement or taking advantage of any bankruptcy, insolvency, debtor's
relief or other similar Law of the United States, the State of Oklahoma or any
other jurisdiction.
"Law(s)" shall mean all applicable statutes, laws, ordinances,
rules, rulings, interpretations, regulations, judgments, requirements,
governmental authorizations (including licenses, permits, franchises and other
governmental consents necessary for the ownership or operation of Property),
orders, writs, injunctions or decrees (or interpretations of any of the
foregoing) of any Governmental Authority or Tribunal.
"Letter of Credit" shall mean any stand-by letter of credit in a
form acceptable to Lender. No Letter of Credit shall be issued with a
maturity in excess of one year.
"Letter of Credit Fee" shall be that fee equal to the greater of
(i) one and one-half of one percent (1-1/2%) per annum of the face amount of
each Letter of Credit issued; provided, however, a Letter of Credit Fee shall
be pro-rated according to the number of days each Letter of Credit is issued
and outstanding in any year or (ii) $250.00. For the purposes of this
definition, a year shall consist of 360 days, but counting the actual days
elapsed (including the first day but excluding the last day) during the period
any Letter of Credit is issued and outstanding. This fee shall be due and
payable on or before the issuance of any Letter of Credit.
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"Lien" shall mean any lien, mortgage, security interest, tax lien,
pledge, conditional sale or title retention arrangement, or any other interest
in or encumbrance upon, property, which is designed to secure the repayment of
Indebtedness, whether arising by agreement, under any Law or otherwise.
"Litigation" shall mean any proceeding, claim, lawsuit, and/or
investigation conducted or threatened by or before any Tribunal.
"LIBOR Interest Period" means a period of one month beginning on
and including the date of this Agreement, and ending on and including the same
day of the next succeeding month as the day on which it began, provided that
each LIBOR Interest Period which would otherwise end on a day which is not a
Business Day shall end on the next succeeding Business Day, provided that if
there are no more Business Days in that month, the LIBOR Interest Period shall
end on the next preceding Business Day. No LIBOR Portion may be elected which
would extend beyond the date on which any Loan is due and payable or beyond
the Maturity Date.
"Loan" shall mean the committed revolving loan facility to be
established by Lender in favor of Borrower pursuant to Section 2.1 hereof.
The term also includes the sum of all advances from time to time outstanding
under the Note.
"Loan Balance" shall mean, at any time, the outstanding principal
balance of the Note plus the face amount of any Letters of Credit issued by
Lender for the benefit of each Borrower at such time.
"Loan Documents" shall mean this Agreement, the Note, the Guaranty
Agreement, the Security Instruments and all other documents and instruments
now or hereafter delivered pursuant to the terms of or in connection with this
Agreement, the Guaranty Agreement, the Note, or the Security Instruments, and
all renewals and extensions of, or amendments or supplements to, or
restatements of any or all of the foregoing from time to time in effect.
"Material Adverse Effect" shall mean any set of circumstances or
events which (a) would have any material adverse effect upon the validity or
enforceability of any of the Loan Documents, (b) is or could reasonably be
expected to become material and adverse to the business, condition (financial
or otherwise), operations or prospects of the Borrower, (c) could reasonably
be expected to materially impair any Borrower's ability to fulfill its
obligations under the terms of the Loan Documents, or (d) causes a Default or
an Event of Default.
"Maturity Date" shall be August 10, 2002.
"Monthly Commitment Reduction" shall mean those monthly decreases
to the Borrowing Base occurring as of the tenth (10th) day of each month
during the term hereof determined by Lender, in its sole discretion,
semi-annually following Lender's review and valuation of the Oil and Gas
Properties based upon the expected future production from existing xxxxx.
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"Mortgaged Properties" shall mean all Oil and Gas Properties of
the Borrowers as evidenced by their working interests, royalty interests, any
distributive cash proceeds relating to general partnership and/or limited
partnership interests, now existing or hereafter acquired, subject to
perfected first-priority Liens pursuant to the Security Instruments in favor
of the Lender, subject only to Permitted Liens, mortgaged as security for the
Obligations.
"New Properties" shall mean Oil and Gas Properties acquired by any
Borrower.
"Note" shall mean the amended and restated promissory note of the
Borrowers in the original face amount of $15,000,000.00 in the form attached
hereto as Exhibit "A", together with any and all renewals, extensions for any
period, increases and rearrangements thereof.
"Obligations" shall mean, without duplication, (a) all
Indebtedness evidenced by the Note and any Letter of Credit, and (b) all other
obligations and liabilities of the Borrowers to the Lender, now existing or
hereafter incurred, under, arising out of or in connection with any Loan
Document, and with respect to all of the foregoing to the extent that any of
the same includes or refers to the payment of amounts deemed or constituting
interest, only so much thereof as shall have accrued, been earned and remains
unpaid at each relevant time of determination.
"Oil and Gas Properties" shall mean fee, leasehold or other
interests in or under mineral estates or oil, gas and other liquid or gaseous
hydrocarbon leases with respect to Oil and Gas Properties situated in the
United States or offshore from any State of the United States, including,
without limitation, overriding royalty and royalty interests, leasehold
estate interests, net profits interests, production payment interests and
mineral fee interests, together with contracts executed in connection
therewith and all tenements, hereditaments, appurtenances and Oil and Gas
Properties appertaining, belonging, affixed or incidental thereto.
"Permitted Liens" shall mean (a) Liens for Taxes incurred in the
course of business (which are not yet due or are being Contested in Good
Faith); (b) Liens in connection with workers' compensation, unemployment
insurance or other social security (other than Liens created by Section 4068
of ERISA), old-age pension or public liability obligations which are not yet
due or are being Contested in Good Faith; (c) Liens in favor of vendors,
carriers, warehousemen, repairmen, mechanics, workmen, materialmen,
construction or similar Liens arising by operation of Law in the ordinary
course of business in respect of obligations which are not yet due or are
being Contested in Good Faith; (d) Liens of operators and non-operators under
joint operating agreements arising in the ordinary course of the business of
the Borrowers to secure amounts owing, which amounts are not yet due and will
be paid in accordance with the Borrowers' customary business practices, as
same exist on the date hereof or are being Contested in Good Faith; (e) Liens
under production sales agreements, division orders, operating agreements and
other agreements customary in the oil and gas business for processing,
producing and selling hydrocarbons; (f) easements, rights of way, restrictions
and other similar encumbrances, and minor defects in the chain of title which
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are customarily accepted in the oil and gas financing industry, none of which
interfere with the ordinary conduct of the business of the Borrowers or
materially detract from the value or use of the Property to which they apply;
(g) Liens of record under terms and provisions of the leases, unit agreements,
assignments and other transfer of title documents in the chain of title under
which the Borrowers acquired the relevant Property; (h) other Liens existing
as of the Closing Date and disclosed on Exhibit "F" attached hereto under the
heading "Permitted Liens"; (i) Liens created in favor of the Lender and other
Liens expressly permitted under the Security Instruments; (j) liens arising in
the ordinary course of business from pledges or deposits to secure public or
statutory obligations, or deposits to secure (or in lieu of) surety, stay,
appeal or customs bonds; encumbrances consisting of easements, zoning
restrictions, or other restrictions on the use of Property, provided that such
encumbrances do not materially impair the use of such Property for the
purposes intended, and none of which are violated by existing or proposed
structure or land use, and such other material encumbrances as have been
disclosed to and approved by Lender in writing; and (k) good faith deposits in
connection with bids, tenders, contracts or leases, performance or other
similar bonds.
"Person" shall mean an individual, corporation, partnership,
trust, unincorporated organization or a government or any agency or political
subdivision thereof.
"Plan" shall mean, at any time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrowers or any Commonly
Controlled Entity is or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be an "employer" as defined in
Section 3(5) of ERISA.
"Principal Office" shall mean the office of Lender in Oklahoma
City, Oklahoma County, Oklahoma presently located at 0000 X.X. 00xx Xxxxxx,
Xxxxxxxx Xxxx, Xxxxxxxx 00000.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, tangible or intangible.
"Release of Hazardous Substances" shall mean any emission, spill,
release, disposal or discharge, except in accordance with a valid permit,
license, certificate or approval of the relevant Governmental Authority, and
notice of which is required to be given thereof by the person responsible for
such emission, spill, release, disposal or discharge to a Governmental
Authority of any Hazardous Substance into or upon (a) the air, (b) soils or
any improvements located thereon, (c) surface water or groundwater, or (d) the
sewer, septic system or waste treatment, storage or disposal system servicing
any Property of the Borrower.
"Requirement of Law" shall mean, as to any Person, the certificate
or articles of incorporation and by-laws or other organizational or governing
documents of such Person, and any applicable Law, treaty, ordinance, order,
judgment, rule, decree or regulation or determination of any Tribunal or other
Governmental Authority, including, without limitation, rules, regulations and
orders and requirements for permits, licenses, registrations, approvals or
authorizations, in each case as such now exist or may be hereafter amended and
are applicable to or binding upon such Person or any of its Property or to
which such Person or any of its Property is subject.
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"Reserve Report" shall mean each report delivered to the Lender by
the Borrower pursuant to Section 6.4.
"Responsible Officer" shall mean, as to each Borrower, the
President, Chief Financial Officer, or such other officer of such Borrower as
shall be designated in writing to the Lender by the previously mentioned
officer.
"Security Instruments" shall mean the security instruments
executed and delivered in satisfaction of the condition set forth in
Subsection 3.1, and all other documents and instruments at any time executed
as security for all or any portion of the Obligations, as the same may be
amended from time to time.
"Subsidiary" shall mean, as to any Person, a corporation of which
shares of stock having ordinary voting power (other than stock having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation are at the time
owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person.
"Superfund Site" shall mean those sites listed on the
Environmental Protection Agency National Priority List (NPL) and eligible for
remedial action, or any comparable state registry or list in any state of the
United States.
"Tangible Net Worth" shall mean, on any date as of which the
amount thereof is to be determined, the sum of the following for Borrowers
calculated in accordance with GAAP: (i) total shareholders' equity less (ii)
Intangible Assets and/or amounts due from Borrowers' Affiliates.
"Taxes" shall mean all taxes, assessments, filing or other fees,
levies, imposts, duties, deductions, withholdings, stamp taxes, interest
equalization taxes, capital transaction taxes, foreign exchange taxes or
charges, or other charges of any nature whatsoever from time to time or at any
time imposed by any Law or Tribunal.
"Transferee" shall mean any Person to which the Lender has sold,
assigned, transferred or granted a participation in any of the Obligations, as
authorized pursuant to Section 10.1, and any Person acquiring, by purchase,
assignment, transfer or participation, from any such purchaser, assignee,
transferee or participant, any part of such Obligations.
"Tribunal" shall mean any court, governmental department or
authority, commission, board, bureau, agency, arbitrator or instrumentality of
any state, political subdivision, commonwealth, nation, territory, county,
parish, or municipality, whether now or hereafter existing, having
jurisdiction over the Lender, the Borrowers or their respective Property.
"Unscheduled Redeterminations" shall mean a redetermination of the
Borrowing Base made at any time other than on the dates set for the regular
10
semi-annual redetermination of the Borrowing Base which is made (A) at the
reasonable request of a Borrower, (B) at any time it appears to the Lender, in
the exercise of its reasonable discretion, that either (i) there has been a
material decrease in the value of the Oil and Gas Properties, or (ii) an event
has occurred which is reasonably expected to have a Material Adverse Effect.
1.3 Undefined Financial Accounting Terms. Undefined financial
accounting terms used in this Agreement shall be defined according to GAAP at
the time in effect.
1.4 References. References in this Agreement to Exhibit, Article or
Section numbers shall be to Exhibits, Articles or Sections of this Agreement,
unless expressly stated to the contrary. References in this Agreement to
"hereby," "herein," "hereinafter," "hereinabove," "hereinbelow," "hereof,"
"hereunder" and words of similar import shall be to this Agreement in its
entirety and not only to the particular Exhibit, Article or Section in which
such reference appears.
ARTICLE II
2 AMOUNT AND TERMS OF CREDIT FACILITY
2.1 The Loan. Subject to the terms and conditions of this Agreement,
and in reliance upon the representations and warranties made by each Borrower
herein Lender agrees to make Advances from time to time, on or before the
Maturity Date, in accordance with the borrowing procedures set forth in
paragraph 2.4 hereof; provided, however, that the aggregate principal amount
at any one time outstanding under the Note shall not exceed the lesser of (i)
the Borrowing Base then in effect less the sum of the Monthly Commitment
Reductions with respect to the Loan which have occurred subsequent to the
immediately preceding Borrowing Base Determination; or (ii) Commitment Amount.
No individual Advance when combined with all other unpaid and outstanding
Advances shall exceed the Available Commitment. Within the limits set forth
herein, each Borrower may borrow, repay without penalty or premium, and
reborrow as provided in this paragraph 2.1.
2.2 The Note. All Advances made under the Note shall be evidenced by
the Note, which shall be made, executed and delivered by Borrowers to Lender
at the Closing. Notwithstanding the principal amount stated on the face of
the Note, the actual principal amount due from Borrowers on account of the
Note shall be the sum of all Advances made by Lender under the Note, less all
principal payments actually received by Lender in collected funds for
application to the Loan. The initial advance of approximately $10,000,000.00
shall be used to acquire 100% of the Stock of OBEC and additional non-operated
interests in Oil and Gas Properties operated by OBEC.
2.3 Use of Proceeds. Proceeds of Advances made under the Loan shall
be used to, among other things: (i) refinance the Bank One Note, (ii) provide
readily available financing for the acquisition and development of producing
oil and gas properties; and (iii) subject to a $1,500,000.00 sub-limit (A)
provide availability to issue necessary letters of credit to meet governmental
11
bonding requirements; (B) fund working capital needs and (C) meet any margin
calls required to secure hedging contracts, as permitted herein.
2.4 Borrowing Procedures. Borrowers may request an Advance under the
Loan on any Business Day on or before the Maturity Date. Any Borrower shall
make such a request by giving Lender written notice (which may be sent via
facsimile) in the form of a properly completed and executed Advance Request
stating the amount of the requested Advance; provided, however, that Borrowers
may give notice by telephone if confirmed by a written notice (which may be
sent via facsimile) in the form of a properly completed and executed Advance
Request within two (2) Business Days thereafter. Subject to Borrowers'
satisfaction of all other conditions precedent as set forth in Section 4.2
hereof, each Advance under the Loan will be made on the same Business Day on
which Lender receives an Advance Request, if the Advance Request is received
by 2:00 p.m., or on the following Business Day, if it is received after 2:00
p.m. Lender will make each Advance under the Loan by crediting the general
operating accounts maintained by Borrowers with Lender. Unless Lender is
otherwise instructed by Borrowers, Advance Requests may be signed and
submitted on behalf of each Borrower by any Responsible Officer.
2.5 Interest Rate. The outstanding unpaid principal balance of the
Note shall bear interest, as determined herein, at a rate per annum (adjusted
monthly) equal to the Applicable LIBOR Rate plus 2.00%. The Applicable LIBOR
Rate shall be adjusted monthly to be effective on the first day of each month
and lasting through the last day of each month. Upon notice from Lender to
Borrowers of the occurrence of any Event of Default, the unpaid principal
amount from time to time outstanding under the Note shall bear interest at a
fluctuating rate per annum equal to the Base Rate (but not less than the
Applicable LIBOR Rate in effect on the date of the occurrence of the Event of
Default), plus three percent (3%). Interest shall be computed on the Note for
the actual number of days elapsed on the basis of a year consisting of 360
days.
2.6 Letter of Credit Fees. Upon the issuance of any Letter of Credit,
Borrowers agree to pay Lender the Letter of Credit Fee.
2.7 Scheduled Principal and Interest Payments. Beginning on the tenth
(10th) day of the calendar month following the date of the first Advance under
the Note and continuing on the tenth (10th) day of each month thereafter
through July 10, 2002, Borrowers shall, at a minimum make a payment of all
accrued but unpaid interest on the Note. In the event the Loan Balance is, at
any time, greater than the Borrowing Base minus the sum of all Monthly
Commitment Reductions with respect to the Loan which have occurred subsequent
to the immediately preceding Borrowing Base Determination, Borrowers shall
prepay, without penalty, an amount sufficient to reduce the Loan Balance by
the difference set forth above. The entire outstanding principal balance of
the Note and all unpaid interest accrued thereon shall be due and payable on
the Maturity Date. If any Letter of Credit is called for funding, repayment
thereof shall be due and payable on demand from Lender but if no demand is
made, it shall be treated as an Advance under the Note.
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2.8 Making of Payments. All payments (including prepayments) made by
Borrowers on account of the Note shall be made to Lender at its main office in
Oklahoma City, Oklahoma, at or before 2:00 p.m., local time, in lawful money
of the United States of America and in immediately available funds. If any
payment under the Note shall be due and payable on a day other than a Business
Day, the maturity thereof shall be extended to the next succeeding Business
Day and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
2.9 Maximum Lawful Interest Rate. It is not the intention of Lender
or Borrowers to violate the laws of any applicable jurisdiction relating to
usury or other restrictions on the maximum lawful interest rate. The Loan
Documents and all other agreements between Borrowers and Lender, whether now
existing or hereafter arising and whether written or oral, are hereby limited
so that in no event shall the interest paid or agreed to be paid to Lender for
use, forbearance or detention of money loaned, or for the payment or
performance of any covenant or obligation contained herein or in any other
Loan Document exceed the maximum amount permissible under applicable law. If
from any circumstances Lender shall ever receive anything of value deemed
interest under applicable law which would exceed interest at the highest
lawful rate, such excessive interest shall be applied to the reduction of the
principal amount owing hereunder, and not to the payment of interest, or if
such excessive interest exceeds any unpaid balance of principal, such excess
shall be refunded to Borrowers. All sums paid or agreed to be paid to Lender
for the use, forbearance or detention of loans evidenced by the Note shall, to
the extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of the Note until payment in full so that the
rate of interest on account of such loans is uniform throughout the term
thereof. This Section 2.9 shall control every other provision of the Loan
Documents and all other agreements between Lender and Borrowers contemplated
thereby.
2.10 Borrowing Base Determinations.
2.10.1 The Borrowing Base as of the Closing Date shall
represent the maximum amount of credit that Lender is willing to loan against
Borrowers' Oil and Gas Properties. As of the Closing Date, the initial
Borrowing Base shall be Fourteen Million Five Hundred Fifty Thousand and
No/100 Dollars ($14,500,000.00). The initial Monthly Commitment Reduction is
$265,000.00 per month beginning July 10, 2000 and continuing on the tenth
(10th) day of each month thereafter until Borrowers are notified of a change
to either the Borrowing Base or the Monthly Commitment Reduction, and the Half
Life of the Borrowers' Oil and Gas Properties is 55 months. The Borrowing
Base shall reduce on the tenth (10th )day of each month in the amount of the
Monthly Commitment Reduction. Nothing contained in this Section 2.10.1 shall
be construed to imply that the amount of the Monthly Commitment Reduction
cannot be zero (0). Beginning February 10, 2001, the Borrowing Base and
Monthly Commitment Reduction shall be recalculated by Lender on, at least, a
semi-annual basis and in accordance with the procedures set forth in paragraph
2.10.2 below. Semi-annually, within 30 days of Lender's receipt of the
Reserve Reports required pursuant to Section 6.4 herein, Lender shall
redetermine Borrowers' Borrowing Base, Monthly Commitment Reduction, and Half
Life.
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2.10.2 Except for such Unscheduled Redeterminations as the
Lender may otherwise require, on or before August 10th and February 10th of
each year beginning February 10, 2001, Lender will recalculate the Borrowing
Base, any Monthly Commitment Reduction and the Half Life in the manner set
forth in this paragraph 2.10.2. Lender will notify Borrower in writing of the
amount of the redetermined Borrowing Base, Monthly Commitment Reduction, and
Half Life and the redetermined Borrowing Base, Monthly Commitment Reduction
and Half Life will become effective on the date such notice is given. The
Borrowing Base and any Monthly Commitment Reduction will be calculated as of
each determination date with reference to the net present value of the future
gross revenues expected to be received by Borrowers from the sale of oil, gas
and other hydrocarbons to be produced from Borrowers' interests in all of its
Oil and Gas Properties, after deducting Borrowers' share of lease operating
expenses (other than nonrecurring expenses), severance, ad valorem, excise,
windfall and production, and state gross production taxes. Each determination
of the Borrowing Base, Monthly Commitment Reduction and Half Life: (i) shall
be made by Lender in its sole discretion, to be exercised in good faith,
consistent with its lending policies then in effect; (ii) shall utilize
pricing assumptions and discount rates consistent with those then being used
generally by Lender in evaluating oil and gas reserves; (iii) shall be based
upon expected future production from existing xxxxx with existing equipment
and operating methods; (iv) shall take into account the information contained
in the engineering report and the monthly reports submitted since the last
determination of the Borrowing Base; and (v) shall be based upon such other
credit factors consistently applied (including, without limitation, the
assets, liabilities, cash flow, business, properties, prospects, management
and ownership of each Borrower) as Lender customarily considers in evaluating
similar credits. Borrowers recognize that decreases in the Borrowing Base may
be caused by such factors as declines in production volumes, other adverse
changes in operating conditions, price decreases, other adverse market
conditions, and increases in interest rates and that Lender reserves the right
to conduct Unscheduled Redeterminations at any time.
2.10.3 Mandatory Prepayments. the Loan Balance as of the date
of Lender's redetermination of the Borrowing Base exceeds the redetermined
Borrowing Base (such excess amount being referred to in this paragraph 2.10.3
as the "Overage Amount"), at Lender's option, one or more of the following
remedies may be required:
(i) within five (5) Business Days after Borrowers'
receipt of such notice, Borrowers shall be required to prepay a principal
amount of the Note, at Lender's discretion, without penalty or premium, equal
to the Overage Amount; or
(ii) within five (5) Business Days after Borrowers'
receipt of such notice, pledge additional collateral of sufficient value (as
acceptable by Lender) as may be required to raise the available credit level
above the outstanding Loan Balances; or
(iii) any combination of (i) and (ii) above.
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2.10.4 Reduction of Commitment. Upon Lender's redetermination
of the Borrowing Base, if no Overage Amount exists but its commitment to make
future Advances exceeds the redetermined Borrowing Base, the Commitment Amount
shall be reduced to an amount equal to the difference between the redetermined
Borrowing Base and the then existing Loan Balance.
2.11 Voluntary Prepayments. The Borrowers shall have the right at any
time or from time to time to prepay without premium or penalty, all or any
part of the Loan Balance outstanding on the Note. All prepayments made
pursuant to this Section shall be applied first to accrued and unpaid interest
and then to the Loan Balance.
2.12 Fees.
(a) Non-Use. In addition to interest on the Note as provided
herein, to compensate the Lender for maintaining funds available, the
Borrowers shall pay to the Lender, in immediately available funds, on the last
Business Day of each January, April, July and October during the Commitment
Period (retroactive to the date hereof), an annual fee in the amount of 1/4%
per annum, calculated on the basis of a year of 360 days, but counting the
actual days elapsed (including the first day but excluding the last day), on
the average daily amount of the Available Commitment during the preceding
calendar quarter for which payment is made.
(b) Facility Fee. No initial commitment fee shall be assessed
hereunder. However, in addition to interest on the Note as provided herein,
in order to compensate Lender for subsequent increases to the Borrowing Base
in accordance with scheduled Borrowing Base reviews, Borrowers shall pay to
the Lender, in immediately available funds and as a precondition to any
increase in the Borrowing Base, a fee of 1/4% of the incremental increase to
the Borrowing Base. Additional fees may be negotiated between Lender and
Borrowers if Lender is requested to complete an unscheduled redetermination of
the Borrowing Base.
2.13 Advances to Satisfy Obligations of Borrower. The Lender may, but
shall not be obligated to, make Advances for the benefit of the Borrowers and
apply same to the satisfaction of any condition, warranty, representation or
covenant of the Borrower contained in this Agreement or any other Loan
Document. However, if no Event of Default exists or is continuing, Lender
shall obtain Borrowers' approval prior to any such Advance. Any funds so
advanced and applied shall be part of the proceeds advanced under and
evidenced by the Note and shall bear interest at the Base Rate.
2.14 Pledge of and Security Interest in Accounts and Right of Offset
or Lien. As security for the payment and/or performance of the Obligations,
each Borrower hereby transfers, assigns and pledges to the Lender and/or
grants to the Lender a security interest in all funds of such Borrower now or
hereafter or from time to time on deposit with the Lender, with such interest
15
of the Lender to be retransferred, reassigned and/or released by the Lender,
as the case may be, at the expense of such Borrower upon payment in full
and/or complete performance by the Borrower of all Obligations. The
aforementioned lien shall not apply to funds contained in any account,
including any drilling or escrow account, of Borrowers held for the benefit of
or in trust for any third party including royalty, overriding royalty, or
working interest owners. All remedies as secured party or assignee of such
funds shall be exercisable, subject to applicable notice and cure periods
provided in this Agreement, by the Lender upon the occurrence of any Event of
Default, regardless of whether the exercise of any such remedy would result in
any penalty or loss of interest or profit with respect to any withdrawal of
funds deposited in a time deposit account prior to the maturity thereof.
Furthermore, each Borrower hereby grants to the Lender the right,
exercisable, subject to applicable notice and cure periods provided in this
Agreement, at such time as any Obligation shall mature, whether by
acceleration of maturity or otherwise, of offset or banker's lien against all
funds of such Borrower now or hereafter or from time to time on deposit with
the Lender, regardless of whether the exercise of any such remedy would result
in any penalty or loss of interest or profit with respect to any withdrawal of
funds deposited in a time deposit account prior to the maturity thereof.
2.15 Letters in Lieu of Transfer Orders. Notwithstanding any other
term or provisions hereof to the contrary, the Lender agrees that the letters
in lieu of transfer or division orders provided by the Borrowers pursuant to
Subsections 4.1(h)(iii) and 6.10 will not be sent to the addressees thereof
prior to the occurrence of an Event of Default, at which time the Lender may,
at its option and in addition to the exercise of any of its other rights and
remedies, send any or all of such letters, provided however, that upon the
occurrence of an Event of Default other than those specified in Section 9.1(g)
or (h), the Lender shall not send any or all of such letters or division
orders until the applicable period to cure such Default has lapsed without
such Default being cured.
2.16 Power of Attorney. Borrowers hereby designate the Lender as
their agent and attorney-in-fact, to act in their name, place and xxxxx
(individually and collectively) for the purpose of completing and delivering
any and all of the letters in lieu of transfer orders delivered by the
Borrowers to the Lender pursuant to Section 2.15 or Section 6.9, including,
without limitation, completing any blanks contained in such letters and
attaching exhibits thereto describing the relevant Collateral. The Borrowers
hereby ratify and confirm all that the Lender shall lawfully do or cause to be
done by virtue of this power of attorney and the rights granted with respect
to such power of attorney. This power of attorney is coupled with the
interests of the Lender in the Collateral, shall commence and be in full force
and effect as of the Closing Date and shall remain in full force and effect
and shall be irrevocable until the obligations, if any, of the Lender
hereunder have terminated and the full satisfaction of all Obligations. The
powers conferred on the Lender by this appointment may only be exercised by
the Lender by execution by any Person who, at the time of exercise, is an
officer of the Lender, and are solely to protect the interests of the Lender
under the Loan Documents and shall not impose any duty upon the Lender to
exercise any such powers. The Lender shall be accountable only for amounts
that it actually receives or has expressly directed that others receive as a
result of the exercise of such powers.
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ARTICLE III
3 COLLATERAL AND OTHER TYPES OF CREDIT ENHANCEMENT
3.1 Oil and Gas Properties. Borrowers shall grant and maintain in
favor of Lender at all times until the Obligations are paid and satisfied in
full, valid first mortgage liens and first, prior and perfected security
interests in and to all their right, title and interest in the Mortgaged
Properties. Borrowers shall execute and deliver, or cause to be executed and
delivered, such oil and gas mortgages, deeds of trusts, instruments,
agreements, assignments, financing statements and other documents as may be
reasonably necessary in the opinion of Lender and Lender's counsel to grant
Lender valid first mortgage liens and first, prior and perfected security
interests in and to such Mortgaged Properties. In conjunction with the
execution of this Agreement and the Note, Borrowers shall execute a mortgage,
deed of trust, or similar instrument(s) on the Oil and Gas Properties of
Borrowers representing, at least, 85% of the total value of all Oil and Gas
Properties owned by Borrowers, as determined by Lender in its sole discretion.
Oil and Gas Properties not mortgaged to Lender shall not be pledged or
encumbered by Borrowers, and such Oil and Gas Properties shall be available to
Lender to be mortgaged at its discretion.
3.2 New Properties. At the time any Advance is used to finance the
acquisition of any Oil and Gas Properties by Borrowers, Borrowers shall, at
Lender's discretion, grant and thereafter shall maintain in favor of Lender at
all times until the Obligations are paid and satisfied in full, valid first
mortgage liens and first, prior and perfected security interests in and to all
of their right, title and interest in such Oil and Gas Properties. Borrowers
shall execute and deliver, or cause to be executed and delivered, such oil and
gas mortgages, deeds of trusts, instruments, agreements, assignments,
financing statements and other documents as may be reasonably necessary in the
opinion of Lender and Lender's counsel to grant Lender valid first mortgage
liens and first, prior and perfected security interests in and to such new Oil
and Gas Properties.
ARTICLE IV
4 CONDITIONS
The obligations of the Lender to enter into this Agreement and to make
Advances are subject to the satisfaction of the following conditions precedent
unless waived in writing by Lender:
4.1 Receipt of Loan Documents and Other Items. The Lender shall have
no obligation under this Agreement unless and until all matters incident to
the consummation of the transactions contemplated herein, including, without
limitation, the review by the Lender or its counsel of the title of the
Borrowers to the Oil and Gas Properties, shall be satisfactory in the good
faith judgment of the Lender, and the Lender shall have received, reviewed and
approved the following documents and other items, appropriately executed when
necessary and, where applicable, acknowledged, all in form and substance
satisfactory in the good faith judgment of the Lender and dated, where
17
applicable, of even date herewith or a date prior thereto (unless specifically
noted below to the contrary) and acceptable in the good faith judgment of the
Lender:
(a) multiple counterparts of this Agreement, as reasonably
requested by the Lender;
(b) the Note;
(c) copies of each Borrower's Articles of Incorporation and
(d) Certificate of Incorporation and all amendments thereto and
by-laws and all amendments thereto, accompanied by a certificate issued by the
secretary or an assistant secretary of each Borrower, to the effect that each
such copy is correct and complete;
(e) certificates of incumbency and signatures of all of each
Borrower's officers who are authorized to execute Loan Documents on behalf of
the respective Borrower, executed by the secretary or an assistant secretary
of each Borrower;
(f) copies of corporate resolutions approving the Loan
Documents and authorizing the transactions contemplated herein and therein,
duly adopted by the board of directors of each Borrower, as the case may be,
accompanied by a certificate of the respective secretary or an assistant
secretary of each Borrower, as the case may be, to the effect that such copies
are true and correct copies of resolutions duly adopted at a meeting or by
unanimous consent of the board of directors of each Borrower and that such
resolutions constitute all the resolutions adopted with respect to such
transactions, have not been amended, modified, or revoked in any respect, and
are in full force and effect as of the date of such certificate;
(g) the following Security Instruments transferring, creating,
evidencing, perfecting and otherwise establishing, as applicable, Liens in
favor of the Lender, in and to the Oil and Gas Properties listed and described
in Exhibit "D" and the Collateral;
(i) Mortgage, Security Agreement, Financing Statement and
Assignment of Production from the Borrowers covering certain Oil and Gas
Properties located in any and all states in which the Oil and Gas Properties
lie, and all improvements, personal property and fixtures related thereto;
(ii) Financing Statements from each Borrower, as debtor,
constituent to the document described in clause (i) immediately above;
(iii) Undated letters in lieu of transfer orders, in form
and substance satisfactory to the Lender, from the Borrowers to each purchaser
of production and disburser of the proceeds of production from or attributable
to the Mortgaged Properties, together with additional letters with the
18
addressees left blank, authorizing and directing the addressees to make future
payments attributable to production from the Mortgaged Properties directly to
the Lender;
(h) The consolidated Financial Statements of PPC and PPI dated
as of March 31, 2000, and of OBEC dated as of February 29, 2000;
(i) certificates dated as of a recent date from the Secretary
of State or other appropriate Governmental Authority evidencing the existence
or qualification and good standing of the Borrowers in all jurisdictions
covered by the Oil and Gas Properties where such qualification is required and
where failure to be qualified or in good standing could reasonably be expected
to have a Material Adverse Effect and for the States of Oklahoma and Nevada
for PPI;
(j) results of searches of the UCC records of the State of
Oklahoma and any and all other jurisdictions in which Oil and Gas Properties
are located from a source acceptable to the Lender and reflecting no Liens,
other than Permitted Liens, against any of the Collateral as to which
perfection of a Lien is accomplished by the filing of a financing statement;
(k) confirmation and/or evidence, acceptable to the Lender in
Lender's sole discretion, including, without limitation, opinions of counsel
satisfactory to the Lender, of the Borrowers having defensible title to the
Mortgaged Properties, free and clear of Liens other than Permitted Liens;
(l) opinion of Borrowers' counsel substantially in the form
acceptable to Lender;
(m) certificates evidencing the insurance maintained by the
Borrowers in compliance with applicable provisions of this Agreement;
(n) a Request for Advance received by the Lender on or before
11:00 a.m., Central Standard or Daylight Savings Time, as the case may be, on
the day preceding the Closing Date;
(o) such other agreements, documents, items, instruments,
opinions, certificates, waivers, consents and evidence as the Lender may
reasonably request;
(p) the Borrowers and any Affiliate thereof shall have
disclosed any and all pending or threatened litigation matters to Lender and
Lender shall be satisfied that such litigation matters are not expected to
result in any material impairment of the ownership of the Borrowers in any
Collateral or to have a Material Adverse Effect on either the Borrowers or any
Affiliate; and
(q) evidence satisfactory to Lender that PPI's acquisition of
OBEC and related assets have closed.
4.2 Each Advance Under the Revolving Note. In addition to the
conditions precedent stated in Section 4.1 having been fulfilled as of the
Closing Date, the Lender shall not be obligated to make any Advance unless;
19
(a) the Borrowers (or either Borrower) shall have delivered to
the Lender a Request for Advance at least the requisite time prior to the
requested date for the relevant Advance; and each statement or certification
made in such Request for Advance shall be true and correct in all material
respects on the requested date for such Advance;
(b) no Event of Default or Default exists or, or by virtue of
any requested Advance, shall exist or will occur;
(c) if requested by the Lender, the Borrowers shall have
delivered evidence satisfactory in the good faith judgment of the Lender
substantiating any of the matters contained in this Agreement which are
necessary to enable the Borrowers to qualify for such Advance;
(d) no event shall have occurred which, in the reasonable
opinion of the Lender, could have a Material Adverse Effect;
(e) each of the representations and warranties contained in
this Agreement shall be true and correct in all material respects and shall be
deemed to be repeated by the Borrowers as if made on the requested date for
such Advance;
(f) the Security Instruments shall be in full force and effect
and provide to the Lender the Liens intended thereby;
(g) to the extent of Borrowers' undivided interest therein, the
Borrowers shall hold full legal title to the Collateral and be the sole
beneficial owner thereof, except for Permitted Liens and shall provide
confirmation acceptable to Lender, including without limitation, opinions of
counsel satisfactory to Lender or other acceptable evidence of Borrowers
having marketable title to the New Properties free and clear of Liens other
than Permitted Liens;
(h) the Lender shall have received reimbursement from the
Borrowers, or legal counsel for the Lender shall have received payment from
the Borrowers, for (i) all reasonable fees and expenses of counsel to the
Lender for which the Borrowers are responsible pursuant to applicable
provisions of this Agreement and for which invoices have been presented as of
or prior to the date of the relevant Advance, and (ii) estimated fees charged
by filing officers and other public officials incurred or to be incurred in
connection with the filing and recordation of any of the Security Instruments,
for which invoices have been presented as of or prior to the date of the
requested Advance; and
(i) all material matters incident to the consummation of the
transactions hereby contemplated shall be satisfactory in the good faith
judgment of the Lender.
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ARTICLE V
5. REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to make the
Advances, the Borrowers represent and warrant to the Lender (which
representations and warranties shall survive the delivery of the Note) that:
5.1 Due Authorization and Corporate Existence. The execution and
delivery by Borrowers of this Agreement and the borrowings hereunder; the
execution and delivery by Borrowers of the Note; the repayment of the Note and
interest and fees provided for in the Note and this Agreement; the execution
and delivery of the Security Instruments by Borrowers and the performance of
all obligations of Borrowers under the Loan Documents are within the power of
the Borrowers and have been duly authorized by all necessary corporate action
of the Borrowers. Each Borrower is a corporation legally existing and in good
standing under the laws of the State of Oklahoma and is duly qualified as a
foreign corporation and is in good standing in all states in which it is doing
business, except where failure to be qualified will not have a Material
Adverse Effect.
5.2 Consents, Conflicts and Creation of Liens. The execution and
delivery by Borrowers of the Loan Documents and the performance (except upon
the occurrence of an Event of Default) of the obligations of the Borrowers
thereunder do not and will not (a) require the consent of any Governmental
Authority, (b) contravene or conflict with any Requirement of Law which
contravention or conflict would have a Material Adverse Effect, (c) contravene
or conflict with any indenture, instrument or other agreement to which
Borrowers are a party or by which any Property of either Borrower may be
presently bound or encumbered, or (d) result in or require the creation or
imposition of any Lien in, upon or of any Property of either Borrower under
any such indenture, instrument or other agreement, other than the Loan
Documents.
5.3 Valid and Binding Obligations. All of the Loan Documents, when
duly executed and delivered by Borrowers, will be the legal, valid and binding
obligations of the Borrowers, enforceable against each Borrower by the Lender
in accordance with their respective terms, except as limited by equitable
principals and applicable liquidation, conservatorship, bankruptcy,
moratorium, arrangement, receivership, insolvency, reorganization or similar
laws from time-to-time affecting the rights of creditors generally.
5.4 Title to Assets and Oil and Gas Properties. The Borrowers have
defensible title to all of their Properties and Oil and Gas Properties, free
and clear of all Liens and such defects in title that individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect
except Permitted Liens.
5.5 Scope and Accuracy of Financial Statements. The Financial
Statements of the Borrowers dated as of the dates set forth in Section 4.1(i)
present fairly the financial position and results of operations of the
Borrowers as at the relevant point in time or for the period indicated. No
21
event or circumstance has occurred since the dates set forth in Schedule
4.1(i) which could reasonably be expected to have a Material Adverse Effect.
5.6 Liabilities, Litigation, and Restrictions. Other than as
disclosed on the Financial Statements of the Borrowers dated as of the dates
set forth in Section 4.1(i), the Borrowers have no liabilities, direct or
contingent, which may materially and adversely affect its business, operations
or ownership of the Collateral. Except as set forth under the heading
"Litigation" on Exhibit "F" hereto, no Litigation of any nature affecting
either Borrower is pending before any Tribunal or, to the best knowledge of
the Borrower, threatened against or affecting either Borrower which might
reasonably be expected to result in any material impairment of its ownership
of any Collateral or to have a Material Adverse Effect. To the best knowledge
of Borrowers, after due inquiry, no unusual or unduly burdensome restriction,
restraint or hazard exists by contract, Requirement of Law, or otherwise
relative to the material business or operations of Borrowers or the ownership
and operation of a material portion of the Collateral other than such as
relate generally to Persons engaged in business activities similar to those
conducted by Borrowers.
5.7 Authorizations and Consents. No authorization, consent, approval,
exemption, franchise, permit or license of, or filing with, any Governmental
Authority, Tribunal or any other Person is required to authorize or is
otherwise required in connection with the valid execution and delivery by the
Borrowers of the Loan Documents, or any instrument contemplated hereby or
thereby, the repayment by the Borrowers of the Note and the interest and fees
provided in the Note and this Agreement, or the performance (except in the
Event of Default) by the Borrowers of the Obligations.
5.8 Compliance with Laws. To the best of each Borrower's knowledge,
the Borrowers and each of their Property, including, without limitation, the
Mortgage Properties, are in compliance in all material respects with all
applicable Requirements of Law, including, without limitation, Environmental
Laws, the Natural Gas Policy Act of 1978, as amended, and ERISA, except such
noncompliance that would not reasonably be expected to have a Material Adverse
Effect.
5.9 Proper Filing of Tax Returns and Payment of Taxes Due. The
Borrowers have duly and properly filed their United States income tax returns
and all other tax returns which are required to be filed by the Borrowers and
have paid all taxes due except such as are being Contested in Good Faith and
as to which adequate provisions and disclosures have been made. The charges
and reserves of the Borrowers with respect to taxes and other governmental
charges are adequate, and the Borrowers have no knowledge of any deficiency or
additional assessment in a material amount in connection with taxes,
assessments, or charges not provided for on its books.
5.10 ERISA. Neither Borrower maintains or sponsors any Plan subject
to Title IV of ERISA.
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5.11 Environmental Laws. To the best knowledge and belief of the
Borrowers, except as would not have a Material Adverse Effect, or as described
on Exhibit "F" under the heading "Environmental Matters";
(a) no Property of Borrowers is currently on or has ever been
on, or is adjacent to any Property which is on or has ever been on, any
federal or state list of Superfund Sites;
(b) no Hazardous Substances have been generated, transported
and/or disposed of by Borrowers at a site which was, at the time of such
generation, transportation and/or disposal, or has since become, a Superfund
Site;
(c) except in accordance with applicable Requirements of Law or
the terms of a valid permit, license, certificate or approval of the relevant
Governmental Authority, no Release of Hazardous Substances by Borrowers or
from, affecting or related to any Property of any Borrowers or adjacent to any
Property of any Borrower has occurred; and
(d) no Environmental Complaint has been received by the
Borrowers.
5.12 No Material Misstatements. To each Borrower's knowledge, no
information, exhibit, statement or report furnished to the Lender by or at the
direction of Borrower in connection with this Agreement contains any material
misstatement of fact or omits to state a material fact necessary to make the
statements contained therein not misleading as of the date made or deemed
made.
5.13 Casualties or Taking of Property. Except as disclosed on Exhibit
"F" under the heading "Casualties," since the dates set forth in Section
4.1(i), neither the business nor any Property of either Borrower has been
materially adversely affected as a result of any fire, explosion, earthquake,
flood, drought, windstorm, accident, strike or other labor disturbance,
embargo, requisition or taking of Property or cancellation of contracts,
permits or concessions by any Governmental Authority, riot, activities of
armed forces or acts of God, which, as a result thereof, could reasonably be
expected to have a Material Adverse Effect.
5.14 Locations of Business, Offices, and Property. The principal
place of business and chief executive office of the Borrowers are located at
the addresses of the Borrowers set forth in Section 10.3 or at such other
location as the Borrowers may have, by proper written notice hereunder,
advised the Lender, provided that such other locations of the Borrowers are
within a state in which appropriate financing statements from the Borrowers in
favor of the Lender have been filed.
5.15 Security Instruments. The provisions of each Security Instrument
are effective to create in favor of the Lender, a legal, valid and enforceable
Lien, except as limited by equitable principles and applicable liquidation,
conservatorship, bankruptcy, moratorium, arrangement, receivership,
insolvency, reorganization or similar laws from time-to-time affecting the
rights of creditors generally, in all right, title and interest of the
Borrowers in the Collateral described therein, which Liens, assuming the
accomplishment of recording and filing in accordance with applicable Laws
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prior to the intervention of rights of other Persons, shall constitute fully
perfected first-priority Liens on all right, title and interest of the
Borrowers in the Collateral described therein, subject to Permitted Liens.
5.16 Subsidiaries. Other than PPC and OBEC being wholly owned
Subsidiaries of PPI none of the Borrowers have any other Subsidiaries as of
the Closing Date.
ARTICLE VI
6. AFFIRMATIVE COVENANTS
Unless agreed in writing by the Lender to the contrary, so long as any
Obligation remains outstanding or unpaid or any commitment to make Advances
exists each Borrower shall:
6.1 Maintenance and Access to Records. Keep adequate records of all
its transactions so that at any time, and from time to time, its true and
complete financial condition may be readily determined, and promptly following
the reasonable request of the Lender, make such records available during
Borrower's customary business hours for inspection by the Lender and, at the
expense of the Borrowers, allow the Lender to make copies thereof at the
Borrowers' premises and take same to Lender's place of business.
6.2 Quarterly Financial Statements. Beginning with the quarter ending
June 30, 2000, deliver to the Lender, (a) on or before the 60th day after the
close of each quarter, a copy of the unaudited Financial Statements of the
Borrowers on a consolidated and consolidating basis as at the close of such
monthly period, such Financial Statement to be certified by a Responsible
Officer of the Borrowers as having been prepared in accordance with GAAP,
consistently applied, and as a fair presentation of the consolidated financial
condition of the Borrowers, and (b) concurrent with (a) above, a Compliance
Certificate executed by each Borrower's Responsible Officer stating that such
Officer, after due inquiry, has no knowledge of a Default or Event of Default
and containing a computation of, and demonstrating compliance with, each
financial covenant set forth in Section 7 herein.
6.3 Annual Financial Statements. Deliver to the Lender, (a) on or
before the 90th day after the close of each of its fiscal years, and prepared
in accordance with GAAP, a copy of the annual Financial Statements of the
Borrowers prepared on a consolidated and consolidating basis, audited by a
nationally recognized firm of independent public accountants and (b)
concurrent with (a) above, a Compliance Certificate executed by each
Borrower's Responsible Officer stating that such Officer, after due inquiry,
has no knowledge of a Default or Event of Default and containing a computation
of, and demonstrating compliance with, each financial covenant set forth in
Section 7 herein. Further, Borrowers shall deliver to the Lender a copy of
its March 31, 2000 audited Financial Statements by June 30, 2000.
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6.4 Reserve Reports.
(a) Deliver to the Lender no later than July 1 of each year
during the term of this Agreement, engineering (petroleum reserves) reports
with an effective date of April 1 of the current year and covering or
pertaining to substantially all of the Oil and Gas Properties of Borrowers in
form and substance acceptable to Lender, said report shall be prepared by an
independent consulting petroleum engineering firm acceptable in the good faith
judgment of the Lender as fairly and accurately setting forth (i) the proven
and producing oil and gas reserves, separately classified as such (and if
Borrowers desire them to be part of the Borrowing Base, a report including
proved, non-producing reserves) attributable to the Oil and Gas Properties as
of April 1 of the year for which such reserve reports are furnished, (ii) the
aggregate present value determined on the basis of stated pricing assumptions,
of the future net income with respect to such Oil and Gas Properties,
discounted at a stated per annum discount rate of proven and producing
reserves, and (iii) projections of the annual rate of production, gross income
and net income with respect to such proven and producing reserves. On or
before January 1 of each year and in conjunction with and as requested by
Lender in connection with any Unscheduled Redeterminations, Borrowers shall
provide Lender with such other reserve information as Lender may reasonably
request to complete its semi-annual redetermination and/or Unscheduled
Redetermination, as the case may be, of the Borrowing Base.
(b) The report provided pursuant to this Section shall be
submitted to the Lender together with additional data as the Lender may
reasonably request concerning pricing, quantities of production from the Oil
and Gas Properties, purchasers of production and engineering and geological
data.
6.5 Production Report. Within sixty (60) days from each calendar
quarter end, furnish Lender a quarterly summary report of oil and gas
production for said period detailing barrel and MCF volumes, pricing, lease
operating expenses and net cash flow on the Mortgaged Properties.
6.6 Take or Pay Agreements. In connection with the Reserve Reports,
deliver to Lender contracts or other agreements concerning "take or pay",
"prepayment", and gas balancing liabilities of Borrower which could have a
Material Adverse Effect.
6.7 Gas Balancing Status Report. Within ninety (90) days of the last
day of each Borrower's fiscal year-end, furnish Lender a report on the status
of all gas balancing (if any) affecting any of the Oil and Gas Properties.
Upon receipt of the Gas Balancing Status Report, Lender, at its discretion,
may redetermine the Borrowing Base.
6.8 Notices of Certain Events. Deliver to the Lender, immediately
upon a Responsible Officer's having knowledge of the occurrence of any of the
following events or circumstances, a written statement with respect thereto,
signed by a Responsible Officer and setting forth the relevant event or
circumstance and the steps being taken by the Borrowers with respect to such
event or circumstance:
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(a) any Default or Event of Default;
(b) any Default or Event of Default under any material
contractual obligation of the Borrower, or any material Litigation, affecting
the Borrowers before any Governmental Authority or Tribunal;
(c) any Litigation involving either Borrower as a defendant or
in which any Property of either Borrower is subject to a claim (i) in which
the amount involved is $250,000 or more and which is not covered by insurance,
(ii) in which, together with any other outstanding litigation or proceeding
(whether or not previously disclosed hereunder), the aggregate amount involved
in all such litigation is $250,000 or more and which is not covered by
insurance, or (iii) in which injunctive or similar relief is sought which
affects a Property having a fair market value (net to the Borrower's interest
therein) of more than $250,000 or could reasonably be expected to result in an
expenditure by Borrowers of more than $250,000;
(d) any existing or asserted Lien on any of the Properties of
Borrowers, personal or real, tangible or intangible, including without
limitation the Mortgaged Properties, excluding Permitted Liens;
(e) the receipt by either Borrower of any Environmental
Complaint or any formal request from any Governmental Authority or other
Person for information (other than requirements for compliance reports)
regarding any Release of Hazardous Substances by Borrower from, affecting or
related to any Property of Borrower or adjacent to any Property of the
Borrower which Environmental Complaint or request could reasonably be expected
to have a Material Adverse Effect;
(f) any actual, proposed or threatened testing or other
investigation by any Governmental Authority or other Person concerning the
environmental condition of, or relating to, any Property of either Borrower or
adjacent to any Property of Borrower following any allegation of a violation
of any Environmental Law which testing or investigation could reasonably be
expected to have a Material Adverse Effect;
(g) any Release of Hazardous Substances by either Borrower
from, affecting or related to any Property of either Borrower or adjacent to
any Property of either Borrower except in accordance with applicable
Environmental Law or the terms of a valid permit, license, certificate or
approval of the relevant Governmental Authority, or the violation of any
Environmental Law, or the revocation, suspension or forfeiture of or failure
to renew, any permit, license, registration, approval or authorization, which
Release, violation, revocation, suspension, forfeiture or failure could
reasonably be expected to have a Material Adverse Effect; and
(h) any change in either Borrower's accounting practices and
procedures, including a change in either Borrower's fiscal year; and
26
(i) any other event or condition which could reasonably be
expected to have a Material Adverse Effect.
6.9 Letters in Lieu of Transfer Orders. Promptly upon a reasonable
request by the Lender at any time and from time to time and without limitation
on the rights of the Lender in accordance with Sections 2.14 and 2.15, execute
such letters in lieu of transfer orders, in addition to the letters signed by
the Borrowers and delivered to the Lender in satisfaction of the conditions
set forth in Subsection 4.1(g)(iii), as are necessary or appropriate to cover
any additional, material purchasers of production; provided, however, that
such letters shall only be delivered to the addressees thereof in accordance
with subsection 2.14 of this Agreement.
6.10 Division Orders. Promptly upon request by the Lender at any time
and from time to time following the occurrence of any Event of Default and
without limitation on the rights of the Lender in accordance with Sections
2.14 and 2.15, execute such division and/or transfer orders as are necessary
or appropriate to transfer and deliver to the Lender proceeds from the sale of
hydrocarbon production from or attributable to any Mortgaged Property,
provided, however, that such letters shall only be delivered to the addressees
thereof in accordance with subsection 2.14 of this Agreement.
6.11 Additional Information. Furnish to the Lender, promptly upon the
reasonable request of the Lender, such additional financial, engineering,
production or other information concerning the assets, liabilities, operations
and transactions of the Borrowers as the Lender may from time to time
reasonably request; and notify the Lender not less than ten Business Days
prior to the occurrence of any condition or event that may change the proper
location for the filing of any financing statement or other public notice or
recording for the purpose of perfecting a Lien in any Collateral, including,
without limitation, any change in name or the location of any principal place
of business or chief executive office of the Borrowers; and upon the
reasonable request of the Lender, the Borrowers shall execute such additional
Security Instruments as may be necessary or appropriate in connection
therewith.
6.12 Compliance with Laws. In all reasonable and in all material
respects, comply with all applicable Requirements of Law, including, without
limitation, (a) the Natural Gas Policy Act of 1978, as amended, (b) the
minimum funding requirements of ERISA so as not to give rise to any material
liability or reportable event, as defined by ERISA, thereunder, (c)
Environmental Laws (i) related to any natural or environmental resource or
media located on, above, within, in the vicinity of, related to or affected by
any Property of the Borrowers, (ii) required for the performance or conduct
of the operations of the Borrowers, including, without limitation, all
permits, licenses, registrations, approvals and authorizations, or (iii)
applicable to the use, generation, handling, storage, treatment, transport or
disposal of any Hazardous Substances, the resulting non-compliance of which
could have a Material Adverse Effect; and (d) securities laws and cause all
operators, employees, crew members, agents, contractors, subcontractors and
future lessees (pursuant to appropriate lease provisions) of the Borrowers,
while such Persons are acting within the scope of their relationship with the
Borrowers, to comply with all such Requirements of Law as may be necessary or
appropriate to enable the Borrowers to so comply. Notwithstanding the
27
reasonable efforts of the Borrowers to comply with its obligations under this
Section 6.12, should any non-compliance with any Requirement of Law cause or
could reasonably be expected to cause a Material Adverse Effect, the Lender
shall be notified of such event pursuant to Section 6.9 and the Lender shall
be entitled to exercise its rights and remedies pursuant to Subsection 9.1 and
Section 9.2.
6.13 Payment of Assessments and Charges. Pay all taxes, assessments,
governmental charges, rent and other Indebtedness which, if unpaid, might
become a Lien, other than a Permitted Lien, against the Property of the
Borrowers, except any of the foregoing being Contested in Good Faith.
6.14 Hazardous Substances Indemnification. Indemnify and hold the
Lender harmless from and against any and all claims, losses, damages,
liabilities, fines, penalties, charges, administrative and judicial
proceedings and orders, judgments, remedial actions, requirements and
enforcement actions of any kind, and all costs and expenses incurred in
connection therewith (including, without limitation, reasonable attorneys'
fees and expenses), arising directly or indirectly, in whole or in part, from
(a) the presence of any Hazardous Substances on, under or from any Property of
the Borrowers, whether prior to or during the term hereof, (b) any activity
carried on or undertaken on or off any Property of the Borrowers, whether
prior to or during the term hereof, and whether by the Borrowers, or any
predecessor in title, employee, agent, contractor or subcontractor of the
Borrowers, or any other Person at any time occupying or present on such
Property, in connection with the handling, treatment, removal, storage,
decontamination, cleanup, transportation or disposal of any Hazardous
Substances at any time located or present on or under such Property, (c) any
residual contamination on or under any Property of the Borrowers, or (d) any
contamination of any Property or natural resources of the Borrowers arising in
connection with the generation, use, handling, storage, transportation or
disposal of any Hazardous Substances by the Borrowers, or any employee, agent,
contractor or subcontractor of the Borrowers, while such Persons are acting
within the scope of their relationship with the Borrowers, irrespective of
whether any of such activities were or will be undertaken in accordance with
applicable Requirements of Law, including, without limitation, any of the
foregoing arising from negligence, whether sole or concurrent, on the part of
the Lender; with the foregoing indemnity surviving satisfaction of all
Obligations and the termination of this Agreement, unless all such Obligations
have been satisfied wholly in cash from the Borrowers and not by way of
realization against any Collateral or the conveyance of any Property in lieu
thereof, provided that such indemnity shall not extend to any of the foregoing
resulting from the Lender's gross negligence or willful conduct or any act or
omission by the Lender with respect to any Property subsequent to the Lender
becoming the owner of such Property and with respect to which Property such
claim, loss, damage, liability, fine, penalty, charge, proceeding, order,
judgment, action or requirement arises subsequent to the acquisition of title
thereto by the Lender.
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6.15 Maintenance of Corporate Existence and Good Standing. Maintain
its corporate existence or qualification and good standing in all states in
which it is doing business, except where failure to so preserve will not have
a Material Adverse Effect.
6.16 Further Assurances. Promptly cure any defects in the execution
and delivery of any of the Loan Documents and all agreements contemplated
thereby, and execute, acknowledge and deliver such other assurances and
instruments as shall, in the good faith and reasonable opinion of the Lender,
be necessary to fulfill the terms of the Loan Documents.
6.17 Initial Fees and Expenses of Lender and/or Legal Counsel to
Lender. Promptly reimburse the Lender for all reasonable and customary
out-of-pocket expenses of the Lender in connection with this Agreement and all
documentation contemplated hereby, the satisfaction of the conditions
precedent set forth herein and the consummation of the transactions
contemplated in this Agreement (including, without limitation, all recording
expenses and all filing fees and all title review and title due diligence fees
and including legal fees).
6.18 Subsequent Fees and Expenses. The Borrowers shall promptly
reimburse the Lender (after the Borrowers' receipt of the Lender's request for
reimbursement) for all amounts reasonably expended, advanced or incurred by
the Lender, together with interest thereon as provided in this Subsection 6.18
(i) to satisfy any of the Obligations, (ii) to protect or enforce the Lender's
rights under any of the Loan Documents or (iii) to protect the Collateral or
business of the Borrowers; provided, however, if an uncured Event of Default
does not exist, the Lender must obtain the Borrowers' contemporaneous written
consent prior to making any such expenditure or Advance, or incurring such
reimbursable amount. The amount so reimbursable pursuant to this Subsection
6.18 shall bear interest in accordance with the terms contained in Section
2.5, with the obligations under this Subsection 6.18 surviving the
non-assumption of this Agreement in a case commenced under any Insolvency
Proceeding and being binding upon the Borrowers and/or a trustee, receiver,
custodian or liquidator of any Borrower appointed in any such case.
6.19 Maintenance and Inspection of Tangible Properties. Maintain all
of its material tangible Properties in good repair and condition, ordinary
wear and tear excepted; make all necessary replacements thereof and operate,
if operated by any Borrower, such Properties in a good and workmanlike manner;
and permit any authorized representative or representatives of the Lender to
reasonably visit and inspect any tangible Property of the Borrowers.
6.20 Maintenance of Insurance and Evidence Thereof. Continue to
maintain or continue to be maintained, insurance with respect to its
Properties and businesses against such liabilities, casualties, risks and
contingencies as is customary in the relevant industry and sufficient to
prevent a Material Adverse Effect, all such insurance to be in amounts and
from insurers reasonably acceptable to the Lender, and, on the Closing Date or
upon any renewal of any such insurance and at other times upon the reasonable
request by the Lender, furnish to the Lender evidence, satisfactory in the
good faith judgment of the Lender of the maintenance of such insurance.
29
6.21 Payment of Note and Performance of Obligations. Pay the Note
according to the reading, tenor and effect thereof, as modified hereby, and do
and perform every act as required in the Loan Documents and discharge all
other Obligations.
6.22 Operation of Oil and Gas Properties. Develop, maintain and
operate, if either Borrower is designated as operator thereof, the Mortgaged
Properties in a prudent and workmanlike manner in accordance with industry
standards.
6.23 Depository Accounts. Maintain an operating account with Lender.
6.24 Existing Business. Maintain its line of business as engaged in as
of the Closing Date unless otherwise consented to by Lender in writing.
6.25 SEC Filings. Promptly upon there filing, provide Lender with a
copy of all documents and/or reports made with the Securities and Exchange
Commission and/or any state securities agency.
ARTICLE VII
7. FINANCIAL COVENANTS.
Unless agreed in writing by the Lender to the contrary, so long as any
Obligation remains outstanding or unpaid or any commitment to make Advances
exists, on a consolidated basis, the Borrowers shall:
7.1 Adjusted Current Ratio. Maintain an Adjusted Current Ratio of at
least, 1.00 to 1.00. The "Adjusted Current Ratio" is defined as Current
Assets plus any unused availability under the Note divided by Current
Liabilities, exclusive of the Loan Balance.
7.2 Debt Service Coverage Ratio. Maintain a Debt Service Ratio,
calculated on a quarterly basis, of not less than 1.20:1.00 For purposes of
this calculation, the cash flow ratio is defined as the quotient of:
the sum of Net Income (as defined by GAAP) less dividends, plus
interest, depletion, depreciation and amortization expense, all
for the quarter then ended
DIVIDED BY
the sum of the quarterly principal reductions required to amortize
the Loan Balance (as of quarter end) over the Half Life of the
Borrowers' Oil and Gas Properties, plus interest expense for the
30
quarter then ended, plus any other current maturities of long term
debt realized during the quarter then ended.
7.3 Tangible Net Worth. Maintain a Tangible Net Worth of at least
ninety percent (90%) of the amount reported as of March 31, 2000 in the final
audited Financial Statement plus (i) seventy-five percent (75%) of the net
income realized for each quarter thereafter, and (ii) 75% of any increase in
Tangible Net Worth resulting from any infusion of equity subsequent to March
31, 2000.
ARTICLE VIII
8 NEGATIVE COVENANTS
Unless agreed in writing by the Lender to the contrary, which agreement
will not be unreasonably withheld, so long as any Obligation remains
outstanding or unpaid or any commitment exists hereunder, neither the
Borrowers nor the Guarantor shall:
8.1 Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness, whether by way of loan or otherwise which exceeds, in the
aggregate, the sum of $250,000.00; provided however, the foregoing restriction
shall not apply to (a) the Obligations, or (b) current accounts payable
incurred in the ordinary course of business.
8.2 Contingent Obligations. Create, incur, assume or suffer to exist
any Contingent Obligation in an amount on an aggregate basis for each
Borrower , in excess of $250,000.00 on or after the Closing Date; provided
however, the foregoing restriction shall not apply to (a) performance
guarantees and performance surety or other bonds provided in the ordinary
course of business, or (b) trade credit incurred or operating leases entered
into in the ordinary course of business.
8.3 Liens. Create, incur, assume or suffer to exist any Lien on any
of its Oil and Gas Properties or any other Property of the Borrowers, whether
now owned or hereafter acquired, without the written consent of Lender;
provided however, the foregoing restrictions shall not apply to Permitted
Liens. For the purposes of this Section 8.3, and only Section 8.3, the term
"Permitted Liens" shall also include purchase money security interests within
the dollar limitation set forth in Section 8.1 above.
8.4 Sales of Assets. Sell, transfer or otherwise dispose of (i) all
or any substantial portion (amounts in excess of $250,000.00 in the aggregate
during any one fiscal year) of their assets, real or personal, now owned or
hereafter acquired, whether pursuant to a single transaction or a series of
transactions.
8.5 Loans or Advances. With the exception of those loans or advances
permitted by Section 8.9 herein, make or agree to make or allow to remain
outstanding any loans or Advances to any Person or Affiliate in excess of
$250,000.00 in the aggregate (for each Borrower); provided however, the
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foregoing restrictions shall not apply to Advances or extensions of credit in
the form of accounts receivable incurred in the ordinary course of business
and upon terms common in the industry for such accounts receivable.
8.6 Dividends and Distributions. Declare, pay or make, whether in
cash or Property, or set aside or apply any money or assets to pay or make any
dividend or distribution on, or purchase, redeem or otherwise acquire for
value, any share of any class of its capital stock without the prior written
consent of Lender.
8.7 Cancellation of Insurance. Allow any insurance policy required to
be carried hereunder to be terminated or lapse or expire without provision for
adequate renewal or comparable substitution.
8.8 Mergers and Consolidations; Changes in Corporate Structure. (i)
merge or consolidate with any Person, or permit any such merger or
consolidation with Borrowers or their subsidiaries in which Borrowers or their
subsidiaries does not survive to be the controlling entity; (ii) discontinue
business; (iii) make any material change in the nature of or manner in which
it conducts its business; (iv) form any Plan which is subject to Title IV of
ERISA; (v) liquidate, wind-up or dissolve; or (vi) incur any material change
in the current senior and/or executive management (Chief Executive or Chief
Operating Officer) of the Borrowers.
8.9 Transactions with Affiliates. No Borrower will enter into any
transaction with any Affiliate (other than with a co-Borrower), except
transactions upon terms that are no less favorable to it than would be
obtained in a transaction negotiated at arm's length with an unrelated third
party.
8.10 Lines of Business. Expand, on its own or through any Subsidiary
or Affiliate, into any line of business other than those in which it is
engaged as of the Closing Date if such an expansion could have a Material
Adverse Effect.
8.11 Organization or Acquisition of Subsidiaries. Organize or acquire
any Subsidiary in addition to those existing as of the Closing Date, if any
such organization or acquisition would have a Material Adverse Effect.
8.12 Hedging Activities. Enter into any transaction providing (i) for
the hedging, forward sale, swap or any derivation thereof of crude oil or
natural gas or other commodities; or (ii) for a swap, collar, floor, cap,
option, corridor, or other contract which is intended to reduce or eliminate
the risk of fluctuation in interest rates, as such terms are referred to in
the capital markets, except the foregoing prohibitions shall not apply to (x)
transactions consented to in writing by the Lender which are on terms
acceptable to the Lender, or (y) Pre-Approved Contracts (hereafter defined).
The term "Pre-Approved Contracts" as used herein shall mean (i) any physical
delivery contract or agreement with an oil and gas purchaser under which the
Borrower agrees to sell its oil and gas at an agreed upon price for an agreed
upon period of time and for volume amounts which do not exceed the monthly
production forecast for all of the Borrower's proved developed producing
reserves and/or (ii) any financial contract or agreement which is consistent
32
with the following: (a) the volume amounts do not exceed 75% of the monthly
production forecast for all of the Borrowers' proved and producing oil and gas
properties and (b) the term does not extend beyond a twenty four (24) month
period. Upon entering into any such contract hereunder, each Borrower agrees
to notify Lender of the terms of such contract so as to allow for an
adjustment to the Borrowing Base if and when deemed appropriate by the Lender
in its sole discretion.
8.14 Investments. Purchase or otherwise acquire any capital stock,
assets, obligations, or other securities of, make any capital contribution to,
or otherwise invest in, or acquire any interest in, any person or entity.
Provided, however, this Section 8.14 shall not apply to Borrowers' investment
in the acquisition or development of Oil and Gas Properties or in any company
whose principal activity is oil and gas exploration and production in which
any Borrower has controlling interest, direct obligations of the United States
or any agency thereof, certificates of deposit issued by any commercial bank
or any mutual fund consisting of obligations of the United States or any
agency thereof.
ARTICLE IX
9. EVENTS OF DEFAULT
9.1 Enumeration of Events of Default. Any of the following events
shall constitute an Event of Default as that term is used herein:
(a) default shall be made in the payment when due of any
installment of principal or interest under this Agreement, the Note or any Fee
provided for herein and such default is not cured to reasonable satisfaction
of Lender within 10 days after either Borrower's receipt of written
notification from Lender of the occurrence of such Event of Default;
(b) an Event of Default as defined in any Loan Document shall
have occurred;
(c) default shall be made by either Borrower in the due
observance or performance of any of its obligations, covenants or agreements
contained in any of the Loan Documents and such default could be expected to
have a Material Adverse Effect;
(d) any representation or warranty made by either Borrower or
Guarantor in any of the Loan Documents, including, without limitation, in a
Request for Advance, proves to have been untrue in any material respect or any
representation, statement (including Financial Statements), certificate or
data furnished or made to the Lender in connection herewith proves to have
been untrue in any material respect as of the date the facts therein set forth
were stated or certified and such misrepresentation or breach of warranty
could reasonably be expected to have a Material Adverse Effect;
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(e) default shall be made by either Borrower or any Guarantor
(as principal or guarantor or other surety) in the payment or performance of
any bond, debenture, note or other evidence of indebtedness or under any
credit agreement, loan agreement, indenture, promissory note or similar
agreement or instrument executed in connection with any of the foregoing, and
such default shall remain unremedied far in excess of the period of grace, if
any, with respect thereto and such default is not being contested in good
faith by the Borrowers;
(f) the Borrowers shall be unable to satisfy any condition or
cure any circumstance specified in Article IV, unless the failure to so
satisfy would not have a Material Adverse Effect, the satisfaction or curing
of which is precedent to the right of the Borrowers to receive an Advance
hereunder, and such inability shall continue for a period in excess of 30
days;
(g) Either Borrower shall (i) apply for or consent to the
appointment of a receiver, trustee or liquidator of it or all or a substantial
part of its assets, (ii) file a voluntary petition commencing an Insolvency
Proceeding concerning either Borrower or Guarantor, (iii) make a general
assignment for the benefit of creditors, (iv) be unable, or admit in writing
its inability, to pay its debts generally as they become due, or (v) file an
answer admitting the material allegations of a petition filed against it in
any Insolvency Proceeding;
(h) an order, judgment or decree shall be entered against any
Borrower by any court of competent jurisdiction or by any other duly
authorized authority, on the petition of a creditor or otherwise, granting
relief in any Insolvency Proceeding or approving a petition seeking
reorganization or an arrangement of its debts or appointing a receiver,
trustee, conservator, custodian or liquidator of it or all or any
substantial part of its assets and such order, judgment or decree shall not be
dismissed or stayed within 30 days after the issuance and entry thereof;
(i) the levy against any significant portion of the Property of
any Borrower, or any execution, garnishment, attachment, sequestration or
other writ or similar proceeding which is not permanently dismissed or
discharged within 30 days after the levy and which could reasonably be
expected to have a Material Adverse Effect;
(j) a final and non-appealable order, judgment or decree shall
be entered against Borrower for money damages and/or Indebtedness due in an
amount in excess of $250,000.00 which is not otherwise covered by insurance
for 100% of the judgment and such order, judgment or decree shall not be
dismissed or the execution thereof stayed within 30 days;
(k) any Person shall engage in any Prohibited Transaction
involving any Plan; any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall exist with respect to any
Plan for which an excise tax is due or would be due in the absence of a
waiver; a Reportable Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Single Employer Plan, which Reportable Event
34
or commencement of proceedings or appointment of a trustee is, in the
reasonable opinion of the Lender, likely to result in the termination of such
Plan for purposes of Title IV of ERISA; any Single Employer Plan shall
terminate for purposes of Title IV of ERISA; the Borrower or any Commonly
Controlled Entity shall incur, or in the reasonable opinion of the Lender, be
likely to incur any liability in connection with a withdrawal from, or the
Insolvency or Reorganization of, a Multi-Employer Plan; or any other event or
condition shall occur or exist with respect to a Plan and the result of such
events or conditions referred to in this Section 9.1(k) could subject the
Borrower or any Commonly Controlled Entity to any tax (other than an excise
tax under Section 4980 of the Code), penalty or other liabilities which taken
in the aggregate would have a Material Adverse Effect and any such
circumstance shall exist for in excess of 30 days;
(l) any charges are filed or any other action or proceeding is
instituted by any Governmental Authority against either Borrower under the
Racketeering Influence and Corrupt Organizations Statute (18 U.S.C. SS 1961 et
seq.), the result of which could be the forfeiture or transfer of any material
Property of the Borrower subject to a Lien in favor of the Lender without (i)
satisfaction or provision for satisfaction of such Lien, or (ii) such
forfeiture or transfer of such Property being expressly made subject to such
Lien, or (iii) the Borrowers paying to the Lender the amount of the resultant
decrease in the Borrowing Base, as a result thereof;
(m) Either Borrower shall have (i) concealed, removed or
diverted, or permitted to be concealed, removed or diverted, any part of its
Property, with intent to hinder, delay or defraud its creditors or any of
them; (ii) made or suffered a transfer of any of its Property which may be
fraudulent under any bankruptcy, fraudulent conveyance or similar Law; (iii)
made any transfer of its Property to or for the benefit of a creditor at a
time when other creditors similarly situated have not been paid with the
intent to hinder, delay or defraud its creditors or any of them; or (iv) shall
have suffered or permitted, while insolvent, any creditor to obtain a Lien
upon any of its Property through legal proceedings or distraint which is not
vacated within 30 days from the date thereof;
(n) any Security Instrument shall for any reason not, or cease
to, create valid and perfected first-priority Liens against the Collateral
purportedly covered thereby and such occurrence would have a Material Adverse
Effect;
(o) the good faith determination by the Lender that a Material
Adverse Effect has occurred or will occur or that the value of the Collateral
has, or will be, materially decreased; or
(p) the dissolution or loss of legal existence of Guarantor.
(q) any material and adverse change in either Borrower's
financial condition.
9.2 Remedies.
(a) Upon the occurrence of an Event of Default specified in
Subsections 9.1(a), (d),(g), (h), (l) or (m) immediately and without notice,
(i) all Obligations shall automatically become immediately due and payable,
35
without presentment, demand, protest, notice of protest, default or dishonor,
notice of intent to accelerate maturity, notice of acceleration of maturity or
other notice of any kind, except as may be provided to the contrary elsewhere
herein, all of which are hereby expressly waived by the Borrower, and (ii) any
obligation to make an Advance shall immediately cease and terminate unless and
until reinstated by the Lender in writing, and in such event, the Lender is
hereby authorized at any time and from time to time, without notice to the
Borrowers (any such notice being expressly waived by the Borrowers), to
set-off and apply any and all deposits of the Borrower (general or special,
time or demand, provisional or final) held by the Lender, except to the extent
any such deposits contain funds of persons other than Borrowers, the
Guarantor, or either Borrower's subsidiaries and any and all other
indebtedness at any time owing by the Lender to or for the credit or account
of the Borrowers against any and all of the Obligations.
(b) Upon the occurrence of any Event of Default other than
those specified in Subsections 9.1(a), (d), (g), (h), (l) or (m) Borrowers
shall have thirty (30) days after receiving written notification of the Event
of Default to cure such Default but, during such cure period, the Lender will
not, as a result of such Default, accelerate the Note or exercise any of its
rights pursuant to the Loan Documents, and notwithstanding subsection 9.1,
such Default will not constitute an "Event of Default", unless such Default is
not remedied to the reasonable satisfaction of Lender within 30 days after
Borrowers' receipt of such written notification. In the event Borrowers shall
fail to effectuate such a cure Lender may declare all Obligations immediately
due and payable, without presentment, demand, protest, notice of protest,
default or dishonor, notice of intent to accelerate maturity, notice of
acceleration of maturity or other notice of any kind, except as may be
provided to the contrary elsewhere herein, all of which are hereby expressly
waived by the Borrowers, and any obligation to make an Advance shall
immediately cease and terminate unless and until reinstated by the Lender in
writing, and in such event, the Lender is hereby authorized at any time and
from time to time, without notice to the Borrowers (any such notice being
expressly waived by the Borrowers), to set-off and apply any and all deposits
containing funds of the Borrowers (general or special, time or demand,
provisional or final) held by the Lender, and any and all other indebtedness
at any time owing by the Lender to or for the credit or account of the
Borrowers against any and all of the Obligations although such Obligations may
be unmatured.
(c) Subject to the provisions of this Agreement, upon the
occurrence of any Event of Default the Lender may, in addition to the
foregoing, exercise any or all of its rights and remedies provided by law or
pursuant to the Loan Documents.
ARTICLE X
10 MISCELLANEOUS
10.1 Transfers and Participations. The Lender may, at any time, sell,
transfer, assign or grant participations in the Obligations or any portion
thereof; and the Lender may forward to each Transferee and each prospective
Transferee all documents and information relating to such obligations, whether
36
furnished by the Borrowers or otherwise obtained, as the Lender determines
necessary or desirable. The Borrowers agree that each Transferee, regardless
of the nature of any transfer to it, may exercise all rights (including,
without limitation, rights of set-off) with respect to the Obligations held by
it as fully as if such Transferee were the direct holder thereof, subject to
any agreements between such Transferee and the transferor to such Transferee.
The Lender agrees that each such Transferee shall assume all of the
obligations of the Lender pursuant to the Loan Documents.
10.2 Survival of Representations. Warranties and Covenants. All
representations and warranties of the Borrowers and all covenants and
agreements herein made shall survive the execution and delivery of the Note
and the Security Instruments and shall remain in force and effect so long as
any Obligation is outstanding or any obligation to make an Advance exists.
10.3 Notices and Other Communications. Except as to verbal notices
expressly authorized herein, which verbal notices shall be confirmed in
writing, all notices, requests and communications hereunder shall be in
writing (including by telegraph or telecopy). Unless otherwise expressly
provided herein, any such notice, request, demand or other communication shall
be deemed to have been duly given or made when delivered by hand, or, in the
case of delivery by mail, deposited in the mail, certified mail, return
receipt requested, postage prepaid, or, in the case of telegraphic notice,
when delivered to the telegraph company, or, in the case of telecopy notice,
when receipt thereof is acknowledged orally, addressed as follows:
if to the Lender, to:
LOCAL OKLAHOMA BANK, N.A.
0000 X.X. 00xx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000-0000
Attention: Xxxx X. Xxxx, Xx., Sr. Vice President
(a) if to the Borrowers, to:
PONTOTOC PRODUCTION COMPANY, INC.
PONTOTOC PRODUCTION, INC.
OKLAHOMA BASIC ECONOMY CORPORATION
000 Xxxx Xxxx Xxxxxx
Xxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxx, President
Any party may, by proper written notice hereunder to the other, change
the individuals or addresses to which such notices to it shall thereafter be
sent.
10.4 Parties in Interest. Subject to applicable restrictions
contained herein, all covenants and agreements herein contained by or on
behalf of the Borrowers or the Lender shall be binding upon and inure to the
37
benefit of the Borrowers or the Lender, as the case may be, and their
respective heirs, legal representatives, successors and assigns.
10.5 Rights of Third Parties. All provisions herein are imposed
solely and exclusively for the benefit of the Lender and the Borrowers. No
other Person shall have any right, benefit, priority or interest hereunder or
as a result hereof or have standing to require satisfaction of provisions
hereof in accordance with their terms, and any or all of such provisions may
be freely waived in whole or in part by the Lender at any time if in its sole
discretion it deems it advisable to do so.
10.6 Articles and Sections. This Agreement, for convenience only, has
been divided into Articles and Sections and it is understood that the rights
and other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
10.7 Number and Gender. Whenever the context requires, reference
herein made to the single number shall be understood to include the plural;
and likewise, the plural shall be understood to include the singular.
Definitions of terms defined in the singular or plural shall be equally
applicable to the plural or singular, as the case may be, unless otherwise
indicated. Words denoting sex shall be construed to include the masculine,
feminine and neuter, when such construction is appropriate; and specific
enumeration shall not exclude the general but shall be construed as
cumulative.
10.8 Renewals and Extensions. All provisions of this Agreement
relating to the Note shall apply with equal force and effect to each
promissory note hereafter executed or issued which in whole or in part
represents a renewal or extension of any part of the Indebtedness of the
Borrowers under this Agreement, the Note, or any other Loan Document.
10.9 No Waiver: Rights Cumulative. No course of dealing on the part
of the Lender, its officers or employees, nor any failure or delay by the
Lender with respect to exercising any of its rights under any Loan Document
shall operate as a waiver thereof. The rights of the Lender under the Loan
Documents shall be cumulative and the exercise or partial exercise of any such
right shall not preclude the exercise of any other right. No Advance
hereunder shall constitute a waiver of any of the covenants, warranties or
conditions of the Borrowers contained herein. In the event the Borrowers are
unable to satisfy any such covenant, warranty or condition, no such Advance
shall have the effect of precluding the Lender from thereafter declaring such
inability to be an Event of Default if same constitutes an Event of Default
under the terms of this Agreement as hereinabove provided.
10.10 Incorporation of Exhibits. The Exhibits attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for all purposes.
10.11 Survival Upon Unenforceability. In the event any one or more of
the provisions contained in any of the Loan Documents or in any other
38
instrument referred to herein or executed in connection with the Obligations
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of any Loan Document or of any other instrument referred to
herein or executed in connection with such Obligations.
10.12 Amendments or Modifications. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by the party against whom enforcement
of the change, waiver, discharge or termination is sought.
10.13 Controlling Provision Upon Conflict. In the event of a conflict
between the provisions of this Agreement and those of any other Loan Document,
the provisions of this Agreement shall control.
10.14 Time, Place and Method of Payments. All payments required
pursuant to this Agreement or the Note shall be made in lawful money of the
United States of America and in immediately available funds; shall be deemed
received by the Lender on the next Business Day following receipt if such
receipt is after 2:00 p.m. Central Standard or Daylight Savings Time, as the
case may be, on any Business Day; and shall be made at the Principal Office of
the Lender. Except as provided to the contrary herein, if the due date of any
payment hereunder or under the Note would otherwise fall on a day which is not
a Business Day, such date shall be extended to the next succeeding Business
Day and interest shall be payable for any principal so extended for the period
of such extension.
10.15 Time of Essence. Time is of the essence of this Agreement and
of each provision hereof.
10.16 Disposition of Collateral. Notwithstanding any term or
provision, express or implied, in any of the Security Instruments, the
realization, liquidation, foreclosure or any other disposition on or of any or
all of the Collateral shall be in the order and manner and determined in the
sole discretion of the Lender; provided however, that in no event shall the
Lender violate applicable Law or exercise rights and remedies other than those
provided in such Security Instruments or otherwise existing at law or in
equity.
10.17 GOVERNING LAW. THIS AGREEMENT, THE NOTE, AND THE GUARANTY SHALL
BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF OKLAHOMA.
10.18 JURISDICTION AND VENUE. All actions or proceedings with respect
to, arising directly or indirectly in connection with, out of, related to or
from this Agreement or any other loan document may be litigated, at the sole
discretion and election of the Lender, in courts having situs in Oklahoma
City, Oklahoma County, Oklahoma. The Borrowers hereby submit to the
jurisdiction of any local, state or federal court located in Oklahoma City,
Oklahoma County, Oklahoma and hereby waives any rights it may have to transfer
39
or change the jurisdiction or venue of any litigation brought against it by
the Lender in accordance with this Section.
10.19 WAIVER OF RIGHTS TO JURY TRIAL. The Borrowers and the Lender
hereby knowingly, voluntarily, intentionally, irrevocably and unconditionally
waive all rights to trial by jury in any action, suit, proceeding,
counterclaim or other litigation that relates to or arises out of this
Agreement or any other loan document or otherwise with respect thereto. The
provisions of this Section are a material inducement for the Lender entering
into this Agreement.
10.20 ENTIRE AGREEMENT. This Agreement constitutes the entire
Agreement among the parties hereto with respect to the parties hereof and
shall supersede any prior agreement between the parties hereto, whether
written or oral, relating to the subject hereof. Furthermore, in this regard,
this written Agreement and the other written loan documents represent,
collectively, the final agreement between the parties and may not be
contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties. There are no unwritten oral agreements between the
parties.
IN WITNESS WHEREOF, this Agreement is deemed executed effective as of the
date first above written.
BORROWERS:
PONTOTOC PRODUCTION, INC.,
By: Xxxxx Xxxxxx
Title: President
PONTOTOC PRODUCTION COMPANY, INC.
By: Xxxxx Xxxxxx
Title: President
OKLAHOMA BASIC ECONOMY CORPORATION
By: Xxxxx Xxxxxx
Title: President
LENDER:
LOCAL OKLAHOMA BANK, N.A.
By: Xxxx X. Xxxx, Xx.
Title: Senior Vice President
40
