EXHIBIT 10.3
AMENDED AND RESTATED
LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT (hereinafter referred to the
"AGREEMENT") is effective as of October 1, 2001, by and among PANHANDLE ROYALTY
COMPANY, an Oklahoma corporation (hereinafter referred to as "PANHANDLE"), PHC,
INC., an Oklahoma corporation (hereinafter referred to as "MERGER SUB"), WOOD
OIL COMPANY, an Oklahoma corporation (hereinafter referred to as "WOOD OIL"),
(Panhandle, Merger Sub and Wood Oil are hereinafter individually referred to as
a "BORROWER" and collectively referred to as the "BORROWERS") and BANCFIRST, an
Oklahoma banking corporation (hereinafter referred to as "BANK").
WITNESSETH:
That for and in consideration of the sum of Ten and No/100s Dollars
($10.00) and the mutual covenants and agreements hereinafter contained, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
covenant and agree as follows:
RECITATIONS. On December 29, 1999 Panhandle and the Bank executed that
certain Loan Agreement providing for, among other things, that certain revolving
loan commitment in an amount not to exceed the lesser of (i) a borrowing base,
or (ii) the sum of $5,000,000. Pursuant to such Loan Agreement, Panhandle made,
executed and delivered to Bank its December 29, 1999 Adjustable Rate Promissory
Note in the stated principal sum of $5,000,000 and maturing December 31, 2002.
On August 9, 2001, Panhandle, Merger Sub and Wood Oil executed that certain
Agreement and Plan of Merger wherein the Merger Sub, a wholly owned subsidiary
of Panhandle, will enter into a merger transaction with Wood Oil and Wood Oil
will become the surviving constituent corporation resulting from such corporate
merger. The Agreement and Plan of Merger provides that, as a consequence of the
merger transaction, Wood Oil will be a wholly owned subsidiary of Panhandle.
Panhandle, Merger Sub and Wood Oil have jointly and severally requested the
Bank amend and restate the December 29, 1999 Loan Agreement to, among other
things, provide the Borrowers (a) a $20,000,000 secured term loan with a
maturity date of September 30, 2006, and (b) a $5,000,000 secured revolving
credit facility which is intended to replace Panhandle's December 29, 1999
Adjustable Rate Promissory Note and contain a maturity date of December 31,
2003. Bank is willing to grant Borrowers' joint and several request for credit
on the terms and conditions hereinafter contained.
This Agreement is intended to amend, restate, replace and modify the
December 29, 1999 Loan Agreement. In addition, Panhandle's December 29, 1999
Adjustable Rate Promissory Note in the stated principal sum of $5,000,000 and
maturing December 31, 2002 is intended to be amended and restated as
contemplated herein.
1. DEFINITIONS. When used herein, the terms "Agreement," "Panhandle,"
"Merger Sub," "Wood Oil," "Borrower," "Borrowers," and "Bank" shall have the
meanings indicated above. When used herein the following terms shall have the
following meanings:
(a) Prime Rate - The fluctuating per annum rate of interest (expressed
as a percentage) designated as the "Prime Rate" in the "Money Rates"
section as published in the most recent issue of The Wall Street Journal.
If more than one Prime Rate is designated in The Wall Street Journal, then
the Index Rate will be the highest rate so determined. The Prime Rate as of
September 17, 2001 is _.__%.
(b) Borrowing Base - The value assigned by the Bank from time to time
to the Oil and Gas Properties. Until the next determination of the
Borrowing Base pursuant to Section 5 hereof, the aggregate Borrowing Base
shall be $25,000,000.
(c) Business Day - The normal banking hours during any day (other than
Saturdays or Sundays) that banks are legally open for business in Oklahoma
City, Oklahoma.
(d) Effective Date - October 1, 2001.
(e) Environmental Laws - The Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Super Fund
Amendments and Reauthorization Act of 1986, 42 U.S.C.A. Section 9601, et
seq., the Resource Conservation and Recovery Act, as amended by the
Hazardous Solid Waste Amendment of 1984, 42 U.S.C.A. Section 6901, et
seq., the Clean Air Act, 42 U.S.C.A. Section 1251, et seq., the Toxic
Substances Control Act, 15 U.S.C.A. Section 2601, et seq., and all other
laws relating to air pollution, water pollution, noise control and/or the
handling, discharge, disposal or recovery of on-site or off-site hazardous
substances or materials, as each of the foregoing may be amended from time
to time.
(f) Environmental Liability - Any claim, demand, obligation, cause of
action, accusation, allegation, order, violation, damage, injury, judgment,
penalty or fine, cost of enforcement, cost of remedial action or any other
costs or expense whatsoever, including reasonable attorneys' fees and
disbursements, resulting from the violation or alleged violation of any
Environmental Law or the imposition of any Environmental Lien (as
hereinafter defined) which would individually or in the aggregate have a
Material Adverse Effect.
(g) Environmental Lien - A Lien in favor of any court, governmental
agency or instrumentality or any other person (i) for any liability under
any Environmental Law or (ii) for damages arising from or cost incurred by
such court or governmental agency or instrumentality or other person in
response to a
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release or threatened release of any hazardous waste, substance or
constituent into the environment.
(h) ERISA - The Employee Retirement income Security Act of 1974, as
amended.
(i) Financial Statements - Balance sheets, income statements,
statements of cash flow and appropriate footnotes and schedules prepared in
accordance with GAAP.
(j) GAAP - Generally accepted accounting principles, consistently
applied.
(k) Lien - Any mortgage, deed of trust, pledge, security interest,
assignment, encumbrance or lien (statutory or otherwise) of every kind and
character.
(l) Loan Documents - This Agreement, the Notes, the Security
Instruments and all other documents contemplated or executed in connection
with the transaction described in this Agreement.
(m) Material Adverse Effect - Any material adverse effect on (i) the
assets or properties, liabilities, financial condition, business or
operations of Borrowers taken as a whole on a consolidated basis or from
those reflected in the consolidated Financial Statements of Panhandle or
from the facts represented or warranted in this Agreement, or (ii) the
ability of Borrowers to carry out their businesses taken as a whole on a
consolidated basis as of the effective date of this Agreement or as
proposed at the date of this Agreement to be conducted or to meet its
obligations under the Loan Documents on a timely basis.
(n) Notes - Both the $20,000,000 secured term adjustable rate
promissory note (the "Term Note") and the $5,000,000 secured revolving
credit adjustable rate promissory note (the "Revolving Note") described in
Section 3 hereof. Either the Term Note or the Revolving Note described in
Section 3 hereof may be hereinafter as a "Note."
(o) Oil and Gas Properties - All proved oil, gas and mineral
properties and interests, and related personal properties, in which each
Borrower has granted and hereinafter grants (to the satisfaction of Bank)
to Bank a negative pledge.
(p) Permitted Liens - The term Permitted Lien shall mean (i)
royalties, overriding royalties, reversionary interests, production
payments and similar burdens if the net cumulative effect of such burdens
does not (when considered cumulatively with the matters discussed in clause
(ii) below) operate to deprive any Borrower of any material right in
respect of any such Borrower's assets or properties (except for rights
customarily granted with respect to such interests); (ii) sales contracts
or other arrangements for the sale of production of oil, gas or associated
liquid or gaseous hydrocarbons which would not (when considered
cumulatively with the matters discussed in clause (i) above) deprive any
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Borrower of any material right in respect of any of such Borrower's assets
or properties (except for rights customarily granted with respect to such
contracts and arrangements); (iii) statutory liens for taxes or other
assessments that are not yet delinquent (or that, if delinquent, are being
contested in good faith by appropriate proceedings and for which any such
Borrower has set aside on their books adequate reserves in accordance with
GAAP); (iv) easements, rights of way, servitudes, permits, surface leases
and other rights in respect to surface operations, pipelines, grazing,
logging, canals, ditches, reservoirs or the like, conditions, covenants and
other restrictions, and easements of streets, alleys, highways, pipelines,
telephone lines, power lines, railways and other easements and rights of
way on, over or in respect of any Borrower's assets or properties; (v)
materialmen's, mechanic's, repairman's, employee's, contractor's,
sub-contractor's, operator's and other Liens incidental to the
construction, maintenance, development or operation of any Borrower's
assets or properties to the extent not delinquent (or which, if delinquent,
are being contested in good faith by appropriate proceedings and for which
any such Borrower have set aside on its books adequate reserves in
accordance with GAAP); (vi) all contracts, agreements and instruments, and
all defects and irregularities and other matters affecting any Borrower's
assets and properties which were in existence at the time any such
Borrower's assets and properties were originally acquired by such Borrower
and all routine operational agreements entered into in the ordinary course
of business, which contracts, agreements, instruments, defects,
irregularities and other matters and routine operational agreements are not
such as to, individually or in the aggregate, interfere materially with the
operation, value or use of any such Borrower's assets and properties,
considered in the aggregate; (vii) liens in connection with workmen's
compensation, unemployment insurance or other social security, old age
pension or public liability obligations; (viii) legal or equitable
encumbrances deemed to exist by reason of the existence of any litigation
or other legal proceeding or arising out of a judgment or award with
respect to which an appeal is being prosecuted in good faith; (ix) rights
reserved to or vested in any municipality, governmental, statutory or other
public authority to control or regulate any Borrower's assets and
properties in any manner, and all applicable laws, rules and orders from
any governmental authority; (x) Liens created by or pursuant to this
Agreement or pursuant to Security Instruments between the Bank and any
Borrower; and (xi) Liens existing at the date of this Agreement which have
been disclosed to Bank in any Borrower's Financial Statements or otherwise
in writing to Bank.
(q) Plan - Any plan subject to Title IV of ERISA and maintained by any
Borrower, or any such plan to which any such Borrower is required to
contribute on behalf of their respective employees.
(r) Revolving Loan - The secured revolving adjustable rate credit Loan
or loans made under the Revolving Loan Commitment pursuant to Section 2
hereof.
(s) Revolving Loan Amount - $5,000,000.
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(t) Revolving Loan Commitment - The secured revolving adjustable rate
credit loan commitment contained in Section 2 of this Agreement.
(u) Revolving Maturity Date - December 31, 2003.
(v) Security Instrument(s) - Each and every assignment, security
agreement, pledge, financing statement, mortgage, deed of trust or other
document or instrument evidencing a Lien on the assets of Borrowers in
favor of Bank including, without limitation, the "Collateral", as that term
is defined in Section 10(q) herein.
(w) Term Loan - The single Advance secured term adjustable rate Loan
made under the Term Loan Commitment pursuant to Section 2 hereof.
(x) Term Loan Amount - $20,000,000.
(y) Term Loan Commitment - The secured term adjustable rate loan
commitment contained in Section 2 of this Agreement.
(z) Term Maturity Date - November 1, 2006.
2. COMMITMENT OF THE BANK; TERMS OF LOAN COMMITMENT. On the terms and
conditions hereinafter set forth, Bank agrees to make loans (hereinafter
sometimes referred to as "ADVANCES" and individually as an "ADVANCE") to the
Borrowers jointly and severally, from time to time, during the period beginning
on the Effective Date and ending on the Revolving Maturity Date in such amounts
as Borrowers may request up to an amount not to exceed, in the aggregate
principal amount outstanding, at any time, of the lesser of (i) the Borrowing
Base or (ii) the sum of the Revolving Loan Amount plus the Term Loan Amount.
Notwithstanding any other provision of this Agreement, no Advance shall be
required to be made hereunder if any Event of Default (as hereinafter defined)
has occurred and is continuing or if any event or condition has occurred that
may, with notice, the passage of time, or both be an Event of Default.
(a) Procedure for Borrowing - Revolving Loan. Whenever Borrowers
desire an Advance in respect of the Revolving Loan Commitment, they shall
give Bank written notice via facsimile ("NOTICE OF BORROWING") of such
requested Advance.
(b) Reduction of Revolving Loan Commitment. Borrowers may at any time,
or from time to time, upon not less than three (3) Business Days prior
written notice to Bank, reduce or terminate the Revolving Loan Commitment;
provided, however, that each reduction in the Revolving Loan Commitment
must be in the amount of $250,000 or if more, in increments of $100,000.
Borrowers shall be under a continuing obligation to reduce, from time to
time, the Revolving Note by a prepayment of the Revolving Note in an amount
by which the principal balance of the Revolving Note plus the principal
balance of the Term Note exceeds the Borrowing Base.
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(c) Procedure for Borrowing - Term Loan. Borrowers may request a
single Advance in respect of the Term Loan Commitment in a Notice of
Borrowing issued to Bank contemporaneous with the "Closing," as that term
is defined in the Agreement and Plan of Merger more particularly described
in Section 1 of this Agreement, in an amount not exceeding the lesser of
(i) the Term Loan Amount plus any remaining principal balance in respect of
the December 29, 1999 Adjustable Rate Promissory Note in the stated
principal sum of $5,000,000 and maturing December 31, 2002 which is
intended to be renewed by Borrowers' execution of the Revolving Note, or
(ii) the Borrowing Base. No further or additional advances shall be
permitted in respect of the Term Loan Commitment.
(d) Reduction of Term Loan Commitment. Borrowers may at any time, or
from time to time, upon not less than three (3) Business Days prior written
notice to Bank, reduce or terminate the Term Loan Commitment; provided,
however, that each reduction in the Term Loan Commitment must be in the
amount of $250,000 or if more, in increments of $100,000. Borrowers shall
be under a continuing obligation to reduce, from time to time, the Term
Note by a prepayment of the Term Note in an amount by which the principal
balance of the Term Note exceeds the Borrowing Base.
(e) Participating Bank. The Bank's commitment to lend is contingent
upon and subject to: (a) the execution of a loan participation agreement
with respect to the Term Note, with terms and conditions acceptable to the
Bank, by Americrest Bank, an Oklahoma banking corporation, in an amount not
less than $6,000,000; and (b) the funding of such participation agreement.
3. NOTES EVIDENCING LOANS. The Revolving Loan and the Term Loan shall each
be evidenced by a promissory note made payable by Borrowers, jointly and
severally, to the order of the Bank as follows:
(a) Form of Revolving Note - The Revolving Loan shall be evidenced by
a Revolving Note in the face amount of $5,000,000, and shall be in the form
of EXHIBIT "A-1," annexed hereto. Notwithstanding the principal amount of
the Note, as stated on the face thereof, the actual principal amount due
from Borrowers jointly and severally on account of the Revolving Note, as
of any date of computation, shall be the sum of Advances then and
theretofore made on account thereof, less all principal payments actually
received by Bank in collected funds with respect thereto. Although the Note
shall be dated as of the Effective Date, interest in respect thereof shall
be payable only for the period during which the loans evidenced thereby are
outstanding and, although the stated amount of the Note may be higher, the
Note shall be enforceable, with respect to Borrowers' joint and several
obligation to pay the principal amount thereof, only to the extent of the
unpaid principal amount of the such loans.
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(b) Form of Term Note - The Term Loan shall be evidenced by a Term
Note in the face amount of $20,000,000, and shall be in the form of EXHIBIT
"A-2," annexed hereto. Notwithstanding the principal amount of the Term
Note, as stated on the face thereof, the actual principal amount due from
Borrowers jointly and severally on account of the Term Note, as of any date
of computation, shall be the sum of initial and single Advance then and
theretofore made on account thereof, less all principal payments actually
received by Bank in collected funds with respect thereto. Although the Term
Note shall be dated as of the Effective Date, interest in respect thereof
shall be payable only for the period commencing with the single Advance and
continuing thereafter so long as any portion of principal balance remains
unpaid.
(c) Interest Rate - The unpaid principal balance of the Notes shall
bear interest from time to time as set forth in Section 4 hereof.
(d) Payment of Interest - Interest on the Notes shall be payable
monthly in arrears on the first Business Day of each calendar month,
beginning December 1, 2001.
(e) Payment of Revolving Note Principal - Principal in respect of the
Revolving Note shall be repayable in full on the Revolving Maturity Date.
(f) Payment of Term Note Principal - Principal in respect of the Term
Note shall be repayable in fifty-nine (59) consecutive monthly installment
payments of $333,000.00 commencing on the first Business Day of each
calendar month, beginning December 1, 2001, and the remaining unpaid
principal balance, if any, shall be repaid in full at the Term Maturity
Date. Commencing March 31, 2002 and on each successive March 31 and
September 30, Borrowers may request the Term Note be reamortized if
prepayments of principal have been made. Any new amortization will divide
the then existing principal balance of the Term Note by the number of
months then remaining prior to the Term Loan Maturity Date to determine the
new amount of the consecutive monthly payments for the Term Note.
4. INTEREST RATES.
(a) Basic Rate. The unpaid principal balance of the Notes shall bear
interest at a fluctuating rate per annum from day to day equal to the Prime
Rate minus 1/4 of one percent.
(b) Default Rate. After maturity (whether by acceleration or
otherwise), the principal balance of the Note shall bear interest at a rate
of two percent (2%) higher than the Basic Rate but in no event more than
18% per year.
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5. BORROWING BASE.
(a) Initial Borrowing Base. From the Effective Date to the first
Determination Date (as hereinafter defined), the Borrowing Base shall be
$25,000,000.
(b) Subsequent Determinations of Borrowing Base. Subsequent
determinations of the Borrowing Base shall be made by the Bank at least
semi-annually on the dates set forth herein below and the Bank may make
additional redeterminations at any time it appears to the Bank, in the
exercise of its discretion, that there has been a material change in the
value of the Oil and Gas Properties ("UNSCHEDULED REDETERMINATIONS").
Effective as of September 30 of each year, Borrowers shall furnish to the
Bank on or prior to December 1 each year, beginning December 1, 2001, for
Panhandle and beginning December 1, 2002 for Wood Oil and if the Bank so
requests, within sixty days of April 1 of each year beginning April 1, 2002
for Panhandle and for Wood Oil and at such other times as Bank shall
request for an Unscheduled Redetermination, all information, reports and
data which the Bank has then requested concerning the Oil and Gas
Properties, said information to include, but not be limited to, (i) revenue
and lifting costs summary report for all Oil and Gas Properties, (ii) as of
September 30 and March 31, respectively, of each such year, an engineering
report in form and substance satisfactory to Bank prepared by an
independent petroleum engineer as is acceptable to Bank, covering the Oil
and Gas Properties, (iii) the most recently available production curves and
tabular production updates, including economic projections on any new
production from acquired or drilled acreage, and (iv) such other
information concerning the value of the Oil and Gas Properties as Bank may
reasonably deem necessary. Bank shall by written notice to Borrowers, no
later than sixty (60) days after receipt of such information set forth
above, designate the new Borrowing Base available to Borrowers hereunder
during the period beginning on each December 31 and June 30 (herein called
the "DETERMINATION DATE") and continuing until but not including the next
date as of which the Borrowing Base is redetermined. Notwithstanding the
foregoing, the first such Determination Date will be January 1, 2002. If an
Unscheduled Redetermination is made by the Bank, the Bank shall notify
Borrowers within a reasonable time after receipt of all requested
information of the new Borrowing Base, if any, and such new Borrowing Base
shall continue until redetermined pursuant to the provisions hereof. If
Borrowers do not furnish all such information, reports and data by the date
specified in the first sentence of this Section 5(b), unless such failure
is of no fault of Borrowers, the Bank may nonetheless designate the
Borrowing Base at any amount which the Bank determines in its reasonable
discretion and may redesignate the Borrowing Base from time to time
thereafter until the Bank receives all such information, reports and data,
whereupon the Bank shall designate a new Borrowing Base as described above.
The Bank shall determine the amount of the Borrowing Base based upon the
loan collateral value which it in its reasonable discretion assigns to such
Oil and Gas Properties of Borrowers at the time in question and based upon
such other credit factors consistently applied
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(including, without limitation, the assets, liabilities, cash flow,
business, properties, prospects, management and ownership of Borrowers and
its affiliates) as the Bank customarily considers in evaluating similar oil
and gas credits. It is expressly understood that the Bank has no obligation
to designate the Borrowing Base at any particular amount, except in the
exercise of its good faith discretion, whether in relation to the Revolving
Loan Commitment made herein or otherwise, and that the Bank's commitment to
advance funds hereunder is determined by reference to the Borrowing Base
from time to time in effect.
6. COMMITMENT FEES. In consideration of the Term Loan Commitment, Borrowers
shall pay to the Bank, upon execution hereof and as a condition to any Advances
being requested hereunder, a Term Loan Commitment Fee (hereinafter referred to
as the "TERM LOAN COMMITMENT FEE") equal to Twelve Thousand Five Hundred and
No/100s Dollars ($12,500.00)
In consideration of the Revolving Loan Commitment, Borrowers shall pay,
jointly and severally, to the Bank a Revolving Loan Commitment Fee (hereinafter
referred to as the "REVOLVING LOAN COMMITMENT FEE") equivalent to 1/16 of 1% per
annum on the average daily amount of the unadvanced amount of the Revolving
Note. The Commitment Fee shall commence to accrue on the Effective Date and
shall be payable quarterly in arrears hereafter on the first Business Day of
each calendar quarter commencing January 1, 2001, with the final fee payment due
at the Revolving Maturity Date for any period then ending for which the
Revolving Loan Commitment Fee shall not have been theretofore paid. In the event
the Commitment terminates on any date prior to the end of any calendar quarter
as a result of either (i) Borrowers terminating the Revolving Loan Commitment or
(ii) Borrowers' default hereunder followed by the termination of the Revolving
Loan Commitment by the Bank as a result of such default, Borrowers, jointly and
severally, will pay to Bank, on the date of such termination, the total
Revolving Loan Commitment Fee due for the quarter in which such termination
occurs. Bank shall invoice Borrowers for the Revolving Loan Commitment Fee
provided that the failure to do so shall not relieve the Borrowers of their
obligation to pay the same in the time and manner set forth hereinabove after
receipt of each such invoice.
7. PREPAYMENTS.
(a) Voluntary Prepayments. The Borrowers may at any time and from time
to time, without penalty or premium, prepay the Notes in whole or in part.
(b) Mandatory Prepayment. In the event the aggregate principal amount
outstanding in respect of the Notes ever exceeds the Borrowing Base as
determined by Bank pursuant to Section 5 hereof, Borrowers shall, within
thirty (30) days after notification from the Bank, either (A) provide
additional Oil and Gas Properties with value and quality in amounts
satisfactory to the Bank in its sole discretion in order to increase the
Borrowing Base by an amount at least equal to such excess, or (B) prepay,
without premium or penalty, the principal amount of the Notes in an amount
at least equal to such excess.
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8. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to enter
into this Agreement, Borrowers hereby represent and warrant to the Bank (which
representations and warranties will survive the delivery of the Notes) that:
(a) Corporate Existence. Each Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it was incorporated and is duly qualified as a
foreign corporation in all jurisdictions wherein the failure to qualify may
result in Material Adverse Effect.
(b) Corporate Power and Authorization. Each Borrower is duly
authorized and empowered to create and issue the Notes; and each Borrower
is duly authorized and empowered to execute, deliver and perform the
Security Instruments, including this Agreement; and all corporate and other
action on Borrowers' part, respectively, requisite for the due creation and
issuance of the Notes and this Agreement, has been duly and effectively
taken.
(c) Binding Obligations. The Loan Documents, upon their creation,
issuance, execution and delivery will, constitute valid and binding
obligations of each Borrower enforceable in accordance with its terms
(except that enforcement may be subject to any applicable bankruptcy,
insolvency or similar laws generally affecting the enforcement of
creditors' rights and subject to availability of equitable remedies).
(d) No Legal Bar or Resultant Lien. None of the Loan Documents violate
any provisions of any contract, agreement, law, regulation, order,
injunction, judgment, decree or writ to which any Borrower is subject, or
result in the creation or imposition of any lien or other encumbrance upon
any assets or properties of any Borrower, other than those contemplated by
this Agreement.
(e) No Consent. The execution, delivery and performance by each
Borrower of the Loan Documents do not require the consent or approval of
any other person or entity, including without limitation any regulatory
authority or governmental body of the United States or any state thereof or
any political subdivision of the United States or any state thereof except
for consents required for federal, state and, in some instances, private
leases, right of ways and other conveyances or encumbrances of oil and gas
leases.
(f) Financial Condition. The audited Financial Statements of (i)
Panhandle dated as of September 30, 2000, and (ii) the unaudited financial
statements of Wood Oil dated as of July 31, 2001, each of which have
heretofore been delivered to Bank, are complete and correct in all material
respects and fully and accurately reflect in all material respects the
financial condition, results of the operations and contingent liabilities
of Panhandle and Wood Oil, respectively, as of such dates and for the
period or periods stated, except for those contingent liabilities disclosed
in the footnotes to Panhandle's September 30, 2000 Form 10-k filing and its
June 30, 2001 10-Q filing with the U.S. Securities and Exchange Commission.
No change has since occurred in the
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condition, financial or otherwise, of either Panhandle or Wood Oil which is
reasonably expected to have a Material Adverse Effect, except as disclosed
to the Bank in EXHIBIT "B" attached hereto. Panhandle will deliver to Bank
a copy of the audited Financial Statements of Wood Oil dated as of July 31,
2001 as soon as the same are available, but in no event later than December
1, 2001.
(g) Liabilities. Borrowers do not have any material (individually or
in the aggregate) liability, direct or contingent, except as disclosed to
the Bank in their respective Financial Statements identified in the
preceding paragraph or in EXHIBIT "B" attached hereto. No unusual or unduly
burdensome restriction, restraint, or hazard exists by contract, law or
governmental regulation or otherwise relative to the business, assets or
properties of any Borrower which is reasonably expected to have a Material
Adverse Effect.
(h) Litigation. Except as described in the notes to the Financial
Statements, or as otherwise disclosed to the Bank in EXHIBIT "C" attached
hereto, there is no litigation, legal or administrative proceeding,
investigation or other action of any nature pending or, to the knowledge of
the officers of any Borrower, threatened against or affecting any Borrower
which involves the possibility of any judgment or liability not fully
covered by insurance, and which is reasonably expected to have a Material
Adverse Effect.
(i) Taxes; Governmental Charges. Each Borrower has filed all tax
returns and reports required to be filed and has paid all taxes,
assessments, fees and other governmental charges levied upon it or its
assets, properties or income which are due and payable, including interest
and penalties, or has provided adequate reserves, if required, in
accordance with GAAP for the payment thereof, except such as are being
contested in good faith by appropriate proceedings and for which adequate
reserves for the payment thereof as required by GAAP have been provided.
(i) Titles, Etc. Each Borrower has good and marketable title to its
assets and properties, including without limitation, the Oil and Gas
Properties, free and clear of all liens or other encumbrances, except
Permitted Liens. Furthermore, revenue is being received, or is expected to
be received, on each of the Oil and Gas Properties and no material revenue
from the Oil and Gas Properties has been suspended because of title
challenges or defects.
(k) Defaults. No Borrower is in default and no event or circumstance
has occurred which, but for the passage of time or the giving of notice, or
both, would constitute a default under any loan or credit agreement,
indenture, mortgage, deed of trust, security agreement or other agreement
or instrument to which any Borrower is a party in any respect that would be
reasonably expected to have a Material Adverse Effect. No Event of Default
hereunder has occurred and is continuing.
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(l) Casualties; Taking of Properties. Since the dates of the latest
Financial Statements of each Borrower provided to Bank, none of the
business or the assets or properties of any Borrower have been materially
or 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 domestic or foreign government or any agency
thereof, riot, activities of armed forces or acts of God or of any public
enemy.
(m) Use of Proceeds; Margin Stock. The proceeds of the loans hereunder
will be used by Borrowers for working capital and general corporate
purposes. No Borrower is engaged in the business of extending credit for
the purpose of purchasing or carrying any "margin stock" as defined in
Regulation U of the Board of Governors of the Federal Reserve System (12
C.F.R. Part 221), or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry a margin
stock or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of said Regulation U. No Borrower is
engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying margin stock.
No Borrower nor any person or entity acting on behalf of any Borrower
has taken or will take any action which might cause the loans hereunder or
any of the Loan Documents to violate Regulation U or any other regulation
of the Board of Governors of the Federal Reserve System or to violate the
Securities Exchange Act of 1934 or any rule or regulation thereunder, in
each case as now in effect or as the same may hereafter be in effect.
(n) Location of Business and Offices. The principal place of business
and executive offices of each Borrower is located at the address stated in
Section 14 hereof.
(o) Compliance with the Law. Each Borrower:
(i) is not in violation of any law, judgment, decree, order,
ordinance, or governmental rule or regulation to which any Borrower,
or any of their assets or properties are subject; or
(ii) has not failed to obtain any license, permit, franchise or
other governmental authorization necessary to the ownership of any of
its assets or properties or the conduct of its business;
which violation or failure is reasonably expected to have a Material
Adverse Effect.
(p) No Material Misstatements. No information, exhibit or report
furnished by Borrowers to the Bank in connection with the negotiation of
this Agreement
12
contained any material misstatement of fact or omitted to state a material
fact or any fact necessary to make the statement contained therein not
misleading.
(q) Not A Utility. No Borrower is an entity engaged in any state in
which it operates in the (i) generation, transmission, or distribution and
sale of electric power; (ii) transportation, distribution and sale through
a local distribution system of natural or other gas for domestic,
commercial, industrial, or other use; (iii) ownership or operation of a
pipeline for the transmission or sale of natural or other gas, crude oil or
petroleum products to other pipeline companies, refineries, local
distribution systems, municipalities, or industrial consumers; (iv)
provision of telephone or telegraph service to others; (v) production,
transmission, or distribution and sale of steam or water; (vi) operation of
a railroad; or (vii) provision of sewer service to others.
(r) ERISA. Each Borrower is in compliance in all material respects
with the applicable provisions of ERISA, and no "reportable event", as such
term is defined in Section 4043 of ERISA, has occurred with respect to any
Plan of any Borrower.
(s) Public Utility Holding Company Act. No Borrower is a "holding
company," or "subsidiary company" of a "holding company", or an "affiliate"
of a "holding company" or of a "subsidiary company" of a "holding company,"
or a "public utility" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
(t) Environmental Matters. Except as disclosed on EXHIBIT "D", no
Borrower: (i) has received notice or otherwise learned of any Environmental
Liability which would individually or in the aggregate have a Material
Adverse Effect arising in connection with (A) any non-compliance with or
violation of the requirements of any Environmental Law or (B) the release
or threatened release of any toxic or hazardous waste into the environment;
(ii) to its knowledge has any threatened or actual liability in connection
with the release or threatened release of any toxic or hazardous waste into
the environment which would individually or in the aggregate have a
Material Adverse Effect; or (iii) has received notice or otherwise learned
of any federal or state investigation evaluating whether any remedial
action is needed to respond to a release or threatened release of any toxic
or hazardous waste into the environment for which any Borrower is or may be
liable.
9. CONDITIONS OF LENDING.
(a) The obligation of the Bank to make the initial Advance under the
Term Loan or under the Revolving Loan shall be subject to the following
conditions precedent:
(i) Borrowers' Execution and Delivery - Borrowers shall have
executed and delivered to the Bank this Agreement, each Note, the
13
Security Instruments and other required documents, all in form and
substance satisfactory to the Bank;
(ii) Corporate Documentation - Bank shall have received (i)
certified copies of the Articles of Incorporation and By-Laws of each
Borrower and all amendments thereto, (ii) appropriate corporate
resolutions of each Borrower, (iii) evidence of good standing and
existence for each Borrower, and (iv) a certificate of the Secretary
of each Borrower certifying the names of each of the officers of each
Borrower authorized to sign on its behalf, together with the true
signatures of each such officer.
(iii) Other Documents - The Bank shall have received such other
instruments and documents incidental and appropriate to the
transaction provided for herein as the Bank or its counsel may
reasonably request, and all such documents shall be in form and
substance satisfactory to the Bank; and
(iv) Opinion of Counsel - The Bank shall have received an opinion
of each Borrower's counsel that the Loan Documents are authorized,
duly executed and enforceable.
(v) Merger Transaction - The Bank shall have received such
information on the acquisition and merger transactions contemplated in
the Agreement and Plan of Merger among Borrowers as Bank may
reasonably request including, without limitation, access to all due
diligence material.
(vi) Participation Agreement - The Bank shall have received an
executed participation agreement for not less than $6,000,000 from a
bank acceptable to Bank and in form and substance acceptable to Bank
in its sole discretion.
(vii) Legal Matters Satisfactory - All legal matters incident to
the consummation of the transactions contemplated hereby shall be
satisfactory to special counsel for the Bank.
(b) The obligation of the Bank to make any Advance (including the
initial Advance) in respect of the Revolving Loan Commitment or the Term
Loan Commitment shall be subject to the following additional conditions
precedent that, at the date of making each such Advance and after giving
effect thereto:
(i) Representation and Warranties - With respect to any Advance,
the representations and warranties of each Borrower under this
Agreement are true and correct in all material respects as of such
date, as if then made (except to the extent that such representations
and warranties related solely to an earlier date);
14
(ii) No Event of Default - No Event of Default shall have
occurred and be continuing nor shall any event have occurred or failed
to occur which, with the passage of time or service of notice, or
both, would constitute an Event of Default;
(iii) Other Documents - The Bank shall have received such other
instruments and documents incidental and appropriate to the
transaction provided for herein as the Bank or its counsel may
reasonably request, and all such documents shall be in form and
substance satisfactory to the Bank; and
(iv) Legal Matters Satisfactory - All legal matters incident to
the consummation of the transactions contemplated hereby shall be
satisfactory to special counsel for the Bank.
10. AFFIRMATIVE COVENANTS. A deviation from the provisions of this Section
10 shall not constitute an Event of Default under this Agreement if such
deviation is consented to in writing by the Bank. Without the prior written
consent of the Bank, each Borrower will at all times comply with the covenants
contained in this Section 10 from the date hereof and for so long as the either
Note evidences an outstanding obligation payable to the Bank.
(a) Financial Statements and Reports. Borrowers shall promptly furnish
to the Bank from time to time upon written request such information
regarding the business and affairs and financial condition of the
Borrowers, as the Bank may reasonably request, and will furnish to the
Bank:
(i) Annual Consolidated and Consolidating Financial Statements -
As soon as available, and in any event within ninety (90) days after
the close of each fiscal year, the annual audited consolidated
Financial Statements and the unaudited consolidating financial
statements of Panhandle showing the results of Borrowers' operations
on a consolidated and consolidating basis under GAAP, including an
opinion from the auditors regarding the fair presentation of such
Financial Statements;
(ii) Quarterly Financial Statements - As soon as available, and
in any event within sixty (60) days after the end of each fiscal
quarter (except the last such quarter in any fiscal year) of each
year, the quarterly unaudited Financial Statements of the Borrowers;
(iii) Report on Properties - As soon as available and in any
event on or before December 1 of each calendar year, and at such other
times as the Bank may reasonably request, the engineering reports
required to be furnished to the Bank under Section 5 hereof on the Oil
and Gas Properties.
15
(iv) Additional Information - Promptly upon request of the Bank
from time to time any additional financial information or other
information that the Bank may reasonably request.
All such reports, balance sheets and Financial Statements referred to in
Subsection 10(a) above shall be in such detail as the Bank may reasonably
request and shall be prepared in a manner consistent with the Financial
Statements.
(b) Certificates of Compliance. Concurrently with the furnishing of
the annual audited Financial Statements pursuant to Subsection 10(a)(i)
hereof and each of the quarterly unaudited Financial Statements pursuant to
Subsection 10(a)(ii) hereof, Borrowers will furnish or cause to be
furnished to the Bank a certificate signed by the chief executive officer
or chief financial officer of each Borrower (i) stating that each Borrower
has fulfilled in all material respects its obligations under the Loan
Documents including, but not limited to, its obligations under Section
10(j) hereof, and that all representations and warranties made herein
continue to be true and correct in all material respects (or specifying the
nature of any change), or if an Event of Default has occurred, specifying
the Event of Default and the nature and status thereof; (ii) to the extent
requested from time to time by the Bank, specifically affirming compliance
of each Borrower in all material respects with any of its representations
or obligations under said instruments; (iii) setting forth the computation,
in reasonable detail as of the end of each period covered by such
certificate, of compliance with Sections 11(d) and (g); and (iv) containing
or accompanied by such financial or other details, information and material
as the Bank may reasonably request to evidence such compliance.
(c) Taxes and Other Liens. The Borrowers will pay and discharge
promptly all taxes, assessments and governmental charges or levies imposed
upon any Borrower or upon the income or any assets or property of any
Borrower as well as all claims of any kind (including claims for labor,
materials, supplies and rent) which, if unpaid, might become a lien or
other encumbrance upon any or all of the assets or property of any
Borrower; provided, however, that Borrowers shall not be required to pay
any such tax, assessment, charge, levy or claim (i) if the amount,
applicability or validity thereof shall currently be contested in good
faith by appropriate proceedings diligently conducted or (ii) if the
failure to pay would result only in the imposition of a lien or other
encumbrance which is a Permitted Lien.
(d) Compliance with Laws. Borrowers will observe and comply, in all
material respects, with all applicable laws, statutes, codes, acts,
ordinances, orders, judgments, decrees, injunctions, rules, regulations,
orders and restrictions relating to environmental standards or controls or
to energy regulations of all federal, state, county, municipal and other
governments, departments, commissions, boards, agencies, courts,
authorities, officials and officers, domestic or foreign.
16
(e) Further Assurances. Borrowers will cure promptly any defects in
the creation and issuance of the Notes and the execution and delivery of
the Notes and the Loan Documents. Borrowers at their sole expense will
promptly execute and deliver to Bank upon request all such other and
further documents, agreements and instruments in compliance with or
accomplishment of the covenants and agreements in the Loan Documents, or to
correct any omissions in the Notes or more fully to state the obligations
set out herein.
(f) Performance of Obligations. Borrowers, jointly and severally,
agree to pay the Notes and other obligations incurred by any of them under
the Loan Documents according to the reading, tenor and effect thereof and
hereof; and each of Borrowers will do and perform every act and discharge
all of the obligations provided to be performed and discharged by each of
them under the Loan Documents, at the time or times and in the manner
specified.
(g) Insurance. Borrowers now maintain and will continue to maintain
insurance with financially sound and reputable insurers with respect to its
assets against such liabilities, fires, casualties, risks and contingencies
and in such types and amounts as is customary in the case of persons
engaged in the same or similar businesses and similarly situated. Upon
request of the Bank, Borrowers will furnish or cause to be furnished to the
Bank from time to time a summary of the respective insurance coverage of
Borrowers in form and substance satisfactory to the Bank, and, if
requested, will furnish the Bank copies of the applicable policies. Upon
written demand by Bank, any insurance policies covering any such property
shall be amended (i) to provide that such policies may not be canceled,
reduced or affected in any manner for any reason without fifteen (15) days
prior notice to Bank, (ii) to provide for insurance against fire, casualty
and other hazards normally insured against, in the amount of the full value
(less a reasonable deductible not to exceed amounts customary in the
industry for similarly situated business and properties) of the property
insured, and (iii) to provide for such other matters as the Bank may
reasonably require. Each Borrower shall at all times maintain adequate
insurance with respect to its properties against its liability for injury
to persons or property, which insurance shall be by financially sound and
reputable insurers and shall without limitation provide the following
coverage: comprehensive general liability (including coverage for damage to
underground resources and equipment, damage caused by blowouts or
cratering, damage caused by explosion, damage to underground minerals or
resources caused by saline substances, broad form property damage coverage,
broad form coverage for contractually assumed liabilities and broad form
coverage for acts of independent contractors), worker's compensation and
automobile liability. Borrowers shall at all times maintain cost of control
of well insurance with respect to its properties which shall insure
Borrowers against seepage and pollution expense if deemed economical in the
reasonable discretion of Borrowers; redrilling expense; and cost of control
of well; fires, blowouts, etc. Additionally, Borrowers shall at all times
maintain adequate insurance with respect to all of its other assets and
xxxxx in accordance with prudent business practices.
17
(h) Accounts and Records. Borrowers will keep books, records and
accounts in which full, true and correct entries will be made of all
dealings or transactions in relation to their business and activities,
prepared in a manner consistent with prior years.
(i) Right of Inspection. Borrowers will permit any officer, employee
or agent of the Bank to examine Borrowers' books, records and accounts, and
take copies and extracts therefrom, all at such reasonable times and as
often as the Bank may reasonably request. Bank will keep all such
information confidential and will not without prior written consent
disclose or reveal the information or any part thereof to any person other
than the Bank's officers, employees, legal counsel, regulatory authorities,
any participants in the Loan, or advisors to whom it is necessary to reveal
such information for the purpose of effectuating the agreements and
undertakings specified herein.
(j) Notice of Certain Events. Borrowers shall promptly notify the Bank
if Borrowers learn of the occurrence of (i) any event which constitutes an
Event of Default, together with a detailed statement by Borrowers of the
steps being taken to cure the Event of Default; or (ii) any legal, judicial
or regulatory proceedings affecting any Borrower, or any of the assets or
properties of any Borrower which, if adversely determined, could reasonably
be expected to have a Material Adverse Effect; or (iii) any dispute between
any Borrower and any governmental or regulatory body or any other person or
entity which, if adversely determined, might reasonably be expected to
cause a Material Adverse Effect; or (iv) any other matter which in its
reasonable opinion could have a Material Adverse Effect.
(k) ERISA Information and Compliance. Borrowers will promptly furnish
to the Bank immediately upon becoming aware of the occurrence of any
"reportable event," as such term is defined in Section 4043 of ERISA, or of
any "prohibited transaction", as such term is defined in Section 4975 of
the Internal Revenue Code of 1954, as amended, in connection with any Plan
or any trust created thereunder, a written notice signed by the President
or the chief financial officer of such Borrower, specifying the nature
thereof, what action such Borrower is taking or proposes to take with
respect thereto, and, when known, any action taken by the Internal Revenue
Service with respect thereto.
(l) Environmental Reports and Notices. Borrowers will deliver to the
Bank (i) promptly upon its becoming available, one copy of any material
report sent by any Borrower to any court, governmental agency or
instrumentality pursuant to any Environmental Law, (ii) notice, in writing,
promptly upon any Borrower's learning that it has received notice or
otherwise learned of any claim, demand, action, event, condition, report or
investigation indicating any potential or actual liability arising in
connection with (x) the non-compliance with or violation of the
requirements of any Environmental Law which reasonably could be expected to
have a Material Adverse Effect; (y) the release or threatened release of
any toxic or hazardous waste into the environment which reasonably could be
expected to
18
have a Material Adverse Effect or which release any Borrower would have a
duty to report to any court or government agency or instrumentality, or
(iii) the existence of any Environmental Lien on any properties or assets
of any Borrower, and Borrowers shall immediately deliver a copy of any such
notice to Bank.
(m) Maintenance. Borrowers will (i) observe and comply with all valid
laws, statutes, codes, acts, ordinances, orders, judgments, decrees,
injunctions, rules, regulations, orders and restrictions relating to
environmental standards or controls or to energy regulations of all
federal, state, county, municipal and other governments, departments,
commissions, boards, agencies, courts, authorities, officials and officers,
domestic or foreign; (ii) except as provided in Subsections 10(n) and 10(o)
below, consistent with Borrower's prior practice, maintain the Oil and Gas
Properties and other assets and properties in good and workable condition
at all times and make all repairs, replacements, additions, betterments and
improvements to the Oil and Gas Properties and other assets and properties
as are needed and proper so that the business carried on in connection
therewith may be conducted properly and efficiently at all times in the
opinion of the Borrowers exercised in good faith; (iii) take or cause to be
taken whatever actions are reasonably necessary or desirable to prevent an
event or condition of default by any Borrower under the provisions of any
gas purchase or sales contract or any other contract, agreement or lease
comprising a part of the Oil and Gas Properties; and (iv) furnish Bank upon
written request evidence satisfactory to Bank that there are no liens,
claims or encumbrances on the Oil and Gas Properties, except laborers',
vendors', repairmen's, mechanics', workers', or materialmen's liens arising
by operation of law or incident to the construction or improvement of
property if the obligations secured thereby are not yet due or are being
contested in good faith by appropriate legal proceedings or Permitted
Liens.
(n) Operation of Properties. Except as provided in Subsection 10(p)
below, Borrowers will operate, or cause to be operated, all Oil and Gas
Properties in a careful and efficient manner in accordance with the
practice of the industry and in compliance in all material respects with
all applicable laws, rules, and regulations, and in compliance in all
material respects with all applicable proration and conservation laws of
the jurisdiction in which the properties are situated, and all applicable
laws, rules, and regulations, of every other agency and authority from time
to time constituted to regulate the development and operation of the
properties and the production and sale of hydrocarbons and other minerals
therefrom; provided, however, that Borrowers shall have the right to
contest, in good faith by appropriate proceedings, the applicability or
lawfulness of any such law, rule or regulation and pending such contest may
defer compliance therewith, as long as such deferment shall not subject the
properties or any part thereof to foreclosure or loss.
(o) Compliance with Leases and Other Instruments. Borrowers will pay
or cause to be paid and discharged all rentals, delay rentals, royalties,
production
19
payment, and indebtedness required to be paid by the Borrowers accruing
under, and perform or cause to be performed in all material respects each
and every act, matter, or thing required of any Borrower by each and all of
the assignments, deeds, leases, subleases, contracts, and agreements in any
way relating to any Borrower and do all other things necessary of the
Borrowers to keep unimpaired in all material respects the rights of the
Borrowers thereunder and to prevent the forfeiture thereof or default
thereunder; provided, however, that nothing in this Subsection 10(o) shall
be deemed to require the Borrowers to perpetuate or renew any oil and gas
lease or other lease by payment of rental or delay rental or by
commencement or continuation of operations or to prevent the Borrowers from
abandoning or releasing any oil and gas lease or other lease or well
thereon when, in any of such events, in the opinion of Borrowers exercised
in good faith, it is not in the best interest of the Borrowers to
perpetuate the same.
(p) Certain Additional Assurances Regarding Maintenance and Operations
of Properties. With respect to those Oil and Gas Properties which are being
operated by operators other than Borrowers, Borrowers shall not be
obligated to perform any undertakings contemplated by the covenants and
agreement contained in Subsections 10(n) or 10(o) hereof which are
performable only by such operators and are beyond the control of Borrowers;
however, Borrowers agree to promptly take all actions available under any
operating agreements or otherwise to bring about the performance of any
such undertakings required to be performed thereunder.
(q) Collateral. Payment of the Notes and all other obligations
evidenced by the Loan Documents, and the performance by the Borrowers under
the Loan Documents, shall be secured by one or more Security Instruments,
all in form and substance acceptable to the Bank, by which the Borrowers
convey, mortgage and xxxxx x Xxxx to the Bank upon the all assets of
Borrowers now owned or hereafter acquired (the "Collateral") including,
without limitation, the Oil and Gas Properties and the following categories
of assets as defined by the Uniform Commercial Code: Accounts; As-extracted
collateral; Chattel Paper; Deposit Accounts; Documents; Equipment; General
Intangibles including Payment Intangibles; Instruments, including
Promissory Notes; Inventory; Investment Property; Letter of Credit Rights;
and Supporting Obligations.. Should the Bank elect to accept Security
Instruments as of the Effective Date encumbering less than all of
Borrowers' Oil and Gas Properties or other Collateral, Borrowers covenant
and agree, from time to time, during the term of this Agreement, the Bank,
may require and Borrowers agree to execute and deliver for recordation such
other and further Security Instruments to confirm and further secure the
interest of the Bank in all of Borrowers' assets, including the Collateral.
11. NEGATIVE COVENANTS. A deviation from the provisions of this Section 11
shall not constitute an Event of Default under this Agreement if such deviation
is consented to in writing by the Bank. Without the prior written consent of the
Bank, Borrowers will at all times comply with the covenants contained in this
Section 11 from the date hereof and for so long as the Note is in existence.
20
(a) Liens. Borrowers will not create, incur, assume or permit to exist
any lien, security interest or other encumbrance on any of its materials,
assets or properties, including, but not limited to, Oil and Gas
Properties, except Permitted Liens or Liens in favor of Bank.
(b) Sales of Assets. The Borrowers will not sell, lease or otherwise
transfer, directly or indirectly, all or any material part of the Oil and
Gas Properties or oil and gas assets, to any other person or entity, except
sales, leases or other transfers (i) made in the ordinary course of
business by Borrowers, or (ii) sales of Oil and Gas Properties or oil and
gas assets, the gross sales proceeds of which do not exceed $250,000 in the
aggregate in any fiscal year.
(c) Debts, Guaranties and Other Obligations. Borrowers will not incur,
create, assume or in any manner become or be liable in respect of any
indebtedness, nor will the Borrowers guarantee or otherwise in any manner
become or be liable in respect of any indebtedness, liabilities or other
obligations of any other person or entity, whether by agreement to purchase
the indebtedness of any other person or entity or agreement for the
furnishing of funds to any other person or entity through the purchase or
lease of goods, supplies or services (or by way of stock purchase, capital
contribution, advance or loan) for the purpose of paying or discharging the
indebtedness of any other person or entity, or otherwise, except that the
foregoing restrictions shall not apply to:
(i) the Notes, or other indebtedness of Borrowers heretofore
disclosed to Bank in writing;
(ii) taxes, assessments or other government charges which are not
yet due or are being contested in good faith by appropriate action
promptly initiated and diligently conducted, if such reserve as shall
be required by generally accepted accounting principles shall have
been made therefore; and
(iii) indebtedness incurred in the ordinary course of business.
(d) Dividends. The aggregate cash dividends paid on the stock of
Panhandle shall not exceed an amount equal to 50% of Panhandle's
consolidated cash flow from operations (as determined in accordance with
GAAP) after payment of any debt service requirements on a consolidated
basis, to be tested quarterly at the end of each fiscal quarter using the
fiscal quarter ended just prior to the testing date plus the previous three
fiscal quarters. Wood Oil may pay any dividends to Panhandle without any
restriction or limitation so long as Wood Oil remains a wholly owned
subsidiary of Panhandle.
(e) Stock Acquisitions. Borrowers shall not acquire in any fiscal year
treasury stock with a value exceeding $75,000 in the aggregate and on a
21
consolidated basis. This limitation shall not apply to purchases of stock
from the Employee Stock Ownership Plan. Borrowers' right to purchase stock
through or from the Employee Stock Ownership Plan or treasury stock shall
end upon the occurrence of an Event of Default.
(f) Other Negative Pledges. Borrowers will not grant a negative pledge
on any of their assets except the negative pledge granted herein to Bank.
(g) Net Income. Borrowers shall not allow their consolidated net
income (calculated in accordance with GAAP), to ever be less than zero
($0.00), excluding therefrom: (i) the effect of any oil and gas property
asset writedowns mandated by the Securities and Exchange Commission
regulations regarding capitalized assets, and (ii) costs for exploratory
xxxxx determined to be incapable of producing oil, gas or other
hydrocarbons in commercially paying quantities or so called "dry holes."
Net income under this provision will be tested quarterly using the fiscal
quarter ending just prior to the testing date plus the previous three
fiscal quarters.
12. EVENTS OF DEFAULT. Any one or more of the following events shall be
considered an "Event of Default" as that term is used herein:
(a) Borrowers shall fail to pay within five (5) days of when due or
declared due the principal of or interest on the Notes or any fee or any
other indebtedness of Borrowers incurred pursuant to the Loan Documents; or
(b) Any representation or warranty made by Borrowers under the Loan
Documents, or in any certificate or statement furnished or made to Bank
pursuant thereto, or in connection herewith, or in connection with any
document furnished hereunder, shall prove to be untrue in any material
respect as of the date on which such representation or warranty is made (or
deemed made), or any representation, statement (including financial
statements), certificate, report or other data furnished or to be furnished
or made by any Borrower under the Loan Documents, proves to have been
untrue in any material respect, as of the date on which the facts therein
set forth were stated or certified, and such untruth shall continue for
more than thirty (30) days; or
(c) Default shall be made in the due observance or performance of any
of the covenants or agreements of the Borrowers contained in the Loan
Documents, and such default shall continue for more than thirty (30) days;
or
(d) Default shall be made in respect of any obligation for borrowed
money, other than the Notes, for which any Borrower is liable (directly, by
assumption, as guarantor or otherwise), or any obligations secured by any
mortgage, pledge or other security interest, lien, charge or encumbrance
with respect thereto, on any asset or property of any Borrower or in
respect of any agreement relating to any such obligations, and such default
shall continue beyond the applicable grace period, if any; or
22
(e) Any Borrower shall commence a voluntary case or other proceedings
seeking liquidation, reorganization or other relief with respect to itself
or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking an appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial
part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary
case or other proceeding commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any action authorizing the
foregoing; or
(f) An involuntary case or other proceeding shall be commenced against
any Borrower seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of sixty (60)
days; or an order for relief shall be entered against any Borrower under
the federal bankruptcy laws as now or hereinafter in effect; or
(g) A final judgment or order for the payment of money in excess of
$100,000.00 (or judgments or orders aggregating in excess of $100,000.00)
shall be rendered against any Borrower and such judgment or order shall
continue unsatisfied and unstayed for a period of thirty (30) days; or
(h) In the event the aggregate principal amount outstanding under the
Notes shall at any time exceed the Borrowing Base established for the
Notes, Borrowers shall fail to provide such additional Oil and Gas
Properties or prepay the principal of the Notes, or either of them, in
compliance with the provisions of Section 7 hereof.
Upon occurrence of any Event of Default specified in Subsections 12(e) and
12(f) hereof, the Revolving Loan Commitment and the Term Loan Commitment shall
terminate and the entire principal amount due under the Notes and all interest
then accrued thereon, and any other liabilities of Borrowers hereunder, shall
become immediately due and payable all without notice and without presentment,
demand, protest, notice of protest or dishonor or any other notice of default of
any kind, all of which are hereby expressly waived by Borrowers. In any other
Event of Default, the Bank may by notice to Borrowers terminate the Revolving
Loan Commitment and the Term Loan Commitment and declare the principal of, and
all interest then accrued on, the Notes and any other liabilities hereunder to
be forthwith due and payable, whereupon the same shall forthwith become due and
payable without presentment, demand, protest or other notice of any kind, all of
which Borrowers hereby expressly waive, anything contained herein or in the
Notes to the contrary notwithstanding. Nothing contained in this Section 12
shall be construed to limit or amend in any way the Events of Default enumerated
in the Notes, or any other of the Loan Documents.
23
Upon the occurrence and during the continuance of any Event of Default, the
Bank is hereby authorized at any time and from time to time, without notice to
Borrowers (any such notice being expressly waived by Borrowers), to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Bank to
or for the credit or the account of the Borrowers against any and all of the
indebtedness of the Borrowers under the Notes and the Loan Documents,
irrespective of whether or not the Bank shall have made any demand under the
Loan Documents, including this Agreement or the Notes and although such
indebtedness may be unmatured. Any amount set off by the Bank shall be applied
against the indebtedness owed the Bank by Borrowers. The Bank agrees promptly to
notify Borrowers after any such setoff and application, provided that the
failure to give such notice shall not affect the validity of such setoff and
application. The rights of the Bank under this Section 12 are in addition to
other rights and remedies (including, without limitation, other rights of
setoff) which the Bank may have. None of the rights granted to the Bank in this
Section 12 shall apply to any deposits held by the Bank constituting trust funds
and so identified to the Bank at the time the applicable deposit account is
created. Within three (3) Business Days after such setoff or appropriation by
the Bank, the Bank shall give Borrowers written notice thereof. However, a
failure to give such notice will not affect the validity of the setoff or
appropriation.
13. EXERCISE OF RIGHTS. No failure to exercise, and no delay in exercising,
on the part of the Bank, any right under any of the Loan Documents shall operate
as a waiver thereof, nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right. The
rights of the Bank under the Loan Documents shall be in addition to all other
rights provided by law. No modification or waiver of any provision of the Loan
Documents or consent to departure therefrom, shall be effective unless in
writing, and no such consent or waiver shall extend beyond the particular case
and purpose involved. No notice or demand given in any case shall constitute a
waiver of the right to take other action in the same, similar or other
circumstances without such notice or demand.
14. NOTICES. Any notices or other communications required or permitted to
be given by this Agreement or any other Loan Documents and instruments referred
to herein must be given in writing and must be: (a) personally delivered; (b)
mailed by prepaid certified or registered mail, or (c) sent by (i) overnight
express mail and (ii) telecopier or facsimile machine, to the party to whom such
notice or communication is directed at the address of such party as follows: (a)
BORROWERS: PANHANDLE ROYALTY COMPANY and PHC, INC., Suite 210 Grand Centre, 0000
X.X. Xxxxx Xxxx., Xxxxxxxx Xxxx, Xxxxxxxx 00000-0000, Attention: Xxxxxxx X.
Xxxxxxx, Vice President/Treasurer; (b) WOOD OIL COMPANY, Suite 210 Grand Centre,
0000 X.X. Xxxxx Xxxx., Xxxxxxxx Xxxx, Xxxxxxxx 00000-0000, Attention: Xxxxxxx X.
Xxxxxxx, Vice President/Treasurer; (c) BANCFIRST, 000 X. Xxxxxxxx, Xxxxxxxx
Xxxx, Xxxxxxxx 00000, Attention: E.G. Alexander, Senior Vice President. Any such
notice or other communication shall be deemed to have given (whether actually
received or not) on the day it is personally delivered, if personally delivered
as aforesaid or, if mailed, on the fifth day after it is mailed as aforesaid or,
if sent overnight or by fax as aforesaid,
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one day thereafter. Any party may change its address for purposes of this
Agreement by giving notice of such change to the other party pursuant to this
Section 14. Upon receipt by Bank of any such notice, Bank shall promptly provide
copies of such notice or notices to the Bank.
15. EXPENSES.
(a) Borrowers agree, jointly and severally, to pay, in immediately
available funds, to the Bank (i) all reasonable attorney's fees incurred by
the Bank in respect of the preparation, documentation, recordation,
amendments and the enforcement of rights of the Bank under the terms of
this Agreement and the Loan Documents, (ii) all out-of-pocket costs and
expenses of the Bank incurred in connection with the filing, recording,
refiling or re-recording of any Security Instruments relating to the
Collateral and all amendments or supplements to any thereof and any and all
other documents or instruments or further assurances required to be filed
or recorded or refiled or re-recorded, and (iii) the reasonable costs and
expenses incurred by the Bank to enforce the rights of the Bank under the
terms of the Loan Documents including, without limitation, reasonable
attorney's fees. The Borrower hereby authorizes the Bank to, in Bank's
discretion, charge Borrower's deposit accounts with Bank or, in the
alternative, advance funds from the Notes to pay any such fees, costs or
expenses. In addition, the Borrower agrees to pay, and to save the Bank
harmless from all liability for any stamp or other taxes which may be
payable in connection with the execution or delivery of this Agreement or
the issuance of the Notes or of any other instruments or documents provided
for herein or delivered or to be delivered hereunder or in connection
herewith. All fees, costs and expenses chargeable to the Borrower under the
terms of the Loan Documents shall be payable immediately upon receipt of an
invoice or other notification thereof from the Bank to Borrowers.
(b) Borrowers shall pay (i) any waiver or consent hereunder or any
amendment hereof or any default or Event of Default and (ii) if a default
or an Event of Default occurs, all reasonable and necessary out-of-pocket
expenses incurred by the Bank, including fees and disbursements of counsel,
in connection with such default and Event of Default and collection and
other enforcement proceedings resulting therefrom. The Borrowers shall
indemnify the Bank against any transfer taxes, document taxes, assessments
or charges made by any governmental authority by reason of the execution
and delivery of the Loan Documents.
(c) Borrowers agree to indemnify and hold harmless the Bank from and
against any loss, cost, liability, damage or expense (including the
reasonable fees and out-of-pocket expenses of counsel to the Bank,
including all local counsel hired by such counsel) incurred by the Bank in
investigating or preparing for, defending against, or providing evidence,
producing documents or taking any other action in respect of any commenced
or threatened litigation, administrative proceeding or investigation under
any federal securities law or any other statute of any jurisdiction, or any
regulation, or at common law or otherwise, which is
25
alleged to arise out of or is based upon any acts, practices or omissions
or alleged acts, practices or omissions of any Borrower or its agents. The
indemnity set forth herein shall be in addition to any other obligations or
liabilities of the Borrowers to the Bank hereunder or at common law or
otherwise, and shall survive any termination of this Agreement, the
expiration of the Revolving Loan Commitment, the expiration of the Term
Loan Commitment, and the payment of all indebtedness of the Borrowers to
the Bank under the Notes or the Loan Documents; provided that the Borrowers
shall have no obligation under this Section 15 to the Bank with respect to
any of the foregoing arising out of the gross negligence, or willful
misconduct of the Bank.
16. GOVERNING LAW. THIS AGREEMENT IS BEING EXECUTED AND DELIVERED, AND IS
INTENDED TO BE PERFORMED, IN OKLAHOMA CITY, OKLAHOMA, AND THE SUBSTANTIVE LAWS
OF OKLAHOMA SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND
INTERPRETATION OF THIS AGREEMENT AND ALL OTHER DOCUMENTS AND INSTRUMENTS
REFERRED TO HEREIN, UNLESS OTHERWISE SPECIFIED THEREIN OR UNLESS THE LAWS OF
ANOTHER STATE REQUIRE THE APPLICATION OF THE LAWS OF SUCH STATE. THIS AGREEMENT
SHALL GOVERN AND CONTROL OVER ANY INCONSISTENT PROVISIONS, IF ANY, CONTAINED IN
ANY OF THE OTHER LOAN DOCUMENTS.
17. INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective during
the term of this Agreement, such provisions shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement, and the
remaining provisions of the Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement.
18. MAXIMUM INTEREST RATE. Regardless of any provisions contained in this
Agreement or in any other documents and instruments referred to herein, the Bank
shall never be deemed to have contracted for or be entitled to receive, collect
or apply as interest on the Notes any amount in excess of the maximum rate of
interest permitted to be charged by applicable law, and in the event the Bank
ever receives, collects or applies as interest any such excess, or if an
acceleration of the maturities of the Notes or if any prepayment by Borrowers
results in Borrowers having paid any interest in excess of the maximum rate,
such amount which would be excessive interest shall be applied to the reduction
of the unpaid principal balance of the Notes for which such excess was received,
collected or applied, and, if the principal balance of such Notes is paid in
full, any remaining excess shall forthwith be paid to Borrowers. All sums paid
or agreed to be paid to the Bank for the use, forbearance or detention of the
indebtedness evidenced by the Notes and/or the Loan Documents shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such indebtedness until payment in full so that the
rate or amount of interest on account of such indebtedness does not exceed the
maximum lawful rate permitted under applicable law. In determining whether or
not the interest paid or payable under any specific contingency exceeds the
maximum rate of interest permitted by law, Borrowers
26
and the Bank shall, to the maximum extent permitted under applicable law, (i)
characterize any non-principal payment as an expense, fee or premium, rather
than as interest; and (ii) exclude voluntary prepayments and the effect thereof;
and (iii) compare the total amount of interest contracted for, charged or
received with the total amount of interest which could be contracted for,
charged or received throughout the entire contemplated term of the Notes at the
maximum lawful rate under applicable law.
19. AMENDMENTS. This Agreement may be amended only by an instrument in
writing executed by an authorized officer of the party against whom such
amendment is sought to be enforced.
20. MULTIPLE COUNTERPARTS. This Agreement may be executed in a number of
identical separate counterparts, each of which for all purposes is to be deemed
an original, but all of which shall constitute, collectively, one agreement. No
party to this Agreement shall be bound hereby until a counterpart of this
Agreement has been executed by all parties hereto.
21. SURVIVAL. All covenants, agreements, undertakings, representations and
warranties made in this Agreement, the Notes or other Loan Documents referred to
herein shall survive all closings hereunder and shall not be affected by any
investigation made by any party.
22. PARTIES BOUND. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns, heirs,
legal representatives and estates, provided, however, that no Borrower may,
without the prior written consent of the Bank, assign any rights, powers, duties
or obligations hereunder.
23. PARTICIPATIONS. The Bank shall have the right at any time and from time
to time to sell one or more participations in the Notes or any Advance
thereunder. Except for the participation referred to in Section 2(e) herein, the
Bank shall notify Panhandle in writing of the sale of any such participations.
To the extent of any such participation, the provisions of this Agreement shall
inure to the benefit of, and be binding on, each participant, including, but not
limited to, any indemnity from Borrowers to the Bank. The Borrowers shall have
no obligation or liability to and no obligation to negotiate or confer with, any
participant, and Borrowers shall be entitled to treat the Bank as the sole owner
of the Notes without regard to notice or actual knowledge of any such
participation. Upon the occurrence of a default or an Event of Default, each
participant will have and is hereby granted the right to set off against and to
appropriate and apply from time to time, without prior notice to the Borrowers
or any other party, any such notice being hereby expressly waived, any and all
deposits (general or special or other indebtedness or claims, direct or
indirect, contingent or otherwise), at any time held or owing by the participant
to or for the credit or account of any Borrower against the payment of the Notes
and any other obligations of the Borrowers hereunder, provided, however, none of
the rights granted in this Section 23 shall apply to any deposits held by any
participant constituting trust funds and so identified to such participant at
the time the applicable deposit account is created. Within three (3) Business
Days after such setoff or appropriation by a participant, that participant shall
give Borrowers written notice
27
thereof. However, a failure to give any such notices will not affect the
validity of this setoff or appropriation.
24. OTHER AGREEMENTS. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
"BORROWERS": PANHANDLE ROYALTY COMPANY,
an Oklahoma corporation
By:
--------------------------------------
Name: H W Peace, II
Title: President and CEO
PHC, INC., an Oklahoma corporation
By:
--------------------------------------
Name: H W Peace, II
Title: President and CEO
WOOD OIL COMPANY,
an Oklahoma corporation
By:
--------------------------------------
Name: H W Peace, II
Title: President and CEO
"BANK": BANCFIRST, an Oklahoma banking corporation
By:
--------------------------------------
Xx Xxxxxxxxx, Senior Vice President
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