Bank of Texas, N.A.
Bank
of
Texas,
N.A.
5
Houston
Center
0000
XxXxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxx 00000
March
14,
2008
Tandem
Energy Corporation
PER
Gulf
Coast, Inc.
Attention:
Xxxxxxx X. Xxxxxxxxxx, Senior Vice President
000
X.
Xxxxxxx, Xxxxx 000
Xxxxxxx,
Xxxxx 00000
Re: Loan
Agreement
Gentlemen:
This
letter sets forth the Loan Agreement (this ALoan
Agreement@)
among
Tandem
Energy Corporation,
a
Delaware corporation, and PER
Gulf
Coast, Inc.,
a
Delaware corporation (collectively ABorrowers@);
Bank of
Texas, N.A.,
as
administrative agent (AAgent@);
and
Bank of
Texas, N.A.
(ABank
of Texas@),
and
all banks and financial institutions now or hereafter a party to this Loan
Agreement (collectively ABanks@),
with
respect to loans from Banks to Borrowers and obligations of Borrowers to Agent
and Banks.
1. Loan.
(a)
Subject
to the terms and conditions set forth in this Loan Agreement and the other
agreements, instruments, and documents executed and delivered in connection
herewith (collectively the ALoan
Documents@),
each
of the Banks severally agrees to make a revolving loan (the ARevolving
Loans@)
to
Borrowers for the purposes set forth below, in an amount not to exceed in the
aggregate at any one time outstanding, the amount of each Banks=
Percentage Share (as defined below) of the sums set forth below. Each
Banks=
Percentage Share of the Revolving Loans shall be evidenced by and under the
terms set forth in separate notes in the form of the Revolving Promissory Note
attached as Exhibit
A
and in
an amount equal to such Banks=
Percentage Share of $100,000,000.00 (collectively the ARevolving
Notes@).
Tandem
Energy Corporation,
et
al
March
14,
2008
Page
2
of
26
(b) Subject
to the terms and conditions hereof, Borrowers may borrow, repay, and reborrow
on
a revolving basis from time to time during the period commencing on the date
hereof and continuing through 11:00 a.m. (Houston, Texas time) on March 14,
2012
(the ATermination
Date@),
such
amounts as Borrowers may request under the Revolving Loans; provided, however,
the total principal amount outstanding at any time shall not exceed the lesser
of (i) the aggregate sums permitted under the Borrowing Base (as defined below),
which is initially set at $35,000,000.00, provided, however, that the principal
amount outstanding on the Revolving Loan may not exceed $10,000,000.00 until
Agent has satisfactorily completed the additional due diligence contemplated
by
Subsection (b) of Section 5 below, or (ii) $100,000,000.00. All sums advanced
under the Revolving Loans, together with all accrued but unpaid interest
thereon, shall be due and payable in full on the Termination Date.
(c) Banks
shall share ratably in the principal advanced to Borrowers on the
Revolving
Notes and the payments of principal and interest received from Borrowers on
the
Revolving Notes, according to the percentages shown in Schedule
1
attached
(the APercentage
Share@).
(d) All
amounts owed on the Revolving Notes shall bear interest from the date advanced
until paid or until default or maturity at the rates per annum elected by
Borrowers from the following options under the terms of the Revolving Notes:
(i)
the Prime Rate, or (ii) the sum of the LIBOR Rate plus
the
LIBOR Spread. The LIBOR Spread will vary based on the Borrowing Base Utilization
(as defined below) as in effect from time to time, with each change in the
applicable rate resulting from a change in the Borrowing Base Utilization to
take effect on the day such change in the Borrowing Base Utilization occurs.
ABorrowing
Base Utilization@
is
defined as an amount expressed as a percentage, equal to the quotient of (i)
the
sum of (A) the aggregate principal amount of the Revolving Loans outstanding,
plus (B) the aggregate undrawn amount of all outstanding Letters of Credit,
divided by (ii) the Borrowing Base. Based on the Borrowing Base Utilization,
the
LIBOR Spread will vary as set forth below:
|
Borrowing
Base Utilization
|
LIBOR
Spread
|
|
|
Greater
than 90%
|
2.25%
|
|
|
Less
than or equal to 90%,
|
||
|
but
greater than 66%
|
2.00%
|
|
|
Less
than or equal to 66%,
|
||
|
but
greater than 33%
|
1.75%
|
|
|
Less
than or equal to 33%
|
1.50%
|
The
APrime
Rate@
shall be
equal to the BOKF National Prime Rate, which is defined as the rate of interest
set by BOK Financial
Corporation,
in its
sole discretion, on a daily basis, as published by BOK Financial Corporation
from time to time; and the ALIBOR
Rate@
means
the rate of interest per annum at which deposits in U.S. dollars are offered
by
the major London clearing banks, as quoted by the British Banker=s
Association and reported by Bloomberg Professional Service on page BBAM (or
such
other similar news reporting service as Agent may subscribe to at the time
such
LIBOR Rate is determined), in the London interbank offered rate market for
a
period of time equal or comparable to a one, two, or three month interest
period, as elected by Borrowers, and in an amount equal to or comparable to
the
principal amount of the LIBOR Balance (as defined in the Revolving Note) to
which such interest period relates; provided,
however, that only four (4) interest period options shall be in effect at any
one time and the selection of the LIBOR Rate for a particular interest period
shall be for no less than $1,000,000.00 of unpaid principal and in even
multiples of $100,000.00 in principal.
Tandem
Energy Corporation,
et
al
March
14,
2008
Page 3
of
26
(e) Advances
on the Revolving Loans may be used only for the following purposes: (i) to
refinance indebtedness owed by Tandem Energy Corporation (ATEC@)
to
Guaranty
Bank,
(ii) to
fund capital expenditures, including, without limitation, the acquisition and
development of oil and gas properties, (iii) the issuance of Letters of
Credit (as
defined below), and (iv) working capital and general corporate purposes.
(f) Borrowers
shall give Agent (which shall promptly notify the Banks) written
notice (effective upon receipt) of any advance on the Revolving Loans not later
than 10:00 a.m. (Houston, Texas time) at least one Business Day (as defined
in
the Revolving Notes) before the date of the advance, specifying (1) the date
of
proposed advance, and (2) the aggregate amount of the proposed advance on the
Revolving Loans. By 12:00 noon (Houston, Texas time) on the date of
Borrowers=
notice,
Agent shall promptly notify each of the Banks of Borrowers=
request
for an advance on the Revolving Loans. Not later than 12:00 noon (Houston,
Texas
time), on the date of the requested advance, each of the Banks will make
available to Agent at Agent=s
office
in Houston, Texas, in immediately available funds, that Bank=s
Percentage Share of advance on the Revolving Loans. After Agent=s
receipt
of these funds, not later than 2:00 p.m. (Houston, Texas time), on the date
of
the advance and subject to the conditions precedent set forth in this Loan
Agreement, Agent will make the advance available to Borrowers in immediately
available funds by crediting the amount thereof to Borrowers=
account
with Agent. Agent will not disburse any advance until Agent has received each
Banks=
Percentage Share of the advance; provided, however, that unless Agent receives
notice from a Bank prior to the date on which Banks are to provide funds to
Agent for an advance that a Bank will not make available to Agent the funds,
Agent may assume that Banks have made the funds available to Agent on the date
of the advance, and Agent in its sole discretion, may, but shall not be
obligated to, in reliance upon such assumption, make available to Borrowers
on
the date a corresponding amount. If and to the extent Banks have not made such
funds available to Agent, Banks agree to repay to Agent, immediately on demand,
the corresponding amount together with interest thereon, for each day from
the
date the amount is made available to Borrowers until the date the amount is
repaid to Agent, at the customary rate set by Agent for the correction of errors
among banks for three Business Days and thereafter at the Contract Rate set
forth in the Revolving Notes. When Banks shall repay to Agent the corresponding
amount, such amount so repaid shall constitute Banks=
loan for
purposes of this Loan Agreement. All notices given by Borrowers under this
Section shall be irrevocable.
(g) All
payments of principal of, and interest on, any Notes shall be made by Borrowers
to Agent before 12:00 noon (Houston, Texas time), in immediately available
funds, at Agent=s
principal banking office in Houston, Texas. On the Business Day of receipt
by
Agent, if Agent=s
receipt
occurs before 12:00 noon (Houston, Texas time), Agent will promptly thereafter
cause to be distributed, on the same Business Day, (1) each Banks=
Percentage Share of the payments of principal and interest in like funds to
each
Bank for its account, and (2) other fees payable to any Banks to be applied
in
accordance with the terms of this Loan Agreement. All payments received by
Agent
after 12:00 noon (Houston, Texas time) will be distributed promptly by Agent,
and in no event later than 2:00 p.m. (Houston, Texas time) on the next
succeeding Business Day. If and to the extent Agent has not timely distributed
the payment to Banks, Agent agrees to repay to Banks, immediately on demand,
the
corresponding amount together with interest thereon, for each day from the
date
the amount is paid by Borrowers until the date the amount is repaid to Banks,
at
the customary rate set by Agent for the correction of errors among banks for
three Business Days and thereafter at the Contract Rate set forth in the
Revolving Notes. Borrowers authorize each Bank, if and to the extent payment
is
not made when due under this Loan Agreement or under any Notes, to charge from
time to time against any account of Borrowers with such Bank any amount as
due.
(h) All
payments made on the Revolving Notes shall be credited, to the extent of the
amount thereof, in the following manner: (i) first to fees, costs, and expenses
which Borrowers have agreed to pay under the Loan Documents; (ii) second,
against the amount of interest accrued that is due and unpaid on the Revolving
Notes as of the date of such payment; (iii) third, against all principal (if
any) due and owing on the Revolving Notes as of the date of such payment; (iv)
fourth, as a prepayment of the Revolving Notes; and (v) fifth, as a prepayment
of any remaining obligations; provided, however, that if an Event of Default
has
occurred and is continuing at the time of such payment, then, except for
payments that cure the Event of Default which shall be applied to so cure,
to
the extent the payment does not cure the default, each of the Banks shall be
entitled to apply the payment to Loans in the manner it shall deem appropriate.
Tandem
Energy Corporation,
et
al
March
14,
2008
Page 4
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26
(i) (i)
At
the request of Borrowers, Banks shall from time to time issue one or more
letters of credit for the account of Borrowers or affiliates (the ALetters
of Credit@);
provided, however, that Banks shall not be obligated to issue a Letter of Credit
if the aggregate face amount of all outstanding Letters of Credit will exceed
$5,000,000.00. Borrowers=
availability on the Revolving Loans will be reduced by the face amount of all
unexpired Letters of Credit. Any fundings under any Letters of Credit will
be
treated as an advance on the Revolving Loans and will be secured by the Security
Documents (as defined below). All Letters of Credit shall be for a term of
up to
one year (or longer if necessary for regulatory requirements) but shall expire
not later than five days prior to the Termination Date, unless adequately
secured by cash collateral held by Banks. Borrowers will sign and deliver
Banks=
customary forms for the issuance of Letters of Credit. Borrowers agree to pay
to
Agent for the benefit of Banks a Letter of Credit fee equal to the Letter of
Credit Fee Rate per annum set forth below, calculated on the aggregated stated
amount of each Letter of Credit for the stated duration thereof (computed on
the
basis of actual days elapsed as if each year consisted of 360 days). The Letter
of Credit Fee Rate will vary as set forth below based on the Borrowing Base
Utilization:
|
Borrowing
Base Utilization
|
Letter
of Credit Fee Rate
|
|
|
Greater
than 90%
|
2.25%
|
|
|
Less
than or equal to 90%,
|
||
|
but
greater than 66%
|
2.00%
|
|
|
Less
than or equal to 66%,
|
||
|
but
greater than 33%
|
1.75%
|
|
|
Less
than or equal to 33%
|
1.50%
|
Any
renewal or extension of a Letter of Credit will be treated as a new issuance
for
the purpose of the Letter of Credit fees. These fees are payable quarterly
in
arrears within fifteen (15) days of the last day of each calendar
quarter.
(ii)
Each
of
the Banks issuing any Letter of Credit irrevocably grants to the
other
Banks and, Banks irrevocably accept and purchase from Banks, on the terms
and
conditions stated below, for each Bank=s
own
account and risk, an undivided interest equal to each Bank=s
Percentage Share of Banks=s
obligations and rights under each Letter of Credit issued hereunder and
the
amount of each draft paid by Banks thereunder. In the event that Borrowers
fail
to pay Banks on demand the amount of any draft or other request for payment
drawn under a Letter of Credit as required by the letter of credit application,
the draft or payment shall be treated as an advance on the Revolving Loans
and
each of the Banks shall pay to the issuing Bank at its lending office,
in
immediately available funds, the other Banks=
Percentage Share of the amount of such draft or other request for payment
from
Borrowers. Banks=
obligation to reimburse the issuing Bank pursuant to the terms of this
subsection is irrevocable and unconditional; provided, however, that Banks
shall
not be obligated to reimburse the issuing Bank for any wrongful payment
or
disbursement made under any Letter of Credit as a result of acts or omissions
constituting gross negligence or willful misconduct on the part of the
issuing
Bank.
(j) At
the
request of Borrowers and in the sole discretion of Banks, Banks may from time
to
time issue one or more auction letters or letters of guarantee in connection
with auctions or other purchases of oil and gas properties by Borrowers. Each
auction letter and letter of guarantee will have an expiration date not longer
than five (5) days from the date of the letter. Notwithstanding any provision
to
the contrary, Borrowers=
availability on the Revolving Loans will be reduced by the aggregate maximum
amount stated in all unexpired auction letters and letters of guarantee until
Banks are satisfied that (i) Borrowers were unsuccessful in the auction or
purchase, or (ii) Borrowers consummate the purchase of the oil and gas
properties. Any fundings pursuant to an auction letter or letter of guarantee
will be treated as an advance on the Revolving Loans and will be secured by
the
Security Documents.
(k) Borrowers
agree to pay to Agent for the benefit of Banks the following fees that are
non-refundable and earned by Banks upon execution of this Loan Agreement (unless
otherwise provided):
(i)
Upon
execution of this Loan Agreement, Borrowers agree to pay Agent
for
the benefit of Banks the fees set forth in any separate fee
letters.
(ii)
Upon
any
increase in the Borrowing Base, Borrowers agree to pay Agent
for
the benefit of Banks an Increase Fee equal to one-quarter of one percent
(0.25%)
of the increase in the Borrowing Base.
Tandem
Energy Corporation,
et
al
March
14,
2008
Page 5
of
26
(iii)
Borrowers
agree to pay to Agent for the benefit of Banks a Commitment Fee on the Revolving
Loans equal to Commitment Fee Rate set forth below per annum (computed on the
basis of actual days elapsed and as if each calendar year consisted of 360
days)
of the average for the period of calculation of an amount determined daily
equal
to the difference between the Borrowing Base and the sum of (i) the aggregate
outstanding principal balance on the Revolving Loans at such time, plus (ii)
the
aggregate undrawn amount on all outstanding Letters of Credit. The Commitment
Fee Rate will vary as set forth below based on the Borrowing Base
Utilization:
|
Borrowing
Base Utilization
|
Facility
Fee Rate
|
|
|
Greater
than 90%
|
0.250%
|
|
|
Less
than or equal to 90%,
|
||
|
but
greater than 66%
|
0.375%
|
|
|
Less
than or equal to 66%,
|
||
|
but
greater than 33%
|
0.375%
|
|
|
Less
than or equal to 33%
|
0.500%
|
This
Commitment Fee is payable quarterly within fifteen (15) days of the end of
each
calendar quarter. This Commitment Fee shall be shared by Banks ratably based
on
their respective Percentage Share.
(iv) Upon
each
request by Borrowers for a Special Redetermination (as defined below) of the
Borrowing Base, Borrowers will pay to Agent for the benefit of Banks an
Engineering Fee in the amount of $7,500.00.
(l) The
Revolving Loans, all other loans now or hereafter made by any of the Banks
to
Borrowers, or either of them, and any renewals or extensions of or substitutions
for those loans, will be referred to collectively as the ALoans.@
The
Revolving Notes, all other promissory notes now or hereafter payable by
Borrowers, or either of them, to any of the Banks, and any renewals or
extensions of or substitutions for those notes, will be referred to collectively
as the ANotes.@
2. Collateral.
(a)
Payment
of the Notes and the Hedge Liabilities (as defined below) will be secured by
the
first liens and first security interests created or described in the following
(collectively the ASecurity
Documents@):
(i) a
Deed of
Trust and Security Agreement (the ADeed
of Trust@)
of even
date, executed by TEC in favor of Agent for the benefit of Banks, and covering
oil and gas properties located in Eddy and Lea Counties, New Mexico, and Hardin,
Harris, Xxx Xxxx, Palo Xxxxx, Pecos, and Scurry Counties, Texas; and
(ii)
any other security documents now or hereafter executed in connection with the
Loans.
All
oil
and gas properties now or hereafter mortgaged to Agent by Borrowers, including
the oil and gas properties covered by the Security Documents, will be referred
to as the AProperties.@
The Deed
of Trust will renew and consolidate liens and security interests granted by
TEC
to Guaranty Bank; and Borrowers shall cause Guaranty Bank to assign its liens
and security interest to Agent for the ratable benefit of Banks. If requested
by
Agent, Borrowers will execute in favor of Agent for the ratable benefit of
Banks
mortgages, deeds of trust, security agreements, or amendments, in Proper Form
(as defined below), mortgaging all additional oil and gas properties and all
additional interests in the Properties acquired by Borrowers, or either of
them,
so that Agent will continuously maintain under mortgage not less than eighty
percent (80%) of the aggregate present value (as calculated by Agent in its
sole
discretion in accordance with the methods set forth below for the Borrowing
Base) assigned to Borrowers=
oil and
gas properties based upon Agent=s
in-house evaluation.
Tandem
Energy Corporation,
et
al
March
14,
2008
Page 6
of
26
(b) Payment
of the Notes and the Hedge Liabilities will be guaranteed by all existing and
hereafter acquired companies, subsidiaries, or partnerships of Borrowers; and
Borrowers agree to cause all such companies, subsidiaries, and partnerships
to
execute and deliver guaranties in Proper Form to Agent for the benefit of Banks.
(c) In
connection with the Security Documents and at such time as Agent requires
Borrowers to mortgage additional oil and gas properties, Borrowers shall, upon
request of Agent, deliver to Agent for the benefit of Banks title opinions
and/or other title information acceptable to Agent covering at least eighty
percent (80%) of the present value (as determined by Agent in the manner set
forth for Borrowing Base determinations below) of the Properties and the oil
and
gas properties which are to become Properties, along with such other information
regarding title as Agent shall reasonably request, all in Proper Form and from
attorneys or landmen acceptable to Agent. Agent reserves the right to
immediately exclude any oil and gas property from the Borrowing Base if Agent
learns of any material title issue with respect to the oil and gas property
or
if Agent=s
review
of Borrowers=
title to
the oil and gas property indicates that Borrowers=
title is
unacceptable to Agent, in its sole discretion.
(d) Agent
shall hold the Properties and all related collateral, along with all payments
and proceeds arising therefrom, for the benefit of Banks as security for the
payment of the Loans and the Hedge Liabilities. Except as otherwise expressly
provided for in this Section, Agent, in its own name or in the name of Banks,
may enforce any of the collateral or the security therefor by any mode provided
under the Loan Documents or by the law of the state in which the collateral
or
in which any of the Properties is located, and may collect and receive proceeds
receivable on account of ownership of the Properties. Agent, in its sole
discretion and in good faith, may (but is not required to) take whatever action
it deems necessary to protect and enforce the Properties and other collateral
or
the rights of Banks under the Loan Documents. Specifically, Agent is authorized
to sign and deliver partial releases of the Security Documents for sales of
oil
and gas properties permitted by Section 7(d) below.
(e) After
an
Event of Default (as defined below) that remains uncured after the expiration
of
any notice and cure period required by this Loan Agreement, or if there is
an
existing Borrowing Base deficiency that is not addressed by Borrowers in
accordance with Section 3(b) below, Agent reserves the right to require
Borrowers to set up a lockbox account to be managed by Agent for the purpose
of
collection of production proceeds attributable to Borrowers=
interest
in the Properties. Borrowers agree that upon Agent=s
election to require the lockbox after an Event of Default, Agent will receive
the proceeds of oil and gas produced from or attributable to
Borrowers=
interest
in the Properties for application to the Revolving Notes and the Hedge
Liabilities; and Borrowers hereby direct all production purchasers or operators
distributing proceeds to pay Borrowers=
distributions attributable to Borrowers=
interest
in the Properties directly to Agent, if Agent so elects. All production proceeds
attributable to the Properties received in the lockbox account by Agent that
are
attributable to another person=s
or
entities=
interest
in the Properties shall be released immediately to Borrowers upon
Borrowers=
request.
All production proceeds attributable to Borrowers=
interest
in the Properties received in the lockbox account by Agent in excess of the
current scheduled monthly payment and any other fees or expenses owed to Agent
or Banks will be transferred to Borrowers at the end of each month for its
use
consistent with the provisions of this Loan Agreement, so long as there is
no
existing Event of Default. If the production proceeds attributable to
Borrowers=
interest
in the Properties received by Agent during any month are not sufficient to
make
the scheduled monthly payment, Borrowers will pay Agent the deficiency within
ten (10) days. Contemporaneously with the execution of this Loan Agreement,
TEC
will sign and deliver letters in lieu of transfer orders to all purchasers
of
production directing those parties to pay all proceeds attributable to
TEC=s
interest in the Properties to the lockbox account, and these letters, signed
in
blank, will be held by Agent until such time as Agent elects to require the
lockbox after an Event of Default.
(f) All
payments and proceeds of every kind from the Properties, when directly received
by Agent (whether from payments on or with respect to the Properties, from
production proceeds collected by Agent, from foreclosure and sale to third
parties, from sale of collateral subsequent to a foreclosure at which Agent
or
another Bank was the purchaser, or otherwise) shall be held by it as a part
of
the collateral and, except as otherwise expressly provided hereinafter, shall
be
applied to the Revolving Loans and the Hedge Liabilities in the manner set
forth
below.
Tandem
Energy Corporation,
et
al
March
14,
2008
Page 7
of
26
(g) Upon
the
occurrence and during the continuance of any Event of Default, Agent, after
giving written notice and taking any other action necessary under applicable
statutes of the jurisdiction in which the Properties are located, to Borrowers
and to Banks of the action to be taken, may at any time or times thereafter
exercise all available rights and remedies, including the right, if any, to
sell, assign, and deliver all or any part of the Properties, or any substitution
therefor or any additions thereto as provided hereafter. Any sale or assignment
may be at any public or private sale at the option of Agent, without
advertisement or any notice to Borrowers or any other person except those
required by applicable law (Borrowers hereby agreeing that 10 days notice
constitutes Areasonable
notice@);
and
Banks, individually or collectively, may bid and become a purchaser at any
such
sale. Sales hereunder may be at such time or times, place or places, for cash
or
credit, and upon such terms and conditions as Agent may determine in its sole
discretion. Upon the completion of any sale, Agent shall execute all instruments
of transfer necessary to vest in the purchaser title to the property sold,
and
shall deliver to the purchaser any of the property so sold which may be in
the
possession of Agent. Agent, in its sole discretion and in good faith, may (but
is not required to) take whatever action it deems necessary to protect and
enforce the Properties and other collateral or the rights of Agent or Banks
under the Loan Documents.
(h) In
the
case of any sale of all or part of the Properties or other collateral, the
purchase money proceeds and all other proceeds which then may be held or
recovered by Agent for the benefit of Banks, shall be applied in the following
order:
(i)
First,
to
the payment of the reasonable costs and expenses of the sale and of the
collection or enforcement of the collateral, and reasonable compensation to
Agent, its agents and attorneys, and of all reasonable expenses and liabilities
incurred and advances made by Banks in connection therewith;
(ii)
Second,
to the payment of expenses of Banks which Borrowers are obligated
to pay pursuant to this Loan Agreement;
(iii)
Third,
to
the payment ratably of the sum of (i) amounts due for
principal and interest on all Loans then outstanding, and (ii) amounts
owed as
the Hedge Liabilities, without preference or priority of the indebtedness
owing
to one Bank over another, or of Hedge Liabilities over Loans, or of Loans
over
Hedge Liabilities, or of principal over interest, or of interest over principal;
and
(iv)
Fourth,
to the payment of the surplus, if any, to Borrowers, their
successors or assigns, or to whomsoever may be lawfully entitled to receive
the
same, or as a court of competent jurisdiction may direct.
(i) Unless
a
security interest would be prohibited by law or would render a nontaxable
account taxable, Borrowers grant to Banks a contractual possessory security
interest in, and hereby assigns, pledges, and transfers to Banks all
Borrowers=
rights
in any deposits or accounts now or hereafter maintained with any of the Banks
(whether checking, savings, or any other account), excluding, however, accounts
maintained by Borrowers with any of the Banks for the purpose of revenue
distribution to third parties entitled to those revenues and any other accounts
held by Borrowers for the benefit of a third party. Borrowers authorize Banks,
to the extent permitted by applicable law, to charge or setoff any sums owing
on
the Loans or the Hedge Liabilities against any and all such deposits and
accounts; and Banks shall be entitled to exercise the rights of offset and
banker=s
lien
against all such accounts and other property or assets of Borrowers, or either
of them, with or in the possession of Banks to the extent of the full amount
of
the Loans and the Hedge Liabilities. Any amount offset by a Bank shall be shared
with the other Banks in accordance with the Percentage Share of each, and each
of the Banks shall apply its share in accordance with this Loan Agreement.
Tandem
Energy Corporation,
et
al
March
14,
2008
Page 8
of
26
3.
Borrowing
Base.
(a) On
or
around May 1 and November 1 of each year (APeriodic
Redetermination@),
commencing May 1, 2008, Agent may determine or redetermine, in its sole
discretion, a Borrowing Base (as defined below). In addition, Required Banks
(as
defined below) shall have the right to request at any time, and Borrowers shall
have the right to request once per six-month period between Periodic
Redeterminations, an unscheduled redetermination (ASpecial
Redetermination@)
of the
Borrowing Base by Banks, and Agent shall conduct such Special Redetermination
using the methods described in this Section. The term ABorrowing
Base@
refers
to the designated loan value (as calculated by Agent in its sole discretion)
assigned to the discounted present value of future net income accruing to the
Properties based upon Agent=s
in-house evaluation of Borrowers=
oil and
gas properties. Agent=s
determination of the Borrowing Base will use such methodology, assumptions,
and
discount rates customarily used by Agent with respect to credits of a similar
size and nature in assigning collateral value to oil and gas properties and
will
be based upon such other credit factors or financial information available
to
Agent at the time of each determination, including, without limitation, current
market conditions and Borrowers=
assets,
liabilities, cash flow, liquidity, business, properties, prospects, management,
and ownership. Borrowers acknowledge that increases in the Borrowing Base are
subject to appropriate credit approval by Banks.
(b) The
outstanding principal balance owing on the Revolving Notes, plus the aggregate
face amount of all Letters of Credit, may not exceed the Borrowing Base at
any
time, subject to the payout provisions below in the event of a Borrowing Base
decrease. A decrease in the Borrowing Base will result in an immediate decrease
in Banks=
commitment under the Revolving Loans. If the redetermined Borrowing Base is
less
than the sum of the outstanding principal then owing on the Revolving Notes,
plus the aggregate face amount of all Letters of Credit, Agent will notify
Borrowers of the amount of the Borrowing Base and the amount of the deficiency.
Within thirty (30) days after notice is sent by Agent, Borrowers shall remedy
the deficiency by either: (i) making a lump sum payment on the Revolving Notes
to reduce the principal outstanding plus Letters of Credit to an amount equal
to
or less than the new Borrowing Base; (ii) committing to make five equal monthly
installment payments on the Revolving Notes to reduce the principal plus Letters
of Credit to an amount equal to or less than the new Borrowing Base; or (iii)
mortgaging additional collateral, which must be acceptable to Agent as to type,
value, and title.
(c) Upon
each
Periodic or Special Redetermination, Agent will review and set the Borrowing
Base and an MCR (as defined below) within thirty (30) days from receipt by
Banks
of all pertinent information, and Agent will advise Borrowers and Banks of
Agent=s
decision, which will be at Agent=s
sole
discretion. Each of the Banks must approve or reject the proposed Borrowing
Base
and MCR within twenty-one (21) days of Agent=s
notice.
The failure of any Bank to respond within the twenty-one day period shall be
deemed to be approval of the proposed Borrowing Base and MCR. Any increase
in
the Borrowing Base and any decrease in the MCR must be unanimously approved
by
all Banks, and each reaffirmation or reduction in the Borrowing Base and
reaffirmation or increase to the MCR must be approved by Agent and Required
Banks. As used in this Loan Agreement, ARequired
Banks@
means
Banks holding an aggregate Percentage Share not less than one hundred percent
(100%). If, in conjunction with a Special Redetermination, Borrowers submit
to
Agent for its review additional oil and gas properties to be mortgaged and
Banks
elect to increase the Borrowing Base, the increase in the Borrowing Base will
be
effective as of the date upon which Borrowers execute and deliver to Agent
appropriate mortgages or amendments in Proper Form, which will grant to Agent
for the benefit of Banks a valid, enforceable and first priority lien against
the additional Properties as security for the Revolving Loans.
(d) At
the
time of any Periodic or Special Redetermination, Agent reserves the right to
establish an equal Monthly Commitment Reduction (AMCR@)
amount
by which the Borrowing Base shall be automatically reduced effective as of
the
fifth (5th)
day of
each successive calendar month until the next Borrowing Base redetermination.
Agent=s
determination of the MCR will use such methodology, assumptions, and discount
rates customarily used by Agent with respect to credits of a similar size and
nature in determining commitment reductions and will be based upon such other
credit factors or financial information available to Agent at the time of each
determination, including, without limitation, the economic half-life of the
Properties, and Borrowers=
assets,
liabilities, cash flow, liquidity, business, properties, prospects, management,
and ownership. The MCR will be set at $0 until reset in connection with a
Borrowing Base redetermination or until the Termination Date. If the outstanding
principal balance owing on the Revolving Notes, plus the face amount of all
unexpired and outstanding Letters of Credit, shall exceed the Borrowing Base
solely because of an MCR reduction, Borrowers shall promptly make a single
lump
sum payment in an amount not to exceed the MCR to reduce the outstandings below
the Borrowing Base. If the outstanding principal balance owing on the Revolving
Notes, plus the face amount of all unexpired and outstanding Letters of Credit,
shall exceed the Borrowing Base because of a Periodic or Special Redetermination
(or a Periodic or Special Redetermination combined with a required MCR),
Borrowers shall have the right to cure as set forth in subsection (b) above;
provided, however, that if the MCR was applicable before the Periodic or Special
Redetermination, then the MCR amount will be due in a lump sum and Banks may
continue the MCR at the same amount or change the MCR effective on the
redetermination date.
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(e) If
Borrowers sell, transfer, or otherwise dispose of any oil and gas properties
included in the Borrowing Base that have an aggregate sales price in excess
of
five percent (5%) of the most recent Borrowing Base, Agent reserves the right
to
redetermine the Borrowing Base in accordance with this Section 3, which
redetermination will be in addition to any Special Redetermination permitted
to
Agent or Banks under subsection (a) above. Any Borrowing Base deficiency
resulting from the sale of any oil and gas properties shall be immediately
reduced by a single lump sum payment in an amount not to exceed the net proceeds
from the sale of the oil and gas properties, and any remaining deficiency after
the Borrowing Base redetermination shall be cured by Borrowers pursuant to
subsection (b) above.
4. Xxxxxx
and Swaps.
(a) Definitions.
As used
in this Loan Agreement and the Loan Documents, the following terms have the
meanings assigned below:
(i) AISDA
Agreement@
means
any International Swaps and Derivatives Association, Inc. master agreement
or
any similar agreement (with all related schedules, annexes, exhibits,
amendments, and confirmations), now existing or hereafter entered into by
Borrowers, or either of them, as amended, modified, replaced, consolidated,
extended, renewed, or supplemented from time to time.
(ii) AHedge
Transaction@
means
all Transactions (as defined in the ISDA Agreement) and any other commodity
swap
(including price protection for future production of oil, gas, or other
hydrocarbons or mineral or mining interests and rights therein), commodity
option, interest rate swap (including rate hedge products), basis or currency
or
cross-currency rate swap, forward rate, cap, call, floor, put, collar, future
rate, forward agreement, spot contract, or other credit, price, foreign
exchange, rate, equity, equity index option, bond option, interest rate option,
rate protection agreement, currency option, or other option, or commodities
derivative, exchange, risk management, or protection agreement, or
commodity, securities, index, market, or price-linked transaction or
agreement,
or any
option with respect to any such transaction or similar transaction or
combination of any of the foregoing, now existing or hereafter entered into
by
Borrowers, whether linked to one or more interest rates, foreign currencies,
commodity prices, equity prices, indexes, or other financial measures and
whether such transactions or combinations thereof are governed by or subject
to
any ISDA Agreement or other similar agreement or arrangement, including all
obligations and liabilities thereunder, and including all renewals, extensions,
amendments, and other modifications or substitutions.
(iii)
AHedge
Liabilities@
means
any and
all liabilities and obligations of every nature and howsoever created, direct,
indirect, absolute, contingent, or otherwise, whether now existing or hereafter
arising, created, or accrued, of Borrowers, or either of them, from time to
time
owed or owing to Agent, Banks, or Hedge Providers in connection with any ISDA
Agreement [and each Transaction (as defined in the ISDA Agreement) and each
Confirmation (as defined in the ISDA Agreement)] or any Hedge Transaction,
including, but not limited to, obligations and liabilities arising in connection
with or as a result of early or premature termination, cancellation, rescission,
buy back, reversal, or assignment or other transfer of a Hedge
Transaction,
and
including any obligations or liabilities under the Letters of Credit issued
in
connection with Hedge Transactions to which another entity is a
counter-party,
whether
for principal, interest (including interest which, but for the filing of a
petition in bankruptcy with respect to such obligor, would have accrued on
such
obligation, whether or not a claim is allowed for such interest in the related
bankruptcy proceedings), reimbursement obligations, fees, expenses,
indemnification, or otherwise.
(iv)
AHedge
Provider@
means
BOK or
any affiliate of any of the Banks contracting with Agent or Banks with respect
to Hedge Transactions for Borrowers.
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(v)
ABOK@
means
collectively
Bank of Oklahoma, N.A. and any affiliate of Bank of Oklahoma, N.A. or Bank
of
Texas, including without limitation, Bank of Albuquerque, N.A., Bank of
Arkansas, N.A., Bank of Arizona, Colorado State Bank and Trust, N.A., and such
other present or future banking or financial institution affiliates now or
hereafter owned or controlled directly or indirectly by BOK
Financial Corporation.
(b) ISDA
Agreement.
Borrowers and Agent,
Banks, or Hedge Providers
may
enter into an ISDA Agreement, governing certain Hedge Transactions available
to
Borrowers from Agent,
Banks, or Hedge Providers.
Borrowers may enter into Transactions (as defined in the ISDA Agreement) subject
to the provisions of Confirmations (as defined in the ISDA Agreement).
Notwithstanding any provision to the contrary, the provisions of this Loan
Agreement shall remain in force until all Hedge Transactions with Agent, Banks,
or Hedge Providers have expired and all Hedge Liabilities have been satisfied
in
full, even though the Loans may have previously been paid in full and
terminated.
(c) Security.
Borrowers
agree that the Security Documents shall secure payment of all Hedge Liabilities.
Borrowers, Agent, and Banks hereby agree that the Loans and the Hedge
Liabilities shall rank pari
passu
and
shall collectively be secured by the Security Documents on a pro rata basis.
Agent shall hold the Properties and all related collateral under the Security
Documents, along with all payments and proceeds arising therefrom, for the
benefit of Agent, as security for the payment of all Loans and as security
for
all Hedge Liabilities on a ratable basis. The
benefit of the Security Documents and of the provisions of this Loan Agreement
relating to the collateral shall also extend to and be available to Agent,
Banks, or Hedge Providers to the extent any is a counter-party to any Hedge
Transactions on a pro rata basis with respect to any obligations, liabilities,
or indebtedness of Borrowers.
(d) Termination.
If
and to
the extent any Hedge Transaction is required by this Loan Agreement or used
in
calculation of the Borrowing Base, such Hedge Transaction cannot be cancelled,
liquidated, or Aunwound@
without
the prior written consent of Agent and Required Banks.
(e) Hedging
Limitations.
Borrowers shall not enter into any Hedge Transaction related to crude oil,
natural gas, or other commodities, except hedging required by Agent and Banks
and except for Hedge Transactions which meet the following
requirements:
(i) Hedge
Transactions resulting in a cap on the price to be received by Borrowers,
involving in the aggregate at any time not more than ninety percent (90%) of
Borrowers=
anticipated production from its proved developed producing oil and gas
properties (as
forecast in Agent and Banks=
most
recent engineering valuation
of the
Properties); provided, however, that there shall be no limitation on the volume
of Hedge Transactions resulting only in a floor price per barrel or mcf;
and
(ii) Hedge
Transactions that would not result in a price per barrel or mcf lower than
the
base case price used by Agent and Banks in the most-recent engineering
evaluation of Borrowers=
oil and
gas properties, adjusted for variances between the hedging price and
Borrowers=
actual
product price as determined by Agent and Banks, or otherwise at hedging prices
acceptable to Agent; and
(iii) Hedge
Transactions that include
a
Aprice
floor@
or
comparable financial hedge or risk management agreement acceptable to Agent
in
all respects (including, without limitation, price and term);
and
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(iv) Hedge
Transactions that are each for a period not to exceed sixty (60) months or
twelve (12) months beyond the Termination Date; and
(v) Hedge
Transactions
where,
in each case, the underlying contracts are with one or more of Agent, Banks,
or
Hedge Providers, as counterparty, with a counter-party (or the parent entity
thereof) acceptable to Agent and who at the time the contract is made has
long-term obligations rated BBB+ or better by Standard & Poor=s
Ratings
Group or Baa1 or better by Xxxxx=s
Investors Services, Inc., or with a counter-party that is otherwise approved
by
Agent in writing; and
(vi) Hedge
Transactions
that are
not effective at concurrent or overlapping periods of time on the same volumes
of production on
both
a
physical and financial basis, unless the combined volumes are in compliance
with
the volume limitations set forth above.
Borrowers
may enter into swaps, collars, floors, caps, options, corridors, or other
contracts, as such terms are commonly referred to in the capital markets, which
are intended to reduce or eliminate the risk of fluctuation in interest rates
for
the
purpose and effect of fixing and capping interest rates on a principal amount
of
indebtedness of Borrowers;
provided
that (A)
the floating rate index of each such contract generally matches the index used
to determine the floating rates of interest on the corresponding indebtedness
of
Borrowers to be hedged by such contract and the interest rate exposure would
not
cause the notional amount of all such Hedge Transactions then in effect for
the
purpose of hedging interest rate exposure to exceed one
hundred percent (100%)
of the
total consolidated indebtedness of Borrowers projected to be outstanding for
any
period covered by such Hedge Transaction, and (B) Borrowers shall not establish
or maintain any margin accounts with respect to such contracts.
(f) Required
Xxxxxx.
Unless
Agent agrees in writing to the contrary, Borrowers shall maintain the Hedge
Transactions described in Schedule
2
attached
and meeting the following requirements: (i) the Hedge Transactions shall cover
the volumes set forth in Schedule
2
attached; (ii) the Hedge Transactions shall cover the periods set forth in
Schedule
2
attached; and (iii) the Hedge Transactions shall have a fixed price or floor
price per barrel equal to or greater than set forth in Schedule
2
attached. Within thirty (30) days of the date of this Loan Agreement, Borrowers
shall provide evidence to Agent that all of the Existing Hedge Transactions
described in Schedule
3
attached
have been assigned from Parent to TEC.
(g) Speculation.
Borrowers shall not invest for speculative purposes in any Hedge Transactions
or
in any other options, futures, or derivatives.
(h) Third
Party Hedge Transactions.
If
any
Hedge Transaction is entered into with an outside counter-party, (I)
notwithstanding Subsection (i) of Section 1 of the Loan Agreement, Agent and
Banks shall not be required to provide any Letter of Credit with respect to
any
margin call on the Hedge Transactions, unless Agent, in its sole discretion,
agrees to do so; and (II) Borrowers shall collaterally assign and pledge in
favor of Agent for the ratable benefit of Banks a first-priority continuing
security interest in the applicable trading account and the hedging contract,
including the Hedge Transactions listed in Schedules
2 and 3
attached, as additional security for the Loans. In connection therewith,
Borrowers shall execute and deliver to Agent for the ratable benefit of Banks
such security agreements, control agreements, and financing statements as deemed
appropriate by Agent to create and perfect the continuing security interest
therein.
5. Conditions
Precedent.
(a) The
obligation of Banks to make the initial advance on the Revolving Loans is
subject to Borrowers=
satisfaction, in Agent=s
sole
discretion, of the following conditions precedent:
(1) Agent=s
receipt
of satisfactory evidence that Borrowers have no
outstanding
indebtedness other than the Revolving Loans, the Subordinate Indebtedness as
permitted below, and trade accounts payable and taxes incurred in the ordinary
course of business.
(2)
except
as
approved by Agent in writing, Borrowers shall be in compliance in all material
respects with all existing obligations, there shall be no default at closing
or
funding on any existing loans, and all representations and warranties in
connection with existing obligations must be true in all material
respects.
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(3) the
negotiation, execution, and delivery of Loan Documents in Proper Form,
including, but not limited to, the following:
(i) this
Loan
Agreement;
(ii) the
Revolving Note;
(iii)
the
Deed of Trust;
(iv) Borrowing
Resolutions;
(v) Letters
in Lieu; and
(vi)
the
Subordination Agreement (as defined below) signed by Borrowers and Platinum
Energy Resources, Inc. (AParent@),
a
Delaware corporation.
(4) satisfactory
evidence that Agent holds perfected liens and security interests in all
collateral for the Loans, subject to no other liens or security
interests.
(5) there
shall not have occurred a material adverse change in the business, assets,
liabilities (actual and contingent), operations, or condition (financial or
otherwise) of Borrowers or in the facts and information as represented to date,
from that reflected in Borrowers=
financial statements for the year ending December 31, 2007, as provided to
Agent.
(6) there
being no order or injunction or other pending or threatened litigation in which
there is a reasonable possibility, in Agent=s
judgment, of a decision which could materially adversely affect the ability
of
Borrowers to perform under the Loan Documents.
(7) Agent
shall have completed and approved a review of title to, and the status of the
environmental condition of, Borrowers=
oil and
gas properties, including the Borrowing Base properties, and the results of
such
review shall be acceptable to Agent in its sole discretion.
(8) Agent=s
receipt
and review, with results satisfactory to Agent and its counsel, of information
regarding litigation, tax, accounting, insurance, pension liabilities (actual
or
contingent), real estate leases, material contracts, debt agreements, property
ownership, and contingent liabilities of Borrowers.
(9) Agent=s
receipt
of assignments in Proper Form of the mortgages and UCC financing statements
of
Guaranty Bank.
(10)
Borrowers
shall cause BP Corporation
North America, Inc.
and
Shell
Trading (U.S.) Company to
assign
and novate the existing Hedge Transactions listed in Schedule
3
attached
to BOK on terms acceptable to Agent.
(11) Borrowers
shall deliver legal opinions in Proper Form, from Borrowers=
counsel,
addressed to Agent and Banks, regarding Borrowers=
authority, the enforceability of the Loan Documents, and other matters
reasonably required by Agent.
(b) Notwithstanding
any provision of the Loan Agreement or the Revolving Note to the contrary,
the
principal amount outstanding on the Revolving Loan may not exceed $10,000,000.00
until Agent has satisfactorily completed the additional due diligence described
below:
(1) Agent=s
receipt
and satisfactory review of the audited financial statement for 2007 fiscal
year
for Parent,
on
a
consolidated and consolidating basis, and internally-prepared financial
statements for 2007 fiscal year for Borrowers, both statements prepared in
conformity with generally accepted accounting principles in effect on the date
such statement was prepared, consistently applied (AGAAP@).
(2) Agent=s
receipt
and satisfactory review of a third-party reserve report in accordance with
the
requirements of Subsection (d) of Section 9 below, for the Borrowing Base
properties, including data for valuation of Borrowers=
proved
developed non-producing reserves and proved undeveloped reserves.
(3) Agent=s
receipt
and satisfactory review of background checks regarding Borrowers and its
principals.
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(c) Banks
will not be obligated to make the Loans or any subsequent advance on the Loans,
if, prior to the time that a loan or advance is made, (i) there has been any
material adverse change in either Borrowers=
financial condition since the most-recent financial statements furnished to
Banks, (ii) any representation or warranty made by Borrowers in this Loan
Agreement or the other Loan Documents is untrue or incorrect in any material
respect as of the date of the advance or loan, (iii) Agent has not received
all
Loan Documents appropriately executed by Borrowers and all other proper parties,
(iv) Agent has requested that Borrowers execute additional loan or security
documents and those documents have not yet been properly executed, delivered,
and recorded, (v) Borrowers are not in compliance with the Borrowing Base and
all reporting requirements, or (vi) an Event of Default (as defined below)
has
occurred and is continuing.
6. Representations
and Warranties.
Borrowers hereby represent and warrant to Agent and Banks as
follows:
(a) The
execution, delivery, and performance of this Loan Agreement, the Notes, the
Security Documents, and all of the other Loan Documents by Borrowers have been
duly authorized by Borrowers=
respective boards of directors, and this Loan Agreement, the Notes, the Security
Documents, and all of the other Loan Documents constitute legal, valid, and
binding obligations of Borrowers, enforceable in accordance with their
respective terms;
(b) The
execution, delivery, and performance of this Loan Agreement, the Notes, the
Security Documents, and the other Loan Documents, and the consummation of the
transaction contemplated, do not require the consent, approval, or authorization
of any third party and do not and will not conflict with, result in a violation
of, or constitute a default under (i) any provision of Borrowers=
certificate of incorporation or bylaws, or any other agreement or instrument
binding upon Borrowers, or (ii) any law, governmental regulation, court decree,
or order applicable to Borrowers;
(c) Each
financial statement of Borrowers or Parent,
hereafter supplied to Agent or Banks, will be prepared in accordance with GAAP,
in Proper Form, and truly discloses and fairly presents in all material respects
their respective financial condition as of the date of each such statement,
and
there has been no material adverse change in such financial condition subsequent
to the date of the most recent financial statement supplied to
Agent;
(d) There
are
no actions, suits, or proceedings pending or, to Borrowers=
knowledge, threatened against or affecting Borrowers, Parent, or the Properties,
before any court or governmental department, commission, or board, which, if
determined adversely, would reasonably be expected to have a material adverse
effect on the Properties or the operations or financial condition of Borrowers
or Parent;
(e) Borrowers
have filed all federal, state, and local tax reports and returns required by
any
law or regulation to be filed and due and have either duly paid all taxes,
duties, and charges indicated due on the basis of such returns and reports,
or
made adequate provision for the payment thereof, and the assessment of any
material amount of additional taxes in excess of those paid and reported is
not
reasonably expected;
(f) Borrowers
are in compliance in all material respects with all applicable provisions of
the
Employee Retirement Income Security Act of 1974, as amended or recodified from
time to time (AERISA@);
Borrowers have not violated any provision of any Adefined
benefit plan@
(as
defined in ERISA) maintained or contributed to by Borrowers (each a APlan@);
no
AReportable
Event@
as
defined in ERISA has occurred and is continuing with respect to any Plan
initiated by Borrowers, unless
the
reporting requirements have been waived by the Pension Benefit Guaranty
Corporation;
and
Borrowers have met their minimum funding requirements under ERISA with respect
to each Plan;
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(g) Borrowers
have disclosed to Agent all of the terms of all material agreements affecting
Borrowers=
oil and
gas properties or its operations, including all gas balancing agreements and
advance payment contracts;
(h) Borrowers
certify that Borrowers have no existing subsidiaries or other entities owned
by
Borrowers; and
(i) Schedule
3
sets
forth, as of the date of this Loan Agreement, a true and complete list of all
existing ISDA Agreements and Hedge Transactions of Borrowers, the material
terms
thereof (including the type, term, effective date, termination date, and
notional volumes and prices), the net xxxx-to-market value thereof, all credit
support agreements relating thereto (including any margin required or supplied),
and the counter-party to each such Hedge Transactions.
7.
Covenants.
Until
the Loans and the Hedge Liabilities and all other obligations and liabilities
of
Borrowers under this Loan Agreement, the Notes, the Security Documents, and
the
other Loan Documents are fully paid and satisfied, Borrowers agree and covenant
that they shall, unless Agent and Required Banks otherwise consent in
writing:
(a) (i)
Maintain their existence in good standing in the State of Delaware, maintain
their authority to do business in the States of New Mexico and Texas and all
other states in which either is required to qualify, and maintain full legal
capacity to perform all their obligations under this Loan Agreement and the
Loan
Documents, (ii) continue to operate their business as presently conducted,
(iii)
not permit a material change in their ownership, control, or management, (iv)
not permit any changes in Borrowers=
directors or officers that alter a majority of the current directors or
officers, (v) not permit either of their dissolution, liquidation, or other
termination of existence or forfeiture of right to do business, (vi) not form
any subsidiary without notifying Agent in writing at least thirty (30) days
in
advance, (vii) not permit a merger or consolidation (unless a Borrower is the
surviving entity), and (viii) not acquire all or substantially all of the assets
of any other entity without first notifying Agent in writing at least thirty
(30) days in advance.
(b) Manage
the Properties in an orderly and efficient manner consistent with good business
practices, and perform and comply in all material respects with all statutes,
rules, regulations, and ordinances imposed by any governmental unit upon the
Properties, Borrowers,, or their operations including, without limitation,
compliance with all applicable laws relating to the environment.
(c) Maintain
insurance as customary in the industry, including but not limited to, casualty,
comprehensive property damage, and commercial general liability, and other
insurance, including worker=s
compensation (if necessary to comply with law), naming Agent as an additional
insured or a loss payee, and containing provisions prohibiting their
cancellation without prior written notice to Agent, and provide Agent with
evidence of the continual coverage of those policies prior to the lapse of
any
policy.
(d)
Not
sell,
assign, transfer, or otherwise dispose of all or any interest in the Properties,
any other oil and gas properties included in the Borrowing Base, or any other
material assets, except for (i) the sale of hydrocarbons in the ordinary course
of business, (ii) the sale or transfer of equipment that is no longer necessary
for the business of Borrowers or that is replaced by equipment of at least
comparable value and use, and (iii) the sale of oil and gas properties having
an
aggregate sales price and market value not in excess of five percent (5%) of
the
Borrowing Base per fiscal year, without the prior written consent of Agent,
provided that Agent and Banks shall not unreasonably withhold its consent for
any sale, farmout, farmin, or other disposition of any oil and gas properties
or
any interest therein, so
long
as: (x) the net sales proceeds received by Borrowers are equal to or greater
than net present value of the proved developed producing oil and gas reserves
as
of the most recent redetermination date (scheduled or otherwise) discounted
at
nine percent (9%); (y) any resulting Borrowing Base deficiency after exclusion
of the sale properties from the Borrowing Base is immediately eliminated by
a
single lump sum payment; and (z) there is no existing Event of
Default.
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(e) Promptly
inform Agent of (i) any and all material adverse changes in
Borrowers=
or
Parent=s
financial condition, (ii) all litigation and claims which could reasonably
be
expected to materially and adversely affect the financial condition of Borrowers
or the Properties, (iii) all actual or contingent material liabilities of
Borrowers, (iv) any change in name, identity, or structure of Borrowers or
Parent, and (v) any uninsured or partially insured loss of any collateral
through fire, theft, liability, or property damage.
(f) Maintain
Borrowers=
and
Parent=s
books
and records in accordance with GAAP, and permit Agent and Banks to examine,
audit, and make and take away copies or reproductions of their books and
records, reasonably required by Agent or Banks, at all reasonable times; and
permit such persons as Agent or Banks may designate at reasonable times to
visit
and inspect the Properties and examine all records with respect to the
Properties, and pay for the reasonable cost of such examinations, audits, and
inspections required by Agent or Banks.
(g) Pay
and
discharge when due all indebtedness and obligations, including without
limitation, all assessments, taxes, governmental charges, levies, and liens,
of
every kind and nature, and all obligations under authorizations for expenditures
for development of Borrowers=
oil and
gas properties, imposed upon Borrowers or the Properties, prior to the date
on
which penalties would attach, and all lawful claims that, if unpaid, might
become a lien or charge upon the Properties, income, or profits, and pay all
trade payables and other current liabilities incurred in the ordinary course
of
business within ninety (90) days of their due date; provided, however, Borrowers
will not be required to pay and discharge any such assessment, tax, charge,
levy, lien, or claim so long as (i) the legality of the same shall be contested
in good faith by appropriate judicial, administrative, or other legal
proceedings, and (ii) Borrowers have established adequate reserves with respect
to such contested assessment, tax, charge, levy, lien, or claim in accordance
with GAAP.
(h)
Not
directly or indirectly create, incur, assume, or permit to exist any loans
or
indebtedness (including guaranties), secured or unsecured, absolute or
contingent, except for (i) the indebtedness to Banks, (ii) any trade payables,
taxes, and current liabilities incurred in the ordinary course of business,
(iii) obligations related to Hedge Transactions permitted by this Loan
Agreement, (iv) the Subordinate Indebtedness (as defined below) owed to Parent,
and (v) additional indebtedness not to exceed $1,000,000.00 in the aggregate
at
any time.
(i) Not
mortgage, assign, hypothecate, pledge, or encumber, and not create, incur,
or
assume any lien or security interest on or in, the Properties (or any interest
in the Properties), any oil and gas properties included in the Borrowing Base
determination, or any of Borrowers=
property
or assets, except (1) those in favor of Agent for the ratable benefit of Banks,
(2) liens for taxes not delinquent or being contested in good faith, (3)
mechanic=s
and
materialman=s
liens
with respect to obligations not overdue or being contested in good faith, (4)
liens resulting from deposits to secure the payments of workers=
compensation or social security, (5) purchase money security interests or
construction liens that attach solely to the asset acquired or constructed,
that
secure indebtedness in an amount less than the cost and the fair market value
of
the asset acquired or constructed, and that are in an aggregate amount not
to
exceed $1,000,000.00, and (6) contractual liens that arise in the ordinary
course of business under or in connection with operating agreements, oil and
gas
leases, farm-out agreements, contracts for the sale, transportation, or exchange
of oil and natural gas, unitization and pooling declarations and agreements,
area of mutual interest agreements, marketing agreements, processing agreements,
development agreements, gas balancing or deferred production agreements,
injection, repressuring, and recycling agreements, salt water or other disposal
agreements, seismic or other geophysical permits or agreements, and other
agreements which are usual and customary in the oil and gas business and are
for
claims which are not delinquent or which are being contested in good
faith.
(j) Not
make
any loans or advances to any party, including without limitation, Parent, or
any
of its other subsidiaries, shareholders, officers, directors, partners, joint
venturers, members, managers, relatives, and affiliates, or any profit sharing
or retirement plan.
(k) Not
make
any dividends or other distributions to any party, including without limitation,
Parent, or any of its other subsidiaries, shareholders, officers, directors,
partners, joint venturers, members, managers, relatives, and affiliates, or
any
profit sharing or retirement plan, except so long as there is not an Event
of
Default existing, no Event of Default will be caused by the dividend or
distribution, and there is no Borrowing Base deficiency, Borrowers may
(i) pay
up to
$1,000,000.00 per fiscal year to Parent as a management fee, and (ii) repay
up
to $2,000,000.00 in principal per fiscal year in Subordinate Indebtedness owed
to Parent.
(l) Not
purchase, acquire, redeem, or retire any stock or other ownership interest
in
Borrowers; and not permit any transaction or contract with any affiliates or
related parties, except at arms length and on market terms.
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(m)
INDEMNIFY
AGENT AND BANKS AGAINST ALL LOSSES, LIABILITIES, WITHHOLDING AND OTHER TAXES,
CLAIMS, DAMAGES, OR EXPENSES RELATING TO THE LOANS, THE LOAN DOCUMENTS, OR
THE
BORROWERS=
USE OF
THE LOAN PROCEEDS, INCLUDING BUT NOT LIMITED TO ATTORNEYS AND OTHER PROFESSIONAL
FEES AND SETTLEMENT COSTS, BUT EXCLUDING, HOWEVER, THOSE CAUSED SOLELY BY OR
RESULTING SOLELY FROM ANY GROSS NEGLIGENCE OR WILLFUL MISCONDUCT BY AGENT OR
BANKS; AND THIS INDEMNITY SHALL SURVIVE THE TERMINATION OF THIS LOAN
AGREEMENT.
(n) Comply
in
all material respects with all applicable provisions of ERISA, not violate
any
provision of any Plan, meet their minimum funding requirements under ERISA
with
respect to each Plan, and notify Agent in writing of the occurrence and nature
of any Reportable Event or Prohibited Transaction, each as defined in ERISA,
or
any funding deficiency with respect to any Plan.
(o) If
Borrowers now or hereafter acquire any wholly-owned subsidiary or owns any
issued and outstanding capital stock or partnership interests of any companies
or partnerships, Borrowers shall sign and deliver to Agent for the benefit
of
Banks within fifteen (15) days a pledge agreement in Proper Form, creating
a
first-priority security interest covering the issued and outstanding capital
stock or partnership interests of all existing and hereafter acquired companies,
subsidiaries, or partnerships of Borrowers, and Borrowers shall cause the
wholly-owned subsidiary to sign and deliver to Agent for the benefit of Banks
within fifteen (15) days a guaranty in Proper Form, guaranteeing payment of
the
Loans.
(p) Execute
and deliver, or cause to be executed and delivered, any and all other
agreements, instruments, or documents which Agent may reasonably request in
order to give effect to the transactions contemplated under this Loan Agreement
and the Loan Documents, and to grant, perfect, and maintain liens and security
interests on or in the Properties and related collateral, and promptly cure
any
defects in the execution and delivery of any Loan Documents.
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8.
Financial
Covenants.
Until
the Loans and the Hedge Liabilities and all other obligations and liabilities
of
Borrowers under this Loan Agreement, the Notes, the Security Documents, and
the
other Loan Documents are fully paid and satisfied, Borrowers agree and covenant
that they will, unless Agent and Required Banks otherwise consent in writing,
maintain the following financial covenants on a consolidated basis:
(a) Maintain
at the end of each fiscal quarter a Current Ratio greater than or equal to
1.0
to 1.0. ACurrent
Ratio@
is
defined as the ratio of (i) Borrowers=
current
assets, plus
availability on the Revolving Loan, divided
by (ii)
Borrowers=
current
liabilities (excluding current maturities of long-term debt); provided, however,
that the xxxx-to-market values for hedging positions in accordance with FASB
133
shall be excluded from this calculation until such time as the gains or losses
from the xxxxxx are actually realized and the xxxxxx expire.
(b) Maintain
at the end of each fiscal quarter a Funded Debt to EBITDA Ratio less than or
equal to 3.0 to 1.0. AFunded
Debt to EBITDA Ratio@
is
defined as the ratio of (i) the total amount outstanding on the Loans,
divided
by
(ii) the
sum of Borrowers=
most
recent quarter=s
net
income annualized, plus
income
taxes for the same period annualized, plus
interest
expense on the Loans for the same period annualized, plus
depletion, depreciation, amortization, and other non-cash charges for the same
period annualized, minus
gains
from the sale of assets (or plus
losses
from the sale of assets) for the same period annualized; provided, however,
that
EBITDA from acquisitions may only be included in this covenant after Agent
has
reviewed and approved pro-forma financial statements demonstrating the effect
of
the acquisition.
Unless
otherwise specified, all accounting and financial terms and covenants set forth
above are to be determined according to GAAP, consistently applied.
9. Reporting
Requirements.
Until
the Loans and the Hedge Liabilities and all other obligations and liabilities
of
Borrowers under this Loan Agreement, the Notes, the Security Documents, and
the
other Loan Documents are fully paid and satisfied, Borrowers will, unless Agent
and Required Banks otherwise consent in writing, furnish to Agent in Proper
Form:
(a)
As
soon
as available, and in any event within ninety (90) days of the end of
Borrowers=
fiscal
year, annual financial statements for Parent on a consolidated and consolidating
basis, consisting of at least a balance sheet, an income statement, a statement
of cash flows, a statement of changes in owners=
equity,
and a statement of contingent liabilities, audited by an independent certified
public accountant acceptable to Agent and certified by an authorized officer
of
Parent and Borrowers (i) as being true and correct in all material aspects
to
the best of his knowledge, (ii) as fairly reporting the financial condition
of
Parent and its consolidated subsidiaries, including Borrowers, as of the close
of the fiscal year and the results of their operations for the year, and (iii)
as having been prepared in accordance with GAAP;
(b) As
soon
as available, and in any event within sixty (60) days of the end of each fiscal
quarter, quarterly financial statements for Borrowers
and Parent on a consolidated and consolidating basis, consisting of at least
a
balance sheet, an income statement, a statement of cash flows, a statement
of
changes in owners=
equity,
and a statement of contingent liabilities, for the quarter and for the period
from the beginning of the fiscal year to the close of the quarter, certified
by
an authorized officer of Parent and Borrowers (i) as being true and correct
in
all material aspects to the best of his knowledge, (ii) as fairly reporting
the
financial condition of Parent and its consolidated subsidiaries, including
Borrowers, as of the close of the fiscal quarter and the results of their
operations for the quarter, and (iii) as having been prepared in accordance
with
GAAP, subject to normal year-end adjustments and the absence of
footnotes;
(c) With
the
quarterly and annual financial statements required above, a quarterly compliance
certificate in the form of Exhibit
B
attached, signed by an authorized officer of Borrowers, and certifying
compliance with the financial covenants and other matters in this Loan
Agreement;
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(d) On
or
before April 1 of each year, a reserve report dated as of December 31, prepared
by an independent petroleum engineer or engineering firm acceptable to Agent,
and on or before October 1 of each year, a reserve report dated as of June
30,
prepared by Borrowers, both reports to be prepared on a consistent basis in
accordance with the customary standards and procedures of the petroleum
industry, estimating the quantity of oil, gas, and associated hydrocarbons
recoverable from the Properties and all of Borrowers=
oil and
gas properties, and the projected income and expense attributable to the
Properties and all of Borrowers=
oil and
gas properties, including, without limitation, a description of reserves, net
revenue interests and working interests attributable to the reserves, rates
of
production, gross revenues, operating expenses, ad valorem taxes, capital
expenditures necessary to cause the Properties and all of Borrowers=
oil and
gas properties to achieve the rate of production set forth in the report, net
revenues and present value of future net revenues attributable to the reserves
and production therefrom, a statement of the assumptions upon which the
determinations were made and any other matters related to the operations of
the
Properties and all of Borrowers=
oil and
gas properties and the estimated income therefrom;
(e) Within
fifteen (15) days of filing, copies of Borrowers=
federal,
state, and local income tax filings or returns, with all schedules, attachments,
forms, and exhibits;
(f)
With
the
semi-annual reserve reports required above or within thirty (30) days of
Agent=s
request, a
hedging
report setting forth as of the last business day of such prior fiscal quarter
end, a summary of Borrowers=
existing
hedging positions under all Hedge Transactions (including forward agreements
or
contracts of sale which provide for prepayment for deferred shipment or delivery
of oil, gas, and other commodities) of Borrowers, including the type, term,
effective date, termination date, and notional volumes and prices for such
volumes, the hedged prices, interest rates, or exchange rates, as applicable,
and any new credit support agreements relating thereto not previously disclosed
to Agent;
(g) Within
five
(5)
days of
Agent=s
request, Borrowers shall provide to Agent and Banks full and complete copies
of
all agreements, documents, and instruments evidencing all existing Hedge
Transactions and such other information regarding Hedge Transactions as Agent
may reasonably request;
(h) Within
sixty (60) days of the end of each month, a
production report, on a lease-by-lease or unit basis, showing the gross proceeds
from the sale of oil, gas, and associated hydrocarbons produced from the
Properties, the quantity of oil, gas, and associated hydrocarbons sold, the
severance, gross production, occupation, or gathering taxes deducted from or
paid out of the proceeds, the lease operating expenses, and such other
information as Agent may reasonably request;
(i) With
the
semi-annual reserve reports required above or within thirty (30) days of
Agent=s
request,
a
gas
balancing report, in Proper Form and duly certified by an authorized
representative of Borrowers as being true and correct in all material aspects
to
the best of his or her knowledge;
(j) At
any
time upon request by Agent and within thirty (30) days of any change thereafter,
a list showing the name and address of each purchaser of oil, gas, and
associated hydrocarbons produced from or attributable to the Properties;
(k) Within
five (5) days after Borrowers learn of any such occurrence, a written report
of
any pending or threatened litigation which would reasonably be expected to
have
a material adverse effect upon Borrowers, the Properties, or
Borrowers=
financial condition or which asserts damages or claims in an amount in excess
of
$100,000;
(l) Within
five (5) days after Borrowers learn of
any
default under one or more Hedge Transactions that results in an obligation
of
Borrowers to make one or more material payments, written notice of the default
and copies of all documentation relating to the default;
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(m)
As
soon
as possible and in any event within five (5) days after the occurrence of any
Event of Default, or any event which, with the giving of notice or lapse of
time
or both, would constitute an Event of Default, the written statement of
the President
or Chief Financial Officer of Borrowers setting forth the details of such Event
of Default and the action which Borrowers propose to take with respect thereto;
and
(n) Such
other information respecting the condition and the operations, financial or
otherwise, of Parent, Borrowers, and the Properties as Agent or Banks may from
time to time reasonably request.
10. Events
of Default.
(a) The
occurrence at any time of any of the following events or the existence of any
of
the following conditions shall be called an AEvent
of Default@:
(1) Failure
to make punctual payment when due of any sums owing on any of the Notes or
any
of the other secured indebtedness (as described in the Security Documents)
or
any other amounts owed by Borrowers, or either of them, to Agent or Banks,
including amounts owed under any fee letters among Borrowers and Agent or Banks;
or
(2) Failure
of any of the Obligated Parties (as defined below) to properly perform any
of
the obligations, covenants, or agreements, contained in this Loan Agreement
or
any of the other Loan Documents; or any representation or warranty made by
Borrowers proves to have been false, misleading, or erroneous in any material
respect; or
(3) A
material default by Borrowers under any ISDA Agreement or with respect to any
Hedge Liabilities; or non-payment
when due or the material breach by Borrowers or any Obligated Parties of any
term, provision, or condition contained in any Hedge Transaction or any
confirmation or other transaction consummated thereunder, whether or not Agent
or Banks are a party thereto;
or
(4) If
production payments for oil and gas produced from or attributable to
Borrowers=
oil and
gas properties are directed to any party other than the lockbox maintained
by
Agent following the establishment of the lockbox under Section 2(e) of this
Loan
Agreement; or
(5) A
failure
by Borrowers to resolve a Borrowing Base deficiency in accordance with Section
3(b) of this Loan Agreement; or
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(6) Levy,
execution, attachment, sequestra-tion, or other writ against any real or
personal property, representing the security for the Loans, and not removed,
released, or bonded against within thirty (30) days; or
(7) Any
AEvent
of
Default@
not
promptly cured under the Notes or any of the other Loan Documents, the Events
of
Default defined in the Notes and Loan Documents being cumulative to those
contained in this Loan Agreement; or
(8) Except
as
expressly permitted by this Loan Agreement, the transfer, whether voluntarily
or
by operation of law, of all or any portion of the Properties, without obtaining
Agent=s
partial
release; or
(9) The
failure of any of the Obligated Parties to pay any money judgment in excess
of
$200,000.00, against that party before the expiration of thirty (30) days after
the judgment becomes final or the failure of any of the Obligated Parties to
obtain dismissal within ninety (90) days of any involuntary proceeding filed
against that party under any Debtor Relief Laws (as defined below);
or
(10) Borrowers=
liquidation, termination of existence, merger or consolidation with another
(unless a Borrower is the surviving entity), forfeiture of right to do business,
or appointment of a trustee or receiver for any part of its property or the
filing of an action seeking to appoint a trustee or receiver; or
(11) A
filing
by any of the Obligated Parties of a voluntary petition in bankruptcy, or taking
advantage of any Debtor Relief Laws; or an answer admitting the material
allegations of a petition filed against any of the Obligated Parties, under
any
Debtor Relief Laws; or an admission by any of the Obligated Parties in writing
of an inability to pay its or their debts as they become due; or the calling
of
any meeting of creditors of any of the Obli-gated Parties for the purpose of
considering an arrangement or composition; or
(12) Any
of
the Obligated Parties revokes or disputes the validity of or liability under
any
of the Loan Documents, including any guaranty or security
document.
(b) The
term
AObligated
Parties@
means
Borrowers, or either of them, Parent, any other party liable, in whole or in
part, for the payment of any of the Notes, whether as maker, endorser,
guaran-tor, surety, or otherwise, and any party executing any deed of trust,
mortgage, security agreement, pledge agreement, assignment, or other contract
of
any kind executed as securi-ty in connection with or pertaining to the Notes
or
the Loans. The term ADebtor
Relief Laws@
means
any applicable liquidation, conservatorship, receivership, bankruptcy,
morato-rium, rearrangement, insolvency, reorganization, or similar laws
affecting the rights or remedies of creditors generally, as in effect from
time
to time.
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11. Remedies.
(a)
Upon the occurrence and during the continuance of any one or more of the
foregoing Events of Default and the expiration of any notice, cure, or grace
period required by Subsection (b) below, the entire unpaid principal balances
of
the Notes, together with all accrued but unpaid interest thereon, and all other
indebtedness then owing by Borrowers to Banks, shall, at the option of Agent
and
Required Banks, become immediately due and payable without further presentation,
demand for payment, notice of intent to accelerate, notice of acceleration
or
dishonor, protest or notice of protest of any kind, all of which are expressly
waived by Borrowers. Any and all rights and remedies of Agent and Banks pursuant
to this Loan Agreement or any of the other Loan Documents may be exercised
by
Agent and Banks, at their option, upon the occurrence and during the continuance
of an Event of Default and the expiration of any cure or grace period required
by Subsection (b) below. All remedies of Agent and Banks may be exercised
singularly, concurrently, or consecutively, without waiver or
election.
(b) Upon
any
event described in Subsection 10 (a)(1) above regarding payment of sums owing
to
Banks, Agent shall provide Borrowers with an invoice for the payment due and
Borrowers shall have five (5) days grace after the due date in order to cure
the
default prior to acceleration of the Notes and exercise of any remedies. Upon
any other event described in Subsection 10 (a) above, Agent shall provide
Borrowers with written notice of the default and Borrowers shall have twenty
(20) days after notice in order to cure the default prior to acceleration of
the
Notes and exercise of any remedies; except Borrowers shall have no cure period
for any voluntary filing by Borrowers under any Debtor Relief Laws, for any
liquidation or termination of existence of Borrowers, or for any Event of
Default that is not capable of cure during that period, and provided that Agent
and Banks are not obligated to provide written notice of any default which
Borrowers report to Agent, but Borrowers shall have the benefit of any
applicable grace or cure period required herein.
(c) All
rights of Agent and Banks under the terms of this Loan Agreement shall be
cumulative of, and in addition to, the rights of Agent and Banks under any
and
all other agreements among Borrowers, Agent, and Banks (including, but not
limited to, the other Loan Documents), and not in substitution or diminution
of
any rights now or hereafter held by Agent or Banks under the terms of any other
agreement.
12.
Subordinate
Indebtedness.
All
debts now or hereafter payable by Borrowers, or either of them, to Parent shall
be called the ASubordinate
Indebtedness.@
Borrowers have incurred and may hereafter incur Subordinate Indebtedness owed
to
Parent. Borrowers and Parent agree to sign and deliver in favor of Agent and
Banks, a subordination agreement (the ASubordination
Agreement@)
in
Proper Form, by which Borrowers and Parent subordinate the Subordinate
Indebtedness to repayment of the Loans and
the
Hedge Liabilities. Borrowers and Parent hereby agree that (i) the Subordinate
Indebtedness shall not exceed $2,000,000.00 in aggregate principal at any time,
(ii) repayment of the Subordinate Indebtedness is subordinate to repayment
of
the Loans and the Hedge Liabilities, (iii) Borrowers will not grant, and
subordinate creditors will not permit, any liens or security interests securing
payment of the Subordinate Indebtedness covering the Properties, any other
collateral of Agent, or any of Borrowers=
assets,
(iv) the Subordinate Indebtedness may not mature by its terms or by acceleration
of the maturity before thirty (30) days after the Termination Date (as hereafter
extended), (v) no payments, prepayments, or changes may be made to the
Subordinate Indebtedness, except as specifically permitted hereunder, without
the prior written consent of Agent, (vi) so long as there is not an Event of
Default existing, no Event of Default will be caused by the payment, and so
long
that there is no Borrowing Base deficiency, Borrowers may pay up to
$1,000,000.00 per fiscal year to Parent as a management fee, and repay up to
$2,000,000.00 in principal per fiscal year in Subordinate Indebtedness, and
(vii) unless and only to the extent that Agent gives its prior written consent,
no other payments of principal or interest will be permitted on the Subordinate
Indebtedness until the Loans and the Hedge Liabilities are paid in
full.
13. Waiver
and Amendment.
Neither
the failure nor any delay on the part of Agent or Banks to exercise any right,
power, or privilege herein or under any of the other Loan Documents shall
operate as a waiver thereof, nor shall any single or partial exercise of such
right, power, or privilege preclude any other or further exercise thereof or
the
exercise of any other right, power, or privilege. No waiver of any provision
in
this Loan Agreement or in any of the other Loan Documents and no departure
by
Borrowers therefrom shall be effective unless the same shall be in writing
and
signed by Agent, and then shall be effective only in the specific instance
and
for the purpose for which given and to the extent specified in such writing.
No
modification or amendment to this Loan Agreement or to any of the other Loan
Documents shall be valid or effective unless the same is signed by the party
against whom it is sought to be enforced.
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14.
Savings
Clause.
Regardless of any provision contained in this Loan Agreement, the Notes, or
any
of the Loan Documents, it is the express intent of the parties that at no time
shall Borrowers or any of the Obligated Parties pay interest in excess of the
Maximum Rate (or any other interest amount which might in any way be deemed
usurious), and Banks will never be considered to have contracted for or to
be
entitled to charge, receive, collect, or apply as interest on any of the Notes,
any amount in excess of the Maximum Rate (or any other interest amount which
might in any way be deemed usurious). In the event that Banks ever receive,
collect, or apply as interest any such excess, the amount which would be
excessive interest will be applied to the reduction of the principal balances
of
the Notes, and, if the principal balances of the Notes are paid in full, any
remaining excess shall forthwith be paid to Borrowers. In determining whether
the interest paid or payable exceeds the Maximum Rate (or any other interest
amount which might in any way be deemed usurious), Borrowers and Banks shall,
to
the maximum extent permitted under applicable law: (i) characterize any
non-principal payment (other than payments which are expressly designated as
interest payments hereunder) as an expense or fee rather than as interest;
(ii)
exclude voluntary prepayments and the effect thereof; and (iii) amortize, pro
rate, or spread the total amount of interest throughout the entire contemplated
term of the Notes so that the interest rate is uniform throughout the term.
The
term AMaximum
Rate@
means
the maximum interest rate which may be lawfully charged under applicable
law.
15. Notices.
Any
notice or other communications provided for in this Loan Agreement shall be
in
writing and shall be given to the party at the address shown below:
|
Agent:
|
Bank
of Texas, N.A.
|
Attention:
Xxxx Xxxxxx, Senior Vice President
5
Houston
Center
0000
XxXxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxx 00000
Fax
Number (000) 000-0000
|
Banks:
|
Bank
of Texas, N.A.
|
Attention:
Xxxx Xxxxxx, Senior Vice President
5
Houston
Center
0000
XxXxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxx 00000
Fax
Number (000) 000-0000
With
a
copy
to
counsel for
|
Agent:
|
Xxxx
X. Xxxxxxxx
|
Xxxxxx,
Xxxxxx & Xxxxx,
P.C.
000
Xxxx
Xxxxxx, Xxxxx 0000
Xxxx
Xxxxx, Xxxxx 00000-0000
Fax
Number (000) 000-0000
| Borrowers: |
Tandem
Energy Corporation
|
PER
Gulf
Coast, Inc.
Attention:
Xxxxxxx X. Xxxxxxxxxx, Senior Vice President
000
X.
Xxxxxxx, Xxxxx 000
Xxxxxxx,
Xxxxx 00000
Fax
Number (000) 000-0000
Tandem
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March
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Any
such
notice or other communication shall be deemed to have been given on the day
it
is personally delivered or, if mailed, on the third day after it is deposited
in
an official receptacle for the United States mail, or, if faxed, on the date
it
is received by the party. Any party may change its address for the purposes
of
this Loan Agreement by giving notice of such change in accordance with this
paragraph.
16. Miscellaneous.
(a)
This
Loan Agreement shall be binding upon and inure to the benefit of Agent, Banks,
Borrowers, and their respective heirs, personal representatives, successors,
and
assigns; provided, however, that Borrowers may not, without the prior written
consent of Agent, assign any rights, powers, duties, or obligations under this
Loan Agreement or any of the other Loan Documents.
(b) THIS
LOAN
AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE
STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA AND
SHALL
BE PERFORMED IN XXXXXX COUNTY, TEXAS. BORROWERS, AGENT, AND BANKS IRREVOCABLY
AGREE THAT VENUE FOR ANY ACTION OR CLAIM RELATED TO THIS LOAN AGREEMENT, THE
NOTES, THE LOANS, THE LOAN DOCUMENTS, OR THE PROPERTIES SHALL BE IN COURT IN
XXXXXX COUNTY, TEXAS.
(c) If
any
provision of this Loan Agreement or any other Loan Documents is held to be
illegal, invalid, or unenforceable under present or future laws, such provision
shall be fully severable and the remaining provisions of this Loan Agreement or
any of the other Loan Documents shall remain in full force and effect and shall
not be affected by the illegal, invalid, or unenforceable provision or by its
severance.
(d) All
covenants, agreements, undertakings, representations, and warranties made in
this Loan Agreement and the other Loan Documents shall survive any closing
hereunder.
(e) All
documents delivered by Borrowers or Parent to Agent or Banks must be in Proper
Form. The term AProper
Form@
means in
form, substance, and detail reasonably satisfactory to Agent in its sole
discretion.
(f) Without
limiting the effect of any provision of any Loan Document which provides for
the
payment of expenses and attorneys fees upon the occurrence of certain events,
Borrowers shall pay all costs and expenses (including, without limitation,
the
reasonable attorneys fees of Agent=s
and
Banks=
independent legal counsel) in connection with (i) the preparation of this Loan
Agreement and the other Loan Documents, and any and all extensions, renewals,
amendments, supplements, extensions, or modifications thereof, (ii) any action
reasonably required in the course of administration of the Loans, (iii)
resolution of any disputes with Borrowers or Parent related to the Loans or
this
Loan Agreement, and (iv) any action in the enforcement of Agent=s
or
Banks=
rights
upon the occurrence of an Event of Default. Notwithstanding any provision to
the
contrary, however, Agent agrees that if the legal fees (excluding expenses)
on
the initial preparation of this Loan Agreement and the other Loan Documents,
legal fees related to title examination, and the original closing of the
Revolving Loan exceed $25,000.00, then Agent shall pay one-half of any amount
in
excess of $25,000.00.
(g) If
there
is a conflict between the terms of this Loan Agreement and the terms of any
of
the other Loan Documents, the terms of this Loan Agreement will
control.
(h) Banks
shall have the right, with the consent of Borrowers (unless an Event of Default
has occurred and is continuing, in which case no consent is needed), which
will
not be unreasonably withheld, (i) to assign the Loans or commitment and be
released from liability thereunder, and (ii) to transfer or sell participations
in the Loans or commitment with the transferability of voting rights limited
to
principal, rate, fees, and term; provided, however, that Bank of Texas shall
have the right to make intercompany assignments to BOK, without restriction
or
consent.
Tandem
Energy Corporation,
et
al
March
14,
2008
Page 24
of
26
(i) This
Loan
Agreement may be separately executed in any number of counterparts, each of
which will be an original, but all of which, taken together, shall be deemed
to
constitute one agreement, and Agent is authorized to attach the signature pages
from the counterparts to copies for Agent, Banks, and Borrowers. At
Agent=s
option,
this Loan Agreement and the Loan Documents may also be executed by Borrowers
and
Banks in remote locations with signature pages faxed to Agent. Borrowers and
Banks agree that the faxed signatures are binding upon Borrowers and Banks,
and
Borrowers further agree to promptly deliver the original signatures for the
Loan
Agreement and all Loan Documents, and it will be an Event of Default if
Borrowers fail to promptly deliver all required original
signatures.
17.
Agency
Provisions.
(a)
Each of
the Banks hereby irrevocably appoints and authorizes Agent to take such action
as Agent on its behalf and to exercise such powers under this Loan Agreement
as
are delegated to Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. The duties of Agent shall be mechanical and
administrative in nature, and Agent shall not by reason of this Loan Agreement
be a trustee or fiduciary for Banks. Agent shall have no duties or
responsibilities except those expressly set forth herein. As to any matters
not
expressly provided for by this Loan Agreement (including, without limitation,
enforcement or collection of the Notes), Agent shall not be required to exercise
any discretion or take any action, but shall be required to act or to refrain
from acting (and shall be fully protected in so acting or so refraining from
acting) upon the instructions of Banks, and such instructions shall be binding
upon all Banks and all holders of the Notes; provided, however, that Agent
shall
not be required to take any action which exposes Agent to personal liability
or
which is contrary to this Loan Agreement or applicable law. Without the prior
instructions of Banks, Agent may exercise any provisions of this Loan Agreement
or the other Loan Documents which directly or indirectly authorize Agent to
exercise its discretion or otherwise take actions which are discretionary in
nature.
(b) Any
provision of this Loan Agreement, the Notes, or the other Loan Documents may
be
amended or waived if, but only if such amendment or waiver is in writing and
is
signed by Borrowers and Agent; provided that no amendment or waiver shall,
unless signed by Agent and all Banks: (i) modify the Percentage Share of any
Bank, (ii) release a guarantor, (iii) amend or waive any of provisions related
to the Borrowing Base, (iv) increase the commitment of any Bank or subject
any
Bank to any additional obligation, (v) forgive any of the principal of or reduce
the rate of interest on any Loans or any fees hereunder, (vi) postpone the
date
fixed for any payment of principal of or interest on any Loans or any fees
hereunder, or (vii) change the number or percentage of Banks required to take
any action under this Section or any other provision of this Loan Agreement.
All
other major decisions with respect to the management of Banks=
relationship with Borrowers and the credit facilities created under this Loan
Agreement and the other Loan Documents, including without limitation (i) whether
or not to accelerate the Notes, (ii) whether or not to agree to amendments
or
waivers under the terms of this Loan Agreement or any of the other Loan
Documents, (iii) all material matters relating to foreclosure and collection,
and (iv) what directions to give Agent regarding matters not covered by this
Loan Agreement and the other Loan Documents, shall be made by the unanimous
consent of all Banks.
(c) Neither
Agent nor any of its directors, officers, agents, or employees shall be liable
for any action taken or omitted to be taken by it or them under or in connection
with this Loan Agreement in the absence of its or their own gross negligence
or
willful misconduct. Without limitation of the generality of the foregoing,
Agent
(1) may treat the payee of any Notes as the holder thereof until Agent receives
written notice of the assignment or transfer thereof signed by such payee and
in
form satisfactory to Agent; (2) may consult with legal counsel (including
counsel for Borrowers), independent public accountants, and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants, or experts; (3) makes no warranty or representation to any Bank
and
shall not be responsible to any Bank for any statements, warranties, or
representations made in or in connection with this Loan Agreement; (4) shall
not
have any duty to ascertain or to inquire as to the performance or observance
of
any of the terms, covenants, or conditions of this Loan Agreement on the part
of
Borrowers, or to inspect the property or assets (including the books and
records) of Borrowers; (5) shall not be responsible to any Bank for the due
execution, legality, validity, enforceability, genuineness, perfection,
sufficiency, or value of this Loan Agreement or any other instrument or document
furnished pursuant thereto; and (6) shall incur no liability under or in respect
of this Loan Agreement by acting upon any notice, consent, certificate, or
other
instrument or writing (which may be sent by telegram, telex, or facsimile
transmission) believed by it to be genuine and signed or sent by the proper
party or parties.
(d) With
respect to its Percentage Share, the advances on the Revolving Loans
made
by
it, and the Revolving Note payable to it, Bank of Texas shall have the same
rights and powers under this Loan Agreement as any other Bank and may exercise
the same as though it were not collateral agent; and the terms ABank,@ ABanks,@
and
ARequired
Banks@
shall,
unless otherwise expressly indicated, include Bank of Texas in its individual
capacity. Bank of Texas and its affiliates may accept deposits from, lend money
to, act as trustee under indentures of, and generally engage in any kind of
business with, Borrowers, any subsidiary, and any person who may do business
with or own securities of Borrowers, all as if Bank of Texas were not Agent
and
without any duty to account therefor to Banks.
Tandem
Energy Corporation,
et
al
March
14,
2008
Page 25
of
26
(e) Each
of
the Banks acknowledges that it has, independently and without reliance
upon Agent or any other Banks and based on such documents and information as
it
has deemed appropriate, made its own credit analysis and decision to enter
into
this Loan Agreement. Each of the Banks also acknowledges that it will,
independently and without reliance upon Agent or any other Banks and based
on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Loan Agreement. Except for notices, reports, and other documents and
information expressly required to be furnished to Banks by Agent hereunder,
Agent shall have no duty or responsibility to provide any Bank with any credit
or other information concerning the affairs, financial condition, or business
of
Borrowers which may come into the possession of Agent.
(f) Each
of
the Banks agrees to indemnify Agent (to the extent not reimbursed
by Borrowers), ratably according to its Percentage Share, from and against
any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against Agent
in
any way relating to or arising out of this Loan Agreement or any action taken
or
omitted by Agent under this Loan Agreement, provided that no Bank shall be
liable for any portion of any of the foregoing resulting from Agent=s
gross
negligence or willful misconduct. Without limitation of the foregoing, each
of
the Banks agrees to reimburse Agent (to the extent not reimbursed by the
Borrowers) promptly upon demand for its ratable share of any out-of-pocket
expenses (including counsel fees) incurred by Agent in connection with the
preparation, administration, or enforcement of, or legal advice in respect
of
rights or responsibilities under, this Loan Agreement.
(g) Agent
may
resign at any time by giving at least sixty (60) days prior written notice
thereof to Banks and Borrowers. Upon any such resignation, within thirty (30)
days after the retiring Agent=s
giving
of notice of resignation, then Banks may appoint a successor Agent, which shall
be a commercial bank organized under the laws of the United States of America
or
of any State thereof and having a combined capital and surplus of at least
$100,000,000. Upon the acceptance of any appointment as Agent hereunder by
a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges, and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Loan Agreement. After any retiring Agent=s
resignation, the provisions of this Section shall inure to its benefit as to
any
actions taken or omitted to be taken by it while it was Agent under this Loan
Agreement.
(h) If
any
Bank shall obtain any payment (whether voluntary, involuntary, through
the exercise of any right of set off, or otherwise) on account of the Notes
held
by it in excess of its ratable share of payments on account of the Notes
obtained by all Banks, such Bank shall purchase from the other Banks such
participations in the Notes held by them as shall be necessary to cause such
purchasing Bank to share the excess payment ratably with the other
Banks.
18. Notice
of Final Agreement.
(a) In
connection with the Loans, Borrowers, Agent, and Banks have executed and
delivered this Loan Agreement and the Loan Documents (collectively the
AWritten
Loan Agreement@).
(b) It
is the
intention of Borrowers, Agent, and Banks that this paragraph be incorporated
by
reference into each of the Loan Documents. Borrowers, Agent, and Banks each
warrant and represent that their entire agreement with respect to the Loans
is
contained within the Written Loan Agreement, and that no agreements or promises
have been made by, or exist by or among, Borrowers, Agent, and Banks that are
not reflected in the Written Loan Agreement.
(c) THE
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 AGREEMENTS BETWEEN THE
PARTIES.
If
the
foregoing correctly sets forth our agreement, please so acknowledge by signing
and returning the additional copy of this Loan Agreement enclosed to
me.
| Yours very truly, | ||
|
AGENT:
|
Bank of Texas, N.A. | |
| |
|
|
| By: | /s/ Xxxx Xxxxxx | |
|
Xxxx Xxxxxx, |
||
| Senior Vice President | ||
Tandem
Energy Corporation,
et
al
March
14,
2008
Page 26
of
26
Accepted
and agreed to
this
14th
day of March, 2008:
BORROWERS:
Tandem
Energy Corporation
By:
/s/
Xxxxxxx X. Xxxxxxxxxx
Xxxxxxx
X. Xxxxxxxxxx,
Senior
Vice President
PER
Gulf
Coast, Inc.
By:
/s/
Xxxxxxx X. Xxxxxxxxxx
Xxxxxxx
X. Xxxxxxxxxx,
Senior
Vice President
BANKS:
Bank
of
Texas, N.A.
By:
/s/
Xxxx Xxxxxx
Xxxx
Xxxxxx,
Senior
Vice President
Exhibits
and Schedules:
Schedule
1 - Banks and Percentage Share
Schedule
2 - Required Hedge Transactions
Schedule
3 - Existing Hedge Transactions
Exhibit
A
- Revolving Note
Exhibit
B
- Compliance Certificate
Schedule
1
to
Loan
Agreement
Banks
and Percentage Share
|
Banks
|
Commitment
Amount
|
Commitment
Percentage
|
Face
Amount of
Note
|
|
Bank
of Texas, N.A.
|
$35,000,000.00
|
100.00000%
|
$100,000,000.00
|
|
Totals:
|
$35,000,000.00
|
100.00000%
|
$100,000,000.00
|
|
Banks
|
Lending
Office
|
Address
for Notice
|
|
Bank
of Texas, N.A.
|
Bank
of Texas, N.A. Attention:
Xxxx Xxxxxx,
Senior
Vice President
5
Houston Center
0000
XxXxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxx 00000
Fax
Number (000) 000-0000
|
Bank
of Texas, N.A. Attention:
Xxxx Xxxxxx,
Senior
Vice President
5
Houston Center
0000
XxXxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxx 00000
Fax
Number (000) 000-0000
|
|
Administrative
Agent
|
Address
for Notice
|
|
|
Bank
of Texas, N.A.
|
Bank
of Texas, N.A. Attention:
Xxxx Xxxxxx,
Senior
Vice President
5
Houston Center
0000
XxXxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxx 00000
Fax
Number (000) 000-0000
|
Schedule
2
to
Loan
Agreement
Required
Hedge Transactions
|
Type
of Hedge Transaction
|
Period
|
Minimum
Price
|
Volume
|
||||
|
1.
|
Crude
Oil Swaps
|
January
1, 2009 -
|
$71.00
per bbl
|
10,000
bbls per month
|
|||
|
|
December
31, 2009
|
||||||
|
2.
|
Crude
Oil Puts
|
January
1, 2010 -
|
$75.00
per bbl
|
10,000
bbls per month
|
|||
|
|
December
31, 2010
|
||||||
|
3.
|
Crude
Oil Puts
|
December
1, 2010 -
|
$85.00
per bbl
|
10,000
bbls per month
|
|||
|
|
December
31, 2010
|
||||||
|
4.
|
Crude
Oil Puts
|
January
1, 2011 -
|
$80.00
per bbl
|
10,000
bbls per month
|
|||
|
|
December
31, 2011
|
||||||
|
5.
|
Crude
Oil Collar
|
January
1, 2008 -
|
$40.00
per bbl floor
|
12,500
bbls per month
|
|||
|
|
|
October
31, 2008
|
$67.00
per bbl ceiling
|
||||
|
6.
|
Natural
Gas Collar
|
January
1, 2008 -
|
$5.00
per mcf floor
|
35
MMcf per month
|
|||
|
|
|
October
31, 2008
|
$9.10
per mcf ceiling
|
||||
Schedule
3
to
Loan
Agreement
Existing
Hedge Transactions
A. ISDA
Master Agreement dated __________________, between Tandem Energy Corporation
and
Shell
Trading (U.S.) Company,
with
the following outstanding Hedge Transactions:
[Note
to Borrowers: please identify which of the existing xxxxxx are with Shell and
with BP and please also make sure that we have all of the net positions
covered.]
|
1.
|
Crude
Oil Puts
|
January
1, 2010 -
|
$75.00
per bbl
|
10,000
bbls per month
|
|||
|
|
December
31, 2010
|
||||||
|
2.
|
Crude
Oil Puts
|
December
1, 2010 -
|
$85.00
per bbl
|
10,000
bbls
|
|||
|
|
December
31, 2010
|
||||||
|
3.
|
Crude
Oil Puts
|
January
1, 2011 -
|
$80.00
per bbl
|
10,000
bbls per month
|
|||
|
|
December
31, 2011
|
||||||
|
4.
|
Crude
Oil Collar
|
January
1, 2008 -
|
$40.00
per bbl floor
|
12,500
bbls per month
|
|||
|
|
|
October
31, 2008
|
$67.00
per bbl ceiling
|
||||
|
5.
|
Natural
Gas Collar
|
January
1, 2008 -
|
$5.00
per mcf floor
|
35
MMcf per month
|
|||
|
|
|
October
31, 2008
|
$9.10
per mcf ceiling
|
B. ISDA
Master Agreement dated August 28, 2006, between Tandem Energy Corporation and
BP
Corporation
North America Inc.,
with
the following oustanding Hedge Transactions:
|
1.
|
Crude
Oil Swaps
|
January
1, 2009 -
|
$71.00
per bbl
|
10,000
bbls per month
|
|||
|
|
December
31, 2009
|
||||||
|
2.
|
Crude
Oil Puts
|
January
1, 2010 -
|
$75.00
per bbl
|
10,000
bbls per month
|
|||
|
|
December
31, 2010
|
||||||
|
3.
|
Crude
Oil Puts
|
December
1, 2010 -
|
$85.00
per bbl
|
10,000
bbls
|
|||
|
|
December
31, 2010
|
||||||
|
4.
|
Crude
Oil Puts
|
January
1, 2011 -
|
$80.00
per bbl
|
10,000
bbls per month
|
|||
|
|
December
31, 2011
|
Exhibit
A
REVOLVING
PROMISSORY NOTE
|
$100,000,000.00
|
Houston,
Texas
|
March
14, 2008
|
Promise
to Pay. For
value
received, on or before March 14, 2012 (AMaturity
Date@),
Tandem
Energy Corporation,
a
Delaware corporation, and PER
Gulf
Coast, Inc.,
a
Delaware corporation (collectively ABorrowers@),
jointly and severally promise to pay to the order of Bank
of
Texas, N.A.
(ABank@),
at the
offices of Bank
of
Texas,
N.A.
(AAgent@)
in
Xxxxxx County, Texas at 5 Houston Center, 0000 XxXxxxxx, Xxxxx 0000,
Xxxxxxx,
Xxxxx 00000, the principal amount of One Hundred Million Dollars
($100,000,000.00) (ATotal
Principal Amount@),
or
such amount less than the Total Principal Amount which has been advanced
to
Borrowers under this Revolving Promissory Note (ANote@),
together with interest on the portion of the Total Principal Amount advanced
to
Borrowers from the date advanced until paid at the rates per annum provided
below.
Definitions.
For
purposes of this Note, unless the context otherwise requires, certain
terms used
herein shall be defined as follows:
AAdjusted
LIBOR Rate@
means
with respect to each Interest Period, a rate per annum equal to the sum
of (i)
the LIBOR Spread, plus
(ii) the
LIBOR Rate with respect to such Interest Period. Each determination by
Agent of
the Adjusted LIBOR Rate shall, in the absence of manifest error, be prima
facie and
binding.
ABanks@
means
all banks and financial institutions now or hereafter a party to the
Loan
Agreement.
ABusiness
Day@
means
any day other than a Saturday, Sunday or any other day on which national
banking
associations are authorized to be closed.
AConsequential
Loss@
means,
with respect to Borrowers=
payment
of all or any portion of the then-outstanding principal amount of any
LIBOR
Balance on a day other than the last day of the Interest Period related
thereto,
any loss, cost, or expense incurred by Bank in redepositing such principal
amount, including the sum of (i) the interest which, but for such payment,
Bank
would have earned in respect of such principal amount so paid, for the
remainder
of the Interest Period applicable to such sum, reduced, if Bank is able
to
redeposit such principal amount so paid for the balance of such Interest
Period,
by the interest earned by Bank as a result of so redepositing such principal
amount plus
(ii) any
expense or penalty incurred by Bank on redepositing such principal amount,
but
excluding taxes on the income of Bank imposed by any governmental
authority.
AContract
Rate@
means
the Adjusted LIBOR Rate or the Prime Rate, as in effect from time to
time under
this Note.
ADollars@
means
lawful currency of the United States of America.
AExcess
Interest Amount@
means,
on any date, the amount by which (i) the amount of all interest which
would have
accrued prior to such date on the principal of this Note, had the applicable
Contract Rate at all times been in effect without limitation by the Maximum
Rate, exceeds
(ii) the
aggregate amount of interest accrued on this Note on or prior to such
date as
limited by the Maximum Rate.
AInterest
Notice@
means
the notice given by Borrowers to Agent of an Interest Option selected
hereunder.
Each Interest Notice given by Borrowers under this Note shall be irrevocable
and
must be given not later than 10:00 a.m. (Houston, Texas time) on a day
which is
not less than the number of Business Days or LIBOR Business Days required
below
for an Interest Option.
AInterest
Option@
means
Borrowers=
option
to select an Adjusted LIBOR Rate or the Prime Rate, as described more
fully
below.
AInterest
Payment Date@
means
the first (1st)
day of
each month hereafter for interest on the Prime Rate Balance, the last
day of the
applicable Interest Period for interest on the LIBOR Balance, and the
Maturity
Date.
AInterest
Period@
means,
with respect to any LIBOR Balance, a period commencing: (i) on any date
which,
pursuant to an Interest Notice, the principal amount of such LIBOR Balance
begins to accrue interest at the Adjusted LIBOR Rate, or (ii) the Business
Day
following the last day of the immediately preceding Interest Period in
the case
of a rollover to a successive Interest Period, and ending one, two, or three
months thereafter as Borrowers shall elect in accordance with the provisions
hereof; provided that: (A) any Interest Period which would otherwise
end on a
day which is not a LIBOR Business Day shall be extended to the succeeding
LIBOR
Business Day and (B) any Interest Period which would otherwise end after
the
Maturity Date shall end on the Maturity Date.
ALIBOR
Balance@
means
the principal balance of this Note, which, pursuant to an Interest Notice,
bears
interest at the Adjusted LIBOR Rate.
ALIBOR
Business Day@
means a
day on which dealings in Dollars are carried out in the London interbank
offered
rate market.
ALIBOR
Rate@
means
the rate of interest per annum at which deposits in Dollars are offered
by the
major London clearing banks, as quoted by the British Banker=s
Association and reported by Bloomberg Professional Service on page BBAM
(or such
other similar news reporting service as Agent may subscribe to at the
time such
LIBOR Rate is determined), in the London interbank offered rate market
for a
period of time equal or comparable to an Interest Period and in an amount
equal
to or comparable to the principal amount of the LIBOR Balance to which
such
Interest Period relates. The LIBOR Rate for the Interest Period to which
it
relates shall (i) be determined as of 11:00 a.m. (London, England time)
two (2)
LIBOR Business Days prior to the first day of such Interest Period, and
(ii)
shall be rounded upward, if necessary, to the nearest one-hundreth of
one
percent.
2
ALIBOR
Spread@
means
the ALIBOR
Spread@
as
defined in the Loan Agreement; and the LIBOR Spread will vary as set
forth in
the Loan Agreement, based on the Borrowing Base Utilization (as defined
in the
Loan Agreement) as in effect from time to time, with each change in the
applicable percentage resulting from a change in the Borrowing Base Utilization
to take effect on the day such change in the Borrowing Base Utilization
occurs.
ALoan
Agreement@
means
the Loan Agreement of even date, by and among Borrowers, Agent, and Banks,
as
amended.
AMaximum
Rate@
means at
the particular time in question the maximum rate of interest which, under
applicable law, may then be charged on this Note. If the maximum rate
of
interest changes after the date hereof, the Maximum Rate shall be automatically
increased or decreased, as the case may be, without notice to Borrowers
from
time to time as of the effective date of each change in the maximum rate.
If
applicable law ceases to provide for a maximum rate of interest, the
Maximum
Rate shall be equal to eighteen percent (18%) per annum.
APrime
Rate@
means
the BOKF National Prime Rate, which is defined as the rate of interest
set by
BOK Financial
Corporation,
in its
sole discretion, on a daily basis, as published by BOK Financial Corporation
from time to time (which may not be the lowest, best or most favorable
rate of
interest which Agent or Banks may charge on loans to their
customers).
APrime
Rate Balance@
means
the principal balance of this Note bearing interest at a rate based upon
the
Prime Rate.
Payments
of Interest and Principal.
The
principal of and all accrued but unpaid interest on this Note shall be
due and
payable as follows:
(a) accrued,
unpaid interest on this Note shall be due and payable on each Interest
Payment
Date, commencing on the first (1st)
day of
April, 2008, and continuing until the Maturity Date;
(b) the
principal of this Note shall be due and payable as required by the Loan
Agreement to meet any Borrowing Base deficiency or Monthly Commitment
Reductions
(if and when required by Agent and Banks under the Loan Agreement);
and
(c) the
outstanding principal balance of this Note, together with all accrued
but unpaid
interest, shall be due and payable on the Maturity Date.
3
Revolving
Credit. Under
the
Loan Agreement, Borrowers may request advances and make payments hereunder
from
time to time, provided that it is understood and agreed that the aggregate
principal amount outstanding from time to time hereunder shall not at
any time
exceed the Total Principal Amount or the Borrowing Base (as defined in
the Loan
Agreement). In addition, Agent and Banks may set a monthly commitment
reduction
pursuant to the Loan Agreement, thereafter the Borrowing Base and
Bank=s
commitment under this Note will decline monthly, and the amount outstanding
under this Note may not exceed the amount of Bank=s
Commitment under the declining Borrowing Base. The unpaid balance of
this Note
shall increase and decrease with each new advance or payment hereunder,
as the
case may be. This Note shall not be deemed terminated or canceled prior
to the
Maturity Date, although the entire principal balance hereof may from
time to
time be paid in full. Borrowers may borrow, repay and reborrow hereunder.
Unless
otherwise agreed to in writing or otherwise required by applicable law,
payments
will be applied first to unpaid accrued interest, then to principal,
and any
remaining amount to any unpaid collection costs, delinquency charges,
and other
charges; provided, however, upon delinquency or other Event of Default,
Bank
reserves the right to apply payments among principal, interest, delinquency
charges, collection costs, and other charges, in such order and manner
as the
holder of this Note may from time to time determine in its sole discretion.
All
payments and prepayments of principal of or interest on this Note shall
be made
in Dollars in immediately available funds, at the address of Agent indicated
above, or such other place as the holder of this Note shall designate
in writing
to Borrowers. If any payment of principal of or interest on this Note
shall
become due on a day which is not a Business Day or LIBOR Business Day,
such
payment shall be made on the next succeeding Business Day or LIBOR Business
Day,
as applicable, and any such extension of time shall be included in computing
interest in connection with such payment. The books and records of Agent
shall
be prima facie
evidence
of all outstanding principal of and accrued and unpaid interest on this
Note.
Accrual
of Interest.
The
unpaid principal of the Prime Rate Balance shall bear interest at a rate
per
annum which shall from day to day be equal to the lesser of (i) the Prime
Rate,
or (ii) the Maximum Rate. The unpaid principal of each LIBOR Balance
shall bear
interest at a rate per annum which shall be equal to the lesser of (i)
the
Adjusted LIBOR Rate for the Interest Period in effect with respect to
the LIBOR
Balance, or (ii) the Maximum Rate. Each change in the Prime Rate shall
become
effective without prior notice to Borrowers automatically as of the opening
of
business on the date of such change in the Prime Rate. Interest on this
Note
shall be calculated on the basis of the actual days elapsed, but computed
as if
each year consisted of 360 days.
Interest
Options.
Subject
to the provisions hereof, Borrowers shall have the option (the AInterest
Option@)
of
having the unpaid principal balance of this Note bear interest at the
Adjusted
LIBOR Rate or the Prime Rate; provided, however, that only four (4) Interest
Period options shall be in effect at any one time and the selection of
the
Adjusted LIBOR Rate for a particular Interest Period shall be for no
less than
$1,000,000.00 of unpaid principal and in even multiples of $100,000.00
in
principal. The Interest Option shall be exercised in the manner provided
below:
(a) Advances.
Each
advance on the Note will initially be funded as a Prime Rate Balance
and will
accrue interest from the date advanced at the Prime Rate.
(b) Conversion
From Prime Rate.
During
any period in which the principal hereof bears interest at the Prime
Rate,
Borrowers shall have the right, on any LIBOR Business Day (the AConversion
Date@),
to
convert all or part of the principal balance owed on the Note from the
Prime
Rate Balance to a LIBOR Balance by giving Agent an Interest Notice of
such
selection at least two (2) LIBOR Business Days prior to the Conversion
Date.
4
(c) At
Expiration of Interest Periods.
At
least two (2) LIBOR Business Days prior to the termination of each Interest
Period, Agent shall receive from Borrowers an Interest Notice indicating
the
Interest Option to be applicable to the corresponding LIBOR Balance upon
the
expiration of such Interest Period. If the required Interest Notice shall
not
have been timely received by Agent, Borrowers shall be deemed to have
selected
the Prime Rate to be applicable to the corresponding LIBOR Balance upon
the
expiration of the Interest Period and to have given Agent notice of such
selection.
Interest
Recapture.
If on
each Interest Payment Date or any other date on which interest payments
are
required hereunder, Bank does not receive interest on this Note computed
at the
Prime Rate or Adjusted LIBOR Rate because such Contract Rate exceeds
or has
exceeded the Maximum Rate, then Borrowers shall, upon the written demand
of
Agent, pay to Bank in addition to the interest otherwise required to
be paid
hereunder, on each Interest Payment Date thereafter, the Excess Interest
Amount
(calculated as of such later Interest Payment Date); provided that in
no event
shall Borrowers be required to pay, for any Interest Period, interest
at a rate
exceeding the Maximum Rate effective during such period.
Interest
on Past Due Amounts and Default Interest.
To the
extent any interest is not paid on or before the date it becomes due
and
payable, Agent may, at its option, add such accrued but unpaid interest
to the
principal of this Note. Notwithstanding anything herein to the contrary,
(i)
while any Event of Default (as defined below) is outstanding, (ii) upon
acceleration of the maturity hereof following an uncured Event of Default,
or
(iii) at the Maturity Date, all principal of this Note shall, at the
option of
Agent, bear interest at the Maximum Rate until paid.
Loan
Agreement/Security.
This
Note is subject to the terms and provisions of the Loan Agreement. This
Note is
secured by all liens and security interests described in the Loan Agreement.
This Note, the Loan Agreement, and all other documents evidencing, securing,
governing, guaranteeing, or pertaining to this Note are hereinafter collectively
referred to as the ALoan
Documents.@
The
holder of this Note is entitled to the benefits and security provided
in the
Loan Documents.
Prepayments;
Consequential Loss.
Borrowers may from time to time prepay all or any portion of the principal
of
this Note without premium or penalty, except as set forth herein. Any
prepayment
made hereunder shall be made together with all interest accrued but unpaid
on
this Note through the date of such prepayment. If Borrowers make any
prepayment
of principal with respect to any LIBOR Balance on any day prior to the
last day
of the Interest Period applicable to such LIBOR Balance, Borrowers shall
reimburse the Bank on demand the Consequential Loss incurred by Bank
as a result
of the timing of such payment. A certificate of Agent setting forth the
basis
for the determination of a Consequential Loss shall be delivered to Borrowers
and shall, in the absence of manifest error, be prima facie evidence
as to such
determination and amount.
5
Special
Provisions for LIBOR Pricing. Borrowers
agree to the following special provisions regarding LIBOR pricing:
(a)
If
Agent
determines that, by reason of circumstances affecting the London interbank
offered rate market generally, deposits in Dollars (in the applicable
amounts)
are not being offered to United States financial institutions in the
London
interbank offered rate market for the applicable Interest Period, or
that the
rate at which such Dollar deposits are being offered will not adequately and
fairly reflect the cost to Bank of making or maintaining a LIBOR Balance
for the
applicable Interest Period, Agent shall forthwith give written notice
to
Borrowers, and thereafter until Agent notifies Borrowers that the circumstances
giving rise to such suspension no longer exist, (i) the right of Borrowers
to
select the Adjusted LIBOR Rate as an Interest Option under this Note
shall be
suspended, and (ii) Borrowers shall be deemed to have converted each
LIBOR
Balance to a Prime Rate Balance under this Note in accordance with the
provisions hereof on the last day of the then-current Interest Period
applicable
to such LIBOR Balance.
(b) If
the
adoption of any applicable law, rule, or regulation, or any change therein,
or
any change in the interpretation or administration thereof by any governmental
authority, central bank, or agency charged with the interpretation or
administration thereof, or compliance by Bank with any request or directive
(whether or not having the force of law) of any such authority, central
bank, or
agency shall make it unlawful or impossible for Bank to make or maintain
a LIBOR
Balance, Agent shall so notify Borrowers. Upon receipt of such written
notice,
Borrowers shall be deemed to have converted any LIBOR Balance to a Prime
Rate
Balance under this Note, on either (i) the last day of the then-current
Interest
Period applicable to such LIBOR Balance if Bank may lawfully continue
to
maintain and fund such LIBOR Balance to such day, or (ii) immediately
if Bank
may not lawfully continue to maintain such LIBOR Balance to such
day.
(c)
If
any
governmental authority, central bank, or other comparable authority,
shall at
any time after the date of this Note impose, modify, or deem applicable
any
reserve (including, without limitation, any imposed by the Board of Governors
of
the Federal Reserve System), special deposit, or similar requirement
against
assets of, deposits with or for the account of, or credit extended by,
Bank, or
shall impose on Bank (or its LIBOR lending office) or the London interbank
offered rate market any other condition affecting its LIBOR Balance,
this Note,
or its obligation to make LIBOR advances; and the result of any of the
foregoing
is to increase the cost to Bank of making or maintaining its LIBOR Balance,
or
to reduce the amount of any sum received or receivable by Bank under
this Note
by an amount reasonably deemed by Bank to be material; then, within five
(5)
days after demand by Agent, Borrowers shall pay to Bank, such additional
amount
or amounts as will compensate Bank for such increased cost or reduction.
Agent
will promptly notify Borrowers of any event of which it has knowledge,
occurring
after the date hereof, which will entitle Bank to compensation pursuant
to this
Subsection. A certificate of Agent claiming compensation under this Subsection
and setting forth the additional amount or amounts to be paid to it hereunder
shall be prima
facie in
the
absence of manifest error. If Agent demands compensation under this Subsection,
then Borrowers may at any time, upon at least two (2) Business Days prior
notice
to Agent, either (i) repay in full the then outstanding LIBOR Balance,
together
with accrued interest thereon to the date of prepayment, or (ii) convert
such
LIBOR Balance to Prime Rate Balance in accordance with the provisions
of this
Note; provided, however, that Borrowers shall be liable for any Consequential
Loss arising pursuant to such actions.
6
(d) If
(i)
the obligation of Bank to permit LIBOR Balance has been suspended pursuant
to
subsections (a) or (b) above or (ii) Bank has demanded compensation under
subsection (c) above, then, unless and until Agent notifies Borrowers
that the
circumstances giving rise to such suspension or demand for compensation
no
longer apply, all advances on this Note which would otherwise be made
by Bank as
LIBOR Balance shall be made instead as Prime Rate Balance.
Business
Loan. Borrowers
represent to and covenant with Agent and Banks that: (1) all loans evidenced
by
this Note are and shall be Abusiness
loans@
as that
term is used in the Depository Institutions Deregulation and Monetary
Control
Act of 1980, as amended; and (2) the loans are for business, commercial,
investment, or other similar purposes and not for personal, family, household,
or agricultural use, as those terms are used in the Texas Finance Code.
Event
of Default. Borrowers
agree that upon the occurrence of any one or more of the following events
of
default (AEvent
of Default@):
(a) failure
of Borrowers to pay any installment of principal of or interest on this
Note
when due; or
(b) the
occurrence of any Event of Default specified in the Loan Agreement or
any other
Loan Documents;
and
the
expiration of any notice, grace, or cure period required in the Loan
Agreement,
the holder of this Note may, at its option, without further notice or
demand,
(i) declare the outstanding principal balance of and accrued but unpaid
interest
on this Note at once due and payable, (ii) refuse to advance any additional
amounts under this Note, (iii) foreclose all liens securing payment hereof,
(iv)
pursue any and all other rights, remedies, and recourses available to
the holder
hereof, including but not limited to any such rights, remedies, or recourses
under the Loan Documents, at law or in equity, or (v) pursue any combination
of
the foregoing.
No
Waiver by Agent or Banks. The
failure to exercise the option to accelerate the maturity of this Note
or any
other right, remedy, or recourse available to Agent or the holder hereof
upon
the occurrence of an Event of Default hereunder shall not constitute
a waiver of
the right of Agent or the holder of this Note to exercise the same at
that time
or at any subsequent time with respect to such Event of Default or any
other
Event of Default. The rights, remedies, and recourses of Agent and the
holder
hereof, as provided in this Note and in any other Loan Documents, shall
be
cumulative and concurrent and may be pursued separately, successively,
or
together as often as occasion therefor shall arise, at the sole discretion
of
the holder hereof. The acceptance by the holder hereof of any payment
under this
Note which is less than the payment in full of all amounts due and payable
at
the time of such payment shall not (i) constitute a waiver of or impair,
reduce,
release, or extinguish any right, remedy, or recourse of the holder hereof,
or
nullify any prior exercise of any such right, remedy, or recourse, or
(ii)
impair, reduce, release, or extinguish the obligations of any party liable
under
any of the Loan Documents as originally provided herein or therein.
7
Usury
Savings Clause. This
Note
and all other Loan Documents are intended to be performed in accordance
with,
and only to the extent permitted by, all applicable usury laws. If any
provision
hereof or of any other Loan Documents or the application thereof to any
person
or circumstance shall, for any reason and to any extent, be invalid or
unenforceable, neither the application of such provision to any other
person or
circumstance nor the remainder of the instrument in which such provision
is
contained shall be affected thereby, and all provisions shall be enforced
to the
greatest extent permitted by law. It is expressly stipulated and agreed
to be
the intent of the holder hereof to at all times comply with the usury
and other
applicable laws now or hereafter governing the interest payable on the
indebtedness evidenced by this Note. If the applicable law is ever revised,
repealed, or judicially interpreted so as to render usurious any amount
called
for under this Note or under any other Loan Documents, or contracted
for,
charged, taken, reserved, or received with respect to the indebtedness
evidenced
by this Note, or if Agent=s
exercise of the option to accelerate the maturity of this Note or if
any
prepayment by Borrowers results in Borrowers having paid any interest
in excess
of that permitted by law, then it is the express intent of Borrowers,
Agent, and
Banks that all excess amounts theretofore collected by Agent or Bank
be credited
on the principal balance of this Note (or, if this Note and all other
indebtedness arising under or pursuant to the other Loan Documents have
been
paid in full, refunded to Borrowers), and the provisions of this Note
and the
other Loan Documents immediately be deemed reformed and the amounts thereafter
collectable hereunder and thereunder reduced, without the necessity of
the
execution of any new document, so as to comply with the then-applicable
law, but
so as to permit the recovery of the fullest amount otherwise called for
hereunder or thereunder. All sums paid, or agreed to be paid, by Borrowers
for
the use, forbearance, detention, taking, charging, receiving, or reserving
of
the indebtedness of Borrowers to Bank under this Note or arising under
or
pursuant to the other Loan Documents shall, to the maximum 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 usury
ceiling
from time to time in effect and applicable to such indebtedness for so
long as
such indebtedness is outstanding. To the extent federal law permits Bank
to
contract for, charge, or receive a greater amount of interest, Bank will
rely on
federal law instead of Texas
Finance Code, for the purpose of determining the Maximum Rate. Additionally,
to
the maximum extent permitted by applicable law now or hereafter in effect,
Bank
may, at its option and from time to time, implement any other method
of
computing the Maximum Rate under the Texas Finance Code, or under other
applicable law by giving notice, if required, to Borrowers as provided
by
applicable law now or hereafter in effect. Notwithstanding anything to
the
contrary contained herein or in any other Loan Documents, it is not the
intention of Agent or Bank to accelerate the maturity of any interest
that has
not accrued at the time of such acceleration or to collect unearned interest
at
the time of such acceleration.
8
Applicability
of Laws.
In
no
event shall Chapter 346 of the Texas Finance Code (which regulates certain
revolving loan accounts and revolving tri-party accounts) apply to this
Note. To
the extent that Chapter 303 of the Texas Finance Code is applicable to
this
Note, the Aweekly
ceiling@
specified in Chapter 303 is the applicable ceiling; provided that, if
any
applicable law permits greater interest, the law permitting the greatest
interest shall apply.
Attorneys
Fees. If
this
Note is placed in the hands of an attorney for collection, or is collected
in
whole or in part by suit or through probate, bankruptcy, or other legal
proceedings of any kind, Borrowers agree to pay, in addition to all other
sums
payable hereunder, all costs and expenses of collection, including but
not
limited to reasonable attorneys fees.
Borrowers=
Waiver. Except
as
expressly provided herein, Borrowers and any and all endorsers and guarantors
of
this Note severally waive presentment for payment, notice of nonpayment,
protest, demand, notice of protest, notice of intent to accelerate, notice
of
acceleration and dishonor, diligence in enforcement and indulgences of
every
kind and without further notice hereby agree to renewals, extensions,
exchanges
or releases of collateral, taking of additional collateral, indulgences,
or
partial payments, either before or after maturity.
Applicable
Law. EXCEPT
TO THE EXTENT THAT THE LAWS OF THE UNITED STATES MAY APPLY, THIS NOTE
SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS.
THIS INSTRU-MENT IS MADE AND IS PERFORMABLE IN HOUSTON, XXXXXX COUNTY,
TEXAS,
AND IN THE EVENT OF A DISPUTE INVOLVING THIS NOTE OR ANY OTHER INSTRUMENT
EXECUTED IN CONNECTION HEREWITH, BORROWERS IRREVOCABLY AGREES THAT VENUE
FOR
SUCH DISPUTES SHALL BE IN ANY COURT OF COMPETENT JURIS-DICTION IN XXXXXX
COUNTY,
TEXAS.
Renewal.
This
Note is given in renewal and extension, but not extinguishment, of amounts
left
owing and unpaid on the promissory note (the APrior
Note@)
executed and delivered by Tandem Energy Corporation, and payable to the
order of
Guaranty
Bank F.S.B.,
and
Bank is the owner and holder of the Prior Note as assignee of Guaranty
Bank F.S.B.
Captions.
Captions
used herein are for convenience only and should not be used in interpreting
this
Note.
9
Final
Agreement.
THE
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 AGREEMENTS BETWEEN
THE
PARTIES.
Executed
and delivered to Bank in Houston, Texas, on the date stated above.
|
BORROWERS:
Tandem
Energy Corporation
By:______________________________
Xxxxxxx
X. Xxxxxxxxxx,
Senior
Vice President
PER
Gulf Coast, Inc.
By:______________________________
Xxxxxxx
X. Xxxxxxxxxx,
Senior
Vice President
|
This
note
was prepared by:
Xxxxxx,
Xxxxxx & Xxxxx,
P.C.
000
Xxxx
Xxxxxx, Xxxxx 0000
Xxxx
Xxxxx, Xxxxx 00000
(000)
000-0000
1410028.1
[March
20,
2008]
10
Exhibit
B
QUARTERLY
COMPLIANCE CERTIFICATE
Pursuant
to the Loan Agreement (the ALoan
Agreement@)
dated
March 14, 2008, among Tandem
Energy Corporation,
a
Delaware corporation, and PER
Gulf
Coast, Inc.,
a
Delaware corporation (collectively ABorrowers@);
Bank of
Texas, N.A.,
as
administrative agent (AAgent@);
and
Bank of
Texas, N.A.
(ABank
of Texas@),
and
all banks and financial institutions now or hereafter a party to
this Loan
Agreement (collectively ABanks@),
Borrowers have reviewed their activities for the fiscal quarter ending
on
______________________, 200___, and hereby represent and warrant
to Agent and
Banks that the information set forth below, calculated on a consolidated
basis,
is true and correct as of that date (capitalized terms below have
the meanings
assigned in the Loan Agreement):
|
|
1.
Financial Covenants.
|
Required | Actual | ||
|
(a)
|
Current Ratio (minimum) | 1.0 to 1.0 _____ to 1.0 | |||
| to be tested quarterly | |||||
| Current assets | $__________ | ||||
| Availability on Revolving Loan | $__________ | ||||
| Current liabilities | $__________ |
For
the
purpose of this calculation, ACurrent
Ratio@
is
defined as the ratio of (i) Borrowers=
current
assets, plus
availability on the Revolving Loan, divided
by (ii)
Borrowers=
current
liabilities (excluding current maturities of long-term debt); provided,
however,
that the xxxx-to-market values for hedging positions in accordance
with FASB 133
shall be excluded from this calculation until such time as the gains
or losses
from the xxxxxx are actually realized and the xxxxxx expire.
|
(b)
|
Funded Debt to EBITDA Ratio | 3.0 to 1.0 | _____ to 1.0 | ||
| (maximum) to be tested quarterly | |||||
| Amount outstanding on Loans | $__________ | ||||
| Net income annualized | $__________ | ||||
| Income taxes annualized | $__________ | ||||
| Interest expense annualized | $__________ | ||||
| DD&A annualized | $__________ | ||||
| Gains or losses annualized | $__________ |
For
the
purposes of this calculation, AFunded
Debt to EBITDA Ratio@
is
defined as the ratio of (i) the total amount outstanding on the Loans,
divided
by
(ii) the
sum of Borrowers=
most
recent quarter=s
net
income annualized, plus
income
taxes for the same period annualized, plus
interest
expense on the Loans for the same period annualized, plus
depletion, depreciation, amortization, and other non-cash charges
for the same
period annualized, minus
gains
from the sale of assets (or plus
losses
from the sale of assets) for the same period annualized; provided,
however, that
EBITDA from acquisitions may only be included in this covenant after
Agent has
reviewed and approved pro-forma financial statements demonstrating
the effect of
the acquisition.
2. The
undersigned officers hereby certify on behalf of Borrowers that (a)
Borrowers
are in compliance with all covenants of the Loan Agreement, and (b)
as of the
effective date of this compliance certificate and the date received
by Agent, no
Event of Default or event that would, with the lapse of time or giving
of
notice, or both, be an Event of Default, has occurred. The Revolving
Note and
the Loan Agreement are acknowledged, ratified, confirmed, and agreed
by
Borrowers to be valid, subsisting, and binding obligations. Borrowers
agree that
there is no right to set off or defense to payment of the Revolving
Note.
Dated
____________________, 200__.
|
Tandem
Energy Corporation
By:
____________________________
Name:
Title:
PER
Gulf Coast, Inc.
By:
____________________________
Name:
Title:
|
1410033.1
[March
20,
2008]
