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SECOND
RESTATED
REVOLVING CREDIT
AND
TERM LOAN AGREEMENT
Dated as of
August 25, 1997
among
MIDDLE BAY OIL COMPANY, INC.
BISON ENERGY CORPORATION
and
SHORE OIL COMPANY
"Borrowers"
and
BANK OF OKLAHOMA, NATIONAL ASSOCIATION
"Bank"
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SECOND
RESTATED REVOLVING CREDIT
AND
TERM LOAN AGREEMENT
THIS SECOND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT, dated as
of August 25, 1997, is made and entered into between and among MIDDLE BAY OIL
COMPANY, INC., an Alabama corporation ("Middle Bay"), BISON ENERGY CORPORATION,
a Kansas corporation, ("Bison") and SHORE OIL COMPANY, a Texas corporation
("Shore") (Middle Bay, Bison and Shore being collectively referred to as the
"Borrowers") and BANK OF OKLAHOMA, NATIONAL ASSOCIATION ("BOk").
WITNESSETH:
WHEREAS, Middle Bay, Bison and BOk entered into that certain Restated
Revolving Credit and Term Loan Agreement dated as of March 31, 1997 (the
"Existing Agreement") pursuant to which BOk issued a $15,000,000.00 convertible
revolving credit facility commitment and a $50,000.00 irrevocable standby letter
of credit facility (collectively the "Existing Commitments") as secured by the
Collateral and Security Instruments described and defined in the Existing
Agreement;
WHEREAS, Middle Bay has acquired all of the outstanding issued capital
stock of Shore and has also acquired (with loan proceeds extended by the Bank
under the Existing Agreement) from Great River Oil & Gas Corporation ("Seller")
certain interests in two (2) oil and gas xxxxx located in the State of Louisiana
("Seller Properties");
WHEREAS, Shore has an outstanding credit commitment from Xxxxx Fargo
Bank, N.A. ("Xxxxx Fargo") in the maximum principal amount of $20,000,000.00
(the "Shore Commitment") secured by the Shore Properties described and defined
in Article IV hereof below, which indebtedness evidenced and issued pursuant to
the Shore Commitment has been assumed by Middle Bay as a result of Middle Bay's
acquisition of Shore;
WHEREAS, the Borrowers have applied to BOk to modify the existing
convertible revolving credit facility commitment (including consolidation
therewith of the Shore Commitment by discharge of Shore's existing indebtedness
to Xxxxx Fargo) in the increased maximum principal amount of FIFTY MILLION and
NO/100 DOLLARS ($50,000,000.00), subject in all respects to the borrowing base
and other provisions, limitations and conditions hereof, including, without
limitation, Section 10.1 hereof, and to be evidenced by Borrowers' promissory
note payable to the order of BOk and dated as of even date herewith (the
"Convertible Note"), the outstanding principal balance of which shall be
converted on the Conversion Date to a term facility maturing March 31, 2004
(collectively the "Commitments"); and
WHEREAS, BOk is willing to extend its Percentage Interest in the
Commitment to the Borrowers upon the terms and conditions herein set forth and
upon Borrowers' granting, continuing, ratifying and restating in favor of Bank a
continuing and continuous first and prior mortgage lien, pledge of and security
interest in certain oil and gas leasehold, mineral and mining interests, all as
more particularly described and defined in the Sixth Amended Mortgage and the
Louisiana Mortgage, each of even date, as collateral and security for all
indebtedness incurred pursuant to the Commitments described and defined in the
Existing Agreement or herein, including without limitation, the Shore Properties
and the Seller Properties, subject in all respects to BOk's Commitment hereunder
not in excess of $15,000,000 and subject to Borrowers' agreement to such
additional Bank(s), Assignee(s) or Credit Participant(s) as may be obtained by
mutual consent of BOk and Borrowers in accordance with the provisions of
Articles X and XI hereof.
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NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, receipt of which is
acknowledged by the parties hereto, the parties agree, as follows:
ARTICLE I
CERTAIN DEFINITIONS
When used herein, the following terms shall have the following
meanings:
1.1 "Adjusted Gross Proceeds" shall mean (i) all proceeds received
by the Borrowers during the applicable period, whether directly or indirectly,
from purchasers of Hydrocarbons produced from the Mortgaged Property, plus (ii)
all amounts which Borrowers were entitled to receive during such period but
which were offset by the purchaser of production or an intermediary against
obligations owing by the Borrowers; less the amount of all gathering, severance
and windfall profits taxes required to be paid by the Borrowers with respect to
said proceeds and all royalty and overriding royalty payments to third parties
and all ordinary and necessary operating expenses paid by the Borrowers with
respect to the Mortgaged Property, if not already deducted or withheld by the
purchaser or an intermediary, excluding only such expenses that (i) qualify as
capitalized items under GAAP or (ii) are defined or described in the energy
industry as workover expenses or costs.
1.2 "Administrative Agent" shall mean BOk as appointed by the
Banks pursuant to Section 10.2 hereof.
1.3 "Applicable Prime Rate" shall mean the annual rate of interest
announced by Chase Manhattan Bank, National Association, New York, New York
("Chase") from time to time as its prime or base rate, which shall be the rate
used by Chase as a base or standard for pricing purposes and which shall not
necessarily be its "best" or lowest rate. Should Chase cease to announce a prime
or base rate, or should it be merged, consolidated, liquidated or dissolved in
such a manner that it loses its separate corporate or banking identity, then the
Applicable Prime Rate shall be the Prime Rate published by the Wall Street
Journal in its "Money Rates" column or a similar rate if such rate ceases to be
published. Any change in the Applicable Prime Rate shall be effective as of the
date of the change.
1.4 "Assignee(s)" shall have the meaning ascribed thereto in
Section 11.2 hereof.
1.5 "Bank" shall initially mean only BOk and "Banks" shall mean
each of the Persons listed as Banks on the signature page hereto, including BOk
in its capacity as a Bank and such other Persons who may from time to time own a
Percentage Interest in the Convertible Loan in accordance with Article X hereof,
but the term "Bank" shall not include any Bank Participant.
1.6 "Bank Borrowing Base" shall mean the lesser of the (i)
Commitments or (ii) the Collateral Borrowing Base calculated in accordance with
the provisions of Section 3.1 hereof.
1.7 "BOk Borrowing Base" shall mean the lesser of the "BOk
Commitment" or (ii) BOk's Percentage Interest in the Bank Borrowing Base.
1.8 "BOk Commitment" shall mean BOk's portion of the Commitments
which shall not exceed $15,000,000 unless and until BOk agrees in writing to
increase such BOk Commitment above $15,000,000 pursuant to the provisions of
Articles X and XI hereof.
1.9 "Business Day" shall mean a day other than a Saturday, Sunday
or a day upon which banks in the State of Oklahoma are closed to business
generally.
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1.10 "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, together with all
regulations and rulings promulgated with respect thereto.
1.11 "Closing Date" shall mean the date the Loan Documents are
executed and delivered to the Bank.
1.12 "Collateral" shall have the meaning assigned to that term in
Article IV of this Agreement.
1.13 "Collection Account" shall mean the Collection Account
described in Section 5.1 of this Agreement.
1.14 "Commitments" shall mean the agreement of the Banks at any
time prior to the Conversion Date to make Convertible Loan advances under this
Agreement in the maximum aggregate outstanding principal amount of $50,000,000,
including therein the $50,000 Letter of Credit facility previously extended by
BOk under Section 2.4 of the Existing Agreement.
1.15 "Conversion Date" shall mean March 31, 1998, or such later
date as the Banks shall agree to in writing.
1.16 "Convertible Loan" shall have the meaning ascribed to it in
Section 2.1 of this Agreement.
1.17 "Corresponding Source of Funds" shall mean in the case of any
Libor-Rate Funding Period, the proceeds of hypothetical receipts by the Banks
through a branch, subsidiary or affiliate of one or more Dollar deposits in the
interbank eurodollar market at the beginning of the applicable thirty (30),
sixty (60), ninety (90) or one hundred eight (180) day Libor-Rate Funding Period
and in an aggregate amount approximately equal to the Convertible Loan advance
covered by such Funding Period(s).
1.18 "Credit Participant" is defined in Section 11.2 of this
Agreement.
1.19 "Default Rate" shall mean the Applicable Prime Rate plus six
percentage points (6.0%) per annum.
1.20 "Dollar", "Dollars" and the symbol "$" shall mean lawful money
of the United States of America.
1.21 "Environmental Laws" shall mean Laws, including without
limitation federal, state or local Laws, ordinances, rules, regulations,
interpretations and orders of courts or administrative agencies or authorities
relating to pollution or protection of the environment (including, without
limitation, ambient air, surface water, groundwater, land surface and subsurface
strata), including without limitation CERCLA, XXXX, RCRA, HSWA, OPA, HMTA, TSCA
and other Laws relating to (i) Polluting Substances or (ii) the manufacture,
processing, distribution, use, treatment, handling, storage, disposal or
transportation of Polluting Substances.
1.22 "ERISA" shall mean the Federal Employee Retirement Income
Security Act of 1974, as amended, together with all regulations and rulings
promulgated with respect thereto.
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1.23 "Event of Default" shall mean any of the events specified in
Section 9.1 of this Agreement, and "Default" shall mean any event, which
together with any lapse of time or giving of any notice, or both, would
constitute an Event of Default.
1.24 "Funding Period(s)" shall have the meaning assigned to such
term in Section 2.6(b) hereof.
1.25 "GAAP" shall mean generally accepted accounting principles
applied on a consistent basis in all material respects to those applied in the
preceding period. Unless otherwise indicated herein, all accounting terms will
be defined according to GAAP.
1.26 "hereby", "herein", "hereof", "hereunder" and similar such
terms shall mean and refer to this Agreement as a whole and not merely to the
specific section, paragraph or clause in which the respective word appears.
1.27 "HMTA" shall mean the Hazardous Materials Transportation Act,
as amended, together with all regulations and rulings promulgated with respect
thereto.
1.28 "HSWA" shall mean the Hazardous and Solid Waste Amendments of
1984, as amended, together with all regulations and rulings promulgated with
respect thereto.
1.29 "Hydrocarbons" shall have the meaning assigned to that term in
the Mortgages.
1.30 "Indebtedness" shall mean and include any and all: (i)
indebtedness, obligations and liabilities of the Borrowers to the Banks incurred
or which may be incurred hereafter pursuant to the terms of this Agreement or
any of the other Loan Documents, and any extensions, renewals, substitutions,
amendments and increases in amount thereof, including such amounts as may be
evidenced by the Notes and all lawful interest thereon, all outstanding and
unadvanced Letters of Credit, letter of credit fees, commitment fees and other
charges, and all reasonable costs and expenses incurred by the Administrative
Agent or the Banks in connection with the preparation, filing and recording of
the Loan Documents, including attorneys fees; (ii) all reasonable costs and
expenses, including attorneys' fees, paid or incurred by the Administrative
Agent or the Banks in enforcing or attempting to enforce collection of any
Indebtedness and in enforcing or realizing upon or attempting to enforce or
realize upon any collateral or security for any Indebtedness and in protecting
and preserving the Banks' interest in the Indebtedness or any collateral or
security for any Indebtedness in any bankruptcy or reorganization proceeding,
including interest on all sums so expended by the Administrative Agent or the
Banks accruing from the date upon which such expenditures are made until paid,
at an annual rate equal to the Default Rate; (iii) sums expended by the
Administrative Agent or the Banks in curing any Event of Default or Default of
the Borrowers under the terms of this Agreement, the other Loan Documents or any
other security agreement or other writing evidencing or securing the payment of
the Notes and the Letters of Credit together with interest on all sums so
expended by the Administrative Agent or the Banks accruing from the date upon
which such expenditures are made until paid, at an annual rate equal to the
Default Rate; and (iv) all "Indebtedness" or "Secured Indebtedness" as said
terms are defined in each of the Loan Documents.
1.31 "Laws" shall mean all statutes, laws, ordinances, regulations,
orders, writs, injunctions, or decrees of the United States, any state or
commonwealth, any municipality, any foreign country, any territory or
possession, or any Tribunal.
1.32 "Letters of Credit" shall mean any and all letters of credit
now existing or hereafter issued by the Bank pursuant to the request of any of
the Borrowers in accordance with the provisions of Section 2.12.1 hereof which
at any time remain outstanding and subject to draw by the
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beneficiary, whether in whole or in part, including without limitation, the
$50,000 standby letter of credit issued pursuant to Section 2.4 of the Existing
Credit Agreement.
1.33 "Letter of Credit Exposure" means, at any date, the sum of (a)
the aggregate face amount of all drafts that may then or thereafter be presented
by beneficiaries under all Letters of Credit then outstanding, plus (b) the
aggregate face amount of all drafts that the Letter of Credit Issuer has
previously accepted under Letters of Credit but has not paid.
1.34 "Letter of Credit Issuer" means, for any Letter of Credit,
BOk, or in the event BOk does not for any reason issue a requested Letter of
Credit, another Bank designated by BOk to issue such Letter of Credit in
accordance with Section 2.12.1 of this Agreement.
1.35 "Libor-Rate" and "Libor-Rate Options" shall have the meanings
assigned to those terms as described in Section 2.6(a) hereof.
1.36 "Libor-Rate Funding Periods" shall have the meaning assigned
to that term as described in Section 2.6(b) hereof.
1.37 "Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement or other similar form of public notice under the Laws of any
jurisdiction).
1.38 "Lien Notice" shall mean notice received or obtained by the
Banks or knowledge obtained by the Banks of any Lien being claimed (whether
valid or not) by any Person, other than the Banks or a trustee on behalf of the
Banks, with respect to the Mortgaged Property.
1.39 "Loan Documents" shall mean this Agreement, the Notes, the
Security Instruments and all other documents, instruments, title reports, title
opinions and certificates executed and delivered to the Administrative Agent or
the Banks by the Borrowers pursuant to the terms of this Agreement or the
Existing Agreement.
1.40 "London Business Day" shall mean a day for dealing in deposits
in Dollars by and among banks in the London interbank market which is also a
Business Day.
1.41 "Month", with respect to a Libor-Rate Funding Period, shall
mean the interval between the Fixed Dates in consecutive calendar months as to
such Libor-Rate Funding Period. The "Fixed Date" shall mean the first day of
such Period and in a succeeding calendar month as to such Period shall mean the
day in such calendar month numerically corresponding to such first day except
(a) if there is no such numerically corresponding day in a succeeding calendar
month the "Fixed Date" for such calendar month shall mean the last London
Business Day of such calendar month, (b) if such first day is the last day of a
calendar month the "Fixed Date" for any succeeding calendar month shall mean the
last London Business Day of such calendar month and (c) otherwise, if a
numerically corresponding day in a succeeding calendar month is not a London
Business Day, the "Fixed Date" for such calendar month shall mean the next
following day that is a London Business Day.
1.42 "Mortgages" shall have the meaning assigned to that term in
Section 4.1(a) of this Agreement.
1.43 "Mortgaged Property" shall have the meaning assigned to that
term in the Mortgages.
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1.44 "Notes" shall mean (i) the Convertible Note described in
Section 2.2 of this Agreement and (ii) the Letter of Credit Note described in
Section 2.4 of the Existing Agreement, together with each and every extension,
renewal, modification, replacement, substitution and change in form of either
thereof which may be from time to time and for any term or terms effected.
1.45 "Official Body" shall mean any government or political
subdivision or any agency, authority, bureau, central bank, commission,
department or instrumentality of either, or any court, tribunal, grand jury or
arbitrator, in each case whether foreign or domestic.
1.46 "OPA" shall mean the Oil Pollution Act of 1990, as amended,
together with all regulations and rulings promulgated with respect thereto.
1.47 "Options" shall mean the Prime Rate Option and the Libor-Rate
Options, as the case may be.
1.48 "Person" shall mean and include an individual, a partnership,
a joint venture, a corporation, a trust, an unincorporated organization, and a
government or any department, agency or political subdivision thereof.
1.49 "Polluting Substances" shall mean all pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or wastes
and shall include, without limitation, any flammable explosives, radioactive
materials, oil, hazardous materials, hazardous or solid wastes, hazardous or
toxic substances or related materials defined in CERCLA/XXXX, RCRA/HSWA and in
the HMTA; provided, in the event either CERCLA/XXXX, RCRA/HSWA or HMTA is
amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment and,
provided further, to the extent that the Laws of any State or other Tribunal
establish a meaning for "hazardous substance, "hazardous waste," "hazardous
material," "solid waste" or "toxic substance" which is broader than that
specified in CERCLA/XXXX, RCRA/HSWA, or HMTA, such broader meaning shall apply.
1.50 "Prime Rate Option" shall have the meaning assigned to that
term as described in Section 2.6(a)(i) hereof.
1.51 "RCRA" shall mean the Resource Conservation and Recovery Act
of 1976, as amended, together with all regulations and rulings promulgated with
respect thereto.
1.52 "Register" is defined in Section 11.1.3 of this Agreement.
1.53 "Required Banks" with respect to any approval, consent,
modification, waiver or other action to be taken by the Administrative Agent or
the Banks under the Loan Documents which require action by the Required Banks,
such Banks that own 66 2/3% of the outstanding Percentage Interests (it being
stipulated that notwithstanding BOk's Percentage Interest set forth in Section
10.1 hereof, that for so long as BOk is the only Bank under this Agreement, BOk
shall be deemed to be the holder of 100% of the outstanding Percentage Interest
for purposes of the definition of "Required Banks" as contemplated hereby),
except only as otherwise provided in Section 10.6 of this Agreement.
1.54 "XXXX" shall mean the Superfund Amendments and Reauthorization
Act of 1987, as amended, together with all regulations and rulings promulgated
with respect thereto.
1.55 "Security Instruments" shall mean the Mortgages and all other
financing statements, mortgages, assignments, security agreements, documents or
writings of any and all amendments and supplements thereto, granting,
conveying, assigning, transferring or in any manner providing the
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Bank with a security interest or mortgage lien in any property as security for
the repayment of all or any part of the Indebtedness.
1.56 "Standard Notice" shall mean an irrevocable notice provided to
the Banks on a Business Day which is at least one Business Day in advance in the
case of selection of, conversion to or renewal of a Libor-Rate Option or Libor
Funding Period(s) or prepayment of either of such Options. Standard Notice must
be provided no later than 10:00 a.m., Central Time in Tulsa, Oklahoma, on the
last day permitted for such notice.
1.57 "Taxes" shall mean all taxes, assessments, fees, or other
charges or levies from time to time or at any time imposed by any Laws or by any
Tribunal.
1.58 "Tribunal" shall mean any municipal, state, commonwealth,
Federal, foreign, territorial or other sovereign, governmental entity,
governmental department, court, commission, board, bureau, agency or
instrumentality.
1.59 "TSCA" shall mean the Toxic Substances Control Act, as
amended, together with all regulations and rulings promulgated with respect
thereto.
Accounting Principles, Terms and Determinations. All references in this
Agreement to "GAAP" shall be deemed to refer to generally accepted accounting
principles in effect in the United States at the time of application thereof.
Unless otherwise specified herein, all accounting terms used herein shall be
interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all unaudited financial statements and certificates and
reports as to financial matters required to be furnished hereunder shall be
prepared, in accordance with generally accepted accounting principles, applied
on a basis consistent with the most recent audited consolidated financial
statements of the Borrowers and their Subsidiaries delivered pursuant to clause
(b) of Section 7.9 or, if no such statements have been so delivered, the most
recent audited financial statements referred to in Section 8.3 hereof.
ARTICLE II
LOANS
2.1 Convertible Loan. The Banks agree, upon the terms and subject
to the conditions hereinafter set forth, severally in accordance with their
respective Percentage Interests and Commitments to make revolver loans and issue
Letters of Credit from time to time on or after the Closing Date to the
Borrowers jointly, the unpaid principal balance of which revolver loans is
automatically convertible to a seventy-two (72) month term loan on the
Conversion Date ("Convertible Loan") in an amount equal to the lesser of the
unpaid principal balance of the Convertible Note on the Conversion Date
(including without limitation, draws on Letters of Credit issued hereunder or on
the Letter of Credit Note), or the Collateral Borrowing Base as defined in
Section 3.1 hereof, proceeds of which Convertible Loan advances shall be
requested only for the limited purposes hereinafter described.
Each Convertible Loan requested by the Borrowers from the Banks from
the Closing Date until the Conversion Date shall (i) be requested in writing by
Middle Bay (as agent on behalf of all of the Borrowers) pursuant to a
Convertible Loan Advance Request, the form of which is annexed hereto as Exhibit
A, no later than 12:00 noon (applicable current time in Tulsa, Oklahoma) on the
date upon which the advance is to be made, (ii) be in the amount of $10,000.00
or an integral
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multiple thereof (unless the amount then available to borrow is less than
$10,000.00, in which event an advance may be made in the amount available);
(iii) not cause the aggregate outstanding and unpaid principal amount of the
Convertible Note to exceed the Collateral Borrowing Base; and (iv) be advanced
by the Banks on the applicable date, provided the request is timely made in
accordance with Section 2.1(i) hereof and all other conditions of funding are
met. All advances made by the Banks shall, for mutual convenience, be deposited
to Borrowers' general deposit account No. 207928428 with the Administrative
Agent (the "General Account"). The Banks shall have no responsibility to monitor
the distribution of such advances in any other respect. The Borrowers may
reborrow subject to the limitations and conditions for the Convertible Loan
contained herein. All advances made by the Banks on the Convertible Note
(including the payment of drafts drawn on Letters of Credit) and all payments or
prepayments of principal and interest thereon made by the Borrowers shall be
recorded by the Administrative Agent in its records, and the aggregate unpaid
principal amount so recorded shall be conclusive evidence of the principal
amount owing and unpaid on the Convertible Note. The failure to so record shall
not, however, limit or otherwise affect the joint and several obligations of the
Borrowers hereunder or under the Convertible Note to repay the principal amount
of each Convertible Loan together with all interest accrued thereon. If
additional lines or blanks shall be needed for the purpose of recording advances
or payments on the schedule, one or more additional schedules may be annexed to
the Convertible Note and shall become a part thereof.
2.2 Convertible Note. On the Closing Date the Borrowers shall
execute and deliver to the order of BOk their joint and several promissory note
in the principal amount of $50,000,000.00, the form of which is annexed hereto
as Exhibit "B-1" and hereby made a part hereof (hereinafter referred to as the
"Convertible Note"). The Convertible Note shall be dated as of the Closing Date,
shall provide for monthly interest payments due on the last day of every month
commencing August 31, 1997. The unpaid and outstanding principal balance of the
Convertible Note shall be converted on the Conversion Date to a term loan
payable in seventy-one (71) consecutive monthly principal payments, each equal
to one-seventy-second (1/72nd) of the lesser of the then outstanding principal
balance of the Convertible Note or the Collateral Borrowing Base (initially
$15,000,000.00 from the Closing Date through the first effective date of the
Redetermined Borrowing Base) as redetermined as of September 30, 1997 (the
"Redetermined Borrowing Base") payable on the last day of each calendar month
commencing March 31, 1998, with the remaining principal payable at final
maturity on March 31, 2004. The Convertible Note shall bear interest on unpaid
balances of principal from time to time outstanding and on any past due interest
at a variable annual Option rate or Option rates per annum determined pursuant
to Section 2.6 hereof, but in no event at a rate greater than permitted by
applicable law. All payments received shall be applied first to accrued interest
and then to the outstanding principal amount owing on the Convertible Note. The
Borrowers may from time to time make prepayments of principal without premium or
penalty, provided that on or after April 1, 1998, interest on the amount
prepaid, accrued to the prepayment date, shall be paid on such prepayment date.
The Borrowers may not reborrow any amounts paid or prepaid on the Convertible
Note on or after the Conversion Date. All payments and prepayments shall be made
in lawful money of the United States of America. Any payments or prepayments on
the Convertible Note received by the Administrative Agent after 12:00 noon
(applicable current time in Tulsa, Oklahoma) shall be deemed to have been made
on the next succeeding Business Day. All outstanding principal of and unpaid
accrued interest on the Convertible Note not previously paid hereunder shall be
due and payable at final maturity on March 31, 2004, unless such final maturity
shall be extended by the Banks in writing or accelerated pursuant to the terms
hereof. After maturity (whether by acceleration or otherwise) the Convertible
Note shall bear interest at the Default Rate, payable on demand. Interest shall
be calculated on the basis of a year of 360 days but assessed for the actual
number of days elapsed in each accrual period.
2.3 Proceeds of Convertible Loans. Proceeds of the Convertible
Loan shall be used only for the purposes of (i) consolidation herewith of the
existing Convertible Loan of Middle Bay and
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Bison to the Bank outstanding pursuant to the Existing Agreement, (ii)
discharging the Shore indebtedness to Xxxxx Fargo by payment in full thereof to
Xxxxx Fargo, including extinguishment of the Shore Commitment and (iii) funding
Borrowers' future oil and gas mining and mineral acquisitions and development
thereof subject to the Collateral Borrowing Base, the Bank Borrowing Base and
the BOk Commitment.
Unless its Convertible Loan Commitment shall be sooner terminated
pursuant to the provisions of this Agreement or the other Loan Documents, the
Convertible Loan shall mature on March 31, 2004. All advanced but unpaid amounts
on Bison's and Middle Bay's existing $15,000,000.00 Convertible Loan credit with
the Bank, as presently established under the Existing Agreement, and any
outstanding amounts owed to Xxxxx Fargo on the Shore Commitment shall be paid in
full out of the Convertible Loan proceeds. The outstanding principal balance on
the existing Convertible Note issued pursuant to the Existing Agreement is
$8,851,298.47 as of the date hereof. The remaining funds available under the
Convertible Loan shall be used by Borrowers in their acquisition and development
of certain oil and gas working interests and other acquisitions of proven
developed reserve properties.
2.4 Proceeds of Sale of Mortgaged Property. In the event any
undivided interest in any of the Mortgaged Property is sold when the Borrowers
are not in default hereunder, the "Sales Proceeds" of any such sale shall be
applied to the outstanding principal balance of the Convertible Note in the
inverse order of the due date of scheduled monthly installments; provided,
however, no such sale shall occur without the prior written consent of each of
the Banks, not to be unreasonably withheld. All such amounts shall be applied to
principal installments due under the Convertible Note in inverse order of their
maturity. For purposes of this section, "Sales Proceeds" shall mean the greater
of (i) sixty-five percent (65%) of the gross sales price of such Mortgaged
Property; or (ii) sixty-five percent (65%) of the discounted present worth of
the Mortgaged Property as evaluated and determined by BOk's most recent
semi-annual engineering reports required by Section 3.1 hereof. In the event the
oil and gas properties sold were not individually evaluated in the most recent
semi-annual BOk engineering report, sixty-five percent (65%) of the gross sales
price thereof shall be applied in reduction of the principal balance of the
Convertible Note in the inverse order of the due date of scheduled monthly
installments.
2.5 Commitment Fees. From the Closing Date until the Convertible
Loan is converted to the term loan pursuant to Section 2.2 hereof, the Borrowers
shall pay to the Administrative Agent for the benefit of the Banks, as a
commitment fee for its Convertible Loan Commitment, an amount equal to three
eighths percentage point (0.375%) per annum of the amount by which the then
applicable Convertible Borrowing Base exceeds the aggregate of the outstanding
unpaid principal balance of the Convertible Note plus the unfunded and
outstanding portion of Letters of Credit from time to time computed daily on the
basis of a calendar year of 360 days but assessed for the actual number of days
elapsed during each accrual period. Such fee shall be payable quarterly as the
same accrues on the fifteenth (15th) day after the end of each quarter-annual
period ending March 31, June 30, September 30 and December 31, commencing
October 15, 1997, and at the maturity of the Convertible Note, whether by
acceleration or otherwise. Not sooner than three (3) days following the mailing
by regular mail of notice of an intended debit, the amount of Commitment Fees
payable for each such quarter shall be paid by debit to the General Account of
Borrowers at BOk as more particularly described in Section 2.1 hereof) in such
amount. For the purposes of this Section 2.5, Borrowers hereby appoint the
Administrative Agent its attorney-in-fact for the execution and performance of
such debits, and hereby absolves the Banks and the Administrative Agent of any
loss or negligence arising by virtue of its exercise of such power, except only
for gross negligence or willful misconduct. Said power shall be deemed a power
coupled with an interest and shall be irrevocable.
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2.6 Interest Rates; Funding Period; Transactional Amounts.
(a) Subject to the provisions hereof, Middle Bay, as agent for all
of the Borrowers, shall select either the Prime Rate Option or the Libor-Rate
Option for Convertible Loan advances hereunder. The Prime Rate Option is a rate
per annum for each day equal to the Applicable Prime Rate for such day. There
shall be no minimum Funding Period under the Prime Rate Option. The Libor-Rate
Option from which Borrowers may select is a rate per annum (based on a year of
360 days and actual days elapsed) equal to the per annum Libor-Rate plus per
annum percentage points (the "Libor Margin") as follows:
Percentage of Collateral
Borrowing Base Advanced
Under Convertible Loan
(including pending request
per Section 2.1) Libor Margin
--------------------------- -------------
< 75% 1.75% above Libor-Rate
> 75% 2.00% above Libor-Rate
-
"Libor-Rate" shall mean the rate of interest quoted for the "London Interbank
Offered Rates (LIBOR)" category of the "Money Rates" column in the Wall Street
Journal on the date of the Borrowers' initial Request for Advance for a Funding
Period (or, if no Wall Street Journal is published on such day, the next
previous publication date thereof) as the average of quotations at major money
center banks for the applicable thirty (30), sixty (60), ninety (90) or one
hundred eighty (180) day Funding Period available hereunder for the Libor-Rate
Option two (2) London Business Days prior to the first day of such applicable
Libor-Rate Funding Period. The Libor-Rate established on the date of the initial
Request for Advance for a Funding Period shall be the interest rate basis used
for each day in the applicable thirty (30), sixty (60), ninety (90) or one
hundred eighty (180) day Libor-Rate Funding Period.
The Administrative Agent shall give prompt notice to Middle Bay of the
Libor-Rate so determined or adjusted, which determination or adjustment shall be
conclusive if made in good faith. If the Wall Street Journal shall cease to
publish such Libor-Rate quotations, the Administrative Agent shall determine
such rates as the average of such Libor-Rate quotations of three (3) major New
York money center banks of whom the Administrative Agent shall inquire.
At the end of each applicable Funding Period, the Borrowers may either:
(i) repay all outstanding balances of principal and interest; or (ii) select the
same or a different Option described above, including the same or a different
Libor Rate Funding Period described below to apply to at least $1,000,000 of the
outstanding principal balance of the Convertible Note. During any applicable
Libor-Rate Funding Period, the Borrowers may not prepay (in part or in whole)
the outstanding principal balance of the Note evidenced by such Funding Period
amount and the Libor-Rate Funding Period shall continue until the end of the
applicable Libor-Rate Funding Period.
If the Prime Rate Option is selected, then at any time during the term
of the Convertible Loan, Middle Bay may notify the Administrative Agent that
Borrowers wish to convert to the Libor Rate Option. In such event, a minimum of
$1,000,000 of the outstanding principal balance of principal on the Convertible
Note shall convert to the Libor Rate Option.
At any one time during the term of the Convertible Loan, only two (2)
Libor-Rate Funding Periods may be in effect.
(b) Funding Periods. At any time when Middle Bay shall select,
convert to or renew one of the applicable Libor-Rate Funding Periods to apply to
the Convertible Loan (in no event less than
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$1,000,000), it shall fix such period during which such Libor-Rate shall apply,
such periods (the "Funding Period") being set forth in the chart below:
Interest Rate Option Available Funding Periods
-------------------- -------------------------
Libor-Rate Option One month (30 days),
two months (60) days,
three months (90) days,
or six months (180) days
("Libor-Rate Funding Periods");
provided, that each Libor-Rate Funding Period shall begin on a London Business
Day and the duration of each applicable Libor-Rate Funding Period shall be
determined in accordance with the definition of the term "Month" herein.
(c) Interest After Maturity. After the principal amount of the
Convertible Loan outstanding shall have become past due (by acceleration or past
the stated maturity date except as renewed pursuant to Section 2.7(a) hereof),
such Convertible Loan shall bear interest for each day until paid (before and
after judgment) at the Default Rate.
(d) Libor-Rate Unascertainable; Impracticability. If
(i) on any date on which a Libor-Rate would otherwise be
set the Administrative Agent shall have in good faith determined (which
determination shall be conclusive) that:
(A) adequate and reasonable means do not exist
for ascertaining such Libor-Rate,
(B) a contingency has occurred which materially
and adversely affects the issuance of negotiable certificates
of deposit by the Administrative Agent or the interbank
eurodollar market, as the case may be, or
(C) the effective cost to the Administrative
Agent of funding a Funding Period of the Libor-Rate Option
from a Corresponding Source of Funds shall exceed the
Libor-Rate applicable to such Funding Period, or
(ii) at any time the Administrative Agent shall have
determined in good faith (which determination shall be conclusive) that
the making, maintenance or funding of the Libor-Rate Option has been
made impracticable or unlawful by compliance by the Banks in good faith
with any Law or guideline or interpretation or administration thereof
by any Official Body charged with the interpretation or administration
thereof or with any request or directive of any such Official Body
(whether or not having the force of law);
then, and in any such event, the Administrative Agent may notify Middle Bay of
such determination. Upon such effective date as shall be specified in such
notice (which shall not be earlier than the date such notice is given) the
obligation of the Banks to allow the Borrowers to select, convert to or renew
the Libor-Rate Option, as the case may be, shall be suspended until the
Administrative Agent shall have later notified Middle Bay of the Banks'
determination in good faith (which determination shall be conclusive) that the
circumstances giving rise to such previous determination no longer exists.
At the time the Banks make a determination under subsection (i) or (ii)
of this Section 2.6(d) such notification by the Administrative Agent to the
Borrower shall be deemed to provide for
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conversion of then existing Libor-Rate Option amounts to the Prime Rate Option
on the effective date specified in such Administrative Agent's notification.
Commencing on such effective date, the Banks shall utilize the Applicable Prime
Rate or prepay such Libor Rate Option amounts in accordance with Section 2.8
hereof. If Middle Bay has previously notified the Administrative Agent of the
selection of one or more Libor-Rate Option Funding Periods that have not yet
gone into effect as of the foregoing notification date, such notification shall
be deemed to provide for selection of or conversion to or renewal of the Prime
Rate Option instead of the Libor-Rate Option(s).
2.7 Conversion or Renewal of Libor-Rate Options.
(a) Conversion or Renewal. Subject to the provisions of Section
2.11 hereof the Borrowers may convert the expiring portion of the Convertible
Loan to a different interest rate Option and/or may renew the Libor-Rate Option
in accordance with Section 2.6(a) above. Whenever Borrowers desire to convert or
renew any Libor Funding Period, Middle Bay shall provide the Administrative
Agent with the following information:
(i) The date, which shall be a Business Day, on which the
proposed conversion or renewal is to be made; and
(ii) The then applicable Libor Funding Period selected in
accordance with Section 2.6(a) hereof.
Notice having been so provided, after the date specified in such notice
(telephonic or where applicable, in writing) interest shall be calculated upon
the entire principal amount of the Convertible Loan as so converted or renewed.
Interest on the principal amount of the Convertible Loan converted or renewed
(automatically or otherwise) shall be due and payable in accordance with the
provisions of Section 2.9 hereof below.
(b) Failure to Convert or Renew. Absent due notice from Middle Bay
of conversion or renewal in the circumstances described in Section 2.6(a)(ii)
hereof, the Libor Funding Period for which such notice is not received shall be
converted automatically to the Prime Rate Option on the last day of the
applicable expiring Funding Period.
2.8 Prepayments. Subject to the provisions of Section 2.11 hereof
the Borrowers shall have the right at their option from time to time to prepay
the Convertible Loan in whole or part without premium or penalty at any time
with respect to the Prime Rate Option. Borrowers may prepay any part of the
Convertible Loan funded under an unexpired Libor Rate Funding Period on the date
specified on a notice by the Administrative Agent pursuant to Section 2.6(d)
hereof. In connection with any prepayment permitted hereby, Middle Bay shall
provide the Administrative Agent with the following information:
(a) the date, which shall be a Business Day, on which the
proposed prepayment is to be made; and
(b) the aggregate principal amount of such partial
prepayment, which shall be the sum of the principal amounts selected
pursuant to this Section 2.8 and which shall be an integral multiple of
$100,000 plus applicable fees or charges, if any, imposed by the Banks
in accordance with Section 2.11 hereof.
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2.9 Interest Payments Dates. Interest on the Convertible Note
shall be due and payable on the last day of each month after the date hereof and
on March 31, 2004. After maturity of the Convertible Loan (by acceleration or
otherwise), interest thereon shall be due and payable on demand.
2.10 Payments. All payments to be made in respect of principal,
interest or other amounts due from the Borrowers hereunder or under the
Convertible Note shall be payable at 2:00 P.M., Central Time in Tulsa, Oklahoma,
on the day when due without presentment, demand, protest or notice of any kind,
all of which are hereby expressly waived, and an action therefor shall
immediately accrue. Such payments shall be made to the Administrative Agent at
its Tulsa, Oklahoma main banking office in Dollars in funds immediately
available at such office without setoff, counterclaim or other deduction of any
nature. To the extent permitted by law, after there shall have become due (by
acceleration or otherwise) interest or any other amounts due from the Borrowers
hereunder or under the Convertible Note (excluding overdue principal, which
shall bear interest as described in Section 2.6(c) hereof, but including
interest payable under this Section 2.10), such amounts shall bear interest for
each day until paid (before and after judgment), payable on demand, at the
Default Rate.
2.11 Additional Compensation in Certain Circumstances.
(a) Compensation for Taxes, Reserves and Expenses on Outstanding
Loans. If any Law or guideline or interpretation or application thereof by any
Official Body charged with the interpretation or administration thereof or
compliance with any request or directive of any Official Body (whether or not
having the force of law):
(i) imposes, modifies or deems applicable any reserve,
special deposit or similar requirement against assets held by, credit
extended by, deposits with or for the account of, or other acquisition
of funds by, the Banks (other than requirements expressly included
herein in the determination of the Libor-Rate hereunder), or
(ii) imposes upon the Banks any other condition or expense
with respect to this Agreement, the Convertible Note or its making,
maintenance or funding of any part of the Convertible Loan or any
security therefor,
and the result of either of the foregoing is to increase the cost to, reduce the
income receivable by or impose any expense (including loss of margin) upon the
Banks with respect to this Agreement, the Convertible Note or the funding of any
part of the Convertible Loan by an amount which the Banks deem to be material
(the Banks being deemed for this purpose to have made, maintained and funded
each Funding Period(s) of a Libor-Rate Option from a Corresponding Source of
Funds), the Administrative Agent shall from time to time notify Middle Bay of
the amount determined in good faith by the Banks together with reasonable
substantiation thereof (which determination shall be conclusive) to be necessary
to compensate the Banks for such increase in cost, reduction in income or
additional expense. Such amount shall be due and payable by the Borrowers to the
Administrative Agent ten (10) Business Days after such notice is given.
(b) Indemnity. In addition to the compensation required by
subsection (a) of this Section 2.11, the Borrowers shall indemnify the
Administrative Agent and the Banks against any loss or expense (including loss
of margin) which the Administrative Agent and/or any of the Banks has sustained
or incurred as a consequence of any attempt by the Borrowers to revoke
(expressly, by later inconsistent notices or otherwise) in whole or part any
notice stated herein to be irrevocable (the Banks having in their sole
discretion the options (A) to give effect to such attempted revocation and
obtain indemnity under this Section 2.11(b) or (B) to treat such attempted
revocation as having no force or effect, as if never made). If the Banks sustain
or incur any such loss or expense the
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Administrative Agent shall from time to time notify Middle Bay of the amount
determined in good faith by the Banks (which determination shall be conclusive
absent manifest error) to be necessary to indemnify the Banks for such loss or
expense (the Banks being deemed for this purpose to have made, maintained or
funded each Funding Period(s) of the Libor-Rate Option from a Corresponding
Source of Funds). Such amount shall be due and payable by the Borrowers to the
Administrative Agent ten (10) Business Days after such notice is given.
2.12.1 Letters of Credit. Upon the Borrowers' application from time
to time by use of BOk's standard form Letter of Credit Application Agreement and
subject to the terms and provisions therein and herein set forth, BOk agrees to
issue standby letters of credit on behalf of the Borrowers under the BOk
Commitment in an aggregate unfunded amount not in excess of $1,000,000
(including, without limitation, the outstanding $50,000 standby Letter of Credit
issued pursuant to Section 2.4 of the Existing Agreement), provided that (i) any
letters of credit issued on behalf of or on the account of Borrowers with an
expiry date later than March 31, 1998, will, at the Bank's sole option, be fully
secured and collateralized by cash or cash equivalent (certificate of deposit,
time deposit or comparable investments) acceptable to the Bank in its sole
discretion and held thereby from and after March 31, 1998, until expiration or
cancellation of such letter(s) of credit or payment of all draws made thereon on
demand of the Bank and (ii) no letter of credit will be issued on behalf of or
for the account of the Borrowers if at the time of issuance the outstanding
amount of all unpaid Convertible Loan advances (including the aggregate
outstanding and unfunded amount of unexpired letters of credit then existing)
under the Commitments as evidenced by the Convertible Note plus the maximum
amount of such Letter of Credit then being requested would exceed the Bank
Borrowing Base. If any letter of credit is drawn upon at any time, each amount
drawn, whether a full or partial draw thereon, shall be automatically reflected
by the Bank as an advance on the Convertible Note effective as of the date of
BOk's honoring the sight draft. In consideration of BOk's agreement to issue
standby letters of credit hereunder, the Borrowers agree to pay to BOk letter of
credit fees equal to one and one-half percentage points (1.5%) per annum on the
face amount of each letter of credit, which such fee shall be due and payable to
BOK at the time of issuance of each applicable letter of credit.
2.12.2 Banks' Participation in Letters of Credit. Upon the issuance
of any Letter of Credit, a participation therein, in an amount equal to each
Bank's Percentage Interest, shall automatically be deemed granted by the Letter
of Credit Issuer to each Bank on the date of such issuance and the Banks shall
automatically be obligated, as set forth in Section 10.4, to reimburse the
Letter of Credit Issuer to the extent of their respective Percentage Interests
for all obligations incurred by the Letter of Credit Issuer to third parties in
respect of such Letter of Credit not reimbursed by the Borrowers. The Letter of
Credit Issuer will send to each Bank a confirmation regarding the participations
in Letters of Credit outstanding during such month.
2.12.3 Presentation. The Letter of Credit Issuer may accept or pay
any draft presented to it, regardless of when drawn and whether or not
negotiated, if such draft, the other required documents and any transmittal
advice are presented to the Letter of Credit Issuer and dated on or before the
expiration date of the Letter of Credit under which such draft is drawn. Except
insofar as instructions actually received may be given by the Borrowers in
writing expressly to the contrary with regard to, and prior to, the Letter of
Credit Issuer's issuance of any Letter of Credit for the account of the
Borrowers and such contrary instructions are reflected in such Letter of Credit,
to the maximum extent permitted by law the Letter of Credit Issuer may honor as
complying with the terms of the Letter of Credit and with this Agreement any
drafts or other documents otherwise in order signed or issued by an
administrator, executor, conservator, trustee in bankruptcy, debtor in
possession, assignee for benefit of creditors, liquidator, receiver or other
legal representative of the party authorized under such Letter of Credit to draw
or issue such drafts or other documents.
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2.12.4 Uniform Customs and Practice. The Uniform Customs and Practice
for Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, and any subsequent revisions thereof approved by a Congress
of the International Chamber of Commerce and adhered to by the Letter of Credit
Issuer (the "Uniform Customs and Practice"), shall be binding on the Borrowers
and the Letter of Credit Issuer except to the extent otherwise provided herein,
in any Letter of Credit or in any other Loan Document. Anything in the Uniform
Customs and Practice to the contrary notwithstanding:
(a) Neither the Borrowers nor any beneficiary of any
Letter of Credit shall be deemed an agent of any Letter of Credit
Issuer.
(b) With respect to each Letter of Credit, neither any
Letter of Credit Issuer nor its correspondents shall be responsible,
except to the extent required by law, for or shall have any duty to
ascertain:
(i) the genuineness of any signature;
(ii) the validity, form, sufficiency, accuracy,
genuineness or legal effect of any endorsements;
(iii) delay in giving, or failure to give, notice
of arrival, notice of refusal of documents or of discrepancies
in respect of which any Letter of Credit Issuer refuses the
documents or any other notice, demand or protest;
(iv) the performance by any beneficiary under any
Letter of Credit of such beneficiary's obligations to the
Borrowers;
(v) inaccuracy in any notice received by the
Letter of Credit Issuer;
(vi) the validity, form, sufficiency, accuracy,
genuineness or legal effect of any instrument, draft,
certificate or other document required by such Letter of
Credit to be presented before payment of a draft, or the
office held by or the authority of any Person signing any of
the same; or
(vii) failure of any instrument to bear any
reference or adequate reference to such Letter of Credit, or
failure of any Person to note the amount of any instrument on
the reverse of such Letter of Credit or to surrender such
Letter of Credit or to forward documents in the manner
required by such Letter of Credit.
(c) In the event of any conflict between the provisions
of this Agreement and the Uniform Customs and Practice and Article 5 of
the Uniform Commercial Code, the provisions of this Agreement shall
govern to the maximum extent permitted by applicable law.
2.12.5 Modification, Consent. If the Borrowers request or consent in
writing to any modification or extension of any Letter of Credit, or waive any
failure of any draft, certificate or other document to comply with the terms of
such Letter of Credit, and if the Letter of Credit Issuer consents thereto, the
Letter of Credit Issuer shall be entitled to rely on such request, consent or
waiver. This Agreement shall be binding upon the Borrowers with respect to such
Letter of Credit as so modified or extended, and with respect to any action
taken or omitted by such Letter of Credit Issuer pursuant to any such request,
consent or waiver.
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ARTICLE III
COLLATERAL BORROWING BASE
3.1 Semi-annual Engineering Reports.
(a) The Borrowers shall deliver to the Administrative Agent at the
Borrower's cost by each February 20 and August 20, commencing August 20, 1997
and at least twenty (20) days prior to any sale or disposition of any portion of
the Mortgaged Property of $250,000.00 or more, as contemplated by Section 2.4
hereof, such current data, reports and engineering information as is necessary
or appropriate for the Banks' engineers or any other independent petroleum
engineer acceptable to the Banks to compile and prepare by each March 31 and
September 30 (commencing September 30, 1997), and where applicable, by the
closing of the prospective sale of Mortgaged Property as contemplated above, an
engineering report in form and substance satisfactory to BOk, evaluating the
proven producing oil and gas reserves attributable to the Borrowers' aggregate
interest in the Mortgaged Property (as defined in subsection (b) below),
together with the expenses attributable thereto. The engineering data and
information furnished to the Administrative Agent by or on behalf of the
Borrowers shall be accompanied by such other information as shall be requested
by the Administrative Agent in order for it to make its determination of the
Collateral Borrowing Base, and by a certificate of the Borrowers certifying that
the Borrowers have good and defensible title to the Mortgaged Properties valued
and that payments are being received from purchasers of production with respect
to said interests. At any time after thirty (30) days of the receipt of such
information and in no event later than each March 31 and September 30
(commencing September 30, 1997) the Administrative Agent, on behalf of the Banks
shall make a determination concerning compliance of the present worth, using
such pricing and discount factor as it deems appropriate pursuant to BOk's then
applicable energy lending policies and procedures, of the future net revenue
estimated by the Administrative Agent to be received by the Borrowers from
production from the Mortgaged Properties so evaluated, multiplied by a
percentage then determined by the Administrative Agent to be appropriate on the
basis of the Bank's then applicable energy lending policies and criteria. The
"Collateral Borrowing Base" shall not exceed the remainder of (i) the initial
Collateral Borrowing Base amount of Fifteen Million Dollars ($15,000,000.00), or
such redetermined Collateral Borrowing Base (the initial redetermination being
effective as of September 30, 1997) less, after the Conversion Date, (ii) the
then aggregate sum of all scheduled principal reductions payable on the
Convertible Note as of such applicable March 31 or September 30 (inclusive
thereof). The good faith determinations of the Administrative Agent in such
respects shall be conclusive.
(b) The term "Mortgaged Property" shall refer only to such
properties covered by the Mortgage (or a supplemental mortgage or deed of trust,
duly executed, acknowledged and delivered by the Borrowers to the Administrative
Agent in form satisfactory to counsel for the Banks) and which properties are,
at the time:
(i) Particularly and adequately described under the
Mortgage or other supplemental mortgage or deed of trust;
(ii) Completed or developed (in the case of oil and gas
leases) to the extent that value is being assigned to them by the
Administrative Agent in connection with such evaluation and the
Administrative Agent has determined that such properties are capable of
producing oil or gas in commercial quantities; and
(iii) Approved as to title to the satisfaction of the
Administrative Agent.
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(c) The initial Collateral Borrowing Base is stipulated to be
$15,000,000.00 and shall remain in effect until September 30, 1997 or until
otherwise changed by written agreement between the Borrower and the Banks or by
the Administrative Agent pursuant to the procedures established herein.
(d) Borrowers agree that the Banks shall be entitled at all times
at its option to have the "Mortgaged Property" covered and encumbered by the
Mortgage or supplemental mortgages or deeds of trust constitute one-hundred
percent (100%) of the aggregate value of Borrowers' Proven Reserves determined
in accordance with sub-sections 3.1(a) and (b) above. For the purpose of
determining the Collateral Borrowing Base and compliance herewith, the term
"Proven Reserves", in addition to properties that qualify as "Mortgaged
Property" pursuant to the criteria hereof and of subsection 3.1(b), shall refer
only to such other oil and gas mining, mineral and/or leasehold interests of
Borrowers, if any, that satisfy the criteria of clauses (ii) and (iii) of
subsection 3.1(b) hereof above in all respects.
3.2 Collateral Deficiency. Should the aggregate unpaid outstanding
principal balance of the Convertible Note (including outstanding portions of
unexpired Letters of Credit) at any time be greater than the Collateral
Borrowing Base in effect at such time, the Administrative Agent may notify the
Borrowers in writing of the deficiency. Within ten (10) days from and after the
date of any such deficiency notice the Borrowers shall notify the Administrative
Agent in writing of its election to:
(a) Make a cash prepayment upon the Convertible Note in
an amount sufficient to reduce the sum of the unpaid principal amount
of the Convertible Note plus outstanding Letters of Credit to an amount
equal to or less than the amount of the Collateral Borrowing Base;
(b) Adjust upward the monthly principal installments due
on the Convertible Note for the next six (6) successive monthly
payments to an amount that will reduce the sum of the outstanding
principal balance of the Convertible Note plus outstanding Letters of
Credit to the projected Collateral Borrowing Base as of the next
immediate semi-annual redetermination thereof in accordance with the
provisions of Section 3.1(a) hereof; or
(c) Convert the portion of the outstanding principal
balance of the Convertible Note in compliance with the Collateral
Borrowing Base to the seventy-two (72) month term payout provisions of
Sections 2.1 and 2.2 hereof with the excess principal balance of the
Convertible Note to be paid in accordance with the provisions of clause
(b) hereof above.
If the Borrowers shall have elected to make a prepayment on the Convertible Note
under Section 3.2(a) hereof, such prepayment shall be due within five (5) days
after the Borrowers shall have notified the Administrative Agent of such
election, and the prepayment shall be applied, at the Administrative Agent's
option, to the principal payments of the Convertible Note in inverse order of
maturity. If Borrowers shall elect to increase the Convertible Note monthly
principal payments due to the Banks under Section 3.2(b) hereof, the
Administrative Agent shall roll forward its then most current engineering
determination and determine the projected Collateral Borrowing Base for the next
successive determination date (either March 31 or September 30 as the case may
be).
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ARTICLE IV
SECURITY
4.1 Collateral. The repayment of the Indebtedness shall be secured
by a first and prior mortgage lien and security interest in and to all of the
portions of the Mortgaged Property owned or hereafter acquired by the Borrowers,
which has been granted to the Bank, pursuant to the terms of that certain (i)
Sixth Amended and Supplemental Mortgage, Deed of Trust, Security Agreement,
Financing Statement and Assignment (with power of sale) dated as of even date
herewith (the "Sixth Amended Mortgage") including properties situated in Texas,
Arkansas, Alabama and Mississippi previously mortgaged to Xxxxx Fargo by Shore
and (ii) Collateral Act of Mortgage and Security Agreement dated as of even date
herewith (the "Louisiana Mortgage") including the Louisiana properties and
interests previously mortgaged to Xxxxx Fargo by Shore and the interests in the
two (2) Louisiana xxxxx being acquired concurrently herewith from Seller
(respectively the "Shore Properties" and the "Seller Properties") (via
acquisition of Shore or otherwise) or its related entities with the Convertible
Loan proceeds (collectively referred to as the "Mortgages") together with all
prior security and collateral documents and/or instruments described or defined
therein (including the Original Mortgage, the First Amended Mortgage, the Second
Amended Mortgage, the Third Amended Mortgage, the Fourth Amended Mortgage and
the Fifth Amended Mortgage defined therein) and all proceeds and products of the
items or types of collateral described in this Article IV including without
limitation, insurance proceeds and all cash, money, deposits and deposit or
demand accounts of either or more or all of the Borrowers at any time in the
possession or control of the Administrative Agent (the collateral described
herein and in the Security Instruments being collectively referred to as the
"Collateral").
4.2 Additional Properties. In order to satisfy the BOk's optional
one-hundred percent (100%) of Proven Reserves policy described in subsection
3.1(d) above, the Administrative Agent has the right, in its sole discretion, to
elect to take any or all oil and gas reserves of all of the Borrowers as
Collateral for the Indebtedness pursuant to such supplemental or additional
mortgages, deeds of trusts or security agreements covering such additional
properties in form and substance satisfactory to BOk and its counsel and in full
compliance with the criteria of clauses (i), (ii) and (iii) of subsection 3.1(b)
above as additional security for the Notes and the Indebtedness. All of such
additional properties will be deemed part and parcel of the Collateral
constituting security for the repayment of the Indebtedness.
ARTICLE V
COLLECTION ACCOUNT
5.1 Deposit of Production Proceeds. At the option of the
Administrative Agent upon written notice to Middle Bay, Borrowers promptly
thereafter shall cause all production payments and production run checks payable
to Borrowers (whether or not encumbered by the Mortgages or any supplemental
mortgages or deeds of trust) to be remitted by the purchasers thereof directly
to a special joint lockbox account of the Borrowers established at the
Administrative Agent's (the "Collection Account"), pursuant to its standard
lockbox agreement to be executed by the Borrowers concurrently herewith.
5.2 Transfer of Deposited Proceeds. So long as no Default has
occurred hereunder or under any of the other Loan Documents, the Administrative
Agent shall, on the earliest Business Day such funds are collected, transfer all
such collected funds, if any, in the Collection Account to Borrowers' demand
deposit account at the Administrative Agent. The Administrative Agent shall have
no liability for the distribution of funds from such demand deposit account.
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5.3 Application After Default or Lien Notice. If Default has
occurred under any of the Loan Documents or the Administrative Agent has
received a Lien Notice or Lien Notices representing in the aggregate at least
$50,000.00 in Liens outstanding at any time, the Administrative Agent shall be
entitled to retain all funds paid into the Collection Account and to apply the
same as received to the Indebtedness in such order and to such extent as the
Administrative Agent shall determine in its discretion.
5.4 Exculpation. The Banks and the Administrative Agent are hereby
absolved from all liability for failure to enforce collection of any proceeds so
assigned and from all other responsibility in connection therewith, except the
responsibility to account to the Borrowers for funds actually received.
ARTICLE VI
CONDITIONS PRECEDENT TO LOANS
6.1 Conditions Precedent. The obligation of each Bank to make the
Convertible Loan advances is subject to the satisfaction of all of the following
conditions on or prior to the Closing Date (in addition to the other terms and
conditions set forth herein):
(a) No Default. There shall exist no Event of Default or
Default on the Closing Date.
(b) Representations and Warranties. The representations,
warranties and covenants set forth in Article VIII shall be true and
correct on and as of the Closing Date, with the same effect as though
made on and as of the Closing Date.
(c) Certificate. Borrowers shall have delivered to the
Administrative Agent a Certificate, dated as of the Closing Date, and
signed by the President or Vice President and the Secretary or
Assistant Secretary of Borrowers certifying (i) to the matters covered
by the conditions specified in subsections (a) and (b) of this Section
6.1, (ii) that each of the Borrowers has performed and complied with
all agreements and conditions required to be performed or complied with
by it prior to or on the Closing Date, (iii) to the name and signature
of each officer of Borrowers authorized to execute and deliver the Loan
Documents and any other documents, certificates or writings and to
borrow under this Agreement, and (iv) to such other matters in
connection with this Agreement which the Administrative Agent shall
determine to be advisable. The Banks may conclusively rely on such
Certificate until the Administrative Agent receives notice in writing
to the contrary.
(d) Proceedings. Prior to the Closing Date, all corporate
proceedings of the Borrowers shall be taken in connection with the
transactions contemplated by the Loan Documents and shall be
satisfactory in form and substance to the Administrative Agent and its
counsel; and the Administrative Agent shall have received certified
copies, in form and substance satisfactory to the Administrative Agent
and its counsel, of the Articles or Certificate of Incorporation and
By-Laws of the Borrowers and the resolutions of the Board of Directors
of the Borrowers, as adopted, authorizing the execution and delivery of
the Loan Documents, the borrowings under this Agreement, and the
granting of the security interests
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in the Collateral pursuant to the Security Instruments, to secure the
payment of the Indebtedness.
(e) Loan Documents/Security Instruments. The Borrowers
shall have delivered to the Administrative Agent this Loan Agreement
and each of the Mortgages, each appropriately executed by the
appropriate parties and, where applicable, and acknowledged to the
satisfaction of the Administrative Agent and dated as of the Closing
Date, together with such financing statements, and other documents as
shall be necessary and appropriate to perfect the Banks' mortgage
liens, pledge and security interests in the Collateral covered by said
Security Instruments.
(f) Convertible Note. The Borrowers shall have jointly
delivered the Convertible Note to the order of BOk, each appropriately
executed. The initial funding on the Convertible Note shall be used
solely for the purposes of paying in full the Convertible Note of
Middle Bay and Bison issued pursuant to the Existing Agreement
(including extinguishment of the existing Convertible Loan Commitment)
and Shore's obligations to Xxxxx Fargo on the Shore Commitment
(approximately $2,105,000) principal balance plus accrued interest
thereon.
(g) Title. Borrowers shall have provided the
Administrative Agent with evidence satisfactory to the Administrative
Agent and its legal counsel that Borrowers have valid, merchantable
title to the Shore Properties and the Seller Properties, including
(without limitation) title reports or title opinions (division order or
otherwise).
(h) Closing Opinion. The Administrative Agent shall have
received from counsel to Borrowers a favorable closing opinion,
satisfactory in form and substance to the Administrative Agent and its
legal counsel.
(i) Other Information. The Administrative Agent shall
have received such other information, documents and assurances as shall
be reasonably requested by the Banks.
ARTICLE VII
COVENANTS
The Borrowers covenant and agree with the Banks that from the date
hereof and so long as this Agreement is in effect (by extension, amendment or
otherwise) and until payment in full of all Indebtedness and the performance of
all other obligations of the Borrower under this Agreement, unless the Banks
shall otherwise consent in writing:
7.1 Payment of Taxes and Claims. The Borrowers will pay and
discharge or cause to be paid and discharged all Taxes imposed upon the income
or profits of the Borrowers or upon the property, real, personal or mixed, or
upon any part thereof, belonging to Borrowers before the same shall be in
default, and all lawful claims for labor, rentals, materials and supplies which,
if unpaid, might become a Lien upon its property or any part thereof; provided
however, that the Borrowers shall not be required to pay and discharge or cause
to be paid or discharged any such Tax, assessment or claim so long as the
validity thereof shall be contested in good faith by appropriate proceedings,
and adequate book reserves shall be established with respect thereto, and the
Borrowers
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shall pay such Tax, charge or claim before any property subject thereto shall
become subject to execution.
7.2 Maintenance of Corporate Existence. The Borrowers will do or
cause to be done all things necessary to preserve and keep in full force and
effect their respective corporate existences, rights and franchises and will
continue to conduct and operate their respective businesses substantially as
being conducted and operated presently. Borrowers will become and remain
domesticated as a foreign corporation in each jurisdiction where the nature of
the business or ownership of property by Borrowers may require such
domestication.
7.3 Preservation of Property. Borrowers will at all times
maintain, preserve and protect all of Borrowers' properties which are used or
useful in the conduct of Borrowers' business whether owned in fee or otherwise,
or leased, in good repair and operating condition; from time to time make, or
cause to be made, all needful and proper repairs, renewals, replacements,
betterments and improvements thereto so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
and comply with all material leases to which it is a party or under which it
occupies property so as to prevent any material loss or forfeiture thereunder.
7.4 Insurance. Borrowers will keep or cause to be kept (whether
Borrower or, if applicable, the operator of the Proven Reserves,) adequately
insured by financially sound and reputable insurers Borrowers' equipment, motor
vehicles, and all other property of a character usually insured by businesses
engaged in the same or similar businesses, including the Collateral. Upon demand
by the Banks any insurance policies covering the Collateral shall be endorsed to
provide for payment of losses to the Banks as their interests may appear, to
provide that such policies may not be canceled, reduced or affected in any
manner for any reason without thirty (30) days prior notice to the
Administrative Agent, and to provide for any other matters which the Banks may
reasonably require; and such insurance shall be against fire, casualty and any
other hazards normally insured against and shall be in the amount of the full
value (less a reasonable deductible not to exceed amounts customary in the
industry for similarly situated businesses and properties) of the property
insured. Borrowers shall at all times maintain or, where applicable, cause the
operators of the Proven Reserves to maintain adequate insurance by financially
sound and reputable insurers, including, without limitation, insurance against
damage to persons and property, including comprehensive general liability,
worker's compensation and automobile liability.
7.5 Compliance with Applicable Laws. Borrowers will comply with
the requirements of all applicable Laws and orders of any Tribunal and obtain
any licenses, permits, franchises or other governmental authorizations necessary
to the ownership of Borrowers' properties or to the conduct of Borrowers'
respective business.
7.6 Environmental Covenants. Borrowers will immediately notify the
Administrative Agent of and provide the Administrative Agent with copies of any
notifications of discharges or releases or threatened releases or discharges of
a Polluting Substance on, upon, into or from the Collateral which are given or
required to be given by or on behalf of the Borrower to any federal, state or
local Tribunal if any of the foregoing may materially and adversely affect
Borrowers or any part of the Collateral, and such copies of notifications shall
be delivered to the Administrative Agent at the same time as they are delivered
to the Tribunal. Borrowers further agree promptly to undertake and diligently
pursue to completion any appropriate and legally required or authorized remedial
containment and cleanup action in the event of any release or discharge or
threatened release or discharge of a Polluting Substance on, upon, into or from
the Collateral. At all times while owning and operating the Collateral, the
Borrowers will maintain and retain complete and accurate records of all
releases, discharges or other disposal of Polluting Substances on, onto, into or
from the Collateral, including, without limitation, records of the quantity and
type of any Polluting Substances disposed of on or off the Collateral.
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7.7 Environmental Indemnities. Borrowers hereby agree to
indemnify, defend and hold harmless the Administrative Agent and the Banks and
each of their respective officers, directors, employees, agents, consultants,
attorneys, contractors and each of its affiliates, successors or assigns, or
transferees from and against, and reimburse said Persons in full with respect
to, any and all loss, liability, damage, fines, penalties, costs and expenses,
of every kind and character, including reasonable attorneys' fees and court
costs, known or unknown, fixed or contingent, occasioned by or associated with
any claims, demands, causes of action, suits and/or enforcement actions,
including any administrative or judicial proceedings, and any remedial, removal
or response actions ever asserted, threatened, instituted or requested by any
Persons, including any Tribunal, arising out of or related to: (a) the breach of
any representation or warranty of Borrowers contained in Section 8.5 set forth
herein; (b) the failure of Borrowers to perform any of its covenants contained
in Section 7.5 or 7.6 hereunder; (c) the ownership, construction, occupancy,
operation, use of the Collateral prior to the earlier of the date on which (i)
the Indebtedness and obligations secured hereby have been paid and performed in
full and the Security Instruments have been released, or (ii) the Collateral has
been sold by Banks following Banks' ownership of the Collateral by way of
foreclosure of the Liens granted pursuant hereto, deed in lieu of such
foreclosure or otherwise (the "Release Date"); provided, however, this indemnity
shall not apply with respect to matters caused by or arising solely from the
Bank's activities during any period of time after the Banks acquire ownership of
the Collateral.
The indemnities contained in this Section 7.7 apply, without limitation,
to any violation on or before the Release Date of any Environmental Law and any
liability or obligation relating to the environmental conditions on, under or
about the Lands or the Collateral on or prior to the Release Date (including,
without limitation: (a) the presence on, upon or in the Collateral or release,
discharge or threatened release on, upon or from the Collateral of any Polluting
Substances generated, used, stored, treated, disposed of or otherwise released
prior to the Release Date, and (b) any and all damage to real or personal
property or natural resources and/or harm or injury including wrongful death, to
persons alleged to have resulted from such release of any Polluting Substances
regardless of whether the act, omission, event or circumstances constituted a
violation of any Environmental Law at the time of its existence or occurrence).
The term "release" shall have the meaning specified in CERCLA/XXXX and the terms
"stored," "treated" and "disposed" shall have the meanings specified in
RCRA/HSWA; provided, however, any broader meanings of such terms provided by
applicable laws of the State of Oklahoma shall apply.
The provisions of this Section 7.7 shall be in addition to any other
obligations and liabilities Borrowers may have to the Banks at common law and
shall survive the Release Date and shall continue thereafter in full force and
effect.
The Banks agree that in the event that such claim, suit or enforcement
action is asserted or threatened in writing or instituted against them or any of
their respective officers, employers, agents or contractors or any such
remedial, removal or response action is requested of it or any of its officers,
employees, agents or con tractors for which the Banks may desire indemnity or
defense hereunder, the Banks shall give written notification thereof to the
Borrowers.
Notwithstanding anything to the contrary stated herein, the indemnities
created by this Section 7.7 shall only apply to losses, liabilities, damages,
fines, penalties, costs and expenses actually incurred by the Administrative
Agent or Banks as a result of claims, demands, actions, suits or proceedings
brought by Persons who are not the beneficiaries of any such indemnity. The
Administrative Agent shall act as the exclusive agent for all indemnified
Persons under this Section 7.7. With respect to any claims or demands made by
such indemnified Persons, the Administrative Agent shall notify the Borrower
within thirty (30) days after the Administrative Agent's receipt of a writing
advising the Administrative Agent of such claim or demand. Such notice shall
identify (i) when such claim or demand was first made, (ii) the identity of the
Person making it, (iii) the indemnified Person and (iv) the substance of such
claim or demand. Failure by the
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Administrative Agent to so notify the Borrowers within said thirty (30) day
period shall reduce the amount of the Borrowers' obligations and liabilities
under this Section 7.7 by an amount equal to any damages or losses suffered by
the Borrower resulting from any prejudice caused the Borrowers by such delay in
notification from the Administrative Agent. Upon receipt of such notice, the
Borrowers shall have the exclusive right and obligation to contest, defend,
negotiate or settle any such claim or demand through counsel of their own
selection (but reasonably satisfactory to the Administrative Agent) and solely
at Borrowers' own cost, risk and expense; provided, that the Administrative
Agent, at its own cost and expense shall have the right to participate in any
such contest, defense, negotiations or settlement. The settlement of any claim
or demand hereunder by the Borrowers may be made only upon the prior approval of
the Banks of the terms of the settlement, which approval shall not be
unreasonably withheld.
7.8 Quarterly Production Reports. At the Administrative Agent's
written request (but not more frequently than quarterly) Borrowers shall furnish
to the Administrative Agent as soon as practicable and in any event within
thirty (30) days after such written request, a production report and an expense
report for such quarter, certified by Middle Bay's chief financial officer as
being true, correct and complete, showing on a well by well basis (i) the gross
proceeds from the sale of Hydrocarbons produced from the Mortgaged Property
(including additional properties mortgaged subsequent to the Closing pursuant to
Section 4.2 above) owned by Borrowers, (ii) the severance, production and
gathering taxes deducted from or paid from the proceeds, (iii) the Adjusted
Gross Proceeds, (iv) the quantity of Hydrocarbons produced and sold and the
number and identity of xxxxx operated, drilled or abandoned, and (v) for each of
the xxxxx such operating and other expense and net income information pertaining
to the Mortgaged Property owned by Borrowers as the Administrative Agent may
request or specify including, without limitation, a listing of material royalty
liabilities and obligations on a well by well basis.
7.9 Financial Statements and Reports.
(a) Quarterly Operating Statements. The Borrowers shall
maintain a standard system of accounting and shall furnish to the
Administrative Agent as soon as practicable after the end of each
calendar quarter, commencing with the quarter ending September 30,
1997, and in any event within thirty (30) days after the end of each
said calendar quarter, consolidated and consolidating operating
statements for the Borrowers certified, on the Borrowers' behalf, by
the President or the chief financial officer of Middle Bay to have been
prepared in accordance with GAAP consistently applied and to fairly
present the consolidated financial condition of the Borrowers for such
period, and shall include at least a consolidated and consolidating
balance sheet as at the end of such period, and a statement of income
and a consolidated and consolidating statement of cash flows for such
period, all in reasonable detail, setting forth, in each case, the
comparative figures for the corresponding date or period from the
operating statements for the immediately preceding fiscal year.
(b) Annual Financial Statements. As soon as practicable
after the end of each fiscal year and in any event within one hundred
twenty (120) days thereafter, the Borrowers shall furnish to the
Administrative Agent the following audited consolidated and
consolidating financial statements, together with a report thereon and
an unqualified opinion, prepared in accordance with GAAP of reputable
independent certified public accountants selected by Borrowers and
acceptable to the Administrative Agent:
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(i) A consolidated balance sheet of Borrowers at
the end of such year,
(ii) A consolidated statement of income of
Borrowers for such year, and
(iii) A consolidated statement of cash flows of
Borrowers for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, if applicable, all in reasonable detail. Upon
receipt thereof, Borrowers shall also deliver to the Administrative
Agent a copy of each report submitted to the Borrowers by independent
accountants in connection with any annual, special or other audit or
report made by them including, without limitation, any comment letter
submitted thereby to management pertaining thereto or in connection
with their audit and all reports and notices of proxy statements sent
by Borrowers to their shareholders, all registration statement,
periodic and other reports, schedules or filings made by the Borrowers
to the Securities and Exchange Commission or any similar state or
federal governmental authority.
(c) SEC Filings/Special Auditing Reports. Promptly upon
receipt thereof, the Borrowers shall deliver to the Administrative
Agent copies of each 10-Q and 10-K filing with the Securities and
Exchange Commission and a full and complete copy of each report
submitted to the Borrowers by independent accountants in connection
with any annual, interim or special audit made by them of the books and
records of the Borrowers, including, without limitation, any comment
letter submitted by such accountants to management in connection with
their audit.
(d) Income Tax Returns. As soon as practicable after the
preparation and filing of all federal and state income tax returns and
in any event not later than September 15 of each calendar year, the
Borrowers shall deliver to the Administrative Agent copies of each such
return filed by or for the Borrowers whether filed as joint return with
other parties, or not, for the preceding calendar or fiscal year,
together with all schedules and addenda thereto in the form filed with
the appropriate taxing authorities.
7.10 Notice of Default. Immediately upon the happening of any
condition or event which constitutes an Event of Default or Default or any
default or event of default under any other loan, mortgage, financing or
security agreement, the Borrowers will give the Administrative Agent a written
notice thereof specifying the nature and period of existence thereof and what
actions, if any, the Borrowers are taking and proposes to take with respect
thereto.
7.11 Notice of Litigation. Immediately upon becoming aware of the
existence of any action, suit or proceeding at law or in equity before any
Tribunal, an adverse outcome in which would (i) materially impair the ability of
the Borrowers to carry on their businesses substantially as now conducted, (ii)
materially and adversely affect the condition (financial or otherwise) of the
Borrowers, or (iii) result in monetary damages in excess of $100,000.00, the
Borrowers will give the Administrative Agent a written notice specifying the
nature thereof and what actions, if any, the Borrowers are taking and propose to
take with respect thereto.
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7.12 Notice of Claimed Default. Immediately upon becoming aware
that the holder of any note or any evidence of indebtedness or other security of
Borrowers has given notice or taken any action with respect to a claimed default
or event of default thereunder, the Borrowers will give the Administrative Agent
a written notice specifying the notice given or action taken by such holder and
the nature of the claimed default or event of default thereunder and what
actions, if any, the Borrowers are taking and propose to take with respect
thereto.
7.13 Requested Information. With reasonable promptness, the
Borrowers will give the Administrative Agent such other data and information as
from time to time may be reasonably requested by the Administrative Agent or any
of the Banks.
7.14 Inspection. Borrowers will keep complete and accurate books
and records with respect to the Collateral and their other properties, business
and operations and will permit employees and representatives of the
Administrative Agent, upon reasonable notice, to audit, inspect and examine the
same and to make copies thereof and extracts therefrom during normal business
hours. All such records shall be at all times kept and maintained at the
principal offices of Borrower in Mobile, Alabama. Upon any Default or Event of
Default of the Borrower, it will surrender all of such records relating to the
Collateral to the Administrative Agent upon receipt of any request therefor from
the Administrative Agent.
7.15 Maintenance of Employee Benefit Plans. The Borrowers will
maintain each employee benefit plan as to which Borrowers may have any liability
or responsibility in compliance with ERISA and all other Laws applicable
thereto.
7.16 Limitation on Liens. Borrowers will not create or suffer to
exist any Lien upon any of their respective properties or assets except (i)
Liens in favor of the Banks securing the Indebtedness; (ii) Liens arising in the
ordinary course of business for sums not due or sums being contested in good
faith and by appropriate proceedings and not involving any deposits, advances,
borrowed money or the deferred purchase price of property or services; (iii)
liens existing as of the Closing Date and described on Exhibit C annexed hereto;
and (iv) Liens permitted to exist under the terms of any of the Security
Instruments.
7.17 Disposition/Negative Pledge re Encumbrance of Collateral and
Other Assets. Borrowers will not sell or encumber any of the Collateral without
first obtaining the Administrative Agent's written consent thereto and Borrowers
will not sell, lease, transfer, scrap or otherwise dispose of or mortgage,
pledge, grant a security interest in or otherwise encumber any of Borrowers'
other oil and gas mining or mineral properties or assets, whether for
replacement or not, unless such sale or disposition shall be in the ordinary
course of business and for a full and fair consideration, subject to the
Borrowers' limited right to sell up to $150,000.00 worth in the aggregate of
their properties or assets not constituting Collateral in the aggregate during
any calendar year thereof (other than and expressly excluding oil and gas
leasehold, mining or other mineral interests wherever located) in the ordinary
course of business during any calendar year without obtaining the Administrative
Agent's prior consent. In no event shall Borrowers cause or permit the voluntary
or involuntary pledge, mortgage or other encumbrance, attachment or levy of or
against any of the properties or assets of whatsoever nature or type to any
Person (financial institution or otherwise) without first obtaining the
Administrative Agent's written consent thereto.
7.18 Other Agreements. Borrowers will not enter into or permit to
exist any agreement (i) which would cause an Event of Default or a Default
hereunder; or (ii) which contains any provision which would be violated or
breached by the performance of Borrowers' obligations hereunder or under any of
the other Loan Documents.
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7.19 Limitation on Other Indebtedness. The Borrowers will not
create, incur, assume, become or be liable in any manner in respect of, or
suffer to exist, any indebtedness whether evidenced by a note, bond, debenture,
agreement, letter of credit or similar or other obligation, or accept any
deposits or advances of any kind, in excess of $250,000.00 in the aggregate
during any fiscal year of Borrowers except (i) trade payables and current
indebtedness (other than for borrowed money) incurred in, and deposits and
advances accepted in, the ordinary course of Borrowers' existing business; (ii)
the Indebtedness or (iii) the existing indebtedness more particularly described
on Exhibit D hereto, the Administrative Agent's review and approval of which is
noted thereon.
7.20 Collection Account. Upon notice of the Administrative Agent's
exercise of its option, the Borrowers agree to promptly notify all purchasers of
hydrocarbons from all of the Borrowers' oil and gas interests, whether or not
covered by the Security Instruments, to remit proceeds of production to the
Collection Account to be established pursuant to Section 5.1 above. The
Borrowers agree that any payments received by the Borrowers which should have
been remitted to the Collection Account will be promptly deposited by the
Borrowers in the Collection Account.
7.21 Notice of Change of Management. Within two (2) Business Days
after any change in management of the Borrowers or any officers of either of the
Borrowers holding an office of President, Chairman or chief financial officer,
the Borrowers shall give written notice thereof to the Administrative Agent,
together with a description of the reasons for the change.
7.22 Merger, Consolidation, Acquisition. The Borrowers will not nor
will they permit any subsidiary to, merge or consolidate with or into any other
Person; or permit any other Person to consolidate with or merge into the
Borrowers or any subsidiary; or acquire all or substantially all of the assets
or properties or capital stock of any other Person; or adopt or effect any plan
of reorganization, recapitalization, liquidation or dissolution; or acquire any
properties or assets, other than in the ordinary course of business, to the
extent that such acquisitions exceed $250,000.00 in the aggregate during any
calendar year.
7.23 Dividends. The Borrowers will not declare, pay or become
obligated to declare or pay any dividend on any class of their capital stock now
or hereafter outstanding, make any distribution of cash or property to holders
of any shares of such stock, or redeem, retire, purchase or otherwise acquire,
directly or indirectly, any shares of any class of its capital stock now or
hereafter outstanding except only for dividends currently paid by Borrowers on
preferred stock issued as of the Closing Date hereof in amounts not in excess of
the lesser of the dividend rates paid thereon during the previous or current
fiscal year of the Borrower.
7.24 Current Ratio. Borrowers shall maintain at all times during
each fiscal year thereof a minimum Current Ratio (excluding from such
calculation all Bay City Minerals, Inc. accounts and/or accounts receivable and
current maturities of Borrowers' long term debt owed to the Banks) of at least
.9 to 1.0.
7.25 Change of Fiscal Year. Borrowers will not change their fiscal
year from their present fiscal year.
7.26 Articles of Incorporation; By-Laws and Assumed Names. The
Borrowers will not, nor will any of the Borrowers permit any subsidiary to,
amend, alter, modify or restate their Articles or Certificate of Incorporation
or By-Laws in any way which would (i) change the corporate name or adopt a trade
name for either the Borrowers or any other subsidiary thereof; or (ii) in any
manner adversely affect either of the Borrowers' obligations or covenants to the
Banks hereunder.
7.27 Lockbox Arrangements. Following receipt of the Administrative
Agent's written request, Borrowers agree to promptly notify all purchasers of
hydrocarbons from all of the
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Borrowers' oil and gas interests, whether or not covered by the Security
Instruments, to remit proceeds of production to the Collection Account in
accordance with Section 5.1 above. The Borrowers agree that any payments
received by the Borrowers which should have been remitted to the Collection
Account will be promptly deposited thereby in the Collection Account.
7.28 Additional Mortgaged Properties. The Borrower agrees that upon
request by the Administrative Agent the Borrowers will, within five (5) days of
such request, grant the Banks a first and prior mortgage or deed of trust lien
on any oil and gas properties owned or hereafter acquired thereby whether by
virtue of acquisition, drilling or otherwise.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
To induce the Banks to enter into this Agreement and to make the
Convertible Loan advances to the Borrowers under the provisions hereof, and in
consideration thereof, the Borrowers represent, warrant and covenant as follows:
8.1 Litigation. Except as set forth on Exhibit E attached hereto,
there is no action, suit, investigation or proceeding threatened or pending
before any Tribunal against or affecting any of the Borrowers or any properties
or rights of the Borrowers, which, if adversely determined, would result in a
liability of greater than $100,000.00 or would otherwise result in any material
adverse change in the business or condition, financial or otherwise, of
Borrowers. Borrowers are not in default with respect to any judgment, order,
writ, injunction, decree, rule or regulation of any Tribunal.
8.2 Conflicting Agreements and Other Matters. The Borrowers are
not in default in the performance of any obligation, covenant, or condition in
any agreement to which it is a party or by which it is bound. The Borrowers are
not parties to any contract or agreement or subject to any charter or other
corporate restriction which materially and adversely affects its business,
property or assets, or financial condition. The Borrowers are not a parties to
or otherwise subject to any contract or agreement which restricts or otherwise
affects the right or ability of the Borrowers to execute the Loan Documents or
the performance of any of their respective terms. Neither the execution nor
delivery of any of the Loan Documents, nor fulfillment of nor compliance with
their respective terms and provisions will conflict with, or result in a breach
of the terms, conditions or provisions of, or constitute a default under, or
result in any violation of, or result in the creation of any Lien (except those
created by the Loan Documents) upon any of the properties or assets of the
Borrowers pursuant to, or require any consent, approval or other action by or
any notice to or filing with any Tribunal (other than routine filings after the
Closing Date with the Securities and Exchange Commission, any securities
exchange and/or state blue sky authorities) pursuant to any award of any
arbitrator, or any agreement, instrument or Law to which either of the Borrowers
is subject.
8.3 Financial Statements. The financial statements of Borrowers
furnished to the Bank have been prepared on an accrual basis in accordance with
GAAP, show all material liabilities, direct and contingent, and fairly present
the financial condition of the Borrowers as at date thereof and the results of
its operations for the periods then ended, and since such date there has been no
material adverse change in the business, financial condition or operations of
the Borrowers.
8.4 Title to Properties; Authority. Borrowers have full power,
authority and legal right to own and operate the properties which they now own
and operate, and to carry on the lines of business in which they are now
engaged, and has good and marketable title to the Mortgaged
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Property in corporate capacity subject to no Lien of any kind except Liens
permitted by this Agreement. On or prior to the Closing Date hereof, the
Borrowers will own a working interest and net revenue interest in the oil and
gas leasehold estate for the Mortgaged Property of not less than the amounts set
forth on a well by well basis on Exhibit E attached to the Existing Agreement,
as supplemented by Exhibit G annexed hereto (covering the Shore Properties and
the Seller Properties only). Borrowers have full power, authority and legal
right to execute and deliver and to perform and observe the provisions of this
Agreement and the other Loan Documents. Borrowers further represent to the Bank
that any and all after acquired interest in any one or more of the Mortgaged
Property being concurrently or subsequently assigned of record to Borrowers is
and shall be deemed encumbered by the Mortgage in all respects.
8.5 Environmental Representations.
(a) To the best of Borrowers' knowledge, neither Borrower
is subject to any liability or obligation relating to (i) the
environmental conditions on, under or about the Collateral, including,
without limitation, the soil and ground water conditions at the
location of any of the Borrowers' properties, or (ii) the use,
management, handling, transport, treatment, generation, storage,
disposal, release or discharge of any Polluting Substance;
(b) Borrowers have not obtained and are not required to
obtain or make application for any permits, licenses or similar
authorizations to construct, occupy, operate or use any buildings,
improvements, facilities, fixtures and equipment forming a part of the
Collateral by reason of any Environmental Laws;
(c) Borrowers have taken all steps necessary to determine
and have determined that no Polluting Substances have been disposed of
or otherwise released on, onto, into, or from the Collateral (the term
"release" shall have the meanings specified in CERCLA/XXXX, and the
term "disposal" or "disposed" shall have the meanings specified in
RCRA/HSWA; provided, in the event either CERCLA/XXXX or RCRA/HSWA is
amended so as to broaden the meaning of any term defined thereby, such
broader meaning shall apply subsequent to the effective date of such
amendment and provided further, to the extent that the laws of any
State or Tribunal establish a meaning for "release," "disposal" or
"disposed" which is broader than that specified in CERCLA/XXXX,
RCRA/HSWA or other Environmental Laws, such broader meaning shall
apply);
(d) To the best of Borrowers' knowledge, there are no
PCB's or asbestos-containing materials, whether in the nature of
thermal insulation products such as pipe boiler or breech coverings,
wraps or blankets or sprayed-on or troweled-on products in, on or upon
the Collateral; and
(e) To the best of Borrowers' knowledge, there is no urea
formaldehyde foam insulation ("UFFI") in, on or upon the Collateral.
8.6 Oil and Gas Contracts. All contracts, agreements and leases
related to any of the oil and gas mining, mineral or leasehold properties and
all contracts, agreements, instruments and leases to which either of the
Borrowers is a party, are valid and effective in accordance with their
respective
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terms, and all agreements included in the oil and gas mining, mineral or
leasehold properties in the nature of oil and/or gas purchase agreements, and
oil and/or gas sale agreements are in full force and effect and are valid and
legally binding obligations of the parties thereto and all payments due
thereunder have been made, except for those suspended for reasonable cause in
the ordinary course of business; and, there is not under any such contract,
agreement or lease any existing default by any party thereto or any event which,
with notice or lapse of time, or both, would constitute such default, other than
minor defaults which, in the aggregate, would not result in losses or damages of
more than $100,000.00 to Borrowers.
8.7 Natural Gas Policy Act and Natural Gas Act Compliance. To the
best of Borrowers' knowledge, all material filings and approvals under the
Natural Gas Policy Act of 1978, as amended, and the Natural Gas Act, as amended,
or with the Federal Energy Regulatory Commission (the "FERC") or required under
any rules or regulations adopted by the FERC which are necessary for the
operation of Borrowers' businesses or the Collateral in the manner in which they
are presently being operated have been made and the terms of the agreements and
contractual rights included in the Borrowers' businesses or the Collateral do
not conflict with or contravene any such Law, rule or regulation.
8.8 Take or Pay Obligations, Prepayments, BTU Adjustments and
Balancing Problems. To the best of the Borrowers' knowledge, after diligent
inquiry, there is no take or pay obligation under any gas purchase agreement
comprising a portion of the Collateral which is not matched by a commensurate
and corresponding pay or take obligation binding upon the purchaser under a
corresponding gas sales agreement such that with respect to the ownership and
operation of the business operations of Borrowers or the Collateral, any such
obligation in favor of any seller under any gas purchase agreement to which
either of the Borrowers is a "buyer" is matched by a corresponding obligation on
the part of "purchasers" under corresponding gas sales agreements pursuant to
which either of the Borrowers is the "seller". Neither the Borrowers nor the
Collateral is subject to requirements to make BTU adjustments or effect gas
balancing in favor of third parties which would result in Borrowers being
required to (i) deliver gas at a price below that established in applicable gas
sales agreements or on behalf of and for the benefit of third parties in
exchange or to otherwise compensate for prior above market or above contract
purchases of gas from Borrowers or their predecessors in interest, or (ii)
balance in kind by allowing other owners in the Collateral to make up the past
imbalances in gas sales, or (iii) balance in cash by paying other owners of the
collateral for the past gas imbalances in the aggregate in excess of $100,000.00
except only for the matters described on Exhibit F hereto which have been
disclosed to the Banks.
8.9 Gas Purchase Obligations in Excess of Gas Sales Rights. The
ownership and operation of the business operations of Borrowers or the
Collateral have not resulted or will not result in the existence of minimum
purchase obligations under any gas purchase agreement (relating to the volume of
gas to be taken thereunder or the price to be paid with respect thereto for the
duration of any such gas purchase agreement) which are not matched by
corresponding and commensurate rights to sell all such gas under applicable gas
sales agreements at prices in excess of the amount to be paid therefor under gas
purchase agreements (without regard to costs associated with transporting any
such gas and risks of volume "shrinkage" occurring in the transportation
process).
8.10 Purposes. Borrowers are not engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System) and no part of the proceeds of
any borrowing hereunder will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock. If requested by the Bank, the Borrowers will furnish to the
Administrative Agent a statement in conformity with the requirements of Federal
Reserve Form U-1, referred to in Regulation U, to the foregoing effect.
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Neither the Borrowers nor any agent acting on their behalves has taken or will
take any action which might cause this Agreement or the Note to violate any
regulation of the Board of Governors of the Federal Reserve System (including
Regulations G, T, U and X) or to violate any Securities Laws, state or federal,
in each case as in effect now or as the same may hereafter be in effect.
8.11 Compliance with Applicable Laws. The Borrowers are in
compliance with all Laws, ordinances, rules, regulations and other legal
requirements applicable to them and the businesses conducted thereby, the
violation of which could or would have a material adverse effect on their
respective business conditions, financial or otherwise.
8.12 Possession of Franchises, Licenses. Borrowers possess all
franchises, certificates, licenses, permits and other authorizations from
governmental political subdivisions or regulatory authorities, free from
burdensome restrictions, that are necessary in any material respect for the
ownership, maintenance and operation of their respective properties and assets,
and Borrowers are not in violation of any thereof in any material respect.
8.13 Leases, Easements and Rights of Way. Borrowers enjoy peaceful
and undisturbed possession of all leases, easements and rights of way necessary
in any material respect for the operation of their properties and assets, none
of which contains any unusual or burdensome provisions which might materially
affect or impair the operation of such properties and assets. All such leases,
easements and rights of way are valid and subsisting and are in full force and
effect.
8.14 Taxes. Borrowers have filed all Federal, state and other
income tax returns which are required to be filed and have paid all Taxes, as
shown on said returns, and all Taxes due or payable without returns and all
assessments received to the extent that such Taxes or assessments have become
due. All Tax liabilities of the Borrowers are adequately provided for on the
books of the Borrowers, including any interest or penalties. No income tax
liability of a material nature has been asserted by taxing authorities for Taxes
in excess of those already paid.
8.15 Disclosure. Neither this Agreement nor any other Loan Document
or writing furnished to the Bank by or on behalf of the Borrowers in connection
herewith contains any untrue statement of a material fact nor do such Loan
Documents and writings, taken as a whole, omit to state a material fact
necessary in order to make the statements contained herein and therein not
misleading. There is no fact known to Borrowers and not reflected in the
financial statements provided to the Banks which materially adversely affects
their assets or in the future may materially adversely affect the business,
property, assets or financial conditions of Borrowers which has not been set
forth in this Agreement, in the Loan Documents or in other documents furnished
to the Bank by or on behalf of the Borrowers prior to the date hereof in
connection with the transactions contemplated hereby.
8.16 ERISA. Since the effective date of Title IV of ERISA, no
Reportable Event has occurred with respect to any Plan. For the purposes of this
section the term "Reportable Event" shall mean an event described in Section
4043(b) of ERISA. For the purposes hereof the term "Plan" shall mean any plan
subject to Title IV of ERISA and maintained for employees of Borrowers, or of
any member of a controlled group of corporations, as the term "controlled group
of corporations" is defined in Section 1563 of the Internal Revenue Code of
1986, as amended (the "Code"), of which either of the Borrowers is a part. Each
Plan established or maintained by Borrowers is in material compliance with the
applicable provisions of ERISA, and the Borrowers have filed all reports
required by ERISA and the Code to be filed with respect to each Plan. Borrowers
have met all requirements with respect to funding Plans imposed by ERISA or the
Code. Since the effective date of Title IV of ERISA there have not been any nor
are there now existing any events or conditions that would permit any Plan to be
terminated under circumstances which would cause the lien provided under Section
4068 of ERISA to attach to the assets of Borrowers. The value of each
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Plan's benefits guaranteed under Title IV of ERISA on the date hereof does not
exceed the value of such Plan's assets allocable to such benefits on the date
hereof.
8.17 Ownership of Mortgaged Property. The Borrowers hereby
represent, warrant and covenant that as of the Funding Date the Borrowers will
own working interests, royalty interests and net revenue interests in the oil
and gas leasehold estate for the Mortgaged Property covered by the Mortgages not
less than the amounts set forth on a well by well basis on Exhibit G attached to
the Existing Agreement, as supplemented by Exhibit G annexed hereto (only
insofar as the Shore Properties and the Seller Properties are concerned).
8.18 Organization and Capacity. Middle Bay is duly organized,
validly existing and in good standing under the Laws of the State of Alabama as
a corporation, Bison is duly organized, validly existing and in good standing
under the laws of the State of Kansas and Shore is duly organized, validly
existing and in good standing under the laws of the State of Texas. Bison and
Shore are wholly owned subsidiaries of Middle Bay. Borrowers have the corporate
capacity and authority to enter into this Agreement, the Convertible Note and
the Security Instruments and to perform and carry out the terms and provisions
hereof.
ARTICLE IX
EVENTS OF DEFAULT
9.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default (whether such occurrence
shall be voluntary or involuntary or come about or be effected by operation of
Law or otherwise):
(a) The Borrowers shall fail to make any monthly payment
due on either of the Notes, or fail to pay either of the Notes within
five (5) days after the same shall become due and payable (whether by
extension, renewal, acceleration, maturity or otherwise); or
(b) Any representation or warranty of the Borrowers made
herein or in any writing furnished in connection with or pursuant to
any of the Loan Documents shall have been false or misleading in any
material respect on the date when made; or
(c) Borrowers shall fail to duly observe, perform or
comply with any covenant, agreement or term (other than payment
provisions which are governed by Section 9.1(a) hereof) contained in
this Agreement or any of the Loan Documents and such default or breach
shall have not been cured or remedied within the earlier of thirty (30)
days after Borrowers shall know (or should have known) of its
occurrence or thirty (30) days following receipt of notice thereof from
the Administrative Agent; or
(d) Borrowers shall default in the payment of principal
or of interest on any other obligation for money borrowed or received
as an advance (or any obligation under any conditional sale or other
title retention agreement, or any obligation issued or assumed as full
or partial payment for property whether or not secured by purchase
money Lien, or any obligation under notes payable or drafts accepted
representing extensions of credit) beyond any grace period provided
with respect
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thereto, or shall default in the performance of any other agreement,
term or condition contained in any agreement under which such
obligation is created (or if any other default under any such agreement
shall occur and be continuing beyond any period of grace provided with
respect thereto) if the effect of such default is to cause, or to
permit the holder or holders of such obligation (or a trustee on behalf
of such holder or holders) to cause such obligation to become due prior
to its date of maturity; or
(e) Any of the following: (i) any of the Borrowers shall
be unable to pay its debts as they mature, or shall make an assignment
for the benefit of creditors or admit in writing its inability to pay
its debts generally as they become due or fail generally to pay its
debts as they mature; or (ii) an order, judgment or decree is entered
adjudicating such Borrower or insolvent or an order for relief under
the United States Bankruptcy Code is entered with respect to such
Borrower or (iii) either of the Borrowers shall petition or apply to
any Tribunal for the appointment of a trustee, receiver, custodian or
liquidator of such Borrower or of any substantial part of the assets of
such Borrower or shall commence any proceedings relating to such
Borrower under any bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debts, dissolution, or liquidation Law of
any jurisdiction, whether now or hereafter in effect; or (iv) any such
petition or application shall be filed, or any such proceedings shall
be commenced, against such Borrower and such Borrower by any act shall
indicate its approval thereof, consent thereto or acquiescence therein,
or an order, judgment or decree shall be entered appointing any such
trustee, receiver, custodian or liquidator, or approving the petition
in any such proceedings, and such order, judgment or decree shall
remain unstayed and in effect for more than thirty (30) days; or (vi)
any of the Borrowers shall fail to make timely payment or deposit of
any amount of tax required to be withheld by such Borrower and paid to
or deposited to or to the credit of the United States of America
pursuant to the provisions of the Internal Revenue Code of 1986, as
amended, in respect of any and all wages and salaries paid to employees
of such Borrower; or
(f) Any final judgment on the merits for the payment of
money in an amount in excess of $100,000.00 shall be outstanding
against any of the Borrowers and such judgment shall remain unstayed
and in effect and unpaid for more than thirty (30) days; or
(g) Any Reportable Event described in Section 8.16 hereof
which the Banks determine in good faith might constitute grounds for
the termination of a Plan therein described or for the appointment by
the appropriate United States District Court of a trustee to administer
any such Plan shall have occurred and be continuing thirty (30) days
after written notice to such effect shall have been given to Borrowers
or any such Plan shall be terminated, or a trustee shall be appointed
by an appropriate United States District Court to administer any such
Plan or the Pension Benefit Guaranty Corporation shall institute
proceedings to terminate any such Plan or to appoint a trustee to
administer any such Plan; or
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(h) Any default or event of default under the Mortgages
or any of the other Loan Documents.
9.2 Remedies. Upon the occurrence of any Event of Default referred
to in Section 9.1(e) the Convertible Loan Commitment shall immediately and
automatically terminate and the Convertible Note and all other Indebtedness
shall be immediately due and payable, without notice of any kind. Upon the
occurrence of any other Event of Default, and without prejudice to any other
right or remedy of the Banks under this Agreement or the Loan Documents or under
applicable Law of under any other instrument or document delivered in connection
herewith, the Banks may (i) declare the Convertible Loan Commitment terminated
or (ii) declare the Convertible Loan Commitment terminated and declare the
Convertible Note and the other Indebtedness, or any part thereof, to be
forthwith due and payable, whereupon the Convertible Note and the other
Indebtedness, or such portion as is designated by the Banks, shall forthwith
become due and payable, without presentment, demand, notice or protest of any
kind, all of which are hereby expressly waived by the Borrowers. No delay or
omission on the part of the Administrative Agent or the Banks in exercising any
power or right hereunder or under either of the Notes, the Loan Documents or
under applicable law shall impair such right or power or be construed to be a
waiver of any default or any acquiescence therein, nor shall any single or
partial exercise by the Administrative Agent or the Banks of any such power or
right preclude other or further exercise thereof or the exercise of any other
such power or right by the Administrative Agent or the Banks. In the event that
all or part of the Indebtedness becomes or is declared to be forthwith due and
payable as herein provided, the Banks shall have the right to set off the amount
of all the Indebtedness of the Borrowers owing to the Banks against, and shall
have a lien upon and security interest in, all property of the Borrowers in the
Administrative Agent's or any Banks' possession at or subsequent to such
default, regardless of the capacity in which the Administrative Agent or the
Banks possess such property, including but not limited to any balance or share
of any deposit, demand, collection or agency account. At any time after the
occurrence of any Event of Default, the Banks may, at their option, cause an
audit of any and/or all of the books, records and documents of the Borrowers to
be made by auditors satisfactory to the Banks at the expense of the Borrowers.
The Banks also shall have, and may exercise, each and every right and remedy
granted to it for default under the terms of the other Loan Documents.
ARTICLE X
LOAN OPERATIONS
10.1 Interests in Loans/Commitments. The percentage interest of BOk
and each other Bank that may hereafter become an Assignee or Credit Participant
pursuant to Article XI hereof for Commitment amounts in excess of the BOk
Commitment or, alternatively, subject to BOk's consent, the Banks extend to
Borrowers hereunder Commitments not in excess of $35,000,000 in the aggregate
(in addition to the existing $15,000,000 BOk Commitment) to be evidenced by an
additional Convertible Note jointly and severally issued hereunder by Borrowers
to the order of such additional Bank(s) in form and content similar to the
Convertible Note annexed hereto as Exhibit A (in which event such existing
$50,000,000 Convertible Note would be reissued concurrently therewith in a
correspondingly reduced original principal amount but in no event shall the sum
of all Convertible Notes issued hereunder plus the existing Letter of Credit
Note exceed $50,000,000 in the aggregate), in the Convertible Loan and Letters
of Credit, and the Commitments, shall be computed based on the maximum principal
amount for each Bank as follows:
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Bank Maximum Commitment Amount Percentage Interest
---- ------------------------- -------------------
BOk $15,000,000 30.00%
Other Bank(s)
hereafter extending
Commitment(s) or as
Assignee(s) (other
than a Credit
Participant(s)
pursuant to
Article XI below) $35,000,000 70.00%
----------- -------
Total $50,000,000 100.00%
The foregoing percentage interests, as from time to time in effect and reflected
in the Register, are referred to as the Percentage Interest with respect to all
or any portion of the Convertible Loan advances and the Commitments. BOk has no
obligation to increase the BOk Commitment above either its existing Percentage
Interest or the maximum amount of $15,000,000 (including the existing $50,000
Letter of Credit Note) and any future determination of BOk to increase the BOk
Commitment shall be in its sole and absolute discretion and subject to BOk
obtaining Assignee(s) or Credit Participant(s) under Article XI hereof for all
amounts of the Commitments in excess of the existing $15,000,000 BOk Commitment.
10.2 Administrative Agent's Authority to Act. Each of the Banks
appoints and authorizes BOk to act for the Banks as Administrative Agent in
connection with the transactions contemplated by this Agreement and the other
Loan Documents on the terms set forth herein. In acting hereunder, the
Administrative Agent is acting for the account of BOk to the extent of its
Percentage Interest and for the account of each other Bank to the extent of such
Bank's Percentage Interest, and all action in connection with the enforcement
of, or the exercise of any remedies (other than the Banks' rights of set-off as
provided herein or in any other Loan Document) in respect of the Loans and the
Indebtedness shall be taken by the Administrative Agent.
10.3 Borrowers to Pay Administrative Agent. The Borrowers shall be
fully protected in making all payments in respect of the Convertible Note or the
Letter of Credit Note to the Administrative Agent, in relying upon consents,
modifications and amendments executed by the Administrative Agent purportedly on
the Banks' behalf, and in dealing with the Administrative Agent as herein
provided. Upon three (3) Business Days notice, the Administrative Agent may
charge the accounts of the Borrowers, on the dates when the amounts thereof
become due and payable, with the amounts of the principal of and interest on the
Convertible Loan, and all other fees and amounts owing under any Loan Document.
10.4 Bank Operations for Advances.
10.4.1 Advances. On the funding date for each Convertible
Loan advance, each Bank shall advance to the Administrative Agent in
immediately available funds such Bank's Percentage Interest in the
portion of a Loan advanced on such funding date prior to 1:00 P.M.
(Tulsa, Oklahoma time). If such funds are not received at such time,
but all applicable conditions set forth in Article VI have been
satisfied, each Bank authorizes and requests the Administrative Agent
to advance for such Bank's account, pursuant to the terms hereof, the
Bank's respective Percentage Interest in such portion of such Loan and
agrees to reimburse the Administrative Agent in immediately available
funds for the amount thereof prior to 3:00 p.m. (Tulsa, Oklahoma time)
on the day any portion of such Loan is advanced hereunder; provided,
however, that the Administrative Agent is not authorized to make any
such
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advance for the account of any Bank who has previously notified the
Administrative Agent in writing that such Bank will not be performing
its obligations to make further advances hereunder; and provided,
further, that the Administrative Agent shall be under no obligation to
make any such advance.
10.4.2 Letters of Credit. Each of the Banks authorizes and
requests each Letter of Credit Issuer to issue the Letters of Credit
provided for in Section 2.12.1 and agrees to purchase a participation
in each of such Letters of Credit in an amount equal to its Percentage
Interest in the amount of each such Letter of Credit. Promptly upon the
request of any Letter of Credit Issuer, each Bank shall reimburse such
Letter of Credit Issuer in immediately available funds for such Bank's
Percentage Interest in the amount of all obligations to third parties
incurred by the Letter of Credit Issuer in respect of each Letter of
Credit and each draft accepted under a Letter of Credit to the extent
not timely reimbursed by the Borrowers. Each Letter of Credit Issuer
will notify each Bank (and the Administrative Agent if the
Administrative Agent is not the Letter of Credit Issuer) of the
issuance of each Letter of Credit, the amount and date of payment of
any draft drawn or accepted under a Letter of Credit and whether in
connection with the payment of any such draft the amount thereof was
added to the Revolving Credit Loan or was reimbursed by the Borrowers.
10.4.3 Administrative Agent to Allocate Payments. All
payments of principal and interest in respect of the extensions of
credit made pursuant to this Agreement, reimbursement of amounts paid
by each Letter of Credit Issuer to third parties under Letters of
Credit or drafts presented thereunder, commitment fees, Letter of
Credit issuance fees and other fees under this Agreement (except for
the standard Letter of Credit application/processing fees of any Letter
of Credit Issuer), which shall not be shared by the Banks shall, as a
matter of convenience, be made by the Borrowers to the applicable
Letter of Credit Issuer or the applicable Administrative Agent, as the
case may be. The share of each Bank shall be credited to such Bank by
the Administrative Agent in immediately available funds in such manner
that the principal amount of the Loans constituting Credit Obligations
to be paid shall be paid proportionately in accordance with the Banks'
respective Percentage Interests in such Loans, except as otherwise
provided in this Agreement.
10.4.4 Delinquent Banks; Nonperforming Banks. In the event
that any Bank fails to reimburse the Administrative Agent pursuant to
Section 10.4.1 for the Percentage Interest of such Bank (a "Delinquent
Bank") in any credit advanced by the Administrative Agent pursuant
hereto, overdue amounts (the "Delinquent Payment") due from the
Delinquent Bank to the Administrative Agent shall bear interest,
payable by the Delinquent Bank on demand, at a per annum rate equal to
(a) the Federal Funds Rate for the first three days overdue and (b) the
sum of two percentage points (2%) plus the Federal Funds Rate for any
longer period. Such interest shall be payable to the Administrative
Agent for its own account for the period commencing on the date of the
Delinquent Payment and ending on the date the Delinquent Bank
reimburses the Administrative Agent on account of the Delinquent
Payment (to the extent not paid by the Borrowers as provided below) and
the accrued interest thereon (the "Delinquency Period"), whether
pursuant to the assignments referred to below or otherwise. Upon notice
by the Administrative Agent, the Borrowers will pay to the
Administrative Agent the principal (but not the interest) portion of
the Delinquent Payment. During the Delinquency Period, in order to make
reimbursements for the Delinquent Payment and accrued interest thereon,
the Delinquent Bank shall be deemed to have assigned to the
Administrative Agent all interest, commitment fees and other payments
made by the Borrowers hereunder that would have thereafter otherwise
been payable under the Loan Documents to the Delinquent Bank. During
any other period in which any Bank is not performing its obligations to
extend credit under Article II hereof (a "Nonperforming Bank"), the
Nonperforming Bank shall be deemed to have assigned to each Bank that
is not a
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37
Nonperforming Bank (a "Performing Bank") all principal and other
payments made by the Borrowers that would have thereafter otherwise
been payable thereunder to the Nonperforming Bank. The Administrative
Agent shall credit a portion of such payments to each Performing Bank
in an amount equal to the Percentage Interest of such Performing Bank
in an amount equal to the Percentage Interest of such Performing Bank
divided by one minus the Percentage Interest of the Nonperforming Bank
until the respective portions of the Loans owed to all the Banks are
the same as the Percentage Interests of the Banks immediately prior to
the failure of the Nonperforming Bank to perform its obligations under
Article II hereof. The foregoing provisions shall be in addition to any
other remedies the Administrative Agent, the Performing Banks or the
Borrowers may have under law or equity against the Delinquent Bank as a
result of the Delinquent Payment or against the Nonperforming Bank as a
result of its failure to perform its obligations under Article II
hereof.
10.5 Sharing of Payments. To the extent permitted by applicable
Bank regulatory and legal requirements, each Bank agrees that (i) if by
exercising any right of set-off or counterclaim or otherwise, it shall receive
payment of (a) a proportion of the aggregate amount due with respect to its
Percentage Interest in the Convertible Loan advances and Letter of Credit
Exposure which is greater than (b) the proportion received by any other Bank in
respect of the aggregate amount due with respect to such other Bank's Percentage
Interest in the Convertible Loan advances and Letter of Credit Exposure and (ii)
if such inequality shall continue for more than 10 days, the Bank receiving such
proportionately greater payment shall purchase participations in the Percentage
Interests in the Convertible Loan advances and Letter of Credit Exposure held by
the other Banks, and such other adjustments shall be made from time to time
(including rescission of such purchases of participations in the event the
unequal payment originally received is recovered from such Bank through
bankruptcy proceedings or otherwise), as may be required so that all such
payments of principal and interest with respect to the Convertible Loan advances
and Letter of Credit Exposure held by the Banks shall be shared by the Banks pro
rata in accordance with their respective Percentage Interests; provided,
however, that this Section 10.5 shall not impair the right of any Bank to
exercise any right of set-off or counterclaim it may have and to apply the
amount subject to such exercise to the payment of Indebtedness of Borrowers
other than Borrowers' Indebtedness with respect to the Convertible Loan advances
and Letter of Credit Exposure. Each Bank that grants a participation in the
Convertible Loan and Commitments to a Credit Participant shall require as a
condition to the granting of such participation that such Credit Participant
agree to share payments received in respect of the Indebtedness as provided in
this Section 10.5. The provisions of this Section 10.5 are for the sole and
exclusive benefit of the Banks and no failure of any Bank to comply with the
terms hereof shall be available to any of the Borrowers as a defense to the
payment of the Loans.
10.6 Amendments, Consents, Waivers. Except as otherwise set forth
herein the Administrative Agent may (and upon the written request of the
Required Banks the Administrative Agent shall) take or refrain from taking any
action under this Agreement or any other Loan Document, including giving its
written consent to any modification of or amendment to and waiving in writing
compliance with any covenant or condition in this Agreement or any other Loan
Document or any Default or Event of Default, all of which actions shall be
binding upon all of the Banks; provided, however, that:
(i) Without the written consent of the Banks owning at least two
thirds (2/3) of the Percentage Interests (other than Delinquent Banks during the
existence of a Delinquency Period so long as such Delinquent Bank is treated the
same as the other Banks with respect to any actions enumerated below), no
written modification of, amendment to, consent with respect to, waiver of
compliance with or waiver of a Default under, any of the Loan Documents shall be
made, including
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without limitation, Section 9.1 of this Agreement, the related defined terms or
this Section 10.6(a) shall be made.
(ii) Without the written consent of such Banks as own 100% of the
Percentage Interests (other than Delinquent Banks during the existence of a
Delinquency Period so long as such Delinquent Bank is treated the same as the
other Banks with respect to any actions enumerated below):
(a) No reduction shall be made in (A) the amount of
principal of any of the Convertible Loan advances or reimbursement
obligations for payments made under Letters of Credit, (B) the interest
rate on the Convertible Loan advances or (C) the Letter of Credit
processing/application fees, the amount of which shall be within the
sole discretion of each Letter of Credit Issuer or commitment
(non-usage) fees.
(b) No change shall be made in the stated time of payment
of all or any portion of any of the Convertible Loan advances or
interest thereon or reimbursement of payments made under Letters of
Credit or fees relating to any of the foregoing payable to all of the
Banks and no waiver shall be made of any Default under Section 9.1(a).
(c) No increase shall be made in the amount, or extension
of the term, of the Commitments.
(d) No alteration shall be made of the Banks' rights of
set-off contained herein or in the other Loan Documents.
(e) No release of any Collateral shall be made (except
that the Administrative Agent may release particular items of
Collateral in dispositions permitted by the Security Instruments and
may release all Collateral upon payment in full of the Loans evidenced
by the Convertible Note and termination of the Commitments without the
written consent of the Banks).
(f) No amendment to or modification of this Section
10.6(ii) shall be made.
10.7 Administrative Agent's Resignation. The Administrative Agent
may resign at any time by giving at least 30 days' prior written notice of its
intention to do so to each other of the Banks and the Borrowers and upon the
appointment by the Required Banks of a successor Administrative Agent
satisfactory to the Borrowers. If no successor Administrative Agent shall have
been so appointed and shall have accepted such appointment within 45 days after
the retiring Administrative Agent's giving of such notice of resignation, then
the retiring Administrative Agent may with the consent of the Borrowers, which
shall not be unreasonably withheld, appoint a successor Administrative Agent
which shall be a bank or a trust Borrowers organized under the laws of the
United States of America or any state thereof and having a combined capital,
surplus and undivided profit of at least $50,000,000; provided, however, that
any successor Administrative Agent appointed under this sentence may be removed
upon the written request of the Required Banks, which request shall also appoint
a successor Administrative Agent satisfactory to the Borrowers. Upon the
appointment of a new Administrative Agent hereunder, the term "Administrative
Agent" shall for all purposes of this Agreement thereafter mean such successor.
After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, or the removal hereunder of any successor Administrative
Agent, the provisions of this Agreement shall continue to inure to the benefit
of such Administrative Agent as to any actions taken or omitted to be taken by
it while it was Administrative Agent under this Agreement.
- 37 -
39
10.8 Concerning the Administrative Agent.
10.8.1 Action in Good Faith. The Administrative Agent and
its officers, directors, employees and agents shall be under no
liability to any of the Banks or to any future holder of any interest
in the Indebtedness for any action or failure to act taken or suffered
in good faith, and any action or failure to act in accordance with an
opinion of its counsel shall conclusively be deemed to be in good
faith. The Administrative Agent shall in all cases be entitled to rely,
and shall be fully protected in relying, on instructions given to the
Administrative Agent by the Required Holders of the Bank Note
evidencing the Bank Obligations as provided in this Agreement.
10.8.2 No Implied Duties. The Administrative Agent shall
have and may exercise such powers as are specifically delegated to the
Administrative Agent under this Agreement or any other Loan Document
together with all other powers incidental thereto. The Administrative
Agents shall have no implied duties to any Person or any obligation to
take any action under this Agreement or any other Loan Document except
for action specifically provided for in this Agreement or any other
Loan Document to be taken by the Administrative Agent. Before taking
any action under this Agreement or any other Loan Document, the
Administrative Agent may request an appropriate specific indemnity
satisfactory to it from each Bank in addition to the general indemnity
provided for in Section 10.11. Until the Administrative Agent has
received such specific indemnity, the Administrative Agent shall not be
obligated to take (although such Administrative Agent may in its sole
discretion take) any such action under this Agreement or any other Loan
Document. Each Bank confirms that the Administrative Agent does not
have a fiduciary relationship to them under the Loan Documents. The
Borrowers and its Subsidiaries party hereto confirm that neither the
Administrative Agent nor any other Bank has a fiduciary relationship to
them under the Loan Documents.
10.8.3 Validity. The Administrative Agent shall not be
responsible to any Bank or any future holder of any interest in the
Convertible Loan and Indebtedness (a) for the legality, validity,
enforceability or effectiveness of this Agreement or any other Loan
Document, (b) for any recitals, reports, representations, warranties or
statements contained in or made in connection with this Agreement or
any other Loan Document, (c) for the existence or value of any assets
included in any security for the Convertible Loan and Indebtedness, (d)
for the effectiveness of any Lien purported to be included in the
Collateral, (e) for the specification or failure to specify any
particular assets to be included in the Collateral, or (f) unless the
Administrative Agent shall have failed to comply with Section 10.8.1,
for the perfection of the security interests in the Collateral.
10.8.4 Compliance. The Administrative Agent shall not be
obligated to ascertain or inquire as to the performance or observance
of any of the terms of this Agreement or any other Loan Document; and
in connection with any extension of credit under this Agreement or any
other Loan Document, the Administrative Agent shall be fully protected
in relying on a certificates of the Borrowers as to the fulfillment by
the Borrowers of any conditions to such extension of credit.
10.8.5 Employment Administrative Agent and Counsel. The
Administrative Agent may execute any of their respective duties as
Administrative Agent under this Agreement or any other Loan Document by
or through employees, agents and attorneys-in-fact and shall not be
responsible to any of the Banks, the Borrowers for the default or
misconduct of any such Administrative Agent or attorneys-in-fact
selected by the Administrative Agent acting in good faith. The
Administrative Agent shall be entitled to advice of counsel concerning
all
- 38 -
40
matters pertaining to the agency hereby created and its duties
hereunder or under any other Loan Document.
10.8.6 Reliance on Documents and Counsel. The Administrative
Agent shall be entitled to rely, and shall be fully protected in
relying, upon any affidavit, certificate, cablegram, consent,
instrument, letter, notice, order, document, statement, telecopy,
telegram, telex or teletype message or writing reasonably believed in
good faith by the Administrative Agent to be genuine and correct and to
have been signed, sent or made by the Person in question, including any
telephonic or oral statement made by such Person, and, with respect to
legal matters, upon an opinion or the advice of counsel selected by
such Administrative Agent.
10.8.7 Administrative Agent's Reimbursement. Each of the
Banks severally agrees to reimburse the Administrative Agent, in the
amount of such Bank's Percentage Interest, for any reasonable expenses
not reimbursed by the Borrowers (without limiting the obligation of the
Borrowers to make such reimbursement): (a) for which the Administrative
Agent are entitled to reimbursement by the Borrowers under this
Agreement or any other Loan Document, and (b) after the occurrence of a
Default, for any other reasonable expenses incurred by the
Administrative Agent on the Banks' behalf in connection with the
enforcement of the Banks' rights under this Agreement or any other Loan
Document.
10.9 Rights as a Bank. With respect to any Loan(s) or advance(s)
extended by it hereunder, the Administrative Agent shall have the same rights,
obligations and powers hereunder as any other Bank and may exercise such rights
and powers as though it were not an Administrative Agent, and unless the context
otherwise specifies, the Administrative Agent shall be treated in their
respective individual capacities as though they were not the Administrative
Agent hereunder. Without limiting the generality of the foregoing, the
Percentage Interest of the Administrative Agent shall be included in any
computations of Percentage Interests. The Administrative Agent and its
Affiliates may accept deposits from, lend money to, act as trustee for and
generally engage in any kind of banking or trust business with the Borrowers,
any of its Subsidiaries or any Affiliate of any of them and any Person who may
do business with or own an equity interest in the Borrowers, any of its
Subsidiaries or any Affiliate of any of them, all as if the Administrative Agent
were not the Administrative Agent and without any duty to account therefor to
the other Banks.
10.10 Independent Credit Decision. Each of the Banks acknowledges
that it has independently and without reliance upon either of the Administrative
Agent, based on the financial statements and other documents referred to in
Section 8.3, on the other representations and warranties contained herein and on
such other information with respect to the Borrowers and their Subsidiaries as
such Bank deemed appropriate, made such Bank's own credit analysis and decision
to enter into this Agreement and to make the extensions of credit provided for
hereunder. Each Bank represents to the Administrative Agent that such Bank will
continue to make its own independent credit and other decisions in taking or not
taking action under this Agreement or any other Loan Document. Each Bank
expressly acknowledges that neither the Administrative Agent nor any of its
respective officers, directors, employees, agent, attorneys-in-fact or
Affiliates has made any representations or warranties to such Bank, and no act
by the Administrative Agent taken under this Agreement or any other Loan
Document, including any review of the affairs of the Borrowers and their
Subsidiaries, shall be deemed to constitute any representation or warranty by
either of the Administrative Agent. Except for notices, reports and other
documents expressly required to be furnished to each Bank by the Administrative
Agent under this Agreement or any other Loan Document, the Administrative Agent
shall not have any duty or responsibility to provide any Bank with any credit or
other information concerning the business, operations, property, condition,
financial or otherwise, or creditworthiness of the Borrowers or any Subsidiary
which may come into
- 39 -
41
the possession of the Administrative Agent or any of their respective officers,
directors, employees, agent, attorneys-in-fact or Affiliates.
10.11 Indemnification. The holders of the Indebtedness shall
indemnify the Administrative Agent and its respective officers, directors,
employees and Administrative Agent (to the extent not reimbursed by the
Borrowers and without limiting the obligation of the Borrowers to do so), pro
rata in accordance with their respective Percentage Interests, from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time be imposed on, incurred by or asserted against either of the
Administrative Agent or such Persons relating to or arising out of this
Agreement, any other Loan Document, the transactions contemplated hereby or
thereby, or any action taken or omitted by the Administrative Agent in
connection with any of the foregoing; provided, however, that the foregoing
shall not extend to actions or omissions which are taken by the Administrative
Agent with gross negligence or willful misconduct.
ARTICLE XI
ASSIGNMENTS/PARTICIPATIONS
11. Successors and Assigns; Bank Assignment and Participations.
Any reference in this Agreement to any party hereto shall be deemed to include
the successors and assigns of such party, and all covenants and agreements by or
on behalf of the Borrowers, the Administrative Agent or the Banks that are
contained in this Agreement or any other Loan Documents shall bind and inure to
the benefit of their respective successors and assigns; provided, however, that
(a) the Borrowers may not assign their rights or obligations under this
Agreement, and (b) the Banks shall be not entitled to assign their respective
Percentage Interests in the Convertible Loan evidenced by the Convertible Note
hereunder except as set forth below in this Section 11.
11.1 Assignments by Banks.
11.1.1 Assignees and Assignment Procedures. Each Bank may
(i) without the consent of the Administrative Agent or the Borrowers if
the proposed assignee is already a Bank hereunder or a Wholly Owned
Subsidiary of the same corporate parent of which the assigning Bank is
a Subsidiary, or (ii) otherwise with the consents of the Administrative
Agent and (so long as no Event of Default exists) the Borrowers (which
consents will not be unreasonably withheld), in compliance with
applicable laws in connection with such assignment, assign to one or
more commercial banks or other financial institutions (each, an
"Assignee") all or a portion of its interests, rights and obligations
under this Agreement and the other Loan Documents, including all or a
portion, which need not be pro rata among the Convertible Loan advances
and the Letter of Credit Exposure, of its Commitments, the portion of
the Convertible Loan advances and the Letter of Credit Exposure at the
time owing to it and the Convertible Note held by it, but excluding its
rights and obligations as one of the Administrative Agent; provided,
however, that:
(i) the aggregate amount of the Commitments of the
assigning Bank subject to each such assignment to any Assignee other
than another Bank (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the
Administrative Agent) shall be not less than $1,000,000 and in
increments of $500,000; and
(ii) the parties to each such assignment shall execute and
deliver to the Administrative Agent an Assignment and Acceptance (the
"Assignment and Acceptance")
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42
in the form satisfactory to the Administrative Agent, together with the
Convertible Note or Notes subject to such assignment.
Upon acceptance and recording pursuant to Section 11.1.4, from
and after the effective date specified in each Assignment and
Acceptance (which effective date shall be at least five (5) Business
Days after the execution thereof unless waived in writing by the
Administrative Agent):
(A) the Assignee shall be a party hereto and, to the
extent provided in such Assignment and Acceptance,
have the rights and obligations of a Bank under this
Agreement; and
(B) the assigning Bank shall, to the extent provided in
such assignment, be released from its obligations
under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the
remaining portion of an assigning Bank's rights and
obligations under this Agreement, such Bank shall
cease to be a party hereto but shall continue to be
entitled to any fees accrued for its account
hereunder and not yet paid).
11.1.2 Terms of Assignment and Acceptance. By executing and
delivering an Assignment and Acceptance, the assigning Bank and
Assignee shall be deemed to confirm to and agree with each other and
the other parties hereto as follows:
(a) other than the representation and warranty that it is
the legal and beneficial owner of the interest being assigned thereby
free and clear of any adverse claim, such assigning Bank makes no
representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement,
any other Loan Document or any other instrument or document furnished
pursuant hereto;
(b) such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to the financial
condition of the Borrowers and their Subsidiaries or the performance or
observance by the Borrowers or any of their Subsidiaries of any of its
obligations under this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto;
(c) such Assignee confirms that it has received a copy of
this Agreement, together with copies of the most recent quarterly or
annual financial statements delivered pursuant hereto and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and
Acceptance;
(d) such Assignee will independently and without reliance
upon the Administrative Agent, such assigning Bank or any other Bank,
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 Agreement;
(e) such Assignee appoints and authorizes the
Administrative Agent to take such action as Administrative Agent on its
behalf and to exercise such powers under this Agreement as are
delegated to the Administrative Agent by the terms hereof, together
with such powers as are reasonably incidental thereto; and
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43
(f) such Assignee agrees that it will perform in
accordance with the terms of this Agreement all the obligations which
are required to be performed by it as a Bank.
11.1.3 Register. The Administrative Agent shall maintain at
its main Tulsa, Oklahoma banking office a register (the "Register") for
the recordation of (a) the names and addresses of the Banks and the
Assignees which assume rights and obligations pursuant to an assignment
under Section 11.1.1, (b) the Percentage Interest of each such Bank as
set forth in Section 10.1 and (c) the amount of the Convertible Loan
owing to each Bank from time to time. The entries in the Register shall
be conclusive, in the absence of manifest error, and the Borrowers, the
Administrative Agent and the Banks may treat each Person whose name is
registered therein for all purposes as a party to this Agreement. The
Register shall be available for inspection by the Borrowers or any Bank
at any reasonable time and from time to time upon reasonable prior
notice.
11.1.4 Acceptance of Assignment and Assumption. Upon its
receipt of a completed Assignment and Acceptance executed by an
assigning Bank and an Assignee, in exchange for the Convertible Note
subject to such assignment, together with the Convertible Note or Notes
subject to such assignment, and the processing and recordation fee
referred to in Section 11.1.1, the Administrative Agent shall (a)
accept such Assignment and Acceptance, (b) record the information
contained therein in the Register and (c) give prompt notice thereof to
the Borrowers. Within five (5) Business Days after receipt of notice,
the Borrowers, at its own expense, shall execute and deliver to the
Administrative Agent, in exchange for the surrendered Convertible Note
or Notes, a new Convertible Note or Notes to the order of such Assignee
in a principal amount equal to the applicable Commitments and Loans
assumed by it pursuant to such Assignment and Acceptance and, if the
assigning Bank has retained Commitments and Convertible Loan advances,
a new Convertible Note or Notes to the order of such assigning Bank in
a principal amount equal to the applicable Commitments and its
Percentage Interest in the Convertible Loan retained by it. Such new
Convertible Note or Notes shall be in an aggregate principal amount
equal to the aggregate principal amount of such surrendered Convertible
Note or Notes, and shall be dated the date of the surrendered
Convertible Note or Notes which it or they replace. All such
Convertible Notes so replaced shall be delivered by the Administrative
Agent to the Borrowers or, alternatively, at the Administrative Agent's
election, marked appropriately to evidence the replacement thereof by
such replacement Convertible Note(s).
11.1.5 Federal Reserve Bank. Notwithstanding the foregoing
provisions of this Section 11, any Bank may at any time pledge or
assign all or any portion of such Bank's rights under this Agreement
and the other Loan Documents to a Federal Reserve Bank; provided,
however, that no such pledge or assignment shall release such Bank from
such Bank's obligations hereunder or under any other Loan Document.
11.1.6 Further Assurances. The Borrowers and their
Subsidiaries shall sign such documents and take such other actions from
time to time reasonably requested by an Assignee to enable it to share
in the benefits of the rights created by the Loan Documents.
11.2 Credit Participants. Each Bank may, without the consent of the
Borrowers and with the consent of the Administrative Agent, in compliance with
applicable laws in connection with such participation, sell to one or more
commercial banks or other financial institutions (each a "Credit Participant")
participations in all or a portion of its interests, rights and obligations
under this Agreement and the other Loan Documents (including all or a portion of
its Percentage Interest in the Commitments, the Convertible Loan advances and
Letter of Credit Exposure owing to it and the Convertible Notes held by it);
provided, however, that:
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44
(i) such Bank's obligations under this Agreement shall remain
unchanged;
(ii) such Bank shall remain solely responsible to the other parties
hereto for the performance of such obligations;
(iii) the Credit Participant shall be entitled to the benefit of any
cost protection provisions contained in the Credit Agreement, but shall not be
entitled to receive any greater payment thereunder than the selling Bank would
have been entitled to receive with respect to the interest so sold if such
interest had not been sold; and
(iv) the Borrowers, the Administrative Agent and the other Banks
shall continue to deal solely and directly with such Bank in connection with
such Bank's rights and obligations under this Agreement, and such Bank shall
retain the sole right as one of the Banks to vote with respect to the
enforcement of the obligations of the Borrowers relating to the Convertible Loan
and Letter of Credit Exposure and the approval of any amendment, modification or
waiver of any provision of this Agreement (other than amendments, modifications,
consents or waivers described in Section 10.6(ii)).
Borrowers agree, to the fullest extent permitted by applicable law, that any
Credit Participant and any Bank purchasing a participation from another Bank
pursuant to Section 11.1 may exercise all rights of payment (including the right
of set-off), with respect to its participation as fully as if such Credit
Participant or such Bank were the direct creditor of the Borrowers and a Bank
hereunder in the amount of such participation. Upon receipt of notice of the
address of each Credit Participant, the Borrowers shall thereafter supply such
Credit Participants with the same information and reports communicated to the
Banks. The Borrowers hereby acknowledge and agree that Credit Participants shall
be deemed a holder of the applicable Convertible Notes to the extent of their
respective participations, and the Borrowers hereby waive their right, if any,
to offset amounts owing to the Borrowers from the Banks against each Credit
Participant's portion of the applicable Convertible Notes.
ARTICLE XII
MISCELLANEOUS
12.1 Notices. Unless otherwise provided herein, all notices,
requests, consents and demands shall be in writing and shall be either
hand-delivered (by courier or otherwise) or mailed by certified mail, postage
prepaid, to the respective addresses specified below, or, as to any party, to
such other address as may be designated by it in written notice to the other
parties:
If to the Borrowers, to:
Middle Bay Oil Company, Inc.
0000 Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
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45
If to the Banks, to:
Bank of Oklahoma, N.A.
P. O. Xxx 0000
Xxxxx, Xxxxxxxx 00000
Attention: Energy Department
All notices, requests, consents and demands hereunder will be effective when
hand-delivered by the Administrative Agent to the applicable notice address of
the Borrowers or when mailed by certified mail, postage prepaid, addressed as
aforesaid by either party hereto.
12.2 Place of Payment. All sums payable hereunder shall be paid in
immediately available funds to the Administrative Agent, at its principal
banking offices at Bank of Oklahoma Tower, One Xxxxxxxx Center in Tulsa,
Oklahoma, or at such other place as the Administrative Agent shall notify the
Borrowers in writing. If any interest, principal or other payment falls due on a
date other than a Business Day, then (unless otherwise provided herein) such due
date shall be extended to the next succeeding Business Day, and such extension
of time will in such case be included in computing interest, if any, in
connection with such payment.
12.3 Survival of Agreements. All covenants, agreements,
representations and warranties made herein shall survive the execution and the
delivery of Loan Documents. All statements contained in any certificate or other
instrument delivered by the Borrower hereunder shall be deemed to constitute
representations and warranties by the Borrowers.
12.4 Parties in Interest. All covenants, agreements and obligations
contained in this Agreement shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto, except that the
Borrowers may not assign their rights or obligations hereunder without the prior
written consent of the Banks.
12.5 Governing Law. This Agreement and the Notes shall be deemed to
have been made or incurred under the Laws of the State of Oklahoma and shall be
construed and enforced in accordance with and governed by the Laws of Oklahoma.
12.6 SUBMISSION TO JURISDICTION. THE BORROWERS HEREBY CONSENT TO
THE JURISDICTION OF ANY OF THE LOCAL, STATE, AND FEDERAL COURTS LOCATED WITHIN
TULSA COUNTY, OKLAHOMA AND WAIVE ANY OBJECTION WHICH BORROWERS MAY HAVE BASED ON
IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY
SUCH COURT AND WAIVES PERSONAL SERVICE OR ANY AND ALL PROCESS UPON EITHER OF
THEM, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER
DIRECTED TO IT AT THE ADDRESS SET FORTH IN SUBSECTION 12.1 HEREOF AND THAT
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL
RECEIPT OR THREE (3) BUSINESS DAYS AFTER MAILED OR DELIVERED BY MESSENGER.
12.7 Maximum Interest Rate. Regardless of any provision herein, the
Banks shall never be entitled to receive, collect or apply, as interest on the
Indebtedness any amount in excess of the maximum rate of interest permitted to
be charged by the Banks by applicable Law, and, in the event the Banks shall
ever receive, collect or apply, as interest, any such excess, such amount which
would be excessive interest shall be applied to other Indebtedness and then to
the reduction of principal; and, if the other Indebtedness and principal are
paid in full, then any remaining excess shall forthwith be paid to the
Borrowers.
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46
12.8 No Waiver; Cumulative Remedies. No failure to exercise, and no
delay in exercising, on the part of the Banks, any right, power or privilege
hereunder or under any other Loan Document or applicable Law shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege of the Banks. The rights and remedies herein provided are cumulative
and not exclusive of any other rights or remedies provided by any other
instrument or by law. No amendment, modification or waiver of any provision of
this Agreement or any other Loan Document shall be effective unless the same
shall be in writing and signed by the Banks. No notice to or demand on the
Borrowers in any case shall entitle the Borrowers to any other or further notice
or demand in similar or other circumstances.
12.9 Costs. The Borrowers agree to pay to the Administrative Agent
on demand all recording fees and filing costs and all reasonable attorneys fees
and legal expenses incurred or accrued by the Administrative Agent or the Banks
in connection with the preparation, negotiation, closing, administration of the
Loan Documents and the filing and recording of the Security Instruments or any
amendment, waiver, consent or modification to and of the Loan Documents. In any
action to enforce or construe the provisions of this Agreement or any of the
Loan Documents, the prevailing party shall be entitled to recover its reasonable
attorneys' fees and all costs and expenses related thereto.
12.10 Headings. The article and section headings of this Agreement
are for convenience of reference only and shall not constitute a part of the
text hereof nor alter or otherwise affect the meaning hereof.
12.11 Severability. The unenforceability or invalidity as determined
by a Tribunal of competent jurisdiction, of any provision or provisions of this
Agreement shall not render unenforceable or invalid any other provision or
provisions hereof.
12.12 Exceptions to Covenants. The Borrowers shall not be deemed to
be permitted to take any action or fail to take any action which is permitted as
an exception to any of the covenants contained herein or which is within the
permissible limits of any of the covenants contained herein if such action or
omission would result in the breach of any other covenant contained herein.
12.13 Replacement of Existing Agreement. This Agreement modifies and
amends the Existing Agreement and the Convertible Loan Commitment therein
established together with all Indebtedness described or defined therein are
renewed, extended and restructured into and become a part of the Commitments and
all Indebtedness, including the Notes, described and/or defined herein, all of
which shall be continuously secured by all of the Collateral described and
defined in the Security Instruments, including without limitation, the
Mortgages.
12.14 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument.
12.15 WAIVER OF JURY. BORROWERS FULLY, VOLUNTARILY AND EXPRESSLY
WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS UNDER THE NOTES, THIS AGREEMENT, THE SECURITY INSTRUMENTS OR
UNDER ANY AMENDMENT, SUPPLEMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED (OR
WHICH MAY IN THE FUTURE BE DELIVERED) IN CONNECTION HEREWITH OR ARISING FROM ANY
BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT. BORROWERS AGREE
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.
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47
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Tulsa, Oklahoma as of the day and year first
above written by the undersigned duly authorized corporate officers.
MIDDLE BAY OIL COMPANY, INC.
By /s/ Xxxx X. Xxxxxxx
-----------------------------------------
Xxxx X. Xxxxxxx, President
"Middle Bay"
BISON ENERGY CORPORATION
By /s/ Xxxx X. Xxxxxxx
-----------------------------------------
Xxxx X. Xxxxxxx,
Chief Executive Officer
"Bison"
SHORE OIL COMPANY
By /s/ Xxxx X. Xxxxxxx
-----------------------------------------
Xxxx X. Xxxxxxx,
Chairman and Chief Executive Officer
"Shore"
Collectively the "Borrowers"
BANK OF OKLAHOMA, NATIONAL
ASSOCIATION
By /s/ Xxxxxxx X. Xxxxx
-----------------------------------------
Xxxxxxx X. Xxxxx, Senior Vice President
"Bank"
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48
EXHIBITS
Exhibit A Convertible Loan Advance Request
Exhibit B-1 Convertible Note
Exhibit C Existing Liens
Exhibit D Other Indebtedness
Exhibit E Litigation
Exhibit F Take or Pay Disputes
Exhibit G Title to Properties
49
EXHIBIT A
LOAN REQUEST, CERTIFICATION AND
CONFIRMATORY SECURITY AGREEMENT
FOR CONVERTIBLE NOTE
Bank of Oklahoma, National Association
X.X. Xxx 0000
Xxxxx, Xxxxxxxx 00000
Attn: Energy Department
Gentlemen:
Pursuant to the provisions of the Second Restated Revolving Credit and
Term Loan Agreement dated as of August 25, 1997, as amended (collectively the
"Credit Agreement"), between and among MIDDLE BAY OIL COMPANY, BISON ENERGY
CORPORATION and SHORE OIL COMPANY (collectively the "Borrower") and you, the
undersigned, hereby (i) confirms and ratifies your continuing first and prior
security interest and mortgage lien in and to all of the Collateral (including
proceeds thereof) described or referred to in the Credit Agreement or in the
Security Instruments described therein; (ii) applies to you for a Convertible
Loan in the amount of $_____________ on the Convertible Note; (iii) certifies
that no Event of Default or Default under the Credit Agreement has occurred and
is continuing as of the date hereof or exists or would continue to exist but for
the lapse of time or giving of notice, or both; (iv) represents and warrants to
you that the representations, covenants and warranties set forth or referred to
in the Credit Agreement are true and correct on and as of this date; and (v)
certifies to you the accuracy of the following information concerning the
Collateral Borrowing Base for the Convertible Note:
1. Collateral Borrowing Base
(determined/redetermined
as of each March 31 and September 30,
initially on September 30, 1997) $15,000,000
-----------
2. Convertible Loan Balance $
(including the outstanding portions of --------------
unexpired Letters of Credit issued pursuant
to Section 2.12.1 of the Credit Agreement -
not to exceed $1,000,000 in the aggregate)
3. New Convertible Loan Balance $
(Line 2 + $__________ advance -----------
requested hereby but not to exceed
lesser of Line 1 or Bank Borrowing Base
(per ss. 1.6 of Credit Agreement)
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
______ day of _______________, 199__.
MIDDLE BAY OIL COMPANY, INC.
By
-----------------------------------------
(Title)
(As agent for and on behalf of Bison Energy
Corporation, Shore Oil Company and itself)
50
EXHIBIT B-1
PROMISSORY NOTE
$50,000,000.00
Tulsa, Oklahoma
August 25, 1997
FOR VALUE RECEIVED, MIDDLE BAY OIL COMPANY, INC., BISON ENERGY
CORPORATION and SHORE OIL COMPANY (collectively the "Borrowers"), hereby jointly
and severally promise to pay to the order of BANK OF OKLAHOMA, NATIONAL
ASSOCIATION (the "Bank"), at the Bank's principal offices in Tulsa, Oklahoma, in
lawful money of the United States of America, the principal sum of FIFTY MILLION
and NO/100 DOLLARS ($50,000,000.00), payable in seventy-one (71) consecutive
monthly installments of principal in an amount equal to one seventy-second
(1/72nd) of the lesser of the outstanding principal balance hereof on March 31,
1998 (the "Conversion Date") or the then applicable Collateral Borrowing Base in
effect as of the Conversion Date, each due on the last day of each calendar
month, commencing April 30, 1998, together with interest from the date funds are
advanced hereunder on the unpaid balance of principal from time to time
outstanding, and on any past due interest, at the variable annual rate of
interest hereinafter specified, at the Option rate or rates per annum determined
pursuant to Section 2.6 of the Loan Agreement (as hereinafter defined) and due
and payable monthly as it accrues on the last day of each calendar month,
commencing August 31, 1997, with a final payment of all unpaid principal and
accrued but unpaid interest due and payable at final maturity on March 31, 2004.
For the purposes of this Note, the "Applicable Prime Rate" shall mean
the annual rate of interest announced by Chase Manhattan Bank (National
Association) New York, New York ("Chase") from time to time as its prime or base
rate, which shall be the rate used by Chase as a base or standard for pricing
purposes and which shall not necessarily be its "best" or lowest rate.
After default in the payment of any amount of principal or interest
owing hereunder within five (5) days of the due date thereof (whether on
maturity, acceleration or otherwise) or upon the occurrence of any Default or
Event of Default as described in the Second Restated Revolving Credit and Term
Loan Agreement of even date herewith among the Borrowers and the Bank (said
Second Revolving Credit and Term Loan Agreement as the same may at any time be
amended, supplemented, extended or modified and in effect being herein called
the "Loan Agreement"), the unpaid principal amount hereof shall bear interest
computed at a variable annual rate equal from day to day to the Applicable Prime
Rate plus six percentage points (6.0%). Upon default in the payment of any
installment of principal or interest payable hereunder, such interest shall, to
the full extent permitted by law, bear interest at the same rate as principal.
This Note is made pursuant to the Loan Agreement and is the Convertible
Note therein described. The Loan Agreement, among other things, contains
prepayment provisions, provisions for semi-annual collateral borrowing base
calculations and provisions for acceleration of the maturity hereof upon the
events, terms and conditions therein specified.
51
Promissory Note
August 25, 1997
Page 2
This Note is secured by the Collateral described in the Security
Instruments defined in the Loan Agreement which have been executed by the
Borrowers and delivered to the Bank. Reference is hereby made to the Security
Instruments for a description of the property, assets and interests thereby
mortgaged, conveyed and/or assigned, as the case may be, the nature and extent
of the security thereunder and the security interests or mortgage liens created
thereby, and the rights of the Bank (or the holder of this Note) and the
Borrower in respect thereof.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity or in bankruptcy, receivership or other court
proceedings or this Note be placed in the hands of attorneys for collection
after default, the Borrowers agree to pay hereunder, in addition to the
principal and interest due and payable hereon, reasonable attorneys fees, court
costs and other collection fees and expenses incurred by the holder hereof.
The Borrowers hereby waive presentment for payment, demand, notice of
nonpayment, protest and notice of protest with respect to any payment hereunder
and agree to any extension of time with respect to any payment due hereunder, to
any substitution or release of the security or collateral described in the
Security Instruments and to the addition or release of any party liable
hereunder. No delay on the part of the holder hereof in exercising any rights
hereunder shall operate as a waiver of such rights.
This Note constitutes a replacement and modification of that certain
$15,000,000.00 Convertible Note from Middle Bay Oil Company, Inc. and Bison
Energy Corporation payable to the order of the Bank dated March 31, 1997, as
more particularly described in the Existing Agreement defined in the Loan
Agreement. This Note and the indebtedness evidenced hereby shall be construed
and enforced in accordance with and governed by the laws of the State of
Oklahoma and is delivered to the order of the Bank in Tulsa, Oklahoma, by the
undersigned duly authorized corporate officers of the respective Borrowers.
Notwithstanding the stated principal amount on the face of this Note in
no event shall the Bank's funding obligation hereunder or pursuant to Article II
of the Loan Agreement exceed the lesser of (i) the Bank's Maximum Commitment
Amount pursuant to Section 10.1 of the Loan Agreement or (ii) the Bank Borrowing
Base defined in the Loan Agreement, as it may be redetermined from time to time
pursuant to the terms and provisions of the Loan Agreement.
MIDDLE BAY OIL COMPANY, INC.
By
----------------------------------
Xxxx X. Xxxxxxx, President
52
Promissory Note
August 25, 1997
Page 3
BISON ENERGY CORPORATION
By
------------------------------------------
Xxxx X. Xxxxxxx,
Chief Executive Officer
SHORE OIL COMPANY
By
------------------------------------------
Xxxx X. Xxxxxxx,
Chairman and Chief Executive Officer
"Borrowers"
Due: March 31, 2004
53
EXHIBIT C
Existing Liens
(Section 7.16)
NONE
54
EXHIBIT D
Other Indebtedness
(Section 7.19)
NONE
55
EXHIBIT E
Litigation
(Section 8.1)
1. Civil Action No. 97-40-A-M2, X. X. Xxxxx Co., Inc. v. Shore Oil
Company, in the United States District Court for the Middle District of
Louisiana.
2. Civil Action No. H-97-0158, Shore Oil Company v. X. X. Xxxxx Co., Inc.,
in the United States District Court for the Southern District of Texas,
Houston Division.
3. Xxxxxxx X. Xxxxxx, Xx., et al. v. Shore Oil Company, et al., 00xx
Xxxxxxxx Xxxxxxxx Xxxxx, Xxxxxx of Terrebonne, Number 113341, Division
"E."
56
EXHIBIT F
Take or Pay Disputes
(Section 8.8)
NONE
57
EXHIBIT G
Title to Properties
(Section 8.17)
