CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of September 22, 2000, is by and
between BONNEVILLE FUELS CORPORATION, a Colorado corporation ("Borrower"), and
WELLS FARGO BANK WEST, NATIONAL ASSOCIATION, a national banking association
("WFBW").
RECITAL
Borrower and WFBW wish to enter into this Credit Agreement in
order to provide for the terms upon which WFBW will make advances to Borrower
and issue letters of credit upon the request of Borrower and by which such
advances and letters of credit will be governed and repaid.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
Definitions and References
Section 1.1. Defined Terms. As used in this Agreement, each of the following
terms has the meaning given it in this Section 1.1 or in the sections and
subsections referred to below:
"Advance" means an advance of funds by WFBW to or for the
account of Borrower pursuant to Article II below.
"Affiliate" means, as to any Person, each Person that directly
or indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person; provided that, for
the purposes of this definition, a Person shall be deemed to control another
entity if the controlling Person possesses, directly or indirectly, the power to
direct or control the direction of the management and policies of such entity,
whether through the ownership of membership interests or other interests
therein, by contract or otherwise, and shall include without limitation any
controlling member or owner thereof.
"Agreement" means this Credit Agreement.
"Borrower" means Bonneville Fuels Corporation, a Colorado
corporation.
"Borrowing Base" means, at any time, the lesser of the Borrowing
Base (Determined) and the Borrowing Base (Elected).
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"Borrowing Base (Determined)" means, at any time prior to the Maturity
Date, the aggregate loan value of all Borrowing Base Properties, as determined
by WFBW in its sole and absolute discretion, using such assumptions as to
pricing, discount factors, discount rates, expenses and other factors as WFBW
customarily uses as to borrowing-base oil and gas loans at the time such
determination is made; provided that the Borrowing Base (Determined) in effect
from time to time during the time period from the date of this Agreement through
the first re-determination of the Borrowing Base (Determined) shall be as set
forth on Exhibit F attached hereto and made a part hereof, unless Borrower and
WFBW hereafter mutually agree upon a different amount or unless the Borrowing
Base (Determined) is re-determined prior to any such date pursuant to Section
2.8 below.
"Borrowing Base (Elected)" means, at any time, the amount
elected by Borrower for the then-current Quarterly Borrowing Base Period
pursuant to Section 2.8 below; provided that the Borrowing Base (Elected) in
effect from time to time during the Quarterly Borrowing Base Period from the
date of this Agreement through December 31, 2000 shall be $16,850,000, unless
Borrower and WFBW hereafter mutually agree upon a different amount.
"Borrowing Base Notice" means a written notice sent to Borrower
by WFBW notifying Borrower of WFBW's determination of the Borrowing Base
(Determined) for the upcoming Borrowing Base Period or other period.
"Borrowing Base Period" means: (a) the time period from the date
of this Agreement through May 1, 2001; (b) thereafter, until the May 1 or
November 1 most nearly preceding the Maturity Date, each six-month time period
beginning on May 1 or November 1 of each year; and (c) the time period from the
May 1 or November 1 most nearly preceding the Maturity Date through the Maturity
Date.
"Borrowing Base Properties" means any and all interests of
Borrower (or, to the extent agreed to by WFBW, any Affiliate of Borrower),
whether now owned or hereafter acquired, in any and all oil and gas wells,
leases and other related rights and assets to which WFBW now or hereafter gives
value in determining the Borrowing Base (Determined).
"Business Day" means: (a) with respect to the making, prepaying,
repaying or issuance of, or otherwise relating to, any LIBOR Tranche, any day
which is not a Saturday, a Sunday or a legal holiday on which commercial banks
are authorized or required to be closed in Denver, Colorado and which is also a
day on which dealings are carried on in the London interbank eurocurrency
market, and (b) for all other purposes hereof, any day which is not a Saturday,
a Sunday or a legal holiday on which commercial banks are authorized or required
to be closed in Denver, Colorado.
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"Capital Additions" means: (a) the net proceeds of any sale by
or on behalf of Borrower or any subsidiary of Borrower of any common stock,
preferred stock, notes, debentures or other securities issued by Borrower or any
subsidiary of Borrower, net of reasonable brokerage, printing, accounting,
engineering, legal and other costs actually paid to third parties in connection
therewith; plus (b) any and all capital contributions to Borrower or other
capital additions to Borrower.
"Collateral" means all tangible or intangible real or personal
property which, under the terms of any Security Document, is or is purported to
be covered thereby or subject thereto.
"Commitment" means the agreement of WFBW to make Advances to
Borrower and to issue Letters of Credit at the request of Borrower, in an
aggregate amount up to the Commitment Amount, on the terms and subject to the
conditions hereof.
"Commitment Amount" means, at any time, the lesser of: (a) the Maximum
Loan Amount, or (b) the Borrowing Base at that time.
"Commitment Fee Calculation Base" means, at any time, the lesser
of: (a) the Maximum Loan Amount, or (b) the Borrowing Base at that time;
provided that, if the Borrowing Base is increased at any time during a Borrowing
Base Period as a result of Borrower's election to increase the Borrowing Base
(Elected), the applicable "Commitment Fee Calculation Base" for such Borrowing
Base Period shall be re-calculated as though such increase had occurred on the
first day of the applicable Borrowing Base Period and any related adjustments
shall be made to the amount of any commitment fees previously paid hereunder for
such Borrowing Base Period.
"Consolidated" means, as to any Person, the combined financial
statements, financial position, financial condition, net income, assets,
liabilities and other financial data of such Person and of any and all
Affiliates of such Person that would be considered consolidated Affiliates under
GAAP.
"Conversion Date" means the Business Day immediately after the
earlier of: (a) the last day of the Revolving Period, or (b) the date of any
termination of the Commitment.
"Cumulative Net Income" means, with respect to Borrower, the sum
of Borrower's net income, determined in accordance with GAAP or with another
accounting system approved in writing by WFBW, for each completed Fiscal Quarter
after the date from which such calculation is being made; provided that if
Borrower's net income is negative for any such Fiscal Quarter, in computing
Cumulative Net Income, Borrower's net income shall be deemed to be zero for that
Fiscal Quarter.
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"Current Ratio" means, at any time and from time to time, the
ratio of: (a) the sum of: (1) Borrower's current assets (excluding Hedging
Assets), plus (2) the excess, if any, of: (A) the Commitment Amount, over (B)
the unpaid balance of all outstanding Advances plus the face amount of all
outstanding Letters of Credit; to (b) Borrower's current liabilities (excluding
current maturities of the Loan and Hedging Obligations), all determined in
accordance with GAAP or with another accounting system approved in writing by
WFBW.
"Debt" means, as to any Person, all indebtedness, liabilities
and obligations of such Person, whether primary or secondary, direct or
indirect, absolute or contingent, including without limitation obligations under
any and all capital leases.
"Default" means any Event of Default and any default, event or
condition which would, with the giving of any requisite notice and/or the
passage of time, constitute an Event of Default.
"Distribution" means any distribution payable in cash or
property to any shareholder of Borrower, or any purchase, redemption or
retirement of, or other payment with respect to, any stock in Borrower.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, together with all rules and regulations
promulgated with respect thereto.
"ERISA Plan" means any pension benefit plan subject to Title IV
of ERISA maintained by Borrower or any Affiliate of Borrower to which Borrower
is required to contribute.
"Event of Default" has the meaning given such term in Section
7.1 below.
"Fiscal Quarter" means a three-month period ending on the last
day of March, June, September or December of any year.
"Fiscal Year" means a twelve-month period ending on December 31
of any year.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor) and which, in the case of
Borrower: (a) are applied for all periods in a consistent manner, and (b) are
consistently applied for all periods after the date hereof so as to properly
reflect the financial condition, and the results of operations and changes in
financial position, of Borrower.
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"Gas-Marketing Letter of Credit" means a Letter of Credit issued
for the purpose of backing up a gas-marketing obligation of Borrower or any
Affiliate of Borrower; provided that the determination of whether a Letter of
Credit qualifies as a "Gas Marketing Letter of Credit" shall be at the sole
discretion of WFBW.
"Guarantor" means Carbon Energy Corporation, a Colorado
corporation.
"Guaranty" means the Guaranty executed and delivered by
Guarantor to WFBW to guaranty the Obligations.
"Hedging Assets" means, with respect to any Person, all assets
of such Person under: (a) interest rate swap agreements, interest rate cap
agreements, interest rate collar agreements and all other agreements and
arrangements designed to protect such Person against fluctuations in interest
rates, or (b) commodity hedge, commodity swap, exchange, collar or cap
agreements, fixed price agreements and all other agreements and arrangements
designed to protect such Person against fluctuations in the price of oil, gas or
other hydrocarbons.
"Hedging Obligations" means, with respect to any Person, all
liabilities of such Person under: (a) interest rate swap agreements, interest
rate cap agreements, interest rate collar agreements and all other agreements
and arrangements designed to protect such Person against fluctuations in
interest rates, or (b) commodity hedge, commodity swap, exchange, collar or cap
agreements, fixed price agreements and all other agreements and arrangements
designed to protect such Person against fluctuations in the price of oil, gas or
other hydrocarbons.
"Initial Advance" means the first Advance on the Loan, in the
amount requested by Borrower, up to, but not in excess of, the Commitment
Amount.
"Initial Engineering Report" means the report or reports
covering the Borrowing Base Properties, prepared by Ryder Scott Company, dated
as of January 1, 2000, a true and correct copy of which has been furnished by
Borrower to WFBW.
"Initial Financial Statements" means the audited annual
financial statements of Guarantor dated as of December 31, 1999, and the
unaudited quarterly financial statements of Guarantor dated as of March 31, 2000
and June 30, 2000, copies of all of which have heretofore been delivered by
Guarantor to WFBW.
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"Interest Rate Election" means an election delivered by Borrower
to WFBW from time to time in the form of Exhibit D attached hereto and made a
part hereof.
"Letter of Credit" means a standby letter of credit issued by
WFBW pursuant to Article II below.
"LIBOR (Adjusted)" means, with respect to each LIBOR Tranche and
the related LIBOR Interest Period, the rate of interest per annum determined
pursuant to the following formula:
LIBOR (Unadjusted)
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LIBOR (Adjusted) = 1.00 - LIBOR Reserve Percentage
"LIBOR Interest Period" means, with respect to each LIBOR
Tranche, a period of one, two, three or six months, as specified in the Interest
Rate Election submitted by Borrower pursuant to Section 2.2(b) below with
respect thereto, beginning on and including the date specified in such Interest
Rate Election (which must be a Business Day) and ending on (but not including,
for the purpose of computing the number of days in the LIBOR Interest Period)
the date which corresponds numerically to such beginning date one, two, three or
six months thereafter (or if such month has no numerically corresponding date,
on the last Business Day of such month); provided that each LIBOR Interest
Period which would otherwise end on a day which is not a Business Day shall end
on the next succeeding Business Day unless such next succeeding Business Day is
the first Business Day of a calendar month, in which case such LIBOR Interest
Period shall end on the Business Day next preceding such numerically
corresponding day. No LIBOR Interest Period may be elected which would end after
the Maturity Date.
"LIBOR Reserve Percentage" means, with respect to any LIBOR
Interest Period, the reserve percentage (expressed as a decimal) equal to the
maximum aggregate reserve requirements (including all basic, emergency,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements)
specified under regulations issued from time to time by the Board of Governors
of the Federal Reserve System and then applicable to assets or liabilities
consisting of and including "Eurocurrency Liabilities", as currently defined in
Regulation D of the Board of Governors of the Federal Reserve System, having a
term approximately equal or comparable to such LIBOR Interest Period.
"LIBOR Spread" means, with respect to any LIBOR Tranche, 1.75
percentage points per annum.
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"LIBOR Tranche" means a portion of the Loan outstanding for a
specific LIBOR Interest Period and bearing interest at a fixed rate based upon
LIBOR (Adjusted).
"LIBOR (Unadjusted)" means, with respect to each LIBOR Tranche
and the related LIBOR Interest Period, the rate of interest per annum (expressed
as a decimal) determined by WFBW, in accordance with its customary practices, to
be representative of the rates at which deposits of U.S. dollars are being
offered in the London interbank eurocurrency market for delivery on the first
day of such LIBOR Interest Period in an amount equal or comparable to the amount
of such LIBOR Tranche and for a period of time equal or comparable to the length
of such LIBOR Interest Period. LIBOR (Unadjusted), as determined by WFBW with
respect to a particular LIBOR Tranche, shall be fixed at such rate for the
duration of the associated LIBOR Interest Period. If WFBW is unable so to
determine LIBOR (Unadjusted) for any LIBOR Tranche, or if the associated LIBOR
(Adjusted) would exceed the maximum rate of interest, if any, then permitted to
be charged on the Note under applicable law, Borrower shall be deemed to have
elected to have included in the Prime Rate Portion the portion of the Loan that
would otherwise have been included in such LIBOR Tranche.
"Lien" means, with respect to any property or assets, any right
or interest therein of a creditor to secure Debt owed to him or any other
arrangement with such creditor which provides for the payment of such Debt out
of such property or assets or which allows him to have such Debt satisfied out
of such property or assets prior to the general creditors of any owner thereof,
including without limitation any lien, mortgage, security interest, pledge,
deposit, production payment, rights of a vendor under any title retention or
conditional sale agreement or lease substantially equivalent thereto, or any
other charge or encumbrance for security purposes, whether arising by law or
agreement or otherwise, but excluding any right of offset which arises without
agreement in the ordinary course of business.
"Loan" has the meaning given such term in Section 2.1 below.
"Loan Documents" means this Agreement, the Security Documents
(including without limitation the Guaranty), the Note, applications for Letters
of Credit, Advance requests and all other agreements, certificates, legal
opinions and other documents, instruments and writings heretofore or hereafter
delivered in connection herewith or therewith, as the same may be in effect from
time to time, including any amendments thereto.
"Maturity Date" means the earliest of: (a) the first day of the
forty-eighth month after the month in which the Conversion Date occurs (i.e.,
October 1, 2006, if the Conversion Date is October 1, 2002), (b) such date as
may be established pursuant to the amortization schedule determined by WFBW as
described in the definition "Principal Payment Amount" set forth in this Section
1.1, or (c) such date on which the Loan is due and payable in full by reason of
the occurrence of an Event of Default, as established pursuant to Section 7.1
below.
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"Maximum Loan Amount" means $20,000,000.
"Minimum Principal Payment" means the product of: (a) the
greater of: (1) 0.01666667, or (2) the decimal-equivalent of a fraction, the
numerator of which is one and the denominator of which is the Revenue Half-Life
of the Borrowing Base Properties, as determined by WFBW as of the then most
recent redetermination of the Borrowing Base (Determined) pursuant to Section
2.8 below, and (b) the outstanding principal balance of the Loan as of the close
of business on the last day of the Revolving Period (or, if the last day of the
Revolving Period is not a Business Day, the Business Day immediately preceding
the last day of the Revolving Period).
"Note" means a Promissory Note in the form of Exhibit A attached
hereto and made a part hereof, duly executed and delivered by Borrower.
"Obligated Person" means Borrower, Guarantor or any other Person
that hereafter guaranties or otherwise becomes responsible for repayment of all
or any portion of the Loan.
"Obligations" means all Debt from time to time owing by Borrower
to WFBW under or pursuant to any of the Loan Documents. "Obligation" means any
part of the Obligations.
"Oil and Gas Interests" means any and all oil or gas properties,
gas gathering systems, and other related personal property and interests now or
hereafter owned by Borrower (or any Affiliate of Borrower).
"Payment Date" means the first Business Day of each calendar
month, commencing November 1, 2000, through the Maturity Date.
"Person" means an individual, corporation, partnership,
association, joint-stock company, trust or trustee thereof, estate or executor
thereof, limited liability company, unincorporated organization or joint
venture, court or governmental unit or any agency or subdivision thereof, or any
other legally recognizable entity.
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"Prime Rate" means the fluctuating interest rate per annum
announced from time to time by WFBW as its prime rate, which may not be the
lowest interest rate charged by WFBW.
"Prime Rate Portion" means the portion of the Loan bearing
interest based upon the Prime Rate.
"Principal Payment Amount" means: (a) the amount, if any,
provided for in an amortization schedule established by WFBW in its sole
discretion, as of the end of the Revolving Period (and thereafter adjusted, at
WFBW's sole discretion, at the time of any subsequent determination of the
Borrowing Base (Determined)), in accordance with WFBW's then-current practices
as to oil and gas loans and in accordance with the most recent engineering data
and other information then available with respect to the Borrowing Base
Properties, including without limitation any appropriate revision of the
Maturity Date, or (b) if no amortization schedule has been established by WFBW
pursuant to clause (a) above, the Minimum Principal Payment.
"Quarterly Borrowing Base Period" means: (a) the time period
from the date of this Agreement through December 31, 2000; (b) thereafter, each
three-month time period beginning on January 1, April 1, July 1 or October 1 of
each year, and (c) the time period from the January 1, April 1, July 1 or
October 1 most nearly preceding the Maturity Date through the Maturity Date.
"Revenue Half-Life" means, at any time after the Conversion
Date, the number of months (rounded to the nearest whole number) from the date
of measurement to the point in time when one-half of the then-remaining
undiscounted oil and gas sales from the Borrowing Base Properties will have been
produced, as most recently determined by WFBW pursuant to the procedures set
forth in Section 2.8 below.
"Revolving Period" means the time period from the date of this
Agreement through September 30, 2002.
"Security Documents" means all security agreements, deeds of
trust, mortgages, chattel mortgages, pledges, guaranties (including without
limitation the Guaranty), financing statements, continuation statements,
extension agreements and other agreements or instruments now, heretofore, or
hereafter delivered by any or all of the Obligated Persons or any other Person
to WFBW in connection with this Agreement or any transaction contemplated
hereby, to secure or guaranty the payment of any part of the Obligations or the
performance of any other duties and obligations of any or all of the Obligated
Persons under the Loan Documents, whenever made or delivered.
"Subordinated Debt" means any indebtedness or other obligations
of Borrower, to the extent that the rights of the holders thereof to enforce the
indebtedness and other obligations of Borrower thereunder have been subordinated
to the rights of WFBW hereunder or in connection herewith by subordination
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agreements executed by the holders of the Subordinated Debt and satisfactory in
form and substance to WFBW, the terms of which subordination agreements will
typically permit Borrower to pay interest at a reasonable rate on the
Subordinated Debt so long as no Default has occurred and is continuing.
"Tangible Net Worth" means, as to any Person: (a) the equity in
such Person owned by the shareholders, partners, members or other owners of such
Person, determined in accordance with GAAP or with another accounting system
approved in writing by WFBW (but excluding Hedging Assets and Hedging
Obligations), less (b) goodwill and any and all other intangible assets of such
Person, determined in accordance with GAAP or with another accounting system
approved in writing by WFBW.
"Taxes" has the meaning given such term in Section 3.7 below.
"Termination Event" means: (a) the occurrence with respect to
any ERISA Plan of (1) a reportable event described in Section 4043(b)(5) of
ERISA or (2) any other reportable event described in Section 4043 of ERISA other
than a reportable event not subject to the provision for 30-day notice to the
Pension Benefit Guaranty Corporation under such regulations, or (b) the
withdrawal of Borrower or of any Affiliate of Borrower from an ERISA Plan during
a plan year in which it was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, or (c) the filing of a notice of intent to terminate any
ERISA Plan or the treatment of any ERISA Plan amendment as a termination under
Section 4041 of ERISA, or (d) the institution of proceedings to terminate any
ERISA Plan by the Pension Benefit Guaranty Corporation under Section 4042 of
ERISA, or (e) any other event or condition which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any ERISA Plan.
Section 1.2. Incorporation of Exhibits. All Exhibits attached
to this Agreement are a part hereof for all purposes.
Section 1.3. Amendment of Defined Instruments. Unless the
context otherwise requires or unless otherwise provided herein, the terms
defined in this Agreement which refer to a particular agreement, instrument or
document also refer to and include all renewals, extensions and modifications of
such agreement, instrument or document, provided that nothing contained in this
section shall be construed to authorize any such renewal, extension or
modification.
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Section 1.4. References and Titles. All references in this
Agreement to Exhibits, Schedules, articles, sections, subsections and other
subdivisions refer to the Exhibits, Schedules, articles, sections, subsections
and other subdivisions of this Agreement unless expressly provided otherwise.
Titles appearing at the beginning of any subdivisions are for convenience only
and do not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. Unless set off with asterisks in
this Agreement (i.e., *or*), the word "or" has the inclusive meaning frequently
identified by the phrase "and/or". Pronouns in masculine, feminine and neuter
genders shall be construed to include any other gender, and words in the
singular form shall be construed to include the plural and vice versa, unless
the context otherwise requires.
Section 1.5. Calculations and Determinations. All interest and
fees accruing under the Loan Documents shall be calculated on the basis of
actual days elapsed (including the first day but excluding the last) and a year
of 365 days, except that a year of 360 days shall be used for calculations
relating to interest on any LIBOR Tranche. Unless otherwise expressly provided
herein or unless WFBW otherwise consents, all financial statements and reports
furnished to WFBW hereunder shall be prepared and all financial computations and
determinations pursuant hereto shall be made in accordance with GAAP or with
another accounting system approved in writing by WFBW.
ARTICLE II
The Loan
Section 2.1. The Loan. (a) Subject to the other terms and
conditions of this Agreement, WFBW agrees to: (1) make Advances to Borrower from
time to time requested upon written notice to WFBW from Borrower no later than
noon, Denver time, at least one Business Day prior to any Advance, and (2) issue
Letters of Credit from time to time requested upon written notice to WFBW from
Borrower no later than five Business Days prior to the date of issuance of any
such Letter of Credit.
(b) Each request by Borrower for an Advance shall be in the form of
Exhibit B attached hereto and made a part hereof. Each request by Borrower for
the issuance of a Letter of Credit shall be in the form of Exhibit C attached
hereto and made a part hereof, and shall be accompanied by an application for
issuance of a letter of credit on WFBW's then-standard form, duly executed by
Borrower.
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(c) WFBW shall not have any obligation to: (1) make any Advance (other
than an Advance arising from the making of a payment under a Letter of Credit)
on or after the Conversion Date, (2) issue or renew a Letter of Credit which
does not expire prior to the Maturity Date, (3) issue a LIBOR Tranche as to
which the LIBOR Interest Period does not expire prior to the Maturity Date, (4)
issue a LIBOR Tranche at any time when four or more prior LIBOR Tranches remain
outstanding, (5) make an Advance in an amount less than $10,000, (6) issue a
LIBOR Tranche in an amount less than $500,000, (7) issue a LIBOR Tranche in an
amount which is not an integral multiple of $100,000, or (8) make an Advance or
issue a Letter of Credit if, after such Advance is made or such Letter of Credit
is issued, the aggregate amount of all Advances outstanding hereunder plus the
face amounts of all Letters of Credit outstanding hereunder would exceed the
Commitment Amount.
(d) Each payment by WFBW under a Letter of Credit shall be deemed to be
an Advance included in the Prime Rate Portion, bearing interest from the date of
such payment, shall be entitled to all benefits of the Security Documents and
shall be subject to all terms of this Agreement and any and all other applicable
Loan Documents.
(e) Within the limitation of the Commitment Amount and subject to the
other terms and provisions hereof, Borrower may borrow, repay and reborrow
hereunder. The Advances and Letters of Credit described above shall be herein
collectively referred to as the "Loan". Borrower hereby expressly requests and
irrevocably authorizes WFBW to make the Loan.
Section 2.2. The Note; Interest. (a) Borrower's obligation to repay the
Loan, with interest thereon, shall be evidenced by the Note. In the event any
provision contained in the Note conflicts with a provision contained in this
Agreement, the provisions of this Agreement shall control.
(b) At any time and from time to time hereafter, if Borrower desires to
include in a LIBOR Tranche all or any portion of the Loan which will not already
be included in a LIBOR Tranche as of the beginning of the requested LIBOR
Interest Period, Borrower shall deliver an Interest Rate Election to WFBW at
least three Business Days prior to the first day of the requested LIBOR Interest
Period, specifying the dollar amount it desires to have included in the LIBOR
Tranche, the first day of the LIBOR Interest Period and the duration of the
LIBOR Interest Period. As soon as reasonably possible after LIBOR (Adjusted) can
be determined for the requested LIBOR Interest Period, WFBW shall provide to
Borrower a quote of LIBOR (Adjusted) for the dollar amount and time period
requested by Borrower. If the inclusion of the requested portion of the Loan in
the requested LIBOR Tranche is in conformity with all of the terms and
provisions of this Agreement, the LIBOR Tranche shall become effective for the
requested dollar amount and the applicable LIBOR Interest Period based upon the
rate quoted by WFBW. Any portion of the Loan which is not included in a LIBOR
Tranche shall be included in the Prime Rate Portion.
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(c)(1) Except as otherwise provided in (3) below, interest on each
LIBOR Tranche shall accrue at a fixed annual rate equal to LIBOR (Adjusted) with
respect to such LIBOR Tranche plus the LIBOR Spread. (2) Except as otherwise
provided in (3) below, interest on the Prime Rate Portion shall accrue at a
fluctuating annual rate equal to the Prime Rate minus one-quarter of one
percentage point per annum. (3) From and after the occurrence, and during the
continuance, of any Event of Default hereunder (including without limitation any
failure by Borrower to pay the entire outstanding principal balance of the Loan,
together with all accrued interest, fees and other amounts payable in connection
therewith on or before the Maturity Date), interest on the Loan shall accrue,
from the date of occurrence of the Event of Default until the date the Event of
Default is cured, at a fluctuating annual rate equal to the Prime Rate plus
three percentage points per annum.
(d) Interest accrued on the Prime Rate Portion shall be due and payable
on each Payment Date. Interest accrued on each LIBOR Tranche shall be due and
payable on the last day of the LIBOR Interest Period for such LIBOR Tranche and,
as to any LIBOR Tranche having a LIBOR Interest Period of six months, on the
ninetieth day of such LIBOR Interest Period. All accrued and unpaid interest
shall be due and payable not later than the Maturity Date. Approximately five
days prior to the due date of each interest payment, WFBW shall notify Borrower
of the amount due (or an estimate of such amount).
Section 2.3. Mandatory Principal Payments. (a) Borrower shall
make a principal payment on each Payment Date, commencing with the Payment Date
in the calendar month immediately after the calendar month in which the
Conversion Date occurs, each such payment to be in an amount equal to the
Principal Payment Amount; provided that any such payments shall be in addition
to any amounts due and payable by Borrower pursuant to the other provisions of
this Section 2.3 and any interest payments due and payable pursuant to Section
2.2 above.
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(b) If for any reason the aggregate outstanding principal balance of
all Advances plus the aggregate face amount of all outstanding Letters of Credit
shall exceed the Commitment Amount, Borrower shall, not later than 30 days after
written notice thereof from WFBW: (1) pay the excess to WFBW in a lump sum; *or*
(2) commence (and thereafter continue) an amortization schedule under which
Borrower makes payments on the Loan in an amount at least equal to the excess in
six equal monthly principal installments on the first Business Day of each
calendar month, which amounts shall be in addition to the monthly interest
payments and any other principal payments otherwise due, such that the entire
excess is paid within six months; *or* (3) execute and deliver to WFBW
additional mortgages, supplements to mortgages or other instruments satisfactory
in form and substance satisfactory to WFBW, by which Borrower mortgages, pledges
or hypothecates to WFBW, or creates a security interest in for the benefit of
WFBW, sufficient additional Oil and Gas Interests to induce WFBW to make a
redetermination of the Borrowing Base (Determined) such that the Commitment
Amount is increased to an amount no less than the aggregate outstanding
principal balance of all Advances plus the aggregate face amount of all
outstanding Letters of Credit. Failure by Borrower to comply with the foregoing
shall be deemed an Event of Default hereunder.
(c) The outstanding principal balance of all Advances, together with
all unpaid fees and expenses, shall be due and payable not later than the
Maturity Date.
Section 2.4. Voluntary Prepayments. Borrower shall have the
right to prepay any or all Advances at any time, in whole or in part, without
penalty or premium (except as otherwise described in Section 3.5 below);
provided that, prior to the Maturity Date, Borrower shall not at any time reduce
the aggregate outstanding principal amount of all Advances to less than $1,000
unless, contemporaneously therewith, Borrower is terminating this Agreement
pursuant to Section 2.5 below.
Section 2.5. Termination of Agreement. Borrower shall have the
right at any time and from time to time, upon not less than three Business Days'
prior written notice to WFBW, to terminate this Agreement. Upon any termination
of this Agreement, Borrower shall, at the time of such termination, prepay the
Note in full and cause all outstanding Letters of Credit to be cancelled and
released. Any such prepayment shall be without penalty or premium (except as
otherwise described in Section 3.5 below).
Section 2.6. Payments to WFBW. Borrower will pay to WFBW each
payment which Borrower owes under the Loan Documents not later than 12:00 noon,
Denver time, on the due date, in lawful money of the United States of America
and in immediately available funds. Any payment received after such time will be
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deemed to have been made on the next following Business Day. Except as otherwise
provided in this Agreement as to LIBOR Tranches, should any such payment become
due and payable on a day other than a Business Day, the maturity of such payment
shall be extended to the next succeeding Business Day, and, in the case of a
payment of principal or past due interest, interest shall accrue and be due and
payable thereon for the period of such extension. Each payment under a Loan
Document shall be due and payable at the place provided therein or, if no
specific place of payment is provided, shall be due and payable at the place of
payment of the Note.
Section 2.7. Use of Proceeds. In no event shall the Loan
proceeds be used directly or indirectly for the purpose, whether immediate,
incidental or ultimate, of purchasing, acquiring or carrying any "margin stock"
(as such term is defined in Regulation U promulgated by the Board of Governors
of the Federal Reserve System) or to extend credit to others directly or
indirectly for the purpose of purchasing or carrying any such margin stock or
margin securities. Borrower represents and warrants to WFBW that Borrower is not
engaged principally, or as one of its important activities, in the business of
extending credit to others for the purpose of purchasing or carrying such margin
stock. Borrower will use the Loan proceeds solely for the repayment of certain
existing indebtedness of Borrower, the funding of capital expenditures by
Borrower relating to oil and gas properties, acquisitions by Borrower of other
oil and gas properties, general working capital purposes of Borrower and other
uses in the ordinary course of Borrower's business.
Section 2.8. Borrowing Base Procedures. The Borrowing Base
(Determined) will be re-determined semi-annually by WFBW, effective as of May 1
and November 1 of each year, commencing May 1, 2001, based upon the engineering
reports submitted by Borrower pursuant to Section 6.1 below, the monthly
production information submitted by Borrower pursuant to Section 6.1 below and
such other information and data as WFBW deems relevant; provided that, after the
Conversion Date, WFBW will also determine or re-determine the Revenue Half-Life
of the Borrowing Base Properties as of such dates. WFBW may, in its sole
discretion, re-determine the Borrowing Base (Determined) (and, if applicable,
the Revenue Half-Life of the Borrowing Base Properties) not more than one
additional time during each calendar year prior to the Maturity Date. WFBW shall
advise Borrower of each re-determination of the Borrowing Base (Determined)
(and, if applicable, the Revenue Half-Life of the Borrowing Base Properties) by
WFBW by providing to Borrower a Borrowing Base Notice by approximately 10 days
prior to the effective date of any such re-determination; provided that if, due
to any failure by Borrower to submit in a timely manner any engineering report
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or other information required to be submitted by Borrower hereunder or, if
requested in writing by WFBW, any additional information or data needed in
connection with a re-determination of the Borrowing Base (Determined) or due to
any other reason beyond the control of WFBW, WFBW does not provide a Borrowing
Base Notice at the time described above, then: (a) unless WFBW gives notice to
the contrary to Borrower, the Borrowing Base (Determined) (and, if applicable,
the Revenue Half-Life of the Borrowing Base Properties) from the previous period
shall be carried over into the new period until a Borrowing Base Notice is sent
to Borrower by WFBW and the remainder of the procedures described in this
Section 2.8 have been completed, and (b) unless Borrower gives notice to the
contrary to WFBW, the Borrowing Base (Elected) from the previous period shall be
carried over into the new period until a Borrowing Base Notice is sent to
Borrower by WFBW and the remainder of the procedures described in this Section
2.8 have been completed. Borrower shall have the right, by giving notice to WFBW
not later than five days prior to the commencement of any Quarterly Borrowing
Base Period (or, if a Borrowing Base Notice is due, not later than five days
after the effective date of such Borrowing Base Notice), to elect a lesser
amount (the "Borrowing Base (Elected)"); provided that, if Borrower fails to
make such an election, the Borrowing Base (Elected) shall be deemed to be equal
to the Borrowing Base (Determined).
ARTICLE III
Security; Fees; LIBOR Provisions; Taxes; Increased Capital
Section 3.1. The Security. The Obligations will be secured by the
Security Documents and any additional Security Documents hereafter delivered by
Borrower, Guarantor or any other Person and accepted by WFBW.
Section 3.2. Perfection and Protection of Security Interests and
Liens. Borrower will from time to time deliver to WFBW any amendments, financing
statements, continuation statements, extension agreements and other documents,
properly completed and executed (and acknowledged when required) by Borrower in
form and substance reasonably satisfactory to WFBW, which WFBW may request for
the purpose of perfecting, confirming or protecting WFBW's Liens and other
rights in the Collateral.
Section 3.3. Bank Accounts and Offset. To secure the repayment
of the Obligations, Borrower hereby grants to WFBW a security interest, a lien,
and a right of offset, each of which shall be upon and against: (a) any and all
moneys, securities or other property (and the proceeds therefrom) of Borrower
now or hereafter held or received by or in transit to WFBW from or for the
account of Borrower, whether for safekeeping, custody, pledge, transmission,
collection or otherwise, (b) any and all deposits (general or special, time or
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demand, provisional or final) of Borrower with WFBW, and (c) any other credits
and claims of Borrower at any time existing against WFBW, including without
limitation claims under certificates of deposit; provided that accounts held in
Borrower's name as a trustee or in another fiduciary capacity shall not be
subject to the rights granted to WFBW in this Section 3.3. Upon the occurrence
of any Event of Default, WFBW is hereby authorized to foreclose upon, offset,
appropriate, and apply, at any time and from time to time, without notice to
Borrower, any and all items referred to in this Section 3.3 against the
Obligations (whether or not such Obligations are then due and payable). WFBW
shall give prompt notice to Borrower of any exercise of the rights of WFBW under
this Section 3.3, but such notice shall not be required to be given prior to the
exercise of such rights.
Section 3.4. Fees. (a) Borrower shall pay to WFBW, within 15
days after the end of each calendar quarter, for the time period commencing with
the date of the Initial Advance and ending on the last day of the Revolving
Period, a commitment fee in an amount equal to: (1) one-quarter of one percent
per annum, times (2) the excess of the Commitment Fee Calculation Base over the
sum of the aggregate outstanding principal balance of all Advances plus the face
amount of all outstanding Letters of Credit, computed on a daily basis for such
calendar quarter or other period.
(b) Borrower shall pay to WFBW with respect to each Letter of Credit a
fee in an amount equal to the greater of: (1) $500.00, or (2) one percent per
annum (or, as to any Gas-Marketing Letter of Credit, one-half of one percent per
annum) times the face amount of such Letter of Credit, which fee shall be due
and payable at the time of issuance (and again at the time of any renewal) of
such Letter of Credit.
Section 3.5. Special LIBOR Provisions. (a) If WFBW shall
reasonably determine (which determination shall, upon notice thereof to
Borrower, be conclusive and binding on Borrower and WFBW) that the introduction
of or any change in or in the interpretation of any law makes it unlawful, or
any central bank or other governmental authority having jurisdiction asserts
that it is unlawful, for WFBW to fund, continue or maintain any LIBOR Tranche,
the obligation of WFBW to fund, continue or maintain any such LIBOR Tranche
shall, upon such determination, forthwith be suspended until WFBW shall notify
Borrower that the circumstances causing such suspension no longer exist, and all
LIBOR Tranches shall automatically be converted into the Prime Rate Portion at
the end of the then-current LIBOR Interest Periods with respect thereto or
sooner, if required by such law or assertion.
(b) If WFBW shall reasonably determine that:
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(1) U.S. Dollar deposits in the relevant amount and for the relevant
LIBOR Interest Period are not available to WFBW in its relevant market; or
(2) By reason of circumstances affecting WFBW's relevant market,
adequate means do not exist for ascertaining the interest rate applicable
hereunder to LIBOR Tranches;
then, upon notice from WFBW to Borrower, the obligation of WFBW to include any
portion of the Loan in a LIBOR Tranche shall forthwith be suspended until three
Business Days after the circumstances causing such suspension no longer exist.
(c) Borrower agrees to reimburse WFBW for any increase in the cost to
WFBW of, or any reduction in the amount of any sum receivable by WFBW in respect
of, funding, continuing or maintaining (or of its obligation to fund, continue
or maintain) any LIBOR Tranche; provided that the foregoing shall not apply to
increases resulting from general increases in interest rates or general
increases in WFBW's administrative expenses or overhead costs. WFBW shall
promptly notify Borrower in writing of the occurrence of any such event, such
notice to state, in reasonable detail, the reasons therefor and the additional
amount required fully to compensate WFBW for such increased cost or reduced
amount. Such additional amount shall be due and payable by Borrower to WFBW
within fifteen days of Borrower's receipt of such notice, and such notice shall,
in the absence of clear error, be conclusive and binding on Borrower.
(d) In the event WFBW shall incur any loss or expense (including any
loss or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by WFBW to fund, continue or maintain any
portion of the principal amount of any LIBOR Tranche) as a result of:
(1) Any conversion, repayment or prepayment (whether voluntary or
mandatory) of the principal amount of any LIBOR Tranche on a date other than the
scheduled last day of the LIBOR Interest Period applicable thereto;
(2) Any requested LIBOR Tranche not being funded as a LIBOR Tranche in
accordance with the provisions of this Agreement or the Interest Rate Election
therefor; or
(3) Any LIBOR Tranche not being continued as a LIBOR Tranche in
accordance with the provisions of this Agreement or the Interest Rate Election
therefor;
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then, upon the written notice by WFBW to Borrower, Borrower shall, within
fifteen days of receipt thereof, pay WFBW such amount as will (in the reasonable
determination of WFBW) reimburse WFBW for such loss or expense. Such written
notice (which shall include calculations in reasonable detail) shall, in the
absence of clear error, be conclusive and binding on Borrower.
Section 3.6. Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority affects or would affect the amount of capital
required or expected to be maintained by WFBW or any Person controlling WFBW
with respect to any portion of the Loan included in a LIBOR Tranche, and WFBW
reasonably determines that the rate of return on its or such controlling
Person's capital as a consequence of such portion of the Loan is reduced to a
level below that which WFBW or such controlling Person could have achieved but
for the occurrence of any such circumstance, then, in any such case upon notice
from time to time by WFBW to Borrower, Borrower hereby agrees to pay to WFBW,
within fifteen days of the effective date of such notice, such additional amount
(as may be reasonably determined by WFBW) sufficient to compensate WFBW or such
controlling Person for such reduction in rate of return. A statement to Borrower
by WFBW as to any such additional amount or amounts (including calculations
thereof in reasonable detail) shall, in the absence of clear error, be
conclusive and binding on Borrower.
Section 3.7. Taxes. All payments by Borrower of principal of,
and interest on, the Loan and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future income,
excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or
other charges of any nature whatsoever imposed by any taxing authority, but
excluding franchise taxes and taxes imposed on or measured by WFBW's net income
or receipts (such non-excluded items being called "Taxes"). In the event that
any withholding or deduction from any payment to be made by Borrower hereunder
is required in respect of any Taxes pursuant to any applicable law, rule or
regulation, Borrower will:
(a) Pay directly to the relevant authority the full amount required to
be so withheld or deducted;
(b) Promptly forward to WFBW an official receipt or other documentation
evidencing such payment to such authority; and
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(c) Pay WFBW such additional amount or amounts as may be necessary to
ensure that the net amount actually received by WFBW will equal the full amount
WFBW would have received had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against WFBW with respect to any
payment received by WFBW hereunder, WFBW may pay such Taxes and Borrower will
promptly pay such additional amounts (including any penalties, interest or
expenses, except any of the foregoing which arise as a result of WFBW's failure
to notify Borrower promptly of its obligation to pay the same) as may be
necessary in order that the net amount received by WFBW after the payment of
such Taxes (including any Taxes on such additional amount) shall equal the
amount WFBW would have received had not such Taxes been asserted.
If Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to WFBW the required receipts or other
required documentary evidence, then Borrower shall indemnify, save and hold
harmless WFBW from and against any incremental Taxes, interest or penalties that
may become payable by WFBW as a result of any such failure.
Section 3.8. Obligations Absolute. The obligation of Borrower to
repay any amount drawn on WFBW pursuant to the terms of a Letter of Credit shall
be absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement, under all circumstances whatsoever,
including without limitation the following circumstances:
(a) The existence of any claim, set-off, defense or other right which
Borrower may have at any time against any beneficiary of a Letter of Credit (or
any Person for whom any such beneficiary may be acting) or any other Person,
whether in connection with this Agreement, the transactions contemplated hereby
or any unrelated transactions;
(b) Any statement or any other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect whatsoever;
or
(c) Payment by WFBW under any Letter of Credit against presentation of
a draft or certificate which does not comply in all material respects with the
terms of such Letter of Credit.
Payment by Borrower of a reimbursement obligation in connection with a Letter of
Credit issued pursuant to this Agreement shall not be deemed a waiver of any
rights of Borrower against WFBW under Section 3.10(d) below.
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Section 3.9. Indemnification. Borrower hereby indemnifies and
holds harmless WFBW from and against any and all claims, damages, losses,
liabilities, costs or expenses whatsoever which WFBW may incur (or which may be
claimed against WFBW by any Person) by reason of or in connection with the
execution and delivery or transfer of or payment or failure to pay under any
Letter of Credit; provided, however, that Borrower shall not be required to
indemnify WFBW for any claims, damages, losses, liabilities, costs or expenses
to the extent, but only to the extent, caused by the willful misconduct, bad
faith or gross negligence of WFBW in connection with paying a draft presented
under a Letter of Credit. Nothing in this Section 3.9 is intended to limit the
obligation of Borrower to repay any amount drawn on WFBW pursuant to the terms
of a Letter of Credit.
Section 3.10. Liability of WFBW. Borrower assumes all risks of
the acts or omissions of any beneficiary or permitted transferee of any Letter
of Credit with respect to its use of such Letter of Credit. Neither WFBW nor any
of its employees, officers or directors shall be liable or responsible for:
(a) The use which may be made of any Letter of Credit or for any acts
or omissions of any beneficiary or transferee thereof in connection therewith;
(b) The validity, sufficiency or genuineness of documents, or of any
endorsements thereon, even if such documents should in fact prove to be in any
or all respects invalid, insufficient, fraudulent or forged;
(c) Payment by WFBW against presentation of documents which do not
comply with the terms of the applicable Letter of Credit, including failure of
any documents to bear any reference or adequate reference to the applicable
Letter of Credit, unless such payment by WFBW results from WFBW's willful
misconduct, bad faith or gross negligence in connection therewith; or
(d) Any other circumstance whatsoever in making or failing to make
payment under the Letter of Credit, except only that Borrower shall have a claim
against WFBW, and WFBW shall be liable to Borrower, to the extent, but only to
the extent, of any direct (as opposed to consequential) damages suffered by
Borrower which were caused by:
(1) WFBW's willful misconduct, bad faith or gross negligence in
connection with the Letter of Credit; or
(2) WFBW's bad-faith or grossly negligent failure to pay under any
Letter of Credit after the presentation to it by the beneficiary of a draft and
certificate strictly complying with the terms and conditions of such Letter of
Credit.
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ARTICLE IV
Conditions Precedent to Loan
Section 4.1. Conditions Precedent to Initial Advance. WFBW shall
have no obligation to make the Initial Advance or to issue any Letter of Credit
unless WFBW shall have received all of the following at its office in Denver,
Colorado, duly executed and delivered and in form, substance and date
satisfactory to WFBW:
(a) The Note.
(b) An "Omnibus Certificate" of an officer of each of
Borrower and Guarantor, which shall contain the names
and signatures of the officers of Borrower and
Guarantor authorized to execute Loan Documents and
which shall certify to the truth, correctness and
completeness of the following exhibits attached
thereto: (1) a copy of the articles of incorporation of
Borrower and of Guarantor and all amendments thereto,
(2) a copy of the bylaws of Borrower and of Guarantor
and all amendments thereto, and (3) a copy of the
resolutions of the Board of Directors of Borrower and
Guarantor authorizing this Agreement, the Guaranty and
the transactions contemplated hereby.
(c) A "Compliance Certificate" of an officer of Borrower
and of Guarantor in which each such person certifies to
the satisfaction of the conditions set out in
subsections (a), (b), and (c) of Section 4.2 below.
(d) The Security Documents.
(e) Such title opinions, supplemental title opinions, UCC
searches and other title information concerning
Borrower's title to the Borrowing Base Properties or
any portions thereof as may be satisfactory to WFBW.
(f) Any and all other Loan Documents.
Section 4.2. Additional Conditions Precedent. WFBW shall have no
obligation to make the Initial Advance or any subsequent Advance or to issue any
Letter of Credit unless the following conditions precedent have been satisfied:
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(a) All representations and warranties made by any
Obligated Person in any Loan Document shall be true on
and as of the date of the Advance or the date of
issuance of the Letter of Credit as if such
representations and warranties had been made as of the
date hereof.
(b) No Default shall exist and be continuing as of the
date of the Advance or the date of issuance of the
Letter of Credit.
(c) Each Obligated Person shall have performed and complied
with all agreements and conditions herein required to
be performed or complied with by it on or prior to the
date of the Advance or the date of issuance of the
Letter of Credit.
(d) The making of the Advance or the issuance of the Letter
of Credit shall not be prohibited by any law or any
regulation or order of any court or governmental agency
or authority and shall not subject WFBW to any penalty
or other onerous condition under or pursuant to any
such law, regulation or order.
ARTICLE V
Representations and Warranties
Section 5.1. Borrower's and Guarantor's Representations and
Warranties. To induce WFBW to enter into this Agreement and to make the Loan,
each of Borrower and Guarantor represents and warrants to WFBW (which
representations and warranties shall survive the delivery of the Note and shall
be deemed to be continuing representations and warranties until repayment in
full of the Note) as follows; provided that those portions of the following
representations and warranties relating to Borrower shall be deemed made solely
by Borrower and those portions of the following representations and warranties
relating to Guarantor shall be deemed made solely by Guarantor:
(a) No Default. Neither Borrower nor Guarantor is in default in
any material respect in the performance of any of the
covenants and agreements contained herein. No event has
occurred and is continuing which constitutes a Default.
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(b) Organization and Good Standing. Borrower is a corporation duly
organized, validly existing and in good standing under the
laws of the State of Colorado, having all powers required to
carry on its business and enter into and carry out the
transactions contemplated hereby. Guarantor is a corporation
duly organized, validly existing and in good standing under
the laws of the State of Colorado, having all powers required
to carry on its business and enter into and carry out the
transactions contemplated hereby. Each of Borrower and
Guarantor is duly qualified, in good standing, and authorized
to do business in all other jurisdictions wherein the
character of the properties owned or held by it or the nature
of the business transacted by it makes such qualification
necessary.
(c) Authorization. Each of Borrower and Guarantor has duly taken
all action necessary to authorize the execution and delivery
by it of the Loan Documents and to authorize the consummation
of the transactions contemplated thereby and the performance
of its obligations thereunder.
(d) No Conflicts or Consents. The execution and delivery by each
of Borrower and Guarantor of the Loan Documents to which each
is a party, the performance by each of its obligations under
such Loan Documents, and the consummation of the transactions
contemplated by the various Loan Documents, do not and will
not (1) conflict with any provision of (A) any domestic or
foreign law, statute, rule or regulation, (B) the governing
documents of Borrower or Guarantor, or (C) any agreement,
judgment, license, order or permit applicable to or binding
upon any Borrower or Guarantor, (2) result in the acceleration
of any Debt owed by Borrower or Guarantor, or (3) result in or
require the creation of any Lien upon any assets or properties
of Borrower or Guarantor except as expressly contemplated in
the Loan Documents. Except as expressly contemplated in the
Loan Documents, no consent, approval, authorization or order
of, and no notice to or filing with, any court or governmental
authority or third party is required in connection with the
execution, delivery or performance by Borrower or Guarantor of
any Loan Document or to consummate any transactions
contemplated by the Loan Documents.
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(e) Enforceable Obligations. This Agreement is, and the other Loan
Documents, when duly executed and delivered, will be, legal
and binding obligations of each of Borrower and Guarantor
which is a party hereto or thereto, enforceable in accordance
with their respective terms, except as limited by bankruptcy,
insolvency or similar laws of general application relating to
the enforcement of creditors' rights and as limited by general
equitable principles.
(f) Initial Financial Statements. The Initial Financial Statements
fairly present Guarantor's financial position at the dates
thereof. Since the dates of the Initial Financial Statements,
no material adverse change has occurred in Borrower's or
Guarantor's financial condition or business. All Initial
Financial Statements were prepared in accordance with GAAP or
with another accounting system approved in writing by WFBW.
(g) Other Obligations. Neither Borrower nor Guarantor has any
outstanding Debt of any kind (including contingent
obligations, tax assessments, and unusual forward or long-term
commitments) which is not shown in the Initial Financial
Statements or the notes thereto, except that Borrower has
unsecured indebtedness in the outstanding principal amount of
not more than $260,000 owed to Guarantor and unsecured
obligations in an aggregate amount not in excess of $250,000
owed to various Affiliates of Borrower.
(h) Full Disclosure. No certificate, statement or other
information delivered herewith or heretofore by Borrower or
Guarantor to WFBW in connection with the negotiation of this
Agreement or in connection with any transaction contemplated
hereby contains any untrue statement of a material fact or
omits to state any material fact known to Borrower or
Guarantor necessary to make the statements contained herein or
therein not misleading in any material respect as of the date
made or deemed to have been made. At the date of this
Agreement, neither Borrower nor Guarantor is aware of any
material fact that has not been disclosed to WFBW in writing
which could materially and adversely affect the properties,
businesses, prospects or condition (financial or otherwise) of
Borrower or Guarantor. To the best knowledge of Borrower and
Guarantor, the Initial Engineering Report is based upon
complete and accurate factual information in all material
respects, it being understood that the Initial Engineering
Report is necessarily based upon professional opinions,
estimates and projections and that Borrower and Guarantor do
not warrant that such opinions, estimates and projections will
ultimately prove to have been accurate.
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(i) Litigation. Except as disclosed in the Initial Financial
Statements or as otherwise disclosed in writing to WFBW: (1)
there are no actions, suits or legal, equitable, arbitrative
or administrative proceedings pending, or to the knowledge of
Borrower or Guarantor, threatened, against Borrower or
Guarantor before any federal, state, municipal or other court,
department, commission, body, board, bureau, agency, or
instrumentality, domestic or foreign, which do or may
materially and adversely affect Borrower or Guarantor, any
Affiliate controlled by Borrower or Guarantor, any of
Borrower's or Guarantor's ownership or use of any of its
assets or properties, its business or financial condition or
prospects, or the right or ability of Borrower or Guarantor to
enter into the Loan Documents or perform its obligations
thereunder, and (2) there are no outstanding judgments,
injunctions, writs, rulings or orders by any such governmental
entity against Borrower or Guarantor which have or may have
any such effect.
(j) Title to Properties. Borrower has good and defensible title to
the Borrowing Base Properties, free and clear of all liens,
encumbrances and defects of title, except for covenants,
restrictions, rights, easements, liens, encumbrances and minor
irregularities in title which do not materially interfere with
the occupation, use and enjoyment of such Borrowing Base
Properties in the normal course of business as presently
conducted or materially impair the value thereof for such
business. Borrower enjoys peaceful and undisturbed possession
under all material leases under which it operates, and all
such leases are valid and subsisting, with no material default
existing thereunder.
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(k) Place of Business. The chief executive office and principal
place of business of Borrower are located at the address of
Borrower set out in Section 8.3 below.
(l) Taxes. All tax returns required to be filed by Borrower or
Guarantor in any jurisdiction prior to the date hereof have
been filed; all taxes, assessments, fees and other
governmental charges upon Borrower or Guarantor or upon any of
their respective properties, income or franchises, which are
due and payable have been paid, or adequate reserves have been
provided for payment thereof.
(m) Use of Proceeds. Neither Borrower nor Guarantor is engaged
principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U or X
of the Board of Governors of the Federal Reserve System), and
no part of the proceeds of the Loan will be used to purchase
or carry any such margin stock or to extend credit to any
Person for the purpose of purchasing or carrying any such
margin stock. None of Borrower, Guarantor or any Person acting
on Borrower's or Guarantor's behalf has taken or will take any
action which might cause this Agreement or the Note or the
application of the proceeds of the Loan to violate either of
said Regulations U or X or any other regulation of the Board
of Governors of the Federal Reserve System or to violate the
Securities Exchange Act of 1934, in each case as now in effect
or as the same may hereafter be in effect.
(n) Investment Company Act Not Applicable. Neither Borrower nor
Guarantor is an "investment company" or a person "controlled"
by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(o) Public Utility Holding Company Act Not Applicable. Neither
Borrower nor Guarantor is a "holding company," or a
"subsidiary company" of a "holding company," or an "affiliate"
of a "holding company," or of a "subsidiary company" of a
"holding company" as such terms are defined in the Public
Utility Holding Company Act of 1935, as amended.
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(p) ERISA Liabilities. Except as disclosed in the Initial
Financial Statements, no Termination Event has occurred with
respect to any ERISA Plan, and each of Borrower and Guarantor
is in compliance with ERISA in all material respects. Neither
Borrower nor Guarantor is required to contribute to, or has
any other absolute or contingent liability in respect of, any
"multiemployer plan" as defined in Section 4001 of ERISA.
Section 5.2. Representations by WFBW. WFBW hereby represents
that it will acquire the Note for its own account in the ordinary course of its
commercial banking business; however, the disposition of WFBW's property shall
at all times be and remain within its control and this section does not prohibit
WFBW's sale of the Note or of any participation in the Note to any bank,
financial institution, investor or other purchaser.
ARTICLE VI
Covenants of Borrower and Guarantor
Section 6.1. Affirmative Covenants. Each of Borrower and
Guarantor warrants, covenants and agrees as follows, until the full and final
payment of the Obligations and the termination of this Agreement, unless WFBW
has previously agreed otherwise in writing; provided that those portions of the
following covenants relating to Borrower shall be deemed made solely by Borrower
and those portions of the following covenants relating to Guarantor shall be
deemed made solely by Guarantor:
(a) Payment and Performance. Borrower will pay all amounts due
under the Loan Documents in accordance with the terms thereof
and will in all material respects observe, perform and comply
with every covenant, term and condition express or implied in
the Loan Documents. Guarantor will observe, perform and comply
with every such term, covenant and condition, to the extent
applicable to Guarantor.
(b) Books, Financial Statements and Records. Each of Borrower and
Guarantor will at all times maintain full and accurate books
of account and records, will maintain a standard system of
accounting in accordance with GAAP or with another accounting
system approved in writing by WFBW and will furnish the
following statements and reports to WFBW at the expense of the
furnishing party:
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(1) As soon as available, and in any event within 90 days after the end
of each Fiscal Year, complete audited Consolidated financial statements of
Guarantor (together with a supplement showing the complete unaudited financial
statements of Borrower), prepared in reasonable detail and in accordance with
GAAP or with another accounting system approved in writing by WFBW. These
financial statements shall contain at least a balance sheet as of the end of
such Fiscal Year and a statement of earnings and cash flow, setting forth in
comparative form the corresponding figures for the preceding Fiscal Year and, to
the extent that they relate to Guarantor, shall be accompanied by an opinion of
a firm of independent certified public accountants chosen by Guarantor and
competent to perform accounting functions for a substantial public company,
which opinion shall be unqualified and shall state that said financial
statements have been prepared in accordance with GAAP and fairly present the
financial position and the results of operations of Guarantor as of the end of
and for such Fiscal Year;
(2) As soon as available and in any event within 60 days after the end
of each Fiscal Quarter (except the last Fiscal Quarter of each Fiscal Year),
complete unaudited Consolidated financial statements of Guarantor (together with
a supplement showing the complete unaudited financial statements of Borrower)
for such Fiscal Quarter and for the then- current Fiscal Year, prepared by
Guarantor in reasonable detail and in accordance with GAAP or with another
accounting system approved in writing by WFBW;
(3) At the time of submission of any and all financial statements
furnished pursuant to clause (1) or (2) above, a report signed by the president
or chief financial officer of Borrower and of Guarantor, in the form of Exhibit
E attached hereto and made a part hereof;
(4) Upon the request of WFBW, copies of any and all federal and state
income tax returns filed by Borrower, including all schedules and amendments
thereto;
(5) By March 31 of each year, commencing March 31, 2001, through the
Maturity Date, an engineering report and economic evaluation prepared by one or
more independent petroleum engineers chosen by Borrower and reasonably
acceptable to WFBW, covering all oil and gas properties and interests included
in the Borrowing Base Properties. Each such engineering report shall be in form
and substance reasonably satisfactory to WFBW and shall contain information and
analysis comparable in scope to that contained in the Initial Engineering
Report; and
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(6) As soon as available, and in any event within 60 days after the end
of each calendar quarter, commencing with the calendar quarter ending September
30, 2000, a report describing, for each calendar month during such calendar
quarter, the gross volume of production and sales attributable to production
(and the prices at which such sales were made and the revenues derived from such
sales, the prices so disclosed to be the average prices on a field-by-field
basis) for each such calendar month from the Borrowing Base Properties, and
describing the related ad valorem, severance and production taxes and lease
operating expenses attributable thereto and incurred for each such calendar
month.
(c) Other Information and Inspections. Each of Borrower and
Guarantor will furnish to WFBW any information which WFBW may from time to time
reasonably request concerning any covenant, provision or condition of the Loan
Documents or any matter in connection with Borrower's or Guarantor's businesses
and operations. Each of Borrower and Guarantor will permit representatives
appointed by WFBW, including independent accountants, agents, attorneys,
appraisers and any other persons, upon reasonable prior notice and during
regular office hours, to visit and inspect, at their sole risk (and, except
during the continuance of an Event of Default, at their sole cost and expense),
any of Borrower's or Guarantor's property, including its books of account, other
books and records, and any facilities or other business assets, and to make
extra copies therefrom and photocopies and photographs thereof, and to write
down and record any information such representatives obtain, and each of
Borrower and Guarantor shall permit WFBW or its representatives to investigate
and verify the accuracy of the information furnished to WFBW in connection with
the Loan Documents and to discuss all such matters with its officers, managers,
employees and representatives.
(d) Notice of Material Events. Borrower will promptly notify
WFBW: (1) of any material adverse change in the financial condition of Borrower
or Guarantor, (2) of the occurrence of any Default, (3) of the acceleration of
the maturity of any Debt owed by Borrower or Guarantor or of any default by
Borrower or Guarantor under any indenture, mortgage, agreement, contract or
other instrument to which any of them is a party or by which any of them or any
of their properties is bound, (4) of any uninsured claim of $500,000 or more
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asserted against Borrower or Guarantor or any of Borrower's or Guarantor's
properties, (5) of the filing of any suit or proceeding against Borrower or
Guarantor (or the occurrence of any material development in any such suit or
proceeding) in which an adverse decision could have a material adverse effect
upon Borrower's or Guarantor's financial condition, business or operations (or
could result in a judgment not covered by insurance of $500,000 or more against
Borrower or Guarantor), (6) of the merger or consolidation of Borrower or
Guarantor with any other business entity, (7) of the occurrence of any
Termination Event, and (8) of the sale, transfer to a third party, lease,
exchange or disposal by Borrower or Guarantor of any material assets or
properties or any assets or properties with a value in excess of $500,000,
except sales of already-severed hydrocarbons and other products in the ordinary
course of business of Borrower or Guarantor. Upon the occurrence of any of the
foregoing, each of Borrower and Guarantor will take all necessary or appropriate
steps to remedy promptly any such material adverse change, Default, or default,
to protect against any such adverse claim, to defend any such suit or
proceeding, and to resolve all controversies on account of any of the foregoing
or to contest in good faith the validity thereof by appropriate proceedings.
Borrower or Guarantor will also notify WFBW in writing at least twenty Business
Days prior to the date that Borrower or Guarantor changes its name or the
location of its chief executive office or principal place of business or the
place where it keeps its books and records concerning the Collateral, furnishing
with such notice any necessary financing statement amendments or requesting WFBW
and its counsel to prepare the same.
(e) Maintenance of Existence and Qualifications. Borrower will
maintain and preserve its existence and its rights and franchises in full force
and effect and will qualify to do business in all states or jurisdictions where
required by applicable law, except where the failure so to qualify will not have
any material adverse effect on Borrower.
(f) Maintenance of Properties. Borrower will in all material
respects maintain, preserve, protect and keep all property used or useful in the
conduct of its business in accordance with the standards of a reasonable and
prudent operator.
(g) Payment of Trade Debt, Taxes, etc. Each of Borrower and
Guarantor will: (1) timely file all required tax returns; (2) timely pay all
taxes, assessments, and other governmental charges or levies imposed upon it or
upon its income, profits or property; (3) pay all Debt owed by it on ordinary
trade terms to vendors, suppliers and other Persons providing goods and services
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used by it in the ordinary course of its business; and (4) maintain appropriate
accruals and reserves for all of the foregoing Debt in accordance with its
present system of accounting. Each of Borrower and Guarantor will pay and
discharge in all material respects, when due, all other Debt, taxes or
assessments now or hereafter owed by it. Each of Borrower and Guarantor may,
however, delay paying or discharging any such Debt so long as it is in good
faith contesting the validity thereof by appropriate proceedings and has set
aside on its books adequate reserves therefor.
(h) Insurance. Borrower will maintain with financially sound and
reputable insurance companies, insurance with respect to its business,
operations and properties in at least such amounts and against at least such
risks as are usually insured against in the same general area by companies of
established repute engaged in the same or a similar business.
(i) Payment of Expenses. Borrower will promptly (and in any
event within 30 days after any invoice or other statement or notice) pay all
reasonable costs and expenses incurred by or on behalf of WFBW (including
attorneys' fees) in connection with: (1) the preparation, execution and delivery
of the Loan Documents (including without limitation any and all future
amendments or supplements thereto or restatements thereof), and any and all
consents, waivers or other documents or instruments relating thereto, except
that WFBW shall bear any and all costs incurred by WFBW in connection with the
preparation of this Agreement and the Note, (2) the preparation, execution,
delivery, filing, recording, refiling and re-recording of any Security Documents
and any other documents or instruments or further assurances required to be
filed or recorded or refiled or re-recorded by the terms of any Loan Document,
except that WFBW shall bear any and all costs incurred by WFBW in connection
with the initial preparation, filing and recording of the Security Documents
executed and delivered within 90 days of the time of execution and delivery of
this Agreement (but not of future amendments or re-recordings of said
documents), (3) the examination of Borrower's title to the Collateral, except
that WFBW shall bear the cost of any title examination that it requires to be
performed either at the time of the execution and delivery of this Agreement or
within 180 days thereafter, and (4) the enforcement, after the occurrence of a
Default or an Event of Default, of the Loan Documents.
(j) Performance on Borrower's Behalf. If Borrower fails to pay
any taxes, insurance premiums or other amounts it is required to pay under any
Loan Document, WFBW may pay the same. Borrower shall immediately reimburse WFBW
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for any such payments and each amount paid shall constitute a part of the
Obligations, shall be secured by the Security Documents and shall bear interest
at the rate described in Section 2.2(c)(3) above, from the date such amount is
paid by WFBW until the date such amount is repaid to WFBW.
(k) Compliance with Agreements and Law. Borrower will perform
all material obligations it is required to perform under the terms of each
indenture, mortgage, deed of trust, security agreement, lease, franchise,
agreement, contract or other instrument or obligation to which it is a party or
by which it or any of its properties is bound in such a way that they result in
no material adverse effect upon the Borrowing Base Properties or the ability of
Borrower to perform its obligations under or in connection with this Agreement.
Borrower will in all material respects conduct its business and affairs in
compliance with all laws, regulations, and orders applicable thereto (including
those relating to pollution and other environmental matters).
(l) Certifications of Compliance. Each of Borrower and Guarantor
will furnish to WFBW at such Person's expense all certifications which WFBW from
time to time reasonably requests, as to the accuracy and validity of or
compliance with all representations, warranties and covenants made by Borrower
or Guarantor in the Loan Documents, the satisfaction of all conditions contained
therein, and all other matters pertaining thereto.
(m) Additional Security Documents. Promptly after a request
therefor by WFBW at any time and from time to time, Borrower will execute and
deliver to WFBW such additional Security Documents and/or amendments to existing
Security Documents as WFBW may deem necessary or appropriate in order to grant
to WFBW a perfected lien on and security interest in any or all oil and/or gas
interests owned by Borrower.
Section 6.2. Negative Covenants. Borrower warrants, covenants
and agrees that until the full and final payment of the Obligations and the
termination of this Agreement, unless WFBW has previously agreed otherwise in
writing:
(a) Financial Covenants. (1) The Current Ratio of Borrower will
not be less than 1.0:1.0 at any time after the date hereof. (2) The Tangible Net
Worth of Borrower will not, at any time after the date hereof, be less than: (A)
$20,000,000, plus (B) 50 percent of any and all Capital Additions to Borrower
after June 30, 2000, plus (C) 50 percent of the Cumulative Net Income of
Borrower for all Fiscal Quarters ending after June 30, 2000.
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(b) Limitation on Liens. Borrower will not create, assume or
permit to exist any mortgage, deed of trust, pledge, encumbrance, lien or charge
of any kind (including any security interest in or vendor's lien on property
purchased under conditional sales or other title retention agreements and
including any lease intended as security or in the nature of a title retention
agreement) upon any of Borrower's or Guarantor's properties or assets, whether
now owned or hereafter acquired except:
(1) Liens at any time existing in favor of WFBW;
(2) statutory Liens for taxes, statutory or contractual mechanics' and
materialmen's Liens incurred in the ordinary course of business, and other
similar Liens incurred in the ordinary course of business, provided such Liens
secure only Debt which is not delinquent or which is being contested as provided
in Section 6.1(g) above; and
(3) purchase-money security interests granted by Borrower on office
equipment, vehicles and other personal property acquired by Borrower in the
ordinary course of business; provided that the aggregate amount secured by all
such security interests outstanding at any one time shall not exceed $500,000.
(c) Additional Debt. Borrower will not create, incur, assume or
permit to exist Debt except: (1) the Loan, (2) trade debt owed to suppliers,
pumpers, mechanics, materialmen and others furnishing goods or services to
Borrower in the ordinary course of Borrower's business, (3) Subordinated Debt,
(4) Debt of the types permitted to be secured by the security interests
described in Section 6.2(b)(3) above; provided that the amount of such Debt does
not exceed the limits set forth in said Section, (5) Hedging Obligations, (6)
unsecured Debt owed to Affiliates of Borrower not in excess of $1,000,000 in the
aggregate at any time, and (7) other unsecured Debt not in excess of $500,000 in
the aggregate at any time.
(d) Limitation on Sales of Property. Borrower will not sell,
transfer, lease, exchange, alienate or dispose of any of the assets included in
the Borrowing Base Properties except as follows (and the following exceptions
shall be subject to any limitations contained in the Security Documents):
(1) equipment which is worn out or obsolete, which is replaced by
equipment of equal suitability and value or which is salvaged from wells which
have been plugged and abandoned by or on behalf of Borrower;
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(2) inventory (including oil and gas sold as produced) which is sold in
the ordinary course of business;
(3) personal property located on oil and gas properties operated by
third parties, the sale of which personal property cannot be prevented by
Borrower; and
(4) any sale or sales of one or more oil and/or gas properties having
an aggregate value of less than $500,000 during any calendar year.
(e) Limitation on Credit Extensions. Borrower will not extend
credit, make advances or make loans other than normal and prudent extensions of
credit to customers buying goods and services in the ordinary course of
business, which extensions shall not be for longer periods than those extended
by similar businesses operated in a normal and prudent manner.
(f) Fiscal Year. Borrower will not change its fiscal year.
(g) Amendment of Contracts. Borrower will not amend or permit
any amendment to any contract which could reasonably be foreseen to release,
qualify, limit, make contingent or otherwise detrimentally affect, in any
material way, the rights and benefits of WFBW under or acquired pursuant to any
of the Security Documents.
(h) Limitation on Guaranties. Borrower will not assume, guaranty,
endorse or be or become secondarily liable for any Debt which is the primary
obligation of any other Person.
(i) ERISA Plans. Borrower will not incur any obligation to
contribute to any "multiemployer plan" as defined in Section 4001 of ERISA.
(j) Distributions. Borrower will not make any Distributions.
(k) Reorganizations; Combinations. Borrower will not change
its name or the nature of its business, reorganize, liquidate, dissolve or enter
into any merger, joint venture, partnership or other combination.
(l) Ownership. Borrower will continue to be a wholly-owned
subsidiary of Guarantor.
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ARTICLE VII
Events of Default and Remedies
Section 7.1. Events of Default. Each of the following events
constitutes an Event of Default under this Agreement:
(a) Borrower fails to pay any Obligation on or before one
Business Day after the stated due-date of any such Obligation without regard to
the provisions of this Section 7.1(a), whether at a date for the payment of a
fixed installment or contingent or other payment to WFBW or as a result of
acceleration or otherwise; or
(b) Any "default" or "event of default" occurs under any Loan
Document which defines either term and any applicable cure period set forth in
any such Loan Document expires; or
(c) Borrower or Guarantor fails to duly observe, perform or
comply with any covenant, agreement, condition or provision of any Loan
Document; provided that, except with respect to: (1) any such covenant,
agreement, condition or provision which may constitute an Event of Default under
one of the other subsections of this Section 7.1, or (2) any covenant,
agreement, condition or provision contained in any of Sections 2.2, 2.3 or 6.2
above, Borrower shall have a 30-day grace period after written notice of such
failure by WFBW to Borrower in which to cure such failure; or
(d) Any representation or warranty previously, presently or
hereafter made in writing by or on behalf of Borrower or Guarantor in connection
with any Loan Document shall prove to have been false or incorrect in any
material respect on any date on or as of which made; or
(e) Borrower or Guarantor:
(1) suffers the entry against it of a judgment, decree or order for
relief by a court of competent jurisdiction in an involuntary proceeding
commenced under any applicable bankruptcy, insolvency or other similar law of
any jurisdiction now or hereafter in effect, including the federal Bankruptcy
Code, as from time to time amended, or has any such proceeding commenced against
it which remains undismissed for a period of 60 days; or
(2) suffers the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for a substantial part of
its assets or for any part of the Borrowing Base Properties in a proceeding
brought against or initiated by it, and such appointment is neither made
ineffective nor discharged within 30 days after the making thereof, or such
appointment is consented to, requested by, or acquiesced to by it; or
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(3) commences a voluntary case under any applicable bankruptcy,
insolvency or similar law now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended; or applies for or consents to the
entry of an order for relief in an involuntary case under any such law or to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or other similar official of any substantial
part of its assets or any part of the Borrowing Base Properties; or makes a
general assignment for the benefit of creditors; or fails generally to pay (or
admits in writing its inability to pay) its debts as such debts become due; or
takes action in furtherance of any of the foregoing; or
(4) suffers the entry against it of a final judgment for the payment of
money in excess of $500,000 (not covered by insurance), unless the same is
discharged within 30 days after the date of entry thereof or an appeal or
appropriate proceeding for review thereof is taken within such period and a stay
of execution pending such appeal is obtained; or
(5) suffers the entry of an order issued by any court or tribunal
taking, seizing or apprehending all or one or more parts of the Borrowing Base
Properties having an aggregate value in excess of five percent of the total
present value, using a discount rate of 10 percent per annum, of all proved,
developed, producing reserves attributed to the Borrowing Base Properties and
bringing the same into the custody of such Court or tribunal, and such order is
not stayed or released within thirty days after the entry thereof; or
(f) Either: (1) any "accumulated funding deficiency" (as defined
in Section 412(a) of the Internal Revenue Code of 1986, as amended) in excess of
$10,000 exists with respect to any ERISA Plan, whether or not waived by the
Secretary of the Treasury or his delegate, or (2) any Termination Event occurs
with respect to any ERISA Plan and the then current value of such ERISA Plan's
benefits guaranteed under Title IV of ERISA exceeds the then current value of
such ERISA Plan's assets available for the payment of such benefits by more than
$10,000 (or in the case of a Termination Event involving the withdrawal of a
substantial employer, the withdrawing employer's proportionate share of such
excess exceeds such amount); or
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(g) The Guaranty ceases to be in full force and effect and
applicable to any and all of the Obligations covered thereby in accordance with
its terms, whether by operation of law, revocation or attempted revocation or
otherwise; or
(h) Any default, including the expiration of any applicable
period of grace, occurs with respect to any other indebtedness owed by Borrower
to any Person.
Upon the occurrence of an Event of Default described in subsection (e)(1),
(e)(2) or (e)(3) of this section, all of the Obligations shall thereupon be
immediately due and payable, without presentment, demand, protest, notice of
protest, declaration or notice of acceleration or intention to accelerate, or
any other notice or declaration of any kind, all of which are hereby expressly
waived by Borrower. During the continuance of any other Event of Default, WFBW
at any time and from time to time (unless all Events of Default have theretofore
been remedied) may declare any or all of the Obligations immediately due and
payable, and all such Obligations shall thereupon be immediately due and
payable.
Section 7.2. Remedies. If any Default or Event of Default shall
occur and be continuing, the obligation of WFBW to make Advances under this
Agreement shall terminate immediately. If any Event of Default shall occur, WFBW
may protect and enforce its rights under the Loan Documents by any appropriate
proceedings, including proceedings for specific performance of any covenant or
agreement contained in any Loan Document, and WFBW may enforce the payment of
any Obligations due or enforce any other legal or equitable right. All rights,
remedies and powers conferred upon WFBW under the Loan Documents shall be deemed
cumulative and not exclusive of any other rights, remedies or powers available
under the Loan Documents or at law or in equity.
Section 7.3. Indemnity. Borrower hereby agrees to indemnify,
defend and hold harmless WFBW and its agents, affiliates, officers, directors,
and employees from and against any and all claims, losses, demands, actions,
causes of action, and liabilities whatsoever (including without limitation
reasonable attorney's fees and expenses, and costs and expenses reasonably
incurred in investigating, preparing or defending against any litigation or
claim, action, suit, proceeding or demand of any kind or character) arising out
of or resulting from: (a) the Loan Documents (including without limitation the
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enforcement thereof), except to the extent such claims, losses, and liabilities
are proximately caused by a WFBW's gross negligence or willful misconduct, (b)
the contamination of any of the Borrowing Base Properties by any hazardous
substance or environmental pollutant, or (c) the violation of any federal, state
or local environmental statute, rule, regulation or ordinance, including without
limitation violation of the Comprehensive Environmental Response, Compensation
and Liability Act, as amended from time to time, or of the Resource Conservation
and Recovery Act, as amended from time to time.
ARTICLE VIII
Miscellaneous
Section 8.1. Waiver and Amendment. No failure or delay by WFBW
in exercising any right, power or remedy which it may have under any of the Loan
Documents shall operate as a waiver thereof or of any other right, power or
remedy, nor shall any single or partial exercise by WFBW of any such right,
power or remedy preclude any other or further exercise thereof or of any other
right, power or remedy. No waiver of any provision of any Loan Document and no
consent to any departure therefrom shall ever be effective unless it is in
writing and signed by WFBW, and then such waiver or consent shall be effective
only in the specific instances and for the purposes for which given and to the
extent specified in such writing. No notice to or demand on Borrower or
Guarantor shall in any case of itself entitle Borrower or Guarantor to any other
or further notice or demand in similar or other circumstances. No modification
or amendment of or supplement to this Agreement or the other Loan Documents
shall be valid or effective unless the same is in writing and signed by the
party against whom it is sought to be enforced.
Section 8.2. Survival of Agreements; Cumulative Nature. All of
Borrower's and Guarantor's various representations, warranties, covenants and
agreements in the Loan Documents shall survive the execution and delivery of
this Agreement and the other Loan Documents and the performance hereof and
thereof, including without limitation the making or granting of the Loan and the
delivery of the Note and the other Loan Documents, and shall further survive
until all of the Obligations are paid in full to WFBW and all of WFBW's
obligations to Borrower are terminated. The representations, warranties, and
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covenants made by Borrower or Guarantor in the Loan Documents, and the rights,
powers, and privileges granted to WFBW in the Loan Documents, are cumulative,
and no Loan Document shall be construed in the context of another to diminish,
nullify, or otherwise reduce the benefit to WFBW of any such representation,
warranty, covenant, right, power or privilege. In particular and without
limitation, no exception set out in this Agreement to any representation,
warranty or covenant herein contained shall apply to any similar representation,
warranty or covenant contained in any other Loan Document, and each such similar
representation, warranty or covenant shall be subject only to those exceptions
which are expressly made applicable to it by the terms of the various Loan
Documents.
Section 8.3. Notices. All notices, requests, consents, demands
and other communications required or permitted under any Loan Document shall be
in writing and, unless otherwise specifically provided in such Loan Document,
shall be deemed sufficiently given or furnished if delivered by personal
delivery, by expedited delivery service with proof of delivery, or by registered
or certified United States mail, return receipt requested, postage prepaid, at
the addresses specified below (unless changed by similar notice in writing given
by the particular Person whose address is to be changed). Any such notice or
communication shall be deemed to have been given, in the case of notices by
personal delivery or by expedited delivery service, at the time of delivery to
the appropriate address, marked to the attention of the appropriate person, or,
in the case of mail, three Business Days after deposit in the United States
mail, addressed in the manner provided herein:
Borrower's address: 1700 Broadway Street, Suite 1150
Denver, Colorado 80290
Attention: Mr. Kevin Struzeski
with a copy to
Guarantor at: 1700 Broadway Street, Suite 1150
Denver, Colorado 80290
Attention: Mr. Kevin Struzeski
WFBW's address: MAC #C7301-046
1740 Broadway
Denver, Colorado 80274
Attention: Energy & Minerals Group
Section 8.4. Parties in Interest. All grants, covenants and
agreements contained in the Loan Documents shall bind and inure to the benefit
of the parties thereto and their respective successors and assigns; provided,
however, that no Obligated Person may assign or transfer any of its rights or
delegate any of its duties or obligations under any Loan Document without the
prior written consent of WFBW.
Section 8.5. Governing Law. The Loan Documents shall be deemed
contracts and instruments made under the laws of the State of Colorado and shall
be construed and enforced in accordance with and governed by the laws of the
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State of Colorado and the laws of the United States of America, except: (a) to
the extent that the law of another jurisdiction is expressly elected in a Loan
Document, and (b) with respect to specific Liens, or the perfection thereof,
evidenced by Security Documents covering real or personal property which by the
laws applicable thereto are required to be construed under the laws of another
jurisdiction. Each of Borrower and Guarantor hereby irrevocably submits itself
to the non-exclusive jurisdiction of the state and federal courts of the State
of Colorado.
Section 8.6. Limitation on Interest. WFBW and the Obligated
Persons intend to contract in strict compliance with applicable usury law from
time to time in effect. In furtherance thereof such persons stipulate and agree
that none of the terms and provisions contained in the Loan Documents shall ever
be construed to create a contract to pay, for the use, forbearance or detention
of money, interest in excess of the maximum amount of interest permitted to be
charged by applicable law from time to time in effect. Neither any Obligated
Person nor any present or future guarantors, endorsers, or other Persons
hereafter becoming liable for payment of any Obligation shall ever be liable for
unearned interest thereon or shall ever be required to pay interest thereon in
excess of the maximum amount that may be lawfully charged under applicable law
from time to time in effect, and the provisions of this section shall control
over all other provisions of the Loan Documents which may be in conflict or
apparent conflict herewith. WFBW expressly disavows any intention to charge or
collect excessive unearned interest or finance charges in the event the maturity
of any Obligation is accelerated. If: (a) the maturity of any Obligation is
accelerated for any reason, (b) any Obligation is prepaid and as a result any
amounts held to constitute interest are determined to be in excess of the legal
maximum, or (c) WFBW or any other holder of any or all of the Obligations shall
otherwise collect moneys which are determined to constitute interest which would
otherwise increase the interest on any or all of the Obligations to an amount in
excess of that permitted to be charged by applicable law then in effect, then
all such sums determined to constitute interest in excess of such legal limit
shall, without penalty, be promptly applied to reduce the then outstanding
principal of the related Obligations or, at WFBW's option, promptly returned to
Borrower or the other payor thereof upon such determination.
Section 8.7. Severability. If any term or provision of any Loan
Document shall be determined to be illegal or unenforceable, all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable law.
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Section 8.8. Counterparts. This Agreement may be separately
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to
constitute one and the same Agreement.
Section 8.9. Conflicts. To the extent of any irreconcilable
conflicts between the provisions of this Agreement and the provisions of any of
the Loan Documents, the provisions of this Agreement shall prevail.
Section 8.10. Entire Agreement. This Agreement, the Note, the
Security Documents and the other Loan Documents from time to time executed in
connection herewith state the entire agreement between the parties with respect
to the subject matter hereof.
Section 8.11. Arbitration. (a) Subject to the provisions of
Section 8.11(b) below, WFBW and each of Borrower and Guarantor agree to submit
to binding arbitration any and all claims, disputes and controversies between
them (and their respective employees, officers, directors, attorneys and other
agents), whether in tort, contract or otherwise, arising out of or in any way
relating to this Agreement, the Note, the Security Documents, the other Loan
Documents, the Loan and the negotiation, execution, administration,
collateralization, repayment, modification, extension, collection, enforcement,
default or termination thereof. Such arbitration shall proceed in Denver,
Colorado, shall be governed by Colorado law (including without limitation the
provisions of CRS 13-21-102(5) and all applicable statutes of limitation) and
shall be conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association (the "AAA"). Any award entered in an
arbitration, whether on motions or at a hearing, with or without testimony from
witnesses, shall be made by a written opinion stating the reasons for the award
made. The decision of any arbitration pursuant to this Agreement shall be made
based upon Colorado law without reference to any choice of law rules. Judgment
on any award hereunder may be entered in any court having jurisdiction.
(b) Nothing in the preceding paragraph, nor the exercise of any right
to arbitrate thereunder, shall limit the right of any party hereto: (1) to
foreclose against any real or personal property collateral by the exercise of
the power of sale under a deed of trust, mortgage, or other security agreement
or instrument or applicable law; (2) to exercise self-help remedies such as
setoff or repossession; or (3) to obtain provisional or ancillary remedies such
as replevin, injunctive relief, attachment or appointment of a receiver from a
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court having jurisdiction, before, during or after the pendency of any
arbitration proceeding. The institution and maintenance of any action for such
judicial relief, or pursuit of provisional or ancillary remedies, or exercise of
self-help remedies shall not constitute a waiver of the right or obligation of
any party to submit any claim or dispute to arbitration, including those claims
or disputes arising from exercise of any judicial relief, or pursuit of
provisional or ancillary remedies or exercise of self-help remedies.
(c) If the amount in dispute is $500,000 or more, arbitration hereunder
shall be before a three-person panel of neutral arbitrators, consisting of one
person from each of the following categories: (1) an attorney who has practiced
in the area of commercial law for at least eight years or a retired judge at the
Colorado or United States District Court or an appellate court level: (2) a
person with at least eight years experience in commercial lending: and (3) a
person with at least eight years experience in the petroleum industry. The
parties to the dispute or their representatives shall obtain from the AAA a list
of persons meeting the criteria outlined above for each category of arbitrator,
and the parties shall select one person from each category in the manner
established by the AAA.
(d) If the amount in dispute is less than $500,000, the arbitration
shall be conducted before one arbitrator, who shall be an attorney who has
practiced in the area of commercial law for at least eight years or a retired
judge at the Colorado or United States District Court or an appellate court
level. The parties to the dispute or their representatives shall obtain from the
AAA a list of persons meeting the criteria outlined above, and the parties shall
select the person in the manner established by the AAA.
(e) In any arbitration hereunder: (1) the arbitrator(s) shall decide
(by documents only or with a hearing, at the arbitrators' discretion) any
pre-hearing motions which are substantially similar to pre-hearing motions to
dismiss for failure to state a claim or motions for summary adjudication; (2)
discovery shall be permitted, but shall be limited as provided in Rule 26.1(o)
of the Colorado Rules of Civil Procedure, and shall be subject to the scheduling
by the arbitrator(s), and any discovery disputes shall be subject to final
determination by the arbitrator(s); and (3) the arbitrator(s) shall award costs
and expenses of the arbitration proceeding in accordance with the provisions of
this Agreement, the Note and/or the other Loan Documents.
IN WITNESS WHEREOF, this Agreement is executed as of the date
first written above.
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BONNEVILLE FUELS CORPORATION
By:___________________________
Patrick R. McDonald,
President
WELLS FARGO BANK WEST, NATIONAL ASSOCIATION
By: __________________________
Don McDonald,
Vice President
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LIMITED JOINDER
CARBON ENERGY CORPORATION, a Colorado corporation ("Guarantor"),
joins herein for the sole purpose of making the representations and warranties
set forth in the foregoing Credit Agreement, insofar and only insofar as they
relate to Guarantor, and agreeing to perform the covenants set forth in the
foregoing Credit Agreement, insofar and only insofar as they relate to
Guarantor; provided that this joinder shall not be deemed an undertaking by
Guarantor to repay the Loan (as defined in the foregoing Credit Agreement)
except to the extent that Guarantor is obligated to do so pursuant to the terms
of the Guaranty (as defined in the foregoing Credit Agreement).
CARBON ENERGY CORPORATION
By:___________________________
Patrick R. McDonald,
President
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