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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to section 13 or 15 (d) of
the Securities Exchange Act of 1934
April 26, 1995
--------------
Date of Report (Date of earliest event reported)
PrimeEnergy Corporation
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
0-7406 84-0637348
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(Commission File Number) (IRS Employer Identification
Number)
One Landmark Square, Stamford, Connecticut 06901
------------------------------------------------
(Address of principal executive offices)
(203) 358-5700
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(Registrant's telephone number)
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ITEM 5. OTHER EVENTS.
On April 26, 1995, the Registrant and its wholly-owned subsidiary,
PrimeEnergy Management Corporation, ("PEMC") entered into a Credit Agreement
(the "Credit Agreement") providing for a $50,000,000 master note revolving line
of credit with Bank One, Texas, National Association, a national banking
association ("BankOne"), which amended and restated the existing credit
facility with BankOne. Among other matters, the Credit Agreement provides for
syndication with other lenders, initially, Den norske Bank AS, increases the
borrowing base of the Registrant to $12.5 million and provides for a lower
rate of interest. A copy of the Credit Agreement is filed herewith as Exhibit
10.7. Substantially all of the producing properties and other oil and gas
interests and assets of the Registrant and PEMC are pledged as security for the
indebtedness of Registrant incurred under the Credit Agreement, pursuant to
that certain Mortgage, Deed of Trust, Indenture, Security Agreement, Financing
Statement and Assignment of Production, as ratified and amended, filed herewith
as Exhibit 10.8. Each of the Registrant's subsidiaries, Prime Operating
Company, Eastern Oil Well Service Company and Southwest Oilfield Construction
Company, have pledged substantially all of the assets of such subsidiaries as
security for the indebtedness of Registrant and PEMC under the Credit
Agreement.
ITEM 6. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
10.7 Credit Agreement dated April 26, 1995, between PrimeEnergy
Corporation, PrimeEnergy Management Corporation and Bank One,
Texas, National Association (filed herewith)
10.8 Mortgage, Deed of Trust, Indenture, Security Agreement,
Financing Statement and Assignment of Production dated May 27,
1994, as ratified and amended April 26, 1995, between
PrimeEnergy Corporation, PrimeEnergy Management Corporation
and Bank One, Texas, National Association (filed herewith)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PrimeEnergy Corporation
Date: May 5, 1995 By: /s/ Beverly A. Cummings
Beverly A. Cummings
Executive Vice President
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EXHIBIT 10.7
================================================================================
CREDIT AGREEMENT
AMONG
PRIMEENERGY CORPORATION
AND
PRIMEENERGY MANAGEMENT CORPORATION,
AS BORROWERS,
BANK ONE, TEXAS, NATIONAL ASSOCIATION,
AS AGENT,
AND
THE LENDERS SIGNATORY HERETO
April 26, 1995
________________________________________________
$50,000,000 MASTER NOTE FACILITY
________________________________________________
================================================================================
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Additional Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Undefined Financial Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.4 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.5 Articles and Sections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.6 Number and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.7 Incorporation of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE II TERMS OF FACILITY
2.1 Revolving Line of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.2 Letter of Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.3 Limitations on Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.4 Limitation on Types of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.5 Use of Loan Proceeds and Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.6 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.7 Repayment of Loans and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.8 General Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.9 Time, Place, and Method of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.10 Pro Rata Treatment; Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.11 Borrowing Base Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.12 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.13 Voluntary Prepayments and Conversions of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.14 Commitment Fee; Reduction of Commitment Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.15 Engineering Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.16 Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.17 Letter of Credit Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.18 Loans to Satisfy Obligations of Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.19 Security Interest in Accounts; Right of Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.20 General Provisions Relating to Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.21 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.22 Yield Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.23 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.24 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.25 Replacement Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.26 Regulatory Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.27 Letters in Lieu of Transfer Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.28 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.29 Automatic Debit Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.30 Joint and Several Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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ARTICLE III CONDITIONS
3.1 Conditions Precedent to Initial Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.2 Conditions Precedent to Each Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.3 Conditions Precedent to Issuance of Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE IV REPRESENTATIONS AND WARRANTIES
4.1 Due Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.2 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.3 Valid and Binding Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.4 Security Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.5 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.6 Scope and Accuracy of Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.7 No Material Misstatements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.8 Liabilities, Litigation, and Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.9 Authorizations; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.10 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.11 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.12 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.13 Compliance with Federal Reserve Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.14 Investment Company Act Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.15 Public Utility Holding Company Act Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.16 Proper Filing of Tax Returns; Payment of Taxes Due . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.17 Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.18 Gas Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.19 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.20 Casualties or Taking of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.21 Chief Executive Officers of Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.22 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE V AFFIRMATIVE COVENANTS
5.1 Maintenance and Access to Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.2 Quarterly Unaudited Financial Statements; Quarterly Receivables Reports; Monthly Borrowing Base
Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.3 Annual Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.4 Oil and Gas Reserve Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.5 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.6 Security Instruments; Title Opinions; Title Defects . . . . . . . . . . . . . . . . . . . . . . . . 44
5.7 Notices of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.8 Statement of Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.9 Letters in Lieu of Transfer Orders; Division Orders . . . . . . . . . . . . . . . . . . . . . . . . 46
5.10 Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.11 Compliance with Laws and Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.12 Maintenance of Corporate Existence and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . 47
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5.13 Payment of Notes; Performance of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.14 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.15 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.16 Operation of Oil and Gas Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.17 Maintenance and Inspection of Tangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.18 Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.19 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.20 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE VI NEGATIVE COVENANTS
6.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.2 Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.3 Loans or Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.4 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.5 Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.6 Payment of Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.7 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.8 Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.9 Changes in Corporate Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.10 Cancellation of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.11 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.12 Lines of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.13 Current Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.14 Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.15 Debt Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.16 Interest Coverage Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VII EVENTS OF DEFAULT
7.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE VIII THE AGENT
8.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
8.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
8.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
8.4 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.6 Non-Reliance on Agent and Other Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.8 Restitution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.9 Agent in Its Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.10 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.11 Applicable Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
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ARTICLE IX MISCELLANEOUS
9.1 Assignments; Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.2 Survival of Representations, Warranties, and Covenants . . . . . . . . . . . . . . . . . . . . . . . 61
9.3 Notices and Other Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.4 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.5 Rights of Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.6 No Waiver; Rights Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.7 Survival Upon Unenforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.8 Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.9 Controlling Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.10 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.11 JURISDICTION AND VENUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.12 WAIVER OF RIGHTS TO JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.13 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
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LIST OF EXHIBITS
Exhibit I - Form of Notes
Exhibit II - Form of Assignment Agreement
Exhibit III - Form of Borrowing Base Report
Exhibit IV - Form of Borrowing Request
Exhibit V - Commitment Amounts
Exhibit VI - Form of Compliance Certificate
Exhibit VII - Form of Opinion of Counsel
Exhibit VIII - Disclosures
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CREDIT AGREEMENT
This CREDIT AGREEMENT is made and entered into this 26th day
of April, 1995, by and among PRIMEENERGY CORPORATION, a Delaware corporation
("PEC"), PRIMEENERGY MANAGEMENT CORPORATION, a New York corporation ("PEMC,"
with PEC and PEMC being individually referred to as a "Borrower" and
collectively as the "Borrowers"), BANK ONE, TEXAS, N.A., a national banking
association ("Bank One"), and DEN NORSKE BANK AS, a Norwegian bank ("DNB," with
Bank One, DNB, and each other lender that becomes a signatory hereto as
provided in Section 9.1, individually, together with its successors and
assigns, a "Lender" and, collectively, together with their respective
successors and assigns, the "Lenders"), and Bank One, as agent for the Lenders
(in such capacity, together with its successors in such capacity pursuant to
the terms hereof, the "Agent").
W I T N E S S E T H:
In consideration of the mutual covenants and agreements herein
contained, the parties hereto hereby agree as follows, amending and restating
in its entirety the Credit Agreement dated as of March 24, 1994, by and among
the Borrowers and Bank One, as heretofore amended, restated, or supplemented
(the "Existing Credit Agreement").
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above. As used in this Agreement, the
terms "Agent," "Bank One," "Borrower," "Borrowers," "Existing Credit
Agreement," "Lender," "Lenders," "PEC," and "PEMC" shall have the meaning
assigned to them hereinabove.
1.2 Additional Defined Terms. As used in this Agreement,
each of the following terms shall have the meaning assigned thereto in this
Section, unless the context otherwise requires:
"Accounts" shall mean all accounts receivable, book debts,
notes, drafts, instruments, documents, acceptances, and other forms of
obligations now owned or hereafter received or acquired by or
belonging or owing to any Loan Party (including, without limitation,
any such obligation which might be characterized as an account,
general intangible, other than contract rights under contracts
containing prohibitions against assignment of or the granting of a
security interest in the rights of a party thereunder, or chattel
paper under the Uniform Commercial Code in effect in any
jurisdiction), and all moneys due or to become due to any Loan Party
under all contracts for the sale or lease of goods or the performance
of services (whether or not earned by performance) or in connection
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with any other transaction, and all collateral security and guarantees
of any kind given by any Person with respect to any of the foregoing.
"Additional Costs" shall mean costs which the Agent or any
Lender determines are attributable to its obligation to make or its
making or maintaining any LIBO Rate Loan or issuing or participating
in Letters of Credit, or any reduction in any amount receivable by the
Agent or such Lender in respect of any such obligation or any LIBO
Rate Loan or Letter of Credit, resulting from any Regulatory Change
which (a) changes the basis of taxation of any amounts payable to the
Agent or such Lender under this Agreement or any Note in respect of
any LIBO Rate Loan or Letter of Credit (other than taxes imposed on
the overall net income of the Agent or such Lender or its Applicable
Lending Office for any such LIBO Rate Loan by the jurisdiction in
which the Agent or such Lender has its principal office or Applicable
Lending Office), (b) imposes or modifies any reserve, special deposit,
minimum capital, capital ratio, or similar requirements (other than
the Reserve Requirement utilized in the determination of the Adjusted
LIBO Rate for such Loan) relating to any extensions of credit or other
assets of, or any deposits with or other liabilities of, the Agent or
such Lender (including LIBO Rate Loans and Dollar deposits in the
London interbank market in connection with LIBO Rate Loans), or the
Commitment of the Agent or such Lender, or the London interbank
market, or (c) imposes any other condition affecting this Agreement or
any Note or any of such extensions of credit, liabilities, or
Commitments.
"Adjusted LIBO Rate" shall mean, for any Interest Period for
any LIBO Rate Loan, an interest rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined by the Agent to be
equal to the quotient of (a) the sum of the LIBO Rate for such
Interest Period for such Loan plus the Applicable Margin divided by
(b) 1 minus the Reserve Requirement for such Loan for such Interest
Period, such rate to be computed on the basis of a year of 360 days
and actual days elapsed (including the first day but excluding the
last day) during the period for which payable, but in no event shall
such rate exceed the Highest Lawful Rate.
"Affiliate" shall mean any Person directly or indirectly
controlled by, controlling, or under common control with, either
Borrower and includes any Subsidiary of either Borrower and any
"affiliate" of either Borrower within the meaning of Reg. Section
240.12b-2 of the Securities Exchange Act of 1934, as amended, with
"control," as used in this definition, meaning ownership of ten
percent or more of the voting equity of any Person or possession,
directly or indirectly, of the power to direct or cause the direction
of management, policies or action through ownership of the voting
securities, contract, voting trust, or membership in management or in
the group appointing or electing management or otherwise through
formal or informal arrangements or business relationships.
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"Agreement" shall mean this Credit Agreement, as amended,
restated, or supplemented from time to time.
"Applicable Lending Office" shall mean, for each Lender and
type of Loan, the lending office of such Lender (or an affiliate of
such Lender) designated for such type of Loan on the signature pages
hereof or such other office of such Lender (or an affiliate of such
Lender) as such Lender may from time to time specify to the Agent and
the Borrowers as the office by which its Loans of such type are to be
made and maintained.
"Applicable Margin" shall mean, as to each Floating Rate Loan,
one-half of one percent (1/2%), and as to each LIBO Rate Loan, two and
three-fourths percent (2-3/4%).
"Assignment Agreement" shall mean an Assignment Agreement,
substantially in the form of Exhibit II, with appropriate insertions.
"Available Commitment" shall mean, at any time, an amount
equal to the remainder, if any, of (a) the lesser of the Maximum
Commitment Amount or the Borrowing Base in effect at such time minus
(b) the sum of the Loan Balance at such time plus the L/C Exposure at
such time.
"Base Rate" shall mean the interest rate announced or
published by Bank One from time to time as its general reference rate
of interest, which Base Rate shall change upon each change in such
announced or published general reference interest rate and which Base
Rate may not be the lowest interest rate charged by Bank One.
"Borrowing Base" shall mean, at any time, the amount
determined in accordance with Section 2.11.
"Borrowing Base Report" shall mean a report provided by the
Borrowers pursuant to Section 5.2(c), substantially in the form of
Exhibit III, together with a summary of Credit Accounts and a schedule
reflecting the net book value and location by state of all Equipment
of each Loan Party.
"Borrowing Request" shall mean each written request, in
substantially the form attached hereto as Exhibit IV, by the Borrowers
to the Agent for a borrowing, conversion, or prepayment pursuant to
Sections 2.1 or 2.13, each of which shall:
(a) be signed by a Responsible Officer of the
Borrowers;
(b) specify the amount and type of Loan
requested, and, as applicable, the Loan to be converted or
prepaid and the date of
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<PAGE> 9
the borrowing, conversion, or prepayment (which shall be a
Business Day);
(c) when requesting a Floating Rate Loan, be
delivered to the Agent no later than 11:00 a.m., Central
Standard or Daylight Savings Time, as the case may be, on the
Business Day preceding the requested borrowing, conversion, or
prepayment; and
(d) when requesting a LIBO Rate Loan, be
delivered to the Agent no later than 11:00 a.m., Central
Standard or Daylight Savings Time, as the case may be, the
third Business Day preceding the requested borrowing,
conversion, or prepayment and designate the Interest Period
requested with respect to such Loan.
"Business Day" shall mean a day other than a day when
commercial banks are authorized or required to close in the State of
Texas and, with respect to all requests, notices, and determinations
in connection with, and payments of principal and interest on, LIBO
Rate Loans, which is a day for trading in Dollar deposits in the
London interbank market.
"Closing Date" shall mean April 26, 1995.
"Code" shall mean the United States Internal Revenue Code of
1986, as amended from time to time.
"Collateral" shall mean the Mortgaged Properties, the
Accounts, the Equipment, and any other Property, wherever located and
whether now owned or existing or hereafter acquired or arising, that
is now or at any time used or intended to be subject to the Liens
created in the Security Instruments or otherwise as security for the
payment or performance of all or any portion of the Obligations.
"Commitment Amount" shall mean, for each Lender, the amount
set forth opposite the name of such Lender on Exhibit V under the
caption "Commitment Amounts," as modified from time to time to reflect
assignments permitted by Section 9.1 or otherwise pursuant to the
terms hereof.
"Commitment Period" shall mean the period from and including
the Closing Date to but not including the Commitment Termination Date.
"Commitment Termination Date" shall mean July 1, 1996.
"Commitments" shall mean the several obligations of the
Lenders to make Loans to or for the benefit of the Borrowers pursuant
to Section 2.1 and the
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<PAGE> 10
obligations of the Agent to issue and the Lenders to participate in
Letters of Credit pursuant to Section 2.2.
"Commonly Controlled Entity" shall mean any Person which is
under common control with either Borrower within the meaning of
Section 4001 of ERISA.
"Compliance Certificate" shall mean each certificate,
substantially in the form attached hereto as Exhibit VI, executed by
the president or chief financial officer of the Borrowers and
furnished to the Agent from time to time in accordance with the terms
hereof.
"Consolidated Cash Flow" shall mean, for any period,
consolidated net income of PEC and its Subsidiaries from operations
for such period plus depreciation, amortization, depletion, and other
non- cash expenses of PEC and its Subsidiaries for such period (except
for normally re-occurring accruals permitted under GAAP and usual for
Persons engaged in businesses of the type in which PEC and its
Subsidiaries are engaged) minus non-cash revenues for such period and
cash used during such period to purchase PEC capital stock.
"Consolidated Debt" shall mean, for any period, consolidated
Indebtedness of PEC and its Subsidiaries for borrowed money and
capitalized leases for such period.
"Contested in Good Faith" shall mean a matter (a) which is
being contested in good faith by or on behalf of any Loan Party, by
appropriate and lawful proceedings diligently conducted, satisfactory
to the Agent, and for which a reserve has been established in an
amount determined in accordance with GAAP, (b) in which foreclosure,
distraint, sale, forfeiture, levy, execution or other similar
proceedings have not been initiated or have been stayed and continue
to be stayed, and (c) in which a good faith contest will not
materially detract from the value of the Collateral, jeopardize the
rights of the Agent, any Lender, or any Loan Party with respect
thereto, interfere with the operation by any Loan Party of its
business, or otherwise have a Material Adverse Effect.
"Contingent Obligation" shall mean, as to any Person, any
obligation of such Person guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends, or other obligations of any other
Person (for purposes of this definition, a "primary obligation") in
any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, regardless of whether such
obligation is contingent, (a) to purchase any primary obligation or
any Property constituting direct or indirect security therefor, (b) to
advance or supply funds (i) for the purchase or payment of any primary
obligation, or (ii) to maintain working or equity capital of any other
Person in respect of any primary obligation, or otherwise to maintain
the net worth or solvency of any other Person, (c) to purchase
Property, securities or services primarily for the purpose
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<PAGE> 11
of assuring the owner of any primary obligation of the ability of the
Person primarily liable for such primary obligation to make payment
thereof, or (d) otherwise to assure or hold harmless the owner of any
such primary obligation against loss in respect thereof, with the
amount of any Contingent Obligation being deemed to be equal to the
stated or determinable amount of the primary obligation in respect of
which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith.
"Credit Accounts" shall mean any "account," "chattel paper,"
and "general intangible," as such terms are defined in the UCC, now or
hereafter owned by any Loan Party, which is classified as a receivable
on a balance sheet of such Loan Party.
"Current Assets" shall mean all assets that should, in
accordance with GAAP, be classified as current assets on a balance
sheet of PEC.
"Current Liabilities" shall mean all liabilities that should,
in accordance with GAAP, be classified as current liabilities on a
balance sheet of PEC.
"Debtor Relief Laws" shall mean the Bankruptcy Code of the
United States of America, as amended from time to time, and all other
applicable liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, reorganization, or similar
debtor relief laws from time to time in effect in any jurisdiction
affecting the rights of creditors generally.
"Default" shall mean any event or occurrence which with the
lapse of time or the giving of notice or both would become an Event of
Default.
"Default Rate" shall mean a per annum interest rate equal to
the Base Rate plus five percent (5%), such rate to be computed on the
basis of a year of 365 or 366 days, as the case may be, and actual
days elapsed (including the first day but excluding the last day)
during the period for which payable, but in no event shall such rate
exceed the Highest Lawful Rate.
"Dollars" and "$" shall mean dollars in lawful currency of the
United States of America.
"Eligible Equipment" shall mean, at a particular date,
Equipment:
(a) which does not constitute part of the
Mortgaged Property and which is owned solely by any Loan Party
and as to which such Loan Party has good and marketable title,
free and clear of any and all Liens, other than Permitted
Liens, and which is subject to a valid and continuing
first-priority perfected Lien in favor of the Agent pursuant
to the Security Instruments;
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<PAGE> 12
(b) which is in the possession and control of
such Loan Party or another Person acceptable to the Agent in
the exercise of its good faith discretion and, in such latter
case, evidenced by warehouse receipts or other documentation
satisfactory to the Agent in the exercise of its good faith
discretion;
(c) which is located in jurisdictions for which
the Agent has been furnished the results of a recent search by
a Person satisfactory to the Agent of the Uniform Commercial
Code filings which may have been filed in such jurisdictions
in the name of such Loan Party as debtor; and
(d) which the Agent has not otherwise determined
in the exercise of its good faith discretion to be
unacceptable in accordance with its customary practices for
facilities of this nature.
"Eligible Joint Interest Accounts" shall mean, at a particular
date, Credit Accounts:
(a) which are solely owned by any Loan Party and
in which such Loan Party has good and marketable title, free
and clear of any and all Liens or rights of others, other than
Permitted Liens, and which are subject to a valid and
continuing first-priority perfected Lien in favor of the Agent
pursuant to the Security Instruments;
(b) which are not outstanding more than 30 days
past the due date expressed in the related invoice;
(c) which are not due more than 30 days after the
issuance date expressed in the related invoice;
(d) as to which the account debtor thereunder has
been sent an invoice within 30 days after such Credit Accounts
have been entered on the financial records of such Loan Party;
(e) which are not owed by an obligor that is (i)
organized under the laws of a jurisdiction outside the United
States or Canada, or (ii) an Affiliate of any Loan Party;
(f) which are not owed by an obligor that has
taken any of the actions or suffered any of the events of the
kind described in Sections 7.1(e) or 7.1(f);
(g) which are bona fide, valid, and legally
enforceable obligations of the parties thereto or the account
debtor in respect
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<PAGE> 13
thereof and arise as the result of advances and payments made
by such Loan Party, as operator, for the benefit of
non-operators under joint operating agreements covering Oil
and Gas Properties;
(h) as to which all consents, licenses,
approvals, or authorizations of, or registrations or
declarations with, any Governmental Authority required to be
obtained, effected, or given in connection with the execution,
delivery, and performance thereof by each party obligated
thereunder have been duly obtained, effected, or given, are in
full force and effect, and do not subject the scope of such
Credit Accounts to any materially adverse limitation, either
specific or general in nature;
(i) as to which neither such Loan Party nor (to
the best knowledge of such Loan Party) any other party to such
Credit Account is in default or is likely to become in default
in the performance or observance of any of the terms thereof
and as to which such Loan Party has fully performed all its
obligations;
(j) against which no defense, offset,
counterclaim, or claim has been asserted or alleged and which
are not subject to any defense, offset, counterclaim, or
claim;
(k) as to which no amounts payable under or in
connection therewith are evidenced by promissory notes or
other instruments except (i) instruments which constitute a
part of chattel paper and which have been individually marked
to show the Lien created by the Security Instruments, and (ii)
notes or instruments which have been delivered to the Agent;
and
(l) which the Agent has not otherwise determined
in the exercise of its good faith discretion to be
unacceptable in accordance with its customary practices for
facilities of this nature.
"Environmental Complaint" shall mean any written or oral
complaint, order, directive, claim, citation, notice of environmental
report or investigation, or other notice by any Governmental Authority
or any other Person with respect to (a) air emissions, (b) spills,
releases, or discharges to soils, any improvements located thereon,
surface water, groundwater, or the sewer, septic, waste treatment,
storage, or disposal systems servicing any Property of any Loan Party
or any Property for which any Loan Party serves as operator, (c) solid
or liquid waste disposal, (d) the use, generation, storage,
transportation, or disposal of any Hazardous Substance, or (e) other
environmental, health, or safety matters affecting any Property of any
Loan Party or any Property for which any Loan Party serves as operator
or the business conducted thereon.
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<PAGE> 14
"Environmental Laws" shall mean (a) the following federal laws
as they may be cited, referenced, and amended from time to time: the
Clean Air Act, the Clean Water Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Endangered Species Act,
the Hazardous Materials Transportation Act of 1986, the Occupational
Safety and Health Act, the Oil Pollution Act of 1990, the Resource
Conservation and Recovery Act of 1976, the Safe Drinking Water Act,
the Superfund Amendments and Reauthorization Act, and the Toxic
Substances Control Act; (b) any and all equivalent environmental
statutes of any state in which Property of any Loan Party or any
Property for which any Loan Party serves as operator or any Mortgaged
Property is situated, as they may be cited, referenced and amended
from time to time; (c) any rules or regulations promulgated under or
adopted pursuant to the above federal and state laws; and (d) any
other equivalent federal, state, or local statute or any requirement,
rule, regulation, code, ordinance, or order adopted pursuant thereto,
including, without limitation, those relating to the generation,
transportation, treatment, storage, recycling, disposal, handling, or
release of Hazardous Substances.
"EOWSC" shall mean Eastern Oil Well Service Company, a West
Virginia corporation.
"Equipment" shall mean all goods classified as "equipment," in
Section 9.109(2) of the UCC, together with all accessions,
improvements, attachments, and other additions thereto and substitutes
and replacements therefor, and all tools, parts, and appurtenances now
or at any time hereafter used in connection therewith.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations thereunder
and interpretations thereof.
"Event of Default" shall mean any of the events specified in
Section 7.1.
"Existing Loan Documents" shall mean the Loan Documents, as
such term is defined in the Existing Credit Agreement.
"Existing Note" shall mean the $10,000,000 Promissory Note
dated March 24, 1994, by the Borrowers payable to the order of Bank
One.
"Existing Security Instruments" shall mean the Security
Instruments, as such term is defined in the Existing Credit Agreement.
"Federal Funds Rate" shall mean, for any day, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
equal to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers on such day, as
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<PAGE> 15
published by the Federal Reserve Bank of New York, on the Business Day
next succeeding such day, provided that (a) if the day for which such
rate is to be determined is not a Business Day, the Federal Funds Rate
for such day shall be such rate on such transactions on the next
preceding Business Day as so published on the next succeeding Business
Day, and (b) if such rate is not so published for any day, the Federal
Funds Rate for such day shall be the average rate charged to the Agent
on such day on such transactions as determined by the Agent.
"Final Maturity" shall mean July 1, 1996.
"Financial Statements" shall mean statements of the financial
condition as at the point in time and for the period indicated and
consisting of at least a balance sheet and related statements of
operations, stockholders' equity, and cash flows and, when required by
applicable provisions of this Agreement to be audited, accompanied by
the unqualified certification of independent certified public
accountants acceptable to the Agent and footnotes to any of the
foregoing, all of which shall be prepared in accordance with GAAP
consistently applied and in comparative form with respect to the
corresponding period of the preceding fiscal period.
"Floating Rate" shall mean, for any day, an interest rate per
annum equal to the greater of (a) the Base Rate for such day plus the
Applicable Margin or (b) the Federal Funds Rate for such day plus one
percent (1%), such rate to be computed, in either case, on the basis
of a year of 365 or 366 days, as the case may be, and actual days
elapsed (including the first day but excluding the last day) during
the period for which payable, but in no event shall such rate exceed
the Highest Lawful Rate.
"Floating Rate Loan" shall mean any Loan and any portion of
the Loan Balance which the Borrowers have requested, in the initial
Borrowing Request for such Loan or a subsequent Borrowing Request for
such portion of the Loan Balance, bear interest at the Floating Rate,
or which pursuant to the terms hereof are otherwise required to bear
interest at the Floating Rate.
"GAAP" shall mean generally accepted accounting principles
established by the Financial Accounting Standards Board or the
American Institute of Certified Public Accountants and in effect in
the United States from time to time.
"Governmental Authority" shall mean any nation, country,
commonwealth, territory, government, state, county, parish,
municipality, or other political subdivision and any entity exercising
executive, legislative, judicial, regulatory, or administrative
functions of or pertaining to government.
"Hazardous Substances" shall mean flammables, explosives,
radioactive materials, hazardous wastes, asbestos, or any material
containing asbestos, polychlorinated biphenyls (PCBs), toxic
substances or related materials,
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<PAGE> 16
petroleum, petroleum products, associated oil or natural gas
exploration, production, and development wastes, or any substances
defined as "hazardous substances," "hazardous materials," "hazardous
wastes," or "toxic substances" under the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, the Superfund
Amendments and Reauthorization Act, as amended, the Hazardous
Materials Transportation Act, as amended, the Resource Conservation
and Recovery Act, as amended, the Toxic Substances Control Act, as
amended, or any other Requirement of Law.
"Highest Lawful Rate" shall mean, with respect to each Lender,
the maximum non-usurious interest rate, if any (or, if the context so
requires, an amount calculated at such rate), that at any time or from
time to time may be contracted for, taken, reserved, charged, or
received under laws applicable to such Lender, as such laws are
presently in effect or, to the extent allowed by applicable law, as
such laws may hereafter be in effect and which allow a higher maximum
non-usurious interest rate than such laws now allow.
"Indebtedness" shall mean, as to any Person, without
duplication, (a) all liabilities (excluding reserves for deferred
income taxes, deferred compensation liabilities, and other deferred
liabilities and credits) which in accordance with GAAP would be
included in determining total liabilities as shown on the liability
side of a balance sheet, (b) all obligations of such Person evidenced
by bonds, debentures, promissory notes, or similar evidences of
indebtedness, (c) all other indebtedness of such Person for borrowed
money, and (d) all obligations of others, to the extent any such
obligation is secured by a Lien on the assets of such Person (whether
or not such Person has assumed or become liable for the obligation
secured by such Lien).
"Insolvent" or "Insolvency" shall mean, with respect to any
Multiemployer Plan, that such Plan is insolvent within the meaning of
such term as used in Section 4245 of ERISA.
"Insolvency Proceeding" shall mean application (whether
voluntary or instituted by another Person) for or the consent to the
appointment of a receiver, trustee, conservator, custodian, or
liquidator of any Person or of all or a substantial part of the
Property of such Person, or the filing of a petition (whether
voluntary or instituted by another Person) commencing a case under
Title 11 of the United States Code, seeking liquidation,
reorganization, or rearrangement or taking advantage of any other
Debtor Relief Law.
"Intellectual Property" shall mean patents, patent
applications, trademarks, tradenames, copyrights, technology,
know-how, and processes.
"Interest Expense" shall mean, for any period, consolidated
interest expense of PEC and its Subsidiaries for such periods as
determined in accordance with GAAP.
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<PAGE> 17
"Interest Period" shall mean, subject to the limitations set
forth in Section 2.3, with respect to any LIBO Rate Loan, a period
commencing on the date such Loan is made or converted from a Loan of
another type pursuant to this Agreement or the last day of the next
preceding Interest Period with respect to such Loan and ending on the
numerically corresponding day in the calendar month that is one, two,
or, subject to availability, three months thereafter, as the Borrowers
may request in the Borrowing Request for such Loan.
"Investment" in any Person shall mean any stock, bond, note,
or other evidence of Indebtedness, or any other security of, or
investment or partnership interest in, such Person.
"L/C Exposure" shall mean, at any time, the aggregate maximum
amount available to be drawn under outstanding Letters of Credit at
such time.
"Letter of Credit" shall mean any standby letter of credit
issued for the account of the Borrowers or either of them pursuant to
Section 2.2.
"Letter of Credit Application" shall mean the standard letter
of credit application employed by the Agent, as the issuer of the
Letters of Credit, from time to time in connection with letters of
credit.
"Letter of Credit Payment" shall mean any payment made by the
Agent on behalf of the Lenders under a Letter of Credit, to the extent
that such payment has not been repaid by the Borrowers.
"LIBO Rate" shall mean, with respect to any Interest Period
for any LIBO Rate Loan, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) equal to the average of the
offered quotations appearing on Knight-Ridder Page 62 (or any
successor or similar service selected by the Agent) as of
approximately 11:00 a.m., Central Standard or Daylight Savings Time,
as the case may be, on the day three Business Days prior to the first
day of such Interest Period for Dollar deposits in an amount
comparable to the principal amount of such LIBO Rate Loan and having a
term comparable to the Interest Period for such LIBO Rate Loan. If
neither such Knight-Ridder Page 62 nor any successor or similar
service is available, the term "LIBO Rate" shall mean, with respect to
any Interest Period for any LIBO Rate Loan, the rate per annum
(rounded upwards if necessary, to the nearest 1/100 of 1%) quoted by
the Agent at approximately 11:00 a.m., London time (or as soon
thereafter as practicable) three Business Days prior to the first day
of the Interest Period for such LIBO Rate Loan for the offering by the
Agent to leading banks in the London interbank market of Dollar
deposits in an amount comparable to the principal amount of such LIBO
Rate Loan and having a term comparable to the Interest Period for such
LIBO Rate Loan.
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<PAGE> 18
"LIBO Rate Loan" shall mean any Loan and any portion of the
Loan Balance which the Borrowers have requested, in the initial
Borrowing Request for such Loan or a subsequent Borrowing Request for
such portion of the Loan Balance, bear interest at the Adjusted LIBO
Rate and which are permitted by the terms hereof to bear interest at
the Adjusted LIBO Rate.
"Lien" shall mean any interest in Property securing an
obligation owed to, or a claim by, a Person other than the owner of
such Property, whether such interest is based on common law, statute,
or contract, and including, but not limited to, the lien or security
interest arising from a mortgage, ship mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt, or a lease,
consignment, or bailment for security purposes (other than true leases
or true consignments), liens of mechanics, materialmen, and artisans,
maritime liens and reservations, exceptions, encroachments, easements,
rights of way, covenants, conditions, restrictions, leases, and other
title exceptions and encumbrances affecting Property which secure an
obligation owed to, or a claim by, a Person other than the owner of
such Property (for the purpose of this Agreement, each Loan Party
shall be deemed to be the owner of any Property which it has acquired
or holds subject to a conditional sale agreement, financing lease, or
other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes), and
the filing or recording of any financing statement or other security
instrument in any public office.
"Limitation Period" shall mean, with respect to any Lender,
any period while any amount remains owing on the Note payable to such
Lender and interest on such amount, calculated at the applicable
interest rate, plus any fees or other sums payable to such Lender
under any Loan Document and deemed to be interest under applicable
law, would exceed the amount of interest which would accrue at the
Highest Lawful Rate.
"Litigation" shall mean any proceeding, claim, lawsuit, and/or
investigation conducted or threatened (and known to the Person in
question) by or before any Governmental Authority.
"Loan" shall mean any loan made by any Lender to or for the
benefit of the Borrowers or either of them pursuant to this Agreement
and any payment made by the Agent or any Lender under a Letter of
Credit.
"Loan Balance" shall mean, at any time, the aggregate
outstanding principal balance of the Notes at such time.
"Loan Documents" shall mean the Existing Loan Documents, this
Agreement, the Notes, the Letter of Credit Applications, the Letters
of Credit, the Security Instruments, and all other documents and
instruments now or hereafter delivered pursuant to the terms of or in
connection with the Existing
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<PAGE> 19
Loan Documents, this Agreement, the Notes, the Letter of Credit
Applications, the Letters of Credit, or the Security Instruments, and
all renewals and extensions of, amendments and supplements to, and
restatements of, any or all of the foregoing from time to time in
effect.
"Loan Party" shall mean either Borrower, POC, EOWSC, or SOCC.
"Material Adverse Effect" shall mean (a) any material adverse
effect on the validity or enforceability of any Loan Document, (b) any
material adverse effect upon the financial position or business
operations of any Loan Party, or (c) any adverse effect upon the
ability of any Loan Party to fulfill its obligations under the terms
of the Loan Documents.
"Maximum Commitment Amount" shall mean the sum of the
Commitment Amounts of all Lenders.
"Mortgaged Properties" shall mean all Oil and Gas Properties
subject to a Lien in favor of the Agent to secure the Obligations.
"Multiemployer Plan" shall mean a Plan which is a
multiemployer plan as defined in Section 4001(a)(3) of ERISA.
"Notes" shall mean, collectively, each of the promissory notes
of the Borrowers payable to a Lender in the amount of the Commitment
Amount of such Lender or such amount in excess thereof as may be
agreed to by the Borrowers, the Agent, and such Lender, in the form
attached hereto as Exhibit ?, with appropriate insertions, together
with all renewals, extensions for any period, increases, and
rearrangements thereof.
"Obligations" shall mean, without duplication, (a) all
Indebtedness evidenced by the Notes, (b) the obligation of the
Borrowers to provide to or reimburse the Agent, as the issuer of
Letters of Credit, or the Lenders, as the case may be, for, amounts
payable, paid, or incurred with respect to Letters of Credit, (c) the
undrawn, unexpired amount of all outstanding Letters of Credit, (d)
the obligation of the Loan Parties for the payment of fees and
expenses pursuant to the Loan Documents, and (e) all other obligations
and liabilities of the Loan Parties to the Agent and the Lenders, now
existing or hereafter incurred, under, arising out of or in connection
with any Loan Document, and to the extent that any of the foregoing
includes or refers to the payment of amounts deemed or constituting
interest, only so much thereof as shall have accrued, been earned and
which remains unpaid at each relevant time of determination.
"Oil and Gas Properties" shall mean fee, leasehold, or other
interests in or under mineral estates or oil, gas, and other liquid or
gaseous hydrocarbon leases with respect to Properties situated in the
United States or offshore from any State of the United States,
including, without limitation, overriding royalty and
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royalty interests, leasehold estate interests, net profits interests,
production payment interests, and mineral fee interests, together with
contracts executed in connection therewith and all tenements,
hereditaments, appurtenances, and Properties appertaining, belonging,
affixed, or incidental thereto.
"Operating Cash Flow" shall mean, for any period, consolidated
net income from operations of PEC and its Subsidiaries for such period
determined in accordance with GAAP plus depreciation, depletion,
amortization, other non-cash expenses of PEC, and Interest Expense to
the extent such expenses are deducted in determining consolidated net
income from operations.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA or any entity
succeeding to any or all of its functions under ERISA.
"Percentage Share" shall mean, (a) until such time as the Loan
Balance has been $12,500,000 for 30 consecutive days and DNB has made
payment to Bank One of twenty-five percent (25%) of such Loan Balance
pursuant to Section 2.10, as to Bank One, one hundred percent (100%),
and as to DNB, zero percent (0%), and (b) at all times thereafter, as
to each Lender, the percentage such Lender's Commitment Amount
constitutes of the Maximum Commitment Amount.
"Permitted Liens" shall mean (a) the Liens in favor of the
Agent, (b) Liens for taxes, assessments, or other governmental charges
or levies incurred in the ordinary course of business which are not
yet due and payable or which are being Contested in Good Faith, (c)
Liens in favor of vendors, carriers, warehousemen, repairmen,
mechanics, materialmen and landlords and similar Liens arising by
operation of law in the ordinary course of business in respect of
obligations which are not yet due or which are being Contested in Good
Faith, (d) the currently existing Liens described in Exhibit VIII
hereto, if any, (e) pledges or deposits made in the ordinary course of
business to secure the payment of workers' compensation, or to
participate in any fund in connection with workers' compensation,
unemployment insurance, old-age pensions, or other social security
programs (other than Liens created by Section 4068 of ERISA), (f)
good-faith pledges or deposits made in the ordinary course of business
to secure performance of bids, tenders, contracts (other than for the
repayment of borrowed money), or leases, not in excess of 10% of the
aggregate amount due thereunder, or to secure statutory obligations,
or surety, appeal, indemnity, performance, or other similar bonds
required in the ordinary course of business, (g) zoning restrictions,
easements, rights of way, restrictions and other similar encumbrances
and minor defects in the chain of title which are customarily accepted
in the oil and gas financing industry, none of which interfere with
the ordinary or intended use of the Property affected thereby or
materially detract from the value or use of such Property, (h) Liens
in favor of operators and non-operators under joint operating
agreements arising in the ordinary course of
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business to secure obligations which are not yet due or are being
Contested in Good Faith, (i) Liens under production sales agreements,
division orders, and other agreements customary in the oil and gas
industry for processing, producing and selling hydrocarbons securing
obligations not constituting Indebtedness and provided that such Liens
do not secure obligations to deliver hydrocarbons at some future date
without receiving full payment therefor within 90 days of delivery,
(j) Liens against Oil and Gas Properties acquired subsequent to the
date of this Agreement securing the payment of a portion of the cash
flow attributable to such Properties reserved by or granted to the
seller of such Properties in connection with the acquisition of such
Properties, (k) Liens securing Indebtedness permitted under Section
6.1(f) provided such Liens affect only the Property acquired in
connection with such Indebtedness, and (l) other Liens expressly
permitted under the Security Instruments.
"Person" shall mean an individual, corporation, partnership,
trust, unincorporated organization, government, any agency or
political subdivision of any government, or any other form of entity.
"Plan" shall mean, at any time, any employee benefit plan
which is covered by ERISA and in respect of which either Borrower or
any Commonly Controlled Entity is (or, if such plan were terminated at
such time, would under Section 4069 of ERISA be deemed to be) an
"employer" as defined in Section 3(5) of ERISA.
"POC" shall mean Prime Operating Company, a Texas corporation.
"Principal Office" shall mean the principal office of the
Agent in Houston, Texas, presently located at 910 Travis, Houston,
Texas 77002.
"Prohibited Transaction" shall have the meaning assigned to
such term in Section 4975 of the Code.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, tangible or intangible.
"Receivable Report" shall mean a schedule provided by the
Borrowers pursuant to Section 5.2(b) and reflecting a detailed listing
(showing the names and addresses of account debtors and amounts owing)
and aging (in appropriate columns entitled "Current," "31-60 Days,"
"61-90 Days," and "Over 90 Days") of the Credit Accounts.
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System (or any successor), as amended
or supplemented from time to time.
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"Regulatory Change" shall mean, with respect to any Lender,
the passage, adoption, institution, or modification of any federal,
state, local, or foreign Requirement of Law (including, without
limitation, Regulation D), or any interpretation, directive, or
request (whether or not having the force of law) of any Governmental
Authority or monetary authority charged with the enforcement,
interpretation, or administration thereof, occurring after the Closing
Date and applying to a class of lenders including such Lender or its
Applicable Lending Office.
"Release of Hazardous Substances" shall mean any emission,
spill, release, disposal, or discharge, except in accordance with a
valid permit, license, certificate, or approval of the relevant
Governmental Authority, of any Hazardous Substance into or upon (a)
the air, (b) soils or any improvements located thereon, (c) surface
water or groundwater, or (d) the sewer or septic system, or the waste
treatment, storage, or disposal system servicing any Property of any
Loan Party.
"Reorganization" shall mean, with respect to any Multiemployer
Plan, that such Plan is in reorganization within the meaning of such
term in Section 4241 of ERISA.
"Reportable Event" shall mean any of the events set forth in
Section 4043(b) of ERISA, other than those events as to which the
thirty-day notice period is waived under subsections .13, .14, .16,
.18, .19 or .20 of PBGC Reg. Section 2615.
"Requirement of Law" shall mean, as to any Person, any
applicable law, treaty, ordinance, order, judgment, rule, decree,
regulation, or determination of an arbitrator, court, or other
Governmental Authority, including, without limitation, rules,
regulations, orders, and requirements for permits, licenses,
registrations, approvals, or authorizations, in each case as such now
exist or may be hereafter amended and are applicable to or binding
upon such Person or any of its Property or to which such Person or any
of its Property is subject.
"Reserve Report" shall mean each report provided by the
Borrowers pursuant to Section 5.4.
"Reserve Requirement" shall mean, for any Interest Period for
any LIBO Rate Loan, the average maximum rate at which reserves
(including any marginal, supplemental, or emergency reserves) are
required to be maintained during such Interest Period under Regulation
D by member banks of the Federal Reserve System in Dallas, Texas, with
deposits exceeding one billion Dollars against "Eurocurrency
liabilities" (as such term is used in Regulation D) and any other
reserves required by reason of any Regulatory Change to be maintained
by such member banks against (a) any category of liabilities which
includes deposits by reference to which the LIBO Rate is to be
determined as provided herein in the
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definition of the term "LIBO Rate" or (b) any category of extensions
of credit or other assets which include a LIBO Rate Loan.
"Reserve Value" shall mean the loan value of the Mortgaged
Property as determined by the Lenders in accordance with Section 2.11.
"Responsible Officer" shall mean, as to any Person, its
President, its Chief Financial Officer, or any Executive Vice
President.
"Security Instruments" shall mean (a) the Existing Security
Instruments, (b) the security instruments executed and delivered in
satisfaction of the condition set forth in Section 3.1(f), and (c) all
other documents and instruments at any time executed as security for
all or any portion of the Obligations, as each of the foregoing may be
amended, restated, or supplemented from time to time.
"Single Employer Plan" shall mean any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan.
"SOCC" shall mean Southwest Oilfield Construction Company, an
Oklahoma corporation.
"Subsidiary" shall mean, as to any Person, (a) a corporation
of which shares of the stock having ordinary voting power (other than
stock having such power only by reason of the occurrence of a
contingency to elect a majority of the board of directors (or
individuals performing similar functions) of such corporation are
owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries by such Person, and (b)
a partnership, association, joint venture or other entity in which
such Person, directly or indirectly through one or more intermediates,
is a general partner or has a majority equity interest.
"Superfund Site" shall mean those sites listed on the
Environmental Protection Agency National Priority List and eligible
for remedial action or any comparable state registries or list in any
state of the United States.
"Swap Obligations" shall mean crude oil, natural gas, or other
hydrocarbon floor, collar, cap, price protection, or swap agreements
and interest rate swap or other financial hedging agreements.
"Tangible Net Worth" shall mean (a) total assets, as would be
reflected on a balance sheet of PEC in accordance with GAAP, exclusive
of intangible assets, including, without limitation, patents, patent
applications, copyrights, trademarks, tradenames, experimental or
organization expenses, franchises, licenses, permits and other like
intangibles, treasury stock, unamortized underwriters' debt discount
and expenses, and goodwill minus (b) total liabilities, as would be
reflected on a balance sheet of PEC in accordance with GAAP.
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"UCC" shall mean the Uniform Commercial Code as from time to
time in effect in the State of Texas.
1.3 Undefined Financial Accounting Terms. Undefined
financial accounting terms used in this Agreement shall be defined according to
GAAP at the time in effect.
1.4 References. References in this Agreement to Exhibit,
Article, or Section numbers shall be to Exhibits, Articles, or Sections of this
Agreement, unless expressly stated to the contrary. References in this
Agreement to "hereby," "herein," "hereinafter," "hereinabove," "hereinbelow,"
"hereof," "hereunder" and words of similar import shall be to this Agreement in
its entirety and not only to the particular Exhibit, Article, or Section in
which such reference appears.
1.5 Articles and Sections. This Agreement, for
convenience only, has been divided into Articles and Sections; and it is
understood that the rights and other legal relations of the parties hereto
shall be determined from this instrument as an entirety and without regard to
the aforesaid division into Articles and Sections and without regard to
headings prefixed to such Articles or Sections.
1.6 Number and Gender. Whenever the context requires,
reference herein made to the single number shall be understood to include the
plural; and likewise, the plural shall be understood to include the singular.
Definitions of terms defined in the singular or plural shall be equally
applicable to the plural or singular, as the case may be, unless otherwise
indicated. Words denoting sex shall be construed to include the masculine,
feminine and neuter, when such construction is appropriate; and specific
enumeration shall not exclude the general but shall be construed as cumulative.
1.7 Incorporation of Exhibits. The Exhibits attached to
this Agreement are incorporated herein and shall be considered a part of this
Agreement for all purposes.
ARTICLE II
TERMS OF FACILITY
2.1 Revolving Line of Credit. (a) Upon the terms and
conditions and relying on the representations and warranties contained in this
Agreement, each Lender severally agrees to make Loans during the Commitment
Period to or for the benefit of the Borrowers or either of them in an aggregate
principal amount not to exceed at any time outstanding the lesser of the
Commitment Amount of such Lender or the Percentage Share of such Lender of the
Borrowing Base then in effect; provided, however, that (i) the Loan Balance
plus the L/C Exposure shall not exceed at any time the lesser of the Maximum
Commitment Amount or the Borrowing Base then in effect, and (ii) the sum of the
outstanding principal balance of all Loans by any Lender plus the Percentage
Share of such Lender of the L/C Exposure shall not exceed at any time an amount
equal to the Percentage Share of such Lender multiplied by the lesser of the
Maximum Commitment Amount or the Borrowing Base then in effect.
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(b) Subject to the terms of this Agreement, during the
Commitment Period, the Borrowers may borrow, repay, and reborrow and convert
Loans of one type or with one Interest Period into Loans of another type or
with a different Interest Period. Except for prepayments made pursuant to
Section 2.12, each borrowing, conversion, and prepayment of principal of Loans
shall be in an amount at least equal to $100,000. Each borrowing, prepayment,
or conversion of or into a Loan of a different type or, in the case of a LIBO
Rate Loan, having a different Interest Period, shall be deemed a separate
borrowing, conversion, and prepayment for purposes of the foregoing, one for
each type of Loan or Interest Period. Anything in this Agreement to the
contrary notwithstanding, the aggregate principal amount of LIBO Rate Loans
having the same Interest Period shall be at least equal to $500,000; and if any
LIBO Rate Loan would otherwise be in a lesser principal amount for any period,
such Loan shall be a Floating Rate Loan during such period.
(c) Not later than noon, Central Standard or Daylight
Savings Time, as the case may be, on the date specified for each borrowing,
each Lender shall make available an amount equal to its Percentage Share of the
borrowing to be made on such date to the Agent, at an account designated by the
Agent, in immediately available funds, for the account of the Borrowers. The
amount so received by the Agent shall, subject to the terms and conditions
hereof, be made available to the Borrowers in immediately available funds at
the Principal Office. All Loans by each Lender shall be maintained at the
Applicable Lending Office of such Lender and shall be evidenced by the Note of
such Lender.
(d) The failure of any Lender to make any Loan required
to be made by it hereunder shall not relieve any other Lender of its obligation
to make any Loan required to be made by it, and no Lender shall be responsible
for the failure of any other Lender to make any Loan.
2.2 Letter of Credit Facility. (a) Upon the terms and
conditions and relying on the representations and warranties contained in this
Agreement, the Agent, as issuing bank for the Lenders, agrees, from the date of
this Agreement until the date which is thirty days prior to the Commitment
Termination Date, to issue, on behalf of the Lenders in their respective
Percentage Shares, Letters of Credit for the account of the Borrowers or either
of them and to renew and extend such Letters of Credit. Letters of Credit
shall be issued, renewed, or extended from time to time on any Business Day
designated by the Borrowers following the receipt in accordance with the terms
hereof by the Agent of the written (or oral, confirmed promptly in writing)
request by a Responsible Officer of the Borrowers therefor and a Letter of
Credit Application. Letters of Credit shall be issued in such amounts as the
Borrowers may request; provided, however, that (i) no Letter of Credit shall
have an expiration date which is subsequent to the earlier of two years after
the issuance thereof or ten days prior to the Commitment Termination Date, (ii)
the Loan Balance plus the L/C Exposure shall not exceed at any time the lesser
of the Maximum Commitment Amount or the Borrowing Base, and (iii) the L/C
Exposure shall not exceed at any time $750,000.
(b) Prior to any Letter of Credit Payment in respect of
any Letter of Credit, each Lender shall be deemed to be a participant through
the Agent with respect to the relevant Letter of Credit in the obligation of
the Agent, as the issuer of such Letter of Credit, in an
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amount equal to the Percentage Share of such Lender of the maximum amount which
is or at any time may become available to be drawn thereunder. Upon delivery
by such Lender of funds requested pursuant to Section 2.2(c), such Lender shall
be treated as having purchased a participating interest in an amount equal to
such funds delivered by such Lender to the Agent in the obligation of the
Borrowers to reimburse the Agent, as the issuer of such Letter of Credit, for
any amounts payable, paid, or incurred by the Agent, as the issuer of such
Letter of Credit, with respect to such Letter of Credit.
(c) Each Lender shall be unconditionally and irrevocably
liable, without regard to the occurrence of any Default or Event of Default, to
the extent of the Percentage Share of such Lender at the time of issuance of
each Letter of Credit, to reimburse, on demand, the Agent, as the issuer of
such Letter of Credit, for the amount of each Letter of Credit Payment under
such Letter of Credit. Each Letter of Credit Payment shall be deemed to be a
Floating Rate Loan by each Lender to the extent of funds delivered by such
Lender to the Agent with respect to such Letter of Credit Payment and shall to
such extent be deemed a Floating Rate Loan under and shall be evidenced by the
Note of such Lender.
(d) EACH LENDER AGREES TO INDEMNIFY THE AGENT, AS THE
ISSUER OF EACH LETTER OF CREDIT, AND THE OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES OF THE AGENT (TO THE EXTENT NOT
REIMBURSED BY THE BORROWERS AND WITHOUT LIMITING THE OBLIGATION OF THE
BORROWERS TO DO SO), RATABLY ACCORDING TO THE PERCENTAGE SHARE OF SUCH LENDER
AT THE TIME OF ISSUANCE OF SUCH LETTER OF CREDIT, FROM AND AGAINST ANY AND ALL
LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND WHATSOEVER
WHICH MAY AT ANY TIME (INCLUDING, WITHOUT LIMITATION, ANY TIME FOLLOWING THE
PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF THIS
AGREEMENT) BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT AS THE
ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES IN ANY WAY RELATING TO OR ARISING OUT
OF THIS AGREEMENT OR SUCH LETTER OF CREDIT OR ANY ACTION TAKEN OR OMITTED BY
THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES UNDER OR IN
CONNECTION WITH ANY OF THE FOREGOING, INCLUDING, WITHOUT LIMITATION, ANY
LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS IMPOSED, INCURRED OR
ASSERTED AS A RESULT OF THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE
AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES; PROVIDED THAT NO LENDER
(OTHER THAN THE AGENT AS THE ISSUER OF A LETTER OF CREDIT) SHALL BE LIABLE FOR
THE PAYMENT OF ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
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EXPENSES OR DISBURSEMENTS RESULTING SOLELY FROM THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE AGENT AS THE ISSUER OF A LETTER OF CREDIT. THE AGREEMENTS IN
THIS SECTION 2.2(d) SHALL SURVIVE THE PAYMENT AND PERFORMANCE OF ALL
OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
2.3 Limitations on Interest Periods. Each Interest
Period selected by the Borrowers (a) which commences on the last Business Day
of a calendar month (or any day for which there is no numerically corresponding
day in the appropriate subsequent calendar month) shall end on the last
Business Day of the appropriate subsequent calendar month, (b) which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or, if such next succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day), (c) which
would otherwise end after Final Maturity shall end on Final Maturity, and (d)
shall have a duration of not less than one month and, if any Interest Period
would otherwise be a shorter period, the relevant Loan shall be a Floating Rate
Loan during such period.
2.4 Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, no more than ten separate Loans shall be outstanding
at any one time, with, for purposes of this Section, all Floating Rate Loans
constituting one Loan, and all LIBO Rate Loans for the same Interest Period
constituting one Loan. Anything herein to the contrary notwithstanding, if, on
or prior to the determination of any interest rate for any LIBO Rate Loan for
any Interest Period therefor:
(a) the Agent determines (which determination shall be
conclusive, absent manifest error) that quotations of interest rates
for the deposits referred to in the definition of "LIBO Rate" in
Section 1.2 are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining the rate of interest
for such Loan as provided in this Agreement; or
(b) the Agent determines (which determination shall be
conclusive, absent manifest error) that the rates of interest referred
to in the definition of "LIBO Rate" in Section 1.2 upon the basis of
which the rate of interest for such Loan for such Interest Period is
to be determined do not adequately cover the cost to the Lenders of
making or maintaining such Loan for such Interest Period,
then the Agent shall give the Borrowers and the Lenders prompt notice thereof;
and so long as such condition remains in effect, the Lenders shall be under no
obligation to make LIBO Rate Loans or to convert Floating Rate Loans into LIBO
Rate Loans, and the Borrowers shall, on the last day of the then current
Interest Period for each outstanding LIBO Rate Loan, either prepay such LIBO
Rate Loan or convert such Loan into a Floating Rate Loan in accordance with
Section 2.13.
2.5 Use of Loan Proceeds and Letters of Credit. (a) As
of the date hereof, indebtedness in the amount of $5,880,503.69 is outstanding
under the Existing Note. Such indebtedness shall be renewed, extended, and
rearranged pursuant to the terms of this Agreement
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and the Notes and, subject to Section 2.30, shall for all purposes be deemed a
borrowing hereunder. Proceeds of all subsequent Loans shall be used solely for
the acquisition and development of Oil and Gas Properties by either Borrower,
for the acquisition and development of Oil and Gas Properties to be conveyed to
partnerships in which a Loan Party is the general partner, and to provide
working capital to the Borrowers.
(b) Letters of Credit shall be used solely for general
corporate purposes of the Borrowers not in violation of this Agreement or any
other Loan Document, including the acquisition of Oil and Gas Properties;
provided, however, no Letter of Credit may be used in lieu or in support of
stay or appeal bonds.
2.6 Interest. Subject to the terms of this Agreement
(including, without limitation, Section 2.20), interest on the Loans shall
accrue and be payable at a rate per annum equal to the Floating Rate for each
Floating Rate Loan and the Adjusted LIBO Rate for each LIBO Rate Loan.
Notwithstanding the foregoing, interest on past-due principal and, to the
extent permitted by applicable law, past-due interest, shall accrue at the
Default Rate and shall be payable upon demand by the Agent at any time as to
all or any portion of such interest. In the event that the Borrowers fail to
select the duration of any Interest Period for any LIBO Rate Loan within the
time period and otherwise as provided herein, such Loan (if outstanding as a
LIBO Rate Loan) will be automatically converted into a Floating Rate Loan on
the last day of the then current Interest Period for such Loan or (if
outstanding as a Floating Rate Loan) will remain as, or (if not then
outstanding) will be made as, a Floating Rate Loan. Interest provided for
herein shall be calculated on unpaid sums actually advanced and outstanding
pursuant to the terms of this Agreement and only for the period from the date
or dates of such advances until repayment.
2.7 Repayment of Loans and Interest. Accrued and unpaid
interest on each outstanding Floating Rate Loan shall be due and payable
monthly commencing on the first day of May, 1995, and continuing on the first
day of each calendar month thereafter while any Floating Rate Loan remains
outstanding, the payment in each instance to be the amount of interest which
has accrued and remains unpaid in respect of the relevant Loan. Accrued and
unpaid interest on each outstanding LIBO Rate Loan shall be due and payable on
the last day of the Interest Period for such LIBO Rate Loan, the payment in
each instance to be the amount of interest which has accrued and remains unpaid
in respect of the relevant Loan. The Loan Balance, together with all accrued
and unpaid interest thereon, shall be due and payable at Final Maturity. At
the time of making each payment hereunder or under the Notes, the Borrower
making such payment shall specify to the Agent the Loans or other amounts
payable by the Borrowers hereunder to which such payment is to be applied. In
the event either Borrower making any such payment fails to so specify, or if an
Event of Default has occurred and is continuing, the Agent may apply such
payment as it may elect in its discretion and in accordance with the terms
hereof.
2.8 General Terms. (a) The outstanding principal
balance of the Note of each Lender reflected in the records of such Lender
shall be deemed rebuttably presumptive evidence of the principal amount owing
on such Note. The liability for payment of principal and interest evidenced by
each Note shall be limited to principal amounts actually advanced and
outstanding
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pursuant to this Agreement and interest on such amounts calculated in
accordance with this Agreement.
(b) Unless the Agent shall have been notified by a Lender
or the Borrowers prior to the date on which either of them is scheduled to make
payment to the Agent of (in the case of a Lender) the proceeds of a Loan to be
made by such Lender hereunder or (in the case of the Borrowers) a payment to
the Agent for the account of one or more of the Lenders hereunder (such payment
being herein called the "Required Payment"), which notice shall be effective
upon receipt, that it does not intend to make the Required Payment to the
Agent, the Agent may assume that the Required Payment has been made and, in
reliance upon such assumption, may (but shall not be required to) make the
amount thereof available to the intended recipient on such date. If such
Lender or the Borrowers, as the case may be, has not in fact made the Required
Payment to the Agent, the recipient of such payment shall, on demand, repay to
the Agent for its account the amount so made available together with interest
thereon in respect of each day during the period commencing on the date such
amount was so made available by the Agent until the date the Agent recovers
such amount at a rate per annum equal to, in the case of a Lender as recipient,
the Federal Funds Rate or, in the case of the Borrowers as recipient, the
Floating Rate.
2.9 Time, Place, and Method of Payments. All payments
required pursuant to this Agreement or the Notes shall be made without set-off
or counterclaim in Dollars and in immediately available funds. All payments by
the Borrowers shall be deemed received on the next Business Day following
receipt if such receipt is after 2:00 p.m., Central Standard or Daylight
Savings Time, as the case may be, on any Business Day, and shall be made to the
Agent at the Principal Office. Except as provided to the contrary herein, if
the due date of any payment hereunder or under any Note would otherwise fall on
a day which is not a Business Day, such date shall be extended to the next
succeeding Business Day, and interest shall be payable for any principal so
extended for the period of such extension.
2.10 Pro Rata Treatment; Adjustments. (a) On the Business
Day following the date on which the Loan Balance has been $12,500,000 for 30
consecutive days, DNB shall pay to Bank One twenty-five percent (25%) of the
Loan Balance. Immediately following such payment, such portion of the Loan
Balance shall be owing to DNB, and the Percentage Shares of the Lenders shall
be adjusted as provided in clause (b) of the definition of the term "Percentage
Shares."
(b) Except to the extent otherwise expressly provided herein,
(i) each borrowing pursuant to this Agreement shall be made from the Lenders
pro rata in accordance with their Percentage Shares, (ii) each payment by the
Borrowers of fees shall be made for the account of the Lenders pro rata in
accordance with their respective Percentage Shares, (iii) each payment of
principal of Loans shall be made for the account of the Lenders pro rata in
accordance with their respective shares of the Loan Balance, and (iii) each
payment of interest on Loans shall be made for the account of the Lenders pro
rata in accordance with their respective shares of the aggregate amount of
interest due and payable to the Lenders.
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(c) The Agent shall distribute all payments with respect
to the Obligations to the Lenders promptly upon receipt in like funds as
received. In the event that any payments made hereunder by the Borrowers at
any particular time are insufficient to satisfy in full the Obligations due and
payable at such time, such payments shall be applied (a) first, to fees and
expenses due pursuant to the terms of this Agreement or any other Loan
Document, (b) second, to accrued interest, (c) third, to the Loan Balance, and
(d) last, to any other Obligations.
(d) If any Lender (for purposes of this Section, a
"benefitted Lender") shall at any time receive any payment of all or part of
its portion of the Obligations, or receive any Collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Sections 7.1(e) or 7.1(f), or
otherwise) in an amount greater than such Lender was entitled to receive
pursuant to the terms hereof, such benefitted Lender shall purchase for cash
from the other Lenders such portion of the Obligations of such other Lenders or
shall provide such other Lenders with the benefits of any such Collateral or
the proceeds thereof as shall be necessary to cause such benefitted Lender to
share the excess payment or benefits of such Collateral or proceeds with each
of the Lenders according to the terms hereof. If all or any portion of such
excess payment or benefits is thereafter recovered from such benefitted Lender,
such purchase shall be rescinded and the purchase price and benefits returned
by such Lender, to the extent of such recovery, but without interest. Each
Borrower agrees that each such Lender so purchasing a portion of the
Obligations of another Lender may exercise all rights of payment (including,
without limitation, rights of set-off) with respect to such portion as fully as
if such Lender were the direct holder of such portion. If any Lender ever
receives, by voluntary payment, exercise of rights of set-off or banker's lien,
counterclaim, cross-action or otherwise, any funds of either Borrower to be
applied to the Obligations, or receives any proceeds by realization on or with
respect to any Collateral, all such funds and proceeds shall be immediately
forwarded to the Agent for distribution in accordance with the terms of this
Agreement.
2.11 Borrowing Base Determinations. (a) The Borrowing
Base, at any time, shall be the sum of the following; provided, however, the
sum of clauses (ii) and (iii) below shall never exceed $1,000,000:
(i) the Reserve Value then in effect,
(ii) an amount equal to 80% of the aggregate
amount of Eligible Joint Interest Accounts at
such time as determined by the Lenders
pursuant to the terms hereof,
(iii) an amount equal to 50% of the net book value
of Eligible Equipment at such time as
determined by the Lenders pursuant to the
terms hereof, and
(iv) an amount determined by the Lenders in their
sole discretion to be supported by their
estimate of the projected future net
operating income of PEC at such time.
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(b) The Borrowing Base as of the Closing Date is
acknowledged by the Borrowers and the Lenders to be $12,500,000. The Reserve
Value as of the Closing Date is acknowledged by the Borrowers and the Lenders
to be $4,375,000. The Borrowing Base and the Reserve Value shall be
redetermined semi-annually in the normal course of business of the Lenders
following the receipt by the Lenders of Reserve Reports and upon the basis of
the Borrowing Base Reports, Reserve Reports, Receivables Reports, other
information supplied by the Borrowers in compliance with the provisions of this
Agreement, and all other information available to the Lenders. Notwithstanding
the foregoing, the Lenders may at their discretion make redeterminations of the
Borrowing Base and the Reserve Value at any time and from time to time,
including, without limitation, upon the occurrence of any sale, transfer,
release or other disposition or loss or relinquishment of any Collateral by any
Loan Party; provided, however, that nothing in this provision shall be deemed
to authorize any sale of Property prohibited pursuant to this Agreement or any
other Loan Document.
(c) The Borrowing Base shall represent the determination
by the Lenders, in accordance with the applicable definitions and provisions
herein contained and their customary lending practices for loans of this
nature, of the value, for loan purposes, of the Mortgaged Property, the
Eligible Equipment, and the Eligible Joint Interest Accounts, together with the
amount determined by the Lenders pursuant to subsection (a)(iv) of this
Section. Furthermore, the Borrowers acknowledge that the determination of the
Borrowing Base contains an equity cushion (such that market value should always
be in excess of loan value), which is acknowledged by the Borrowers to be
essential for the adequate protection of the Lenders.
(d) Upon each determination of the Borrowing Base and/or
the Reserve Value, the Agent shall notify the Borrowers orally (confirming such
notice promptly in writing) of such determination, and the Borrowing Base
and/or Reserve Value so communicated to the Borrowers shall become effective
upon such oral notification and shall remain in effect until the next
subsequent determination of the Borrowing Base and/or Reserve Value.
2.12 Mandatory Prepayments. If at any time the sum of the
Loan Balance and the L/C Exposure exceeds the lesser of the Maximum Commitment
Amount or the Borrowing Base then in effect, the Borrowers shall, within 15
Business Days of notice from the Agent of such occurrence, (a) prepay, or make
arrangements acceptable to the Lenders for the prepayment of, the amount of
such excess for application on the Loan Balance, (b) provide additional
collateral, of character and value satisfactory to the Lenders in their sole
discretion, to secure the Obligations by the execution and delivery to the
Agent of security instruments in form and substance satisfactory to the Agent,
or (c) effect any combination of the alternatives described in clauses (a) and
(b) of this Section and acceptable to the Lenders in their discretion. In the
event that a mandatory prepayment is required under this Section and the Loan
Balance is less than the amount required to be prepaid, the Borrowers shall
repay the entire Loan Balance and, in accordance with the provisions of the
relevant Letter of Credit Applications executed by the Borrowers or otherwise
to the satisfaction of the Agent, deposit with the Agent, as additional
collateral securing the Obligations, an amount of cash, in immediately
available funds, equal to the L/C Exposure minus the lesser of the Maximum
Commitment Amount or the Borrowing Base. The cash deposited with the Agent in
satisfaction of the requirement provided in this Section may be invested, at
the sole discretion of the Agent and then only at the express
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direction of the Borrowers as to investment vehicle and maturity (which shall
be no later than the latest expiry date of any then outstanding Letter of
Credit), for the account of the Borrowers in cash or cash equivalent
investments offered by or through the Agent.
2.13 Voluntary Prepayments and Conversions of Loans.
Subject to applicable provisions of this Agreement, the Borrowers shall have
the right at any time or from time to time to prepay Loans and to convert Loans
of one type or with one Interest Period into Loans of another type or with a
different Interest Period; provided, however, that (a) the Borrowers shall give
the Agent notice of each such prepayment or conversion of all or any portion
of a LIBO Rate Loan no less than three Business Days prior to prepayment or
conversion, (b) any LIBO Rate Loan may be prepaid or converted only on the last
day of an Interest Period for such Loan, (c) each prepayment shall be in an
amount not less than $100,000 or incremental amounts of $50,000 in excess
thereof or the Loan Balance, (d) the Borrowers shall pay all accrued and unpaid
interest on the amounts prepaid or converted, and (e) no such prepayment or
conversion shall serve to postpone the repayment when due of any Obligation.
2.14 Commitment Fee; Reduction of Commitment Amount. To
compensate the Lenders for maintaining funds available, the Borrowers shall pay
to the Agent for the account of the Lenders a fee in the amount of one-half of
one percent (1/2%) per annum, calculated on the basis of a year of 365 or 366
days, as the case may be, and actual days elapsed (including the first day but
excluding the last day), on the average daily amount of the Available
Commitment. Such accrued commitment fees shall be payable on the first day of
July, 1995, the first day of each third calendar month thereafter during the
Commitment Period, and on the Commitment Termination Date. The Borrowers may,
with 30 days' written notice to the Agent, reduce the Commitment Amounts pro
rata, and subsequent thereto, provided that no Default or Event of Default has
occurred and is continuing, with five days' written notice to the Agent and the
payment of all fees due under this Section which would have accrued but for
such reduction, increase the Commitment Amounts to their original amounts.
2.15 Engineering Fee. To compensate the Lenders for the
costs of evaluating the Mortgaged Properties and reviewing the Reserve Reports,
the Borrowers shall pay to the Agent for the account of the Lenders on the date
of each redetermination of the Reserve Value, an engineering fee in the amount
of $5,000.
2.16 Facility Fee. To compensate the Lenders for the
costs of the extension of credit hereunder, the Borrowers shall pay to Bank One
on the Closing Date a facility fee in the amount of $33,645 and shall pay to
DNB on the Closing Date a facility fee in the amount of $11,215, and shall pay
to the Agent for the account of the Lenders, on the date of any increase in the
Borrowing Base to an amount exceeding $12,500,000, a fee in the amount of one
percent (1%) of the amount by which the revised Borrowing Base exceeds
$12,500,000.
2.17 Letter of Credit Fee. The Borrowers shall pay to the
Agent for the account of the Lenders, on the date of the issuance or renewal of
each Letter of Credit, a fee in the amount of one percent (1%) per annum,
calculated on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed (including the first day but excluding the last day), on
the face amount of such Letter of Credit for the period beginning on the date
on which
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such Letter of Credit is issued or renewed and ending on the earlier of the
stated expiry date of such Letter of Credit or the first anniversary of such
date of issuance or renewal. On the first anniversary of the date of issuance
or renewal of each Letter of Credit, the Borrowers shall pay to the Agent for
the account of the Lenders a fee in the amount of one percent (1%) per annum,
calculated as set forth above, on the face amount of such Letter of Credit for
the remaining term, if any, of such Letter of Credit. The Borrowers shall pay
to the Agent for its own account as the issuer of each Letter of Credit, on the
date of issuance or renewal of each Letter of Credit, an issuing fee of $400.
The Borrowers also agree to pay on demand to the Agent for its own account as
the issuer of the Letters of Credit its customary letter of credit
transactional fees, including, without limitation, amendment fees, payable with
respect to each Letter of Credit.
2.18 Loans to Satisfy Obligations of Borrowers. The
Lenders may, but shall not be obligated to, make Loans for the benefit of the
Borrowers and apply proceeds thereof to the satisfaction of any condition,
warranty, representation, or covenant of the Borrowers contained in this
Agreement or any other Loan Document. Such Loans shall be evidenced by the
Notes, shall bear interest at the Default Rate, and shall be payable upon
demand.
2.19 Security Interest in Accounts; Right of Offset. As
security for the payment and performance of the Obligations, each Borrower
hereby transfers, assigns, and pledges to the Agent and each Lender and grants
to the Agent and each Lender a security interest in all funds of such Borrower
now or hereafter or from time to time on deposit with the Agent or such Lender,
with such interest of the Agent and the Lenders to be retransferred,
reassigned, and/or released at the reasonable expense of such Borrower upon
payment in full and complete performance of all Obligations and the termination
of the Commitment. All remedies as secured party or assignee of such funds
shall be exercisable by the Agent and each Lender with the verbal consent
(confirmed promptly in writing) of the Lenders upon the occurrence of any Event
of Default, regardless of whether the exercise of any such remedy would result
in any penalty or loss of interest or profit with respect to any withdrawal of
funds deposited in a time deposit account prior to the maturity thereof.
Furthermore, each Borrower hereby grants to the Agent and each Lender the
right, exercisable at such time as any Event of Default shall occur, of offset
or banker's lien against all funds of such Borrower now or hereafter or from
time to time on deposit with the Agent or such Lender, regardless of whether
the exercise of any such remedy would result in any penalty or loss of interest
or profit with respect to any withdrawal of funds deposited in a time deposit
account prior to the maturity thereof.
2.20 General Provisions Relating to Interest. (a) It is
the intention of the parties hereto to comply strictly with all applicable
usury laws. In this connection, there shall never be collected, charged, or
received on the sums advanced hereunder interest in excess of that which would
accrue at the Highest Lawful Rate. For purposes of Article 5069-1.04, Vernon's
Texas Civil Statutes, as amended, the Borrowers agree that the Highest Lawful
Rate shall be the "indicated (weekly) rate ceiling" as defined in such Article,
provided that the Agent and the Lenders may also rely, to the extent permitted
by applicable laws, on alternative maximum rates of interest under other laws,
if greater.
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(b) Notwithstanding anything herein or in the Notes to
the contrary, during any Limitation Period, the interest rate to be charged on
amounts evidenced by the Notes shall be the Highest Lawful Rate, and the
obligation, if any, of the Borrowers for the payment of fees or other charges
deemed to be interest under applicable law shall be suspended. During any
period or periods of time following a Limitation Period, to the extent
permitted by applicable laws, the interest rate to be charged hereunder shall
remain at the Highest Lawful Rate until such time as there has been paid to the
Agent and each Lender (i) the amount of interest in excess of that accruing at
the Highest Lawful Rate that such Lender would have received during the
Limitation Period had the interest rate remained at the otherwise applicable
rate, and (ii) all interest and fees otherwise payable to the Agent and such
Lender but for the effect of such Limitation Period.
(c) If, under any circumstances, the aggregate amounts
paid on the Notes or under this Agreement or any other Loan Document include
amounts which by law are deemed interest and which would exceed the amount
permitted if the Highest Lawful Rate were in effect, the Borrowers stipulate
that such payment and collection will have been and will be deemed to have
been, to the extent permitted by applicable laws, the result of mathematical
error on the part of the Borrowers, the Agent, and the Lenders; and the party
receiving such excess shall refund the amount of such excess (to the extent
only of such interest payments in excess of that which would have accrued and
been payable on the basis of the Highest Lawful Rate) upon discovery of such
error by such party or notice thereof from the Borrowers. In the event that
the maturity of any Obligation is accelerated, by reason of an election by the
Lenders or otherwise, or in the event of any required or permitted prepayment,
then the consideration constituting interest under applicable laws may never
exceed the Highest Lawful Rate; and excess amounts paid which by law are deemed
interest, if any, shall be credited by the Agent and the Lenders on the
principal amount of the Obligations, or if the principal amount of the
Obligations shall have been paid in full, refunded to the Borrowers.
(d) All sums paid, or agreed to be paid, to the Lenders
for the use, forbearance and detention of the proceeds of any advance hereunder
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full term hereof until paid in full so
that the actual rate of interest is uniform but does not exceed the Highest
Lawful Rate throughout the full term hereof.
2.21 Obligations Absolute. Subject to the further
provisions of this Section, the Obligations of the Borrowers under this Article
shall be absolute and unconditional under any and all circumstances and
irrespective of any set-off, counterclaim, or defense to payment or performance
which the Borrowers may have or have had against the Agent, any Lender, or any
beneficiary of any Letter of Credit. The Borrowers agree that none of the
Agent or the Lenders shall be responsible for, nor shall the Obligations be
affected by, among other things, (a) the validity or genuineness of documents
or any endorsements thereon presented in connection with any Letter of Credit,
even if such documents shall in fact prove to be in any and all respects
invalid, fraudulent or forged, AND EVEN IF DUE TO THE NEGLIGENCE, WHETHER SOLE
OR CONCURRENT, OF THE AGENT OR ANY LENDER, so long as the Agent, as the issuer
of such Letter of Credit, has no actual knowledge of any such invalidity, lack
of genuineness, fraud, or forgery prior to the presentment for payment of a
corresponding Letter
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of Credit or any draft thereunder; provided, however, with respect to the
preceding matters in this Section, the Agent, as the issuer of the Letters of
Credit, agrees to exercise ordinary care in examining each document required to
be presented pursuant to each Letter of Credit to ascertain that each such
document appears on its face to comply with the terms thereof, or (b) any
dispute between or among the Borrowers and any beneficiary of any Letter of
Credit or any other party to which any Letter of Credit may be transferred, or
any claims whatsoever of the Borrowers against any beneficiary of any Letter of
Credit or any such transferee, EVEN IF DUE TO THE NEGLIGENCE, WHETHER SOLE OR
CONCURRENT, OF THE AGENT OR ANY LENDER; provided, in all respects, that the
Agent, as the issuer of Letters of Credit, shall be liable to the Borrowers to
the extent, but only to the extent, of any direct, as opposed to consequential
or punitive, damages suffered by the Borrowers as a result of the willful
misconduct or gross negligence of the Agent as the issuer of Letters of Credit
in determining whether documents presented under a Letter of Credit complied
with the terms of such Letter of Credit that resulted in either a wrongful
payment under such Letter of Credit or a wrongful dishonor of a claim or draft
properly presented under such Letter of Credit. In the absence of gross
negligence or willful misconduct by the Agent as the issuer of Letters of
Credit, the Agent shall not be liable for any error, omission, interruption or
delay, EVEN IF DUE TO THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT,
in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit. The Agent, the Lenders,
and the Borrowers agree that any action taken or omitted by the Agent, as
issuer of any Letter of Credit, under or in connection with any Letter of
Credit or the related drafts or documents, EVEN IF DUE TO THE NEGLIGENCE,
WHETHER SOLE OR CONCURRENT, OF THE AGENT OR ANY LENDER, if done in the absence
of gross negligence or willful misconduct, shall be binding as among the Agent,
as issuer of such Letter of Credit or otherwise, the Lenders, and the Borrowers
and shall not put the Agent, as issuer of such Letter of Credit or otherwise,
or any Lender under any liability to the Borrowers.
2.22 Yield Protection. (a) Without limiting the effect of
the other provisions of this Section (but without duplication), the Borrowers
shall pay to the Agent and each Lender from time to time such amounts as the
Agent or such Lender may determine are necessary to compensate it for any
Additional Costs incurred by the Agent or such Lender.
(b) Without limiting the effect of the other provisions
of this Section (but without duplication), the Borrowers shall pay to each
Lender from time to time on request such amounts as such Lender may determine
are necessary to compensate such Lender for any costs attributable to the
maintenance by such Lender (or any Applicable Lending Office), pursuant to any
Regulatory Change, of capital in respect of its Commitment, such compensation
to include, without limitation, an amount equal to any reduction of the rate of
return on assets or equity of such Lender (or any Applicable Lending Office) to
a level below that which such Lender (or any Applicable Lending Office) could
have achieved but for such Regulatory Change.
(c) Without limiting the effect of the other provisions
of this Section (but without duplication), in the event that any Requirement of
Law or Regulatory Change or the compliance by the Agent or any Lender therewith
shall (i) impose, modify, or hold applicable any reserve, special deposit, or
similar requirement against any Letter of Credit or obligation
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to issue Letters of Credit, or (ii) impose upon the Agent or such Lender any
other condition regarding any Letter of Credit or obligation to issue Letters
of Credit, and the result of any such event shall be to increase the cost to
the Agent or such Lender of issuing or maintaining any Letter of Credit or
obligation to issue Letters of Credit or any liability with respect to Letter
of Credit Payments, or to reduce any amount receivable in connection therewith,
then upon demand by the Agent or such Lender, as the case may be, the Borrowers
shall pay to the Agent or such Lender, from time to time as specified by the
Agent or such Lender, additional amounts which shall be sufficient to
compensate the Agent or such Lender for such increased cost or reduced amount
receivable.
(d) Without limiting the effect of the other provisions
of this Section (but without duplication), the Borrowers shall pay to the Agent
and each Lender such amounts as shall be sufficient in the reasonable opinion
of the Agent and such Lender to compensate them for any loss, cost, or expense
incurred by and as a result of:
(i) any payment, prepayment, or conversion by the
Borrowers of a LIBO Rate Loan on a date other
than the last day of an Interest Period for
such Loan; or
(ii) any failure by the Borrowers to borrow a LIBO
Rate Loan on the date for such borrowing
specified in the relevant Borrowing Request;
such compensation to include, without limitation, with respect to any LIBO Rate
Loan, an amount equal to the excess, if any, of (A) the amount of interest
which would have accrued on the principal amount so paid, prepaid, converted,
or not borrowed for the period from the date of such payment, prepayment,
conversion, or failure to borrow to the last day of the then current Interest
Period for such Loan (or, in the case of a failure to borrow, the Interest
Period for such Loan which would have commenced on the date of such failure to
borrow) at the applicable rate of interest for such Loan provided for herein
over (B) the interest component of the amount the Agent or such Lender would
have bid in the London interbank market for Dollar deposits of amounts
comparable to such principal amount and maturities comparable to such period,
as reasonably determined by the Agent or such Lender.
(e) Determinations by the Agent or any Lender for
purposes of this Section of the effect of any Regulatory Change on capital
maintained, its costs or rate of return, maintaining Loans, issuing Letters of
Credit, its obligation to make Loans and issue Letters of Credit, or on amounts
receivable by it in respect of Loans, Letters of Credit, or such obligations,
and the additional amounts required to compensate the Agent and such Lender
under this Section shall be conclusive, absent manifest error, provided that
such determinations are made on a reasonable basis. The Agent or the relevant
Lender shall furnish the Borrowers with a certificate setting forth in
reasonable detail the basis and amount of increased costs incurred or reduced
amounts receivable as a result of any such event, and the statements set forth
therein shall be conclusive, absent manifest error. The Agent or the relevant
Lender shall (i) notify the Borrowers, as promptly as practicable after the
Agent or such Lender obtains knowledge of any Additional Costs or other sums
payable pursuant to this Section and determines to request
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compensation therefor, of any event occurring after the Closing Date which will
entitle the Agent or such Lender to compensation pursuant to this Section; and
(ii) designate a different Applicable Lending Office for the Loans affected by
such event if such designation will avoid the need for or reduce the amount of
such compensation and will not, in the sole opinion of the Agent or such
Lender, be disadvantageous to the Agent or such Lender. If any Lender requests
compensation from the Borrowers under this Section, the Borrowers may, after
payment of all compensation then accrued and by notice to the Agent and such
Lender, require that the Loans by such Lender of the type with respect to which
such compensation is requested be converted into Floating Rate Loans in
accordance with Section 2.13. Any compensation requested by the Agent or any
Lender pursuant to this Section shall be due and payable within five days of
delivery of any such notice to the Borrowers.
2.23 Illegality. Notwithstanding any other provision of
this Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to (a) honor its obligation to make LIBO Rate Loans,
or (b) maintain LIBO Rate Loans, then such Lender shall promptly notify the
Agent and the Borrowers thereof. The obligation of such Lender to make LIBO
Rate Loans and convert Floating Rate Loans into LIBO Rate Loans shall then be
suspended until such time as such Lender may again make and maintain LIBO Rate
Loans, and the outstanding LIBO Rate Loans of such Lender shall be converted
into Floating Rate Loans in accordance with Section 2.13.
2.24 Taxes. (a) All payments made by the Borrowers under
this Agreement shall be made free and clear of, and without reduction or
withholding for or on account of, present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority on the basis of any change after the date hereof in any applicable
treaty, law, rule, guideline or regulations or in the interpretation or
administration thereof, excluding, in the case of the Agent and each Lender,
net income and franchise taxes imposed on the Agent or such Lender by the
jurisdiction under the laws of which the Agent or such Lender is organized or
any political subdivision or taxing authority thereof or therein, or by any
jurisdiction in which such Lender's lending office is located or any political
subdivision or taxing authority thereof or therein (all such non-excluded
taxes, levies, imposts, deductions, charges or withholdings being hereinafter
called "Taxes"). If any Taxes are required to be withheld from any amounts
payable to the Agent or any Lender hereunder or under any other Loan Document,
the amounts so payable to the Agent or such Lender shall be increased to the
extent necessary to yield to the Agent or such Lender (after payment of all
Taxes) interest or any such other amounts payable hereunder at the rates or in
the amounts specified in this Agreement and the other Loan Documents. Whenever
any Taxes are payable by the Borrowers, as promptly as possible thereafter, the
Borrowers shall send to the Agent for its own account or for the account of
such Lender, as the case may be, a certified copy of an original official
receipt received by the Borrowers showing payment thereof. If the Borrowers
fail to pay any Taxes when due to the appropriate taxing authority or fails to
remit to the Agent the required receipts or other required documentary
evidence, the Borrowers shall indemnify the Agent and the Lenders for any
incremental taxes, interest or penalties that may become payable by the Agent
or any Lender as a result of any such failure. The agreements in this Section
shall survive the termination of this Agreement and the payment of all
Obligations.
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(b) Each Lender that is not incorporated under the laws
of the United States of America or a state thereof agrees that, prior to the
first date on which any payment is due to it hereunder, it will, to the extent
it may lawfully do so, deliver to the Borrowers and the Agent two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224 or
successor applicable form, as the case may be, certifying in each case that
such Lender is entitled to receive payments under this Agreement and the Note
payable to it, without deduction or withholding of any United States federal
income taxes. At the written request of the Borrowers, each Lender which
delivers to the Borrowers and the Agent a Form 1001 or 4224 pursuant to the
preceding sentence further undertakes to deliver to the Borrowers and the Agent
two further copies of such Form 1001 or 4224, or successor applicable forms, or
other manner of certification, as the case may be, on or before the date that
any such letter or form expires or becomes obsolete or after the occurrence of
any event requiring a change in the most recent form previously delivered by it
to the Borrowers, and such extensions or renewals thereof as may reasonably be
requested by the Borrowers, certifying in the case of Form 1001 or 4224 that
such Lender is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes, unless in
any such case, an event (including, without limitation, any change in treaty,
law or regulation) has occurred prior to the date on which any such delivery
would otherwise be required which renders all such forms inapplicable or which
would prevent such Lender from duly completing and delivering any such form
with respect to it and such Lender advises the Borrowers that it is not capable
of receiving payments without any deduction or withholding of United States
federal income tax.
2.25 Replacement Lenders. (a) If any Lender has notified
the Borrowers of its incurring additional costs under Section 2.22 or has
required the Borrowers to make payments for Taxes under Section 2.24, the
Borrowers may, unless such Lender has notified the Borrowers that the
circumstances giving rise to such notice no longer apply, terminate, in whole
but not in part, the Commitment of any Lender (other than the Agent) (the
"Terminated Lender") at any time upon five Business Days' prior written notice
to the Terminated Lender and the Agent (such notice referred to herein as a
"Notice of Termination").
(b) In order to effect the termination of the Commitment
of the Terminated Lender, the Borrowers shall (i) obtain an agreement with one
or more Lenders to increase their Commitments and/or (ii) request any one or
more other banking institutions to become a "Lender" in place and instead of
such Terminated Lender and agree to accept a Commitment; provided, however,
that such one or more other banking institutions are reasonably acceptable to
the Agent and become parties by executing an Assignment Agreement (the Lenders
or other banking institutions that agree to accept in whole or in part the
Commitment of the Terminated Lender being referred to herein as the
"Replacement Lenders"), such that the aggregate increased and/or accepted
Commitment Amounts of the Replacement Lenders under clauses (i) and (ii) above
equal the Commitment Amount of the Terminated Lender.
(c) The Notice of Termination shall include the name of
the Terminated Lender, the date the termination will occur (the "Termination
Date"), the Replacement Lender or Replacement Lenders to which the Terminated
Lender will assign its Commitment, and, if there will be more than one
Replacement Lender, the portion of the Terminated Lender's Commitment to be
assigned to each Replacement Lender.
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(d) On the Termination Date, (i) the Terminated Lender
shall by execution and delivery of an Assignment Agreement assign its
Commitment to the Replacement Lender or Replacement Lenders (pro rata, if there
is more than one Replacement Lender, in proportion to the portion of the
Terminated Lender's Commitment to be assigned to each Replacement Lender)
indicated in the Notice of Termination and shall assign to the Replacement
Lender or Replacement Lenders its Loan (if any) then outstanding pro rata as
aforesaid), (ii) the Terminated Lender shall endorse its Note, payable without
recourse, representation or warranty to the order of the Replacement Lender or
Replacement Lenders (pro rata as aforesaid), (iii) the Replacement Lender or
Replacement Lenders shall purchase the Note held by the Terminated Lender (pro
rata as aforesaid) at a price equal to the unpaid principal amount thereof plus
interest and fees accrued and unpaid to the Termination Date, and (iv) the
Replacement Lender or Replacement Lenders will thereupon (pro rata as
aforesaid) succeed to and be substituted in all respects for the Terminated
Lender with like effect as if becoming a Lender pursuant to the terms of
Section 9.1(b), and the Terminated Lender will have the rights and benefits of
an assignor under Section 9.1(b). To the extent not in conflict, the terms of
Section 9.1(b) shall supplement the provisions of this Section.
2.26 Regulatory Change. In the event that by reason of
any Regulatory Change or any other circumstance arising after the Closing Date
affecting any Lender, such Lender (a) incurs Additional Costs based on or
measured by the excess above a specified level of the amount of a category of
deposits or other liabilities of such Lender which includes deposits by
reference to which the interest rate on any LIBO Rate Loan is determined as
provided in this Agreement or a category of extensions of credit or other
assets of such Lender which includes any LIBO Rate Loan, or (b) becomes subject
to restrictions on the amount of such a category of liabilities or assets which
it may hold, then, at the election of such Lender with notice to the Agent and
the Borrowers, the obligation of such Lender to make LIBO Rate Loans and to
convert Floating Rate Loans into LIBO Rate Loans shall be suspended until such
time as such Regulatory Change or other circumstance ceases to be in effect,
and all such outstanding LIBO Rate Loans shall be converted into Floating Rate
Loans in accordance with Section 2.13.
2.27 Letters in Lieu of Transfer Orders. The Agent agrees
that none of the letters in lieu of transfer or division orders previously
provided by the Borrowers or subsequently provided pursuant to Section 5.9 will
be sent to the addressees thereof prior to the occurrence of an Event of
Default, at which time the Agent may, at its option and in addition to the
exercise of any of its other rights and remedies, send any or all of such
letters.
2.28 Power of Attorney. Each Borrower hereby designates
the Agent as its agent and attorney-in- fact, to act in its name, place, and
stead for the purpose of completing and, upon the occurrence of an Event of
Default, delivering any and all of the letters in lieu of transfer orders
currently held by the Agent or subsequently delivered by such Borrower pursuant
to Section 5.9, including, without limitation, completing any blanks contained
in such letters and attaching exhibits thereto describing the relevant
Collateral. Each Borrower hereby ratifies and confirms all that the Agent
shall lawfully do or cause to be done by virtue of this power of attorney and
the rights granted with respect to such power of attorney. This power of
attorney is coupled with the interests of the Agent in the Collateral, shall
commence and be in full force and effect as of the Closing Date and shall
remain in full force and effect and shall be
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irrevocable so long as any Obligation remains outstanding or unpaid or any
Commitment exists. The powers conferred on the Agent by this appointment are
solely to protect the interests of the Agent and the Lenders under the Loan
Documents and shall not impose any duty upon the Agent to exercise any such
powers. The Agent shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers and shall not be
responsible to the Borrowers or any other Person for any act or failure to act
with respect to such powers, EVEN IF DUE TO THE NEGLIGENCE (WHETHER SOLE OR
CONCURRENT) OF THE AGENT, except for gross negligence or willful misconduct.
2.29 Automatic Debit Authority. Each Borrower hereby
grants to Bank One the authority, without any obligation or liability to any
Person, including, without limitation, such Borrower, to automatically debit
from the operating accounts of such Borrower maintained at Bank One any and all
payments due to the Agent or any Lender hereunder or under any other Loan
Document.
2.30 Joint and Several Liability. The liability of the
Borrowers for the Obligations shall be joint and several.
ARTICLE III
CONDITIONS
3.1 Conditions Precedent to Initial Loan. The Lenders
shall have no obligation to make the initial Loan unless and until all matters
incident to the consummation of the transactions contemplated herein,
including, without limitation, the review by the Agent or its counsel of the
title of the Borrowers to their respective Oil and Gas Properties, shall be
satisfactory to the Agent, and the Agent shall have received, reviewed, and
approved the following documents and other items, appropriately executed when
necessary and, where applicable, acknowledged by one or more authorized
officers of the Borrowers, all in form and substance satisfactory to the Agent
and dated, where applicable, of even date herewith or a date prior thereto and
acceptable to the Agent:
(a) multiple counterparts of this Agreement, as requested
by the Agent;
(b) the Notes;
(c) copies of the Articles of Incorporation or
Certificate of Incorporation and all amendments thereto and the bylaws
and all amendments thereto of each Borrower, accompanied by a
certificate issued by the secretary or an assistant secretary of such
Borrower, to the effect that each such copy is correct and complete;
(d) certificates of incumbency and signatures of all
officers of each Borrower who are authorized to execute Loan Documents
on behalf of such
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Borrower, each such certificate being executed by the secretary or an
assistant secretary of such Borrower;
(e) copies of corporate resolutions approving the Loan
Documents and authorizing the transactions contemplated herein and
therein, duly adopted by the board of directors of each Borrower,
accompanied by certificates of the secretary or an assistant secretary
of such Borrower, to the effect that such copies are true and correct
copies of resolutions duly adopted at a meeting or by unanimous
consent of the board of directors of such Borrower and that such
resolutions constitute all the resolutions adopted with respect to
such transactions, have not been amended, modified, or revoked in any
respect, and are in full force and effect as of the date of such
certificate;
(f) multiple counterparts, as requested by the Agent, of
the following Security Instruments ratifying, amending, and/or
restating the Existing Security Instruments and otherwise establishing
Liens in favor of the Agent in and to the Collateral:
(i) Second Amendment to Security Agreement
instruments from each Loan Party other than
SOCC, together with constituent amendments to
financing statements;
(ii) Ratification of and Amendment to Mortgage,
Collateral Real Estate Mortgage, Deed of
Trust, Indenture, Security Agreement,
Financing Statement and Assignment of
Production from PEC;
(iii) Ratification of and Amendment to Mortgage,
Deed of Trust, Indenture, Security Agreement,
Financing Statement and Assignment of
Production from PEC and PEMC;
(iv) Amendments to Financing Statements
constituent to the documents described in
(ii) and (iii) above; and
(v) Security Agreement from SOCC, together with
constituent financing statements;
(g) certificates dated as of a recent date from the
Secretary of State or other appropriate Governmental Authority
evidencing the existence or qualification and good standing of each
Loan Party in its jurisdiction of incorporation and in any other
jurisdictions where it does business;
(h) results of searches in the name of each Borrower and
POC of the Uniform Commercial Code Records of the Secretary of State
of the States of
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Colorado, Connecticut, Kansas, Louisiana, Mississippi, Montana, New
Mexico, Oklahoma, Texas, West Virginia, and Wyoming, and in the name
of EOWSC of the Uniform Commercial Code Records of the Secretary of
State of the States of Connecticut, Oklahoma, Texas, and West
Virginia, and in the name of SOCC of the Uniform Commercial Code
Records of the Secretary of State of the States of Connecticut,
Oklahoma, and Texas, in each case from a source acceptable to the
Agent and reflecting no Liens against any of the Collateral as to
which perfection of a Lien is accomplished by the filing of a
financing statement other than in favor of Bank One or the Agent;
(i) confirmation, acceptable to the Agent, of the title
of the Borrowers to their respective Mortgaged Properties, free and
clear of Liens other than Permitted Liens;
(j) the opinion of James F. Gilbert, corporate counsel to
the Loan Parties, in the form attached hereto as Exhibit VII, with
such changes thereto as may be approved by the Agent; and
(k) such other agreements, documents, instruments,
opinions, certificates, waivers, consents, and evidence as the Agent
or any Lender may reasonably request.
3.2 Conditions Precedent to Each Loan. The obligations
of the Lenders to make each Loan are subject to the satisfaction of the
following additional conditions precedent:
(a) the Borrowers shall have delivered to the Agent a
Borrowing Request and a Compliance Certificate at least the requisite
time prior to the requested date for the relevant Loan; and each
statement or certification made in such Borrowing Request and
Compliance Certificate shall be true and correct in all material
respects on the requested date for such Loan;
(b) no Default or Event of Default shall exist or will
occur as a result of the making of the requested Loan;
(c) if requested by the Agent or any Lender, the
Borrowers shall have delivered evidence satisfactory to the Agent or
such Lender substantiating any of the matters contained in this
Agreement which are necessary to enable the Borrowers to qualify for
such Loan;
(d) the Agent shall have received, reviewed, and approved
such additional documents and items as described in Section 3.1 as may
be requested by the Agent with respect to such Loan;
(e) no Material Adverse Effect shall have occurred;
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(f) each of the representations and warranties contained
in this Agreement and the other Loan Documents shall be true and
correct and shall be deemed to be repeated by the Borrowers as if made
on the requested date for such Loan;
(g) all of the Security Instruments shall be in full
force and effect and provide to the Lenders the security intended
thereby;
(h) neither the consummation of the transactions
contemplated hereby nor the making of such Loan shall contravene,
violate, or conflict with any Requirement of Law;
(i) each Loan Party shall hold full legal title to the
Collateral pledged by such entity and be the sole beneficial owner
thereof;
(j) the Agent and each Lender shall have received the
payment of all fees payable by the Borrowers hereunder and the Agent
shall have received reimbursement from the Borrowers, or special legal
counsel for the Agent shall have received payment from the Borrowers,
for (i) all reasonable fees and expenses of counsel to the Agent for
which the Borrowers are responsible pursuant to applicable provisions
of this Agreement and for which invoices have been presented as of or
prior to the date of the relevant Loan, and (ii) estimated fees
charged by filing officers and other public officials incurred or to
be incurred in connection with the filing and recordation of any
Security Instruments, for which invoices have been presented as of or
prior to the date of the requested Loan; and
(k) all matters incident to the consummation of the
transactions hereby contemplated shall be satisfactory to the Agent
and each Lender.
3.3 Conditions Precedent to Issuance of Letters of
Credit. The obligation of the Agent, as the issuer of the Letters of Credit,
to issue, renew, or extend any Letter of Credit is subject to the satisfaction
of the following additional conditions precedent:
(a) the Borrowers shall have delivered to the Agent a
written (or oral, confirmed promptly in writing) request for the
issuance, renewal, or extension of a Letter of Credit at least three
Business Days prior to the requested issuance, renewal, or extension
date and a Letter of Credit Application at least one Business Day
prior to the requested issuance date; and each statement or
certification made in such Letter of Credit Application shall be true
and correct in all material respects on the requested date for the
issuance of such Letter of Credit;
(b) no Default or Event of Default shall exist or will
occur as a result of the issuance, renewal, or extension of such
Letter of Credit; and
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(c) the terms, provisions, and beneficiary of the Letter
of Credit or such renewal or extension shall be satisfactory to the
Agent, as the issuer of the Letters of Credit, in its sole discretion.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this
Agreement and to extend credit to the Borrowers, the Borrowers represent and
warrant to the Agent and each Lender (which representations and warranties
shall survive the delivery of the Notes) that:
4.1 Due Authorization. The execution and delivery by the
Borrowers of this Agreement and the borrowings hereunder, the execution and
delivery by the Borrowers of the Notes and the other Loan Documents, the
repayment of the Notes and interest and fees provided for in the Notes and this
Agreement, and the performance of all obligations of the Borrowers under the
Loan Documents are within the power of the Borrowers, have been duly authorized
by all necessary corporate action by the Borrowers, and do not and will not (a)
require the consent of any Governmental Authority, (b) contravene or conflict
with any Requirement of Law or the articles or certificate of incorporation,
bylaws, or other organizational or governing documents of the Borrowers, (c)
contravene or conflict with any indenture, instrument, or other agreement to
which either Borrower is a party or by which its Property may be presently
bound or encumbered, or (d) result in or require the creation or imposition of
any Lien in, upon or of any Property of either Borrower under any such
indenture, instrument, or other agreement, other than the Loan Documents.
4.2 Corporate Existence. Each Borrower is a corporation
duly organized, legally existing, and in good standing under the laws of its
state of incorporation and is duly qualified as a foreign corporation and is in
good standing in all jurisdictions wherein the ownership of Property or the
operation of its business necessitates same. The addresses of all places of
business of the Borrowers are as set forth in Exhibit VIII. Except for the
change in name from KRM Petroleum Corporation to PrimeEnergy Corporation and
the change in name from Sterling Drilling and Production Company to PrimeEnergy
Management Corporation, neither Borrower nor any predecessor to either Borrower
has changed its name or been the surviving corporation in a merger.
4.3 Valid and Binding Obligations. All Loan Documents to
which either Borrower is a party, when duly executed and delivered by such
Borrower, will be the legal, valid, and binding obligations of such Borrower,
enforceable against such Borrower in accordance with their respective terms
(subject to any Debtor Relief Laws)
4.4 Security Instruments. The provisions of each
Security Instrument executed by either Borrower are effective to create in
favor of the Agent, a legal, valid, and enforceable Lien in all right, title,
and interest of such Borrower in the Collateral described therein, which Liens,
assuming the accomplishment of recording and filing in accordance with
applicable laws
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prior to the intervention of rights of other Persons, shall constitute fully
perfected first-priority Liens on all right, title, and interest of such
Borrower in the Collateral described therein, subject only to Permitted Liens.
4.5 Title to Assets. Each Borrower has good and
indefeasible title to all of its Collateral and all other material real
Property and good and marketable title to all of its other Property, free and
clear of all Liens except Permitted Liens.
4.6 Scope and Accuracy of Financial Statements. The
Financial Statements of the Borrowers as of September 30, 1994, present fairly
the financial position and results of operations and cash flows of the
Borrowers in accordance with GAAP as at the relevant point in time or for the
period indicated, as applicable. No event or circumstance has occurred since
September 30, 1994, which could reasonably be expected to have a Material
Adverse Effect.
4.7 No Material Misstatements. No information, exhibit,
statement, or report furnished to the Lenders by or at the direction of either
Borrower in connection with this Agreement contains any material misstatement
of fact or omits to state a material fact or any fact necessary to make the
statements contained therein not misleading as of the date made or deemed made.
4.8 Liabilities, Litigation, and Restrictions. Other
than as listed under the heading "Liabilities" on Exhibit VIII attached hereto,
neither Borrower has any material liabilities of any nature, direct, or
contingent. Neither Borrower is in default with respect to any liabilities.
Except as set forth under the heading "Litigation" on Exhibit VIII hereto, no
Litigation affecting either Borrower or any Property of either Borrower is
pending before any Governmental Authority or, to the knowledge of either
Borrower, threatened against or affecting either Borrower that would in the
aggregate involve the payment of $250,000 or more or which could reasonably be
expected to result in any Material Adverse Effect. To the best knowledge of
each Borrower, after due inquiry, no unusual or unduly burdensome restriction,
restraint or hazard exists by contract, Requirement of Law, or otherwise
relative to the business or operations of such Borrower or the ownership and
operation of such Collateral other than such as relate generally to Persons
engaged in business activities similar to those conducted by such Borrower.
4.9 Authorizations; Consents. No authorization, consent,
approval, exemption, franchise, permit, or license of, or filing with, any
Governmental Authority or any other Person is required to authorize or is
otherwise required in connection with the valid execution and delivery by the
Borrowers of the Loan Documents or any instrument contemplated hereby or
thereby, the repayment by the Borrowers of the Notes and interest and fees
provided in the Notes or the other Loan Documents, or the performance by the
Borrowers of the Obligations.
4.10 Compliance with Laws. Neither the business nor any
of the activities of the Borrowers as presently conducted violates any
applicable Requirement of Law (including, without limitation, any Environmental
Law), the result of which violation could have a Material Adverse Effect. Each
Borrower possesses all licenses, approvals, registrations, permits and other
authorizations necessary to enable it to carry on its business in all material
respects. All
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such licenses, approvals, registrations, permits and other authorizations are
in full force and effect, and neither Borrower has reason to believe that it
will be unable to obtain the renewal of any such licenses, approvals,
registrations, permits and other authorizations in due course.
4.11 ERISA. Since the effective date of ERISA, no
Reportable Event or Prohibited Transaction has occurred with respect to any
Plan. Each Plan established or maintained by the Borrowers meets the minimum
funding standards of Section 302 of ERISA and otherwise is in compliance with
all applicable provisions of ERISA. The Borrowers have filed all reports
required by ERISA and required to be filed with respect to each Plan. Neither
Borrower has knowledge of any event that could result in any material liability
of such Borrower to the PBGC. The Borrowers have met all requirements with
respect to funding the Plans imposed by ERISA or the PBGC. Since the effective
date of Title IV of ERISA, there have not been any nor are there now existing
any events or conditions that would permit any Plan to be terminated under
circumstances that would cause the lien provided under Section 4068 of ERISA to
attach to any Property of either Borrower. The value of the Plans' benefits
guaranteed under Title IV of ERISA on the date hereof does not exceed the value
of such Plans' assets allocable to such benefits as of the date of this
Agreement and shall not be permitted to do so hereafter. No Borrower or
Commonly Controlled Entity (a) contributes to, or has an obligation to
contribute to, and has heretofore contributed to, or had an obligation to
contribute to, any Multiemployer Plan, (b) will, during the term of this
Agreement, assume an obligation, or acquire any entity or the assets of any
entity which has at any time had an obligation, to contribute to any
Multiemployer Plan.
4.12 Environmental Laws. To the best knowledge and belief
of the Borrowers, except as would not have a Material Adverse Effect, or as
described on Exhibit VIII under the heading "Environmental Matters:"
(a) no Property of any Loan Party or Property for which
any Loan Party serves as operator is currently on or has ever been on,
or is adjacent to any Property which is on or has ever been on, any
federal or state list of Superfund Sites;
(b) no Hazardous Substances have been generated,
transported, and/or disposed of by any Loan Party at a site which was,
at the time of such generation, transportation, and/or disposal, or
has since become, a Superfund Site;
(c) except in accordance with applicable Requirements of
Law or the terms of a valid permit, license, certificate, or approval
of the relevant Governmental Authority, no Release of Hazardous
Substances by any Loan Party or from, affecting, or related to any
Property of any Loan Party, any Property for which any Loan Party
serves as operator, or any Property adjacent to any Property of any
Loan Party or any Property for which any Loan Party serves as operator
has occurred; and
(d) no Environmental Complaint has been received by any
Loan Party.
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4.13 Compliance with Federal Reserve Regulations. No
transaction contemplated by the Loan Documents is in violation of any
regulations promulgated by the Board of Governors of the Federal Reserve
System, including, without limitation, Regulations G, T, U, or X.
4.14 Investment Company Act Compliance. Neither Borrower
is, or is directly or indirectly controlled by or acting on behalf of any
Person which is, an "investment company" or an "affiliated person" of an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
4.15 Public Utility Holding Company Act Compliance.
Neither Borrower is a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
4.16 Proper Filing of Tax Returns; Payment of Taxes Due.
Each Borrower has duly and properly filed its United States income tax return
and all other tax returns which are required to be filed and has paid all taxes
due except such as are being Contested in Good Faith. The respective charges
and reserves on the books of the Borrowers with respect to taxes and other
governmental charges are adequate and neither Borrower has knowledge of any
deficiency or additional assessment in a material amount in connection with any
taxes or other governmental charges not provided for on its books.
4.17 Refunds. Except as described on Exhibit VIII under
the heading "Refunds," no orders of, proceedings pending before, or other
requirements of, the Federal Energy Regulatory Commission, the Texas Railroad
Commission, or any other Governmental Authority exist which could result in
either Borrower being required to refund any material portion of the proceeds
received or to be received from the sale of hydrocarbons constituting part of
the Mortgaged Property.
4.18 Gas Contracts. Except as described on Exhibit VIII
under the heading "Gas Contracts," neither Borrower (a) is obligated in any
material respect by virtue of any prepayment made under any contract containing
a "take-or-pay" or "prepayment" provision or under any similar agreement to
deliver hydrocarbons produced from or allocated to any of the Mortgaged
Property at some future date without receiving full payment therefor within 90
days of delivery, and (b) has produced gas, in any material amount, subject to,
and neither such Borrower nor any of the Mortgaged Properties is subject to,
balancing rights of third parties or subject to balancing duties under
governmental requirements, except as to such matters for which such Borrower
has established monetary reserves adequate in amount to satisfy such
obligations and has segregated such reserves from other accounts.
4.19 Intellectual Property. Each Borrower owns or is
licensed to use all Intellectual Property necessary to conduct all business
material to its condition (financial or otherwise), business, or operations as
such business is currently conducted. No claim has been asserted or is pending
by any Person with the respect to the use of any such Intellectual Property or
challenging or questioning the validity or effectiveness of any such
Intellectual Property; and
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such Borrower knows of no valid basis for any such claim. The use of such
Intellectual Property by such Borrower does not infringe on the rights of any
Person, except for such claims and infringements as do not, in the aggregate,
give rise to any material liability on the part of such Borrower.
4.20 Casualties or Taking of Property. Except as
disclosed on Exhibit VIII under the heading "Casualties," since September 30,
1994, neither the business nor any Property of either Borrower has been
materially adversely affected as a result of any fire, explosion, earthquake,
flood, drought, windstorm, accident, strike or other labor disturbance,
embargo, requisition or taking of Property, or cancellation of contracts,
permits, or concessions by any Governmental Authority, riot, activities of
armed forces, or acts of God.
4.21 Chief Executive Officers of Borrowers. The principal
place of business and chief executive office of the Borrowers are at the
address set forth on the signature pages hereof for such Borrower or at such
other location as the Borrowers may have, by proper written notice hereunder,
advised the Agent, provided that such other location is within a state in which
appropriate financing statements from the relevant Borrower in favor of the
Agent have been filed.
4.22 Subsidiaries. The Borrowers have no Subsidiaries
except those described on Exhibit VIII under the heading "Subsidiaries".
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any
Commitment exists, the Borrowers shall:
5.1 Maintenance and Access to Records. Keep adequate
records, in accordance with GAAP, of all their transactions so that at any
time, and from time to time, their true and complete financial condition may be
readily determined, and promptly following the reasonable request of the Agent
or any Lender, make such records available for inspection by the Agent or any
Lender and allow the Agent or any Lender to make and take away copies thereof.
5.2 Quarterly Unaudited Financial Statements; Quarterly
Receivables Reports; Monthly Borrowing Base Reports. (a) Deliver to the Agent
and each Lender, as soon as available but in no event later than 60 days after
the end of each of the first three fiscal quarters of the fiscal year of PEC,
the unaudited consolidated Financial Statements of PEC and its Subsidiaries, as
at the end of such period and from the beginning of such fiscal year to the end
of such period, as applicable, and the unaudited consolidating Financial
Statements of PEC and its Subsidiaries from the beginning of such fiscal year
to the end of such period, which Financial Statements shall be certified by the
president or chief financial officer of PEC as being true and correct, subject
to changes resulting from normal year-end audit adjustments.
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(b) Deliver to the Agent and each Lender, as soon as
available but in no event later than 30 days after the end of each fiscal
quarter of PEC, a Receivables Reports. The first Receivables Report delivered
hereunder shall contain addresses for each account debtor. Upon the request of
the Agent, the Borrowers shall provide addresses of all new account debtors and
all changes in address for account debtors.
(c) Deliver to the Agent and each Lender, on or before
the 30th day after the close of each calendar month, a Borrowing Base Report.
5.3 Annual Financial Statements. Deliver to the Agent
and each Lender, as soon as available but in no event later than 120 days after
the close of each fiscal year of PEC, a copy of the annual audited consolidated
and unaudited consolidating Financial Statements of PEC and its Subsidiaries.
5.4 Oil and Gas Reserve Reports. (a) Deliver to the
Agent and each Lender no later than April 1 of each year during the term of
this Agreement, engineering reports in form and substance meeting the
requirements of the Securities and Exchange Commission for financial reporting
purposes, prepared by any nationally- or regionally-recognized independent
consulting petroleum engineers acceptable to the Agent as fairly and accurately
setting forth (i) the proven and producing oil and gas reserves (separately
classified as such) attributable to the Mortgaged Properties as of December 31
of the year for which such reserve reports are furnished, (ii) the aggregate
present value, determined on the basis of stated pricing assumptions, of the
future net income with respect to such Mortgaged Properties, discounted at a
stated per annum discount rate of proven and producing reserves, (iii)
projections of the annual rate of production, gross income, and net income with
respect to such proven and producing reserves, and (iv) information with
respect to the "take-or-pay," "prepayment," and gas-balancing liabilities of
the Loan Parties.
(b) Deliver to the Agent and each Lender no later than
November 1 of each year during the term of this Agreement, engineering reports
in form and substance satisfactory to the Agent prepared by or under the
supervision of the chief petroleum engineer of PEC evaluating the Mortgaged
Properties as of June 30 of the year for which such reserve reports are
furnished and updating the information provided in the reports pursuant to
Section 5.4(a).
(c) Each of the reports provided pursuant to this Section
shall be submitted to the Agent and each Lender together with additional data
concerning pricing, quantities of production from the Mortgaged Properties,
purchasers of production, and such other information and engineering and
geological data with respect thereto as the Agent may reasonably request.
5.5 Compliance Certificate. At the time of delivery of
the Financial Statements pursuant to Sections 5.2 and 5.3 and with each
Borrowing Base Report, deliver to the Agent and each Lender a Compliance
Certificate.
5.6 Security Instruments; Title Opinions; Title Defects.
Promptly upon the request of the Agent, (a) execute and deliver to the Agent
Security Instruments in form and substance satisfactory to the Agent covering
such Oil and Gas Properties of the Loan Parties as
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the Agent may request, (b) furnish to the Agent title opinions, in form and
substance and by counsel satisfactory to the Agent, or other confirmation of
title acceptable to the Agent, covering Oil and Gas Properties constituting not
less than 80% of the value, determined by the Agent in its discretion, of the
Mortgaged Properties, and (c) cure any title defect, material in the opinion of
the Agent, in value, in the title of the Borrowers to any of its Mortgaged
Properties and, in the event any such title defects are not cured in a timely
manner, pay all related costs and fees incurred by the Agent to do so.
5.7 Notices of Certain Events. Deliver to the Agent and
each Lender, immediately upon having knowledge of the occurrence of any of the
following events or circumstances, a written statement with respect thereto,
signed by a Responsible Officer of the Borrowers and setting forth the relevant
event or circumstance and the steps being taken by the Borrowers with respect
to such event or circumstance:
(a) any Default or Event of Default;
(b) any default or event of default under any contractual
obligation of any Loan Party, or any Litigation or investigation
between any Loan Party and any Governmental Authority which, in either
case, if not cured or if adversely determined, as the case may be,
could reasonably be expected to have a Material Adverse Effect;
(c) any Litigation involving any Loan Party as a
defendant or in which any Property of any Loan Party is subject to a
claim and in which the amount involved is $250,000 or more and which
is not covered by insurance or in which injunctive or similar relief
is sought;
(d) any Reportable Event or imminently expected
Reportable Event with respect to any Plan; any withdrawal from, or the
termination, Reorganization or Insolvency of, any Multiemployer Plan;
the institution of proceedings or the taking of any other action by
the PBGC, either Borrower or any Commonly Controlled Entity or
Multiemployer Plan with respect to the withdrawal from, or the
termination, Reorganization or Insolvency of, any Single Employer Plan
or Multiemployer Plan; or any Prohibited Transaction in connection
with any Plan or any trust created thereunder and the action being
taken by the Internal Revenue Service with respect thereto;
(e) the receipt by any Loan Party of any Environmental
Complaint or any formal request from any Governmental Authority or
other Person for information (other than requirements for compliance
reports) regarding any Release of Hazardous Substances by any Loan
Party or from, affecting or related to any Property of any Loan Party
or any Property for which any Loan Party serves as operator or
adjacent to any Property of any Loan Party or any Property for which
any Loan Party serves as operator which could reasonably be expected
to have a Material Adverse Effect;
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(f) any actual, proposed, or threatened testing or other
investigation by any Governmental Authority or other Person concerning
the environmental condition of, or relating to, any Property of any
Loan Party or any Property for which any Party serves as operator or
adjacent to any Property of any Loan Party or any Property for which
any Loan Party serves as operator following any allegation of a
violation of any Requirement of Law;
(g) any Release of Hazardous Substances by any Loan Party
or from, affecting, or related to any Property of any Loan Party or
any Property for which any Party serves as operator or adjacent to any
Property of any Loan Party or any Property for which any Loan Party
serves as operator except in accordance with applicable Requirements
of Law or the terms of a valid permit, license, certificate, or
approval of the relevant Governmental Authority, or the violation of
any Environmental Law, or the revocation, suspension, or forfeiture of
or failure to renew, any permit, license, registration, approval, or
authorization which could reasonably be expected to have a Material
Adverse Effect;
(h) the change in identity or address of any Person
remitting to either Borrower proceeds from the sale of hydrocarbon
production from or attributable to any Mortgaged Property; and
(i) any other event or condition which could reasonably
be expected to have a Material Adverse Effect.
5.8 Statement of Material Adverse Effect. Deliver to the
Agent and each Lender, promptly upon any officer of either Borrower having
knowledge of any Default, Event of Default or Material Adverse Effect, a
statement of the president or chief financial officer of the Borrowers or other
Responsible Officer of the Borrowers, setting forth the Default, Event of
Default or Material Adverse Effect and the steps being taken by the Borrowers
with respect thereto.
5.9 Letters in Lieu of Transfer Orders; Division Orders.
Promptly upon request by the Agent at any time and from time to time, and
without limitation on the rights of the Agent pursuant to Sections 2.27 and
2.28, execute such letters in lieu of transfer orders, and/or division and/or
transfer orders as are necessary or appropriate to transfer and deliver to the
Agent proceeds from or attributable to any Mortgaged Property.
5.10 Additional Information. Furnish to the Agent and
each Lender, promptly upon the request of the Agent or any Lender, such
additional financial or other information concerning the assets, liabilities,
operations, transactions, and projected future financial condition of the Loan
Parties as the Agent or any Lender may from time to time request.
5.11 Compliance with Laws and Payment of Taxes. Comply
with all applicable Requirements of Law and pay all taxes, assessments, and
governmental charges (including federal income taxes), claims for labor,
supplies, rent, and other obligations which, if unpaid,
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might become a Lien against its Property, except any of the foregoing being
Contested in Good Faith.
5.12 Maintenance of Corporate Existence and Good Standing.
Maintain its corporate existence or qualification and good standing in its
jurisdiction of incorporation and in all jurisdictions in which Collateral
owned by the relevant Borrower is located.
5.13 Payment of Notes; Performance of Obligations. Pay
the Notes according to the reading, tenor, and effect thereof, as modified
hereby, and do and perform every act and discharge all of its other
Obligations.
5.14 Further Assurances. Promptly cure any defects,
errors, or omissions in the execution and delivery of any of the Loan Documents
and all agreements contemplated thereby, and upon notice, immediately execute,
acknowledge, and deliver to the Agent such other assurances and instruments as
shall, in the opinion of the Agent, be necessary to fulfill the terms of the
Loan Documents.
5.15 Fees and Expenses. (a) Upon request by the Agent,
promptly pay all reasonable fees and expenses of the Agent in connection with
the preparation, negotiation, syndication, execution, delivery, administration,
and enforcement of this Agreement and the other Loan Documents and any
amendments, restatements, or supplements thereto, the satisfaction of the
conditions precedent set forth herein, the filing and recordation of Security
Instruments, and the consummation of the transactions contemplated in the Loan
Documents, including, without limitation, travel expenses and fees and expenses
of legal counsel, auditors and accountants, petroleum engineers, and
environmental and insurance consultants.
(b) Upon request by the Agent, promptly pay (to the
fullest extent permitted by law) all amounts reasonably expended, advanced, or
incurred by or on behalf of the Agent or any Lender to satisfy any obligation
of the Borrowers under any of the Loan Documents; to collect the Obligations;
to enforce the rights of the Agent and the Lenders under any of the Loan
Documents; and to protect the Properties or business of the Borrowers,
including, without limitation, the Collateral, which amounts shall be deemed
compensatory in nature and liquidated as to amount upon notice to the Borrowers
by the Agent and which amounts shall include, but not be limited to (i) all
court costs, (ii) reasonable fees and expenses of legal counsel, auditors and
accountants, petroleum engineers, and environmental and insurance consultants,
(iii) fees and expenses incurred in connection with the participation by the
Agent and the Lenders as members of the creditors' committee in a case
commenced under any Insolvency Proceeding, (iv) fees and expenses incurred in
connection with lifting the automatic stay prescribed in Section 362 Title 11
of the United States Code, and (v) fees and expenses incurred in connection
with any action pursuant to Section 1129 Title 11 of the United States Code all
reasonably incurred by the Agent and the Lenders in connection with the
collection of any sums due under the Loan Documents, together with interest at
the per annum interest rate equal to the Default Rate, on each such amount from
the date of notification to the Borrowers that the same was expended, advanced,
or incurred by the Agent or any Lender until the date it is repaid to the Agent
or such Lender, with the obligations under this Section surviving the
non-assumption of this Agreement in a case
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commenced under any Insolvency Proceeding and being binding upon the Borrowers
and/or a trustee, receiver, custodian, or liquidator of any such party
appointed in any such case.
5.16 Operation of Oil and Gas Properties. Develop,
maintain, and operate their Oil and Gas Properties in a prudent and workmanlike
manner in accordance with industry standards.
5.17 Maintenance and Inspection of Tangible Property.
Maintain all of its tangible Property in good repair and working order and;
make all necessary replacements thereof and operate such Property in a good and
workmanlike manner; and permit any authorized representative of the Agent or
any Lender to visit and inspect any tangible Property of the Borrowers.
5.18 Maintenance of Insurance. Continue to maintain, or
cause to be maintained, insurance with respect to the Properties and businesses
of the Borrowers against such liabilities, casualties, risks, and contingencies
and in amounts as is customary in the industry and furnish to the Agent, on
the Closing Date and annually thereafter, certificates evidencing such
insurance, with the Agent named as co-insured and loss payee.
5.19 Compliance with ERISA. Furnish to the Agent and each
Lender (i) promptly after the filing thereof with the United States Secretary
of Labor or the PBGC, copies of each annual and other report with respect to
each Plan or any trust created thereunder, and (ii) immediately upon becoming
aware of the occurrence of any Reportable Event, or of any Prohibited
Transaction, in connection with any Plan or any trust created thereunder, a
written notice from the Borrowers specifying the nature thereof, what action
the Borrowers are taking or proposes to take with respect thereto, and, when
known, any action taken by the Internal Revenue Service with respect thereto.
The Borrowers will fund all current service pension liabilities as they are
incurred under the provisions of all Plans from time to time in effect. The
Borrowers will not during the term of this Agreement assume an obligation to
contribute to any Multiemployer Plan. The Borrowers will not acquire any
Person or the assets of any Person which has or has had at any time from and
after January 2, 1974, an obligation to contribute to any Multiemployer Plan.
5.20 Indemnification. INDEMNIFY AND HOLD HARMLESS THE
AGENT AND EACH OF THE LENDERS AND THEIR RESPECTIVE SHAREHOLDERS, OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, AND AFFILIATES AND EACH
TRUSTEE FOR THE BENEFIT OF THE AGENT OR THE LENDERS UNDER ANY SECURITY
INSTRUMENT FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES, DAMAGES, LIABILITIES,
FINES, PENALTIES, CHARGES, ADMINISTRATIVE AND JUDICIAL PROCEEDINGS AND ORDERS,
JUDGMENTS, REMEDIAL ACTIONS, REQUIREMENTS AND ENFORCEMENT ACTIONS OF ANY KIND,
AND ALL COSTS AND EXPENSES INCURRED IN CONNECTION THEREWITH (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES AND EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN
WHOLE OR IN PART, FROM (A) THE PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER,
OR FROM ANY PROPERTY OF ANY LOAN PARTY OR ANY PROPERTY FOR WHICH ANY LOAN
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PARTY SERVES AS OPERATOR, WHETHER PRIOR TO OR DURING THE TERM HEREOF, (B) ANY
ACTIVITY CARRIED ON OR UNDERTAKEN ON OR OFF ANY PROPERTY OF ANY LOAN PARTY OR
ANY PROPERTY FOR WHICH ANY LOAN PARTY SERVES AS OPERATOR, WHETHER PRIOR TO OR
DURING THE TERM HEREOF, AND WHETHER BY ANY LOAN PARTY OR ANY PREDECESSOR IN
TITLE, EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF ANY LOAN PARTY OR ANY
OTHER PERSON AT ANY TIME OCCUPYING OR PRESENT ON SUCH PROPERTY, IN CONNECTION
WITH THE HANDLING, TREATMENT, REMOVAL, STORAGE, DECONTAMINATION, CLEANUP,
TRANSPORTATION, OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES AT ANY TIME LOCATED OR
PRESENT ON OR UNDER SUCH PROPERTY, (C) ANY RESIDUAL CONTAMINATION ON OR UNDER
ANY PROPERTY OF ANY LOAN PARTY OR ANY PROPERTY FOR WHICH ANY LOAN PARTY SERVES
AS OPERATOR, (D) ANY CONTAMINATION OF NATURAL RESOURCES OR ANY PROPERTY OF ANY
LOAN PARTY OR ANY PROPERTY FOR WHICH ANY LOAN PARTY SERVES AS OPERATOR ARISING
IN CONNECTION WITH THE GENERATION, USE, HANDLING, STORAGE, TRANSPORTATION OR
DISPOSAL OF ANY HAZARDOUS SUBSTANCES BY ANY LOAN PARTY OR ANY EMPLOYEE, AGENT,
CONTRACTOR, OR SUBCONTRACTOR OF ANY LOAN PARTY WHILE SUCH PERSONS ARE ACTING
WITHIN THE SCOPE OF THEIR RELATIONSHIP WITH SUCH LOAN PARTY, IRRESPECTIVE OF
WHETHER ANY OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH
APPLICABLE REQUIREMENTS OF LAW, OR (E) THE PERFORMANCE AND ENFORCEMENT OF ANY
LOAN DOCUMENT, ANY ALLEGATION BY ANY BENEFICIARY OF A LETTER OF CREDIT OF A
WRONGFUL DISHONOR BY THE AGENT OF A CLAIM OR DRAFT PRESENTED THEREUNDER, OR ANY
OTHER ACT OR OMISSION IN CONNECTION WITH OR RELATED TO ANY LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING, WITHOUT LIMITATION, ANY OF THE
FOREGOING IN THIS SECTION ARISING FROM NEGLIGENCE, WHETHER SOLE OR CONCURRENT,
ON THE PART OF THE AGENT OR ANY LENDER OR ANY OF THEIR RESPECTIVE SHAREHOLDERS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, OR AFFILIATES OR ANY
TRUSTEE FOR THE BENEFIT OF THE AGENT OR THE LENDERS UNDER ANY SECURITY
INSTRUMENT BUT EXCLUDING ANY OF THE FOREGOING ARISING FROM THE GROSS NEGLIGENCE
OR WILFUL MISCONDUCT ON THE PART OF THE AGENT OR ANY LENDER; WITH THE FOREGOING
INDEMNITY SURVIVING SATISFACTION OF ALL OBLIGATIONS AND THE TERMINATION OF THIS
AGREEMENT.
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ARTICLE VI
NEGATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any
Commitment exists, the Borrowers will not:
6.1 Indebtedness. Create, incur, assume, or suffer to
exist any Indebtedness or Swap Obligation; provided, however, the foregoing
restriction shall not apply to (a) the Obligations, (b) unsecured current
accounts payable incurred in the ordinary course of business which are not
overdue or are being Contested in Good Faith, (c) crude oil, natural gas, or
other hydrocarbon floor, collar, cap, price protection, or swap agreements and
futures contracts, in form and substance acceptable to the Lenders, provided
that such agreements shall not be entered into with respect to Mortgaged
Properties constituting more than 25% of the present value of estimated future
net revenues, as determined by the Agent and the Lenders in their sole good
faith discretion, of all proved developed producing Mortgaged Properties, (d)
Indebtedness with respect to capitalized leases, the payments under which for
any 12-month period shall not exceed $300,000 in the aggregate for both
Borrowers, (e) Indebtedness with respect to payments to sellers of Oil and Gas
Properties acquired subsequent to the date of this Agreement of a portion of
the cash flow attributable to such Properties that is acceptable to the Agent
and the Lenders in their sole good faith discretion, or (f) Indebtedness not
exceeding $500,000 at any time outstanding incurred for the acquisition of
field service equipment.
6.2 Contingent Obligations. Create, incur, assume, or
suffer to exist any Contingent Obligation; provided, however, the foregoing
restriction shall not apply to (a) performance guarantees and performance
surety or other bonds provided in the ordinary course of business, or (b) trade
credit incurred or operating leases entered into in the ordinary course of
business.
6.3 Loans or Advances. Make or agree to make or allow to
remain outstanding any loans or advances to any Person, except (a) advances or
extensions of credit in the form of accounts receivable incurred in the
ordinary course of business, (b) the outstanding loan in the amount of $400,000
to Alabama Shopping Center Associates, and (c) loans or advances to PrimeEnergy
Asset and Income Fund L.P. A-1, PrimeEnergy Asset and Income Fund L.P. A-2,
PrimeEnergy Asset and Income Fund L.P. A-3, PrimeEnergy Asset and Income Fund
L.P. AA-1, PrimeEnergy Asset and Income Fund L.P. AA- 2, PrimeEnergy Asset and
Income Fund L.P. AA-3, PrimeEnergy Asset and Income Fund L.P. AA-4, PrimeEnergy
Asset and Income Trust A-1, PrimeEnergy Asset and Income Trust A-2 and any
other oil and gas limited partnership for which either Borrower is the managing
general partner and any business trust formed in the ordinary course of
business of the Borrowers for which either Borrower is the managing trustee,
provided that no default or event of default exists under any material
contractual obligation of such partnership or trust.
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6.4 Liens. Create, incur, assume, or suffer to exist any
Lien on any of their respective Properties, whether now owned or hereafter
acquired; provided, however, the foregoing restrictions shall not apply to
Permitted Liens.
6.5 Sales of Assets. Without the prior written consent
of the Lenders, sell, transfer or otherwise dispose of, in one or any series of
transactions within any 12-month period, assets, whether now owned or hereafter
acquired, the book value of which exceeds $250,000 in the aggregate for both
Borrowers, or enter into any agreement to do so; provided, however, the
foregoing restriction shall not apply to the sale of hydrocarbons or inventory
in the ordinary course of business or the sale or other disposition of Property
destroyed, lost, worn out, damaged or having only salvage value or no longer
used or useful in the business of either Borrower.
6.6 Payment of Accounts Payable. Allow any account
payable by either Borrower to remain unpaid more than 60 days after its due
date, except such as are being Contested in Good Faith.
6.7 Investments. Make Investments in or purchase or
otherwise acquire all or substantially all of the assets of any Person, or any
shares of stock of, or similar interest in, any other Person; provided,
however, the foregoing restriction shall not apply to the purchase or
acquisition of (a) Oil and Gas Properties, (b) Investments in the form of (i)
debt securities issued or directly and fully guaranteed or insured by the
United States Government or any agency or instrumentality thereof, with
maturities of no more than one year, (ii) commercial paper of a domestic issuer
rated at the date of acquisition at least P-2 by Moody's Investor Service, Inc.
or A-2 by Standard & Poor's Corporation and with maturities of no more than one
year from the date of acquisition, or (iii) repurchase agreements covering debt
securities or commercial paper of the type permitted in this Section,
certificates of deposit, demand deposits, eurodollar time deposits, overnight
bank deposits and bankers' acceptances, with maturities of no more than one
year from the date of acquisition, issued by or acquired from or through the
Agent, (c) money-market funds of a degree of creditworthiness acceptable to the
Agent and the Lenders, (d) crude oil, natural gas or other hydrocarbons swap
agreements and futures contracts, in form and substance acceptable to the Agent
and the Lenders, or (e) Investments in oil and gas limited partnerships,
business trusts and other similar entities in the ordinary course of business
of the Borrowers and the purchase of interests of other Persons in such
partnerships, trusts and other entities.
6.8 Dividends and Distributions. Declare, pay, or make,
whether in cash or other Property, any dividend or distribution on any share of
any class of the capital stock of either Borrower, or purchase, redeem, or
otherwise acquire for value any share of any class of capital stock of either
Borrower other than the purchase of the capital stock of PEC for an amount not
exceeding $750,000 in any fiscal year provided that no Default or Event of
Default exists or will occur as the result of such purchase and provided
further that the Lender has received written notice of any such purchase for an
amount exceeding $100,000.
6.9 Changes in Corporate Structure. Issue or agree to
issue additional shares of capital stock, in one or any series of transactions
except for the issuance of not more than
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936,500 shares of common stock of PEC pursuant to options existing as of the
date hereof or which may be granted pursuant to the employee stock ownership
plan of the Borrowers, or consolidate or merge with or purchase (for cash or
securities) all or a substantial part of the assets or capital stock of any
corporation, firm, association or enterprise, or allow any such entity to be
merged into either Borrower.
6.10 Cancellation of Insurance. Allow any insurance
policy required to be carried hereunder to be terminated or lapse or expire
without provision for adequate renewal thereof.
6.11 Transactions with Affiliates. Directly or
indirectly, enter into any transaction (including the sale, lease, or exchange
of Property or the rendering of service) with any of their Affiliates, other
than upon fair and reasonable terms no less favorable than could be obtained in
an arm's length transaction with a Person which was not an Affiliate.
6.12 Lines of Business. Engage in any business differing
materially from its existing business.
6.13 Current Ratio. Permit the ratio of total Current
Assets to total Current Liabilities excluding Indebtedness to the Lenders to be
less than 1.00 to 1.00.
6.14 Tangible Net Worth. Permit Tangible Net Worth to be
less than $7,000,000, adjusted for Property acquisitions, plus an amount equal
to 75% of positive net income from operations for each fiscal quarter ending on
or after March 31, 1995.
6.15 Debt Coverage Ratio. Permit, at any time, the ratio
of Consolidated Cash Flow for the preceding four fiscal quarters of PEC to
one-fourth of the monthly average (determined as of the last day of each
calendar month) or, if materially greater as a result of payments made shortly
before the last day of a calendar month and reborrowings made soon after the
beginning of the next calendar month, the daily average, of Consolidated Debt
for such preceding four fiscal quarters, to be less than 1.25 to 1.00.
6.16 Interest Coverage Ratio. Permit, at the end of any
fiscal quarter of PEC, the ratio of Operating Cash Flow to Interest Expense to
be less than 2.50 to 1.00.
ARTICLE VII
EVENTS OF DEFAULT
7.1 Events of Default. The occurrence of any of the
following events shall constitute an Event of Default:
(a) the Borrowers shall fail to pay when due any
installment of principal or interest under this Agreement or the Notes
or any fee or other sum payable under any Loan Document and such
failure shall continue for in excess
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of three Business Days after the earlier of notice thereof by the
Agent to the Borrowers or knowledge thereof by any Borrower;
(b) any Loan Party shall fail to observe or perform any
covenant, condition or agreement contained in this Agreement or any
other Loan Document to which such Loan Party is a party, and with
respect to the provisions of Sections 5.2, 5.3, 5.4, and 5.5 only,
such failure shall continue for in excess of 10 days after the earlier
of notice thereof by the Agent to the Borrowers or knowledge thereof
by either Borrower;
(c) any Financial Statement, representation, warranty or
certificate made or furnished by or on behalf of any Loan Party to the
Agent or any Lender in connection with this Agreement, or as an
inducement to the Agent and the Lenders to enter into this Agreement,
or in any instrument furnished in compliance with or in reference to
this Agreement, shall be materially false, incorrect, or incomplete at
or as of the time made;
(d) any Loan Party shall fail to pay Indebtedness
exceeding $100,000 in the aggregate due to any third Persons and such
failure shall continue beyond any applicable grace period unless such
payment is being Contested in Good Faith, or any Loan Party shall fail
to observe or perform any covenant, condition or agreement contained
in any agreement binding such Loan Party, and such failure shall
continue for more than the period of grace, if any, therein specified
or 30 days, whichever is the lesser;
(e) any Loan Party shall (i) apply for or consent to the
appointment of a receiver, trustee or liquidator of it or all or a
substantial part of its assets, (ii) file a voluntary petition
commencing an Insolvency Proceeding, (iii) make a general assignment
for the benefit of creditors, (iv) be unable, or admit in writing its
inability, to pay its debts generally as they become due, or (v) file
an answer admitting the material allegations of a petition filed
against it in any Insolvency Proceeding;
(f) a petition shall be filed against any Loan Party in
any Insolvency Proceeding, and such petition shall not be controverted
within 15 days or dismissed or stayed within 60 days; or an order,
judgment or decree shall be entered against any Loan Party by any
court of competent jurisdiction or by any other duly authorized
authority, on the petition of a creditor or otherwise, granting relief
in any Insolvency Proceeding or approving a petition seeking
reorganization or an arrangement of its debts or appointing a
receiver, trustee, conservator, custodian or liquidator of it or all
or any substantial part of its assets and such order, judgment or
decree shall not be dismissed or stayed within 60 days;
(g) a final and non-appealable order, judgment or decree
shall be entered against any Loan Party for money damages and/or
Indebtedness due in
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an amount in excess of $250,000, and such order, judgment or decree
shall not be dismissed, stayed, or satisfied within 30 days;
(h) any Person shall engage in any Prohibited Transaction
involving any Plan; any "accumulated funding deficiency" (as defined
in Section 302 of ERISA), whether or not waived, shall exist with
respect to any Plan for which an excise tax is due or would be due in
the absence of a waiver; a Reportable Event shall occur with respect
to, or proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate, any Single
Employer Plan, which Reportable Event or commencement of proceedings
or appointment of a trustee is, in the reasonable opinion of the
Agent, likely to result in the termination of such Plan for purposes
of Title IV of ERISA; any Single Employer Plan shall terminate for
purposes of Title IV of ERISA; either Borrower or any Commonly
Controlled Entity shall incur, or in the reasonable opinion of the
Agent, be likely to incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a
Multiemployer Plan; or any other event or condition shall occur or
exist with respect to a Plan and the result of such events or
conditions referred to in this Section 7.1(h) could subject either
Borrower or any Commonly Controlled Entity to any tax (other than an
excise tax under Section 4980 of the Code), penalty or other
liabilities which taken in the aggregate would have a Material Adverse
Effect and any such circumstance shall exist for in excess of 30 days;
(i) any charges are filed or any other action or
proceeding is instituted by any Governmental Authority against any
Loan Party under the Racketeering Influence and Corrupt Organizations
Statute (18 U.S.C. Section 1961 et seq.), the result of which could be
the forfeiture or transfer of any material Property of any Loan Party
subject to a Lien in favor of the Agent without (i) satisfaction or
provision for satisfaction of such Lien, or (ii) such forfeiture or
transfer of such Property being expressly made subject to such Lien;
(j) any Loan Party shall have (i) concealed, removed or
diverted, or permitted to be concealed, removed or diverted, any part
of its Property, with intent to hinder, delay or defraud its creditors
or any of them; (ii) made or suffered a transfer of any of its
Property which may be fraudulent under any Debtor Relief Law; (iii)
made any transfer of its Property to or for the benefit of a creditor
at a time when other creditors similarly situated have not been paid;
or (iv) shall have suffered or permitted, while insolvent, any
creditor to obtain a Lien upon any of its Property through legal
proceedings or distraint which is not vacated within 30 days from the
date thereof;
(k) the Liens granted in any Security Instrument shall
not constitute a first and prior Lien upon the Collateral described
therein, subject only to Permitted Liens;
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(l) a judgment creditor of any Loan Party shall obtain
possession of any of the Collateral by any means, including, without
limitation, levy, attachment or self help;
(m) the validity or enforceability of any of the Loan
Documents shall be contested by any Loan Party, or any Loan Party
shall deny that it has any or further liability or obligation under
any Loan Document to which it is a party;
(n) a Material Adverse Effect shall have occurred and
shall remain unremedied in excess of 30 days after notice thereof
given by the Agent to the Borrowers or knowledge thereof by either
Borrower;
(o) the levy against any significant portion of the
Property of any Loan Party, or any execution, garnishment, attachment,
sequestration or other writ or similar proceeding which is not
permanently dismissed or discharged within 60 days after the levy; or
(p) the Borrowers shall be unable to satisfy any
condition or cure any circumstance specified in Article III, the
satisfaction or curing of which is precedent to the right of the
Borrowers to receive a Loan or obtain the issuance of a Letter of
Credit, and such inability shall continue for a period in excess of 30
days.
7.2 Remedies. (a) Upon the occurrence of an Event of
Default specified in Sections 7.1(e) or 7.1(f), immediately and without notice,
(i) all Obligations shall automatically become immediately due and payable,
without presentment, demand, protest, notice of protest, default, or dishonor,
notice of intent to accelerate maturity, notice of acceleration of maturity, or
other notice of any kind, except as may be provided to the contrary elsewhere
herein, all of which are hereby expressly waived by the Borrowers; (ii) the
Commitments shall immediately cease and terminate unless and until reinstated
by the Agent and the Lenders in writing; and (iii) with the oral consent of the
Lenders (confirmed promptly in writing), the Agent and each Lender are hereby
authorized at any time and from time to time, without notice to the Borrower
(any such notice being expressly waived by the Borrower), to set-off and apply
any and all deposits (general or special, time or demand, provisional or final)
held by the Agent or such Lender and any and all other indebtedness at any time
owing by the Agent or such Lender to or for the credit or account of the
Borrower against any and all of the Obligations.
(b) Upon the occurrence of any Event of Default other than
those specified in Sections 7.1(e) or 7.1(f), (i) the Agent may and, upon the
request of the Lenders, shall, by notice to the Borrowers, declare all
Obligations immediately due and payable, without presentment, demand, protest,
notice of protest, default, or dishonor, notice of intent to accelerate
maturity, notice of acceleration of maturity, or other notice of any kind,
except as may be provided to the contrary elsewhere herein, all of which are
hereby expressly waived by the Borrowers; (ii) the Agent may and, upon the
request of the Lenders, shall, declare the Commitments terminated, whereupon
the Commitments shall immediately cease and terminate unless and until
reinstated by the Agent and the Lenders in writing; and (iii) with the written
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consent of the Lenders, the Agent and each Lender are hereby authorized at any
time and from time to time, without notice to the Borrowers (any such notice
being expressly waived by the Borrowers), to set-off and apply any and all
deposits (general or special, time or demand, provisional or final) held by the
Agent or such Lender and any and all other indebtedness at any time owing by
the Agent or such Lender to or for the credit or account of the Borrowers or
either of them against any and all of the Obligations although such Obligations
may be unmatured.
ARTICLE VIII
THE AGENT
8.1 Appointment. Each Lender hereby designates and
appoints the Agent as the agent of such Lender under this Agreement and the
other Loan Documents. Each Lender authorizes the Agent, as the agent for such
Lender, to take such action on behalf of such Lender under the provisions of
this Agreement and the other Loan Documents and to exercise such powers and
perform such duties as are expressly delegated to the Agent by the terms of
this Agreement and the other Loan Documents, together with such other powers as
are reasonably incidental thereto. Notwithstanding any provision to the
contrary elsewhere in this Agreement or in any other Loan Document, the Agent
shall not have any duties or responsibilities except those expressly set forth
herein or in any other Loan Document or any fiduciary relationship with any
Lender; and no implied covenants, functions, responsibilities, duties,
obligations, or liabilities on the part of the Agent shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
8.2 Delegation of Duties. The Agent may execute any of
its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
8.3 Exculpatory Provisions. Neither the Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or affiliates
shall be (a) required to initiate or conduct any litigation or collection
proceedings hereunder, except with the concurrence of the Lenders and
contribution by each Lender of its Percentage Share of costs reasonably
expected by the Agent to be incurred in connection therewith, (b) liable for
any action lawfully taken or omitted to be taken by it or such Person under or
in connection with this Agreement or any other Loan Document (except for gross
negligence or willful misconduct of the Agent or such Person), or (c)
responsible in any manner to any Lender for any recitals, statements,
representations or warranties made by the Borrowers or any officer thereof
contained in this Agreement or any other Loan Document or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Agent under or in connection with, this Agreement or any other Loan
Document, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
for any failure of the Borrowers to perform their obligations hereunder or
thereunder. The Agent shall not be under any
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obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of the Borrowers.
8.4 Reliance by Agent. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any Note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrowers), independent accountants and other experts selected by the Agent.
The Agent may deem and treat the payee of any Note as the owner thereof for all
purposes unless and until a written notice of assignment, negotiation, or
transfer thereof shall have been received by the Agent. The Agent shall be
fully justified in failing or refusing to take any action under this Agreement
or any other Loan Document unless it shall first receive such advice or
concurrence of the Lenders as it deems appropriate and contribution by each
Lender of its Commitment Percentage of costs reasonably expected by the Agent
to be incurred in connection therewith. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
other Loan Documents in accordance with a request of the Lenders. Such request
and any action taken or failure to act pursuant thereto shall be binding upon
the Lenders and all future holders of the Notes. In no event shall the Agent
be required to take any action that exposes the Agent to personal liability or
that is contrary to any Loan Document or applicable Requirement of Law.
8.5 Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
unless the Agent has received notice from a Lender or the Borrowers referring
to this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default." In the event that the Agent receives
such a notice, the Agent shall promptly give notice thereof to the Lenders.
The Agent shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Lenders; provided that unless
and until the Agent shall have received such directions, subject to the
provisions of Section 7.2, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default
or Event of Default as it shall deem advisable in the best interests of the
Lenders. In the event that the officer of the Agent primarily responsible for
the lending relationship with the Borrowers or the officer of any Lender
primarily responsible for the lending relationship with the Borrowers becomes
aware that a Default or Event of Default has occurred and is continuing, the
Agent or such Lender, as the case may be, shall use its good faith efforts to
inform the other Lenders and/or the Agent, as the case may be, promptly of such
occurrence. Notwithstanding the preceding sentence, failure to comply with the
preceding sentence shall not result in any liability to the Agent or any
Lender.
8.6 Non-Reliance on Agent and Other Lenders. Each Lender
expressly acknowledges that neither the Agent nor any other Lender nor any of
their respective officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representation or warranty to such Lender and that no
act by the Agent or any other Lender hereafter taken, including any review of
the affairs of the Borrowers, shall be deemed to constitute any representation
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or warranty by the Agent or any Lender to any other Lender. Each Lender
represents to the Agent that it has, independently and without reliance upon
the Agent or any other Lender, and based on such documents and information as
it has deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, condition (financial and otherwise) and
creditworthiness of the Borrowers and the value of the Collateral and other
Properties of the Borrowers and has made its own decision to enter into this
Agreement. Each Lender also represents that it will, independently and without
reliance upon the Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
condition (financial and otherwise) and creditworthiness of the Borrowers and
the value of the Collateral and other Properties of the Borrowers. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial and
otherwise), or creditworthiness of the Borrowers or the value of the Collateral
or other Properties of the Borrowers which may come into the possession of the
Agent or any of its officers, directors, employees, agents, attorneys-in-fact
or affiliates.
8.7 Indemnification. EACH LENDER AGREES TO INDEMNIFY THE
AGENT AND ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND
AFFILIATES (TO THE EXTENT NOT REIMBURSED BY THE BORROWERS AND WITHOUT LIMITING
THE OBLIGATION OF THE BORROWERS TO DO SO), RATABLY ACCORDING TO THE PERCENTAGE
SHARE OF SUCH LENDER, FROM AND AGAINST ANY AND ALL LIABILITIES, CLAIMS,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES AND DISBURSEMENTS OF ANY KIND WHATSOEVER WHICH MAY AT ANY TIME
(INCLUDING, WITHOUT LIMITATION, ANY TIME FOLLOWING THE PAYMENT AND PERFORMANCE
OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT) BE IMPOSED ON,
INCURRED BY OR ASSERTED AGAINST THE AGENT OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES IN ANY WAY RELATING TO OR
ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OTHER DOCUMENT
CONTEMPLATED OR REFERRED TO HEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
ANY ACTION TAKEN OR OMITTED BY THE AGENT OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES UNDER OR IN CONNECTION WITH
ANY OF THE FOREGOING, INCLUDING, WITHOUT LIMITATION, ANY LIABILITIES, CLAIMS,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES AND DISBURSEMENTS IMPOSED, INCURRED OR ASSERTED AS A RESULT OF THE
NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES; PROVIDED THAT NO
LENDER SHALL BE LIABLE FOR THE PAYMENT OF ANY PORTION OF SUCH LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
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ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING SOLELY
FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE AGENT OR ANY OF ITS
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES. THE
AGREEMENTS IN THIS SECTION SHALL SURVIVE THE PAYMENT AND PERFORMANCE OF ALL
OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
8.8 Restitution. Should the right of the Agent or any
Lender to realize funds with respect to the Obligations be challenged and any
application of such funds to the Obligations be reversed, whether by
Governmental Authority or otherwise, or should the Borrowers otherwise be
entitled to a refund or return of funds distributed to the Lenders in
connection with the Obligations, the Agent or such Lender, as the case may be,
shall promptly notify the Lenders of such fact. Not later than Noon, Central
Standard or Daylight Savings Time, as the case may be, of the Business Day
following such notice, each Lender shall pay to the Agent an amount equal to
the ratable share of such Lender of the funds required to be returned to the
Borrowers. The ratable share of each Lender shall be determined on the basis
of the percentage of the payment all or a portion of which is required to be
refunded originally distributed to such Lender, if such percentage can be
determined, or, if such percentage cannot be determined, on the basis of the
Percentage Share of such Lender. The Agent shall forward such funds to the
Borrowers or to the Lender required to return such funds. If any such amount
due to the Agent is made available by any Lender after Noon, Central Standard
or Daylight Savings Time, as the case may be, of the Business Day following
such notice, such Lender shall pay to the Agent (or the Lender required to
return funds to the Borrowers, as the case may be) for its own account interest
on such amount at a rate equal to the Federal Funds Rate for the period from
and including the date on which restitution to the Borrowers is made by the
Agent (or the Lender required to return funds to the Borrowers, as the case may
be) to but not including the date on which such Lender failing to timely
forward its share of funds required to be returned to the Borrowers shall have
made its ratable share of such funds available.
8.9 Agent in Its Individual Capacity. The Agent and its
affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Borrowers as though the Agent were not the agent
hereunder. With respect to any Note issued to the Lender serving as the Agent,
the Agent shall have the same rights and powers under this Agreement as a
Lender and may exercise such rights and powers as though it were not the Agent.
The terms "Lender" and "Lenders" shall include the Agent in its individual
capacity.
8.10 Successor Agent. The Agent may resign as Agent upon
ten days' notice to the Lenders and the Borrowers. If the Agent shall resign
as Agent under this Agreement and the other Loan Documents, Lenders for which
the Percentage Shares aggregate at least 67% shall appoint from among the
Lenders a successor agent for the Lenders, whereupon such successor agent shall
succeed to the rights, powers and duties of the Agent. The term "Agent" shall
mean such successor agent effective upon its appointment. The rights, powers,
and duties of the former Agent as Agent shall be terminated, without any other
or further act or deed on the part of such former Agent or any of the parties
to this Agreement or any holders of the Notes. After the removal or
resignation of any Agent hereunder as Agent, the provisions of this Article
VIII and Sections 2.2(d), 5.15, and 5.20 shall inure to its benefit as to any
actions taken
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or omitted to be taken by it while it was Agent under this Agreement and the
other Loan Documents.
8.11 Applicable Parties. The provisions of this Article
are solely for the benefit of the Agent and the Lenders, and the Borrowers
shall not have any rights as a third party beneficiary or otherwise under any
of the provisions of this Article. In performing functions and duties
hereunder and under the other Loan Documents, the Agent shall act solely as the
agent of the Lenders and does not assume, nor shall it be deemed to have
assumed, any obligation or relationship of trust or agency with or for the
Borrowers or any legal representative, successor, and assign of the Borrowers.
ARTICLE IX
MISCELLANEOUS
9.1 Assignments; Participations. (a) The Borrowers may
not assign any of their rights or obligations under any Loan Document without
the prior consent of the Agent and the Lenders.
(b) With the consent of the Agent and the Borrower, any
Lender may assign to one or more assignees all or a portion of its rights and
obligations under this Agreement pursuant to an Assignment Agreement. Any such
assignment shall be in the amount of at least $1,000,000 (or any whole multiple
of $1,000,000 in excess thereof) or the full amount outstanding to such Lender,
if less than $1,000,000, and the assignee shall pay to the Agent a transfer fee
in the amount of $5,000 for each such assignment. Any such assignment shall
become effective upon the execution and delivery to the Agent of the Assignment
Agreement and the consent of the Agent. Promptly following receipt of an
executed Assignment Agreement, the Agent shall send to the Borrowers a copy of
such executed Assignment Agreement. Promptly following receipt of such
executed Assignment Agreement, the Borrowers shall execute and deliver, at
their own expense, new Notes to the assignee and, if applicable, the assignor,
in accordance with their respective interests, whereupon the prior Notes of the
assignor and, if applicable, the assignee, shall be cancelled and returned to
the Borrowers. Upon the effectiveness of any assignment pursuant to this
Section 9.1(b), the assignee will become a "Lender," if not already a "Lender,"
for all purposes of the Loan Documents, and the assignor shall be relieved of
its obligations hereunder to the extent of such assignment. If the assignor no
longer holds any rights or obligations under this Agreement, such assignor
shall cease to be a "Lender" hereunder, except that its rights under Sections
2.2(d), 5.15 and 5.20 shall not be affected. On the last Business Day of each
month during which an assignment has become effective pursuant to this Section
9.1(b), the Agent shall prepare a new Exhibit V giving effect to all such
assignments effected during such month and will promptly provide a copy thereof
to the Borrowers and each Lender.
(c) Each Lender may transfer, grant, or assign
participations in all or any portion of its interests hereunder to any Person
pursuant to this Section 9.1(c), provided that such Lender shall remain a
"Lender" for all purposes of this Agreement and the transferee of
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such participation shall not constitute a "Lender" hereunder. In the case of
any such participation, the participant shall not have any rights under any
Loan Document, the rights of the participant in respect of such participation
to be against the granting Lender as set forth in the agreement with such
Lender creating such participation), and all amounts payable by the Borrowers
hereunder shall be determined as if such Lender had not sold such
participation.
(d) The Lenders may furnish any information concerning
the Borrowers in the possession of the Lenders from time to time to assignees
and participants and prospective assignees and participants.
(e) Notwithstanding anything in this Section to the
contrary, any Lender may assign and pledge all or any of its Notes or any
interest therein to any Federal Reserve Bank or the United States Treasury as
collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such Federal
Reserve System and/or such Federal Reserve Bank. No such assignment or pledge
shall release the assigning or pledging Lender from its obligations hereunder.
(f) Notwithstanding any other provisions of this Section,
no transfer or assignment of the interests or obligations of any Lender or
grant of participations therein shall be permitted if such transfer,
assignment, or grant would require the Borrowers to file a registration
statement with the Securities and Exchange Commission or any successor
Governmental Authority or qualify the Loans under the "Blue Sky" laws of any
state.
9.2 Survival of Representations, Warranties, and
Covenants. All representations and warranties of the Borrowers and all
covenants and agreements herein made shall survive the execution and delivery
of the Notes and the Security Instruments and shall remain in force and effect
so long as any Obligation is outstanding or any Commitment exists.
9.3 Notices and Other Communications. Except as to oral
notices expressly authorized herein, which oral notices shall be confirmed in
writing, all notices, requests, and communications hereunder shall be in
writing (including by telecopy). Unless otherwise expressly provided herein,
any such notice, request, demand, or other communication shall be deemed to
have been duly given or made when delivered by hand, or, in the case of
delivery by mail, two Business Days after deposited in the mail, certified
mail, return receipt requested, postage prepaid, or, in the case of telecopy
notice, when receipt thereof is acknowledged orally or by written confirmation
report, addressed to each party at the "Address for Notices" specified below
its name on the signature pages hereof or at such other address as shall be
designated by such party in a properly given notice.
9.4 Parties in Interest. Subject to applicable
restrictions contained herein, all covenants and agreements herein contained by
or on behalf of the Borrowers, the Agent or the Lender shall be binding upon
and inure to the benefit of the Borrowers, the Agent, and the Lenders, as the
case may be, and their respective legal representatives, successors, and
assigns.
9.5 Rights of Third Parties. All provisions herein are
imposed solely and exclusively for the benefit of the Agent, the Lenders and
the Borrowers and their successors and
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permitted assigns. No other Person shall have any right, benefit, priority, or
interest hereunder or as a result hereof or have standing to require
satisfaction of provisions hereof in accordance with their terms.
9.6 No Waiver; Rights Cumulative. No course of dealing
on the part of the Agent or the Lenders or their officers or employees, nor any
failure or delay by the Agent or the Lenders with respect to exercising any of
their rights under any Loan Document shall operate as a waiver thereof. The
rights of the Agent and the Lenders under the Loan Documents shall be
cumulative and the exercise or partial exercise of any such right shall not
preclude the exercise of any other right. Neither the making of any Loan nor
the issuance of a Letter of Credit shall constitute a waiver of any of the
covenants, warranties, or conditions of the Borrowers contained herein. In the
event the Borrowers are unable to satisfy any such covenant, warranty, or
condition, neither the making of any Loan nor the issuance of a Letter of
Credit shall have the effect of precluding the Agent or the Lenders from
thereafter declaring such inability to be an Event of Default as hereinabove
provided.
9.7 Survival Upon Unenforceability. In the event any one
or more of the provisions contained in any of the Loan Documents or in any
other instrument referred to herein or executed in connection with the
Obligations shall, for any reason, be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision of any Loan Document or of any other
instrument referred to herein or executed in connection with such Obligations.
9.8 Amendments; Waivers. Neither this Agreement nor any
of the other Loan Documents nor any terms hereof or thereof may be amended,
supplemented, modified, or waived except in writing and in accordance with the
provisions of this Section. The Agent and the Borrowers may, from time to time
with the written consent of the Lenders, enter into written amendments,
supplements, or modifications to the Loan Documents for the purpose of adding
any provisions to this Agreement or the other Loan Documents or changing in any
manner the rights of the Lenders or the Borrowers hereunder or thereunder or
waiving, on such terms and conditions as the Agent may specify in such
instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences. Any such
amendment, supplement, modification, or waiver shall apply equally to each of
the Lenders and shall be binding upon the Borrowers, the Lenders, and the Agent
and all future holders of the Notes. Notwithstanding the foregoing, the Agent
may, provided that no Default or Event of Default exists, release Collateral
the value of which, as set forth in the most recently provided Reserve Report,
in any fiscal year of PEC does not exceed $250,000. In the event of any
waiver, the Borrowers, the Lenders, and the Agent shall be restored to their
respective former positions and rights hereunder and under the other Loan
Documents, and any Default or Event of Default waived shall be deemed to be
cured and not continuing; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right with respect thereto.
9.9 Controlling Agreement. In the event of a conflict
between the provisions of this Agreement and those of any other Loan Document,
the provisions of this Agreement shall control.
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9.10 GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE
DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT VERNON'S TEXAS
CIVIL STATUTES, ARTICLE 5069, CHAPTER 15 (WHICH REGULATES CERTAIN REVOLVING
CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY.
9.11 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS
WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF,
RELATED TO, OR FROM THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED,
AT THE SOLE DISCRETION AND ELECTION OF THE AGENT, IN COURTS HAVING SITUS IN
HOUSTON, HARRIS COUNTY, TEXAS. EACH BORROWER HEREBY SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS
COUNTY, TEXAS, AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE
THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY THE AGENT IN
ACCORDANCE WITH THIS SECTION.
9.12 WAIVER OF RIGHTS TO JURY TRIAL. EACH BORROWER, THE
AGENT, AND EACH LENDER HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY,
IRREVOCABLY, AND UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR
ARISES OUT OF ANY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE ACTS OR
OMISSIONS OF THE AGENT OR ANY LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR
PROVISIONS OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH
RESPECT THERETO. THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR
THE AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT.
9.13 ENTIRE AGREEMENT. THIS AGREEMENT AMENDS, RESTATES,
AND REPLACES THE EXISTING CREDIT AGREEMENT AND CONSTITUTES THE ENTIRE AGREEMENT
AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL SUPERSEDE
ANY PRIOR AGREEMENT BETWEEN OR AMONG THE PARTIES, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT HEREOF, INCLUDING, WITHOUT LIMITATION, THE EXISTING
CREDIT AGREEMENT. FURTHERMORE, IN THIS REGARD, THIS AGREEMENT AND THE OTHER
WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE
PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.
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9.14 Counterparts. For the convenience of the parties,
this Agreement may be executed in multiple counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall
be deemed to be an original and all of which together shall constitute one and
the same agreement.
IN WITNESS WHEREOF, this Agreement is executed as of the date
first above written.
BORROWER:
PRIMEENERGY CORPORATION
By:
-------------------------------------
Beverly A. Cummings
Executive Vice President, Treasurer
and Chief Financial Officer
Address for Notices:
One Landmark Square
Stamford, Connecticut 06901
Attention: Ms. Beverly A. Cummings
Telecopy: (203) 358-5786
BORROWER:
PRIMEENERGY MANAGEMENT
CORPORATION
By:
-------------------------------------
Beverly A. Cummings
Executive Vice President, Treasurer
and Chief Financial Officer
Address for Notices:
One Landmark Square
Stamford, Connecticut 06901
Attention: Ms. Beverly A. Cummings
Telecopy: (203) 358-5786
(Signatures continued on next page)
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AGENT AND LENDER:
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By:
-------------------------------------
Kelly L. Elmore, III
Vice President
Address for Notices:
910 Travis
Houston, Texas 77002
Attention: Energy Group III - 6th Floor
Telecopy: (713) 751-3544
Applicable Lending Office
for Floating Rate Loans and
LIBO Rate Loans:
910 Travis
Houston, Texas 77002
(Signatures continued on next page)
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LENDER:
DEN NORSKE BANK AS
By:
-------------------------------------
Printed Name:
---------------------------
Address for Notices Title:
----------------------------------
Den norske Bank AS
Three Allen Center By:
333 Clay, Suite 4890 -------------------------------------
Houston, Texas 77002 Printed Name:
Attention: William V. Moyer ---------------------------
Telecopy: (713) 757-1167 Title:
----------------------------------
Applicable Lending Office
for Floating Rate Loans and
LIBO Rate Loans:
600 Fifth Avenue
New York, New York 10020
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EXHIBIT I
[FORM OF NOTE]
PROMISSORY NOTE
$[______________] Houston, Texas [____________], 19[___]
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned
("Makers"), jointly and severally, promise to pay to the order of
[_____________________] ("Payee"), at the banking quarters of Bank One, Texas,
National Association (the "Agent"), in Houston, Harris County, Texas, the sum
of [____________________________________] DOLLARS ($[_____________ ]), or so
much thereof as may be advanced against this Note pursuant to the Credit
Agreement dated of even date herewith by and among Makers, the Agent, and the
lenders signatory thereto from time to time (as amended, restated, or
supplemented from time to time, the "Credit Agreement"), together with interest
at the rates and calculated as provided in the Credit Agreement.
Reference is hereby made to the Credit Agreement for matters
governed thereby, including, without limitation, certain events which will
entitle the holder hereof to accelerate the maturity of all amounts due
hereunder. Capitalized terms used but not defined in this Note shall have the
meanings assigned to such terms in the Credit Agreement.
This Note is issued pursuant to, is a "Note" under, and is
payable as provided in the Credit Agreement. Subject to compliance with
applicable provisions of the Credit Agreement, Makers may at any time pay the
full amount or any part of this Note without the payment of any premium or fee,
but such payment shall not, until this Note is fully paid and satisfied, excuse
the payment as it becomes due of any payment on this Note provided for in the
Credit Agreement.
This Note is issued, in whole or in part, in renewal and
extension, but not in novation or discharge, of the remaining principal balance
of the Existing Note.
Without being limited thereto or thereby, this Note is secured
by the Security Instruments.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE
STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT VERNON'S TEXAS CIVIL STATUTES,
ARTICLE 5069, CHAPTER 15 (WHICH REGULATES
I-i
<PAGE> 73
CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL
NOT APPLY TO THIS NOTE.
PRIMEENERGY CORPORATION
By:
----------------------------------------
Printed Name:
------------------------------
Title:
-------------------------------------
PRIMEENERGY MANAGEMENT CORPORATION
By:
----------------------------------------
Printed Name:
------------------------------
Title:
-------------------------------------
I-ii
<PAGE> 74
EXHIBIT II
FORM OF
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT (this Agreement") is dated as of ________,
199___, by and between ___________________ __________ (the "Assignor") and
________________________________ (the "Assignee").
RECITALS
A. The Assignor is a party to the Credit Agreement dated as of
April 26, 1995 (as amended, restated or supplemented from time to time, the
"Credit Agreement") by and among _________________________, a ________
corporation (the "Company"), each of the lenders that is or becomes a party
thereto as provided in Section 9.1(b) of the Credit Agreement (individually,
together with its successors and assigns, a "Lender", and collectively,
together with their successors and assigns, the "Lenders"), and
______________________________, a national banking association (in its
individual capacity, "___________") and as agent for the Lenders (in such
capacity, together with its successors in such capacity, the "Agent").
B. The Assignor proposes to sell, assign and transfer to the
Assignee, and the Assignee proposes to purchase and assume from the Assignor,
[ALL][A PORTION] of the Assignor's Commitment Amount, its outstanding Loans and
its Percentage Share of the outstanding LC Exposure, all on the terms and
conditions of this Agreement.
C. In consideration of the foregoing and the mutual agreements
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. All capitalized terms used but not defined
herein have the respective meanings given to such terms in the Credit
Agreement.
1.2 Other Definitions. As used herein, the following terms have
the following respective meanings:
"Assigned Interest" shall mean all of Assignor's (in its
capacity as a "Lender") rights and obligations (i) under the Credit
Agreement and the other Loan Documents in respect of [ALL OF] the
[PORTION OF THE] Commitment Amount of the Assignor in the principal
amount equal to $_____________, including, without limitation, any
obligation to
II-i
<PAGE> 75
participate pro rata in any LC Exposure and (ii) to make Loans under
its Commitment up to the Commitment Amount referenced above and any
right to receive payments for the Loans currently outstanding under
its Commitment in the principal amount of $____________ (the "Loan
Balance"), plus the interest and fees which will accrue from and after
the Assignment Date.
"Assignment Date" shall mean ________________, 199___.
ARTICLE II
SALE AND ASSIGNMENT
2.1 Sale and Assignment. On the terms and conditions set forth
herein, effective on and as of the Assignment Date, the Assignor hereby sells,
assigns and transfers to the Assignee, and the Assignee hereby purchases and
assumes from the Assignor, all of the right, title and interest of the Assignor
in and to, and all of the obligations of the Assignor in respect of, the
Assigned Interest. Such sale, assignment and transfer is without recourse and,
except as expressly provided in this Agreement, without representation or
warranty.
2.2 Assumption of Obligations. The Assignee agrees with the
Assignor (for the express benefit of the Assignor and the Company) that the
Assignee will, from and after the Assignment Date, perform all of the
obligations of the Assignor in respect of the Assigned Interest. From and after
the Assignment Date: (a) the Assignor shall be released from the Assignor's
obligations in respect of the Assigned Interest, and (b) the Assignee shall be
entitled to all of the Assignor's rights, powers and privileges under the
Credit Agreement and the other Loan Documents in respect of the Assigned
Interest.
2.3 Consent by Agent. By executing this Agreement as provided
below, in accordance with Section 9.1(b) of the Credit Agreement, the Agent
hereby acknowledges notice of the transactions contemplated by this Agreement
and consents to such transactions.
ARTICLE III
PAYMENTS
3.1 Payments. As consideration for the sale, assignment and
transfer contemplated by Section 2.1 hereof, the Assignee shall, on the
Assignment Date, assume Assignor's obligations in respect of the Assigned
Interest and pay to the Assignor an amount equal to the Loan Balance, if any.
An amount equal to all accrued and unpaid interest and fees shall be paid to
the Assignor as provided in Section 3.2 (iii) below. Except as otherwise
provided in this Agreement, all payments hereunder shall be made in Dollars and
in immediately available funds, without setoff, deduction or counterclaim.
II-ii
<PAGE> 76
3.2 Allocation of Payments. The Assignor and the Assignee agree
that (i) the Assignor shall be entitled to any payments of principal with
respect to the Assigned Interest made prior to the Assignment Date, together
with any interest and fees with respect to the Assigned Interest accrued prior
to the Assignment Date, (ii) the Assignee shall be entitled to any payments of
principal with respect to the Assigned Interest made from and after the
Assignment Date, together with any and all interest and fees with respect to
the Assigned Interest accruing from and after the Assignment Date, and (iii)
the Agent is authorized and instructed to allocate payments received by it for
account of the Assignor and the Assignee as provided in the foregoing clauses.
Each party hereto agrees that it will hold any interest, fees or other amounts
that it may receive to which the other party hereto shall be entitled pursuant
to the preceding sentence for account of such other party and pay, in like
money and funds, any such amounts that it may receive to such other party
promptly upon receipt.
3.3 Delivery of Notes. Promptly following the receipt by the
Assignor of the consideration required to be paid under Section 3.1 hereof, the
Assignor shall, in the manner contemplated by Section 9.1(b) of the Credit
Agreement, (i) deliver to the Agent (or its counsel) the Note held by the
Assignor and (ii) notify the Agent to request that the Company execute and
deliver new Notes to the Assignor, if Assignor continues to be a Lender, and
the Assignee, dated the date of this Agreement in respective principal amounts
equal to the respective Commitment Amounts of the Assignor (if appropriate) and
the Assignee after giving effect to the sale, assignment and transfer
contemplated hereby.
3.4 Further Assurances. The Assignor and the Assignee hereby
agree to execute and deliver such other instruments, and take such other
actions, as either party may reasonably request in connection with the
transactions contemplated by this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions Precedent. The effectiveness of the sale,
assignment and transfer contemplated hereby is subject to the satisfaction of
each of the following conditions precedent:
(a) the execution and delivery of this Agreement by the
Assignor and the Assignee;
(b) the receipt by the Assignor of the payments required
to be made under Section 3.1 hereof; and
(c) the acknowledgment and consent by the Agent
contemplated by Section 2.3 hereof.
II-iii
<PAGE> 77
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Assignor. The Assignor
represents and warrants to the Assignee as follows:
(a) it has all requisite power and authority, and has
taken all action necessary to execute and deliver this Agreement and
to fulfill its obligations under, and consummate the transactions
contemplated by, this Agreement;
(b) the execution, delivery and compliance with the terms
hereof by Assignor and the delivery of all instruments required to be
delivered by it hereunder do not and will not violate any Requirement
of Law applicable to it;
(c) this Agreement has been duly executed and delivered
by it and constitutes the legal, valid and binding obligation of the
Assignor, enforceable against it in accordance with its terms;
(d) all approvals and authorizations of, all filings with
and all actions by any Governmental Authority necessary for the
validity or enforceability of its obligations under this Agreement
have been obtained;
(e) the Assignor has good title to, and is the sole legal
and beneficial owner of, the Assigned Interest, free and clear of all
Liens, claims, participations or other charges of any nature
whatsoever; and
(f) the transactions contemplated by this Agreement are
commercial banking transactions entered into in the ordinary course of
the banking business of the Assignor.
5.2 Disclaimer. Except as expressly provided in Section 5.1
hereof, the Assignor does not make any representation or warranty, nor shall it
have any responsibility to the Assignee, with respect to the accuracy of any
recitals, statements, representations or warranties contained in the Credit
Agreement or in any other Loan Document or for the value, validity,
effectiveness, genuineness, execution, legality, enforceability or sufficiency
of the Credit Agreement, the Notes or any other Loan Document or for any
failure by the Company [,THE GUARANTOR] or any other Person (other than
Assignor) to perform any of its obligations thereunder or for the existence,
value, perfection or priority of any collateral security or the financial or
other condition of the Company [,THE GUARANTOR] or any other Person, or any
other matter relating to the Credit Agreement or any other Loan Document or any
extension of credit thereunder.
5.3 Representations and Warranties of the Assignee. The Assignee
represents and warrants to the Assignor as follows:
II-iv
<PAGE> 78
(a) it has all requisite power and authority, and has
taken all action necessary to execute and deliver this Agreement and
to fulfill its obligations under, and consummate the transactions
contemplated by, this Agreement;
(b) the execution, delivery and compliance with the terms
hereof by Assignee and the delivery of all instruments required to be
delivered by it hereunder do not and will not violate any Requirement
of Law applicable to it;
(c) this Agreement has been duly executed and delivered
by it and constitutes the legal, valid and binding obligation of the
Assignee, enforceable against it in accordance with its terms;
(d) all approvals and authorizations of, all filings with
and all actions by any Governmental Authority necessary for the
validity or enforceability of its obligations under this Agreement
have been obtained;
(e) the Assignee has fully reviewed the terms of the
Credit Agreement and the other Loan Documents and has independently
and without reliance upon the Assignor, and based on such information
as the Assignee has deemed appropriate, made its own credit analysis
and decision to enter into this Agreement;
(f) if the Assignee is not incorporated under the laws of
the United Sates of America or a state thereof, the Assignee has
contemporaneously herewith delivered to the Agent and the Company such
documents as are required by Section 2.25(b) of the Credit Agreement;
and
(g) the transactions contemplated by this Agreement are
commercial banking transactions entered into in the ordinary course of
the banking business of the Assignee.
ARTICLE VI
MISCELLANEOUS
6.1 Notices. All notices and other communications provided for
herein (including, without limitation, any modifications of, or waivers,
requests or consents under, this Agreement) shall be given or made in writing
(including, without limitation, by telex or telecopy) to the intended recipient
at its "Address for Notices" specified below its name on the signature pages
hereof or, as to either party, at such other address as shall be designated by
such party in a notice to the other party.
6.2 Amendment, Modification or Waiver. No provision of this
Agreement may be amended, modified or waived except by an instrument in writing
signed by the Assignor and the Assignee, and consented to by the Agent.
II-v
<PAGE> 79
6.3 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. The representations and warranties made herein by the
Assignee are also made for the benefit of the Agent, and the Assignee agrees
that the Agent is entitled to rely upon such representations and warranties.
6.4 Assignments. Neither party hereto may assign any of its
rights or obligations hereunder except in accordance with the terms of the
Credit Agreement.
6.5 Captions. The captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
6.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be identical and all of which, taken
together, shall constitute one and the same instrument, and each of the parties
hereto may execute this Agreement by signing any such counterpart.
6.7 Governing Law. THIS AGREEMENT (INCLUDING, BUT NOT LIMITED TO,
THE VALIDITY AND ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, OTHER THAN THE CONFLICT OF
LAWS RULES THEREOF.
6.8 Expenses. To the extent not paid by the Company pursuant to
the terms of the Credit Agreement, each party hereto shall bear its own
expenses in connection with the execution, delivery and performance of this
Agreement.
6.9 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed and delivered as of the date first above written.
ASSIGNOR
--------
----------------------------------------
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
II-vi
<PAGE> 80
Address for Notices:
----------------------------------------
----------------------------------------
----------------------------------------
Telecopier No.:
-------------------------
Telephone No.:
--------------------------
Attention:
------------------------------
ASSIGNEE
--------
----------------------------------------
By:
-------------------------------------
Name:
-----------------------------------
Title:
Address for Notices:
----------------------------------------
----------------------------------------
----------------------------------------
Telecopier No.:
-------------------------
Telephone No.:
--------------------------
Attention:
------------------------------
ACKNOWLEDGED AND CONSENTED TO:
,
- ------------------------------
as Agent
By:
---------------------------
Name:
-------------------------
Title:
------------------------
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<PAGE> 81
EXHIBIT III
(FORM OF BORROWING BASE REPORT)
______________, 19__
Bank One, Texas, National Association, as Agent
910 Travis
Houston, Texas 77002
Attention: Mr. Kelly L. Elmore, III
Re: Credit Agreement dated as of April 26, 1995, by and among
PrimeEnergy Corporation, PrimeEnergy Management Corporation,
Bank One, Texas, National Association, as Agent, and the
lenders signatory thereto from time to time (as amended,
restated and supplemented from time to time the "Credit
Agreement")
Ladies and Gentlemen:
Pursuant to applicable requirements of the Credit Agreement,
the undersigned, as the ___________________ of the Borrowers, hereby certifies
to the Agent and the Lenders as follows:
As of ______________, 19__, the proposed Borrowing Base is
$_____________, computed as follows:
<TABLE>
<S> <C> <C> <C>
(A) Reserve Value pursuant to most
recent determination ($[_______]) $
--------------
(B) Outstanding Balance of Credit
Accounts (total accounts
receivable)
----------
(C) Less: Excluded Credit Accounts
(receivables for sale of oil
and gas or owned by affiliates
or older than 60 days and
others excluded pursuant to
Credit Agreement)
----------
(D) Outstanding Balance of Eligible
Joint Interest Accounts
----------
</TABLE>
III-i
<PAGE> 82
<TABLE>
<S> <C> <C> <C>
(E) 80% of Eligible Joint Interest
Accounts $
--------------
(F) Book value of Equipment
----------
(G) Less: Excluded Equipment
(Equipment constituting
part of Mortgaged Property
and other Equipment
excluded pursuant to
Credit Agreement)
----------
(H) Net book value of Eligible Equipment
----------
(I) 50% of net book value of Eligible Equipment $
--------------
(J) Advance supported by projected future net operating
income $
--------------
(K) Proposed Borrowing Base (sum of A
+ E + I + J) $
--------------
</TABLE>
Each capitalized term used but not defined herein shall have
the meaning assigned to such term in the Credit Agreement.
Very truly yours,
PRIMEENERGY CORPORATION
By:
-------------------------------------
Printed Name:
---------------------------
Title:
----------------------------------
PRIMEENERGY MANAGEMENT
CORPORATION
By:
-------------------------------------
Printed Name:
---------------------------
Title:
----------------------------------
III-ii
<PAGE> 83
EXHIBIT IV
[FORM OF BORROWING REQUEST]
Bank One, Texas, National Association, as Agent
910 Travis
Houston, Texas 77002
Attention: Mr. Kelly L. Elmore, III
Re: Credit Agreement dated as of April 26, 1995, by and among
PrimeEnergy Corporation, PrimeEnergy Management Corporation,
Bank One, Texas, National Association, as Agent, and the
lenders signatory thereto from time to time (as amended,
restated, or supplemented from time to time, the "Credit
Agreement")
Ladies and Gentlemen:
Pursuant to the Credit Agreement, the Borrowers hereby make
the requests indicated below:
/ / 1. Loans
(a) Amount of new Loan: $________________
(b) Requested funding date: ___________, 19___
(c) $________________ of such Loan is to be a Floating Rate Loan;
and
$________________ of such Loan is to be a LIBO Rate Loan.
(d) Requested Interest Period for LIBO Rate Loan: ____ months.
/ / 2. Continuation or conversion of LIBO Rate Loan maturing on
__________:
(a) Amount to be continued as a LIBO Rate Loan is
$______________________, with an Interest Period of ____
months; and
(b) Amount to be converted to a Floating Rate Loan is
$________________.
/ / 3. Conversion of Floating Rate Loan:
(a) Requested conversion date: __________, 19____.
(b) Amount to be converted to a LIBO Rate Loan is $________, with
an Interest Period of _____ months.
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<PAGE> 84
The undersigned certifies that [s]he is the [___________] of
the Borrowers, has obtained all consents necessary, and as such is authorized
to execute this request on behalf of the Borrowers. The undersigned further
certifies, represents, and warrants on behalf of the Borrowers that no Default
or Event of Default exists and the Borrowers are entitled to receive the
requested borrowing, continuation, or conversion under the terms and conditions
of the Credit Agreement.
Each capitalized term used but not defined herein shall have
the meaning assigned to such term in the Credit Agreement.
Very truly yours,
PRIMEENERGY CORPORATION
By:
-----------------------------------------
Printed Name:
-------------------------------
Title:
--------------------------------------
PRIMEENERGY MANAGEMENT CORPORATION
By:
-----------------------------------------
Printed Name:
-------------------------------
Title:
--------------------------------------
IV-ii
<PAGE> 85
EXHIBIT V
COMMITMENT AMOUNTS
<TABLE>
<CAPTION>
Commitment
Name of Lender Percentage Share Amount
-------------- ---------------- ----------
<S> <C> <C>
Bank One 75% $12,500,000
DNB 25% $4,166,666.67
</TABLE>
V-i
<PAGE> 86
EXHIBIT VI
[FORM OF COMPLIANCE CERTIFICATE]
______________, 19__
Bank One, Texas, National Association, as Agent
910 Travis
Houston, Texas 77002
Attention: Mr. Kelly L. Elmore, III
Re: Credit Agreement dated as of April 26, 1995, by and among
PrimeEnergy Corporation, PrimeEnergy Management Corporation,
Bank One, Texas, National Association, as Agent, and the
lenders signatory thereto from time to time (as amended,
restated, or supplemented from time to time, the "Credit
Agreement")
Ladies and Gentlemen:
Pursuant to applicable requirements of the Credit Agreement,
the undersigned, as the _________________ of the Borrowers, hereby certifies to
the Agent and the Lenders the following information as true and correct as of
the date hereof or for the period indicated, as the case may be:
[1. To the best of the knowledge of the undersigned, no Default or
Event of Default exists as of the date hereof or has occurred since
the date of our previous certification to you, if any.]
[1. To the best of the knowledge of the undersigned, the following
Defaults or Events of Default exist as of the date hereof or have
occurred since the date of our previous certification to you, if any,
and the actions set forth below are being taken to remedy such
circumstances:]
2. The compliance of the Borrowers with the financial covenants
of the Credit Agreement, as of the close of business on
____________________, is evidenced by the following:
(a) Section 6.5: Sales of Assets
<TABLE>
<CAPTION>
Permitted Actual
--------- ------
<S> <C>
Not more than $250,000 $[ ]
-----------
</TABLE>
VI-i
<PAGE> 87
<TABLE>
<S> <C> <C> <C>
(b) Section 6.13: Current Ratio
-------------
Required Actual
-------- ------
Not less than 1.0 to 1.0 to 1.0
------
(c) Section 6.14: Tangible Net Worth
------------------
Required Actual
-------- ------
Not less than $7,000,000,
adjusted for Property acquisitions,
plus 75% of positive net income for
each financial quarter ending on or
after 3/31/95
Calculation of Tangible Net Worth:
Previous period requirement $[ ]
---------
plus 75% of quarterly positive
net income $[ ]
---------
Tangible Net Worth $[ ]
---------
(d) Section 6.15: Debt Coverage Ratio
-------------------
Required Actual
-------- ------
Not less than 1.25 to 1.00 to 1.00
-----
Calculation of Debt Coverage:
Consolidated Cash Flow for preceding
four fiscal quarters $[ ]
----------
Monthly average of Consolidated Debt for
preceding four fiscal quarters
Average of Bank One, et al. debt [ ]
----------
plus average of other debt [ ]
----------
Total monthly average of Consolidated
Debt [ ]
----------
One-fourth of total monthly average of
Consolidated Debt $[ ]
----------
</TABLE>
VI-ii
<PAGE> 88
(e) Section 6.16: Interest Coverage Ratio*
<TABLE>
<CAPTION>
Required Actual
-------- ------
<S> <C>
Not less than 2.50 to 1.00 ________ to 1.00
*at the end of any fiscal quarter
</TABLE>
Each capitalized term used but not defined herein shall have the
meaning assigned to such term in the Credit Agreement.
PRIMEENERGY CORPORATION
By:
-------------------------------------
Printed Name:
---------------------------
Title:
----------------------------------
PRIMEENERGY MANAGEMENT
CORPORATION
By:
-------------------------------------
Printed Name:
---------------------------
Title:
----------------------------------
VI-iii
<PAGE> 89
EXHIBIT VII
[FORM OF OPINION OF COUNSEL]
April 26, 1995
Bank One, Texas, National Association
910 Travis
Houston, Texas 77002
Attention: Mr. Kelly L. Elmore III
Re: Credit Agreement dated as of April 26, 1995, by and among
PrimeEnergy Corporation, PrimeEnergy Management Corporation,
Bank One, Texas, National Association, as Agent, and the
lenders signatory thereto from time to time (the "Credit
Agreement")
Ladies and Gentlemen:
This opinion is furnished to you pursuant to the Credit
Agreement. Each capitalized term used but not defined herein shall have the
meaning assigned to such term in the Credit Agreement.
I have acted as counsel to the Borrowers and the other Loan
Parties in connection with the transactions contemplated in the Credit
Agreement. In my representation of the Borrowers and the other Loan Parties, I
have examined an executed counterpart of each of the following documents
(collectively, the "Loan Documents"):
(a) the Credit Agreement;
(b) the Notes;
(c) Ratification of and Amendment to Mortgage, Collateral
Real Estate Mortgage, Deed of Trust, Indenture, Security Agreement,
Financing Statement and Assignment of Production dated of even date
herewith by PEC and Bank One;
(d) Ratification of and Amendment to Mortgage, Deed of
Trust, Indenture, Security Agreement, Financing Statement and
Assignment of Production dated of even date herewith among PEC, PEMC,
and Bank One;
(e) Second Amendment to Security Agreement dated of even
date herewith by PEC and Bank One;
VII-i
<PAGE> 90
(f) Second Amendment to Security Agreement dated of even
date herewith by PEMC and Bank One;
(g) Second Amendment to Security Agreement dated of even
date herewith by POC and Bank One;
(h) Second Amendment to Security Agreement dated of even
date herewith by EOWSC and Bank One;
(i) Financing Statement Change (Amendment) instruments
constituent to documents described in (e) through (h) above;
(j) Security Agreement dated of even date herewith by
SOCC; and
(k) Non-Standard Financing Statement constituent to
document described in (j) above.
In addition, I have examined originals or copies of
certificates of public officials necessary for certain of the opinions
expressed herein. In my examination of such certificates of public officials,
I have assumed the genuineness of all signatures thereto, the authority of the
individual signing on behalf of the issuer thereof, and the conformity to the
authentic original document of any certificate submitted to us in the form of a
copy. Furthermore, I have, for purposes of this Opinion, assumed that each of
the Loan Documents to which the Agent or any Lender is a party or under which
it has any obligation represents the valid, binding and enforceable obligation
of the Agent and such Lender.
Based on the foregoing and having regard for such legal
considerations as I deem relevant, I am of the opinion, subject to the
qualifications set forth hereinafter, that:
1. PEC is a corporation duly organized, legally existing
and in good standing under the laws of the State of Delaware and is
duly qualified as a foreign corporation and is in good standing in the
States of Connecticut, Louisiana, Mississippi, Montana, New Mexico,
North Dakota, Oklahoma, Texas, Utah, West Virginia and Wyoming. PEMC
is a corporation duly organized, legally existing and in good standing
under the laws of the State of New York and is duly qualified as a
foreign corporation and is in good standing in the States of Colorado,
Connecticut, Kansas, Oklahoma, Texas and West Virginia. POC is a
corporation duly organized, legally existing and in good standing
under the laws of the State of Texas and is duly qualified as a
foreign corporation and is in good standing in the States of Colorado,
Kansas, Louisiana, Oklahoma, New Mexico, West Virginia and Wyoming.
EOWSC is a corporation duly organized, legally existing and in good
standing under the laws of the State of West Virginia and is duly
qualified as a foreign corporation and is in good standing in the
States of Colorado, Oklahoma, and Texas. SOCC is a corporation duly
organized, legally existing and in good standing under the laws of the
State of Oklahoma and is duly
VII-ii
<PAGE> 91
qualified as a foreign corporation and is in good standing in the
States of ___________________________.
2. The execution and delivery by each Borrower of the
Credit Agreement and the borrowings thereunder; the execution and
delivery by each Borrower of the Notes; and the repayment of the Notes
and interest and fees provided in the Notes and the Credit Agreement
are within the power of such Borrower, have been duly authorized by
all necessary corporate action, and do not (a) require the consent of
any Governmental Authority; (b) contravene or conflict with any
Requirement of Law or the charter or bylaws of such Borrower; (c) to
the best of my knowledge, contravene or conflict with any indenture,
instrument or other agreement to which such Borrower is a party or by
which any Property of such Borrower may be presently bound or
encumbered or result in or require the creation or imposition of any
Lien in, upon or of any Property of such Borrower under any such
indenture, instrument or other agreement, other than under the Loan
Documents.
3. The execution and delivery by each Loan Party of the
Loan Documents to which it is a party and the performance of all
obligations of such Loan Party thereunder are within the power of such
Loan Party, have been duly authorized by all necessary corporate
action, and do not (a) require the consent of any Governmental
Authority; (b) contravene or conflict with any Requirement of Law or
the charter or bylaws of such Loan Party; (c) to the best of my
knowledge, contravene or conflict with any indenture, instrument or
other agreement to which such Loan Party is a party or by which any
Property of such Loan Party may be presently bound or encumbered or
result in or require the creation or imposition of any Lien in, upon
or of any Property of such Loan Party under any such indenture,
instrument or other agreement, other than under the Loan Documents.
4. The Loan Documents, as they exist as of the date
hereof, constitute legal, valid and binding obligations of each Loan
Party party thereto, enforceable against such Loan Party in accordance
with their respective terms.
5. To the best of my knowledge, except as disclosed in
Exhibit VIII to the Credit Agreement, no Litigation affecting either
Borrower is pending before any Governmental Authority or threatened
against either Borrower which, if determined adversely to the
interests of such Borrower, might reasonably be expected to result in
any impairment of its ownership of any Property or any Material
Adverse Effect.
The opinions expressed herein are subject to the following
qualifications and limitations:
A. I am licensed to practice law only in the State of
Texas; accordingly, the foregoing opinions are limited solely to the
laws of the State of
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<PAGE> 92
Texas, applicable United States federal law and the corporation laws
of the States of Delaware, New York, Oklahoma, and West Virginia.
B. The validity, binding effect and enforceability of
the Loan Documents may be limited or affected by bankruptcy,
insolvency, moratorium, reorganization or other similar laws affecting
rights of creditors generally, including, without limitation, statutes
or rules of law which limit the effect of waivers of rights by a
debtor or grantor; provided, however, that the limitations and other
effects of such statutes or rules of law upon the validity and binding
effect of the Loan Documents should not differ materially from the
limitations and other effects of such statutes or rules of law upon
the validity and binding effect of credit agreements, promissory notes
and security instruments generally.
C. The enforceability of the obligations of the Loan
Parties under the Loan Documents is subject to general principles of
equity (whether such enforceability is considered in a suit in equity
or at law).
Very truly yours,
VII-iv
<PAGE> 93
EXHIBIT VIII
DISCLOSURES
Section 1.2 Permitted Liens:
Lien in favor the "Jackson Group" composed of Jeral W.
Jackson, Inc., Pangaea Properties, Inc. and William H. Nichols by
PrimeEnergy Corporation, Sterling Asset and Income Funds A-1, A-2,
AA-1 and AA-2 (now PrimeEnergy Asset and Income Funds A-1, A-2, AA-1
and AA-2) to secure the payment to the Jackson Group of the "JPN Fee",
being an amount of certain of the proceeds and accounts arising from
the sale of oil and gas from certain properties located in Garvin
County, Oklahoma, as determined pursuant to the terms of that certain
Memorandum of Agreement dated October 1, 1990, and as evidenced by
Financing Statement filed January 23, 1991, Volume 1295, page 58,
Garvin County, Oklahoma, and Financing Statement filed January 28,
1991, N-00844, Central Filing Office, Oklahoma County Clerk.
Section 4.2 Places of Business:
1. PrimeEnergy Corporation
PrimeEnergy Management Corporation
One Landmark Square
Stamford, CT 06901
2. Prime Operating Company
Eastern Oil Well Service Company
(a) 2900 Wilcrest Drive, Suite 475
Houston, Texas 77042-6009
(b) North Park Executive Center
Building L, Suite L220
731 Wadley Avenue
Midland, Texas 79705
(c) 5400 Grand Blvd.
Oklahoma City, OK 73112-5652
(d) 714 1/2 Lee Street, East
Charleston, WV 25268
(e) Highway 83 South, Box 797
Carrizo Springs, Texas 78834
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(f) Route 2, Box 37
Orma, WV 25268
(g) 700 West Wagoner
Yukon, OK 73099
(h) 3520 E. Garden City Highway
Midland, TX 79702
(i) P. O. Box 159
Marshall, OK 73056
3. Southwest Oilfield Construction Company
(a) 5400 Grand Blvd.
Oklahoma, OK 73112-5652
(b) Box 376
Kingfisher, Oklahoma 73750
Section 4.8 Liabilities:
None, except for those liabilities reflected on the financial
statements of Borrowers as of December 31, 1994.
Litigation:
In March, 1990 a demand was made on Sterling Drilling and
Production Company, Inc. (now PrimeEnergy Management Corporation) on
behalf of McIntosh Partnerships claiming a loss of production from
certain existing wells of McIntosh by reason of Sterling's development
of Devonia Shales under a Calhoun County, West Virginia, farm-out from
McIntosh, asserting a loss in the amount of $520,000. No litigation
has been initiated and no further communication has been received from
McIntosh or its counsel.
Section 4.12 Environmental Matters:
Section 4.17 Refunds:
Section 4.18 Gas Contracts:
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<PAGE> 95
Section 4.20 Casualties:
Section 4.22 Subsidiaries:
1. PrimeEnergy Management Corporation
a New York corporation
100% owned by PrimeEnergy Corporation
2. Prime Operating Company,
a Texas corporation,
100% owned by PrimeEnergy Corporation
3. Eastern Oil Well Service Company
a West Virginia corporation
100% owned by PrimeEnergy Corporation
4. Southwest Oilfield Construction Company,
an Oklahoma corporation
100% owned by PrimeEnergy Corporation
5. PrimeEnergy Depositary Corp.,
a New York corporation
100% owned by PrimeEnergy Management Corporation
Limited Partnerships and business trusts in which PrimeEnergy
Management Corporation is managing general partner or managing trustee:
Sterling Gas Drilling Fund
Sterling Gas Drilling Fund 1979-1
Sterling Gas Drilling Fund 1979-2
Sterling Gas Drilling Fund 1980-1
Sterling Gas Drilling Fund 1980-2
Sterling Gas Drilling Fund 1981
Sterling Gas Drilling Fund 1982
Sterling Drilling Fund 1983-1
Sterling Drilling Fund 1983-2
Sterling Drilling Fund 1984-1
Sterling Drilling Fund 1984-2
Sterling Drilling Fund 1985-1
Sterling Drilling Fund 1985-2
Sterling Drilling Fund 1985-3
Sterling Drilling Fund L.P. 1986-1
PrimeEnergy Asset and Income Fund L.P. A-1
PrimeEnergy Asset and Income Fund L.P. A-2
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<PAGE> 96
PrimeEnergy Asset and Income Fund L.P. A-3
PrimeEnergy Asset and Income Fund L.P. AA-1
PrimeEnergy Asset and Income Fund L.P. AA-2
PrimeEnergy Asset and Income Fund L.P. AA-3
PrimeEnergy Asset and Income Fund L.P. AA-4
PrimeEnergy Asset and Income Trust A-1
PrimeEnergy Asset and Income Trust A-2
Personal Economics Natural Gas Ltd. Partnership #2
Personal Economics Natural Gas Ltd. Partnership #3
Personal Economics Natural Gas Ltd. Partnership #4
Mountain Gas Ltd. Partnership "A"
The Clay Ltd. Partnership "A"
The New York Limited Partnership
West Virginia Natural Gas Ltd. Partnership
The Clay Ltd. Partnership "B"
Injun Developmental Drilling Limited Partnership
The Clay Ltd. Partnership "C"
The Reservoir Ltd. Partnership
Natural Gas of W.V. Ltd. Partnership
Dodd Production Ltd. Partnership
The B&R Ltd. Partnership
The Golden Circle Drilling Ltd. Partnership
Emerald Circle Limited Partnership
Freeman's Creek Development Drilling Limited Partnership
The 1980 Reservoir Ltd. Partnership
The 1980 West Virginia Natural Gas Limited Partnership
Thanksgiving Drilling Limited Partnership
1980 Golden Circle Ltd. Partnership
Snow Lion Drilling L.P.
The West Virginia Basin Ltd. Partnership
Devonian Developmental Ltd. Partnership
Xenobia Drilling L.P.
Horseshoe Development Limited Partnership
Appalachian Spring Drilling L.P.
Master Club Natural Gas Ltd. Partnership
Economic Natural Gas Ltd. Partnership
VIII-iv
<PAGE> 1
EXHIBIT 10.8
MORTGAGE, DEED OF TRUST, INDENTURE,
SECURITY AGREEMENT,FINANCING STATEMENT
AND ASSIGNMENT OF PRODUCTION
(THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS)
A POWER OF SALE HAS BEEN GRANTED IN THIS DEED OF TRUST. A
POWER OF SALE MAY ALLOW THE MORTGAGEE TO TAKE THE MORTGAGED
PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE
ACTION UPON DEFAULT BY THE MORTGAGOR UNDER THIS DEED OF TRUST.
FROM
PRIMEENERGY CORPORATION and PRIMEENERGY
MANAGEMENT CORPORATION
(Mortgagor and Debtor)
TO
Arthur R. Gralla, Jr., Trustee
for the benefit of
BANK ONE, TEXAS, NATIONAL ASSOCIATION
(Mortgagee and Secured Party)
May _____, 1994
For purposes of filing this Deed of Trust as a financing statement, the mailing
address of Mortgagor is One Landmark Square, Stamford, Connecticut 06901; the
mailing address of Mortgagee is 910 Travis, Houston, Texas 77002.
***********************************
This instrument, prepared by Teresa G. Bushman, JACKSON & WALKER, L.L.P., P.O.
Box 4771, Houston, Texas 77210-4771, contains after-acquired property
provisions and covers future advances and proceeds to the fullest extent
allowed by applicable law.
ATTENTION OF RECORDING OFFICER: This instrument is a mortgage of both real and
personal property and is, among other things, a Security Agreement and
Financing Statement under the Uniform Commercial Code. This instrument creates
a lien on rights in or relating to lands of Mortgagor which are described in
Exhibit A hereto.
RECORDED DOCUMENT SHOULD BE RETURNED TO:
JACKSON & WALKER, L.L.P.
P.O. Box 4771
Houston, Texas 77210-4771
Attn.: Ms. Marie T. Heard
<PAGE> 2
MORTGAGE, DEED OF TRUST, INDENTURE,
SECURITY AGREEMENT, FINANCING STATEMENT
AND ASSIGNMENT OF PRODUCTION
(THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS)
A POWER OF SALE HAS BEEN GRANTED IN THIS
DEED OF TRUST. A POWER OF SALE MAY ALLOW THE MORTGAGEE
TO TAKE THE MORTGAGED PROPERTY AND SELL IT WITHOUT
GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT
BY THE MORTGAGOR UNDER THIS DEED OF TRUST.
KNOW ALL MEN BY THESE PRESENTS: That the undersigned
PRIMEENERGY CORPORATION and PRIMEENERGY MANAGEMENT CORPORATION, both Delaware
corporations, and each having its principal office in Stamford, Connecticut,
the mailing address for both of which is One Landmark Square, Stamford,
Connecticut 06901 (individually and/or collectively, "Mortgagor"), hereby
agrees as follows:
ARTICLE I.
GRANT
1.01 Lien. Mortgagor, for valuable consideration, the
receipt of which is hereby acknowledged, and in consideration of the debt and
trust hereinafter mentioned, has granted, bargained, sold, conveyed,
transferred and assigned, and by these presents does grant, bargain, sell,
convey, transfer and assign to Arthur R. Gralla, Jr., Trustee, whose address is
c/o Bank One, Texas, National Association, 910 Travis, Houston, Texas 77002,
and his successors and substitutes in trust, as hereinafter provided (the
"Trustee"), for the benefit of BANK ONE, TEXAS, NATIONAL ASSOCIATION, a
national banking association, the banking quarters for which are in Houston,
Harris County, Texas, the mailing address for which is 910 Travis, Houston,
Texas 77002 ("Mortgagee"), the following described property:
Those certain interests in oil, gas and mineral estates in the
property more particularly described in the schedule attached
hereto, marked Exhibit A for identification, incorporated
herein and made a part hereof for all purposes (the "Land").
1.02 Security Interest. Mortgagor, for the same
consideration, hereby grants to Mortgagee a continuing security interest in all
improvements and all personal property of any kind or character defined in and
subject to the provisions of the Uniform Commercial Code, including the
proceeds and products from any and all of such improvements and personal
property, whether now
<PAGE> 3
owned and existing or hereafter acquired or arising, and situated on any of the
Land, including, but not limited to, pipe, casing, tubing, rods, storage tanks,
boilers, loading racks, pumps, foundations, warehouses, and all other personal
property and equipment of every kind and character upon, incident, appurtenant
or belonging to and used in connection with the interest of Mortgagor, whether
now owned and existing or hereafter acquired or arising, in the Land, including
all oil, gas and other minerals produced or to be produced to the account of
Mortgagor from the Land and all accounts receivable, general intangibles and
contract rights of Mortgagor in connection with the Land or the leases
described in Exhibit A (the "Leases") and all proceeds, products, substitutions
and exchanges thereof (the Land, the Leases, and the real and personal property
interests hereinabove described being the "Mortgaged Property").
1.03 Assignment of Security. Mortgagor, for the same
consideration, hereby grants to Mortgagee any and all rights of Mortgagor to
liens and security interests securing payment of proceeds from the sale of
production from the Mortgaged Property.
1.04 After-Acquired Property. Mortgagor, for the same
consideration, hereby grants, bargains, sells, conveys, transfers and assigns
to the Trustee or grants to Mortgagee a continuing security interest in, as
the case may be, all additional right, title or interest which Mortgagor may
hereafter acquire or become entitled to in the interests, properties, Lands,
Leases and premises aforesaid, and in the oil, gas or other minerals in and
under or produced from or attributable to any of the Lands or Leases which are
the subject of this Mortgage, Deed of Trust, Indenture, Security Agreement,
Financing Statement and Assignment of Production (this "Deed of Trust"), which
additional right, title and interest, when acquired, shall constitute
"Mortgaged Property," the same as if expressly described and conveyed herein.
1.05 Habendum. TO HAVE AND TO HOLD all and singular the
Mortgaged Property and all other property which, by the terms hereof, has or
may hereafter become subject to the lien and/or security interest of this Deed
of Trust, together with all rights, hereditaments and appurtenances in anywise
belonging to the Trustee or Mortgagee, as the case may be, or the successors or
assigns of either of them forever.
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<PAGE> 4
ARTICLE II.
INDEBTEDNESS SECURED
This conveyance is made, IN TRUST, HOWEVER, to secure and
enforce the payment of the following indebtedness, obligations and liabilities:
2.01 Specific Obligation. The promissory note dated March
24, 1994, executed by Mortgagor to the order of Mortgagee in the face amount of
TEN MILLION DOLLARS ($10,000,000), bearing interest and payable as therein
provided.
2.02 Other and Further Indebtedness. It is contemplated
that Mortgagor may from time to time borrow additional sums of money from or
otherwise be or become obligated to Mortgagee, and this Deed of Trust is given
to secure any and all indebtedness of either Mortgagor, present or future,
either direct or indirect, primary or secondary, fixed or contingent, which
such Mortgagor, may now or hereafter owe, or as to which such Mortgagor may in
any manner become obligated to Mortgagee for payment, including, without
limitation, all Obligations, as such term is defined in the Governing Agreement
(defined hereinbelow), and indebtedness arising by way of guaranty as to
obligations of another to Mortgagee and indebtedness originally owed to a party
other than Mortgagee but which becomes owing to Mortgagee as the result of
Mortgagee having acquired the right to payment thereof; and this Deed of Trust
shall likewise secure not only the above-described indebtedness, but any and
all renewals for any period, extensions and rearrangements of all or any
portion thereof; and the liens and security interests under this Deed of Trust
shall be cumulative of all other liens and security of any and every other kind
or character whatsoever securing the above-described indebtedness; provided,
however, it is not the intention of the parties hereto to extend the lien and
security interest of this Deed of Trust so as to violate, or give rise to an
allegation of violation of, any provision of any statute, regulation, rule,
ordinance or order of any applicable jurisdiction or any agency or subdivision
of any of such jurisdictions; and, in this connection, this Deed of Trust shall
not, solely as to the relevant indebtedness, serve as security for any
indebtedness when for it to do so would violate any provision of any statute,
regulation, rule, ordinance or order of any applicable jurisdiction or any
agency or subdivision of any of such jurisdictions.
2.03 "Indebtedness." The word "Indebtedness" wherever
used in this Deed of Trust shall refer to all present and future debts,
obligations and liabilities described or referred to in this Article II or
otherwise in this Deed of Trust, subject, however, to the limitations provided
hereinabove in this Article II.
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<PAGE> 5
ARTICLE III.
WARRANTIES
3.01 Warranty of Title. Each Mortgagor hereby binds itself,
its legal representatives, successors and assigns, to warrant and forever
defend all and singular the above-described property, rights, and interests
constituting the Mortgaged Property to the Trustee and to the successors and
assigns of the Trustee forever, against every person whomsoever lawfully
claiming or to claim the same or any part thereof.
3.02 Additional Warranties. For the same consideration, each
Mortgagor, for itself, its legal representatives, successors and assigns,
covenants, represents and warrants that:
(a) Authority and Enforceability. The incurring by such
Mortgagor of the indebtedness secured by this Deed of Trust and the
execution and delivery by such Mortgagor of the evidences of such
indebtedness and this Deed of Trust and the performance and observance
by such Mortgagor of the terms and provisions of such evidences of
indebtedness and this Deed of Trust have been duly authorized by all
necessary partnership and corporate proceedings and will not
contravene any requirement of law or any provision of the partnership
agreement of such Mortgagor or result in the breach or termination of,
or constitute a default under, any indenture or other agreement or
instrument to which such Mortgagor is a party or by which it or any of
its property may be bound or affected. Each Mortgagor has full right
and authority to pledge, mortgage, assign, sell and convey the
Mortgaged Property.
(b) Interests in Mortgaged Property. Mortgagor is the
lawful owner of the Mortgaged Property, and the interests of Mortgagor
in the Mortgaged Property, as set forth in Exhibit A hereto, are true
and correct.
(c) Leases in Effect. All of the Leases specifically
described in Exhibit A are in full force and effect, and all
covenants, express or implied, in respect thereof, or of any
assignment thereof which may affect the validity of any of the Leases,
have been performed insofar as the Leases pertain to the Land.
(d) Interests Free of Liens. The interests of Mortgagor
in the Leases are free and clear of all liens, mortgages, oil
payments, or other burdens or
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<PAGE> 6
encumbrances, and all gross production taxes and other taxes as to
which non-payment could result in a lien against any of the Mortgaged
Property have been paid, except as described in the Governing
Agreement (defined hereinbelow).
(e) Compliance with Laws. Mortgagor and the Mortgaged
Property are in compliance with all applicable federal, state and
local laws, regulations and ordinances, including, without limitation,
(i) the Natural Gas Policy Act, as amended, (ii) the following federal
laws as they may be cited, referenced and amended from time to time:
the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act,
the Comprehensive Environmental Response, Compensation and Liability
Act, the Endangered Species Act, the Resource Conservation and
Recovery Act, the Occupational Safety and Health Act, the Hazardous
Materials Transportation Act, the Superfund Amendments and
Reauthorization Act, and the Toxic Substances Control Act; (iii) any
and all equivalent environmental statutes of any state in which any
Mortgaged Property is situated, as they may be cited, referenced and
amended from time to time; (iv) any rules or regulations promulgated
under or adopted pursuant to the above federal and state laws; and (v)
any other equivalent federal, state or local statute or any
requirement, rule, regulation, code, ordinance or order adopted
pursuant thereto, including, without limitation, those relating to the
generation, transportation, treatment, storage, recycling, disposal,
handling or release of flammables, explosives, radioactive materials,
hazardous wastes, asbestos or any material containing asbestos,
polychlorinated biphenyls (PCB's), toxic substances or related
materials, petroleum and petroleum products and associated oil or
natural gas exploration, production and development wastes or any
substances defined as "hazardous substances," "hazardous materials,"
"hazardous wastes" or "toxic substances" under the Comprehensive
Environmental Response, Compensation and Liability Act, as amended;
the Superfund Amendments and Reauthorization Act, as amended; the
Hazardous Materials Transportation Act, as amended; the Resource
Conservation and Recovery Act, as amended; the Toxic Substances
Control Act, as amended; or any other law, statute, ordinance, rule,
regulation or order now or hereafter enacted or promulgated by any
governmental authority with jurisdiction and relating to the
protection of the environment ("Hazardous Substances," with all laws,
regulations and statutes referred to in clauses (i)
5
<PAGE> 7
through (v) of this subsection being collectively, Environmental
Laws").
(f) Gas Contracts. Mortgagor (i) is not obligated in any
material respect by virtue of any prepayment made under any contract
containing a "take-or-pay" or "prepayment" provision or under any
similar agreement to deliver hydrocarbons produced from or allocated
to any of the Mortgaged Property at some future date without receiving
full payment therefor at the time of delivery, and (ii) has not
produced gas, in any material amount, subject to, and neither
Mortgagor nor any of the Mortgaged Property is subject to, balancing
rights of third parties or balancing duties under governmental
requirements, except as to such matters for which Mortgagor has
established monetary reserves adequate in amount to satisfy such
obligations and has segregated such reserves from other accounts.
(g) Refunds. No orders of, proceedings pending before,
or other governmental requirements of, the Federal Energy Regulatory
Commission, the Texas Railroad Commission or any other similar state
or federal regulatory body or governmental authority exist which could
result in Mortgagor being required to refund any material portion of
the proceeds received or to be received from the sale of hydrocarbons
constituting part of the Mortgaged Property.
ARTICLE IV.
COVENANTS OF MORTGAGOR
In consideration of the Indebtedness hereinabove described,
each Mortgagor, for itself, its legal representatives, successors and assigns,
covenants and agrees as follows:
4.01 Title Curative. Mortgagor will proceed with reasonable
diligence to correct any defect in the title to the Mortgaged Property should
any such defect be found to exist after the execution and delivery of this Deed
of Trust.
4.02 Further Assurances. Upon request of Mortgagee,
Mortgagor will promptly correct any defects, errors or omissions in the
execution or acknowledgment of this Deed of Trust or any other document
executed in connection herewith or relating to or evidencing all or any portion
of the Indebtedness, and will execute, acknowledge, and deliver such division
orders, transfer orders and other assurances and instruments as shall, in the
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<PAGE> 8
opinion of Mortgagee, be necessary or proper to convey and assign to the
Trustee all of the Mortgaged Property herein conveyed or assigned, or intended
to be conveyed or assigned.
4.03 Maintenance of Leases. Mortgagor will keep and
continue all Leases, estates and interests herein described and all contracts
and agreements relating thereto in full force and effect in accordance with the
terms thereof and will not permit the same to lapse or otherwise become
impaired for failure to comply with the obligations thereof, whether express or
implied. In this connection, Mortgagor shall not release any of the Leases
without the prior written consent of Mortgagee.
4.04 Maintenance of Equipment. Mortgagor will keep and
maintain all improvements and all personal property and equipment now or
hereafter situated on the Land and constituting a portion of the Mortgaged
Property and used or obtained in connection therewith in good state of repair
and condition, ordinary wear and tear excepted, and will not tear down or
remove the same or permit the same to be torn down or removed without the prior
consent of Mortgagee, except in the usual course of operations as may be
required for replacement when otherwise in compliance with the provisions of
this Deed of Trust.
4.05 Notification of Loss. Mortgagor will notify
Mortgagee of the destruction, loss, termination or acquisition of any
Mortgaged Property within three business days thereof.
4.06 Pooling or Unitization. Mortgagor will not, without
the prior written consent of Mortgagee, pool or unitize all or any part of the
Mortgaged Property where the pooling or unitization would result in the
diminution of the net revenue interest of Mortgagor in production from the
pooled or unitized lands attributable to the Mortgaged Property constituting a
portion of such pooled or unitized lands. Immediately after the formation of
any pool or unit in accordance herewith, Mortgagor will furnish to Mortgagee a
conformed copy of the pooling agreement, declaration of pooling, or other
instrument creating the pool or unit. The interest of Mortgagor included in
any pool or unit attributable to the Mortgaged Property or any part thereof
shall become a part of the Mortgaged Property and shall be subject to liens and
security interests hereof in the same manner and with the same effect as though
the pool or unit and the interest of Mortgagor therein were specifically
described in Exhibit A hereto. In the event any proceedings of any
governmental body which could result in pooling or unitizing all or any part of
the Mortgaged Property are commenced, Mortgagor shall give immediate written
notice thereof to Mortgagee. Any pooling or unitization of all or any part of
the Mortgaged Property in violation of this Section shall be of no force or
effect against the Trustee or Mortgagee.
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<PAGE> 9
4.07 Payment of Lienable Claims. Mortgagor will pay all
taxes now or hereafter to accrue against any of the Mortgaged Property and all
other taxes or assessments, general or special, lawfully levied against it on
such Mortgaged Property which might become a lien thereon before such taxes
become delinquent.
4.08 Payment by Mortgagee of Lienable Claims. In the
event Mortgagor shall fail or neglect to pay any taxes, general or special, or
shall fail or neglect to relieve the Mortgaged Property from any lien which
might become superior or equal to the lien of this Deed of Trust, or fail to
carry workers' compensation or other insurance required herein, the Trustee, at
his option, or Mortgagee, at its option, may pay such taxes, liens, charges or
encumbrances, or any part thereof, or effect such workers' compensation
insurance; and Mortgagor will promptly reimburse the Trustee or Mortgagee, as
the case may be, therefor; and any and all such sums so paid hereunder shall be
paid by Mortgagor upon demand at the principal offices of Mortgagee and shall
constitute a part of the Indebtedness.
4.09 Operation of Mortgaged Property. Mortgagor will
operate or, to the extent that the right of operation is vested in others, will
exercise its best efforts to require the operator to operate the Mortgaged
Property and all wells drilled thereon and that may hereafter be drilled
thereon, continuously and in good workmanlike manner in accordance with the
best usage of the field and in accordance with all laws of the United States of
America and the state in which the Mortgaged Property is situated, as well as
all rules, regulations and laws of any governmental agency having jurisdiction
to regulate the manner in which the operation of the Mortgaged Property shall
be carried on, and will comply with all terms and conditions of the Leases it
now holds and each assignment or contract obligating Mortgagor in any way with
respect to the Mortgaged Property; but nothing herein shall be construed to
empower Mortgagor to bind the Trustee or Mortgagee to any contract or
obligation or render the Trustee or Mortgagee in any way responsible or liable
for bills or obligations incurred by Mortgagor.
4.10 Maintenance of Workers' Compensation Insurance.
Mortgagor will at all times maintain workers' compensation insurance with a
responsible insurance company where required by, and in accordance with, the
laws of the state in which the Mortgaged Property is located.
4.11 Maintenance of Liability and Casualty Insurance.
Mortgagor will carry with standard insurance companies satisfactory to
Mortgagee, public liability and property damage insurance, as well as insurance
against loss or damage to the Mortgaged Property by fire, lightning, tornado
and explosion, all in amounts
8
<PAGE> 10
satisfactory to Mortgagee. All such policies shall be payable to Mortgagee,
and the policies evidencing the same or acceptable certificates thereof shall
be held by Mortgagee. Mortgagee shall have the right to collect, and Mortgagor
hereby assigns to Mortgagee, any and all monies that may become payable under
any policies of insurance by reason of damage, loss or destruction of the
Mortgaged Property or any part thereof; and Mortgagee shall apply all such sums
or any part thereof, at its election, toward the payment of the Indebtedness,
whether the same shall then be due, application to be made first to interest
and then to principal, and shall deliver to Mortgagor the balance, if any,
after such application has been made.
4.12 Compliance with Operating Agreements. Mortgagor
agrees to promptly pay all bills for labor and materials incurred in the
operation of the Mortgaged Property and will promptly pay its share of all
costs and expenses incurred under any joint operating agreement affecting the
Mortgaged Property or any portion thereof; will furnish Mortgagee, as and when
requested, full information as to the status of any joint account maintained
with others under any such operating agreement; will not take any action to
incur any liability or lien thereunder; and will not enter into any new
operating agreement or any amendment of any existing operating agreement
affecting the Mortgaged Property without prior written consent of Mortgagee.
Furthermore, Mortgagor will not consent or agree to participate in any proposed
operation under any presently existing operating agreement affecting the
Mortgaged Property unless Mortgagor obtains the prior written consent of
Mortgagee and, if requested by Mortgagee, deposits with the operator or
Mortgagee, where Mortgagor is a non-operator, or with Mortgagee, where
Mortgagor is an operator, Mortgagor's share of the estimated cost of the
proposed operation prior to electing to participate in the operation. To the
extent that Mortgagor is unable to consent to any proposed operation with
respect to any of the Mortgaged Property, prior to electing not to participate
in the proposed operation, Mortgagor will use its best efforts, to the extent
practicable and to the extent allowed to do so under the relevant operating
agreement or other applicable contract, to farmout to others acceptable to
Mortgagee, on the best terms obtainable and acceptable to Mortgagee, the
interest or relevant portion of the interest of Mortgagor in the proposed
operation.
4.13 Access to Mortgaged Property. Mortgagor will permit
Mortgagee and its accredited agents, representatives, attorneys and employees
at all times to go upon, examine, inspect and remain on the Mortgaged Property,
and to go upon the derrick floor of any well at any time drilled or being
drilled thereon, and will furnish Mortgagee, upon request, all pertinent
information regarding the development and operation of the Mortgaged Property.
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4.14 Evidence of Title. Promptly upon receipt of a
request from Mortgagee, Mortgagor will furnish and deliver, at the election of
Mortgagee, either (a) complete or supplemental abstracts of title, as the case
may be, prepared by competent abstractors, or (b) title opinions prepared by
competent legal counsel and, in either event, covering title to the real
property herein mortgaged from the sovereignty of the soil to the latest
practicable date, when taken together with abstracts and/or title opinions
previously furnished to Mortgagee by Mortgagor. Should Mortgagor fail to
furnish such abstracts upon such request, Mortgagee may obtain such abstracts,
and any and all costs incurred thereby shall be payable by Mortgagor to
Mortgagee upon demand at the principal offices of Mortgagee. The abstracts
shall be and constitute a part of the Mortgaged Property as defined above.
4.15 Notification of Legal Proceedings. Mortgagor will
notify Mortgagee promptly and in writing of the commencement of any legal
proceedings affecting the Mortgaged Property or any part thereof, and will take
such action as may be necessary to preserve the rights of Mortgagor, the
Trustee and Mortgagee affected thereby; and should Mortgagor fail or refuse to
take any such action, Mortgagee may at its election take such action on behalf
and in the name and at the cost and expense of Mortgagor.
4.16 Maintenance of Existence; Mergers. If Mortgagor is a
corporation, it (a) will maintain its corporate existence and will maintain and
procure all necessary corporate franchises and permits to the end that
Mortgagor shall be and continue to be a corporation in good standing in the
state of its incorporation and in each state wherein any portion of the
Mortgaged Property is located, with full power and authority to own and operate
all of the Mortgaged Property as contemplated herein until this Deed of Trust
shall have been fully satisfied, and (b) will not, without the prior written
consent of Mortgagee, consolidate or merge into any other corporation or permit
another corporation to merge into it.
4.17 Waivers. Mortgagor hereby expressly waives, to the
full extent permitted by applicable law, any and all rights or privileges of
marshalling of assets, sale in inverse order of alienation, notices,
appraisements, redemption and any prerequisite in the event of foreclosure of
the liens and/or security interests created herein. Mortgagee at all times
shall have the right to release any part of the Mortgaged Property now or
hereafter subject to the liens or security interests of this Deed of Trust, any
part of the proceeds of production or other income herein or hereafter assigned
or pledged, or any other security it now has or may hereafter have securing the
Indebtedness, without releasing any other part of the Mortgaged Property,
proceeds or income, and without affecting the liens or security interests
hereof as to the
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part or parts of the Mortgaged Property, proceeds or income not so released or
the right to receive future proceeds and income.
4.18 Payment of Expenses of Mortgagee. Upon demand of
Mortgagee, Mortgagor will pay promptly all costs and expenses heretofore or
hereafter incurred by Mortgagee for legal, accounting, engineering or
geological services rendered to it in connection with the making of the initial
or any future loan to Mortgagee secured in whole or in part by the liens and
security interests hereof or in the enforcement of any of the rights of
Mortgagee hereunder. The obligations of Mortgagor hereunder shall survive the
non-assumption of this Deed of Trust in a case commenced under Title 11 of the
United States Code or other similar law of the United States of America, the
State of Texas or any other jurisdiction and be binding upon Mortgagor or a
trustee, receiver, custodian or liquidator of Mortgagor appointed in any such
case.
4.19 Liens. Without prior approval and written consent of
Mortgagee, Mortgagor will not create, incur, assume or suffer to exist any
mortgage, lien, security interest, charge, encumbrance or assessment on all or
any portion of the Mortgaged Property, regardless of whether the mortgage,
lien, security interest, charge, encumbrance or assessment is senior,
coordinate, junior, inferior or subordinate to the lien and security interest
created hereby. Should any such mortgage, lien, security interest, charge,
encumbrance or assessment not consented to in writing by Mortgagee arise,
Mortgagor will promptly discharge and remove the same from the Mortgaged
Property. Any mortgage, lien, security interest, charge, encumbrance or
assessment in violation of this Section shall be of no force or effect against
Mortgagee.
4.20 Transfer or Division Orders. Upon request of
Mortgagee, Mortgagor will execute and deliver written notices of assignments to
any persons, corporations or other entities owing or which may in the future
owe to Mortgagor monies or accounts arising in connection with (a) any oil, gas
or mineral production from all or any portion of the Mortgaged Property; (b)
any gas contracts, processing contracts or other contracts relating to all or
any portion of the Mortgaged Property; or (c) the operation of or production
from all or any portion of the Mortgaged Property. The notices of assignments
shall advise the third parties that all of the monies or accounts described
above have been assigned to Mortgagee, and if required by Mortgagee, shall also
require and direct that future payments thereof, including amounts then owing
and unpaid, be paid directly to Mortgagee.
4.21 Sales of Assets. Without the prior written consent
of Mortgagee, Mortgagor will not sell, lease, transfer or otherwise dispose of
all or substantially all of its properties and assets.
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4.22 Compliance with Laws. Mortgagor will comply at all
times with all Requirements of Law applicable to the Mortgaged Property,
including, without limitation, Environmental Laws, (a) related to any natural
or environmental resource or media located on, above, within, in the vicinity
of, related to or affected by the Mortgaged Property or any other property of
Mortgagor, (b) applicable to the use, generation, handling, storage, treatment,
transport and disposal of any Hazardous Substances now or hereafter located or
present on or under any Mortgaged Property or any other property of Mortgagor,
or (c) required for the performance or conduct of the operations of Mortgagor
and cause all employees, agents, contractors, sub-contractors and future
lessees (pursuant to appropriate lease provisions) of Mortgagor, while such
persons are acting within the scope of their relationship with Mortgagor, to so
comply with, all such Requirements of Law.
4.23 Notification of Hazardous Substances Inquiries.
Mortgagor will forthwith notify Mortgagee in writing of any request from any
governmental agency or other entity for information regarding releases of
Hazardous Substances from, affecting or related to the Mortgaged Property, any
other property of Mortgagor in which Mortgagee has a mortgage, security or
other interest or any other property of Mortgagor and of any actual, proposed
or threatened testing or other investigation by any governmental agency or
other entity concerning the environmental condition of or related to such
property, and will provide to Mortgagee such information as Mortgagee shall
request concerning the generation, storage, disposal, transportation or other
management, if any, of any Hazardous Substance.
4.24 Hazardous Substances Indemnification. Mortgagor hereby
indemnifies and holds Mortgagee, its shareholders, officers, directors,
employees, agents, attorneys-in-fact and affiliates harmless from and against
any and all claims, losses, damages, liabilities, fines, penalties, charges,
administrative and judicial proceedings and orders, judgments, remedial
actions, requirements and enforcement actions of any kind, and all costs and
expenses incurred in connection with any of the foregoing, including, without
limitation, attorneys' fees and expenses ("Claims"), arising directly or
indirectly, in whole or in part, from (a) the presence of any Hazardous
Substances on, under or from the Mortgaged Property or any other property of
Mortgagor whether prior to or during the term hereof, (b) any activity by
Mortgagor (or any predecessor in title or any employee, agent, contractor or
subcontractor of Mortgagor or Mortgagor's predecessors in title or other
persons or entities at any time occupying or present on any Mortgaged Property
or any other Property of Mortgagor in connection with the handling, treatment,
removal, storage, decontamination, cleanup, transport or disposal of any
Hazardous Substance at any time located or present on or under any Mortgaged
Property or any
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other property of Mortgagor, whether such activity is carried on, or (c) any
residual contamination on or under the Mortgaged Property or affecting any
natural resources in, on or under the Mortgaged Property, or any contamination
of any other property or natural resources arising in connection with the
generation, use, handling, storage, transport or disposal of any Hazardous
Substance by Mortgagor or any employee, agent, contractor or subcontractor of
Mortgagor, irrespective of whether any of such activities were or will be
undertaken in accordance with applicable laws, regulations, codes and
ordinances, including, without limitation, any of the foregoing arising, in
whole or in part, from negligence on the part of Mortgagee or any of its
shareholders, officers, directors, employees, agents, attorneys-in-fact or
affiliates (the foregoing indemnity being the "Hazardous Substances
Indemnity").
4.25 Survival of Indemnification. The Hazardous Substances
Indemnity shall survive repayment of the Indebtedness, provided that the claims
and other actions of any kind against Mortgagee which give rise to the
Hazardous Substances Indemnity are not barred by the applicable statute of
limitations at the time such claims or actions are instituted.
4.26 Uneconomic Wells. Should proceeds from the sale of
production from any oil and/or gas well constituting part of the Mortgaged
Property (net of production, severance and windfall profit taxes and royalties,
overriding royalties and other payments out of or measured by production) not
exceed the expense of operation of such well (including, but not limited to,
operator's overhead, payments to contractors and suppliers and annual taxes
assessed on the basis of the value of the property prorated on a monthly basis,
but expressly excluding any portion of the cost of drilling or completing the
relevant well or the cost of non-routine workover or remedial operators) for a
period in excess of three consecutive calendar months, then, upon receipt by
Mortgagor of written notification from Mortgagee, Mortgagor will (a) take all
necessary steps to abandon the relevant well, or (b) provide from sources other
than proceeds from the sale of production attributable to the Mortgaged
Property (i.e., through borrowings or contractual commitments obtained from
third parties not in violation of any provision of this Deed of Trust) the
funds required to pay the share of Mortgagor of the expenses associated with
the continuing operation of such well.
4.27 Performance of Gas Contracts. Mortgagor will perform
and observe in all material respects all of its obligations under each contract
relating to the sale of gas produced from or attributable to the Mortgaged
Property and will not, except in good faith and as the result of arm's length
negotiations and with prior written notice to Mortgagee, change, modify, amend
or waive any of the terms or provisions of any such contract or take any other
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action which would release any other party from its obligations or liabilities
under any such contract.
4.28 Transactions with Affiliates. Mortgagor will not,
directly or indirectly, enter into any sale, lease or exchange of any property
or any contract for the rendering of goods or services with respect to any of
the Mortgaged Property (including, but not limited to, operating agreements
under which Mortgagor or an affiliate of Mortgagor serves as operator) with any
affiliate of Mortgagor other than upon fair and reasonable terms no less
favorable than could be obtained in an arm's length transaction with a person
not an affiliate of Mortgagor.
4.29 Covenants Running with the Land. All covenants and
agreements herein contained shall constitute covenants running with the Land.
ARTICLE V.
DEFEASANCE, FORECLOSURE
AND OTHER REMEDIES
5.01 Defeasance. Should Mortgagor make due and punctual
payment of the Indebtedness, as the same becomes due and payable, and duly
observe and perform all of the covenants, conditions and agreements herein and
in all other agreements with Mortgagee provided to be observed and performed by
Mortgagor, then the conveyance of the Mortgaged Property shall become of no
further force and effect, and the lien and security interest hereof shall be
released at the cost and expense of Mortgagor; otherwise, it shall remain in
full force and effect.
5.02 Events of Default. Any of the following events shall
constitute an Event of Default as that term is used herein:
(a) Payment of Indebtedness. Default shall be made by
Mortgagor in the due and punctual payment of the Indebtedness, or any
part thereof, principal or interest, as the same becomes due and
payable, whether by acceleration of maturity or otherwise; or
(b) Covenants and Warranties. Default shall be made by
Mortgagor in the due observance or performance of any of the
covenants, conditions or agreements herein provided to be observed or
performed by Mortgagor or any warranty of Mortgagor herein made proves
to be untrue or inaccurate in any material respect; or
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(c) Involuntary Insolvency. An order, judgment or decree
shall be entered against Mortgagor by any court of competent
jurisdiction or by any other duly authorized authority, on the
petition of a creditor or otherwise, granting relief under Title 11 of
the United States Code or under any bankruptcy, insolvency, debtor's
relief or other similar law of the United States or any state
approving a petition seeking reorganization or an arrangement of the
debts of Mortgagor or appointing a receiver, trustee, conservator,
custodian or liquidator of Mortgagor or all or any substantial part of
the assets of Mortgagor; or
(d) Voluntary Insolvency. Mortgagor shall (i)
discontinue its usual business, or (ii) apply for or consent to the
appointment of a receiver, trustee or liquidator of Mortgagor or all
or a substantial part of its assets, or (iii) file a voluntary
petition commencing a case under Title 11 of the United States Code,
seeking liquidation, reorganization or rearrangement, or taking
advantage of any bankruptcy, insolvency, debtor's relief or other
similar law of the United States or any state, or (iv) make a general
assignment for the benefit of creditors, or (v) be unable, or admit in
writing its inability, to pay its debts generally as they become due,
or (vi) file an answer admitting the material allegations of a
petition filed against it in any case commenced under Title 11 of the
United States Code or any reorganization, insolvency, conservatorship
or similar proceeding under any bankruptcy, insolvency, debtor's
relief or other similar law of the United States or any state, or
apply for relief under any state or federal act for the relief of
debtors; or
(e) Failure of Title. The title of Mortgagor to the
Mortgaged Property, or any substantial part thereof, shall become the
subject of actual or threatened litigation which would or might, in
the opinion of Mortgagee, on final determination result in substantial
impairment or loss of the security provided for herein; or
(f) Sale or Encumbrance. Mortgagor shall sell, assign,
lease, transfer, mortgage, pledge, hypothecate or otherwise dispose of
or encumber all or any portion of the Mortgaged Property or enter into
any contractual arrangement to do so, without the prior written
consent of Mortgagee (Mortgagee having an absolute right to refuse to
consent or to condition its consent upon
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satisfaction of any one or more of the following requirements:
(i) that the interest rate on the Indebtedness be
increased to a rate acceptable to Mortgagee;
(ii) that a reasonable transfer fee, in an amount
determined by Mortgagee, be paid;
(iii) that a principal amount deemed appropriate by
Mortgagee be paid against the Indebtedness to reduce to a
level acceptable to Mortgagee the ratio that the outstanding
balance of the Indebtedness bears to the value of the
Mortgaged Property as determined by Mortgagee;
(iv) that Mortgagor and each proposed transferee
execute such assumption agreements and other instruments as
Mortgagee shall reasonably require;
(v) that the creditworthiness and experience of
the proposed transferee in owning and operating similar
properties be demonstrable and proven to the reasonable
satisfaction of Mortgagee as being at least as good as that of
Mortgagor;
(vi) that the liability to Mortgagee of Mortgagor
and all other guarantors of all or any part of the
Indebtedness will be confirmed by them in writing to be
unaffected and unimpaired by such transfer, conveyance or
encumbering; and
(vii) that any proposed junior mortgagee expressly
subordinate to all liens and security interests securing the
Indebtedness as to both lien and payment right priority; and
irrespective of whether the transfer, conveyance or encumbrance would
or might (A) diminish the value of any security for the Indebtedness,
(B) increase the risk of default under this Deed of Trust, (C)
increase the likelihood of Mortgagee having to resort to any security
for the Indebtedness after default, or (D) add or remove the liability
of any person or entity for payment or
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performance of the Indebtedness or any covenant or obligation under
this Deed of Trust);provided, however, the foregoing shall not apply
to the sale of hydrocarbons in the ordinary course of business; or
(g) Contracts Relating to Indebtedness. Default shall be
made by Mortgagor in the due observance or performance of any of the
covenants, conditions or agreements provided to be observed or
performed by Mortgagor in any note, guaranty, loan agreement or other
contract or agreement relating to any Indebtedness; or
(h) Decline in Value of Collateral. The Mortgaged
Property shall materially decline in value in the determination of
Mortgagee; or Mortgagee, in its sole discretion, should deem payment
of the Indebtedness to be insecure; or
(i) Fraudulent Actions or Preference of Creditor.
Mortgagor shall conceal, remove, or permit to be concealed or removed,
any part of its property, with intent to hinder, delay or defraud its
creditors or any of them; or make or suffer a transfer of any of its
property which may be fraudulent under any bankruptcy, fraudulent
conveyance or similar law; or make any transfer of its property to or
for the benefit of a creditor at a time when other creditors situated
similarly to Mortgagee have not been paid amounts owing; or take any
other action in the nature of a fraud upon its creditors or any of
them.
5.03 Acceleration and Exercise of Power of Sale. (a) Upon
the occurrence of an Event of Default specified in Section 5.02(c) or (d), the
aggregate principal amount of all Indebtedness then outstanding and all
interest accrued thereon shall automatically become immediately due and
payable, without presentment, demand, protest, notice of protest, default or
dishonor, notice of intent to accelerate maturity, notice of acceleration of
maturity or other notice of any kind, all of which are hereby expressly waived
by Mortgagor to the full extent permitted by applicable law. Upon the
occurrence of any other Event of Default, Mortgagee may declare the aggregate
principal amount of all Indebtedness then outstanding and all interest accrued
thereon immediately due and payable, whereupon the same shall become
immediately due and payable without presentment, demand, protest, notice of
protest, default or dishonor, notice of intent to accelerate maturity, notice
of acceleration of maturity or other notice of any kind, all of which are
hereby expressly waived by Mortgagor to the full extent permitted by applicable
law.
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(b) Upon the occurrence of any Event of Default
or at any time thereafter while the Indebtedness or any part thereof remains
unpaid, it shall be the duty of the Trustee, on request of Mortgagee (which
request is hereby presumed), to enforce this Trust and, after advertising the
time and place of the sale for at least 21 days prior to the day of sale, by
posting or causing to be posted a written or printed notice thereof at the
courthouse door and by filing a copy of such notice in the office of the county
clerk of each county in which the Mortgaged Property or any part thereof may be
situated, and serving written notice of the proposed sale on each debtor
obligated to pay the Indebtedness according to the records of Mortgagee, by
postage prepaid, certified United States mail, at the most recent address for
such debtor as shown by the records of Mortgagee, at least 21 days prior to the
day of sale, to sell the Mortgaged Property, either as a whole or in parcels,
as the Trustee may deem proper, at public venue at the courthouse of the county
in which the Mortgaged Property or any part thereof may be situated (and being
the county designated in the notice of sale) on the first Tuesday of any month
between the hours of 10:00 a.m. and 4:00 p.m., to the highest bidder for cash,
and after such sale to execute and deliver to the purchaser or purchasers good
and sufficient deeds and assignments, conveying such property so sold to the
purchaser or purchasers with general warranty of title made on behalf of
Mortgagor. The Trustee, or his successor or substitute, is hereby authorized
and empowered to appoint any one or more persons as his attorneys-in-fact to
act as Trustee under him and in his name, place and stead, such appointment to
be evidenced by a written instrument executed by the Trustee, or his successor
or substitute, to perform any one or more act or acts necessary or incident to
any sale under the power of sale hereunder, including, without limitation, the
posting and filing of any notices, the conduct of the sale and the execution
and delivery of any instruments conveying the Mortgaged Property as a result of
the sale, but in the name and on behalf of the Trustee, or his successor or
substitute; and all acts done or performed by such attorneys-in-fact shall be
valid, lawful and binding as if done or performed by the Trustee, or his
successor or substitute. No single sale or series of sales by the Trustee
shall extinguish the lien or exhaust the power of sale hereunder except with
respect to the items of property sold, but such lien and power shall exist for
so long as and may be exercised in any manner by law or as herein provided as
often as the circumstances require to give Mortgagee full relief hereunder.
The purchaser at any such sale shall not assume, nor shall the heirs, legal
representatives, successors or assigns of such purchaser, be deemed to have
assumed, by reason of the acquisition of property or rights mortgaged
hereunder, any liability or obligation of any lessee or operator of the
Mortgaged Property, or any part thereof, arising by reason of any occurrence
taking place prior to such sale. It shall not be necessary to have present, or
to exhibit at any such sale, any of
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the personal property subject to the lien or security interest hereof.
5.04 Rights as Secured Party. Upon the occurrence of any
Event of Default, Mortgagee shall be entitled to all of the rights, powers and
remedies afforded a secured party by the Uniform Commercial Code with respect
to the personal property and fixtures in which Mortgagee has been granted a
security interest hereby, or Mortgagee may proceed in accordance with the
provisions hereof as to both the real and personal property covered hereby.
5.05 Application of Proceeds of Sale. The Trustee is
authorized to receive the proceeds of each sale of Mortgaged Property and apply
the same as follows:
FIRST: to the payment of all necessary costs and expenses
incident to the execution of this Deed of Trust, including,
but not limited to, a fee to the Trustee of 5% of the amount
realized at the sale, if required by the Trustee;
SECOND: to any and all Indebtedness then hereby secured,
application to be made in such order and in such manner as
Mortgagee may, in its discretion, elect;
THIRD: the balance, if any, to Mortgagor or its successors or
assigns.
5.06 Substitute Trustee. In the event of the death of the
Trustee, or his removal from the State of Texas, or his failure, refusal, or
inability for any reason to make any such sale or to perform any of the trusts
herein declared, or at any time, whether with or without cause, Mortgagee may
appoint, in writing, a substitute trustee who shall thereupon succeed to all
the estates, rights, powers, and trusts herein granted to and vested in the
Trustee. In the same events as first above stated, and in the same manner,
successive substitute Trustees may thereafter be appointed.
5.07 Statements by Trustee. It is agreed that in any deed
or deeds given by any Trustee any and all statements of fact or other recitals
therein made as to the identity of the holder or holders of the Indebtedness,
or as to default in the payments thereof or any part thereof, or as to the
breach of any covenants herein contained, or as to the request to sell, notice
of sale, time, place, terms and manner of sale, and receipt, application, and
distribution of the money realized therefrom, or as to the due and proper
appointment of a substitute trustee, and, without being
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limited by the foregoing, as to any other or additional act or thing having
been done by Mortgagee or the Trustee, shall be taken by all courts of law and
equity as prima facie evidence that the statements or recitals state facts and
are without further question to be so accepted; and Mortgagor does hereby
ratify and confirm any and all acts that the Trustee may lawfully do in the
premises by virtue of the terms and conditions of this instrument.
5.08 Suit to Collect and Foreclose. Mortgagee, at its
election, or the Trustee, upon written request of Mortgagee, may proceed by
suit or suits, at law or in equity, to enforce the payment of the Indebtedness
in accordance with the terms hereof and of the notes, guaranties or other
documents evidencing it, and to foreclose the lien and/or security interest of
this Deed of Trust as against all or any portion of the Mortgaged Property and
to have such property sold under the judgment or decree of a court of competent
jurisdiction.
5.09 Mortgagee or Trustee as Purchaser. It is expressly
understood that Mortgagee or the Trustee may be a purchaser of the Mortgaged
Property, or of any part thereof, at any sale thereof, whether such sale be
under the power of sale hereinabove vested in the Trustee or upon any other
foreclosure of the lien and/or security interest hereof, or otherwise; and
Mortgagee or the Trustee so purchasing shall, upon any such purchase, acquire
good title to the Mortgaged Property so purchased, free of the lien and/or
security interest of this Deed of Trust and free of all rights of redemption in
Mortgagor.
5.10 Performance by Mortgagee or Trustee. If Mortgagor
should fail to comply with any of the covenants or obligations of Mortgagor
hereunder, then Mortgagee or the Trustee may perform the same for the account
and at the expense of Mortgagor but shall not be obligated so to do. Any and
all expenses incurred or paid in so doing shall be payable by Mortgagor to
Mortgagee, with interest at the greater of (a) the rate of 10% per annum, or
(b) the rate agreed upon in any other document or instrument relating to the
Indebtedness or any part thereof, from the date when same was so incurred or
paid, and the amount thereof shall be payable on demand and shall be secured by
and under this Deed of Trust. The amount and nature of such expense and the
time when paid shall be fully established by the affidavit of Mortgagee or any
officer or agent thereof or by the affidavit of any Trustee acting hereunder;
provided, however, that the exercise of the privileges granted in this Section
shall in no way be considered or constitute a waiver of the right of Mortgagee
upon the occurrence of an Event of Default hereunder to declare the
Indebtedness at once due and payable but shall be cumulative of such right and
all other rights herein given.
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5.11 Entry and Operation. Upon the occurrence of any one
or more Events of Default, then in each and every such case and in addition to
the other rights and remedies hereunder, the Trustee or Mortgagee, whether or
not the Indebtedness shall have become due and payable, may, but shall not be
obligated to, enter into and upon and take possession of all or any part of the
Mortgaged Property and may exclude Mortgagor, its agents and servants wholly
therefrom and have, hold, use, operate, manage and control all or any part of
the Mortgaged Property and produce the oil, gas and other minerals therefrom
and market the same, all at the sole risk and expense of Mortgagor and at the
expense of the Mortgaged Property, applying the net proceeds so derived, first,
to the cost of maintenance and operation of such Mortgaged Property; second, to
the payment of all Indebtedness secured hereby, principal and interest,
application to be made first to interest and then to principal; and the balance
thereof, if any, shall be paid to Mortgagor. Upon such payment of all such
costs and Indebtedness, the Mortgaged Property shall be returned to Mortgagor
in its then condition and neither the Trustee nor Mortgagee shall be liable to
Mortgagor for any damage or injury to the Mortgaged Property except such as may
be caused through the fraud or willful misconduct of the Trustee or Mortgagee,
as the case may be.
5.12 Power of Attorney to Mortgagee. Mortgagor does
hereby designate Mortgagee as the agent of Mortgagor to act in the name, place
and stead of Mortgagor in the exercise of each and every remedy set forth
herein and in conducting any and all operations and taking any and all action
reasonably necessary to do so, recognizing such agency in favor of Mortgagee to
be coupled with the interests of Mortgagee under this Deed of Trust and, thus,
irrevocable so long as this Deed of Trust is in force and effect.
5.13 Remedies Cumulative and Non-Exclusive. The rights of
entry, sale, or suit, as hereinabove or hereinafter conferred, are cumulative
of all other rights and remedies herein or by law or in equity provided, and
shall not be deemed to deprive Mortgagee or the Trustee of any such other legal
or equitable rights or remedies, by judicial proceedings or otherwise,
appropriate to enforce the conditions, covenants and terms of this Deed of
Trust and of any note, guaranty or other document reflecting the Indebtedness;
and the employment of any remedy hereunder or otherwise shall not prevent the
concurrent or subsequent employment of any other appropriate remedy or
remedies.
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ARTICLE VI.
ASSIGNMENT OF PRODUCTION
6.01 Assignment. In addition to the conveyance to the
Trustee herein made, Mortgagor does hereby transfer, assign, deliver and convey
unto Mortgagee, its successors and assigns, all of the oil, gas and other
minerals produced, saved or sold from the Mortgaged Property and attributable
to the interest of Mortgagor therein subsequent to 7:00 a.m. on the first day
of the month in which this Deed of Trust is executed, together with the
proceeds of any sale thereof. Mortgagor hereby directs any purchaser now or
hereafter taking any production from the Mortgaged Property to pay to Mortgagee
such proceeds derived from the sale thereof and to continue to make payments
directly to Mortgagee until notified in writing by Mortgagee to discontinue the
same, and the purchaser of any such production shall not be required to see to
the application of the proceeds thereof by Mortgagee, and payment made to
Mortgagee shall be binding and conclusive as between such purchaser and
Mortgagor. Mortgagor further agrees to perform all such acts and to execute
all such further assignments, transfer and division orders and other
instruments as may be required or desired by Mortgagee or any other party to
have such proceeds and revenues so paid to Mortgagee.
6.02 Change of Purchaser. Should any purchaser taking the
production from the Mortgaged Property fail to make prompt payment to Mortgagee
in accordance with the provisions of Section 6.01, Mortgagee shall have the
right, at the expense of Mortgagor, to demand a change of connection and to
designate another purchaser with whom a new connection may be made, without any
liability on the part of Mortgagee in making such selection, so long as
ordinary care is used in the making thereof; and promptly upon such demand,
Mortgagor shall take all necessary and appropriate action to effect such change
of connection.
6.03 Application of Proceeds. Mortgagor authorizes and
empowers Mortgagee to receive, hold and collect all sums of money paid to
Mortgagee in accordance with the provisions of Section 6.01, and to apply the
same as hereinafter provided, all without any liability or responsibility on
the part of Mortgagee, save and except as to good faith in so receiving and
applying such sums. All payments provided for in Section 6.01 shall be paid
promptly to Mortgagee, and any provisions contained in any note, guaranty or
other document evidencing the Indebtedness or any part thereof to the contrary
notwithstanding, Mortgagee may apply the same or so much thereof as it elects
to the payment of the Indebtedness, application to be made in such manner as
Mortgagee may elect, regardless of whether the application so made shall exceed
the payments of principal and interest then due as provided in the
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notes, guaranties or other documents evidencing the Indebtedness. After such
application has been so made by Mortgagee, the balance of any such payment or
payments remaining shall be paid to Mortgagor.
6.04 No Postponement of Installments on Indebtedness. It
is understood and agreed that should such payments provided for by Section 6.01
be less than the sum or sums then due on the Indebtedness, such sum or sums
then due shall nevertheless be paid by Mortgagor in accordance with the
provisions of the notes, guaranties or other documents evidencing the
Indebtedness, and neither the assignment made pursuant to Section 6.01 nor any
other provisions hereof shall in any manner be construed to affect the terms
and provisions of such notes, guaranties or other documents evidencing the
Indebtedness. Likewise, neither the assignment made pursuant to Section 6.01
nor any other provisions hereof shall in any manner be construed to affect the
liens, rights, title and remedies herein granted securing the Indebtedness or
the liability of Mortgagor therefor. The rights under this Article VI are
cumulative of all other rights, remedies, and powers granted under this Deed of
Trust and are cumulative of any other security which Mortgagee now holds or may
hereafter hold to secure the payment of the Indebtedness.
6.05 Turnover to Mortgagee. Should Mortgagor receive any
of the proceeds of any sale of oil, gas or other minerals produced, saved or
sold from the Mortgaged Property, which under the terms hereof should have been
remitted to Mortgagee, Mortgagor will immediately remit same in full to
Mortgagee.
6.06 Release of Proceeds Upon Payment of Indebtedness.
Upon payment in full of all Indebtedness, the remainder of such proceeds held
by Mortgagee, if any, shall be paid over to Mortgagor upon demand, and a
release of the interest hereby assigned will be made by Mortgagee to Mortgagor
at its request and its expense.
6.07 Duty of Mortgagee. Mortgagee shall not be liable for
any failure to collect, or for any failure to exercise diligence in collecting,
any funds assigned hereunder. Mortgagee shall be accountable only for funds
actually received.
6.08 Power of Attorney to Mortgagee. Mortgagor does
hereby designate Mortgagee as the agent of Mortgagor to act in the name, place
and stead of Mortgagor for the purpose of taking any and all actions deemed by
Mortgagee necessary for the realization by Mortgagee of the benefits of the
assignment of production provided herein, recognizing such agency in favor of
Mortgagee to be coupled with the interests of Mortgagee under this Deed of
Trust and, thus, irrevocable so long as this Deed of Trust is in force and
effect.
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<PAGE> 25
ARTICLE VII.
MISCELLANEOUS
7.01 Interest. Any provision in any document that may be
executed in connection herewith to the contrary notwithstanding, Mortgagee
shall in no event be entitled to receive or collect, nor shall any amounts
received hereunder be credited so that Mortgagee shall be paid, as interest a
sum greater than that authorized by law. If any possible construction of this
Deed of Trust or any note, guaranty or other document evidencing or relating to
all or any portion of the Indebtedness seems to indicate any possibility of a
different power given to Mortgagee or any authority to ask for, demand or
receive any larger rate of interest, this clause shall override and control,
and proper adjustments shall be made accordingly.
7.02 Agreement as Entirety. This Deed of Trust, for
convenience only, has been divided into Articles, Sections and subsections; and
it is understood that the rights, powers, privileges, duties and other legal
relations of Mortgagor, the Trustee and Mortgagee shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles, Section and subsections and without regard to headings affixed to
such Articles, Sections or subsections.
7.03 Number and Gender. Whenever the context requires,
reference herein made to the single number shall be understood to include the
plural, and the plural shall likewise be understood to include the singular.
Words denoting sex shall be construed to include the masculine, feminine and
neuter when such construction is appropriate; and specific enumeration shall
not exclude the general, but shall be construed as cumulative.
7.04 Rights and Remedies Cumulative. All rights, powers,
immunities, remedies and liens of Mortgagee existing and to exist hereunder or
under any other instruments or at law or in equity and all other or additional
security shall be cumulative and not exclusive, each of the other. Mortgagee
shall, in addition to the rights and remedies herein expressly provided, be
entitled to such other remedies as may now or hereafter exist at law or in
equity for securing and collecting the Indebtedness, for enforcing the
covenants herein, and for foreclosing the liens hereof. Resort by Mortgagee to
any right or remedy provided for hereunder or at law or in equity shall not
prevent concurrent or subsequent resort to the same or any other right or
remedy. No security heretofore, herewith or subsequently taken by Mortgagee
shall in any manner impair or affect the security given by this instrument or
any
24
<PAGE> 26
security by endorsement or otherwise presently or previously given; and all
security shall be taken, considered and held as cumulative.
7.05 Parties in Interest. This Deed of Trust shall be
binding upon the parties and their respective heirs, administrators, legal
representatives, successors and assigns, and shall inure to the benefit of the
Mortgagee and its legal representatives, successors and assigns. The terms
used to designate any of the parties herein shall be deemed to include the
heirs, administrators, legal representatives, successors and assigns of such
parties; and the term "Mortgagee" shall also include any lawful owner, holder
or pledgee of any Indebtedness.
7.06 Supplements. Without in any manner limiting the
effect of Section 1.04 or any other provisions of this Deed of Trust as to the
binding effect of this Deed of Trust on after-acquired rights of Mortgagor, it
is contemplated by the parties hereto that from time to time additional
interests and properties may or will be added to the interests and properties
subject to the liens, rights, titles and interests created by this Deed of
Trust by means of supplemental indentures identifying this Deed of Trust and
describing such interests and properties to be so added and included. Upon the
execution of any such supplemental indenture, the liens, rights, titles and
interests created herein shall immediately attach to and be effective with
respect to any such interests and properties so described, the same as if such
interests and properties had been specifically described herein, and such
interests and properties being included in the term "Mortgaged Property," as
used herein.
7.07 Invalidity. In the event that any one or more of the
provisions contained in this Deed of Trust shall for any reason be held
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provision of this Deed of Trust
or any provision of any other document relating to any Indebtedness.
7.08 Construction. All titles or headings to Articles,
Sections, subsections or other divisions of this Deed of Trust or the exhibits
hereto are only for the convenience of the parties and shall not be construed
to have any effect or meaning with respect to the other content of such
Articles, Sections, subsections or other divisions, such other content being
controlling as to the agreement among the parties hereto. Article, Section,
subsection and Exhibit references herein are to such Articles, Sections,
subsections and Exhibits of this Deed of Trust unless otherwise specified. The
words "hereby," "herein," "hereinabove," "hereinafter," "hereinbelow," "hereof"
and "hereunder" when used in this Deed of Trust shall refer to this Deed of
Trust as a whole and
25
<PAGE> 27
not to any particular Article, Section, subsection or provision of this Deed of
Trust.
7.09 Fixtures, Minerals and Accounts. Without in any
manner limiting the generality of any of the foregoing hereof, some portions of
the personal property described hereinabove are or are to become fixtures on
the land described herein or to which reference is made herein. In addition,
the security interest created hereby under applicable provisions of the Uniform
Commercial Code attaches to minerals, including oil and gas, and accounts
resulting from the sale thereof, at the wellhead or minehead located on the
land described or to which reference is made herein.
7.10 Financing Statement Filings. This Deed of Trust may
be filed as provided in Article 9 of the Uniform Commercial Code as adopted and
in effect from time to time in any relevant jurisdiction (the "UCC"), to assure
that the security interests granted by this Deed of Trust are perfected. In
this connection, this instrument will be presented to a filing officer under
the UCC to be filed in the real estate records as a Financing Statement
covering minerals and fixtures.
7.11 Addresses. For purposes of filing this Deed of Trust
as a financing statement, the addresses for Mortgagor, as the debtor, and
Mortgagee, as the secured party, are as set forth hereinabove.
7.12 Counterparts. For the convenience of the parties,
this instrument may be executed in multiple counterparts, each of which for all
purposes shall be deemed, and may be enforced from time to time as, a chattel
mortgage, real estate mortgage, deed of trust, security agreement, assignment
or contract, or as one or more thereof. For recording purposes, various
counterparts have been executed, and there may be attached to each such
counterpart an Exhibit A containing only the description of the Mortgaged
Property, or portions thereof, which relates to the county or state in which
the particular counterpart is to be recorded. A complete, original counterpart
of this instrument with a complete Exhibit A may be obtained from Mortgagee.
Each of the counterparts hereof so executed shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
7.13 No Waiver by Mortgagee. No course of dealing on the
part of Mortgagee, its officers or employees, nor any failure or delay by
Mortgagee with respect to exercising any of its rights or remedies hereunder
shall operate as a waiver thereof nor shall the exercise or partial exercise of
any such right or remedy shall preclude the exercise of any other right or
remedy.
26
<PAGE> 28
7.14 Governing Agreement. This Deed of Trust is made pursuant
and subject to the terms and provisions of that certain Credit Agreement dated
as of March 24, 1994, between Mortgagor and Mortgagee, as amended, restated and
supplemented from time to time (the "Governing Agreement"). In the event of a
conflict between the terms and provisions of this Deed of Trust and those of
the Governing Agreement, the terms and provisions of the Governing Agreement
shall govern and control; provided, however, the inclusion in this Deed of
Trust of provisions not addressed in the Governing Agreement shall not be
deemed a conflict and all such additional provisions contained herein shall be
given full force and effect.
7.15 Special Provisions Applicable to Mortgaged Property in
Oklahoma. Insofar as the Mortgaged Property is located in the State of
Oklahoma, the foreclosure and other remedial provisions of this Deed of Trust
are subject to the applicable provisions of Oklahoma law. In that regard, the
following special provisions shall apply:
(a) Upon the occurrence of an Event of Default,
prior to enforcing the trust created hereby, notice shall be properly
and duly posted as required by the laws of the State of Oklahoma,
after which the Mortgaged Property may be sold at public auction for
cash. Accordingly, Mortgagee, personally or by its agents or
attorneys, shall have the right and power, with or without first
taking possession, to declare the Indebtedness due and payable, and to
sell, to the extent permitted by law, at one or more sales, as an
entirety or in parcels, as it may elect, the Mortgaged Property and
all of the Mortgagor's estate, right, title and interest, claim and
demand therein and right of redemption thereof, all at such place or
places and otherwise in such manner and upon such notice as may be
required by Title 46 Okla. Stat. Sections 40-48 (Oklahoma Power of
Sale Mortgage Foreclosure Act) or other applicable law, or, in the
absence of any such requirement, as Mortgagee may deem appropriate,
and to make such conveyance to the purchaser or purchasers. Mortgagee
may postpone the sale of all or any portion of such property by public
announcement at the time and place of such sale, and from time to time
thereafter may further postpone such sale by public announcement made
at the time of sale fixed by the preceding postponement. The right of
sale hereunder shall not be exhausted by one or any sale, and
Mortgagee may make other successive sales until all of the Mortgaged
Property is legally sold.
27
<PAGE> 29
(b) In lieu of or in addition to exercising any
power of sale hereinabove given, Mortgagee (whether or not the notice
provided for in Title 46 Okla. Stat. Section 44 has been given by
Mortgagee, but after the time for cure therein provided if such notice
has been given) may proceed by a suit or suits in equity or at law,
whether for a foreclosure hereunder, or for the sale of the Mortgaged
Property, or for the specific performance of any covenant or agreement
herein contained or in aid of the execution of any power herein
granted, or to enforce the payment of the Indebtedness in accordance
with the terms hereof and of the notes, guaranties or other documents
evidencing it, or for the enforcement of any other appropriate legal
or equitable remedy. Should Mortgagee elect judicial foreclosure of
this Deed of Trust in lieu of exercising the power of sale hereinabove
granted, the Indebtedness shall, at the election of Mortgagee, become
immediately due and payable without notice. Appraisement of the
Mortgaged Property is hereby waived, or not waived, at the option of
Mortgagee, such option to be exercised at or prior to the time
judgment is rendered in any judicial foreclosure hereof. In case of
any sale by virtue of judicial proceedings, the Mortgaged Property may
be sold in one parcel and as an entirety or in such parcels, manner or
order as Mortgagee in its sole discretion may elect.
(c) To the full extent that it may be lawfully so
agreed, Mortgagor for itself and for all who may claim under Mortgagor
agrees that it will not at any time insist upon, plead, claim or take
the benefit or advantage of any stay, extension or redemption law now
or hereafter in force, in order to prevent or hinder the enforcement
of this Deed of Trust or the sale of the Mortgaged Property, or any
part thereof, pursuant thereto or the possession thereof by any
purchaser at any such sale, but Mortgagor, for itself and all who may
claim under it, insofar as it now or hereafter lawfully may, hereby
waives the benefit of all such laws.
(d) The Trustee herein shall be deemed to be a
mortgagee acting on behalf of Mortgagee. The power of sale herein
granted shall apply only to the extent permitted by the laws of the
State of Oklahoma.
(e) A POWER OF SALE HAS BEEN GRANTED IN THIS DEED
OF TRUST. A POWER OF SALE MAY ALLOW THE MORTGAGEE TO TAKE THE
MORTGAGED PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE
ACTION UPON DEFAULT BY THE MORTGAGOR UNDER THIS DEED OF TRUST.
28
<PAGE> 30
IN WITNESS WHEREOF, this Deed of Trust is executed as of May
____, 1994.
<TABLE>
<S> <C>
ATTEST: PRIMEENERGY CORPORATION
- ------
By: By:
------------------------- -------------------------------
Printed Name: Beverly A. Cummings
--------------- Vice President
Title:
----------------------
[SEAL]
ATTEST: PRIMEENERGY MANAGEMENT CORPORATION
- ------
By: By:
------------------------- -------------------------------
Printed Name: Beverly A. Cummings
--------------- Vice President
Title:
----------------------
[SEAL]
</TABLE>
29
<PAGE> 31
THE STATE OF CONNECTICUT Section
Section
COUNTY OF ___________ Section
Before me, a Notary Public in and for said state, on this ________ day
of May, 1994, personally appeared Beverly A. Cummings, to me known to be the
identical person who subscribed the names of PRIMEENERGY CORPORATION and
PRIMEENERGY MANAGEMENT CORPORATION, both Delaware corporations, to the
foregoing instrument as Vice President, and acknowledged to me that she
executed the same as her free and voluntary act and deed, and as the free and
voluntary acts and deeds of such corporations for the uses and purposes therein
set forth.
____________________________________
Notary Public in and for the
State of Connecticut
My Commission Expires:
___________________________ ____________________________________
(Printed Name of Notary Public)
30
<PAGE> 32
EXHIBIT A
TO
MORTGAGE, DEED OF TRUST, INDENTURE,
SECURITY AGREEMENT, FINANCING STATEMENT
AND ASSIGNMENT OF PRODUCTION
(THE "DEED OF TRUST")
This Exhibit A sets forth the description of certain property
interests covered by the Deed of Trust to which this Exhibit A is attached.
All of the terms defined in the Deed of Trust are used in this Exhibit A with
the same meanings given therein.
This Exhibit A and the Deed of Trust cover and include the following:
(a) All right, title and interest, whether now owned and
existing or hereafter acquired or arising, of Mortgagor in and to the
oil, gas and mineral leases described herein (or described or referred
to in any document described herein) and/or lands described in and
subject to such oil, gas and mineral leases (regardless, as to such
leases and/or lands, of any surface acreage and/or depth limitations
set forth in any description of any of such oil, gas and mineral
leases), and all right, title and interest, whether now owned and
existing or hereafter acquired or arising, of Mortgagor in and to any
of the oil, gas and minerals in, on or under the lands, if any,
described on this Exhibit, including, without limitation, all
contractual rights, fee interests, leasehold interests, overriding
royalty interests, non-participating royalty interests, mineral
interests, production payments, net profits interests or any other
interest measured by or payable out of production of oil, gas or other
minerals from the oil, gas and mineral leases and/or lands described
herein; and
(b) All of the foregoing interests of Mortgagor as such
interests may be enlarged by the discharge of any payments out of
production or by the removal of any charges or encumbrances, together
with all interests, whether now owned and existing or hereafter
acquired or arising, of Mortgagor in, to and under or derived from all
renewals and extensions of any oil, gas and mineral leases described
herein, it being specifically intended hereby that any new oil and gas
lease (i) in which an interest is acquired by Mortgagor after the
termination or expiration of any oil and gas lease, the interests of
Mortgagor in, to and under or derived from which are
A-i
<PAGE> 33
subject to the lien and security interest hereof, and (ii) that covers
all or any part of the property described in and covered by such
terminated or expired leases, shall, to the extent, and only to the
extent such new oil and gas lease may cover such property, be
considered a renewal or extension of such terminated or expired lease;
and
(c) All right, title and interest, whether now owned and
existing or hereafter acquired or arising, of Mortgagor in, to and
under or derived from any operating, farmout and bidding agreements,
assignments and subleases, whether described in this Exhibit A, to the
extent, and only to the extent, that such agreements, assignments and
subleases (i) cover or include any present right, title and interest
of Mortgagor in and to the leases and/or lands described in this
Exhibit A, or (ii) cover or include any other undivided interests now
or hereafter held by Mortgagor in, to and under the described leases
and/or lands, including, without limitation, any future operating,
farmout and bidding agreements, assignments, subleases and pooling,
unitization and communitization agreements and the units created
thereby (including, without limitation, all units formed under orders,
regulations, rules or other official acts of any governmental body or
agency having jurisdiction) to the extent and only to the extent that
such agreements, assignments, subleases, or units cover or include the
described leases and/or lands; and
(d) All right, title and interest, whether now owned and
existing or hereafter acquired or arising, of Mortgagor in, to and
under or derived from all presently existing and future advance
payment agreements, oil, casinghead gas and gas sales, exchange and
processing contracts and agreements, including, without limitation,
those contracts and agreements that are described on this Exhibit A,
to the extent, and only to the extent, those contracts and agreements
cover or include the described leases and/or lands; and
(e) All right, title and interest, whether now owned and
existing or hereafter acquired or arising, of Mortgagor in, to and
under or derived from all existing and future permits, licenses,
easements and similar rights and privileges that relate to or are
appurtenant to any of the described leases and/or lands.
Notwithstanding the intention of this Deed of Trust to cover all of
the right, title and interest of Mortgagor in and to
A-ii
<PAGE> 34
the described leases and/or lands, whether now owned and existing or hereafter
acquired or arising, Mortgagor hereby specifically warrants and represents that
the interests covered by this Deed of Trust (a) do not obligate Mortgagor to
bear a share expenses that is greater than the working interest set forth in
connection with each oil and gas well or unit described in this Exhibit, and
(b) entitle Mortgagor to a share of production that is not less than the net
revenue interest, overriding royalty interest, net profit interest, production
payment interest, royalty interest or other interest payable out of or measured
by production set forth in connection with each oil and gas well or unit
described in this Exhibit. In the event Mortgagor owns any other or greater
interest, such additional interest shall also be covered by and included in
this Deed of Trust.
The designation "Working Interest" or "W.I." means an interest owned
in an oil, gas and mineral lease that determines the cost-bearing percentage of
the owner of such interest. The designation "Net Revenue Interest" or "N.R.I."
means net revenue interest, or that portion of the production attributable to
the owner of a working interest after deduction for all royalty burdens,
overriding royalty burdens or other burdens on production, except severance,
production, windfall profits and other similar taxes. The designation
"Overriding Royalty Interest" or "ORRI" means an interest in production which
is free of any obligation for the expense of exploration, development and
production, bearing only its pro rata share of severance, production, windfall
profits and other similar taxes and, in instances where the document creating
the overriding royalty interest so provides, costs associated with compression,
dehydration, other treating or processing or transportation of production of
oil, gas or other minerals relating to the marketing of such production. The
designation "Royalty Interest" or "RI" means an interest in production which
results from an ownership in the mineral fee estate or royalty estate in the
relevant land and which is free of any obligation for the expense of
exploration, development and production, bearing only its pro rata share of
severance, production, windfall profits and other similar taxes and, in
instances where the document creating the royalty interest so provides, costs
associated with compression, dehydration, other treating or processing or
transportation of production of oil, gas or other minerals relating to the
marketing of such production.
A-iii
<PAGE> 35
RATIFICATION OF AND AMENDMENT TO MORTGAGE,
DEED OF TRUST, INDENTURE, SECURITY AGREEMENT,
FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION
This instrument, dated as of the ____ day of __________, 1995,
is by and among PRIMEENERGY CORPORATION, a Delaware corporation, and
PRIMEENERGY MANAGEMENT CORPORATION, a New York corporation, the address for
both parties for purposes hereof is One Landmark Square, Stamford, Connecticut
06901 (collectively, "Mortgagor"), and BANK ONE, TEXAS, NATIONAL ASSOCIATION, a
national banking association, the address for which for purposes hereof is P.O.
Box 2629, Houston, Texas 77252-2629 ("Bank One").
W I T N E S S E T H:
WHEREAS, Mortgagor has heretofore executed and delivered the
security instruments more particularly described in Exhibit A attached hereto
and incorporated herein for all purposes by this reference (the "Security
Instruments");
WHEREAS, the Security Instruments secure the payment or
performance of certain indebtedness and other obligations of Mortgagor, as more
fully described in the Security Instruments (the "Described Indebtedness"),
which Described Indebtedness is, in part, evidenced by that certain promissory
note described in the Security Instruments, executed by Mortgagor, and
delivered to Bank One (the "Original Note");
WHEREAS, the Described Indebtedness, the Original Note, and
the benefits of the mortgagee and secured party under the Security Instruments
are owned and held by Bank One;
WHEREAS, pursuant to the terms and conditions of the Credit
Agreement (as amended, restated or supplemented from time to time, the "Credit
Agreement") dated of even date herewith by and among Mortgagor, Bank One, as
Agent and a lender, and Den norske Bank AS (together with Bank One and the
lenders signatory thereto from time to time, the "Lenders"), the Lenders have
agreed to extend credit to or for the benefit of Mortgagor and renew, extend,
and rearrange the Described Indebtedness, including, without limitation, the
indebtedness evidenced by the Original Note; and
WHEREAS, pursuant to the Credit Agreement the parties hereto
desire to ratify and amend the Security Instruments as described below;
<PAGE> 36
NOW, THEREFORE, in consideration of the foregoing, the
benefits to be derived by Mortgagor and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows, with capitalized terms used but not defined herein
having the meanings assigned to such terms in the Credit Agreement:
1. AMENDMENTS.
(a) AMENDMENT OF MORTGAGEE. All references to Mortgagee
and Secured Party in the Security Instruments are amended to refer to Bank One,
as Agent for the Lenders pursuant to the Credit Agreement, together with its
successors in such capacity ("Mortgagee"), whose address is as set forth
hereinabove for Bank One.
(b) AMENDMENT OF SECURED INDEBTEDNESS. The Security
Instruments are hereby amended so as to secure and enforce the payment and
performance of, and to substitute for the Described Indebtedness, the
following:
(i) Specific Obligations. The
Obligations, including, without limitation:
(A) the indebtedness evidenced
by the Notes, including the following described promissory
notes dated of even date herewith executed by Mortgagor, each
bearing interest and being payable as provided in the Credit
Agreement, evidencing, in whole or in part, a renewal,
extension, and rearrangement, but not the novation or
discharge, of all or a portion of the indebtedness evidenced
by the Original Note:
(I) Promissory Note to the order of Bank One in
the original principal amount of THIRTY-SEVEN
MILLION FIVE HUNDRED THOUSAND DOLLARS
($37,500,000); and
(II) Promissory Note to the order of Den norske
Bank AS in the original principal amount of
TWELVE MILLION FIVE HUNDRED THOUSAND DOLLARS
($12,500,000); and
(B) all other obligations and
liabilities of Mortgagor or either of them to Mortgagee and
the Lenders, now
2
<PAGE> 37
existing or hereafter incurred, under, arising out of or in
connection with any Loan Document.
(ii) Other and Further Indebtedness. It
is contemplated that Mortgagor, or either of them, may from time to
time borrow additional sums of money from or otherwise be or become
obligated to Mortgagee and the Lenders under the Credit Agreement and
the other Loan Documents. The Security Instruments shall secure any
and all indebtedness of Mortgagor, or either of them, to Mortgagee,
the Lenders, or any of them, now existing or hereafter incurred, under
or arising out of or in connection with the Credit Agreement or any
other Loan Document. The Security Instruments shall likewise secure
not only the above-described indebtedness, but any and all renewals
for any period, extensions and rearrangements of all or any portion
thereof; and the liens and security interests under the Security
Instruments shall be cumulative of all other liens and security of any
and every other kind or character whatsoever securing the
above-described indebtedness; provided, however, it is not the
intention of the parties hereto to extend the liens and security
interests of the Security Instruments so as to violate, or give rise
to an allegation of violation of, any provision of TEX. REV. CIV.
STAT. ANN. art. 5069-3.20(2), art. 5069-4.04(2) or art. 5069-15.07
(Vernon 1987), as amended from time to time, or any other statute,
regulation, rule, ordinance or order of the State of Texas, any other
applicable jurisdiction or any agency or subdivision of any of such
jurisdictions. In this connection, the Security Instruments shall
not, solely as to the relevant indebtedness, serve as security for any
indebtedness when for them to do so would violate any provision of
TEX. REV. CIV. STAT. ANN. art. 5069-3.20(2), art. 5069-4.04(2) or
art. 5069-15.07 (Vernon 1987), as amended from time to time, or any
other statute, regulation, rule, ordinance or order of the State of
Texas, any other applicable jurisdiction or any agency or subdivision
of any of such jurisdictions.
(iii) Indebtedness. The word
"Indebtedness" whenever used in the Security Instruments shall refer
to all present and future debts, obligations, and liabilities
described or referred to in this Section 1(b), subject, however, to
the limitations provided hereinabove in this Section 1(b).
(c) AMENDMENT OF GOVERNING AGREEMENT. All references to
Governing Agreement in the Security Instruments are hereby amended to refer to
the Credit Agreement as such term is defined herein.
2. WARRANTIES, REPRESENTATIONS AND COVENANTS. The
warranties, representations and covenants of Mortgagor contained in the
Security Instruments
3
<PAGE> 38
are hereby remade by Mortgagor to Mortgagee and are in full force and effect as
of the date hereof.
3. REAFFIRMATION OF SECURITY INSTRUMENTS. To secure the
Indebtedness (as described in the Security Instruments, as amended hereby),
each Mortgagor has granted, bargained, sold, mortgaged, assigned, transferred
and conveyed, and by these presents does grant, bargain, sell, mortgage,
assign, transfer and convey, unto the Trustee named in the Security Instruments
("Trustee"), for the benefit of Mortgagee, and grants to Mortgagee a security
interest in, all of such Mortgagor's right, title and interest, whether now
owned or hereafter acquired, in and to the Mortgaged Property (as defined in
the Security Instruments and described in the Exhibits thereto and so used
herein).
TO HAVE AND TO HOLD the Mortgaged Property (as defined in the
Security Instruments), together with the rights, privileges and appurtenances
now or hereafter at any time before the release of the Security Instruments in
anywise belonging or appertaining thereto, unto the Trustee or Mortgagee, as
the case may be, to secure the payment of the Indebtedness (as described in the
Security Instruments, as amended hereby) and the performance of the agreements
and covenants of Mortgagor herein and in the Security Instruments.
4. MISCELLANEOUS. This instrument shall be considered
as an amendment to and ratification of the Security Instruments, and the
Security Instruments, as herein expressly amended, are hereby ratified,
approved and confirmed in every respect. All liens created, extended or
renewed by the Security Instruments are hereby extended, renewed and carried
forward by this instrument and incorporated herein. All references to the
Security Instruments in any documents heretofore or hereafter executed shall be
deemed to refer to the Security Instruments as amended by this instrument.
For the convenience of the parties, this instrument may be
executed in multiple counterparts. For recording purposes, various
counterparts have been executed, and there may be attached to each such
counterpart (a) an Exhibit A containing the filing or recording data for the
Security Instruments recorded in the county or state in which the particular
counterpart hereof is to be filed or recorded, and/or (b) an Exhibit B
containing only the description of the Mortgaged Property that is located in
the county or state in which the particular counterpart hereof is to be
recorded. A complete, original counterpart of this instrument with complete
Exhibits may be obtained from Mortgagee. Each of the counterparts hereof so
executed shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument.
4
<PAGE> 39
IN WITNESS WHEREOF, Mortgagor and Mortgagee have executed this
instrument as of the date first above written.
<TABLE>
<S> <C>
ATTEST: PRIMEENERGY CORPORATION
By:
- ---------------------------------------------- ---------------------------------
Printed Name: Beverly A. Cummings
--------------------------------- Executive Vice President
Title:
----------------------------------------
[SEAL]
ATTEST: PRIMEENERGY MANAGEMENT
CORPORATION
By:
- ---------------------------------------------- ---------------------------------
Printed Name: Beverly A. Cummings
--------------------------------- Executive Vice President
Title:
----------------------------------------
[SEAL]
ATTEST: BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By:
- ---------------------------------------------- ---------------------------------
Printed Name: Kelly L. Elmore, III
---------------------------------
Title:
----------------------------------------
</TABLE>
[SEAL]
5
<PAGE> 40
THE STATE OF ____________ Section
Section
COUNTY OF _____________ Section
Before me, a Notary Public, in and for said state, on the
______ day of _______________, 1995, personally appeared Beverly A. Cummings,
to me known to be the identical person who subscribed the names of PRIMEENERGY
CORPORATION, a Delaware corporation, and PRIMEENERGY MANAGEMENT CORPORATION, a
New York corporation, to the foregoing instrument as Executive Vice President,
and acknowledged to me that she executed the same as her free and voluntary act
and deed, and as the free and voluntary acts and deeds of such corporations for
the uses and purposes therein set forth.
IN WITNESS WHEREOF, I have hereunder set my hand and affixed
my official seal in the City of ___________ ___, County of __________________,
State of ______________________ this _______ day of ______________, 1995.
_________________________________
Notary Public in and for the
State of_________________________
My Commission Expires:
__________________________________ _________________________________
(Printed Name of Notary Public)
Address of Notary Public:
_________________________________
_________________________________
6
<PAGE> 41
THE STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
Before me, a Notary Public, in and for said state, on the
_____ day of __________, 1995, personally appeared Kelly L. Elmore, III, to me
known to be the identical person who subscribed the name of BANK ONE, TEXAS,
NATIONAL ASSOCIATION, a national banking association, to the foregoing
instrument as its Vice President, and acknowledged to me that he executed the
same as his free and voluntary act and deed, and as the free and voluntary act
and deed of such banking association for the uses and purposes therein set
forth
IN WITNESS WHEREOF, I have hereunder set my hand and affixed
my official seal in the City of Houston, County of Harris, State of Texas, this
______ day of ___________, 1995.
_________________________________
Notary Public in and for the
State of Texas
My Commission Expires:
__________________________________ _________________________________
(Printed Name of Notary Public)
Address of Notary:
_________________________________
_________________________________
7
<PAGE> 42
EXHIBIT A
1. Mortgage, Collateral Real Estate Mortgage, Deed of Trust, Indenture,
Security Agreement, Financing Statement and Assignment of Production
dated as of November 1, 1991, from PrimeEnergy Corporation to Arthur
R. Gralla, Jr., Trustee for the benefit of Bank One, Texas, National
Association, filed and recorded as follows:
<TABLE>
<CAPTION>
JURISDICTION FILING DATA
------------ -----------
<S> <C>
NEW MEXICO
----------
Rio Arriba County Book 163, Page 304, Mortgage Records
San Juan County Book 1141, Page 492, Mortgage Records
NORTH DAKOTA
------------
McKenzie County Microfilm Document No. 312835
OKLAHOMA
--------
Garvin County Volume 1323, Page 21, Land Records
TEXAS
-----
Dimmit County Volume 128, Page 1, Deed of Trust Records
Jack County Volume 134, Page 378, Deed of Trust Records
Leon County Volume 810, Page 507, Official Records
Martin County Volume 14, Page 199, Official Public Records
Maverick County Volume 307, Page 36, Official Public Records
</TABLE>
A-i
<PAGE> 43
<TABLE>
<S> <C> <C>
Upton County Volume 586, Page 1, Official Public Records
Young County Volume 195, Page 39, Deed of Trust Records
Secretary of State Utility Security Instrument No. 92-018442, filed January 29,
1992
UTAH
----
Summit County Book 643, Page 129
WYOMING
-------
Campbell County Book 1174, Page 617, Photo Records
Sweetwater County Book 823, Page 399
Uinta County Book 594, Page 649
</TABLE>
2. Ratification of and Amendment to Mortgage, Collateral Real Estate
Mortgage, Deed of Trust, Indenture, Security Agreement, Financing
Statement and Assignment of Production dated March 24, 1994, between
PrimeEnergy Corporation and Bank One, Texas, National Association,
filed and recorded as follows:
<TABLE>
<CAPTION>
JURISDICTION FILING DATA
------------ -----------
<S> <C>
NEW MEXICO
----------
Rio Arriba County Book 182, Page 159, Mortgage Records
San Juan County Book 1182, Page 1031, Mortgage Records
NORTH DAKOTA
------------
McKenzie County Microfilm Document No. 319825
OKLAHOMA
--------
Garvin County Book 1389, Page 817, Land Records
</TABLE>
A-ii
<PAGE> 44
<TABLE>
<S> <C> <C>
TEXAS
-----
Dimmit County Volume 135, Page 344, Deed of Trust Records
Jack County Volume 604, Page 274, Deed Records
Leon County Volume 878, Page 394, Official Records
Martin County Volume 42, Page 219, Official Public Records
Maverick County Volume 366, Page 294, Official Public Records
Upton County Volume 620, Page 654, Official Public Records
Young County Volume 797, Page 57, Deed Records
Secretary of State Amendment to Utility Security Instrument No. 92-018442, filed
May 19, 1994
UTAH
----
Summit County Book 808, Page 564, Mortgage Records
WYOMING
-------
Campbell County Book 1294, Page 84, Photo Records
Sweetwater County Book 850, Page 902, Photo Records
Uinta County Book 632, Page 107, Mortgage Records
</TABLE>
A-iii
<PAGE> 45
EXHIBIT A
Mortgage, Deed of Trust, Indenture, Security Agreement, Financing Statement and
Assignment of Production dated May 27, 1994, from PrimeEnergy Corporation and
PrimeEnergy Management Corporation to Arthur R. Gralla, Jr., Trustee for the
benefit of Bank One, Texas, National Association, filed and recorded as
follows:
<TABLE>
<CAPTION>
JURISDICTION FILING DATA
------------ -----------
<S> <C>
OKLAHOMA
--------
Alfalfa County Book 505, Page 786, Land Records
Beaver County Book 929, Page 443, Land Records
Caddo County Book 1905, Page 1, Land Records
Canadian County Book 1889, Page 637, Land Records
Comanche County Book 2433, Page 130, Land Records
Dewey County Book 1013, Page 194, Land Records
Ellis County Book 575, Page 299, Miscellaneous Records
Garfield County Book 1268, Page 1123, Land Records
Garvin County Book 1394, Page 778, Land Records
Grady County Book 2721, Page 74, Land Records
Harper County Book 0498, Page 021, Land Records
Kingfisher County Book 1405, Page 233, Land Records
Lincoln County Book 1254, Page 343, Land Records
Logan County Book 1338, Page 421, Land Records
</TABLE>
A-i
<PAGE> 46
<TABLE>
<S> <C>
Major County Book 1364, Page 42, Miscellaneous Records
Noble County Book 471, Page 522, Land Records
Oklahoma County Book 6645, Page 505, Land Records
Payne County Book 1050, Page 661, Land Records
Pottawatomie County Book 2338, Page 200, Land Records
Texas County Book 893, Page 356, Land Records
Woods County Book 777, Page 449, Miscellaneous Records
Woodward County Book 1414, Page 112, Land Records
</TABLE>
A-ii
