CREDIT AGREEMENT
BETWEEN
PLAYA MINERALS & ENERGY, INC.
AND
EQUIVA TRADING COMPANY
November 14, 2000
TERM LOAN OF $1,700,000
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS AND INTERPRETATION 1
1.1 Terms Defined Above 1
1.2 Additional Defined Terms 1
1.3 Undefined Financial Accounting Terms 8
1.4 References 8
1.5 Articles and Sections 8
1.6 Number and Gender 8
1.7 Incorporation of Exhibits 9
ARTICLE 2. TERMS OF FACILITY 9
2.1 Term Loan 9
2.2 Use of Loan Proceeds 9
2.3 Interest 9
2.5 Outstanding Amounts 10
2.6 Time Place and Method of Payments 10
2.7 Voluntary Prepayments of Loans 10
2.8 Security Interest in Accounts: Right of Offset 10
2.9 General Provisions Relating to Interest 11
ARTICLE 3. CONDITIONS 12
3.1 Receipt of Loan Documents and Other Items 12
ARTICLE 4. REPRESENTATIONS AND WARRANTIES 14
4.1 Due Authorization 14
4.2 Corporate Existence 14
4.3 Valid and Binding Obligations 15
4.4 Security Instruments 15
4.5 Title to Assets 15
4.6 Scope and Accuracy of Financial Statements 15
4.7 No Material Misstatements 15
4.8 Liabilities Litigation. and Restrictions 15
4.9 Authorizations; Consents 15
4.10 Compliance with Laws 16
4.11 ERISA 16
4.12 Environmental Laws 16
4.13 Investment Company Compliance 16
4.14 Public Utility Holding Company Act Compliance 16
4.15 Proper Filing of Tax Returns; Payment of Taxes Due 16
4.16 Refunds 17
4.17 Intellectual Property 17
4.18 Casualties or Taking of Property 17
4.19 Location of Borrower 17
4.20 Subsidiaries 17
ARTICLE 5. AFFIRMATIVE COVENANTS 17
5.1 Maintenance and Access to Records 17
5.2 Quarterly Financial Statements; Compliance Certificates 18
5.3 Annual Financial Statements 18
5.4 Oil and Gas Reserve Reports 18
5.5 Title Opinions; Title Defects 18
5.6 Notices of Certain Events 19
5.7 Additional Information 20
5.8 Compliance with Laws 20
5.9 Payment of Assessments and Charges 20
5.10 Maintenance of Corporate Existence and Good Standing 20
5.11 Payment of Notes; Performance of Obligations 20
5.12 Further Assurances 20
5.13 Subsequent Fees and Expenses of Lender 21
5.14 Operation of Oil and Gas Properties 21
5.15 Maintenance and Inspection of Properties 21
5.16 Maintenance of Insurance 21
5.17 Indemnification 22
ARTICLE 6. NEGATNE COVENANTS 23
6.1 Indebtedness 23
6.2 Contingent Obligations 23
6.3 Liens 23
6.4 Sales of Assets 23
6.5 Leasebacks 24
6.6 Loans or Advances 24
6.7 Investments 24
6.8 Dividends and Distributions 24
6.9 Changes in Corporate Structure 24
6.10 Transactions with Affiliates 24
6.11 Lines of Business 24
6.12 Plan Obligations 25
6.13 Current Ratio 25
6.14 Debt Coverage Ratio 25
ARTICLE 7. EVENTS OF DEFAULT 25
7.1 Enumeration of Events of Default 25
7.2 Remedies 27
ARTICLE 8. MISCELLANEOUS 27
8.1 Transfers; Participations 27
8.2 Survival of Representations; Warranties, and Covenants 28
8.3 Notices and Other Communications 28
8.4 Parties in Interest 28
8.5 Rights of Third Parties 29
8.6 Renewals; Extensions 29
8.7 No Waiver; Rights Cumulative 29
8.8 Survival Upon Unenforceability 29
8.9 Amendments; Waivers 29
8.10 Controlling Agreement 29
8.11 Disposition of Collateral 29
8.12 Governing Law 30
8.13 Jurisdiction And Venue 30
8.14 Waiver of Rights To Jury Trial 30
8.15 Entire Agreement 30
8.16 Counterparts 31
LIST OF EXHIBITS
Exhibit I - Form of Note
Exhibit III - Form of Compliance Certificate
Exhibit V - Disclosures
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made and entered into as of this 14th day of
November 2000, by and between PLAYA MINERALS & ENERGY, INC., a Texas corporation
(the "Borrower"), and EQUIVA TRADING COMPANY, a general partnership (the
"Lender").
W I T N E S S E T H:
In consideration of the mutual covenants and agreements herein contained,
the Borrower and the Lender hereby agree as follows:
ARTICLE 1.
DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above. As used in this Credit Agreement, the terms
"Borrower" and "Lender" shall have the meaning assigned to them hereinabove.
1.2 Additional Defined Terms. As used in this Credit Agreement, each of the
following terms shall have the meaning assigned thereto in this Section, unless
the context otherwise requires:
"Affiliate" shall mean any Person directly or indirectly controlling,
or under common control with, the Borrower and includes any Subsidiary of
the Borrower and any "affiliate" of the Borrower within the meaning of Reg.
ss.240.12b-2 of the Securities Exchange Act of 1934, as amended, with
"control," as used in this definition, meaning possession, directly or
indirectly, of the power to direct or cause the direction of management,
policies or action through ownership of 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.
"Agreement" shall mean this Credit Agreement, as it may be amended,
supplemented, or restated from time to time.
"Business Day" shall mean a day other than a Saturday, Sunday, legal
holiday for commercial banks under the laws of the State of Texas, or any
other day when banking is suspended in the State of Texas.
"Closing Date" shall mean the effective date of this Agreement.
"Collateral" shall mean the Mortgaged Properties and any other
Property now or at any time used or intended as security for the payment or
performance of all or any portion of the Obligations.
"Commonly Controlled Entity" shall mean any Person which is under
common control with the Borrower within the meaning of Section 4001 of
ERISA.
"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 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.
"Current Assets" shall mean all assets which would, in accordance with
GAAP, be included as current assets on a balance sheet of the Borrower as
of the date of calculation, plus unused availability under this facility.
"Current Liabilities" shall mean all liabilities which would, in
accordance with GAAP , be included as current liabilities on a balance
sheet of the Borrower as of the date of calculation, but excluding the
current maturities of long term debt.
"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 eighteen
percent (18%) per annum, but in no event exceeding the Highest Lawful Rate.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"EBITDA" shall mean, for any period, net income for such period plus
interest expense, federal and state income taxes, depreciation,
amortization, and other non-cash expenses, plus scheduled Borrowing Base
reductions for such period deducted in the determination of net income for
such period.
"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
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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 the Borrower, (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 the Borrower or the business conducted
thereon.
"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 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; (b) any and all " equivalent environmental statutes of any
state in which Property of the Borrower 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.
"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.
"Final Maturity" shall mean October 31, 2003.
"Financial Statements" shall mean statements of the financial
condition of the Borrower as at the point in time and for the period
indicated and consisting of at least a balance sheet and related statements
of operations, common stock and other stockholders' equity, and cash flows
for the Borrower and, when required by applicable provisions of this
Agreement to be audited, accompanied by the unqualified certification of a
nationally-recognized firm of independent certified public accountants or
other independent certified public accountants acceptable to the Lender 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.
"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
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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,
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 law or regulation now or
hereafter enacted or promulgated by any Governmental Authority.
"Highest Lawful Rate" shall mean 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 applicable laws of the State of Texas
or the United States of America, whichever authorizes the greater rate, 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).
"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
bankruptcy, insolvency, debtor's relief, or other similar law of the United
States, the State of Texas, or any other jurisdiction.
"Intellectual Property" shall mean patents, patent applications,
trademarks, tradenames, copyrights, technology, know-how, and processes.
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"Investment" in any Person shall mean any stock, bond, note, or other
evidence of Indebtedness, or any other security (other than current trade
and customer accounts) of, investment or partnership interest in or loan
to, such Person 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, the
Borrower 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 any period while any amount remains
owing on the Note and interest on such amount, calculated at the applicable
interest rate, plus any fees or other sums payable 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 shall mean any loan
made by the Lender to or for the benefit of the Borrower pursuant to this
Agreement.
"Loan Balance" shall mean, at any time, the outstanding principal
balance of the Note at such time.
"Loan Documents" shall mean this Agreement, the Note, the Security
Instruments, and all other documents and instruments now or hereafter
delivered pursuant to the terms of or in connection with this Agreement,
the Note 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.
"Material Adverse Effect" shall mean (a) any adverse effect on the
business, operations, properties, condition (financial or otherwise), or
prospects of the Borrower, which materially increases the risk that any of
the Obligations will not be repaid as and when due, or (b) any material
adverse effect upon the Collateral.
"Mortgaged Properties" shall mean all Oil and Gas Properties of the
Borrower subject to a perfected Lien in favor of the Lender, subject only
to Permitted Liens, as security for the Obligations shall mean the
promissory note of the Borrower, in the form attached hereto as Exhibit
8.16, together with all renewals, extensions for any period, increases, and
rearrangements thereof.
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"Obligations" shall mean, without duplication, (a) all Indebtedness
evidenced by the Note, (b ) all obligations and liabilities whether now
existing or hereafter arising of the Borrower to the Lender in connection
with any Lease Purchase Agreement, and (c) all other obligations and
liabilities of the Borrower to the Lender, 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 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.
"Permitted Liens" shall mean (a) Liens for taxes, assessments, or
other governmental charges or levies not yet due or which (if foreclosure,
distraint, sale, or other similar proceedings shall not have been
initiated) are being contested in good faith by appropriate proceedings,
and such reserve as may be required by GAAP shall have been made therefor,
(b) Liens in connection with workers' compensation, unemployment insurance
or other social security (other than Liens created by Section 4068 of
ERISA), old-age pension, or public liability obligations which are not yet
due or which are being contested in good faith by appropriate proceedings,
if such reserve as may be required by GAAP shall have been made therefor,
(c) Liens in favor of vendors, carriers, warehousemen, repairmen,
mechanics, workmen, materialmen, construction, or 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 by appropriate proceedings, if such reserve as may be required by
GAAP shall have been made therefor, (d) Liens in favor of operators and
non-operators under joint operating agreements or similar contractual
arrangements arising in the ordinary course of the business of the Borrower
to secure amounts owing, which amounts are not yet due or are being
contested in good faith by appropriate proceedings, if such reserve as may
be required by GAAP shall have been made therefor, (e) Liens under
production sales agreements, division orders, operating agreements, and
other agreements customary in the oil and gas business 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, (f) 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 conduct of the business
of the Borrower or materially detract from the value or use of the Property
to which they apply, and (g) Liens in favor of the Lender and other Liens
expressly permitted under the Security Instruments.
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"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 shall mean, at
any time, any employee benefit plan which is covered by ERISA and in
respect of which the 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.
"Principal Office" shall mean the principal office of the Lender in
Houston, Texas, presently located at Suite 3200, 500 Dallas, Houston, Texas
77002.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
"Regulatory Change" shall mean the passage, adoption, institution, or
amendment 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 banks including the Lender.
"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 the Borrower.
"Requirement of Law" shall mean, as to any Person, the certificate or
articles of incorporation and by-laws or other organizational or governing
documents of such Person, and 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 delivered to the Lender
pursuant to Section 5.4.
"Responsible Officer" shall mean, as to any Person, its President
Chief Executive Officer or any Vice President.
"Security Instruments" shall mean the security instruments executed
and delivered in satisfaction of the condition set forth in Section 3.1(f),
and all other documents and instruments at any time executed as security
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for all or any portion of the Obligations, as such instruments may be
amended, restated, or supplemented from time to time.
"Subsidiary" shall mean, as to any Person, a corporation of which
shares of stock having ordinary voting power ( other than stock having such
power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation are at the
time owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person.
"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.
"Transferee" shall mean any Person to which the Lender has sold,
assigned, transferred, or granted a participation in any of the
Obligations, as authorized pursuant to Section 8.1, and any Person
acquiring, by purchase, assignment, transfer, or participation, from any
such purchaser, assignee, transferee, or participant, any part of such
Obligations 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.
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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 2.
TERMS OF FACILITY
2.1 Term Loan.
(a) Upon the terms and conditions and relying on the representations
and warranties contained in this Agreement, the Lender agrees, in
immediately available funds at the Principal Office, to or for the benefit
of the Borrower, to advance up to $1,700,000.00 in funds for the purposes
set forth in this Agreement.
(b) The Loans shall be made and maintained at the Principal Office and
shall be evidenced by the Note.
2.2 Use of Loan Proceeds. Proceeds of all Loans shall be used solely
to finance acquisition and development of Oil and Gas Properties.
2.3 Interest. Subject to the terms of this Agreement (including,
without limitation, Section 2.9), interest on the Loans shall accrue and be
payable at a rate of fourteen percent (14%) per annum. Interest on all
Loans shall 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. 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. 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,
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, and shall be payable upon demand by
the Lender at any time as to all or any portion of such interest
2.4 Repayment of Loans and Interest.
(a) Principal and accrued and unpaid interest on the aggregate
outstanding Loan Balance shall be due and payable monthly in the amount of
$58.892.56 commencing on the 20th of January 2001, and continuing on 20th
of each calendar month thereafter while any amount of the Loan Balance
remains outstanding.
(b) Until the Loan is fully repaid, Borrower shall not (i) change the
quantity or price in or (ii) terminate its contract to sell the crude oil
produced from its interests in the Horseshoe Gallup Unit and NE Hogback
Unit, San Juan County. New Mexico (NM Interest) to Giant Refining Company
(Giant) without prior approval from Lender. If Borrower does not comply
with this obligation, the Loan Balance shall be immediately due, and
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Borrower shall reimburse Lender for all costs and expenses, specifically
including attorneys fees, incurred by Lender in collection of the debt.
(c) As security for the Loan, Borrower has assigned to Lender payments
from Giant for crude oil purchased from Borrower's NM Interest. Lender will
wire transfer to Borrower the assigned payment received from Giant, less
ten cents per net revenue interest barrel and the monthly amount due for
principal and interest as provided for by section 2.4(a) above hereinafter
referred to as "Residual Assignment Monies".
(d) To support repayment of the Loan, in addition to the risk
management instruments set forth in the Lease Purchase Agreement for
Borrower's Gulf of Mexico production barrels, Lender and Borrower will
enter into risk management agreements covering the New Mexico production
that will be purchased by Giant. The risk management instruments covering
the New Mexico Properties are listed in Exhibit VI and will be settled on a
monthly basis. Any amount due Borrower will be added to Lender's
distribution of Residual Assignment Monies due Borrower. Any amount due
Lender will be deducted from the monthly distribution of Residual
Assignment Monies due Borrower. If the amount due Lender is greater than
the Residual Assignment Monies, then Lender will directly invoice Borrower
for any amount in excess of the Residual Assignment Monies.
2.5 Outstanding Amounts. The liability for payment of principal and
interest evidenced by the Note shall be limited to principal amounts actually
advanced and outstanding pursuant to this Agreement and interest on such amounts
calculated in accordance with this Agreement.
2.6 Time, Place, and Method of Payments. All payments required pursuant to
this Agreement or the Note shall be made in lawful money of the United States of
America and in immediately available funds, shall be deemed received by the
Lender 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 at the Principal Office. Except as provided to
the contrary herein, if the due date of any payment hereunder or under the 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.
2.7 Voluntary Prepayments of Loans. Subject to applicable provisions of
this Agreement, the Borrower shall have the right at any time or from time to
time to prepay Loans without prepayment penalty provided, however, (a) the
Borrower shall pay all accrued and unpaid interest on the amounts prepaid, and
(b) no such prepayment shall serve to postpone the repayment when due of any
Obligation.
2.8 Security Interest in Accounts: Right of Offset. As security for the
payment and performance of the Obligations, the Borrower hereby transfers,
assigns, and pledges to the Lender and grants to the Lender a security interest
in all funds of the Borrower now or hereafter or from time to time on deposit
with the Lender, with such interest of the Lender to be retransferred,
reassigned, and/or released by the Lender, as the case maybe, at the expense of
10
the Borrower upon payment in full and complete performance by the Borrower of
all Obligations. All remedies as secured party or assignee of such funds shall
be exercisable by the Lender upon the occurrence of any Event of Default,
regardless of whether the exercise of any such remedy would result in any 10
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,
the Borrower hereby grants to the Lender the right, exercisable at such time as
any Obligation shall mature, whether by acceleration of maturity or otherwise,
of offset or banker's lien against all funds of the Borrower now or hereafter or
from time to time on deposit with the 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.
2.9 General Provisions Relating to Interest.
(a) It is the intention of the parties hereto to comply strictly with
the usury laws of the State of Texas and the United States of America. 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 Chapter 303 of the Texas
Finance Code (Vernon's 1999), the Borrower agrees that the Highest Lawful
Rate shall be the "weekly ceiling" as defined in such Section, provided
that the Lender may also rely, to the extent permitted by applicable laws
of the State of Texas or the United States of America, on alternative
maximum rates of interest under other laws of the State of Texas or the
United States of America applicable to the Lender, if greater.
(b) Notwithstanding anything herein or in the Note to the contrary,
during any Limitation Period, the interest rate .to be charged on amounts
evidenced by the Note shall be the Highest Lawful Rate, and the obligation,
if any, of the Borrower 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 of the State of Texas or the United States of America, the
interest rate to be charged hereunder shall remain at the Highest Lawful
Rate until such time as there has been paid to the Lender (i) the amount of
interest in excess of that accruing at the Highest Lawful Rate that the
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 Lender but for the effect of such Limitation
Period.
(c) If, under any circumstances, the aggregate amounts paid on the
Note 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 Borrower
stipulates that such payment and collection will have been and will be
deemed to have been, to the extent permitted by applicable laws of the
State of Texas or the United States of America, the result of mathematical
error on the part of the Borrower and the Lender; and the Lender shall
promptly 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 the Lender or notice thereof from the Borrower. In the event that
11
the maturity of any Obligation is accelerated, by reason of an election by
the Lender 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 Lender
on the principal amount of the Obligations, or if the principal amount of
the Obligations shall have been paid in full, refunded to the Borrower.
(d) All sums paid, or agreed to be paid, to the Lender 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.
ARTICLE 3.
CONDITIONS
The obligations of the Lender to enter into this Agreement and to make
Loans are subject to the satisfaction of the following conditions precedent:
3.1 Receipt of Loan Documents and Other Items. The Lender shall have no
obligation under this Agreement unless and until all matters incident to the
consummation of the transactions contemplated herein, including, without
limitation, the review by the Lender or its counsel of the title of the Borrower
to its Oil and Gas Properties, shall be satisfactory to the Lender, and the
Lender 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 Borrower, all in form and
substance satisfactory to the Lender and dated, where applicable, of even date
herewith or a date prior thereto and acceptable to the Lender:
(a) multiple counterparts of this Agreement, as requested by the
Lender;
(b) the Note;
(c) copies of the Articles of Incorporation or Certificate of
Incorporation and all amendments thereto and the bylaws and all amendments
thereto of the Borrower, accompanied by a certificate issued by the
secretary or an assistant secretary of the Borrower, to the effect that
each such copy is correct and complete;
(d) certificates of incumbency and signatures of all officers of the
Borrower who are authorized to execute Loan Documents on behalf of the
Borrower, each such certificate being executed by the secretary or an
assistant secretary of the Borrower;
(e) copies of corporate resolutions approving the Loan Documents and
authorizing the transactions contemplated herein and therein, duly adopted
by the boards of directors of the Borrower, accompanied by certificates of
the secretary or an assistant secretary of the Borrower, to the effect that
such copies are true and correct copies of resolutions duly adopted at a
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meeting or by unanimous consent of the board of directors of the 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 Lender, of the
following Security Instruments creating, evidencing, perfecting, and
otherwise establishing Liens in favor of the Lender in and to the
Collateral:
(i) Mortgage, Deed of Trust, Indenture, Security Agreement,
Assignment of Production, and Financing Statement from the Borrower
covering all Oil and Gas Properties of the Borrower and all
improvements, personal property, and fixtures related thereto;
(ii) Financing Statements from the Borrower, as debtor,
constituent to the instrument described in clause (i) above;
(g) unaudited Financial Statements of the Borrower as of June 30,
2000;
(h) 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 the Borrower in its jurisdiction of
incorporation arid in any other jurisdictions where it does business;
(i) all operating, lease, sublease, royalty, sales, exchange,
processing, farmout, bidding, pooling, unitization, communitization, and
other agreements relating to the Mortgaged Properties requested by the
Lender;
(j) engineering reports covering the Mortgaged Properties;
(k) certificates evidencing the insurance coverage required pursuant
to Section 5.16; and
(l) such other agreements, documents, instruments, opinions,
certificates, waivers, consents, and evidence as the Lender may reasonably
request.
(m) no Event of Default or Default shall exist or will occur as a
result of the making of the requested Loan;
(n) no event shall have occurred which, in the reasonable opinion of
the Lender, could have a Material Adverse Effect;
(o) each of the representations and warranties contained in this
Agreement shall be true and correct and shall be deemed to be repeated by
the Borrower as if made on the requested date for such Loan;
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(p) all of the Security Instruments shall be in full force and effect
and provide to the Lender the security intended thereby;
(q) neither the consummation of the transactions contemplated hereby
nor the making of such Loan shall contravene, violate, or conflict with any
Requirement of Law;
(r) the Borrower shall hold full legal title to the Collateral and be
the sole beneficial owner thereof;
(s) the Lender shall have received the payment of 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
(t) all matters incident to the consummation of the transactions
hereby contemplated shall be satisfactory to the Lender.
(u) the execution of a Term Sales Agreement between Playa and Giant
for the life of the loan along with an irrevocable assignment letter from
Playa to Giant whereby Playa authorizes Giant to pay Equiva for the benefit
of Playa for the term of the loan.
ARTICLE 4.
REPRESENTATIONS AND W ARRANTIES
To induce the Lender to enter into this Agreement and to make the Loans,
the Borrower represents and warrants to the Lender (which representations and
warranties shall survive the delivery of the Note) that:
4.1 Due Authorization. The execution and delivery by the Borrower of this
Agreement and the borrowings hereunder, the execution and delivery by the
Borrower of the Note, the repayment of the Note and interest and fees provided
for in the Note and this Agreement, the execution and delivery of the Security
Instruments by the Borrower and the performance of all obligations of the
Borrower under the Loan Documents are within the power of the Borrower, have 10
been duly authorized by all necessary corporate action by the Borrower, and do
not and will not (a) require the consent of any Governmental Authority, (b)
contravene or conflict with any Requirement of Law, (c) contravene or conflict
with any indenture, instrument, or other agreement to which the Borrower is a
party or by which any Property of the Borrower 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 the Borrower under any such indenture,
instrument, or other agreement, other than the Loan Documents.
4.2 Corporate Existence. The 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
14
standing in all jurisdictions wherein the ownership of Property or the operation
of its business necessitates same, other than those jurisdictions wherein the
failure to so qualify will not have a Material Adverse Effect.
4.3 Valid and Binding Obligations. All Loan Documents, when duly executed
and delivered by the Borrower, will be the legal, valid, and binding obligations
of the Borrower, enforceable against the Borrower in accordance with their
respective terms.
4.4 Security Instruments. The provisions of each Security Instrument are
effective to create in favor of the Lender, a legal, valid, and enforceable Lien
in all right, title, and interest of the Borrower in the Collateral described
therein, which Liens, assuming the accomplishment of recording and filing in
accordance with applicable laws prior to the intervention of rights of other
Persons, shall constitute fully perfected first-priority Liens on all right,
title, and interest of the Borrower in the Collateral described therein.
4.5 Title to Assets. The Borrower has good and indefeasible title to all of
its Properties, free and clear of all Liens except Permitted Liens.
4.6 Scope and Accuracy of Financial Statements. The Financial Statements of
the Borrower as of June 30, 2000, present fairly the financial position and
results of operations and cash flows of the Borrower 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 June 30, 2000, 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 Lender by or at the direction of the 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 8.16 attached hereto, the Borrower has no
liabilities, direct, or contingent, which may materially and adversely affect
its business or operations or its ownership of the Collateral. Except as set
forth under the heading "Litigation" on Exhibit 8.16 hereto, no litigation or
other action of any nature affecting the Borrower is pending before any
Governmental Authority 10, or, to the best knowledge of the Borrower, threatened
against or affecting the Borrower. No unusual or unduly burdensome restriction,
restraint or hazard exists by contract, Requirement of Law, or otherwise
relative to the business or operations of the Borrower or the ownership and
operation of the Collateral other than such as relate generally to Persons
engaged in business activities similar to those conducted by the Borrower.
4.9 Authorizations; Consents. Except as expressly contemplated by this
Agreement, 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 Borrower of the Loan Documents or any instrument
contemplated hereby, the repayment by the Borrower of the Note and interest and
fees provided in the Note and this Agreement, or the performance by the Borrower
of the Obligations.
15
4.10 Compliance with Laws. The Borrower and its Property, including,
without limitation, the Mortgaged Property, are in compliance with all
applicable Requirements of Law, including, without limitation, Environmental
Laws, the Natural Gas Policy Act of 1978, as amended, and ERISA, except to the
extent non-compliance with any such Requirements of Law could not reasonably be
expected to have a Material Adverse Effect.
4.11 ERISA. The Borrower does not maintain nor has it maintained any Plan.
The Borrower does not currently contribute to or have any obligation to
contribute to or otherwise have any liability with respect to any Plan.
4.12 Environmental Laws. To the best knowledge and belief of the Borrower,
except as would not have a Material Adverse Effect, or as described on Exhibit
8.16 under the heading "Environmental Matters":
(a) no Property of the Borrower 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 the Borrower 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 the Borrower
or from, affecting, or related to any Property of the Borrower or adjacent
to any Property of the Borrower has occurred; and
(d) no Environmental Complaint has been received by the Borrower.
4.13 Investment Company Act Compliance. The Borrower is not, nor is the
Borrower 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.
4.14 Public Utility Holding Company Act Compliance. The Borrower is not 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.
4.15 Proper Filing of Tax Returns; Payment of Taxes Due. The 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 and as to which adequate provisions and
disclosures have been made. The respective charges and reserves on the books of
the Borrower with respect to taxes and other governmental charges are adequate.
16
4.16 Refunds. Except as described on Exhibit 8.16 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
Governmental Authority exist which could result in the 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.
4.17 Intellectual Property. The 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
the Borrower knows of no valid basis for any such claim. The use of such
Intellectual Property by the 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 the Borrower.
4.18 Casualties or Taking of Property. Except as disclosed on Exhibit 8.16
under the heading "Casualties," since June 30, 2000, neither the business nor
any Property of the 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.
4.19 Locations of Borrower. The principal place of business and chief
executive office of the Borrower is located at the address of the Borrower set
forth in Section 8.3 or at such other location as the Borrower may have, by
proper written notice hereunder, advised the Lender, provided that such other
location is within a state in which appropriate financing statements from the
Borrower in favor of the Lender have been filed.
4.20 Subsidiaries. The Borrower has no Subsidiaries except those described
on Exhibit 8.16 under the heading "Subsidiaries".
ARTICLE 5.
AFFIRMATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any Commitment
exists, the Borrower shall:
5.1 Maintenance and Access to Records. Keep adequate records, in accordance
with GAAP , of all its transactions so that at any time, and from time to time,
its true and complete financial condition may be readily determined, and
promptly following the reasonable request of the Lender, make such records
17
available for inspection by the Lender and, at the expense of the Borrower,
allow the Lender to make and take away copies thereof.
5.2 Quarterly Financial Statements; Compliance Certificates. Compliance
Certificates. Deliver to the Lender, (a) on or before the 45th day after the
close of each of the first three quarterly periods of each fiscal year of the
Borrower, a copy of the unaudited Financial Statements of the Borrower as at the
close of such quarterly period and from the beginning of such fiscal year to the
end of such period, such Financial Statements to be certified by a Responsible
Officer of the Borrower as having been prepared in accordance with GAAP
consistently applied and as a fair presentation of the condition of the
Borrower, subject to changes resulting from normal year-end audit adjustments,
and (b) on or before the 45th day after the close of each fiscal quarter, with
the exception of the last fiscal quarter, a Compliance Certificate.
5.3 Annual Financial Statements. Deliver to the Lender, on or before the
120th day after the close of each fiscal year of the Borrower, a copy of the
annual audited Financial Statements of the Borrower and a Compliance
Certificate.
5.4 Oil and Gas Reserve Reports.
(a) Deliver to the Lender no later than April 1 of each year during the
term of this Agreement, engineering reports in form and substance satisfactory
to the Lender certified by any nationally- or regionally-recognized independent
consulting petroleum engineers acceptable to the Lender as fairly and accurately
setting forth (i) the proven and producing, shut-in, behind-pipe, and
undeveloped oil and gas reserves (separately classified as such) attributable to
the Mortgaged Properties as of January 1 of the year for which such reserve
reports are furnished, (ii) the aggregate present value 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 Borrower.
(b) Deliver to the Lender no later than October 1 of each year during the
term of this Agreement, engineering reports in form and substance satisfactory
to the Lender prepared by or under the supervision of the chief petroleum
engineer of the Borrower evaluating the Mortgaged Properties as of July 1 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 Lender together with additional data concerning pricing,
quantities of production from the Mortgaged Properties, volumes of production
sold, purchasers of production, gross revenues, expenses, and such other
information and engineering and geological data with respect thereto as the
Lender may reasonably request.
5.5 Title Opinions: Title Defects. Promptly upon the request of the Lender,
furnish to the Lender title opinions, in form and substance and by counsel
18
satisfactory to the Lender, or other confirmation of title acceptable to the
Lender, covering Oil and Gas Properties constituting not less than 81% of the
value, determined by the Lender in its sole discretion, of the Mortgaged
Properties; and promptly, but in any event within 60 days after notice by the
Lender of any defect, material in the opinion of the Lender in value, in the
title of the Borrower to any of its Oil and Gas Properties, clear such title
defects, and, in the event any such title defects are not cured in a timely
manner, pay all related costs and fees incurred by the Lender to do so.
5.6 Notices of Certain Events. Deliver to the 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 Borrower and setting forth the relevant event or circumstance and
the steps being taken by the Borrower 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 the Borrower or any litigation, investigation, or proceeding between the
Borrower 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 or proceeding involving the Borrower as a defendant
or in which any Property of the Borrower is subject to a claim and in which
the amount involved is $200,000 or more and which is not covered by
insurance or in which injunctive or similar relief is sought;
(d) the receipt by the Borrower of any Environmental Complaint;
(e) 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 the Borrower or adjacent to
any Property of the Borrower following any allegation of a violation of any
Requirement of Law;
(f) any Release of Hazardous Substances by the Borrower or from,
affecting, or related to any Property of the Borrower or adjacent to any
Property of the Borrower 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;
(g) the change in identity or address of any Person remitting to the
Borrower proceeds from the sale of hydrocarbon production from or
attributable to any Mortgaged Property;
(h) any change in the senior management of the Borrower; and
19
(i) any other event or condition which could reasonably be expected to
have a Material Adverse Effect.
5.7 Additional Information. Furnish to the Lender, promptly upon the
request of the Lender, such additional financial or other information concerning
the assets, liabilities, operations, and transactions of the Borrower as the
Lender may from time to time request; and notify the Lender not less than ten
Business Days prior to the occurrence of any condition or event that may change
the proper location for the filing of any financing statement or other public
notice or recording for the purpose of perfecting a Lien in any Collateral,
including, without limitation, any change in its name or the location of its
principal place of business or chief executive office; and upon the request of
the Lender, execute such additional Security fustruments as may be necessary or
appropriate in connection therewith.
5.8 Compliance with Laws. Except to the extent the failure to comply or
cause compliance would not have a Material Adverse Effect, comply with all
applicable Requirements of Law, including, without limitation, (a) the Natural
Gas Policy Act of 1978, as amended, (b) ERISA, 10 (c) Environmental Laws, and
(d) all permits, licenses, registrations, approvals, and authorizations (i)
related to any natural or environmental resource or media located on, above,
within, in the vicinity of, related to or affected by any Property of the
Borrower, (ii) required for the performance of the operations of the Borrower,
or (iii) applicable to the use, generation, handling, storage, treatment,
transport, or disposal of any Hazardous Substances; and cause all employees,
crew members, agents, contractors, subcontractors, and future lessees (pursuant
to appropriate lease provisions) of the Borrower, while such Persons are acting
within the scope of their relationship with the Borrower, to comply with all
such Requirements of Law as may be necessary or appropriate to enable the
Borrower to so comply.
5.9 Payment of Assessments and Charges. Pay all taxes, assessments,
governmental charges, rent, and other indebtedness which, if unpaid, might
become a Lien against the Property of the Borrower, except any of the foregoing
being contested in good faith and as to which adequate reserve in accordance
with GAAP has been established or unless failure to pay would not have a
Material Adverse Effect.
5.10 Maintenance of Corporate Existence and Good Standing. Maintain its
corporate existence or qualification and good standing in its jurisdictions of
incorporation and in all jurisdictions wherein the Property now owned or
hereafter acquired or business now or hereafter conducted necessitates same,
unless the failure to do so would not have a Material Adverse Effect.
5.11 Payment of Notes: Performance of Obligations. Pay the Note according
to the reading, tenor, and effect thereof, as modified hereby, and do and
perform every act and discharge all of its other Obligations.
5.12 Further Assurances. Promptly cure any defects in the execution and
delivery of any of the Loan Documents and all agreements contemplated thereby,
and execute, acknowledge, and deliver such other assurances and instruments as
shall, in the opinion of the Lender, be necessary to fulfill the terms of the
Loan Documents.
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5.13 Subsequent Fees and Expenses of Lender. Upon request by the Lender,
promptly reimburse the Lender (to the fullest extent permitted by law) for all
amounts reasonably expended, advanced, or incurred by or on behalf of the Lender
to satisfy any obligation of the Borrower under any of the Loan Documents; to
collect the Obligations; to ratify, amend, restate, or prepare additional Loan
Documents, as the case may be; for the filing and recordation of Security
Instruments; to enforce the rights of the Lender under any of the Loan
Documents; and to protect the Properties or business of the Borrower, including,
without limitation, the Collateral, which amounts shall be deemed compensatory
in nature and liquidated as to amount upon notice to the Borrower by the Lender
and which amounts shall include, but not be limited to (a) all court costs, (b)
reasonable attorneys' fees, (c) reasonable fees and expenses of auditors and
accountants incurred to protect the interests of the Lender, (d) fees and
expenses incurred in connection with the participation by the Lender as a member
of the creditors' committee in a case commenced under any Insolvency Proceeding,
(e) fees and expenses incurred in connection with lifting the automatic stay
prescribed in ss.362 Title 11 of the United States Code, and (f) fees and
expenses incurred in connection with any action pursuant to ss. 1129 Title 11 of
the United States Code all reasonably incurred by the Lender 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 Floating Rate, calculated on a basis
of a calendar year of 365 or 366 days, as the case may be, counting the actual
number of days elapsed, on each such amount from the date of notification that
the same was expended, advanced, or incurred by the Lender until the date it is
repaid to the Lender, with the obligations under this Section surviving the
non-assumption of this Agreement in a case commenced under any Insolvency
Proceeding and being binding upon the Borrower and/or a trustee, receiver,
custodian, or liquidator of the Borrower appointed in any such case.
5.14 Operation of Oil and Gas Properties. Develop, maintain, and operate
its Oil and Gas Properties in a prudent and workmanlike manner in accordance
with industry standards.
5.15 Maintenance and Inspection of Properties. Maintain all of its tangible
Properties in good repair and condition, ordinary wear and tear excepted; make
all necessary replacements thereof and operate such Properties in a good and
workmanlike manner; and permit any authorized representative of the Lender to
visit and inspect, at the expense of the Borrower, any tangible Property of the
Borrower.
5.16 Maintenance of Insurance. Maintain insurance with respect to its
Properties and businesses against such liabilities, casualties, risks, and
contingencies as is customary in the relevant industry and sufficient to prevent
a Material Adverse Effect, all such insurance to be in amounts and from insurers
acceptable to the Lender, maintained by Borrower, naming the Lender as loss
payee, and, upon any renewal of any such insurance and at other times upon
request by the Lender, furnish to the Lender evidence, satisfactory to the
Lender, within 30 days of the Closing Date of the maintenance of such insurance.
The Lender shall have the right to collect, and the Borrower hereby assigns to
the Lender, any and all monies that may become payable under any policies of
insurance relating to business interruption or by reason of damage, loss, or
destruction of any of the Collateral in the event of any damage, loss, or
destruction for which insurance proceeds relating to business interruption or
Collateral exceed $100,000, the Lender may, at its option, apply all such sums
21
or any part thereof received by it toward the payment of the Obligations,
whether matured or unmatured, application to be made first to interest and then
to principal, and shall deliver to the Borrower the balance, if any, after such
application has been made. In the event of any such damage, loss, or destruction
for which insurance proceeds are $100,000 or less, provided that no Default or
Event of Default has occurred and is continuing, the Lender shall deliver any
such proceeds received by it to the Borrower. In the event the Lender receives
insurance proceeds not attributable to Collateral or business interruption, the
Lender shall deliver any such proceeds to the Borrower.
5.17 Indemnification. INDEMNIFY AND HOLD THE LENDER AND ITS SHAREHOLDERS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, AND AFFILIATES AND
EACH TRUSTEE FOR THE BENEFIT OF THE LENDER UNDER ANY SECURITY INSTRUMENT
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 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 THE BORROWER, WHETHER PRIOR TO OR DURING THE TERM
HEREOF, (B) ANY ACTIVITY CARRIED ON OR UNDERTAKEN ON OR OFF ANY PROPERTY OF THE
BORROWER, WHETHER PRIOR TO OR DURING THE TERM HEREOF, AND WHETHER BY THE
BORROWER OR ANY PREDECESSOR IN TITLE, EMPLOYEE, AGENT , CONTRACTOR, OR
SUBCONTRACTOR OF THE BORROWER 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 THE BORROWER, (D) ANY
CONTAMINATION OF ANY PROPERTY OR NATURAL RESOURCES ARISING IN CONNECTION WITH
THE GENERATION, USE, HANDLING, STORAGE, TRANSPORTATION OR DISPOSAL OF ANY
HAZARDOUS SUBSTANCES BY THE BORROWER OR ANY EMPLOYEE, AGENT, CONTRACTOR, OR
SUBCONTRACTOR OF THE BORROWER WHILE SUCH PERSONS ARE ACTING WITHIN THE SCOPE OF
THEIR RELATIONSHIP WITH THE BORROWER, IRRESPECTIVE OF WHETHER ANY OF SUCH
ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH APPLICABLE REQUIREMENTS
22
OF LAW, OR (E) THE PERFORMANCE AND ENFORCEMENT OF ANY LOAN DOCUMENT 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 LENDER OR ANY OF ITS SHAREHOLDERS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, OR AFFILIATES OR ANY TRUSTEE FOR THE
BENEFIT OF THE LENDER UNDER ANY SECURITY INSTRUMENT; WITH THE FOREGOING
INDEMNITY SURVIVING SATISFACTION OF ALL OBLIGATIONS AND THE TERMINATION OF THIS
AGREEMENT, UNLESS ALL SUCH OBLIGATIONS HAVE BEEN SATISFIED WHOLLY IN CASH FROM
THE BORROWER AND NOT BY WAY OF REALIZATION AGAINST ANY COLLATERAL OR THE
CONVEYANCE OF ANY PROPERTY IN LIEU THEREOF, PROVIDED THAT SUCH INDEMNITY SHALL
NOT EXTEND TO ANY ACT OR OMISSION BY THE LENDER WITH RESPECT TO ANY PROPERTY
SUBSEQUENT TO THE LENDER BECOMING THE OWNER OF SUCH PROPERTY AND WITH RESPECT TO
WHICH PROPERTY SUCH CLAIM., LOSS, DAMAGE, LIABILITY, FINE, PENALTY, CHARGE,
PROCEEDING, ORDER, JUDGMENT, ACTION, OR REQUIREMENT ARISES SUBSEQUENT TO THE
ACQUISITION OF TITLE THERETO BY THE LENDER.
ARTICLE 6.
NEGATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any Commitment
exists, the Borrower will not:
6.1 Indebtedness. Create, incur, assume, or suffer to exist any
Indebtedness, whether by way of loan or otherwise; provided, however, the
foregoing restriction shall not apply to (a) the Obligations, (b) unsecured
accounts payable incurred in the ordinary course of business, which are not
unpaid in excess of 60 days beyond invoice date or are being contested in good
faith and as to which such reserve as is required by GAAP has been made, (c)
crude oil, natural gas, or other hydrocarbon floor, collar, cap, price
protection, or swap agreements, in form and substance and with a Person
acceptable to the Lender, provided that (i) each commitment issued under such
agreement must also be approved by the Lender and (ii) such agreements shall not
be entered into with respect to Mortgaged Properties constituting more 75% of
the present value of estimated future net revenues, computed using a discount
factor of 10%, of all proved developed producing Mortgaged Properties.
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 Liens. Create, incur, assume, or suffer to exist any Lien on any of its
Oil and Gas Properties or any other Property, whether now owned or hereafter
acquired; provided, however, the foregoing restrictions shall not apply to
Permitted Liens.
6.4 Sales of Assets. Without the prior written consent of the Lender, sell,
transfer, or otherwise dispose of, in one or any series of transactions, assets,
whether now owned or hereafter acquired.
23
6.5 Leasebacks. Enter into any agreement to sell or transfer any Property
and thereafter rent or lease as lessee such Property or other Property intended
for the same use or purpose as the Property sold or transferred.
6.6 Loans or Advances. Make or agree to make or allow to remain outstanding
any loans or advances to any Person; provided, however, the foregoing
restrictions shall not apply to (a) advances or extensions of credit in the form
of accounts receivable incurred in the ordinary course of business and upon
terms common in the industry for such accounts receivable, or (b) advances to
employees of the Borrower for the payment of expenses in the ordinary course of
business.
6.7 Investments. Acquire Investments in, or purchase or otherwise acquire
all or substantially all of the assets of, any 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 Lender or any bank or
trust company organized under the laws of the United States or any state thereof
and having capital surplus and undivided profits aggregating at least
$100,000,000, (c) other short-term Investments similar in nature and degree of
risk to those described in clause (b) of this Section, or (d) money-market
funds.
6.8 Dividends and Distributions. Declare, pay, or make, whether in cash or
Property of the Borrower, any dividend or distribution on, or purchase, redeem,
or otherwise acquire for value, any share of any class of its capital stock;
provided, however, the foregoing restriction shall not apply to dividends paid
in capital stock of the Borrower.
6.9 Changes in Corporate Structure. Enter into any transaction of
consolidation, merger, or amalgamation; liquidate, wind up, or dissolve (or
suffer any liquidation or dissolution).
6.10 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 its 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.
6.11 Lines of Business. Expand, on its own or through any Subsidiary, into
any line of business other than those in which the Borrower is engaged as of the
date hereof.
24
6.12 Plan Obligations. Assume or otherwise become subject to an obligation
to contribute to or maintain any Plan or acquire any Person which has at any
time had an obligation to contribute to or maintain any Plan.
6.13 Current Ratio. Permit the ratio of Current Assets to Current
Liabilities to be less than 1.00 to 1.00 at anytime.
6.14 Debt Coverage Ratio. Permit, as of the close of any fiscal quarter,
the ratio of (a) EBITDA to (b) interest shall not be lest than 1.1 to 1.0.
ARTICLE 7.
EVENTS OF DEFAULT
7.1 Enumeration of Events of Default. Any of the following events shall
constitute an Event of Default:
(a) default shall be made in the payment when due of any installment
of principal or interest under this Agreement or the Note or in the payment
when due of any fee or other sum payable under any Loan Document and such
default as to interest or fees only shall have continued for three days;
(b) default shall be made by the Borrower in the due observance or;
performance of any of its obligations under the Loan Documents, and such
default shall continue for 30 days after the earlier of notice thereof to
the Borrower by the Lender or knowledge thereof by the Borrower;
(c) any representation or warranty made by the Borrower in any of the
Loan Documents proves to have been untrue in any material respect or any
representation, statement (including Financial Statements), certificate, or
data furnished or made to the Lender in connection herewith proves to have
been untrue in any material respect as of the date the facts therein set
forth were stated or certified;
(d) default shall be made by the Borrower (as principal or guarantor
or other surety) in the payment or performance of any bond, debenture,
note, Commodity Hedge Agreement or other Indebtedness or under any credit
agreement, loan agreement, indenture, promissory note, or similar agreement
or instrument executed in connection with any of the foregoing, and such
default shall remain unremedied for in excess of the period of grace, if
any, with respect thereto;
(e) the Borrower shall be unable to satisfy any condition or cure any
circumstance specified in Article 3, the satisfaction or curing of which is
precedent to the right of the Borrower to obtain a Loan and such inability
shall continue for a period in excess of 30 days;
25
(f) the Borrower 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;
(g) an order, judgment, or decree shall be entered against the
Borrower 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;
(h) the levy against any significant portion of the Property of the
Borrower, 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;
(i) a final and non-appealable order, judgment, or decree shall be
entered against the Borrower for money damages and/or Indebtedness due in
an amount in excess of $200,000, and such order, judgment, or decree shall
not be dismissed or stayed within 60 days;
(j) any charges are filed or any other action or proceeding is
instituted by any Governmental Authority against the Borrower under the
Racketeering Influence and Corrupt Organizations Statute (18 U.S.C.
ss.1961), the result of which could be the forfeiture or transfer of any
material Property of the Borrower subject to a Lien in favor of the Lender
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;
(k) the Borrower 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 bankruptcy, fraudulent conveyance, or similar 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;
26
(l) any Security Instrument shall for any reason not, or cease to,
create 10 valid and perfected first-priority Liens against the Collateral
purportedly covered thereby;
(m) John N. Ehrman ceases to be the chief executive officer of the
Borrower; or
(n) the occurrence of a Material Adverse Effect and the same shall
remain unremedied for in excess of 30 days after notice given by the
Lender.
7.2 Remedies.
(a) Upon the occurrence of an Event of Default specified in Sections
7.1(f) or 7.1(g), 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 Borrower; and (ii) the
Lender is 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 Lender and any and all
other indebtedness at any time owing by the Lender to or for the credit or
account of the Borrower against any and all of the Obligations although
such Obligations may be unmatured.
(b) Upon the occurrence of any Event of Default other than those
specified in Sections 7.1(f) or 7.1(g), (i) the Lender may, by notice to
the Borrower, 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
Borrower; and (ii) the Lender is 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 Lender and any and all other indebtedness at any time owing by the
Lender to or for the credit or account of the Borrower against any and all
of the Obligations although such Obligations may be unmatured.
(c) Upon the occurrence of any Event of Default, the Lender may, in
addition to the foregoing in this Section, exercise any or all of its
rights and remedies provided by law or pursuant to the Loan Documents.
ARTICLE 8.
MISCELLANEOUS
8.1 Transfers; Participations. The Lender may, at any time, sell, transfer,
assign, or grant participations in the Obligations or any portion thereof; and
the Lender may forward to each Transferee and prospective Transferee all
27
documents and information relating to such Obligations, whether furnished by the
Borrower or otherwise obtained, as the Lender determines necessary or desirable.
The Borrower agrees that each Transferee, regardless of the nature of any
transfer to it, may exercise all rights (including, without limitation, rights
of set-off) with respect to the portion of the Obligations held by it as fully
as if such Transferee were the direct holder thereof, subject to . any
agreements between such Transferee and the transferor to such Transferee.
8.2 Survival of Representations, Warranties, and Covenants. All
representations and warranties of the Borrower and all covenants and agreements
herein made shall survive the execution and delivery of the Note and the
Security Instruments and shall remain in force and effect so long as any
Obligation is outstanding or any Commitment exists.
8.3 Notices and Other Communications. Except as to verbal notices expressly
authorized herein, which verbal 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, when
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 as follows:
(a) if to the Lender, to:
Equiva Trading Company
Suite 3200
500 Dallas
Houston, Texas 77002
Attn: Jerry Afdahl
Telecopy: (713) 277-6865
(b) if to the Borrower, to:
Playa Minerals & Energy, Inc.
650 North Sam Houston Parkway East
Houston, Texas 77060
Attention: President
Telecopy: (281) 272-2987
Any party may, by proper written notice hereunder to the others, change the
individuals or addresses to which such notices to it shall thereafter be sent.
8.4 Parties in Interest. Subject to the restrictions on changes in
corporate structure set forth in Section 6.9 and other applicable restrictions
contained herein, all covenants and agreements herein contained by or on behalf
28
of the Borrower or the Lender shall be binding upon and inure to the benefit of
the Borrower or the Lender, as the case may be, and their respective legal.
representatives, successors, and assigns.
8.5 Rights of Third Parties. All provisions herein are imposed solely and
exclusively for the benefit of the Lender and the Borrower. 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, and any or all of such provisions may be freely
waived in whole or in part by the Lender at any time if in its sole discretion
it deems it advisable to do so.
8.6 Renewals: Extensions. All provisions of this Agreement relating to the
Note shall apply with equal force and effect to each promissory note hereafter
executed which in whole or in part represents a renewal or extension of any part
of the Indebtedness of the Borrower under this Agreement, the Note, or any other
Loan Document.
8.7 No Waiver: Rights Cumulative. No course of dealing on the part of the
Lender, its officers or employees, nor any failure or delay by the Lender with
respect to exercising any of its rights under any Loan Document shall operate as
a waiver thereof. The rights of the Lender 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. The making of any Loan shall not
constitute a waiver of any of the covenants, warranties, or conditions of the
Borrower contained herein. In the event the Borrower is unable to satisfy any
such covenant, warranty, or condition, the making of any Loan shall not have the
effect of precluding the Lender from thereafter declaring such inability to be
an Event of Default as hereinabove provided.
8.8 Survival Upon Unenforceability. In the event anyone 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.
8.9 Amendments: Waivers. Neither this Agreement nor any provision hereof
may be amended, waived, discharged, or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
amendment, waiver, discharge, or termination is sought.
8.10 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.
8.11 Disposition of Collateral. Notwithstanding any term or provision,
express or implied, in any of the Security Instruments, the realization,
liquidation, foreclosure, or any other disposition on or of any or all of the
Collateral shall be in the order and manner and determined in the sole
29
discretion of the Lender; provided, however, that in no event shall the Lender
violate applicable law or exercise rights and remedies other than those provided
in such Security Instruments or otherwise existing at law or in equity.
8.12 GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL BE DEEMED TO BE
CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LA WS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF
RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS
FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND
REVOLVING TRIP ARTY ACCOUNTS) SHALL NOT APPLY.
8.13 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 LENDER, IN COURTS HAVING SITUS IN HOUSTON, HARRIS
COUNTY, TEXAS. THE 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 LENDER IN ACCORDANCE WITH THIS SECTION.
8.14 WAIVER OF RIGHTS TO JURY TRIAL. THE BORROWER AND THE 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 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 LENDER ENTERING INTO THIS AGREEMENT.
8.15 ENTIRE AGREEMENT. THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT
BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL
SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER WRITTEN OR
ORAL, RELATING TO THE SUBJECT HEREOF, INCLUDING, WITHOUT LIMITATION, THE
CORRESPONDENCE DATED SEPTEMBER 7,2000, FROM THE LENDER TO THE BORROWER AND THE
TERM SHEET ENCLOSED THEREWITH. 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.
8.16 Counterparts. For the convenience of the parties, this Agreement may
be executed in multiple counterparts, each of which for all purposes shall be
deemed to be an original, and all such counterparts shall together constitute
but one and the same Agreement.
IN WITNESS WHEREOF, this Agreement is deemed executed effective as of the
date first above written.
BORROWER:
PLAYA MINERALS & ENERGY, INC.
By: /s/ John N. Ehrman
---------------------------------
Printed Name: John N. Ehrman
Title: President
LENDER:
EQUIVA TRADING COMPANY
By: /s/ David D. Chapman
---------------------------------
Printed Name: David D. Chapman
Title: General Manager
31
EXHIBIT I
[FORM OF NOTE]
PROMISSORY NOTE
$1,700,000 Houston, Texas November 14, 2000
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned ("Maker") promises to
pay to the order of EQUIVA TRADING CQMPANY ("Payee"), at its offices in Houston,
Harris County, Texas, the sum of ONE MILLION SEVEN HUNDRED THOUSAND DOLLARS
($1,700,000), or so much thereof as may be advanced against this Note pursuant
to the Credit Agreement dated of even date herewith by and between Maker and
Payee (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 the "Note" under, and is payable as
provided in the Credit Agreement. Subject to compliance with applicable
provisions of the Credit Agreement, Maker 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.
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 CHAPTER 345 OF THE TEXAS FINANCE CODE (WHICH REGULATES
CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIP ARTY ACCOUNTS) SHALL
NOT APPLY TO THIS NOTE.
MAKER:
PLAYA MINERALS & ENERGY, INC.
By:
-------------------------------
Printed Name:
------------------------
Title:
-----------------------------
EXHIBIT III
[FORM OF COMPLIANCE CERTIFICATE]
__________, 19__
EQUIVA TRADING COMPANY
- ----------------------
HOUSTON, TEXAS 77002
Attention:
---------------------------------
Re: Credit Agreement dated as of November 10,2000, by and between PLAYA
MINERALS & ENERGY, INC. and EQUIVA TRADING COMPANY (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 a Responsible Officer of the Borrower, hereby certifies to you
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 Borrower with the financial covenants of the
Credit Agreement, as of the close of business on .is evidenced by the following:
(a) 6.13 Current Ratio. Permit the ratio of Current Assets to Current
Liabilities to be less than 1.00 to 1.00 at any time.
Actual
(b) 6.14 Debt Coverage Ratio. Permit, as of the close of any fiscal
quarter, the ratio of (a) EBITDA to (b) the sum of monthly Borrowing Base
reductions plus interest.
Actual
3. No Material Adverse Effect has occurred since the date of the Financial
Statements dated as of ----------.
Each capitalized term used but not defined herein shall have the meaning
assigned to such term in the Credit Agreement.
Very truly yours,
PLAYA MINERALS & ENERGY, INC.
By:
-------------------------------
Printed Name:
------------------------
Title:
-----------------------------
EXHIBIT V
DISCLOSURES
Section 4.8 Liabilities
None
Litigation
None
Section 4.12 Environmental Matters
None
Section 4.17 Refunds
None
Section 4.20 Casualties
None
Section 4.22 Subsidiaries
None
EXHIBIT VI
RISK MANAGEMENT INSTRUMENTS
Trade Date: November 14, 2000
Seller: Playa Energy & Minerals, Inc
Buyer: ETCO
Commodity: NYMEX WTI Instrument: Swap
Swap Price: USD $ _____for the period Dec. 1, 2000 -Dec. 31, 2001
USD $ _____for the period Jan. 1. 2001- Dec. 31, 2002
USD $ _____for the period Jan. 1, 2002- Dec. 31, 2003
Pricing Period: As noted above.
Calculation Period(s): Single Month Calculation Period
Total Quantity: 22,750 barrels for the period Dec. 1, 2000- Dec. 31,2001
22,200 barrels for the period Jan. 1, 2001- Dec. 31, 2002
21,000 barrels for the period Jan. 1, 2002- Dec. 31, 2003
Quantity Per
Calculation Period: 1, 750 barrels for the period Dec. 1, 2000- Dec. 31, 2001
1,850 barrels for the period Jan. 1, 2001- Dec. 31, 2002
1,750 barrels for the period Jan. 1, 2002- Dec. 31, 2003
Price Formula: To be based on the average
of the NYMEX WTI Daily Settlement
prices ("NYMEX WTI Monthly Average")
for the prompt month of the NYMEX
Light Sweet Crude Oil Futures
Contract for each NYMEX Trading Day
for the applicable Calculation
Period.
If the `NYMEX WTI Monthly Average is
greater than the "Swap Price, Seller
will pay Buyer via the formula:
quantity per calculation period
multiplied by (`NYMEX Monthly
Average' less `Swap Price').
If the `NYMEX WTl Monthly Average is
less than the "Swap Price", Buyer
will pay Seller via the formula:
quantity per calculation period
multiplied by (`Swap Price' less
`NYMEX Monthly Average').