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EXHIBIT 10.17
Loan Agreement
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November 13, 1997
Between
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BORROWER BANK
TOREADOR ROYALTY CORPORATION COMPASS BANK
TOREADOR EXPLORATION & PRODUCTION INC. 8080 N. Central Expressway
530 Preston Commons West Dallas, Texas 75206
8117 Preston Road
Dallas, Texas 75225
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In consideration of the creation of the reducing revolving facility
described below and the mutual covenants and agreements contained herein, and
intending to be legally bound hereby, Bank and Borrowers agree as follows:
1.0 CERTAIN DEFINITIONS. In addition to any other terms defined herein,
the following terms shall have the meaning set forth with respect thereto:
"ACCEPTABLE HEDGING AGREEMENTS" means those Hedging Agreements
meeting all of the following criteria:
(a) the quantity of hydrocarbons owned by Borrowers
subject to Hedging Agreements shall not be greater than 75% of
the monthly production of the Mortgaged Properties forecast in
Bank's most recent engineering evaluation delivered to
Borrowers;
(b) the "strike prices" under any Hedging Agreements
shall not be less than the lowest prices utilized for such
production in Bank's most recent base case evaluation of the
Mortgaged Properties as reported to Borrowers;
(c) Bank must have given its written consent to the
counterparties under the Hedging Agreements; and
(d) Bank shall have received first and prior
perfected security interests pursuant to security agreements
in form and substance satisfactory to Bank in and to the right
to receive payment under the Hedging Agreements to the extent
permitted by applicable law under the Hedging Agreements.
"AGREEMENT" means this Loan Agreement and all subsequent
modifications and amendments hereto.
"CBIR RATE" means, on any day, the prime rate as announced in
The Wall Street Journal's "Money Rates" table for such day. If multiple
prime rates are quoted in such table, then the highest prime rate
quoted therein shall be the CBIR Rate. In the event that a prime rate
is not published in The Wall Street Journal's "Money Rates" table, Bank
will choose a substitute
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CBIR Rate, which is based on comparable information, until such time a
prime rate is published in The Wall Street Journal's "Money Rates"
table.
"CONTESTED IN GOOD FAITH" means, as to any payment, tax,
assessment, charge, levy, lien, encumbrance or claim, contesting the
amount, applicability or validity thereof in good faith by appropriate
proceedings or other appropriate actions promptly initiated and
diligently conducted in a manner satisfactory to Bank, provided (a) a
deposit of funds or other security satisfactory to Bank in the full
amount of such contested payment, tax, assessment, charge, levy, lien,
encumbrance or claim has been provided for in a manner satisfactory to
Bank, and (b) the enforcement of the contested payment, tax,
assessment, charge, levy, lien, encumbrance or claim is stayed in a
manner satisfactory to Bank pending the resolution of such contest.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations promulgated thereunder, as in
effect as of the date hereof and any subsequent provisions which are
amendatory thereof, supplemental thereto or substituted therefor. In
addition, the terms "Commonly Controlled Entity," "Multiemployer Plan,"
"PBGC," "Plan," "Prohibited Transaction," and "Reportable Event" have
the same means as provided therefor in ERISA.
"HEDGING AGREEMENT" means this (a) any interest rate or
currency swap, rate cap, rate floor, rate collar, forward agreement, or
other exchange or rate protection agreement or any option with respect
to any such transaction, and (b) any swap agreement, cap, floor,
collar, exchange transaction, forward agreement, or other exchange or
protection agreement relating to hydrocarbons or any option with
respect to any such transaction.
"LOAN(S)" means collectively any and all loans heretofore or
hereafter made by Bank to the Borrowers.
"LOAN DOCUMENTS" means this Agreement, the Note, the Oil and
Gas Mortgages, the UCC-1 financing statements, the Officer's
Certificate, the Section 26.02 Notice, and all other documents,
instruments, guarantees, security agreements, deeds of trust, pledge
agreements, certificates and agreements executed and/or delivered by
Borrowers, any guarantor or third party in connection with any Loan.
"MATERIAL OIL AND GAS PROPERTY" means any Mineral Interests of
either Borrower in an oil and gas property which compromises at least
ten percent (10%) of the present worth future net income at nine
percent (9%) of all Mineral Interests in all oil and gas properties of
such Borrower.
"MATURITY DATE" means October 1, 2000.
"MINERAL INTERESTS" means (a) all present and future interests
and estates existing under an oil and gas lease including without
limitation working interests, royalties, over-riding royalties,
production payments and net profits interests, (b) all present and
future rights in mineral fee interests and rights therein, including
without limitation, any reversionary or carried interests relating
thereto, (c) all rights, titles and interests created by or arising
under the terms of all present and future unitization, communitization,
and pooling arrangements (and all properties covered and units created
thereby) whether arising by contract or operation of law which now or
hereafter include all or any part of the foregoing, and (d) all rights,
remedies, powers and privileges with respect to all of the foregoing.
LOAN AGREEMENT - Page 2
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"MORTGAGED PROPERTIES" means all present and future Mineral
Interests of Borrowers in the oil and gas properties in which Borrowers
hereafter grant to Bank a mortgage or lien.
"NOTE" means that certain promissory note made by Borrowers
payable to the order of Bank in the original principal sum of
$10,000,000 dated November 13, 1997, and all renewals, extensions,
modifications and amendments thereto, and substitutions therefor.
"OBLIGATIONS" means the joint and several obligations of
Borrowers:
(a) to pay all indebtedness arising out of this
Agreement, any future advances under this Agreement, and all
renewals, extensions or amendments of such indebtedness or any
part thereof or any such future advances;
(b) to pay the principal of and interest on the Note
in accordance with the terms thereof, and all renewals,
extensions, modifications and amendments of such Note or any
part thereof, and any future advances made pursuant thereto;
(c) to repay to Bank all amounts advanced by Bank
hereunder or under the other Loan Documents on behalf of
Borrowers, including, without limitation, advances for
principal or interest payments to prior secured parties,
mortgagees, or lienors, or for taxes, levies, insurance, rent,
repairs to or maintenance or storage of any of the collateral;
(d) to pay any and all other indebtedness of
Borrowers to Bank of every kind, nature and description,
direct or indirect, primary or secondary, secured or unsecured
(including overdrafts), joint or several, absolute or
contingent, due or to become due, now existing or hereafter
arising, regardless of how it may be evidenced, including
without limitation all future advances, whether or not
presently contemplated by the parties hereto;
(e) to perform fully all of the terms and provisions
of each of the instruments constituting the Loan Documents;
and
(f) to reimburse Bank, on demand, for all of Bank's
reasonable expenses and costs, which Borrowers are obligated
to pay pursuant to the terms of the Loan Documents.
"PLAN" means, at any time, any employee benefit plan which is
covered by ERISA and in respect of which Borrowers or any Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under ERISA be deemed to be) an "employer" as defined in ERISA.
"POTENTIAL DEFAULT" means any condition, event or act, which
with the giving of notice of the lapse of time, or both, will
constitute an Event of Default hereunder.
"PRINCIPAL DEBT" means the sum of (a) the aggregate principal
balance of all Loans hereunder outstanding at any one time, plus (b)
the aggregate undrawn amount of all Letters of Credit plus any and all
amounts paid by Bank in connection with drawings under any Letter of
Credit for which Bank has not been reimbursed.
"RESERVE REPORT" means a report in form and substance
satisfactory to Bank prepared by Harlan Consulting or such other
independent petroleum consulting firm selected by Borrowers
LOAN AGREEMENT - Page 3
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and acceptable to Bank evaluating the oil and gas reserves attributable
to the Mineral Interests of Borrowers in all of their oil and gas
properties as of each December 31 and which shall, among other things,
(a) identify the wells covered thereby, (b) specify such engineers'
opinions with respect to the total volume of reserves (the "available
reserves") of hydrocarbons (using the terms or categories "proved
developed producing reserves," "proved developed nonproducing reserves"
and "proved undeveloped reserves") which Borrowers have advised such
engineers that the Borrowers have the right to produce for their own
account, (c) set forth such engineers' opinions with respect to the
projected future cash proceeds from the available reserves, discounted
for present value at a rate acceptable to Bank, for each calendar year
or portion thereof after the date of such findings and data, (d) set
forth such engineers' opinions with respect to the projected future
rate of production of the available reserves, (e) contain such other
information as requested by Bank with respect to the projected rate of
production, gross revenues, operating expenses, taxes, capital costs,
net revenues and present value of future net revenues attributable to
such reserves and production therefrom, and (f) contain a statement of
the price and escalation parameters, procedures and assumptions upon
which such determinations were based.
2.0 LOAN.
2.1 THE LOAN. Bank agrees, subject to the terms and conditions
hereof, to lend Borrowers at any time and from time to time on or
before the Maturity Date, sums (each year-end called a "Loan" and
collectively the "Loans") which may be repaid and reborrowed pursuant
to the terms hereof and which shall not exceed at any one time
outstanding the lesser of $10,000,000 or the Borrowing Base (defined in
Section 3.0 below). Whenever Borrowers desire to borrow hereunder, they
shall give Bank written notice specifying (a) the date of the proposed
borrowing, (b) the amount to be borrowed, and (c) a description of the
purpose for which the proceeds of the Loan will be used. The request
shall be made by means of a Borrowing Request in the form of Exhibit A
attached hereto with blanks completed in conformity herewith. Notice
shall be given by 12 p.m., (Dallas, Texas, time) on the date of the
proposed borrowing. The notice may be given by facsimile transmission
provided the original manually executed Borrowing Request is promptly
delivered to Bank.
2.2 USE OF PROCEEDS. The proceeds of Loans may be used solely
to support the acquisition and development of oil and gas properties.
2.3 PROMISSORY NOTE. The obligation of Borrowers to repay the
aggregate principal balance of all Loans hereunder outstanding at any
one time shall be evidenced by a promissory note (the "Note") which (a)
shall be dated November 13, 1997, (b) be payable on or before the
Maturity Date for the amount of $10,000,000, or the Principal Debt then
outstanding, whichever is less, (c) bear interest from the date thereof
until paid in the manner provided in the Note, (d) be entitled to the
benefits of this Agreement in the security provided for herein, and (e)
be in the form attached hereto as Exhibit C.
2.4 INTEREST RATE. During any period that the Principal Debt
then outstanding is equal to or less than eighty percent (80%) of the
Borrowing Base then in effect, the unpaid principal balance of the Note
shall bear interest at a rate per annum equal to the lesser of (a) a
fluctuating rate of interest equal to the CBIR Rate (changing as the
CBIR Rate changes) less one-half percent (.50%), or (b) the maximum
rate permitted by applicable law. During any period that the Principal
Debt then outstanding is greater than eighty percent (80%) of the
Borrowing Base then in effect, the unpaid principal balance of the Note
shall bear interest at a rate per annum equal to the lesser of (a) a
fluctuating rate of interest equal to the CBIR Rate (changing as the
CBIR Rate changes), or (b) the maximum rate permitted by applicable
law.
LOAN AGREEMENT - Page 4
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2.5 AMORTIZATION. Interest on the unpaid principal balance of
the Note shall be due and payable quarterly as it accrues on the first
day of each calendar quarter commencing the first day of January 1998.
The Principal Debt then outstanding, plus accrued but unpaid interest
then outstanding, plus accrued but unpaid interest to the date of
payment, shall be due and payable on the Maturity Date.
2.6 COLLATERAL. If at any time the Principal Debt then
outstanding equals or exceeds $2,000,000 then, Borrowers will promptly
do the following:
(a) Grant to Bank to secure the payment and
performance of the Obligations a first and superior lien
against Borrowers' entire Mineral Interest in those oil and
gas properties selected by Bank which in the aggregate
comprise at least eighty percent (80%) of the present worth
future net income at nine percent (9%) of all oil and gas
properties of Borrowers, which determination shall be made by
Bank in accordance with then-current practices, customary
procedures and standards used by Bank for its petroleum
industry customers generally including an analysis of such
reserve and production data with respect to each such property
as is provided Bank from time to time utilizing pricing
parameters of Bank then in effect, all pursuant to the terms
of one or more deeds of trust (each "Oil and Gas Mortgage") in
the form of Exhibit D attached hereto, with blanks completed
in conformity herewith.
(b) Provide to Bank with respect to Borrowers'
Mineral Interest in each such property mortgaged to Bank, a
property certificate in the form of Exhibit E attached hereto,
and an affidavit of payment of trade bills in the form of
Exhibit F attached hereto, in each instance with blanks
completed in conformity herewith and therewith and which are
otherwise satisfactory to Bank.
(c) Deliver to Bank one or more title opinions
reflecting title to Borrowers' Mineral Interest in such
property which is acceptable to Bank.
2.7 LETTER OF CREDIT SUBFEATURE. As a subfeature under the
revolving credit facility created by this Agreement, Bank may from time
to time up to and including seven days prior to the Maturity Date,
issue Letters of Credit for the account of either Borrower (each a
"Letter of Credit" and collectively, the "Letters of Credit"); provided
however that (a) the form and substance of each Letter of Credit shall
be subject to approval by Bank in its sole discretion, and (b) the
aggregate undrawn amount of all outstanding Letters of Credit shall not
at any time exceed $500,000. No Letter of Credit shall have an
expiration date subsequent to the Maturity Date. The undrawn amount of
all Letters of Credit plus any and all amounts paid by Bank in
connection with drawings under any Letter of Credit for which Bank has
not been reimbursed shall be reserved under the revolving credit
facility and shall not be available for Loans thereunder. Each draft
paid by Bank under a Letter of Credit shall be deemed a Loan and shall
be repaid in accordance with the terms of this Agreement; provided
however, that if a Loan is not available for any reason whatsoever at
the time any draft is paid by Bank, or, if Loans are not then available
in such amount due to any limitation on borrowing set forth in this
Agreement, then the full amount of such draft shall immediately be due
and payable, together with interest thereon, from the date such amount
is paid by Bank to the date such amount is fully repaid by Borrowers,
at the rate of interest applicable to Loans under the Note. In such
event, Borrowers agree that Bank, at Bank's sole discretion, may debit
Borrowers' deposit account with Bank for the amount of such draft.
Borrowers shall pay a fee for the issuance of each Letter of Credit in
an amount equal to 7/8ths percent (0.875%) per annum of the face amount
of such Letter of Credit, with a $350 minimum. This fee shall be
payable upon issuance.
LOAN AGREEMENT - Page 5
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2.8 UNUSED COMMITMENT FEE. Borrowers agree to pay Bank an
unused commitment fee for the period commencing with the date of this
Agreement to the Maturity Date computed at the rate of 3/8ths of one
percent (0.375%) per annum on the average daily unused portion of the
commitment. The phrase "unused portion of the commitment" as used in
the preceding sentence means the difference between (a) the lesser of
$10,000,000 or the Borrowing Base, and (b) the Principal Debt. The
commitment fee shall be payable quarterly in arrears beginning January
1, 1998, and at maturity, and shall be due and payable upon receipt of
billing from Bank.
3.0 BORROWING BASE. The term "Borrowing Base" means, as of the date of
determination thereof, an amount as determined by Bank in accordance with
then-current practices, customary procedures and standards used by Bank for its
petroleum industry customers including an analysis of such reserve and
production data with respect to the Mineral Interests of Borrowers in all of
their oil and gas properties, as is provided to Bank in accordance herewith. The
Borrowing Base shall initially be $4,000,000.
3.1 PERIODIC DETERMINATIONS OF BORROWING BASE. The Borrowing
Base shall be redetermined by Bank as of May 1 and November 1 of each
year (each a "Determination Date") until maturity, commencing May 1,
1998. The Borrowing Base, as redetermined, shall remain in effect until
the next Determination Date, provided the Borrowing Base may be
redetermined between Determination Dates in accordance with Section 3.3
hereof.
3.2 ENGINEERING DATA TO BE PROVIDED PRIOR TO SCHEDULED
DETERMINATION DATES.
(a) On or before April 1 of each year for the Determination
Date of May 1, Borrowers shall deliver to Bank a Reserve Report and the
other data specified in Section 6.4 hereof. Bank shall then determine
the Borrowing Base for the six (6) month period commencing April 1.
(b) On or before October 1 of each year for the Determination
Date of November 1, Borrowers shall deliver to Bank such information,
reports and data pertaining to Borrowers' Mineral Interests in all of
their oil and gas properties, as Bank may reasonably request. Such
information shall (i) set forth the historical production data of the
oil and gas reserves included in such properties, (ii) set forth for
each property prices received for production, lease operating expenses,
capital expenditures and such other information as Bank may deem
necessary or appropriate, (iii) set forth for each property any
material changes since the date of most recent Reserve Report, if any,
in Borrowers' working interest or net revenue interest therein, and
(iv) be accompanied by a certification of Borrowers to the effect that
no material adverse changes have occurred since the date of the last
Reserve Report except those which have previously been disclosed to
Bank in writing. Bank shall then determine the Borrowing Base for the
next six (6) month period.
3.3 SPECIAL DETERMINATIONS OF BORROWING BASE. Special
determinations of the Borrowing Base may be requested by Borrowers not
more than one (1) time per calendar year or by Bank at any time during
the term hereof. If any special determination is requested by
Borrowers, it shall be accompanied by engineering data described in
Section 3.2(b). If any special determination is requested by Bank,
Borrowers will provide Bank with the information specified in Section
3.2(b) hereof as soon as is reasonably possible following the request.
The determination whether to increase or decrease the Borrowing Base
shall then be made by Bank in its sole discretion in accordance with
the standards set forth in Section 3.0 hereof. In the event of any
special determination of the Borrowing Base pursuant to this Section,
Bank in the exercise of its discretion may suspend the next regularly
scheduled determination of the Borrowing Base.
LOAN AGREEMENT - Page 6
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3.4 BORROWING BASE DEFICIENCY. If by reason of any adjustment
to the Borrowing Base, the Principal Debt then outstanding exceeds the
amount of the Borrowing Base, then Bank shall notify Borrowers of the
same, and Borrowers shall within thirty (30) days following receipt of
such notice elect whether to (i) prepay an amount which will reduce the
Principal Debt to the amount of the Borrowing Base (this sum may be
paid in one installment or, at Borrowers' option, in three equal
consecutive monthly installments), or (ii) execute and deliver to Bank
instruments mortgaging such other collateral as is acceptable to Bank,
pursuant to security documents acceptable to Bank having present values
which, in the opinion of Bank, taken in the aggregate are sufficient to
increase the Borrowing Base to an amount at least equal to the
Principal Debt then outstanding, or (iii) do any combination of the
foregoing as is acceptable to Bank. If Borrowers so elect to mortgage
additional oil and gas properties, then clause (ii) above shall be
accomplished within forty-five (45) days from Bank's date of
notification. If Borrowers fail to make an election among clauses (i)
through (iii) above within thirty (30) days from Bank's notification,
then Borrowers shall be deemed to have selected the payment option
specified in clause (i) thereof.
4.0 CONDITIONS PRECEDENT TO CLOSING. The obligations of Bank as set
forth herein are subject to the satisfaction (in the opinion of Bank), unless
waived in writing by Bank, of each of the following conditions:
4.1 EFFECTIVENESS OF LOAN DOCUMENTS. Each of the Loan
Documents shall be in full force and effect.
4.2 CREDIT OPINION. There shall have been delivered a
favorable opinion of Borrowers' counsel covering such matters incident
to the Loan as Bank may reasonably request.
4.3 INSURANCE CERTIFICATE. Bank shall have received evidence
that Borrowers have obtained the policies of insurance specified and
required by Section 6.7 hereof.
4.4 DOCUMENTATION AND PROCEEDINGS. Borrowers shall have
delivered resolutions of their boards of directors authorizing their
execution, delivery and performance of the Loan Documents.
4.5 SECTION 26.02 NOTICE. Borrowers shall have executed a
notice in compliance with the provisions of Section 26.02 of the Texas
Business and Commerce Code (the "Section 26.02 Notice").
4.6 REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained herein or in the documents referred to herein or
otherwise made in writing in connection herewith or therewith shall be
true and correct with the same force and effect as though such
representations and warranties have been made on and as of this date.
4.7 EXPENSES. Borrowers shall have paid all reasonable
expenses of Bank in connection with the preparation of the Loan
Documents, including but not limited to, the fees and expenses of
counsel for Bank, subject to a cap of $2,000 plus out-of-pocket
expenses.
5.0 CONDITIONS PRECEDENT TO SUBSEQUENT LOANS. The obligation of Bank to
make subsequent Loans to Borrowers is subject, at the time of the funding of
each such Loan (the "Funding Date"), to the satisfaction (in the opinion of
Bank), unless waived in writing by Bank, of each of the following conditions:
LOAN AGREEMENT - Page 7
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5.1 BORROWING REQUEST. Borrowers shall have given Bank written
notice within the time frame specified in Section 2.1 hereof by means
of a Borrowing Request appropriately completed in compliance herewith.
5.2 AVAILABILITY OF COMMITMENT. The then Principal Debt plus
the amount of the requested Loan shall be equal to or less than the
Borrowing Base then in effect.
5.3 EXPENSES. Borrowers shall have paid all reasonable
expenses of Bank in connection with the making of the Loan.
5.4 REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained herein in the Loan Documents shall be true and
correct in all material respects as though such representations and
warranties have been made on and as of the Funding Date.
5.5 NO DEFAULT. There shall exist no Event of Default or
Potential Default hereunder.
5.6 CHANGE IN CONDITION. No adverse change in condition
(financial or otherwise) of either Borrower or any other event shall
have occurred which creates a possibility of materially adversely
effecting (a) the condition (financial or otherwise) of such Borrower
(b) the validity or enforceability of any of the Loan Documents, or (c)
the ability of such Borrower to meet and carry out its obligations
under the Loan Documents or perform the transactions contemplated
hereby or thereby.
6.0 AFFIRMATIVE COVENANTS. Until full payment and performance of all
Obligations, Borrowers will, unless Bank consents otherwise in writing (and
without limiting any requirement of any other Loan Document):
6.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. Deliver or
cause to be delivered to Bank (a) quarterly consolidated financial
statements of Toreador Royalty Corporation within sixty (60) days after
the end of each of the first three fiscal quarters of each fiscal year,
in each instance to include a balance sheet, an income statement, a
cash flow statement and such other financial statements and supporting
schedules or documentation required by Bank prepared in accordance with
generally accepted accounting principles consistently applied and
presented in a format acceptable to Bank, and (b) annual audited
consolidated financial statements of Toreador Royalty Corporation by
April 15th of each year, to include a balance sheet, an income
statement and a cash flow statement prepared in accordance with
generally accepted accounting principles consistently applied and
presented in a format acceptable to Bank, and (c) such additional
information, reports and statements with respect to the business
operations and financial condition of Borrowers as Bank may reasonably
request from time to time, and (d) within sixty (60) days after the end
of each quarter of the first three (3) fiscal quarters and within one
hundred twenty (120) days after the end of each fiscal year, a
compliance certificate in the form of Exhibit B attached hereto, and
(e) within fifteen (15) days after the filing thereof, copies of any
report, proxy statement, financial statement, or other filing made by
either Borrower with the Securities and Exchange Commission, any state
securities agency, or any national stock exchange or quotation service,
and promptly upon receipt thereof, copies of any notices received from
the Securities and Exchange Commission or any state securities agency
relating to any order, rule, statute, or other laws or information that
could have a material adverse effect upon the financial condition,
properties, or operations of either Borrower.
LOAN AGREEMENT - Page 8
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6.2 ADVERSE CONDITIONS OR EVENTS. Promptly advise Bank in
writing of (i) any condition, event or act which comes to the attention
of either Borrower that would or might materially adversely affect
either Borrower's financial condition or operations, the collateral
from time to time securing the Loan, or Bank's rights under the Loan
Documents, (ii) any litigation filed by or against either Borrower,
(iii) any event that has occurred that would constitute an event of
default under any Loan Documents, (iv) any uninsured or partially
uninsured loss through fire, theft, liability or property damage in
excess of an aggregate of $50,000, (v) any actual, proposed or
threatened testing or other investigation by any governmental authority
or other person or entity concerning the environmental condition of, or
relating to, any of the Mortgaged Properties or the release of any
hazardous substances by or from, affecting or related to any of the
Mortgaged Properties (except such releases as are made in accordance
with applicable environmental laws), and (vi) any circumstances that
constitute grounds entitling the PBGC to institute proceedings to
terminate a Plan subject to ERISA, and the receipt of any notice to
either Borrower or any Commonly Controlled Entity that the PBGC intends
to terminate a Plan, and the receipt of notice concerning the
imposition of withdrawal liability in excess of $25,000 with respect to
either Borrower or any Commonly Controlled Entity.
6.3 QUARTERLY SALES REPORTS. As soon as available and in any
event not later than the sixtieth (60th) day following the end of each
calendar quarter, internally prepared reports showing for all of their
oil and gas properties all production of oil, gas and other
hydrocarbons therefrom during the subject quarter, all proceeds
received during the subject quarter from the sale of production from
such properties, all expenses incurred during the subject quarter
attributable to such Properties, a description of all material
operations conducted on such Properties since the last quarterly report
and such other information as Bank may reasonably request.
6.4 RESERVE REPORT. Deliver to Bank on or before April 1 of
each year (i) a Reserve Report as of December 31 of the immediately
preceding year, and (ii), if Borrowers (or either of them) have
executed on Oil and Gas Mortgage,, a schedule comparing the net revenue
interests of each well or lease of the Mortgaged Properties as
reflected in such Oil and Gas Mortgage after giving effect to all
encumbrances listed thereon, to net revenues reflected in the Reserve
Report along with an explanation as to any material discrepancies
between the two net revenue interest disclosures.
6.5 ENGINEERING EXPENSES. Pay all reasonable engineering
expenses incurred by Bank after the date hereof in connection with the
administration of the credit facility evidenced by this Agreement.
6.6 TAXES AND OTHER OBLIGATIONS. Pay all of each Borrower's
taxes, assessments and other obligations, including, but not limited to
taxes and assessments and lawful claims which, if unpaid, might by law
become a lien against the assets of each Borrower, as the same become
due and payable, except to the extent the same are being Contested in
Good Faith.
6.7 INSURANCE. Keep their properties of an insurable nature
insured at all times against such risks and to the extent that like
properties are customarily insured by other companies engaged in the
same or similar businesses similarly situated, maintain insurance of
the types and in the coverage amounts and with reasonable deductibles
as are usual and customary including the following:
LOAN AGREEMENT - Page 9
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(a) Employer's liability insurance in the limits of
$500,000 per accident covering injury or death to any employee
who may be outside the scope of the worker's compensation
statute of the state in which the work is performed.
(b) Commercial or comprehensive general liability
insurance with combined single limits per occurrence (and
general aggregate if applicable) of $1,000,000 for bodily
injury and property damage, including property damage by
blowout and cratering, completed operations and broad form
contractual liability as respects any contract in which either
Borrower as operator may enter into under the terms of its
joint operating agreement.
(c) Automobile liability insurance covering owned,
non-owned and hired automotive equipment with limits of bodily
injury and property damage of $1,000,000.
Borrowers shall obtain the agreement of each insurance company
that its policy may not be canceled, altered or amended without ten
(10) days prior written notice to Borrowers and Bank. Borrowers shall
promptly give Bank notice of any cancellation, alteration or amendment
of an insurance policy received by them from an insurer or from the
operator. If requested by Bank, such insurance policies shall (1)
provide that Bank shall receive prompt notice of any claims filed
thereunder; (2) include a standard mortgagee clause in favor of Bank
with loss payable for all claims in excess of $10,000 to Bank; and (3)
provide that no adverse alteration or cancellation thereof shall be
effective as against Bank until thirty (30) days after written notice
of such alteration or cancellation is given to Bank. Borrowers shall
deliver to Bank certificates of insurance coverage for each Mortgaged
property as and when requested by Bank.
6.8 COMPLIANCE WITH LAWS. Comply with all applicable laws
(including environmental laws), rules, regulations and orders of any
governmental authority.
6.9 INSPECTION OF BOOKS AND RECORDS. Allow any representative
of Bank to visit and inspect any of its oil and gas properties, to
examine its books of record and account and to discuss its affairs,
finances and accounts with any of its officers, directors, employees
and agents, all at such reasonable times and as often as Bank may
request. Bank agrees that it will take all reasonable steps to keep
confidential any proprietary information given to it by Borrowers,
provided, however, that this restriction shall not apply to information
which (i) has at the time in question entered the public domain, (ii)
is required to be disclosed by law, (iii) is disclosed to Bank's
auditors, attorneys or agents, or (iv) is disclosed in the course of
enforcing Bank's rights and remedies during the existence of an Event
of Default.
6.10 FURTHER ASSURANCES. Take any and all such other action as
Bank may from time to time deem necessary or appropriate in connection
with this Agreement or any of the other Loan Documents (a) to cure any
defects in the creation of the Loan Documents, or (ii) to evidence
further or more fully describe the collateral intended as security, or
(iii) to correct any omissions in the Loan Documents, or (iv) to state
more fully the security obligations set forth in this Agreement or in
any of the Loan Documents, or (v) to perfect, protect or preserve any
liens pursuant to any of the Loan Documents, or (vi) for better
assuring and confirming unto Bank all or any part of the security for
such obligations.
7.0 NEGATIVE COVENANTS. Until full payment and performance of
all Obligations, neither Borrower will, without the prior written
consent of Bank (and without limiting any requirement of any other Loan
Documents):
LOAN AGREEMENT - Page 10
11
7.1 NEGATIVE PLEDGE. Grant, suffer or permit to exist any
contractual or noncontractual lien on or security interest in its
assets, except (a) liens in favor of Bank, (b) liens for taxes,
assessments or similar charges, incurred in the ordinary course of
business that are not yet due and payable, (c) liens of mechanics,
materialmen, warehousemen, carriers, operators and other like liens
securing obligations incurred in the ordinary course of business that
are not yet due and payable; and (d) landlord's liens for rentals not
yet due and payable.
7.2 SALE OF MINERAL INTERESTS. Directly or indirectly sell,
lease or otherwise dispose of (by farmout or otherwise) any of its
present or future Mineral Interests in any oil and gas property now
owned or hereafter acquired other than (a) sales of oil and gas
properties in the ordinary course of business, (b) sales of
hydrocarbons in the ordinary course of business, (c) any compulsory
pooling or unitization ordered by a governmental body with jurisdiction
over the Mineral Interests, and (d) sales of oil and gas properties
(other than those described in clauses (a), (b) and (c) above) which do
not exceed in any twelve month period an aggregate amount of 10% of the
collateral value which Bank has assigned to such oil and gas
properties, provided that 100% of the net proceeds of sale are paid to
Bank for application to the Obligations.
7.3 ABANDONMENT, ETC. Permit the surrender, abandonment,
release or termination, in whole or in part, of any present or future
Mineral Interests in any Material Oil and Gas Property now owned or
hereafter acquired by it, unless in the opinion of Bank the same has
become unprofitable, or is not producing hydrocarbons in commercially
profitable quantities.
7.4 MERGER, ETC. Enter into any merger or consolidation, or
form or acquire any subsidiary, except (a) the Borrowers may merge into
or consolidate with each other, and (b) either Borrower may merge into
or consolidate with any of its subsidiaries so long as such Borrower is
the survivor.
7.5 EXTENSIONS OF CREDIT. Make any loan or advance to any
individual, partnership, corporation or other entity, except (a) loans
and intercompany adjustments between Borrowers, individually, occurring
in the ordinary course of business, and (b) advances made to employees
of Borrowers for the payment by them of items for which an expense
report or voucher will be filed and which items will constitute
ordinary and necessary business expenses of Borrowers, and (c) loans or
advances (other than those provided by clauses (a) and (b) above) in an
aggregate amount not do exceed $250,000 at any time outstanding.
7.6 BORROWINGS. Create, incur, assume or become liable in any
manner for any indebtedness (for borrowed money, deferred payment for
the purchase of assets, lease payments, as surety or guarantor for the
debt for another, or otherwise) other than to Bank, except for normal
trade debts incurred in the ordinary course of its business, and except
for existing indebtedness disclosed to Bank in writing and acknowledged
by Bank prior to the date of this Agreement.
7.7 DIVIDENDS AND DISTRIBUTIONS. Make any distribution (other
than dividends payable in its capital stock) on any shares of any class
of its capital stock or apply any of its property or assets to the
purchase, redemption or other retirement of any shares of any class of
its capital stock.
7.8 HEDGING TRANSACTIONS. Enter into any Hedging Agreement,
other than Acceptable Hedging Agreements.
LOAN AGREEMENT - Page 11
12
7.9 CURRENT RATIO. Permit at any fiscal quarter end the ratio
of its consolidated current assets to consolidated current liabilities
to be less than 1.0 to 1.0. Current maturities of long term debt shall
be excluded from the determination of current liabilities.
7.10 DEBT SERVICE COVERAGE RATIO. Permit, as of the last day
of any fiscal quarter, the Debt Service Coverage Ratio of Toreador
Royalty Corporation to be less than 1.50 to 1.0; provided that if at
any time this loan is secured by Mortgaged Properties, this ratio shall
thereafter be 1.25 to 1.0. "Debt Service Coverage Ratio" means the
quotient obtained by dividing Funded Debt Service of Toreador Royalty
Corporation for such fiscal quarter into Adjusted Cash Flow of Toreador
Royalty Corporation for such fiscal quarter, in each instance
determined on a consolidated basis in accordance with generally
accepted accounting principles consistent with that applied in the
preparation of the financial statements previously furnished to Bank.
"Funded Debt Service" means the sum of (a) the aggregate of all
scheduled principal payments on debt other than the Note actually paid
on account of funded debt during such fiscal quarter, plus (b) all debt
service (both principal and interest) actually paid on the Note during
such fiscal quarter. "Adjusted Cash Flow" means for the fiscal quarter
(a) the sum of net earnings after taxes and all non-cash charges (such
as deferred taxes, depreciation and amortization of goodwill) which, in
determining of the net income of Toreador Royalty Corporation for such
fiscal quarter were deducted from its gross income for such fiscal
quarter, (b) minus non-cash income of Toreador Royalty Corporation, all
as determined on a consolidated basis in accordance with generally
accepted accounting principles consistent with that applied in the
preparation of the financial statements previously furnished to Bank.
7.11 PRINCIPAL DEBT NOT TO EXCEED COMMITMENT. Permit at any
time the Principal Debt to exceed the lesser of $10,000,000 or the
Borrowing Base then in effect.
7.12 INVESTMENTS. Invest in (by capital contribution or
otherwise), or acquire or purchase or make any commitment to purchase
the obligations or stock of, any entity, except (i) temporary
investments in securities of the United States having maturities not in
excess of one (1) year, and (ii) demand deposits and certificates of
deposit issued by Bank or by a domestic office of any national or state
bank which is organized of the laws of the United States of America or
any state therein, which has capital, surplus and undivided profits of
at least $500,000,000, and (iii) readily marketable commercial paper
rated "A-1" by Standard & Poor's Corporation (or similar rating by any
similar organization which rates commercial paper), and (iv) such other
investments as are approved by Bank in writing from time to time.
7.13 CHANGE OF CONTROL OF BORROWER. Permit the change of
control of either Borrower. "Change of control" as used in the
preceding sentence means (i) the acquisition of more than fifty percent
(50%) of the outstanding voting stock of a Borrower by any person or
entity or group of persons or entities acting in concert, or (b) the
acquisition of more than fifteen percent (15%) of the outstanding
voting stock of a Borrower by any person or entity or group of persons
or entities acting in concert if at any time following such acquisition
of fifteen percent (15%) or more of a Borrower's outstanding voting
stock more than fifty percent (50%) of the persons serving on the board
of directors of a Borrower are persons proposed directly or indirectly
by the persons or entities or group of persons or entities acting in
concert who have acquired such fifteen percent (15%) or more of a
Borrower's outstanding voting stock.
7.14 CHANGE IN MANAGEMENT. Permit Edward C. Marhanka to cease
being Vice President of Toreador Royalty Corporation for any reason
other than his death or disability.
LOAN AGREEMENT - Page 12
13
7.15 CHANGE IN NATURE OF BUSINESS. Conduct any business other
than, or make any material change in the nature of, its business as
carried on as of the date hereof.
7.16 ARM'S LENGTH TRANSACTIONS. Enter into transaction with
any affiliate, except a transaction upon terms that are not less
favorable to it than would be obtained in a transaction negotiated at
arm's length with an unrelated third party.
8.0 REPRESENTATIONS AND WARRANTIES. Borrowers hereby jointly and
severally represent and warrant to Bank as follows:
8.1 NO LIENS. Toreador Exploration & Production Inc. has good
and defensible title to all of the its Mineral Interests in and to the
oil and gas leases which are described in and covered by the
engineering reports previously delivered to and relied upon by Bank in
connection with this Agreement, and none of such Mineral Interests are
subject to any security interest, mortgage, deed of trust, pledge,
lien, title retention document or encumbrance of any character, except
for except for (i) the contracts, agreements, burdens, encumbrances and
other matters as may be set forth in the description of each of the
Mortgaged Properties, (ii) the liens and security interests evidenced
by the Oil and Gas Mortgages, (iii) statutory liens for taxes which are
not yet delinquent, (iv) liens under operating agreements, pooling
orders and unitization agreements, and mechanic's liens with respect to
obligations which are not yet due, (v) minor defects and irregularities
of title which are not liens and do not materially impair with the
value of any Mortgaged Property.
8.2 GAS IMBALANCES. There are no material gas imbalances, take
or pay or other prepayments with respect to any of the leases described
in the Oil and Gas Mortgages for which Borrowers are the operator which
would require the delivery of hydrocarbons produced from such leases at
some time in the future without then or thereafter receiving full
payment therefor.
8.3 GOOD STANDING. Toreador Royalty Corporation is a
corporation, duly organized, validly existing and in good standing
under the laws of Delaware. Toreador Exploration & Production Inc. is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Texas. Each Borrower has the power and
authority to own its property and to carry on its business in Texas in
each other jurisdiction in which the character of the properties owned
or held by it or the nature of the business transacted by it makes such
qualification necessary.
8.4 AUTHORITY AND COMPLIANCE. Each Borrower has full power and
authority to execute, deliver and perform the Loan Documents and to
incur and perform the obligations provided for therein. No consent or
approval of any public authority or other third party is required as a
condition to the validity or performance of any Loan Document. Each
Borrower is in compliance with all laws and regulatory requirements to
which such Borrower is subject, except where failure so to comply would
not have a material adverse effect upon the financial condition,
properties or operations of either Borrower.
8.5 BINDING AGREEMENT. This Agreement and the other Loan
Documents executed by Borrowers constitute valid and legally binding
obligations of Borrowers, enforceable in accordance with their terms,
except as such enforcement may be limited by bankruptcy, insolvency or
other similar laws of general application relating to the enforcement
of creditors' rights.
LOAN AGREEMENT - Page 13
14
8.6 LITIGATION. There is no proceeding involving an amount in
excess of $100,000 involving either Borrower pending or, to the
knowledge of Borrowers, threatened before any court or governmental
authority, agency or arbitration authority, except as disclosed to Bank
in writing and acknowledged by Bank prior to the date of this
Agreement.
8.7 NO CONFLICTING AGREEMENTS. There is no charter, bylaw,
stock provision, partnership agreement or other document pertaining to
the power or authority of either Borrower and no provision of any
existing agreement, mortgage, indenture or contract binding on either
Borrower or affecting either Borrower's property, which would conflict
with or in any way prevent the execution, delivery or carrying out of
the terms of this Agreement and the other Loan Documents.
8.8 TAXES. All taxes and assessments due and payable by
Borrowers have been paid or are being Contested in Good Faith, and
Borrowers have filed all tax returns which Borrowers are required to
file.
8.9 ERISA. Borrowers are in compliance in all material
respects with all applicable provisions of ERISA. Neither a Reportable
Event nor a Prohibited Transaction has occurred and is continuing with
respect to any Plan; no notice of intent to terminate a Plan has been
filed, nor has any Plan been terminated; neither Borrower nor any
Commonly Controlled Entity has completely or partially withdrawn from a
Multiemployer Plan; and Borrowers and each Commonly Controlled Entity
have met their minimum funding requirements under ERISA with respect to
all of their Plans.
8.10 ACCURACY OF INFORMATION. To the best of each Borrower's
knowledge, all factual information furnished by Borrowers to Bank in
connection with this Agreement and the other Loan Documents is and will
be accurate and complete on the date as of which such information is
delivered to Bank and is not and will not be incomplete by the omission
of any material fact necessary to make such information not misleading.
9.0 DEFAULT. Any of the following shall constitute events of
default (each and "Event of Default"):
9.1 NONPAYMENT. Borrowers shall default in the due and
punctual payment of any principal or interest of the Note or any of the
other Obligations when due and payable, whether at maturity or
otherwise.
9.2 REPRESENTATIONS AND WARRANTIES. Any representation,
warranty or statement made by Borrowers herein or otherwise in writing
in connection herewith or in connection with any of the other Loan
Documents and the agreements referred to herein or therein or in any
financial statement, certificate or statement signed by any officer or
employee of Borrowers and furnished pursuant to any provision of the
Loan Documents shall be breached, or shall be materially false,
incorrect or incomplete when made.
9.3 CERTAIN AFFIRMATIVE AND NEGATIVE COVENANTS. (i) Either
Borrower shall default in the due performance or observance by it of
any term, covenant or agreement on its part to be performed or observed
pursuant to Section 6.2 or Sections 7.1 through 7.16; or (ii) either
Borrower shall default in the due performance or observance of any
term, covenant or agreement on its part to be observed or performed
pursuant to Sections 6.1 or 6.3 through 6.10 hereof, and such failure
shall continue unremedied for a period of fifteen (15) days after (a)
notice of such
LOAN AGREEMENT - Page 14
15
default from Bank; or (b) Bank is notified of such default or should
have been so notified pursuant to the provisions of Section 6.2 hereof,
whichever is earlier.
9.4 OTHER COVENANTS. Either Borrower shall default in the due
performance or observance by it of any term, covenant or agreement
(other than those referred to in Sections 9.1, 9.2 and 9.3 hereof)
contained in this Agreement and such default shall continue unremedied
for a period of thirty (30) days after: (a) notice of such default from
Bank, or (b) Bank is notified of such default or should have been so
notified pursuant to the provisions of Section 6.2 hereof, whichever is
earlier.
9.5 DEFAULT IN OTHER LOAN DOCUMENTS. Either Borrower shall
default in the due performance of or observance by such Borrower of any
term, covenant or agreement on such Borrower's part to be performed
pursuant to the terms of any of the other Loan Documents and the
default shall continue unremedied beyond any grace or cure period
therein provided.
9.6 DEFAULT IN OTHER DEBT. An event of default shall occur
under the provisions of any instrument (other than the Loan Documents)
evidencing indebtedness of either Borrower for the payment of borrowed
money in excess of $50,000 or of any agreement relating thereto (the
effect of which is to permit the holder or holders of such instrument
to cause the indebtedness evidenced by such instrument to become due
prior to its stated maturity).
9.7 VALIDITY OF LOAN DOCUMENTS. Any of the Loan Documents
shall cease to be a legal, valid and binding agreement enforceable
against any party executing the same in accordance with the respective
terms thereof, or shall in any way be terminated, or become or be
declared ineffective or inoperative, or shall in any way whatsoever
cease to give or provide the respective rights, remedies, powers and
privileges intended to be created thereby.
9.8 BANKRUPTCY. Either Borrower shall suspend or discontinue
its business operations, or shall generally fail to pay its debts as
they mature, or shall file a petition commencing a voluntary case
concerning such Borrower under any chapter of the United States
Bankruptcy Code; or any involuntary case shall be commenced against
either Borrower under the United States Bankruptcy Code and such case
remains undismissed for a period of forty-five (45) days.
9.9 JUDGMENTS AND DECREES. Either Borrower shall suffer a
final judgment for the payment of money in excess of $50,000 and not
otherwise covered by insurance satisfactory to Bank in its discretion,
and such Borrower shall not discharge the same within a period of
thirty (30) days unless, pending further proceedings, execution has not
been commenced, or, if commenced, has been effectively stayed. Any
order, judgment or decree shall be entered in any proceeding against
either Borrower decreeing the dissolution or split up of such Borrower
and such order shall remain undischarged or unstayed for a period in
excess of thirty (30) days.
9.9 ERISA. Any of the following events shall occur or exist
with respect to either Borrower and any Commonly Controlled Entity
under ERISA and the regulations promulgated thereunder:
(a) any Reportable Event shall occur;
(b) complete or partial withdrawal from any
Multiemployer Plan shall take place;
LOAN AGREEMENT - Page 15
16
(c) any Prohibited Transaction shall occur;
(d) a notice of intent to terminate a Plan shall be
filed, or a Plan shall be terminated; or
(e) circumstances shall exist which constitute
grounds entitling the PBGC to institute proceedings to
terminate a Plan, or the PBGC shall institute such
proceedings;
and in each case above, such event or condition, together with all
other events or conditions, if any, could subject either Borrower to
any tax, penalty or other liability which in the aggregate may exceed
$50,000.
10.0 REMEDIES. Upon the occurrence of an Event of Default described in
Section 9.8 hereof, the entire principal of and accrued interest on the Note
shall forthwith be due and payable without demand, presentment for payment,
notice of nonpayment, protest, notice of protest, notice of intent to
accelerate, notice of acceleration and all other notices and further actions of
any kind, all of which are hereby expressly waived by Borrowers. In the event
that any other Event of Default occurs and is continuing, Bank may, without
demand or notice of its election terminate its obligation to make further Loans
hereunder and/or declare the entire unpaid balance of the Note and all other
indebtedness of Borrowers to Bank, or any part thereof, immediately due and
payable, whereupon the principal of and accrued interest on such Note and other
indebtedness shall be forthwith due and payable without demand, presentment for
payment, notice of nonpayment, protest, notice of protest, notice of intent to
accelerate, notice of acceleration and all other notices and further actions of
any kind, all of which are hereby expressly waived by Borrowers. Upon the
occurrence and during the continuance of any Event of Default, Bank may (a)
exercise any and all rights under or pursuant to any of the Loan Documents, and
(b) exercise any and all rights afforded to Bank by the laws of the State of
Texas or any other applicable jurisdiction or in equity or otherwise, as Bank
may deem appropriate.
11.0 NOTICES. All notices, requests or demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to the other party at the addresses set
forth on the first page of this Agreement or to such other address as any party
may designate by written notice to the other party. Each such notice, request
and demand shall be deemed given or made (a) if sent by hand delivery or private
carrier, upon delivery; and (b) if sent by mail, upon the earlier of the date of
receipt or five (5) days after deposit in the U.S. Mail, first class postage
prepaid.
12.0 COSTS, EXPENSES, ATTORNEYS' FEES, AND INDEMNITY. Borrowers shall
pay to Bank immediately upon demand the full amount of all costs and expenses,
including reasonable attorneys' fees, incurred by Bank in connection with (a)
negotiation and preparation of this Agreement and each of the Loan Documents,
and (b) any modifications of or consents or waivers under or amendments to or
interpretations of or the enforcement of this Agreement, the Note, the other
Loan Documents and the agreements described therein, and the collection of the
Obligations. Borrowers further agree to indemnify Bank from and hold it harmless
against any and all losses, liabilities, claims, damages or expenses which Bank
suffers or incurs as a result of its entering into this Agreement, or the
consummation of the transactions contemplated by this Agreement and the Loan
Documents, or the use or contemplated use of the proceeds of the Loan,
including, without limitation, the fees and disbursements of counsel incurred in
connection with any litigation, arbitration or other proceeding arising out of
or by reason of any of the after said; provided that no Borrower shall be
obligated under this Section to indemnify Bank for that portion, if any, of such
losses, liabilities, claims, damages or
LOAN AGREEMENT - Page 16
17
expenses which are caused by Bank's own negligence. Borrowers shall defend any
claim for which Bank is entitled to seek indemnity pursuant to the preceding
sentence, and Bank shall cooperate with the defense. Bank may have separate
counsel, and Borrowers will pay the expenses and reasonable fees of such
separate counsel if either counsel for Borrowers or counsel for Bank shall
advise Bank that the interests of both Borrowers and Bank with respect to such
claim are or with reasonable certainty will become adverse.
13.0 MISCELLANEOUS. Borrowers and Bank further covenant and agree as
follows, without limiting any requirement of any other Loan Document:
13.1 CUMULATIVE RIGHTS AND NO WAIVER. Each and every right granted to
Bank under any Loan Document, or allowed it by law or equity shall be cumulative
of each other and may be exercised in addition to any and all other rights of
Bank, and no delay in exercising any right shall operate as a waiver thereof,
nor shall any single or partial exercise by Bank of any right preclude any other
or future exercise thereof or the exercise of any other right. Borrowers
expressly waive any presentment, demand, protest or other notice of any kind,
including but not limited to notice of intent to accelerate and notice of
acceleration. No notice to or demand on Borrowers in any case shall, of itself,
entitle Borrowers to any other or future notice or demand in similar or other
circumstances.
13.2 CHOICE OF LAW AND VENUE. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS (BUT NOT THE RULES GOVERNING CONFLICTS
OF LAWS) OF THE STATE OF TEXAS AND SHALL BE PERFORMABLE IN DALLAS COUNTY, TEXAS.
13.3 AMENDMENT. No modification, consent, amendment or waiver of any
provision of this Agreement, nor consent to any departure by Borrowers
therefrom, shall be effective unless the same shall be in writing and signed by
an officer of Bank, and then shall be effective only in the specified instance
and for the purpose for which given. This Agreement is binding upon Borrowers,
their successors and assigns, and inures to the benefit of Bank, its successors
and assigns; however, no assignment or other transfer of Borrowers' rights or
obligations hereunder shall be made or be effective without Bank's prior written
consent, nor shall it relieve Borrowers of any obligations hereunder. There is
no third party beneficiary of this Agreement.
13.4 DOCUMENTS. All documents, certificates and other items required
under this Agreement to be executed and/or delivered to Bank shall be in form
and content satisfactory to Bank and its counsel.
13.5 PARTIAL INVALIDITY. The unenforceability or invalidity of any
provision of this Agreement shall not affect the enforceability or validity of
any other provision herein and the invalidity or unenforceability of any
provision of any Loan Document to any person or circumstance shall not affect
the enforceability or validity of such provision as it may apply to other
persons or circumstances.
13.6 SURVIVABILITY. All covenants, agreements, representations and
warranties made herein or in the other Loan Documents shall survive the making
of the Loan and shall continue in full force and effect so long as the
Obligations are outstanding or the obligation of Bank to make any advances
hereunder shall not have expired.
13.7 JOINT AND SEVERAL LIABILITY. The obligations of Borrowers
hereunder and under all of the other Loan Documents are joint and several in all
respects.
LOAN AGREEMENT - Page 17
18
14.0 AGREEMENT CONTROLLING. In the event of a conflict between the
terms and provisions of this Agreement and the terms and provisions of any of
the other Loan Documents, the terms and provisions of this Agreement shall
control.
15.0 NOTICE OF FINAL AGREEMENT. THIS WRITTEN AGREEMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
TOREADOR ROYALTY CORPORATION
By: /S/ EDWARD C. MARHANKA
------------------------------------
Edward C. Marhanka
Vice President
TOREADOR EXPLORATION &
PRODUCTION INC.
By: /S/ EDWARD C. MARHANKA
------------------------------------
Edward C. Marhanka
Vice President
COMPASS BANK
By: /S/ TERRY O. McCARTER
------------------------------------
Terry O. McCarter
Senior Vice President
LOAN AGREEMENT - Page 18
19
LIST OF EXHIBITS
A .......................... Borrowing Request .................Section 2.1
B ........................Compliance Certificate ...............Section 6.1
C .................................Note ........................Section 2.3
D .........................Oil and Gas Mortgage ................Section 2.6(a)
E .........................Property Certificate ................Section 2.6(b)
F ...................Affidavit of Payment of Trade Bills .......Section 2.6(b)
20
EXHIBIT C
REVOLVING NOTE
$10,000,000 DALLAS, TEXAS NOVEMBER 13, 1997
FOR VALUE RECEIVED, TOREADOR ROYALTY CORPORATION, a Delaware
corporation having its principal place of business at 530 Preston Commons West,
8117 Preston Road, Dallas, Texas 75225, and TOREADOR EXPLORATION & PRODUCTION
INC., a Texas corporation having its principal place of business at 530 Preston
Commons West, 8117 Preston Road, Dallas, Texas 75225, collectively referred to
herein as the "Borrowers," promise to pay to the order of COMPASS BANK, a state
banking association and referred to herein as the "Lender," the principal sum of
Ten Million Dollars ($10,000,000) or, if less, all such sums as may have been
advanced and be outstanding hereunder, together with interest on the unpaid
principal balance as set forth below. All sums hereunder are payable to the
Lender at its principal office in Dallas, Dallas County, Texas.
1. DEFINITIONS. Unless the context hereof otherwise requires or
provides, the terms used herein defined in that certain Loan Agreement among the
Borrowers and the Lender of even date herewith, as the same has been or may be
amended or supplemented from time to time (the "Agreement") have the same
meanings. In addition, "MAXIMUM RATE" means the higher of the maximum interest
rate allowed by applicable United States or Texas law as amended from time to
time and in effect on the date for which a determination of interest accrued
hereunder is made. The determination of the maximum rate permitted by applicable
Texas law shall be made pursuant to the indicated rate ceiling as defined in
Tex.Rev.Civ.Stat.Ann. art. 5069-1D.003, but the Lender reserves the right to
implement from time to time any other rate ceiling permitted by such law.
2. INTEREST RATE.
(a) The unpaid principal balance from time to time outstanding from the
date hereof until maturity (whether by acceleration or otherwise) shall bear
interest as is provided in the Agreement.
(b) Interest shall be calculated at a daily rate equal to 1/365th
(1/366th in leap year) of the rate per annum specified therein, and shall be
charged and collected on the actual number of days elapsed. The rate of interest
on this Note shall change automatically, without notice to the Borrowers, as of
the opening of business on the effective date of each and every change of the
CBIR Rate charged by the Lender.
(c) If at any time the rate of interest which this Note would bear if
the rate of interest were determined in accordance with Section 2(a) hereof
otherwise would exceed the Maximum Rate, then the rate of interest which this
Note bears shall be limited to the Maximum Rate; provided any subsequent
reductions in the interest rate determined in accordance with Section 2(a)
hereof shall not reduce the rate of interest which this Note bears below the
Maximum Rate (or if there is then no such Maximum Rate, then below the sum of
the CBIR Rate plus 5%) until the total amount of the interest
21
paid and accrued on this Note equals the amount of interest which would have
been paid or accrued if the interest rate determined in accordance with Section
2(a) hereof had at all times been in effect.
(d) All past-due payments of principal and interest under this Note
shall bear interest at the Maximum Rate (or if there is no such Maximum Rate,
then at the CBIR Rate plus 5%) from maturity until paid.
3. PAYMENT OF INTEREST AND PRINCIPAL.
(a) Interest hereunder shall be payable quarterly as it accrues on the
first day of each calendar quarter commencing on January 1, 1998, and at
maturity (whether by acceleration or otherwise) and after maturity on demand.
(b) The outstanding principal hereof, plus accrued but unpaid interest
to the date of payment, shall be due and payable on October 1, 2000.
(c) The principal and interest due hereunder shall be evidenced by the
Lender's records which, absent manifest error, shall be conclusive evidence of
the computation of principal and interest balances owed by the Borrowers to the
Lender.
4. DEFAULT. Upon the occurrence of an Event of Default described in
Section 9.8 of the Agreement, the entire principal of and accrued interest on
this Note shall forthwith be due and payable without demand, presentment for
payment, notice of nonpayment, protest, notice of protest, notice of intent to
accelerate, notice of acceleration and all other notices and further actions of
any kind, all of which are hereby expressly waived by the Borrowers. Should any
other Event of Default occur and be continuing, the holder of this Note may,
without demand or notice of its election declare the entire unpaid balance of
this Note, or any part thereof, immediately due and payable, whereupon the
principal of and accrued interest on such Note shall be forthwith due and
payable without demand, presentment for payment, notice of nonpayment, protest,
notice of protest, notice of intent to accelerate, notice of acceleration and
all other notices and further actions of any kind, all of which are hereby
expressly waived by the Borrowers.
5. WAIVER. Each surety, endorser, guarantor and any other party now or
hereafter liable for the payment of this Note in whole or in part ("Surety") and
the Borrowers hereby severally (a) waive grace, demand, presentment for payment,
notice of nonpayment, protest, notice of protest, non-payment or dishonor,
notice of intent to accelerate, notice of acceleration and all other notices
(except as provided in the Agreement), filing of suit and diligence in
collecting this Note or enforcing any other security with respect to same, (b)
agree to any substitution, surrender, subordination, waiver, modification,
change, exchange or release of any security or of the liability of any parties
primarily or secondarily liable hereon, (c) agree that the Lender is not
required first to institute suit or exhaust its remedies hereon against the
Borrowers, any Surety or others liable or to become liable hereon or to enforce
its rights against them or any security with respect to same, and (d) consent to
any extension or postponement of time of payment of this Note and to any other
indulgence with respect hereto without notice thereof to any of them. No failure
or delay on the part of the Lender in exercising any right, power or privilege
hereunder shall operate as a waiver thereof.
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6. ATTORNEYS' FEES. If this Note is not paid at maturity, regardless of
how such maturity may be brought about, or is collected or attempted to be
collected through the initiation or prosecution of any suit or through any
probate, bankruptcy or any other judicial proceedings, or is placed in the hands
of an attorney for collection, the Borrowers shall pay, in addition to all other
amounts owing hereunder, all actual expenses of collection, all court costs and
reasonable attorney's fees incurred by the holder hereof.
7. LIMITATION ON AGREEMENTS. All agreements between the Borrowers and
the Lender, whether now existing or hereafter arising, are hereby limited so
that in no event shall the amount paid, or agreed to be paid to or charged or
demanded by the Lender for the use, forbearance, or detention of money or for
the payment or performance of any covenant or obligation contained herein or in
any other document evidencing, securing or pertaining to this Note, exceed the
Maximum Rate. If any circumstance otherwise would cause the amount paid, charged
or demanded to exceed the Maximum Rate, the amount paid or agreed to be paid to
or charged or demanded by the Lender shall be reduced to the Maximum Rate, and
if the Lender ever receives interest which otherwise would exceed the Maximum
Rate, such amount which would be excessive interest shall be applied to the
reduction of the principal of this Note and not to the payment of interest, or
if such excessive interest otherwise would exceed the unpaid balance of
principal of this Note such excess shall be applied first to other indebtedness
of the Borrowers to the Lender, and the balance, if any, shall be refunded to
the Borrowers. In determining whether the interest paid, agreed to be paid,
charged or demanded hereunder exceeds the highest amount permitted by applicable
law, all sums paid or agreed to be paid to or charged or demanded by the Lender
for the use, forbearance or detention of the indebtedness of the Borrowers to
the Lender shall, to the extent permitted by applicable law, (i) be amortized,
prorated, allocated and spread throughout the full term of such indebtedness
until payment in full so that the actual rate of interest on account of such
indebtedness is uniform throughout such term, (ii) be characterized as a fee,
expense or other charge other than interest, and (iii) exclude any voluntary
prepayments and the effects thereof. The terms and provisions of this paragraph
shall control and supersede every other provision of all agreements between the
Lender and the Borrowers in conflict herewith.
8. GOVERNING LAW AND VENUE. This Note and the rights and obligations of
the parties hereunder shall be governed by the laws of the United States of
America and by the laws of the State of Texas, and is performable in Dallas
County, Texas. Chapter 15 of the Texas Credit Code (Tex.Rev.Civ.Stat.Ann. art.
5069-15.01 et seq., now known as Chapter 346 of the Texas Finance Code) does not
apply to this Note.
9. BUSINESS DAY. If any action is required or permitted to be taken
hereunder on a Sunday, legal holiday or other day on which banking institutions
in the State of Texas are authorized or required to close, such action shall be
taken on the next succeeding day which is a business day, and, to the extent
applicable, interest on the unpaid principal balance shall continue to accrue at
the applicable rate.
10. AGREEMENT. This Note is the Note referred to in the Agreement, and
is entitled to the benefits thereof and the security as provided for therein.
Reference is made to the Agreement and the Loan Documents for a statement of the
rights and obligations of the Borrowers, a description of
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the nature and extent of the security and the rights of the parties in respect
to such security, and a statement of the terms and conditions under which the
due date of this Note may be accelerated.
11. JOINT AND SEVERAL LIABILITY. The obligations of the Borrowers under
this Note are joint and several in all respects.
TOREADOR ROYALTY CORPORATION
By: /s/ EDWARD C. MARHANKA
-----------------------------------
Edward C. Marhanka
Vice President
TOREADOR EXPLORATION & PRODUCTION
INC.
By: /s/ EDWARD C. MARHANKA
-----------------------------------
Edward C. Marhanka
Vice President
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