U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the fiscal year ended December 31, 2000.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
Commission File Number: 0-9435
Colorado 84-0811034 -------- ---------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1703 Edelweiss Drive Cedar Park, Texas 78613 ----------------- ----- (Address of Principal Executive Offices) (Zip Code) (512) 250-8692 -------------- (Issuer's Telephone Number, Including Area Code) |
Securities registered under Section 12(b) of the Exchange Act:
(None)
Securities registered under Section 12(g) of the Exchange Act:
Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ X ]
The issuer's revenues for its most recent fiscal year were $1,638,127.
As of December 31, 2000, 7,040,325 shares of the Registrant's common stock par value $.01 per share, were outstanding. The aggregate market value of the voting stock held by non-affiliates of the Registrant at March 30, 2001, was $7,534,824.
Documents Incorporated by Reference: The Registrant hereby incoporates herein by reference the following documents.
Item 13. Exhibits
PART I
General
FieldPoint Petroleum Corporation, a Colorado corporation (the "Company"), was formed on March 11, 1980, to acquire and enhance mature oil and natural gas field production in the mid-continent and the Rocky Mountain regions. Since 1980, The Company had engaged in oil and gas operations and, in 1986, divested all oil and gas assets and operations. From December 1986, until its reverse acquisition on December 31, 1997, The Company had not engaged in oil and gas operations.
Reverse Acquisition - On December 22,1997, The Company entered into an Agreement with Bass Petroleum, Inc., a Texas corporation ("BPI"), pursuant to which, on December 31, 1997, the Company acquired from the shareholders of BPI an aggregate of 8,655,625 shares of capital stock of BPI, in exchange for the issuance of 4,000,000 unregistered shares of the Company's common stock. The transaction was treated, for accounting purposes, as an acquisition of FieldPoint Petroleum Corporation by Bass Petroleum, Inc. On December 31,1997, the Company changed its name from Energy Production Company to FieldPoint Petroleum Corporation.
On January 11, 1999, the Company entered into an agreement with W.B.McKee Securities to act as placement agent in the selling of up to a maximum of 1,466,667 Units each consisting of one share of the Company's Common Stock and one common stock warrant, with its exercise price of $1.25, (the "Warrants"),on a "best efforts all or none" basis with respect to the first 533,333 Units (the "Minimum Offering"), and a "best efforts" basis with respect to the remaining 933,334 Units (the "Maximum Offering") at a purchase price of $.75 per Unit. Proceeds from the offering were used to fund the acquisition of certain oil and gas properties from Pontotoc Production, Inc. and for working capital.
Forward-Looking Statements
Certain statements contained in this document, including without limitation statements containing the words "believes," "anticipates," "intends," "expects," and words of similar import, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the company to materially differ from any future results, performance or achievements expressed or implied by such forward-looking statements.
Business Strategy
The Company's business strategy is to continue to expand its reserve base and increase production and cash flow through the acquisition of producing oil and gas properties. Such acquisitions will be based on an analysis of the properties' current cash flow and the Company's ability to profit from the acquisition. The Company's ideal acquisition will include not only oil and gas production, but also leasehold and other working interest in exploration areas.
The Company will also seek to identify promising areas for the exploration of oil and gas through the use of outside consultants and the expertise of the Company. This identification will include collecting and analyzing geological and geophysical data for exploration areas. Once promising properties are identified, the Company will attempt to acquire the properties either for drilling oil and natural gas wells, using independent contractors for drilling operations, or for sale to third parties.
The Company recognizes that the ability to implement its business strategies is largely dependent on the ability to raise additional debt or equity capital to fund future acquisition, exploration, drilling and development activities. The Company's capital resources are discussed more thoroughly in Part II, Item 6, in Management's Discussion and Analysis.
Operations
As of December 31, 2000, the Company had varying ownership interest in 338 gross productive wells (89.77 net) located in 3 states. The Company operates 59 of the 338 wells; the other wells are operated by independent operators under contracts that are standard in the industry. It is a primary objective of the Company to operate most of the oil and gas properties in which it has an economic interest. The Company believes, with the responsibility and authority as operator, it is in better position to control cost, safety, and timeliness of work as well as other critical factors affecting the economics of a well.
Market for Oil and Gas
The demand for oil and gas is dependent upon a number of factors, including the availability of other domestic production, crude oil imports, the proximity and size of oil and gas pipelines in general, other transportation facilities, the marketing of competitive fuels, and general fluctuations in the supply and demand for oil and gas. The Company intends to sell all of its production to traditional industry purchasers, such as pipeline and crude oil companies, who have facilities to transport the oil and gas from the wellsite.
Competition
The oil and gas industry is highly competitive in all aspects. The Company will be competing with major oil companies, numerous independent oil and gas producers, individual proprietors, and investment programs. Many of these competitors possess financial and personnel resources substantially in excess of those which are available to the Company and may, therefore, be able to pay greater amounts for desirable leases and define, evaluate, bid for and purchase a greater number of potential producing prospects that the Company's own resources permit. The Company's ability to generate resources will depend not only on its ability to develop existing properties but also on its ability to identify and acquire proven and unproven acreage and prospects for further exploration.
Environmental Matters and Government Regulations
The Company's operations are subject to numerous federal, state and local laws and regulations controlling the discharge of materials into the environment or otherwise relating to the protection of the environment. Such matters have not had a material effect on operations of the Company to date, but the Company cannot predict whether such matters will have any material effect on its capital expenditures, earnings or competitive position in the future.
The production and sale of crude oil and natural gas are currently subject to extensive regulations of both federal and state authorities. At the federal level, there are price regulations, windfall profits tax, and income tax laws. At the state level, there are severance taxes, proration of production, spacing of wells, prevention and clean-up of pollution and permits to drill and produce oil and gas. Although compliance with their laws and regulations has not had a material adverse effect on the Company's operations, the Company cannot predict whether its future operations will be adversely effected thereby.
Operational Hazards and Insurance
The Company's operations are subject to the usual hazards incident to the drilling and production of oil and gas, such as blowouts, cratering, explosions, uncontrollable flows of oil, gas or well fluids, fires, pollution, releases of toxic gas and other environmental hazards and risks. These hazards can cause personal injury and loss of life, severe damage to and destruction of property and equipment, pollution or environmental damage and suspension of operations.
The Company maintains insurance of various types to cover its operations. The Company's insurance does not cover every potential risk associated with the drilling and production of oil and gas. In particular, coverage is not obtainable for certain types of environmental hazards. The occurrence of a significant adverse event, the risks of which are not fully covered by insurance, could have a material adverse effect on the Company's financial condition and results of operations. Moreover, no assurance can be given that the Company will be able to maintain adequate insurance in the future at rates it considers reasonable.
Administration
Office Facilities- The office space for the Company's executive offices at 1703 Edelweiss Drive, Cedar Park, Texas 78613, is currently provided by the majority shareholder at a cost of $1000 per month as of December 31, 2000.
Employees- As of March 30, 2001, the Company had 4 employees, the Company considers its relationship with its employees satisfactory.
Principal Oil and Gas Interest
Chickasha Field, Grady County Oklahoma is a waterflood project producing from the Medrano Sand. The Rush Springs Medrano Unit is located approximately sixty five miles southwest of Oklahoma City, Oklahoma. The Company has a 20.64% working interest in the unit which consist of 21 producing oil and gas wells and 11 water injection wells.
Hutt Wilcox Field, McMullen and Atascosa County Texas is an oil and gas field located approximately 60 miles south of San Antonio, Texas producing from the Wilcox sand. The Company has a working interest in 14 oil wells.
West Allen Field, Pontotoc County Oklahoma is a producing oil and gas field located approximately 100 miles south of Oklahoma City, Oklahoma. The Company has a working interest in 52 leases or a total of 225 wells, the leases have multiple wellbores which the Company has plans to participate in the recompletion of behind pipe zones.
Giddings Field, Fayette County Texas is in the prolific Austin Chalk field located in various counties surrounding the city of Giddings, Texas. In February 1998, the company acquired a 97% working interest in the Shade lease. The lease currently has 3 producing oil and gas wells with a daily production rate of approximately 120 Mcfe net to the Company. Oil and Gas are produced from the Austin chalk formation; the Company will evaluate whether additional reserves can be developed by use of horizontal well technology.
Big Muddy Field, Converse County Wyoming is a producing oilfield located approximately thirty miles south of Casper, Wyoming. FieldPoint Petroleum owns a 100% working interest in the Elkhorn and J.C. Kinney lease which consists of 3 oil wells producing out of the Wallcreek and Dakota formations at depth ranging in general from approximately 3,200 feet to approximately 4,000 feet.
Serbin Field, Lee and Bastrop Counties Texas is an oil and gas field located approximately 50 miles east of Austin and 100 miles west of Houston. The Company has a working interest in 72 producing oil and gas wells with a production rate for 2000 of approximately 60 barrels of oil equivalent ("BOE") net to the Company. Oil and gas are produced from the Taylor Sand at depths ranging from approximately 5,300 feet to approximately 5,600 feet; it is a 46-gravity oil sand.
Production
The table below sets forth oil and gas production from the Company's net interest in producing properties for each of its last two fiscal years.
Oil and Gas Production ---------------------- 2000 1999 Quantities ---- ---- Oil (Bbls) 37,769 33,120 Gas (Mcf) 143,172 114,278 Average Sales Price Oil ($/Bbl) $28.06 $17.75 Gas ($/Mcf) $3.14 $1.74 Average Production Cost ($/BOE) $8.88 $6.00 |
The Company's oil and gas production is sold on the spot market and the Company does not have any production that is subject to firm commitment contracts. During the year ended December 31, 2000, purchases by each of five customers, Dorado Oil Company, Conoco, Plains Petroleum,GPM Gas Corporation, and Pontotoc Production, Inc. represented more than 10% of the total Company revenues. Neither of these five customers, or any other customers of the Company, has a firm sales agreement with the Company. The Company believes that it would be able to locate alternate customers in the event of the loss of one or all of these customers.
Productive Wells
The table below sets forth certain information regarding the Company's ownership, as of December 31, 2000, of productive wells in the areas indicated.
Productive Wells Oil Gas State Gross1 Net2 Gross1 Net2 ----- ------- ------- ------- ------- Oklahoma 209 47.23 37 4.59 Texas 82 31.15 7 3.8 Wyoming 3 3 - - --------- ------- ------- ------- ------- Total 294 81.38 44 8.39 |
Drilling Activity
The Company participated in drilling one well in Oklahoma in 2000, and drilled one well in 1999.
2 A net well or acre is deemed to exist when the sum of fractional ownership working interests in gross wells or acres equals one. The number of net wells or acres is the sum of the fractional working interests owned in gross wells or acres expressed as whole numbers and fractions thereof.
Reserves
Please refer to unaudited Note 12 in the accompanying audited financial statements for a summary of the Company's reserves at December 31, 2000 and 1999.
Acreage
The following tables set forth the gross and net acres of developed and undeveloped oil and gas leases in which the Company had working interest and royalty interest as of December 31, 2000. The category of "Undeveloped Acreage" in the table includes leasehold interest that already may have been classified as containing proved undeveloped reserves.
Developed1 Undeveloped2 State Gross3 Net4 Gross3 Net4 ----- ----- ----- ----- ----- Oklahoma 8906 1175 200 19 Texas 2120 547 1360 1000 Wyoming 200 200 2000 2000 ----------- ----- ----- ----- ----- Total 11226 1922 1960 1419 |
None.
None.
PART II
The Company's Common Stock is traded in the over-the-counter market and listed on the Bulletin Board under the symbol "FPPC." Prior to January 1998 the Company's symbol was "ENEU." Also prior to January 1998, the Company's Common Stock experienced only limited trading and its prices were quoted irregularly in the National Quotation Bureau's "Pink Sheets." Information regarding bid prices and closing bids has been obtained from the National Quotation Bureau. The following quotations, where quotes were available, reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions.
FISCAL 1999 CLOSING BID ----------- ----------- HIGH LOW ---- --- First Quarter 1.6250 1.0000 Second Quarter 1.6250 1.1250 Third Quarter 1.7500 1.0312 Fourth Quarter 1.8125 .7500 FISCAL 2000 ----------- HIGH LOW ---- --- First Quarter 2.0625 .6875 Second Quarter 2.0000 1.1250 Third Quarter 2.8400 1.5000 Fourth Quarter 1.8125 1.0000 |
At March 30, 2001, the approximate number of shareholders of record was 1,130. The Company has not paid any dividends on its Common Stock and does not expect to do so in the foreseeable future.
Recent Sales of Unregistered Securities
During the fiscal year ended December 2000, and December 1999 the Company issued the following securities without registration under the Securities Act of 1933, as amended.
On January 11, 1999, the Company entered into an agreement with W.B McKee Securities to act as placement agent in selling up to a maximum of 1,466,667 Units at a price of $0.75 per Unit, each Unit consisting of one share of the Company's Common Stock and one common stock warrant, with its exercise price of $1.25 (the "Warrant") the offering was fully subscribed and closed on September 30, 1999. The Company also issued a total of eighty thousand shares of restricted stock to two consultants in October 1999.
During the year ended December 31, 2000 the Company issued 433,400 shares of Common Stock upon the exercise of warrants associated the W.B. McKee Securities Unit offering.
As to the issuance of securities identified above, the Company relied upon
Section 4(2) of the Securities Act in claiming exemption from the registered
requirement of the Securities Act. All the persons to whom the securities were
issued had full information concerning the business and affairs of the Company
and acquired the shares for investment purposes. Certificates representing the
securities issued bear a restrictive legend prohibiting transfer of the
securities except in compliance with applicable securities laws.
The following discussion should be read in conjunction with the Company's Financial Statements, and respective notes thereto, included elsewhere herein. The information below should not be construed to imply that the results discussed herein will necessarily continue into the future or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of the management of FieldPoint Petroleum Corporation.
Overview
FieldPoint Petroleum Corporation derives its revenues from its operating activities including sales of oil and gas and operating oil and gas properties. The Company's capital for investment in producing oil and gas properties has been provided by cash flow from operating activities and from bank financing. The Company categorizes its operating expenses into the categories of production expenses and other expenses.
Results of Operation
Revenues increased 78% or $720,317 to $1,638,127 for the year ended December 31, 2000, from the comparable 1999 period. Oil production volumes increased by 14% at the same time the average price per barrel increased 58% during 2000 to $28.06 from the comparable 1999 period average price of $17.75 per barrel. Also in 2000, the gas production volume increased by 25% while the average price per Mcf was $3.14, a 80% increase from the 1999 comparable period. The increase in production volumes were primarily due to the development of oil and gas wells in Oklahoma and Texas in 2000.
Year Ended December 31, 2000 1999 ------- ------- Oil Production 37,769 33,120 Average Sales Price Per Bbl ($/Bbl) $28.06 $17.75 Gas Production 143,172 114,278 Average Sales Price Per Mcf ($/Mcf) $3.14 $1.74 |
Production expenses increased 74% or $234,011 to $547,446 for the year ended December 31, 2000, from the comparable 1999 period. The increase was due to cost associated with additional 2000 production, with increases in workover expense and remedial repairs incurred in 2000 as compared to 1999. Depletion and depreciation expense increased 17% or $25,685 to $177,851 for the year ended December 31, 2000 from the comparable 1999 period. The increase in depletion and depreciation was due to increases in oil and gas property cost offset by an increase in oil and gas reserves. General and administrative overhead cost remained relatively stable and increased 2% or $8,927 to $318,639 for the 2000 period verses the comparable 1999 period.
Net other expenses for the year ended December 31, 2000, was $63,454 compared to net other expenses of $64,264 for 1999. This increase was primarily due to lower interest expense offset by, a decrease in miscellaneous income.
The Company's net income increased by $335,816 to income of $401,281 for the year ended December 31, 2000, from the comparable 1999 period. The increase in net income was primarily due to higher prices received for oil and gas sales and increases in production.
Liquidity and Capital Resources
Cash flow from operating activities was $722,793 for the year ended December 31, 2000, compared to $218,650 for the year ended December 31, 1999. The increase in cash flow from operating activities was primarily due to the increase in net income for the year ended December 31, 2000.
Cash flow used by investing activities was $1,393,886 in the period ended December 31, 2000, compared to $1,282,264 for December 31, 1999. This is primarily due to increased purchases of oil and gas properties in 2000. Cash flow from financing activities was $1,203,373 for the period ended December 31, 2000, compared to $1,179,498 for the same period in 1999. This was due to increases in long-term debt and proceeds from exercises of common stock options and warrants.
Capital Requirements
Management believes the Company will be able to meet its current operating needs through internally generated cash from operations. Management believes that oil and gas property investing activities in 2001 can be financed through cash on hand, cash from operating activities, and bank borrowing. The Company anticipates continued investments in proven oil and gas properties in 2001. If bank credit is not available, the Company may not be able to continue to invest in strategic oil and gas properties. The Company cannot predict how oil and gas prices will fluctuate during 2001 and what effect they will ultimately have on the Company, but Management believes that the Company will be able to generate sufficient cash from operations to service its bank debt and provide for maintaining current production of its oil and gas properties. The Company had no significant commitments for capital expenditures at December 31, 2000. The timing of most capital expenditures for new operations is relatively discretionary. Therefore, the Company can plan expenditures to coincide with available funds in order to minimize business risks.
The information required is included in this report as set forth in the "Index
to Financial Statements." Index to Financial Statements ----------------------------- Independent Auditor's Report F-1 Consolidated Balance Sheets F-2 Consolidated Statements of Operations F-3 Consolidated Statements of Stockholders' Equity F-4 Consolidated Statements of Cash Flows F-5 Notes to Consolidated Financial Statements F-6 - F-13 Supplemental Oil and Gas Information (Unaudited) F-13 - F-15 |
None.
PART III
(a) Identification of Directors and Executive Officers. The following table sets forth the names and ages of the Directors and Executive Officers of the Company, all positions and offices with the Company held by such person, and the time during which each such person has served:
Name Age Position with Company Period Served ----- --- --------------------- ------------- Ray D. Reaves 39 Director, President, Chairman, May 1997-present Chief Executive Officer Roger D. Bryant 58 Director July 1997-present Robert A. Manogue 76 Director July 1997-present Donald H. Stevens 47 Director September 1999-present |
Mr. Reaves, age 39, has been Chairman, Director, President, Chief Executive Officer and Chief Financial Officer of the Company since May 22, 1997. Mr. Reaves has also served as Chairman, Chief Executive Officer, Chief Financial Officer and Director of Bass Petroleum, Inc. from October 1989 to the present and as President of Field Point Inc., a private investment firm from October 1995.
Mr. Reaves will serve until the next meeting of the shareholders or until his successor(s) have been duly elected and qualified.
Roger D. Bryant, age 58, has been a Director of the Company since July 1997. From November 1994 to present, Bryant has been President of Dial-thru International. From May 1993 to October 1994, Bryant was President of Network Data Corporation. From January 1993 to May 1993, he served as Senior Vice President, Corporate Development, of Network Data Corporation. From January 1993 to May 1993, he served as Senior Vice President, Corporate Development, of Network Data Corporation. From May 1991 to July 1992, he served as President of Dresser Industries, Inc., Wayne Division, a leading international manufacturer of fuel dispensing equipment. Additionally, from August 1989 to May 1991, Bryant was President of Schlumberger Limited, Retail Petroleum Systems Division, U.S.A., a division of Schlumberger Corporation.
Robert A. Manogue, age 76, has been a Director of the Company since July 1997. Since 1982, Manogue has been retired and has been involved in house construction in Albuquerque, New Mexico under R.A. Manogue Construction. From 1976 to 1982, Manogue was President of C.P. Clare International N.V. in Brussels, Belgium, a $50 million subsidiary of General Instruments Corporation. He also served as Vice President of Marketing for Emerson Electric Company, a manufacturer and marketer of consumer and industrial products, from 1971 to 1976.
Donald H. Stevens, age 47, has been a Director of the Company since September 1999. Since August 1997 to present he has been Vice President and Treasurer of Forest Oil Corp. He served as Vice President of Corporate Relations for Barrett Resources Corp. from August 1992 until August 1997. He also served as Manager of Corporate and Tax planning for Kennecott Corp. from July 1989 until August 1992.
(b) Identification of Significant Employees. The Company does not employ any
persons, other than its President, who make or are expected to make any
significant contributions to the business of the Company.
(c) Family Relationships. There is no family relationship between any present
director, executive officer or person nominated or chosen by the Company to
become a director or executive officer.
(d) Involvement in Certain Legal Proceedings. No present director or executive
officer of the Company has been the subject of any civil or criminal
proceeding during the past five years which is material to an evaluation of
his integrity or ability to serve as an officer or director, nor is any
such person the subject of any order, judgment or decree of any federal or
state authority which is material to an evaluation of his abilities or
integrity.
a. Meetings of the Board of Directors
During the fiscal year ended December 31, 2000. Two meetings of the Board of Directors were held, including regularly scheduled and special meetings, each of which were attended by all of the Directors. Outside Directors receive $500 per meeting and were reimbursed their expenses associated with attendance at such meetings or otherwise incurred in connection with the discharge of their duties as a Director. Directors received a grant of options to purchase 100,000 shares of common stock at the date of their appointment and could receive an additional grant of options to purchase shares of common stock, as long as they continue to serve as directors.
b. Committees
The board appoints committees to help carry out its duties. In particular, board committee work on key issues in greater detail than would be possible at full board meetings. Each committee reviews the result of its meetings with the full board.
During the fiscal year ended December 31, 2000, the Board did not have an Audit Committee, Compensation Committee, Nomination Committee or any other standing committees. However, during the current fiscal year, the Board has established the following committees:
Audit Committee
The audit committee is currently composed of the following directors:
Donald Stevens, Chairman Roger Bryant
The Board of Directors has determined that Messrs. Stevens and Bryant are "independent" within the meaning of the National Association of Securities Dealers, Inc.'s listing standards. For this purpose, an audit committee member is deemed to be independent if he does not possess any vested interests related to those of management and does not have any financial, family or other material personal ties to management.
The audit committee was not formed or organized and did not meet during fiscal 2000. the committee is responsible for accounting and internal control matters. The audit committee:
- reviews with management, the internal auditors and the independent auditors policies and procedures with respect to internal controls;
- reviews significant accounting matters;
- approves any significant changes in accounting principles of financial reporting practices;
- reviews independent auditor services; and
- recommends to the board of directors the firm of independent auditors to audit our consolidated financial statements.
In addition to its regular activities, the committee is available to meet on all of the independent accountants, controller or internal auditor whenever a special situation arises.
The Audit Committee of the Board of Directors has adopted a written charter, which is attached to this Annual Report as Exhibit 10.4.
Compensation Advisory Committee
The compensation advisory committee is currently composed of the following directors:
Roger Bryant Robert Manogue
The compensation advisory committee was not formed or organized and did not meet during fiscal 2000. The compensation advisory committee:
- recommends to the board of directors the compensation and cash bonus opportunities based on the achievement of objectives set by the compensation advisory committee with respect to our chairman of the board and president, our chief executive officer and the other executive officers;
- administers our compensation plans for the same executives;
- determines equity compensation for all employees;
- reviews and approves the cash compensation and bonus objectives for the executive officers; and
- reviews various matters relating to employee compensation and benefits.
Any transactions between the Company and its officers, directors, principal shareholders, or other affiliates have been and will be on terms no less favorable to the Company than could be obtained from unaffiliated third parties on an arms-length basis and will be approved by a majority of the Company's independent, outside disinterested directors.
The following table sets forth in summary form the compensation received during each of the Company's last two completed fiscal years by each of the Company's Chief Executive Officer and President. No employee of the Company received total salary and bonus exceeding $100,000 during the last two fiscal years.
Long-Term Name and Compensation Principal Position Fiscal Year Salary Bonus Options (#) -------------------------------------------------------------------------------- Ray D. Reaves 2000 $90,000 $30,000 400,000 Chief Executive Officer 1999 $90,000 -- and President |
Option Grants Table
The following table sets forth information concerning individual grants of stock options made during the fiscal years ended December 31, 2000 and 1999, to the Company's Officers and Directors.
Name Options Granted (#) Price ($/sh.) Expiration Date -------------------------------------------------------------------------------- Ray D. Reaves 200,000 $2.125 4/01/2004 President and CEO 200,000 $0.69 12/31/2002 Donald H. Stevens 100,000 $1.16 12/31/2002 Director |
Jonathan B. Wilkins(1) 100,000 $2.125 4/01/2004
(1) These options were cancelled upon Mr. Wilkins resignation from the board in February 2001.
The following table sets forth the persons known to the Company to own beneficially more than five percent of the outstanding shares of Common Stock as of December 31, 2000 and information as of December 31, 2000, with respect to the ownership of Common Stock by each director and executive officer of the Company. In all cases, the owners have sole voting and investment powers with respect to the shares.
Name and Address of Amount and Nature Beneficial Owner of Beneficial Owner Percent of Class ---------------- ------------------- ---------------- The Delray Trust 628,428 9.2% 3606 Belle Grove Sugar Land, Texas 77479 |
Ray D. Reaves 3,017,425 1 39.5% 1703 Edelweiss Drive Cedar Park, Texas 78613 Robert A. Manogue 384,277 2 5.7% 1703 Edelweiss Drive Cedar Park, Texas 78613 Roger D. Bryant 50,000 3 1.3% 1703 Edelweiss Drive Cedar Park, Texas 78613 Donald H. Stevens 100,000 4 1.4% 1703 Edelweiss Drive Cedar Park, Texas 78613 All Officers and Directors 3,551,702 48.2% as a Group (4 persons) |
The Company leases office space from its majority shareholder. The lease requires monthly payments of $1,000 on a month to month basis.
At December 31, 2000, the Company had a note receivable from its majority shareholder in the amount of $7,500.
At December 31, 2000, the Company had a note payable to stockholder in the amount of $16,000.
ITEM 13-EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Financial Statements of the Company as set forth under Item 7 of this Report on Form 10-KSB
3.1 Articles of Incorporation (incorporated by reference to Amendment No. 1 to Form S-2 dated August 1, 1980.)
3.2(b) Articles of Amendment of Articles of Incorporation, dated December 31, 1997 (incorporated by reference to the Company's 10KSB for the year ended December 31, 1997.)
3.3 Bylaws (incorporated by reference to Amendment No. 1 to Form S-2 dated August 1, 1980.)
4.1 Plan of Exchange (incorporated by reference to the Company's definitive proxy statement dated December 8, 1997).
4.2 Indenture (Term Loan) dated June 21, 1999 by and among the Company and Union Planters Bank
4.3 Indenture (Term Loan) dated August 18, 1999 by and among the Company and Union Planters Bank
10.1 Consulting Agreement dated May 9, 2000 between FieldPoint Petroleum Corp. and Parrish Brian & Co. (incorporated by reference to the Company's 10QSB/A for the quarter ended September 30, 2000.)
10.2 Executive Employment Agreement, dated March 28, 2001, by and among FieldPoint Petroleum Corp. and Ray D. Reaves (filed herewith)
10.3 Credit Agreement (Revolving Credit Note) dated December 14, 2000 by and among FieldPoint Petroleum Corp. and Union Planters Bank (filed herewith)
10.4 Audit Committee Charter adopted by the Company on March 28, 2001 (filed herewith)
Reports on Form 8-K
A report on Form 8-K filed on December 27, 2000 reporting an event under Item 2. Acquisition or Disposition of Assets and Item 7. Financial Statements and Exhibits.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
By: /s/ Ray Reaves ------------------------------------------------------------------- Ray Reaves, President Date: 04/12/01 ------------ |
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Ray Reaves Date: April 12, 2001 ---------------------- Ray Reaves President, Chief Executive Officer, Director, Chairman, Chief Financial Officer By: /s/ Roger D. Bryant Date: April 12, 2001 ------------------- Roger D. Bryant Director By: /s/ Robert A. Manogue Date: April 12, 2001 --------------------- Robert A. Manogue Director By: /s/ Donald H. Stevens Date: April 12, 2001 --------------------- Donald H. Stevens Director |
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
FieldPoint Petroleum Corporation
Austin, Texas
We have audited the accompanying consolidated balance sheets of FieldPoint Petroleum Corporation as of December 31, 2000 and 1999, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of FieldPoint Petroleum Corporation as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles.
HEIN + ASSOCIATES LLP
Dallas, Texas
February 28, 2001
FIELDPOINT PETROLEUM CORPORATION CONSOLIDATED BALANCE SHEETS ASSETS ------ DECEMBER 31, -------------------------- 2000 1999 ----------- ----------- CURRENT ASSETS: Cash $ 649,539 $ 117,259 Trading securities 2,880 2,880 Accounts receivable: Due from stockholder 7,500 -- Oil and gas sales 180,418 135,067 Joint interest billings, less allowance for doubtful accounts of $43,753 and $40,753, respectively 61,632 84,906 Prepaid expenses 54,535 2,535 ----------- ----------- Total current assets 956,504 342,647 PROPERTY AND EQUIPMENT: Oil and gas properties (successful efforts method): Proved leasehold costs 3,704,362 2,396,998 Lease and well equipment 437,731 351,425 Furniture and equipment 32,496 32,280 Transportation equipment 75,974 75,974 Less accumulated depletion and depreciation (853,275) (675,424) ----------- ----------- Net property and equipment 3,397,288 2,181,253 OTHER ASSETS 197,015 25,981 ----------- ----------- Total assets $ 4,550,807 $ 2,549,881 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Current portion of long-term debt $ 407,143 $ 409,132 Accounts payable and accrued expenses 105,092 112,339 Oil and gas revenues payable 63,862 49,799 ----------- ----------- Total current liabilities 576,097 571,270 LONG-TERM DEBT, net of current portion 1,238,618 559,462 DEFERRED INCOME TAXES 78,000 15,954 COMMITMENT (Note 10) STOCKHOLDERS' EQUITY: Common stock, $.01 par value, 75,000,000 shares authorized; 7,040,325 and 6,331,925 shares issued and outstanding, respectively 70,403 63,319 Additional paid-in capital 2,024,317 1,177,785 Treasury stock, 117,500 shares, at cost (1,175) (1,175) Retained earnings 564,547 163,266 ----------- ----------- Total stockholders' equity 2,658,092 1,403,195 ----------- ----------- Total liabilities and stockholders' equity $ 4,550,807 $ 2,549,881 =========== =========== |
See accompanying notes to these financial statements.
FIELDPOINT PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
2000 1999 ----------- ----------- REVENUE: Oil and gas sales $ 1,509,024 $ 786,361 Well operational and pumping fees 129,103 131,449 ----------- ----------- Total revenue 1,638,127 917,810 COSTS AND EXPENSES: Production expense 547,446 313,435 Depletion and depreciation 177,851 152,166 General and administrative 318,639 309,712 ----------- ----------- Total costs and expenses 1,043,936 775,313 OTHER INCOME (EXPENSE): Interest expense, net (71,464) (83,826) Miscellaneous 8,010 19,562 ----------- ----------- Total other income (expense) (63,454) (64,264) ----------- ----------- INCOME BEFORE INCOME TAXES 530,737 78,233 INCOME TAX PROVISION - deferred (129,456) (12,768) ----------- ----------- NET INCOME $ 401,281 $ 65,465 =========== =========== EARNINGS PER SHARE - Basic and diluted $ .06 $ .01 =========== =========== |
See accompanying notes to these financial statements.
FIELDPOINT PETROLEUM CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE PERIOD FROM JANUARY 1, 1999 TO DECEMBER 31, 2000 Common Stock Treasury Stock Additional ------------------------- ------------------------- Paid-In Retained Shares Amount Shares Amount Capital Earnings ----------- ----------- ----------- ----------- ----------- ----------- BALANCES, January 1, 1999 4,613,259 $ 46,132 210,000 $ (2,100) $ 117,723 $ 97,801 Proceeds from private placement, net of offering costs 1,466,666 14,667 -- -- 916,353 -- Issuance of common stock and treasury stock to private placement consultants 80,000 800 (10,000) 100 (900) -- Issuance of common stock to consultant 35,000 350 -- -- 41,150 -- Issuance of common stock to bridge lender 2,000 20 -- -- 2,180 -- Exercise of options 135,000 1,350 -- -- 44,650 -- Sales of treasury stock -- -- (82,500) 825 56,629 -- Net income for year -- -- -- -- -- 65,465 ----------- ----------- ----------- ----------- ----------- ----------- BALANCES, December 31, 1999 6,331,925 63,319 117,500 (1,175) 1,177,785 163,266 Issuance of common stock to consultant 160,000 1,600 -- -- 258,400 -- Exercise of options 115,000 1,150 -- -- 10,350 -- Income tax benefit from stock options exercised -- -- -- -- 67,410 -- Exercise of warrants, net of commissions 433,400 4,334 -- -- 510,372 -- Net income -- -- -- -- -- 401,281 ----------- ----------- ----------- ----------- ----------- ----------- BALANCES, December 31, 2000 7,040,325 $ 70,403 117,500 $ (1,175) $ 2,024,317 $ 564,547 =========== =========== =========== =========== =========== =========== Total ----------- BALANCES, January 1, 1999 $ 259,556 Proceeds from private placement, net of offering costs 931,020 Issuance of common stock and treasury stock to private placement consultants -- Issuance of common stock to consultant 41,500 Issuance of common stock to bridge lender 2,200 Exercise of options 46,000 Sales of treasury stock 57,454 Net income for year 65,465 ----------- BALANCES, December 31, 1999 1,403,195 Issuance of common stock to consultant 260,000 Exercise of options 11,500 Income tax benefit from stock options exercised 67,410 Exercise of warrants, net of commissions 514,706 Net income 401,281 ----------- BALANCES, December 31, 2000 $ 2,658,092 =========== |
See accompanying notes to these financial statements.
FIELDPOINT PETROLEUM CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS DECEMBER 31, -------------------------- 2000 1999 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 401,281 $ 65,465 Adjustments to reconcile to net cash from operating activities: Depletion and depreciation 177,851 152,166 Deferred income taxes 62,046 15,954 Income tax benefit from stock options exercised 67,410 -- Common stock and options issued for services 25,998 43,700 Changes in assets and liabilities: Accounts receivable and accrued income (29,577) (93,722) Income taxes recoverable -- 48,000 Prepaid expenses and other assets 10,968 30,834 Accounts payable and accrued expenses (7,247) (16,008) Oil and gas revenues payable 14,063 (12,739) Due to related party -- (15,000) ----------- ----------- Net cash provided by operating activities 722,793 218,650 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to oil and gas properties (1,393,670) (1,280,387) Purchase of furniture and equipment (216) (1,877) ----------- ----------- Net cash used by investing activities (1,393,886) (1,282,264) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt 1,200,000 810,000 Repayments of long-term debt (522,833) (664,976) Proceeds from sales of common stock, net of offering costs -- 977,020 Proceeds from sales of treasury stock -- 57,454 Proceeds from exercise of common stock options and warrants 526,206 -- ----------- ----------- Net cash provided by financing activities 1,203,373 1,179,498 ----------- ----------- NET CHANGE IN CASH 532,280 115,884 CASH, beginning of year 117,259 1,375 ----------- ----------- CASH, end of year $ 649,539 $ 117,259 =========== =========== SUPPLEMENTAL INFORMATION: Cash paid during the year for interest $ 73,526 $ 85,941 =========== =========== Cash paid during the year for income taxes $ -- $ -- =========== =========== Stock issued for future services $ 234,000 $ -- =========== =========== |
See accompanying notes to these financial statements.
FIELDPOINT PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Capitalized amounts attributable to proved oil and gas properties are depleted by the unit-of-production method based on proved reserves. Depreciation and depletion expense for oil and gas producing property and related equipment was $159,851 and $134,166 for the years ended December 31, 2000 and 1999, respectively.
Capitalized costs are evaluated for impairment based on an analysis of undiscounted future net cash flows in accordance with Financial Accounting Standards Board Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". If impairment is indicated, the asset is written down to its estimated fair value based on expected future discounted cash flows.
Joint Interest Billings Receivable and Oil and Gas Revenue Payable
Joint interest billings receivable represent amounts receivable for lease operating expenses and other costs due from third party working interest owners in the wells that the Company operates. The receivable is recognized when the cost is incurred and the related payable and the Company's share of the cost is recorded.
Oil and gas revenues payable represents amounts due to third party revenue interest owners for their share of oil and gas revenue collected on their behalf by the Company. The payable is recorded when the Company recognizes oil and gas sales and records the related oil and gas sales receivable.
FIELDPOINT PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In December 2000, the Company acquired interests in certain producing properties in Oklahoma for consideration of $1,010,015. The acquisition was financed with an extension of the Company's existing borrowing facility with a bank. The following unaudited pro forma information is presented as if the interests in the property had been acquired on January 1, 2000 and 1999, respectively.
Year Ended December 31, -------------------------------- 2000 1999 ------------- ------------- Revenues $ 2,455,276 $ 1,601,769 Net income $ 400,283 $ 35,301 Net income per share $ .06 $ .01 |
FIELDPOINT PETROLEUM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. RELATED PARTY TRANSACTIONS -------------------------- At December 31, 2000, the Company had a short-term advance receivable from its majority stockholder of $7,500. The Company leases office space from its majority stockholder. Rent expense for this lease was $12,000 for each of the years ended December 31, 2000 and 1999. At December 31, 2000 and 1999, the Company had a note payable to a stockholder in the amount of $16,000 as described in Note 4. 4. LONG-TERM DEBT -------------- Long-term debt at December 31, 2000 and 1999 consisted of the following: 2000 1999 ------------- ------------- Note payable to a bank, interest at the bank's floating rate, monthly payments of principal and interest of $17,227 were due, until maturity in June 2001. This note was collateralized by certain oil and gas properties and guaranteed by the majority stockholder of the Company. The note was repaid in 2000. $ -- 299,703 Note payable to a bank, interest at the bank's floating rate, monthly payments of principal of $3,788 plus accrued interest were due, until maturity in March 2001. This note was collateralized by certain oil and gas properties and guaranteed by the majority stockholder of the Company. The note was repaid in 2000. -- 56,818 Note payable to a bank, interest at the bank's floating rate (10.5% at December 31, 2000), monthly payments of principal of $32,595, plus accrued interest, until maturity in April 2002. This note is collateralized by certain oil and gas properties and is guaranteed by the majority stockholder of the Company. 1,629,761 576,190 Unsecured note payable to a stockholder, interest at the prime rate (9.5% at December 31, 2000), principal and accrued interest due upon demand. 16,000 16,000 Other notes payable collateralized by vehicles. -- 19,883 ------------- ------------- Total 1,645,761 968,594 Less current portion (407,143) (409,132) ------------- ------------- $ 1,238,618 $ 559,462 ============= ============= |
Maturities of long-term debt for the years ending December 31 are as follows:
2001 $ 407,143 2002 1,238,618 ------------ $ 1,645,761 |
FIELDPOINT PETROLEUM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. INCOME TAXES ------------ The difference between the Company's effective federal income tax rate and the statutory federal income tax rate in the years ended December 31, 2000 and 1999 primarily results from the effect of tax benefits on options exercised deductible for tax and not for book, and differences between depletion for book and tax. The Company's deferred tax assets (liabilities) are composed of the following: DECEMBER 31, ----------------------------- 2000 1999 ------------ ------------ Deferred tax assets: Non-deductible acquisition cost $ 13,000 $ 13,000 Net operating loss carryforwards 11,000 13,000 Allowance for doubtful accounts and other assets 38,000 1,000 ------------ ------------ 62,000 27,000 Deferred tax liabilities: Difference in bases of oil and gas properties (140,000) (42,954) ------------ ------------ Net asset (liability) before valuation allowance (78,000) (15,954) Valuation allowance -- -- ------------ ------------ Net asset (liability) $ (78,000) $ (15,954) ============ ============ 6. EARNINGS PER SHARE ------------------ Basic earnings per share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share takes common stock equivalents (such as options and warrants) into consideration. The following table sets forth the computation of basic and diluted earnings per share: DECEMBER 31, ----------------------------- 2000 1999 ------------ ------------ Numerator: Net income $ 401,281 $ 65,465 ------------ ------------ Numerator for basic and diluted earnings per share 401,281 65,465 Denominator: Denominator for basic earnings per share - weighted average shares 6,629,182 5,568,811 Effect of dilutive securities: Director stock options 222,815 296,928 Warrants 255,530 75,359 ------------ ------------ Dilutive potential common shares 478,345 372,287 ------------ ------------ Denominator for diluted earnings per share - adjusted weighted average shares 7,107,527 5,941,098 ============ ============ Basic earnings per share $ 0.06 $ 0.01 ============ ============ Diluted earnings per share $ 0.06 $ 0.01 ============ ============ |
FIELDPOINT PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For additional disclosures regarding the stock options and the warrants, see Note 7. The net effect of converting stock options and warrants to purchase 1,683,266 and 1,881,666 shares of common stock at exercise prices less than the average market prices has been included in the computation of diluted earnings per share for the year ended December 31, 2000 and 1999, respectively.
In January 2000, the Company granted 200,000 non-qualified stock options to a director to purchase the Company's common stock at $0.69 per share, which was greater than the quoted market price on the date of grant. The options may be exercised from December 31, 2000 to December 31, 2002.
In July 2000, the Company granted 300,000 non-qualified stock options to directors to purchase the Company's common stock at $2.13 per share, which was greater than the quoted market price on the date of grant. The options are exercisable from January 2001 to April 2004.
DECEMBER 31, 2000 DECEMBER 31, 1999 -------------------- -------------------- Weighted Weighted Average Average Number Exercise Number Exercise Of Shares Price Of Shares Price --------- -------- --------- -------- Outstanding, beginning of year 415,000 $ 0.10 455,000 $ 0.18 Canceled or expired - $ - (5,000) $ 0.88 Granted 500,000 $ 1.55 100,000 $ 1.16 Exercised (115,000) $ 0.10 (135,000) $ 0.34 --------- -------- --------- -------- Outstanding, end of year 800,000 $ 1.14 415,000 $ 0.36 ========= ======== ========= ======== Exercisable, end of year 500,000 $ 1.55 315,000 $ 0.10 ========= ======== ========= ======== |
FIELDPOINT PETROLEUM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS If not previously exercised, options outstanding at December 31, 2000 will expire as follows: Weighted Average Number Exercise Of Shares Price --------- -------- December 31, 2001 200,000 $ 0.10 December 31, 2002 300,000 0.85 December 31, 2004 300,000 2.13 --------- -------- Total 800,000 $ 1.14 ========= ======== Presented below is a comparison of the weighted average exercise prices and fair values of the Company's common stock options on the measurement date for the options granted during fiscal years 2000 and 1999. The exercise price exceeded the market price at the measurement date for each option. 2000 1999 ----------------------------- ----------------------------- Number Exercise Fair Number Exercise Fair Of Shares Price Value Of shares Price Value --------- -------- ------ --------- -------- ------ Exercise price greater than market price 500,000 $ 1.51 $ 1.55 100,000 $1.16 $ 0.77 |
2000 1999 ------------ ------------ Net income: As reported $ 401,281 $ 65,465 Pro forma 162,024 1,006 Net income per common share: As reported $ 0.06 $ 0.01 Pro forma $ 0.02 $ * |
The estimated fair value of each officer and director option granted during fiscal year 2000 and 1999 was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
2000 1999 ------------ ------------ Expected volatility 111.3%-119.6% 104.7% Risk-free interest rate 5.81% 5.88% Expected dividends -- -- Expected terms (in years) 2-3 3 |
FIELDPOINT PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During 1999, the Company closed a private placement of its common stock and redeemable common stock purchase warrants. The Company sold 1,466,666 equity units for $0.75 per unit. Each unit consisted of one share of common stock and one redeemable Class A common stock purchase warrant with an exercise price of $1.25. Proceeds from the offering totaled $931,020, net of approximately $168,980 of associated commissions and offering expenses. In the current year, warrants representing 433,400 shares of common stock were exercised, netting proceeds of $514,706 after approximately $27,044 of commissions. At December 31, 2000, warrants for the purchase of 1,033,266 common shares remain outstanding.
The warrants are exercisable during a three-year period commencing the earlier of one year from the date of issuance or the effective date of a registration statement registering the warrants. The warrants are redeemable by the Company at $0.01 per warrant if the public trading price of the Company's common stock equals or exceeds 150% of the exercise price of the warrants for twenty consecutive days. The warrants were not redeemed as of December 31, 2000.
In June 2000, the Company issued 160,000 shares of common stock to a consultant in lieu of cash for services. The shares were recorded at the quoted market value of the stock at the time of the transaction of $260,000. This amount is being amortized over the five-year life of the contract.
The Company is engaged in oil and gas exploration and production and may become subject to certain liabilities as they relate to environmental clean up of well sites or other environmental restoration procedures as they relate to the drilling of oil and gas wells and the operation thereof. In the Company's acquisition of existing or previously drilled well bores, the Company may not be aware of what environmental safeguards were taken at the time such wells were drilled or during such time the wells were operated. Should it be determined that a liability exists with respect to any environmental clean up or restoration, the liability to cure such a violation could fall upon the Company. No claim has been made, nor is the Company aware of any liability which the Company may have, as it relates to any environmental clean up, restoration or the violation of any rules or regulations relating thereto.
As of December 31, 2000 and 1999, the Company had a $10,000 open letter of credit in favor of the State of Wyoming as a plugging bond. The letter of credit is collateralized by a certificate of deposit in the same amount.
The Company's financial instruments are cash, amounts receivable and payable and long-term debt. Management believes the fair values of these instruments, with the exception of the long-term debt, approximate the carrying values, due to the short-term nature of the instruments. Management believes the fair value of long-term debt also reasonably approximates its carrying value, based on expected cash flows and interest rates.
FIELDPOINT PETROLEUM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Financial instruments that subject the Company to credit risk consist principally of receivables. The receivables are primarily from companies in the oil and gas business or from individual oil and gas investors. These parties are primarily located in the Southwestern region of the United States. The Company does not ordinarily require collateral, but in the case of receivables for joint operations, the Company often has the ability to offset amounts due against the participant's share of production from the related property. The Company believes the allowance for doubtful accounts at December 31, 2000 and 1999 is adequate. The Company had the following concentrations in volume of oil and gas sales revenue by customer as a percentage of total oil and gas revenue: Customer 2000 1999 -------- -------- -------- A 23% 45% B 38% 14% C 14% 17% D 13% 14% E 10% - Additionally, the four customers above accounted for a total of 85% and 88% of accrued oil and gas sales as of December 31, 2000 and 1999, respectively. 12. SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) ------------------------------------------------------------------------ The following table sets forth certain information with respect to the oil and gas producing activities of the Company: YEAR ENDED DECEMBER 31, -------------------------- 2000 1999 ----------- ----------- Costs incurred in oil and gas producing activities: Acquisition of unproved properties $ -- $ -- Acquisition of proved properties 1,209,653 1,137,062 Development costs 184,017 143,325 ----------- ----------- Total costs incurred $ 1,393,670 $ 1,280,387 =========== =========== Net capitalized costs related to oil and gas producing activities: Proved leasehold costs and lease and well equipment $ 4,142,093 $ 2,748,423 Less accumulated depletion and depreciation (755,785) (594,434) ----------- ----------- Net oil and gas property costs $ 3,386,308 $ 2,153,989 =========== =========== |
The following table, based on information prepared by independent petroleum engineers, summarizes changes in the estimates of the Company's net interest in total proved reserves of crude oil and condensate and natural gas, all of which are domestic reserves:
FIELDPOINT PETROLEUM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Oil Gas (Barrels) (MCF) ---------- ---------- Balance, January 1, 1999 153,076 488,947 Purchase of minerals in place 436,330 1,580,342 Revisions of previous estimates 56,086 166,582 Production (33,120) (114,278) ---------- ---------- Balance, December 31, 1999 612,372 2,121,593 ---------- ---------- Purchase of minerals in place 252,885 16,388 Revisions of previous estimates 49,857 (152,974) Production (37,769) (143,172) ---------- ---------- Balance, December 31, 2000 877,345 1,841,835 ========== ========== Proved developed reserves, December 31, 2000 813,957 1,796,644 ========== ========== Proved developed reserves, December 31, 1999 549,203 2,076,403 ========== ========== Proved oil and gas reserves are the estimated quantities of crude oil, condensate and natural gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed oil and gas reserves are reserves that can be expected to be recovered through existing wells with existing equipment and operating methods. The above estimated net interests in proved reserves are based upon subjective engineering judgments and may be affected by the limitations inherent in such estimation. The process of estimating reserves is subject to continual revision as additional information becomes available as a result of drilling, testing, reservoir studies and production history. There can be no assurance that such estimates will not be materially revised in subsequent periods. 13. STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS (UNAUDITED) -------------------------------------------------------------------- The standardized measure of discounted future net cash flows at December 31, 2000 and 1999, relating to proved oil and gas reserves is set forth below. The assumptions used to compute the standardized measure are those prescribed by the Financial Accounting Standards Board and, as such, do not necessarily reflect the Company's expectations of actual revenues to be derived from those reserves nor their present worth. The limitations inherent in the reserve quantity estimation process are equally applicable to the standardized measure computations since these estimates are the basis for the valuation process. YEAR ENDED DECEMBER 31, ---------------------------- 2000 1999 ------------ ------------ Future cash inflows $ 29,271,000 $ 17,316,000 Future development and production costs (12,335,000) (6,442,000) ------------ ------------ Future net cash flows, before income tax 16,936,000 10,874,000 Future income taxes (5,667,000) (3,117,000) ------------ ------------ Future net cash flows 11,269,000 7,757,000 10% annual discount (4,169,000) (3,056,000) ------------ ------------ Standardized measure of discounted future net cash flows $ 7,100,000 $ 4,701,000 ============ ============ |
FIELDPOINT PETROLEUM CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Future net cash flows were computed using year-end prices and costs, and year-end statutory tax rates (adjusted for permanent differences) that relate to existing proved oil and gas reserves at year end. The following are the principal sources of change in the standardized measure of discounted future net cash flows: YEAR ENDED DECEMBER 31, -------------------------- 2000 1999 ----------- ----------- Sales of oil and gas produced, net of production costs $ (962,000) (473,000) Purchase of minerals in place 1,779,000 5,101,000 Net changes in prices and production costs 2,382,000 1,288,000 Revisions and other 336,000 (56,000) Accretion of discount 470,000 52,000 Net change in income taxes (1,606,000) (1,734,000) ----------- ----------- Net change 2,399,000 4,178,000 Balance, beginning of year 4,701,000 523,000 ----------- ----------- Balance, end of year $ 7,100,000 $ 4,701,000 =========== =========== |
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EXHIBIT 10.2
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (the "Agreement") is made the 28th day of March 2001, by and between FieldPoint Petroleum Corporation, a Colorado corporation acting by and through its hereunto duly authorized officer (the "Company"), and Ray D. Reaves (the "Executive").
WHEREAS, the Executive is presently in the employ of the Company in the capacity of President and Chief Executive Officer, and the Company is willing to provide certain employment assurances to the Executive in the event of a Change of Control (as defined below) of the Company as incentive and inducement for the Executive to continue in such employment in his present capacity after a Change of Control; and
WHEREAS, in consideration of such employment assurances, the Executive is willing to remain in the employ of the Company in the capacity of President and Chief Executive Officer after a Change of Control of the Company.
NOW, THEREFORE, in consideration of the premises and the mutual terms and conditions hereof, the Company and the Executive hereby agree as follows:
1. Employment. In consideration of the benefits hereinafter specified, the Executive hereby agrees to continue his employment with the Company in the capacity of President and Chief Executive Officer after a Change of Control of the Company and to discharge his duties in such capacity during the term of this Agreement.
2. Exclusive Services. The Executive shall devote his full working time, ability and attention to the business of the Company during the term of this Agreement and shall not, directly or indirectly, render any services of a business, commercial or professional nature to any other person, corporation or organization, whether for compensation or otherwise, without the prior knowledge and consent of the Board of Directors (the "Board") of the Company; provided, however, that the provisions of this Agreement shall not be construed as preventing the Executive from investing in other non-competitive businesses or enterprises if such investments do not require substantial services on the part of the Executive in the affairs of operations of any such business or enterprise so as to significantly diminish the performance by the Executive of his duties, functions and responsibilities under this Agreement. During the term of this Agreement, the Executive shall not, directly or indirectly, either through any kind of ownership (other than ownership of securities of publicly held corporations of which the Executive owns less than five percent (5%) of any class of outstanding securities) or as a director, officer, agent, employee or consultant engage in any business that is competitive with the Company.
3. Authority and Duties. During the term of this Agreement, the Executive shall have such authority and shall perform such duties, functions and responsibilities as are specified by the Bylaws of the Company, the Executive Committee and the Board of Directors of the Company and/or as are appropriate for the office of the President and Chief Executive Officer and shall serve with the necessary power and authority commensurate with such position. If the Company removes the Executive from the office of the President and Chief Executive Officer of the Company after a Change of Control or limits, restricts or reassigns his authority and responsibility after a Change of Control so as to be less significant than, or not comparable to, that to which he held immediately preceding such Change of Control in his capacity as President and Chief Executive Officer without his prior mutual consent, the Executive shall be entitled to resign for good reason and receive the Severance Benefits set forth in this Agreement.
4. Compensation. In consideration for the services to be rendered by the Executive to the Company and/or its subsidiaries, the Company shall pay to the Executive at least the gross cash compensation and shall award to the Executive at least the bonuses as set forth below:
Annual Period Annual Base Salary -------------------------------------------------------------------------------- For the one year period following 100% of the average of the Executive's |
In the event that the Executive shall not have been employed for three years prior to the effective date of this Agreement, the Executive's annual base compensation rate or bonus rate shall be averaged over the actual period of employment of the Executive by the Company.
Each of the annual base salary amounts set forth above shall be paid to the Executive in equal monthly installments, or as otherwise agreed, during each corresponding year of the term of this Agreement, provided that for any period of less than one (1) year, the annual base salary shall be pro-rated accordingly. The annual bonus amount indicated above or amounts in excess of such indicated bonus shall be awarded no later than December 31 of the corresponding annual period. The amount set forth above is compensation to the Executive or gross amounts due hereunder, and the Company shall have the right to deduct therefrom all taxes and other amounts which may be required to be deducted or withheld by law (including, but not limited to, income tax, withholding, social security and medicare payments) whether such law is now in effect or becomes effective after the execution of this Agreement.
5. Benefits and Business Expenses. During the term hereof:
(a) The Executive shall be entitled to continue his participation in programs maintained by the Company for the benefit of its employees and officers and to participate in new or amended programs, including, but not limited to, medical, health, life, accident and disability insurance programs, pension plans, incentive compensation plans, stock option plans, stock appreciation rights plans, and limited stock appreciation rights plans. The Company shall not terminate nor amend such plans to the detriment of the Executive.
(b) To the extent that the Company has provided the Officer with an automobile, club memberships, association and trade memberships and other memberships prior to the Change of Control, the Company shall continue to provide the Officer with such items, of a comparable nature, following a Change of Control. The Company shall pay the expenses of such automobile, memberships and subscriptions.
(c) The Executive shall be reimbursed for any business expenses reasonably incurred in carrying out his duties, functions and responsibilities upon presentation of expense reports to the Company.
6. Term. This Agreement shall have a term of three (3) years commencing on the effective date of a Change of Control and shall be automatically extended on the 9th day of each and every calendar month during the term of this Agreement for an additional calendar month so that at the beginning of each and every month during the term of this Agreement there shall be a remaining term of three (3) years (but in no event beyond the time the Executive reaches age 65) unless and until the Company gives written notice to the Executive that the term of this Agreement shall not be further so extended, in which case the Executive shall be entitled to resign for good reason. The provisions of this Section 6 shall apply to each Change of Control irrespective of any Change of Control which may have occurred previously.
7. Severance Benefits After Change of Control. In addition to such compensation and other benefits payable to or provided for the Executive as authorized by the Board from time to time, Executive shall be entitled to receive in lieu of the compensation described in paragraph 4 hereof, and the Company shall pay or provide to the Executive the following severance benefits (the "Severance Benefits") in the event that, during the term hereof, the Company discharges the Executive without cause or the Executive resigns for good reason after a Change of Control, to-wit:
(a) The Company shall pay to the Executive a lump sum cash payment (multiplied by the applicable factor described below) payable on such date of termination of employment equal to the Executive's "base compensation" then in effect, which shall, and is defined to, consist of the sum of (i) the Executive's annual base salary then in effect, (ii) the average of the amounts of the last three annual cash bonuses paid or granted to, or earned by, the Executive, and (iii) the average of the total amounts of the Company's contributions to its retirement plan allocable to the Executive on a fully vested basis for the last three fiscal years of the retirement plan. The amount of the "base compensation" payable to the Executive pursuant to this Section 7(a) shall be multiplied by the number three (3) for the purposes of determining the lump sum cash severances payment due under this Section 7(a).
(b) All stock options granted by the Company to the Executive, all contributions made by the Executive and by the Company for the account of the Executive to any pension, retirement or any other benefit plan, and all other benefits or bonuses, including but not limited to net profits interests which contain vesting or exercisability provisions conditioned upon or subject to the continued employment of the Executive, shall become fully vested and exercisable and shall remain fully exercisable for a period of the later of three hundred sixty (360) days after (i) the date of such termination of employment, or (ii) the termination of this Agreement.
(c) The Company shall continue the participation of the Executive in all life, accident, disability, medical, dental and all other health and casualty insurance plans maintained by the Company for its officers and employees for a period of one (1) year after the date of such termination of employment or for such longer period as may be required by applicable law.
(d) Notwithstanding any provision of this Agreement to the contrary, if the Executive is a disqualified individual (as the term "disqualified individual" is defined in Section 280G of the Code) and if any portion of the Severance Benefits under this Section 7 of this Agreement would be an excess parachute payment (as the term "excess parachute payment" is defined in Section 280G of the Code) but for the application of this sentence, then the amount of the Severance Benefits otherwise payable to the Executive pursuant to this Agreement will be reduced to the minimum extent necessary (but in no event to less than zero) so that no portion of the Severance Benefits, as so reduced, constitutes an excess parachute payment. The determination of whether any reduction in the amount of the Severance Benefits is required pursuant to this Section 7(d) will be made by the Company's independent accountants. The fact that the Executive has his Severance Benefits reduced as a result of the limitation set forth in this Section 7(d) will not of itself limit or otherwise affect any rights of the Executive arising other than pursuant to this Agreement.
(e) The Company has determined that the amounts payable under the Agreement constitute reasonable compensation for services rendered. Accordingly, notwithstanding any other provisions hereof, unless such action would be expressly prohibited by applicable law, if any amount is paid pursuant to this Agreement which is determined to be subject to the excise tax imposed by Section 4999 of the Code, the Company will pay to the Executive an additional amount in cash equal to the amount necessary to cause the aggregate amount payable under this Agreement, including such additional cash payment (net of all federal, state and local income taxes and all taxes payable as the result of the application of Sections 280G and 4999 of the Code), to be equal to the aggregate amount payable under this Agreement, excluding such additional payment (net of all federal, state and local income taxes), as if Section 280G and 4999 of the Code (and any successor provisions thereto) had not been enacted into law.
8. Place of Performance. During the term hereof:
(a) The principal office of the Executive and the principal place for performance by him of his duties, functions and responsibilities under this Agreement shall be in the City or suburbs of Austin, Texas.
(b) It is recognized that the performance of the Executive's duties hereunder may occasionally require the Executive, on behalf of the Company, to be away from his principal office for business reasons. Unless consent of the Executive is obtained, such periods of being away from his principal office on behalf of the company shall not exceed thirty (30) calendar days per year.
9. Definition of Change of Control. For purposes of this Agreement,
"Change of Control" shall mean the occurrence of one or more of the following
events: (i) a person or entity or group (as that term is used in Section 13(d)
(3) of the Exchange Act) of persons or entities shall have become the beneficial
owner of a majority of the securities of the Company ordinarily having the right
to vote in the election of directors, (ii) during any consecutive two-year
period, individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any directors who are members of such
Board of Directors of the Company on the date hereof and any new directors whose
election by such Board of Directors of the Company or whose nomination for
election by the stockholders o f the Company was approved by a vote of 66% of
the directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office, (iii) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, the assets of the Company to any person or entity or group
(as so defined in Section 13(d) (3) of the Exchange Act) of persons or entities
(other than any wholly owned subsidiary of the Company), or (iv) the merger or
consolidation of the Company into or with another corporation or the merger of
another corporation into the Company with the effect that immediately after such
transaction any person or entity or group (as so defined in Section 13(d) (3) of
the Exchange Act) of persons or entities, or the stockholders of any other
entity, shall have become the beneficial owner of securities of the surviving
corporation of such merger or consolidation representing a majority of the
voting power of the outstanding securities of the surviving corporation
ordinarily having the right to vote in the election of directors.
10. Discharge with Cause. For the purposes of this Agreement, the Company shall be deemed to have discharged the Executive for cause only if any one of the following conditions existed:
(a) If the Executive shall have willfully breached or habitually neglected his duties and responsibilities as the President and Chief Executive Officer of the Company; or
(b) If the Executive shall have been convicted of any felony offense during the term of this Agreement.
The discharge of the Executive by the Company when none of the foregoing conditions exist shall be deemed to be a discharge without cause.
11. Resignation for Good Reason. For the purposes of this Agreement, the Executive shall have resigned for good reason if any one of the following conditions existed at the time of his resignation:
(a) If the Company shall have assigned to the Executive authority and responsibilities less significant than, or not comparable to, that which he had in his capacity as President and Chief Executive Officer immediately preceding a Change of Control or shall otherwise so limit or restrict his authority and responsibilities after a Change of Control;
(b) The Company shall have reduced the Executive's annual base salary below his annual base salary in effect on the effective date of a Change of Control or the Company shall have reduced the Executive's annual cash bonus below that of his last annual cash bonus prior to the effective date of a Change of Control;
(c) The Company shall have taken any actions having the purpose or intent and the effect of inducing the Executive to resign, such as failing to provide the Executive with all personnel benefits which are otherwise generally provided to executive officers of the Company or reasonably necessary or appropriate for the performance by the Executive of his duties as President and Chief Executive Officer of the Company; or
(d) The Company shall have declined to extend the term of this Agreement pursuant to Section 6 hereof.
12. Termination Upon Death. This Agreement shall terminate immediately upon the date of the death of the Executive.
13. Remedies. If the Executive shall file any judicial action for enforcement of this Agreement and successfully recover compensation or damages, the Executive shall be entitled to recover from the Company an additional amount equal to interest at ten percent (10%) per annum on the amount recovered from the date such amount was due and payable together with all expenses and reasonable attorney's fees incurred in obtaining legal advice and counseling respecting his rights under this Agreement and in prosecuting and disposing of such action. The provisions of this Section shall be cumulative and without prejudice to any other right or remedy to which the Executive may be entitled either at law, in equity or under this Agreement and shall not constitute the exclusive remedy of the Executive for breach of this Agreement
14. General Provisions.
(a) Notices. Any notices to be given hereunder by either party to the other may be given either by personal delivery in writing or by fax, or by mail, registered or certified, postage prepaid, return receipt requested, addressed to the parties at their respective addresses set forth below their signatures to this Agreement, or at such other addresses as they may specify to the other in writing.
(b) Law Governing. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas.
(c) Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term hereof, such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and still be legal, valid or enforceable.
(d) Entire Agreement. This Agreement sets forth the entire understanding of the parties and supersedes all prior agreements or understandings, whether written or oral, with respect to the subject matter hereof. No terms, conditions or warranties, other than those contained herein, and no amendments or modifications hereto shall be binding unless made in writing and signed by the parties hereto.
(e) Binding Effect. This Agreement shall extend to and be binding upon and inure to the benefit of the parties hereto, their respective heirs, representatives, successors and assigns. All of the provisions of this Agreement shall be fully applicable to any successor to the Company resulting from a Change of Control. The Company agrees that in the event of a tender or exchange offer, merger, consolidation or liquidation or any such similar event involving the Company, its securities or assets, it shall reveal the existence of this Agreement to the acquiring person or entity. The Company further agrees that if such action is not inconsistent with the best interests of the Company, it shall condition approval of any transactions proposed by the acquiror upon obtaining the consent, in writing, of the potential successor to the Company to be bound by this Agreement. In the event the Executive dies prior to the termination of this Agreement, any compensation or other payment due and owing to the Executive on or before the date of the Executive's death shall be paid to his estate, executors, administrators, heirs or legal representatives. Since the duties and services of the Executive hereunder are special, personal and unique in nature, the Executive may not transfer, sell or otherwise assign his rights, obligations or benefits under this Agreement.
(f) Waiver. The waiver by either party hereto of a breach of any term or provision of this Agreement shall not operate or be construed as a waiver of a subsequent breach of the same provisions by either party or of the breach of any other term or provision of this Agreement.
(g) Titles. Titles of the paragraphs herein are used solely for convenience and shall not be used for interpretation or construing any word, clause, paragraph or provision of this Agreement.
(h) Mediation/Arbitration. In the event of a dispute between the parties to this Agreement, the parties agree to participate in good faith in a minimum of four (4) hours of mediation in Austin, Texas with an attorney-mediator trained and certified by the American Arbitration Association, the United States Arbitration and Mediation Service, or any comparable organization, and to abide by the mediation procedures and decision of such organization. The parties agree to equally bear the costs of the mediation. In the event the parties cannot resolve their dispute through mediation as described herein, the parties agree to participate in binding arbitration pursuant to the rules of the American Arbitration Association or mutually agreeable similar organization. Such arbitration shall be held in Austin, Texas, shall be binding and nonappealable and a judgment on the award to the prevailing party (inclusive of reasonable attorney's fees and costs) may be entered in any court having competent jurisdiction.
IN WITNESS WHEREOF, the Company and the Executive have executed this Executive Employment Agreement as of the day and year first written above, effective as of the date specified above.
CREDIT AGREEMENT
between
UNION PLANTERS BANK, N.A.
and
FIELDPOINT PETROLEUM CORPORATION
$2,000,000.00
Revolving Credit Note
TABLE OF CONTENTS ARTICLE 1. DEFINED TERMS.................................................... 1 Section 1.1 Certain Defined Terms..................................... 1 Section 1.2 Other Definitional Provisions............................. 5 ARTICLE 2. AMOUNT AND TERMS OF THE LOAN..................................... 5 Section 2.1 Borrowing Base and the Loan............................... 5 Section 2.2 Interest and Fees......................................... 6 Section 2.3 Payments.................................................. 6 Section 2.4 Prepayment................................................ 6 Section 2.5 Payment on Non-Business Days.............................. 7 Section 2.6 Overdue Principal and Interest............................ 7 Section 2.7 Usury Not Intended........................................ 7 ARTICLE 3. CONDITIONS PRECEDENT............................................. 8 Section 3.1 Conditions Precedent to the Initial Advance............... 8 Section 3.2 Conditions Precedent to Each Subsequent Advance........... 8 ARTICLE 4. REPRESENTATIONS AND WARRANTIES................................... 9 Section 4.1 Corporate Authority....................................... 9 Section 4.2 Authorization; Consent.................................... 10 Section 4.3 Binding Obligations....................................... 10 Section 4.4 Financial Condition....................................... 10 Section 4.5 Title, Etc................................................ 10 Section 4.6 Investments and Guaranties................................ 10 Section 4.7 Liabilities; Litigation................................... 11 Section 4.8 Taxes; Governmental Charges............................... 11 Section 4.9 Licenses and Permits...................................... 11 Section 4.10 Defaults.................................................. 11 Section 4.11 ERISA..................................................... 11 Section 4.12 Environmental............................................. 11 Section 4.13 Margin Stock.............................................. 12 Section 4.14 No Material Misstatements................................. 12 ARTICLE 5. AFFIRMATIVE COVENANTS............................................ 13 Section 5.1 Business and Financial Information........................ 13 Section 5.2 Certificates of Compliance................................ 15 Section 5.3 Books and Records......................................... 15 Section 5.4 Inspection................................................ 15 Section 5.5 Maintenance of the Property............................... 15 Section 5.6 Compliance with Laws, etc................................. 15 Section 5.7 Taxes and Other Liens..................................... 15 Section 5.8 Performance of Obligations................................ 16 Section 5.9 Maintenance............................................... 16 Section 5.10 Further Assurances........................................ 16 Section 5.11 Required Insurance........................................ 16 Section 5.12 Conduct of Business....................................... 16 i |
Section 5.13 Title Opinion............................................. 16 Section 5.14 Information............................................... 17 Section 5.15 Access to Mortgaged Properties............................ 17 Section 5.16 Maintenance of Borrower's Files........................... 17 Section 5.17 Reservoir Reports......................................... 18 Section 5.18 Title Opinions. ......................................... 18 Section 5.19 Notice of Change of Address; Transfer or Division Orders; Change of Purchaser.................................... 18 ARTICLE 6. NEGATIVE COVENANTS............................................... 18 Section 6.1 Debt...................................................... 18 Section 6.2 Liens..................................................... 18 Section 6.3 Dividends; Redemptions.................................... 19 Section 6.4 Sale of Assets; Mortgaged Properties...................... 19 Section 6.5 Limitations on Contingent Liabilities..................... 19 Section 6.6 Investments, Loans and Advances........................... 20 Section 6.7 Mergers; etc.............................................. 20 Section 6.8 Nature of Business........................................ 20 Section 6.9 ERISA..................................................... 21 Section 6.10 Sale or Discount of Receivables........................... 21 Section 6.11 Sale and Leasebacks....................................... 21 Section 6.12 Transaction with Affiliates............................... 21 Section 6.13 Environmental Matters..................................... 21 Section 6.14 Cancellation of Insurance................................. 21 Section 6.15 No Subsidiaries........................................... 21 Section 6.16 Independence of Covenants................................. 21 ARTICLE 7. DEFAULT.......................................................... 22 Section 7.1 Events of Default......................................... 22 Section 7.2 Rights and Remedies....................................... 23 ARTICLE 8. MISCELLANEOUS.................................................... 24 Section 8.1 Expenses.................................................. 24 Section 8.2 Indemnification........................................... 24 Section 8.3 Waivers................................................... 25 Section 8.4 Applicable Law............................................ 25 Section 8.5 Notices................................................... 25 Section 8.6 Survival of Warranties and Agreements..................... 25 Section 8.7 Waiver; Remedies Cumulative............................... 25 Section 8.8 Severability.............................................. 26 Section 8.9 Entire Agreement.......................................... 26 Section 8.10 Further Assurances........................................ 26 Section 8.11 Headings.................................................. 26 Section 8.12 Successors and Assigns; Subsequent Holders of the Revolving Credit Note.......................................... 26 Section 8.13 Amendments................................................ 27 Section 8.14 Counterparts; Effectiveness............................... 27 Section 8.15 Joinder................................................... 27 |
ANNEX A - Essential Loan Terms ANNEX B - Form of Revolving Credit Note ANNEX C - Schedule of Mortgages ANNEX D - Form of Guaranty Agreement ANNEX E - Form of Advance Certificate ANNEX F - Form of Security Agreement covering Bank Accounts Schedule 4.7 - Existing Litigation Schedule 4.8 - Outstanding Taxes Schedule 6.1 - Existing Debt Schedule 6.2 - Existing Liens |
THIS CREDIT AGREEMENT dated as of this 14th day of December, 2000 , is by and between each of the following named parties whose respective addresses, telephone and telecopier numbers are set forth with their names:
UNION PLANTERS BANK (the "Bank") 5005 Woodway Houston, Texas 77056 Telephone: 713/867-6330 Telecopier: 713/867-7439 Attention: Rebecca Dozier, Senior Vice President and FIELDPOINT PETROLEUM CORPORATION (whether one or more, "Borrower") a Colorado corporation P.O. Box 200685 Austin, Texas 78720 Telephone: 512/250-8692 Telecopier: 512/335-1294 |
W I T N E S S E T H:
WHEREAS, Borrower desires to obtain a loan, the proceeds of which will be used for the purposes set forth on Annex A and which loan shall be secured by those certain oil and gas properties which are more particularly described on Annex C; and
WHEREAS, the Bank is willing to make the loan to Borrower on the terms and conditions provided herein;
NOW, THEREFORE, for and in consideration of the mutual covenants, agreements and undertakings herein contained, the Bank and Borrower hereby agree as follows:
ARTICLE 1. DEFINED TERMS
Section 1.1 Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings:
"Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under, controlled with, such Person. For the purposes of this definition, "control" (including with correlated meanings, the terms "controlling," "controlled by" and "under control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
"Agreement" means this Credit Agreement, as amended or supplemented from time to time in accordance with the terms hereof. This Agreement shall be deemed to include each of the Security Documents; accordingly, this Agreement and the Security Documents should be read and treated as one agreement.
"Borrowing Base" means the aggregate outstanding indebtedness in an amount determined by the Bank in its sole discretion, in accordance with its normal and customary oil and gas lending parameters and Procedures. The "Initial Borrowing Base" is set forth on Annex A. The Borrowing Base may be redetermined from time to time, as provided in this Agreement.
"Borrowing Base Redetermination Date" means the (i) date set forth on
Annex A, (ii) the date that is thirty (30) days after the date that Borrower
delivers to the Bank a request for a redetermination of the Borrowing Base,
together with such engineering, title, and other information as the Bank may
require in connection with such redetermination, and (iii) any other date on
which the Bank, in its sole discretion, redetermines the Borrowing Base;
provided, however, that the Bank will not exercise its rights under this clause
(iii) more often than once during any calendar year).
"Borrower's Files" means all now owned or hereafter acquired, books, records, files, land files, well logs, engineering data, reports, analyses, title opinions, and any other information pertinent to the ownership, operation or evaluation of the Mortgaged Properties.
"Business Day" means any day other than a Saturday, Sunday or legal holiday under the laws of the State of Texas.
"Corporate Guarantor" means Bass Petroleum, Inc. If there is no corporate guarantor of the indebtedness of Borrower, then all references herein to Corporate Guarantor shall be deemed inapplicable, and this Agreement shall be deemed amended to the extent necessary to delete any reference to Corporate Guarantors.
"Debt" shall mean, as applied to any Person, without duplication; (a)
all indebtedness of such Person for borrowed money (whether matured or
unmatured, liquidated or unliquidated, direct or indirect, joint or several,
contingent or otherwise); (b) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money;
(c) any obligation owed for the deferred purchase price of assets or services
and all obligations under leases which shall have been, or should have been, in
accordance with generally accepted accounting principles, recorded as capital
leases in respect of which such Person is liable, contingently or otherwise, as
obligor, guarantor or otherwise, or in respect of which obligations such Person
otherwise assures a creditor against loss; (d) all indebtedness secured by any
Lien on any Property owned or held by such Person, whether or not the
indebtedness secured thereby shall have been assumed; (e) all direct and
indirect liability, contingent or otherwise, of that Person with respect to any
letter of credit (other than letters of credit secured by cash), guaranty or in
respect of which such Person otherwise assures a creditor against loss; and (f)
any other indebtedness or obligation which, in accordance with generally
accepted accounting principles, would be shown on the liability side of a
balance sheet.
"Default" means the occurrence of any of the events described in
Section 7.1 hereof.
"Environmental Laws" shall mean the Resource Conservation and Recovery Act of 1987, as amended, the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, the Oil Pollution Act of 1990, as amended, any so-called "Superfund" or "Superlien" law, the Toxic Substances Control Act, the Clean Air Act and any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste or substance, whether now in existence or at any time hereafter in effect.
"Event of Default" means any of the events specified in Section 7.1.
"Governmental Requirement" shall mean any applicable law, statute, code, ordinance, order, rule, policy, regulation, judgment, decree, directive, injunction, franchise, permit, certificate, license, authorization or other direction or requirement of any domestic or foreign Federal, state, county, parish, municipal or other government, department, commission, board, court, agency or any other instrumentality of any of them, which exercises jurisdiction over Borrower or any of its property.
"Guarantors" means the Corporate Guarantor (if any) and Ray D. Reaves, Jr., whose address is set forth on Annex A.
"Guaranty Agreement" means the Guaranty Agreement in the form of Annex D, in favor of the Bank to be executed by each of the Guarantors.
"Hazardous Materials" shall mean any hazardous substance, pollutant or contaminant defined as such in (or for the purposes of) any Environmental Law and shall include, but not be limited to, petroleum (except to the extent that petroleum is deemed exempt for the purpose of any Environmental Law), any radioactive material and asbestos in any form or condition.
"Hydrocarbons" means all present and future oil, gas, casinghead gas, drip gasoline, natural gasoline, distillate, all other liquid or gaseous hydrocarbons produced or to be produced in conjunction therewith, all products, by-products, and all other substances derived therefrom or the processing thereof, and all other similar minerals now or hereafter accruing to, attributable to, or produced from the Mortgaged Property.
"Laws" means all applicable statutes, laws, ordinances, regulations, orders, units, writs, injunctions, or decrees of any state, commonwealth, nation, territory, possession, county, parish, municipality, or Tribunal.
"Lien" means, as applied to property or assets, real or personal, tangible or intangible, any claim, pledge, hypothecation, mortgage, lien, charge, restriction, deposit arrangement, security interest, security arrangement, financing lease, deed of trust or encumbrance of any kind (including, without limitation, any conditional sale agreement or any other title retention agreement) or any sale or similar arrangement of any Person whether arising by contract or under law. The term "Lien" shall also include reservations, exceptions, encroachments, easements, rights of way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting property.
"Material Adverse Effect" means any set of circumstances or events which (i) will or could reasonably be expected to have any adverse effect whatsoever upon the validity, performance, or enforceability of this instrument or the other Security Documents, (ii) is or could reasonably be expected to be material and adverse to the financial condition of Borrower as represented to the Bank in the financial statements heretofore furnished to the Bank by Borrower, (iii) will or could reasonably be expected to impair Borrower's ability to fulfill its obligations under the terms and conditions of the Note, this instrument, or the other Security Documents, or (iv) will or could reasonably be expected to cause a Default (as defined herein).
"Maturity Date" means, unless extended by the Bank in its sole discretion, the earlier of the Maturity Date indicated in Annexes A and B, or the acceleration by the Bank of amounts due under the Note.
"Monthly Borrowing Base Reduction" means an amount by which the Borrowing Base shall reduced on a monthly basis, as set forth in Section 2.1, below.
"Mortgage" means each of the Deeds of Trust, Mortgages, Assignments of Production, Security Agreements and Financing Statements referred to on Annex C which have heretofore been executed for the benefit of Bank by Borrower or the Corporate Guarantor.
"Mortgaged Property" has the meaning specified in the Mortgages.
"Person" means and includes natural persons, corporations, partnerships or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof.
"Plan" shall mean any employee pension, retirement, profit-sharing, benefit or other similar employee benefit plan, any part or all of which is subject to or governed by any provision of the Employee Retirement Income Security Act of 1974, as amended.
"Prime Rate" means at any time the prime rate of interest, as quoted in the Wall Street Journal, with the understanding that such prime rate may not be the lowest of the rates of interest available from the Bank, and which rate of interest shall change as and when announced in the Wall Street Journal, without notice to Borrower or any other Person.
"Security Agreement" means the Security Agreement substantially in the form of the attached Annex F which is being executed by Borrower in favor of the Bank and covers Borrower's accounts established at the Bank, to which reference is here made for all purposes.
"Security Documents" means the Security Agreements, the Guaranty Agreements, the Mortgages, and any related notices, powers of attorney, proxies and other financing statements and any other documents now or hereafter existing securing all amounts due and owing hereunder, as the same may be amended or supplemented from time to time in accordance with the terms thereof.
"Taxes" means taxes, assessments, fees, levies, imposts, duties, deductions, withholdings, or other similar charges from time to time or at any time imposed by any Law or any Tribunal, including, but not limited to, ad valorem taxes, windfall profits taxes, franchise taxes, severance taxes, production taxes, and excise taxes.
"Loan" means the aggregate outstanding principal amount, at any time, of the Loan Advances.
"Loan Advances" means the advances by the Bank to Borrower pursuant to
Section 2.1.
"Note" means the promissory note executed and delivered to the Bank by Borrower with respect to the Loan, substantially in the form of Annex B, as the same may be modified, amended, endorsed or otherwise rearranged from time to time in accordance with the terms hereof.
"Tribunal" means any court or governmental department, commission, board, bureau, agency, or instrumentality of any state, commonwealth, nation, territory, possession, county, parish, or municipality whether now or hereafter constituted or existing.
"Trustee" means the person identified in the Mortgage as the "Trustee".
Section 1.2 Other Definitional Provisions. References to "Sections" shall be to Sections of this Agreement unless otherwise specifically provided. Any of the terms defined in Section 1.1 may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference.
ARTICLE 2. AMOUNT AND TERMS OF THE LOAN
Section 2.1 Borrowing Base and the Loan. The Bank, on the terms and conditions hereinafter set forth, agrees to make a Loan to Borrower in an amount up to but no greater than the Borrowing Base. The aggregate outstanding indebtedness, including all presently existing loans of Borrower, shall never exceed the Borrowing Base, as the same may be redetermined from time to time, as provided in this Agreement. The Initial Borrowing Base is set forth on Annex A. The amount of the Borrowing Base will be redetemined by the Bank as of each Borrowing Base Redetermination Date, taking into account such matters as the Bank, in its sole discretion, deems relevant. The Borrowing Base shall be increased or decreased, as the case may be, immediately upon each Borrowing Base Redetermination Date. Effective as of the date of the Initial Borrowing Base Reduction, as set forth on Annex A, the Borrowing Base shall be reduced by the Monthly Borrowing Base Reduction which is set forth on Annex A, and each month subsequent to such date, the Borrowing Based shall be deemed reduced by a like amount. Upon any change in the Borrowing Base, the Bank shall redetermine, in its sole discretion, the amount by which the Borrowing Base will reduce effective the first day of each month thereafter. If the requisite engineering report for the Borrowing Base Redetermination is not submitted in a timely manner, as required in this Agreement, the line of credit offered herein shall be frozen.
The schedule for all Loan advances is set forth on Annex A. The Loan Advances shall be evidenced by the Note, a copy of which is attached as Annex B. A duly authorized officer of Borrower shall request each Loan Advance by delivering to the Bank a certificate in the form of Annex D.
Section 2.2 Interest and Fees.
(a) Borrower shall pay to the Bank, at the Closing of the Loan, the Original Transaction Fee set forth on Annex A. Borrower shall pay to the Bank the sum prescribed on Annex A as an Additional Facility Fee upon the effective date of any increase in the Borrowing Base. Finally, Borrower shall pay to the Bank a Borrowing Base Redetermination Fee in the amount set forth on Annex A, or such lesser amount as the Bank may determine, in its sole discretion, for each redetermination of the Borrowing Base which is based upon a third party engineering report satisfactory to the Bank and which has been delivered to the Bank; in addition, Borrower shall reimburse the Bank for all engineering and related expenses incurred by the Bank in connection with such redetermination, including a reasonable charge for services performed by employees of the Bank or its affiliates.
(b) Interest shall accrue on the outstanding daily principal balance of the Loan at the rate and in the manner provided on Annexes A and B. Borrower acknowledges and agrees that the rate of interest on the Loan may change at any time, and from time to time, on the effective date of each change in the Prime Rate. Borrower agrees that the amount shown on the books and records of the Bank as being the aggregate principal amount of the Loan and any accrued and unpaid interest, fees or expenses shall be prima facie evidence of the amounts outstanding under the Note and this Agreement. The Bank agrees to provide Borrower with monthly statements setting forth the current principal balance of the Loan and the accrued and unpaid interest, fees and expenses due from Borrower.
(c) All interest due pursuant to this Agreement or the Note shall be computed on the basis of a 365 day year and paid for the actual number of days elapsed (including the first but excluding the last day) during any period.
Section 2.3 Payments.
(a) All payments of principal and accrued and unpaid interest on the Loan shall be made on the schedule set forth on Annex A. Borrower may reduce the principal amount of the Loan from time to time, in accordance with Section 2.4, below, and thereafter increase the amount of the Loan by reborrowing the amount of any prepayement(s), subject to the limitations imposed by the Borrowing Base, as provided in this Agreement. All payments of principal and interest due under the Note and all fees and expenses provided for hereunder shall be made to the Bank without setoff, counterclaim or deduction in immediately available funds to an account designated by the Bank to Borrower from time to time.
(b) Any payment made under this Agreement, the Note or the Security Documents shall be applied in the following order: first, to any fees or expenses payable under this Agreement, the Note and the Security Documents; second, to any accrued and unpaid interest under the Note; and third, to any principal outstanding under the Note.
Section 2.4 Prepayment. Borrower may, on at least three (3) Business Days' notice to the Bank specifying the date and amount of any such prepayment, prepay the Loan in whole or in part at any time or from time to time without penalty or premium but with accrued interest to the date of prepayment on the amount so prepaid; provided, however, that no such prepayment shall be in an amount less than the minimum prepayment amount set forth on Annex B, unless the Bank shall otherwise agree. Borrower shall have the right to re-borrow any amounts prepaid hereunder, as provided in Section 2.3(a), above.
Section 2.5 Payment on Non-Business Days. Whenever any payment to be made hereunder or under the Note shall be stated to be due on a day other than a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest on the Note.
Section 2.6 Overdue Principal and Interest. Any principal of, and, to the extent permitted by law, interest on, the Note overdue for more than three Business Days shall bear interest, payable on demand, for each day until paid at a rate equal to 3% per annum above the rate specified in Section 2.3, but in no event to exceed the maximum non-usurious rate permitted by applicable law.
Section 2.7 Usury Not Intended. It is the intent of Borrower and the Bank in the execution and performance of this Agreement to contract in strict compliance with applicable usury laws governing the Note, including any applicable law from time to time in effect. In furtherance thereof, the Bank and Borrower stipulate and agree that none of the terms and provisions contained in this Agreement or any Security Document delivered pursuant to this Agreement shall ever be construed to create a contract to pay, as consideration for the use, forbearance or detention of money, interest at a rate in excess of the maximum nonusurious rate of interest permitted by applicable law and that for purposes hereof, interest shall include the aggregate of all charges which constitute interest under such laws that are contracted for, charged or received under this Agreement; and in the event that, notwithstanding the foregoing, under any circumstances the aggregate amounts taken, reserved, charged, received or paid on the Note include amounts which by applicable law are deemed interest which would exceed the maximum amount of nonusurious interest permitted by applicable law, then such excess shall be deemed to be a mistake, and the Bank shall credit the same against the principal outstanding under the Note. In the event that the maturity of the Note has been accelerated under this Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest may never include more than the maximum nonusurious amount permitted by applicable law, and excess interest, if any, provided for in this Agreement or otherwise shall be cancelled automatically as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited against the amounts due under the Note or, if the Note shall have been paid in
full, refunded to Borrower. It is further agreed that, without limiting the foregoing, all calculations of the rate of interest contracted for, charged or received by the Bank under the Note, this Agreement or the other Security Documents shall be made, to the extent permitted by applicable law, by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of the indebtedness evidenced by the Note all interest at any time contracted for, charged or received by the the Bank in connection therewith. The provisions of this Section 2.7 shall control over all other provisions of this Agreement, the Note and any other instrument executed and delivered pursuant to this Agreement which may be in apparent conflict herewith.
ARTICLE 3. CONDITIONS PRECEDENT
Section 3.1 Conditions Precedent to the Initial Loan Advance. The obligation of the Bank to make the initial Loan Advance is subject to the conditions precedent that the Bank shall have received on or before the date thereof all the following in form and substance satisfactory to the Bank:
(a) this Agreement, the Note, the Security Agreement and each of the Security Documents properly executed on behalf of Borrower and the other Persons specified therein;
(b) Borrower shall have delivered such number of completed and undated letters-in-lieu of transfer or division orders as the Bank shall have requested;
(c) certificates of insurance complying as to form and substance with the terms of Section 11(i) of the Mortgage; and
(d) any other documents and instruments that the Bank shall have requested concerning the accuracy and validity of or compliance with any representation, warranty and covenant made by Borrower in this Agreement, the satisfaction of any conditions contained herein and any other matters pertaining hereto.
Section 3.2 Conditions Precedent to Each Loan Advance. The obligation of the Bank to make each Loan Advance shall be subject to the following additional conditions precedent:
(a) the representations and warranties contained in Section 4 shall be true and correct in all material respects on and as of the date of such Loan Advance as though made on and as of such date and no Event of Default or event which, with the passage of time, the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing;
(b) The Bank shall have received satisfactory evidence that Borrower owns good and defensible title to the Mortgaged Properties free and clear of all Liens not permitted pursuant to the terms of this Agreement or the Mortgage;
(c) The Bank shall, on the date of such Loan Advance and the filing of all appropriate Security Documents, have a first priority perfected deed of trust Lien on and security interest in the Mortgaged Properties and any Liens otherwise permitted under Section 6.2 of this Agreement and permitted by the Mortgage; and
(d) Borrower shall have paid all fees and expenses due with respect to such Loan Advance.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Agreement and to make the Loan, Borrower represents and warrants to the Bank as follows:
Section 4.1 Corporate Authority. Borrower (i) is a corporation duly organized, validly existing, and in good standing under the Laws of its state of incorporation, (ii) is duly qualified to transact business as a foreign corporation in each jurisdiction where the nature and extent of its business and properties require the same, (iii) possesses all requisite authority, power, licenses, permits, and franchises to conduct its business and to execute, deliver, and perform and comply with the terms of this Agreement, the Note and those Security Documents to which it is a party, to enter into the Note, to mortgage, grant, bargain, sell, pledge, assign, convey, transfer, and set over the Mortgaged Property and to grant and create the Liens of this instrument and the other Security Documents, and all of the foregoing having been duly authorized and approved by all necessary corporate action on behalf of Borrower and for which no approval or consent of any Person or Tribunal is required which has not been obtained, (iv) has not used or transacted business under any other corporate, assumed, or trade name in the five-year period preceding the date hereof, (v) is not a "utility" as defined in Chapter 35 of the Texas Business and Commerce Code, as amended, and (vi) is not (and the execution, delivery, and performance of and compliance with the terms of this instrument or any other Security Document will not cause Borrower to be) in violation of the Bylaws or Articles or Certificate of Incorporation of Borrower. Borrower does not have any subsidiaries, and does not own any other interest, direct or indirect, in any other Person. The address of the chief executive office and principal place of business of Borrower is as set forth in the opening paragraph of this Agreement. Borrower has no other place of business. All records pertaining to its accounts receivable (including computer records) are kept at this address. Borrower agrees to maintain its principal office and place of business with all of Borrower's Files, in the jurisdiction where Borrower is entitled to receive notices hereunder unless changed after 30 days prior written notice to the Bank.
Section 4.2 Authorization; Consent. The execution, delivery and performance of this Agreement, the Note and those Security Documents to which Borrower is a party have been duly authorized by all necessary action by Borrower and do not and will not (i) violate any provision of any Laws applicable to Borrower, its certificate of incorporation, by-laws or any order, judgment or decree of any court or other agency of government binding on Borrower; (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any contractual obligation of Borrower, other than any such breach which will not, collectively or individually, cause a Material Adverse Effect, and except those agreements for which appropriate waivers or consents have been obtained and which are in full force and effect and copies of which have been provided to the Bank; (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Borrower (other than in favor of the Bank); or (iv) require any approval, authorization or declaration of, or to, any other Person except for those Persons from whom appropriate consents or approvals have been obtained and which are in full force and effect and copies of which have been provided to the Bank.
Section 4.3 Binding Obligations. This Agreement, the Note and those Security Documents to which Borrower is a party, when executed and delivered will be, legal, valid and binding obligations of Borrower enforceable in accordance with their respective terms.
Section 4.4 Financial Condition. The consolidated financial statements of Borrower and the Corporate Guarantor previously delivered to the Bank fairly present the consolidated financial position of each of these entities as of the date thereof and have been prepared in accordance with generally accepted accounting principles, and are correct and complete in all material respects. There has been no material adverse change in the condition, financial or otherwise, of either Borrower or the Corporate Guarantor since the date of the most recent financial statements delivered to the Bank.
Section 4.5 Title, Etc. Borrower has good and defensible title in and to all of its properties (i) shown as owned by Borrower on its books and records and (ii) reflected in the financial statements previously delivered to the Bank free and clear of all Liens except Liens otherwise permitted under Section 6.2
Section 4.6 Investments and Guaranties; Subsidiaries.
(a) Borrower has not made investments in, advances to or guaranties of the obligations of any Person, except for investments, advances and guarantees permitted by Section 6.6.
(b) Borrower has no subsidiaries except Bass Petroleum, Inc.
Section 4.7 Liabilities; Litigation.
(a) Borrower has no Debt, except as permitted by Section 6.1.
(b) There is no litigation, legal, administrative or arbitral proceeding, investigation or other action of any nature pending or, to the knowledge of Borrower, threatened against or affecting Borrower or threatened against or affecting any property owned or leased by Borrower which will, if determined adversely against Borrower, will have a Material Adverse Effect, except as set forth on Schedule 4.7.
Section 4.8 Taxes; Governmental Charges. Borrower has filed all tax returns (federal, state and local) and reports required to be filed and has paid all Taxes, assessments, fees and other governmental charges levied upon it or upon any of its properties or income which are due and payable except as set forth in Schedule 4.8 and except such as are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves under generally accepted accounting principles have been established.
Section 4.9 Licenses and Permits. Borrower possesses all governmental and regulatory licenses, permits, franchises and authorizations material to the conduct of its business. All such leases, licenses, permits, franchises and authorizations in any manner related to the property or business of Borrower and all other instruments, documents and agreements pursuant to which Borrower has obtained the right to use any property are in good standing, valid and effective in accordance with their respective terms, and there is not under any of such leases, instruments, documents or agreements any existing breach or default, nor has there occurred any event that (with or without the giving of notice of lapse of time, or both) would constitute a breach or default.
Section 4.10 Defaults. Borrower is not in default under, nor has any event or circumstance occurred which, but for the passage of time or the giving of notice, or both, would constitute a default under, any loan or credit agreement, indenture, mortgage, deed of trust, security agreement or other instrument or agreement evidencing or pertaining to any Debt of Borrower or under any contract or instrument to which Borrower is a party or by which Borrower is bound including, without limitation, any oil and/or gas lease, operating agreement, unitization agreement or other similar agreement for the production of Hydrocarbons.
Section 4.11 ERISA. Borrower does not sponsor, maintain or contribute to any Plan, and has not at any time in the past sponsored, maintained or contributed to any Plan.
Section 4.12 Environmental. (a) Except for matters which would not have a material adverse effect on the Borrower or any Corporate Guarantor, the Borrower, the Corporate Guarantor, and all of their respective properties, assets and operations are in full compliance with all Environmental Laws. Neither the Borrower nor any Corporate Guarantor is aware of, or has received notice of, any past, present, or future conditions, events, activities, practices, or incidents which may interfere with or prevent the compliance or continued compliance in all materials respects by the Borrower and the Corporate Guarantor with all Environmental Laws.
(b) The Borrower and the Corporate Guarantor have obtained all permits, licenses, and authorizations which are required under all Environmental Laws applicable to their respective businesses and properties.
(c) Except for matters which would not have a material adverse effect on the Borrower or the Corporate Guarantor, no non-exempt Hazardous Materials exist on, about, or within or have been used, generated, stored, transported, disposed of on, or released from any of the properties or assets of the Borrower or the Corporate Guarantor. The use which the Borrower and the Corporate Guarantor make and intend to make of their respective properties and assets will not result in the use, generation, storage, transportation, accumulation, disposal, or release of any Hazardous Materials on, in, or from any such properties or assets except for matters which would not have a material adverse effect on the Borrower or such Corporate Guarantor.
(d) There is no action, suit, proceeding, investigation, or inquiry before any court, administrative agency, or other governmental authority pending or, to the knowledge of the Borrower, threatened against the Borrower or the Corporate Guarantor relating in any way to any Environmental Law. Neither the Borrower nor the Corporate Guarantor has (i) any material liability for remedial action under any Environmental Law, (ii) received any request for information by any governmental authority or other Person with respect to the condition, use, or operation of any of its properties or assets that is reasonably likely to result in any material liability for remedial action under any Environmental Law or that is reasonably likely to have a material adverse effect on the Borrower or such Corporate Guarantor or (iii) received any notice from any governmental authority or other Person with respect to any material violation of or material liability under any Environmental Law.
Section 4.13 Margin Stock. None of the proceeds of the Loan Advances will be used for the purpose of purchasing or carrying "margin stock" as defined in Regulation G of the Board of Governors of the Federal Reserve System (12 C.F.R. Part 207) or for the purpose of reducing or retiring any Debt which was originally incurred to purchase or carry margin stock or for any other purpose which might constitute this transaction a "purpose" credit within the meaning of such Regulation G. Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stocks. Neither Borrower nor any Person acting on its behalf has taken or will take any action which might cause the Notes or this Agreement to violate Regulation G, or any other regulation thereunder, in each case as now in effect or as the same may hereinafter be in effect.
Section 4.14 No Material Misstatements. No information, exhibit or report including, without limitation, the reserve reports prepared by the Borrower with respect to the Mortgaged Properties that has been furnished to the Bank in connection with the negotiation of this Agreement contained any untrue statement of any material fact or omits to state a material fact necessary in order to make the statement contained herein or therein not misleading; subject, however, in the case of the reserve reports provided by the Borrower to the assumptions set forth therein. There is no fact known to the Borrower that the Borrower foresees will have a material adverse effect on the operations, Property, assets or condition (financial of otherwise) of the Borrower that has not been disclosed herein or in such other documents, certificates and written statements furnished to the Bank for use in connection
with the transactions contemplated hereby. Without limiting the foregoing, the Borrower's interest in each of the Mortgaged Properties will (i) with respect to each tract of land described in Exhibit A to the Mortgage (A) entitle the Borrower to receive a decimal share of the Hydrocarbons produced from, or obligated to, such tract not less than a decimal share of net revenue interests set forth in Exhibit A to the Mortgage in connection with such tract, (B) cause the Borrower to be obligated to bear a decimal share of the cost of exploration, development and operation of such tract of land not greater than the decimal share of working interests set forth in Exhibit A to the Mortgage in connection with such tract and (ii) if such Mortgaged Properties are shown in Exhibit A to be subject to a unit or units, with respect to each such unit, entitle the Borrower to receive a decimal share of all Hydrocarbons covered by such unit which are produced from, or allocated to, such unit not less than a decimal share of unit working interests set forth in Exhibit A in connection with such Mortgaged Properties.
ARTICLE 5. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any amounts are due under the Note or this Agreement unless the Bank shall otherwise give its prior written consent:
Section 5.1 Business and Financial Information. The Borrower will promptly furnish to the Bank from time to time upon request such information regarding the business and affairs and financial condition of the Borrower as the Bank may reasonably request, and will furnish to the Bank:
(a) Annual Reports - promptly after becoming available and in any event within 90 days after the close of each fiscal year of the Borrower, the audited consolidated balance sheet of the Borrower as of the end of such year and the audited consolidated statements of income, cash flow and stockholders' equity of the Borrower and the Corporate Guarantor for such year, setting forth in each case in comparative form, the corresponding figures for the preceding fiscal year, all in reasonable detail, and certified by an independent firm of certified public accountants reasonably acceptable to the Bank as having been prepared in accordance with generally accepted accounting principles; and
(b) Monthly Statements - promptly after becoming available, and in any event within 30 days after the close of each calendar month of the Borrower, the unaudited consolidated balance sheet of the Borrower as of the end of such period, and unaudited consolidated statements of income, cash flow and stockholders' equity for such month and for the period from the beginning of the fiscal year to the close of such month, accompanied by a statement of the chief financial officer of the Borrower to the effect that such statements have been prepared in accordance with generally accepted accounting principles; and
(c) Production Information - promptly upon becoming available, and in any event within 45 days after the end of each calendar month, a report showing, for such calendar month, the gross proceeds attributable to the interests of the Borrower of the sale of Hydrocarbons produced from the Mortgaged Properties, the quantities so sold, the taxes deducted from or paid out of such proceeds, the number of wells operated, drilled and abandoned, the aggregate lease operating expenses payable with respect to the Mortgaged Properties for such calendar month and such other information as the Bank may reasonably request; and
(d) Notice of Default - promptly upon becoming aware of the existence of any condition or event which constitutes, or with notice or lapse of time (or both) would constitute, an Event of Default under this Agreement, a written notice specifying the nature and period of existence thereof and what action the Borrower is taking or proposes to take with respect thereto; and
(e) Notice of Claimed Default - promptly upon becoming aware that any Person has given notice or taken any other action with respect to a claimed default under any indenture, mortgage, deed of trust, promissory note, loan agreement or note agreement to which the Borrower or the Guarantor is a party or has given written notice with respect to a claimed default under any other material agreement or undertaking to which the Borrower or the Guarantor is a party, a written notice specifying the notice given or action taken by such Person and the nature of the claimed default and what action the Borrower or such Guarantor is taking or proposes to take with respect thereto; and
(f) Environmental Matters - give written notice to the Bank immediately upon receipt of any notice that (i) the operations of Borrower or the Guarantor are not in material compliance with the requirements of all applicable Environmental Laws; (ii) Borrower or the Guarantor is subject to federal or state investigation evaluating whether any remedial action is needed to respond to the release of any Hazardous Material into the environment that is reasonably likely to result in any material liability for remedial action; or (iii) any properties or assets of Borrower or the Guarantor are subject to an Environmental Lien; and
(g) Litigation - promptly upon becoming aware of any action, suit or proceeding pending or threatened against the Borrower or the Guarantor in any court or before any arbitrator or governmental authority which suit or proceeding is not being handled by an insurer and is for any material amount, a written notice specifying the nature thereof and what action the Borrower or such Guarantor is taking or proposes to take with respect thereto.
Section 5.2 Certificates of Compliance. Concurrently with the furnishing of the annual and the quarterly financial statements pursuant to Sections 5.1(a) and (b) the Borrower will furnish or cause to be furnished to the Bank a certificate signed by the President or chief accounting officer of the Borrower stating that no Event of Default has occurred or is continuing.
Section 5.3 Books and Records. The Borrower shall, and shall cause the Corporate Guarantor to, keep books of record and account in which full, true and correct entries will be made of all financial dealings or transactions in relation to its business and activities, in accordance with generally accepted accounting principles, consistently applied.
Section 5.4 Inspection. The Borrower shall, and shall cause the Corporate Guarantor to, permit any officer, employee or agent of the Bank to visit and inspect any and all parts of its property, examine the books of record and accounts of the Borrower and the Corporate Guarantor, take copies and extracts therefrom, and discuss the affairs, finances and accounts of the Borrower and the Corporate Guarantor with their respective officers, accountants and auditors, all at such reasonable times and as often as the Bank may desire.
Section 5.5 Maintenance of the Property. The Borrower shall, and shall cause the Corporate Guarantor to, maintain all property owned by it in sufficient condition, or replace such property as is necessary in order to continue the business of Borrower or such Guarantor in substantially the manner in which it is presently conducted.
Section 5.6 Compliance with Laws, etc. The Borrower shall, and shall cause the Corporate Guarantor to, comply in all material respects with all Governmental Requirements (including, without limitation, Environmental Laws) applicable to Borrower or such Guarantor or any property owned by any of them.
Section 5.7 Taxes and Other Liens. The Borrower shall pay and discharge, and shall cause the Corporate Guarantor to pay and discharge, promptly when due, all taxes, assessments and governmental charges or levies imposed upon the Borrower or such Corporate Guarantor or upon the income or any part of the property as well as all claims of any kind (including claims for labor, materials, supplies and rent) which, if unpaid, might become a Lien upon any or all of the property of the Borrower or such Corporate Guarantor; provided, however, that the Borrower and the Corporate Guarantor shall not be required to pay any such tax, assessment, charge, levy or claim if the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings diligently conducted by or on behalf of the Borrower or such Corporate Guarantor, and if the Borrower or such Corporate Guarantor shall have set up reserves therefor adequate under generally accepted accounting principles.
Section 5.8 Performance of Obligations. The Borrower (a) shall pay the Note according to the reading, tenor and effect thereof and (b) shall do and perform, and shall cause each of the Guarantors to do and perform, every act and discharge all of the obligations provided to be performed and discharged under this Agreement, the Note and the Security Documents.
Section 5.9 Maintenance. The Borrower shall, and shall cause the Corporate Guarantor to: (a) maintain its corporate existence; (b) maintain its property (and any properties leased by or consigned to it or held under title retention or conditional sales contracts) in good and workable condition at all times and make all repairs, replacements, additions, betterments and improvements to its property as are necessary to the continuation of the business as it is presently conducted.
Section 5.10 Further Assurances. The Borrower shall (a) cure promptly any defects in the creation and issuance of the Note, any Security Document or the execution and delivery of this Agreement, and (b) at its expense, promptly do such other acts and execute and deliver to the Bank all such other and further documents, agreements and instruments as the Bank may request to carry into effect the purposes of this Agreement, the Note or the Security Documents.
Section 5.11 Required Insurance. In addition to the requirements provided in the Mortgage, as to all working interests owned by Borrower, Borrower shall maintain at its sole cost, with financially sound and reputable insurers acceptable to the Bank, insurance with respect to their respective interests in the property against such liabilities, casualties, risks and contingencies, including, but not limited to (i) comprehensive general liability insurance, protecting against claims for bodily injury, death and/or property damage arising out of the use, ownership, possession, operation and condition of the property owned or operated by Borrower, and (ii) workmen's compensation insurance, and in such types and amounts as is customary for Persons engaged in the same or similar businesses and similarly situated.
Section 5.12 Conduct of Business. The Borrower shall, and shall cause the Corporate Guarantor to, preserve and maintain all of its material leases, privileges, franchises, qualifications and rights that are necessary or desirable in the ordinary conduct of its business, and conduct its business as presently conducted in an orderly and efficient manner in accordance with good business practices. The Borrower shall perform, and shall cause the Corporate Guarantor to perform, all material obligations it is required to perform under the terms of each indenture, mortgage, deed of trust, security agreement, lease, franchise agreement, operating agreement or other instrument or obligation to which it is a party or by which it or any of its properties is bound.
Section 5.13 Title Opinion. Borrower shall, within thirty days of the execution of this Agreement, and, at the sole discretion of the Bank, prior to the initial Loan Advance to be made hereunder, deliver to the Bank an opinion of counsel with respect to the Borrower's title in any of the Mortgaged Properties not heretofore committed to a Mortgage in favor of the Bank, which opinion shall confirm the priority of the deed of trust Lien on and security interest of the Bank in the Mortgaged Properties covered by such opinion and the absence of any defects in the Borrower's title to such Mortgaged Properties that could have a material adverse effect on the Borrower's right, title and interest in the Mortgaged Properties or that could result in any of the representations and warranties of the Borrower with respect to the Mortgaged Properties being untrue. The Bank may waive or modify this requirement, at its discretion, and any such waiver or modification of this requirement shall not be deemed to be an amendment of this Agreement except to the extent of the specific waiver or modification.
Section 5.14 Information. The Borrower shall make available to the Bank and its engineers, attorneys, or representatives, at any time requested, Borrower's Files and if the Bank, or its representative, takes possession of the Mortgaged Property pursuant to this instrument, any other Security Document, or Law, the Bank shall be entitled to prompt possession of all Borrower's Files, and should the Liens of any Security Document be foreclosed, the purchaser at the resulting foreclosure sale shall be entitled to all Borrower's Files.
Section 5.15 Access to Mortgaged Properties. Borrower shall permit the Bank and its accredited agents, representatives, and employees at all times, and at their own expense to go upon, examine, inspect, and remain on the Mortgaged Properties, and to go on the derrick floor of any well being drilled thereon.
Section 5.16 Maintenance of Borrower's Files. Borrower shall maintain Borrower's Files, when applicable, as the same would be maintained by a reasonable and prudent operator, in which full, true, and correct entries shall be promptly made as to all operations, and all of Borrower's Files shall be subject to inspection by the Bank and its duly accredited representatives and attorneys during reasonable business hours; make a report of operations of the Mortgaged Property for the period since the last report setting out all data as to production, revenue, and expenses, prepared in such manner and in such form, and as often as the Bank may request; deliver to the Bank as soon as practicable, but in no event later than 60 days after the close of Borrower's fiscal quarter (or calendar quarter if Borrower is not on a fiscal year), Borrower's balance sheet as of the end of such quarter and a statement of Borrower's profits and losses for such quarter and for the year to date; deliver to the Bank as soon as practicable, but in no event later than 90 days after the end of Borrower's fiscal year (or calendar year if Borrower is not on a fiscal year), a report showing for such year the gross proceeds of the sale of Hydrocarbons, the quantity so sold, the Taxes, and the operating and other expenses deducted from, or paid out of, or with respect to, such proceeds, the number of such wells operated, drilled, completed, and abandoned, and such other information as The Bank may reasonably request, and such financial statements shall be prepared in a fashion as set forth above, shall be in reasonable detail, and shall otherwise be satisfactory in form to the Bank; and comply with the Bank's request, which request shall be Borrower's discretion to make, to have Borrower's financial statements for such year reviewed and reported upon, within 30 days before the end of Borrower's fiscal or calendar year, as the case may be, at Borrower's sole cost and expense, by independent public accountants acceptable to the Bank.
Section 5.17 Reservoir Reports. Within thirty (30) days of the Borrowing Base Redetermination Date (or at such other time as the Bank may request; provided, however, that the Bank shall not make such request more often than once each calendar year), Borrower shall furnish, at Borrower's expense, a report of an independent petroleum engineer or an engineering firm acceptable to the Bank, covering the prior and future productivity of the Mortgaged Property, which report will be prepared in such a manner and in such form as the Bank may request. If the report contemplated herein is not delivered in a timely manner, Borrower shall be deemed in default under the terms of this Agreement.
Section 5.18 Title Opinions. Furnish the Bank with copies of any title opinions covering Borrower's interest obtained by Borrower (either before or after the date hereof) on all of the Mortgaged Property when requested by the Bank.
Section 5.19 Notice of Change of Address; Transfer or Division Orders; Change of Purchaser. Upon the request of the Bank, Borrower will execute and deliver to any persons, corporations or other entities which pay over to Borrower the proceeds from the sale of production from the Mortgaged Properties a written notice of change of address of Borrower so that all transmittals of funds representing the proceeds from the sale of production shall be made to Borrower in care of the Bank at the Bank's address, as set forth on the opening page hereof. In addition, upon the request of the Bank, Borrower will execute and deliver to the same persons or entities described above in this section notices of the assignment of production provided for in the Mortgage, as well as assignment of all monies and accounts related to the properties described in the Mortgage, and shall require and direct that future payments attributable to such production or such monies or accounts, including amounts then owing but unpaid, shall be paid directly to the Bank. Finally, Borrower shall notify Bank of any change of purchaser of the production from the Mortgaged Properties and shall notify the Bank of the name and address of any such new purchaser.
ARTICLE 6. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any amounts are due under the Note or this Agreement unless the Bank shall otherwise give its prior written consent:
Section 6.1 Debt. Borrower shall not, and shall not permit any Corporate Guarantor to, incur, assume or otherwise become or remain directly or indirectly liable with respect to any Debt, except:
(a) Debt owing to the Bank or to any Person holding, directly or indirectly, all of the voting stock of the Bank; and
(b) Accounts payable incurred in the ordinary course of business; and
(c) The Debt identified on Schedule 6.1 and any renewals or extensions thereof; provided, however, that the principal amount thereof shall not be increased or the maturity date thereof accelerated; and
(d) Any Debt owing to the Guarantors; provided that such Debt is effectively subordinated to the rights of the Bank pursuant to the terms of a subordination agreement on a form acceptable to Bank.
Section 6.2 Liens. Borrower shall not, and shall not permit the Corporate Guarantor to, make, create, incur, assume or permit to exist any Lien or other encumbrance (including, without limitation, licenses, leases, easements, and concessions) on any of its property (now owned or hereafter acquired), except that the foregoing restrictions shall not apply to:
(a) Liens securing Debt owing to the Bank or to any Person holding, directly or indirectly, all of the voting stock of the Bank;
(b) Liens for taxes, assessments and other governmental charges or levies or the Liens, claims or demands of landlords, carriers, warehousemen, mechanics, laborers, materialmen, operators (except with respect to the Mortgaged Properties) and other like Persons arising by law in the ordinary course of business for sums which are not yet due and payable or which are being contested in good faith by appropriate proceedings diligently conducted if reserves adequate under generally accepted accounting principles shall have been established therefor;
(c) easements, rights-of-way, restrictions, title irregularities and other similar charges or encumbrances incurred in the ordinary course of business and not materially interfering with (i) the ordinary conduct of the business of the Borrower or such Corporate Guarantor, or (ii) the value of the particular property upon which said easement, right-of-way, restrictions, title irregularities or other similar charge or encumbrance is created;
(d) Liens disclosed on Schedule 6.2; or
(e) Liens disclosed on Exhibit B to any of the Mortgages.
Section 6.3 Dividends; Redemptions. The Borrower shall not, and shall not permit the Corporate Guarantor to, declare or pay any dividend or make any other distribution in respect of the capital stock (other than a dividend payable in common stock) of the Borrower or the Corporate Guarantor or purchase, retire, redeem or otherwise acquire for value any of such capital stock.
Section 6.4 Sale of Assets; Mortgaged Properties. (a) The Borrower shall not, and shall not permit the Corporate Guarantor to, sell, lease, transfer or otherwise dispose of any property material to the conduct of the business of Borrower or such Corporate Guarantor, except for the sale of Hydrocarbons in the ordinary course of business and the sale or disposal of inventory or equipment in the ordinary course of business.
(b) The Borrower shall not (i) sell, lease, assign, transfer, abandon or otherwise directly or indirectly dispose of all or any interest in any of the Mortgaged Properties, (ii) forward sell production of Hydrocarbons from the Mortgaged Properties pursuant to any arrangement that does not provide for full payment therefor at the time of production and delivery or (iii) directly or indirectly, create, incur, assume or suffer to exist any mineral fee interests, overriding royalty and royalty interests, leasehold interests, interests in production or any other interest in Hydrocarbons produced on the Mortgaged Properties, other than those in effect on the date hereof and disclosed in the Mortgage.
Section 6.5 Limitations on Contingent Liabilities. Borrower shall not, and shall not permit the Corporate Guarantor to, enter into any guarantees or otherwise become responsible, through indemnity, suretyship or any other contractual relationship, contingently or otherwise, for the obligations of any other Person, except endorsements of negotiable instruments for collection in the ordinary course of business.
Section 6.6 Investments, Loans and Advances. The Borrower shall not, and shall not permit the Corporate Guarantor to, make or permit to remain outstanding any investments, loans or advances to any Person, except:
(a) investments in obligations of the United States government or any agency thereof or obligations guaranteed by the United States government having a maturity not in excess of one year;
(b) investments in certificates of deposit with any commercial banks with a combined capital and surplus in excess of $100,000,000.00 and having maturities not in excess of one year;
(c) repurchase agreements relating to investments described in Sections 6.9(a) and (b) with any Person with a combined capital and surplus in excess of $100,000,000.00;
(d) commercial paper issued by any Person if at the time of purchase such commercial paper is rated not less than "A-1" (or the then equivalent) by the rating service of Standard & Poor's Corporation or not less than "P-1" (or the then equivalent) by the rating service of Moody's Investors Service;
(e) loans or advances not exceeding $50,000 at any time outstanding to the Corporate Guarantor;
(f) advances or extensions of credit in the form of accounts receivable made in the ordinary course of business;
(g) loans, advances or extension of credit to the Corporate Guarantor under applicable contracts or agreements in connection with oil and gas development activities of the Borrower; or
(h) loans and advances to employees of the Borrower or any subsidiary of the Corporate Guarantor made in the ordinary course of business not exceeding $15,000 in the aggregate at any time outstanding.
Section 6.7 Mergers; etc. (a) The Borrower shall not, and shall not permit the Corporate Guarantor to, merge or consolidate with any Person.
(b) The Borrower shall not issue any additional shares of capital stock or any other securities convertible or exchangeable into its capital stock.
Section 6.8 Nature of Business. The Borrower will not permit any material change to be made in the character of its business or the business of the Corporate Guarantor as carried on at the date hereof.
Section 6.9 ERISA. Borrower will not, and will not permit the Corporate Guarantor to, at any time sponsor, maintain or contribute to any Plan.
Section 6.10 Sale or Discount of Receivables. The Borrower shall not, and shall not permit the Corporate Guarantor to, discount or sell with recourse or sell for less than the market value thereof, any of its notes or accounts receivables.
Section 6.11 Sale and Leasebacks. The Borrower shall not, and shall not permit the Corporate Guarantor to, enter into any arrangement, directly or indirectly, with any Person where the Borrower or such Corporate Guarantor shall sell or transfer any property, whether now or hereafter acquired, and whereby the Borrower or such Corporate Guarantor shall then or thereafter rent or lease as lessee such property or any part thereof or any other property which the Borrower or such Corporate Guarantor intends to use for substantially the same purpose or purposes as the property sold or transferred.
Section 6.12 Transaction with Affiliates. The Borrower shall not enter into any transaction (including without limitation, the purchase, sale or exchange of any property or the rendering of any service) with any Affiliates except transactions in the ordinary course of business and pursuant to the
reasonable requirements of the Borrower's business and upon fair and reasonable terms no less favorable to the Borrower than the Borrower would obtain in a comparable arms-length transaction with a Person not an Affiliate; provided, however, that nothing in this Section 6.12 shall permit any transaction prohibited by the other provisions of this Agreement.
Section 6.13 Environmental Matters. Except in material compliance with the relevant Governmental Requirements, the Borrower will not cause or permit any non-exempt Hazardous Material to be placed, held, located or disposed of on, under or at any property now or hereafter owned, leased or otherwise controlled directly or indirectly by Borrower or any Corporate Guarantor.
Section 6.14 Cancellation of Insurance. The Borrower shall not cause or permit any insurance policy required to be carried hereunder to be terminated or lapse or expire without provision for adequate renewal thereof.
Section 6.15 No Subsidiaries. The Borrower will not create or suffer to exist any subsidiary of the Borrower.
Section 6.16 Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of an Event of Default if such action is taken or condition exists.
ARTICLE 7. DEFAULT
Section 7.1 Events of Default. Any of the following events shall be considered an Event of Default:
(a) Default in the payment of any principal or interest on the Note when it becomes due and payable, whether as a result of mandatory prepayment, acceleration or otherwise;
(b) Default in the payment of any fees or expenses required to be paid under this Agreement when the same become due and payable;
(c) The discovery by the Bank that any statement, representation or warranty made by the Borrower or any Guarantor in this Agreement or the Security Documents or by the Borrower in a certificate, instrument or statement delivered to or in connection with this Agreement is false, misleading or erroneous in any material respect when made;
(d) Default in the performance or breach of any covenant or agreement contained in Sections 5 and 6 and the continuance of such default for a period of ten (10) Business Days after the earlier of (A) receipt by the Borrower of written notice thereof from the Bank or (B) the Borrower otherwise having knowledge of such default or breach.
(e) Default in the performance or breach of any covenant or agreement in this Agreement (other than as specified in Articles 5 and 6 of this Agreement or otherwise provided for in this Section 7.1) or in any Security Document and the continuance of such default or breach for a period of 30 days after the earlier of (A) receipt by the Borrower of written notice thereof from the Bank; or (B) the Borrower otherwise having knowledge of such default or breach;
(f) The Borrower or any Guarantor shall execute an assignment for the benefit of their respective creditors or apply for or consent to the appointment of any receiver, trustee or similar officer for it or all or any substantial part of its property or assets, or such receiver, trustee or similar officer shall be appointed without the application or consent of the Borrower or such Guarantor and such appointment shall continue for a period of 30 days;
(g) The Borrower or any Guarantor shall institute (by petition, application, answer, consent or otherwise) any bankruptcy, insolvency, reorganization, readjustment of debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction.
(h) Any proceeding referred to in Section 7.1 (g) shall be instituted against the Borrower or any Guarantor or any writ, warranty or attachment or execution or similar process shall be issued or levied against a substantial part of the property or assets of the Borrower or any Guarantor and such writ, warrant of attachment or execution or similar process shall not be released, vacated or fully bonded within 30 days after its issue or levy;
(i) An event of default (however defined) shall occur with respect to any bond, debenture, note or other evidence of indebtedness of the Borrower (other than this Agreement and the Note) or any Corporate Guarantor in an amount exceeding $50,000 or under any indenture or other instrument under which such indebtedness has been issued or by which it is governed and the expiration of the applicable period of grace, if any, specified in such evidence of indebtedness or indenture or instrument.
(j) Any change in one or more of the partners of Borrower, if Borrower is a partnership (other than by reason of death or legal incapacity).
(k) Any change in one or more of the officers of Borrower, if Borrower is a corporation (other than by reason of death or legal incapacity).
(l) Any change in ownership of more than 50% of the equity interests in Borrower if Borrower is not one or more individuals.
(m) The failure of Borrower or any Guarantor to pay any money judgment, writ, warrant of attachment, or similar process, involving an amount in excess of $10,000.00, entered or filed against Borrower or any Guarantor, or any of Borrower's or any Guarantor's assets that remains undischarged, unvacated, unbonded, or unstayed for a period of ten days or in any event later than ten days prior to the date on which the assets of Borrower or any Guarantor may be sold to satisfy such judgment.
(n) The failure to have discharged within a period of ten days after the commencement thereof, any attachment, sequestration, or similar proceedings against any of Borrower's or any Guarantor's assets.
Section 7.2 Rights and Remedies. Upon the occurrence of an Event of Default, the Bank may exercise any or all of the following rights and remedies:
(a) By notice to the Borrower, declare its commitment to make Loan Advances terminated; provided, however, that upon the occurrence of an Event of Default described in Section 7.1(f), (g) or (h), any commitment to make Loan Advances shall terminate automatically without notice or any other action by the Bank.
(b) By notice to the Borrower, declare the entire unpaid principal
amount of the Note outstanding, all interest accrued and unpaid thereon, and all
other amounts payable under this Agreement to be forthwith due and payable,
whereupon the Note, all such accrued interest and all such amounts shall become
and be forthwith due and payable without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrower;
provided, however, that upon the occurrence of an Event of Default described in
Section 7.1(f), (g) or (h), the entire unpaid principal of the Note, all accrued
interest and all other amounts payable under this Agreement and the Note shall
be automatically due and payable without any notice or demand.
(c) Exercise or enforce any or all other rights or remedies available to the Bank by applicable law, agreement or otherwise.
ARTICLE 8. MISCELLANEOUS
Section 8.1 Expenses. Borrower agrees to pay, reimburse, and save the Bank harmless against liability for the payment of, all out-of-pocket expenses arising in connection with any transaction contemplated by this Agreement which may be payable in respect of the execution, delivery, performance or enforcement of this Agreement, the Note and the Security Documents, and the fees and expenses of the Bank's counsel (a) in connection with the negotiation, preparation, execution and delivery of any modifications to this Agreement, the Note and the Security Documents, (b) the administration of any of the foregoing, and (c) all amounts reasonably expended, advanced or incurred by the Bank to satisfy any obligation of the Borrower under this Agreement, or to collect the Note, or to enforce the rights of the Bank under this Agreement, the Note or any of the Security Documents, including, but not limited to, fees of auditors and accountants, and investigation expenses incurred by the Bank in connection with any such matters. The obligations of Borrower hereunder shall survive payment of the amounts due under the Note.
Section 8.2 Indemnification. The Borrower hereby agrees to indemnify and defend the Bank and its directors, officers, agents, employees and special counsel (the "Indemnified Persons") from and hold each of them harmless against any and all losses, liabilities, claims, damages, deficiencies, interest, judgments, expenses, suits, actions, obligations, penalties and disbursements, including, without limitation, reasonable legal and investigative fees and expenses of whatever kind and nature (the "Liabilities") which may be incurred by or imposed, at any time, in any way relating to or arising out of or alleged, by a Person other than such Indemnified Person to in any way relate to or arise out of (i) any of the transactions contemplated by this Agreement; (ii) any violation by the Borrower or the Corporate Guarantor of any Governmental Requirement including but not limited to any Environmental Laws or any laws or regulations relating to Hazardous Material, treatment, storage, disposal, generation and transportation, air, water and noise pollution, soil or ground or water contamination, the handling, storage or release into the environment of Hazardous Materials; or (iii) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission or release from, properties utilized by Borrower or the Corporate Guarantor in the conduct of its business into or upon any land, the atmosphere, or any watercourse, body of water or wetland, of any Hazardous Material (including, without limitation, any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under the Environmental Laws), provided, however, that the foregoing indemnity with respect to any Indemnified Person shall not extend to any Liabilities resulting from the gross negligence or willful misconduct of such Indemnified Person. If any such claim or action shall be brought against any Indemnified Person that the Indemnified Person believes would be indemnified against hereunder, such Indemnified Person shall give prompt notice to the Borrower. Upon receipt of such notice of any claim by Borrower from an Indemnified Person, the Borrower shall be entitled to participate in the joint defense thereof. The provision of and undertakings and indemnifications set out in this Section 8.2 shall survive the satisfaction, payment and performance of the obligation and the termination of this Agreement.
Section 8.3 Waivers. THE BORROWER IRREVOCABLY AND UNCONDITIONALLY SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE Note AND THE SECURITY DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NONEXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF TEXAS, CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT ANY SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT FORUM, AGREES NOT TO PLEAD OR CLAIM ANY SUCH OBJECTION AND AGREES THAT AND HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN THIS ARTICLE 8
Section 8.4 Applicable Law. THIS AGREEMENT AND Note SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE SUBSTANTIVE LAWS
OF THE STATE OF TEXAS.
Section 8.5 Notices. Except as may otherwise be expressly provided herein, any notice herein required or permitted to be given shall be in writing or by telephone or facsimile transmission with subsequent written confirmation, and may be personally served or sent by United States mail and shall be deemed to have been given when sent or transmitted, as the case may be. For the purposes hereof, the addresses of the parties hereto (until notice of a change thereof is delivered as provided in this Section 8.5) shall be as set forth in the opening paragraph of this Agreement.
Section 8.6 Survival of Warranties and Agreements. All agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement.
Section 8.7 Waiver; Remedies Cumulative. No failure or delay on the part of the Bank in the exercise of any power, right or privilege hereunder or under the Note shall impair such power, right or privilege or operate as a waiver thereof; nor shall any single or partial exercise of any such power, right, or privilege preclude any other or further exercise thereof or of any other right, power or privilege. The powers, rights, privileges and remedies herein provided are cumulative and not exclusive of any rights, powers, privileges or remedies provided by law or in equity.
Section 8.8 Severability. In case any provision in or obligation under this Agreement or the Note shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
Section 8.9 Entire Agreement. This Agreement, the Security Documents and the various additional agreements and documents contemplated hereby contain the entire agreement of the parties concerning the subject matter hereof. In the event of irreconcilable conflict between this Agreement and the other documents contemplated hereby, the provisions of this Agreement shall control.
This Agreement supercedes the following agreements entered into by and between the Bank and Borrower and the Corporate Guarantor:
(a) Credit Agreement dated June 21, 1999, entered into by and between Borrower and Bank, pertaining to a Term Loan in the original principal amount of $500,000;
(b) Credit Agreement dated August 18, 1999, entered into by and between Borrower and Bank, pertaining to a Term Loan in the original principal amount of $125,000.
Both Borrower and the Bank warrant and represent that the entire agreement made between them is contained within this Agreement, as defined herein, as the same may be amended or supplemented from time to time, and that no agreements or promises exist between the Parties that are not reflected in the language of the various documents executed in conjunction with this transaction.
THIS WRITTEN LOAN 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.
Section 8.10 Further Assurances. At any time or from time to time upon the request of the Bank, Borrower will execute and deliver such further documents and do such other acts and things as the Bank may reasonably request in order to effect fully the purposes of this Agreement, the Note and the Security Documents.
Section 8.11 Headings. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for an other purpose or be given any substantive effect.
Section 8.12 Successors and Assigns; Subsequent Holders of the Note. This Agreement shall be binding upon the parties hereto and their respective permitted successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of the Bank. Borrower's rights or any interest therein hereunder may not be assigned without the consent of the Bank. Borrower hereby agrees that any disposition of the Note or an interest therein, will give rise to a direct obligation of Borrower to the subsequent holder of the Note and the subsequent holder shall for all purposes be considered a the Bank and shall have all rights of the Bank arising under this Agreement and the Note.
Section 8.13 Amendments. No amendment or waiver of any provision of this Agreement shall be effective unless the same shall be in writing and signed by the Borrower and the Bank.
Section 8.14 Counterparts; Effectiveness. This Agreement and any amendments, waivers, consents, or supplements may be executed in any number of counterparts, and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument.
Section 8.15 Joinder. The undersigned accommodation makers and guarantors join in the execution hereof to evidence their approval of the terms and conditions herein set forth and their agreement to be bound by such terms and conditions and to perform their obligations under each Note and Guaranty. In respect of each such obligation, which is also an obligation of the Borrower, the undersigned accommodation makers and guarantors and Borrower shall be jointly and severally obligated thereon.
IN WITNESS WHEREOF, the parties have caused this Credit Agreement to be executed the day and year first above written.
UNION PLANTERS BANK, N.A.
FIELDPOINT PETROLEUM CORPORATION
GUARANTORS:
BASS PETROLEUM, INC.
The following jurat is included for purposes of the declaration regarding the purpose of the Loan as set forth on Annex A:
SUBSCRIBED AND sworn to before me by Ray D. Reaves, Jr., this 14th day of December, 2000.
[stamp]
ANNEX A
Essential Loan Terms Borrower: Name: FieldPoint Petroleum Corporation Address: P.O. Box 200685 Austin, Texas 78720 Telephone: 512/250-8692 Telecopier: 512/335-1294 Tax ID number: 84-0811034 |
Purpose of Revolving Line of Credit:: For acquisition of properties and to provide working capital.
Borrower warrants that the Revolving Line of Credit is to be used solely for business, commercial or agricultural purposes. Borrower further warrants that the Revolving Line of Credit is specifically exempted under Section 226.3 (a) of Regulation Z issued by the Governors of the Federal Reserve System under Title I (viz., the Truth in Lending Act) and Title V (viz., General Provisions) of the Consumer Protection Act, and that no disclosures are required to be given under such regulations and federal laws in connection with the Revolving Line of Credit. Borrower further acknowledges that Lender is in reliance upon the truth of the foregoing statements and that Lender is making the Revolving Line of Credit without giving to Borrower the disclosures that may otherwise be required under such laws and regulations.
Original Principal Amount of Revolving Line of Credit (Section 2.1): $2,000,000
Schedule for Revolving Line of Credit Advances (Section 2.1):
Any amount, which combined with all prior draws and combined with the unpaid principal balances on Loan Nos. 27828 (dated June 21, 1999, in the original principal amount of $500,000) and 27955 (dated August 18, 1999, in the original principal amount of $125,000), will not exceed the sum of $2,000,000, may be drawn upon one Business Day's written notice to the Bank in the form of Annex C by an officer of Borrower. Each draw shall be deposited in Borrower's designated account.
Interest Rate and Manner of Calculation (Section 2.2(b)):
The prime rate of interest, as quoted in the Wall Street Journal, plus
one percent (1%), floating Maturity Date (Section 2.3(a)): April 1, 2002 Initial Borrowing Base: $2,000,000 |
Borrowing Base Redetermination Date: May 1 and November 1 annually during the term of the loan
Monthly Borrowing Base Reduction: One fiftieth of the aggregate borrowing base in the first month and a fractional reduction each succeeding month equal to a fraction the numerator of which is one and the denominator of which is the denominator of the preceding month minus one.
Effective Date of Initial Borrowing Base Reduction: January 25, 2001
Payment Schedule and Commencement Date (Section 2.3(a)):
Commencing on January 25, 2001, Borrower shall pay to Bank 1/50th of the outstanding principal balance, together with all accrued and unpaid interest; on February 25, 2001, Borrower shall pay to Bank 1/49th of the outstanding principal balance, together with all
accrued and unpaid interest; on March 25, 2001, Borrower shall pay to Bank 1/48th of the outstanding principal balance, together with all accrued and unpaid interest; and continuing on the twenty-fifth day of each succeeding calendar month until the Maturity Date, Borrower shall pay a fraction of the outstanding principal balance, the numerator of which shall be one and the denominator of which shall be the denominator of the preceding month less one. On the Maturity Date Borrower shall pay to Bank all remaining unpaid principal and accrued and unpaid interest. Commencing on January 25, 2001, Borrower shall pay to Bank all accrued and unpaid interest, and on the twenty-fifth day of each succeeding calendar month until the Maturity Date Borrower shall continue to pay Bank all accrued and unpaid interest.
Revolving Line of Credit Advance Origination Fee (Section 2.2(a)): none
Original Transaction Fee (Section 2.3(c)): $15,000.00
Minimum Prepayment Amount (Section 2.4): none
Borrowing Base Redetermination Fee (Section 2) For each redetermination of the
Borrowing Base, Borrower shall reimburse the Bank for all engineering and related expenses incurred by Bank in connection with such redetermination, including a reasonable charge for services performed by employees of the Bank or its affiliates. Corporate Guarantor: Bass Petroleum, Inc. P. O. Box 200685 Austin, Texas 78720 Individual Guarantor: Ray D. Reaves, Jr. 1703 Edelweiss Drive Cedar Park, Texas 78613 512/335-6920 |
ANNEX B
[See attached.]
$2,000,000.00 December 14, 2000 Maker: FIELDPOINT PETROLEUM CORPORATION Payee: UNION PLANTERS BANK, N.A. P.O. Box 200685 5005 Woodway Austin, Texas 78720 Houston, Texas 77056 |
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned Maker named above promises to pay to the order of Payee named above at its offices at the address set forth above in lawful money of the United States of America, the principal sum of TWO MILLION and NO/100 DOLLARS ($2,000,000.00), or so much thereof as may be advanced and outstanding against this Note pursuant to the Revolving Credit Agreement of even date herewith by and between Maker and Payee (as amended, supplemented or restated from time to time, the "Credit Agreement"), together with interest on the principal balance from time to time remaining unpaid at the rate and upon the terms provided in the Credit Agreement.
Reference is hereby made to the Credit Agreement for matters governed thereby, including, without limitation, certain events which will entitled the holder hereof to accelerate the maturity of all amounts due hereunder. Unless otherwise defined herein or unless the context hereof otherwise requires, each term used herein with its initial letter capitalized has the meaning given to such term 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 the 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 Documents.
IN WITNESS WHEREOF, the undersigned has executed this note as of the day and year first above written.
MAKER:
FIELDPOINT PETROLEUM CORPORATION
a Colorado corporation
ANNEX C SCHEDULE OF MORTGAGES ================================================================================ -------------------------------------------------------------------------------- LIENS granted by FieldPoint Petroleum Corporation for the benefit of Union Planters Bank, N.A., each dated August 18, 1999, originally given to secure the repayment of a Note in the original principal amount of $500,000 -------------------------------------------------------------------------------- Coal County, Oklahoma Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement Aug. 24, 1999 Clerk's File No. 99711, UCC Records Mortgage Aug. 24, 1999 Book 581, page 741, Real Property Records Logan County, Oklahoma Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement August 23, 1999 Clerk's File No. 555, UCC Records Mortgage August 23, 1999 Book 1516, page 439, Real Property Records McClain County, Oklahoma Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement Aug. 23, 1999 Clerk's File No. 677, UCC Records Mortgage Aug. 23, 1999 Book 1525, page 15, Real Property Records Oklahoma County, Oklahoma Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement September 27, 1999 Clerk's File No. N0007023, UCC Records Mortgage September 28, 1999 Book 7692, page 1065, Real Property Records Pontotoc County, Oklahoma Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement September 23, 1999 Clerk's File No. 971, UCC Records Mortgage September 23, 1999 Book 1549, page 391, Real Property Records -------------------------------------------------------------------------------- LIENS granted by FieldPoint Petroleum Corporation for the benefit of Union Planters Bank, N.A., each dated June 21, 1999, originally given to secure the repayment of a Note in the original principal amount of $500,000 -------------------------------------------------------------------------------- Blaine County, Oklahoma Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement July 19, 1999 Clerk's File No. 394, UCC Records Mortgage July 19, 1999 Book 787, page 234, Real Property Records Caddo County, Oklahoma Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement July 17, 1999 Clerk's File No. 1134, UCC Records Mortgage Aug. 12, 1999 Book 2249, page 319, Real Property Records -1- |
Carter County, Oklahoma Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement Aug. 16, 1999 Clerk's File No. 1080, UCC Records Mortgage Aug. 16, 1999 Book 3431, page 244, Real Property Records Comanche County, Oklahoma Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement Aug. 25, 1999 Clerk's File No. R000922, UCC Records Mortgage Aug. 25, 1999 Book 3284, page 215, Real Property Records Coal County, Oklahoma Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement July 20, 1999 Clerk's File No. R0684, UCC Records Mortgage July 20, 1999 Book 581, page 97, Real Property Records Creek County, Oklahoma Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement July 19, 1999 Clerk's File No. 915, UCC Records Mortgage July 19, 1999 Book 408, page 454, Real Property Records Custer County, Oklahoma Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement July 19, 1999 Clerk's File No. 596, UCC Records Mortgage July 19, 1999 Book 1075, page 215, Real Property Records Dewey County, Oklahoma Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement July 19, 1999 Clerk's File No. 708, UCC Records Mortgage July 19, 1999 Book 1114, page 464, Real Property Records Grady County, Oklahoma Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement July 19, 1999 Clerk's File No. 911-L, UCC Records Mortgage July 19, 1999 Book 3129, page 338, Real Property Records Haskell County, Oklahoma* Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement July __, 1999 Clerk's File No. _____, UCC Records Mortgage July __, 1999 Book ____, page ___, Real Property Records Latimer County, Oklahoma Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement July 20, 1999 Clerk's File No. 283, UCC Records Mortgage July 20, 1999 Book 543, page 707, Real Property Records -2- |
LeFlore County, Oklahoma Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement July 20, 1999 Clerk's File No. 1598, UCC Records Mortgage July 20, 1999 Book 1288, page 387, Real Property Records Logan County, Oklahoma Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement July 19, 1999 Clerk's File No. 473, UCC Records Mortgage July 19, 1999 Book 1512, page 322, Real Property Records McClain County, Oklahoma Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement July 19, 1999 Clerk's File No. 577, UCC Records Mortgage July 19, 1999 Book 1521, page 884, Real Property Records Oklahoma County, Oklahoma Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement Aug. 18, 1999 Clerk's File No. 42180, UCC Records Mortgage July 26, 1999 Book 7645, page 943, Real Property Records Oklahoma County, Oklahoma - Statewide UCC Filings Financing Statement Filed August 18, 1999; Clerk's File No. 42181 Pittsburg County, Oklahoma Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement July 21, 1999 Clerk's File No. 1122, UCC Records Mortgage July 21, 1999 Book 1014, page 314, Real Property Records Pontotoc County, Oklahoma Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement July 19, 1999 Clerk's File No. 725, UCC Records Mortgage July 19, 1999 Book 1544, page 438, Real Property Records Washita County, Oklahoma* Instrument Date filed Recording data ---------- ---------- -------------- Financing Statement July __, 1999 Clerk's File No. _____, UCC Records Mortgage July __, 1999 Book ____, page ___, Real Property Records |
Deed of Trust, recorded in Volume 1059, page 364, Official Public Records, Fayette County, Texas.
Financing Statement, filed April 14, 1999, under Clerk's File No. 22471, Fayette County, Texas, and filed April 14, 1999, under Clerk's File No. 99-074409 in the office of the Secretary of State of Texas.
$500,000 -------------------------------------------------------------------------------- Jurisdiction Type of Instrument Dated filed Recording data ------------ ------------------- ----------- -------------- Bastrop County, Texas Deed of Trust 12-30-96 Volume 830, page 677, Official Records Financing Statement 12-30-96 Clerk's File No.41 Lee County, Texas Deed of Trust 12-23-96 Volume 791, page 65, Real Property Records Financing Statement 12-23-96 Clerk's File No. 13151 Secretary of State Financing Statement 12-27-96 File Stamp No. 96-255364 |
Jurisdiction Type of Instrument Dated filed Recording data ------------ ------------------- ----------- -------------- Converse County WY Deed of Trust 09-17-96 Clerk's file No. 823078 and recorded in Book 1099, page 288, Mortgage Records Financing Statement 09-17-96 Clerk's file No. 823079 Secretary of State Financing Statement 09-17-96 Clerk's file No. 96261-11-1A07 |
ANNEX D
[attached]
THIS GUARANTY AGREEMENT, dated as of December 14, 2000, is executed by and between each of the following named parties whose addresses, telephone and telecopier numbers are set forth with their respective names:
RAY D. REAVES, JR. and BASS PETROLEUM, INC. (collectively "Guarantors") 1703 Edelweiss P. O. Box 200685 Austin, Texas 78613 Austin, Texas 78720 Telephone: 512/335-6920 Telephone: 512/250-8692 |
and
UNION PLANTERS BANK, N.A. ("Assignee")
a national banking corporation
5005 Woodway
Houston, Texas 77056
Telephone: 713/867-6330
Telecopier: 713/867-7439
Attention: Rebecca Dozier, Senior Vice President
W I T N E S S E T H:
WHEREAS, the Bank and FieldPoint Petroleum Corporation, a Colorado corporation ("FieldPoint"), have entered into that certain Revolving Credit Agreement dated of even date herewith (the "Credit Agreement"), pursuant to which the Bank has agreed to loan to FieldPoint the sum of $2 million, on the terms set forth in the Credit Agreement, which loan is secured by certain oil and gas properties and related rights in accordance with the terms and conditions provided therein; and
WHEREAS, it is a condition precedent of the Credit Agreement that Guarantors shall execute and deliver to the Bank a satisfactory guaranty of the obligations of FieldPoint set forth in the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and of Ten Dollars and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledge, Guarantor and the Bank hereby agree as follows:
Section 1. Definitions. The following terms shall have the following meanings:
"Guarantied Obligations" means collectively all of the undertakings which are guaranteed by Guarantors and described in Section 2. hereof.
Section 2. Guaranty.
(a) Guarantors hereby irrevocably, absolutely, and unconditionally guarantee and agree with the Bank that:
(i) FieldPoint shall perform, in all material respects, all duties, obligations and undertakings set froth in the Credit Agreement; and
(ii) all sums payable by FieldPoint under the Note or under the Credit Agreement will be promptly paid in full when due in accordance with the provisions thereof.
(b) If FieldPoint shall for any reason fail to perform any Guarantied Obligation, Guarantors will either:
(i) cause such Guarantied Obligation to be promptly and fully performed, or, at the Bank's election,
(ii) make all payments to the Bank which may from time to time be required of FieldPoint.
(c) Regardless of whether the Bank is (at any time) precluded or stayed from enforcing or exercising any of its rights or remedies under the Credit Agreement or any related instrument or document (collectively, the "Operative Documents") against Guarantors, such rights and remedies may be enforced directly against Guarantors, as a primary obligation of Guarantors, without the joinder of, demand on or the taking of any other action against FieldPoint or any other person. Regardless of whether FieldPoint or any person is precluded or stayed from (or otherwise fails to) pay or perform any of the Guaranteed Obligations (upon demand by the Bank), Guarantors shall pay or perform (or cause to be paid or performed) such Guaranteed Obligations. Without limiting the foregoing provisions, if enforcement of the rights or remedies of the Bank under the Operative Documents is dependent upon delivering notices or taking any other actions (such as delivering a demand), then the Bank may deliver such notices to and take such other action with or against Guarantors (in lieu of FieldPoint) for all purposes under this Agreement and the Operative Documents. Nothing herein requires the Bank to first exercise or exhaust remedies against FieldPoint or any other person before exercising remedies against Guarantors pursuant to this Agreement.
Section 3. Successors and Assigns. Guarantors' rights or obligations hereunder may not be assigned or delegated. This Guaranty shall apply to and inure to the benefit of the Bank and its successors and assigns.
Section 4. Representations and Warranties. Guarantors hereby represent and warrant as follows:
(a) The recitals at the beginning of this Guaranty are true and correct in all respects.
(b) This Guaranty is a legal, valid and binding obligation of Guarantors, enforceable against Guarantors in accordance with its terms except as limited by bankruptcy, insolvency or other laws of general application relating to the enforcement of creditors' rights and by general equitable principles.
(c) There is no action, suit or proceeding pending or, to the knowledge of Guarantors, threatened against or otherwise affecting Guarantors before any court, arbitrator or governmental department, commission, board, bureau, agency or instrumentality which may materially and adversely affect Guarantors' financial condition or Guarantors' ability to perform Guarantors' obligations hereunder.
Section 5. Nature of Guaranty. This Agreement is (a) irrevocable, unconditional and absolute; (b) a guaranty of payment, performance and compliance and not of collection; and (c) in no way conditioned or contingent upon any attempt to collect from or enforce performance or compliance by FieldPoint, or upon any other event, contingency or circumstance whatsoever. This Agreement and the Guaranteed Obligations shall be binding upon and against Guarantors without regard to the validity or enforceability of any of the Operative Documents, or any provision thereof, and Guarantors hereby waive any defense relating to the enforceability of such documents or any provision contained therein. Guarantors also agree to pay to the Bank such further amounts as shall be sufficient to cover the costs of collecting or enforcing the Guaranteed Obligations or otherwise enforcing this Agreement (including reasonable fees, expenses and disbursements of its counsel).
Section 6. Guarantors' Obligations Unconditional. The covenants, agreements and duties of Guarantors set forth in this Agreement shall not be subject to any counterclaim, setoff, deduction, diminution, abatement, stay, recoupment, suspension, deferment, reduction or defense (other than full and strict compliance or performance by Guarantors with Guarantors' obligations hereunder) based upon any claim that Guarantors, or any other person, may have against the Bank or any other person, and shall remain in full force and effect without regard to, and shall not be released, discharged or in any way affected by, any circumstance or condition whatsoever (whether or not Guarantors or the Bank shall have knowledge or notice thereof or shall have assented thereto and notwithstanding the fact that no rights were reserved against Guarantors in connection therewith).
Section 7. No Subrogation. GUARANTORS HEREBY WAIVE ANY AND ALL RIGHTS OF SUBROGATION, INDEMNIFY, CONTRIBUTION OR REIMBURSEMENT, ANY BENEFIT OF, OR RIGHT TO ENFORCE ANY REMEDY THAT THE BANK NOW HAS OR MAY HEREAFTER HAVE AGAINST FIELDPOINT IN RESPECT OF THE GUARANTEED OBLIGATIONS, OR ANY PROPERTY, NOW OR HEREAFTER HELD BY FIELDPOINT AS SECURITY FOR THE GUARANTEED OBLIGATIONS AND ANY AND ALL SIMILAR RIGHTS GUARANTORS MAY HAVE AGAINST THE CORPORATION UNDER APPLICABLE LAW OR OTHERWISE. If, notwithstanding the foregoing, any amount shall be paid to Guarantors on account of any such subrogation, indemnification, contribution or reimbursement rights at any time, such amount shall be held in trust for the benefit of the Bank and shall forthwith be paid to the Bank to be credited and applied against the Guaranteed Obligations, whether matured, unmatured, absolute or contingent, as the Bank may see fit in its discretion.
Section 8. Security. This Agreement shall be secured by the Mortgages listed on the attached Exhibit A, to which reference is here made for all purposes, each of which is being modified by agreements of even date herewith to be applicable to the Guaranteed Obligations.
Section 9. Non-Exclusive Remedies. No right or remedy of the Bank under any Operative Document shall be exclusive of any other right, power or remedy, but shall be cumulative and in addition to any other right, power or remedy thereunder or now or hereafter existing by law or in equity and the exercise by the Bank of any one or more of such rights, powers or remedies shall not preclude the simultaneous or further exercise of any or all of such other rights, powers or remedies. Any failure to insist upon the strict performance of any provision hereof or to exercise any option, right, power or remedy contained herein shall not constitute a waiver or relinquishment thereof for the future. Receipt by the Bank of any amount payable under any Operative Document with knowledge of a default or event of default shall not constitute a waiver of such default or event of default, and no waiver by the Bank or any provision of the Operative Documents shall be deemed to be made unless made in writing. The Bank shall be entitled to injunctive relief in case of the violation or attempted or threatened violation of any of the provisions of the Operative Documents by any other party hereto, a decree compelling performance or any of the provisions hereof, or any other remedy allowed by Law or in equity.
Section 10. Severability. If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid or unenforceable, then the remaining provisions or the application of such provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall continue to be valid and enforceable. The provisions of this Section 9 shall not be construed to limit the rights of the Bank to exercise remedies as a consequence of an event of default arising under any Operative Document.
Section 11. Governing Law and Submission to Jurisdiction.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO ANY OPERATIVE DOCUMENT, OR ANY CONVEYANCING DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, GUARANTORS HEREBY ACCEPT FOR GUARANTORS AND IN RESPECT OF GUARANTORS' PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. GUARANTORS HEREBY IRREVOCABLY WAIVE ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH GUARANTORS MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NONEXCLUSIVE AND DOES NOT PRECLUDE THE BANK FROM OBTAINING JURISDICTION OVER GUARANTORS IN ANY COURT OTHERWISE HAVING JURISDICTION.
Section 12. Entire Agreement. The parties hereto acknowledge and agree that this Guaranty and the Operative Documents represent all of the agreements and understandings relating to the transactions contemplated by such documents as between the Bank, on the one hand, and Guarantors and their affiliates on the other hand, and the parties hereto acknowledge and agree that all prior written and oral agreements or understandings between or among such persons are hereby superseded in their entirety.
Section 13. Interpretation and Reliance. No presumption will apply in favor of any party hereto in the interpretation of the Operative Documents or in the resolution of any ambiguity of any provision hereof or thereof. Guarantors acknowledge that it has not relied upon any statements, representations or warranties of the Bank in entering into this guaranty.
Section 14. Time. TIME IS OF THE ESSENCE IN THIS AGREEMENT, AND THE TERMS HEREIN SHALL BE SO CONSTRUED.
Section 15. Reasonableness Standard. If and when in this Agreement any party is required to exercise any discretion in a "reasonable" manner, the parties hereto acknowledge that the term "reasonable" or "reasonably" shall have the meaning given to such term under (and shall be consistent with any standard of commercial reasonableness implied by) the laws of the State of Texas in effect as of the date hereof.
Section 16. No Oral Change. No amendment of any provision of this Guaranty shall be effective unless it is in writing and signed by Guarantors and the Bank, and no waiver of any provision of this Guaranty, and no consent to any departure by Guarantors therefrom, shall be effective unless it is in writing and signed by the Bank, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
Section 17. Headings and References. The headings used herein are for purposes of convenience only and shall not be used in construing the provisions hereof. the words "this Guaranty," "this instrument," "herein", "hereof," "hereby" and words of similar import refer to this Guaranty as a whole and not to any particular subdivision unless expressly so limited. The word "or" is not exclusive. Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires.
Section 18. Term. The term of this Guaranty shall be the earlier of the full payment of the Guaranteed Obligations or sixty (60) months from the date hereof.
Section 19. Notices. Any notice or communication required or permitted hereunder shall be given in writing, sent by (a) personal delivery, (b) expedited delivery service with proof of delivery, (c) registered or certified United States mail, postage prepaid, or (d) telegram or telex, addressed to the appropriate party at the address set forth in the opening paragraph of this Agreement or to such other address or to the attention of such other individual as hereafter shall be designated in writing by the applicable party sent in accordance herewith. Any such notice or communication shall be deemed to have been given either at the time of personal delivery or, in the case of delivery service or mail, as of the date of first attempted delivery at the address and in the manner provided herein, or in the case of telegram or telex, upon receipt.
IN WITNESS WHEREOF, Guarantors have executed and delivered this Guaranty as of the date first above written.
GUARANTORS: BANK: BASS PETROLEUM, INC. UNION PLANTERS BANK, N.A. By: By: ------------------------------ ------------------------------------- Ray D. Reaves, Jr., President Rebecca Dozier, Senior Vice President |
ANNEX E
ADVANCE CERTIFICATE
I, Ray D. Reaves, Jr., the duly elected President of FieldPoint Petroleum Corporation, a Colorado corporation ("Borrower"), do hereby certify that:
1. This Certificate is furnished pursuant to Section 2.1 of the Credit Agreement (the "Agreement") between Borrower and Union Planters Bank, N.A., dated as of December 14, 2000. Unless otherwise defined herein, capitalized terms used in this Certificate have the meanings assigned to such terms in the Agreement;
2. Borrower requests an Advance of $____________________ on ______________ , 200__;
3. The representations and warranties made by Borrower and the Guarantors in the Agreement and Security Documents are true and correct as of the date hereof as though made on and as of the date hereof;
4. No Event of Default has occurred and is continuing or would result from the consummation of the transactions contemplated by the Agreement on the date hereof;
5. Borrower has performed and complied with all agreements and conditions in the Agreement required to be complied with prior to the date of the above requested Advance; and
6. I have carefully examined this Certificate and assert that all of the statements and representations contained herein are true to the best of my knowledge, information and belief.
IN WITNESS WHEREOF, I have executed this certificate as of the day of , 200__.
ANNEX F
[attached]
10.4
FIELDPOINT PETROLEUM CORPORATION
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
General
The role of the Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities by:
o Serving as an independent and objective party to monitor the Corporation's financial reporting process and internal control system.
o Reviewing and appraising the audit efforts of the Corporation's independent accountants.
o Providing an open avenue of communication among the independent accountants, financial and senior management and the Board of Directors.
Composition
The Audit Committee shall consist of two or more directors as determined by the Board, each of whom shall be independent directors, and free from any relationship that, in the opinion of the Board, would interfere with the exercise of his or her independent judgement as a member of the Committee. In determining whether any director is independent, the Board shall take into consideration the requirements of the principal exchange or system on which the Corporation's common stock is traded. Directors, who are affiliates of the Company, or officers or employees of the Company or of its subsidiaries, will not be considered independent
All members of the Committee must be able to read and understand fundamental financial statements, including a corporation's balance sheet, income statement, and cash flow statement or become able to do so within a reasonable period of time after his or her appointment to the Committee, and at least one member of the Committee is to have past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the member's financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities.1
The members of the Committee are to be elected by the Board and shall serve until their successors are duly elected and qualified. Unless a Chair is elected by the full Board, the members of the Committee may designate a Chair by majority vote of the full Committee membership.
Meetings
The Committee shall hold regular meetings as may be necessary and special meetings as may be called by the Chairman of the Committee. As part of its job to foster open communication, the Committee should meet at least annually with management and the independent accountants in separate executive sessions to discuss any matters that the Committee or either of these groups believe should be discussed privately. In addition, the Committee or its Chair should meet with the independent accountants and management quarterly to review the Corporation's financial statements.
Relationship with Independent Accountants
The Corporation's independent accountants are to be ultimately accountable to the Board and the Committee, and the Committee and the Board shall have the ultimate authority and responsibility to select, evaluate and, where appropriate, replace the independent accountants (or nominate the outside auditor to be proposed for shareholder approval in any proxy statement).
Responsibilities and Duties
To fulfill its responsibilities and duties the Audit Committee shall:
1. Review and assess the adequacy of this Charter at least annually, and otherwise as conditions dictate.
2. Review the Corporation's annual financial statements and any reports or other financial information submitted to the Securities and Exchange Commission or the public; including any certification, report, opinion, or review rendered by the independent accountants.
3. Review with financial management and the independent accountants the Corporation's filings with the Securities and Exchange Commission on Form 10-Q2 prior to their filing or prior to the release of earnings. The Chair of the Committee may represent the entire Committee for purposes of this review.
4. Recommend to the Board the selection of the independent accountants, considering independence and effectiveness, and approve the fees and other compensation to be paid to the independent accountants.
5. On an annual basis, obtain from the independent accountants, and review and discuss with the independent accountants, a formal written statement delineating all relationships the independent accountants have with the Corporation, consistent with Independence Standards Board Standard 1, and actively engage in a dialogue with the independent accountants with respect to any disclosed relationships or services that may impact the objectivity and independence of the independent accountants.
6. Recommend to the Board any appropriate action to oversee the independence of the independent accountants.
7. Review the performance of the independent accountants and approve any proposed discharge of the independent accountants when circumstances warrant.
8. Periodically consult with the independent accountants out of the presence of management about internal controls and the fullness and accuracy of the Corporation's financial statements.
9. In consultation with the independent accountants, review the integrity of the organization's financial reporting processes, both internal and external.
10. Consider the independent accountant's judgments about the quality and appropriateness of the Corporation's accounting principles as applied in its financial reporting.
11. Consider, and approve, if appropriate, major changes to the Corporation's auditing and accounting principles.
12. Establish regular and separate reporting to the Committee by each of management and the independent accountants regarding any significant judgments made in management's preparation of the financial statements and the view of each as to appropriateness of such judgments.
13. Following completion of the annual audit, review separately with each of management and the independent accountants any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information.
14. Review any significant disagreement among management and the independent accountants in connection with the preparation of the financial statements.
15. Review with the independent accountants and management the extent to which changes or improvements in financial or accounting practices, as approved by the Committee, have been implemented.
16. Establish, review and update periodically a Code of Conduct and ensure that management has established a system to enforce this Code.
17. Review, with the Corporation's counsel, any legal matter that could have a significant impact on the Corporation's financial statements.
18. Perform any other activities consistent with this Charter, the Corporation's bylaws and governing law, as the Committee or the Board deems necessary or appropriate.
Adopted by Resolution of the Board of Directors
March 28, 2001