SECOND AMENDMENT TO CREDIT AGREEMENT
(August 1, 1999)
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "AMENDMENT") is made
and entered into as of August 1, 1999, among ▇▇▇▇▇▇▇ PETROLEUM CORPORATION, a
Texas corporation (the "BORROWER"), the entities listed on the signature pages
hereof as Lenders (collectively, the "LENDERS"), and CHRISTIANIA BANK OG
KREDITKASSE ASA ("CHRISTIANIA") as administrative agent (in such capacity, the
"AGENT").
W I T N E S S E T H
WHEREAS, the Borrower, the Agent and the Lenders entered into that
certain Credit Agreement dated as of May 15, 1998 (the "ORIGINAL CREDIT
AGREEMENT") as modified and/or amended by (i) that certain letter agreement
dated as of June 30, 1998 (the "ALPHA WAIVER LETTER"), (ii) that certain First
Amendment to Credit Agreement dated as of March 29, 1999 (the "FIRST
AMENDMENT"), and (iii) that certain letter agreement dated March 30, 1999 (the
"MARCH 1999 LETTER" and, together with the Original Credit Agreement, the
Alpha Waiver Letter and the First Amendment, the "CREDIT AGREEMENT"); and
WHEREAS, the Borrower, the Agent and the Lenders wish to amend the
Credit Agreement and provide for certain other matters as set forth herein;
NOW, THEREFORE, for and in consideration of the mutual promises, the
mutual agreements contained herein and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
do hereby agree as follows:
1. DEFINITIONS.
(a) Capitalized terms used and not defined in this Amendment shall
have the meanings specified in the Credit Agreement.
(b) The definition of "SECURITY DOCUMENTS" in ARTICLE I of the Credit
Agreement is hereby deleted in its entirety and replaced by the following
definition of such term:
SECURITY DOCUMENTS means the Mortgage, the Pledge Agreement,
the Alpha Mortgage and any other agreement or writing evidencing any
Encumbrance created in favor of Agent on behalf of Lenders in or on
the Collateral and any other documents relevant thereto; Security
Documents also includes the Subsidiary Guarantee and any other
agreement in writing creating a guarantee in favor of Agent on behalf
of the Lenders with respect to the Obligations.
(c) The following definitions are inserted in alphabetical order in
ARTICLE I of the Credit Agreement:
ALPHA means ▇▇▇▇▇▇▇ Petroleum Alpha Corporation, a Texas
corporation and wholly-owned subsidiary of Borrower.
ALPHA MORTGAGE means that certain Deed of Trust, Mortgage,
Assignment of Production, Security Agreement, and Financing Statement
from Alpha to the Trustee and the Agent filed on July 1, 1999 in
Clerk's Office of ▇▇▇▇ County, Texas, Vol. 789, Pg. 863-A, and in the
Clerk's Office of ▇▇▇▇▇▇ County, Texas, Vol. 618, Pg. 348.
ALPHA WAIVER LETTER means that certain letter agreement dated
July 30, 1998 entered into with respect to this Agreement.
▇▇▇▇▇▇▇▇ means ▇▇▇▇▇▇▇▇ Oils Texas, Inc., a former subsidiary
of Alpha that merged into Alpha on June 3, 1999.
▇▇▇▇▇▇ means Gas Naturale de ▇▇▇▇▇▇, Inc., a Texas
corporation and wholly-owned Subsidiary of Borrower.
MOHAN means Mohan Petroleum Texas, Inc., a former subsidiary
of Alpha that merged into Alpha on June 3, 1999.
PLEDGE AGREEMENT means that certain Pledge Agreement dated as
of June 30, 1999 between Borrower and Agent.
SECOND AMENDMENT means that certain Second Amendment to
Credit Agreement dated as of August 1, 1999 amending this Agreement.
SUBSIDIARY GUARANTEE means that certain Subsidiary Guarantee
dated June 30, 1999 among Borrower, Alpha, ▇▇▇▇▇▇ and Agent.
(d) The definition of "PERMITTED INVESTMENTS" in ARTICLE I of the
Credit Agreement is modified by deleting current PARAGRAPHS 9 THROUGH 12
thereunder and replacing them with the following PARAGRAPH 9:
"Intercompany loan from Borrower to Alpha to finance the
acquisition by Alpha of ▇▇▇▇▇▇▇▇ and Mohan as contemplated by the
Alpha Waiver Letter."
(e) The following SECTION 1.6 is added to the Credit Agreement:
"AMENDMENTS TO LOAN DOCUMENTS. Except as otherwise expressly
provided herein, any reference in this Agreement to any Loan Document
shall mean such document as amended, restated, supplemented or
otherwise modified from time to time."
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2. INTEREST AND ADVANCES.
(a) From and after the date of this Amendment, and for purposes of
all outstanding as well as future Advances, the definitions of "ABR" and
"EURODOLLAR RATE" in ARTICLE I of the Credit Agreement will be deleted in
their entirety and replaced by the following definitions of such terms:
ABR means the highest of (i) the rate of interest publicly
announced by Agent as its prime rate in effect at its principal office
in New York City (the "PRIME RATE") PLUS 1.5%, (ii) the secondary
market rate for three-month certificates of deposit (adjusted for
statutory reserve requirements) PLUS 2.5% and (iii) the Federal Funds
Rate PLUS 2.00%.
EURODOLLAR RATE means the rate (adjusted for statutory
reserve requirements of eurocurrency liabilities) at which eurodollar
deposits for one, two, three or six (or, if available and acceptable
to Required Lenders, nine or twelve) months (as selected by Borrower)
are offered to Agent in the Interbank eurodollar market, PLUS 3.25%.
(b) Notwithstanding anything to the contrary in the Credit Agreement,
including, without limitation, SECTIONS 2.3 and 2.13 of the Credit Agreement,
from and after the date of this Amendment, Lender's commitment to make
Eurodollar Rate Advances is terminated and Borrower may not receive or
rollover Eurodollar Rate Advances or convert ABR Advances to Eurodollar Rate
Advances. The terms of outstanding Eurodollar Rate Advances remain unchanged
except as provided in PARAGRAPH 2(A) of this Amendment.
3. CONVERSION OF SENIOR NOTES. If on or before September 15, 1999 a
binding agreement has not been reached with the holders of the Senior
Notes to convert such Senior Notes to equity, then a Default will occur on
September 16, 1999 and will continue thereafter.
4. GAS PURCHASE AGREEMENT WAIVER. Notwithstanding anything to the
contrary in the Loan Documents, Borrower shall be permitted to enter into
that certain Gas Purchase Agreement (the "PURCHASE AGREEMENT") between
Borrower and Engage Energy US, L.P. ("SELLER"), in the form attached to
this Amendment as EXHIBIT B with such changes as Agent may, in its sole
discretion, permit and such changes to the conditions set forth in the
following proviso as Agent may, in its sole discretion, require; PROVIDED
THAT, (a) the "Prepayment Amount" Borrower receives from Seller pursuant
to the Purchase Agreement shall be applied by Borrower (i) first, to
prepay $900,000 of Principal Debt and (ii) thereafter, for the purposes
stated in SECTION 2.2 of the Credit Agreement, as amended, and (b)
Borrower hereby acknowledges that Agent's permission to enter into the
Purchase Agreement is one-time waiver and hereby agrees that no Company
shall sell, transfer, assign or grant (including any option for any
Person to acquire) any of its assets (as that term is defined in
accordance with GAAP) or take any action in furtherance thereof, except
for the sale of production or inventory in the ordinary course of such
Company's business. For the
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avoidance of doubt, the sale of production or inventory in the ordinary
course of a Company's business means a contract for sale of production or
inventory with (a) a term for ninety (90) days or less and (b) prices
established pursuant to applicable market indices.
5. AMENDMENT TO SECTION 2.2. SECTION 2.2 of the Credit Agreement is
deleted in its entirety and replaced by the following SECTION 2.2:
"PURPOSE OF THE ADVANCES. Proceeds of the Loans shall be used
to finance working capital needs of Borrower and for its general
corporate purposes in the ordinary course of business; PROVIDED THAT,
notwithstanding any other provision of this Agreement to the contrary,
proceeds of the Loans shall not be used directly or indirectly to pay
interest on the Senior Notes. Multiple Advances shall be permitted
under the Loans, PROVIDED THAT all conditions precedent thereto set
forth in ARTICLE VIII have been satisfied."
6. AMENDMENT TO SECTION 2.9. SECTION 2.9 of the Credit Agreement is
deleted in its entirety and replaced by the following SECTION 2.9:
"MANDATORY PREPAYMENT. If the Principal Debt (together with
the LC Exposure) ever exceeds the Borrowing Base or the Total
Commitment (as either may be reduced or cancelled in accordance with
this Agreement), Borrower shall forthwith repay such excess in full."
7. AMENDMENT TO SECTION 2.11(A). The first two sentences of SECTION
2.11(A) of the Credit Agreement are deleted and replaced by the following
first three sentences of SECTION 2.11(A):
"During the period from and after April 1, 1999, and until
the Borrowing Base is redetermined in accordance with this SECTION
2.11, the maximum amount of the Borrowing Base shall be $23,000,000.
The maximum amount of the Borrowing Base shall be reduced (i) by
$900,000 upon payment of the sum contemplated by PARAGRAPH 4 of the
Second Amendment and (ii) on the last day of each calendar month,
commencing October 31, 1999, and thereafter until the Borrowing Base
is reduced to zero, by the amount (the "BB REDUCTION AMOUNT") set
forth on SCHEDULE 2 corresponding with the last day of each calendar
month."
8. AMENDMENT TO SECTION 7.12. SECTION 7.12 of the Credit Agreement is
deleted in its entirety and replaced by the following SECTION 7.12:
"DIVIDENDS. Borrower shall not, without the prior consent of
Agent, declare or pay any cash dividends or distributions to its
shareholders, or declare or make any capital distribution in cash or
other property or return of capital, purchase or redeem any of its
capital stock or other securities, or take any other action which
would have an equivalent effect to any of the foregoing or issue
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additional capital stock, including stock presently authorized but
unissued to any Person."
9. ACKNOWLEDGEMENT AND WAIVER REGARDING NON-COMPLIANCE WITH SECTION
7.17. The Agent and the Lenders acknowledge that they received timely
(within the requirements of SECTION 5.4 of the Credit Agreement) notice of
the failure by Borrower to comply with the Interest Coverage Ratio
covenant set forth in SECTION 7.17 of the Credit Agreement as of the last
day of March, 1999 and June, 1999 and the Lenders hereby waive any Default
arising therefrom.
10. ACKNOWLEDGEMENT AND WAIVER REGARDING NON-COMPLIANCE WITH SECTION
7.18. The Agent and the Lenders acknowledge that they received timely
(within the requirements of SECTION 5.4 of the Credit Agreement) notice of
the failure by Borrower to comply with the Minimum Current Ratio covenant
set forth in SECTION 7.18 of the Credit Agreement and the Lenders hereby
waive any Default arising from such failure until September 1, 1999.
11. AMENDMENT TO SECTION 9.1(C). SECTION 9.1(C) of the Credit
Agreement is deleted in its entirety and replaced by the following SECTION
9.1(C):
"any Company or any other obligor shall fail to comply with:
(i) any covenant set forth in SECTIONS 6.2, 7.1, 7.2, 7.4,
7.5, 7.7, 7.8, 7.9, 7.12, 7.15, 7.17, 7.18 or 7.19, or
(ii) any item, condition, or covenant of or in any Loan
Document other than those described in SECTION 9.1(a), SECTION 9.1(B)
or SUBSECTION 9.1(C)(I), where such failure is not remedied by such
Company or other obligor within 30 days after such Company or other
obligor has knowledge thereof or receives written notice from Agent;
PROVIDED THAT, such 30 day period shall be reduced to zero with
respect to any breach which is not susceptible to cure or with respect
to which such Company or obligor does not diligently pursue a cure."
12. AMENDMENT TO SECTION 11.3. The first sentence of SECTION 11.3 of
the Credit Agreement is deleted and replaced by the following first
sentence of SECTION 11.3:
"Subject to the provisions of this section, any Lender may at
any time, in the ordinary course of its commercial banking business,
(i) without the consent of Borrower or Agent, assign all or any part
of its Rights and obligations under the Loan Documents to any of its
Affiliates which has sufficient resources with which to honor its
obligations under this Agreement (each a "PURCHASER"), (ii) if no
Default exists, upon the prior written consent of Borrower (which will
not be unreasonably withheld) and Agent, assign to any other Person
(each of which is also a "PURCHASER") a proportionate part (not less
than $7,500,000 and an integral multiple of $500,000) of all or any
part of its Rights and obligations under the Loan Documents and (iii)
if a Default exists (including any Default that has been
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waived), assign to any other Person (each of which is also a
"PURCHASER") a proportionate part (not less than $7,500,000 and an
integral multiple of $500,000) of all or any part of its Rights and
obligations under the Loan Documents; PROVIDED THAT, prior to
assignment under SUBSECTION (III), Lender shall give notice to
Borrower, Agent and other Lenders of such assignment (though failure
to give such notice shall not invalidate the assignment).
13. AMENDMENT TO SCHEDULE 2. SCHEDULE 2 of the Credit Agreement is
deleted in its entirety and replaced by the SCHEDULE 2 attached to this
Amendment as EXHIBIT A.
14. ACKNOWLEDGEMENT WITH RESPECT TO BORROWING BASE AND ADDITIONAL
ADVANCES. BORROWER ACKNOWLEDGES THAT THERE HAS BEEN NO AGREEMENT BY THE
LENDERS TO INCREASE THE BORROWING BASE AND THAT THE LENDERS HAVE NO
OBLIGATION (AND HAVE INDICATED THAT THEY DO NOT INTEND) TO ADVANCE
ADDITIONAL FUNDS UNDER THE CREDIT AGREEMENT.
15. WAIVER OF COLLATERAL. Lenders waive, for the time being, the
delivery by ▇▇▇▇▇▇ of collateral to secure its obligations under the
Subsidiary Guarantee; PROVIDED THAT, Lenders may elect at any time to
require delivery of such collateral.
16. CONDITIONS TO EFFECTIVENESS OF AMENDMENT. The obligations of the
Lenders herein and the effectiveness of the other provisions of this
Amendment shall be subject to the fulfillment of the following conditions
precedent in a manner satisfactory to the Agent:
(a) The Agent shall have received all the following (each of the
following documents in form and substance satisfactory to the Agent):
(i) A copy of the resolutions of the Board of Directors of
the Borrower, dated on the date hereof, certified by the Secretary of
Assistant Secretary of the Borrower, authorizing the execution,
delivery and performance by the Borrower of this Amendment and any
other document to be delivered pursuant hereto (collectively, the
"AMENDMENT DOCUMENTS");
(ii) A certificate of the Secretary or an Assistant Secretary
of the Borrower, dated on the date hereof, as to the incumbency and
signature of the officers of the Borrower authorized to sign the
Amendment Documents, together with evidence of the incumbency of such
Secretary or Assistant Secretary;
(iii) All consents, approvals, waivers, authorizations and
orders of any courts or governmental authorities (including, without
limitation, federal and state banking authorities) or third parties
required in connection with the execution, delivery and performance by
the Borrower of the Amendment Documents and the performance of the
transactions contemplated hereby; and
(iv) All other documents the Agent may reasonably request
with respect to any matter relevant to the Amendment Documents or the
transactions contemplated hereby;
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(b) The representations and warranties contained in the Credit
Agreement, as amended hereby, shall be true and correct in all material
respects on and as of the date hereof and on and as of the date of actual
execution and delivery hereof by the Borrower; and
(c) All corporate and legal proceedings and all documents required to
be completed and executed by the provisions of, and all instruments to be
executed in connection with the transactions contemplated by the Amendment
Documents and any related agreements shall be satisfactory in form and
substance to the Agent, and the Agent shall have received all information and
copies of all documents, including records of corporate proceedings, required
by the Amendment Documents and any related agreements to be executed or which
the Agent may reasonably have requested in connection therewith, such
documents, where appropriate, to be certified by proper corporate or
governmental authorities.
17. DEFAULTS AND POTENTIAL DEFAULTS. The Borrower represents and
warrants that after giving effect to this Amendment no Default or
Potential Default exists under the Credit Agreement; PROVIDED THAT,
Borrower acknowledges the possibility that it might continue to be in
Default with respect to the Minimum Current Ratio covenant set forth in
SECTION 7.18 of the Credit Agreement after September 1, 1999.
18. EXPENSES. The Borrower shall pay all out-of-pocket expenses of the
Agent arising in connection with the Loans and the preparation, execution,
delivery and administration of this Amendment, including, but not limited
to, all reasonable legal fees and expenses incurred by the Agent.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers, to be effective as of the date first
above written.
▇▇▇▇▇▇▇ PETROLEUM CORPORATION,
as the Borrower
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Title: PRESIDENT
----------------------------
CHRISTIANIA BANK OG KREDITKASSE ASA,
as the Agent and the sole Lender
By: /S/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------
Title: SENIOR VICE PRESIDENT
----------------------------
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------
Title: FIRST VICE PRESIDENT
----------------------------
EXHIBIT A
SEE ATTACHED SCHEDULE 2.
Exhibit A-1
SCHEDULE 2
BORROWING BASE REDUCTION SCHEDULE
DATE AMOUNT OF REDUCTION NEW BORROWING BASE*
---- ------------------- -------------------
October 31, 1999 $1,500,000 $20,600,000
November 30, 1999 $1,500,000 $19,100,000
December 31, 1999 $1,500,000 $17,600,000
January 31, 2000 $1,500,000 $16,100,000
February 29, 2000 $1,500,000 $14,600,000
March 31, 2000 $1,500,000 $13,100,000
April 30, 2000 $1,500,000 $11,600,000
May 31, 2000 $1,500,000 $10,100,000
June 30, 2000 $1,500,000 $8,600,000
July 31, 2000 $1,500,000 $7,100,000
August 31, 2000 $1,500,000 $5,600,000
September 30, 2000 $1,500,000 $4,100,000
October 31, 2000 $1,500,000 $2,600,000
November 30, 2000 $1,500,000 $1,100,000
December 31, 2000 $1,100,000 $0
* The figures in this column assume that the Borrowing Base has been reduced
by $900,000 pursuant to SECTION 2.11(a)(i) of this Agreement.
Schedule 2 - 1
