EXHIBIT 10.27
SECOND AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
BETWEEN
SOUTHERN MINERAL CORPORATION
SMC ECUADOR, INC.
SMC PRODUCTION CO.
BEC ENERGY, INC.
AND
AMERAC ENERGY CORPORATION
AND
COMPASS BANK, AS AGENT AND LENDER
AND
FIRST UNION NATIONAL BANK AS A LENDER
MARCH 29, 1999
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REVOLVING LINE OF CREDIT OF UP TO $200,000,000
TABLE OF CONTENTS
PAGE
ARTICLE I. DEFINITIONS ..................................... 1
1.01 Terms Defined Above ........................................ 1
1.02 Terms Defined in Agreement ................................. 1
1.03 References ................................................. 2
1.04 Articles and Sections ...................................... 2
1.05 Number and Gender .......................................... 2
ARTICLE II. AMENDMENTS ..................................... 2
2.01 Amendment of Section 1.2 ................................... 2
2.02 Addition of Section 2.5(a) ................................. 4
2.03 Amendment of Section 2.9(a) ................................ 4
2.04 Amendment of Section 2.10 .................................. 4
2.05 Amendment of Section 2.12 .................................. 5
2.07 Amendment of Section 3.1 ................................... 6
2.09 Addition of Section 5.22 ................................... 7
2.10 Addition of Section 5.23 ................................... 7
2.11 Addition of Section 5.24 ................................... 9
2.12 Addition of Section 5.25 ................................... 10
2.13 Amendment of Section 6.14 .................................. 10
2.14 Addition of Section 6.15 ................................... 10
2.15 Additions to Section 7.1 ................................... 11
ARTICLE III CONDITIONS ................................................ 11
3.01 Receipt of Documents ....................................... 11
3.02 Accuracy of Representations and Warranties ................. 12
3.03 Matters Satisfactory to Parties ............................ 13
ARTICLE IV. REPRESENTATIONS AND WARRANTIES ................. 13
4.01 Restatement of Representations and Warranties .............. 13
ARTICLE V. RATIFICATION .................................... 13
ARTICLE VI. MISCELLANEOUS .................................. 13
6.01 Scope of Second Amendment .................................. 13
6.02 Agreement as Amended ....................................... 14
6.03 Parties in Interest ........................................ 14
6.04 Rights of Third Parties .................................... 14
6.05 GOVERNING LAW .............................................. 14
6.06 JURISDICTION AND VENUE ..................................... 14
6.07 ENTIRE AGREEMENT ........................................... 14
6.08 Confidentiality ............................................ 15
SECOND AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
This SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"SECOND AMENDMENT") is made and entered into effective as of March 29, 1999,
between SOUTHERN MINERAL CORPORATION, a Nevada corporation, ("Borrower"), SMC
PRODUCTION CO., a Texas corporation, AMERAC ENERGY CORPORATION, a Delaware
corporation, SMC ECUADOR, INC., a Texas corporation, and BEC ENERGY, INC., a
Texas corporation ("CO-BORROWERS") and COMPASS BANK, an Alabama state chartered
banking institution ("COMPASS") and FIRST UNION NATIONAL BANK, a national
banking association ("FIRST UNION") with each other lender that becomes a
signatory hereto as provided in Section 9.1, individually and together with
their successors and assigns, (the "Lenders"), and Compass, as Agent for the
Lenders in such capacity together with its successors in such capacity pursuant
to the terms hereof, the "Agent."
W I T N E S S E T H:
WHEREAS, the above named parties did execute and exchange
counterparts of that certain Amended and Restated Credit Agreement dated June
19, 1998, as amended by First Amendment to Amended and Restated Credit Agreement
dated effective as of September 1, 1998 (the "AGREEMENT"), to which reference is
here made for all purposes;
WHEREAS, the parties subject to and bound by the Agreement are
desirous of amending the Agreement in the particulars hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties to the Agreement, as set forth therein, and the mutual
covenants and agreements of the parties hereto, as set forth in this Second
Amendment, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.01 TERMS DEFINED ABOVE. As used herein, each of the terms "AGENT,"
"AGREEMENT," "BORROWER," "CO-BORROWERS," "COMPASS," "FIRST UNION," "LENDERS" and
"SECOND AMENDMENT" shall have the meaning assigned to such term hereinabove.
1.02 TERMS DEFINED IN AGREEMENT. As used herein, each term defined in the
Agreement shall have the meaning assigned thereto in the Agreement, unless
expressly provided herein to the contrary.
1.03 REFERENCES. References in this Second Amendment to Article or Section
numbers shall be to Articles and Sections of this Second Amendment, unless
expressly stated
herein to the contrary. References in this Second Amendment to "hereby,"
"herein," "hereinafter," "hereinabove," "hereinbelow," "hereof," and "hereunder"
shall be to this Second Amendment in its entirety and not only to the particular
Article or Section in which such reference appears.
1.04 ARTICLES AND SECTIONS. This Second Amendment, for convenience only,
has been divided into Articles and Sections and it is understood that the
rights, powers, privileges, duties, and other legal relations of the parties
hereto shall be determined from this Second Amendment as an entirety and without
regard to such division into Articles and Sections and without regard to
headings prefixed to such Articles and Sections.
1.05 NUMBER AND GENDER. Whenever the context requires, reference herein
made to the single number shall be understood to include the plural and likewise
the plural shall be understood to include the singular. Words denoting sex shall
be construed to include the masculine, feminine, and neuter, when such
construction is appropriate, and specific enumeration shall not exclude the
general, but shall be construed as cumulative. Definitions of terms defined in
the singular and plural shall be equally applicable to the plural or singular,
as the case may be.
ARTICLE II.
AMENDMENTS
The Borrower, Co-Borrowers and the Agent and the Lenders hereby amend the
Agreement in the following particulars:
2.01 AMENDMENT OF SECTION 1.02. Section 1.2 of the Agreement is hereby
amended as follows:
The following definitions are added, deleted, and/or amended to read
as follows:
"AVAILABLE COMMITMENT" shall mean, at any time, an amount equal to the
remainder, if any, of (a) the Borrowing Base in effect at such time plus
the Tranche A Principal MINUS (b) the sum of the Loan Balance at such time
and the L/C Exposure at such time.
"BOND INTEREST PAYMENT" shall mean the scheduled interest payments due
under the 6.875% Convertible Subordinated Debenture due 2007.
"BORROWING BASE UTILIZATION" shall mean the aggregate principal amount
of Loans outstanding hereunder, plus any L/C Exposure hereunder as a
percentage of the Borrowing Base, plus the Tranche A Principal.
"COMMITMENT AMOUNT" shall mean for Compass, $23,289,500 and for First
Union, $12,540,500 as of the closing of the Second Amendment.
"DEBT SERVICE" shall mean an amount equal to (i) actual principal
amounts paid, other than principal payment required as a result of asset
sales, on Indebtedness other than the Obligations during each quarter,
including all consolidated debt of the Borrower and/or the Co-Borrowers,
plus (ii) principal amounts required to be paid, other than principal
payments required as a result of asset sales, on the Obligations during
such quarter with the exception of Tranche A Principal.
"LOCKBOX" shall mean P.O. Box 4927, Houston, Texas 77210-4927,
established by the Borrower with the Agent, to which each purchaser of
production and disburser of the proceeds of production from or attributable
to the Mortgaged Properties shall be directed to make remittance.
"LOCKBOX ACCOUNTS" shall mean Account Nos. 75092717, 75092695, and
75092709 of the Borrower and Co-Borrowers established with the Agent in
association with the Lockbox.
"LOCKBOX AGREEMENT" shall mean the lockbox agreement between the
Borrower and the Agent relating to the Lockbox and being in form and
substance satisfactory to the Lenders, as the same may be amended,
restated, or supplemented from time to time.
"MINERAL INTERESTS SALE" shall mean the sale of certain Oil and Gas
Properties referred to in Borrower's press release dated March 12, 1999.
"PROTECTED ACCOUNT" shall mean an account with Agent where Borrower
shall deposit the sum of $1,423,125, which is the amount of the Bond
Interest Payment due April 1, 1999.
"RESTRUCTURE FEE" shall mean the fee payable to the Lenders by the
Borrower and the Co-Borrowers pursuant to Section 2.26.
"TRANCHE A PRINCIPAL" shall mean the sum of $12,500,000.
The following definitions will be deleted:
"ADJUSTED LIBO RATE", "APPLICABLE MARGIN", "LIBO Rate", "LIBO RATE LOAN"
and "FIXED RATE LOAN" and any reference to such terms in the Agreement
shall be deleted, and the Borrower and/or the Co-Borrowers shall not have
the option to make Fixed Rate Loans.
2.02 ADDITION OF SECTION 2.5(a). Section 2.5(a) shall be added to the
Agreement as follows:
"2.5(a) REPAYMENT OF TRANCHE A PRINCIPAL AND INTEREST. Accrued and
unpaid interest at the Floating Rate, plus one percent (1%) on Tranche A
Principal shall be due and payable monthly commencing on the first day of
April, 1999, and continuing on the first day of each calendar month
thereafter until September 1, 1999, when all accrued interest and principal
if not sooner paid as required under Section 5.23 below shall be due and
payable. Any payments on the Tranche A Principal shall permanently reduce
Tranche A Principal by a like amount. Borrower shall not be allowed to
reborrow under the Tranche A Principal.
2.03 AMENDMENT OF SECTION 2.9(a) Section 2.9(a) of the Agreement is amended
to read as follows:
"2.9(a) BORROWING BASE DETERMINATIONS (a) The Borrowing Base as of
March 1, 1999, is acknowledged by the Borrower and the Co-Borrowers and the
Lenders to be $23,330,000. Commencing on April 1, 1999, and continuing on
the first day of each calendar month thereafter until the earlier of the
date such amount is redetermined or the Commitment Termination Date, the
Scheduled Reduction Amount shall be $40,000. In addition the Borrower
and/or Co-Borrowers shall make principal payments on the Loan Balance equal
to required mandatory prepayment of principal on the Borrowing Base upon
the reductions of the Borrowing Base of (i) $3,976,875 from the proceeds of
the Mineral Interests Sale upon the closing of this Second Amendment; (ii)
$523,125 from the proceeds of the remainder of the Mineral Interests Sale
upon completion of the remainder of the Mineral Interests Sale which
payment shall occur no later than April 30, 1999; provided that Lenders
consent to such remainder of the Mineral Interest Sale and deliver
necessary releases on such property, and (iii) $1,423,125 at 12:00 noon
central time on April 30, 1999, in the event that by such date and time the
Borrower has not paid in full the April 1, 1999 scheduled Bond Interest
Payment. The next Borrowing Base redetermination shall be July 1, 1999.
2.04 AMENDMENT OF SECTION 2.10. Section 2.10 of the Agreement is amended to
read as follows:
"2.10 MANDATORY PREPAYMENTS. If at any time the sum of the Loan
Balance and the L/C Exposure exceeds the sum of Borrowing Base and the
Tranche A Principal and the then in effect, the Borrower and the
Co-Borrowers shall, within 30 days of notice from the Agent of such
occurrence except for the payments required under Section 5.23, where
payments are required without notice from the Agent, (a) prepay, or make
arrangements acceptable to the Lenders for the prepayment of, the amount of
such excess for application on the Loan Balance, (b) provide additional
Collateral, of character and value satisfactory to the Lenders in their
sole discretion, to secure the amount of such excess by the execution and
delivery to the Lenders of Security Instruments in form and substance
satisfactory to the Lenders, or (c) effect any combination of the
alternatives described in clauses (a) and (b) of this Section and
acceptable to the Lenders in their sole discretion. In the event that a
mandatory prepayment is required under this Section and the Loan Balance is
less than the amount required to be prepaid, the Borrower and the
Co-Borrowers shall repay the entire Loan Balance and, in accordance with
the provisions of the relevant Letter of Credit Applications executed by
the Borrower and/or the Co-Borrowers or otherwise to the satisfaction of
the Lenders, deposit with the Agent for the benefit of the Lenders, as
additional collateral securing the Obligations, an amount of cash, in
immediately available funds, equal to the L/C Exposure minus the lesser of
the aggregate Commitment Amounts or the sum of Borrowing Base plus Tranche
A Principal. The cash deposited with the Agent for the benefit of the
Lenders in satisfaction of the requirement provided in this Section may be
invested, at the sole discretion and at the express direction of the
Borrower and/or Co-Borrowers as to investment vehicle and maturity (which
shall be no later than the latest expiry date of any then outstanding
Letter of Credit), for the account of the Borrower and/or Co-Borrowers in
cash or cash equivalent investments offered by or through the Lenders.
2.05 AMENDMENT OF SECTION 2.12. Section 2.12 of the Agreement is amended to
read as follows:
"2.12 COMMITMENT FEE. In addition to interest on the Notes as provided
herein and other fees payable hereunder and to compensate the Lenders for
maintaining funds available, the Borrower and Co-Borrowers shall pay to the
Agent for the account of the Lenders in immediately available funds, on the
first day of July, 1998, and on the first day of each third calendar month
thereafter during the Commitment Period and on the Commitment Termination
Date, a fee in the amount per annum as set forth below, calculated on the
basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed (including the first day but excluding the last day), on the
average daily amount of the Available Commitment during the preceding
quarterly period as follows:
BORROWING BASE
UTILIZATION COMMITMENT FEE
-------------------------- ----------------------------
1) greater than 50% one-half percent (1/2%)
of the sum of the
Borrowing Base plus
the Tranche Principal
2) less than or equal to 50% three-eighths percent (3/8%)
of the sum of the Borrowing
Base plus the Tranche Principal
The Borrowing Base Utilization and the corresponding Commitment Fee shall
be set at each quarter end for the next quarter.
2.06 ADDITION OF SECTION 2.26. Section 2.26 shall be added to the Agreement
to read as follows:
"2.26 RESTRUCTURE FEE. In addition to interest on the Notes as
provided herein and other fees payable hereunder and to compensate the
Lenders for the restructuring of the facility, the Borrower and/or the
Co-Borrowers shall pay to the Agent for the account of the Lenders, a
Restructure Fee equal to one and one half percent of the Tranche A
Principal (i.e. $187,500.00) which amount is deemed earned by the Lenders
as of the closing of this Second Amendment but payable upon the Borrower
and/or the Co-Borrowers' completion of a transaction that will enable the
Borrower and/or the Co-Borrowers to pay the Tranche A Principal in full.
2.07 AMENDMENT OF SECTION 3.1 Section 3.1 of the Agreement is amended to
read as follows by adding the following subparagraph:
"(p) the Lockbox Agreement and Collateral Assignment
of Deposit Account and Security Agreement."
2.08 AMENDMENT OF SECTION 5.15. Section 5.15 is amended to read as follows:
"5.15 SUBSEQUENT FEES AND EXPENSES OF AGENT AND LENDERS. Upon request
by the Agent and/or the Lenders, promptly (within 45 days of receipt of
monthly invoices) reimburse the Agent and/or the Lenders (to the fullest
extent permitted by law) for all amounts reasonably expended, advanced, or
incurred by or on behalf of the Agent or the Lenders to ratify, amend,
restate, or prepare additional
Loan Documents, as the case may be; for the filing and recordation of
Security Instruments. Promptly reimburse the Agent and each Lender to
satisfy any obligation of the Borrower and/or the Co-Borrowers under any of
the Loan Documents; to collect the Obligations; to enforce the rights of
the Agent and each Lender under any of the Loan Documents; and to protect
the Properties or business of the Borrower and/or the Co-Borrowers,
including, without limitation, the Collateral, which amounts shall be
deemed compensatory in nature and liquidated as to amount upon notice to
the Borrower and/or the Co-Borrowers by the Agent and each Lender and which
amounts shall include, but not be limited to (a) all court costs, (b)
reasonable attorneys' fees, (c) reasonable fees and expenses of auditors
and accountants incurred to protect the interests of the Agent and each
Lender, (d) fees and expenses incurred in connection with the participation
by the Agent and each Lender as a member of the creditors' committee in a
case commenced under any Insolvency Proceeding, (e) fees and expenses
incurred in connection with lifting the automatic stay prescribed in ss.362
Title 11 of the United States Code, and (f) fees and expenses incurred in
connection with any action pursuant to ss.1129 Title 11 of the United
States Code all reasonably incurred by the Agent and each Lender in
connection with the collection of any sums due under the Loan Documents,
together with interest at the per annum interest rate equal to the Floating
Rate, calculated on a basis of a calendar year of 365 or 366 days, as the
case may be, counting the actual number of days elapsed, on each such
amount from the date of notification that the same was expended, advanced,
or incurred by the Agent and each Lender until the date it is repaid to the
Agent and each Lender, with the obligations under this Section surviving
the non-assumption of this Agreement in a case commenced under any
Insolvency Proceeding and being binding upon the Borrower and/or the
Co-Borrowers and/or a trustee, receiver, custodian, or liquidator of the
Borrower and/or the Co-Borrowers appointed in any such case.
2.09 ADDITION OF SECTION 5.22. Section 5.22 shall be added to the Agreement
to read as follows:
"5.22 ADDITIONAL REPORTING REQUIREMENTS. Deliver to the Agent and each
Lender within 15 days of each month end (i) a capital expenditure forecast
for the next six month period; and (ii) a report of accounts payable that
represents amounts due aged according to invoice date in form acceptable to
Lenders.
Borrower shall also furnish the Agent and each Lender to the extent
provided to the Borrower by CIBC any written status report regarding CIBC's
sales efforts immediately upon receipt by the Borrower and/or Co-Borrowers.
2.10 ADDITION OF SECTION 5.23. Section 5.23 shall be added to the Agreement
to read as follows:
"5.23 APPLICATION OF PROCEEDS FROM PROPERTY SALES. Proceeds from the
sales of Property by the Borrower and/or the Co-Borrowers shall be made to
the Lenders by the Borrowers and/or Co-Borrowers on the same day such
proceeds are received by the Borrower and/or Co-Borrowers and applied as
follows:
CATEGORY 1. Oil and Gas Properties currently assigned value under the
Borrowing Base (excluding the Oil and Gas Properties included in the
Mineral Interests Sale) - Proceeds from the sale of such properties
will be applied in the following order, subject to Lenders' prior
consent to the release of their mortgages/liens in connection with any
such sale:
(a) first, to the payment of the reasonable costs of such sales, if any;
(b) next, to the payment of past due interest and/or fees due to Lenders,
if any;
(c) next, to the reduction of the Borrowing Base to the extent of the
allocated Borrowing Base value for such assets sold;
(d) next, to the payment of the Tranche A Principal; and
(e) finally, 100% of the remainder, if any, to reduce the Loan Balance. The
Borrowing Base shall reduce by a like amount.
CATEGORY 2. THE OIL AND GAS PROPERTIES INCLUDED IN THE MINERAL
INTERESTS SALE. Proceeds from the Mineral Interests Sale, to which
the Lenders will consent, in the amount of $6,000,000 which will be
applied in the following order:
(a) first, to the payment of the reasonable costs of such sales, which is
$35,500;
(b) next, to advance the amount of $1,423,125 into the Protected Account to
provide for the April 1, 1999 scheduled Bond Interest Payment (if such Bond
Interest Payment has not already been provided for);
(c) next, to principal payments on the Loan Balance equal to the reduction
payment of the Borrowing Base by $4,500,000, which is the allocated
Borrowing Base value for the Oil and Gas Properties included in the Mineral
Interests Sale (this reduction shall be applied toward the required
reductions in 2.9(a)(i) and (ii) of this Agreement;
(d) next, to the payment of the Tranche A Principal; and
(e) finally, 100% of the remainder, if any, to reduce the Loan Balance. The
Borrowing Base shall reduce by a like amount.
CATEGORY 3. Neutrino Resources Inc. ("NTO") - Proceeds from the sale
of the stock of NTO or the assets of NTO (after satisfaction of NTO
creditors), will be applied in the following order:
(a) first, to the payment of the reasonable costs of such sales, if any;
(b) next, to the payment of past due interest and/or fees due to Lenders,
if any;
(c) next, to advance the amount of $1,423,125 into the Protected Account to
provide for the April 1, 1999 scheduled Bond Interest Payment (if such Bond
Interest Payment has not already been provided for);
(d) next, to the payment of the Tranche A Principal; and
(e) finally, 50% of the proceeds, if any, to reduce the Loan Balance. The
Borrowing Base shall reduce by a like amount. The remaining 50% of the
remaining proceeds, if any, will be retained by the Borrower and the
Co-Borrowers for capital investment and general corporate purposes.
CATEGORY 4. Any other Property sales not included in Categories 1,
2, or 3 above - Proceeds from the sale of such assets will be
applied in the following order:
(a) first, to the payment of the reasonable costs of such sales, if any;
(b) next, to the payment of past due interest and/or fees due to Lenders,
if any;
(c) next, to advance the amount of $1,423,125 into the Protected Account to
provide for the April 1, 1999 scheduled Bond Interest Payment (if such Bond
Interest Payment has not already been provided for);
(d) next, to the payment of the Tranche A Principal; and
(e) finally, 50% of the remaining proceeds to reduce the Loan Balance. The
Borrowing Base shall reduce by a like amount. The remaining 50% will be
retained by the Borrower and/or the Co-Borrowers for capital investment and
general corporate purposes.
2.11 ADDITION OF SECTION 5.24. Section 5.24 shall be added to the Agreement
to read as follows:
"5.24 LOCKBOX ARRANGEMENT. Execute, maintain in full force and effect,
and comply in all respects with the provisions of such documentation as may
be reasonably required by the Lenders to establish the Lockbox and the
Lockbox Accounts (including, without limitation, the Lockbox Agreement and
Collateral Assignment of Deposit Accounts and Security Agreement); direct
all purchasers of production from the Mortgaged Properties to make
remittance to the Lockbox; and deposit directly into the Lockbox Accounts
all funds received by the Borrower and/or the Co-Borrowers, if any, from
purchasers of production and/or dispersers of the proceeds of production
from the Mortgaged Properties. Funds received in the Lockbox shall be
transferred daily by the Agent to the Lockbox Accounts over which the Agent
shall have exclusive control and then provided there is no Event of Default
to Borrower's Operating Accounts. Upon the occurrence of an Event of
Default, the Agent may, at its option, apply any or all of such funds in
the Lockbox Account to the Obligations, whether matured or unmatured."
2.12 ADDITION OF SECTION 5.25. Section 5.25 shall be added to the Agreement
to read as follows:
"5.25 PROCEEDS FROM MINERAL INTERESTS SALE. In addition to the
payments to the Lenders from the Mineral Interests Sale required in Section
5.23 Category 2(b), the Borrower and/or Co-Borrowers will deposit proceeds
from the Mineral Interests Sale totaling $1,423,125 in the Protected
Account at the closing of this Second Amendment. At all times until 12:00
noon central time on April 30, 1999, Agent shall (i) limit any transfer of
funds in the Protected Account to payment of the April 1, 1999 Bond
Interest Payment pursuant to written instructions of the Borrower, and (ii)
not exercise any of its rights and remedies with respect to the funds in
the Protected Account. Notwithstanding anything herein to the contrary, if
the April 1, 1999 scheduled Bond Interest Payment is not made by the
Borrower by 12:00 noon, central time on April 30, 1999, then at any time
thereafter, the Lenders may exercise any and all of their rights and
remedies with respect to any and all funds in the Protected Account,
including, without limitation, the right to offset such funds."
2.13 AMENDMENT OF SECTION 6.14. Section 6.14 of the Agreement is amended to
read as follows:
"6.14 TANGIBLE NET WORTH. Permit Tangible Net Worth as of the close of
any fiscal quarter to be less than $10,000,000, beginning December 31,
1998, plus (i) 50% of positive Net Income, (ii) 75% of other increases in
equity, and (iii) 100% of any unrealized positive Canadian currency
translation adjustments, less any unrealized negative Canadian currency
translation adjustments (as recognized on the balance sheet) for all fiscal
quarters ending subsequent to December 31, 1998."
2.14 ADDITION OF SECTION 6.15. Section 6.15 shall be added to the Agreement
to read as follows:
"6.15 EXPENDITURES IN CAPITAL EXPENDITURE FORECAST. If an Event of
Default has occurred and is continuing, the Borrower and/or Co-Borrowers
shall make no expenditures set forth in the capital expenditures forecast,
without the prior written consent of the Lenders."
2.15 ADDITIONS TO SECTION 7.1. Section 7.1 of the Agreement is amended to
read as follows by adding the following subparagraphs:
"(n) an Event of Default shall occur automatically and without any
notice to the Borrower or Co-Borrowers if any Scheduled
Reduction Amount payment is not made on the first day of each month
beginning 2:00 p.m. central time April 1, 1999; and
(o) an Event of Default shall occur automatically and without any
notice to the Borrower or Co-Borrowers if the Bond Interest Payment is
not made within 30 days after the Interest Payment Date as defined in
the Indenture dated October 7, 1997, for the 6.875% Convertible
Subordinated Debenture due 2007."
ARTICLE III.
CONDITIONS
The obligation of the Agent and the Lenders to amend the Agreement as
provided herein is subject to the fulfillment of the following conditions
precedent:
3.01 RECIEPT OF DOCUMENTS. The Agent and the Lenders shall have received,
reviewed, and approved the following documents and other items, appropriately
executed when necessary and in form and substance satisfactory to the Agent and
the Lenders:
(a) multiple counterparts of this Second Amendment as requested by the
Lenders;
(b) Mortgage, Deed of Trust, Indenture, Security Agreement, Financing
Statement and Assignment of Production from Diverse GP III in certain
designated Oil and Gas Properties, and all improvements, personal
property, and fixtures related thereto;
(c) Financing Statements from Diverse GP III, as Debtor, constituent
to the instrument described above;
(d) Letters in lieu of transfer orders executed by Diverse GP III
constituent to the documents described above;
(e) Security Agreement (Stock Pledge) and blank Stock Power from
Spruce Hills Production Company, Inc. ("Spruce Hills"), as Debtor, to
Agent as Secured Party pledging 100% of the stock of Neutrino
Resources Inc. and Financing Statement as to dividends and proceeds;
(f) Security Agreement (Stock Pledge) and blank Stock Power from the
Borrower, as Debtor, to Agent as Secured Party pledging 100% of the
stock of Spruce Hills Production Company, Inc. and Financing Statement
as to dividends and proceeds;
(g) Collateral Assignment of Deposit Accounts and Security Agreement
from the Borrower pledging certain accounts with Compass;
(h) Financing Statement from the Borrower, as Debtor, constituent to
the instrument described in (h); and
(i) notification letters to be mailed on the date of execution of the
Second Amendment in form and substance satisfactory to the Agent, from
the Borrower and/or the Co-Borrowers to each purchaser of production
and disburser of proceeds of production from or attributable to the
Mortgaged Properties, authorizing and directing the addressees to make
future payments attributable to production from the Mortgaged
Properties directly to the Lockbox and with a provision that such
instructions cannot be changed without the prior consent of the Agent
and the Borrower and Co-Borrowers;
(j) 1999 capital expenditure budget;
(k) 1999 general and administrative budget approved by the Lenders,
which approval shall not be unreasonably withheld. Such budget may not
be changed without prior written consent of the Lenders, which consent
shall not be unreasonably withheld; and
(l) such other agreements, documents, items, instruments, opinions,
certificates, waivers, consents, and evidence as the Agent and the
Lenders may reasonably request.
3.02 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in Article IV of the Agreement and this Second Amendment
shall be true and correct, except that (i) the last sentence of Section 4.6 of
the Agreement is amended to read as follows: "No event or circumstance has
occurred since December 31, 1998, which could reasonably be expected to have a
Material Adverse Effect," and (ii) Exhibit VI to the Agreement is amended to add
Neutrino Resources, Inc.
3.03 MATTERS SATISFACTORY TO PARTIES. All matters incident to the
consummation of the transactions contemplated hereby shall be satisfactory to
the parties hereto.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
4.01 RESTATEMENT OF REPRESENTATIONS AND WARRANTIES. The Borrower and
Co-Borrowers hereby expressly re-make, in favor of the Agent and the Lenders,
all of the representations and warranties set forth in Article IV of the
Agreement, and represents and warrants that all such representations and
warranties remain true and unbreached except that (i) the last sentence of
Section 4.6 of the Agreement is amended to read as follows: "No event or
circumstance has occurred since December 31, 1998, which could reasonably be
expected to have a Material Adverse Effect," and (ii) Exhibit VI to the
Agreement is amended to add Neutrino Resources, Inc.
ARTICLE V.
RATIFICATION
Each of the parties hereto does hereby adopt, ratify, and confirm the
Agreement and the other Loan Documents, in all things in accordance with the
terms and provisions thereof, as amended by this Second Amendment.
ARTICLE VI.
MISCELLANEOUS
6.01 SCOPE OF SECOND AMENDMENT. The scope of this Second Amendment is
expressly limited to the matters addressed herein and this Second Amendment
shall not operate as a waiver of any past, present, or future breach, Default,
or Event of Default under the Agreement, except to the extent, if any, that any
such breach, Default, or Event of Default is remedied by the effect of this
Second Amendment.
6.02 AGREEMENT AS AMENDED. All references to the Agreement in any document
heretofore or hereafter executed in connection with the transactions
contemplated in the Agreement shall be deemed to refer to the Agreement as
amended by this Second Amendment.
6.03 PARTIES IN INTEREST. All provisions of this Second Amendment shall be
binding upon and shall inure to the benefit of the Borrower, the Co-Borrowers,
the Agent, the Lenders and their respective successors and assigns.
6.04 RIGHTS OF THIRD PARTIES. All provisions herein are imposed solely and
exclusively for the benefit of the Agent and the Lenders, the Borrower and
Co-Borrowers, and no other Person shall have standing to require satisfaction of
such provisions in accordance with their terms and any or all of such provisions
may be freely waived in whole or in part by the Lenders at any time if in their
sole discretion they deem it advisable to do so.
6.05 GOVERNING LAW. THIS SECOND AMENDMENT, THE AGREEMENT AND THE NOTES
SHALL BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT TEX.
FIN. CODE ANN. SS. 303.301 (VERNON 1998) (WHICH REGULATES CERTAIN REVOLVING
CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY; AND
PROVIDED FURTHER, THE PARTIES AGREE THAT THE LAWS OF NORTH CAROLINA SHALL GOVERN
AND CONTROL THE LAWFULNESS OF THE AMOUNT OR RATE OF INTEREST CONTRACTED FOR,
CHARGED OR RECEIVED UNDER THE LOAN DOCUMENTS.
6.06 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO,
ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM
THIS SECOND AMENDMENT, THE AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE
LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE LENDERS, IN COURTS HAVING
SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. THE BORROWER AND THE CO-BORROWERS HEREBY
SUBMIT TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN
HOUSTON, HARRIS COUNTY, TEXAS, AND HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO
TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST
THEM BY THE LENDERS IN ACCORDANCE WITH THIS SECTION.
6.07 ENTIRE AGREEMENT. THIS SECOND AMENDMENT CONSTITUTES THE ENTIRE
AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND
SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER WRITTEN
OR ORAL, RELATING TO THE SUBJECT HEREOF. FURTHERMORE, IN THIS REGARD, THIS
SECOND AMENDMENT AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY,
THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.
6.08 CONFIDENTIALITY. Lenders agree to keep confidential any information
furnished or made available to them by or on behalf of Borrower and/or
Co-Borrowers pursuant to this Agreement; PROVIDED that nothing herein shall
prevent Lenders from disclosing such information (a) to any affiliate of
Lenders, or any officer, director, employee, agent, or advisor of Lenders or
affiliate of any Lenders, (b) to any other Person if necessary to the
administration of this Agreement, (c) as required by any law, rule, or
regulations, (d) upon the order of any court or administrative agency, (e) upon
the written request or demand of any regulatory agency or
authority, (f) that is or becomes available to the public or that is or becomes
available to Lenders other than as a result of a disclosure by Lenders
prohibited by this Agreement, (g) in connection with any litigation relating to
this Agreement to which Lenders or any of its affiliates is a party, (h) to the
extent necessary in connection with the exercise of any remedy of Lender under
this Agreement and to any actual or proposed participant or assignee of the
Lender.
6.09 RELEASE OF CLAIMS. The Borrower and Co-Borrowers hereby release the
Agent and the Lenders from any and all known or suspected claims, actions,
demands or causes of action of whatever kind or character arising on or prior to
the date hereof. IT IS EXPRESSLY AGREED THAT THE CLAIMS RELEASED BY THE BORROWER
AND THE CO-BORROWERS HEREBY INCLUDE THOSE ARISING FROM OR IN ANY MANNER
ATTRIBUTABLE TO THE NEGLIGENCE (SOLE, CONCURRENT, ORDINARY, OR OTHERWISE), OF
THE AGENT AND THE LENDERS, THEIR RESPECTIVE REPRESENTATIVES, AGENTS, OFFICERS,
DIRECTORS, EMPLOYEES, SUCCESSORS AND ASSIGNS. Notwithstanding any provision of
this Second Amendment or any other Loan Document, this section shall remain in
full force and effect and shall survive the delivery and payment of the Notes,
this Second Amendment and the other Loan Documents and the making, extension,
renewal, modification, amendment or restatement of any thereof.
IN WITNESS WHEREOF, this Second Amendment is deemed executed
effective as of the date first above written.
BORROWER:
SOUTHERN MINERAL CORPORATION
By:
Steven H. Mikel
President and Chief Executive
Officer
CO-BORROWERS:
SMC ECUADOR, INC.
SMC PRODUCTION CO.
BEC ENERGY, INC.
AMERAC ENERGY CORPORATION
BY:
Steven H. Mikel
President and Chief Executive
Officer
LENDER AND AGENT:
COMPASS BANK
By:
Allison Hammer
Vice-President
LENDER:
FIRST UNION NATIONAL BANK
By:
Robert Wetteroff
Senior Vice-President