EXHIBIT 10.28
THIRD AMENDMENT TO CREDIT AGREEMENT
THIRD AMENDMENT TO CREDIT AGREEMENT (this "Third Amendment"), dated as
of October 29, 1999 (the "Effective Date") among Miller Oil Corporation, a
corporation formed under the laws of the State of Michigan (the "Borrower"),
Miller Exploration Company (the "Parent"), each of the lenders that is a
signatory, or which becomes a signatory, to the Credit Agreement referred to
below (individually, together with its successors and assigns, a "Lender" and
collectively, the "Lenders") and Bank of Montreal, a foreign bank formed under
the laws of Canada in its individual capacity as a Lender and as agent for
Lenders under the Credit Agreement referred to below (in its capacity as agent,
together with its successors and assigns in such capacity, the "Agent").
RECITALS
WHEREAS, the Borrower, the Parent, the Lenders and the Agent are
parties to that certain Credit Agreement, dated as of February 9, 1998, as
amended by that certain First Amendment to Credit Agreement, dated as of June
24, 1998 and as amended by that certain Second Amendment to Credit Agreement
dated as of April 14, 1999 (as so amended, the "Credit Agreement"); and
WHEREAS, the Borrower has advised the Lenders and the Agent that it
desires to amend certain provisions of the Credit Agreement, and the Borrower
has requested that the Lenders and the Agent agree to amend certain provisions
of the Credit Agreement; and
WHEREAS, the Lenders and the Agent have agreed to so amend certain
provisions of the Credit Agreement upon the terms and subject to the conditions
and limitations of this Third Amendment;
NOW, THEREFORE, in consideration of the premises, covenants and
agreements contained herein, the parties hereto hereby agrees as follows:
Section 1. Definitions. Capitalized terms used and not otherwise
defined herein are used with the meanings ascribed thereto in the Credit
Agreement. The following capitalized terms shall have the following respective
meanings when used herein:
A. "Lending Relationship" shall refer to the Credit Agreement and the
other Loan Documents, including, without limitation, this Third Amendment,
together with any and all negotiations, discussions, acts, omissions, renewals,
extensions, and other agreements or events related to the Credit Agreement and
such other Loan Documents, the parties' obligations thereunder and the
transactions contemplated thereby, including, without limitation, any such
negotiations, discussions, acts, omissions, renewals, extensions, other
agreements or events that (a) occurred prior to the date
hereof, (b) may occur on the date hereof, or (c) occurred prior to the execution
of this Third Amendment and the instruments and documents executed and delivered
in connection herewith or relating hereto.
B. "Supplemental Mortgages" shall mean, collectively, all those
mortgages and supplements to mortgages necessary to grant to the Agent for the
benefit of the Lenders a first priority perfected Lien on the Oil and Gas
Properties owned by the Parent, the Borrower or any Subsidiary including those
Oil and Gas Properties acquired by the Parent, the Borrower or any Subsidiary
after February 9, 1998, and including without limitation, those properties
listed on Schedule III hereto and those properties located in the State of
Montana, all such mortgages and supplements to mortgages to be delivered within
thirty (30) days of the date hereof in accordance with Section 7.
C. "Released Claims" shall mean any and all claims (including without
limitation any liabilities, damages, demands and causes of action arising
therefrom), whether (a) at law or in equity, (b) on the alleged commission of a
tort, (c) on the alleged breach (or anticipatory breach or repudiation) of any
contract, duty, or warranty (whether oral or written, express or implied), (d)
on the alleged violation of any statute, tariff, or regulation (whether
promulgated by the United States, any state thereof, any foreign state or
country, or any other governmental agency or entity, wherever located), or (e)
on any other factual, legal or equitable theory, including, without limitation,
any claim for damages of any type or nature, for injunctive or other relief, for
attorneys' fees, interest or any other liability whatsoever on any theory,
including without limitation any loss, cost or damage in connection with or
based upon "lender liability", unfair dealing, duress, coercion, control or
undue influence, extortion or commercial bribery, breach of an implied covenant
or duty of good faith and fair dealing, material misrepresentation or omission,
overreaching, unconscionability, conflict of interest, bad faith, malpractice,
disparate bargaining position, detrimental reliance, promissory estoppel,
estoppel by deed, waiver, laches, or any other equitable theory, equitable
subordination, breach of fiduciary duty or any other duty, or tortious
inducement to commit such breach, tortious interference with contract or
prospective business relations, negligent performance of contractual
obligations, or other theories of negligence, negligent or intentional
infliction of emotional distress, slander, libel, other defamation, fraudulent
transfer, conversion, trespass to (or clouding the title of) property, usury,
violations of the Racketeer Influenced and Corrupt Organizations Act, deceptive
trade practices, conspiracy, or any theory of liability as partners or joint
venturers, that any Releasing Party may have as of the date hereof against any
Released Party with respect to the Lending Relationship.
D. "Released Party" shall mean each of the Agent, the Lenders and
their respective predecessors, successors, assigns, directors, officers,
partners, employees, agents, attorneys, principals and Affiliates and all other
Persons liable or who might be claimed to be liable on their behalf
(collectively, the "Released Parties").
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E. "Releasing Party" shall mean each of the Borrower and the
Guarantors and their respective predecessors, successors, assigns, directors,
officers, partners, employees, agents, attorneys, principals, Affiliates and all
other Persons who might have a claim against any Released Party (collectively,
the "Releasing Parties").
Section 2. Amendments to Credit Agreement. The Credit Agreement is
amended hereby as follows:
A. Section 1.02 is amended hereby:
(i) by inserting the reference "and the Third Amendment"
after the reference "Second Amendment" in the definition of the term
"Agreement";
(ii) by deleting the references "October 15, 1999" and
"$37,000,000" in the definition of "Aggregate Maximum Credit Amounts" and
substituting the references "April 15, 2000" and "$25,468,000".
(iii) by deleting the reference "(i) the sixth anniversary of
the Closing Date," in the definition of the term "Final Maturity Date" and
substituting the following therefor "(i) January 1, 2001,".
(iv) by adding the following definition where alphabetically
appropriate:
"Third Amendment Effective Date" shall mean the "Effective
Date" as such term is defined in the Third Amendment.
B. Section 2.07 of the Credit Agreement is amended hereby as
follows:
(i) by deleting subsection (b)(i) in its entirety and
substituting therefor the following new subsection (b)(i):
"(i) The Borrower shall make prepayments as set forth below:
A. The Borrower shall prepay the Loans as follows:
(1) On or before October 31, 1999, after
application of any prepayments made pursuant to
subsection C. below, the amount of $750,000;
(2) On or before November 30, 1999, after
application of any prepayments made pursuant to
subsection C. below, the amount of $750,000;
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(3) On or before December 31, 1999, after
application of any prepayments made pursuant to
subsection C. below, the amount of $750,000;
(4) On or before January 31, 2000, after
application of any prepayments made pursuant to
subsection C. below, the amount of $4,000,000;
and
(5) On or before February 29, 2000, after
application of any prepayments made pursuant to
subsection C. below, the amount of $750,000;
B. In addition to the prepayments required by
subsections 2.07(b)(i)A. and C., upon any Transfer of Property
that would be included in the Borrowing Base, the Borrower shall
prepay the Loans in an amount equal to 100% of the net cash
proceeds of any such Transfer, and any net cash proceeds in
excess of the value attributable to such Property in the
Borrowing Base determined by the Agent in its sole discretion at
the time of the Transfer shall be credited against the
prepayments required under subsection 2.07(b)(i)(A);
C. Upon any Transfer of Property that would not be
included in the Borrowing Base, the Borrower shall prepay the
Loans in an amount equal to 100% of the net cash proceeds of any
such Transfer, which prepayments shall be credited against the
prepayments required under subsection 2.07(b)(i)(A);
D. The entire amount of any prepayment made
pursuant to this subsection shall be applied to reduce the
Aggregate Maximum Credit Amounts pro rata to each Lender based on
its Percentage Share."
C. Section 2.08 of the Credit Agreement is amended hereby by as
follows:
(i) by deleting the reference "October 15, 1999" in subsection
(d) and substituting therefor the reference "April 15, 2000"; and
(ii) by deleting the first sentence of subsection (d) in its
entirety and substituting the following therefor:
"On April 15, 2000 (or such earlier time as the Borrower shall
request in writing to the Agent, provided that the Borrower timely
delivers a Reserve Report as required by Section 8.07 hereof) and, so
long as any of the
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Commitments are in effect and until payment in full of all
Loans hereunder, on or around the first Business Day of each May and
November, commencing November, 2000 (each being a "Scheduled
Redetermination Date"), the Lenders shall redetermine the amount of
the Borrowing Base in accordance with Section 2.08(b)."
D. Section 8.07 of the Credit Agreement is amended hereby as follows:
(i) by deleting the first sentence of subsection (a) in its
entirety and substituting the following therefor:
"On April 1, 2000 (or, if the Borrower requests a Borrowing Base
redetermination prior to April 15, 2000 in accordance with Section
2.08 hereof, not less than 15 days prior to the date of such
redetermination) and on or before each November 1 and April 1
thereafter, commencing November 1, 2000, the Borrower shall furnish to
the Agent a Reserve Report."
E. Section 9.12 of the Credit Agreement is amended hereby by deleting
the reference "December 31, 1999" and substituting the reference "October 1,
2000."
F. Section 9.14 of the Credit Agreement is amended hereby by deleting
the reference "$24,000,000" and substituting the reference "$20,000,000."
Section 3. Covenants.
A. Covenants of the Borrower and the Parent. The Borrower or the
Parent, as the case may be, covenants and agrees that during the period from the
Third Amendment Effective Date through and including April 15, 2000 (or, if
earlier, the date of the next redetermination of the Borrowing Base in
accordance with Section 2.08(d) of the Credit Agreement as amended hereby):
(i) Every two weeks the Parent shall deliver cash budgets in
form and substance reasonably satisfactory to the Agent and cash flow
statements in form and substance reasonably satisfactory to the Agent with
variance analysis to budget (including accounts receivables and accounts
payables reporting) not later than the Friday following the last week to
which such budgets and statements relate.
(ii) The Borrower shall not spud any wells or conduct any other
drilling operations (other than with respect to wells identified on
Schedule II hereto and routine workovers normally expensed in accordance
with past practice) without the prior written consent of the Agent and the
Lenders, and shall not, without the prior written consent of the Agent and
the Lenders, use any amounts to acquire acreage, leases, seismic data, or
for any drilling costs and expenses other than to acquire, extend or renew
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the Leases identified on Schedule I hereto or to pay the drilling costs or
expenses identified on Schedule II hereto.
(iii) The Borrower shall use its best efforts to raise capital,
whether through debt, equity or consummation of asset sales to achieve Borrowing
Base compliance, provided that the Lenders shall not require proceeds raised
through debt or equity offerings to be used for debt prepayments.
(iv) The Borrower shall provide to the Agent from time to time
upon request by the Agent the certificate of a Responsible Officer of the
Borrower stating that, except as disclosed in a schedule thereto, the Borrower
has not received written notice that any mechanics' liens have been filed or
will be filed on the Mortgaged Properties; provided that mere receipt of an
invoice for services rendered shall not constitute written notice that a
mechanics' lien will be filed.
B. The Lenders and the Agent Covenants. Each of the Lenders and the
Agent, as the case may be, covenants and agrees that during the period from the
Third Amendment Effective Date through and including April 15, 2000 (or, if
earlier, the date of the next determination of the Borrowing Base in accordance
with Section 2.08(d) of the Credit Agreement as amended hereby):
(i) the Agent will release any Lien that it may have on assets
of the Borrower sold by the Borrower in one or more arms length
transactions for fair value by the Borrower in accordance with the terms of
the Credit Agreement as amended hereby, the net cash proceeds of which
sales are paid to the Bank pursuant to Section 2.07(b)(i) of the Credit
Agreement as amended hereby.
Section 4. Conditions Precedent. This Third Amendment shall become
binding upon receipt by the Agent of the following documents and satisfaction of
the other conditions provided in this Section 4, each of which must be
satisfactory to the Agent in form and substance:
A. counterparts of this Amendment executed by the Borrower, the Agent
and the Lenders;
B. certificates of the Secretary or an Assistant Secretary of the
Borrower and the Guarantor setting forth for each of them (i) the resolutions of
its board of directors or managers (or if such Guarantor is a partnership,
resolutions of the general partner of such partnership), as applicable, with
respect to the authorization to execute and deliver this Amendment and
consummate the transactions contemplated hereby; (ii) the Responsible Officer of
such entity authorized to sign this Amendment, and (iii) the signature of such
authorized Responsible Officer of such entity;
C. a Consent and Acknowledgement executed by each of the Guarantors;
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D. an opinion of counsel to Borrower substantially in the form
attached hereto as Exhibit A;
E. payment to the Agent for the ratable benefit of the Lenders of all
accrued and unpaid Interest outstanding under the Credit Agreement and the
Notes; F. payment of the fees and expenses of the Agent and the Lenders
including the payment of the Amendment Fee provided in Section 8.A. of the
Second Amendment; and
G. such other documents as the Agent may reasonably request.
Section 5. Representations and Warranties.
A. The Borrower hereby reaffirms that the representations and
warranties made by the Borrower and the Parent in the Credit Agreement were true
and correct when made and, except as to be described in writing to the Agent as
of the date hereof, are true and correct as though made on and as of the date
hereof, and further, the Borrower represents that,
(i) as of the date hereof, no Default or Material Adverse
Effect has occurred and is continuing except as previously disclosed to the
Agent in writing or as set forth in Schedule IV hereto;
(ii) neither the Borrower, the Parent nor any Subsidiary has
acquired any additional Oil and Gas Properties since April 14, 1999 except as
identified on Schedule III hereto; and
(iii) the execution, delivery and performance by the Borrower or
any Guarantor of this Third Amendment and the other Loan Documents and all
instruments and documents to be delivered by the Borrower or such Guarantor, to
the extent a party thereto, hereunder and thereunder and the creation of all
Liens provided for herein and therein: (a) are within the Borrower's or such
Guarantor's corporate power; (b) have been duly authorized by all necessary or
proper corporate action, including the consent of stockholders, members and/or
partners therein or thereof; (c) are not in contravention of any provision of
the Borrower's or such Guarantor's certificate of incorporation, bylaws or
similar organizational and/or governing documents; (d) will not violate (1) any
law or regulation or (2) any order or decree of any court or governmental
instrumentality; (e) will not conflict with or result in the breach or
termination of, constitute a default under or accelerate any performance
required by, any indenture, mortgage, deed of trust, lease, agreement or other
instrument to which the Borrower or such Guarantor is a party or by which the
Borrower or such Guarantor or any of their respective property is bound; (f)
will not result in the creation or imposition of any Lien upon any of the
property of the Borrower or such Guarantor other than those in favor of the
Agent pursuant to the terms of this Third Amendment and the other Loan Documents
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to be delivered in connection herewith; and (g) do not require the consent or
approval of any governmental body, agency, authority or any other Person that
has not been duly obtained, made or complied with prior to the date hereof. At
or prior to the date hereof, each of this Third Amendment and the other Loan
Documents to be delivered in connection herewith shall have been duly executed
and delivered for the benefit of or on behalf of the Borrower or such Guarantor,
in each case to the extent a party thereto, and each shall then constitute a
legal, valid and binding obligation of the Borrower or such Guarantor,
enforceable against it in accordance with its terms.
B. Each of the Borrower and such Guarantor further represents and
warrants, for itself only that he or it (i) is executing this Third Amendment
after consultation with counsel of his or its own choosing, (ii) has read and
understands the release granted by Section 6 hereof, (iii) desires to execute
this Third Amendment and (iv) has the requisite authority to enter into and be
bound by this Third Amendment, including the release granted by Section 6
hereof.
Section 6. Release.
A. Each of the Releasing Parties desires and intends fully to
compromise, release and settle any and all of the Released Claims; and each of
the Releasing Parties hereby covenants, warrants and represents unto each of the
Released Parties that such Releasing Party does hereby FOREVER RELEASE, ACQUIT,
WAIVE AND DISCHARGE each of the Released Parties of and from the Released Claims
and each of the Releasing Parties hereby declares the same FOREVER RELEASED,
ACQUITTED, WAIVED, SETTLED AND DISCHARGED. This release is effective without
regard to whether (i) such Released Claims are known or unknown, (ii) damages
arising out of such Released Claims have yet accrued, (iii) such Released Claims
arose collaterally, directly, derivatively, or otherwise between the parties
hereto or (iv) an ordinary person in the same or similar circumstances would or
would not, through the exercise of due care, have discovered such claims by the
date of this Amendment. In connection with the foregoing release:
B. The Borrower and each Guarantor represents and warrants that it
has the full power and authority to perform the release granted in this Section
6 and that it has not in any manner made any assignment of any Released Claim to
any third party.
C. The release granted in this Section 6 will be effective upon
execution of this Third Amendment by all of the parties hereto.
D. Each party executing this Amendment understands and agrees that
the release granted in this Section 6 is a full, final and complete release of
the Released Claims and that such release may be pleaded as an absolute and
final bar to any or all suits which may hereafter be filed or prosecuted by any
one or more of the Releasing Parties or anyone claiming by, through or under any
one or more of the Releasing Parties in respect of any of the matters released
hereby, and that no recovery on account of the
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Released Claims may hereafter be had from any of the Released Parties; and that
the consideration given for such release is not an admission of liability or
fault on the part of any of the Released Parties (it being the express intent of
the parties hereto to obtain peace of mind and avoid the expense and uncertainty
of potential litigation), and that none of the Releasing Parties or those
claiming by, through or under any of them will ever claim that it is.
E. The parties hereto acknowledge that the release granted by this
Section 6 does not have any effect with respect to relationships between the
Borrower and each Guarantor and the Lenders and the Agent other than in
connection with the Lending Relationship.
Section 7. Events of Default and Remedies.
A. The occurrence of the following event (regardless of the reason
therefor) shall constitute an "Event of Default" hereunder:
(i) The Borrower shall fail to deliver within thirty (30) days
after closing the Supplemental Mortgages and the other documents required under
Section 8.09 of the Credit Agreement (including, without limitation, the legal
opinion), granting to the Agent a first priority Lien interest (subject only to
Excepted Liens) on the Borrower's, the Parent's, or any Subsidiary's interest in
any additional Oil and Gas Property listed on Schedule III hereto.
B. The occurrence and continuation of an Event of Default hereunder
shall constitute an Event of Default under the Credit Agreement as amended
hereby.
Section 8. Payment of Fees and Expenses; Form of Payment.
A. The Borrower agrees to pay to the Agent for the ratable benefit of
the Lenders a fee (the "Amendment Fee") in an amount equal to two percent (2%)
on the outstanding balance of the Loans as of April 15, 2000, payable on April
15, 2000.
B. The Borrower agrees, whether or not the transactions contemplated
hereby are consummated, to pay all reasonable expenses of the Agent and the
Lenders (including, without limitation, all reasonable fees and disbursements of
counsel and other outside consultants for the Agent and/or the Lenders) in
connection with the negotiation, investigation, preparation, execution and
delivery of, recording and filing of, preservation of rights under and
enforcement of this Amendment and the other Loan Documents to be delivered in
connection herewith.
C. All payments to be made by the Borrower under this Amendment shall
be made in Dollars, in immediately available funds, to the Agent at such account
as the Agent shall specify by notice in accordance with Section 4.01 of the
Credit Agreement.
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Section 9. Limitations. The amendments set forth herein are limited
precisely as written and shall not be deemed to (a) be a consent to, or waiver
or modification of, any other term or condition of the Credit Agreement or any
of the other Loan Documents, or (b) prejudice any right or rights that the
Lenders or the Agent may have at any time under or in connection with the Credit
Agreement as amended hereby or any of the other Loan Documents. Except as
expressly supplemented, amended or modified hereby, the terms and provisions of
the Credit Agreement or any other Loan Documents are and shall remain in full
force and effect. In the event of a conflict between this Amendment and any of
the foregoing documents, the terms of this Amendment shall be controlling.
Section 10. Non-Reliance on Agent and Other Lenders. Each Lender
acknowledges and agrees that it has, independently and without reliance on the
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own decision to enter into this Amendment, and that
it will, independently and without reliance upon the Agent or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking or not taking
action under this Amendment or the Credit Agreement. The Agent shall not be
required to keep itself informed as to the performance or observance by the
Borrower of this Amendment or any other Loan Document or any other document
referred to or provided for herein or therein or to inspect the properties or
books of the Borrower. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the Agent
hereunder and under the Credit Agreement, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of the Borrower (or any
of its Affiliates) which may come into the possession of the Agent or any of its
Affiliates. In this regard, each Lender acknowledges that Weil, Gotshal &
Manges LLP is acting in this transaction as special counsel to the Agent only.
Each Lender will consult with its own legal counsel to the extent that it deems
necessary in connection with this Amendment and the matters contemplated herein.
Section 11. Governing Law. This Amendment and the rights and
obligations of the parties hereunder and under the Credit Agreement shall be
construed in accordance with and be governed by the laws of the State of Texas
and the United States of America.
Section 12. Descriptive Headings, etc. The descriptive headings of the
several Sections of this Amendment are inserted for convenience only and shall
not be deemed to affect the meaning or construction of any of the provisions
hereof.
Section 13. Counterparts. This Amendment may be executed in any number
of counterparts and by different parties on separate counterparts and all of
such counterparts shall together constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date first written above.
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE (Section)26.02
THIS AMENDMENT AND OTHER LOAN DOCUMENTS EXECUTED BY ANY OF THE PARTIES
BEFORE OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH THE EXECUTION HEREOF TOGETHER
CONSTITUTE A WRITTEN LOAN AGREEMENT AND REPRESENT 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
AGREEMENT BETWEEN THE PARTIES.
BORROWER: MILLER OIL CORPORATION
By: /s/ Kelly E. Miller
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Name: Kelly E. Miller
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Title: President
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PARENT: MILLER EXPLORATION COMPANY
By: /s/ Kelly E. Miller
--------------------------------
Name: Kelly E. Miller
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Title: President & CEO
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LENDER AND AGENT: BANK OF MONTREAL
By: /s/ Thomas E. McGraw
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Thomas E. McGraw
Director