FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "AMENDMENT") is entered
into as of November 3, 1997 among Fortune Natural Resources Corporation
(formerly Fortune Petroleum Corporation), a Delaware corporation ("Borrower"),
Credit Lyonnais New York Branch, as Agent (in such capacity, "AGENT"), and
certain LENDERS (herein so called) named on SCHEDULE 2.1 (as amended and
supplemented from time to time) of the Credit Agreement (as hereinafter
defined).
R E C I T A L S
- - - - - - - -
A. Borrower, Lenders, and Agent entered into that certain Credit
Agreement dated as of July 11, 1997 (the "CREDIT AGREEMENT"). Unless otherwise
indicated herein, all terms used with their initial letter capitalized are used
herein with their meaning as defined in the Credit Agreement, and all Section
references are to Sections in the Credit Agreement.
B. Borrower has requested that the Lenders permit Borrower to incur
certain additional Debt in an aggregate principal amount of up to $4,500,000.00
which Debt shall be subordinate and junior in all respects to the Obligation.
C. The Lenders are willing to amend the Credit Agreement, as requested,
to permit such additional subordinated Debt but only upon the condition, that
Borrower and the Lenders shall have executed and delivered this Amendment and
that Borrower shall have fully satisfied the terms and conditions hereof.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Borrower, Agent and the Lenders hereby agree, as follows:
PARAGRAPH 1. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is hereby
amended, as follows:
1.1 Definitions.
(a) The definition of "SUBORDINATED DEBT" appearing in SECTION
1.1 is amended, in its entirety, to read as follows:
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SUBORDINATED DEBT means, at any time, (a) the
Subordinated Debentures (10-1/2%), (b) the
Subordinated Notes (12%), and (c) any Debt that (i)
is used solely for the redemption and repurchase of
(and may never exceed) the Subordinated Notes (12%)
and related, customary transactional expenses, (ii)
is subject to subordination, payment blockage, and
standstill provisions at least as favorable to
Lenders as those applicable to the Subordinated Notes
(12%) under the terms thereof, this agreement or
otherwise, (iii) is subject to representations,
covenants, events of default and other provisions not
significantly more onerous to Borrower than those
applicable to the Subordinated Notes (12%), and (iv)
does not have a net effective interest rate which is
greater than that of the Subordinated Notes (12%) or
any scheduled or mandatory principal or sinking fund
payment due before the Stated-Termination Date.
(b) SECTION 1.1 is further amended by adding the following new
definitions thereto, such definitions to appear in appropriate alphabetical
order therein:
APPROVED ACQUISITION means the acquisition by any
Restricted Company of Mineral Interests in which such
Restricted Company shall acquire from the seller(s)
thereof indefeasible title to such Mineral Interests,
subject to no Liens other than Permitted Liens, and
with respect to which (i) written notice of such
acquisition, together with copies of all material
documents, instruments, reports and agreements
entered or to be entered into or prepared in
connection therewith or relating thereto, including,
without limitation, all material engineering reports,
environmental reports, title reports or opinions, and
other due diligence information related to such
acquisition (collectively, the "Acquisition
Documents") shall have been delivered to the Agent at
least fifteen (15) Business Days prior to the date
that the transactions contemplated by the Acquisition
Documents are to be consummated (the "ACQUISITION
DATE"), and (ii) such Mineral Interests to be
acquired and the terms and provisions of the
Acquisition Documents shall have been approved, in
writing, on or prior to the Acquisition Date by the
Determining Lenders, in the exercise of their sole
discretion.
APPROVED DEVELOPMENT PROJECT means the development
for the production of oil, gas or other hydrocarbons
by any Restricted Company of certain Mineral
Interests in which such Restricted Company owns
indefeasible title, subject to no Liens other than
Permitted Liens, and with respect to which (i)
written notice of such development project, together
with copies of all material documents, instruments,
reports and agreements entered or to be entered into
or prepared in connection therewith or relating
thereto, including, without limitation, all
working-interest owner proposals, authorizations for
expenditure, cost estimates, material engineering
reports, and other due diligence information related
to such development project (collectively, the
"Development Project Documents") shall have been
delivered to the Agent at least fifteen (15) Business
Days prior to the date that such development project
commences (the "Development Commencement Date"), and
(ii) such Development Project Documents shall have
been approved, in writing, on or prior to the
Development Commencement Date by the Determining
Lenders, in the exercise of their sole discretion.
SUBORDINATED DEBENTURES (10-1/2%) means the 10-1/2%
Convertible Subordinated Debentures due December 31,
1997 issued by Borrower, not to exceed an aggregate
principal amount outstanding of $1,028,000.00.
SUBORDINATED NOTES (12%) means (a) the 12%
Convertible Subordinated Promissory Notes dated as of
November 3, 1997 in the aggregate original principal
amount of $1,350,000.00, due December 31, 2007 issued
by Borrower, and (b) any additional Debt incurred by
Borrower on or before December 31, 1997, not to
exceed an aggregate principal amount outstanding of
$3,150,000.00, the terms and provisions of the
instruments and agreements governing such Debt are
the same as those contained in the instruments
described in the immediately preceding clause (a).
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1.2 Amendment to SECTION 2.1(C) SECTION 2.1(C) is amended, in its
entirety, to read as follows:
The Commitment Usage may never exceed the lesser of either the
total Commitments for the Revolving Facility or the Borrowing
Base.
1.3 Amendment to SECTION 2.6(B). SECTION 2.6(B) is amended by replacing
the first sentence contained therein, in its entirety, with the following:
The Borrowing Base shall be redetermined by the Lenders
semi-annually through the Termination Date, within four (4)
months after each December 31 and June 30, with the first such
Borrowing Base redetermination under this Agreement to be made
on or before October 31, 1997 for the Mortgaged Properties as
of June 30, 1997, in accordance with the standard engineering
and lending policies and practices customary for loans of this
nature and on the basis of information supplied by the
Borrower in compliance with the provisions of this Agreement,
including, without limitation, the Reserve Reports, and all
other information available to the Lenders.
1.4 Amendment to SECTION 3.2(C). SECTION 3.2(C) is amended, in its
entirety, to read as follows:
(c) Revolving Facility-Mandatory Prepayments.
(1) At any time a Borrowing-Base Deficiency
exists, Borrower shall make prepayments to Agent (with any
related Funding Loss) under the Revolving Facility so that (i)
such Borrowing Base Deficiency has been reduced by at least
50% within 30 days after notice from Agent of the existence of
such Borrowing Base Deficiency, and (ii) such Borrowing-Base
Deficiency no longer exists by the sixtieth (60th) day after
notice from the Agent of the existence of such Borrowing Base
Deficiency.
(2) Borrower shall make prepayments to Agent
(with any related Funding Loss) under the Revolving Facility
in an amount equal to the lesser of (i) the excess, if any, of
(x) the aggregate gross proceeds received from the issuance of
the Subordinated Notes (12%), less all reasonable and
customary out-of-pocket fees and expenses incurred by Borrower
in connection therewith, over (y) $2,500,000.00, and (ii) the
Principal Debt outstanding on October 31, 1997; such
prepayments, if any, being due and payable from time to time
within one Business Day of Borrower's receipt of any such
proceeds from the issuance of the Subordinated Notes (12%) in
excess of $2,500,000.00.
1.5 Amendment to SECTION 7.1. SECTION 7.1(A) is amended, in its
entirety, to read as follows:
(a) Borrower will use LCs for general corporate
purposes and the proceeds of Borrowings under the Revolving
Facility for financing (i) the purchase price of Approved
Acquisitions, and (ii) the development costs incurred in
connection with Approved Development Projects.
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1.6 Amendment to SECTIONS 9.2(B) and (C). SECTION 9.2(B) and SECTION
9.2(C) are amended, in their entirety, to read, respectively, as follows:
(b) Pay or cause to be paid any principal of,
or any interest on, any of its Debt except (i) the Obligation,
(ii) any of its other Senior Debt if no Default or Potential
Default exists, (iv) the Subordinated Debentures (10-1/2%) if
no Default or Potential Default exists and regular, scheduled
payments of accrued interest on any other Subordinated Debt if
no Default or Potential Default exists or would result
therefrom, and (v) conversions of Subordinated Debt in
accordance with its terms to equity issued by Borrower.
(c) Amend, modify, renew or extend the terms
of the Subordinated Debentures (10-1/2%), or amend or modify
the terms of any other Subordinated Debt to any extent that
(i) any of the applicable subordination, payment blockage, or
standstill provisions are less favorable to Lenders than exist
for such Subordinated Debt on the date of its issuance, (ii)
the applicable representations, covenants, events of default,
and other provisions are significantly more onerous to
Borrower than exist for such Subordinated Debt on the date of
its issuance, or (iii) the net effective interest rate
applicable to such Subordinated Debt is increased or scheduled
or mandatory principal or sinking fund payment obligations
before the Stated-Termination Date are made applicable to such
Subordinated Debt.
1.7 Amendment to SECTION 10.3. SECTION 10.3 is amended, in its
entirety, to read as follows:
10.3 Coverage of Subordinated Debentures (10-1/2%).
The value of all investments of Borrower permitted pursuant to
paragraphs 1-8 on Schedule 9.8, plus all cash on hand, to be
less than $1,028,000.00 at any time during which any
Subordinated Debentures (10-1/2%) remain outstanding.
1.8 Amendment to Compliance Certificate. The last section (headed
"Section 10.3 Coverage of Subordinated Debt*") of EXHIBIT D-4 to the Credit
Agreement is amended, in its entirety, to read as follows:
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COVENANT AT END OF SUBJECT PERIOD
================================================================================
Section 10.3 COVERAGE OF SUBORDINATED DEBENTURES
(10-1/2%)*
------------------------------------------------ ------------- -------------
(a) Investments (permitted pursuant $
to 1- 8 of Schedule 9.8 to
Credit Agreement) at the end
of the Subject Period ------------- -------------
(b) Cash Balance at the end of $
the Subject Period ------------- -------------
(c) SUM of Line (a) plus Line (b) $
------------- -------------
(d) MINIMUM $1,028,000.00
================================================================================
* Covenant applicable only if any Subordinated Debentures
(10-1/2%) remain outstanding.
PARAGRAPH 2. AMENDMENT EFFECTIVE DATE. This Amendment shall be binding upon all
parties to the Loan Documents on the last day upon which the following has
occurred:
(a) Borrower shall have delivered to Agent true and
correct copies of (i) all documents evidencing or relating to the
issuance of that portion of the Subordinated Notes (12%) described in
CLAUSE (A) of the definition thereof, together with evidence that such
documents have been filed with all Governmental Authorities as may be
required under applicable Laws and that the transactions contemplated
thereby have been consummated; and
(b) Counterparts of this Amendment shall have been
executed and delivered to Agent by Borrower, Agent, and the Lenders or
when Agent shall have received telecopied, telexed, or other evidence
satisfactory to it that all such parties have executed and are
delivering to Agent counterparts thereof.
Upon satisfaction of the foregoing conditions, this Amendment shall be deemed
effective on and as of November 3, 1997 (the "AMENDMENT EFFECTIVE DATE");
provided, however, that if no portion of the Subordinated Notes (12%) have been
issued, or the foregoing conditions shall not have been fully satisfied, by
November 15, 1997, this Amendment shall be null and void ab initio and shall be
of no further effect.
PARAGRAPH 3. REPRESENTATIONS AND WARRANTIES. As a material inducement to Lenders
to execute and deliver this Amendment, Borrower hereby represents and warrants
to Lenders (with the knowledge and intent that Lenders are relying upon the same
in entering into this Amendment) the following: (a) the representations and
warranties in the Credit Agreement and in all other Loan Documents are true and
correct on the date hereof in all material respects, as though made on the date
hereof; (b) except for matters being waived in this Amendment, no Default or
Potential Default exists under the Loan Documents; and (c) the transactions
regarding the issuance, amount, terms and use of proceeds of the Subordinated
Notes (12%) have been accurately and completely described in the documents
provided to the Agent pursuant to PARAGRAPH 2(A) above.
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PARAGRAPH 4. MISCELLANEOUS.
4.1 EFFECT ON LOAN DOCUMENTS. The Credit Agreement and all
related Loan Documents shall remain unchanged and in full force and effect,
except as provided in this Amendment, and are hereby ratified and confirmed. On
and after the Amendment Effective Date, all references to the "Credit Agreement"
shall be to the Credit Agreement as herein amended. The execution, delivery, and
effectiveness of this Amendment shall not, except as expressly provided herein,
operate as a waiver of any Rights of the Lenders under the Credit Agreement or
any Loan Documents, nor constitute a waiver under the Credit Agreement or any
other provision of the Loan Documents.
4.2 REFERENCE TO MISCELLANEOUS PROVISIONS. This Amendment and
the other documents delivered pursuant to this Amendment are part of the Loan
Documents referred to in the Credit Agreement, and the provisions relating to
Loan Documents set forth in SECTION 14 are incorporated herein by reference the
same as if set forth herein verbatim.
4.3 COSTS AND EXPENSES. Borrower agrees to pay promptly the
reasonable fees and expenses of counsel to Agent for services rendered in
connection with the preparation, negotiation, reproduction, execution, and
delivery of this Amendment.
4.4 COUNTERPARTS. This Amendment may be executed in a number of
identical counterparts, each of which shall be deemed an original for all
purposes, and all of which constitute, collectively, one agreement; but, in
making proof of this Amendment, it shall not be necessary to produce or account
for more than one such counterpart. It is not necessary that all parties execute
the same counterpart so long as identical counterparts are executed by Borrower,
each Lender, and Agent.
4.5 THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT AMONG THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENT OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
AMONG THE PARTIES.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK. SIGNATURE PAGES FOLLOW.]
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment in
multiple counterparts effective as of the Amendment Effective Date.
FORTUNE NATURAL RESOURCES
CORPORATION, as Borrower
By /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------
Name Xxxxxx X. Xxxxxxxxx
---------------------------------
Title President and CEO
---------------------------------
CREDIT LYONNAIS NEW YORK BRANCH,
as Agent
By /s/ Philippe Soustra
---------------------------------
Name Philippe Soustra
---------------------------------
Title Senior Vice President
---------------------------------
LENDERS:
CREDIT LYONNAIS NEW YORK BRANCH,
as a Lender
By /s/ Philippe Soustra
---------------------------------
Name Philippe Soustra
---------------------------------
Title Senior Vice President
---------------------------------
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