AMENDMENT NO. 1 AND WAIVER
AMENDMENT
NO. 1
AND WAIVER
This Amendment
No. 1 and Waiver (this
"Agreement")
dated
as of July 3,
2007
(the "Effective
Date"),
is by
and among Tekoil
and Gas Gulf Coast, LLC,
a
Delaware limited liability company (the "Company"),
Tekoil
& Gas Corporation,
a
Delaware corporation, as guarantor (the "Guarantor"),
the
lenders party to the Credit Agreement described below ("Lenders"),
X.
Xxxx & Company,
as Lead
Arranger and as Syndication Agent (in such capacities, "Syndication
Agent"),
and
X.
Xxxx & Company,
as
Administrative Agent for such Lenders (together with its permitted successors
in
such capacity, the "Administrative
Agent").
RECITALS
A. Reference
is made to that certain Credit and Guaranty Agreement dated as of May 11,
2007 among the Company, the Guarantor, the Lenders, the Syndication Agent and
the Administrative Agent (the "Credit
Agreement").
B. Subject
to the terms and conditions of this Agreement, the Company, the Guarantor,
the
Lenders, the Syndication Agent and the Administrative Agent, wish to (i) make
certain amendments to the Credit Agreement as provided herein and (ii) provide
a
waiver for the Waiver Defaults, as defined below.
NOW
THEREFORE, in consideration of their mutual undertakings, the Company, the
Guarantor, the Lenders, the Syndication Agent and the Administrative Agent
hereby agree as follows:
Section
1. Definitions
and Interpretations.
As used
in this Agreement, each of the terms defined in the opening paragraph and the
Recitals above shall have the meanings assigned to such terms therein. Each
term
defined in the Credit Agreement and used herein without definition shall have
the meaning assigned to such term in the Credit Agreement, unless expressly
provided to the contrary. Article, Section, Schedule, and Exhibit references
are
to this Agreement, unless otherwise specified. Paragraph headings have been
inserted in this Agreement as a matter of convenience for reference only and
it
is agreed that such paragraph headings are not a part of this Agreement and
shall not be used in the interpretation of any provision of this
Agreement.
Section
2. Waiver.
(a) The
Company hereby acknowledges the existence of the following Events of Default
(the "Waiver
Defaults"):
(i)
the Company did not furnish the title opinions required by the Credit Agreement
(the "Post-Closing
Title Opinions")
on or
before June 23, 2007 and (ii) the bonds and/or letters of credit in lieu of
bonds maintained by Sellers with respect to the Properties for the Railroad
Commission of Texas ceased to be in full force and effect prior to June 11,
2007
without Company first providing all such bonds and/or letters of credit in
lieu
of bonds with respect to the Properties.
(b) Subject
to the terms and conditions of this Agreement, the Lenders hereby waive the
Waiver Defaults. The waiver by the Lenders described in this Section 2 is
contingent upon the satisfaction of the conditions precedent set forth below
in
this Agreement and is limited to the Waiver Defaults. Such waiver shall not
be
construed to be a consent to or a permanent waiver of any Section covered by
either of the Waiver Defaults or any other terms, provisions, covenants,
warranties or agreements contained in the Credit Agreement or in any of the
other Transaction Documents. The Lenders reserve the right to exercise any
rights and remedies available to them in connection with any other present
or
future defaults with respect to the Credit Agreement or any other provision
of
any Transaction Document. The description herein of the Waiver Defaults is
based
upon the information available to the Lenders on the date hereof and shall
not
be deemed to exclude the existence of any other Events of Default. The failure
of the Lenders to give notice to any Credit Party of any such other Events
of
Default is not intended to be nor shall be a waiver thereof. The Company and
the
Guarantor hereby agree and acknowledge that the Lenders require and will require
strict performance by the Company and the Guarantor of all of their respective
obligations, agreements and covenants contained in the Credit Agreement and
the
other Transaction Documents, as amended hereby, and no inaction or action
regarding any Event of Default is intended to be or shall be a waiver thereof.
(c) Without
limitation of the foregoing, any failure to deliver the Post-Closing Title
Opinions by the date set forth in Section 8.1(s) of the Credit Agreement (as
amended hereby), or any failure of Company to maintain hereafter all bonds
and/or letters of credit in lieu of bonds required with respect to the
Properties for the Railroad Commission of Texas, shall constitute an Event
of
Default.
Section
3. Amendments
to the Credit Agreement.
(a) Section
1.1 of the Credit Agreement is amended by adding the following new terms in
alphabetical order:
"July
2007 Uncommitted Loan"
means
the $6,752,200 Uncommitted Loan made pursuant to the Amendment No. 1 and Waiver
dated as of July 3, 2007.
"July
2007 Uncommitted Loan Maturity Date"
means,
with respect to the July 2007 Uncommitted Loan, the earlier of (a) July 3,
2008,
and (b) the date that all Loans shall become due and payable in full hereunder,
whether by acceleration or otherwise.
(b) Section
2.1(b) of the Credit Agreement is amended by deleting the reference to "Maturity
Date" and replacing it with the phrase "July 2007 Uncommitted Loan Maturity
Date."
(c) Section
2.6(c) of the Credit Agreement is amended by deleting clause (iv) thereof and
replacing it with the following clause (iv):
(iv)
at
maturity, including the July 2007 Uncommitted Loan Maturity Date and the
Maturity Date, as applicable.
(d) Section
2.4 of the Credit Agreement is amended by deleting the second sentence thereof
and replacing such second sentence with the following two
sentences:
The
proceeds of the Loans made after the Closing Date (other than the July 2007
Uncommitted Loan) shall be applied by Company (a) to implement the Approved
Plan
of Development, (b) to make other expenditures from time to time approved by
Required Lenders, (c) subject to the requirements of Section 6.3, to
purchase crude oil puts / natural gas floors, and (d) for Company's working
capital. The proceeds of the July 2007 Uncommitted Loan shall be applied by
Company (a) to provide as cash collateral to Amegy Bank National Association
in
connection with the issuance by such bank of a letter of credit (the
"Letter
of Credit")
in the
amount of $6,370,000 in favor of the Texas Railroad Commission with respect
to
the Properties and (b) to pay related expenses, costs and fees.
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(e) Section
2.11 of the Credit Agreement is hereby deleted in its entirety and replaced
with
the following:
2.11 ANCF
Payment of Principal.
On each
Quarterly Payment Date, Company will pay (or prepay) the principal of the Loans,
without premium or penalty, in an amount equal to 100% of ANCF (or such lesser
percentage of ANCF, not to be less than 50%, as may be selected by Agent in
its
sole discretion) for the immediately preceding Calculation Quarter.
Such
amount shall be applied first
to pay
(or prepay) the principal of Loans other than the July 2007 Uncommitted Loan
and
second
to pay
(or prepay) the principal of the July 2007 Uncommitted Loan.
(f) Section
2.13 of the Credit Agreement is hereby amended by adding the following clause
(b) in appropriate alphabetical order:
2.13 Mandatory
Prepayments.
(b) In
the
event that any cash collateral or other funds held by Amegy Bank National
Association with respect to the Letter of Credit are returned to Company or
otherwise released (other than for reimbursement of the issuer for any draws
under such Letter of Credit or payment of usual and customary fees with respect
thereto), Company shall immediately prepay outstanding principal amount of
the
July 2007 Uncommitted Loan by an amount equal to the amount so released. No
Make-Whole Amount shall be payable with respect to any such prepayment of the
July 2007 Uncommitted Loan unless the outstanding principal amount of the Loans
made pursuant to Section 2.1(a) has been or is prepaid contemporaneously or
otherwise in connection with such prepayment of the July 2007 Uncommitted
Loan.
(g) Section
5.8 of the Credit Agreement is amended by deleting the 6th
sentence
thereof in its entirety and replacing such 6th
sentence
with the following:
Company
agrees to be insured by insurers with a financial strength rating of "A-" or
better and financial size category of "VII" or better from AM Best, "A-" or
better by Standard & Poor's or an equivalent rating from a recognized rating
agency; provided
that
Company may be insured by Southern County Mutual Insurance Company as
Administrative Agent deems reasonable.
(h) Section
8.1(s) of the Credit Agreement is hereby deleted in its entirety and replaced
with the following:
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(s) Borrower
shall fail to (i) furnish, on or before July 23, 2007, title opinions, in form
and substance reasonably satisfactory to Administrative Agent, covering Texas
State Lease MF030085 (State Tract 5-8A), Texas State Lease MF062790 (State
Tract
343), and any lease pooled or unitized therewith, specifically addressing,
without limitation, the interests of Borrower in and to the following xxxxx
and
non-producing reserves: (a) State Tract 5-8A #02, (b) Xxxxx Xxxxx 0-0X #00,
Xxxxx Xxxxx 5-8 #01(BP01), State Tract 5-8A #01(BP02), State Xxxxx 000#000,
Xxxxx Xxxxx 000 #000, Xxxxx Xxxxx 343 #018 (BP01), State Xxxxx 000 #000 (XX00),
xx (xx) comply with all reasonable requirements made by Administrative Agent
pursuant to such title opinions; or
(j) Section
8.1 of the Credit Agreement is amended by adding the following clause (t) in
appropriate alphabetical order:
(t) Any
drawing shall be made or requested under the Letter of Credit.
Section
4. July
2007 Loan.
Subject
to the terms and conditions of this Agreement, the Credit Agreement and the
other Transaction Documents, the Lenders and the Company hereby agree that
as of
the Effective Date the Lenders have agreed to provide Uncommitted Loans pursuant
to Section 2.1(b) of the Credit Agreement in an aggregate amount equal to
$6,752,200. Such Uncommitted Loan shall be made in a single advance on the
Effective Date. In addition to the Funding Notice required by Section 2.2 of
the
Credit Agreement, the Company shall deliver all such information in connection
with such Uncommitted Loan as the Administrative Agent may reasonably request.
The Uncommitted Loan of each Lender shall constitute a "Loan" as provided in
the
Credit Agreement. The determination of the Lenders to provide Uncommitted Loans
in the amount set forth above was discretionary as provided in Section 2.1(b)
of
the Credit Agreement, and the Company acknowledges that the Lenders are not
required to provide any Loans.
Section
5. Additional
Agreement of the Parties.
In
order to avoid including the July 2007 Uncommitted Loan and the Letter of Credit
obtained therewith on a duplicative basis in calculating the financial covenants
set forth in the Credit Agreement, and in order to make certain conforming
changes in connection therewith, the parties hereto agree and acknowledge the
following: (i) solely for the purpose of calculating the Debt to EBITDA ratio
in
Section 6.11 and determining the PDP Collateral Coverage Ratio and the Proved
Collateral Coverage ratio in Section 6.12, "Indebtedness" shall not include
the
amount of the Company's Liabilities with respect to the Letter of Credit, (ii)
solely for the purpose of calculating the Current Ratio in Section 6.10,
"Consolidated Current Liabilities" shall not include the amount of the Company's
Liabilities with respect to the Letter of Credit, and (iii) solely for the
purpose of calculating the Current Ratio in Section 6.10, "Consolidated Current
Assets" shall not include the amount of the cash collateral held by the issuing
bank with respect to the Letter of Credit.
Section
6. Representations
and Warranties.
(a) The
Guarantor represents and warrants that (i) after giving effect to this
Agreement, the representations and warranties set forth in the Credit Agreement
and the representations and warranties contained in the other Transaction
Documents to which the Guarantor is a party are true and correct in all material
respects on and as of the Effective Date as if made on and as of such date;
(ii)
other than the Waiver Defaults, no Default or Event of Default has occurred
and
is continuing; (iii) the execution, delivery and performance of this Agreement
and the other documents, instruments, certificates and agreements required
to be
delivered by this Agreement ("Other
Documents")
and to
which the Guarantor is a party are within the corporate power and authority
of
the Guarantor and have been duly authorized by appropriate corporate action
and
proceedings; (iv) this Agreement and the Other Documents to which the Guarantor
is a party constitute legal, valid, and binding obligations of the Guarantor
enforceable in accordance with their respective terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws
affecting the rights of creditors generally and general principles of equity;
(v) there are no governmental or other third party consents, licenses and
approvals required in connection with the execution, delivery, performance,
validity and enforceability of this Agreement or any of the Other Documents
to
which the Guarantor is a party; and (vi) the Liens under the Security Documents
are valid and subsisting and secure the Company's and the Guarantor's
obligations under the Transaction Documents.
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(b) The
Company represents and warrants that: (i) after giving effect to this Agreement,
the representations and warranties contained in the Credit Agreement and the
representations and warranties contained in the other Transaction Documents
to
which the Company is a party are true and correct in all material respects
on
and as of the Effective Date as if made on and as of such date; (i) other than
the Waiver Defaults, no Default or Event of Default has occurred and is
continuing; (ii) the execution, delivery and performance of this Agreement
and
the Other Documents to which the Company is a party are within the limited
liability company power and authority of the Company and have been duly
authorized by appropriate limited liability company action and proceedings;
(iv)
this Agreement and the Other Documents to which the Company is a party
constitute legal, valid, and binding obligations of the Company enforceable
in
accordance with their respective terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting
the rights of creditors generally and general principles of equity; (v) there
are no governmental or other third party consents, licenses and approvals
required in connection with the execution, delivery, performance, validity
and
enforceability of this Agreement or any of the Other Documents to which the
Company is a party; and (vi) the Liens under the Security Documents are valid
and subsisting and secure Company's obligations under the Transaction
Documents.
Section
7. Conditions
to Effectiveness.
This
Agreement shall become effective and enforceable against the parties hereto,
the
Credit Agreement shall be amended as provided herein, upon the occurrence of
the
following conditions precedent on or before the Effective Date:
(a) Agreement.
The
Administrative Agent shall have received multiple original counterparts of
this
Agreement duly and validly executed and delivered by duly authorized officers
of
the Company, the Guarantor, the Administrative Agent, and the
Lenders;
(b) Cash
Collateral Agreement.
The
Company shall have executed a cash collateral agreement with Amegy Bank National
Association ("Amegy")
and
the Company, Amegy, and the Administrative Agent shall have executed a letter
agreement in connection therewith (i) providing, in the case of the letter
agreement, that any funds returned to Company or otherwise released by Amegy
(other than for reimbursement of Amegy for any draws under such Letter of Credit
or payment of usual and customary fees with respect thereto) shall be paid
directly to the Administrative Agent and (ii) in the case of both such
agreements, otherwise on terms acceptable to the Administrative
Agent.
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(c) Closing
Documents List.
The
Administrative Agent shall have received, and shall be satisfied in its sole
discretion with, the other items listed on the Closing Documents List attached
hereto as Exhibit
A
(other
than any items noted as being deliverable post-closing).
(d) No
Default; Representations.
Other
than the Waiver Defaults, no Default or Event of Default shall have occurred
and
be continuing as of the Effective Date. The representations and warranties
in
this Agreement, and in the Credit Agreement, shall be true and correct in all
material respects.
(e) Fees.
The
Company shall have paid (i) a waiver and amendment fee equal to $334,425,
(ii) a funding fee of $47,775, and (ii) all fees and expenses of the
Administrative Agent's outside legal counsel and other consultants pursuant
to
all invoices presented for payment on or prior to the Effective
Date.
Section
8. Effect
on Transaction Documents; Acknowledgments.
(a) The
Company and the Guarantor each acknowledges that on the date hereof all
Obligations are payable without defense, offset, counterclaim or
recoupment.
(b) Except
as
set forth in Section 2 above, the Lenders and Administrative Agent hereby
expressly reserve all of their respective rights, remedies, and claims under
the
Transaction Documents. Nothing in this Agreement shall constitute a waiver
or
relinquishment of (i) any Default or Event of Default under any of the
Transaction Documents other than as expressly set forth in Section 2 above,
(ii)
any of the agreements, terms or conditions contained in any of the Transaction
Documents, (iii) any rights or remedies of the Lenders or Administrative Agent
with respect to the Transaction Documents, or (iv) the rights of Lenders and
Administrative Agent to collect the full amounts owing to it under the
Transaction Documents.
(c) The
Company, the Guarantor, the Lenders and Administrative Agent, each hereby
adopts, ratifies, and confirms the Credit Agreement, as amended hereby, and
acknowledges and agrees that the Credit Agreement, as amended hereby, and the
other Transaction Documents are and remain in full force and effect, and the
Company and the Guarantor each acknowledges and agrees that its liabilities
under the Credit Agreement and the other Transaction Documents are not impaired
in any respect by this Agreement.
(d) From
and
after the Effective Date, all references to the Credit Agreement and the
Transaction Documents shall mean such Credit Agreement and such Transaction
Documents as amended by this Agreement.
(e) This
Agreement and each of the Other Documents is a Transaction Document for the
purposes of the provisions of the other Transaction Documents. Without limiting
the foregoing, any breach of representations, warranties, and covenants under
this Agreement shall be a Default or Event of Default, as applicable, under
the
Credit Agreement.
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Section
9. Reaffirmation
of the Guaranty.
The
Guarantor hereby ratifies, confirms, and acknowledges that its obligations
under
the Guaranty are in full force and effect and that the Guarantor continues
to
unconditionally and irrevocably guarantee the full and punctual payment, when
due, whether at stated maturity or earlier by acceleration or otherwise, all
of
the Guaranteed Obligations as such Guaranteed Obligations have been increased
and amended by this Agreement. The Guarantor hereby acknowledges that its
execution and delivery of this Agreement does not indicate or establish an
approval or consent requirement by the Guarantor under the Credit Agreement
in
connection with the execution and delivery of amendments to the Credit
Agreement, the Notes or any of the other Loan Documents.
Section
10. Miscellaneous.
(a) Counterparts.
This
Agreement may be signed in any number of counterparts, each of which shall
be an
original and all of which, taken together, constitute a single instrument.
This
Agreement may be executed by facsimile signature and all such signatures shall
be effective as originals.
(b) Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted pursuant to the Credit
Agreement.
(c) Invalidity.
In the
event that any one or more of the provisions contained in this Agreement shall
for any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement.
(d) Governing
Law.
THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS
OF
THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES
THEREOF.
THIS
AGREEMENT, THE CREDIT AGREEMENT AS AMENDED BY THIS AGREEMENT, THE NOTES, AND
THE
OTHER TRANSACTION DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE
PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY
PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
THERE
ARE NO UNWRITTEN
ORAL AGREEMENTS AMONG THE PARTIES.
[Remainder
of this page intentionally left blank. Signature pages to follow.]
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IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by
their respective officers thereunto duly authorized, as of the date first above
written.
| COMPANY | ||
| TEKOIL AND GAS GULF COAST, LLC | ||
| By: Tekoil & Gas Corporation, its Managing Member | ||
| |
|
|
| By: | /s/ Xxxx Xxxxxxx | |
|
Xxxx Xxxxxxx |
||
| CEO and Chairman of the Board of Directors | ||
| GUARANTOR | ||
| TEKOIL & GAS CORPORATION | ||
| |
|
|
| By: | /s/ Xxxx Xxxxxxx | |
|
Xxxx Xxxxxxx |
||
| CEO and Chairman of the Board of Directors | ||
|
X.
XXXX & COMPANY,
as
Lead Arranger, Syndication Agent,
Administrative
Agent and a Lender
|
||
| |
|
|
| By: | ||
|
Authorized Signatory |
||
EXHIBIT
A
TO
AMENDMENT NO. 1 AND WAIVER
[CLOSING
DOCUMENT LIST]
