January 12, 1998
Frontier Natural Gas Corporation
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxxxxxxx
RE: Credit Agreement dated as of January 3, 1996, as amended
Ladies and Gentlemen:
Please refer to the Credit Agreement dated as of January 3, 1996, as
amended by Amendment No. 1 to Credit Agreement dated as of November 1, 1996
and Amendment No. 2 to Credit Agreement dated as of July 1, 1997 (as amended
from time to time, the "Credit Agreement"), between Frontier Natural Gas
Corporation ("Borrower") and Bank of America Illinois,
predecessor-in-interest to Bank of America National Trust and Savings
Association (the "Lender"). All capitalized terms used herein and not
otherwise defined shall have the respective meanings assigned to them in the
Credit Agreement.
You have requested that the Lender, for a certain period of time, waive
compliance by Borrower with certain provisions of the Credit Agreement.
1. INDEBTEDNESS UNDER ASPECT LOAN AGREEMENT. The Lender hereby waives
Borrower's compliance with SECTION 7.2.2 of the Credit Agreement, insofar as
such section prohibits Borrower from incurring certain indebtedness, to the
extent necessary to permit Borrower to incur the indebtedness described in
that certain Credit Agreement dated as of January 12, 1998 (the "ASPECT LOAN
AGREEMENT"), between Borrower and Aspect Resources LLC, a Colorado limited
liability company ("ASPECT"), in a maximum principal amount of $1,800,000.00.
A true, correct and complete copy of the Aspect Loan Agreement and all of its
exhibits and schedules is attached to this letter as ANNEX I, and there exist
no amendments or other agreements varying the terms of the Aspect Loan
Agreement.
Frontier Natural Gas Corporation
January 12, 1998
Page 2
2. LIENS UNDER ASPECT LOAN AGREEMENT. The Lender hereby waives
Borrower's compliance with SECTION 7.2.3 of the Credit Agreement, insofar as
such section prohibits Liens on the property, revenues or assets, whether now
owned or hereafter acquired, or Borrower or its Subsidiaries, to the extent
necessary to permit Borrower or its Subsidiaries to grant Liens in favor of
Aspect pursuant to the Aspect Loan Agreement, insofar and only insofar as
such Liens burden the property, revenues and assets described in ANNEX I
hereto and insofar and only insofar as such Liens do not burden any property,
revenues or assets currently subject to Liens in favor of the Lender.
3. NEGATIVE COVENANTS UNDER ASPECT LOAN AGREEMENT. The Lender hereby
waives Borrower's compliance with SECTION 7.2.11 of the Credit Agreement,
insofar as such section prohibits Borrower from entering into agreements
prohibiting the creation or assumption of any Liens on the property, revenues
or assets, whether now owned or hereafter acquired, or Borrower or its
Subsidiaries, or the ability of Borrower to amend or otherwise modify the
Credit Agreement or any other Loan Document, to the extent that the Aspect
Loan Agreement contains such a prohibition.
4. ACQUISITION AGREEMENT. The Lender hereby waives Borrower's
compliance with SECTION 7.2.8 of the Credit Agreement, insofar as such
section prohibits Borrower from consolidating with, or acquiring all or
substantially all of the assets of any Person, to the extent necessary to
permit Borrower to acquire the "Aspect Assets" and the "Esenjay Assets," as
defined and described in that certain Acquisition Agreement and Plan of
Exchange dated as of January 19, 1998 (the "ACQUISITION AGREEMENT"), between
Borrower, Aspect and Esenjay Petroleum Corporation, a Texas corporation
("ESENJAY"); PROVIDED, HOWEVER, that nothing in this waiver shall permit
Borrower to assume and become liable for some or all of the indebtedness of
Aspect to Joint Energy Development Investments II, a Delaware limited
partnership as contemplated by SECTION 3.02(a) of the Acquisition Agreement.
The Lender hereby waives Borrower's compliance with SECTION 7.2.6 of the
Credit Agreement, insofar as such section prohibits Borrower from making
distributions to redeem any class of equity, to the extent necessary to
permit Borrower to redeem 85,961 shares of $0.01 par value preferred stock of
Borrower (having a $10.00 per share redemption value) in connection with the
consummation of the transactions described in the Acquisition Agreement. The
Lender hereby waives SECTION 8.1.8 of the Credit Agreement, insofar as such
section provides that a Change in Control is an Event of Default, to the
extent that Xxxxx X. Xxxxx and Xxxxx X. Xxxxxxxxxxxxxx shall no longer own
their respective existing percentages of the voting capital stock of
Frontier Natural Gas Corporation
January 12, 1998
Page 3
Borrower; PROVIDED, HOWEVER, that this waiver shall not waive any Event of
Default that would occur if either of such Persons failed to be actively
involved in the management of the business of Borrower. A true, correct and
complete copy of the Acquisition Agreement and all of its exhibits and
schedules is attached to this letter as ANNEX II, and there exist no
amendments or other agreements varying the terms of the Acquisition Agreement.
5. INDEBTEDNESS UNDER DUKE LOAN AGREEMENT. The Lender hereby waives
Borrower's compliance with SECTION 7.2.2 of the Credit Agreement, insofar as
such section prohibits Borrower from incurring certain indebtedness, to the
extent necessary to permit Borrower to incur the indebtedness described in
that certain Credit Agreement dated as of February __, 1998 (the "DUKE LOAN
AGREEMENT"), between Borrower and Duke Energy Financial Services, Inc., a
Delaware corporation ("DUKE"), in a maximum principal amount of
$7,800,000.00 and for the uses, purposes and on the terms set forth in the
Duke Loan Agreement. A true, correct and complete copy of the Duke Loan
Agreement and all of its exhibits and schedules is attached to this letter as
ANNEX III, and there exist no amendments or other agreements varying the
terms of the Duke Loan Agreement.
6. LIENS UNDER DUKE LOAN AGREEMENT. The Lender hereby waives
Borrower's compliance with SECTION 7.2.3 of the Credit Agreement, insofar as
such section prohibits Liens on the property, revenues or assets, whether now
owned or hereafter acquired, or Borrower or its Subsidiaries, to the extent
necessary to permit Borrower or its Subsidiaries to grant Liens in favor of
Duke pursuant to the Duke Loan Agreement, insofar and only insofar as such
Liens burden the property, revenues and assets described in ANNEX III hereto
and insofar and only insofar as such Liens do not burden any property,
revenues or assets currently subject to Liens in favor of the Lender.
7. NEGATIVE COVENANTS UNDER DUKE LOAN AGREEMENT. The Lender hereby
waives Borrower's compliance with SECTION 7.2.11 of the Credit Agreement,
insofar as such section prohibits Borrower from entering into agreements
prohibiting the creation or assumption of any Liens on the property, revenues
or assets, whether now owned or hereafter acquired, or Borrower or its
Subsidiaries, or the ability of Borrower to amend or otherwise modify the
Credit Agreement or any other Loan Document, to the extent that the Duke Loan
Agreement contains such a prohibition.
8. FINANCIAL COVENANTS UNDER CREDIT AGREEMENT. The Lender hereby
waives Borrower's compliance with SECTION 7.2.4 of the Credit Agreement, for
the period commencing on January 1, 1998 and ending on the earlier to occur
of June 30, 1998 or the Closing under the Acquisition Agreement.
Frontier Natural Gas Corporation
January 12, 1998
Page 4
9. TIMING; PAYMENT IN FULL; AMENDMENT OF STATED MATURITY DATE. The
foregoing waivers set forth in PARAGRAPHS 1, 2, and 3 above are effective from
the date hereof through and including the earlier to occur of June 30, 1998
or the Closing under the Acquisition Agreement. The foregoing waivers set
forth in PARAGRAPHS 4, 5, 6 AND 7 above are effective from the date hereof.
The foregoing waivers set forth in PARAGRAPH 8 above are effective from
January 1, 1998, through and including the earlier to occur of June 30, 1998
or the Closing under the Acquisition Agreement. In the event that all
indebtedness under the Aspect Loan Agreement has not been repaid and
discharged in full and all Liens granted under the Aspect Loan Agreement have
not been released or terminated in full by June 30, 1998, then, without
further notice or demand of any kind, the entire indebtedness of Borrower to
the Lender under the Credit Agreement shall become and be immediately due and
payable as of June 30, 1998. In addition, the existing definition of "Stated
Maturity Date" in the Credit Agreement is hereby deleted and the following is
inserted in its place: "Stated Maturity Date means December 31, 1998."
10. NO OBLIGATION TO LEND. In consideration of the foregoing waivers,
Borrower agrees that, so long as the Aspect Loan Agreement or the Duke Loan
Agreement remains in effect and there are outstanding loans to Borrower from
Aspect or Duke or commitments by Aspect or Duke in favor of Borrower under
the Aspect Loan Agreement or the Duke Loan Agreement, Borrower shall not be
entitled to request a Loan or Loans, and the Lender shall not be obligated to
lend, any additional amount under the Credit Agreement.
11. NO OTHER DEFAULTS. To induce the Lender to grant the foregoing
waivers, Borrower hereby represents and warrants that (i) as of the date
hereof and after giving effect to the waivers set forth herein, there exists
no Default or Event of Default and (ii) no action, suit or proceeding is
pending or threatened against the Borrower or any other Obligor which (a) if
adversely determined, would have a Material Adverse Effect, or (b) pertains
to the Credit Agreement or any other Loan Document or the ability of Borrower
or any other Obligor to perform their respective obligations to the Lender
under the Credit Agreement or under any other Loan Document. Borrower
reaffirms, as of the date hereof, the representations and warranties
contained in ARTICLE VI of the Credit Agreement (except to the extent such
representations and warranties relate solely to an earlier date).
Frontier Natural Gas Corporation
January 12, 1998
Page 5
The waivers set forth above are subject to the conditions and
limitations set forth herein and shall be applicable only for the purposes,
and the periods, set forth herein, and not for any other purposes or with
respect to any subsequent period. The waivers contained herein shall not
apply to any Default or Event of Default (other than those specifically
waived in this letter), regardless of whether such other Default or Event of
Default is prior or subsequent to any of the matters referred to herein or is
of the same or a different type as any of the matters referred to herein.
If the foregoing correctly sets forth your understanding, kindly sign
and return the enclosed signed copy of this letter.
Very truly yours,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
successor-by-merger to Bank of
America Illinois
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------
XXXXXXX X. XXXXXXXX
Title: Vice President
Confirmed and agreed to:
FRONTIER NATURAL GAS CORPORATION
By: /s/ Xxxxx X. Xxxxxxxxxxxxxx
---------------------------
XXXXX X. XXXXXXXXXXXXXX
Title: Executive Vice President
The undersigned Guarantors hereby consent to the foregoing waiver:
FRONTIER, INC.
By: /s/ Xxxxx X. Xxxxxxxxxxxxxx
---------------------------
XXXXX X. XXXXXXXXXXXXXX
Title: Executive Vice President
Frontier Natural Gas Corporation
January 12, 1998
Page 6
FRONTIER ACQUISITION CORPORATION
By: /s/ Xxxxx X. Xxxxxxxxxxxxxx
---------------------------
XXXXX X. XXXXXXXXXXXXXX
Title: Executive Vice President
FRONTIER EXPLORATION AND PRODUCTION CORPORATION
By: /s/ Xxxxx X. Xxxxxxxxxxxxxx
---------------------------
XXXXX X. XXXXXXXXXXXXXX
Title: Executive Vice President
