LETTER AMENDMENT NO. 2
June 30, 2000
The Prudential Insurance Company
of America
c/o Prudential Capital Group
Attention: Xxxxxxxx X. Xxxxxx
0000 Xxxx Xxxxxx, Xxxxx 0000X
Xxxxxx, Xxxxx 00000
Ladies and Gentlemen:
We refer to the Amended and Restated Subordinated Note and Warrant
Purchase Agreement dated as of June 8, 1999 (the "Agreement") among the
undersigned, Hallwood Energy Corporation, Hallwood Consolidated Resources
Corporation and you. Unless otherwise defined herein, the terms defined in the
Agreement shall be used herein as therein defined.
Paragraph 6B(6) of the Agreement requires that Indebtedness of
Subsidiaries of the Parent not exceed the greater of $1,000,000 or 2% of the
Consolidated Net Worth of the Parent. As of June 30, 2000, Indebtedness of
Subsidiaries of the Parent, other than the Company, computed after marking to
market Hedging Transactions, was approximately $26,000,000. We request that you
amend paragraph 6B(6) of the Agreement to allow for the exclusion of the hedging
exposure amounts.
You have indicated your willingness to so agree. As a condition to your
agreement you have requested, and we have agreed, to further amend the Agreement
by amending paragraph 6B(7) as provided herein. Accordingly, it is hereby agreed
by you and us as follows:
The Agreement is, effective the date first above written, hereby amended as
follows:
(a) Paragraph 6B(2). Liens. Clause (v) of Paragraph 6B(2) of the Agreement
is amended in full to read as follows:
"(v) other Liens on properties of Parent, the Company or any other
Subsidiary of the Parent, provided that (i) the aggregate amount of
Indebtedness or other obligations secured by such Liens plus (ii) (without
duplication) the aggregate amount of Indebtedness of Subsidiaries of the
Parent, other than (A) Indebtedness of the Company and (B) Indebtedness
that constitutes Senior Debt, does not exceed, at any time, the greater of
$1,000,000 or 2% of Consolidated Net Worth of the Parent. For the purposes
of this clause (v) only, "Indebtedness" of Subsidiaries contemplated by
clause (ii) will not include the amount of Hedging Transactions of
Subsidiaries of the Parent if such Hedging Transactions comply with
paragraph 6B(7)."
(b) Paragraph 6B(6). Priority Debt. Paragraph 6B(6) of the Agreement is
amended in full to read as follows:
"6B(6). Priority Debt. Permit (i) Indebtedness of Subsidiaries of the
Parent, other than (A) Indebtedness of the Company and (B) Indebtedness
that constitutes Senior Debt, plus (without duplication) (ii) Indebtedness
secured by Liens permitted by clause (v) of paragraph 6B(2) to exceed, at
any time, the greater of $1,000,000 or 2% of Consolidated Net Worth of the
Parent. For the purposes of this paragraph 6B(6) only, "Indebtedness" of
Subsidiaries contemplated by clause (i) will not include the amount of
Hedging Transactions of Subsidiaries of the Parent if such Hedging
Transactions comply with paragraph 6B(7)."
(c) Paragraph 6B(7). Hedging Transactions. Paragraph 6B(7) of the Agreement
is amended by adding to the end thereof the following sentences:
"In addition, the Company will not and will not permit any Subsidiary
to enter into a Hedging Transactions with respect to crude oil, natural gas
or liquid hydrocarbons other than Hedging Transactions (i) that by volume
apply to not more than 75% of the proved developed producing reserves,
(based on the most recent engineering report furnished to the Banks
pursuant to the Credit Agreement) projected to be produced in any calendar
year (the "Subject Year") (determined using basis adjusted prices from the
New York Mercantile Exchange in the preceding fiscal quarter) and (ii) that
do not extend beyond the three calendar years following the Subject Year.
The Company will deliver to the holders of each Note a statement detailing
its hedge position as of the end of the previous fiscal quarter in a form
satisfactory to the Required Holders of the Notes at the same time it
delivers the financial statements contemplated by paragraphs 5A(i) and
5A(ii). Such statement will set forth (a) all Hedging Transactions, (b) a
valuation of the Company's proved developed producing reserves using basis
adjusted prices from the New York Mercantile Exchange as of the last day of
the previous fiscal quarter, and (c) the amount of the obligations of the
Company and its Subsidiaries under any Hedging Transaction determined as of
the end of the then most recently ended fiscal quarter, based on the
assumption that such Hedging Transaction had terminated at the end of such
fiscal quarter."
(d) Paragraph 12B. Other Terms. Paragraph 12B of the Agreement is amended
by amending the definition of "Indebtedness" to add a closing parenthesis at the
end of clause (i) in front of the semicolon.
On and after the effective date of this Letter Amendment, each reference in
the Agreement to "this Agreement," "hereunder," "hereof," or words of like
import referring to the Agreement, and each reference in the Notes to "the
Agreement," "thereunder," "thereof," or words of like import referring to the
Agreement, shall mean the Agreement as amended by this Letter Amendment. The
Agreement, as amended by this Letter Amendment, is and shall continue to be in
full force and effect and is hereby in all respects ratified and confirmed. The
execution, delivery and effectiveness of this Letter Amendment shall not, except
as expressly provided herein, operate as a waiver of any right, power or remedy
under the Agreement nor constitute a waiver of any provision of the Agreement.
This Letter Amendment may be executed in any number of counterparts and by
any combination of the parties hereto in separate counterparts, each of which
counterparts shall be an original and all of which taken together shall
constitute one and the same Letter Amendment. The effectiveness of this Letter
Amendment is conditioned upon the accuracy of the factual matters described
above and the execution of the Consent attached hereto.
If you agree to the terms and provisions hereof, please evidence your
agreement by executing and returning at least a counterpart of this Letter
Amendment to Hallwood Energy Corporation, 0000 X. Xxxxxx Xxxxxx, Xxxxx 000,
Xxxxxx, XX 00000, Attention: Legal Department. This Letter Amendment shall
become effective as of the date first above written when and if counterparts of
this Letter Amendment shall have been executed by you and us.
Very truly yours,
HALLWOOD ENERGY CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxxxxx
Title: Vice President
HALLWOOD CONSOLIDATED
RESOURCES CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxxxxx
Title: Vice President
Agreed as of the date first above written:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Xxx X. Xxxx
Title: Vice President
CONSENT
Hallwood Consolidated Partners, L.P., is a Guarantor under the Senior
Subordinated Guaranty Agreement dated as of December 23, 1997, and each of the
other undersigned entities are Guarantors under the Senior Subordinated Guaranty
Agreement dated as of June 8, 1999 (each being a "Guaranty") in favor of The
Prudential Insurance Company of America ("Prudential") with respect to the
obligations of Hallwood Consolidated Resources Corporation (the "Company") under
that certain Amended and Restated Subordinated Note and Warrant Purchase
Agreement dated as of June 8, 1999 (the "Agreement"). Prudential and the Company
are entering into Letter Agreement No. 2 to the Agreement (the "Amendment").
Each of the undersigned hereby consents to the Amendment, and each hereby
confirms and agrees that its Guaranty is, and shall continue to be, in full
force and effect and hereby confirmed and ratified in all respects except that,
upon the effectiveness of, and on and after the date of this Consent, all
references in the Guaranty of the undersigned to the "Agreement," "thereunder,"
"thereof," or words of like import referring to the Agreement shall mean the
Agreement as amended by the Amendment, as the same may be further amended or
modified from time to time.
Dated as of June 30, 2000
HALLWOOD CONSOLIDATED MAY ENERGY PARTNERS OPERATING
PARTNERS, L.P. PARTNERSHIP, LTD.
By: Hallwood Consolidated Resources By: HEC Acquisition Corp.,
Corporation Its General Partner
Its General Partner
By:/s/ Xxxxxxx X. Xxxxxxxxxxx
By: /s/ Xxxxxxx X. Xxxxxxxxxxx Title: Vice President
Title: Vice President
HALLWOOD ENERGY PARTNERS, L.P. CONCISE OIL & GAS PARTNERSHIP
By: HEC Acquisition Corp., By: HEC Acquisition Corp.,
Its General Partner Its General Partner
By: /s/ Xxxxxxx X. Xxxxxxxxxxx By: /s/ Xxxxxxx X. Xxxxxxxxxxx
Title: Vice President Title: Vice President
LA PLATA ASSOCIATES, LLC EM NOMINEE PARTNERSHIP COMPANY
By: Hallwood Petroleum, Inc. By: HEC Acquisition Corp.
Its Manager Its General Partner
By: /s/ Xxxxxxx X. Xxxxxxxxxxx By:/s/ Xxxxxxx X. Xxxxxxxxxxx
Title: Vice President Title: Vice President
HALLWOOD LA PLATA, LLC
By: Hallwood Petroleum, Inc.
Its Manager
By: /s/ Xxxxxxx X. Xxxxxxxxxxx
Title: Vice President
