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Exhibit 10.4
LIMITED WAIVER AND LOAN MODIFICATION AGREEMENT
THIS LIMITED WAIVER AND LOAN MODIFICATION AGREEMENT (the "Waiver
Agreement") is made effective as of May 15, 2000 by and among Rocky Shoes &
Boots, Inc., an Ohio corporation ("Rocky Inc."), Five Star Enterprises Ltd., a
Cayman Islands corporation ("Five Star"), Lifestyle Footwear, Inc., a Delaware
corporation ("Lifestyle") (the foregoing parties being referred to herein
individually as a "Borrower" and collectively as the "Borrowers"), Bank One, NA,
a national banking association ("Bank One"), The Huntington National Bank, a
national banking association ("HNB")(Bank One and HNB shall be referred to
herein individually as a "Bank" and collectively as the "Banks"), and Bank One,
NA, as Agent, acting in the manner and to the extent described in Article IX of
the Agreement referred to herein (in such capacity, the "Agent").
BACKGROUND INFORMATION
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A. The Borrowers, Bank One, HNB and the Agent entered into a certain
Revolving Credit Loan Agreement, dated as of January 28, 1997, as amended by (i)
a Term Loan Agreement and First Amendment to Revolving Credit Loan Agreement,
dated effective as of Xxxxx 00, 0000, (xx) a Second Amendment to Revolving
Credit Loan Agreement, dated effective as of May 29, 1998, (iii) a Third
Amendment to Revolving Credit Loan Agreement, dated effective as of April 1,
1999, and (iv) a Fourth Amendment to Revolving Credit Loan Agreement, dated
effective as of July 23, 1999 (such agreement, as so amended, the "Agreement"),
pursuant to which Bank One and HNB agreed to provide revolving credit loans to
the Borrowers, upon and subject to the terms and conditions as set forth in the
Agreement.
B. Events of Default have occurred under the terms of the Facility
Documents, and the Borrowers have requested that the Banks waive certain
provisions of the Agreement, and the Banks are willing do to so, but only in
accordance with the terms as set forth in this Waiver Agreement.
PROVISIONS
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NOW, THEREFORE, in consideration of the waiver of the Banks as set forth
herein, the mutual agreements hereunder and under the Facility Documents, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Borrowers, the Banks and the Agent hereby agree as
follows:
SECTION 1. CAPITALIZED TERMS. Except as provided for herein, the
capitalized terms used herein shall have the same meanings as set forth in the
Agreement.
SECTION 2. CURRENT AMOUNT OF REVOLVING CREDIT LOANS. The Borrowers
certify, acknowledge, agree and state that (i) as of May 3, 2000, the total
principal amount of Revolving Credit Loans owed to the Banks under the Agreement
and the Notes is $25,925,000 (with $15,555,000 being owed to Bank One and
$10,370,000 being owed to HNB), and that such amounts are payable to the Banks
without any offsets, counterclaim, defense or reductions, and
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(ii) the aggregate undrawn amount of outstanding Commercial L/Cs and Standby
L/Cs is $2,657,303.82 (with Bank One's participation therein being $1,594,382.29
and HNB's participation therein being $1,062,921.53).
SECTION 3. DEFAULT; WAIVER BY THE BANKS; WAIVER FEE; INCREASE IN INTEREST
RATE; DISCUSSIONS AMONG BANKS AND BORROWERS.
(a) The Borrowers acknowledge and agree that the Borrowers are
currently in default with respect to the following sections of the
Agreement (such sections being referred to collectively as the "Subject
Sections"):
(i) Section 7.2(l) (i) (relating to the Consolidated Net Worth
financial covenant);
(ii) Section 7.2(l) (ii) (relating to the Consolidated Fixed
Charge Coverage Ratio financial covenant); and
(iii) Section 7.2(l)(iii) (relating to the Consolidated Funded
Debt to Consolidated EBITDA Ratio financial covenant).
(b) Subject to the terms of this Waiver Agreement, the Banks
hereby waive compliance (the "Waiver") by the Borrowers with the Subject
Sections for the period (the "Waiver Period") commencing on March 30, 2000
(the "Effective Date") and continuing through and including June 29, 2000
(the "Termination Date"). EACH BORROWER ACKNOWLEDGES AND AGREES THAT THE
BANKS DO NOT INTEND TO EXTEND, AND NEITHER BANK IS MAKING ANY COMMITMENT
TO EXTEND, THE WAIVER PROVIDED FOR HEREIN BEYOND THE TERMINATION DATE.
(c) The Borrowers, jointly and severally, shall pay to the Agent
for the ratable benefit the Banks a waiver fee in the amount of
$20,000.00.
(d) During the Waiver Period, in determining the interest rate
applicable to each LIBOR Rate Loan (whether outstanding on the Effective
Date or originating thereafter), the Applicable Margin shall be 225 basis
points, rather than the Applicable Margin that would otherwise be in
effect pursuant to the Agreement.
(e) Although the Banks are agreeing to the Waiver as set forth
herein, the Banks (i) are not waiving, abandoning, discharging, releasing,
modifying, extending, canceling or relinquishing any right, claims, or
causes of action, and (ii) are not accepting any security or promise
granted herein as payment of any right, claims, or causes of action. The
Waiver by the Banks as set forth herein shall not affect or impair any
right that the Banks may have against any Borrower or any other party.
(f) The Banks and the Borrowers have had discussions with respect
to the possible modification and adjustment of certain terms of the
Agreement, including with
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respect to the Subject Sections, and it is anticipated that such
discussions will continue in the near future. HOWEVER, THE BANKS HAVE NOT
MADE ANY COMMITMENT, AND THIS WAIVER AGREEMENT SHALL NOT BE A CONSIDERED
TO BE A COMMITMENT BY THE BANKS, TO (i) CONTINUE ANY SUCH DISCUSSIONS OR
(ii) MODIFY, AMEND OR OTHERWISE CHANGE ANY TERMS OF THE AGREEMENT OR ANY
OTHER FACILITY DOCUMENTS AND THE CREDIT FACILITIES PROVIDED THEREBY.
SECTION 4. ABSENCE OF WAIVER. The Borrowers and the Banks agree that the
agreements set forth in Section 3 hereof shall not be deemed to:
(a) except as expressly set forth in Section 3 of this Waiver
Agreement, modify or limit any other term the Facility Documents;
(b) impose upon the Banks any obligation, express or implied, to
consent to any amendment or modification of the Facility Documents; or
(c) prejudice any right or remedy that the Banks may now have or
may in the future have under the Facility Documents or any instrument or
agreement referred to therein including, without limitation, any right or
remedy resulting from any Default or Event of Default not covered by the
Waiver with respect to the Subject Sections.
SECTION 5. CONTINUING OBLIGATIONS; MODIFICATIONS; ADDITIONAL OBLIGATIONS;
PROVISION OF ADDITIONAL ITEMS.
(a) Except with respect to the Subject Sections, the Borrowers
shall continue to comply, observe and perform all of their obligations
under the Agreement and the other Facility Documents.
(b) Effective as the date hereof and continuing hereafter:
(i) Exhibit D of the Agreement, containing the form of the
Borrowing Base Certificate, is hereby amended by deleting said
Exhibit D in its entirety and substituting in place thereof a new
Exhibit D in the form of Annex A attached hereto, and whenever the
Borrowers are required to provide a Borrowing Base Certificate to
the Agent and/or the Banks under the Agreement or this Waiver
Agreement, the form of such Borrowing Base Certificate shall be in
the form attached hereto as Annex A, appropriately completed and
signed by the Borrowers; and
(ii) Notwithstanding anything in the Agreement and the other
Facility Documents to the contrary, the Borrowers hereby consent and
agree that the Banks and the Agent shall have, and the Banks and the
Agent hereby reserve, the right and ability to reduce, modify and
otherwise change in any manner the Borrowing Base, which right may
be exercised in the Banks' and the Agent's sole and absolute
discretion and at anytime and from time to time; without limiting
the
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generality of the foregoing, the Banks and the Agent shall have the
right to (x) reduce the percentage of Eligible Accounts Receivable
(currently 80%) and Inventory (currently 50%) which may be included
in calculating the Borrowing Base, (y) which Accounts Receivable
shall constitute Eligible Accounts Receivable, (z) which Inventory
may be included in calculating the Borrowing Base.
(c) In addition to their current obligations under the Agreement
and the other Facility Documents, the Borrowers shall:
(i) provide to the Agent, not later than 2:00 p.m. on each
Monday during the Waiver Period, a Borrowing Base Certificate,
certified by an officer of the Borrowers as true and correct,
setting forth the amount of Eligible Accounts Receivable and
Inventory, in each case as of the close of business of the preceding
Friday; as currently provided in the Agreement, notwithstanding any
provision in the Facility Documents or herein to the contrary, the
total amount of outstanding Revolving Credit Loans under the
Aggregate Commitment, when taken together with the total aggregate
Dollar amount available to be drawn under outstanding Commercial
L/Cs and Standby L/Cs, shall at no time exceed the lesser of (i) the
Aggregate Commitment or (ii) the Borrowing Base as set forth on the
most recent weekly Borrowing Base Certificate provided to the Agent,
plus 50% of the Dollar amount available to be drawn under
outstanding Commercial L/Cs;
(ii) provide to the Agent as soon as available, but in any
event not later than 25 days after the end of each month (beginning
with April, 2000 and continuing during the Waiver Period), the
unaudited internally prepared consolidated balance sheet of the
Borrowers as at the end of such month and the related unaudited
unconsolidated statements of income and shareholders equity of the
Borrowers for such month and the portion of the Fiscal Year through
such date, setting forth in each case in comparative form the
figures for the previous year, certified by an appropriate officer
as being fairly stated in all material respects;
(iii) concurrently with the delivery of the monthly financial
statements referred to in subsection (ii) above, a certificate of an
appropriate officer of the Borrowers (in such form as shall be
reasonably acceptable to the Banks) stated to have been made after
due examination by such officer (x) stating that, to the best of
such officer's knowledge, except with respect to the Subject
Sections, the Borrowers during such period have observed or
performed in all material respects all of its covenants and other
agreements, and satisfied every condition, contained in the Facility
Documents to be observed, performed or satisfied by the Borrowers
and that such officer has obtained no knowledge of any Default or
Event of Default except as specified in such certificate, (y)
showing in detail the calculations used in determining the financial
covenants set forth in the Subject Sections, and (z) stating that,
to the best of such officer's knowledge, the
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representations and warranties expressed in Article V are true,
correct and complete in all material respects on and as of the date
of such financial statements delivered concurrently therewith,
except in each case of (x), (y) or (z) as may otherwise be
specifically set forth in such certificate; and
(iv) execute such additional documents reasonably requested by
the Banks and/or the Agent, including without limitation to protect,
perfect or continue perfection of liens.
SECTION 6. TRUTH OF REPRESENTATIONS AND WARRANTIES. The Borrowers hereby
represent and warrant that the following are true and correct as of the date of
this Waiver Agreement:
(a) the representations and warranties of the Borrowers contained
in the Facility Documents are true and correct on and as of the date of
this Waiver Agreement as if made on and as of such date unless stated to
relate to a specific earlier date;
(b) all financial statements of the Borrowers provided to the
Banks are true, accurate and complete in all material respects as of the
date of, and for the periods covered by, such financial statements;
(c) neither this Waiver Agreement nor any other document,
certificate or written statement furnished to the Banks or the Agent by or
on behalf of any Borrower in connection herewith or with the Revolving
Credit Loans and the transactions contemplated hereby and by the Facility
Documents contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
herein and therein not misleading;
(d) each Borrower has full power and authority (i) to make the
borrowings contemplated by the Facility Documents, (ii) to execute,
deliver and perform this Waiver Agreement, and (iii) to incur the
obligations provided for herein, all of which have been duly authorized by
all necessary and proper corporate action;
(e) no consent, waiver or authorization of, or filing with, any
person or any governmental authority is required to be made or obtained by
the Borrowers in connection with the borrowings under the Facility
Documents, or the execution, delivery, performance, validity or
enforceability of this Waiver Agreement;
(f) this Waiver Agreement constitutes the legal, valid and binding
obligation of each Borrower, enforceable against each Borrower in
accordance with its terms; and
(g) the execution and delivery by the Borrowers of this Waiver
Agreement and the performance by the Borrowers of this Waiver Agreement:
(i) do not and will not violate any law or regulation; (ii) do not and
will not violate any order, decree or judgment by which any Borrower is
bound; (iii) do not and will not violate or conflict with, result in a
breach of or constitute (with notice, lapse of time, or otherwise) a
default under any material agreement, mortgage, indenture or other
contractual obligation to
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which any Borrower is a party, or by which any Borrower's properties are
bound; or (iv) do not and will not result in the creation or imposition of
any lien upon any property or assets of any Borrower.
SECTION 7. CONDITIONS TO THE BANKS 'S OBLIGATIONS. The
obligations of the Banks to enter into this Waiver Agreement and be bound by the
terms hereof are subject to the satisfaction of the following conditions
precedent:
(a) DELIVERY OF DOCUMENTS AND ITEMS. Contemporaneously with or
before the execution of this Waiver Agreement by the Banks, the Agent
shall have received the following, each in form and substance satisfactory
to the Agent, the Banks and their counsel:
(i) WAIVER AGREEMENT. This Waiver Agreement, duly executed by
the Borrowers;
(ii) WAIVER FEE. The waiver fee required to be paid by the
Borrowers pursuant to
Section 3(c) of this Waiver Agreement; and
(iii) OTHER REQUIREMENTS. Such other certificates, documents
and other items as the Banks and/ or the Agent deem necessary or
desirable.
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Borrowers in this Waiver Agreement shall be true
and correct in all material respects as of the date hereof.
SECTION 8. ADDITIONAL EVENTS OF DEFAULT; REVOCATION OF WAIVER. Upon (i)
the failure of the Borrowers, or any of them, to observe, comply or perform any
of their obligations under this Waiver Agreement, or (ii) the occurrence of an
Event of Default, other than with respect to the Subject Sections, during the
Waiver Period, the Waiver provided herein may, in the sole and absolute
discretion of the Banks, be revoked by giving notice thereof by the Agent to the
Borrowers, and upon such revocation, the Waiver shall be null and void and the
Banks and the Agent shall be entitled to exercise all rights and remedies that
the Banks and the Agent now have at law or under the Facility Documents or any
instrument or agreement referred to therein with respect to such failure or
Event of Default, including an Event of Default with respect to any of the
Subject Sections.
SECTION 9. REAFFIRMATION OF LIABILITY; RELEASE OF CLAIMS. Each
Borrower hereby reaffirms its liability to the Banks and the Agent under the
Facility Documents and all other agreements and instruments executed by the
Borrower for the benefit of the Banks and the Agent in connection therewith.
Each Borrower acknowledges and agrees that the Banks and the Agent have
performed all of their respective obligations under the Facility Documents and
that the Banks and the Agent, or any of them, are not in default under any
obligation it has or ever did have to any Borrower under the Facility Documents
or any other agreement or otherwise. As a specific inducement and consideration
to the Banks to enter into this Waiver Agreement and agree to the transactions
contemplated hereby, each Borrower hereby waives and releases the
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Banks and the Agent, their respective officers, directors, employees and
representatives, from any and all claims or causes of actions, if any, accruing
on or before the date hereof and arising out of the past and/or present business
relationship between any Borrower and the Banks and/or the Agent which any
Borrower now has or may have or in the future may have against the Banks and/or
the Agent or any of their respective officers, directors, employees or
representatives.
SECTION 10. EFFECTIVENESS OF FACILITY DOCUMENTS. The Borrowers
have read and understand all terms and provisions of the Facility Documents and
this Waiver Agreement and, subject to the Waiver provided hereby, all of the
terms, covenants and conditions of, and the obligations of the Borrowers under,
all Facility Documents shall remain valid, binding and in full force and effect.
No delay on the part of the Banks or the Agent in the exercise of any right or
remedy under the Facility Documents shall operate as a waiver. No single or
partial exercise by the Banks or the Agent of any such right or remedy shall
preclude any other future exercise of such right or remedy or the exercise of
any other right or remedy. No waiver or indulgence by the Banks of any Default
or Event of Default shall be effective unless in writing and signed by the
Banks, nor shall a waiver on one occasion be construed as a bar to or waiver of
that right on any future occasion.
SECTION 11. PRESERVATION OF EXISTING SECURITY INTERESTS. Each mortgage,
security interest, pledge, assignment, lien or other conveyance or encumbrance,
including without limitation pursuant to the Security Agreement, of any right,
title, or interest in any property of any kind delivered to the Banks at any
time by any person or entity in connection with the Facility Documents or to
secure the performance of the obligations of the Borrowers under the Facility
Documents, , shall remain in full force and effect following the execution of
this Waiver Agreement.
SECTION 12. APPLICABLE LAW. This Waiver Agreement shall be deemed to be a
contract made under the laws of the State of Ohio and for all purposes shall be
construed in accordance with the laws of such state.
SECTION 13. SEVERABILITY. Any provision of this Waiver Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability,
without invalidating the remaining provisions hereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
SECTION 14. INTERPRETATION. This Waiver Agreement is to be deemed to have
been prepared jointly by the parties hereto, and any uncertainty or ambiguity
existing herein shall not be interpreted against any party but shall be
interpreted according to the rules for the interpretation of arm's length
agreements. The various headings in this Waiver Agreement are inserted for
convenience of reference only and shall not affect the meaning or interpretation
of this Waiver Agreement or any provision hereof.
SECTION 15. ENTIRE AGREEMENT. This Waiver Agreement embodies
the entire agreement and understanding among the Borrowers, the Agent and the
Banks relating to, and supersedes all prior agreements and understandings among
the Borrower, the Agent and the Banks relating to, the subject matter hereof.
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SECTION 16. COVENANTS TO SURVIVE, BINDING AGREEMENT. This Waiver Agreement
shall be binding upon and inure to the benefit of the Agent, the Banks, the
Borrowers and their respective successors or assigns; provided, however, that
the Borrowers may not assign or otherwise dispose of any of its rights or
obligations hereunder.
SECTION 17. AMENDMENTS AND SUPPLEMENTS. This Waiver Agreement may not be
amended or supplemented except by an instrument in writing executed by the
Borrowers, the Banks and the Agent.
SECTION 18. EXPENSES. The Borrowers, jointly and severally, shall
reimburse the Banks and the Agent for any costs, internal charges and
out-of-pocket expenses (including reasonable attorneys' fees and time charges of
attorneys for the Banks and the Agent, which attorneys may be employees of the
Banks or the Agent) paid or incurred by the Banks and/or the Agent in connection
with the preparation, negotiation, execution, delivery, review, amendment,
modification, and administration of this Waiver Agreement and the other Facility
Documents. The Borrowers, jointly and severally, also agree to reimburse the
Banks for any costs, internal charges and out-of-pocket expenses (including
reasonable attorneys' fees and time charges of attorneys for the Banks, which
attorneys may be employees of the Banks) paid or incurred by the Banks in
connection with the collection and enforcement of the Facility Documents.
SECTION 19. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one
agreement, and any of the parties hereto may execute this Agreement by signing
any such counterpart. This Agreement shall become effective upon receipt by the
Agent of counterparts hereof signed by each of the parties hereto or, in the
case of any party as to which an executed counterpart shall not have been
received, receipt by the Agent in form satisfactory to it of telegraphic,
facsimile or other written confirmation from such party of execution of a
counterpart hereof by such party. Any such telegraphic, facsimile or other
written confirmation from such party of execution of a counterpart hereof shall
be fully effective as an original counterpart hereof.
SECTION 20. WAIVER OF JURY TRIAL. THE BANKS, THE AGENT AND EACH BORROWER,
AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO
A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS WAIVER, THE
AGREEMENT, THE NOTES, THE OTHER FACILITY DOCUMENTS, OR ANY RELATED INSTRUMENT OR
AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY, OR ANY COURSE OF
CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF ANY OF
THEM. THIS WAIVER SHALL NOT IN ANY WAY AFFECT THE AGENT'S OR THE BANKS' ABILITY
TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION
CONTAINED IN ANY FACILITY DOCUMENT. NEITHER THE BANKS, THE AGENT NOR ANY
BORROWER SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN
WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL
CANNOT BE OR HAS NOT BEEN
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WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY
RESPECT OR RELINQUISHED BY THE BANKS, THE AGENT OR THE BORROWERS EXCEPT BY A
WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
SECTION 21. CONFESSION OF JUDGMENT. Each Borrower irrevocably
authorizes any attorney-at-law, including any attorney-at-law employed or
retained by the Banks or the Agent, to appear for the Borrower in any court of
record in Franklin County, Ohio (which the Borrower acknowledges to be the place
where the Agreement and this Waiver Agreement were made) or any other state or
jurisdiction wherein the Borrower may then reside, to (i) waive the issuing and
service of process, (ii) confess judgment against the Borrower in favor of the
holder of the Agreement for all amounts then due thereunder and under the Notes,
together with costs of suit, (iii) release all errors, and (iv) waive all rights
of appeal. Each Borrower consents to the jurisdiction and venue of that court.
Each Borrower waives any conflict of interest that any attorney-at-law employed
or retained by the Banks or the Agent may have in confessing judgment under the
Agreement and the Notes and consents to payment of a legal fee to any
attorney-at-law confessing judgment thereunder. After judgment is entered
against one or more of the Borrowers, the power conferred may be exercised as to
one or more of the other Borrowers.
[Balance of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the date first written above.
BORROWERS:
Rocky Shoes & Boots, Inc.,
an Ohio corporation
By: /s/ Xxxxx Xxxxxxxxx
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Title: V.P.
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WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO
NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT
JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE
AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR
WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART
TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.
Five Star Enterprises Ltd., Lifestyle Footwear, Inc.,
a Cayman Islands corporation a Delaware corporation
By: /s/ Xxxxx Xxxxxxxxx By: /s/ Xxxxx Xxxxxxxxx
---------------------------- -----------------------------
Title: Exec. V.P. Title: V.P.
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[Signatures continued on next page]
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BANKS:
Bank One, NA,
a national banking association
By: /s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx, Vice President
The Huntington National Bank,
a national banking association
By: /s/ Xxxxxxxx Xxxxxx
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Xxxxxxxx Xxxxxx, Vice President
AGENT:
Bank One, NA, as Agent,
a national banking association
By: /s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx, Vice President
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ANNEX A
FORM OF BORROWING BASE CERTIFICATE
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