<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1995 COMMISSION FILE NUMBER 1-8674
GLOBAL NATURAL RESOURCES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW JERSEY 93-0835865
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5300 MEMORIAL DRIVE 77007
SUITE 800 (ZIP CODE)
HOUSTON, TEXAS
(ADDRESS OF PRINCIPAL
EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 880-5464
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
x YES NO
---- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
As of August 1, 1995, 29,511,297 shares of common stock were
outstanding.
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements . . . . . . . . . . . . . . . 1
Consolidated Balance Sheets - June 30, 1995 and December 31, 1994 . . . . 1
Consolidated Statements of Operations for the Three Months and the Six
Months Ended June 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 3. Defaults upon Senior Securities . . . . . . . . . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . 10
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . 10
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
GLOBAL NATURAL RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
1995 1994
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 6,089 $ 3,881
Short-term liquid investments . . . . . . . . . . . . . . . . . . . . . 14,688 33,279
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 12,341 10,665
Current investments . . . . . . . . . . . . . . . . . . . . . . . . . . 555 832
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,542 4,436
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . 36,215 53,093
-------- --------
Properties and equipment, at cost:
Oil and gas properties (successful efforts method) . . . . . . . . . . . 138,122 119,602
Pipeline facilities . . . . . . . . . . . . . . . . . . . . . . . . . . 19,474 19,320
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,946 12,961
-------- --------
170,542 151,883
Less: accumulated depletion, depreciation and amortization . . . . . . . (69,568) (58,534)
-------- --------
Net properties and equipment . . . . . . . . . . . . . . . . . . . . . 100,974 93,349
-------- --------
Notes receivable - Russian joint venture . . . . . . . . . . . . . . . . . 4,315 3,606
Indonesian venture advances, net . . . . . . . . . . . . . . . . . . . . . 2,367 2,453
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,678 1,999
-------- --------
$145,549 $154,500
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,190 $ 13,256
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 10,251 12,229
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 829 1,309
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . 24,270 26,794
-------- --------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 1,275
Deferred credits and other . . . . . . . . . . . . . . . . . . . . . . . . 498 1,208
Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . . . -- --
Redeemable bearer shares . . . . . . . . . . . . . . . . . . . . . . . . . 17,130 17,467
Shareholders' equity:
Common stock; authorized 100,000,000 shares at $1.00 par value;
issued and outstanding 33,403,540 in 1995 and 33,335,487 in 1994 . . . 33,404 33,335
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . 138,795 138,355
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . (48,824) (44,167)
-------- --------
123,375 127,523
Less: treasury stock; 3,892,240 shares in 1995 and 3,900,697 in 1994 . . (19,724) (19,767)
-------- --------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . 103,651 107,756
-------- --------
$145,549 $154,500
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 4
GLOBAL NATURAL RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ -----------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
Restated Restated
<S> <C> <C> <C> <C>
Revenues:
Oil and gas . . . . . . . . . . . . . . . . $ 13,604 $ 8,827 $ 27,781 $ 19,738
Pipeline . . . . . . . . . . . . . . . . . . 4,145 4,362 8,548 9,255
Other . . . . . . . . . . . . . . . . . . . 128 261 269 511
----------- ----------- ----------- -----------
17,877 13,450 36,598 29,504
----------- ----------- ----------- -----------
Expenses:
Production . . . . . . . . . . . . . . . . 3,264 2,420 6,197 5,082
Exploration . . . . . . . . . . . . . . . . 4,064 6,381 7,020 8,081
Pipeline cost of sales . . . . . . . . . . 3,729 4,169 7,777 8,914
Depletion, depreciation and amortization . 6,711 1,916 11,584 3,648
Administrative . . . . . . . . . . . . . . 2,216 2,132 4,764 4,237
----------- ----------- ----------- -----------
19,984 17,018 37,342 29,962
----------- ----------- ----------- -----------
Income (loss) from operations . . . . . (2,107) (3,568) (744) (458)
Other income (expense):
Interest income . . . . . . . . . . . . . . 470 523 1,012 1,165
Interest expense . . . . . . . . . . . . . (25) (24) (77) (46)
Other . . . . . . . . . . . . . . . . . . . (122) (138) (174) 99
----------- ----------- ----------- -----------
323 361 761 1,218
----------- ----------- ----------- -----------
Income (loss) before income tax
expense . . . . . . . . . . . . . . . . (1,784) (3,207) 17 760
Income tax expense . . . . . . . . . . . . . . 2,139 1,169 4,674 3,071
----------- ----------- ----------- -----------
Net income (loss) . . . . . . . . . . . . . $ (3,923) $ (4,376) $ (4,657) $ (2,311)
=========== =========== =========== ===========
Net income (loss) per share based on weighted
average shares outstanding . . . . . . . . $ (.13) $ (.15) $ (.16) $ (.08)
=========== =========== =========== ===========
Weighted average common shares outstanding . . 29,477,480 29,746,982 29,458,353 29,891,826
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 5
GLOBAL NATURAL RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------------
1995 1994
-------- --------
Restated
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . $ (4,657) $ (2,311)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depletion, depreciation and amortization . . . . . . . . . . . . 11,584 3,648
Leasehold impairments and dry hole expense . . . . . . . . . . . 4,325 6,106
Unrealized (gain) loss on short-term liquid investments . . . . . (215) 337
Gain on asset sales . . . . . . . . . . . . . . . . . . . . . . . (16) (385)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 15
Changes in:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . (1,676) 5,535
Other current assets . . . . . . . . . . . . . . . . . . . . . . 2,171 678
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . (66) (4,637)
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . (1,978) 202
Short-term liquid investments . . . . . . . . . . . . . . . . . . 18,806 3,926
Deferred credits . . . . . . . . . . . . . . . . . . . . . . . . (710) 142
-------- --------
Net cash provided by operating activities . . . . . . . . . . . . . . 27,793 13,256
-------- --------
Cash Flows from Investing Activities:
Additions to oil and gas properties . . . . . . . . . . . . . . . . . (23,469) (19,131)
Additions to pipeline facilities and other properties and equipment. . (412) (610)
Proceeds from asset sales . . . . . . . . . . . . . . . . . . . . . . 548 456
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (669) (1,205)
-------- --------
Net cash used in investing activities . . . . . . . . . . . . . . . . (24,002) (20,490)
-------- --------
Cash Flows from Financing Activities:
Proceeds from common stock issuance . . . . . . . . . . . . . . . . . 509 813
Redemptions of bearer shares . . . . . . . . . . . . . . . . . . . . (337) (555)
Payments on long-term debt . . . . . . . . . . . . . . . . . . . . . (1,275) --
Acquisition of treasury stock . . . . . . . . . . . . . . . . . . . . -- (5,289)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (480) 775
-------- --------
Net cash used in financing activities . . . . . . . . . . . . . . . . (1,583) (4,256)
-------- --------
Net increase (decrease) in cash and cash equivalents . . . . . . . . 2,208 (11,490)
Cash and cash equivalents at beginning of period . . . . . . . . . . 3,881 16,356
-------- --------
Cash and cash equivalents at end of period . . . . . . . . . . . . . $ 6,089 $ 4,866
======== ========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53 $ 7
======== ========
Income taxes:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ --
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,857 3,060
======== ========
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,857 $ 3,060
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
GLOBAL NATURAL RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
Supplemental disclosure of non-cash investing and financing activities:
In connection with the Company's Employees 401(k) Savings Plan, the Company
contributed 8,704 treasury shares during the six month period ended June 30,
1995 with a market value of approximately $73,000 to the plan. During the six
month period ended June 30, 1994, the Company contributed 8,184 treasury shares
with a market value of approximately $58,000 to the plan.
See accompanying notes to consolidated financial statements.
4
<PAGE> 7
GLOBAL NATURAL RESOURCES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
(1) Basis for Preparation of Financial Statements
The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to
such rules and regulations, although the Company believes that the disclosures
are adequate to make the information presented not misleading. It is suggested
that these consolidated financial statements be read in conjunction with the
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K/A-1 for the year ended December 31, 1994.
In the opinion of Management of the Company, the accompanying unaudited
consolidated financial statements contain all necessary adjustments to present
fairly the financial position, the results of operations and cash flows for the
periods reported. All adjustments are of a normal recurring nature.
The 1994 financial information presented herein has been restated to
consolidate the Russian joint venture operations. Prior to the receipt on
March 3, 1995 of an exemption from paying export tax on crude oil sold outside
of Russia, the activities of the Russian joint venture were not significant to
the Company and the Company accounted for these activities using the equity
method. This change had no effect on net income (loss) or shareholders' equity
for the periods presented.
Certain reclassifications have been made to the 1994 financial statements
to conform to the presentation used in 1995.
The results of operations for the above periods are not necessarily
indicative of the results to be expected for the full year.
(2) Investments
The Company classifies its debt and marketable equity securities in one of
three categories: trading, available-for-sale, or held-to-maturity. Trading
securities are bought and held principally for the purpose of selling them in
the near term. Held-to-maturity securities are those securities for which the
Company has the ability and intent to hold until maturity. Any securities not
classified as trading or held-to-maturity are classified as available-for-sale.
The Company has no held-to-maturity or available-for-sale securities.
Trading securities are recorded at fair value. Unrealized holding gains and
losses on trading securities are included in earnings. Dividend and interest
income are recognized when earned.
Marketable investment securities at December 31, 1994 and June 30, 1995
consist of certificates of deposit and U.S. government and corporate debt
securities (included in short-term liquid investments), and equity securities
(included in current investments). During the six month periods ended June 30,
1995 and 1994, the Company recorded $86,000 and $337,000, respectively, of
unrealized losses resulting from changes in the differences between cost and
market value of short-term liquid investments and current investments.
(3) Long-term Debt
The Company executed a Credit Agreement dated May 19, 1995 (the "Credit
Agreement") with NationsBank of Texas, N.A. ("Nations"). Pursuant to the
Credit Agreement, Nations has agreed to provide loans to the Company from time
to time, not to exceed in the aggregate $35,000,000 (subject in all events to
certain periodic reductions and to the calculation of the Available Borrowing
Base, as defined in the Credit Agreement). The Company may borrow, repay and
re-borrow such amounts available under the Credit Agreement until March 31,
2000 (subject to certain early termination dates determined in accordance with
the Credit Agreement). In addition, Nations has agreed to extend credit to the
Company (or any subsidiary of the Company) by issuing, renewing, extending or
reissuing letters of credit not
5
<PAGE> 8
exceeding the lesser of (i) $20,000,000 or (ii) the Aggregate Commitments (as
defined in the Credit Agreement) minus the aggregate principle amount of all
loans then outstanding under the Credit Agreement. The loan facility is
unsecured. As of June 30, 1995 the Company, under this agreement, had no loans
outstanding and had approximately $18 million of letters of credit issued. These
letters of credit are primarily associated with the Redeemable Bearer Shares
discussed in Note 4.
(4) Redeemable Bearer Shares
In August 1993, the Company received $19.2 million from the Hambros Channel
Islands Trust Corporation Limited ("Trust"), in the form of an interest-free
loan. The loan is repayable on demand only to the extent necessary to redeem
bearer share warrants presented for exchange until July 2008. Each bearer
share warrant presented during this period will be redeemed for $6.66. As of
June 30, 1995 there were 2,699,647 outstanding bearer share warrants. The loan
is secured by a letter of credit from a bank. The letter of credit is secured
by the Credit Agreement (see Note 3). During 1995 and 1994 there were no
drawings under the letter of credit. In July 2008, the obligation of the
Company to holders of bearer share warrants will cease, the interest-free loan
will terminate, and any remaining cash will revert to the Company and will be
accounted for as an increase to capital in excess of par value.
(5) Shareholders' Equity
On May 31, 1994 the Company purchased in a private transaction 705,196
shares of its common stock from Noel Group Inc. ("Noel"). The purchase price
was $7.50 per share or approximately $5.3 million.
(6) Earnings per Share
Earnings per share is computed based upon the weighted average common
shares outstanding, determined on a monthly basis. Unexercised stock options
do not have a dilutive effect on the reported earnings per common share.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain data for 1994 has been restated to reflect the change in the
entities comprising the consolidated group, as discussed in Note 1 to the
Consolidated Financial Statements.
Introduction
The Company recorded a net loss of $4.7 million ($.16 per share) for the
first six months of 1995, as compared to a net loss of $2.3 million ($.08 per
share) for the same period in 1994. The 1995 results include dry hole expenses
of $3.8 million, while 1994 results include $4.9 million of similar expenses.
The 1994 results also include a gain of $0.4 million on asset sales.
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
This statement is required by the FASB to be adopted for fiscal years beginning
after December 15, 1995. The Company is currently evaluating the effect this
accounting change will have on its financial condition; however, it is not
believed the impact will be material.
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<PAGE> 9
Results of Operations - Six Months Ended June 30, 1995 and 1994
Oil and Gas Revenues are summarized for the six months ended June 30, 1995 and
1994 in the following table:
<TABLE>
<CAPTION>
Revenues Price Volumes
--------------------- ---------------------- ------------------------
1995 1994 1995 1994 1995 1994
------- ------ ------ ------ --------- ---------
(thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
United States
Oil . . . . . . . . . . $ 2,219 $1,544 $17.59 $14.75 126 MBbls 105 MBbls
Gas . . . . . . . . . . $10,848 $7,946 $ 1.47 $ 2.02 7.4 Bcf 3.9 Bcf
Russia
Oil . . . . . . . . . . $ 7,253 $4,783 $15.55 $13.44 466 MBbls 356 MBbls
Ivory Coast
Oil . . . . . . . . . . $ 682 n/a $15.04 n/a 45 MBbls n/a
Indonesia
Oil . . . . . . . . . . $ 451 $ 280 n/a n/a n/a n/a
Gas . . . . . . . . . . $ 6,328 $5,185 n/a n/a n/a n/a
</TABLE>
United States oil sales volumes increased 21 MBbls from the first six
months of 1994 as compared to the first six months of 1995. This 20% increase
was principally due to production from new offshore properties and increased
production from the Company's Taylor Lake Field.
United States gas sales volumes increased 3.5 Bcf for the six months ended
June 30, 1995 as compared to the same period in 1994. This 90% increase was
primarily due to production from new offshore properties and to increased
production from the Company's Taylor Lake field.
Russian oil sales volumes increased 110 MBbls during the first half of 1995
as compared to the same period of 1994. This 31% increase was primarily due to
increased production from the Onbysk field.
Ivory Coast oil production began April 30, 1995.
Indonesian liquefied natural gas (LNG) liftings for the six months ended
June 30, 1995 totalled 218 as compared to 211 for the same period in 1994. The
Company has not been advised as to specific price on production changes which
would affect Indonesian oil and gas revenues.
Pipeline Operations contributed $8.5 million to consolidated revenues and
incurred $7.8 million in pipeline operating expenses, exclusive of
depreciation, for the six months ended June 30, 1995 as compared to $9.3
million and $8.9 million, respectively, for the same period in 1994. The
primary reason for the decrease in revenues and expenditures in 1995 as
compared to 1994 was a decrease in marketing activities for working interest
partners at the Company's Taylor Lake field. The pipeline segment generated a
net loss from operations before taxes of approximately $0.1 million for the six
months ended June 30, 1995 as compared to a loss of $0.4 million for the same
period in 1994.
Expenses increased to $37.3 million for the six months ended June 30, 1995 as
compared to $30.0 million for the same period in 1994. This 24% increase is
primarily due to increased depletion expense in 1995 which was only partially
offset by a decrease in exploration expenses. The increased depletion expense
was the result of substantially increased oil and gas production and depletion
expense of approximately $3 million associated with the Company's Mustang
Island 783 field. Because of rapidly decreasing bottom hole pressure,
reserves associated with this field were materially reduced which resulted in a
significantly higher depletion rate.
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<PAGE> 10
Other Income decreased approximately $0.5 million for the six months ended June
30, 1995 compared to the same period in 1994. This decrease is primarily the
result of decreases in gains from asset sales mentioned above.
Results of Operations Three Months Ended June 30, 1995 and 1994
Oil and Gas Revenues are summarized for the three months ended June 30, 1995
and 1994 in the following table:
<TABLE>
<CAPTION>
Revenues Price Volumes
--------------------- ---------------------- ------------------------
1995 1994 1995 1994 1995 1994
------- ------ ------ ------ --------- ---------
(thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
United States
Oil . . . . . . . . . . $1,100 $ 872 $17.87 $16.59 62 MBbls 53 MBbls
Gas . . . . . . . . . . $5,188 $3,631 $ 1.54 $ 1.92 3.4 Bcf 1.9 Bcf
Russia
Oil . . . . . . . . . . $3,428 $2,138 $15.89 $14.64 216 MBbls 146 MBbls
Ivory Coast
Oil . . . . . . . . . . $ 682 n/a $15.04 n/a 45 MBbls n/a
Indonesia
Oil . . . . . . . . . . $ 226 $ 126 n/a n/a n/a n/a
Gas . . . . . . . . . . $2,980 $2,060 n/a n/a n/a n/a
</TABLE>
United States oil sales volumes increased 9 MBbls during the second three
months of 1995 as compared to the same period in 1994. This 17% increase was
principally due to production from new offshore properties and to increased
production from the Company's Taylor Lake field.
United States gas sales volumes increased 1.5 Bcf during the second
quarter of 1995 as compared to the second quarter of 1994. This 79% increase
was primarily due to production from new offshore properties and to increased
production from the Company's Taylor Lake field.
Russian oil sales volumes increased 70 MBbls during the second quarter of
1995 as compared to the same period in 1994. This 48% increase was principally
due to increased production from the Onbysk field.
Ivory Coast oil production began April 30, 1995.
Indonesian LNG liftings for the three months ended June 30, 1995 totalled
98 as compared to 93 for the same period in 1994. The Company has not been
advised as to specific price or production changes which would affect
Indonesian oil and gas revenues.
Expenses increased to $20.0 million for the three months ended June 30, 1995 as
compared to $17.0 million for the same period in 1994. This increase was
primarily due to a $4.8 million increase in depletion expenses which was
partially offset by a $2.3 million decrease in exploration expenses. The
increased depletion expense was primarily the result of substantially increased
oil and gas production and depletion expense of approximately $2.2 million
associated with the Company's Mustang Island 783 field.
8
<PAGE> 11
Liquidity and Capital Resources
Cash and cash equivalents increased by $2.2 million during the first six
months of 1995. This increase was primarily due to the excess of cash provided
by operating activities over capital expenditures and reduction of long-term
debt.
Cash provided by operations for the six months ended June 30, 1995 was
$27.8 million compared to $13.3 million for the same period in 1994. The
Company expended approximately $23.9 million for additions to properties and
equipment in the first six months of 1995 compared to $19.7 million for the
same period in 1994. Working capital for the first six months of 1995
decreased by $14.4 million. This decrease was primarily due to decreases in
short-term liquid investments of $18.6 million.
Traditionally, the Company has budgeted its exploration and development
expenditures for each year based on cash to be provided from operating
activities. In 1995, the Company intends to direct its internally generated
cash toward growing the Company's domestic asset base while directing a portion
of its balance sheet cash (cash and cash equivalents and short-term liquid
investments) toward international opportunities. The Russian, Egyptian and
Ivory Coast activities are currently the primary focus of the Company's
international operations. The Company's 1995 budget includes capital
expenditures for these activities of approximately $22 million.
In order to insure that the Company continues to have the necessary
financial flexibility in the future, on May 19, 1995 the Company executed a $35
million unsecured line of credit. The proceeds from this line of credit will
be used for general corporate needs. In addition, the Company executed on July
14, 1995 a $17.5 million secured line of credit specifically for the financing
of development activities for the Ivory Coast CI-11 project. On July 24, 1995,
the Company received $7.7 million as the initial funding from the CI-11 line of
credit with the balance to be drawn as future project expenditures are
incurred.
9
<PAGE> 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings:
None.
Item 2. Changes in Securities:
None.
Item 3. Defaults upon Senior Securities:
None.
Item 4. Submission of Matters to a Vote of Security Holders:
The Annual Meeting of Shareholders of Global Natural Resources Inc.
was held on May 9, 1995 in Houston, Texas.
Madam Linda F. Sjoman and Messrs. Paul E. Carlton, J. Charles
Hollimon, Patrick L. Macdougall and Robert F. Vagt were elected to
the Board of Directors of the Company. The directors whose terms of
office continued after the meeting are William L. Bennett, John A.
Brock, Sidney R. Petersen, and James G. Niven.
Item 5. Other Information:
None.
Item 6. Exhibits and Reports on Form 8-K:
a) Exhibits
The following document is included as an exhibit to this
report.
10.43 Loan Agreement between GNR (Cote d'Ivoire)
Ltd. and International Finance Corporation
dated July 14, 1995.
b) Reports on Form 8-K
On June 15, 1995 a Form 8-K was filed with the
Securities and Exchange Commission. This Form 8-K
reported the execution of a $35,000,000 credit
agreement.
10
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GLOBAL NATURAL RESOURCES INC.
-----------------------------
(Registrant)
Date: August 8, 1995 By /s/ Eric Lynn Hill
--------------------------
Eric Lynn Hill
Vice President-Finance and
Administration and Secretary-Treasurer
11
<PAGE> 14
INDEX TO EXHIBITS
Exhibit 10.43 Loan Agreement between GNR (Cote d'Ivoire) Ltd. and
International Finance Corporation dated July 14, 1995.
Exhibit 27 Financial Data Schedule.
<PAGE> 1
EXHIBIT 10.43
CONFORMED COPY
================================================================================
INVESTMENT NUMBER 7018
LOAN AGREEMENT
Between
GNR (Cote d'Ivoire) Ltd.
And
INTERNATIONAL FINANCE CORPORATION
Dated as of JULY 14, 1995
================================================================================
<PAGE> 2
LOAN AGREEMENT
AGREEMENT, dated as of July 14, 1995, between GNR (Cote d'Ivoire) Ltd. a
company organized and existing under the laws of the Cayman Islands (the
"Borrower" or "GNR-CI") and INTERNATIONAL FINANCE CORPORATION, an international
organization established by Articles of Agreement among its member countries
("IFC").
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.01. DEFINITIONS. Wherever used in the Financing Agreements (as
defined hereinbelow), unless the context otherwise requires, the following terms
have the following meanings:
"A LOAN" means the loan specified in Section 3.01(a) or, as the context
requires, its principal amount from time to time outstanding.
"A LOAN DISBURSEMENT" means any disbursement of the A Loan.
"A LOAN INTEREST RATE" means for any Interest Period, the rate of
interest payable on the A Loan during that Interest Period determined in
accordance with Section 3.03.
"ACCOUNTING PRINCIPLES" means U.S. generally accepted accounting
principles.
"ADVANCES" means any amounts of money owed by the Borrower to any
Controlling Company whether or not evidenced by a promissory note.
"AGREEMENT" and "LOAN AGREEMENT" mean this Loan Agreement.
"AUDITORS" means KPMG Peat Marwick LLP or such other firm of independent
certified public accountants as the Borrower, with IFC's prior consent, from
time to time appoints as auditors of the Borrower.
"AUTHORITY" means any government or governmental, administrative,
financial, judicial, or government-owned body, department, commission,
authority, tribunal, agency or entity or person having de facto or de jure
authority to perform the equivalent functions or exercise the equivalent control
and who is in fact performing the equivalent functions or exercising the
equivalent control of any of them.
"AUTHORIZATION" means any consent, registration, filing, certificate,
license, approval, permit, authority or exemption from, by or with any
Authority, whether given or withheld by express action or by failure to act
within any applicable time period where the effect of such action or failure to
act is prescribed by law and
<PAGE> 3
- 3 -
shareholders' approvals or consents.
"B LOAN" means the loan specified in Section 3.01 (b) or, as the context
requires, its principal amount from time to time outstanding.
"B LOAN DISBURSEMENT" means any disbursement of the B Loan.
"B LOAN INTEREST RATE" means for any Interest Period, the rate of
interest payable on the B Loan during that Interest Period determined in
accordance with Section 3.03.
"BARREL" means a quantity or unit of crude oil equal to forty two (42)
United States gallons.
"BARRELS OIL EQUIVALENT" means the sum of (a) the reserves of Crude Oil
(expressed in Barrels), plus (b) the Crude Oil equivalent reserves of Natural
Gas, which equivalent amount shall equal the quotient obtained by dividing the
volume of Natural Gas reserves (expressed in MCF) by the number 6.0.
"BCEAO" means Banque Centrale des Etats de l'Afrique de l'Ouest (the
Central Bank of the West African States).
"BLOCK CI-11" means an offshore area of the Republic comprising
approximately 252,000 acres, more precisely defined in Annex 1 to the Production
Sharing Contract.
"BLOCK CI-12" has the meaning given to it in the Production Sharing
Contract between the Republic on the one hand and UMIC-CI, Petroci, GNR (Cote
d'Ivoire) CI-12 Ltd., Pluspetrol, and IFC on the other hand, dated April 27,
1995.
"BORROWER" means GNR (Cote d'Ivoire) Ltd. (GNR-CI).
"BORROWER'S CLAWBACK NOTICE" means the notice that may be given from
time to time by the Borrower to the Sponsors in connection with the Clawback
Obligation pursuant to Section 4.02 (a) of the Share Retention, Guarantee and
Clawback Agreement.
"BUSINESS DAY" means a day when banks are open for business in New York,
New York, and, for the purpose of determining the A Loan Interest Rate, the B
Loan Interest Rate and the C Loan Interest Rate in London, England, as well.
"C LOAN" means the loan specified in Section 3.01 (c) or, as the context
requires, its principal amount from time to time outstanding.
"C LOAN DISBURSEMENT" means any disbursement of the C Loan.
"C LOAN INTEREST RATE" means for any Interest Period, the rate of
interest payable on the C Loan during that Interest Period determined in
accordance with Section 3.03.
<PAGE> 4
- 4 -
"CAPITAL COSTS" means the Borrower's share of the cost of wells, Project
Facilities, the principal component of capital leases and purchase money
financing of assets allowed under this Agreement, and the cost of any other
assets related to the Project Plan or related to development of fields other
than the Lion Field and the Panthere Field located on Block CI-11, in all cases,
whose useful life is expected to exceed one year.
"CFA" means Franc de la Communaute Financiere Africaine, the lawful
currency of the Republic, and shall include any currency which from time to time
may replace the Franc de la Communaute Financiere Africaine as the lawful
currency of the Republic.
"CLAWBACK OBLIGATION" means the obligation of the Sponsors to IFC under
Article IV of the Share Retention, Guarantee and Clawback Agreement.
"CLAWBACK PAYMENT" means a payment or payments made by one or both of
the Sponsors to the Borrower or to IFC under the Clawback Obligation.
"CLAWBACK TERMINATION DATE" means the date on which all amounts owed by
the Borrower to IFC under the Loan are paid in full.
"COMPLETION DATE" means the date on which the following requirements are
satisfied:
(a) The Independent Consultant and, if deemed necessary by IFC, the
Independent Engineer shall have communicated in writing to IFC,
and IFC shall have confirmed to the Borrower, as promptly as
practicable (but in any event within not more than ten (10)
Business Days) upon receipt of that communication, that the
following conditions have been satisfactorily complied with:
(i) all the Project Facilities (other than the oil pipeline and
related facilities) and development wells shall have been
acquired, constructed, installed and drilled, and shall be
in operation and in compliance with the recommendations of
the Environmental Assessment Report and applicable rules
and regulations of the Republic;
(ii) all contractors' work and equipment shall have been
accepted by the Operator without material exception, and
suppliers and contractors shall have been paid in full with
no material disputes or material outstanding claims from
them;
(iii) the combined potential productive capacity from not less
than two wells that are capable of producing Petroleum and
are tied by sub-sea pipeline to the MOPP, based on test
results of such wells, shall be at least 55 MMCFD of
Natural Gas;
(iv) at least an average of 20 MMCFD of Natural Gas shall
<PAGE> 5
- 5 -
have been delivered or tendered for delivery under terms
and conditions stipulated in the Gas Sales Contract during
the period of 30 consecutive days immediately preceding the
Completion Report Date;
(v) production of at least an average of 15,000 Barrels of
Crude Oil per day shall have occurred without interruption
except for ordinary maintenance and stoppages pursuant to
normal practice, during the 30 consecutive days immediately
preceding the Completion Report Date;
(vi) as of the Completion Report Date, Proved Total Reserves of
at least 80 MMBOE of which at least 30 MMB are Crude
Oil; and
(vii) the Letters of Understanding shall have been executed.
(b) IFC shall have communicated to the Borrower that the following
conditions have also been satisfactorily complied with:
(i) there shall be on deposit in the Retention Account an
amount not less than the Reserve Amount that shall have
been funded by Project Cash;
(ii) the Crude Oil Sales Agreement and the Gas Sales Contract
shall have been executed and shall be fully effective in
all material respects and the Borrower shall have received
payment from purchasers of Petroleum under terms and
conditions stipulated under such Offtake Agreements for or
in respect of at least 30 days of production of Natural Gas
and 30 days of production of Crude Oil; and
<PAGE> 6
- 6 -
(iii) the Borrower shall have created and perfected as part of
the Security a first ranking mortgage on its undivided
ownership interest in the MOPP and the storage tanker (if
any) and IFC shall have received a satisfactory legal
opinion from French and Ivorian counsel (whose fees and
expenses shall be for the account of the Borrower)
regarding the fulfillment of this condition.
"COMPLETION REPORT DATE" means the date specified in the Independent
Consultant Report or the Independent Engineer Report, as applicable, as the date
as of which such report was prepared, which date shall be not more than thirty
(30) days prior to the Completion Date.
"CONSOLIDATED DEBT" means the aggregate of all Consolidated Liabilities
which fall due or whose final payment is due more than one year after the
respective dates of the agreements providing for such Consolidated Liabilities,
and shall include the portion of such Consolidated Liabilities falling due
within one year, all as shown on the relevant Consolidated Financial Statements.
"CONSOLIDATED DEBT TO EQUITY RATIO" means the ratio of Consolidated Debt
to Consolidated Equity as of the relevant date of calculation.
"CONSOLIDATED EQUITY" means the aggregate of all shareholder equity
accounts of GNR and its Consolidated Subsidiaries as shown in the Consolidated
Financial Statements as of the relevant date of calculation.
"CONSOLIDATED FINANCIAL STATEMENTS" means financial statements which,
treating GNR and all present or future Consolidated Subsidiaries essentially as
if they were a single company with one or more branches or divisions, present
fairly in all material respects in Dollars the financial position, results of
operations and cash flows of the Borrower and the Consolidated Subsidiaries
taken as a whole in accordance with Accounting Principles consistently applied
(the latter, except for such changes as the Auditors may agree upon).
"CONSOLIDATED LIABILITIES" means the aggregate of all obligations of GNR
and the Consolidated Subsidiaries outstanding as of the relevant date of
calculation for the payment or repayment of money including, without limitation:
(i) any amounts payable by GNR or any of the Consolidated Subsidiaries under
capital leases or similar arrangements (however designated) over the duration
periods of such capital leases or similar arrangements; (ii) any credit to GNR
or any of the Consolidated Subsidiaries from a supplier of goods or under any
installment purchase or other similar arrangements; (iii) the aggregate amount
then outstanding of liabilities and obligations of GNR or any of the
Consolidated Subsidiaries to third parties, and (iv) redeemable bearer shares.
"CONSOLIDATED SUBSIDIARIES" means, collectively, GNRCN, the Borrower,
and all consolidated subsidiaries and affiliates of GNR,
<PAGE> 7
- 7 -
GNRCN or the Borrower, which are included, or are required to be included, in
the consolidated accounts of the relevant Consolidated Financial Statements of
GNR in accordance with Accounting Principles.
"CONTRACTOR" has the meaning given to it in the Production Sharing
Contract.
"CONTROLLING COMPANY" means each of the Sponsors and any other company
which, directly or indirectly, has power enabling it to control the Borrower or
any of the Sponsors; in particular and without prejudice to the generality of
the term "Controlling Company", a company shall be deemed to be a Controlling
Company: (i) if it holds more than 50% (fifty per cent) of the common stock of
the Borrower or any of the Sponsors; or (ii) if it holds more than 50% (fifty
per cent) of the voting rights for the election of directors in respect of the
issued shares of the Borrower or any of the Sponsors; or (iii) if it is entitled
or has the power to determine the composition of the majority of the board of
directors of the Borrower or any of the Sponsors, including: (A) the power,
without the consent or concurrence of any other Person, to appoint or remove all
or the majority of such directors; (B) the power to prevent any Person from
being appointed a director unless with its consent; and if a Person's
appointment as a director follows necessarily from its appointment as a director
of the first-mentioned company, it shall be deemed to be a power of the
first-mentioned company for the purposes of this definition. Without prejudice
to any of the above, the term "Controlling Company" as used in this Agreement
also includes any third party companies controlled by the Sponsors or any
"Controlling Company" as herein defined.
"CONVERSION REQUEST DATE" means the Completion Date and December 31 of
any year, starting with the year of the Completion Date, which is the date on
which the Sponsors may request IFC to release them of all or a portion of their
guarantee obligations.
"CRUDE OIL" means crude mineral oil, asphalt, ozokerite, and all kinds
of petroleum and bitumen, either solid or liquid in their natural condition or
obtained from Natural Gas by condensation or extraction, including condensates
and Natural Gas liquids.
"CRUDE OIL SALES AGREEMENT" means the Contract for Purchase and Sale of
Lion Crude Oil, Block CI-11, Offshore Cote d'Ivoire dated as of May 15, 1995, by
and between UMIC-CI, individually and on behalf of IFC, GNR-CI and Pluspetrol
("the Sellers"), and Total International Limited.
"CUMULATIVE CLAWBACK PAYMENTS" means the aggregate payments made by the
Sponsors under the Clawback Obligation (or made by the Sponsors in anticipation
of the payments to be made under the Clawback Obligation) as so designated by
the Sponsors, starting as of the Completion Date and ending on the date as of
which the calculation of Cumulative Clawback Payments is made.
"CUMULATIVE EXCESS REVENUES" means the aggregate Excess
<PAGE> 8
- 8 -
Revenues of the Borrower starting as of the Completion Date and ending on the
date as of which the calculation of Cumulative Excess Revenues is made minus the
amounts of voluntary prepayments made by the Borrower on the Non Guaranteed
Portion which are designated by the Borrower as "Clawback Prepayments".
"CUMULATIVE RESTRICTED PAYMENTS" means the aggregate Restricted Payments
made by the Borrower starting on the Completion Date and ending on the date as
of which the calculation of Cumulative Excess Revenues is made minus the amounts
of voluntary prepayments made by the Borrower on the Non Guaranteed Portion
which are designated by the Borrower as "Clawback Prepayments".
"DELIMITED AREA" means the area described in the Production Sharing
Contract, excluding areas surrendered by the Contractor from time to time, in
respect of which the Government grants to the Contractor an exclusive
exploration right.
"DESIGNATED ACCOUNTS" means one or more accounts to be established by
the Trustee as provided under the Designated Accounts Agreement.
"DESIGNATED ACCOUNTS AGREEMENT" means an agreement of even date herewith
among the Borrower, the Trustee and IFC providing for the creation and operation
of one or more accounts or subaccounts in the name of the Trustee, with the
Borrower and IFC to be named as alternative beneficiaries of the proceeds of
said accounts as follows:
(i) an account in CFAs established or to be established in Abidjan,
Cote d'Ivoire, into which the Borrower shall deposit or cause to
be deposited all Project Cash paid, or payable, to the Borrower in
CFAs (the "Local Account");
(ii) an account established in New York, N.Y., U.S.A., or in such other
place or place as the Borrower may propose to the Trustee from
time to time with the prior written approval of IFC (the "Offshore
Account") into which the Borrower shall deposit or cause to be
deposited all Project Cash paid, or payable, to the Borrower in
Dollars or in any currency other than CFAs; and
(iii) a subaccount of the Offshore Account into which funds shall be
deposited so as to maintain at all times a minimum balance equal
to not less than the Reserve Amount (the "Retention Account").
"DISCOUNT RATE" means the higher of ten per cent (10%) or the Pro-Forma
Interest Rate.
"DISBURSEMENT" means a Loan disbursement.
"DISBURSEMENT DATE" means any date on which a Disbursement is made.
"DOLLARS" AND THE SIGN "$" mean the lawful currency of the
<PAGE> 9
- 9 -
United States of America.
"ENVIRONMENTAL ASSESSMENT REPORT" means one or more of the following
reports: (a) Environmental Impact Assessment Study of Oil and Gas Transport,
Cote d'Ivoire, transmitted by the Operator to IFC by letter dated July 14, 1994;
(b) Report of Oil Spill Risks and Trajectories, Cote d'Ivoire, dated August
1994; (c) Assessment of Impacts arising from Predicted Oil Spills and
Trajectories, Cote d'Ivoire dated August 1994; (d) Report of Groundwater Table
and the Groundwater Quality in the Jacqueville Region, Cote d'Ivoire dated July
1994; (e) Assessment of Environmental Impacts Arising from Early Oil Production
Plan dated April 1995; (f) Oil Spill Contingency Plan dated April 1995; and (g)
Shipboard Oil Pollution Emergency Plan (SOPEP) dated April 1995 and (h) any
updates, revisions, expansions, replacements, and/or substitutions to any or all
of the previously identified documents.
"ENVIRONMENTAL LAWS" means (i) the World Bank Environmental,
Occupational Health and Safety Guidelines in effect on the date of execution of
this Agreement, a copy of which has been delivered to, and is hereby
acknowledged by, the Borrower and (ii) any and all international, national,
regional and local treaties, statutes, laws, regulations, judicial decisions,
ordinances, rules, judgments, orders, decrees, plans, injunctions, permits,
concessions, grants, franchises, licenses, agreements or other governmental
restrictions of any Authority of or in the Republic relating to the environment,
the effect of the environment on human health, noise emissions or to emissions,
discharges or releases of pollutants, contaminants, toxic, radioactive, caustic
or otherwise hazardous substances or wastes into the environment including,
without limitation, ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, toxic,
radioactive, caustic or otherwise hazardous substances or wastes or the clean-up
or other remediation thereof.
"ENVIRONMENTAL MONITORING REPORT" means a report satisfactory to IFC on
the compliance of the Project with environmental requirements of the
Environmental Assessment Report.
"ESTIMATED PROJECT COSTS" means total costs of all Investors to develop
the Lion Field and Panthere Field from inception of the Project through December
31, 1995 in amounts as determined in Section 6.02 (c).
"EVENT OF DEFAULT" means any one of the events specified in Section
7.02.
"EVENT OF TOTAL LOSS" means that the Project Facilities shall have
become destroyed, damaged beyond repair or permanently rendered unfit for
commercial operation as a consequence of any event whatsoever, or there shall
have occurred any other event or circumstance constituting an actual or
constructive total loss which results in an insurance settlement with respect to
the Project on the basis of a total loss or constructive total loss.
<PAGE> 10
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"EXCESS CASH FLOW" means, after the Completion Date, any Project Cash
remaining after payment of all Permitted Expenditures.
"EXCESS REVENUES" means, for any calendar month, (i) the excess of the
Borrower's share of Natural Gas sales for the calendar month above the
Borrower's share of take-or-pay volumes as provided for in the Gas Sales
Contract multiplied by (ii) the average Natural Gas price for all such excess
Natural Gas sold in such calendar month multiplied by (iii) the Percentage
Release in effect during such calendar month. If more than a single Percentage
Release applies during a calendar month, the preceding calculation shall be
based upon the weighted average of such Percentage Releases based on the number
of days each Percentage Release was in effect during the month and the
corresponding excess of the Borrower's share of Natural Gas sales above the
Borrower's share of take or pay volumes for each period of the month during
which each Percentage Release applied.
"EXPLOITATION AUTHORIZATION" means the exclusive right to carry out
petroleum operations within an Exploitation Perimeter enjoyed by the Contractor
pursuant to the Production Sharing Contract.
"EXPLOITATION PERIMETER" means any part of the Delimited Area in respect
of which the Government has granted to the Contractor an exclusive Exploitation
Authorization in accordance with the Production Sharing Contract.
"FINAL DISBURSEMENT DATE" means the earliest of (a) June 30, 1996, (b)
the date on which the Loan is fully disbursed, and (c) the Completion Date.
"FINANCIAL PLAN" means the financial plan described in the Letter of
Information, as amended from time to time with IFC's consent.
"FINANCIAL STATEMENTS" means the balance sheets, income statements, and
statement of cash flows for a financial period, quarterly, semi-annual or
annual, as the case may be, and, in the case of quarterly or semi-annual
Financial Statements, for the portion of the Financial Year ended at the end of
such quarterly or semi-annual period, together with all notes thereto, with
comparable figures for the corresponding periods of their previous Financial
Year (if such corresponding period began after the Starting Date) and prepared
in accordance with Accounting Principles applied on a consistent basis (the
latter, except for such changes as the Auditors may agree upon) in Dollars.
"FINANCIAL YEAR" means the accounting year of the Borrower commencing on
January 1 and ending on December 31 each year.
"FINANCING AGREEMENTS" means collectively this Agreement, the Share
Retention, Guarantee and Clawback Agreement, the Designated Accounts Agreement,
the Insurance Agreements and the Security Documents.
"FORECAST REMAINING LIFE OF LOAN" means the period from the
<PAGE> 11
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relevant Conversion Request Date to the earlier of (i) January 15, 2005, or (ii)
if prepayments have been made, the date on which the A Loan is scheduled to be
fully repaid.
"GAS SALES CONTRACT" means the Contract for Sale and Purchase of Natural
Gas for Block CI-11 dated September 30, 1994 between Caisse Autonome d
Amortissement, acting on behalf of the Fonds Nationale de l'Energie Electrique,
as party of the first part, UMIC-CI, IFC, GNR-CI, and Pluspetrol as parties of
the second part, and Petroci and the Republic and as parties of the third part.
"GNR" means Global Natural Resources Inc. a corporation organized under
the laws of New Jersey.
"GNRCN" means Global Natural Resources Corporation of Nevada, a
corporation organized under the laws of Nevada.
"GOVERNMENT" means the government of the Republic.
"GOVERNMENT'S SHARE OF REMAINING PRODUCTION" means the quantity of Crude
Oil and Natural Gas allocated to the Government as described in Article 16.3 and
Article 21.3.1 of the Production Sharing Contract.
"GUARANTEED PORTION" means any portion of the Loan which is covered by
the Sponsors' Guarantee as provided under Article III of the Share Retention,
Guarantee and Clawback Agreement.
"IFC'S CLAWBACK NOTICE" means the notice that may be given from time to
time by IFC to the Sponsors in connection with the payments of any amounts under
the Clawback Obligation as determined by IFC pursuant to Section 4.02 (b) of the
Share Retention, Guarantee and Clawback Agreement.
"INDEBTEDNESS" means all obligations of the Borrower to repay money
including, without limitation, in respect of:
(i) borrowed money;
(ii) the outstanding principal amount of any bonds, notes, loanstock,
commercial paper, acceptance credits, debentures and bills or
promissory notes drawn, accepted, endorsed or issued by the
Borrower;
(iii) any credit to the Borrower from a supplier of goods or under any
installment purchase or other similar arrangement in respect of
goods or services in the ordinary course of business;
(iv) all liabilities of the Borrower (actual or contingent) under any
conditional sale or a transfer with recourse or obligation to
repurchase, including, without limitation, by way of discount or
factoring of book debts or receivables;
(v) non-contingent obligations of the Borrower to reimburse
<PAGE> 12
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any other person in respect of amounts paid under a letter of
credit or similar instrument (excluding any such letter of credit
or similar instrument issued for the benefit of the Borrower in
respect of trade accounts in the ordinary course of business);
(vi) amounts raised under any other transaction having the commercial
effect of a borrowing and which would be classified as a borrowing
(and not as an off-balance sheet financing) under Accounting
Principles consistently applied including, without limitation,
under leases or similar arrangements entered into primarily as a
means of financing the asset leased;
(vii) any fixed or minimum premium payable on a redemption or
replacement of any of the foregoing obligations; and
(viii) debt incurred in the ordinary course of business, including
accrued liabilities and letters of credit obtained for purposes of
acquiring Project Facilities.
"INDEPENDENT CONSULTANT" means Netherland, Sewell and Associates, Inc.
or any other independent international petroleum engineering consulting firm to
be chosen by IFC with the approval of the Borrower to carry out certain
assignments contemplated in this Agreement.
"INDEPENDENT CONSULTANT REPORT" means a report prepared by the
Independent Consultant, in form and substance satisfactory to IFC, indicating
Proved Lion and Panthere Reserves and Proved Total Reserves, and, in both
instances, Proved Reserves allocable to the Borrower.
"INDEPENDENT ENGINEER" means any independent international petroleum
engineering consulting firm to be chosen by IFC with the approval of the
Borrower to carry out certain assignments contemplated in this Agreement.
"INDEPENDENT ENGINEER REPORT" means a report prepared by the Independent
Engineer, terms of reference of which shall be provided by IFC.
"INITIAL DISBURSEMENT DATE" means the first Disbursement Date to occur.
"INSURANCE AGREEMENTS" means any insurance policy maintained by the
Borrower, or the Operator on behalf of the Borrower, covering losses with
respect to tangible, real or personal property or improvements or losses from
business interruptions.
"INSURANCE PROCEEDS" means (i) insurance proceeds received under any
insurance policy or (ii) any award or other compensation with respect to any
condemnation of property (or any transfer or disposition of property in lieu of
condemnation) received by or for the account of the Borrower.
<PAGE> 13
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"INTEREST DETERMINATION DATE" means the date which is two (2) Business
Days before the beginning of each Interest Period.
"INTEREST PAYMENT DATE" means any day which is July 15 and January 15 in
any year, provided that, if any such day is not a Business Day, the Interest
Payment Date which would otherwise fall on that day will fall on the immediately
succeeding Business Day, provided that, only in connection with the first
payment of interest on the Loan, the first Interest Payment Date will be January
15, 1996.
"INTEREST PERIOD" means each period of six (6) months beginning on an
Interest Payment Date and ending on the day immediately before the next
following Interest Payment Date; except in the case of the first period
applicable to each Disbursement when it shall mean the period beginning on the
date on which that Disbursement is made and ending on the day immediately before
the next following Interest Payment Date.
"INVESTORS" means UMIC-CI, GNR-CI, Pluspetrol, Petroci and IFC, as
parties to the Joint Operating Agreement.
"JOINT OPERATING AGREEMENT" means the Joint Operating Agreement - Block
CI-11 between Petroci and UMIC-CI dated June 27, 1992, as amended on July 23,
1993, July 29, 1993, and August 3, 1993.
"LETTER OF INFORMATION" means the letter of even date herewith addressed
by the Sponsors to IFC detailing the Project, the Financial Plan, and containing
certain representations and warranties and other information about the Project.
"LETTERS OF UNDERSTANDING" means an exchange of letters, in form and
substance satisfactory to IFC, whereby the Investors will agree among themselves
regarding the principles to be followed to allocate costs and revenues
pertaining to Block CI-11.
"LIBO DOLLAR RATE" means the offered per annum rate which appears on the
Reuters Screen LIBO Page as of 11:00 a.m., London time, on the Interest
Determination Date for the relevant Interest Period for six (6) months (or, in
the case of the first Interest Period for any disbursement, for one (1) month,
two (2) months, three (3) months or six (6) months, whichever period is closest
to the duration of the relevant Interest Period or, if two periods are equally
close to the duration of the relevant Interest Period, the longer one).
"LIEN" means any lien, mortgage, pledge, charge, assignment,
hypothecation, nantissement, security interest, title retention, preferential
right, trust arrangement, right of set-off, counterclaim or bankers lien,
privilege or priority of any kind having the effect of security, including,
without limitation, any designation of loss payees or beneficiaries or any
similar arrangement under any insurance policy relating to the transactions
contemplated by this Agreement and Permitted Encumbrances.
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"LION FIELD" means the Exploitation Perimeter of the Lion field as
defined in the exclusive Exploitation Authorization issued by the Government
dated September 12, 1994, and any subsequent expansions thereof.
"LOAN" means collectively the A Loan, the B Loan and the C Loan provided
for in Section 3.01 or, as the context requires, the principal amount of the A
Loan, the B Loan and the C Loan outstanding from time to time.
"LOAN INTEREST RATE" means the interest rate applicable to the A Loan,
the B Loan or the C Loan or any disbursed and outstanding portion thereof (as
the case may be), other than overdue amounts in respect thereof, as determined
in accordance with Section 3.03 hereinbelow.
"LOCAL ACCOUNT" shall have the meaning ascribed to that term under the
definition of the Designated Accounts Agreement.
"LOCAL OPERATING ACCOUNT" means one or more accounts in CFA's opened by
the Operator, in Abidjan, with a financial institution acceptable to IFC which
accounts shall be funded from the Local Account or the Offshore Account to the
extent permitted under the Designated Accounts Agreement, and which accounts
shall be used by the Operator to fund operations related to the Project.
"MAINTENANCE AMOUNT" means the amount certified in the Maintenance
Amount Certification to be IFC's or any Participant's net incremental costs of
making or maintaining the Loan or its Participation which result from:
(i) any change in any applicable law or regulation or directive
(whether or not having force of law) or in its interpretation or
application by any Authority charged with its administration; or
(ii) compliance with any request from, or requirement of, any central
bank or other monetary or other Authority;
which in any case, after the date of this Agreement:
(A) imposes, modifies or makes applicable any reserve, special
deposit or similar requirements against assets held by, or
deposits with or for the account of, or loans by IFC or the
Participant;
(B) imposes a cost on IFC or the Participant as a result of its
having made the Loan (or, in the case of a Participant,
acquired its Participation) or reduces the rate of return
on the overall capital of IFC or the Participant which it
would have achieved, had it not made the Loan or acquired
the Participation;
(C) changes the basis of taxation on payments received by IFC
in respect of the Loan or by the Participant
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in respect of its Participation (otherwise than by a change
in taxation of the overall net income of IFC or the
Participant imposed by the jurisdiction of its
incorporation or in which it books its Participation or in
any political subdivision of any such jurisdiction); or
(D) imposes on IFC or the Participant any other condition
regarding the making or maintaining of its Loan or
Participation;
but excluding any incremental costs of making or maintaining a Participation
which are a direct result of a Participant having its principal office in the
Republic or having or maintaining a permanent office or establishment in the
Republic, if and to the extent that permanent office or establishment acquires
the Participation.
"MAINTENANCE AMOUNT CERTIFICATION" means a certification furnished from
time to time by IFC, or to IFC by any Participant, certifying:
(i) the circumstances giving rise to the Maintenance Amount;
(ii) that the Participant's or IFC's net costs have increased;
(iii) that, in the opinion of IFC or, as the case may be, the
Participant, it has exercised reasonable efforts to minimize
or eliminate such increase; and
(iv) the Maintenance Amount.
"MANAGEMENT LETTER" means a letter or any other written communication
sent by the Auditors to the Borrower or to its management commenting on the
Borrower's financial, accounting or other systems, management or accounts.
"MANDATORY NON-GUARANTEED LIFE OF LOAN RATIO" means a Non-Guaranteed
Life of Loan Ratio of not less than 1.50.
"MANDATORY NON-GUARANTEED DEBT SERVICE COVERAGE RATIO" means a
Non-Guaranteed Debt Service Coverage Ratio of not less than 1.25.
"MANDATORY RATIOS" means (i) a Non-Guaranteed Life of Loan Ratio of not
less than 1.50 and (ii) a Non-Guaranteed Debt Service Coverage Ratio of not less
than 1.25.
"MANDATORY RATIOS CERTIFICATION" means the certification to be provided
by the Borrower to IFC under Section 6.01.
"MATERIAL ADVERSE EFFECT" in connection with an event, fact or
circumstance, means that the occurrence or existence of such event, fact or
circumstance materially and adversely affects or is reasonably likely to
materially and adversely affect the Borrower's
<PAGE> 16
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assets or the ability of the Borrower to construct or operate the Project or to
perform its material obligations under the Project Documents or the ability of
the Sponsors to perform their obligations under the Share Retention, Guarantee
and Clawback Agreement.
"MAXIMUM OUTSTANDING" means (i) (A) prior to the Final Disbursement
Date, the sum of $17,500,000 (which amount represents the sum of the outstanding
principal balance of the Loan plus all undisbursed principal), plus, as of the
date of determination, all accrued but unpaid interest on the Loan and all
unpaid fees that are not overdue, minus the amount of undisbursed portions of
the Loan as to which IFC's or a Participant's commitment to lend has been
cancelled or suspended pursuant to Sections 3.13, 3.14 or 3.16, or (B) from and
after the Final Disbursement Date, the sum, as of the Final Disbursement Date of
the outstanding principal balance of the Loan, plus all accrued but unpaid
interest thereon, plus all unpaid fees that were not overdue, minus (ii) the sum
of all payments made on the obligations described in clause (i) other than
voluntary and mandatory prepayments made under Sections 3.06 and 3.07 of this
Agreement.
"MCF" means 1,000 cubic feet of Natural Gas.
"MMB" means million barrels of Crude Oil.
"MMBOE" means million Barrels Oil Equivalent.
"MMCFD" means million cubic feet of Natural Gas per day.
"MOPP" means a moveable offshore production platform acquired by the
Investors.
"NATURAL GAS" means methane, ethane, propane, butane and dry or wet
gaseous hydrocarbons, whether or not associated with Crude Oil.
"NET OPERATING CASH FLOW" means projected Project Revenues less
projected Operating Costs less projected Capital Costs related to the Lion
Field, the Panthere Field and other areas of CI-11 with Proved Reserves less the
projected payments to be made in respect of obligations secured by Permitted
Encumbrances, all figures to be based on the most recent Pro-Forma Report and
calculated for each six-month period included in the Relevant Period(s).
"NON-GUARANTEED DEBT SERVICE COVERAGE RATIO" means, for each six-month
period for the Relevant Period, the result obtained by dividing Net Operating
Cash Flow for each six-month period by the sum of all principal and interest due
to be paid by the Borrower during the same six-month period in respect of the
Non-Guaranteed Portion of the IFC Loan.
"NON-GUARANTEED LIFE OF LOAN RATIO" means the result obtained by
dividing (a) the net present value of the projected Net Operating Cash Flows
over the Forecast Remaining Life of Loan (based on the most recent Pro-Forma
Report) discounted at the Discount Rate by (b) the sum of all principal
outstanding under the Loan in respect of
<PAGE> 17
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the Non-Guaranteed Portion, calculated as of the beginning of each six-month
period included in the Relevant Period.
"NON-GUARANTEED PORTION" means the amount, rounded to the nearest
$1,000, determined from time to time, equal to (i) the product of (A) the
Maximum Outstanding times (B) the Percentage Release, minus (ii) the sum of all
voluntary and mandatory prepayments made on the Non-Guaranteed Portion, under
Sections 3.06 and 3.07 of this Agreement.
"OFFSHORE ACCOUNT" shall have the meaning ascribed to that term under
the definition of the Designated Accounts Agreement.
"OFFSHORE OPERATING ACCOUNT" means one or more accounts in Dollars
opened by the Operator in the United States of America with a financial
institution acceptable to IFC which accounts shall be funded from the Offshore
Account to the extent permitted under the Designated Accounts Agreement, and
which accounts shall be used by the Operator to fund operations related to the
Project.
"OFFTAKE AGREEMENTS" means the Crude Oil Sales Agreement, the Gas Sales
Contract, and, if applicable, one or more agreements in form and substance
satisfactory to IFC, as follows:
(a) between a third party or its assigns and the Borrower, whereby the
third party or its assigns shall agree to purchase all or part of
the Borrower's Crude Oil from Block CI-11, and to pay for the
Crude Oil in Dollars, directly into the Offshore Account;
(b) between the Caisse Autonome d'Amortissement or its assigns and the
Borrower, whereby Caisse Autonome d'Amortissement or its assigns
will agree, for a period at least as long as the life of the Loan,
to purchase all or part of the Borrower's share of Natural Gas
production (including associated gas) produced from Block CI-11,
payment to be made either (i) in kind in Crude Oil (with such
Crude Oil to be sold by the Borrower, under the Crude Oil Sales
Agreement, in Dollars, and such Dollars to be deposited in the
Offshore Account) or (ii) in Dollars to be deposited into the
Offshore Account;
(c) between any other purchaser of Natural Gas and the Borrower,
whereby such purchaser (or its assigns) will agree to purchase all
or part of the Borrower's share of Natural Gas (including
associated gas) produced from Block CI-11, and to pay for the
Borrower's share of Natural Gas directly into either: (i) the
Local Account, if the sales are paid for in CFA, or (ii) the
Offshore Account, if the sales are paid for in Dollars; provided,
however, that all CFA proceeds shall be converted into Dollars and
deposited into the Offshore Account except for CFA requirements
for operations on Block CI-11; and also
(d) sales of Crude Oil by the Borrower to Petroci as provided under
Article 27 of the Production Sharing Contract.
<PAGE> 18
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"OPERATING COSTS" means the Borrower's share of the costs and expenses
related to the Project Plan of producing, treating, storing, processing, and
transporting Petroleum for delivery under the Offtake Agreements, costs of
repairing and maintaining in good working order the Project Facilities as
necessary to accomplish the preceding, duties, fees, costs of services
(including, but not limited to, engineering, financial, data processing, tax,
legal, purchasing services, operating lease payments), interest imputed on
capital leases and interest on purchase money indebtedness, insurance premiums,
payments under obligations secured by Permitted Encumbrances permitted under
this Agreement, and other costs and expenses incurred in connection with any of
the preceding, but excluding interest, fees and other financing expenses related
to this Agreement.
"OPERATOR" means UMIC-CI or any other Operator designated pursuant to
the Joint Operating Agreement with the concurrence of IFC.
"PANTHERE FIELD" means the Exploitation Perimeter of the Panthere field
as defined in the exclusive Exploitation Authorization issued by the Government
dated September 12, 1994, and any subsequent expansions thereof.
"PARTIAL LOSS OR DAMAGE" means destruction, damage, loss, condemnation,
theft or other similar event relating to the Project Facilities or any part
thereof, not constituting an Event of Total Loss.
"PARTICIPANT" means any bank or financial institution owning a
Participation.
"PARTICIPATING INTEREST" means the "Participating Interest" of the
Borrower as defined in the Joint Operating Agreement.
"PARTICIPATION" means the investment of any Participant in the B Loan
and/or in the C Loan or, as the context requires, in a B Loan Disbursement
and/or in a C Loan Disbursement.
"PARTICIPATION AGREEMENT" means an agreement between IFC and a
Participant pursuant to which the Participant acquires a Participation.
"PERCENTAGE RELEASE" means the percentage to be used for the calculation
of the Non-Guaranteed Portion, as determined from time to time pursuant to
Sections 3.02 and 3.03 of the Share Retention, Guarantee and Clawback Agreement.
"PERMITTED ENCUMBRANCES" means the charge on the Project Revenues
securing the payment of the compensation due to Frank T. Barr and G. Willard
Frank as provided under the Prospect Acquisition Agreement.
"PERMITTED EXPENDITURES" means Operating Costs, Capital Costs and debt
service on the Loan (including prepayments).
<PAGE> 19
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"PERMITTED FARM-OUTS" means the sale by the Borrower of a portion or all
of its Participating Interest to a party which, in the judgment of IFC meets the
following requirements: (i) is a financially sound, internationally-known
petroleum company; (ii) agrees to be bound by the Security Agreements; (iii) in
case that the Permitted Farm-Out involves an assignment of any obligations of
the Borrower and/or the Sponsors to IFC under the Loan Agreement or the Share
Retention, Guarantee and Clawback Agreement (as the case may be), the Borrower
and/or the Sponsors shall have previously demonstrated to the satisfaction of
IFC that the proposed buyer of the relevant Participating Interest has the
necessary financial liquidity to meet the obligations of the Borrower under the
Loan Agreement and/or the Sponsors under the Share Retention, Guarantee and
Clawback Agreement; and (iv) provided further that the Permitted Farm-Out would
not become effective vis-a-vis IFC until the proposed buyer and/or its sponsors
have executed an agreement with, and in form and substance satisfactory to, IFC
under which the proposed buyer and/or its sponsors assume any and all remaining
obligations of the Borrower and/or the Sponsors to IFC under the Loan Agreement
and/or the Sponsors under the Share Retention, Guarantee and Clawback Agreement
in connection with the assigned portion of the Participating Interest.
"PERMITTED INVESTMENTS" means: (a) a deposit made in the United States
of America in Dollars or any other place approved by the Trustee with a bank
having general obligations rated at least A or equivalent by Moody's Investors
Service Inc. or Standard and Poor's Rating Group; (b) a certificate of deposit
denominated in Dollars issued or guaranteed in the United States or any other
place approved by the Trustee by a bank satisfying the requirements specified in
subparagraph (a) above; (c) any other obligation denominated in Dollars
(including, without limitation, any bill, bond, note, debenture, loan stock or
other debt instrument) issued, accepted or accepted and guaranteed in the United
States of America or any other place approved by the Trustee on behalf of IFC,
being in any way a primary obligation of or insured by or carrying the full
faith and credit of the United States of America or any instrumentality or
agency thereof or a bank satisfying the criteria specified in subparagraph (a)
above operating through a branch in that jurisdiction; (d) a contract entered
into with a bank satisfying the criteria specified in subparagraph (a) in the
United States of America or any other place approved by the Trustee on behalf of
IFC for the purchase of currency spot in Dollars or any other major currency;
(e) commercial paper denominated in Dollars rated A-I/P-1 or equivalent or
better by Moody's Investors Services Inc. or Standard and Poor's Ratings Group
issued by a corporation incorporated in the U.S.A. or any other place approved
by IFC; (f) bankers acceptances denominated in Dollars issued by a bank
satisfying the requirements specified in subparagraph (a) above; (g) repurchase
obligations with a term of not more than seven (7) days for securities issued or
insured by the United States of America or any instrumentality or agency thereof
entered into with any bank satisfying the requirements specified in subparagraph
(a) above; and (h) investments in money market funds substantially all of whose
assets comprise securities of the types described in the preceding
subparagraphs.
<PAGE> 20
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"PERMITTED LIENS" means Liens permitted under Section 6.02 (h) of this
Agreement.
"PERSON" means an individual, a corporation, a partnership, an
association, a joint venture, a trust or other entity or organization, including
an Authority.
"PETROCI" means Societe Nationale d'Operations Petrolieres de la Cote
d'Ivoire, the state oil and gas company of the Republic.
"PETROLEUM" means Crude Oil and Natural Gas produced from Block CI-11.
"PETROLEUM COSTS" has the meaning given to it in the Production Sharing
Contract.
"PLUSPETROL" means Pluspetrol S.A., a sociedad anonima incorporated
under the laws of Argentina.
"POTENTIAL EVENT OF DEFAULT" means any event or circumstance which
would, with notice, lapse of time, or both, become an Event of Default.
"PRODUCTION SHARING CONTRACT" means the Contrat de Partage de Production
d'Hydrocarbures - Bloc CI-11 dated June 27, 1992, but effective as of January 3,
1993 among the Republic, Petroci and UMIC-CI, as amended by the Premier Avenant
au Contrat de Partage de Production dated June 24, 1993.
"PRO-FORMA INTEREST RATE" means, unless otherwise agreed between IFC and
the Borrower, the 6-month LIBO Dollar Rate applicable to the next scheduled
interest payment to be made under the Loan plus the weighted average of the
relevant Non- Guaranteed Portion interest rate spread applicable to the
outstanding balances of the A Loan, the B Loan and the C Loan.
"PRO-FORMA REPORT" means a report to be prepared twice a year on or
before April 30 and October 31 each year in a form satisfactory to IFC based on
the assumptions shown in Schedule 5 to this Agreement. The report shall be
prepared based on projections by the Independent Consultant of production of
Proved Lion and Panthere Reserves and production of Proved Total Reserves. For
every Independent Consultant Report, there shall be a Pro-Forma Report prepared
by the Independent Consultant; and for every Reserves Report, there shall be a
Pro-Forma Report prepared by the Borrower.
"PROJECT" has the meaning assigned to it in Section 2.01.
"PROJECT CASH" means Project Revenues, all insurance proceeds related to
the Project, any compensation for any partial or total expropriation or
nationalization of the Project or similar event and all other amounts paid to
the Borrower in connection with the Project.
<PAGE> 21
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"PROJECT DOCUMENTS" means the Production Sharing Contract, the Protocol
d'Accord and all other agreements, consents, authorizations or approvals of any
kind related to the Project and/or Block CI-11 emanating from or granted by the
Republic or any agency or instrumentality of the Republic or to which the
Republic is a party, the construction contracts, and any other agreement related
to the acquisition of assets or services to implement the Project, the Joint
Operating Agreement, the Gas Sales Contract, the Crude Oil Sales Agreement, the
Letters of Understanding, the Project Plan, the Prospect Acquisition Agreement,
and the Insurance Agreements.
"PROJECT FACILITIES" means the facilities used and to be used in the
Project as shall be more particularly described in the Project Plan.
"PROJECT OPERATING REPORTS" means the reports to be provided by the
Operator to the Government pursuant to Articles 8.3(c), 8.3(d), 8.3(d) and 30.3
of the Production Sharing Contract.
"PROJECT PLAN" means the plan prepared by the Operator and submitted to
the Minister of Mines and Energy in July 1994 as amended from time to time by
the Investors, detailing the manner in which the Lion Field and Panthere Field
shall be developed.
"PROJECT REVENUES" means the Borrower's share of all proceeds (as
determined by its Participating Interest in the Production Sharing Contract and
Joint Operating Agreement relating to Block CI-11) from the sale of Petroleum
and use and/or sale of the Project Facilities, including, but not limited to
pipeline tariffs, tariffs charged by the Borrower (or the Operator acting on
behalf of the Borrower) for use of any Project Facilities by third parties,
Controlling Companies, and/or Investors, and all relevant contracts and
agreements, plus interest accrued (or to be accrued for the period in question)
in any interest-paying Designated Accounts.
"PROSPECT ACQUISITION AGREEMENT" means the Prospect Acquisition
Agreement dated December 20, 1991 between United Meridian International
Corporation and Frank T. Barr and G. Willard Frank, as amended by the Assignment
and First Amendment to Prospect Acquisition Agreement dated July 23, 1993, the
Waiver Agreement dated July 23, 1993, and the Assignment and Second Amendment to
Prospect Acquisition Agreement dated August 3, 1993.
"PROTOCOL d'ACCORD" means the Protocol d'Accord to be executed between
the Republic and IFC, substantially as set forth in Schedule 6.
"PROVED ADDITIONAL RESERVES" means Proved Reserves within Block CI-11
not located within the Exploitation Perimeter of the Lion Field or the
Exploitation Perimeter of the Panthere Field, provided that IFC shall be
assured, either by completion undertakings by the Sponsors or by other means
satisfactory to IFC, that such Proved Reserves shall be developed according to
the development plan approved by the Government for the exploitation of such
reserves.
<PAGE> 22
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"PROVED LION AND PANTHeRE RESERVES" means the Proved Reserves within the
Exploitation Perimeter of Lion Field and Proved Reserves within the Exploitation
Perimeter of Panthere Field.
"PROVED RESERVES" means proved reserves within an Exploitation Perimeter
or portion thereof of either Crude Oil or Natural Gas or both, as determined and
certified by the Independent Consultant using the probabilistic method and
taking all well data and reservoir description from 3-D seismic into account.
"PROVED TOTAL RESERVES" means the sum of Proved Lion and Panthere
Reserves and the Proved Additional Reserves.
"PURCHASE MONEY FINANCING" means any credit from a supplier of capital
goods, or under any installment purchase, purchase money indebtedness, capital
lease obligation or any similar arrangement.
"QUARTER" means a quarter in any Financial Year or in any Sponsors'
Financial Year, as the case may be.
"RELEVANT PERIOD" means (i) for purposes of the Mandatory Ratios
Certification, the two consecutive six-month periods starting from July 1 or
January 1, as required under Section 6.01 (f) (iv); (ii) for purposes of Section
6.02(d) (ii) (A) and (B), the two consecutive six-month periods starting from
the most recent January 1 or July 1 immediately preceding the date on which the
Restricted Payment is to be made, unless IFC requires a different starting date;
and (iii), for purposes of calculating the release of guarantees under the Share
Retention, Guarantee and Clawback Agreement, each consecutive six-month period
starting from the most recent January 1 or July 1 included in the Forecast
Remaining Life of Loan, unless IFC requires a different starting date.
"REPUBLIC" means the Republic of Cote d'Ivoire.
"RESERVE AMOUNT" means as of any date the aggregate amount of principal
and interest which is scheduled to become due and payable on the Loan in the six
(6) months next following such date.
"RESERVES REPORT" means a report prepared by the Borrower, in form
satisfactory to IFC, indicating (i) Proved Lion and Panthere Reserves remaining
on the date as of which the Report is prepared calculated by subtracting
production of Lion and Panthere Petroleum from the date Proved Lion and Panthere
Reserves were last certified by the Independent Consultant to the date as of
which the Reserve Report is prepared from the level of Proved Lion and Panthere
Reserves last certified by the Independent Consultant, (ii) Proved Total
Reserves remaining on the date as of which the Report is prepared calculated by
subtracting production of Block CI-11 Petroleum from the date Proved Total
Reserves were last certified by the Independent Consultant to the date as of
which the Reserve Report is being prepared from the level of Proved Total
Reserves, and (iii) in both instances, Proved Reserves allocable to the
Borrower.
<PAGE> 23
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"RESTRICTED PAYMENT" means any and all payments by the Borrower to any
Controlling Company including repayment of Advances, interest on Advances, and
dividends (including payment of dividends to any shareholders of the Borrower
whether or not a Controlling Company) but excluding amounts payable for the
provision of goods or services that are priced at arm's length and that have
been approved for payment under the terms of the Joint Operating Agreement.
"RETENTION ACCOUNT" means the "Reserve Subaccount" in the name of the
Trustee as defined in the Designated Accounts Agreement.
REUTERS SCREEN LIBO PAGE" means the display of London interbank offered
rates (commonly known as "LIBOR") of major banks for Dollar deposits designated
as page "LIBO" on the Reuters Monitor Money Rates Service (or any other page
that replaces the LIBO page and displays such London interbank offered rates for
Dollar deposits).
"SECURITY" means (i) one or more first ranking Liens (subject only to
Permitted Encumbrances and other Permitted Liens) to be created by the Borrower,
in accordance with the laws of the jurisdictions where the relevant secured
collateral is (or is to be) kept or located, over all present and future assets
of the Borrower associated with the Project, including, without limitation,
movable and immovable, tangible and intangible assets and the rights and claims
of the Borrower under the Project Documents, the Designated Accounts Agreement
and any other licenses and permits obtained or entered into by the Borrower in
connection with the Project, to secure any and all amounts owed by the Borrower
to IFC under the Loan; (ii) the naming of the IFC as loss payee under the
Insurance Agreements; and (iii) the assignment to IFC by way of security of any
and all claims of the Borrower to the balance of the Designated Accounts.
"SECURITY DOCUMENTS" means any documents executed by the Borrower from
time to time to create, register, renew the registration, or otherwise evidence
the creation of the Security.
"SHARE RETENTION, GUARANTEE AND CLAWBACK AGREEMENT" means an agreement
of such title of even date herewith among the Sponsors, the Borrower and IFC.
"S.I.R." means Societe Ivoirienne de Raffinage located in Abidjan, a
company organized under the laws of the Republic.
"SPECIAL AREA" has the meaning given to it in Production Sharing
Contract.
"SPONSORS" means, collectively GNR and GNRCN.
"SPONSORS' AUDITORS" means KPMG Peat Marwick LLP, or such other firm of
independent certified public accountants as the Sponsors, with IFC's prior
consent, from time to time appoints as their respective auditors.
"SPONSORS' FINANCIAL YEAR" means the accounting year of GNR and
<PAGE> 24
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GNRCN, commencing each year on January 1 and ending on the following December
31, or such other accounting period of GNR as GNR may from time to time
designate as its accounting year.
"SPONSORS' GUARANTEE" means the repayment guarantee of the Sponsors in
connection with the amounts borrowed by the Borrower from IFC pursuant to the
Loan Agreement as provided under Section 3.01 of the Share Retention, Guarantee
and Clawback Agreement.
"SPONSORS' INDEBTEDNESS" means all obligations of any of the Sponsors to
repay money including, without limitation, in respect of:
(i) borrowed money;
(ii) the outstanding principal amount of any bonds, notes, loanstock,
commercial paper, acceptance credits, debentures and bills or
promissory notes drawn, accepted, endorsed or issued by such
Sponsor;
(iii) any credit to the relevant Sponsor from a supplier of goods or
under any installment purchase or other similar arrangement in
respect of goods or services in the ordinary course of business;
(iv) all liabilities of the relevant Sponsor (actual or contingent)
under any conditional sale or a transfer with recourse or
obligation to repurchase, including, without limitation, by way of
discount or factoring of book debts or receivables;
(v) non-contingent obligations of the relevant Sponsor to reimburse
any other person in respect of amounts paid under a letter of
credit or similar instrument (excluding any such letter of credit
or similar instrument issued for the benefit of such Sponsor or a
subsidiary of such Sponsor in respect of trade accounts in the
ordinary course of business);
(vi) amounts raised under any other transaction having the commercial
effect of a borrowing and which would be classified as a borrowing
(and not as an off-balance sheet financing) under Accounting
Principles consistently applied including, without limitation,
under leases or similar arrangements entered into primarily as a
means of financing the asset leased;
(vii) any fixed or minimum premium payable on a redemption or
replacement of any of the foregoing obligations; and
(viii) debt incurred in the ordinary course of business, including
accrued liabilities and letters of credit obtained for purposes of
acquiring Project Facilities.
"STARTING DATE" means July 1, 1995 or the date of first disbursement
under the Loan, whichever is earlier.
<PAGE> 25
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"TRUSTEE" means Citibank, N.A. in New York, N.Y. and its affiliate in
Abidjan, Cote d'Ivoire.
"UMIC-CI" means UMIC Cote d'Ivoire Corporation, a Delaware corporation.
Section 1.02. INTERPRETATION. In this Agreement, unless the context
otherwise requires:
1. headings and underlinings and the table of contents are for
convenience only and do not affect the interpretation of this Agreement;
2. words importing the singular include the plural and vice versa;
3. an expression importing a natural Person includes any company,
partnership, joint venture, association, corporation, other body corporate or
limited liability company and any governmental authority or agency;
4. a reference to an Annex, Attachment, Article, Exhibit, paragraph (or
subparagraph), Schedule or Section of a Financing Agreement is a reference to
the relevant language contained in an Annex, Attachment, Article, Exhibit,
paragraph (or subparagraph), Schedule or Section of the relevant Financing
Agreement;
5. a reference to a document includes an amendment or supplement to, or
replacement or novation of, that document but disregarding any amendment,
supplement, replacement or novation made in breach of this Agreement;
6. a reference to a party to any document includes that party's
successors and permitted assigns;
7. all financial terms are to be interpreted pursuant to Accounting
Principles, as in effect from time to time, on a basis consistent with the most
recent audited Financial Statements of the Borrower or the Sponsors (as the case
may be) delivered to IFC;
8. unless otherwise specified, the definitions of the terms "Barrel",
"MCF" and other units of Petroleum mean such units as measured at a temperature
of sixty (60) degrees Fahrenheit and under an atmospheric pressure of 14.696
pounds per square inch absolute; and
9. unless otherwise specified, all monetary amounts shall be in Dollars
and all accounts shall be in Dollars.
Section 1.03. Business Day Adjustment. Where the day on or by which a
payment is due to be made is not a Business Day, that payment shall be done on
or by the next succeeding Business Day unless that next succeeding Business Day
falls in a different calendar month, in which case that payment shall be made on
or by the immediately preceding Business Day. Interest, fees and charges (if
any) accrue for the period from the due date which is not a Business Day to that
next succeeding Business Day.
<PAGE> 26
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ARTICLE II
THE PROJECT, PROJECT COST AND FINANCIAL PLAN
Section 2.01. The Project. The "Project" consists of the Borrower's
share of the commercial development of the Lion Field and Panthere Field located
on Block CI-11, with the objective of establishing total production of at least
15,000 Barrels of Crude Oil per day and at least 55 MMCFD to produce estimated
Proved Total Reserves of at least 30 million Barrels of Crude Oil and 300
billion cubic feet of Natural Gas based on the Project Plan, which as of the
date of this Agreement, provides for the following:
(a) the drilling or reentry and completion of six wells at Lion Field
and two wells at Panthere Field located about 8 miles offshore the Republic in
water depths of less than 250 feet to a total vertical depth of about 10,000
feet, and the installation of three guyed tower wellhead platform caissons;
(b) the purchase and equipping of a MOPP including production equipment,
separators, compression facilities and quarters to be installed thereon, and the
installation of corresponding sub-sea pipelines between the wellhead
platform/caissons and the MOPP;
(c) the construction of a 14" gas pipeline and possibly, at the
Investors' election, an 8" oil pipeline from the MOPP to the onshore production
facilities and thereafter to Abidjan (73 miles total pipeline length); and
(d) the installation of a catenary anchor leg mooring buoy for offshore
loading, and the lease and/or purchase of a storage tanker for offshore loading
of Crude Oil produced until such time as the oil pipeline (if constructed)
becomes operational.
Except for 10% of the Borrower's share of Crude Oil produced, which will
be sold to Petroci for CFA to the domestic market at a discount of 25% off
international prices, Crude Oil and Natural Gas will be sold under the terms of
the Offtake Agreements. Crude Oil production began in April 1995, and Natural
Gas sales are expected to begin in October 1995.
Section 2.02. Project Cost. The Borrower's share of the cost of the
Project is estimated to be $23.3 million as shown in the following table.
Borrower's Share of Project Costs
---------------------------------
($)
<TABLE>
<S> <C>
Seismic and studies 425,000
Wells (6) 6,725,000
Caissons (3) 1,700,000
Pipelines 4,700,000
</TABLE>
<PAGE> 27
- 27 -
<TABLE>
<S> <C>
Production Facilities 3,025,000
Terminal & Production Equipment 650,000
Engineering,Overhead & Other 3,575,000
----------
Sub-Total 20,800,000
Contingencies 2,500,000
----------
Total 23,300,000
----------
</TABLE>
ARTICLE III
THE LOAN
Section 3.01. The Loan. On the terms and subject to the conditions of
this Agreement, IFC agrees to lend to the Borrower:
(a) the A Loan, being seven million five hundred thousand Dollars
($7,500,000);
(b) the B Loan, being six million two hundred and fifty thousand Dollars
($6,250,000); and
(c) the C Loan, being three million seven hundred and fifty thousand
Dollars ($3,750,000).
Section 3.02. Disbursement Procedure. (a) The Borrower may request
disbursements of the Loan by delivering to IFC, at least seven (7) business days
prior to the proposed date of disbursement, a disbursement request substantially
in the form of Schedule 1 and an undated receipt substantially in the form of
Schedule 2; except that, in the case of the first disbursement, IFC hereby
acknowledges to have received such disbursement request simultaneously with the
execution of this Agreement and hereby waives such prior notice requirement.
(b) IFC shall make Disbursements to the credit of Citibank, N.A. in New
York, N.Y or such other bank in New York, N.Y. as the Borrower from time to time
designates with IFC's consent.
(c) Each Disbursement, except the last, shall be made in an amount of
not less than one million five hundred thousand Dollars ($1,500,000) for the A
Loan, one million two hundred and fifty thousand Dollars ($1,250,000) for the B
Loan and seven hundred and fifty thousand Dollars ($750,000) for the C Loan.
Section 3.03. Interest. The Borrower shall pay interest on the A Loan,
the B Loan and the C Loan in accordance with this Section 3.03.
(a) During each Interest Period, the A Loan, the B Loan or the C Loan
(or, in respect of the first Interest Period of each A Loan Disbursement, B Loan
Disbursement or C Loan Disbursement, the amount of that A Loan Disbursement, B
Loan Disbursement or C Loan Disburse-
<PAGE> 28
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ment) shall bear interest at the A Loan Interest Rate, the B Loan Interest Rate
or the C Loan Interest Rate, as the case may be (as determined under subsection
(c) below) for that Interest Period.
(b) Interest shall accrue from day to day and is prorated on the basis
of a 360-day year for the actual number of days in the relevant Interest Period
and is payable in arrears on the Interest Payment Date immediately following the
end of that Interest Period.
(c) (i) The A Loan Interest Rate and the C Loan Interest Rate applicable
on any Guaranteed Portion of any of the A Loan or the C Loan, for any Interest
Period shall be two and three-quarters per cent (2.75%) per annum above the LIBO
Dollar Rate.
(ii) The A Loan Interest Rate and the C Loan Interest Rate
applicable on any Non-Guaranteed Portion of any of the A
Loan or the C Loan, for any Interest Period shall be three
and three-quarters per cent (3.75%) per annum above the
LIBO Dollar Rate.
(iii) The B Loan Interest Rate applicable on any Guaranteed
Portion of the B Loan for any Interest Period shall be two
and one-quarter per cent (2.25%) per annum above the LIBO
Dollar Rate.
(iv) The B Loan Interest Rate on any Non-Guaranteed Portion of
the B Loan, for any Interest Period shall be three and one
quarter per cent (3.25%) per annum above the LIBO Dollar
Rate.
(d) If more than one such offered rate appears on the Reuters Screen
LIBO Page, then the offered rate to be used to determine the LIBO Dollar Rate
will instead be the arithmetical average (rounded upward, if necessary, to the
nearest one-sixteenth of one percent (1/16%)) of those offered rates.
(e) If, for any reason, IFC cannot determine the Loan Interest Rates for
any Interest Period from the Reuters Screen LIBO Page, then IFC shall notify the
Borrower and instead determine the Loan Interest Rates by using the offered
rates of any two (2) of the banks (or of the bank, if only one) whose rate(s)
were last quoted on, or whose rates were last used in determining the quote last
appearing on, the Reuters Screen LIBO Page (but in all other respects in
accordance with subsections (c) and (d) above).
(f) If the services of the Reuters Screen LIBO Page are discontinued or
IFC otherwise believes that its inability to determine the Loan Interest Rates
will continue indefinitely, then IFC shall notify the Borrower and thereafter
determine the Loan Interest Rates by using the offered rates of any three (3)
major banks active in the eurodollar interbank market in London (but in all
other respects in accordance with subsections (c) and (d) above). IFC shall
select these three banks after consulting with the Borrower.
(g) On each Interest Determination Date for any Interest
<PAGE> 29
- 29 -
Period, IFC shall, in accordance with the relevant subsection above, determine
the Loan Interest Rates applicable to that Interest Period and promptly notify
the Borrower.
(h) The determination by IFC, from time to time, of the Loan Interest
Rates is final and conclusive and binds the Borrower (unless the Borrower shows
to IFC's satisfaction that the determination involves clerical error).
Section 3.04. Additional Interest. Without limiting the remedies
available to IFC under this Agreement or otherwise and to the maximum extent
permitted by applicable law, if the Borrower fails to make:
(a) any payment of principal or interest; or
(b) any other payment provided for in Section 3.08
on or before its due date as specified in or pursuant to this Agreement (whether
at stated maturity or upon prematuring by acceleration or otherwise), the
Borrower shall pay, by way of liquidated damages, in respect of the amount of
such payment due and unpaid, interest at the rate of two per cent (2%) per annum
plus the applicable A Loan Interest Rate (if that amount relates to the A Loan)
or plus the applicable B Loan Interest Rate (if that amount relates to the B
Loan) or plus the applicable C Loan Interest Rate (if that amount relates to the
C Loan), in effect from time to time from the date any such payment became due
until the date of actual payment (as well after as before judgment). Such
interest shall be payable on demand, or if not demanded, on each Interest
Payment Date after such failure.
Section 3.05. Repayment. (a) The Borrower shall repay the A Loan on the
following dates and in the following amounts:
<TABLE>
<CAPTION>
Date Payment Due Principal Amount Due
---------------- --------------------
<S> <C>
July 15, 1996 $ 250,000
January 15, 1997 $ 250,000
July 15, 1997 $ 458,500
January 15, 1998 $ 458,500
July 15, 1998 $ 458,500
January 15, 1999 $ 458,500
July 15, 1999 $ 458,500
January 15, 2000 $ 458,500
July 15, 2000 $ 458,500
January 15, 2001 $ 458,500
July 15, 2001 $ 458,500
January 15, 2002 $ 458,500
July 15, 2002 $ 458,500
January 15, 2003 $ 458,500
July 15, 2003 $ 458,500
January 15, 2004 $ 458,500
July 15, 2004 $ 290,500
January 15, 2005 $ 290,500
</TABLE>
<PAGE> 30
- 30 -
(b) The Borrower shall repay the B Loan on the following dates and in
the following amounts:
<TABLE>
<CAPTION>
Date Payment Due Principal Amount Due
---------------- --------------------
<S> <C>
July 15, 1996 $ 250,000
January 15, 1997 $ 250,000
July 15, 1997 $ 375,000
January 15, 1998 $ 375,000
July 15, 1998 $ 625,000
January 15, 1999 $ 625,000
July 15, 1999 $ 625,000
January 15, 2000 $ 625,000
July 15, 2000 $ 625,000
January 15, 2001 $ 625,000
July 15, 2001 $ 500,000
January 15, 2002 $ 500,000
July 15, 2002 $ 125,000
January 15, 2003 $ 125,000
</TABLE>
(c) The Borrower shall repay the C Loan on the following dates and in
the following amounts:
<TABLE>
<CAPTION>
Date Payment Due Principal Amount Due
---------------- --------------------
<S> <C>
July 15, 1996 $ 125,000
January 15, 1997 $ 125,000
July 15, 1997 $ 229,000
January 15, 1998 $ 229,000
July 15, 1998 $ 229,000
January 15, 1999 $ 229,000
July 15, 1999 $ 229,000
January 15, 2000 $ 229,000
July 15, 2000 $ 229,000
January 15, 2001 $ 229,000
July 15, 2001 $ 229,000
January 15, 2002 $ 229,000
July 15, 2002 $ 229,000
January 15, 2003 $ 229,000
July 15, 2003 $ 229,000
January 15, 2004 $ 229,000
July 15, 2004 $ 147,000
January 15, 2005 $ 147,000
</TABLE>
<PAGE> 31
- 31 -
(d) From time to time while the Loan is being disbursed, any part of the
Loan which has been disbursed shall be allocated for repayment on each of the
respective dates for repayment of principal set out in the tables in subsections
(a), (b) and (c) above in amounts which are pro rata to the amounts of the
respective installments shown opposite those dates in those tables (with IFC
adjusting those allocations as necessary so as to achieve whole numbers in each
case).
Section 3.06. Voluntary Prepayment. (a) Subject to Section 3.12 of this
Agreement, the Borrower may at any time prepay the Loan in full without notice
and, in case of partial prepayment on not less than thirty (30) days' notice to
IFC and on any Interest Payment Date, all or any part of the Loan; in all cases
without premium or penalty, provided that:
(i) the Borrower simultaneously pays all accrued interest and
Maintenance Amount (if any) on the amount of the Loan to be prepaid together
with all other amounts then payable under this Agreement;
(ii) for a partial prepayment, such prepayment is an amount not less
than one million Dollars ($1,000,000) or other whole multiple of
five hundred thousand Dollars ($500,000);
(iii) if IFC so requires, the Borrower delivers to IFC, prior to the
date of prepayment, evidence satisfactory to IFC that all
governmental approvals necessary in respect of the prepayment have
been obtained; and
(iv) no more than nine (9) voluntary prepayments have been made during
the life of the Loan.
(b) If the Borrower becomes liable for, or reasonably believes that it
will become liable for, any Maintenance Amount or any tax or other liability of
the type described in Section 3.15, the Borrower may at such time, subject to
Section 3.12, but otherwise without notice, premium or penalty, and provided
further that the limit regarding the number of prepayments set forth under
sub-paragraph a(iv) above shall not apply in this case, prepay the part of the
Loan giving rise to such liability.
(c) Subject to subsection (b) above, IFC shall apply amounts prepaid
under this Section:
(i) pro rata between the A Loan, the B Loan and
the C Loan in proportion to their respective principal
amounts outstanding; provided however that the Borrower may
elect to rateably prepay the A Loan and the C Loan in
aggregate amounts not to exceed, regarding each of the A
Loan and the C Loan, the aggregate amount of the principal
repayment installments maturing on January 15, 2004, July
15, 2004 and January 15, 2005, without having to make a
rateable prepayment of the B Loan;
(ii) within each of the A Loan, the B Loan and the C
<PAGE> 32
- 32 -
Loan, subject to the proviso in clause (i) above, to the
outstanding repayment installments of the Loan on a pro
rata basis; and
(iii) furthermore, unless otherwise specified by the Borrower at
the time it gives notice of its intention to prepay as
specified in this Section, voluntary prepayments shall be
used to reduce outstanding Guaranteed Portion and
Non-Guaranteed Portion rateably.
(d) Upon delivery of a notice in accordance with subsection (a) or (a)
and (c) above, as the case may be, the Borrower shall make the prepayment in
accordance with the terms of that notice.
(e) The Borrower may not request disbursement of amounts prepaid under
this Agreement.
Section 3.07. Mandatory Prepayment: (a) If at any time after the
Completion Date the Non-Guaranteed Life of Loan Ratio falls below 1.50 or the
Non-Guaranteed Debt Service Coverage Ratio falls below 1.25, a portion of the
Non-Guaranteed Portion of the Loan equal to the amount required to restore the
Mandatory Ratios to the required levels shall become due and payable within
thirty (30) days after the Mandatory Ratios Certification is issued, unless the
Borrower and IFC shall agree in writing within that period on additional
guarantees and/or security to cover or secure the repayment of the
Non-Guaranteed Portion of the Loan.
(b) To the extent any mandatory prepayments are required to meet the
Non-Guaranteed Debt Service Coverage Ratio, the amounts prepaid will be applied
to the principal installments in the order of their maturity.
(c) To the extent any mandatory prepayments made are required to meet
the Non-Guaranteed Life of Loan Ratio, such prepayments will be applied to the
remaining repayments in inverse order of maturity.
(d) Any mandatory prepayments shall be without premium or penalty and
shall be applied to the Non-Guaranteed Portion of the Loan, and, within the
Non-Guaranteed Portion of the Loan, pro rata to the A Loan, the B Loan, and the
C Loan.
Section 3.08. Fees. (a) The Borrower shall pay to IFC a commitment fee
at the rate of one-half of one per cent (1/2%) per annum on that part of the
Loan which from time to time has not been disbursed or canceled. The commitment
fee shall:
(i) begin to accrue, with respect to the A Loan, on June 11, 1995,
and, with respect to the B Loan and the C Loan, on the date of the
Participation Agreements;
(ii) be pro rated on the basis of a 360-day year for the actual number
of days elapsed; and
<PAGE> 33
- 33 -
(iii) be payable semi-annually, in arrears, on the Interest Payment
Dates in each year, the first such payment with respect to the
Loan to be due on July 15, 1995.
(b) The Borrower shall also pay to IFC:
(i) a front-end fee for the A Loan of seventy five thousand
Dollars ($75,000), equal to one per cent (1%) of the amount
of the A Loan, to be paid within thirty (30) days after the
date of this Agreement, but in any event prior to the date
of the first A Loan Disbursement;
(ii) a front-end fee for the B Loan of sixty-two thousand five
hundred Dollars ($62,500) and a front-end fee for the C
Loan of thirty-seven thousand five hundred Dollars
($37,500), equal to one per cent (1%) of the amount of the
B Loan and the C Loan, respectively, to be paid within
thirty (30) days after the date of the Participation
Agreements, but in any event prior to the date of the first
B Loan and C Loan Disbursements;
(iii) an arranging fee of forty thousand Dollars ($40,000), equal
to four-tenths of one per cent (0.4%) of the amount of the
B Loan and the C Loan, to be paid within thirty (30) days
after the date of the Participation Agreements, but in any
event prior to the first B Loan and C Loan Disbursements;
(iv) a syndication fee of one hundred thousand Dollars
($100,000), equal to one per cent (1%) of the amount of the
B Loan and the C Loan, to be paid within thirty (30) days
after the date of the Participation Agreements, but in any
event prior to the first B Loan and C Loan Disbursements;
and
(v) an annual loan administration fee of two thousand five
hundred Dollars ($2,500) per Participant, the first such
payment being due on the first Interest Payment Date after
the date of the first Participation Agreement, and
subsequent payments being due on the first Interest Payment
Date of each year for as long as any amount due under the B
Loan or the C Loan remains outstanding. The loan
administration fee shall be paid in arrears and pro rated
over the applicable period and applicable number of
Participants from the date of each Participation Agreement.
Section 3.09. Payments in Dollars. (a) The Borrower shall make all
payments of principal, interest, fees, and any other amount due to IFC under
this Agreement in Dollars, in same day funds, at Northern Trust International
Banking Corporation, New York, N.Y., or at such other bank in New York as IFC
from time to time designates.
<PAGE> 34
- 34 -
(b) The tender or payment of any amount payable under this Agreement
(whether or not by recovery under a judgment) in any currency other than Dollars
does not novate, discharge or satisfy the obligation of the Borrower to pay in
Dollars all amounts payable under this Agreement except to the extent IFC
actually receives Dollars in its account in New York.
(c) If a currency other than Dollars is tendered or paid (or recovered
under any judgment) and the amount IFC receives at its designated account in New
York falls short of the full amount of Dollars owed to IFC, then the Borrower
shall continue to owe IFC, as a separate obligation, the amount of the shortfall
(regardless of any judgment for any other amounts due under this Agreement).
(d) Notwithstanding subsections (a) through (c) above, IFC may require
the Borrower to pay (or reimburse IFC) in any currency other than Dollars for:
(i) any taxes and other amounts payable under Section 6.05; and
(ii) any fees, costs and expenses payable under Section 8.03.
to the extent those taxes, amounts, fees, costs, and expenses are payable in
that other currency.
Section 3.10. Allocation of Partial Payments. If IFC at any time
receives less than the full amount then due and payable to it under this
Agreement, IFC may allocate and apply such payment in any way or manner and for
such purpose or purposes under this Agreement as IFC in its sole discretion
determines, notwithstanding any instruction that the Borrower may give to the
contrary.
Section 3.11. Maintenance Amount. On each Interest Payment Date, the
Borrower shall pay, in addition to interest, the amount which IFC from time to
time notifies to the Borrower as being the aggregate Maintenance Amount of IFC
and each Participant accrued and unpaid prior to that Interest Payment Date.
Section 3.12. Funding Costs. (a) If the Borrower:
(i) fails to pay any amount due under this Agreement on its due
date, or to borrow in accordance with a request for disbursement
made pursuant to Section 3.02 or to prepay in accordance with a
notice of prepayment; or
(ii) prepays all or any portion of the Loan on a date other than an
Interest Payment Date;
and as a result IFC or any Participant incurs any cost, expense or loss, then
the Borrower shall immediately pay to IFC the amount which IFC notifies to the
Borrower as being the aggregate net amount of those costs, expenses and losses
incurred.
(b) For the purposes of this Section, "costs, expenses or
<PAGE> 35
- 35 -
losses" include any interest paid or payable to carry any unpaid amount and any
loss, premium, penalty or expense to liquidate or obtain third party deposits or
borrowings in order to make, maintain or fund all or any part of the Loan (but
in the case of a late payment, after taking into account any additional interest
received under Section 3.04).
Section 3.13. Suspension or Cancellation of Disbursements by IFC. (a)
IFC may, by notice to the Borrower, suspend or cancel the right of the Borrower
to Disbursements of the Loan:
(i) if the first Disbursement has not been made by September 30, 1995,
or such other date as the parties agree;
(ii) if any Event of Default has occurred and is continuing, or if the
Event of Default specified in Section 7.02 (d) is, in the
reasonable opinion of IFC, imminent;
(iii) if at any time in the reasonable opinion of IFC, there exists any
situation which, together with all other facts and circumstances
regarding the Borrower, indicates that performance by the Borrower
of any of its material obligations under this Agreement cannot be
expected; or
(iv) on or after July 1, 1996.
(b) Upon the giving of any such notice, the right of the Borrower to
disbursement of the undisbursed part of the Loan shall be suspended or cancelled
as the case may be. The exercise by IFC of its right of suspension does not
preclude IFC from exercising its right of cancellation, either for the same or
any other reason. A suspension does not limit any other provision of this
Agreement.
Section 3.14. Cancellation by the Borrower. The Borrower may, by notice
to IFC, irrevocably request IFC to cancel, in whole or in part, the undisbursed
portion of the Loan on the date specified in such request (which shall be an
Interest Payment Date no earlier than 20 Business Days after the date of the
request). If IFC is reasonably satisfied that the Borrower has sufficient
long-term funding available, on terms satisfactory to IFC, to satisfy the
Financial Plan, and IFC receives, in the case of a cancellation prior to the
first Disbursement, all fees payable under Section 3.08 prior to the first
Disbursement and all other amounts then due and payable under this Agreement on
or before that Interest Payment Date, IFC shall cancel the relevant portion of
the Loan, as requested by the Borrower, effective as of that Interest Payment
Date, provided that in case of partial cancellation, the undisbursed portion of
the A Loan, the B Loan and the C Loan shall be cancelled pro rata to their
respective undisbursed balances.
Section 3.15. Taxes. (a) The Borrower shall pay or cause to be paid all
present and future taxes, duties, fees and other charges of whatsoever nature,
if any, now or in the future levied or imposed by the Government or by any
Authority of the Republic or by any organization of which the Republic is a
member, or any jurisdiction through or out of which a payment is made, or the
jurisdiction of
<PAGE> 36
- 36 -
incorporation of the Borrower, on or in connection with the payment of any and
all amounts due under this Agreement.
(b) All payments of principal, interest and other amounts due under this
Agreement shall be made without deduction for or on account of any such taxes,
duties, fees or other charges.
(c) If the Borrower is prevented by operation of law or otherwise from
making or causing to be made such payments without deduction, the principal or
(as the case may be) interest or other amounts due under this Agreement shall be
increased to such amount as may be necessary so that IFC receives the full
amount it would have received (taking into account any such taxes, duties, fees
or other charges payable on amounts payable by the Borrower under this
subsection) had such payments been made without such deduction.
(d) If subsection (c) above applies and IFC so requires, the Borrower
shall deliver to IFC official tax receipts evidencing payment (or certified
copies of them) within thirty (30) days of the date of payment.
(e) Subsections (a) and (b) above do not apply to taxes, duties, fees
and other charges which directly result from a Participant having its principal
office in the Republic or having or maintaining a permanent office or
establishment in the Republic, if and to the extent that permanent office or
establishment acquires the relevant Participation.
Section 3.16. Illegality of Participation. If, after the date of this
Agreement, any change is made in any applicable law or regulation or official
directive, or its interpretation or application by any Authority charged with
its administration makes it unlawful for any Participant to continue to maintain
or to fund its Participation, then the Borrower shall, upon request by IFC (but
subject to the approval of the BCEAO, which the Borrower agrees to take all
reasonable steps to obtain as quickly as possible, if such approval is then
required), prepay on the next Interest Payment Date (or upon such earlier date
as IFC may advise the Borrower is the latest day permitted by the relevant
change of law, regulation or official directive or relevant interpretation or
application in which case Section 3.12 shall apply) in full that part of the B
Loan or the C Loan which IFC advises corresponds to that Participation, together
with all accrued interest and Maintenance Amount (if any) on that part of the B
Loan or the C Loan. In addition, upon receipt of such request from IFC, the
Borrower will have no further right to disbursement of the part of the B Loan or
the C Loan corresponding to that Participation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Letter of Information. The Borrower confirms the
representations contained in the Letter of Information as if they had been fully
set out in, and made as of, the date of this
<PAGE> 37
- 37 -
Agreement.
Section 4.02. Other Representations. The Borrower also represents that:
(a) it is a company duly organized under the laws of the Cayman Islands
and has the corporate power to own its assets, conduct its business as presently
conducted and to enter into, and perform its obligations under, the Project
Documents and the Financing Agreements to which it is a party or will, in the
case of any Project Documents or Financing Agreements not executed as at the
date of this Agreement, when those Project Documents or Financing Agreements are
executed, have the corporate power to enter into and perform its obligations
under those Project Documents and Financing Agreements.
(b) each Project Document or Financing Agreement to which it is a party
has been, or will be, duly authorized and executed by the Borrower and
constitutes, or will, when executed, constitute, a valid and legally binding
obligation of the Borrower, enforceable in accordance with its terms, except as
such enforceability may be affected by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights;
(c) neither the making of any Financing Agreement to which it is a party
nor (when all the consents referred to in Section 5.01 (h) have been obtained)
the compliance with its terms will conflict with or result in a breach of any of
the terms, conditions or provisions of, or constitute a default or require any
consent (other than consents obtained) under, any indenture, mortgage, agreement
or other instrument or arrangement to which the Borrower is a party or by which
it is bound, or violate any of the terms or provisions of the Borrower's
Memorandum or Articles of Association or any judgment, decree or order or any
statute, rule or regulation applicable to the Borrower;
(d) neither the Borrower nor any of its property enjoys any right of
immunity from set-off, suit or execution in respect of its assets or its
obligations under any Project Document or Financing Agreement.
Section 4.03. IFC Reliance. (a) The Borrower acknowledges that it makes
the representations in Sections 4.01 and 4.02 with the intention of inducing IFC
to enter into this Agreement (and the Participants to enter into the
Participation Agreements) and that IFC enters into this Agreement (and the
Participants will enter into the Participation Agreements) on the basis of, and
in full reliance on, each of such representations.
(b) The Borrower warrants to IFC (for itself and on behalf of the
Participants) that each of such representations is true and correct in all
material respects as of the date of this Agreement and that none of them omits
any matter the omission of which makes any of such representations misleading.
Section 4.04. Rights and Remedies not Limited. IFC's rights and
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remedies in relation to any misrepresentation or breach of warranty on the part
of the Borrower are not prejudiced:
(a) by any investigation by or on behalf of IFC or the Participants into
the affairs of the Borrower;
(b) by the execution or the performance of this Agreement or the
Participation Agreements; or
(c) by any other act or thing which may be done by or on behalf of IFC
(or the Participants) in connection with this Agreement and which might, apart
from this Section, prejudice such rights or remedies.
ARTICLE V
CONDITIONS OF DISBURSEMENT
Section 5.01. Initial Conditions. The obligation of IFC to make the
first Disbursement is subject to the fulfillment, in a manner satisfactory to
IFC, prior to or concurrently with the making of such first Disbursement, of the
following conditions:
(a) the Borrower has performed all of its obligations due to be
performed under the Financing Agreements and has performed all of its respective
obligations under the Project Documents, in each case due to be performed prior
to the first Disbursement;
(b) arrangements have been made with respect to the installation and
operation of an accounting and cost control system satisfactory to IFC and for
the appointment as Auditors of a firm of independent public accountants
acceptable to IFC;
(c) the Borrower has insured its properties and business in accordance
with Section 6.03 and has provided to IFC copies of all insurance policies
required to be in force as at the date of first Disbursement together with a
certificate of the insurance broker or agent confirming that such policies are
in effect or - in case that it should not be possible for the Borrower to
provide copies of all insurance policies - a certificate from the respective
insurer or insurers evidencing such insurance, all in form and substance
satisfactory to IFC;
(d) the Project Documents (except for the Letters of Understanding) and
the Financing Agreements, each in form and substance satisfactory to IFC, have
been entered into by all parties to them, have become (or, as the case may be,
remain) unconditional and fully effective in accordance with their respective
terms (except for this Agreement having become unconditional and fully
effective, if that is a condition of any of such agreements);
(e) IFC has entered into Participation Agreements with Participants for
the acquisition by them of Participations in an
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aggregate amount equal to the full amount of the B Loan and the C Loan and those
commitments are in full force and effect;
(f) the Memorandum and Articles of Association of the Borrower are in
form and substance satisfactory to IFC;
(g) the Security has been duly created and perfected/registered as a
first ranking Lien (except for Permitted Encumbrances and other Permitted Liens)
on the Borrower's undivided ownership interest in all relevant Project assets,
provided that the creation, registration and perfection of the mortgage on the
MOPP and the storage tanker, if any, shall be a condition to be fulfilled not
later than the Completion Date and shall not be a condition for the first
disbursement of the Loan; and the Investors shall have acknowledged, in form and
substance satisfactory to IFC, the seniority of the IFC claims under the Loan in
case of any transfers of their Participation Interests as provided under Section
8.4 of the Joint Operating Agreement;
(h) the Borrower has obtained, or made arrangements satisfactory to IFC
for obtaining, all Authorizations and other necessary approvals or consents for:
(i) the Loan;
(ii) the carrying on of the business of the Borrower as it is
presently carried on and is contemplated to be carried on;
(iii) the carrying out of the Project and the implementation of
the Financial Plan;
(iv) the due execution and delivery of, and performance under,
the Project Documents, and any documents necessary or
desirable in their implementation; and
(v) the remittance to IFC or its assigns in Dollars of all
monies payable in respect of the Financing
Agreements;
and has provided IFC with copies of these Authorizations certified as true and
complete copies by the Borrower, if IFC so requires;
(i) IFC has received a legal opinion or opinions, in form and substance
satisfactory to it, from Maples and Calder as counsel for the Borrower regarding
the organization, existence and operations of the Borrower and its authorized
and subscribed capital stock;
(j) IFC has received a legal opinion or opinions, in form and substance
satisfactory to it, from Gide, Loyrette, Nouel (IFC's special counsel in France)
and the Cabinet Elghozi-Ouangi (IFC's special counsel in Cote d' Ivoire):
(i) the title of the Borrower to, or other interest of
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such Borrower in, the assets which are subject to the
Security in Cote d'Ivoire;
(ii) the authorization, execution, validity and enforceability
of this Agreement, the Financing Agreements and the
Project Documents in Cote d'Ivoire;
(iii) the compliance with all obligations referred to in Sections
3.15 and 6.05;
(iv) the priorities or privileges, if any, that creditors of the
Borrower, other than IFC, may have by reason of law;
(v) paragraphs (f), (g) and (h) hereinabove; and
other matters relating to the transactions contemplated by this Agreement as IFC
reasonably requests;
(k) IFC has received a legal opinion from Becker, Glynn, Melamed and
Muffly, its special counsel in New York with regard to the New
York law aspects of this Agreement and the Financing Agreements
substantially in the form of Schedule 7 hereto and a separate
legal opinion from Akin, Gump, Strauss, Hauer & Feld, L.L.P. in
the form of Schedule 8 hereto;
(l) IFC has received:
(i) reimbursement of fees and expenses of IFC's counsel as
provided in Section 8.03; and
(ii) the fees specified in Section 3.08 required to be paid on
or before the date of the first Disbursement;
(m) arrangements satisfactory to IFC have been made for appointment of
an agent for service of process pursuant to Section 8.06;
(n) IFC has received a copy of the authorization to the Auditors
referred to in Section 6.01 (k);
(o) IFC has received evidence, in the form of Schedule 3, of the
authority of the Person or Persons who will, on behalf of the Borrower, sign the
requests and certifications provided for in this Agreement, or take any other
action or execute any other document required or permitted to be taken or
executed by the Borrower under this Agreement, and the authenticated specimen
signature of each such Person;
(p) all requirements of IFC's Environment Division as set forth in the
Environmental Assessment Report are satisfied prior to first disbursement;
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(q) all Designated Accounts shall have been established pursuant to the
Designated Accounts Agreement; and
(r) IFC shall have received satisfactory evidence from the Operator that
the Project is in compliance with relevant Environmental Laws and arrangements
satisfactory to IFC shall have been made for compliance of the Project with the
recommendations of the Environmental Assessment Report.
Section 5.02. Conditions of all Disbursements. The obligation of IFC to
make any Disbursement is also subject to the conditions that:
(a) no Event of Default and no Potential Event of Default has occurred
and is continuing;
(b) the proceeds of that Disbursement are, at the date of the relevant
request, needed to reimburse the Borrower for part of, but no more than total,
past costs incurred by the Borrower in the Project, or will be needed by the
Borrower for the purpose of the Project within three (3) months of such date;
(c) since the date of the Letter of Information, nothing has occurred
which could reasonably be expected to materially and adversely affect the
carrying out of the Project or the Borrower's business prospects or financial
condition, or make it improbable that the Borrower will be able to fulfill any
of its obligations under this Agreement; provided however that, for purposes of
this subsection, the drilling of a single dry hole in the southern fault block
of the Lion Field shall not be considered by itself to be an occurrence which
will have a material adverse effect;
(d) since the date of the latest Financial Statements attached to the
Letter of Information, the Borrower has not incurred any material liability
other than as contemplated under the Project Plan; provided however that, for
purposes of this subsection, the drilling of a single dry hole in the southern
fault block of the Lion Field shall not be considered by itself to be a material
loss or liability; and
(e) the representations and warranties confirmed or made in Article IV
are true on and as of the date of that Disbursement with the same effect as if
such representations and warranties had been made on and as of the date of that
Disbursement, other than for (i) representations and warranties that relate to a
specific date, and (ii) representations and warranties regarding matters that
are the subjects of covenants set forth in this Agreement and the other
Financing Agreements to the extent that the Borrower is in compliance with such
covenants.
Section 5.03. Additional Conditions for Loan. The obligation of IFC to
make any Disbursement is also subject to the conditions that:
(a) after giving effect to that Disbursement, the Borrower is not in
violation of:
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(i) its Memorandum or Articles of Association;
(ii) any provision contained in any document to which the
Borrower is a party (including this Agreement) or by which
the Borrower is bound; or
(iii) any law, rule or regulation directly or indirectly limiting
or otherwise restricting the Borrower's borrowing power or
authority or its ability to borrow; and
(b) the proceeds of that Disbursement are not in reimbursement of, or to
be used for, expenditures in the territories of any country which is not a
member of IFC or the World Bank or for goods produced in or services supplied
from any such country.
Section 5.04. Disbursement Restrictions. Notwithstanding any other
provision of this Agreement, IFC is not obliged to make:
(a) any B Loan Disbursement or C Loan Disbursement, except to the extent
that the respective Participants provide funds for that B Loan Disbursement or C
Loan Disbursement under their Participations; and
(b) any Disbursement except pro rata from the A Loan, the B Loan and the
C Loan.
Section 5.05. Borrower Certification. At the time of each Disbursement
request, the Borrower shall deliver to IFC:
(a) as part of such request a certification, substantially in the form
of Schedule 1, with respect to the conditions specified in Sections 5.02 and
5.03 expressed to be effective as of the date of the relevant Disbursement;
(b) such evidence as IFC reasonably requests of the proposed utilization
of the proceeds of the relevant Disbursement or the utilization of the proceeds
of any prior Disbursement; and
(c) if IFC requests, a legal opinion or opinions in form and substance
satisfactory to IFC, of counsel acceptable to IFC, and concurred in by counsel
for the Borrower, with respect to any matters relating to the relevant
Disbursement requested.
Section 5.06. Conditions for IFC Benefit. The conditions in Sections
5.01 through 5.05 are for the benefit of IFC and may be waived only by IFC at
its sole discretion.
Section 5.07. Saving of Rights. Unless IFC otherwise notifies the
Borrower, and without limiting the generality of Section 8.11, the right of IFC
to require compliance with any condition under this Agreement which IFC waives
in respect of any Disbursement is preserved for the purposes of any subsequent
Disbursement.
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ARTICLE VI
PARTICULAR COVENANTS
Section 6.01. Affirmative Covenants. Unless IFC otherwise agrees, the
Borrower shall:
(a) conduct its business with due diligence and efficiency and in
accordance with sound engineering financial and business practices;
(b) carry out, and cause the Operator, to carry out the Project in
accordance with the Project Plan and in full compliance with the Project
Documents;
(c) cause the proceeds of the Loan to be applied exclusively to the
Project (including, but not limited to, repayment of Advances) and use its best
efforts to cause the Completion Date to occur on or before June 30, 1996, and
failing that, to cause the Completion Date to occur as soon as practicable
thereafter;
(d) maintain the accounting system and cost control system referred to
in Section 5.01 (b), and maintain books of account and other records adequate to
fairly present in all material respects the financial condition of the Borrower
and the results of its operations (including the progress of the Project) in
conformity with Accounting Principles consistently applied (except such changes
as the Auditors may agree upon);
(e) until the Completion Date:
(i) except in connection with the first Restricted Payment,
regarding which the Borrower will provide to IFC the
satisfactory calculation in support of that payment not
later than three days after the execution of this
Agreement, the Borrower shall, at least 15 days prior to
making any subsequent Restricted Payment, provide IFC with
a satisfactory calculation in support of such planned
Restricted Payment;
(ii) not later than five Business Day after the end of each
calendar month, provide IFC, or cause the Operator to
provide IFC on behalf of the Borrower, with monthly Project
progress reports regarding the previous month comprising a
compilation of the pertinent weekly reports; and
(iii) within 60 days after receiving a request from IFC, but in
any event, not more than once in any Financial Year,
provide IFC or cause the Operator to provide to IFC on
behalf of the Borrower the Independent Engineer Report;
(f) throughout the life of the Project:
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(i) within sixty (60) days of the date of the last Operating
Committee (as defined in the Joint Operating Agreement)
meeting, provide IFC, or cause the Operator to provide to
IFC on behalf of the Borrower the minutes of such Operating
Committee meeting;
(ii) starting as of September 30, 1995 provide IFC or cause the
Operator to provide to IFC on behalf of the Borrower
quarterly Project Operating Reports;
(iii) starting as of December 31, 1995, provide or cause the
Operator to provide to IFC on behalf of the Borrower
annual, and if requested by IFC, semi-annual, Independent
Consultant Reports. In the event that IFC does not request
a semi-annual Independent Consultant Report, the Borrower
will prepare or cause the Operator to prepare on behalf of
the Borrower a Reserves Report; and
(iv) by April 30 and October 31, provide IFC with a Mandatory
Ratios Certification in a form satisfactory to IFC showing
calculations of the Borrower s Net Operating Cash Flows,
Non-Guaranteed Debt Service Coverage Ratios and
Non-Guaranteed Life of the Loan Ratios for the Relevant
Period commencing on January 1 and July 1 in each year,
respectively, to be certified by the Borrower s chief
financial officer;
(g) As soon as available, but in any event within sixty (60) days after
the end of the first half of any Financial Year, deliver to IFC:
(i) two (2) copies of the Borrower's semi-annual unaudited
statements in form satisfactory to IFC certified by the
chief financial officer of the Borrower;
(ii) a report on any factors materially affecting or which could
materially and adversely affect the Borrower's business
and operations or its financial condition; and
(iii) a statement of any and all financial transactions
exceeding, on an individual transaction basis, an amount of
$50,000 equivalent, and in the aggregate, an amount of
$500,000 equivalent in any Financial Year, between the
Borrower and any Controlling Companies and a certification
by the chief financial officer of the Borrower that those
transactions were either (i) on terms not less favorable to
the Borrower than would be available in an arms'-length
transaction, or (ii) approved by the Investors pursuant to
the Joint Operating Agreement; and a statement by the
Borrower of any and all transfers
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of funds between the Borrower and the Operator;
(h) as soon as available but in any event within one hundred and twenty
(120) days after the end of each Financial Year, deliver to IFC:
(i) two (2) copies of its complete Financial Statements for
such Financial Year (which are in agreement with its books
of account) together with an audit report on them, all in
form satisfactory to IFC;
(ii) a copy of any Management Letter or other communication from
the Auditors to the Borrower or to its management
commenting, with respect to such Financial Year, on, among
other things, the adequacy of the Borrower's financial
control procedures and accounting systems and management
information system;
(iii) a certification by the chief financial officer of the
Borrower, that, based on the Borrower's Financial
Statements, the Borrower was in compliance with the
financial covenants contained in Section 6.02 as of the end
of the relevant Financial Year or, as the case may be,
detailing any non-compliance;
(iv) a statement of any and all financial transactions
exceeding, on an individual transaction basis, an amount of
$50,000 equivalent, and in the aggregate, an amount of
$500,000 equivalent in any Financial Year between the
Borrower and any Controlling Companies during such
Financial Year and a certification by the chief financial
officer of the Borrower that those transactions were either
(i) on terms not less favorable to the Borrower than would
be available in an arms'-length transaction, or (ii)
approved by the Investors pursuant to the Joint Operating
Agreement; and a statement by the Borrower of any and all
transfers of funds between the Borrower and the Operator;
(v) a report by the Borrower on any factors materially
affecting or which might materially affect the Borrower's
business and operations or its financial condition;
(i) deliver to the Government promptly upon receiving notice thereof,
notice of any change that would materially and adversely affect the
implementation of the Security;
(j) deliver to IFC promptly following receipt a copy of any Management
Letter or other communication sent by the Auditors or any
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accountants retained by the Borrower to the Borrower or its management in
relation to the Borrower's financial, accounting and other systems, management
or accounts if not provided pursuant to subsection (h) (ii) above;
(k) authorize, in the form of Schedule 4, the Auditors (whose fees and
expenses shall be for the account of the Borrower) to communicate directly with
IFC at any time regarding the Borrower's accounts and operations and furnish to
IFC a copy of such authorization;
(l) promptly notify IFC by facsimile and provide the agenda of the
meeting not less than thirty (30) days before any meeting of its shareholders;
(m) promptly deliver to IFC two (2) copies of:
(i) all notices, reports and other communications of the
Borrower to its shareholders; and
(ii) the minutes of all shareholders' meetings;
(n) promptly provide to IFC such information as IFC from time to time
requests about the Borrower, its assets and the Project;
(o) permit representatives of IFC to visit any of the premises where the
business of the Borrower is conducted and to have access to its books of account
and records during normal office hours and at IFC's risk and expense;
(p) promptly notify IFC of any proposed change in the nature or scope of
the Project or the business or operations of the Borrower and of any event or
condition which might materially and adversely affect the carrying out of the
Project or the carrying on of the Borrower's business or operations;
(q) promptly notify IFC by facsimile as soon as it becomes aware of any
litigation or administrative proceedings before any Authority or arbitral body
which materially and adversely affects or may have a material and adverse effect
on the Borrower, its assets or the Project or on the ability of the Borrower to
perform and observe its obligations under any Project Document or any Financing
Agreement;
(r) cause the Operator to design, construct, operate and maintain all of
its plant, equipment and facilities in accordance with the recommendations in
the Environmental Assessment Report and in compliance with applicable
environmental, occupational health and safety requirements of the Government and
the local authorities and applicable World Bank policies and environmental,
occupational health and safety guidelines substantially as set forth in the
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Environmental Assessment Report;
(s) within ninety (90) calendar days after the end of each Financial
Year, deliver to IFC or cause the Operator to deliver to IFC on behalf of the
Borrower an annual Environmental Monitoring Report, based on the requirements
outlined in the Environmental Assessment Report, confirming compliance with the
applicable requirements, standards, World Bank policies and guidelines referred
to in subsection (r) above or, as the case may be, detailing any non-compliance
together with the action being taken to ensure compliance;
(t) if KPMG Peat Marwick LLP ceases to be the auditor of the Borrower
for any reason, appoint and maintain as the auditor of the Borrower another firm
of independent public accountants satisfactory to IFC and, within thirty (30)
days after such appointment, deliver to IFC a copy of an authorization to such
firm in the form of Schedule 4;
(u) obtain and maintain in force (or where appropriate, promptly renew),
or cause the Operator to obtain and maintain (or where appropriate, promptly
renew), all Authorizations necessary for carrying out the Project and the
Borrower's business and operations generally;
(v) perform and observe, or cause the Operator to perform and observe,
all the conditions and restrictions contained in, or imposed on the Borrower by,
any such Authorizations;
(w) from time to time, execute, acknowledge and deliver or cause to be
executed, acknowledged and delivered such further instruments as may reasonably
be requested by IFC for perfecting or maintaining in full force and effect the
perfection of the Security or for re-registering the Security or to otherwise
comply with the Borrower's obligations under the Financing Agreements;
(x) following the Completion Date, use Project Cash, or if necessary,
Clawback Payments, to maintain the Reserve Amount in the Retention Account;
(y) ensure that the Borrower's share of all Petroleum (other than that
consumed or reinjected in the course of the ordinary operation of the Project,
and excluding the portion of Petroleum corresponding to the Republic's share of
Remaining Production under the Production Sharing Contract) (i) is sold or
disposed of under the Offtake Agreements and (ii) after the Completion Date, is
processed in the MOPP;
(z) pay, and cause the purchasers under the Offtake Agreements to pay,
into the Offshore Account all Project Cash received in Dollars or any currency
other than CFA, such funds to be available to and used by the Borrower only as
permitted by the Financing Agreements;
(aa) pay, and cause the purchasers under the Offtake Agreements
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to pay, into the Local Account all Project Cash received or required to be paid
in CFAs, such funds to be available to and used by the Borrower only as
permitted by the Financing Agreements;
(bb) promptly convert into Dollars any Project Revenues received in CFA
(except for CFA requirements for operations on Block CI-11) or any currencies
other than Dollars and transfer such Dollars to the Offshore Account;
(cc) promptly convert or cause to be converted into Dollars any non-cash
consideration received from any sale of Petroleum or from any partial or total
expropriation, or similar event related to the Project;
(dd) use Project Cash only for Permitted Expenditures or as otherwise
permitted under this Agreement;
(ee) prepare its corporate accounts in Dollars and otherwise in
accordance with Accounting Principles;
(ff) except in case of Permitted Farm-outs, take adequate action to
preserve and protect its Participating Interest in the Production Sharing
Contract and in any related Project Documents; and
(gg) maintain in place at all times satisfactory contractual
arrangements regarding the transportation, marketing and if there is hedging,
hedging, of all Crude Oil produced from Block CI-11.
Section 6.02. Negative Covenants. Unless IFC otherwise agrees, the
Borrower shall not:
(a) declare or pay any dividend or make any distribution (excluding
repayment of Advances) in the capital stock of, or purchase, redeem or otherwise
acquire any shares in the capital of the Borrower or any option over them, if an
Event of Default or Potential Event of Default has occurred and is continuing;
(b) declare or pay any dividend or make any distribution (excluding
repayment of Advances) on its shares (other than dividends or distributions
payable in shares of the Borrower), or purchase, redeem or otherwise acquire any
shares of the Borrower or any option over them unless:
(i) all Advances received by the Borrower have been repaid; and
(ii) after giving effect to such action the Borrower would meet
all necessary requirements for making any Restricted
Payments, as set forth hereinbelow.
(c) prior to the Completion Date, make any Restricted Payments, unless
the Borrower is current in all payments of
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principal, interest and any other amounts due to the IFC under the Loan
Agreement, and then only after providing to IFC satisfactory calculations, at
least 15 days prior to the intended payment date (except in connection with the
first Restricted Payment, regarding which the Borrower will provide to IFC the
satisfactory calculation in support of that payment not later than the date of
the request for first Disbursement if the intended date for such first
Restricted Payment is prior to 15 days after the execution of this Agreement)
showing that after making such payment:
(A) the Trustee has (or, in the case of the first Restricted Payment,
will have) in the Retention Account an amount to be not less than
the Reserve Amount; and
(B) (CB + UL) equal to or greater than (RA + SRE)
where:
"CB" is the cash balance (including any investments thereof) held in the
Designated Accounts.
"UL" is the total undisbursed amount of the Loan available to the
Borrower.
"RA" is the Reserve Amount; and
"SRE" is the Borrower's share of remaining expenditures to complete the
Project.
Provided that, for purposes of calculating Restricted Payments: (A) SRE
shall equal the Borrower's share of Estimated Project Costs less the Borrower's
share of Project costs paid through the date the Restricted Payment is made; (B)
Estimated Project Costs shall be deemed to be equal to $202,400,000 equivalent
on the Starting Date, and shall be reduced by $4,000,000 equivalent at the end
of each 90-day period following the Starting Date, with the total reductions not
to exceed a total of $16,000,000 equivalent. However, no reductions shall be
made unless the Borrower shall have provided to IFC in writing, at least fifteen
days prior to the end of each 90-day period following the Starting Date, a
written certification that to the best of its knowledge, nothing has happened,
nor is there anything that has come to the Borrower's attention that makes it
likely to happen, that would cause total Project costs to exceed an aggregate
amount of $186,400,000 equivalent.
(d) subsequent to the Completion Date, make any Restricted Payment
except from Excess Cash Flow, and then, only if:
(i) the Borrower shall not be in default in payment of any
principal, interest or other amount then due under this
Agreement; and
(ii) after making such payment, the following conditions are
met:
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(A) the Non-Guaranteed Debt Service Coverage Ratio would
not be less than 1.5;
(B) the Non-Guaranteed Life of Loan Ratio would not be
less than 1.7; and
(C) the Trustee has the Reserve Amount in the Retention
Account;
(e) in any Financial Year, incur expenditures or commitments for
expenditures other than those required to meet the cash calls of the Operator
for carrying out the Project, and those necessary to drill exploratory wells and
develop additional discoveries on Block CI-11, provided however that the latter
shall only be financed out of (i) Excess Cash Flow, (ii) Advances, (iii) equity
contributions from Controlling Companies, and (iv) Indebtedness approved by IFC;
(f) incur, assume or permit to exist any Indebtedness except:
(i) the Loan;
(ii) any Purchase Money Financing not exceeding at any one time
outstanding the equivalent of $12,000,000 before the
Completion Date and $6,000,000 after the Completion Date,
including Purchase Money Financing incurred by the Operator
on behalf of the Investors;
(iii) Indebtedness incurred in the ordinary course of business
including trade accounts payable within 90 days,
performance bonds (if and when required under the
Production Sharing Contract), letters of indemnity or
performance guarantees as required under the Offtake
Agreements, accrued liabilities and letters of credit
obtained for purposes of acquiring Project Facilities;
(iv) Advances;
(v) Indebtedness secured by Permitted Encumbrances; and
(vi) Indebtedness permitted under Section 6.02(g) of this
Agreement;
for the purpose of this subsection, any Indebtedness incurred or which
may be contingently incurred under any arrangement for discounting any
trade receivables or in respect of Purchase Money Financing shall be
deemed not to be Indebtedness incurred in the ordinary course of
business, and shall be permitted only to the extent provided in paragraph
(ii) above and in paragraph (h)(iv) below;
(g) enter into any agreement or arrangement to guarantee or, in any way
or under any condition, to become obligated for all or any part of any financial
or other obligation of another Person, except for (i) guarantees undertaken by
the Operator on behalf of the other Investors pursuant to the Joint Operating
Agreement, and
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(ii) endorsements for collection or deposit in the ordinary course of business;
(h) create or permit to exist any Lien on any property, revenues or
other assets, present or future, of the Borrower, except:
(i) the Security;
(ii) the naming of IFC as loss payee under the Borrower's
insurance policies;
(iii) any tax or other statutory Lien, provided that such Lien is
discharged within thirty (30) days after the date it is
created or arises (unless contested in good faith by the
Borrower, in which case it shall be discharged within
thirty (30) days after final adjudication);
(iv) Liens securing Purchase Money Financing permitted under
this Agreement;
(v) Permitted Encumbrances;
(vi) loss payee designations and similar arrangements under
insurance policies in favor of lessors under operating
leases permitted under this Agreement;
(vii) bankers' Liens on the Designated Accounts, to the extent
permitted by the Designated Accounts Agreement;
(i) except in connection with transactions not exceeding an annual
aggregate amount of $50,000 equivalent, enter into any transactions except in
the ordinary course of business on the basis of arms'-length arrangements,
including, without limitation, arrangements whereby the Borrower might pay more
than the ordinary commercial price for any purchase or might receive less than
the full ex-works commercial price (subject to normal trade discounts) for its
products;
(j) establish any sole and exclusive purchasing or sales agency, other
than as agreed under the Project Documents;
(k) other than as provided under the Production Sharing Contract, the
Joint Operating Agreement, and the Permitted Encumbrances, enter into any
partnership, profit-sharing or royalty agreement or other similar arrangement
whereby the Borrower's income or profits are, or might be, shared with any other
Person;
(l) other than as agreed under the Joint Operating Agreement, enter into
any management contract or similar arrangement whereby its business or
operations are managed by any other Person;
(m) form or have any Subsidiary;
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(n) make or permit to exist loans or advances, or deposits, except for
(i) deposits in the ordinary course of business and then only in the Designated
Accounts, (ii) Permitted Investments, (iii) receivables owed by Investors to the
Operator under the Joint Operating Agreement, (iv) employee advances not
exceeding an aggregate outstanding amount of $50,000 at any time made in the
ordinary course of business, and (v) loans or advances to UMIC-CI under Sections
3.2, 3.3 and 5.1(d) of the Acquisition Agreement dated May 17, 1993, by and
between UMIC-CI and GNR-CI;
(o) change its Memorandum or Articles of Association in any manner which
would be inconsistent with the provisions of any Project Document;
(p) change its Financial Year;
(q) change the nature of its business or operations or change the nature
or scope of the Project;
(r) sell, transfer, lease or otherwise dispose of all or a substantial
part of its assets (whether in a single transaction or in a series of
transactions, related or otherwise), other than: (i) Petroleum, (ii) assets no
longer used in the ordinary course of business, (iii) Permitted Investments,
(iv) Restricted Payments and (v) transactions permitted under Section 6.02(n) of
this Agreement;
(s) undertake or permit any merger, consolidation or reorganization;
(t) terminate any of the Financing Agreements or the Project Documents
or amend or grant any waiver in respect of any provision of any Financing
Agreement or Project Document;
(u) enter into any agreement or arrangement to acquire by operating
leases the use of any property or equipment of any kind, except operating leases
in respect of which the aggregate lease payments do not exceed the equivalent of
$8,000,000, including obligations incurred by the Operator on behalf of the
Investors, in any Financial Year;
(v) use the proceeds of any Disbursement in the territories of any
country which is not a member of IFC or the World Bank or for reimbursements of
expenditures in those territories or for goods produced in or services supplied
from those territories;
(w) [intentionally deleted];
(x) except in relation to Permitted Farm-outs, dispose of all or part of
the Borrower's interests in the Project Facilities or of any of its rights or
interest in respect of the Project;
(y) except in relation to: (i) Permitted Farm-Outs and (ii) reassignment
of the Participating Interests (subject to the Security) as provided under the
Joint Operating Agreement, agree to the acquisition by any Person of any rights
or interest of the Borrower in the Project;
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(z) permit any of the Project Facilities to be used for purposes other
than the implementation of the Project except for incidental non-material uses,
provided however that third parties and/or investors in Block CI-12 may lease
Project Facilities (eg., the MOPP and/or pipeline capacity) on terms and
conditions agreed by all Investors, if the leasing of these facilities does not
materially affect production operations on Block CI-11 and/or reduce production
levels in the Lion and the Panthere Fields;
(aa) except as provided under the Production Sharing Contract in
connection with Petroci, carry any other Person's expenditure obligation related
to the Project (or hold such other Person's interest in the Project in trust for
such other Person);
(bb) abandon the Lion Field or the Panthere Field or any of the Project
Facilities unless it has demonstrated to the satisfaction of the IFC that the
Lion Field or the Panthere Field or the relevant Project Facilities are no
longer economically viable;
(cc) permit any of its other business operations and activities, other
than the Project, to have, directly or indirectly, any adverse effect on the
Project, or the Borrower's ability to fulfill its obligations under the
Financing Agreements; and
(dd) open any bank accounts other than the Designated Accounts.
Section 6.03. Insurance. Unless IFC otherwise agrees, the Borrower
shall:
(a) timely insure, renew the insurance policies, replace the insurance
companies and keep insured, and cause the Operator to timely insure, renew the
insurance policies, replace the insurance companies and keep insured at all
times, with financially sound and reputable insurer or insurers all its assets
which can be insured against all insurable losses on a reinstatement basis
utilizing current full replacement values, including, without limitation,
construction all risks, ocean marine, property all risks, operators extra
expense, machinery breakdown, business interruption, public/third party
liability, product liability, workers' compensation, employers liability, and
any insurance required by law with the overall liability coverage to be not less
than one hundred million Dollars ($100,000,000);
(b) punctually pay any premium, commission and any other amount
necessary for effecting and maintaining in force each insurance policy;
(c) ensure that every insurance policy on its assets and for business
interruption cannot be terminated by the insurer for any reason (including
failure to pay the premium or any other amount) unless both IFC and the Borrower
receive at least thirty (30) days notice;
(d) ensure that every insurance policy on its assets which are the
subject of Security and for business interruption names IFC as loss payee for
any claim in excess of $1,000,000;
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(e) ensure that IFC and all contractors working at the Project site are
named as additional named insured on all liability policies;
(f) not do or omit to do, or permit to be done or not done, anything
which might prejudice the Borrower's right to claim or recover under any
insurance policy;
(g) deliver to IFC:
(i) not less than ten (10) days prior to the expiry date of any
insurance policy (or, for insurance with multiple renewal
dates, within ten (10) days prior to the expiry date of the
policy on the principal asset), a certificate of renewal
from the insurer, insurance broker or agent confirming the
renewal of that policy and the renewal period, the premium,
the amounts insured for each asset or item and any changes
in terms or conditions from the policy's issue date or last
renewal and confirmation from the insurer that provisions
naming IFC as loss payee remain in effect;
(ii) within thirty (30) days after any insurance policy is
issued to the Borrower, a copy of that policy incorporating
any loss payee provisions required under subsection (d)
above (unless that policy has been provided to IFC pursuant
to Section 5.01(c)); and
(iii) any other information or documents on each insurance policy
IFC requests;
(h) not vary, rescind, terminate, cancel or cause a material change to
any insurance policy, except as permitted under 6.03(a);
(i) notify IFC as soon as possible of any event entitling the Borrower
to claim for an aggregate amount exceeding the equivalent of $1,000,000 under
any one or more insurance policies; and
(j) promptly notify the relevant insurer of any claim by the Borrower
under any policy written by that insurer and diligently pursue that claim.
Section 6.04. Application of Insurance Proceeds. (a) IFC may, at its
discretion, remit the proceeds of any insurance paid to it to the Borrower or
may apply such proceeds to prepay all or any part of the Loan and to pay all
other amounts owing under this Agreement in accordance with Section 3.07,
provided that there shall be no minimum amount or notice period for any such
prepayment.
(b) The Borrower shall use any insurance proceeds it receives for loss
of or damage to any asset solely either to replace or repair that asset or to
acquire such other assets as the Investors or the Operator may decide to acquire
in lieu of the lost or damaged asset pursuant to the provisions of the Joint
Operating Agreement,
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provided however that any new assets so acquired shall, at the earliest possible
opportunity, be incorporated to the secured collateral and become subject to the
Security.
Section 6.05. Document Taxes. Subject to Section 3.15 (e):
(i) the Borrower shall pay all taxes (including stamp taxes), duties,
fees or other charges payable on or in connection with the
execution, issue, delivery, registration or notarization of the
Financing Agreements; and
(ii) the Borrower shall, upon notice from IFC, reimburse IFC or its
assigns for any such taxes, duties, fees or other charges paid by
IFC or its assigns.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.01. Acceleration after Default. If any Event of Default occurs
and is continuing (whether it is voluntary or involuntary, or results from
operation of law or otherwise), IFC may, by notice to the Borrower, require the
Borrower to repay the Loan or such part as is specified in that notice. On
receipt of any such notice, the Borrower shall immediately repay the Loan (or
that part of the Loan specified in that notice) and all interest accrued on it
and any other amounts then payable under this Agreement. The Borrower waives any
right it might have to further notice, presentment, demand or protest in respect
of that demand for immediate payment.
Section 7.02. Events of Default. It is an Event of Default if:
(a) the Borrower fails to pay when due any part of the Loan or to pay
any interest on the Loan and any such failure continues for a period of five (5)
days;
(b) the Borrower fails to observe or perform any of its obligations
under this Agreement (other than for the payment of principal or interest) or
any other Financing Agreement, or any of the Sponsors fails to observe any of
its obligations under the Share Retention, Guarantee and Clawback Agreement, or
the Trustee fails to observe any of its obligations under the Designated
Accounts Agreement, or any of the insurers fails to observe or perform any of
its obligations under the Insurance Agreements, and any such failure continues
for a period of thirty (30) days after IFC notifies the Borrower of that failure
in writing;
(c) any representation or warranty confirmed or made in the Letter of
Information, in Article IV in connection with the execution and delivery of this
Agreement, in connection with any request for Disbursement under this Agreement
or in any other Financing Agreement, is found to be incorrect in any material
respect;
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(d) any Authority condemns, nationalizes, seizes, or otherwise
expropriates all or any substantial part of the property or other assets of the
Borrower or of its share capital, or assumes custody or control of such property
or other assets or of the business or operations of the Borrower or of its share
capital, or takes any action for the dissolution or disestablishment of the
Borrower or any action that would prevent the Borrower or its officers from
carrying on all or a substantial part of its business or operations;
(e) a decree or order by a court is entered against the Borrower or, so
long as any Guaranteed Portion or Clawback Obligation remains outstanding, any
of the Sponsors:
(i) adjudging the Borrower or such Sponsor bankrupt or
insolvent;
(ii) approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of,
or in respect of, the Borrower, or such Sponsor under any
applicable law;
(iii) appointing a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Borrower or
such Sponsor or of any substantial part of their property
or other assets; or
(iv) ordering the winding up or liquidation of its affairs;
or any petition is filed seeking any of the above and is not dismissed within
thirty (30) days;
(f) the Borrower or, so long as any Guaranteed Portion or Clawback
Obligation remains outstanding, any of the Sponsors:
(i) requests a moratorium or suspension of payment of debts
from any court;
(ii) institutes proceedings or takes any form of corporate
action to be liquidated, adjudicated bankrupt or insolvent;
(iii) consents to the institution of bankruptcy or insolvency
proceedings against it;
(iv) files a petition or answer or consent seeking
reorganization or relief under any applicable law, consents
to the filing of any such petition or to the appointment of
a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Borrower or such Sponsor of
any substantial part of its property;
(v) makes a general assignment for the benefit of creditors; or
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(vi) admits in writing its inability to pay its debts generally
as they become due or otherwise becomes insolvent;
(g) an attachment or analogous process is levied or enforced upon or
issued against any of the assets of the Borrower or, so long as any Guaranteed
Portion or Clawback Obligation remains outstanding, any of the Sponsors and is
not discharged within thirty (30) days;
(h) any other event occurs which under any applicable law would have an
effect analogous to any of those events listed in subsections (e), (f) and (g)
above;
(i) the Borrower fails to pay any of its Indebtedness (other than the
Loan) or to perform any of its obligations under any agreement pursuant to which
there is outstanding any Indebtedness of the Borrower, in excess of an aggregate
amount of $100,000 at any one time outstanding, and such failure continues for
more than any applicable period of grace;
(j) any Authorization necessary for the Borrower to perform and observe
its obligations under any Financing Agreement is not obtained when required or
is rescinded, terminated, lapses or otherwise ceases to be of full force and
effect, including in respect of the remittance to IFC or its assigns in Dollars
of any amounts payable under any Financing Agreement and is not restored or
reinstated within thirty (30) days of written notice by IFC to the Borrower
requiring that restoration or reinstatement;
(k) any Financing Agreement is revoked, terminated or ceases to be in
full force and effect or, in the case of the Security, to provide the security
intended, without, in each case, the prior consent of IFC, or performance of the
obligations under any such document becomes unlawful or any such document is
declared to be void or is repudiated or its validity or enforceability at any
time is contested by any Person and the provision is not restored or replaced by
a provision acceptable to IFC, or such repudiation or challenge withdrawn within
thirty (30) days of IFC's written notice to the Borrower requiring that
restoration, replacement or withdrawal.
(l) any of the Project Documents:
(i) is breached by any party to it and such breach may have a
material adverse effect on the ability of the Borrower to
perform and observe its obligations under any Financing
Agreement; provided that the Borrower shall enjoy an
additional period of thirty (30) days after becoming aware
of the breach to cure such breach; or
(ii) is revoked, terminated or ceases to be in full force and
effect without the prior consent of IFC, or performance of
the obligations under any such agreement becomes unlawful
or any such agreement is
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declared to be void or is repudiated or its validity or
enforceability at any time is contested by any party to it
and is not restored or reinstated within thirty (30) days
of notice by IFC to the Borrower requiring that restoration
or reinstatement; and
(m) so long as any Guaranteed Portion or Clawback Obligation remains
outstanding, any of the Sponsors fails to pay any of its Sponsors' Indebtedness
or fails to perform any of its obligations under any agreement (other than
failure to make any payments or meet any obligations under the Share Retention,
Guarantee and Clawback Agreement) pursuant to which there is outstanding any of
its Sponsors' Indebtedness in excess of an aggregate amount of $5,000,000 at any
one time outstanding, if as a result of such failure the holder of that
Sponsors' Indebtedness would be entitled upon notice, or the expiration of any
applicable period of grace, or both, to demand immediate payment of the amount
in arrears and/or the outstanding balance of such Sponsors' Indebtedness.
Section 7.03. Bankruptcy. If the Borrower is liquidated or declared
bankrupt, the Loan, all interest accrued on it and any other amounts payable
under this Agreement will become promptly due and payable without any
presentment, demand, protest or notice of any kind, all of which the Borrower
waives.
Section 7.04. Notice of Events. If any Event of Default or Potential
Event of Default happens, the Borrower shall promptly after becoming aware
thereof notify IFC by facsimile specifying the nature of such Event of Default
or Potential Event of Default and any steps the Borrower is taking to remedy it.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Notices. Any notice, request or other communication to be
given or made under this Agreement shall be in writing. Such notice, request or
other communication may be delivered by hand, airmail, or facsimile to the
party's address specified below or at such other address as such party notifies
to the other party from time to time and will be effective upon receipt.
For the Borrower:
GNR (Cote d'Ivoire) Ltd.
c/o Global Natural Resources, Inc.
5300 Memorial Drive
Suite 800
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Houston, Texas 77007-8295
Attention: Sr. Vice-President Finance
Facsimile: 713-951-9395
For IFC:
International Finance Corporation
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
Attention: Director, Oil, Gas and Mining Department
Facsimile:
202-334-0230
202-676-9648
Section 8.02. English Language. All documents to be furnished or
communications to be given or made under this Agreement shall be in the English
language or, if in another language, shall be accompanied by a translation into
English satisfactory to IFC certified by a representative of the Borrower, which
translation shall be the governing version between the Borrower and IFC.
Section 8.03. Expenses. The Borrower shall pay to IFC or as IFC may
direct:
(a) the fees and expenses of the Independent Consultant and Independent
Engineer and/or any other consultants employed by IFC incurred in connection
with the investment by IFC provided for under this Agreement;
(b) the fees and expenses of IFC's outside counsel incurred in
connection with:
(i) the preparation of the investment by IFC provided for under
this Agreement.
(ii) the preparation and/or review, execution and, where
appropriate, registration of the Financing Agreements and
any other documents related to them.
(iii) the giving of any legal opinions required by IFC
under this Agreement.
(iv) the administration by IFC of the investment provided for in
this Agreement or otherwise in connection with any
amendment, supplement or modification to, or waiver under,
any of the Financing Agreements.
(v) the registration (where appropriate) and the delivery of
the evidences of indebtedness relating to the Loan and
its disbursement.
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(vi) the occurrence of any Event of Default or Potential Event
of Default; and
(c) the costs and expenses incurred by IFC in relation to the
enforcement or protection or attempted enforcement or protection of its rights
under any of the Financing Agreements, or the exercise of its rights or powers
consequent upon or arising out of the occurrence of any Event of Default or
Potential Event of Default, including legal and other professional consultants'
fees.
Section 8.04. Financial Calculations. (a) All financial calculations to
be made under, or for the purposes of, this Agreement shall be determined in
accordance with the Accounting Principles applied on a consistent basis except
such changes as the Auditors may agree upon, and, except as otherwise required
to conform to the definitions contained in Article I or any other provisions of
this Agreement or the Share Retention, Guarantee and Clawback Agreement, shall
be calculated from the then most recently issued semi-annual Financial
Statements which the Borrower is obligated to furnish to IFC under Section
6.01(g); and
(b) If any material adverse change in the financial condition of the
Borrower after the end of the period covered by the relevant Financial
Statements has occurred, such material adverse change shall also be taken into
account in calculating the relevant figures.
Section 8.05. Termination of Agreement. This Agreement shall continue in
force until all monies payable under it have been fully paid in accordance with
its provisions.
Section 8.06. Jurisdiction and Enforcement. (a) This Agreement is
governed by, and shall be construed in accordance with, the laws of the State of
New York, United States of America.
(b) The Borrower irrevocably agrees that any legal action, suit or
proceeding arising out of or relating to this Agreement or any other to which
the Borrower is a party may be brought by IFC in the courts of the State of New
York or of the United States of America located in the Southern District of New
York. Final judgement against the Borrower in any such action, suit or
proceeding shall be conclusive and may be enforced in any other jurisdiction,
including Cote d'Ivoire, by suit on the judgement, a certified or exemplified
copy of which shall be conclusive evidence of the judgement, or in any other
manner provided by law.
(c) By the execution and delivery of this Agreement, the Borrower
irrevocably submits to the non-exclusive jurisdiction of any such court in any
such action, suit or proceeding and designates, appoints and empowers C.T.
Corporation System, 1633 Broadway, New York, New York, as its authorized agent
to receive for and on its behalf service of any summons, complaint or other
legal process in any such action, suit or proceeding in the State of New York.
(d) Nothing in this Agreement shall affect the right of IFC to commence
legal proceedings or otherwise sue the Borrower in Cote
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d'Ivoire or any other appropriate jurisdiction or to serve process, pleadings
and other legal papers upon the Borrower in any manner authorized by the laws of
any such jurisdiction.
(e) As long as this Agreement remains in force, the Borrower shall
maintain a duly appointed agent for the service of summons, complaint and other
legal process in New York, New York, for purposes of any legal action, suit or
proceeding IFC may bring in respect of this Agreement or any other Financing
Agreement to which the Borrower is a party. The Borrower shall keep IFC advised
of the identity and location of such agent.
(f) The Borrower also irrevocably consents, if for any reason the
Borrower's authorized agent for service of process of summons, complaint and
other legal process in any such action, suit or proceeding is not present in New
York, New York, to service of such papers being made out of those courts by
mailing copies of the papers by registered United States air mail, postage
prepaid, to the Borrower at its address specified in Section 8.01. In such a
case, IFC shall also send by facsimile, or have sent by facsimile, a copy of the
papers to the Borrower.
(g) Service in the manner provided in subsection (f) above in any such
action, suit or proceeding will be deemed personal service, will be accepted by
the Borrower as such and will be valid and binding upon the Borrower for all
purposes of any such action, suit or proceeding.
(h) The Borrower irrevocably waives to the fullest extent permitted by
applicable law,
(i) any objection which it may have now or in the future to the
laying of the venue of any such action, suit or proceedings
in any court referred to in this Section.
(ii) any claim that any such action, suit or proceeding has been
brought in an inconvenient forum.
(iii) its right of removal of any matter commenced by IFC in the
courts of the State of New York to any court of the United
States of America; and
(iv) any and all rights to demand a trial by jury in any such
action, suit or proceeding brought against the Borrower by
IFC.
(i) To the extent that the Borrower may be entitled in any jurisdiction
to claim for itself or its assets immunity in respect of its obligations under
this Agreement or any other to which the Borrower is a party from any suit,
execution, attachment (whether provisional or final, in aid of execution, before
judgment or otherwise) or other legal process or to the extent that in any
jurisdiction such immunity (whether or not claimed) may be attributed to it or
its assets, the Borrower irrevocably agrees not to claim
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and irrevocably waives such immunity to the fullest extent permitted by the laws
of such jurisdiction.
(j) The Borrower hereby acknowledges that IFC shall be entitled under
applicable law, including the provisions of the International Organizations
Immunities Act, to immunity from a trial by jury in any action, suit or
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby or any other to which the Borrower is a party, brought
against IFC in any court of the United States of America. The Borrower hereby
waives any and all rights to demand a trial by jury in any action, suit or
proceeding arising out of or relating to this Agreement or any other to which
the Borrower is a party or the transactions contemplated by this Agreement or
such , brought against IFC in any forum in which IFC is not entitled to immunity
from a trial by jury.
(k) To the extent that the Borrower may, in any suit, action or
proceeding brought in any of the courts referred to in paragraph (b) above or a
court of Cote d'Ivoire or elsewhere arising out of or in connection with this
Agreement or any other agreement to which the Borrower is a party, be entitled
to the benefit of any provision of law requiring IFC in such suit, action or
proceeding to post security for the costs of the Borrower (cautio judicatum
solvi), or to post a bond or to take similar action, the Borrower hereby
irrevocably waives such benefit, in each case to the fullest extent now or in
the future permitted under the laws of Cote d'Ivoire or, as the case may be, the
jurisdiction in which such court is located.
Section 8.07. Successors and Assigns. This Agreement binds and benefits
the respective successors and assigns of its parties. However the Borrower may
not assign or delegate any of its rights or obligations under this Agreement.
Section 8.08. Amendment. Any amendment of any provision of this
Agreement shall be in writing and signed by the parties.
Section 8.09. Counterparts. This Agreement may be executed in several
counterparts, each of which is an original, but all of which together constitute
one and the same agreement.
Section 8.10. Remedies and Waivers. No failure or delay by IFC in
exercising any power, remedy, discretion, authority or other rights under this
Agreement shall waive or impair that or any other right of IFC. No single or
partial exercise of such a right shall preclude its additional or future
exercise. No such waiver shall waive any other right under this Agreement. All
waivers or consents given under this Agreement shall be in writing.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
in their respective names and to be delivered in Washington, D.C. of the United
States of America, as of the date first above written.
GNR (Cote d'Ivoire) Ltd.
By /s/ Mr. Eric Lynn Hill
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Authorized Representative
INTERNATIONAL FINANCE CORPORATION
By /s/ Mr. M.A.K. Alizai
Authorized Representative
SCHEDULE 1
Page 1 of 3
FORM OF REQUEST FOR DISBURSEMENT
(See Sections 3.02 and 5.05)
[Borrower LETTERHEAD]
[Date]
International Finance Corporation
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
Attention: Director, Oil, Gas and Mining Department
Ladies and Gentlemen:
Investment No.________
Request for Loan Disbursement No. [ ]*
1. Please refer to the Loan Agreement (the "Loan Agreement") dated June , 1995
between GNR (Cote d'Ivoire) Ltd. (the "Borrower") and International Finance
Corporation ("IFC"). Terms defined in the Loan Agreement have their defined
meanings whenever used in this request.
2. The Borrower irrevocably requests the disbursement on_________, 19__
(or as soon as practicable thereafter) of the amount of_________(_______)
under the A Loan,__________(______) under the B Loan and______________under the
C Loan (the "Disbursement") in accordance with the provisions of Section 3.02 of
the Loan Agreement. You are requested to pay such amount to the Offshore
Account, Account No.___________, at [Name and Address of Trustee].
3. There is enclosed a signed but undated receipt for the amount of the
Disbursement. The Borrower authorizes IFC to date such receipt with the date of
actual disbursement by IFC.
4. For the purpose of Sections 5.02 and 5.03 of the Loan Agreement, the Borrower
further certifies as follows:
-------------------------
* Each to be numbered in series.
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(a) no Event of Default and no Potential Event of Default has occurred
and is continuing;
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SCHEDULE 1
Page 2 of 3
(b) the proceeds of the Disbursement are at the date of this request
needed by the Borrower for the purpose of the Project, or will be needed for
such purpose within three (3) months of such date;
(c) since the date of the Letter of Information, nothing has occurred
which could reasonably be expected to materially and adversely affect the
carrying out of the Project or the Borrower's business prospects or financial
condition, or make it improbable that the Borrower will be able to fulfill any
of its obligations under the Loan Agreement;
(d) since the date of the latest Financial Statements attached to the
Letter of Information, the Borrower has not incurred any material liability
other than as contemplated under the Project Plan;
(e) the representations and warranties confirmed or made in Article IV
of the Loan Agreement are true on and as of the date of that Disbursement with
the same effect as if such representations and warranties had been made on and
as of the date of this Disbursement, other than for (i) representations and
warranties that relate to a specific date, and (ii) representations and
warranties regarding matters that are the subjects of covenants set forth in
this Loan Agreement and the other Financing Agreements to the extent that the
Borrower is in compliance with such covenants;
(f) after giving effect to this Disbursement, the Borrower will not be
in violation of:
(i) its Memorandum or Articles of Association;
(ii) any provision contained in any document to which the
Borrower is a party (including the Loan Agreement) or by
which the Borrower is bound; or
(iii) any law, rule or regulation directly or indirectly limiting
or otherwise restricting the Borrower's borrowing
power or authority or its ability to borrow; and
(g) the proceeds of this Disbursement are not in reimbursement of, or to
be used for, expenditures in the territories of any country which is not a
member of IFC or the World Bank or for goods produced in or services supplied
from any such country.
<PAGE> 66
- 66 -
SCHEDULE 1
Page 3 of 3
The above certifications are effective as of the date of this Request for
Disbursement and shall continue to be effective as of the date of the
Disbursement. If any certification is no longer valid as of or prior to the date
of the requested Disbursement, the Borrower hereby undertakes to immediately
notify IFC.
Yours truly,
GNR (Cote d'Ivoire) Ltd.
By
-----------------------------------
Authorized Representative
Copy to: Manager, Accounting Division
International Finance Corporation
<PAGE> 67
- 67 -
SCHEDULE 2
Page 1 of 1
FORM OF LOAN DISBURSEMENT RECEIPT
(See Section 3.02 of the Loan Agreement)
[Borrower LETTERHEAD]
[Blank], 1995
International Finance Corporation
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
Attention: Manager, Accounting Division
Ladies and Gentlemen:
Investment No.
Disbursement Receipt No. [ ] (Loan)
We, [Name of Borrower], hereby acknowledge receipt on the date hereof,
of the sum of $________________________ disbursed to us by International Finance
Corporation ("IFC") under the Loan of_____________________ provided for in the
Loan Agreement dated as of July 14, 1995 between our company and International
Finance Corporation.
Yours truly,
GNR (Cote d'Ivoire) Ltd.
By
---------------------------------
Authorized Representative
<PAGE> 68
- 68 -
SCHEDULE 3
Page 1 of 2
FORM OF CERTIFICATE OF INCUMBENCY AND AUTHORITY
(See Section 5.01(o))
[Borrower LETTERHEAD]
[Date]
International Finance Corporation
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
Attention: Director, Oil, Gas and Mining Department
Ladies and Gentlemen:
Certificate of Incumbency and Authority
With reference to the Loan Agreement between us, dated _________, 199_
(the "Loan Agreement"), I, the undersigned [Chairman/Director] of [Name of
Borrower], (the "Borrower"), duly authorized to do so, hereby certify that the
following are the names, offices and true specimen signatures of the persons
each of whom will, and will continue to be authorized:
(a) to sign on behalf of the Borrower the requests for the disbursement
of funds provided for in Section 3.02 of the Loan Agreement;
(b) to sign the certifications provided for in Sections 5.02 and 5.03 of
the Loan Agreement; and
(c) to take any other action required or permitted to be taken, done,
signed or executed under the Loan Agreement or any other agreement to which IFC
and the Borrower may be parties.
<PAGE> 69
- 69 -
SCHEDULE 3
Page 2 of 2
<TABLE>
<CAPTION>
* Name Office Specimen Signature
---- ------ ------------------
<S> <C> <C>
-------------------- ----------------------------- ------------------
-------------------- ----------------------------- ------------------
-------------------- ----------------------------- ------------------
</TABLE>
You may assume that any such person continues to be so authorized until
you receive authorized written notice from the Borrower that they, or any of
them, is no longer so authorized.
Yours truly,
GNR (Cote d'Ivoire) Ltd.
By
[Chairman/Director]
--------------------------
* Designations may be changed by the Company at any time by issuing a new
certificate of Incumbency and Authority authorized by the Board of
Directors of the Company.
<PAGE> 70
- 70 -
SCHEDULE 4
Page 1 of 2
FORM OF LETTER TO Borrower'S AUDITORS
[Borrower LETTERHEAD]
(See Sections 5.01(n) and 6.01(k) of
the Loan Agreement)
[DATE]
[NAME OF AUDITORS]
[ADDRESS]
Ladies and Gentlemen:
We hereby authorize and request you to give to International Finance
Corporation of 1818 H Street, N.W., Washington, D.C. 20433, United States of
America ("IFC"), all such information as IFC may reasonably request with regard
to the Financial Statements of the undersigned, both audited and unaudited. We
have agreed to supply that information and those statements under the terms of a
Loan Agreement between the undersigned Borrower and IFC dated ________, 1995
(the "Loan Agreement"). For your information we enclose a copy of the Loan
Agreement.
We authorize and request you to send two copies of the audited Financial
Statements of the undersigned to IFC to enable us to satisfy our obligation to
IFC under Section 6.01 (h)(i) of the Loan Agreement. When submitting the same to
IFC, please also send, at the same time, a copy of your full report on such
accounts in a form reasonably acceptable to IFC.
Please note that under Section 6.01 (h)(ii) of the Loan Agreement, we
are obliged to provide IFC with a copy of any Management Letter or other
communication from you to the undersigned or its management commenting on, among
other things, the adequacy of the undersigned financial control procedures and
accounting and management information systems.
Please also submit each such communication and report to IFC with the
audited financial statements.
<PAGE> 71
- 71 -
SCHEDULE 4
Page 2 of 2
For our records, please ensure that you send to us a copy of every
letter which you receive from IFC immediately upon receipt and a copy of each
reply made by you immediately upon the issue of that reply.
Yours truly,
GNR (Cote d'Ivoire) Ltd.
By
------------------------------------
Authorized Representative
Enclosure
cc: Director
Oil, Gas and Mining Department
International Finance Corporation
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
<PAGE> 72
- 72 -
SCHEDULE 5
ASSUMPTIONS FOR PRO-FORMA REPORTS
Projected Oil Production: from the report of the Independent Consultant;
Projected Gas Production: from the report of the Independent Consultant, which
shall equal the minimum contract take or pay quantities, including revisions
thereof, as determined in accordance with the Gas Sales Contract;
Projected Condensate Production: From the report of the Independent Consultant
based on the gas production profile prepared by the Independent Consultant;
Crude Oil and Condensate Price not applicable to the Domestic Market Obligation:
average of last three years, calculated in conformity with the prevailing crude
oil price contract. Thus, if the Crude Oil Sales Agreement were to remain in
effect indefinitely, the crude oil price to be used in the first year of the
forecast period would be the average of Brent DTD (average for the last 3 years
based on Platt's Oilgram) less $0.60 per barrel. Crude oil and condensate prices
would escalate beginning in the second year of the forecast period.
Crude Oil and Condensate Price applicable to the Domestic Market Obligation: as
provided under the Production Sharing Contract.
Gas Price: Gas prices according to the Gas Sales Contract. The price of WTI that
would apply for the first year of the forecast period would be the average price
of WTI crude oil during the preceding 3 years as published in the Platt's
Oilgram. WTI crude prices would escalate according to the Forecast Price
Escalation beginning in the second year of the forecast period.
Forecast Price Escalation: Most recent commodity price escalation forecast
applicable to energy (crude oil) as shown in the Commodity Markets and the
Developing Countries publication, published by the World Bank every quarter.
Forecast Cost Escalation: Most recent G-5 MUV Index escalation forecast as shown
in the Commodity Markets and the Developing Countries publication, published by
the World Bank every quarter.
Projected Capital Expenditures: Capital expenditures included in the Report of
the Independent Consultant and audited by the Consultant.
Projected Operating Costs: Operating Costs as included in the Report of the
Independent Consultant and audited by the Consultant.
<PAGE> 73
- 73 -
Allocation of Costs and Revenues among Investors: As agreed by Investors in the
Letters of Understanding.
U.S. Dollar/CFA Exchange Rate: Unless otherwise agreed between IFC and the
Borrower, the exchange rate prevailing at end of the month immediately preceding
the month in which the forecast is submitted.
Past Costs: In calculating the financial projections, the cost recovery balance
of each Borrower (including interest costs that have not been recovered as of
the time the calculations are being prepared) that has not yet been recovered
will be taken into account in determining future cost recovery amounts.
<PAGE> 74
- 74 -
SCHEDULE 6
[PROTOCOL d'ACCORD]
<PAGE> 75
- 75 -
SCHEDULE 7
[DRAFT LEGAL OPINION OF BECKER, GLYNN, MELAMED & MUFFLY]
<PAGE> 76
- 76 -
SCHEDULE 8
[DRAFT LEGAL OPINION OF AKIN, GUMP, STRAUSS, HAUER & FELD LLP]
<PAGE> 77
CONFORMED COPY
================================================================================
INVESTMENT NUMBER 7018
SHARE RETENTION, GUARANTEE AND CLAWBACK
AGREEMENT
among
GLOBAL NATURAL RESOURCES INC.
and
GLOBAL NATURAL RESOURCES CORPORATION OF NEVADA
and
GNR (COTE d'IVOIRE) LTD.
and
INTERNATIONAL FINANCE CORPORATION
Re: IFC's Loan to
GNR (COTE d'IVOIRE) LTD.
Dated as of July 14, 1995
================================================================================
<PAGE> 78
SHARE RETENTION, GUARANTEE AND CLAWBACK
AGREEMENT
AGREEMENT, dated as of July 14, 1995 among GLOBAL NATURAL RESOURCES INC.
("GNR"), a company organized and incorporated in New Jersey, and GLOBAL NATURAL
RESOURCES CORPORATION OF NEVADA ("GNRCN"), a company organized and incorporated
in Nevada, (both of GNR and GNRCN hereinafter collectively called the "Sponsors"
and individually a "Sponsor"), GNR (COTE D'IVOIRE) LTD. (hereinafter called the
"Borrower" or GNR-CI), and INTERNATIONAL FINANCE CORPORATION (hereinafter called
"IFC").
WHEREAS:
(A) By a loan agreement (the "Loan Agreement") of even date herewith,
between the Borrower and IFC, IFC has agreed to lend to the Borrower, and the
Borrower has agreed to borrow from IFC, the Loan, that is, the sum of seventeen
million five hundred thousand Dollars ($17,500,000), made up of the A Loan of
seven million five hundred thousand Dollars ($7,500,000), the B Loan of six
million two hundred fifty thousand Dollars ($6,250,000), and the C Loan of three
million seven hundred fifty thousand Dollars ($3,750,000) upon the terms and
conditions set forth in the Loan Agreement.
(B) GNR is the Controlling Company of GNRCN and GNR-CI, and GNR-CI is a
wholly owned subsidiary of GNRCN.
(C) It is a condition of first disbursement of the Loan under the Loan
Agreement that the parties hereto shall have entered into this Agreement.
(D) Each of the Sponsors has been provided with, and hereby acknowledges
receipt of, a copy of the Loan Agreement.
NOW THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
Section 1.01. All terms defined in Section 1.01. of the Loan Agreement
have the same meanings herein.
Section 1.02. In this Agreement, unless the context otherwise requires:
1. headings and underlinings and the table of contents are for
convenience only and do not affect the interpretation of this Agreement.
<PAGE> 79
- 2 -
2. words importing the singular include the plural and vice versa.
3. an expression importing a natural person includes any company,
partnership, joint venture, association, corporation, other body corporate or
limited liability company and any governmental authority or agency;
4. a reference to an Annex, Attachment, Article, Exhibit, paragraph (or
subparagraph), Schedule or Section, is a reference to the relevant language
contained in an Annex, Attachment, Article, Exhibit, paragraph (or
subparagraph), Schedule or Section of the Financing Agreements or the Project
Documents;
5. a reference to a document includes an amendment or supplement to, or
replacement or novation of, that document but disregarding any amendment,
supplement, replacement or novation made in breach of this Agreement;
6. a reference to a party to any document includes that party's
successors and permitted assigns; and
7. all financial terms are to be interpreted pursuant to Accounting
Principles, as in effect from time to time, on a basis consistent with the most
recent audited financial statements of the Borrower or the Sponsors (as the case
may be) delivered to IFC pursuant to the provisions of this Agreement and/or the
Loan Agreement.
ARTICLE II
SHARE RETENTION
Section 2.01. GNR hereby agrees and undertakes that, for as long as
there is any outstanding liability of the Borrower to IFC under the Loan
Agreement, unless IFC shall otherwise agree, GNR shall remain as the Controlling
Company of GNR-CI.
<PAGE> 80
- 3 -
ARTICLE III
SPONSORS' GUARANTEE
Section 3.01. The Sponsors hereby jointly and severally, irrevocably,
absolutely and unconditionally guarantee, as primary obligors and not as
sureties merely:
(a) Until the Completion Date, the due and punctual payment of the
principal of, and interest and commitment charge on, the Loan, and any and all
sums payable by the Borrower under the Loan Agreement, whether at stated
maturity or upon acceleration due to the occurrence of an Event of Default, all
as set forth in the Loan Agreement.
(b) After the Completion Date, the due and punctual payment of the
principal of, and interest and commitment charge on, the Loan, and any and all
sums payable by the Borrower under the Loan Agreement, whether at stated
maturity or upon the occurrence of an Event of Default with the result that any
such amount is accelerated, all as set forth in the Loan Agreement, less,
subject to Sections 3.02 and 3.03, the amount of the Non-Guaranteed Portion.
(c) that all benefits of the Sponsors' Guarantee may be freely and
unconditionally assigned, transferred or otherwise disposed of, in whole or in
part, by IFC to any other person, corporate or otherwise.
Section 3.02. (a) Starting as of the Completion Date, the Sponsors may
request from IFC a release from the Sponsors' obligations under the Sponsors'
Guarantee in an amount equal to the Non-Guaranteed Portion and IFC shall grant
the release subject to the fulfillment of the following conditions precedent:
(i) the Borrower shall be current in all payments due to IFC under the Loan
Agreement; and (ii) a minimum Non-Guaranteed Life of Loan Ratio of 1.7 and a
minimum Non-Guaranteed Debt Service Coverage Ratio of 1.5 shall be projected in
the Pro-Forma Report in form and substance satisfactory to IFC by the
Independent Consultant, for each six-month interval of the Relevant Period.
(b) For the purpose of calculating the initial Non-Guaranteed Portion,
the Percentage Release shall be the percentage calculated by IFC to be the
highest percentage resulting from applying the following table on the basis of
Proved Total Reserves as of the Completion Date:
<TABLE>
<CAPTION>
Percentage
Proved Total Reserves Release
--------------------- ----------
<S> <C>
80 MMBOE including at least 30 MMB: 50%
90 MMBOE including at least 38 MMB: 70%
100 MMBOE including at least 47 MMB: 100%
</TABLE>
<PAGE> 81
- 4 -
Section 3.03. Subsequent recalculations of the Percentage Release shall
be made by IFC at the request of the Sponsors as of the Conversion Request Dates
providing that:
(a) the same conditions precedent listed under 3.02(a) shall
have been fulfilled as of the Conversion Request Date; and
(b) the Percentage Release shall be the percentage determined by
IFC to be the highest percentage resulting from applying the
table in Section 3.02 (b) above (but in no event less than the
Percentage Release in effect prior to such recalculation)
except that each of the two quantities of Proved Total Reserves
included in the first column of such table as of the Conversion
Request Date shall equal the product obtained by multiplying
the Proved Total Reserves figures shown in such table by the
fraction equal to the outstanding Loan balance divided by
$17,500,000.
Section 3.04. Subject to Sections 3.01, 3.02 and 3.03 above, if and
whenever: (i) the Borrower fails to pay when due any part of the Loan or to pay
any interest on the Loan and any such failure continues for a period of five (5)
days, or (ii) the Borrower fails to observe or perform any of its payment
obligations under this Agreement (other than for the payment of principal or
interest) and any such failure continues for a period of thirty (30) days after
IFC notifies the Borrower of that failure in writing, then (iii) the Sponsors
shall forthwith, upon demand by IFC, pay to IFC, in the currency prescribed in,
and pursuant to, the Loan Agreement, the monies in respect of which such default
shall have occurred.
Section 3.05. The Sponsors' Guarantee shall be a continuing guarantee
and shall remain in full force and effect until the date when all of the
principal of, and interest, commitment charge and prepayment premium on, the
Loan and any and all sums payable by the Borrower under the Loan Agreement other
than the Non-Guaranteed Portion, shall have been fully paid in accordance with
the provisions of the Loan Agreement. Accordingly, the obligations of the
Sponsors hereunder shall not be discharged except by performance and then only
to the extent of such performance. Such obligations shall not be subject to any
prior notice to, demand upon or action against the Borrower, or to any prior
notice to the Sponsors with regard to any default by the Borrower, and shall not
be affected or impaired by any of the following: any extension of time,
forbearance or concession given to the Borrower; any assertion of, or failure to
assert, or delay in asserting, any right, power or remedy against the Borrower,
or in respect of any security for the Loan; any modification or amplification of
the provisions of the Loan Agreement or of any other agreement between IFC and
the Borrower; any failure of the Borrower to comply with any requirement of any
law, regulation or order; the dissolution, liquidation, reorganization or any
other alteration of the legal structure of the Borrower; any purported or actual
assignment of the Loan by IFC to any other party; any invalidity or
unenforceability of the Loan Agreement or any of its provisions; or any other
circumstance (other than complete payment by the Borrower or the Sponsors) which
might
<PAGE> 82
- 5 -
otherwise constitute a legal or equitable discharge or defense of a surety
or a guarantor.
ARTICLE IV
CLAWBACK OBLIGATION
Section 4.01. In addition to, and without detriment to any of, their
obligations to IFC under the Sponsors' Guarantee, the Sponsors hereby jointly
and severally, irrevocably, absolutely and unconditionally undertake that for,
as long as any Non-Guaranteed Portion is outstanding, the Sponsors shall, within
the limits of the Clawback Obligation, make Clawback Payments in the following
order of priority:
(a) If the Borrower is in default for any reason on any payments due to
IFC under the Loan Agreement excluding default due to failure to meet Mandatory
Ratios or to maintain the Reserve Amount in the Retention Account, any and all
amounts required to cure the default shall be paid to IFC;
(b) If the Mandatory Non-Guaranteed Debt Service Coverage Ratio is less
than 1.25 during any Relevant Period, the amount necessary to restore the
Mandatory Non-Guaranteed Debt Service Coverage Ratio to at least 1.25 shall be
paid to IFC, in which case the Clawback Payment shall be applied by IFC to
reduce the outstanding principal amount of the Loan so that the Mandatory
Non-Guaranteed Debt Service Coverage Ratio will be reached;
(c) If the Mandatory Non-Guaranteed Life of Loan Ratio is less than 1.5,
the amount necessary to restore the Mandatory Non-Guaranteed Life of Loan Ratio
to at least 1.5 shall be paid to IFC, in which case the Clawback Payment shall
be applied by IFC to reduce the outstanding principal amount of the Loan in
inverse order of maturity so that the Mandatory Non-Guaranteed Life of Loan
Ratio is reached;
(d) If the balance of the Borrower's Retention Account is less than the
Reserve Amount, the amount necessary to reach the Reserve Amount shall be paid
to the Trustee for deposit in the Retention Account.
Section 4.02. (a) As soon as funds are needed by the Borrower for the
purpose of Section 4.01 hereinabove, the Borrower shall make a determination of
any such funds and give prompt notice thereof (a "Borrower's Clawback Notice")
to the Sponsors with a copy to IFC.
(b) In the event that IFC shall, at any time or from time, determine
that funds are needed by the Borrower for the purpose of Section 4.01 (b), (c)
and/or (d) hereinabove, then IFC may make a determination of any such funds
deficiency and give prompt notice thereof (an "IFC's Clawback Notice") in
respect thereof to the Sponsors with a copy to the Borrower. In the case of
Section 4.01 (a), in the event of failure of the Borrower to pay any amount
under
<PAGE> 83
- 6 -
the Loan Agreement as it becomes due and payable thereunder, then IFC may, based
on its own records, give an IFC's Clawback Notice in respect thereof to the
Sponsors. If there is no Borrower's Clawback Notice or if there is an
inconsistency between a Borrower's Clawback Notice and an IFC's Clawback Notice
with respect to a determination by IFC under this subsection (b), the IFC's
Clawback Notice shall prevail and be considered as final, subject only to
correction of clerical and arithmetical errors.
Section 4.03. Within fifteen (15) days after the Sponsors shall have
been given a Borrower's Clawback Notice or an IFC's Clawback Notice, as the case
may be, the Sponsors shall provide to the Borrower the necessary funds by way of
Advances. The Advances shall be on terms and conditions satisfactory to IFC, and
not inconsistent with the provisions of the Loan Agreement, including the
following:
(A) a rate of interest that shall not exceed the rate charged for
Dollar loans of like maturities in the Loan Agreement;
(B) no payment of interest or other charges on, or principal of,
any Advances shall be made at any time unless the Borrower is
current in all payment of interest and other charges due on,
and principal of, the IFC Loan and meets all required Mandatory
Ratios as provided under the Loan Agreement; and
(C) the Advances shall be unsecured.
Section 4.04. Any of the above notwithstanding, it is hereby agreed and
understood that: (i) Cumulative Clawback Payments shall under no circumstances
exceed the least of (A) Cumulative Excess Revenues or (B) Cumulative Restricted
Payments or (C) the amount of the Non-Guaranteed Portion of the Loans; and (ii)
if any payments are made by the Sponsors to any of the Borrower or IFC in
anticipation of a Clawback Payment, the Sponsors shall simultaneously specify
the extent and nature of the projected deficiency and/or breach of the
Borrower's covenants (if any) that would otherwise occur without the Clawback
Payment.
Section 4.05. The Clawback Obligation shall terminate on the Clawback
Termination Date.
ARTICLE V
SPONSORS' COVENANTS
Section 5.01. Each of the Sponsors shall:
(a) As soon as available but in any event within sixty (60) days after
the end of each of the first three Quarters in any Financial Year, deliver to
IFC two (2) copies of GNR's unaudited Consolidated Financial Statements for the
Quarter certified by the chief financial officer of that Sponsor.
<PAGE> 84
- 7 -
(b) As soon as available but, in any event, within one hundred and
twenty (120) days after the end of each Financial Year of that Sponsor, furnish
to IFC: (i) two (2) copies of GNRCN's complete financial statements in form
satisfactory to IFC, and two (2) copies of GNR's annual audited Consolidated
Financial Statements for such Financial Year (which are in agreement with its
books of account and prepared in accordance with the Accounting Principles
consistently applied), together with the Sponsors' Auditors audit report
thereon; and authorize the Sponsors' Auditors (whose fees and expenses shall be
for account of the Sponsors) to communicate directly with IFC at any time
regarding the relevant Sponsor's accounts and operations; and (ii) the relevant
Sponsor's calculation of the Clawback Obligation.
(c) Account and cause its Consolidated Subsidiaries to account for any
and all claims against the Borrower originating in Advances as subordinated
debt.
(d) Pay and cause its Consolidated Subsidiaries to deposit in the
Offshore Account any amounts received by that Sponsor or any of its Consolidated
Subsidiaries from the Borrower on account of any Restricted Payments and/or
Advances, except as permitted under the Loan Agreements.
Section 5.02. In addition to its preceding obligations under Section
5.01, GNR hereby undertakes and covenants that throughout the life of the IFC
Loan it shall maintain a Consolidated Debt to Equity Ratio not to exceed 60:40.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Each of the Sponsors hereby represents, warrants and covenants to IFC:
(i) that it has the corporate power to, and all necessary action has been taken
to authorize it to, execute and deliver this Agreement and to perform fully and
completely all its obligations and liabilities as described under Articles II,
III and IV, and to covenant as provided under Article V hereof; (ii) that its
execution, delivery and performance of this Agreement will not violate any
provision of any existing law or regulation or order or decree of any court,
governmental authority, bureau or agency or of its relevant Statutes (or similar
charter document) or of any contract, undertaking or agreement to which it is a
party or which purports to be binding upon it or any of its property or assets
and will not result in the imposition or creation of any lien, charge or
encumbrance on, or security interest in, any part thereof pursuant to the
provisions of any such contract, undertaking or agreement; and (iii) that any
and all of its obligations under this Agreement constitute valid obligations of
the relevant Sponsor, legally binding upon it and enforceable in accordance with
their terms.
<PAGE> 85
- 8 -
ARTICLE VII
MISCELLANEOUS
Section 7.01. (a) If the Sponsors shall at any time make payment to IFC
of an amount less than the full amount then due and payable to IFC under this
Agreement, IFC shall have the right to allocate and apply such payment in any
way or manner and for such purpose or purposes as IFC in its sole discretion
shall determine, notwithstanding any instruction that the Sponsors may give to
the contrary.
(b) If any monies shall have become payable or shall have been paid by
the Sponsors under this Agreement, the Sponsors shall not, in respect of such
monies, seek to enforce repayment or to exercise any other rights or legal
remedies of any kind which may accrue to the Sponsors against the Borrower,
whether by way of subrogation or otherwise, in respect of the amount so payable
or so paid or in respect of any other monies for the time being due to the
Sponsors from the Borrower so long as any monies then overdue remain unpaid
under the Loan Agreement and if, in IFC's reasonable opinion, such enforcement
or exercise will adversely affect the ability of the Borrower to fully pay any
monies still owing under the Loan Agreement, and, in the event of the
liquidation or winding up of the Borrower, the Sponsors will not prove in
competition with IFC in respect of any monies owing to the Sponsors by the
Borrower on any account whatsoever, but shall give IFC the benefit of any such
proof and of all monies to be received in respect thereof until all monies now
or hereafter owing under the Loan Agreement shall have been fully paid.
Section 7.02. A certificate by an officer of IFC as to the amounts of
principal of, and interest, commitment charge, and pre-payment premium on, the
Loan, or any other amount due and payable at any time by the Borrower under the
Loan Agreement, or by the Sponsors under this Agreement, shall be binding upon
the Sponsors and shall be conclusive evidence in any legal proceedings with
respect to this Agreement, unless satisfactorily shown by the Sponsors that such
certificate involves manifest error. Each of the Sponsors hereby waives all
requirements as to diligence, presentment, demand of payment, protest or notice
of any kind with respect to the Loan Agreement and this Agreement.
Section 7.03. The Sponsors shall, upon notice from IFC, pay all taxes
(including stamp taxes,) duties, fees or other charges payable on or in
connection with the execution, issue, delivery, registration or notarization of
this Share Retention, Guarantee and Clawback Agreement and shall reimburse IFC
or its assigns for any such taxes, duties, fees or other charges paid by IFC or
its assigns thereon.
<PAGE> 86
- 9 -
ARTICLE VIII
ASSIGNMENT
This Agreement shall bind and inure to the benefit of the respective
successors of the parties hereto; provided, however, that the obligations of any
of the Sponsors hereunder may not be assigned or transferred without the consent
in writing of IFC, provided further that IFC's consent for the assignment or
transfer of the obligations of the Sponsors shall be subject inter alia to: (a)
the relevant Sponsor having demonstrated to the satisfaction of IFC at its sole
discretion that the prospective assignee has the necessary technical and/or
financial capability to perform any and all of the obligations of such Sponsor
under this Agreement, the Financing Agreements and the Project Documents; and
(b) the prospective assignee having executed an agreement with IFC undertaking
to perform any and all obligations of the relevant Sponsor under this Agreement,
the Financing Agreements and the Project Documents, all in form and substance
satisfactory to IFC.
ARTICLE IX
NOTICES, APPLICABLE LAW, JURISDICTION
Section 9.01. Any notice or request required or permitted to be given or
made hereunder shall be in writing. Such notice or request shall be deemed to
have been duly given or made when it shall be delivered by hand, facsimile or
telex to the party to which it is required or permitted to be given or made as
such party's address specified below or at such other address as such party
shall have designated by notice to the party giving such notice or making such
request. Any communication to be delivered to any party under this Agreement
which is sent by facsimile or telex will constitute legal written evidence
thereof between the parties.
For the Sponsors:
Global Natural Resources Inc.
Attn: Sr. Vice-President Finance
5300 Memorial Drive
Suite 800
Houston, Texas 77007-8295
Facsimile: 713-951-9395
Global Natural Resources Corporation of Nevada
c/o Global Natural Resources Inc.
Attn: Sr. Vice-President Finance
5300 Memorial Drive
Suite 800
<PAGE> 87
- 10 -
Houston, Texas 77007-8295
Facsimile: 713-951-9395
<PAGE> 88
- 11 -
For the Borrower:
GNR (Cote d'Ivoire) Ltd.
c/o Global Natural Resources Inc.
Attention: Sr. Vice-President Finance
5300 Memorial Drive
Suite 800
Houston, Texas 77007-8295
Facsimile: 713-951-9395
For IFC:
International Finance Corporation
Attn: Director, Oil, Gas and Mining Department
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
Alternative address for communication by facsimile:
(202) 334-0230
(202) 676-9648
Section 9.02. (a) This Agreement is governed by, and shall be construed
in accordance with, the laws of the State of New York, United States of America.
(b) Each of the Sponsors irrevocably agrees that any legal action, suit
or proceeding arising out of or relating to this Agreement or any other to which
the relevant Sponsor is a party may be brought by IFC in the courts of the State
of New York or of the United States of America located in the Southern District
of New York. Final judgment against the relevant Sponsor in any such action,
suit or proceeding shall be conclusive and may be enforced in any other
jurisdiction, including New Jersey, Nevada or Texas, by suit on the judgment, a
certified or exemplified copy of which shall be conclusive evidence of the
judgment, or in any other manner provided by law.
(c) By the execution and delivery of this Agreement, the relevant
Sponsor irrevocably submits to the non-exclusive jurisdiction of any such court
in any such action, suit or proceeding and designates, appoints and empowers
C.T. Corporation System, 1633 Broadway, New York, New York, as its authorized
agent to receive for and on its behalf service of any summons, complaint or
other legal process in any such action, suit or proceeding in the State of New
York.
(d) Nothing in this Agreement shall affect the right of IFC to commence
legal proceedings or otherwise sue the relevant Sponsor in Texas, or any other
appropriate jurisdiction or to serve process,
<PAGE> 89
- 12 -
pleadings and other legal papers upon the relevant Sponsor in any manner
authorized by the laws of any such jurisdiction.
(e) As long as this Agreement remains in force, the relevant Sponsor
shall maintain a duly appointed agent for the service of summons, complaint and
other legal process in New York, New York, United States of America, for
purposes of any legal action, suit or proceeding IFC may bring in respect of
this Agreement or any other to which the relevant Sponsor is a party. Each of
the Sponsors shall keep IFC advised of the identity and location of such agent.
(f) Each of the Sponsors also irrevocably consents, if for any reason
the relevant Sponsor's authorized agent for service of process of summons,
complaint and other legal process in any such action, suit or proceeding is not
present in New York, New York, to service of such papers being made out of those
courts by mailing copies of the papers by registered United States air mail,
postage prepaid, to the relevant Sponsor at its address specified in Section
9.01. In such a case, IFC shall also send by telex or facsimile, or have sent by
telex or facsimile, a copy of the papers to the relevant Sponsor.
(g) Service in the manner provided in subsection (f) above in any such
action, suit or proceeding will be deemed personal service, will be accepted by
the relevant Sponsor as such and will be valid and binding upon the relevant
Sponsor for all purposes of any such action, suit or proceeding.
(h) Each of the Sponsors irrevocably waives to the fullest extent
permitted by applicable law:
(i) any objection which it may have now or in the future to
the laying of the venue of any such action, suit or
proceedings in any court referred to in this Section;
(ii) any claim that any such action, suit or proceeding
has been brought in an inconvenient forum;
(iii) its right of removal of any matter commenced by IFC in
the courts of the State of New York to any court of the
United States of America; and
(iv) any and all rights to demand a trial by jury in any
such action, suit or proceeding brought against the
relevant Sponsor by IFC.
(i) To the extent that the relevant Sponsor may be entitled in any
jurisdiction to claim for itself or its assets immunity in respect of its
obligations under this Agreement or any other to which the relevant Sponsor is a
party from any suit, execution, attachment (whether provisional or final, in aid
of execution, before judgment or otherwise) or other legal process or to the
extent that in any jurisdiction such immunity (whether or not claimed) may be
attributed to it or its assets, the relevant Sponsor
<PAGE> 90
- 13 -
irrevocably agrees not to claim and irrevocably waives such immunity to the
fullest extent permitted by the laws of such jurisdiction.
(j) Each of the Sponsors hereby acknowledges that IFC shall be entitled
under applicable law, including the provisions of the International
Organizations Immunities Act, to immunity from a trial by jury in any action,
suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby or any other agreement to which the relevant
Sponsor is a party, brought against IFC in any court of the United States of
America. Each of the Sponsors hereby waives any and all rights to demand a trial
by jury in any action, suit or proceeding arising out of or relating to this
Agreement or any other agreement to which the relevant Sponsor is a party or the
transactions contemplated by this Agreement or such agreement, brought against
IFC in any forum in which IFC is not entitled to immunity from a trial by jury.
(k) To the extent that the relevant Sponsor may, in any suit, action or
proceeding brought in any of the courts referred to in paragraph (b) above or a
court of Texas or elsewhere arising out of or in connection with this Agreement
or any other to which the relevant Sponsor is a party, be entitled to the
benefit of any provision of law requiring IFC in such suit, action or proceeding
to post security for the costs of the relevant Sponsor (cautio judicatum solvi),
or to post a bond or to take similar action, the relevant Sponsor hereby
irrevocably waives such benefit, in each case to the fullest extent now or in
the future permitted under the laws of Texas, or, as the case may be, the
jurisdiction in which such court is located.
<PAGE> 91
- 14 -
IN WITNESS WHEREOF, the parties hereto, acting through their duly
authorized representatives, have caused this Agreement to be signed in their
respective names as of the day and year first above written.
GLOBAL NATURAL RESOURCES INC.
By /s/ Mr. Eric Lynn Hill
Authorized Representative
GLOBAL NATURAL RESOURCES CORPORATION
OF NEVADA
By /s/ Mr. Eric Lynn Hill
Authorized Representative
GNR (COTE D'IVOIRE) LTD.
By /s/ Mr. Eric Lynn Hill
Authorized Representative
INTERNATIONAL FINANCE CORPORATION
By /s/ Mr. M.A.K. Alizai
Authorized Representative
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