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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 18, 1999
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KCS ENERGY, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-11698 22-2889587
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(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File No.) Identification No.)
5555 San Felipe Road, Houston, TX 77056
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 877-8006
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Former address - 379 Thornall Street, Edison, NJ 08837
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(Former name or former address, if changed since last report)
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Item 5. Other Events
On May 18, 1999, KCS Energy, Inc. (the "Company") announced that it had
entered into forbearance agreements with respect to each of its revolving bank
credit facilities. The forbearance agreements provide that the lenders will
defer redetermination of the Company's borrowing base until July 1, 1999 and
will refrain from exercising their rights and remedies as a result of existing
defaults until June 30, 1999. The forbearance agreements further provide that
the Company will commit 50% of its monthly cash flow to payments of principal
under the credit facilities, with a minimum of $2 million monthly. In addition,
a portion of the proceeds from the sale of any of the Company's oil and gas
properties will be dedicated to payment of principal.
A copy of the press release, dated May 18, 1999, issued by the Company
announcing the execution of the forbearance agreements is attached hereto.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
Exhibit 10.1. Forbearance Agreement dated May 14, 1999 by and among KCS
Energy, Inc. and certain affiliated entities, Canadian Imperial Bank of
Commerce, as Agent, CIBC Inc., as Collateral Agent and the lenders
party thereto from time to time.
Exhibit 10.2 Forbearance Agreement dated May 14, 1999 by and among KCS
Energy, Inc. and certain affiliated entities, Canadian Imperial Bank of
Commerce, as Agent, CIBC Inc., as Collateral Agent, Bank One, Texas,
National Association, as Co-Agent, Nationsbank of Texas, National
Association, as Co-Agent and the lenders party thereto from time to
time.
Exhibit 99.1
Press release dated May 18, 1999 announcing the execution of the
forbearance agreements by and among KCS Energy, Inc. and certain
affiliated entities and the lenders under their bank credit facilities.
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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 hereunto duly authorized.
KCS Energy, Inc.
May 18, 1999 /s/ Frederick Dwyer
---------------------------------
Frederick Dwyer
Vice President, Controller
and Secretary
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
Exhibit 10.1. Forbearance Agreement dated May 14, 1999 by and among KCS
Energy, Inc. and certain affiliated entities, Canadian
Imperial Bank of Commerce, as Agent, CIBC Inc., as
Collateral Agent and the lenders party thereto from time
to time.
Exhibit 10.2 Forbearance Agreement dated May 14, 1999 by and among KCS
Energy, Inc. and certain affiliated entities, Canadian
Imperial Bank of Commerce, as Agent, CIBC Inc., as
Collateral Agent, Bank One, Texas, National Association,
as Co-Agent, Nationsbank of Texas, National Association,
as Co-Agent and the lenders party thereto from time to
time.
Exhibit 99.1 Press release dated May 18, 1999 announcing the execution
of the forbearance agreements by and among KCS Energy,
Inc. and certain affiliated entities and the lenders
under their bank credit facilities.
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EXHIBIT 10.1
FORBEARANCE AGREEMENT
THIS FORBEARANCE AGREEMENT (this "Agreement") is made and entered into
on May ___, 1999 and effective as of April 1, 1999 (the "Effective Date") by and
among KCS MEDALLION RESOURCES, INC., a Delaware corporation ("KCS Medallion"),
KCS ENERGY, INC., a Delaware corporation ("KCS"), KCS ENERGY SERVICES, INC., a
Delaware corporation ("KCS Energy Services"), and MEDALLION GAS SERVICES, INC.,
an Oklahoma corporation ("Medallion Gas Services," together with KCS Medallion,
KCS, and KCS Energy Services, each individually a "Borrower" and, collectively,
the "Borrowers"), each lender that is a signatory hereto or becomes a party
hereto as provided in Sections 9.1 or 2.24 of the Credit Agreement (hereafter
defined) (individually, together with its successors and assigns, a "Lender"
and, collectively, together with their respective successors and such assigns,
the "Lenders"), CANADIAN IMPERIAL BANK OF COMMERCE, a Canadian chartered bank,
acting through its New York agency (in its individual capacity, "CIBC"), as
agent for the Lenders (in such capacity, together with its successors in such
capacity pursuant to the terms hereof, the "Agent"), and CIBC Inc., a Delaware
corporation as collateral agent for the Lenders (in such capacity pursuant to
the terms hereof, the "Collateral Agent").
W I T N E S S E T H:
WHEREAS, on December 22, 1998, the Borrowers, the Lenders, and the
Agent entered into a First Amended and Restated Credit Agreement (the "Credit
Agreement") whereby, upon the terms and conditions therein stated, the Lenders
agreed to make loans to the Borrowers up to the aggregate amount of
$160,000,000.00 to be used by the Borrowers for the purposes set forth in
Section 2.6 of the Credit Agreement; and
WHEREAS, the Annual Report of KCS on Form 10-K filed with the SEC on
March 31, 1999 (the "10-K Report") revealed the existence of certain events and
conditions (the "MAC Events") which are in violation of the terms and provisions
of the Credit Agreement and/or which constitute a Material Adverse Effect; and
WHEREAS, the Agent has advised the Borrowers in a letter dated April 7,
1999 (the "Default Letter") that the existence of such MAC Events constitutes a
Default which if uncured will, upon the giving of notice or passage of time, or
both, become an Event of Default pursuant to which the Agent, the Collateral
Agent and the Lenders will have the right to exercise the rights and remedies
available to them under such circumstances, all as set forth in the Credit
Agreement; and
WHEREAS, the Borrowers have requested that the Lenders forbear from
exercising such rights and remedies in consideration of the Borrowers'
compliance with the terms and provisions of this Agreement; and
WHEREAS, subject to (i) compliance by the Borrowers with the terms and
provisions of this Agreement, and (ii) the other terms and provisions of this
Agreement, the Lenders have agreed to
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forbear from exercising their rights and remedies as provided in the Credit
Agreement during the Forbearance Period.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE 1
GENERAL TERMS
Section 1.1 Terms Defined in Agreement. As used in this Agreement,
except as may otherwise be provided in this Agreement, all capitalized terms
which are defined in the Credit Agreement shall have the same meaning herein as
therein, all of such terms and definitions being incorporated herein by
reference.
Section 1.2 Forbearance Period. Subject to (i) compliance by the
Borrowers with the terms and provisions of this Agreement, and (ii) the other
terms and provisions of this Agreement, the Lenders hereby agree to forbear form
exercising their rights and remedies provided in the Credit Agreement which are
available to them upon the occurrence and continuance of the Defaults described
in the Default Letter. This Agreement shall commence as of the Effective Date
and end on the first to occur of (i) any event or condition pursuant to which
the Forbearance Period automatically terminates, including without limitation
the provisions of Section 8.1 of this Agreement, or (ii) June 30, 1999 (the
"Forbearance Termination Date"). The term "Forbearance Period" means the period
of time commencing on the Effective Date and ending at 11:59 p.m. on the
Forbearance Termination Date. Except as expressly herein provided, upon
termination of the Forbearance Period (regardless of how such termination
occurs), this Agreement shall have no further force and effect whatsoever
(unless extended in writing by the Borrowers, the Lenders and the Agent) and
thereafter the terms and provisions of the Credit Agreement and the other Loan
Documents shall be effective as expressly therein provided without further
reference to the terms and provisions of this Agreement.
ARTICLE 2
DEFINITIONS
Section 2.1 Definitions. The following terms shall have the meaning as
follows:
"Applicable Margin" shall mean as to each Tranche A Base Rate
Loan and each Tranche A LIBO Rate Loan, an amount equal to the percentage set
forth in the grid below for such type of Loan:
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<TABLE>
<CAPTION>
------------------------------------------------------
Applicable Margin
(Tranche A)
------------------------------------------------------
Type of Loans Base Rate LIBO Rate
------------- --------- ---------
<S> <C> <C>
Conforming Loans 1.5% 2.5%
Non-Conforming
Loans 2.0% 3.0%
-------------------------------------------------------
</TABLE>
"Conforming Loans" shall mean all Tranche A Loans outstanding
as of the Effective Date, the aggregate amount of which is not in
excess of $60,000,000 minus the aggregate amount of all payments
applied to the principal of such Loans from the Effective Date through
the Forbearance Termination Date.
"Interest Period" shall mean, subject to the limitations set
forth in Section 2.4 of the Credit Agreement, with respect to any LIBO
Rate Loan, a period commencing on the date such Loan is made or
converted from a Loan of another type pursuant to the Credit Agreement
or the last day of the next preceding Interest Period with respect to
such Loan and ending on or before the Forbearance Termination Date, as
the Borrowers may request in the Tranche A Borrowing Request or the
Tranche B Borrowing Request for such Loan.
"Non-Conforming Loans" means all Tranche A Loans outstanding
as of the Effective Date, the aggregate amount of which is in excess of
Conforming Loans minus the aggregate amount of all payments applied to
the principal of such Loans from the Effective Date through the
Forbearance Termination Date.
ARTICLE 3
TERMS AND FACILITIES
Section 3.1 Loans and Suspension of Commitments. Except with respect to
reborrowings of LIBO Rate Loans which occur at the end of an Interest Period,
and conversions of LIBO Rate Loans into Base Rate Loans or Base Rate Loans into
LIBO Rate Loans, during the Forbearance Period, the Commitments shall be
suspended and the Lenders shall not be obligated or have any commitment
whatsoever to make Loans. The Borrowers may not reborrow any portion of any Loan
after all or such portion of any such Loan shall have been repaid.
Section 3.2 Letters of Credit. Except for Letters of Credit which are
outstanding as of the Effective Date, the Agent shall not be obligated to issue,
on behalf of the Lenders, or otherwise, any Letters of Credit. The Agent shall
not be obligated to renew or extend on behalf of the Lenders, or otherwise, any
Letters of Credit which are outstanding as of the Effective Date. Nothing herein
shall modify, limit or reduce the obligations of the Lenders as provided in the
Agreement with respect to
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Letters of Credit which are outstanding as of the Effective Date provided such
Letters of Credit are not renewed or extended by the Agent after the Effective
Date.
Section 3.3 Repayment of Loans and Interest. (a) Accrued and unpaid
interest on each outstanding Base Rate Loan shall be due and payable on the date
of execution of this Agreement, May 31, 1999, and June 30, 1999, the payment in
each instance to be the amount of interest which has accrued and remains unpaid
in respect of the relevant Loan. Accrued and unpaid interest on each outstanding
LIBO Rate Loan shall be due and payable on the last day of the Interest Period
for such LIBO Rate Loan and, in the case of any Interest Period for LIBO Rate
Loans outstanding as of the Effective Date which are in excess of one month, on
the last day of each calendar month following the commencement of such Interest
Period, the payment in each instance to be the amount of interest which has
accrued and remains unpaid in respect of the relevant Loan.
(b) The outstanding principal balance of all Tranche A Loans
shall be payable as follows: on the date of execution of this Agreement a
principal installment on the Tranche A Loans shall be due and payable in the
amount of $1,000,000. On May 31, 1999, a principal installment on the Tranche A
Loans shall be due and payable in the amount of the sum of (i) $1,000,000, plus
(ii) twenty-five percent (25%) of all Operating Cash Flow (if a positive number)
during the period commencing April 1, 1999 and ending April 30, 1999 (less the
$1,000,000 paid pursuant to the immediately preceding sentence). On June 30,
1999, a principal installment on the Tranche A Loans shall be due and payable in
the amount of the sum of (i) $1,000,000, plus (ii) twenty-five percent (25%) of
all Operating Cash Flow (if a positive number) during the period commencing May
1, 1999 and ending May 31, 1999 (less the $1,000,000 paid pursuant to the
immediately preceding sentence). The term "Operating Cash Flow" as used herein
means the net cash (exclusive of capital expenditures) provided by operating
activities as set forth on the statements of consolidated cash flow for KCS and
its Subsidiaries calculated in accordance with GAAP. The outstanding principal
balance of all Loans together with all accrued and unpaid interest thereon shall
be due and payable at Final Maturity. The Agent shall apply such payments first
to the Non-Conforming Loans until such NonConforming Loans are paid in full and
next to the Conforming Loans.
Section 3.4 Borrowing Base. (a) The Borrowing Base and the Tranche B
Borrowing Base in effect prior to the Effective Date shall remain in effect
throughout the Forbearance Period. The next Borrowing Base redetermination and
Tranche B Borrowing Base redetermination shall not occur until the next Business
Day (the "Redetermination Date") which is on or after the Forbearance
Termination Date and notwithstanding the provisions of Section 2.12 of the
Agreement, the Borrowing Base determined on the Redetermination Date shall be
the amount agreed to by the Agent and all the Tranche A Lenders, and the Tranche
B Borrowing Base determined on the Redetermination Date shall be an amount
agreed to by the Agent and the Tranche B Lenders.
(b) The Borrowing Base and the Tranche B Borrowing Base shall
be reduced in the amount of the Specified Value of each of the Oil and Gas
Properties of any of the Borrowers sold in accordance with Section 3.6 hereof.
Section 3.5 Mandatory Prepayments. (a) On the Redetermination Date,
if the Tranche A Obligations exceed the Borrowing Base then in effect, (i) the
Borrowers shall, within five (5) days
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of notice from the Agent of such occurrence, prepay the amount of such excess
for application first, to the Non-Conforming Loans portion of the Tranche A Loan
Balance, and next to the Conforming Loans portion of the Tranche A Loan Balance;
(ii) in the event that the Tranche A Loan Balance is less than the amount
required to be prepaid, the Borrowers shall immediately prepay the entire
Tranche A Loan Balance together with accrued interest, and (iii) in accordance
with the provisions of the relevant Letter of Credit Applications executed by
the Borrowers or otherwise to the satisfaction of the Agent, the Borrowers shall
immediately deposit with the Agent, as additional collateral securing the
Obligations, an amount of cash, in immediately available funds, equal to the L/C
Exposure minus the Borrowing Base and such cash may be invested at the express
direction of the Borrowers as to investment vehicle and maturity (which shall be
no later than the latest expiry date of any then outstanding Letter of Credit),
for the account of the Borrowers in cash or cash equivalent investments offered
by or through the Agent.
(b) On the Redetermination Date, if the Tranche B Obligations
exceed the difference between the Tranche B Borrowing Base then in effect minus
the Borrowing Base then in effect, (i) the Borrowers shall, within five (5) days
of notice from the Agent of such occurrence, prepay the amount of such excess
for application on the Tranche B Loan Balance and (ii) in the event that the
Tranche B Loan Balance is less than the amount required to be prepaid, the
Borrowers shall prepay the entire Tranche B Loan Balance together with accrued
interest.
Section 3.6 Sales of Oil and Gas Properties. At any time during the
Forbearance Period that (i) any of the Oil and Gas Properties which are
described in Exhibit "A" hereto, or any other Oil and Gas Properties which are
added to Exhibit "A" pursuant to the agreement of the Agent, the Required
Lenders and KCS with respect to a Specified Value (collectively, the "Scheduled
Properties"), or (ii) any other Oil and Gas Properties owned by any of the
Borrowers (the "Unscheduled Properties") are sold other than Oil and Gas
Properties described in Section 7.1(iii) of this Agreement, the Borrowers shall,
substantially concurrent with the sale thereof, prepay the Conforming Loans in
an amount equal to the value attributable to the Scheduled Properties as
specified in Exhibit "A" as amended from time to time or with respect to the
Unscheduled Properties, the value specified by the Agent with the consent of the
Required Lenders (collectively, the "Specified Value") until such Conforming
Loans are paid in full and next to the Non-Conforming Loans. In addition, upon
the sale of any such Oil and Gas Properties (whether Scheduled Properties or
Unscheduled Properties), if the Net Cash Proceeds are greater than the Specified
Value, the Borrowers shall prepay the Non-Conforming Loans in an amount equal to
twenty percent (20%) of the portion of the Net Cash Proceeds in excess of the
Specified Value until such Non-Conforming Loans are paid in full and next to the
Conforming Loans. The Agent shall have the necessary authority to release Liens
on the Scheduled Properties and the Unscheduled Properties so long as the Net
Cash Proceeds equal or exceed the Specified Value.
Section 3.7 Fees. The Borrowers shall pay to the Agent on the date of
execution of this Agreement a forbearance documentation fee (the "Forbearance
Documentation Fee") in the amount of $30,000.
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ARTICLE 4
CONDITIONS
Section 4.1 Conditions Precedent to Initial Effectiveness of Agreement.
The Lenders shall have no obligation to forbear from exercising their rights and
remedies under and pursuant to the Credit Agreement unless and until:
(a) the Agent shall have received the Forbearance
Documentation Fee;
(b) the Agent shall have received the following documents and
other items, appropriately executed when necessary and, where applicable,
acknowledged by one or more authorized officers of the Borrowers and dated,
where applicable, of even date herewith or a date prior thereto:
(i) multiple counterparts of this Agreement as
requested by the Agent;
(ii) [INTENTIONALLY LEFT BLANK]
(iii) certificates of incumbency and copies of
corporate resolutions in the form attached hereto as Exhibit
"B" approving and authorizing the transactions contemplated
herein duly adopted by the boards of directors of each
Borrower accompanied by certificates of the secretary or an
assistant secretary of each Borrower, as the case may be, to
the effect that such copies are true and correct copies of
resolutions duly adopted at a meeting or by unanimous consent
of the board of directors of each Borrower, as the case may
be, and that such resolutions constitute all the resolutions
adopted with respect to such transactions, have not been
amended, modified, or revoked in any respect, and are in full
force and effect as of the date of such certificate; and
(iv) the opinion of counsel to the Borrowers in the
form attached hereto as Exhibit "C".
(c) The Agent shall have received, for the benefit of the
Tranche A Lenders, accrued interest through April 30, 1999 and the payment of
principal required to be paid on the date of execution of this Agreement by the
Borrowers as provided in Section 3.3(a) and 3.3(b) of this Agreement.
Section 4.2 Additional Conditions Precedent to Initial Effectiveness of
Agreement. The obligations of the Agent, the Collateral Agent, and the Lenders
to forbear from exercising their rights and remedies under and pursuant to the
Credit Agreement are subject to the satisfaction of the following additional
conditions precedent that, as of the date of execution of this Agreement:
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(a) no Default shall exist except for the Defaults referred to
in the Default Letter and the defaults existing in connection with the Affiliate
Credit Agreement and no Event of Default shall have occurred and be continuing;
(b) no Material Adverse Effect shall have occurred and be
continuing except for the MAC Events disclosed in the 10-K Report;
(c) each of the representations and warranties contained in
the Credit Agreement and the other Loan Documents shall be true and correct,
except for (i) such representations and warranties which were contained in the
Credit Agreement and the other Loan Documents which are modified and/or
supplemented as provided in Sections 5.2 and 5.3 of this Agreement or (ii) those
which are expressly stated to be made as of a particular date;
(d) the Security Instruments shall be in full force and effect
and provide to the Lenders the security intended thereby;
(e) the consummation of the transactions contemplated hereby
shall not contravene, violate, or conflict with any Requirement of Law; and
(f) legal counsel for the Agent shall have received payment
(to the extent invoiced) from the Borrowers for all reasonable fees and expenses
which the Borrowers are required to pay.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represent and warrant to the Agent and each Lender
that:
Section 5.1 Representations Repeated. The representations and
warranties of the Borrowers contained in the Credit Agreement and the other Loan
Documents and otherwise made in writing by or on behalf of the Borrowers
pursuant to the Credit Agreement and the other Loan Documents were true and
correct when made, and are true and correct in all material respects at and as
of the Effective Date except for such representations and warranties (i) which
were contained in the Credit Agreement and the other Loan Documents which are
modified or supplemented as provided in Section 5.2 and 5.3 of this Agreement,
and (ii) which are expressly stated to be made as of a particular date which
shall remain true and correct as of the date made.
Section 5.2 Scope and Accuracy of Financial Statements. The Financial
Statements of KCS and its Subsidiaries as at December 31, 1998 present fairly
the financial position and results of operations and cash flows of KCS and its
Subsidiaries in accordance with GAAP as at the relevant point in time or for the
period indicated. No event or circumstance has occurred since December 31, 1998
except for the MAC Events disclosed in the 10-K Report which could reasonably be
expected to have a Material Adverse Effect on KCS or KCS Medallion.
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Section 5.3 Default. None of the Borrowers is in default of, and no
event has occurred which, with the lapse of time or giving of notice, or both,
could result in such a default of, (i) any charter document or bylaws of any
Borrower, or (ii) any agreement, obligation or Debt to which any Borrower is a
party or by which any Property of any Borrower may be bound, pursuant to which
the obligations of the Borrowers in the aggregate under any such agreement,
obligation or Debt, or the obligations secured thereby, exceed $2,500,000,
except such as are being contested in good faith and as to which such reserve as
may be required by GAAP shall have been made therefore, and except for the
Defaults referred to and described in the Default Letter and the defaults
existing in connection with the Affiliate Credit Agreement, which Defaults the
Borrowers hereby acknowledge to be existing as of the Effective Date.
Section 5.4 Defenses. As of the Effective Date, the outstanding
principal amount of the Conforming Loans is $60,000,000 and the outstanding
principal amount of the Non-Conforming Loans is $20,000,000 and neither KCS nor
any Borrower has any defenses, offsets or counterclaims which would limit,
reduce or impair in any manner the obligations and indebtedness of KCS or any
Borrower to pay the full amount of the Obligations when due. .
ARTICLE 6
AFFIRMATIVE COVENANTS
Section 6.1 Monthly Reconciliation Reports. During the Forbearance
Period the Borrowers shall deliver to the Agent, on or before the last day of
each calendar month, commencing May 31, 1999, Sufficient Copies of a
Reconciliation Report as at the close of the immediately preceding calendar
month, such Reconciliation Report to be certified by a Responsible Officer of
KCS as true and correct subject to changes resulting from normal year-end audit
adjustments. The term "Reconciliation Report" means a report prepared by a
Responsible Officer of KCS as at the point in time and for the period indicated
and consisting of reports of KCS and its Subsidiaries on a consolidated basis
with respect to (i) sources and uses of Operating Cash Flow for such period,
(ii) Net Cash Proceeds from sales of Oil and Gas Properties for such period, and
(iii) such other financial information as the Agent or any Lender reasonably
requests.
Section 6.2 Fees and Expenses. In addition to the covenants in the
Credit Agreement, during the Forbearance Period, the Borrowers shall:
(a) promptly pay to or reimburse the Agent or the Collateral
Agent, as applicable, for all reasonable third-party fees, out-of-pocket costs
and expenses of the Agent and the Collateral Agent in connection with the
preparation, negotiation, execution, delivery and enforcement of this Agreement,
the Credit Agreement, and the other Loan Documents, and any and all amendments,
restatements and supplements thereof and thereto, the filing and recordation of
the Security Instruments, and the consummation of the transactions contemplated
by the Loan Documents, including reasonable fees and expenses of legal counsel
and auditors and accountants for the Agent and the Collateral Agent.
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(b) upon request by the Agent promptly pay for all amounts
reasonably expended, advanced, or incurred by or on behalf of the Agent and the
Collateral Agent (i) to satisfy any obligation of the Borrowers under any of the
Loan Documents; (ii) to collect the Obligations; (iii) to enforce the rights of
the Agent, the Collateral Agent, and the Lenders under any of the Loan
Documents; and, (iv) to protect the Properties or business of the Borrowers,
including the Collateral, which amounts shall be deemed compensatory in nature
and liquidated as to amount upon notice to the Borrowers by the Agent and which
amounts shall include all court costs and reasonable fees and expenses of legal
counsel, auditors and accountants, petroleum engineers, and environmental and
insurance consultants.
ARTICLE 7
NEGATIVE COVENANTS
Section 7.1 Sales of Assets. Notwithstanding the provisions of Section
6.5 of the Credit Agreement, KCS and the Borrowers shall not, and shall not
permit any of their respective Subsidiaries to sell, transfer, or otherwise
dispose of any Oil and Gas Properties, in one or any series of transactions,
whether now owned or hereafter acquired, or enter into any agreement to do so
unless the proceeds of such sales (i) are of the type described in clauses (a)
and (b) of the first sentence of Section 6.5 of the Credit Agreement and are
included in Operating Cash Flow, or (ii) are made subject to and in accordance
with the provisions of Section 3.6 of this Agreement concerning prepayments upon
the sale of certain Oil and Gas Properties, or (iii) have an aggregate value for
all such sales of less than $250,000 (excluding sales of Oil and Gas Properties,
the proceeds of which are applied to the Loans in accordance with other
provisions of this Agreement).
Section 7.2 Restricted Payments. During the Forbearance Period (i) the
Borrowers shall not make any payment of principal or interest on the Public Debt
other than scheduled payments of interest and principal and (ii) KCS shall not
pay or make any dividend or distribution or purchase, redeem or otherwise
acquire for value, any share of any class of its capital stock.
ARTICLE 8
TERMINATION
Section 8.1 Termination of Agreement. (a) Upon the occurrence of an
Event of Default specified in Sections 7.1(e) or 7.1(f) of the Credit Agreement,
immediately and without notice, (i) the Forbearance Period shall automatically
terminate and all Obligations shall automatically become immediately due and
payable, without presentment, demand, protest, notice of protest, default, or
dishonor, notice of intent to accelerate maturity, notice of acceleration of
maturity, or other notice of any kind, all of which are hereby expressly waived
by each Borrower.
(b) The Forbearance Period shall automatically terminate upon
the occurrence of (i) any Event of Default other than (A) those specified in
Sections 7.1(e) or 7.1(f) of the Credit Agreement, and (B) those occurring as a
result of the giving of notice or the passage of time in connection with the
Defaults described in the Default Letter, or (ii) the termination of any
forbearance
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by Lenders arising under or in connection with the Affiliate Credit Agreement,
or (iii) any default in the payment when due of any sums payable hereunder or in
the due observance or performance of any obligation of the Borrowers hereunder
or (iv) any representation or warranty made in this Agreement by any Borrower
proving to have been untrue in any material respect as of the date the facts
therein set forth were stated or certified.
(c) Except as herein expressly provided, upon the termination
of the Forbearance Period, this Agreement shall terminate and be of no further
force and effect and the rights and remedies of the Agent, the Collateral Agent
and the Lenders shall be such as are provided in the Credit Agreement and the
other Loan Documents.
ARTICLE 9
MISCELLANEOUS
Section 9.1 No Waiver; Rights Cumulative. No course of dealing on the
part of the Agent, the Collateral Agent or the Lenders or their officers or
employees, nor any forbearance, failure or delay by the Agent, the Collateral
Agent or the Lenders with respect to exercising any of their rights under the
Credit Agreement or any other Loan Document shall operate as a waiver thereof
including, without limitation, (i) any forbearance by the Agent, the Collateral
Agent and the Lenders with respect to the Defaults described in the Default
Letter, (ii) any forbearance by the Agent, the Collateral Agent and the Lenders
from constituting such Defaults as Events of Default and (iii) any and all other
actions of the Agent, the Collateral Agent and the Lenders. The rights of the
Agent, the Collateral Agent and the Lenders under this Agreement, the Credit
Agreement and the other Loan Documents shall be cumulative and the exercise or
partial exercise of any such right shall not preclude the exercise of any other
right. Neither the making of any Loan nor the issuance of a Letter of Credit
shall constitute a waiver of any of the covenants, warranties, or conditions of
the Borrowers contained in this Agreement, the Credit Agreement or any other
Loan Documents. In the event any Borrower is unable to satisfy any such
covenant, warranty, or condition, neither the making of any Loan nor the
issuance of a Letter of Credit nor the forbearance from exercising their rights
and remedies as provided in the Credit Agreement shall have the effect of
precluding the Agent or the Lenders from thereafter declaring such inability to
be a Default or an Event of Default or from exercising their rights and remedies
as provided in the Credit Agreement.
Section 9.2 Release. The Borrowers hereby release the Agent, the
Collateral Agent and the Lenders from any and all claims and causes of action
arising out of or relating in any way to the actions or omissions of such
Persons in connection with the Loans, the Commitments or any of the Loan
Documents.
Section 9.3 Severability. In the event any one or more of the
provisions contained in this Agreement shall, for any reason, be held to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision of this Agreement.
Section 9.4 No Cure of Default. This Agreement shall not have the
effect of curing or otherwise eliminating the Defaults described in the Default
Letter. Unless such Defaults are waived
10
<PAGE> 11
in writing by the Lenders, such Defaults shall continue to exist throughout the
Forbearance Period. Upon the termination of this Agreement, such Defaults shall
automatically become Events of Default and the Commitments shall continue to be
suspended and the Lenders shall not be obligated or have any commitment
whatsoever to make any Loans.
Section 9.5 Extent of Agreement. Except as otherwise expressly provided
herein, the Credit Agreement and the other Loan Documents and the rights and
remedies of the parties thereto, are not amended, modified, altered, or affected
by this Agreement. Except as expressly set forth herein, all of the terms,
conditions, covenants, representations, warranties and all other provisions of
the Credit Agreement and the other Loan Documents are herein ratified and
confirmed and shall remain in full force and effect. This Agreement does not
constitute an amendment to the Credit Agreement or the other Loan Documents, but
rather, constitutes a temporary supplement thereto. The terms and provisions of
the Credit Agreement and the other Loan Documents are expressly incorporated
herein except to the extent such terms and provisions conflict with the terms
and provisions of this Agreement, in which case, during the Forbearance Period,
but not otherwise, the terms and provisions of this Agreement shall control.
Section 9.6 Counterparts. This Agreement may be executed in two or more
counterparts, and it shall not be necessary that the signatures of all parties
hereto be contained on any one counterpart hereof; each counterpart shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
Section 9.7 Indemnification. The Borrowers jointly and severally agree
to indemnify the Agent, the Collateral Agent, the Lenders and each of their
officers, directors, employees, agents, attorneys-in-fact and affiliates (the
"Indemnified Persons") from and against any and all liabilities, claims,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of any kind whatsoever (individually or collectively,
the "Liabilities") which may at any time be imposed on, incurred by or asserted
against the Indemnified Persons in any way relating to or arising out of this
Agreement, the Credit Agreement or any other Loan Document, or any other
document contemplated or referred to herein or the transactions contemplated
hereby or thereby or any action taken or omitted by any of the Indemnified
Persons under or in connection with any of the foregoing, including any
Liabilities incurred or asserted as a result of the negligence, whether sole or
concurrent, of any of the Indemnified Persons; provided that no Borrower shall
be liable to any Indemnified Person for the payment of any portion of such
Liabilities resulting solely from the gross negligence or willful misconduct of
any such Indemnified Person.
Section 9.8 Survival. Notwithstanding any other provision of this
Agreement, all representations and warranties of the Borrowers and the
provisions of Sections 2.1, 3.4, 3.5, 9.2, 9.4, 9.7 and this Section 9.8 of this
Agreement shall survive the termination of the Forbearance Period and the
termination of this Agreement and shall remain in force and effect so long as
any Obligation is outstanding or any Commitment exists.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on this _____, day of May, 1999; provided that this Agreement
shall for all purposes be effective as of the 1st day of April, 1999, as if
originally signed on that date.
11
<PAGE> 12
[SIGNATURE PAGES TO FOLLOW]
<PAGE> 13
BORROWERS:
KCS MEDALLION RESOURCES, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
KCS ENERGY, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
KCS ENERGY SERVICES, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
MEDALLION GAS SERVICES, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Address for Notices:
5555 San Felipe, Suite 1200
Houston, Texas 77056
Attention: Kathryn M. Kinnamon
Telecopy: (713) 964-4850
Principal Place of Business
and Chief Executive Office:
7130 South Lewis Avenue
Suite 700
Tulsa, Oklahoma 74136
Attention:
Telecopy:
<PAGE> 14
LENDERS:
BANK ONE, TEXAS
NATIONAL ASSOCIATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Address for Notices:
910 Travis Street
Houston, Texas 77002
Attention:
-----------
<PAGE> 15
COMERICA BANK-TEXAS
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Address for Notices:
910 Louisiana, 4th Floor
Houston, Texas 77210-4167
Attention: Daniel G. Steele
<PAGE> 16
SOCIETE GENERALE, SOUTHWEST AGENCY
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Address for Notices:
1111 Bagby, Suite 2020
Houston, Texas 77002
Attention: Mark Cox
<PAGE> 17
DEN NORSKE BANK ASA
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Address for Notices:
Three Allen Center
333 Clay Street, Suite 4890
Houston, Texas 77002
Attention: William V. Moyer
<PAGE> 18
PARIBAS
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Address for Notices:
1200 Smith Street, Suite 3100
Houston, Texas 77002
Attention: Douglas R. Liftman
<PAGE> 19
GENERAL ELECTRIC
CAPITAL CORPORATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Address for Notices:
SFG Global Asset Management
120 Long Ridge Road
Stamford, CT 06927
Telecopier No.: (203) 357-4890
Telephone No.: (203) 357-6536
Attention: Peter Fortmann
<PAGE> 20
CIBC INC.
By:
----------------------------------
Marybeth Ross
Authorized Signatory
Address for Notices:
909 Fannin, Suite 1200
Houston, Texas 77010
Attention: Mark Wolf
Telecopy: (713) 650-3727
AGENT:
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY
By:
----------------------------------
Marybeth Ross
Authorized Signatory
Address for Notices:
425 Lexington Avenue
7th Floor
New York, New York 10017
Attention: Marybeth Ross
Syndications Group
Telecopy: (212) 856-3763
with copies to:
CANADIAN IMPERIAL BANK OF COMMERCE
909 Fannin, Suite 1200
Houston, Texas 77010
Attention: Mark Wolf
Telecopy: (713) 650-3727
<PAGE> 21
425 Lexington Avenue
7th Floor
New York, New York 10017
Attention: Marybeth Ross
Syndications Group
Telecopy: (212) 856-3763
COLLATERAL AGENT:
CIBC INC.
By:
----------------------------------
Marybeth Ross
Authorized Signatory
Address for Notices:
909 Fannin, Suite 1200
Houston, Texas 77010
Attention: Mark Wolf
Telecopy: (713) 650-3727
with copies to:
CIBC INC.
909 Fannin, Suite 1200
Houston, Texas 77010
Attention: Mark Wolf
Telecopy: (713) 650-3727
<PAGE> 1
EXHIBIT 10.2
FORBEARANCE AGREEMENT
THIS FORBEARANCE AGREEMENT (this "Forbearance Agreement") is made and
entered into on May _____, 1999 and effective as of April 1, 1999 (the
"Effective Date"), by and among KCS Energy, Inc., a Delaware corporation
("KCS"), KCS RESOURCES, INC., a Delaware corporation ("KRI") for itself and as
successor by merger to KCS PIPELINE SYSTEMS, INC., a Delaware corporation ("KCS
Pipeline"); KCS MICHIGAN RESOURCES, INC., a Delaware corporation ("KCS
Michigan"); and KCS ENERGY MARKETING, INC., a New Jersey corporation ("KCS
Marketing," and together with KRI and KCS Marketing, each individually, a
"Borrower" and collectively, the "Borrowers"), each lender that is a signatory
hereto or becomes a party hereto as provided in Sections 9.1 or 2.24 of the
Credit Agreement (hereinafter defined) (individually, together with its
successors and assigns, a "Lender" and, collectively, together with their
respective successors and assigns, the "Lenders"), CANADIAN IMPERIAL BANK OF
COMMERCE, acting through its New York agency (in its individual capacity,
"CIBC"), and as agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Agent"), BANK ONE, TEXAS, NATIONAL
ASSOCIATION, a national banking association, as co-agent for the Lenders, and
NATIONSBANK, N.A. successor by merger to Nationsbank of Texas, N.A., as co-agent
for the Lenders and CIBC Inc., a Delaware corporation as collateral agent for
the Lenders (in such capacity pursuant to the terms hereof, the "Collateral
Agent").
WITNESSETH:
WHEREAS, on December 22, 1998, the Borrowers, the Lenders, and the
Agent entered into a First Amended and Restated Credit Agreement (the "Credit
Agreement") whereby, upon the terms and conditions therein stated, the Lenders
agreed to make loans to the Borrowers up to the aggregate amount of
$160,000,000.00 to be used by the Borrowers for the purposes set forth in
Section 2.6 of the Credit Agreement; and
WHEREAS, the Annual Report of KCS on Form 10-K filed with the SEC on
March 31, 1999 (the "10-K Report") revealed the existence of certain events and
conditions (the "MAC Events") which are in violation of the terms and provisions
of the Credit Agreement and/or which constitute a Material Adverse Effect; and
WHEREAS, the Agent has advised KCS and the Borrowers in a letter dated
April 7, 1999 (the "Default Letter") that the existence of such MAC Events
constitutes a Default which if uncured will, upon the giving of notice or
passage of time, or both, become an Event of Default pursuant to which the
Agent, the Collateral Agent and the Lenders will have the right to exercise the
rights and remedies available to them under such circumstances, all as set forth
in the Credit Agreement; and
WHEREAS, KCS and the Borrowers have requested that the Lenders forbear
from exercising such rights and remedies in consideration of the compliance by
KCS and the Borrowers with the terms and provisions of this Agreement; and
<PAGE> 2
WHEREAS, subject to (i) compliance by KCS and the Borrowers with the
terms and provisions of this Agreement, and (ii) the other terms and provisions
of this Agreement, the Lenders have agreed to forbear from exercising their
rights and remedies as provided in the Credit Agreement and the Guaranty during
the Forbearance Period.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE 1
GENERAL TERMS
Section 1.1 Terms Defined in Agreement. As used in this Agreement,
except as may otherwise be provided in this Agreement, all capitalized terms
which are defined in the Credit Agreement shall have the same meaning herein as
therein, all of such terms and definitions being incorporated herein by
reference.
Section 1.2 Forbearance Period. Subject to (i) compliance by KCS and
the Borrowers with the terms and provisions of this Agreement, and (ii) the
other terms and provisions of this Agreement, the Lenders hereby agree to
forbear from exercising the rights and remedies provided in the Credit Agreement
and the Guaranty which are available to them upon the occurrence and continuance
of the Defaults described in the Default Letter. This Agreement shall commence
as of the Effective Date and end on the first to occur of (i) any event or
condition pursuant to which the Forbearance Period automatically terminates,
including without limitation the provisions of Section 8.1 of this Agreement, or
(ii) June 30, 1999 (the "Forbearance Termination Date"). The term "Forbearance
Period" means the period of time commencing on the Effective Date and ending at
11:59 p.m. on the Forbearance Termination Date. Except as expressly herein
provided, upon termination of the Forbearance Period (regardless of how such
termination occurs), this Agreement shall have no further force and effect
whatsoever (unless extended in writing by the KCS and the Borrowers, the Lenders
and the Agent) and thereafter the terms and provisions of the Credit Agreement
and the other Loan Documents shall be effective as expressly therein provided
without further reference to the terms and provisions of this Agreement.
ARTICLE 2
DEFINITIONS
Section 2.1 Definitions. The following terms shall have the meaning as
follows:
"Applicable Margin" shall mean as to each Tranche A Base Rate
Loan and each Tranche A LIBO Rate Loan, an amount equal to the
percentage set forth in the grid below for such type of Loan:
2
<PAGE> 3
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Applicable Margin
(Tranche A)
- ------------------------------------------------------------------------------------
Base Rate LIBO Rate
Type of Loans
- ------------------------------------------------------------------------------------
<S> <C> <C>
Conforming Loans 1.5% 2.5%
Non-Conforming
Loans 2.0% 3.0%
- ------------------------------------------------------------------------------------
</TABLE>
"Conforming Loans" shall mean all Tranche A Loans outstanding
as of the Effective Date, the aggregate amount of which is not in
excess of $40,000,000 minus the aggregate amount of all payments
applied to the principal of such Loans from the Effective Date through
the Forbearance Termination Date.
"Interest Period" shall mean, subject to the limitations set
forth in Section 2.4 of the Credit Agreement, with respect to any LIBO
Rate Loan, a period commencing on the date such Loan is made or
converted from a Loan of another type pursuant to the Credit Agreement
or the last day of the next preceding Interest Period with respect to
such Loan and ending on or before the Forbearance Termination Date, as
the Borrowers may request in the Tranche A Borrowing Request or the
Tranche B Borrowing Request for such Loan.
"Non-Conforming Loans" means all Tranche A Loans outstanding
as of the Effective Date, the aggregate amount of which is in excess of
Conforming Loans minus the aggregate amount of all payments applied to
the principal of such Loans from the Effective Date through the
Forbearance Termination Date.
ARTICLE 3
TERMS AND FACILITIES
Section 3.1 Loans and Suspension of Commitments. Except with respect to
reborrowings of LIBO Rate Loans which occur at the end of an Interest Period,
and conversions of LIBO Rate Loans into Base Rate Loans or Base Rate Loans into
LIBO Rate Loans, during the Forbearance Period, the Commitments shall be
suspended and the Lenders shall not be obligated or have any commitment
whatsoever to make Loans. The Borrowers may not reborrow any portion of any Loan
after all or such portion of any such Loan shall have been repaid.
Section 3.2 Letters of Credit. Except for Letters of Credit which are
outstanding as of the Effective Date, the Agent shall not be obligated to issue,
on behalf of the Lenders, or otherwise, any Letters of Credit. The Agent shall
not be obligated to renew or extend on behalf of the Lenders, or otherwise, any
Letters of Credit which are outstanding as of the Effective Date. Nothing herein
shall modify, limit or reduce the obligations of the Lenders as provided in the
Agreement with respect to
3
<PAGE> 4
Letters of Credit which are outstanding as of the Effective Date provided such
Letters of Credit are not renewed or extended by the Agent after the Effective
Date.
Section 3.3 Repayment of Loans and Interest. (a) Accrued and unpaid
interest on each outstanding Base Rate Loan shall be due and payable on the date
of execution of this Agreement, May 31, 1999, and June 30, 1999, the payment in
each instance to be the amount of interest which has accrued and remains unpaid
in respect of the relevant Loan. Accrued and unpaid interest on each outstanding
LIBO Rate Loan shall be due and payable on the last day of the Interest Period
for such LIBO Rate Loan and, in the case of any Interest Period for LIBO Rate
Loans outstanding as of the Effective Date which are in excess of one month, on
the last day of each calendar month following the commencement of such Interest
Period, the payment in each instance to be the amount of interest which has
accrued and remains unpaid in respect of the relevant Loan.
(b) The outstanding principal balance of all Tranche A Loans
shall be payable as follows: on the date of execution of this Agreement a
principal installment on the Tranche A Loans shall be due and payable in the
amount of $1,000,000. On May 31, 1999, a principal installment on the Tranche A
Loans shall be due and payable in the amount of the sum of (i) $1,000,000, plus
(ii) twenty-five percent (25%) of all Operating Cash Flow (if a positive number)
during the period commencing April 1, 1999 and ending April 30, 1999 (less the
$1,000,000 paid pursuant to the immediately preceding sentence). On June 30,
1999, a principal installment on the Tranche A Loans shall be due and payable in
the amount of the sum of (i) $1,000,000, plus (ii) twenty-five percent (25%) of
all Operating Cash Flow (if a positive number) during the period commencing May
1, 1999 and ending May 31, 1999 (less the $1,000,000 paid pursuant to the
immediately preceding sentence). The term "Operating Cash Flow" as used herein
means the net cash (exclusive of capital expenditures) provided by operating
activities as set forth on the statements of consolidated cash flow for KCS and
its Subsidiaries calculated in accordance with GAAP. The outstanding principal
balance of all Loans together with all accrued and unpaid interest thereon shall
be due and payable at Final Maturity. The Agent shall apply such payments first
to the Non-Conforming Loans until such NonConforming Loans are paid in full and
next to the Conforming Loans.
Section 3.4 Borrowing Base. The Borrowing Base and the Tranche B
Borrowing Base in effect prior to the Effective Date shall remain in effect
throughout the Forbearance Period. The next Borrowing Base redetermination and
Tranche B Borrowing Base redetermination shall not occur until the next Business
Day (the "Redetermination Date") which is on or after the Forbearance
Termination Date and notwithstanding the provisions of Section 2.12 of the
Agreement, the Borrowing Base determined on the Redetermination Date shall be
the amount agreed to by the Agent and all the Tranche A Lenders, and the Tranche
B Borrowing Base determined on the Redetermination Date shall be an amount
agreed to by the Agent and the Tranche B Lenders.
(b) The Borrowing Base and the Tranche B Borrowing Base shall
be reduced in the amount of the Specified Value of each of the Oil and Gas
Properties of any of the Borrowers sold in accordance with Section 3.6 hereof.
Section 3.5 Mandatory Prepayments. (a) On the Redetermination Date, if
the Tranche A Obligations exceed the Borrowing Base then in effect, (i) KCS and
the Borrowers shall, within five
4
<PAGE> 5
(5) days of notice from the Agent of such occurrence, prepay the amount of such
excess for application first, to the Non-Conforming Loans portion of the Tranche
A Loan Balance, and next to the Conforming Loans portion of the Tranche A Loan
Balance; (ii) in the event that the Tranche A Loan Balance is less than the
amount required to be prepaid, KCS and the Borrowers shall immediately prepay
the entire Tranche A Loan Balance together with accrued interest, and (iii) in
accordance with the provisions of the relevant Letter of Credit Applications
executed by the Borrowers or otherwise to the satisfaction of the Agent, KCS and
the Borrowers shall immediately deposit with the Agent, as additional collateral
securing the Obligations, an amount of cash, in immediately available funds,
equal to the L/C Exposure minus the Borrowing Base and such cash may be invested
at the express direction of KCS and the Borrowers as to investment vehicle and
maturity (which shall be no later than the latest expiry date of any then
outstanding Letter of Credit), for the account of KCS and the Borrowers in cash
or cash equivalent investments offered by or through the Agent.
(b) On the Redetermination Date, if the Tranche B Obligations exceed
the difference between the Tranche B Borrowing Base then in effect minus the
Borrowing Base then in effect, (i) KCS and the Borrowers shall, within five (5)
days of notice from the Agent of such occurrence, prepay the amount of such
excess for application on the Tranche B Loan Balance and (ii) in the event that
the Tranche B Loan Balance is less than the amount required to be prepaid, KCS
and the Borrowers shall prepay the entire Tranche B Loan Balance together with
accrued interest.
Section 3.6 Sales of Oil and Gas Properties. At any time during the
Forbearance Period that (i) any of the Oil and Gas Properties which are
described in Exhibit "A" hereto, or any other Oil and Gas Properties which are
added to Exhibit "A" pursuant to the agreement of the Agent, the Required
Lenders, KCS and the Borrowers with respect to a Specified Value (collectively,
the "Scheduled Properties"), or (ii) any other Oil and Gas Properties owned by
any of the Borrowers (the "Unscheduled Properties") are sold other than Oil and
Gas Properties described in Section 7.1(iii) of this Agreement, KCS and the
Borrowers shall, substantially concurrent with the sale thereof, prepay the
Conforming Loans in an amount equal to the value attributable to the Scheduled
Properties as specified in Exhibit "A" as amended from time to time or with
respect to the Unscheduled Properties, the value specified by the Agent with the
consent of the Required Lenders (collectively, the "Specified Value") until such
Conforming Loans are paid in full and next to the Non-Conforming Loans. In
addition, upon the sale of any such Oil and Gas Properties (whether Scheduled
Properties or Unscheduled Properties), if the Net Cash Proceeds are greater than
the Specified Value, KCS and the Borrowers shall prepay the Non-Conforming Loans
in an amount equal to twenty percent (20%) of the portion of the Net Cash
Proceeds in excess of the Specified Value until such Non-Conforming Loans are
paid in full and next to the Conforming Loans. The Agent shall have the
necessary authority to release Liens on the Scheduled Properties and the
Unscheduled Properties so long as the Net Cash Proceeds equal or exceed the
Specified Value.
Section 3.7 Fees. KCS and the Borrowers shall pay to the Agent on the
date of execution of this Agreement a forbearance documentation fee (the
"Forbearance Documentation Fee") in the amount of $30,000.
5
<PAGE> 6
ARTICLE 4
CONDITIONS
Section 4.1 Conditions Precedent to Initial Effectiveness of Agreement.
The Lenders shall have no obligation to forbear from exercising their rights and
remedies under and pursuant to the Credit Agreement unless and until:
(a) the Agent shall have received the Forbearance
Documentation Fee;
(b) the Agent shall have received the following documents and
other items, appropriately executed when necessary and, where applicable,
acknowledged by one or more authorized officers of KCS or the Borrowers and
dated, where applicable, of even date herewith or a date prior thereto:
(i) multiple counterparts of this Agreement as
requested by the Agent;
(ii) [INTENTIONALLY LEFT BLANK]
(iii) certificates of incumbency and copies of
corporate resolutions in the form attached hereto as Exhibit
"B" approving and authorizing the transactions contemplated
herein duly adopted by the boards of directors of KCS and each
Borrower accompanied by certificates of the secretary or an
assistant secretary of KCS and each Borrower, as the case may
be, to the effect that such copies are true and correct copies
of resolutions duly adopted at a meeting or by unanimous
consent of the board of directors of KCS and each Borrower, as
the case may be, and that such resolutions constitute all the
resolutions adopted with respect to such transactions, have
not been amended, modified, or revoked in any respect, and are
in full force and effect as of the date of such certificate;
and
(iv) the opinion of counsel to KCS and the Borrowers
in the form attached hereto as Exhibit "C".
(c) The Agent shall have received, for the benefit of the
Tranche A Lenders, accrued interest through April 30, 1999 and the payment of
principal required to be paid on the date of execution of this Agreement by KCS
and the Borrowers as provided in Section 3.3(a) and 3.3(b) of this Agreement.
Section 4.2 Additional Conditions Precedent to Initial Effectiveness of
Agreement. The obligations of the Agent, the Collateral Agent, and the Lenders
to forbear from exercising their rights and remedies under and pursuant to the
Credit Agreement are subject to the satisfaction of the following additional
conditions precedent that, as of the date of execution of this Agreement:
(a) no Default shall exist except for the Defaults referred to
in the Default Letter and the defaults existing in connection with the Affiliate
Credit Agreement and no Event of Default shall have occurred and be continuing;
6
<PAGE> 7
(b) no Material Adverse Effect shall have occurred and be
continuing except for the MAC Events disclosed in the 10-K Report;
(c) each of the representations and warranties contained in
the Credit Agreement and the other Loan Documents shall be true and correct,
except for (i) such representations and warranties which were contained in the
Credit Agreement and the other Loan Documents which are modified and/or
supplemented as provided in Sections 5.2 and 5.3 of this Agreement or (ii) those
which are expressly stated to be made as of a particular date;
(d) the Security Instruments shall be in full force and effect
and provide to the Lenders the security intended thereby;
(e) the consummation of the transactions contemplated hereby
shall not contravene, violate, or conflict with any Requirement of Law; and
(f) legal counsel for the Agent shall have received payment
(to the extent invoiced) from KCS and the Borrowers for all reasonable fees and
expenses which KCS and the Borrowers are required to pay.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
KCS and each Borrower hereby represent and warrant to the Agent and
each Lender that:
Section 5.1 Representations Repeated. The representations and
warranties of KCS and the Borrowers contained in the Credit Agreement and the
other Loan Documents and otherwise made in writing by or on behalf of KCS and
the Borrowers pursuant to the Credit Agreement and the other Loan Documents were
true and correct when made, and are true and correct in all material respects at
and as of the Effective Date except for such representations and warranties (i)
which were contained in the Credit Agreement and the other Loan Documents which
are modified or supplemented as provided in Section 5.2 and 5.3 of this
Agreement, and (ii) which are expressly stated to be made as of a particular
date which shall remain true and correct as of the date made.
Section 5.2 Scope and Accuracy of Financial Statements. The Financial
Statements of KCS and its Subsidiaries as at December 31, 1998 present fairly
the financial position and results of operations and cash flows of KCS and its
Subsidiaries in accordance with GAAP as at the relevant point in time or for the
period indicated. No event or circumstance has occurred since December 31, 1998
except for the MAC Events disclosed in the 10-K Report which could reasonably be
expected to have a Material Adverse Effect on KCS or KCS Medallion.
Section 5.3 Default. Neither KCS nor any of the Borrowers is in default
of, and no event has occurred which, with the lapse of time or giving of notice,
or both, could result in such a default of, (i) any charter document or bylaws
of any Borrower, or (ii) any agreement, obligation or Debt to which any Borrower
is a party or by which any Property of any Borrower may be bound, pursuant
7
<PAGE> 8
to which the obligations of KSC or any of the Borrowers in the aggregate under
any such agreement, obligation or Debt, or the obligations secured thereby,
exceed $2,500,000, except such as are being contested in good faith and as to
which such reserve as may be required by GAAP shall have been made therefore,
and except for the Defaults referred to and described in the Default Letter and
the defaults existing in connection with the Affiliate Credit Agreement, which
Defaults KCS and the Borrowers hereby acknowledge to be existing as of the
Effective Date.
Section 5.4 Defenses. As of the Effective Date, the outstanding
principal amount of the Conforming Loans is $40,000,000 and the outstanding
principal amount of the Non-Conforming Loans is $25,000,000 and neither KCS nor
any Borrower has any defenses, offsets or counterclaims which would limit,
reduce or impair in any manner the obligations and indebtedness of KCS or any
Borrower to pay the full amount of the Obligations when due.
ARTICLE 6
AFFIRMATIVE COVENANTS
Section 6.1 Monthly Reconciliation Reports. During the Forbearance
Period KCS and the Borrowers shall deliver to the Agent, on or before the last
day of each calendar month, commencing May 31, 1999, Sufficient Copies of a
Reconciliation Report as at the close of the immediately preceding calendar
month, such Reconciliation Report to be certified by a Responsible Officer of
KCS as true and correct subject to changes resulting from normal year-end audit
adjustments. The term "Reconciliation Report" means a report prepared by a
Responsible Officer of KCS as at the point in time and for the period indicated
and consisting of reports of KCS and its Subsidiaries on a consolidated basis
with respect to (i) sources and uses of Operating Cash Flow for such period,
(ii) Net Cash Proceeds from sales of Oil and Gas Properties for such period, and
(iii) such other financial information as the Agent or any Lender reasonably
requests.
Section 6.2 Fees and Expenses. In addition to the covenants in the
Credit Agreement, during the Forbearance Period, KCS and the Borrowers shall:
(a) promptly pay to or reimburse the Agent or the Collateral
Agent, as applicable, for all reasonable third-party fees, out-of-pocket costs
and expenses of the Agent and the Collateral Agent in connection with the
preparation, negotiation, execution, delivery and enforcement of this Agreement,
the Credit Agreement, and the other Loan Documents, and any and all amendments,
restatements and supplements thereof and thereto, the filing and recordation of
the Security Instruments, and the consummation of the transactions contemplated
by the Loan Documents, including reasonable fees and expenses of legal counsel
and auditors and accountants for the Agent and the Collateral Agent.
(b) upon request by the Agent promptly pay for all amounts
reasonably expended, advanced, or incurred by or on behalf of the Agent and the
Collateral Agent (i) to satisfy any obligation of KCS and/or any of the
Borrowers under any of the Loan Documents; (ii) to collect the Obligations;
(iii) to enforce the rights of the Agent, the Collateral Agent, and the Lenders
under any of the Loan Documents; and, (iv) to protect the Properties or business
of KCS and the Borrowers,
8
<PAGE> 9
including the Collateral, which amounts shall be deemed compensatory in nature
and liquidated as to amount upon notice to KCS and the Borrowers by the Agent
and which amounts shall include all court costs and reasonable fees and expenses
of legal counsel, auditors and accountants, petroleum engineers, and
environmental and insurance consultants.
ARTICLE 7
NEGATIVE COVENANTS
Section 7.1 Sales of Assets. Notwithstanding the provisions of Section
6.5 of the Credit Agreement, KCS and the Borrowers shall not, and shall not
permit any of their respective Subsidiaries to sell, transfer, or otherwise
dispose of any Oil and Gas Properties, in one or any series of transactions,
whether now owned or hereafter acquired, or enter into any agreement to do so
unless the proceeds of such sales (i) are of the type described in clauses (a)
and (b) of the first sentence of Section 6.5 of the Credit Agreement and are
included in Operating Cash Flow, or (ii) are made subject to and in accordance
with the provisions of Section 3.6 of this Agreement concerning prepayments upon
the sale of certain Oil and Gas Properties, or (iii) have an aggregate value for
all such sales of less than $250,000 (excluding sales of Oil and Gas Properties,
the proceeds of which are applied to the Loans in accordance with other
provisions of this Agreement).
Section 7.2 Restricted Payments. During the Forbearance Period (i) the
Borrowers shall not make any payment of principal or interest on the Public Debt
other than scheduled payments of interest and principal and (ii) KCS shall not
pay or make any dividend or distribution or purchase, redeem or otherwise
acquire for value, any share of any class of its capital stock.
ARTICLE 8
TERMINATION
Section 8.1 Termination of Agreement. (a) Upon the occurrence of an
Event of Default specified in Sections 7.1(e) or 7.1(f) of the Credit Agreement,
immediately and without notice, (i) the Forbearance Period shall automatically
terminate and all Obligations shall automatically become immediately due and
payable, without presentment, demand, protest, notice of protest, default, or
dishonor, notice of intent to accelerate maturity, notice of acceleration of
maturity, or other notice of any kind, all of which are hereby expressly waived
by each Borrower.
(b) The Forbearance Period shall automatically terminate upon
the occurrence of (i) any Event of Default other than (A) those specified in
Sections 7.1(e) or 7.1(f) of the Credit Agreement, and (B) those occurring as a
result of the giving of notice or the passage of time in connection with the
Defaults described in the Default Letter, or (ii) the termination of any
forbearance by lenders arising under or in connection with the Affiliate Credit
Agreement, or (iii) any default in the payment when due of any sums payable
hereunder or in the due observance or
9
<PAGE> 10
performance of any obligation of KCS and/or any of the Borrowers hereunder or
(iv) any representation or warranty made in this Agreement by KCS and/or any
Borrower proving to have been untrue in any material respect as of the date the
facts therein set forth were stated or certified.
(c) Except as herein expressly provided, upon the termination
of the Forbearance Period, this Agreement shall terminate and be of no further
force and effect and the rights and remedies of the Agent, the Collateral Agent
and the Lenders shall be such as are provided in the Credit Agreement and the
other Loan Documents.
ARTICLE 9
MISCELLANEOUS
Section 9.1 No Waiver; Rights Cumulative. No course of dealing on the
part of the Agent, the Collateral Agent or the Lenders or their officers or
employees, nor any forbearance, failure or delay by the Agent, the Collateral
Agent or the Lenders with respect to exercising any of their rights under the
Credit Agreement or any other Loan Document shall operate as a waiver thereof
including, without limitation, (i) any forbearance by the Agent, the Collateral
Agent and the Lenders with respect to the Defaults described in the Default
Letter, (ii) any forbearance by the Agent, the Collateral Agent and the Lenders
from constituting such Defaults as Events of Default and (iii) any and all other
actions of the Agent, the Collateral Agent and the Lenders. The rights of the
Agent, the Collateral Agent and the Lenders under this Agreement, the Credit
Agreement and the other Loan Documents shall be cumulative and the exercise or
partial exercise of any such right shall not preclude the exercise of any other
right. Neither the making of any Loan nor the issuance of a Letter of Credit
shall constitute a waiver of any of the covenants, warranties, or conditions of
KCS and/or any of the Borrowers contained in this Agreement, the Credit
Agreement or any other Loan Documents. In the event any Borrower is unable to
satisfy any such covenant, warranty, or condition, neither the making of any
Loan nor the issuance of a Letter of Credit nor the forbearance from exercising
their rights and remedies as provided in the Credit Agreement shall have the
effect of precluding the Agent or the Lenders from thereafter declaring such
inability to be a Default or an Event of Default or from exercising their rights
and remedies as provided in the Credit Agreement.
Section 9.2 Release. KCS and the Borrowers hereby release the Agent,
the Collateral Agent and the Lenders from any and all claims and causes of
action arising out of or relating in any way to the actions or omissions of such
Persons in connection with the Loans, the Commitments or any of the Loan
Documents.
Section 9.3 Severability. In the event any one or more of the
provisions contained in this Agreement shall, for any reason, be held to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision of this Agreement.
Section 9.4 No Cure of Default. This Agreement shall not have the
effect of curing or otherwise eliminating the Defaults described in the Default
Letter. Unless such Defaults are waived in writing by the Lenders, such Defaults
shall continue to exist throughout the Forbearance Period. Upon the termination
of this Agreement, such Defaults shall automatically become Events of Default
10
<PAGE> 11
and the Commitments shall continue to be suspended and the Lenders shall not be
obligated or have any commitment whatsoever to make any Loans.
Section 9.5 Extent of Agreement. Except as otherwise expressly provided
herein, the Credit Agreement and the other Loan Documents and the rights and
remedies of the parties thereto are not amended, modified, altered, or affected
by this Agreement. Except as expressly set forth herein, all of the terms,
conditions, covenants, representations, warranties and all other provisions of
the Credit Agreement and the other Loan Documents are herein ratified and
confirmed and shall remain in full force and effect. This Agreement does not
constitute an amendment to the Credit Agreement or the other Loan Documents, but
rather, constitutes a temporary supplement thereto. The terms and provisions of
the Credit Agreement and the other Loan Documents are expressly incorporated
herein except to the extent such terms and provisions conflict with the terms
and provisions of this Agreement, in which case, during the Forbearance Period,
but not otherwise, the terms and provisions of this Agreement shall control.
Section 9.6 Counterparts. This Agreement may be executed in two or more
counterparts, and it shall not be necessary that the signatures of all parties
hereto be contained on any one counterpart hereof; each counterpart shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
Section 9.7 Indemnification. KCS and the Borrowers jointly and
severally agree to indemnify the Agent, the Collateral Agent, the Lenders and
each of their officers, directors, employees, agents, attorneys-in-fact and
affiliates (the "Indemnified Persons") from and against any and all liabilities,
claims, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses and disbursements of any kind whatsoever (individually or
collectively, the "Liabilities") which may at any time be imposed on, incurred
by or asserted against the Indemnified Persons in any way relating to or arising
out of this Agreement, the Credit Agreement or any other Loan Document, or any
other document contemplated or referred to herein or the transactions
contemplated hereby or thereby or any action taken or omitted by any of the
Indemnified Persons under or in connection with any of the foregoing, including
any Liabilities incurred or asserted as a result of the negligence, whether sole
or concurrent, of any of the Indemnified Persons; provided that neither KCS nor
any Borrower shall be liable to any Indemnified Person for the payment of any
portion of such Liabilities resulting solely from the gross negligence or
willful misconduct of any such Indemnified Person.
Section 9.8 Survival. Notwithstanding any other provision of this
Agreement, all representations and warranties of KCS and the Borrowers and the
provisions of Sections 2.1, 3.4, 3.5, 9.2, 9.4, 9.7 and this Section 9.8 of this
Agreement shall survive the termination of the Forbearance Period and the
termination of this Agreement and shall remain in force and effect so long as
any Obligation is outstanding or any Commitment exists.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on this _____, day of May, 1999; provided that this Agreement
shall for all purposes be effective as of the 1st day of April, 1999, as if
originally signed on that date.
11
<PAGE> 12
[SIGNATURE PAGES TO FOLLOW]
12
<PAGE> 13
KCS ENERGY, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Address for Notices:
5555 San Felipe, Suite 1200
Houston, Texas 77056
Attention: Kathryn M. Kinnamon
Telecopy: (713) 964-4850
Principal Place of Business
and Chief Executive Office:
5555 San Felipe, Suite 1200
Houston, Texas 77056
Attention: Kathryn M. Kinnamon
Telecopy: (713) 964-4850
BORROWERS:
KCS RESOURCES, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
KCS MICHIGAN RESOURCES, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE> 14
KCS ENERGY MARKETING, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Address for Notices:
5555 San Felipe, Suite 1200
Houston, Texas 77056
Attention: Kathryn M. Kinnamon
Telecopy: (713) 964-4850
<PAGE> 15
CO-AGENT AND A LENDER:
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Applicable Lending Office
for Base Rate Loans and
LIBO Rate Loans:
910 Travis
Houston, Texas 77002
Attention: Karen Smith
Telecopy: (713) 751-7894
Address for Notices:
910 Travis Street
Houston, Texas 77002
Attention:
------------------
Telecopy: (713) 751-3544
<PAGE> 16
CO-AGENT AND A LENDER:
NATIONSBANK, N.A., Successor by
merger to NationsBank of Texas, N.A.
By:
---------------------------------
Name: William E. Livingstone, IV
Title: Managing Director
Applicable Lending Office
for Base Rate Loans and
LIBO Rate Loans:
901 Main Street, 14th Floor
Dallas, Texas 75202
Attention: Corporate Credit Services
Address for Notices:
901 Main Street, 68th Floor
Dallas, Texas 75202
Attention: William E. Livingstone, IV
Telecopy: (214) 209-3533
<PAGE> 17
LENDERS:
COMERICA BANK-TEXAS
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Applicable Lending Office
for Base Rate Loans and
LIBO Rate Loans:
1508 West Mockingbird
Dallas, Texas 75235
Address for Notices:
1601 Elm Street
Second Floor
Dallas, Texas 75202
Attention:
------------------
Telecopy: (214) 965-8990
with copies to:
COMERICA BANK-TEXAS
One Shell Plaza
910 Louisiana, Suite 410
Houston, Texas 77002
Attention: Daniel G. Steele
Telecopy: (713) 722-6550
<PAGE> 18
DEN NORSKE BANK ASA
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Applicable Lending Office
for Base Rate Loans and
LIBO Rate Loans:
200 Park Avenue, 31st Floor
New York, New York 10166-0396
Address for Notices:
200 Park Avenue, 31st Floor
New York, New York 10166-0396
Attention:
--------------------
Telecopy: (212) 681-4123
with copies to:
DEN NORSKE BANK ASA
333 Clay Street, Suite 4890
Houston, Texas 77002
Attention: William V. Moyer
Telecopy: (713) 757-1167
<PAGE> 19
GENERAL ELECTRIC
CAPITAL CORPORATION
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Address for Notices:
SFG Global Asset Management
120 Long Ridge Road
Stamford, CT 06927
Telecopier No.: (203) 357-4890
Telephone No.: (203) 357-6536
Attention: Peter Fortmann
<PAGE> 20
AGENT:
CANADIAN IMPERIAL BANK OF
COMMERCE
By:
------------------------------
Marybeth Ross
Authorized Signatory
Address for Notices:
425 Lexington Avenue
7th Floor
New York, New York 10017
Attention: Marybeth Ross
Syndications Group
Telecopy: (212) 856-3763
with copies to:
CANADIAN IMPERIAL BANK OF COMMERCE
909 Fannin, Suite 1200
Houston, Texas 77010
Attention: Russell Otts
Telecopy: (713) 650-3727
CIBC INC.
By:
------------------------------
Marybeth Ross
Authorized Signatory
Address for Notices:
909 Fannin, Suite 1200
Houston, Texas 77010
Attention: Mark Wolf
Telecopy: (713) 650-3727
<PAGE> 1
EXHIBIT 99.1
AT THE COMPANY AT THE FINANCIAL RELATIONS BOARD
Kathryn M. Kinnamon Marianne Stewart - General Info (212) 661-8030
VP, Treasurer & Acting CFO Beth Lewis - Analyst (617) 342-7003
(713) 877-8006 Claudine Cornelis - Media (212) 661-8030
FOR IMMEDIATE RELEASE
MAY 18, 1999
KCS ENERGY, INC. ENTERS INTO FORBEARANCE AGREEMENTS WITH LENDERS
HOUSTON, TX, MAY 18, 1999 -- KCS Energy, Inc. (NYSE: KCS) today announced that
the Company has entered into forbearance agreements on each of its revolving
bank credit agreements, which provide that the lenders will defer
redetermination of the borrowing base until July 1, 1999 and will refrain from
exercising their rights and remedies as a result of the existing defaults until
June 30, 1999. Under the forbearance agreements, the Company will commit 50% of
monthly cash flow to payments of principal, with a minimum of $2 million
monthly. In addition, a portion of the proceeds from the sale of any of the
Company's oil and gas properties will be dedicated to payment of principal under
the facilities. When the forbearance agreements expire, the lenders will be able
to exercise their rights under the credit agreements, including declaring the
principal balances immediately due and payable. If this should occur, the
Company would be unable to pay the amount due in cash, although the Company
believes the lenders are fully secured; and the holders of the Company's senior
notes and senior subordinated notes would have the right to declare the
principal amount of the notes ($275 million) immediately due and payable. The
lenders have indicated their intention following the termination of the
forbearance period to reduce the Company's borrowing base under the credit
agreements. Such a reduction in excess of principal repayments made under the
forbearance agreements would necessitate additional repayment of principal, and
these payments would have a negative impact on cash availability. As a result of
these factors, there is substantial doubt about the Company's ability to
continue as a going concern.
KCS President and Chief Executive Officer James W. Christmas said, "Although the
forbearance agreements are short in duration, they are supportive of the
Company's desire to reduce its outstanding debt in an orderly fashion and
continue to support current drilling activities and actively pursue new
opportunities within our core operating areas."
KCS is an independent energy company engaged in the acquisition, exploration,
development and production of natural gas and crude oil with operations in the
Mid-Continent, Onshore Gulf Coast, Gulf of Mexico and Rocky Mountains regions.
To receive KCS' latest news and other corporate developments via fax at no cost,
please call 1-800-PRO-INFO. Use company code KCS. See also
http://www.frbinc.com.
This press release contains forward-looking statements that involve a number of
risks and uncertainties. Among the important factors that could cause actual
results to differ materially from those indicated by such forward-looking
statements are delays and difficulties in developing currently owned properties,
the failure of exploratory drilling to result in commercial wells, delays due to
the limited availability of drilling equipment and personnel, fluctuations in
oil and gas prices, general economic conditions and the risk factors detailed
from time to time in the Company's periodic reports and registration statements
filed with the Securities and Exchange Commission.
###
5555 SAN FELIPE, SUITE 1200, HOUSTON, TX 77056
