AMENDMENT NO. 2 AND WAIVER TO
CREDIT AGREEMENT
----------------
This AMENDMENT NO. 2 (this "Amendment"), dated as of February 22,
2005, to the CREDIT AGREEMENT, dated as of July 22, 2004 (the "Credit
Agreement") among Quest Cherokee, LLC, a Delaware limited liability company (the
"Borrower"), the guarantors party thereto and the Lenders (such term and each
other capitalized term used but not defined herein having the meaning given it
in the Credit Agreement, as amended) party thereto, UBS Securities LLC, as
Arranger, Bookmanager, Documentation Agent and Syndication Agent, UBS AG,
Stamford Branch, as Issuing Bank, LC Facility Issuing Bank, Administrative
Agent and Collateral Agent, and UBS Loan Finance LLC, as Swingline Lender, is
entered into by and among the Borrower, the Guarantors and the several Lenders
that have executed a signature page hereto.
R E C I T A L S:
----------------
A. Section 11.02 of the Credit Agreement provides that the Credit
Agreement may be amended with the consent of the Borrower and the Required
Lenders.
B. The Borrower, the Agents and the Lenders wish to amend the Credit
Agreement to allow the Borrower to issue an additional $12.0 million of
Subordinated Notes, which amendment includes $5.0 million of Subordinated Notes
issued on February 11, 2005, and for the Term B Commitment to be increased by
$5.0 million such that the total the Term B Commitment will be $124.7 million.
C. The undersigned Lenders collectively constitute the Required
Lenders and, with respect to the increase in the Term B Commitment, the Term B
Lenders party hereto agree to provide Additional Term B Commitments in the
amount set forth next to their name on the signature page hereto.
D. The Requisite Lenders waive the Default or Events of Default of
the Credit Agreement outstanding as of the date detailed in Section Two of this
Amendment.
E. The Borrower and the undersigned Lenders hereby agree to amend the
Credit Agreement on the terms and to the extent set forth herein.
A G R E E M E N T :
-------------------
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
SECTION 1. Amendments. The following amendments to the Credit
Agreement shall be effective as of the Amendment No. 2 Effective Date:
(a) Section 1.01 of the Credit Agreement is hereby amended by
inserting the following definitions in alphabetical order:
-2-
"'Additional Subordinated Notes' shall mean an aggregate of $12.0 million
of Borrower's 15% Junior Subordinated Notes due 2010 issued pursuant to the
Additional Subordinated Notes Agreement (plus the amount of any interest paid in
kind which may be added to the principal of such Subordinated Notes)."
"'Additional Subordinated Notes Agreement' shall mean the Amended and
Restated Note Purchase Agreement between Borrower and Cherokee Energy Partners
LLC dated as of February 11, 2005 and substantially in the form attached hereto
as Annex A and as thereafter amended from time to time subject to the
requirements of this Agreement."
"'Additional Term B Commitment' shall mean, with respect to each Lender,
the commitment, if any, of such Lender to make an Additional Term B Loan
hereunder on the Amendment No. 2 Effective Date in the amount set forth on the
signature page to Amendment No. 2 to the Credit Agreement executed and delivered
by such Lender (as adjusted by the Administrative Agent if necessary), or in the
Assignment and Assumption pursuant to which such Lender shall have assumed its
Additional Term B Commitment, as the same may be (a) reduced from time to time
pursuant to Section 2.07 and (b) reduced or increased from time to time pursuant
to assignments by or to such Lender pursuant to Section 11.04. The aggregate
amount of the Lenders' Additional Term B Commitments is $5.0 million."
"'Additional Term B Loan' shall mean a loan made by the Lenders to
Borrower pursuant to Section 2.01(a)(ii). Each Additional Term B Loan shall
either be an ABR Term Loan or a Eurodollar Term B Loan."
"'Amendment No. 2 Effective Date' shall mean the date the conditions
precedent contained in Section 3 of Amendment No. 2 to the Credit Agreement
are satisfied in all respects."
"'Original Subordinated Notes' shall mean an aggregate of $51.0 million of
Borrower's 15% Junior Subordinated Notes due 2010 issued pursuant to the
Original Subordinated Notes Agreement (plus the amount of any interest paid in
kind which may be added to the principal of such Subordinated Notes)."
"'Original Subordinated Notes Agreement' shall mean the Note Purchase
Agreement between Borrower and Cherokee Energy Partners LLC dated as of December
22, 2003 pursuant to which the Original Subordinated Notes were issued and as
thereafter amended from time to time subject to the requirements of this
Agreement."
"'Original Term B Commitment' shall mean, with respect to each Lender, the
commitment, if any, of such Lender to make an Original Term B Loan hereunder on
the Closing Date in the amount set forth on Schedule I to the Lender Addendum
executed and delivered by such Lender, or in the Assignment and Assumption
pursuant to which such Lender shall have assumed its Original Term B
Commitment, as applicable, as the same may be (a) reduced from time to time
pursuant to Section 2.07 and (b) reduced or increased from time to time pursuant
to assignments by or to such Lender pursuant to Section 11.04. The aggregate
amount of the Lenders' Original Term B Commitments was $120.0 million."
"'Original Term B Loan' shall mean a loan made by the Lenders to Borrower
pursuant to Section 2.01(a)(i). Each Original Term B Loan shall be either an
ABR Term Loan or a Eurodollar Term B Loan."
-3-
"'Xxxxx In-Progress' shall mean a well that has been drilled but has not
yet been connected to the Borrower's gathering system."
(b) Section 1.01 of the Credit Agreement is hereby amended by adding
the following to the end of the definition of "Applicable Margin":
"provided, however, that until such time as the Borrower's Total Leverage Ratio
as of any Test Period (as set forth in a Compliance Certificate delivered
pursuant to Section 5.01(d) and effective as of the date of such delivery) is
less than 4.0 to 1.0, the Applicable Margin, with respect to any Term B Loan,
Revolving Loan or, for purposes of Section 2.05(d), LC Facility Letter of
Credit, as the case may be, shall be the applicable basis points set forth
below under the appropriate caption
Eurodollar ABR
---------- ---
Term B Loans 475 375
Revolving Loans 450 350
LC Facility Letter of Credit 475 375"
(c) Section 1.01 of the Credit Agreement is hereby amended by
deleting each of the following definitions and replacing it with the following:
"'Capital Expenditures' shall mean, for any period, without duplication,
the cash expenditures made or Indebtedness incurred during such period for the
property, plant and equipment and the work-in-progress as reflected on the
consolidated balance sheet of the Borrower and its Subsidiaries, determined in
accordance with GAAP, but excluding (i) expenditures made in connection with the
replacement, substitution or restoration of property pursuant to Section
2.10(f), (ii) any portion of such increase attributable solely to acquisitions
of property, plant and equipment in Permitted Acquisitions and (iii)
expenditures made with the proceeds of the Original Term B Loan. For the
avoidance of doubt, the acquisition of undeveloped oil and gas leasehold
interests in the Cherokee Basin shall be considered Capital Expenditures."
"'Consolidated EBITDA' shall mean, for any period, Consolidated Net Income
for such period, adjusted by (x) adding thereto, in each case only to the extent
(and in the same proportion) deducted in determining such Consolidated Net
Income (and with respect to the portion of Consolidated Net Income attributable
to any Subsidiary of Borrower only if a corresponding amount would be permitted
at the date of determination to be distributed to Borrower by such Subsidiary
without prior approval (that has not been obtained), pursuant to the terms of
its Organizational Documents and all agreements, instruments, judgments,
decrees, orders, statutes, rules and regulations applicable to such Subsidiary
or its equityholders):
(a) Consolidated Interest Expense and interest expense on the
Subordinated Notes for such period,
(b) Consolidated Amortization Expense for such period,
-4-
(c) Consolidated Depreciation Expense for such period,
(d) Consolidated Tax Expense for such period,
(e) costs and expenses directly incurred in connection with the
Transactions (not to exceed $6.3 million), and
(f) the aggregate amount of all other non-cash items reducing
Consolidated Net Income (excluding any non-cash charge that results in an
accrual of a reserve for cash charges in any future period) for such
period, and
(y) subtracting therefrom, in each case only to the extent (and in the same
proportion) added in determining Consolidated Net Income, (i) the aggregate
amount of all non-cash items increasing Consolidated Net Income (other than the
accrual of revenue or recording of receivables in the ordinary course of
business) for such period and (ii) any general and administrative expenses that
are capitalized and added to the gross property, plant and equipment account
during such period under the full cost method of accounting.
Other than for purposes of calculating Excess Cash Flow, Consolidated
EBITDA shall be calculated on a Pro Forma Basis to give effect to any Permitted
Acquisition and Asset Sales (other than any dispositions in the ordinary course
of business) consummated at any time on or after the first day of the Test
Period thereof as if each such Permitted Acquisition had been effected on the
first day of such period and as if each such Asset Sale had been consummated on
the day prior to the first day of such period.
"'Excess Cash Flow Period' shall mean (i) the period taken as one
accounting period from July 1, 2004 and ending on December 31, 2004 and (ii)
thereafter the two fiscal quarter periods ending at the end of Borrower's second
and fourth quarters."
"'Financial Officer' shall mean with respect to any person, the chief
financial officer or the chief executive officer of such person."
"'Subordinated Notes' shall mean, collectively, the Original Subordinated
Notes and the Additional Subordinated Notes."
"'Subordinated Notes Agreement' shall mean, collectively, the Original
Subordinated Notes Agreement and the Additional Subordinated Notes Agreement.
"'Term B Commitment' shall mean, collectively, the Original Term B
Commitment and the Additional Term B Commitment."
"'Term B Loan' shall mean, collectively, the Original Term B Loans and the
Additional Term B Loans."
"'Total Net Debt' shall mean, at any time, (a) the total principal amount
of Indebtedness of Borrower and its Subsidiaries at such time (excluding the
aggregate principal amount of Subordinated Notes and Indebtedness of the type
described in clauses (j) and (k) (except to the extent of any unreimbursed
drawings thereunder) and (h) of the definition of such term), less (b) the
amount, not in excess of $10.0
-5-
million, of unrestricted cash on hand at Borrower and the Subsidiary Guarantors.
The fact that the Collateral Agent holds a Lien against funds on deposit in
accounts will not cause such funds to be considered restricted for purposes of
this definition."
(d) Section 2.01(a) of the Credit Agreement is hereby amended by
replacing it with the following:
"(a) (i) to make an Original Term B Loan to Borrower on the Closing Date
in the principal amount not to exceed such Lender's Original Term B Commitment
and, at any time and from time to time during the LC Facility Availability
Period, to the extent provided in clause (ii) to the proviso of Section 2.18(e),
to make an Original Term B Loan in an aggregate principal amount at any time
outstanding that will not result in such Lender's LC Facility LC Exposure
exceeding such Lender's original LC Facility Commitment and (ii) to make an
Additional Term B Loan to Borrower on the Amendment No. 2 Effective Date with
the principal amount not to exceed such Lender's Additional Term B Commitment;"
(e) The first paragraph of Section 2.03 of the Credit Agreement is
amended by replacing it with the following:
"To request any Borrowing, Borrower shall deliver, by hand delivery or telecopy,
a duly completed and executed Borrowing Request to the Administrative Agent,
executed by a Financial Officer of the Borrower (i) in the case of a Eurodollar
Borrowing, not later than 11:00 a.m., New York City time, four (4) Business Days
before the date of the proposed Borrowing or (ii) in the case of an ABR
Borrowing, not later than 11:00 a.m., New York City time, two (2) Business Day
before the date of the proposed Borrowing (other than any advance made under
the Swingline Commitment). Each Borrowing Request shall be irrevocable and shall
specify the following information in compliance with Section 2.02:
(a) whether the requested Borrowing is to be a Borrowing of Revolving
Loans or Term B Loans;
(b) the aggregate amount of such Borrowing;
(c) the date of such Borrowing, which shall be a Business Day;
(d) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing; provided that Eurodollar Borrowings shall not be available
until the earlier of (i) August 31, 2004 and (ii) the date on which the
Syndication Agent shall have notified Borrower that a Successful
Syndication has been achieved; provided, further, however, that if on
August 31, 2004, the Syndication Agent shall not have notified Borrower
that a Successful Syndication has been achieved, then Borrower shall only
be entitled to select Interest Periods for Eurodollar Borrowings of one
month until it has been so notified;
(e) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period";
(f) the location and number of Borrower's account to which funds are
to be disbursed, which shall comply with the requirements of Section
2.02(c);
-6-
(g) that the conditions set forth in Sections 4.02(b)-(d) have been
satisfied as of the date of the notice;
(h) the proposed use of proceeds of such Borrowing;
(i) the Borrower's cash balance as of the close of the Business Day
immediately preceding the date of such Borrowing Request;
(j) if the borrowing request is made (i) before January 1, 2007, the
fiscal quarter-to-date Capital Expenditures (through the end of the month
for which the Borrower has delivered financial statements pursuant to
Section 5.01(c)), together with the amount of permitted Capital
Expenditures for the applicable quarter, or (ii) on or after January 1,
2007, the Excess Cash Flow Period-to-date Capital Expenditures (through
the end of the month for which the Borrower has delivered financial
statements pursuant to Section 5.01(c)), together with the amount of
permitted Capital Expenditures for the applicable Excess Cash Flow Period;
(k) a report of gross production volume for each of the last 30 days;
(l) a calculation of the 20-day average gross production figures
using the highest production results achieved for any 20 of the last 30
days ("Average Production"); and
(m) during calendar year 2005, a summary of xxxxx drilled since
January 1, 2005, classifying xxxxx according to one of two types: (i) one
of 26 xxxxx "carried over" from the 2004 drilling budget or (ii) one of
up to 150 xxxxx (in addition to the 26 xxxxx described in clause (i)
above) after the Drilling Recommencement Date.
(f) Section 2.17(a) of the Credit Agreement is hereby amended by
replacing the "$10.0 million" in clause (i) with $500,000."
(g) Section 3.12 of the Credit Agreement is amended by deleting it in
its entirety and replacing it with the following:
"SECTION 3.12 Use of Proceeds. Subject to the provisions of Section 5.08,
Borrower will use the proceeds of (a) the Original Term B Loans to effect the
Refinancing, pay related fees, commissions and expenses, and for working capital
and general corporate purposes (including to effect Permitted Acquisitions),
(b) the Revolving Loans and Swingline Loans after the Closing Date for working
capital and general corporate purposes (including to effect Permitted
Acquisitions), it being understood that no Revolving Loans shall be made on the
Closing Date, (c) the LC Facility Letter of Credit to provide credit support for
certain Commodity Hedging Obligations and (d) the Additional Term Loan B Loans
to repay $3.0 million of Revolving Loans outstanding on the Amendment No. 2
Effective Date and the remainder for working capital and capital expenditures."
(h) Section 5.01(a) of the Credit Agreement is amended by deleting
clause (ii) thereof in its entirety and replacing it with the following:
"(ii)a management report in a form reasonably satisfactory to the
Administrative Agent setting forth, on a consolidated basis, the financial
condition, results of operations and cash flows as of the
-7-
end of and for such fiscal year and, commencing with the fiscal year ended
December 31, 2005, a comparison of the financial condition, results of
operations and cash flows for such fiscal year to the previous fiscal year and
to the budgeted amounts,"
(i) Section 5.01(c) of the Credit Agreement is amended by deleting it
in its entirety and replacing it with the following:
"(c) Monthly Reports. Within 45 days after the end of each of the first
two months of each fiscal quarter beginning with January, 2005, (i) the
consolidated balance sheet of Borrower as of the end of such month and the
related consolidated statements of operations, cash flows and members' equity of
Borrower for such month and for the then elapsed portion of the fiscal year, in
comparative form (including operational and statistical information consistent
with internal and industry wide reporting standards in form reasonably
satisfactory to the Administrative Agent), with the consolidated statements of
operations and cash flows for the comparable periods in the previous fiscal year
and budgeted amounts, accompanied by a certificate of a Financial Officer
stating that such financial statements fairly present, in all material respects,
the consolidated results of operations and cash flows of Borrower as of the date
and for the periods specified in accordance with GAAP consistently applied,
subject to normal year-end audit adjustments, (ii) a management report in a
form substantially similar to the existing "Monthly Operating and Financial
Report" provided to the Borrower's Board of Managers and reasonably satisfactory
to the Administrative Agent setting forth, on a consolidated basis, the
financial condition, results of operations and cash flows for such month and for
the then elapsed portion of the fiscal year compared in reasonable detail to
the comparable periods in the previous fiscal year; provided that such monthly
report shall include, without limitation, a comparison and a discussion of
actual financial, drilling, completion, production and pricing results to the
monthly budgeted amounts."
(j) Section 5.01(h) of the Credit Agreement is amended by deleting it
in its entirety and replacing as follows:
"(h) Budgets. No later than 30 days prior to the first day of each fiscal
year of Borrower (i) a budget in form reasonably satisfactory to the
Administrative Agent (including budgeted statements of operations and cash
flows for each of Borrower's business units and balance sheets) for the next two
fiscal years prepared on a monthly basis for the first year addressed therein,
and a quarterly basis for the second year addressed therein and (ii) projections
on an annual basis through the Final Maturity Date, with appropriate
presentation and discussion of the principal assumptions upon which such budgets
and projections are based, accompanied by the statement of a Financial Officer
of Borrower to the effect that each of the budget and projections of Borrower is
a reasonable estimate for the period covered thereby."
(k) Section 5.01(l)(i) of the Credit Agreement is amended by deleting
it in its entirety and replacing as follows:
"(i) As soon as available and in any event by March 31 and August 15 of
each year, commencing January 1, 2005, Borrower shall deliver to the
Administrative Agent and each Lender a Reserve Report prepared as of the
immediately preceding December 31 and June 30, respectively; provided, that such
Reserve Report shall provide data on a monthly basis for the first twelve months
covered therein."
(l) Section 5.01(l) of the Credit Agreement is amended by adding a
new Section 5.01(l)(iv) as follows:
-8-
"(iv) Beginning February 28, 2005, not later than 5:00 p.m. New York City
time on the Monday following the preceding week, the Borrower shall provide a
weekly production report to the Administrative Agent, which report shall be in
a form reasonably satisfactory to the Administrative Agent."
(m) Section 5.07(a) of the Credit Agreement is amended by deleting it
in its entirety and replacing it with the following:
"(a) Keep proper books of record and account in which full, true and
correct entries in conformity with GAAP and all Requirements of Law are made of
all dealings and transactions in relation to its business and activities. Each
Company will permit any representatives designated by the Administrative Agent
or any Lender to visit and inspect the financial records and the property of
such Company at reasonable times and as often as reasonably requested and to
make extracts from and copies of such financial records, and permit any
representatives designated by the Administrative Agent or any Lender to discuss
the affairs, finances, accounts, condition and Mineral Interests of any Company
with the officers and employees thereof and advisors therefor (including
without limitation the Approved Petroleum Engineer and independent accountants).
The Administrative Agent shall have the right, at the Borrower's expense, to
hire an independent petroleum engineer to review, among other things, the
Reserve Report delivered pursuant to Section 5.01(l), the work of the Approved
Petroleum Engineer and the Borrower's reserves; provided that in connection
with employing any such independent petroleum engineer, the Administrative Agent
may, at its option, elect to (i) coemploy the Borrower's Approved Petroleum
Engineer or (ii) hire its own reserve engineer. Borrower shall, and shall use
its reasonable efforts to cause the Approved Petroleum Engineer to, cooperate
fully in connection with any such review."
(n) Section 5.07 of the Credit Agreement is amended by adding the
following as a new Section 5.07(c):
"(c) The Administrative Agent shall have the right, in consultation with
the Borrower and at the Borrower's expense, to, from time to time, hire an
independent consultant to review, among other things, the Borrower's business,
financial controls and operations. Borrower shall, and shall use its reasonable
efforts to cause its accountants and other advisors to, cooperate fully in
connection with any such review."
(o) Section 5.08 of the Credit Agreement is amended by adding the
following as a new second paragraph thereto:
"Notwithstanding the foregoing, until the later of (i) the first Test
Period for which the Borrower has delivered a Compliance Certificate certifying
that the Borrower's Total Leverage Ratio is less than 3.5 to 1.0 after giving
effect to such Borrowing and (ii) December 31, 2005, the proceeds of the
Revolving Loans may be used for working capital purposes only."
(p) Section 6.01(c) of the Credit Agreement is amended by deleting it
in its entirety and replacing it with the following:
"(c) the Subordinated Notes; provided that the aggregate principal amount
of such Subordinated Note does not exceed $63,000,000 (plus the amount of any
interest paid in kind which may be added to the principal of such Subordinated
Notes) at any time;"
-9-
(q) The Credit Agreement shall be amended by adding a new Section
5.17 as follows:
"Section 5.17. Repricing Fee. Pay each Term B Lender a repricing fee
of 1.0% of the outstanding Term B Loans held by such Lender upon any repricing
of the Applicable Margin on Term B Loans on or prior to the first anniversary of
the Amendment No. 2 Effective Date."
(r) Section 6.10(a) of the Credit Agreement is amended by deleting it
in its entirety and replacing it with the following:
"(a) Maximum Total Leverage Ratio. Permit the Total Leverage Ratio for any
Test Period ending on the dates set forth in the table below to exceed the
ratio set forth opposite such period in the table below:
---------------------------------------------------
Test Period Ending Leverage Ratio
------------------ --------------
---------------------------------------------------
March 31, 2005 5.50 to 1.0
---------------------------------------------------
June 30, 2005 5.00 to 1.0
---------------------------------------------------
September 30, 2005 4.50 to 1.0
---------------------------------------------------
December 31, 2005 3.80 to 1.0
---------------------------------------------------
March 31, 2006 3.30 to 1.0
---------------------------------------------------
June 30, 2006 2.90 to 1.0
---------------------------------------------------
September 30, 2006 and thereafter 2.50 to 1.0
---------------------------------------------------
(s) Section 6.10(c) of the Credit Agreement is amended by deleting it
in its entirety and replacing it with the following:
(c) Minimum Interest Coverage Ratio. Permit the Consolidated Interest
Coverage Ratio for any Test Period (i) ending in 2005 to be less than 2.7 to 1.0
and (ii) thereafter to be less than 3.5 to 1.0.
(t) Section 6.10(d) of the Credit Agreement is amended by deleting it
in its entirety and replacing it with the following:
(d) Minimum Fixed Charge Coverage Ratio. Permit the Consolidated Fixed
Charge Coverage Ratio for any Test Period (i) in 2006 ending on or prior to
September 30, 2006 to be less than 1.0 to 1.0, (ii) ending December 31, 2006 to
be less than 1.1 to 1.0, (iii) ending in 2007 to be less than 1.25 to 1.0 and
(iv) thereafter to be less than 1.5 to 1.0.
(u) Section 6.10(e) of the Credit Agreement is amended by deleting it
in its entirety and replacing it with the following:
(e) Limitation on Capital Expenditures. Permit the aggregate amount of
Capital Expenditures for any quarter ending on the date set forth in the table
below to exceed the amount set forth opposite such period below:
-10-
-------------------------------------------------
Quarter Ending Amount (in millions)
-------------- --------------------
-------------------------------------------------
March 31, 2005 $15.0
-------------------------------------------------
June 30, 2005 $7.25
-------------------------------------------------
September 30, 2005 $9.5
-------------------------------------------------
December 31, 2005 $13.25
-------------------------------------------------
March 31, 2006 $10.00
-------------------------------------------------
June 30, 2006 $10.00
-------------------------------------------------
September 30, 2006 $10.00
-------------------------------------------------
December 31, 2006 $10.00
-------------------------------------------------
and, commencing January 1, 2007, permit the aggregate amount of Capital
Expenditures in any Excess Cash Flow Period to exceed Budgeted Capital
Expenditures for such Excess Cash Flow Period; provided such amount for any
Excess Cash Flow Period shall be increased by an amount, if any, equal to (i)
the amount of Net Cash Proceeds of Excluded Issuances designated for Capital
Expenditures for such Excess Cash Flow Period and (ii) the portion of Excess
Cash Flow not required to be applied to Loans pursuant to Section 2.10(g) for
the immediately preceding Excess Cash Flow Period or used to pay a Dividend or
Subordinated Note payment pursuant to Section 6.08(c).
During any quarter between January 1, 2005 and December 31, 2006,
permitted Capital Expenditures shall be increased by the difference between the
sum of the quarterly maximum Capital Expenditures amounts for each quarter
between January 1, 2005 and the current quarter and the cumulative Capital
Expenditures made between January 1, 2005 and the current quarter.
At the request of Borrower, and upon demonstration by Borrower to the
Administrative Agent of Borrower's compelling need to make Capital Expenditures
in excess of the limitations referred to in this Section 6.10(e), the
Administrative Agent in its sole discretion shall be entitled to approve an
increase in the Capital Expenditures limitations for any Excess Cash Flow Period
set forth above of up to 5% of the aggregate amount set forth above with respect
to such Excess Cash Flow Period."
(v) The Credit Agreement shall be amended by adding a new Section
6.22 as follows:
"SECTION 6.22 Drilling. From and after January 1, 2005, Borrower
shall not drill any new xxxxx (other than the 26 xxxxx originally budgeted to be
drilled during December 2004) until (i) at least 200 xxxxx have been connected
to Borrower's gathering system since January 1, 2005 and (ii) gross daily
production is at least 43mmcfe/d for any 20 of the last 30 days (the "Drilling
Recommencement Date"). Following the Drilling Recommencement Date and prior to
January 1, 2006, Borrower shall drill no more than 150 new xxxxx; provided that
following March 1, 2005 in no event shall the number of Xxxxx InProgress as of
the end of any month exceed 250."
-11-
(w) Section 11.03(a) of the Credit Agreement is amended by adding the
following language after the word "appraisers" and before the words "or other
advisors" in the first sentence following clause (iv):
", independent petroleum engineers."
(x) Schedule 1.01(c) (Subsidiary Guarantors) is replaced by the new
Schedule 1.01(c) attached hereto as Annex I.
(y) Exhibit C is replaced by the new Exhibit C attached hereto as
Annex II.
(z) Exhibit D is replaced by the new Exhibit D attached hereto as
Annex III.
(aa) Exhibit E is replaced by the new Exhibit E attached hereto as
Annex IV.
SECTION 2.Waiver. Borrower has requested and the Lenders agree,
subject to the satisfaction of the conditions set forth in Section 3, to waive
the Defaults or Event of Defaults caused by Borrower not complying with the
following sections of the Credit Agreement:
(a) The Maximum Total Leverage Ratio requirement contained in Section
6.10(a) for the Test Period ending November 30, 2004.
(b) The Minimum Interest Coverage Ratio requirement contained in
Section 6.10(c) for the Test Period ending November 30, 2004.
(c) The requirement to pay the Default Rate of interest pursuant to
Section 2.06.
(d) The budget delivery provision of Section 5.01(h).
(e) If the Additional Subordinated Notes issued pursuant to the
Additional Subordinated Notes Agreement are deemed not to have been incurred
pursuant to Section 6.01(f) or Section 6.01(k), the incurrence of such
Indebtedness and the failure to comply with the mandatory prepayment provisions
set forth in Section 2.10(d).
SECTION 3.Conditions to Effectiveness. This Amendment shall become
effective when, and only when and if:
(a) the Administrative Agent (or its counsel) shall have received
from (A) Lenders constituting (i) the Requisite Lenders and (ii) those Term B
Lenders representing the entire amount of the Additional Term B Loan Commitment
and (B) each of the other parties hereto, either (i) a counterpart of this
Amendment signed on behalf of such party or (ii) written evidence satisfactory
to the Administrative Agent (which may include telecopy transmission of a signed
signature page of this Amendment) that such party has signed a counterpart of
this Amendment;
(b) the representations and warranties set forth in Section 4 hereof
are true and correct in all material respects;
-12-
(c) Borrower has paid the Administrative Agent (i) for the account of
the Lenders, an amount equal to 0.125% of the aggregate principal amount of the
Loans held by the Lenders who provide a consent (but not with respect to any
Additional Term B Commitment) and (ii) all reasonable costs and expenses of the
Administrative Agent in connection with the preparation, execution and delivery
of this Amendment other instruments and documents to be delivered hereunder, if
any (including, without limitation, the reasonable fees and expenses of Xxxxxx
Xxxxxx & Xxxxxxx LLP, counsel to the Administrative Agent) in accordance with
the terms of Section 11.03 of the Credit Agreement;
(d) Borrower shall have paid the fees set forth in the arrangement
letter related to this Amendment.
(e) all corporate and other proceedings taken or to be taken in
connection with this Amendment and all documents incidental thereto, whether or
not referred to herein, shall be reasonably satisfactory in form and substance
to the Administrative Agent;
(f) after giving effect to the Amendment, no Default or Event of
Default has occurred and is continuing;
(g) the Borrower shall have received at least $7.0 million of gross
proceeds from the issuance of Additional Subordinated Notes; and
(h) the Borrower shall deliver any other certificates or
documentation the Administrative Agent may reasonably request.
SECTION 4.Representations and Warranties; No Default. The Borrower
hereby confirms that, after giving effect to this Amendment, no Default or
Event of Default exists under the Credit Agreement and hereby affirms and
restates the representations and warranties made by it in the Credit Agreement
and confirms that all such representations and warranties are true and correct
in all material respects as of the date hereof, except to the extent that any
such representation and warranty specifically relates to an earlier date.
SECTION 5.Miscellaneous.
(a) This Amendment relates only to the specific matters covered
herein and shall not constitute a consent to or waiver or modification of any
other provision, term or condition of the Credit Agreement.
(b) All terms, provisions, covenants, representations, warranties,
agreements and conditions contained in the Credit Agreement shall remain in full
force and effect except as expressly provided herein.
(c) From and after the effectiveness of this Amendment, each
reference in the Credit Agreement to "this Agreement," "hereof," "herein,"
"hereby" or words of like import shall be deemed to be a reference to the Credit
Agreement as amended by this Amendment.
-13-
(d) This Amendment may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.
(e) Any provision of this Amendment which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
(f) This Amendment shall be binding upon the Borrower, the
Guarantors, the Agents and the Lenders and their respective successors and
assigns, and shall inure to the benefit of the Borrower, the Guarantors, the
Agents and the Lenders and the successors and assigns of the Agents and the
Lenders. Except as hereby amended, the Credit Agreement shall remain in full
force and effect and is hereby ratified and confirmed in all respects.
(g) This Amendment shall be governed by, and construed in accordance
with, the laws of the State of New York without regard to principles of conflict
of laws.
IN WITNESS WHEREOF, the Borrower and each of the undersigned Agents
and Lenders have caused this Amendment to be duly executed and delivered by
their duly authorized officers as of the date first above written.
QUEST CHEROKEE, LLC
By: /s/ Xxxxx X. Xxxx
-------------------------------------
Name: Xxxxx X. Xxxx
Title: CEO
BLUESTEM PIPELINE, LLC
by Quest Cherokee, LLC, its sole member
By: /s/ Xxxxx X. Xxxx
-------------------------------------
Name: Xxxxx X. Xxxx
Title: CEO
QUEST OILFIELD SERVICE, LLC
by Quest Cherokee, LLC, its sole member
By: /s/ Xxxxx X. Xxxx
-------------------------------------
Name: Xxxxx X. Xxxx
Title: CEO
UBS SECURITIES LLC, as Arranger, Syndication
Agent and Documentation Agent
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Executive Director
By: /s/ Xxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxx
Title: Director and Counsel
Region Americas Legal
UBS AG, STAMFORD BRANCH, as Issuing Bank, LC
Facility Issuing Bank, Administrative Agent and
Collateral Agent
By: /s/ Xxxxxxx X. Saint
-------------------------------------
Name: Xxxxxxx X. Saint
Title: Director
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Director
UBS LOAN FINANCE LLC, as Swingline Lender
By: /s/ Xxxxxxx X. Saint
-------------------------------------
Name: Xxxxxxx X. Saint
Title: Director
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Director
UBS LOAN FINANCE LLC, as a Lender
By: /s/ Xxxxxxx X. Saint
-------------------------------------
Name: Xxxxxxx X. Saint
Title: Director
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Director
UBS AG, STAMFORD BRANCH, as a Lender
By: /s/ Xxxxxxx X. Saint
-------------------------------------
Name: Xxxxxxx X. Saint
Title: Director
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Director
AMMC CDO II, LIMITED
By: American Money Management Corp.,
QUEST CHEROKEE as Collateral Manager, as a Term B Lender
By: /s/ Xxxxxxx X. Eng
-------------------------------------
Name: Xxxxxxx X. Eng
Title: Senior Vice President
AMMC CLO III, LIMITED
By: American Money Management Corp.,
QUEST CHEROKEE as Collateral Manager, as a Term B Lender
By: /s/ Xxxxxxx X. Eng
-------------------------------------
Name: Xxxxxxx X. Eng
Title: Senior Vice President
AMMC CLO IV, LIMITED
By: American Money Management Corp.,
QUEST CHEROKEE as Collateral Manager, as a Term B Lender
By: /s/ Xxxxxxx X. Eng
-------------------------------------
Name: Xxxxxxx X. Eng
Title: Senior Vice President
Erste Bank der Oesterreichischen Sparkassen AG,
as a Term B Lender
By: /s/ Xxxxx X. Xxxxx
-------------------------------------
Name: Xxxxx X. Xxxxx
Title: 1st Vice President
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Director
By: Callidus Debt Partners CDO Fund I, Ltd.
By: Its Collateral Manager,
Callidus Capital Management, LLC,
as a Lender
By: /s/ Xxxxx Xxxxxxx
--------------------------------------
Name: Xxxxx Xxxxxxx
Title: Senior Managing Director
By: Callidus Debt Partners CLO Fund II, Ltd.
By: Its Collateral Manager,
Callidus Capital Management, LLC,
as a Lender
By: /s/ Xxxxx Xxxxxxx
--------------------------------------
Name: Xxxxx Xxxxxxx
Title: Senior Managing Director
By: Callidus Debt Partners CLO Fund IIII, Ltd.
By: Its Collateral Manager,
Callidus Capital Management, LLC,
as a Lender
By: /s/ Xxxxx Xxxxxxx
--------------------------------------
Name: Xxxxx Xxxxxxx
Title: Senior Managing Director
Dated this 18th day of February, 2005.
NATIONWIDE MUTUAL INSURANCE COMPANY
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. xxxxxxx
Title: Associate Vice President
Public Bonds
Dated this 18th day of February, 2005.
NATIONWIDE MUTUAL FIRE INSURANCE COMPANY
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. xxxxxxx
Title: Associate Vice President
Public Bonds
Dated this 18th day of February, 2005.
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. xxxxxxx
Title: Associate Vice President
Public Bonds
Xxxxxxxxxxx Senior Floating Rate Fund,
as a Lender
By: /s/ Xxxx Xxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxx
Title: AVP
XXXXXX STRAITS CLO 2004, LTD.
By Royal Bank of Canada as Collateral Manager,
as a Term B Lender
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Authorized Signatory
SEQUILS-Glace Bay, Ltd.
By Royal Bank of Canada as Colleral Manager,
as a Term B Lender
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Authorized Signatory
FOXE BASIN CLO 2003, LTD.
By Roayl Bank of Canada as Collateral Manager,
as a Term B Lender
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Authorized Signatory
Venture CDO 2002, Limited, as a Lender
By its investment advisor, MJX Asset
Management LLC
By: /s/ Xxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Director
Venture II CDO 2002, Limited, as a Lender
By its investment advisor, MJX Asset
Management LLC
By: /s/ Xxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Director
Venture III CDO Limited, as a Lender
By its investment advisor, MJX Asset
Management LLC
By: /s/ Xxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Director
Venture IV CDO Limited, as a Lender
By its investment advisor, MJX Asset
Management LLC
By: /s/ Xxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Director
Vista Leveraged Income Fund, as a Term B Lender
By its investment advisor, MJX Asset
Management LLC
By: /s/ Xxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Director
TRS Callisto LLC, as a Lender
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
Xxxxxxxx Floating Rate Fund, LLC,
as a Term B Lender
By: /s/ Xxxx Xxxxxxx
------------------------------------
Name: Xxxx Xxxxxxx
Title: Managing Director
DEBT STRATEGIES FUND, INC.
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Authorized Signatory
SENIOR HIGH INCOME PORTOLIO, INC.
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Authorized Signatory
Diversified Income Strategic Portfolio, Inc.
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Authorized Signatory
Xxxxxxx Xxxxx Global Investment Series:
Income Strategies Portfolio
By: Xxxxxxx Xxxxx Investment Managers, L.P.
as Investment Advisor
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Authorized Signatory
CITICORP INSURANCE AND INVESTMENT TRUST
By: Travelers Asset Management Investment
Company, LLC, as a Term B Lender
By: /s/ Xxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Investment Officer
THE TRAVELERS INSURANCE COMPANY,
as a Term B Lender
By: /s/ Xxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Investment Officer
STONE TOWER CLO II LTD, as a Term B Lender
By: Stone Tower Debt Advisors LLC,
as Collateral Manager
By: /s/ W. Xxxxxxx Xxxxx
-------------------------------------
Name: W. Xxxxxxx Xxxxx
Title: Authorized Signatory
New York Life Insurance Company,
as a Term B Lender
By: /s/ F. Xxxxx Xxxxx
-------------------------------------
Name: F. Xxxxx Xxxxx
Title: Investment Vice President
New York Life Insurance and Annuity Corporation,
as a Term B Lender
By: New York Life Investment Management LLC
Its Investment Manager
By: /s/ F. Xxxxx Xxxxx
-------------------------------------
Name: F. Xxxxx Xxxxx
Title: Director
ELF Funding Trust III, as a Term B Lender
By: New York Life Investment Management LLC
as Attorney-In-Fact
By: /s/ F. Xxxxx Xxxxx
-------------------------------------
Name: F. Xxxxx Xxxxx
Title: Director
NYLIM Flatiron CLO 2003-1, Ltd.,
as a Term B Lender
By: New York Life Investment Management LLC
as Collateral Manager and Attorney-In-Fact
By: /s/ F. Xxxxx Xxxxx
-------------------------------------
Name: F. Xxxxx Xxxxx
Title: Director
NYLIM Flatiron CLO 2004-1, Ltd.,
as a Term B Lender
By: New York Life Investment Management LLC
as Collateral Manager and Attorney-In-Fact
By: /s/ F. Xxxxx Xxxxx
-------------------------------------
Name: F. Xxxxx Xxxxx
Title: Director
MainStay Floating Rate Fund, a series of
Eclipse Funds Inc., as a Term B Lender
By: New York Life Investment Management LLC
By: /s/ F. Xxxxx Xxxxx
-------------------------------------
Name: F. Xxxxx Xxxxx
Title: Director
Citigroup Investments Corporate Loan Fund Inc.
By: Travelers Asset Management International
Company LLC
By: /s/ Xxxxx Xxx
-------------------------------------
Name: Xxxxx Xxx
Title: Xxxxx Xxx, VP
Alternative Investment Strategies
000 Xxxx Xxx./0xx FL/Zn. 2
Ph: (000) 000-0000
LANDMARK IV CDO LIMITED
By: Aladdin Capital Management LLC, as manager,
as a Term B Lender
By: /s/ Xxxxxx Xxxxxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Director
LONG LANE MASTER TRUST II, as a Term B Lender
By: /s/ Xxxxx X. Xxxxx
----------------------------------------
Name: Xxxxx X. Xxxxx
Title: Authorized Agent
ANNEX I
Schedule 1.01(c)
to
Credit Agreement
Subsidiary Guarantor
Bluestem Pipeline, LLC
Quest Oilfield Service, LLC
ANNEX II
EXHIBIT C
[Form of]
BORROWING REQUEST
UBS AG, Stamford Branch,
as Administrative Agent for
the Lenders referred to below,
000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: [ ]
Re: Quest Cherokee, LLC
[Date]
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of July 22, 2004
(as amended, amended and restated, supplemented or otherwise modified from time
to time, the "Credit Agreement") among QUEST CHEROKEE, LLC, a Delaware limited
liability company ("Borrower"), the Guarantors (such term and each other
capitalized term used but not defined herein having the meaning given it in
Article I of the Credit Agreement), the Lenders, UBS SECURITIES LLC, as lead
arranger (in such capacity, "Arranger"), documentation agent (in such capacity,
"Documentation Agent") and syndication agent (in such capacity, "Syndication
Agent"), UBS LOAN FINANCE LLC, as swingline lender (in such capacity,
"Swingline Lender"), and UBS AG, STAMFORD BRANCH, as administrative agent (in
such capacity, "Administrative Agent") for the Lenders, collateral agent (in
such capacity, "Collateral Agent") for the Secured Parties and Issuing Bank.
Borrower hereby gives you notice pursuant to Section 2.03 of the Credit
Agreement that it requests a Borrowing under the Credit Agreement, and in that
connection sets forth below the terms on which such Borrowing is requested to be
made:
(A) Class of Borrowing [Revolving Borrowing]
[Term B Borrowing]
(B) Principal amount of Borrowing1 ____________________
________________________
1 ABR and Eurodollar Loans must be in an amount that is at least $1,000,000
and an integral multiple of $500,000 or equal to the remaining available
balance of the applicable Commitments.
(C) Date of Borrowing (which is a Business Day)
(D) Type of Borrowing [ABR] [Eurodollar]2
(E) Interest Period and the last day thereof3
(F) Funds are requested to be disbursed to Borrower's account with UBS AG,
Stamford Branch (Account No. ).
(G) Proposed use of proceeds: _____________________________________________
(H) Borrower's cash balance as of the close of the Business Day immediately
preceding the date hereof:_____________________________________________
(I) (1) [[For periods prior to January 1, 2007] Quarter-to-date Capital
Expenditures (through the most recent month for which financial statements
have been delivered under Section 5.01(c))] [[Thereafter] Excess Cash Flow
Period-to-date Capital Expenditures (through the most recent month for
which financial statements have been delivered under Section 5.01(c))]:
___________________________________
(2) Comparison of number in (1) to permitted amount for the quarter or
Excess Cash Flow Period as set forth in Section 6.10(e):
__________________________________________
(J) Gross production volume for each of the last 30 days (please attach a
list)
(K) 20-day average gross production using the highest production results
achieved during any 20 of the last 30 days:____________________________
(L) For use only during calendar year 2005, please attach a list showing a
summary of xxxxx drilled since January 1, 2005, classifying xxxxx
according to one of two types: (i) one of 26 xxxxx "carried over" from the
2004 drilling budget or (ii) one of up to 150 xxxxx drilled (in addition
to the 26 xxxxx described in clause (i) above) after the Drilling
Recommencement Date.
Borrower hereby represents and warrants that the conditions to
lending specified in Sections 4.02(b), (c) and (d) of the Credit Agreement are
satisfied as of the date hereof.
________________________
2 Shall be ABR for Swingline Loans.
3 Shall be subject to the definition of "Interest Period"in the Credit
Agreement.
QUEST CHEROKEE, LLC
By:
---------------------------------
Title: [Financial Officer]
ANNEX III
EXHIBIT D
[Form of]
COMPLIANCE CERTIFICATE
I, [ ], the [Financial Officer] of Quest Cherokee, LLC (in such
capacity and not in my individual capacity), hereby certify that, with respect
to that certain Credit Agreement dated as of July 22, 2004 (as it may be
amended, modified, extended or restated from time to time, the "Credit
Agreement"; all of the defined terms in the Credit Agreement are incorporated
herein by reference) among QUEST CHEROKEE, LLC, a Delaware limited liability
company, as borrower (the "Borrower"), the Guarantors party thereto, the Lenders
party thereto, UBS SECURITIES LLC, as Arranger, Documentation Agent and
Syndication Agent, UBS LOAN FINANCE LLC, as Swingline lender and UBS AG,
STAMFORD BRANCH, as Administrative Agent and Collateral Agent:
a. Attached hereto as Schedule 1 are detailed calculations4
demonstrating compliance by Borrower with Section 6.10 and Section 5.08
of the Credit Agreement. Borrower is in compliance with such Sections as
of the date hereof. Attached hereto as Schedule 2 are detailed
calculations setting forth the Borrower's Excess Cash Flow.5 Attached
hereto as Schedule 3 is the report of [accounting firm].6
b. The Borrower was in compliance with each of the covenants set
forth in Section 6.10 of the Credit Agreement [at all times during and]
since [ ].
________________________
4 To accompany annual and quarterly financial statements only. Which
calculations shall be in reasonable detail satisfactory to the
Administrative Agent and shall include, among other things, an explanation
of the methodology used in such calculations and a breakdown of the
components of such calculations.
5 To be provided during the Excess Cash Flow Period.
6 To accompany annual financial statements only. The report must opine or
certify that, with respect to its regular audit of such financial
statements, which audit was conducted in accordance with GAAP, the
accounting firm obtained no knowledge that any Default has occurred or, if
in the opinion of such accounting firm such a Default has occurred,
specifying the nature and extent thereof.
c. No Default has occurred under the Credit Agreement which has not
been previously disclosed, in writing, to the Administrative Agent
pursuant to a Compliance Certificate.7
d. Attached hereto as Schedule 4 is a list of all xxxxx that have
been connected to the Borrower's gathering system, information relating to
Borrower's gross daily gas production and a list of all new xxxxx drilled,
in each case, for the applicable period and Xxxxx-In-Progress as of the
end of the applicable period. Borrower is in compliance with the provision
of Section 6.22.
________________________
7 If a Default shall have occurred, an explanation specifying the nature and
extent of such Default shall be provided on a separate page together with
an explanation of the corrective action taken or proposed to be taken with
respect thereto (include, as applicable, information regarding actions, if
any, taken since prior certificate).
Dated this [ ] day of [ ], 20[ ].
[ ]
By:
----------------------------
Name:
Title: [Financial Officer]
SCHEDULE 1
----------
Financial Covenants
(A) Maximum Total Leverage Ratio: Total
Net Debt to Consolidated EBITDA
Total Net Debt for the four quarter period
ended [ ], 20[ ] ________________
Consolidated EBITDA ________________
Calculation of Consolidated EBITDA:
Consolidated Net Income for such period,
(1) plus, in each case only to the extent (and
in the same proportion) deducted in determining
such Consolidated Net Income:
(a) Consolidated Interest Expense and interest
expense on the Subordinated Notes for such
period, calculation:
total consolidated interest expense under GAAP,
plus or less, without duplication.
plus imputed interest on Capital
Lease Obligations and Attributable
Indebtedness of Borrower and its
Subsidiaries for such period;
plus commissions, discounts and other fees and
charges owed by Borrower or any of its
Subsidiaries with respect to letters of credit
securing financial obligations, bankers'
acceptance financing and receivables financings
for such period;
plus amortization of debt issuance costs, debt
discount or premium and other financing fees
and expenses incurred by Borrower or any of its
Subsidiaries for such period;
plus cash contributions to any employee stock
ownership plan or similar trust made by Borrower
or any
of its Subsidiaries to the extent such
contributions are used by such plan or trust to
pay interest or fees to any person (other than
Borrower or a Wholly Owned Subsidiary) in
connection with Indebtedness incurred by such plan
or trust for such period;
plus all interest paid or payable with respect to
discontinued operations of Borrower or any of
its Subsidiaries for such period;
plus the interest portion of any deferred payment
obligations of Borrower or any of its Subsidiaries
for such period;
plus all interest on any Indebtedness of Borrower or
any of its Subsidiaries of the type described in
clause (f) or (k) of the definition of
"Indebtedness" for such period;
less debt issuance costs, debt discount or premium
and other financing fees and expenses directly
related to the Transactions;
less unrealized gains and losses with respect to
Hedging Agreements; and
less interest expense on the Subordinated Notes
for such period.
subtotal of Consolidated Interest Expense ________________
(b) plus interest expense on the Subordinated
Notes for such period, ________________
(c) plus the amortization expense of Borrower
and its Subsidiaries for such period, determined
on a consolidated basis in accordance with GAAP, ________________
(d) plus the depreciation expense of Borrower
and its Subsidiaries for such period, determined
on a consolidated basis in accordance with GAAP, ________________
(e) plus the tax expense of Borrower and its
Subsidiaries, for such period, determined on a
consolidated basis in accordance with GAAP, ________________
(f) plus costs and expenses directly incurred
in connection with the Transactions (not to
exceed $6.3 million), ________________
(g) plus the aggregate amount of all other
non-cash items reducing Consolidated Net Income
(excluding any non-cash charge that results
in an accrual of a reserve for cash charges in
any future period) for such period, and
(2) subtracting therefrom, in each case only to the
extent (and in the same proportion) added in
determining Consolidated Net Income, (i) the
aggregate amount of all non-cash items
increasing Consolidated Net Income (other than
the accrual of revenue or recording of receivables
in the ordinary course of business)for such period ________________
and (ii) any general and administrative expenses
that are capitalized and added to the gross
property, plant and equipment account during such
period under the full cost method of accounting.
Consolidated EBITDA ________________
Total Net Debt to Consolidated EBITDA [ ]:1.0
Covenant Requirement No more than
[ ]:1.0
(B) Minimum Asset Coverage Ratio: PV-10 Value to Total
Net Debt: _______ : 1.0
(C) Minimum Interest Coverage Ratio:
Consolidated EBITDA to Consolidated
Interest Expense
Consolidated EBITDA (calculated in
accordance with clause (A)) ________________
Consolidated Interest Expense (calculated
in accordance with clause (A)) ________________
Consolidated EBITDA to Consolidated
Interest Expense [ ]:1.0
Covenant Requirement Greater than or
equal to :1.0
(D) Minimum Consolidated Fixed Charge
Ratio: Consolidated EBITDA to
Consolidated Fixed Charges
Consolidated EBITDA (calculated in accordance with
clause (A)) ________________
Consolidated Fixed Charges Calculation is
Consolidated Interest Expense plus Consolidated
Fixed Charges
Consolidated Interest Expense (calculated
in accordance with Clause (A)) ________________
Consolidated Fixed Charges calculation:
Consolidated Interest Expense for such period;
plus the aggregate amount of Capital Expenditures
for such period (other than to the extent
financed by Excluded Issuances or out of that
portion of Excess Cash Flow not required to be
applied to the Term B Loans pursuant to Section
2.10(g));
plus all cash payments in respect of income taxes
made during such period (net of any cash refund
in respect of income taxes actually received
during such period);
plus the principal amount of all scheduled
amortization payments on all Indebtedness
(including the principal component of all
Capital Lease Obligations) of Borrower and its
Subsidiaries for such period (as determined on
the first day of the respective period);
plus the product of (i) all dividend payments on
any series of Disqualified Capital Stock of
Borrower or any of its Subsidiaries (other than
dividend payments to Borrower or any of its
Subsidiaries) multiplied by (ii) a fraction,
the numerator of which is one and the denominator
of which is one minus the then current combined
federal, state and local statutory tax rate of
Borrower and its Subsidiaries, expressed as a
decimal; and
plus the product of (i) all cash dividend payments
on any Preferred Stock (other than Disqualified
Capital
Stock) of Borrower or any of its Subsidiaries
(other than dividend payments to Borrower or any
of its Subsidiaries) multiplied by (ii) a
fraction, the numerator of which is one and the
denominator of which is one minus the then current
combined federal, state and local statutory tax
rate of Borrower and its Subsidiaries, expressed
as a decimal.
Consolidated Fixed Charges Expense. ________________
Consolidated EBITDA to Consolidated Fixed
Charges [ ]:1.0
Covenant Requirement Greater than or
equal to
[ ]:1.0
(E) Maximum Capital Expenditures
Capital Expenditures ________________
Covenant Requirement No more than [ ]
(F) Prior to December 31, 2005, Revolving
Loan Use of Proceeds
Total Leverage Ratio is:
Total Net Debt : Consolidated EBITDA
Total Net Debt for the four quarter period
ended [ ], 20[ ] ________________
Consolidated EBITDA (calculated in
accordance with clause (A)) ________________
Total Net Debt to Consolidated EBITDA [ ]:1.0
Covenant Requirement Less than
3.5:1.0
SCHEDULE 2
----------
Excess Cash Flow Calculation:
Net cash from operating activities for the Excess
Cash Flow Period ________________
less principal payments of Term B Loans required
by Section 2.09(a) that are actually made
during such period;
less the lower of actual Capital Expenditures and
Budgeted Capital Expenditures during such period;
and
less Permitted Tax Distributions that are paid
during such period or will be paid within six
months after the close of such period.
Excess Cash Flow ________________
SCHEDULE 3
----------
[Report of accounting firm, if applicable]
SCHEDULE 4
----------
[Attach:
1. a list of all xxxxx connected to the Borrower's gathering system during the
applicable period;
2. a report on Borrower's gross daily gas production for the applicable period;
3. a list of all new xxxxx drilled for the applicable period; and
4. all Xxxxx-In-Progress as of the end of the applicable period.]
ANNEX IV
EXHIBIT E
[Form of]
INTEREST ELECTION REQUEST
UBS AG, Stamford Branch,
as Administrative Agent
000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: [ ]
[Date]
Re: Quest Cherokee, LLC
Ladies and Gentlemen:
This Interest Election Request is delivered to you pursuant to
Section 2.08 of the Credit Agreement dated as of July 22, 2004 (as amended,
amended and restated, supplemented or otherwise modified from time to time, the
"Credit Agreement") among QUEST CHEROKEE, LLC, a Delaware limited liability
company ("Borrower"), the Guarantors (such term and each other capitalized term
used but not defined herein having the meaning given it in Article I thereof),
the Lenders, UBS SECURITIES LLC, as lead arranger (in such capacity,
"Arranger"), documentation agent (in such capacity, "Documentation Agent") and
syndication agent (in such capacity, "Syndication Agent"), UBS LOAN FINANCE
LLC, as swingline lender (in such capacity, "Swingline Lender"), and UBS AG,
STAMFORD BRANCH, as administrative agent (in such capacity, "Administrative
Agent") for the Lenders, collateral agent (in such capacity, "Collateral Agent")
for the Secured Parties and Issuing Bank.
Borrower hereby requests that on [__________]8 (the "Interest
Election Date"),
1. $[__________] of the presently outstanding principal amount of the
Loans originally made on [__________],
________________________
8 Shall be a Business Day that is (a) the date hereof in the case of a
conversion into ABR Loans to the extent this Interest Election Request
is delivered to the Administrative Agent prior to 11:00 a.m., New York
City time on the date hereof, otherwise the Business Day following the
date of delivery hereof and (b) three Business Days following the date
hereof in the case of a conversion into/continuation of Eurodollar
Loans to the extent this Interest Election Request is delivered to the
Administrative Agent prior to 11:00 a.m. New York City time on the
date hereof, otherwise the fourth Business Day following the date of
delivery hereof, in each case.
2. and all presently being maintained as [ABR Loans] [Eurodollar
Loans],
3. be [converted into] [continued as],
4. [Eurodollar Loans having an Interest Period of
[one/two/three/six[/nine] months] [ABR Loans].
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the proposed Interest Election
Date, both before and after giving effect thereto and to the application of the
proceeds therefrom:
(a) the foregoing [conversion] [continuation] complies with the terms
and conditions of the Credit Agreement (including, without limitation,
Section 2.08 of the Credit Agreement); and
(b) no Default has occurred and is continuing, or would result from
such proposed [conversion] [continuation].9
[Signature Page Follows]
________________________
9 If a Default shall have occurred, an explanation specifying the nature
and extent of such Default shall be provided on a separate page
together with an explanation of the corrective action taken or
proposed to be taken with respect thereto.
Borrower has caused this Interest Election Request to be executed and
delivered by its duly authorized officer as of the date first written above.
QUEST CHEROKEE, LLC
By:
-----------------------------------
Name:
Title:
