| | The
Facility A Borrowing Base will at all times equal the Facility A Borrowing Base
most recently determined by the lenders, less quarterly borrowing base reductions
required subsequent to such determination. The lenders will reset the Facility
A Borrowing Base amount at each borrowing base determination date. If
the outstanding principal balance of the revolving loans under the First Lien
Credit Facility exceeds the Facility A Borrowing Base at any time (including,
without limitation, due to a borrowing base reduction ), we have the option within
30 days to take any of the following actions, either individually or in combination:
make a lump sum payment curing the deficiency, pledge additional collateral sufficient
in the lenders’ opinion to increase the Facility A Borrowing Base and cure the
deficiency or begin making equal monthly principal payments that will cure the
deficiency within the ensuing six-month period. Those payments would be in addition
to any payments that may come due as a result of a borrowing base reduction. Otherwise,
any unpaid principal or interest will be due at maturity. For
each revolving loan, the interest rate will be, at our option, (1) the Eurodollar
Rate, plus an applicable margin equal to 2.375% if the amount borrowed is greater
than or equal to 90% of the Facility A Borrowing Base, 2.0% if the amount borrowed
is less than 90%, but greater than or equal to 50% of the Facility A Borrowing
Base, or 1.625% if the amount borrowed is less than 50% of the Facility A Borrowing
Base; or (2) the Base Rate, plus an applicable margin of 0.375% if the amount
borrowed is greater than or equal to 90% of the Facility A Borrowing Base. The
interest rate on each term loan will be, at our option, (1) the Eurodollar Rate,
plus an applicable margin to be determined by the lenders; or (2) the Base Rate,
plus an applicable margin to be determined by the lenders. Interest on eurodollar
loans is payable on either the last day of each eurodollar option period or monthly,
whichever is earlier. Interest on Base Rate Loans is payable monthly. Prior
to the July 21, 2005 amendment, noted below, we were subject to certain covenants
under the terms of the First Lien Credit Facility. These covenants, as amended,
include, but are not limited to the maintenance of the following financial covenants:
(1) a minimum current ratio of 1.0 to 1.0 (including availability under the borrowing
base), (2) a minimum quarterly debt services coverage of 1.25 times, (3) a minimum
shareholders’ equity equal to $108.8 million, plus 100% of all subsequent common
and preferred equity contributed by shareholders subsequent to December 31, 2004,
plus 50% of all positive earnings occurring subsequent to December 31, 2004, and
(4) a maximum total recourse debt to EBITDA ratio (as defined in the First Lien
Credit Facility) of not more than 3.0 to 1.0. These covenants were amended as
described below in connection with the July 2005 amendment of the First Lien Credit
Facility. The First Lien Credit Facility also places restrictions on additional
indebtedness, dividends to shareholders, liens, investments, mergers, acquisitions,
asset dispositions, asset pledges and mortgages, change of control, repurchase
or redemption for cash of our common stock, speculative commodity transactions
and other matters. On April 27, 2005, we amended the
First Lien Credit Facility to, among other things, add a provision restricting
loans from us to our subsidiaries or guarantors of the First Lien Credit Facility
if the proceeds of such loans will be invested in an entity in which we hold an
equity interest. In connection with entering into the
Second Lien Credit Facility, we amended our First Lien Credit Facility on July
21, 2005. Such amendment included without limitation: (1) an adjustment to the
maximum total net recourse debt to EBITDA (as defined in the First Lien Credit
Facility) ratio, such that the maximum is 3.5 to 1.0 through September 30, 2006,
3.25 to 1.0 through December 31, 2006 and 3.0 to 1.0 thereafter; (2) an adjustment
to the covenant regarding maintenance of a minimum shareholders’ equity, such
that the quarterly minimum is $115.0 million plus 100% of all subsequent common
and preferred equity contributed by shareholders subsequent to March 31, 2005,
plus 50% of all positive earnings occurring subsequent to March 31, 2005; (3)
an adjustment to the covenant regarding maintenance of a minimum EBITDA to interest
expense ratio, such that the minimum is 2.75 to 1.0 through September 30, 2006
and 3.0 to 1.0 thereafter; and (4) the addition of other provisions and a consent
which permits the indebtedness incurred and the liens granted under the Second
Lien Credit Facility. At December 31, 2004, amounts
outstanding under the First Lien Credit Facility totaled $18.0 million with an
additional $12.0 million available for future borrowing. At December 31, 2005,
there were no amounts outstanding under the First Lien Credit Facility. At December
31, 2004 there were no letters of credit outstanding. Second
Lien Credit Facility and Refinancing On July 21,
2005, we entered into a second lien credit agreement with Credit Suisse, as administrative
agent and collateral agent (the “Agent”) and the lenders party thereto (the “Second
Lien Credit Facility”) that matures on July 21, 2010. The Second Lien Credit Facility
provides for a term loan facility in an aggregate principal amount of $150.0 million.
It is secured by substantially all of our assets and is guaranteed by our subsidiary.
The liens securing the Second Lien Credit Facility are second in priority to the
liens securing the First Lien Credit Facility, as more fully described in an intercreditor
agreement dated July 21, 2005 among us, the Agent, the agent under the First Lien
Credit Facility and the lenders. | |
