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First Lien Credit Facility
On September 30, 2004, the Company entered
into a Second Amended and Restated Credit Agreement with Hibernia
National Bank and Union Bank of California, N.A. (the “First Lien
Credit Facility”), which was to mature on September 30, 2007. The
First Lien Credit Facility provided for (1) a revolving line of
credit of up to the lesser of the Facility A Borrowing Base and
$75.0 million and (2) a term loan facility of up to the lesser of
the Facility B Borrowing Base and $25.0 million (subject to the
limit of the borrowing base, which was $22.5 million as of March
31, 2006). It was secured by substantially all of the Company’s
assets and was guaranteed by the Company’s subsidiary, CCBM, Inc.
On May 25, 2006, the Company terminated the First Lien Credit Facility
upon entering into the Senior Credit Facility (discussed below).
Second Lien Credit Facility
On July 21, 2005, the Company 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 the Company’s assets and is guaranteed by
the Company’s subsidiaries. The liens securing the Second Lien Credit
Facility were second in priority to the liens securing the First
Lien Credit Facility prior to its termination in May 2006, as discussed
above, and are second in priority to the liens securing the Senior
Credit Facility (discussed below).
On December 20, 2006, the Company, entered
into an amendment, effective as of December 19, 2006, to the Second
Lien Credit Facility (the “December 2006 Amendment”). The amendment
increased the principal amount available for borrowings under the
Second Lien Credit Facility from $150 million to $225 million. The
amendment also included the following, without limitation: (1) a
reduction in the interest rate on each Eurodollar loan such that
it is the adjusted LIBO rate plus a margin of 4.75%; (2) a reduction
in the interest rate on each base rate loan such that it is (i)
the greater of the Agent’s prime rate and the federal funds effective
rate plus 0.5%, plus (ii) a margin of 3.75%; (3) an adjustment to
the minimum quarterly interest coverage ratio such that it is 2.75
to 1.0 through and including December 31, 2007 and 3.0 to 1.0 thereafter;
(4) an adjustment to the minimum quarterly proved reserve coverage
ratio such that it is 1.5 to 1.0 through December 31, 2007 and 2.0
to 1.0 thereafter; and (5) a maximum total net recourse debt to
EBITDA ratio of not more than 3.75 to 1.0 through December 31, 2007
and 3.25 to 1.0 thereafter.
The interest rate on each base rate loan
will be the greater of the Agent’s prime rate and the federal funds
effective rate plus 0.5%, plus a margin of 3.75%. The interest on
each Eurodollar loan will be the adjusted LIBO rate plus a margin
of 4.75%. Interest on Eurodollar loans is payable on either the
last day of each period or every three months whichever is earlier.
Interest on the Company’s outstanding borrowings under the Second
Lien Credit Facility is payable quarterly. On December 31, 2006,
the interest rate was approximately 10.11%, excluding the impact
of interest rate swaps.
The Company is subject to certain covenants
under the amended terms of the Second Lien Credit Facility. These
covenants 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 under the
Senior Credit Facility; (2) a minimum quarterly interest coverage
ratio of 2.75 to 1.0 through December 31, 2007 and 3.0 to 1.0 thereafter;
(3) a minimum quarterly proved reserve coverage ratio of 1.5 to
1.0 through December 31, 2007 and 2.0 to 1.0 thereafter; and (4)
a maximum total net recourse debt to EBITDA (as defined in the Second
Lien Credit Facility) ratio of not more than 3.75 to 1.0 through
December 31, 2007 and 3.25 to 1.0 thereafter.
The Second Lien Credit Facility also places
restrictions on additional indebtedness, dividends to shareholders,
liens, investments, mergers, acquisitions, asset dispositions, repurchase
or redemption of the Company’s common stock, speculative commodity
transactions, transactions with affiliates and other matters.
The Second Lien Credit Facility is subject
to customary events of default. Subject to certain exceptions, if
an event of default occurs and is continuing, the Agent may accelerate
amounts due under the Second Lien Credit Facility (except for a
bankruptcy event of default, in which case such amounts will automatically
become due and payable). If an event of default occurs under the
Second Lien Credit Facility as a result of an event of default under
the Senior Credit Facility, the Agent may not accelerate the amounts
due under the Second Lien Credit Facility until the earlier of 45
days after the occurrence of the event resulting in the default
and acceleration of the loans under the Senior Credit Facility.
As of December 31, 2006, the Company had
$147.8 million of borrowings outstanding under the Second Lien Credit
Facility. Maturities of long-term debt are $1.5 million in each
of the years 2007 through 2009 and the balance of $184.3 million
is due in 2010. In January 2007, the Company drew the additional
$75.0 million in borrowings and received net proceeds of $72.1 million
related to the December 2006 Amendment.
Senior Secured Revolving Credit Facility
On May 25, 2006, the Company entered into
a Senior Secured Revolving Credit Facility (“Senior Credit Facility”)
with JPMorgan Chase Bank, National Association, as administrative
agent that matures on May 25, 2010. The Senior Credit Facility
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