Seventh Amendment to Amended and Restated Credit Agreement

EX-10.1 4 h25326exv10w1.htm SEVENTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT exv10w1
 

Exhibit 10.1

SEVENTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT

THIS SEVENTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the “Amendment”) dated May 9, 2005, by and among PETROQUEST ENERGY, L.L.C., a Louisiana limited liability company (“Borrower”); PETROQUEST ENERGY, INC., a Delaware corporation (“PEI” ); PITTRANS, INC., an Oklahoma corporation (“Pittrans,”); TDC ENERGY, LLC (f/k/a TDC ACQUISITION SUB LLC), a Louisiana limited liability company (“TDC Energy,” who along with PEI and Pittrans are, or will become, a “Guarantor”); JPMORGAN CHASE BANK, N.A. (successor by merger to BANK ONE, N.A. (Main Office Chicago)) (individually as a lender and as agent, “Agent”) and the financial institutions set forth on the signature pages hereto, (“Lenders”).

R E C I T A L S:

      WHEREAS, Borrower, PEI, Agent and Union Bank of California entered into an Amended and Restated Credit Agreement dated May 14, 2003 (which as the same may have been and be amended from time to time is herein called the “Credit Agreement”), pursuant to which Borrower amended and restated a previously existing credit facility dated May 11, 2001; and

      WHEREAS, Union Bank of California has, by Assignment dated December 23, 2003, assigned and conveyed to Agent, as a Lender, all of its interest in the Credit Agreement; and

      WHEREAS, Agent, as a Lender, has by Assignment effective on or about November 7, 2004, assigned and conveyed to certain other financial institutions a portion of its interest in the Credit Agreement; and

      WHEREAS, Borrower, Guarantors, Agent and the Lenders desire to amend the Credit Agreement as herein set forth.

      NOW THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

      1. Definitions. Except as otherwise provided below, unless the context hereof indicates otherwise, all capitalized terms used herein shall have the same meaning as such capitalized terms are defined in the Credit Agreement.

      (a) The following defined term set forth in Article I of the Credit Agreement is hereby amended as follows:

“Borrowing Base Reduction Amount” means (a) $-0- commencing May 1, 2005 and continuing for each month thereafter until the next semi-annual Borrowing Base redetermination pursuant to Section 2.2.2, and (b) for each month thereafter, such amount as designated by 100% of the Lenders in a notice to Borrower from time to time in connection

 


 

with each successive scheduled semi-annual Borrowing Base redetermination pursuant to Section 2.2.2 or successive unscheduled Borrowing Base redetermination pursuant to Section 2.2.3.; provided however, if 100% of the Lenders fail to timely designate a new Borrowing Base Reduction Amount, then the Borrowing Base Reduction Amount most recently in effect will continue in effect until 100% of the Lenders designate a new Borrowing Base Reduction Amount.

             (b) Article I of the Credit Agreement is hereby amended by adding the following new defined terms and their definitions in proper alphabetical sequence as follows:

“Description of the Notes” means the section titled “Description of the Notes” in the Preliminary Confidential Offering Circular dated April 22, 2005, prepared by PEI and the Borrower with respect to the offer and sale of the Senior Notes, copies of which have been made available to the Agent and the Lenders.

“Note Offering” means (i) the offering and sale of the Senior Notes pursuant to the Preliminary Confidential Offering Circular dated April 22, 2005; and (ii) the registered exchange of such Senior Notes for new Senior Notes pursuant to a registration statement filed and effective with the Securities and Exchange Commission.

“PEI” means PetroQuest Energy, Inc., a Delaware corporation.

“Senior Notes” means the senior unsecured promissory notes due 2013 of the Borrower and PEI, as co-issuers, issued May, 2005 pursuant to the Senior Notes Indenture, , and includes the unsecured guaranties thereof executed from time to time by certain Subsidiaries of PEI and the Borrower, notes (and the guaranties thereof) issued from time to time in exchange for such Senior Notes due 2013 and all reissues and replacements of the foregoing.

“Senior Notes Indenture” means the Indenture to be dated on or about the date the Senior Notes are issued, among the Borrower and PEI, as co-issuers, the subsidiary guarantors identified therein and The Bank of New York Trust Company, N.A., as the same may be amended or supplemented from time to time.

      2. Amendments to the Credit Agreement. Upon the date hereof, and subject to the satisfaction of the conditions precedent set forth in Section 3 hereof, the Credit Agreement is hereby amended as follows:

      (a) Section 2.2.1 Borrowing Base, of the Credit Agreement is hereby amended by deleting the section in its entirety and substituting the following:

      “2.2.1 Until the date as of which the Borrowing Base is next redetermined pursuant to Section 2.2.2, the Borrowing Base shall be $25,000,000, as reduced by Section 2.2.5.”

      (b) Section 6.11 Indebtedness, of the Credit Agreement is hereby amended by deleting the section in its entirety and substituting the following:

 


 

      “6.11. Indebtedness. Neither the Borrower nor any Guarantor will, nor will it permit any Subsidiary to, create, incur or suffer to exist any Indebtedness, except:

      (i) the Credit Extensions;

      (ii) Indebtedness existing on the date hereof and described in Schedule 6.11;

      (iii) Indebtedness arising under Rate Management Transactions permitted under Section 6.25;

      (iv) Indebtedness among the Guarantor, the Borrower or any of their Subsidiaries;

      (v) Indebtedness associated with bonds or surety obligations required by any governmental or regulatory authority or prior owner in connection with owning or operating its Oil and Gas Properties in the ordinary course of business;

      (vi) unsecured accounts payable incurred in the ordinary course of business which remain unpaid after the expiration of ninety (90) days beyond invoice date or are being contested in good faith and as to which such reserve as is required by Agreement Accounting Principles has been made;

      (vii) Indebtedness not to exceed at any one time $500,000 related to purchase money financing;

      (viii) Indebtedness relating to Capitalized Lease Obligations not to exceed at any one time $500,000;

      (ix) Indebtedness relating to net production imbalances not to exceed at any one time $1,000,000;

      (x) Indebtedness relating to overriding royalties and other interests carved out of production incurred in the ordinary course of oil and gas exploration and development projects;

      (xi) Indebtedness associated with the financing of premiums for business insurance of the Guarantor, the Borrower and their Subsidiaries;

      (xii) Contingent Obligations of the Guarantor in connection with guarantees of the obligations of the Borrower and its Subsidiaries in connection with owning and operating Oil and Gas Properties in the ordinary course of business.

      (xiii) Non-Recourse Indebtedness not to exceed $25,000,000;

 


 

      (xiv) Indebtedness resulting from the issuance of the Senior Notes in an aggregate outstanding principal balance at any time of not greater than $150,000,000 and which (a) has a coupon rate of not greater than twelve percent (12%), (b) has a due date not earlier than May 1, 2012, (c) is not subject to negative covenants or events of default (or other provisions which have the same effect as negative covenants or events of default) which are more restrictive on Borrower, PEI and their Subsidiaries than those set forth in the Description of Notes, and (d) except in connection with a “change of control” put option or certain other triggering events relative to asset dispositions as set forth in the Senior Notes Indenture, does not provide for or otherwise require any mandatory redemption, repayment, defeasance, repurchase or other amortization of principal prior to scheduled maturity; and

      (xv) Indebtedness of Borrower or any Guarantor relating to certain commodities hedging contracts and interest rate management contracts to which Macquarie Bank Limited is the counterparty.”

             (c) Section 6.15 Liens, of the Credit Agreement is hereby amended by deleting the section in its entirety and substituting the following:

      “6.15. Liens. Neither the Borrower nor any Guarantor will, nor will it permit any Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the Property of the Borrower, any Guarantor or any of their respective Subsidiaries, except:

      (i) Liens for taxes, assessments or governmental charges or levies on its Property if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings and for which adequate reserves in accordance with Agreement Accounting Principles shall have been set aside on its books;

      (ii) Liens imposed by Law, such as carriers’, warehousemen’s and mechanics’ liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than ninety (90) days past due, or are being contested in good faith and by appropriate proceedings and for which adequate reserves in accordance with Agreement Accounting Principles shall have been set aside on its books;

      (iii) Liens arising out of pledges or deposits under worker’s compensation Laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation;

      (iv) utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character and which do not in any material way affect the marketability of the same or interfere with the use thereof in the business of the Borrower or its Subsidiaries;

 


 

      (v) Liens existing on the date hereof in favor of the Minerals Management Service;

      (vi) Liens in favor of the Agent, for the benefit of the Lenders, granted pursuant to any Collateral Document and other Liens expressly permitted under the Collateral Documents;

      (vii) Liens in favor of operators and non-operators under joint operating agreements or similar contractual arrangements arising in the ordinary course of the business of the Borrower or its Subsidiaries to secure amounts owing, which amounts are not more than ninety (90) days past due or are being contested in good faith by appropriate proceedings, if such reserve as may be required by Agreement Accounting Principles shall have been made therefor;

      (viii) Liens under production sales agreements, division orders, operating agreements, and other agreements customary in the oil and gas business for processing, producing, and selling Hydrocarbons securing obligations not constituting Indebtedness and provided that such Liens do not secure obligations to deliver Hydrocarbons at some future date without receiving full payment therefor within ninety (90) days of delivery.

      (ix) Liens in favor of any of the Lenders in connection with Rate Management Transactions; and

      (x) Liens in favor of Macquarie Bank Limited as the counterparty to the commodities hedging contracts and interest rate management contracts with Borrower or any Guarantor.”

             (d) Section 6.25 Rate Management Transactions, of the Credit Agreement is hereby amended by deleting the section in its entirety and substituting the following:

      “6.25. Rate Management Transactions. Neither the Borrower, any Guarantor nor any Subsidiary will be a party to or in any manner be liable on any Rate Management Transactions except:

      (i) contracts entered into with the purpose of fixing prices on oil or gas expected to be produced by the Borrower or its Subsidiaries, provided that at all times: (a) no such contract fixes a price for a term of more than thirty-six (36) months for any such contract to which any Lender or any Affiliate thereof is a counter-party; or (b) the aggregate monthly production covered by all such contracts (determined, in the case of contracts that are not settled on a monthly basis, by a monthly pro-ration acceptable to the Agent) for any single month does not in the aggregate exceed eighty-five percent

 


 

(85%) of the aggregate Projected Oil and Gas Production of Borrower and its Subsidiaries anticipated to be sold in the ordinary course of such Person’s business for such month; (c) each such contract is with a counterparty or has a guarantor of the obligation of the counterparty who (unless such counterparty is a Lender, or one of their respective Affiliates) at the time the agreement is made has (or whose holding company has) long-term obligations rated AA or AA2 or better, respectively, by either S&P or Moody’s or is an investment grade-rated industry participant. As used in this subsection, the term “Projected Oil and Gas Production” means the projected production of oil or gas from the “proved, developed, and producing” category set forth in the most recent Reserve Report (measured by volume unit or BTU equivalent, not sales price) for the term of the contracts or a particular month, as applicable, from Oil and Gas Properties and interests owned by the Guarantor, the Borrower and their Subsidiaries which are located in or offshore of the United States of America and which have attributable to them proved oil or gas reserves, as such production is projected in the most recent report delivered pursuant to Section 6.1, after deducting projected production from any properties or interests sold or under contract for sale that had been included in such report and after adding projected production from any properties or interests that had not been reflected in such report but that are reflected in a separate or supplemental reports meeting the requirements of Section 6.1 above and otherwise are satisfactory to the Agent;

      (ii) contracts entered into by the Borrower or any Subsidiary with the purpose and effect of fixing interest rates on a principal amount of indebtedness of such Person that is accruing interest at a variable rate, provided that (a) the aggregate notional amount of such contracts never exceeds eighty-five percent (85%) of the anticipated outstanding principal balance of the indebtedness to be hedged by such contracts or an average of such principal balances calculated using a generally accepted method of matching interest swap contracts to declining principal balances, (b) the floating rate index of each such contract generally matches the index used to determine the floating rates of interest on the corresponding indebtedness to be hedged by such contract, and (c) each such contract is with a counterparty or has a guarantor of the obligation of the counterparty who (unless such counterparty is a Lender or one of their Affiliates) at the time the contract is made has (or whose company has) long-term obligations rated AA or AA2 or better, respectively, by either S&P or Moody’s or is an investment grade-rated industry participant; and

      (iii) commodities hedging contracts and interest rate management contracts in favor of Borrower and TDC Energy and which Macquarie Bank Limited is the counterparty.”

 


 

      (e) A new Section 6.33 of “Senior Notes” the Credit Agreement is hereby added as follows:

             “6.33. Senior Notes. The Senior Notes will be unsecured obligations of PEI and the Borrower, as co-issuers, guarantied by the unsecured guaranties of the Subsidiary Guarantors (as such term is described in the Description of the Notes). If not previously provided pursuant to the terms of this Agreement, the Borrower will promptly provide the Agent with copies of all documentation, notices and reports provided by or on behalf of the Borrower, any Guarantor or any Subsidiary to the holders of the Senior Notes. On or before the date the financial statements are due pursuant to Sections 6.1(i) and (ii) hereof, the Borrower shall deliver to the Agent a certificate, executed by an Authorized Officer of the Borrower, setting forth the outstanding principal balance of the Senior Notes as of the last day of the preceding month. The Borrower will not, and will not permit any Guarantor or any Subsidiary to, make any (i) amendment or modification to the Senior Notes or the Senior Notes Indenture (other than supplemental indentures to add subsidiary guarantors as contemplated by the Senior Notes Indenture or, in the event of any discrepancy, to conform the Senior Notes Indenture to the terms in the Description of the Notes) which would be materially adverse to the Lenders without the prior written consent of the Required Lenders; or (ii) directly or indirectly voluntarily prepay, defease or in substance defease, purchase, redeem, retire or otherwise acquire, any portion of the Senior Notes without the prior written consent of the Required Lenders; provided that (I) PEI may redeem Senior Notes out of the net cash proceeds of Equity Offerings (as that term is defined in the Senior Notes Indenture) to the extent described in the Senior Notes; and (II) the Borrower and PEI may comply with their obligations with respect to the purchase of Senior Notes upon (x) an Asset Disposition (as that term is defined in the Senior Notes Indenture) to the extent set forth in the Senior Notes Indenture so long as, prior to such purchase, the Borrower shall have offered to prepay the Obligations to the Lenders by a like amount and the Lenders shall have declined that offer or (y) a Change of Control (as that term is defined in the Senior Notes Indenture) to the extent set forth in the Senior Notes Indenture so long as, if such Change of Control constitutes an Unmatured Default or an Event of Default, the Obligations to the Lender shall have been paid in full prior to such purchase.”

      (f) Section 7.20 of the Credit Agreement is hereby amended by deleting the section in its entirety and substituting the following:

      “7.20 The Borrower shall fail to timely pay any of its obligations to the holders of the Senior Notes or any other event of default shall occur under the Senior Notes or the Senior Notes Indenture.”

      3. Conditions Precedent to Effectiveness of Amendment. This Amendment shall become effective when, and only when, each of the conditions below have been complied with to the satisfaction of the Agent and the Lenders and the documents required below have been delivered to the Agent and the Lenders:

      (a) Counterparts of this Amendment duly executed by Borrower, Guarantors and Lenders;

 


 

      (b) A copy of the resolutions approving this Amendment, and authorizing the transactions contemplated herein or therein duly adopted by the Managers of Borrower, accompanied by a certificate of the duly authorized Secretary of Borrower, that such copy is a true and correct copy of the resolutions duly adopted by the Managers of Borrower, and that such resolutions constitute all the resolutions adopted with respect to such transactions, and have not been amended, modified or revoked in any respect and are in full force and effect as of the date hereof;

      (c) A copy of the resolutions approving this Amendment, and authorizing the transactions contemplated herein or therein duly adopted by the Board of Directors or Members of each Guarantor, as the case may be, accompanied by a certificate of the duly authorized Secretary of such Guarantor, that such copy is a true and correct copy of the resolutions duly adopted by the Board of Directors or Members of such Guarantor, and that such resolutions constitute all the resolutions adopted with respect to such transactions, and have not been amended, modified or revoked in any respect and are in full force and effect as of the date hereof;

      (d) Copies of all documentation executed at the initial closing of the Senior Notes and the Senior Notes Indenture in connection with or related to the Note Offering, certified by an Authorized Officer of Borrower to the effect that such documents are true, correct and complete;

      (e) Evidence satisfactory to the Agent, the Lenders and their counsel as to the termination and release of the Subordinated Credit Agreement and the Liens in favor of Macquarie Bank Limited securing the loans thereunder (but not the Indebtedness permitted under Section 6.11(xv) or the Liens permitted under Section 6.15(x))after giving effect to this Amendment;

      (f) Payment of all fees to the Lenders in connection with this Amendment; and

      (g) The execution and delivery of such additional documents and instruments which the Agent and its counsel may deem necessary to effectuate this Amendment or any document executed and delivered to Lenders in connection herewith or therewith.

      4. Representations and Warranties of Borrower. Borrower represents and warrants as follows:

      (a) Borrower and Guarantors are each duly authorized and empowered to execute, deliver and perform this Amendment and all other instruments referred to or mentioned herein to which it is a party, and all action on its part requisite for the due execution, delivery and the performance of this Amendment has been duly and effectively taken. This Amendment, when executed and delivered, will constitute valid and binding obligations of Borrower and Guarantors, as the case may be, enforceable against such party in accordance with its terms. This Amendment does not violate any provisions of the Articles of Organization or limited liability agreement of Borrower, the Certificate of Incorporation or

 


 

By-Laws or other organizational documents of Guarantors, or any contract, agreement, law or regulation to which Borrower or Guarantors are subject, and does not require the consent or approval of any regulatory authority or governmental body of the United States or any state;

      (b) After giving affect to this Amendment, the representations and warranties contained in the Credit Agreement, as amended hereby, and any other Loan Documents executed in connection herewith or therewith are true, correct and complete on and as of the date hereof as though made on and as of the date hereof;

      (c) After giving affect to this Amendment, no event has occurred and is continuing which constitutes a Default or Unmatured Default; and

      (d) When duly executed and delivered, each of this Amendment and the Credit Agreement will be legal and binding obligations of Borrower, enforceable in accordance with their respective terms, except as limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors’ rights and by equitable principles of general application.

      5. Reference to and Effect on the Loan Documents.

      (a) Upon the effectiveness of Section 2 hereof, on and after the date hereof, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import, and each reference in the Loan Documents shall mean and be a reference to the Credit Agreement as amended hereby.

      (b) Except as specifically amended above, the Credit Agreement and the Note(s), and all other instruments securing or guaranteeing Borrower’s obligations to Lenders, including the Collateral Documents, as amended (collectively, the “Security Instruments”) shall remain in full force and effect and are hereby ratified and confirmed. Without limiting the generality of the foregoing, the Security Instruments and all collateral described therein do and shall continue to secure the payment of all obligations of Borrower and Guarantors under the Credit Agreement and the Note(s), as amended hereby, and under the other Security Instruments.

      (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Lender under any of the Security Instruments, nor constitute a waiver of any provision of any of the Security Instruments.

      6. Waiver. As additional consideration for the execution, delivery and performance of this Amendment by the parties hereto and to induce Lenders to enter into this Amendment, Borrower and Guarantors each warrants and represents to Lenders that no facts, events, statuses or conditions exist or have existed which, either now or with the passage of time or giving of notice, or both, constitute or will constitute a basis for any claim or cause of action against Lenders or any defense to (i) the payment of any obligations and indebtedness under the Note(s) and/or the Security Instruments, or (ii) the performance of any of its obligations with respect to the Note(s) and/or the

 


 

Security Instruments, and in the event any such facts, events, statuses or conditions exist or have existed, Borrower unconditionally and irrevocably waives any and all claims and causes of action against Lenders and any defenses to its payment and performance obligations in respect to the Note(s) and the Security Instruments.

      7. Costs and Expenses. Borrower agrees to pay on demand all costs and expenses of Lenders in connection with the preparation, reproduction, execution and delivery of this Amendment and the other instruments and documents to be delivered hereunder, including the reasonable fees and out-of-pocket expenses of counsel for Lenders. In addition, Borrower shall pay any and all fees payable or determined to be payable in connection with the execution and delivery, filing or recording of this Amendment and the other instruments and documents to be delivered hereunder, and agrees to save Lenders harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omitting to pay such fees.

      8. Execution in Counterparts. 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 to be an original and all of which taken together shall constitute but one and the same instrument.

      9. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Texas.

      10. Final Agreement. THIS WRITTEN AMENDMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[Remainder of Page Intentionally Left Blank]

 


 

      IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly executed in multiple counterparts, each of which is an original instrument for all purposes, all as of the day and year first above written.

         
  “Borrower”

PETROQUEST ENERGY, L.L.C.
 
 
  By:   /s/ Michael O. Aldridge    
    Michael O. Aldridge, Senior Vice President,   
    Chief Financial Officer and Treasurer   
 

 


 

         
  “Guarantors”


PETROQUEST ENERGY, INC.
 
 
  By:   /s/ Michael O. Aldridge    
    Michael O. Aldridge, Senior Vice President,   
    Chief Financial Officer and Treasurer   
 
         
  PITTRANS, INC.
 
 
  By:   /s/ Michael O. Aldridge    
    Michael O. Aldridge, Chief Financial Officer   
       
 
         
  TDC ENERGY LLC

f/k/a TDC ACQUISITION SUB LLC
 
 
  By:   /s/ Michael O. Aldridge    
    Michael O. Aldridge, Senior Vice President,   
    Chief Financial Officer and Treasurer   
 

 


 

         
  “Lenders”


JPMORGAN CHASE BANK, N.A.,
As the Agent, a Lender and LC Issuer
 
 
  By:   /s/ Charles Kingswell-Smith    
    Name:   Charles Kingswell-Smith   
    Title:   Vice President   
 
         
  GUARANTY BANK, FSB,
As a Lender
 
 
  By:   /s/ Brian J. Petet    
    Name:   Brian J. Petet   
    Title:   Assistant Vice President   
 
         
  CALYON NEW YORK BRANCH,
As a Lender
 
 
  By:   /s/ Olivier Audemard    
    Name:   Olivier Audemard   
    Title:   Managing Director   
 
         
     
  By:   /s/ Philippe Soustra    
    Name:   Philippe Soustra   
    Title:   Executive Vice President