THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (herein called the "AMENDMENT")
made as of September 27, 1999 by and among Energy Corporation of America, a West
Virginia corporation (herein called "BORROWER"), General Electric Capital
Corporation, individually and as agent (herein called "AGENT"), and the Lenders
named on Schedule 3 to the Original Agreement ("LENDERS").
W I T N E S S E T H:
WHEREAS, Borrower, Agent and Lenders have entered into that certain Credit
Agreement dated as of May 20, 1997, as amended by a First Amendment to Credit
Agreement and Assignment and Waiver dated as of September 26, 1997, and as
amended by a Second Amendment to Credit Agreement dated as of April 2, 1999 (the
"ORIGINAL AGREEMENT"), for the purpose and consideration therein expressed,
whereby Lenders became obligated to make loans to Borrower as therein provided;
and
WHEREAS, Borrower, Agent and Lenders desire to amend the Original Agreement
as set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Original Agreement and in
consideration of the loans which may hereafter be made by Lenders to Borrower,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
Definitions and References
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Section 1.1. Terms Defined in the Original Agreement. Unless the context
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otherwise requires or unless otherwise expressly defined herein, the terms
defined in the Original Agreement shall have the same meanings whenever used in
this Amendment.
Section 1.2. Other Defined Terms. Unless the context otherwise requires,
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the following terms when used in this Amendment shall have the meanings assigned
to them in this Section 1.2.
"AMENDMENT" shall mean this Third Amendment to Credit Agreement.
"CREDIT AGREEMENT" shall mean the Original Agreement as amended
hereby.
ARTICLE II.
Amendments, Agreements and Waivers
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Section 2.1. Definitions. (a) The following definitions in Section 1.1
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of the Original Agreement are hereby amended in their entirety to provide as
follows:
"Adjusted EBITDA" means, for any period, (i) EBITDA of Borrower for such
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period minus (ii) EBITDA of Eastern Systems for such period plus (iii) all
Distributions made by Eastern Systems to Borrower during such period plus (iv)
fifty percent (50%) of the taxes on income and profits actually paid to Borrower
by Mountaineer for such period. During the Fiscal Quarters ended September 30,
1999, December 31, 1999, March 31, 2000, and June 30, 2000, "Adjusted EBITDA"
shall include impairment and exploration charges for Fiscal Year 1999 in the
amount of $19,387,592.
'Alternate Base Rate' means (i) at all times when no Obligation is past
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due, the per annum rate equal to the Base Rate Margin plus the higher of (a) the
Prime Rate and (b) the Federal Funds Rate plus one and one half of one percent
(1.50%) per annum, and (ii) at all other times, the per annum rate of interest
two percent (2.00%) above the interest rate that would otherwise be in effect
pursuant to the immediately preceding clause (i). If the Prime Rate or the
Federal Funds Rate changes after the date hereof the Alternate Base Rate shall
be automatically increased or decreased, as the case may be, without notice to
Borrower, from time to time as of the effective time of each such change. The
Alternate Base Rate shall in no event, however, exceed the Highest Lawful Rate.
"Borrowing Base" means, at the particular time in question, the amount
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determined by Agent in accordance with the provisions of Section 2.9, as reduced
by the Quarterly Reduction Amount on each Borrowing Base Reduction Date;
provided, however, that in no event shall the Borrowing Base ever exceed the
Commitment.
'Commitment Fee Rate' means, on each day:
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(a) thirty basis points (.30%) per annum when the Facility Usage on
such day is less than twenty-five percent of the Commitment on such day,
(b) fifty basis points (.50%) per annum when the Facility Usage on
such day is greater than or equal to twenty-five percent (25%) and less
than fifty percent (50%) of the Commitment on such day, and
(c) sixty two and one half basis points (.625%) per annum when the
Facility Usage on such day is greater than or equal to fifty percent (50%)
of the Commitment on such day.
'Eurodollar Margin' means (i) on each day when no Obligation is past due,
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three percent (3.00%) per annum and (ii) on each other day, two percent (2%)
above the interest rate that would otherwise be in effect pursuant to the
immediately preceding clause (i).
'Evaluation Date' means each of the following:
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(i) Each date which Borrower specifies as a date as of which the
Borrowing Base is to be redetermined, provided that each such date must be
the first or last date of a current calendar month and that Borrower shall
not be entitled to request any such redetermination more than once during
any Fiscal Year;
(ii) Each date which Lender, at its option, specifies as a date as of
which the Borrowing Base is to be redetermined;
(iii) the last day of each Fiscal Year, beginning June 30, 1997."
(b) The following new definitions are hereby added to Section 1.1 of
the Original Agreement:
"Quarterly Reduction Amount" means the amount of $750,000.
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"Borrowing Base Reduction Date" means December 31, 1999, March 31, 2000,
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June 30, 2000 and September 30, 2000.
Section 2.2. Mandatory Prepayments. Section 2.7(b) is hereby amended in
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its entirety to read as follows:
"(b) If at any time the Facility Usage is less than the Commitment but
in excess of the Borrowing Base (such excess being herein called a
"Borrowing Base Deficiency"), Borrower shall:
(i) if such Borrowing Base Deficiency results from a reduction in the
Borrowing Base due to the Quarterly Reduction Amount, Borrower will prepay
the principal of the Loans in an aggregate amount at least equal to such
Borrowing Base Deficiency on the date Agent gives notice of such Borrowing
Base Deficiency to Borrower, and if such Borrowing Base Deficiency results
from the reduction of the Borrowing Base to $22,000,000 pursuant to the
Third Amendment to this Agreement, Borrower will prepay the principal of
the Loans in an aggregate amount at least equal to such Borrowing Base
Deficiency on the day after the Effective Date;
(ii) except as set forth in clause (i) of this subsection (b)
immediately above, within five Business Days after Agent gives notice of
such fact to Borrower, do any of the following:
(A) prepay the principal of the Loans in an aggregate amount at
least equal to such Borrowing Base Deficiency, or
(B) give notice to Agent electing to prepay the principal of the
Loans in up to three monthly installments in an aggregate amount at
least equal to such Borrowing Base Deficiency, with each such
installment equal to or in excess of one-third of such Borrowing Base
Deficiency, and with the first such installment to be paid one month
after the giving of such notice and the subsequent installments to be
due and payable at one month intervals thereafter until such Borrowing
Base Deficiency has been eliminated, or
(C) give notice to Agent that Borrower desires to provide Agent
with deeds of trust, mortgages, chattel mortgages, security
agreements, financing statements and other security documents in form
and substance satisfactory to Agent, granting, confirming, and
perfecting first and prior liens or security interests in collateral
acceptable to Required Lenders, to the extent needed to allow Required
Lenders to increase the Borrowing Base (as they in their reasonable
discretion deem consistent with prudent oil and gas banking industry
lending standards at the time) to an amount which eliminates such
Borrowing Base Deficiency, and then provide such security documents
within thirty days after Agent specifies such collateral to Borrower.
If, prior to any such specification by Agent, Required Lenders
determine that the giving of such security documents will not serve to
eliminate such Borrowing Base Deficiency, then, within five Business
Days after receiving notice of such determination, Borrower will elect
to make, and thereafter make, the prepayments specified in either of
the preceding subsections (i) or (ii) of this subsection (b)."
Section 2.3. Subsequent Determinations of Borrowing Base. The second
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sentence of Section 2.9 of the Original Agreement is hereby amended in its
entirety to read as follows:
"Within forty-five days after receiving such information, reports
and data, Required Lenders shall agree upon an amount for the
Borrowing Base (provided that all Lenders must agree to any increase
in the Borrowing Base) and Agent shall by notice to Borrower designate
such amount as the new Borrowing Base available to Borrower hereunder,
which designation shall take effect immediately on the date such
notice is sent (herein called a "Determination Date") and shall remain
in effect until but not including the next date as of which the
Borrowing Base is redetermined."
Section 2.4. Financial Covenants. Sections 7.11, 7.12 and 7.13 of the
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Original Agreement are hereby deleted in their entirety and replaced with the
following:
"Section 7.11. Current Ratio. The ratio of Borrower's Consolidated
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current assets to Borrower's Consolidated current liabilities will never be
less than (i) 0.6 to 1.0 at any time during the period from July 1, 1999,
through and including December 30, 1999, and (ii) 1.0 to 1.0 at any time
thereafter. For purposes of this section, Borrower's Consolidated current
assets will include any unused portion of the Borrowing Base which is then
available for borrowing, and Borrower's Consolidated current liabilities
will be calculated without including any payments of principal on the Notes
or the Subordinated Notes which are required to be repaid within one year
from the time of calculation.
Section 7.12. Tangible Net Worth. Borrower's Consolidated Tangible Net
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Worth will never be less than the sum of (i) $20,000,000 plus (ii) fifty
percent (50%) of Borrower's Consolidated Net Income earned during the
period from June 30, 1997, through and including the last day of the
calendar month immediately preceding the date of calculation, determined on
a cumulative basis; provided that clause (ii) of this section shall be
added only if such cumulative amount is a positive number and provided
further that for each Fiscal Quarter ended through June 30, 2000,
impairment and exploration charges in the amount of $19,387,592 shall be
added back for the purpose of the calculation of Borrower's Consolidated
Tangible Net Worth.
Section 7.13. Interest CoverageSection 7.13. Interest Coverage. The
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ratio of (a) Adjusted EBITDA to (b) Adjusted Interest Expense for the Four
Quarter Period then ended shall not be less than (i) 1.15 to 1.0 for the
Fiscal Quarters ended September 30, 1999, December 31, 1999, March 31, 2000
and June 30, 2000 and (ii) 1.5 to 1.0 at any time thereafter.
Section 2.5. Borrowing Base. Pursuant to Section 2.9, Agent hereby
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notifies Borrower that during the period from the date hereof to the first
Determination Date immediately following the date hereof the Borrowing Base
shall be $22,000,000, as reduced by the Quarterly Reduction Amount on each
Borrowing Base Reduction Date.
Section 2.6. Amendment Fee. In consideration of Agent and each Lenders'
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agreement to enter into this Amendment, Borrower will pay to Agent for the
account of Lenders an amendment and waiver fee in the aggregate amount of
$335,000. This amendment fee shall be due and payable on the day after the
Effective Date of this Amendment.
Section 2.7. Waiver of Financial Covenants. Borrower has informed Agent
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and Lenders that Borrower is in violation of the provisions of Sections 7.11,
7.12 and 7.13 of the Credit Agreement for the Fiscal Quarter ended June 30,
1999. Agent and Lenders hereby (i) waive any violation of Sections 7.11, 7.12
and 7.13 of the Original Agreement for the Fiscal Quarter ended June 30, 1999
and (ii) waive any Default or Event of Default resulting from such violations.
ARTICLE III.
Conditions of Effectiveness
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Section 3.1. Effective Date. This Amendment shall become effective (the
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"Effective Date") as of the date first above written when, and only when Agent
shall have received all of the following documents in form and substance
satisfactory to Agent:
(a) this Amendment;
(b) the Consent of the Subsidiaries of Borrower which have executed and
delivered Security Documents;
(c) the written opinion of ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, LLP dated as of the date of
this Amendment, addressed to Agent, to the effect that this Amendment has been
duly authorized, executed and delivered by Borrower and that the Credit
Agreement and the Notes constitute the legal, valid and binding obligation of
Borrower, enforceable in accordance with their terms (subject, as to enforcement
of remedies, to applicable bankruptcy, reorganization, insolvency and similar
laws and to moratorium laws and other laws affecting creditors' rights generally
from time to time in effect);
(d) a certificate of the Secretary of Borrower dated the date of this
Amendment certifying: (i) that resolutions adopted by the Board of Directors of
the Borrower authorize the execution, delivery and performance of this Amendment
by Borrower; (ii) the names and true signatures of the officers of the Borrower
authorized to sign this Amendment; and (iii) that all of the representations and
warranties set forth in Article IV hereof are true and correct at and as of the
time of such effectiveness;
(e) such other supporting documents as Agent may reasonably request.
ARTICLE IV.
Representations and Warranties
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Section 4.1. Representations and Warranties of Borrower. In order to
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induce each Lender to enter into this Amendment, Borrower represents and
warrants to each Lender that:
(a) All representations and warranties made by any Restricted Person in any
Loan Document delivered on or before the date hereof are true on and as of the
date hereof (except to the extent that the facts upon which such representations
are based have been changed by the transactions contemplated herein) as if such
representations and warranties had been made as of the date hereof.
(b) Borrower is duly authorized to execute and deliver this Amendment and
is and will continue to be duly authorized to borrow monies and to perform its
obligations under the Credit Agreement. Borrower has duly taken all corporate
action necessary to authorize the execution and delivery of this Amendment and
to authorize the performance of the obligations of Borrower hereunder.
(c) The execution and delivery by Borrower of this Amendment and the
performance by Borrower of its obligations hereunder and the consummation of the
transactions contemplated hereby does not and will not conflict with any
provision of law, statute, rule or regulation or of the articles of
incorporation and bylaws of Borrower, or of any material agreement, judgment,
license, order or permit applicable to or binding upon Borrower, or result in
the creation of any lien, charge or encumbrance upon any assets or properties of
Borrower. Except for those which have been obtained, no consent, approval,
authorization or order of any court or governmental authority or third party is
required in connection with the execution and delivery by Borrower of this
Amendment or to consummate the transactions contemplated hereby.
(d) When duly executed and delivered, each of this Amendment and the Credit
Agreement will be a legal and binding obligation of Borrower, enforceable in
accordance with its 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.
(e) Drafts of the audited annual Consolidated financial statements of
Borrower dated as of June 30, 1999 (the "Draft Financial Statements") fairly
present the Consolidated financial position at such date and the Consolidated
statement of operations and the changes in Consolidated financial position for
the periods ending on such date for Borrower. The Draft Financial Statements
have heretofore been delivered to each Lender. Since such date, no material
adverse change has occurred in the financial condition or businesses or in the
Consolidated financial condition or businesses of Borrower.
ARTICLE V.
Miscellaneous
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Section 5.1. Ratification of Agreements. The Original Agreement as hereby
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amended is hereby ratified and confirmed in all respects. Any reference to the
Credit Agreement in any Loan Document shall be deemed to be a reference to the
Original Agreement as hereby amended. 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 Lenders under the Credit Agreement, the
Notes, or any other Loan Document nor constitute a waiver of any provision of
the Credit Agreement, the Notes or any other Loan Document.
Section 5.2. Survival of Agreements. All representations, warranties,
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covenants and agreements of Borrower herein shall survive the execution and
delivery of this Amendment and the performance hereof, including without
limitation the making or granting of the Loans and shall further survive until
all of the Obligations are paid in full. All statements and agreements
contained in any certificate or instrument delivered by Borrower any Restricted
Person hereunder or under the Credit Agreement to any Lender shall be deemed to
constitute representations and warranties by, and/or agreements and covenants
of, Borrower under this Amendment and under the Credit Agreement.
Section 5.3. Loan Documents. This Amendment is a Loan Document, and all
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provisions in the Credit Agreement pertaining to Loan Documents apply hereto.
Section 5.4. Governing Law. THIS AMENDMENT SHALL BE DEEMED A CONTRACT AND
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INSTRUMENT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK AND THE LAWS OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW.
Section 5.5. Counterparts: Fax. This Amendment may be separately executed
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in counterparts and by the different parties hereto in separate counterparts,
each of which when so executed shall be deemed to constitute one and the same
Amendment. This Amendment may be validly executed and delivered by facsimile or
other electronic transmission.
THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS REPRESENT 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 OF THE PARTIES.
IN WITNESS WHEREOF, this Amendment is executed as of the date first above
written.
BORROWER:
ENERGY CORPORATION OF AMERICA
By: /s/ ▇▇▇▇ ▇▇▇▇
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▇▇▇▇ ▇▇▇▇
Chief Executive Officer
AGENT:
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and Lender
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Manager of Operations
THE BANK OF NOVA SCOTIA, as
Documentation Agent and Lender
By: /s/ F.C.H. ▇▇▇▇▇
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Name: F.C.H. ▇▇▇▇▇
Title: Sr. Mgr. Loan Operations
UNION BANK OF CALIFORNIA, N.A., as
Lender
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Assistant Vice President
[Third Amendment]
CONSENT
Reference is made to that certain Credit Agreement dated as of May 20, 1997
(the "Original Agreement") as amended by a Second Amendment to Credit Agreement
dated as of April 2, 1999, and as amended by a Third Amendment dated as of even
date herewith (the "Second Amendment" and together with the Original Agreement,
the "Agreement"), by and among Energy Corporation of America, General Electric
Capital Corporation, as Agent, and certain financial institutions, which
Agreement is in full force and effect on the date hereof. Terms which are
defined in the Agreement are used herein with the meanings given them in the
Agreement.
Each of the undersigned hereby consents to the Third Amendment and agrees
and acknowledges, with respect to each Security Document executed by it that (i)
the Security Documents are and shall continue in full force and effect for the
benefit of the Lenders with respect to the Secured Obligations secured thereby;
(ii) there are no offsets, claims or defenses of the undersigned with respect to
the Security Documents nor, to the knowledge of the undersigned, with respect to
the Loan; (iv) the Security Documents are not released, diminished or impaired
in any way by the transaction(s) contemplated in connection with the Third
Amendment; and (v) the Security Documents are hereby ratified and confirmed in
all respects.
Dated: September 27, 1999 EASTERN PIPELINE CORPORATION
EASTERN AMERICAN ENERGY
CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
Title: President
ALLEGHENY & WESTERN ENERGY
CORPORATION
EASTERN MARKETING
CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
Title: President
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
Title: President
