Exhibit 10.1


 


SECOND AMENDMENT TO CREDIT AGREEMENT


 


This SECOND
AMENDMENT TO CREDIT AGREEMENT (“Amendment”), dated as of August 4, 2008,
is by and among PINNACLE GAS RESOURCES, INC., a
Delaware  corporation, the Lenders
from time to time party hereto, and THE ROYAL BANK OF SCOTLAND
plc, as Administrative Agent and as Issuer.


 


WHEREAS, the
Borrower, the Lenders and the Administrative Agent are parties to that certain
Credit Agreement (as amended by that certain Letter Regarding Waiver and
Amendment to Credit Agreement dated March 9, 2007 and as further amended
and supplemented from time to time, the “Credit Agreement); and


 


WHEREAS, the
parties hereto desire to amend the Credit Agreement in certain respects as set
forth herein;


 


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


 


AGREEMENT


 


Section 1.               Definitions.  Capitalized terms used herein but not defined
herein shall have the meanings as given them in the Credit Agreement, unless
the context otherwise requires.


 


Section 2.               Amendments.


 


(a)           Section 1.1.  Section 1.1 of the Credit Agreement is
hereby amended as follows:


 


(i)            The definition of “Applicable
Margin” is hereby amended and restated in its entirety as follows:


 


“Applicable Margin” means, for any day and with respect to
all Loans maintained as Eurodollar Loans or ABR Loans, the applicable
percentage set forth below corresponding to the Utilization Percentage Share:


 


	
  If the Utilization

  Percentage Share is:

  	
   

  	
  Then the Applicable

  Margin for

  Eurodollar Loans is:

  	
   

  	
  Then the Applicable

  Margin for ABR

  Loans is:

  	
   

  	
  Commitment

  Fee is:

  	
   

  
	
  Greater than or equal to 90%

  	
   

  	
  2.50

  	
  %

  	
  1.25

  	
  %

  	
  0.50

  	
  %

  
	
  Greater than or equal to 75% but less than
  90%

  	
   

  	
  2.25

  	
  %

  	
  1.00

  	
  %

  	
  0.50

  	
  %

  
	
  Greater than or equal to 50% but less than
  75%

  	
   

  	
  2.00

  	
  %

  	
  0.75

  	
  %

  	
  0.50

  	
  %

  
	
  Greater than or equal to 25% but less than
  50%

  	
   

  	
  1.75

  	
  %

  	
  0.50

  	
  %

  	
  0.50

  	
  %

  
	
  Less than 25%

  	
   

  	
  1.50

  	
  %

  	
  0.25

  	
  %

  	
  0.50

  	
  %

  



 

















 


If at any time the Borrower
fails to deliver a Reserve Report or Probable and Possible Report pursuant to Section 2.8.2
or 2.8.3, then the “Applicable Margin” means the rate per annum set
forth on the grid when the Utilization Percentage Share is at its highest level
until such time as such Reserve Report and such Probable and Possible Report
have been delivered.


 


(ii)           A new definition “Availability
Utilization Percentage Share” shall be inserted into Section 1.1 in the
appropriate alphabetical order:


 


“Availability
Utilization Percentage Share” means, as of any day, the fraction
expressed as a percentage, the numerator of which is the sum of the Credit
Exposures of the Lenders on such day, and the denominator of which is the
difference of (i) the product of EBITDA of the preceding four fiscal
quarters, as calculated in the most recent Compliance Certificate, multiplied
by three (3) less (ii) the aggregate Permitted Subordinated Debt of
the Borrower and its Subsidiaries outstanding, 
in effect on such day.”


 


(iii)          A new definition “Utilization
Percentage Share” shall be inserted into Section 1.1 in the appropriate
alphabetical order:


 


“Utilization
Percentage Share” means, the greater of the Borrowing Base
Utilization Percentage Share and the Availability Utilization Percentage Share.”


 


(b)           Section 7.15.4.  Section 7.15.4 of the Credit Agreement
is hereby amended and restated in its entirety as follows:


 


“7.15.4 Total Senior
Debt to Annualized EBITDA. The Borrower will not permit the ratio of
Total Senior Debt to Annualized EBITDA to be greater than 3.0 to 1.0 as of the
last day of each calendar quarter.”


 


Section 3.               Conditions to Effectiveness.  This Amendment shall be deemed effective as
of the date hereof following the satisfaction of the following conditions:


 


(a)           the
Administrative Agent shall have received counterparts hereof duly executed by
the Borrower, the Administrative Agent, and the Required Lenders; and


 


(b)           the
Administrative Agent shall have received an amendment fee in an amount equal to
Thirty Thousand Dollars ($30,000.00) for the account of the Administrative
Agent.


 


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Section 4.               Representations and Warranties.  The Borrower hereby represents and warrants
that after giving effect hereto:


 


(a)           the
representations and warranties of the Borrower and each Subsidiary contained in
the Loan Documents are true and correct in all material respects on and as of
the date hereof, other than those representations and warranties that expressly
relate solely to a specific earlier date, which shall remain correct in all
material respects as of such earlier date;


 


(b)           the
execution, delivery and performance by the Borrower and each Subsidiary of this
Amendment has been duly authorized by all necessary corporate action required
on their part and this Amendment, along with the Credit Agreement as amended
hereby and other Loan Documents, constitutes the legal, valid and binding
obligation of each Obligor party thereto enforceable against them in accordance
with its terms, except as its enforceability may be affected by the effect of
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting the rights or remedies of
creditors generally;


 


(c)           neither
the execution, delivery and performance of this Amendment by the Borrower and
each Subsidiary, the performance by them of the Credit Agreement nor the
consummation of the transactions contemplated hereby does or shall contravene,
result in a breach of, or violate (i) any provision of the Borrower or any
Subsidiary’s certificate or articles of incorporation or bylaws or other
similar documents, or agreements, (ii) any law or regulation, or any order
or decree of any court or government instrumentality, or (iii) any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which the Borrower or any of its Subsidiaries is a party or by which the
Borrower or any of its Subsidiaries or any of their property is bound, except
in any such case to the extent such conflict or breach has been waived herein
or by a written waiver document, a copy of which has been delivered to
Administrative Agent on or before the date hereof;


 


(d)           no
Material Adverse Effect has occurred and is continuing; and


 


(e)           no
Default or Event of Default has occurred and is continuing.


 


Section 5.               Ratification.


 


(a)           This
Amendment shall be deemed to be an amendment to the Credit Agreement, and the
Credit Agreement, as hereby amended, and all Obligations in connection
therewith, are hereby ratified, approved and confirmed in each and every
respect.  On and after the effectiveness
of this Amendment in accordance with Section 3 above, each
reference in the Credit Agreement to “this
Agreement”, “hereunder”, “hereof” or words of like import, referring to
the Credit Agreement, and each reference in each other Loan Document to “the Credit Agreement”, “thereunder”, “thereof”
or words of like import referring to the Credit Agreement, shall mean and be a reference
to the Credit Agreement as amended or otherwise modified by this
Amendment.  This Amendment is a Loan
Document.


 


(b)           The
Borrower and each of its Subsidiaries hereby ratifies, approves and confirms in
every respect all the terms, provisions, conditions and obligations of each of
the 


 


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Security Documents, including without limitation all
Mortgages, Pledge and Security Agreements, and Guaranties, to which it is a
party.


 


Section 6.               Costs and Expenses.  As provided in Section 9.4 of the Credit
Agreement, the Borrower agrees to reimburse Administrative Agent for all fees,
costs, and expenses, including the reasonable fees, costs, and expenses of
counsel or other advisors for advice, assistance, or other representation in
connection with this Amendment.


 


Section 7.               GOVERNING LAW. THIS AGREEMENT HAS BEEN NEGOTIATED, IS BEING
EXECUTED AND DELIVERED, AND WILL BE PERFORMED IN WHOLE OR IN PART, IN THE STATE
OF NEW YORK, AND THE SUBSTANTIVE LAWS OF SUCH STATE AND THE APPLICABLE FEDERAL
LAWS OF THE UNITED STATES OF AMERICA SHALL GOVERN THE VALIDITY, CONSTRUCTION,
ENFORCEMENT AND INTERPRETATION OF THE LOAN DOCUMENTS, EXCEPT TO THE EXTENT THE
LAWS OF ANY JURISDICTION WHERE COLLATERAL IS LOCATED REQUIRE APPLICATION OF
SUCH LAWS WITH RESPECT TO SUCH COLLATERAL.


 


Section 8.               Severability.  Any provision of this Amendment that is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Amendment or affecting the validity or enforceability of such provision in any
other jurisdiction.


 


Section 9.               Counterparts.  This Amendment may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Amendment by signing one or
more counterparts.  Any signature hereto
delivered by a party by facsimile transmission shall be deemed to be an
original signature hereto.


 


Section 10.             No Waiver.  Except as expressly set forth in this
Amendment, the execution, delivery and effectiveness of this Amendment shall
not operate as a waiver of any default of the Borrower or any other Obligor or
any right, power or remedy of the Administrative Agent or the other Secured
Parties under any of the Loan Documents, nor constitute a waiver of any
provision of any of the Loan Documents.


 


Section 11.             Successors
and Assigns.  This Amendment
shall be binding upon the Borrower and its successors and permitted assigns and
shall inure, together with all rights and remedies of each Lender hereunder, to
the benefit of each Lender and the respective successors, transferees and
assigns.


 


Section 12.             Entire Agreement.  THIS AMENDMENT, THE  CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS
CONSTITUTE THE ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT HEREOF AND SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES
HERETO, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT HEREOF.  FURTHERMORE, IN THIS REGARD, THIS 


 


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AGREEMENT 
REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF SUCH PARTIES.


 


THERE ARE
NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.


 


[Signature Pages Follow]


 


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IN WITNESS
WHEREOF, the parties hereto have caused this Amendment to be duly executed and
delivered by their respective duly authorized officers as of the date hereof.


 


	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  PINNACLE GAS RESOURCES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter G. Schoonmaker

  
	
   

  	
  Name: Peter G. Schoonmaker

  
	
   

  	
  Title: Chief Executive Officer and President

  



 

















 


	
   

  	
  ADMINISTRATIVE AGENT:

  
	
   

  	
   

  
	
   

  	
  THE ROYAL BANK OF SCOTLAND plc

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert L. Roberts

  
	
   

  	
  Name: Robert L. Roberts

  
	
   

  	
  Title: Managing Director

  



 

















 


	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  THE ROYAL BANK OF SCOTLAND plc

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert L. Roberts

  
	
   

  	
  Name: Robert L. Roberts

  
	
   

  	
  Title: Managing Director