Delaware
|
|
001-38668
|
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82-4919553
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(State or other jurisdiction of
incorporation) |
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(Commission File Number)
|
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(I.R.S. Employer Identification No.)
|
303 W. Wall Street, Suite 1800
Midland, Texas (Address of principal executive offices) |
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79701
(Zip Code) |
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
|
Title of each class
|
Ticker symbol(s)
|
Name of each exchange on which registered
|
Common stock, par value $0.01
|
LGCY
|
NASDAQ Stock Market LLC
|
Item 9.01 |
Financial Statements and Exhibits
|
Exhibit No.
|
|
Description
|
First Amended and Restated Restructuring Support Agreement dated as of June 13, 2019
|
|
Legacy Reserves Inc.
|
|
|
|
|
Dated: June 14, 2019
|
By:
|
/s/ James Daniel Westcott
|
|
Name:
Title:
|
James Daniel Westcott
Chief Executive Officer
|
i. |
Legacy Reserves Inc. (“
Legacy Reserves
”), a publicly-traded company organized under the laws of the State of Delaware and its direct and indirect subsidiaries that are parties to the
Prepetition Credit Agreements (as defined below) (collectively, the “
Company
” or the “
Company Parties
” and such Company Parties (including,
without limitation, Legacy Reserves) that file Chapter 11 Cases (as defined below) as set forth in the Restructuring Term Sheet (as defined below), collectively, the “
Debtors
”);
|
|
ii. |
those certain lenders under that certain Credit Agreement, dated as of October 25, 2016, by and among Legacy Reserves LP, a limited partnership duly formed and existing under the laws of the State of Delaware, the other guarantors
from time to time party thereto, Cortland Capital Market Services LLC, as administrative agent (together with any successor administrative agent, the “
Prepetition Term Loan
Agent
”), and the lenders from time to time party thereto (as amended by that certain First Amendment to Credit Agreement dated as of July 31, 2017, as further amended by that certain Second
Amendment to Credit Agreement dated as of October 30, 2017, as further amended by that certain Third Amendment to Credit Agreement dated as of December 31, 2017, as further amended by that certain Fourth Amendment to Credit Agreement
dated as of March 23, 2018, as further amended by that certain Fifth Amendment to Credit Agreement dated as of September 14, 2018, as further amended by that certain Sixth Amendment to Credit Agreement dated as of September 20, 2018,
and as further amended by that certain Seventh Amendment to Credit Agreement dated as of March 21, 2019, the “
Prepetition Term Loan Credit Agreement
”), that execute signature pages hereto
(such lenders, collectively, the “
Supporting Term Lenders
”); and
|
1 |
Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the term sheet attached hereto as
Exhibit
A-1
or, alternatively, if the Noteholder Termination (as defined herein) has occurred,
Exhibit A-2
(as applicable, and
as the same may be
amended, supplemented, or otherwise modified from time to time, the “
Restructuring Term Sheet
”), subject to Section 2 hereof.
|
|
iii. |
those certain lenders under that certain Third Amended and Restated Credit Agreement dated as of April 1, 2014, by and among Legacy Reserves LP, as borrower, the other guarantors from time to time party thereto, the lenders from time
to time party thereto, and Wells Fargo Bank, National Association, as administrative agent (together with any successor administrative agent, the “
Prepetition RBL Agent
” and together with
the Prepetition Term Loan Agent, collectively, the “
Prepetition Agents
”) (as amended, supplemented, or otherwise modified as of the date hereof, the “
Prepetition
RBL Credit Agreement
” and together with the Prepetition Term Loan Credit Agreement, collectively, the “
Prepetition Credit Agreements
”) (such lenders that execute signature
pages hereto, collectively, the “
Supporting RBL Lenders
”); and
|
|
iv. |
those certain (a) holders of 6.625% Senior Notes due 2021 (the “
2021 Notes
” and such holders thereof, the “
2021 Noteholders
”) issued under
the Indenture dated as of May 28, 2013 (as amended, supplemented, or otherwise modified as of the date hereof, the “
2021 Notes Indenture
”), by and among Legacy Reserves LP, Legacy Reserves
Finance Corporation, the other Company Parties party thereto, and Wilmington Trust, National Association (as successor to Wells Fargo Bank, National Association), as indenture trustee (the “
2021 Notes
Trustee
”), (b) holders of 8% Convertible Notes due 2023 (the “
2023 Notes
” and such holders thereof, the “
2023 Noteholders
”)
issued under the Indenture dated as of September 20, 2018 (as amended, supplemented, or otherwise modified as of the date hereof, the “
2023 Notes Indenture
”), by and among Legacy Reserves
LP, Legacy Reserves Finance Corporation, the other Company Parties party thereto, and Wilmington Trust, National Association, as indenture trustee (the “
2023 Notes Trustee
”) and (c) holders
of 8% Senior Notes due 2020 (the “
2020 Notes
” and such holders thereof, the “
2020 Noteholders
”) issued under the Indenture dated as of
December 4, 2012 (as amended, supplemented, or otherwise modified as of the date hereof, the “
2020 Notes Indenture
” and together with the 2021 Notes Indenture and the 2023 Notes Indenture,
collectively, the “
Prepetition Notes Indentures
”), by and among Legacy Reserves LP, Legacy Reserves Finance Corporation, the other Company Parties party thereto, and Wilmington Trust,
National Association (as successor to Wells Fargo Bank, National Association), as indenture trustee (the “
2020 Notes Trustee
”), in each case that execute signature pages hereto
(collectively, the “
Supporting Noteholders
” and together with the Supporting Term Lenders and the Supporting RBL Lenders, collectively, the “
Supporting
Creditors
”
2
and, collectively, with (i) the Company Parties and (ii) any transferee that becomes a Supporting Creditor pursuant to section
4.03(a), the “
Parties
”).
|
2 |
For the purposes of this Agreement, each party agrees that the terms “Supporting Term Lenders”, “Supporting RBL Lenders”, “Supporting Noteholders” and “Supporting Creditors” shall not include any distinct business unit of a
Supporting Creditor other than the business unit expressly identified in such Supporting Creditor’s signature block appended hereto (if a business unit is specified) unless such other business unit is or becomes a party to this
Agreement.
|
3 |
For the avoidance of doubt, as used herein, the terms “
Supporting Creditors
” and “
Parties
” includes the DIP Lenders and the Sponsor
Backstop Parties in their capacities as such.
|
4 |
For the avoidance of doubt, the obligations and rights of the Supporting Creditors described in this Agreement shall apply to any claims or interests acquired by such Supporting Creditors.
|
5 |
As used herein, (a) the term “
Required Supporting Term Lenders
” means, at any relevant time, the Supporting Creditors holding greater than 50.0% of the outstanding principal amount of
the Term Loan Claims held by Supporting Creditors (b) the term “
Required Supporting RBL Lenders
” means, at any relevant time, the Supporting Creditors holding greater than 50.0% of the
outstanding principal amount of the RBL Claims held by the Supporting Creditors, and (c) the term “
Required Supporting Noteholders
” means, at any relevant time, the Supporting Creditors
holding greater than 50.0% of the outstanding principal amount of the Notes Claims held by the Supporting Creditors;
provided
that Notes Claims held by the Plan Sponsor may not, in the aggregate, account for more than 45% of
the amounts set forth in the calculation of the Required Supporting Noteholders.
|
6 |
For the purposes of this Section 4.03, a “
Qualified Marketmaker
”
means an entity that (a) holds itself out to the market as standing ready in
the ordinary course of its business to purchase from customers and sell to customers claims against and/or interests in (as applicable) the Debtors and their affiliates (including debt securities or other debt) or enter with customers
into long and short positions in claims against the Debtors and their affiliates (including debt securities or other debt), in its capacity as a dealer or market maker in such claims against the Debtors and their affiliates and (b) is
in fact regularly in the business of making a market in claims against issuers or borrowers (including debt securities or other debt).
|
(a)
|
if to a Company Party, to:
|
|
Legacy Reserves Inc.
|
||
303 W. Wall Street, Suite 1800
|
||
Midland, Texas 79701
|
||
Attention: Bert Ferrara
|
||
E-mail address: bferrara@legacyreserves.com
|
||
with copies (which alone shall not constitute notice) to:
|
||
Sidley Austin LLP
|
||
1000 Louisiana Street, Suite 5900
|
||
Houston, TX, 77002
|
||
Attention: Duston K. McFaul; Bojan Guzina;
|
||
E-mail addresses: dmcfaul@sidley.com; bguzina@sidley.com
|
||
(b)
|
if to the Supporting Term Lenders, to:
|
|
Latham & Watkins LLP
|
||
885 Third Avenue
|
||
New York, NY 10022
|
||
Attention: George A. Davis; Jonathan R. Rod; Adam J. Goldberg
|
||
E-mail addresses: george.davis@lw.com; jonathan.rod@lw.com; adam.goldberg@lw.com
|
(c)
|
if to the Supporting RBL Lenders, to:
|
|
Orrick Herrington & Sutcliffe LLP
|
||
51 West 52nd Street
|
||
New York, NY 10019-6142
|
||
United States
|
||
Attention: Raniero D’Aversa; Laura Metzger
|
||
E-mail addresses: rdaversa@orrick.com; lmetzger@orrick.com
|
||
(d)
|
if to the Supporting Noteholders, to:
|
|
Davis Polk & Wardwell LLP
|
||
450 Lexington Avenue
|
||
New York, NY 10017
|
||
United States
|
||
Attention: Brian M. Resnick; Stephen D. Piraino; Michael P. Pera
|
||
E-mail addresses: brian.resnick@davispolk.com; stephen.piraino@davispolk.com; michael.pera@davispolk.com
|
LEGACY RESERVES LP
|
||
By:
|
Legacy Reserves GP, LLC
,
its general partner
|
|
By:
|
Legacy Reserves Inc.,
its sole member
|
|
By:
|
/s/ James Daniel Westcott | |
|
James Daniel Westcott
|
|
|
Chief Executive Officer | |
LEGACY RESERVES OPERATING LP
|
||
By:
|
Legacy Reserves Operating GP LLC , its general partner | |
By:
|
Legacy Reserves LP , its sole member | |
By:
|
Legacy Reserves GP, LLC , its general partner | |
By:
|
Legacy Reserves Inc. , its sole member | |
By:
|
/s/ James Daniel Westcott | |
|
James Daniel Westcott | |
|
Chief Executive Officer | |
LEGACY RESERVES OPERATING GP LLC
|
||
By:
|
Legacy Reserves LP , its sole member | |
By:
|
Legacy Reserves GP, LLC , its general partner | |
By:
|
Legacy Reserves Inc. , its sole member | |
By:
|
/s/ James Daniel Westcott | |
|
James Daniel Westcott | |
|
Chief Executive Officer
|
LEGACY RESERVES GP, LLC
|
||
By:
|
Legacy Reserves Inc. , its sole member | |
By:
|
/s/ James Daniel Westcott | |
|
James Daniel Westcott
|
|
|
Chief Executive Officer
|
|
LEGACY RESERVES SERVICES LLC
|
||
DEW GATHERING LLC
|
||
PINNACLE GAS TREATING LLC
|
||
LEGACY RESERVES ENERGY SERVICES LLC
|
||
LEGACY RESERVES INC.
|
||
LEGACY RESERVES FINANCE CORPORATION
|
||
LEGACY RESERVES MARKETING LLC
|
||
By:
|
/s/ James Daniel Westcott | |
|
James Daniel Westcott
|
|
|
Chief Executive Officer
|
By:
|
/s/ Marisa J. Beeney
|
Name:
|
Marisa J. Beeney
|
Title:
|
Authorized Signatory
|
By:
|
/s/ Marisa J. Beeney
|
Name:
|
Marisa J. Beeney
|
Title:
|
Authorized Signatory
|
By:
|
/s/ Marisa J. Beeney
|
Name:
|
Marisa J. Beeney
|
Title:
|
Authorized Signatory
|
By:
|
/s/ Marisa J. Beeney
|
Name
|
Marisa J. Beeney
|
Title:
|
Authorized Signatory
|
By:
|
/s/ Marisa J. Beeney
|
Name:
|
Marisa J. Beeney
|
Title:
|
Authorized Signatory
|
By:
|
/s/ Marisa J. Beeney
|
Name:
|
Marisa J. Beeney
|
Title:
|
Authorized Signatory
|
By:
|
/s/ Marisa J. Beeney
|
Name:
|
Marisa J. Beeney
|
Title:
|
Authorized Signatory
|
By:
|
/s/ Marisa J. Beeney
|
Name:
|
Marisa J. Beeney
|
Title:
|
Authorized Signatory
|
By:
|
/s/ Marisa J. Beeney
|
Name:
|
Marisa J. Beeney
|
Title:
|
Authorized Signatory
|
By:
|
/s/ Marisa J. Beeney
|
Name:
|
Marisa J. Beeney
|
Title:
|
Authorized Signatory
|
By:
|
/s/ Brett Steele
|
Name:
|
Brett Steele
|
Title:
|
Director
|
By:
|
/s/ Todd Dittmann
|
Name:
|
Todd Dittmann
|
Title:
|
Authorized Person
|
By:
|
/s/ Kevin M. Behan
|
Name:
|
Kevin M. Behan
|
Title:
|
Managing Director
|
By:
|
/s/ Rachel Festervand
|
Name:
|
Rachel Festervand
|
Title:
|
Sr. Vice President
|
By:
|
/s/ Radhika Kapur
|
Name:
|
Radhika Kapur
|
Title:
|
Associate
|
By:
|
/s/ Stephanie Balette
|
Name:
|
Stephanie Balette
|
Title:
|
Authorized Officer
|
By:
|
/s/ Leslie P. Vowell
|
Name:
|
Leslie P. Vowell
|
Title:
|
Attorney-in-Fact
|
By:
|
/s/ Ronald R. Redell | |
Name: Ronald R. Redell
|
||
Title: President
|
By:
|
Canyon Capital Advisors, LLC
its Investment Advisor
|
|
By:
|
/s/ Jonathan M. Kaplan
|
|
Name: Jonathan M. Kaplan
|
||
Title: Authorized Signatory
|
By:
|
Canyon Capital Advisors, LLC
its Investment Advisor
|
|
By:
|
/s/ Jonathan M. Kaplan
|
|
Name: Jonathan M. Kaplan
|
||
Title: Authorized Signatory
|
By:
|
Canyon Capital Advisors, LLC
its Investment Advisor
|
|
By:
|
/s/ Jonathan M. Kaplan
|
|
Name: Jonathan M. Kaplan
|
||
Title: Authorized Signatory
|
By:
|
Canyon Capital Advisors, LLC
its Investment Advisor
|
|
By:
|
/s/ Jonathan M. Kaplan
|
|
Name: Jonathan M. Kaplan
|
||
Title: Authorized Signatory
|
By:
|
Canyon Capital Advisors, LLC
its Investment Advisor
|
|
By:
|
/s/ Jonathan M. Kaplan
|
|
Name: Jonathan M. Kaplan
|
||
Title: Authorized Signatory
|
By:
|
Canyon Capital Advisors, LLC
its co-Investment Advisor
|
|
By:
|
/s/ Jonathan M. Kaplan
|
|
Name: Jonathan M. Kaplan
|
||
Title: Authorized Signatory
|
By:
|
Canyon Partners Real Estate LLC,
Its co-Investment Advisor
|
|
By:
|
/s/ Jonathan M. Kaplan
|
|
Name: Jonathan M. Kaplan
|
||
Title: Authorized Signatory
|
By:
|
Canyon Capital Advisors, LLC
its Investment Advisor
|
|
By:
|
/s/ Jonathan M. Kaplan
|
|
Name: Jonathan M. Kaplan
|
||
Title: Authorized Signatory
|
By: |
Canyon Capital Advisors, LLC
its Investment Advisor
|
|
By:
|
/s/ Jonathan M. Kaplan | |
|
Name: Jonathan M. Kaplan | |
|
Title: Authorized Signatory |
By: |
Canyon Capital Advisors, LLC
its Investment Advisor
|
|
By:
|
/s/ Jonathan M. Kaplan | |
|
Name: Jonathan M. Kaplan | |
|
Title: Authorized Signatory |
By: |
Canyon Capital Advisors, LLC
its Investment Advisor
|
|
By:
|
/s/ Jonathan M. Kaplan | |
Name: Jonathan M. Kaplan
|
||
Title: Authorized Signatory
|
By: |
Canyon Capital Advisors, LLC
its Investment Advisor
|
|
By:
|
/s/ Jonathan M. Kaplan | |
Name: Jonathan M. Kaplan
|
||
Title: Authorized Signatory
|
By: |
Canyon Capital Advisors, LLC
its Investment Advisor
|
|
By:
|
/s/ Jonathan M. Kaplan | |
Name: Jonathan M. Kaplan
|
||
Title: Authorized Signatory
|
By: | JCG 2016 Holdings, LP | |
By:
|
/s/ John C. Goff | |
Name: John C. Goff
|
||
Title: Manager, JCG 2016 Management, LLC, as General Partner
|
By:
|
The John C. Goff 2010 Family Trust | |
By:
|
/s/ John C. Goff | |
Name: John C. Goff
|
||
Title: Trustee
|
By: | John C. Goff SEP-IRA | |
By:
|
/s/ John C. Goff | |
Name: John C. Goff
|
||
Title:
|
By: | Kulik Partners, LP | |
By:
|
/ s/ John C. Goff | |
Name: John C. Goff
|
||
Title: Manager, Kulik GP, LLC, as General Partner
|
By: | Jill Goff | |
By:
|
/s/ Jill Goff | |
Name: Jill Goff
|
||
Title:
|
By:
|
Cuerno Largo Partners, LP | |
By:
|
/s/ John C. Goff | |
Name: John C. Goff
|
||
Title: Chief Executive Officer Goff Capital, Inc., as General Partner
|
By:
|
Goff Family Investments, LP | |
By:
|
/s/ John C. Goff | |
Name: John C. Goff
|
||
Title: Chief Executive Officer Goff Capital, Inc., as General Partner
|
By:
|
The Goff Family Foundation | |
By:
|
/s/ John C. Goff | |
Name: John C. Goff
|
||
Title: Sole Board Member
|
By:
|
Goff REN Holdings, LLC or its affiliates | |
By:
|
/s/ John C. Goff | |
Name: John C. Goff
|
||
Title: Chief Executive Officer, GFS REN GP, LLC, as Manager
|
Wilkie Colyer
|
||
By:
|
/s/ Wilkie Colyer | |
Name: Wilkie Colyer
|
||
Title: Individual
|
MGA INSURANCE COMPANY, INC.
|
||
By:
|
/ s/ Glenn W. Anderson | |
Name: Glenn W. Anderson
|
||
Title: President and CEO
|
By:
|
Keith B. Ohnmeis | |
By:
|
/s/ Keith B. Ohnmeis | |
Name: Keith B. Ohnmeis
|
||
Title: Managing Member, Registered Investment Advisor (RIA)
|
J.H. LANE PARTNERS MASTER FUND, L.P.
|
||
By:
|
/s/ Haskel Ginsberg | |
Name: Haskel Ginsberg
|
||
Title: CFO
|
1
|
Unless otherwise indicated herein, capitalized terms used but not otherwise defined in this Term Sheet have the meanings ascribed to such terms as set forth in
Exhibit A
to this Term Sheet
or the RSA, as applicable.
|
OVERVIEW OF THE RESTRUCTURING
|
|
In general, the Restructuring contemplates the following, in each case subject to the terms and conditions described more fully herein, the RSA, and the Sponsor Backstop Commitment Agreement:
|
|
|
|
|
(a) The Debtors will implement the Restructuring in the Bankruptcy Court pursuant to the Plan on the terms set forth in this Term Sheet (as supplemented by the RSA, Sponsor Backstop Commitment Agreement,
Noteholder Backstop Commitment Agreement, DIP Documents, Exit Facility Term Sheet, MIP Term Sheet and Governance Term Sheet).
(b) The Debtors will obtain a debtor-in-possession financing facility (the “
DIP Facility
”) from certain of the RBL Lenders as set forth in the Senior Secured
Superpriority Debtor-In-Possession Credit Agreement attached hereto as
Exhibit B-1
(the “
DIP Credit Agreement
” and the lenders from time to
time party thereto, the “
DIP Lenders
”) and the proposed interim order approving the DIP Facility attached hereto as
Exhibit B-2
(the “
Interim DIP Order
”). The DIP Facility shall consist of (i) a new money revolving loan facility in the aggregate principal amount of $100 million (“
New Money
DIP Claims
”) and (ii) a refinancing term loan facility in the aggregate principal amount of up to $250 million (“
Refinanced DIP Claims
”). The DIP Credit Agreement, the
Interim DIP Order, the final order approving the DIP Facility (the “
Final DIP Order
”, and together with the Interim DIP Order, the “
DIP Orders
”),
and other documents related thereto are collectively referred to as, the “
DIP Documents
”.
(c) Certain funds managed or advised by GSO Capital Partners LP and its affiliates (collectively, the “
Plan Sponsor
”) will agree (i) to consent to the DIP
Facility and the use of their cash collateral to fund the Chapter 11 Cases pursuant to the DIP Documents, (ii) to vote all of their prepetition claims (including Term Loan Claims and Notes Claims) to accept the Plan pursuant to the RSA,
(iii) to backstop a $189.8 million equity commitment (the “
Sponsor
Backstop Commitment
”) pursuant to the Sponsor Backstop Commitment
Agreement and to backstop $10.2 million of a $66.5 million Rights Offering pursuant to the Noteholder Backstop Commitment Agreement and (iv) to the extent approved by the Plan Sponsor, the Debtors, and the Required Supporting
Noteholders or otherwise consistent with this Term Sheet,
provide additional capital in the form of an unsecured note (the “
New Exit Note
”) subject to documentation, terms, and conditions
to be agreed
between the Plan Sponsor and the Debtors, which would be offered to the Plan Sponsor and the Noteholders that participate in the Rights Offering as set forth herein
.
(d) The DIP Lenders will agree (i) to provide the DIP Facility and consent to the use of their cash collateral to fund the Chapter 11 Cases pursuant to the DIP Documents and (ii) to vote all of their RBL
Claims and Refinanced DIP Claims to accept the Plan pursuant to the RSA.
(e) The Supporting RBL Lenders will agree to provide a senior secured revolving asset-based lending credit facility in a maximum amount of $500 million as set forth in the exit facility term sheet annexed
hereto as
Exhibit D
(the “
Exit Facility Term Sheet
”).
(f) The Supporting Noteholders will agree to vote all of their Notes Claims to accept the Plan pursuant to the RSA.
|
|
(g) The Debtors may, at the Plan Sponsor’s option, offer an additional $125 million of New Common Stock pursuant to the Incremental Equity Investment as described below.
(h) All Claims arising under the DIP Facility will be satisfied in full by one or a combination of the following: (i) New Money DIP Claims shall be paid in full in cash not later than the Effective
Date, and (ii) Refinanced DIP Claims (A) will be paid in cash and exchanged into the Exit Facility pursuant to the Exit Facility Term Sheet, or (B) if the Exit Facility is not consummated, will be paid in full in cash not later than
the Effective Date.
(i) All RBL Claims will be satisfied in full by one or a combination of the following: (i) distribution of claims under the credit facilities described in the Exit Facility Term Sheet (the “
Exit Facility
”) in exchange for the RBL Claims; or (ii) if the Exit Facility is not consummated, payment in full in cash not later than the Effective Date. For avoidance of doubt, there
shall not be any cash paid on account of the principal balance of RBL Claims pursuant to any plan unless and until all Refinanced DIP Claims are paid in full in cash on the Effective Date.
(j) In full and final satisfaction of all Term Loan Claims, holders thereof will receive their respective Pro Rata share of an amount of New Common Stock in accordance with the percentage ownership of
the New Common Equity Pool set forth on
Annex I
.
(k) Holders of Notes Claims (“
Noteholders
”) will receive (i) their respective Pro Rata share of an amount of New Common Stock that is in accordance with
the percentage ownership of the New Common Equity Pool set forth on
Annex I
and (ii) their respective Pro Rata share on the basis of their respective holdings of Note Claims of Subscription Rights to participate in an equity
rights offering in an amount not to exceed $66.5 million (the “
Rights Offering
”) (provided that $10.2 million of such rights shall be allocated to the Plan Sponsor and shall not be
subject to reduction for any reason and the Plan Sponsor shall in no event receive any rights in excess of $10.2 million, and any
such amount in excess of $10.2
million shall instead be allocated to the other Noteholders on a pro rata basis in accordance with their respective holdings of Notes Claims
), which Subscription Rights may only be exercised by Noteholders that are “
accredited investors
” as defined under Rule 501 of the Securities Act, which Rights Offering shall be backstopped in an amount equal to $66.5 million by certain of the Supporting Noteholders
on the terms set forth in the Noteholder Backstop Commitment Agreement attached hereto as
Exhibit G
(including all schedules and exhibits thereto, the “
Noteholder
Backstop Commitment Agreement
”). In addition, Noteholders that subscribe to the Rights Offering (each a “
Participating Noteholder
”) shall receive their respective pro rata
share
(calculated as a
proportion of such Noteholder’s participation in the Rights Offering relative to other Participating Noteholders) of (x) an
amount of New Common Stock in accordance with the percentage ownership of the New Common Equity Pool set forth on
Annex I
(the “
Participation Premium
”)
less
the Non-Accredited Investor Premium (as defined below) and (y) rights to participate in up to 49% of the New Exit Note, if any;
provided
that, to the extent a Noteholder is unable to exercise its
Subscription Rights because it is not an accredited investor, it shall receive its pro rata share of the Participation Premium as if it were a fully-subscribing Participating Noteholder so long as it delivers a notice to counsel to
the Debtors, counsel to the Plan Sponsor, and counsel to the Noteholder Backstop Parties (as defined below) certifying that it is not an accredited investor (the “
Non-Accredited Investor Premium
”).
|
|
(l) Holders of General Unsecured Claims shall receive payment in full in cash or such General Unsecured Claims shall be reinstated.
(m) Holders of Interests in Legacy Reserves shall receive no recovery under the Plan, and all such Interests shall be extinguished.
|
|
|
|
This Term Sheet incorporates the rules of construction as set forth in section 102 of the Bankruptcy Code.
|
The Plan Sponsor shall be entitled to participate in $10.2 million of the Rights Offering
(the “
Sponsor Participation Amount
”)
on account of its Notes Claims and to
receive the corresponding portion of the Participation Premium. The entirety of the Sponsor Participation Amount shall be reserved for and allocated to the Plan Sponsor and shall not be subject to reduction for any reason;
provided
that the Plan Sponsor shall not be entitled to participate in any additional amount of the Rights Offering in excess of the Sponsor Participation Amount.
|
|
The Noteholder
Backstop
Commitment
|
The Supporting Noteholders identified on
Exhibit F
hereto and the Plan Sponsor (together with such other Supporting Noteholders reasonably acceptable to the Plan Sponsor
and the Debtors, collectively, the “
Noteholder Backstop Parties
”) shall agree to backstop the Rights Offering in an amount equal to $66.5 million (the “
Noteholder Backstop Amount
”) on the terms set forth in the Noteholder Backstop Commitment Agreement;
provided
, for the avoidance of doubt, that the Plan Sponsor shall backstop $10.2
million of the Noteholder Backstop Amount (the “
Plan Sponsor Notes Backstop Amount
”) on the same terms as the other Noteholder Backstop Parties, including with respect to the Noteholder Backstop Fee, which the Plan Sponsor shall be entitled to receive on a pro rata basis
(calculated as a proportion of the Plan Sponsor Notes Backstop Amount relative to the Noteholder Backstop Amount);
provided
,
further
, that the Plan Sponsor shall not be entitled to participate in the Noteholder Backstop Amount or the Rights Offering for an amount greater than the Sponsor Participation Amount. The Noteholder Backstop Commitment
Agreement will provide for, among other things, a commitment fee (the “
Noteholder Backstop Fee
”) of 6% of the $66.5 million Noteholder Backstop Amount payable to the Noteholder Backstop Parties on the Effective Date in an amount of
New Common Stock in accordance with the
percentage ownership of the New Common Equity Pool set forth on
Annex I
.
|
2
|
For the avoidance of doubt, the ownership percentages for each person and line item set forth on
Annex I
shall be adjusted accordingly based on the amount of any New Common Stock issued under
the Incremental Equity Investment.
|
3
|
The Prepetition Term Loan Secured Parties reserve their respective rights to assert claims in accordance with the Prepetition Term Loan Documents, including the full amount of the Applicable Premium and
post-petition interest, in the event of termination of the RSA other than upon the Effective Date.
|
Exit Financing
|
Exit Facility
: Except as otherwise provided
in this section, as a condition precedent to the Effective Date, the Debtors shall (a) enter into the Exit Facility, a senior secured revolving reserve-based lending credit facility to be arranged and provided by the Lenders under the
Prepetition RBL Credit Agreement in the maximum amount of $500 million, as set forth in the Exit Facility Term Sheet, or otherwise on terms acceptable to the Debtors, the Plan Sponsor and the Prepetition RBL Agent. or (b) if the Exit
Facility is not consummated, enter into an alternative senior secured revolving reserve-based lending credit facility in form and substance acceptable to the Debtors and the Plan Sponsor;
provided
, for the avoidance of doubt, that, if the Exit Facility is not consummated, the DIP Claims and RBL
Claims shall be paid in full in cash on the Effective Date. To the extent not paid in cash, holders of RBL Claims and Refinanced DIP Claims shall receive a
distribution of commitments under the Exit Facility (in the manner
set forth in the Exit Facility Term Sheet) in exchange for such RBL and Refinanced DIP Claims, on a Pro Rata basis
.
New Exit Note
: If the Plan Sponsor
, Required Supporting Noteholders and the Debtors determine that post-emergence liquidity from the Exit Facility, the Sponsor Backstop Commitment, the Rights Offering,
and the Incremental Equity Investment, if any, is insufficient (including to account for any potential contingency), the Plan Sponsor may,
with the prior
written consent of the Debtors and the Required Supporting Noteholders, provide the New Exit Note in an amount and on terms to be agreed upon between the Plan Sponsor
, the Required Supporting Noteholders and the Debtors. Participating Noteholders shall be permitted to participate in funding their pro rata share (calculated as a
proportion of such Noteholder’s participation in
the Rights Offering relative to other Participating Noteholders)
of up to 49% of the aggregate amount of the New Exit Note;
provided
that the consent of the Required Supporting Noteholders will not be required if the New Exit
Note is necessary to meet the conditions precedent under the Exit Facility or an alternative exit facility, as applicable.
The Debtors shall timely seek approval from the Bankruptcy Court to obtain relief necessary to effectuate the Exit Facility and the
New Exit Note, as applicable.
|
Third Party Investor(s)
|
The Plan Sponsor may designate one or more third party investment partners mutually acceptable to the Plan Sponsor and the Debtors
(each a “
Partner
”) to participate in the funding of the Restructuring through assignment
to any such Partner of any of the Plan Sponsor’s rights, claims or interests with respect to the Term Loan Claims, the Notes Claims, the Sponsor Backstop Commitment, the Noteholder Backstop Commitment, the Rights Offering, the
Incremental Equity Investment, or the New Exit Note, or through any combination of the foregoing.
The Debtors shall, without limitation to other terms and conditions to be agreed between the Debtors, the Plan Sponsor, and any
Partner in connection with such Partner’s participation in any of the foregoing, agree to provide representations and warranties to any such Partner in form and substance reasonably acceptable to the Plan Sponsor and the Debtors
pursuant to documentation in form and substance reasonably acceptable to the Plan Sponsor and the Debtors.
|
4
|
As noted above, if the Effective Date has not occurred on or prior to September 30, 2019, the Allowed amount of the Term Loan Claim shall increase, by this negotiated settlement, at a rate of 14.25% per
annum (prorated from October 1, 2019 to the Effective Date) in consideration of a settlement of the Term Loan Claim, including the Applicable Premium and accrual of post-petition accrued interest. The allocations of the New Common
Stock provided for herein shall be adjusted accordingly as described on Annex I. In addition, the Prepetition Term Loan Secured Parties reserve their respective rights to assert claims in accordance with the Prepetition Term Loan
Documents, including the full amount of the Applicable Premium (as defined in the Prepetition Term Loan Credit Agreement) and post-petition interest, in the event of termination of the RSA other than upon the Effective Date.
|
Class 6
|
General Unsecured Claims
|
Holders of General Unsecured Claims will be paid in the ordinary course of business or receive payment in full in cash or be reinstated on the Effective Date.
|
Unimpaired; deemed to accept.
|
Class 7
|
Intercompany Claims
|
On the Effective Date, Intercompany Claims shall be, at the option of the Debtors, with the consent of the Plan Sponsor, either Reinstated or canceled, released, and extinguished without any distribution.
|
Impaired; deemed to reject or Unimpaired; deemed to accept
|
Class 8
|
Interests in Debtors other than Legacy Reserves
|
On the Effective Date, Interests in the Debtors other than Legacy Reserves shall be, at the option of the Debtors, with the consent of the Plan Sponsor, either Reinstated or canceled, released, and
extinguished without any distribution.
|
Impaired; deemed to reject or Unimpaired; deemed to accept
|
Class 9
|
Interests in Legacy Reserves
|
All Interests in Legacy Reserves will be canceled, released, and extinguished as of the Effective Date, and will be of no further force or effect.
|
Impaired; deemed to reject.
|
GENERAL PROVISIONS REGARDING THE PLAN
|
|
Subordination
|
The classification and treatment of Claims under the Plan shall conform to the respective contractual, legal, and equitable subordination rights of such Claims, and any such rights shall be settled,
compromised, and released pursuant to the Plan.
|
Restructuring
Transactions
|
The Confirmation Order shall be deemed to authorize, among other things, all actions as may be necessary or appropriate to effect any transaction described in, approved by, contemplated by, or necessary
to effectuate the Plan, including the Rights Offering and the issuance of all securities, notes, instruments, certificates, and other documents required to be issued pursuant to the Restructuring, in each case in a manner acceptable to
the Plan Sponsor (collectively, the “
Restructuring Transactions
”). On the Effective Date, the Debtors, as applicable, shall issue all securities, notes, instruments, certificates, and
other documents required to be issued pursuant to the Restructuring.
|
Cancellation of Notes,
Instruments, Certificates,
and Other Documents
|
On the Effective Date, except to the extent otherwise provided in this Term Sheet or the Plan, all notes, instruments, certificates, and other documents evidencing Claims or Interests, including credit
agreements and indentures, shall be canceled and the obligations of the Debtors and any non-Debtor Affiliates thereunder or in any way related thereto shall be deemed satisfied in full and discharged.
|
Executory Contracts and
Unexpired Leases
|
The Debtors shall seek to assume or reject executory contracts and unexpired leases with the reasonable consent of the Plan Sponsor. The Debtors shall not enter into any material contracts during the
Chapter 11 Cases without the prior written consent of the Plan Sponsor, not to be unreasonably withheld. The Plan will provide that the executory contracts and unexpired leases that are not assumed or rejected as of the Confirmation
Date (either pursuant to the Plan or a separate motion) will be deemed assumed pursuant to section 365 of the Bankruptcy Code. For the avoidance of doubt, the Debtors shall obtain the Plan Sponsor’s consent with respect to any decision
to assume or reject an executory contract or unexpired lease, including pursuant to the Plan.
|
Retention of Jurisdiction
|
The Plan will provide for the retention of jurisdiction by the Bankruptcy Court for usual and customary matters.
|
Discharge of Claims and
Termination of Interests
|
Pursuant to section 1141(d) of the Bankruptcy Code, and except as otherwise specifically provided in the Plan, the Confirmation Order or in any contract, instrument, or other agreement or document created
pursuant to the Plan, the distributions, rights, and treatment that are provided in the Plan shall be in complete satisfaction, discharge, and release, effective as of the Effective Date, of Claims (including any Intercompany Claims
resolved or compromised after the Effective Date by the Reorganized Debtors), Interests, and Causes of Action of any nature whatsoever, including any interest accrued on Claims or Interests from and after the Petition Date, whether
known or unknown, against, liabilities of, liens on, obligations of, rights against, and Interests in, the Debtors or any of their assets or properties, regardless of whether any property shall have been distributed or retained pursuant
to the Plan on account of such Claims and Interests, including demands, liabilities, and Causes of Action that arose before the Effective Date, any liability (including withdrawal liability) to the extent such Claims or Interests relate
to services performed by employees of the Debtors prior to the Effective Date and that arise from a termination of employment, any contingent or non-contingent liability on account of representations or warranties issued on or before
the Effective Date, and all debts of the kind specified in sections 502(g), 502(h), or 502(i) of the Bankruptcy Code, in each case whether or not: (a) a Proof of Claim based upon such debt or right is filed or deemed filed pursuant to
section 501 of the Bankruptcy Code; (b) a Claim or Interest based upon such debt, right, or Interest is Allowed pursuant to section 502 of the Bankruptcy Code; or (c) the holder of such a Claim or Interest has accepted the Plan. The
Confirmation Order shall be a judicial determination of the discharge of all Claims and Interests subject to the occurrence of the Effective Date.
|
Releases by the Debtors
|
Except as provided for in the Plan or the Confirmation Order, pursuant to section 1123(b) of the Bankruptcy Code, for good and valuable consideration, on and after the Effective Date, each Released Party
is deemed released and discharged by the Debtors, the Reorganized Debtors, and their Estates from any and all Causes of Action, including any derivative claims, asserted on behalf of the Debtors, that the Debtors, the Reorganized
Debtors, or their Estates would have been legally entitled to assert in their own right (whether individually or collectively) or on behalf of the holder of any Claim against, or Interest in, a Debtor or other Entity, based on or
relating to, or in any manner arising from, in whole or in part, the Debtors, the Debtors’ in- or out-of-court restructuring efforts, intercompany transactions, the Sponsor Backstop Commitment Agreement, the Noteholder Backstop
Commitment Agreement, the Exit Facility, the New Exit Note (if any), the Chapter 11 Cases, the formulation, preparation, dissemination, negotiation, or filing of the RSA, the Disclosure Statement, the DIP Facility, the Sponsor Backstop
Commitment Agreement, the Noteholder Backstop Commitment Agreement, the Plan, the Exit Facility, the New Exit Note (if any) or any Restructuring Transaction, contract, instrument, release, or other agreement or document created or
entered into in connection with the RSA, the Disclosure Statement, the DIP Facility, or the Plan, the Sponsor Backstop Commitment Agreement, the Noteholder Backstop Commitment Agreement, the filing of the Chapter 11 Cases, the pursuit
of Confirmation, the pursuit of Consummation, the administration and implementation of the Plan, including the issuance or distribution of securities pursuant to the Plan, or the distribution of property under the Plan or any other
related agreement, or upon any other act or omission, transaction, agreement, event, or other occurrence taking place on or before the Effective Date. Notwithstanding anything to the contrary in the foregoing, the releases set forth
above do not release obligations of any party or Entity under the Plan, or any document, instrument, or agreement executed to implement the Plan.
|
Releases by Holders of
Claims and Interests
|
Except as provided for in the Plan or Confirmation Order, as of the Effective Date, each Releasing Party is deemed to have released and discharged each Released Party from any and all Causes of Action,
whether known or unknown, including any derivative claims, asserted on behalf of the Debtors, that such Entity would have been legally entitled to assert (whether individually or collectively), based on or relating to, or in any manner
arising from, in whole or in part, the Debtors, the Debtors’ in- or out-of-court restructuring efforts, intercompany transactions, the Sponsor Backstop Commitment Agreement, the Noteholder Backstop Commitment Agreement, the Exit
Facility, the New Exit Note (if any), the Chapter 11 Cases, the formulation, preparation, dissemination, negotiation, or filing of the RSA, the Disclosure Statement, the DIP Facility, the Plan, the Sponsor Backstop Commitment Agreement,
the Noteholder Backstop Commitment Agreement, the Exit Facility, the New Exit Note (if any) or any Restructuring Transaction, contract, instrument, release, or other agreement or document created or entered into in connection with the
RSA, the Disclosure Statement, the DIP Facility, or the Plan, the filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of Consummation, the administration and implementation of the Plan, including the issuance or
distribution of securities pursuant to the Plan, or the distribution of property under the Plan or any other related agreement, or upon any other related act or omission, transaction, agreement, event, or other occurrence taking place
on or before the Effective Date. Notwithstanding anything to the contrary in the foregoing, the releases set forth above do not release obligations of any party or Entity under the Plan, or any document, instrument, or agreement
executed to implement the Plan.
|
Exculpation
|
Except as provided for in the Plan or Confirmation Order, no Exculpated Party shall have or incur, and each Exculpated Party is released and exculpated from any Cause of Action for any claim related to
any act or omission in connection with, relating to, or arising out of, the Chapter 11 Cases, the formulation, preparation, dissemination, negotiation, or filing of the RSA and related prepetition transactions, the Disclosure Statement,
the Plan, or any Restructuring Transaction, contract, instrument, release or other agreement or document created or entered into in connection with the Disclosure Statement or the Plan, the filing of the Chapter 11 Cases, the pursuit of
Confirmation, the pursuit of Consummation, the administration and implementation of the Plan, including the issuance of securities pursuant to the Plan, or the distribution of property under the Plan or any other related agreement,
except for claims related to any act or omission that is determined in a final order to have constituted actual fraud, gross negligence or willful misconduct, but in all respects such Entities shall be entitled to reasonably rely upon
the advice of counsel with respect to their duties and responsibilities pursuant to the Plan.
|
The Section 1125(e) Protected Parties have, and upon completion of the Plan shall be deemed to have, participated in good faith and in compliance with the applicable laws with regard to the solicitation
of votes and distribution of consideration pursuant to the Plan and, therefore, are not, and on account of such distributions shall not be, liable at any time for the violation of any applicable law, rule, or regulation governing the
solicitation of acceptances or rejections of the Plan or such distributions made pursuant to the Plan. Each of the Section 1125(e) Protected Parties shall be entitled to and granted the protections and benefits of section 1125(e) of
the Bankruptcy Code.
|
|
Injunction
|
Except as otherwise expressly provided in the Plan or for obligations issued or required to be paid pursuant to the Plan or the Confirmation Order, all Entities who have held, hold, or may hold claims or
interests that have been released, discharged, or are subject to exculpation are permanently enjoined, from and after the Effective Date, from taking any of the following actions against, as applicable, the Debtors, the Reorganized
Debtors, the Exculpated Parties, or the Released Parties: (a) commencing or continuing in any manner any action or other proceeding of any kind on account of or in connection with or with respect to any such claims or interests; (b)
enforcing, attaching, collecting, or recovering by any manner or means any judgment, award, decree, or order against such Entities on account of or in connection with or with respect to any such claims or interests; (c) creating,
perfecting, or enforcing any encumbrance of any kind against such Entities or the property or the estates of such Entities on account of or in connection with or with respect to any such claims or interests; (d) asserting any right of
setoff, subrogation, or recoupment of any kind against any obligation due from such Entities or against the property of such Entities on account of or in connection with or with respect to any such claims or interests unless such holder
has filed a motion requesting the right to perform such setoff on or before the Effective Date, and notwithstanding an indication of a claim or interest or otherwise that such holder asserts, has, or intends to preserve any right of
setoff pursuant to applicable law or otherwise; and (e) commencing or continuing in any manner any action or other proceeding of any kind on account of or in connection with or with respect to any such claims or interests released or
settled pursuant to the Plan.
|
Taxes
|
The Plan and the Restructuring Transactions contemplated herein and therein shall be implemented in a tax efficient manner satisfactory to the Plan Sponsor, with prior notice to and in consultation with
the Debtors.
|
OTHER MATERIAL PROVISIONS REGARDING THE RESTRUCTURING
|
|
Management
Incentive Plan
|
On the Effective Date, the Reorganized Debtors will continue all existing management compensation plans, and implement a new equity-based management incentive plan (the “
Management
Incentive Plan
”) on terms and conditions set forth in the term sheet attached hereto as
Exhibit C
(the “
MIP Term Sheet
”) and
otherwise acceptable to the Debtors and the Plan Sponsor. For the avoidance of doubt, the Plan will provide for the establishment of the Management Incentive Plan on the Effective Date in a manner acceptable to the Debtors and the Plan
Sponsor.
|
Employment
Obligations
|
Each of the Debtors’ “first day” or “second day” motions and proposed orders relating to wages, compensation, and benefits shall be in form and substance acceptable to the Debtors and the Plan Sponsor.
Wages, compensation and benefit programs that do not relate to insiders shall be continued after the Effective Date, unless otherwise agreed by the Debtors and the Plan Sponsor and subject to the satisfaction and consent of the Plan
Sponsor (such consent not to be unreasonably withheld) following receipt and analysis of satisfactory information from the Debtors regarding such programs, which information the Debtors shall provide as promptly as practicable.
The Company Parties will enter into amended and restated employment agreements with senior executives on substantially the same terms as set forth in the existing agreements, subject to conforming changes
associated with the MIP Term Sheet, including the Change in Control definitions referenced therein. For the avoidance of doubt, the reorganization of the Company will not constitute a Change in Control under the applicable employment
agreements.
|
Indemnification of
Prepetition
Directors,
Officers, Managers,
et al.
|
Consistent with applicable law, all indemnification provisions currently in place (whether in the by-laws, certificates of incorporation or formation, limited liability company agreements, other
organizational documents, board resolutions, indemnification agreements, employment contracts, or otherwise) for the current and former directors, officers, managers, employees, attorneys, accountants, investment bankers, and other
professionals of the Debtors, as applicable, shall be reinstated and remain intact, irrevocable, and shall survive the effectiveness of the Restructuring on terms no less favorable to such current and former directors, officers,
managers, employees, attorneys, accountants, investment bankers, and other professionals of the Debtors than the indemnification provisions in place prior to the Restructuring.
|
Claims of the Debtors
|
The Reorganized Debtors, as applicable, shall retain all rights to commence and pursue any Causes of Action, other than any Causes of Action released by the Debtors pursuant to the release and exculpation
provisions outlined in this Term Sheet.
Prior to Consummation, the Debtors shall not settle, compromise or discharge any Cause of Action that is not agreed to be released pursuant to this Term Sheet without the consent of the Plan Sponsor.
|
Additional Plan
Provisions and
Documentation
|
The Plan shall contain other customary provisions for chapter 11 plans of this type. The Plan and Confirmation Order and all supporting and implementing documentation (including all briefs and other pleadings filed in support
thereof, all documents filed as part of the Plan Supplement, and the Confirmation Order) shall be in form and substance acceptable to the Debtors and the Plan Sponsor.
|
Conditions
Precedent to
Restructuring
|
The following shall be conditions to the Effective Date (the “
Conditions Precedent
”):
(a) the Bankruptcy Court shall have entered the Confirmation Order, which shall be in form and substance acceptable to the Debtors and the Plan Sponsor, shall be a
Final Order, and shall:
(i) authorize the Debtors to take all actions necessary to enter into, implement, and consummate the contracts, instruments, releases, leases, indentures, and
other agreements or documents created in connection with the Plan;
(ii) decree that the provisions of the Confirmation Order and the Plan are nonseverable and mutually dependent;
(iii) authorize the Debtors, as applicable/necessary, to: (A) implement the Restructuring Transactions, including the Rights Offering; (B) distribute the New Common
Stock pursuant to the exemption from registration under the Securities Act provided by section 1145 of the Bankruptcy Code or other exemption from such registration or pursuant to one or more registration statements; (C) make all
distributions and issuances as required under the Plan, including cash and the New Common Stock; and (D) enter into any agreements, transactions, and sales of property as set forth in the Plan Supplement, including the Exit Facility,
the Sponsor Backstop Commitment Agreement, the New Exit Note (if any) and the Management Incentive Plan;
(iv) authorize the implementation of the Plan in accordance with its terms; and
(v) provide that, pursuant to section 1146 of the Bankruptcy Code, the assignment or surrender of any lease or sublease, and the delivery of any deed or other
instrument or transfer order, in furtherance of, or in connection with the Plan, including any deeds, bills of sale, or assignments executed in connection with any disposition or transfer of assets contemplated under the Plan, shall not
be subject to any stamp, real estate transfer, mortgage recording, or other similar tax.
|
(b) the Debtors shall have obtained all authorizations, consents, regulatory approvals, rulings, or documents that are necessary to implement and effectuate the
Plan;
(c) the final versions of the Definitive Documentation, the Plan Supplement and all of the schedules, documents, and exhibits contained therein shall have been
filed in a manner consistent in all material respects with the RSA, this Term Sheet (including all Exhibits hereto), and the Plan and shall be in form and substance acceptable to the Plan Sponsor;
(d) the RSA shall remain in full force and effect;
(e) all conditions precedent to the Exit Facility shall have been satisfied or waived in accordance with the Exit Facility Term Sheet and definitive documentation
to be entered in connection therewith and satisfactory to the RBL Agent and the Plan Sponsor, or (in the alternative) all DIP Claims and RBL Claims will be paid in full in cash;
(f) if the Exit Facility will not be consummated, all conditions precedent to an alternative
senior secured revolving reserve-based lending credit facility acceptable to the Plan Sponsor
shall have been satisfied or waived in accordance with the definitive documentation to be entered in connection therewith;
(g) all conditions precedent to the New Exit Note (if any) shall have been satisfied or waived in accordance with the terms thereof;
(h) the Bankruptcy Court shall have entered an order approving the Sponsor Backstop Commitment Agreement and authorizing payment of obligations thereunder as
Administrative Claims;
(i) the Bankruptcy Court shall have entered an order approving the Noteholder Backstop Commitment Agreement and authorizing payment of obligations thereunder as
Administrative Claims;
(j) all conditions precedent to the effectiveness of (i) the Sponsor Backstop Commitment Agreement and (ii) the Noteholder Backstop Commitment Agreement, in each
case, shall have been satisfied or waived in accordance with the terms thereof;
|
(k) the Debtors shall have received, or shall receive simultaneously with the occurrence of the Effective Date, no less than $256.3 million in aggregate cash
proceeds from the Sponsor Backstop Commitment Agreement, the Noteholder Backstop Commitment Agreement, the Rights Offering, and the Incremental Equity Investment (if any);
(l) all reasonable and documented professional fees and expenses of the advisors to the Supporting Creditors payable pursuant to the RSA, the Sponsor Backstop
Commitment Agreement, the Noteholder Backstop Agreement and the DIP Credit Agreement, the Prepetition Term Loan Agent, the Sponsor Backstop Parties, the Noteholder Backstop Parties, the DIP Lenders, the DIP Agent, the Exit Agent, the
Exit Lenders, the RBL Agent and the RBL Lenders shall have been paid in full; and
(m) the Debtors shall have implemented the Restructuring Transactions, including the Rights Offering, and all transactions contemplated by this Term Sheet
(including all releases and exculpations contemplated herein), in a manner consistent in all respects with the RSA, this Term Sheet, and the Plan, pursuant to documentation acceptable to the Debtors and the Plan Sponsor.
|
|
Waiver of
Conditions
Precedent to the
Effective Date
|
The Debtors, with the prior written consent of the Plan Sponsor, may waive any one or more of the Conditions Precedent to the Effective Date;
provided
that the waiver of the Conditions Precedent
set forth in (c), (d), (g), (i), (j), (k), (l) and (m) in the definition of Conditions Precedent shall require the consent of the Required Noteholder Backstop Parties (such consent not to be unreasonably withheld).
|
Governance
|
The Plan shall provide for the post-Effective Date governance terms as described on
Exhibit H
hereto (the “
Governance
Term Sheet
”).
Unless otherwise directed by the Plan Sponsor, the Debtors agree that Legacy Reserves will remain a public reporting company with the Securities and Exchange Commission during the pendency of the Chapter
11 Cases.
|
Plan Settlement;
Rights Reserved
|
The total enterprise value of the Debtors for purposes of pricing the New Common Stock issued pursuant to the Sponsor Backstop Commitment Agreement, the Rights Offering, the Noteholder Backstop Commitment
Agreement and the Incremental Equity Investment, is a component of a global settlement among the Debtors, the Plan Sponsor, and the other parties to the RSA. The Debtors, the Plan Sponsor, and the other parties to the RSA reserve their
respective rights with respect to valuation of the Debtors and the assets of the Debtors’ estates in the event of termination of the RSA other than upon consummation of the transactions contemplated therein and herein as of the
Effective Date.
|
Term
|
Definition
|
Administrative Claim
|
A Claim for costs and expenses of administration of the Chapter 11 Cases pursuant to sections 503(b), 507(a)(2), 507(b), or 1114(e)(2) of the Bankruptcy Code, including: (a) the actual and necessary costs
and expenses incurred on or after the Petition Date until and including the Effective Date of preserving the Estates and operating the Debtors’ businesses; (b) Allowed Professional Claims; and (c) all fees and charges assessed against
the Estates pursuant to section 1930 of chapter 123 of title 28 of the United States Code.
|
Affiliate
|
As defined in section 101(2) of the Bankruptcy Code.
|
Allowed
|
As to a Claim or an Interest, a Claim or an Interest allowed under the Plan, under the Bankruptcy Code, or by a final order, as applicable. For the avoidance of doubt, (a) there is no requirement to file
a Proof of Claim (or move the Bankruptcy Court for allowance) to be an Allowed Claim under the Plan, and (b) the Debtors may affirmatively determine to deem Unimpaired Claims Allowed to the same extent such Claims would be allowed under
applicable nonbankruptcy law.
|
Bankruptcy Code
|
As defined in the Introduction.
|
Bankruptcy Court
|
As defined in the Introduction.
|
Cause of Action
|
Any claims, interests, damages, remedies, causes of action, demands, rights, actions, suits, obligations, liabilities, accounts, defenses, offsets, powers, privileges, licenses, liens, indemnities,
guaranties, and franchises of any kind or character whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereinafter arising, contingent or non-contingent, liquidated or unliquidated, secured or unsecured,
assertable, directly or derivatively, matured or unmatured, suspected or unsuspected, in contract, tort, law, equity, or otherwise. Causes of Action also include: (a) all rights of setoff, counterclaim, or recoupment and claims under
contracts or for breaches of duties imposed by law; (b) the right to object to or otherwise contest Claims or Interests; (c) claims pursuant to sections 362, 510, 542, 543, 544 through 550, or 553 of the Bankruptcy Code; and (d) such
claims and defenses as fraud, mistake, duress, and usury, and any other defenses set forth in section 558 of the Bankruptcy Code.
|
Term | Definition |
Change in Control
|
As defined in the MIP Term Sheet.
|
Chapter 11 Cases
|
As defined in the Introduction.
|
Claim
|
Any claim, as defined in section 101(5) of the Bankruptcy Code, against any of the Debtors.
|
Class
|
A category of holders of Claims or Interests pursuant to section 1122(a) of the Bankruptcy Code.
|
Company Parties
|
As defined in the Introduction.
|
Conditions Precedent
|
As defined in the Term Sheet.
|
Confirmation
|
Entry of the Confirmation Order on the docket of the Chapter 11 Cases.
|
Confirmation Date
|
The date on which the Bankruptcy Court enters the Confirmation Order on the docket of the Chapter 11 Cases within the meaning of Bankruptcy Rules 5003 and 9021
|
Confirmation Hearing
|
The hearing(s) before the Bankruptcy Court under section 1128 of the Bankruptcy Code at which the Debtors seek entry of the Confirmation Order.
|
Confirmation Order
|
The order of the Bankruptcy Court confirming the Plan under section 1129 of the Bankruptcy Code, which order shall be in form and substance acceptable to the Debtors and the Plan Sponsor.
|
Consummation
|
The occurrence of the Effective Date.
|
Debtors
|
As defined in the Term Sheet.
|
DIP Agent
|
That certain administrative agent under the DIP Credit Agreement.
|
DIP Claim
|
Any Claim held by the DIP Lenders or the DIP Agent arising under or related to the DIP Credit Agreement or the DIP Orders, including any and all fees, interest paid in kind, and accrued but unpaid
interest and fees arising under the DIP Credit Agreement.
|
DIP Documents
|
As defined in the Term Sheet.
|
Term | Definition |
DIP Facility
|
As defined in the Term Sheet.
|
DIP Lenders
|
As defined in the Term Sheet.
|
DIP Credit Agreement
|
As defined in the Term Sheet.
|
DIP Orders
|
As defined in the Term Sheet.
|
Disclosure Statement
|
The disclosure statement for the Plan, including all exhibits and schedules thereto, which shall be in form and substance acceptable to the Debtors and the Plan Sponsor.
|
Effective Date
|
The date that is the first Business Day after the Confirmation Date on which all Conditions Precedent have been satisfied or waived in accordance with the Plan.
|
Entity
|
As defined in section 101(15) of the Bankruptcy Code.
|
Estate
|
The estate of any Debtor created under sections 301 and 541 of the Bankruptcy Code upon the commencement of the applicable Debtor’s Chapter 11 Case.
|
Exculpated Parties
|
Collectively, and in each case, in its capacity as such: (a) the Debtors, (b) Reorganized Debtors; (c) any official committees appointed in the Chapter 11 Cases and each of their respective members; (c)
such Released Parties that are fiduciaries to the Debtors’ Estates; and (d) with respect to each of the foregoing, such Entity and its current and former affiliates, and such Entity’s and its current and former affiliates’ current and
former equity holders, subsidiaries, officers, directors, managers, principals, members, employees, agents, advisors, advisory board members, financial advisors, partners, attorneys, accountants, investment bankers, consultants,
representatives, and other professionals, each in their capacity as such.
|
Exit Agent
|
The administrative agent appointed under the Exit Facility.
|
Exit Facility
|
As defined in the Term Sheet.
|
Exit Facility Term Sheet
|
As defined in the Term Sheet.
|
Exit Lenders
|
The lenders under the Exit Facility.
|
Term | Definition |
Management Incentive
Plan
|
As defined in the Term Sheet.
|
Maximum Noteholder
Subscription Amount
|
As defined in the Term Sheet.
|
New Board
|
As defined in the Term Sheet.
|
New Common
Equity Pool
|
100% of the New Common Stock issued and outstanding on the Effective Date to be distributed in accordance with the Plan, subject to dilution on account of the Management Incentive Plan.
|
New Common Stock
|
The common stock of Reorganized Legacy Reserves.
|
New Exit Note
|
As defined in the Term Sheet.
|
Non-Accredited Investor
Premium
|
As defined in the Term Sheet.
|
Noteholders
|
As defined in the Term Sheet.
|
Noteholder Backstop
Amount
|
As defined in the Term Sheet.
|
Noteholder Backstop Fee
|
As defined in the Term Sheet.
|
Noteholder Backstop
Parties
|
As defined in the Term Sheet.
|
Notes Claim
|
Any Claim arising under, derived from, or based upon the Prepetition Notes Indentures.
|
Other Priority Claim
|
Any Claim other than an Administrative Claim or a Priority Tax Claim entitled to priority in right of payment under section 507(a) of the Bankruptcy Code.
|
Other Secured Claim
|
Any Secured Claim, including any Secured Tax Claim, other than an RBL Claim, a Term Loan Claim or a DIP Claim. For the avoidance of doubt, Other Secured Claims includes any Claim arising under, derived
from, or based upon any letter of credit issued in favor of one or more Debtors, the reimbursement obligation for which is either secured by a Lien on collateral or is subject to a valid right of setoff pursuant to section 553 of the
Bankruptcy Code.
|
Term | Definition |
Participating Noteholder
|
As defined in the Term Sheet.
|
Participation Premium
|
As defined in the Term Sheet.
|
Petition Date
|
The date on which the Chapter 11 Cases were commenced.
|
Plan
|
As defined in the Term Sheet.
|
Plan Sponsor
|
As defined in the Term Sheet.
|
Plan Sponsor Notes
Backstop Amount
|
As defined in the Term Sheet.
|
Plan Supplement
|
Any compilation of documents and forms of documents, agreements, schedules, and exhibits to the Plan, which shall be filed by the Debtors no later than ten (10) days before the Confirmation Hearing or
such later date as may be approved by the Bankruptcy Court on notice to parties in interest, and additional documents filed with the Bankruptcy Court prior to the Effective Date as amendments to the Plan Supplement, each of which shall
be consistent in all respects with, and shall otherwise contain, the terms and conditions set forth in the RSA and Term Sheet, where applicable, and shall be in form and substance acceptable to the Debtors and the Plan Sponsor.
|
Prepetition Intercreditor
Agreement
|
That certain Intercreditor Agreement dated as of October 25, 2016, by and among the Company Parties, Wells Fargo Bank, National Association, as original priority lien agent, and Cortland Capital Market
Services LLC, as original junior lien agent.
|
Prepetition Notes
Indentures
|
As defined in the RSA.
|
Prepetition RBL Agent
|
As defined in the RSA.
|
Prepetition RBL Credit
Agreement
|
As defined in the RSA.
|
Prepetition Term Loan
Agent
|
Cortland Capital Market Services LLC, in its capacity as administrative agent pursuant to the Prepetition Term Loan Documents, its successors, assigns, or any replacement agent appointed pursuant to the
terms of the Prepetition Term Loan Credit Agreement.
|
Page
|
|||
ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS
|
99
|
||
Section 1.01
|
Terms Defined Above
|
99
|
|
Section 1.02
|
Certain Defined Terms
|
100
|
|
Section 1.03
|
Types of Loans and Borrowings
|
128
|
|
Section 1.04
|
Terms Generally
|
128
|
|
Section 1.05
|
Accounting Terms and Determinations; GAAP
|
129
|
|
Section 1.06
|
[Reserved]
|
129
|
|
Section 1.07
|
Divisions
|
129
|
|
ARTICLE II THE CREDITS
|
129
|
||
Section 2.01
|
Commitments
|
129
|
|
Section 2.02
|
Loans and Borrowings
|
130
|
|
Section 2.03
|
Requests for Borrowings
|
131
|
|
Section 2.04
|
Interest Elections
|
132
|
|
Section 2.05
|
Funding of Borrowings
|
133
|
|
Section 2.06
|
Termination and Reduction of Aggregate Commitments
|
134
|
|
Section 2.07
|
[Reserved]
|
134
|
|
Section 2.08
|
Letters of Credit
|
134
|
|
Section 2.09
|
Collateral; Guarantees
|
139
|
|
ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES
|
141
|
||
Section 3.01
|
Repayment of Loans
|
141
|
|
Section 3.02
|
Interest
|
141
|
|
Section 3.03
|
Alternate Rate of Interest
|
142
|
|
Section 3.04
|
Prepayments
|
143
|
|
Section 3.05
|
Fees
|
144
|
|
ARTICLE IV PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS.
|
145
|
||
Section 4.01
|
Payments Generally; Pro Rata Treatment; Sharing of Set-offs
|
145
|
|
Section 4.02
|
Presumption of Payment by the Borrower
|
146
|
|
Section 4.03
|
Payments and Deductions by the Agent; Defaulting Lenders
|
146
|
|
ARTICLE V INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY
|
149
|
||
Section 5.01
|
Increased Costs
|
149
|
Page
|
|||
Section 5.02
|
Break Funding Payments
|
150
|
|
Section 5.03
|
Taxes
|
151
|
|
Section 5.04
|
Designation of Different Lending Office
|
154
|
|
Section 5.05
|
Illegality
|
154
|
|
ARTICLE VI CONDITIONS PRECEDENT
|
155
|
||
Section 6.01
|
Interim Facility Effective Date
|
155
|
|
Section 6.02
|
Final Facility Effective Date
|
157
|
|
Section 6.03
|
Conditions Precedent to Each Borrowing
|
158
|
|
ARTICLE VII REPRESENTATIONS AND WARRANTIES
|
160
|
||
Section 7.01
|
Organization; Powers
|
160
|
|
Section 7.02
|
Authority; Enforceability
|
160
|
|
Section 7.03
|
Approvals; No Conflicts
|
161
|
|
Section 7.04
|
Financial Position; No Material Adverse Change
|
161
|
|
Section 7.05
|
Litigation
|
161
|
|
Section 7.06
|
Environmental Matters
|
162
|
|
Section 7.07
|
Compliance with the Laws and Agreements; No Defaults
|
163
|
|
Section 7.08
|
Investment Company Act
|
163
|
|
Section 7.09
|
Taxes
|
163
|
|
Section 7.10
|
ERISA
|
163
|
|
Section 7.11
|
Disclosure; No Material Misstatements
|
164
|
|
Section 7.12
|
Insurance
|
165
|
|
Section 7.13
|
Restriction on Liens
|
165
|
|
Section 7.14
|
Subsidiaries
|
165
|
|
Section 7.15
|
Location of Business and Offices
|
165
|
|
Section 7.16
|
Properties; Titles, Etc.
|
166
|
|
Section 7.17
|
Maintenance of Properties
|
167
|
|
Section 7.18
|
Gas Imbalances, Prepayments
|
167
|
|
Section 7.19
|
Marketing of Production
|
167
|
|
Section 7.20
|
Swap Agreements
|
167
|
|
Section 7.21
|
Use of Loans and Letters of Credit
|
168
|
|
Section 7.22
|
[Reserved]
|
168
|
|
Section 7.23
|
USA PATRIOT; AML Laws; Anti-Corruption Laws and Sanctions
|
168
|
Page
|
|||
Section 7.24
|
International Operations
|
168
|
|
Section 7.25
|
Accounts
|
168
|
|
Section 7.26
|
[Reserved]
|
168
|
|
Section 7.27
|
[Reserved]
|
168
|
|
Section 7.28
|
DIP Orders
|
168
|
|
Section 7.29
|
Budget
|
168
|
|
Section 7.30
|
Representations and Warranties of the Parent Guarantors
|
168
|
|
ARTICLE VIII AFFIRMATIVE COVENANTS
|
169
|
||
Section 8.01
|
Financial Statements; Other Information
|
169
|
|
Section 8.02
|
Notices of Material Events
|
172
|
|
Section 8.03
|
Existence; Conduct of Business
|
173
|
|
Section 8.04
|
Payment of Obligations
|
173
|
|
Section 8.05
|
Performance of Obligations under Loan Documents
|
174
|
|
Section 8.06
|
Operation and Maintenance of Properties
|
174
|
|
Section 8.07
|
Insurance
|
174
|
|
Section 8.08
|
Books and Records; Inspection Rights
|
175
|
|
Section 8.09
|
Compliance with Laws
|
175
|
|
Section 8.10
|
Environmental Matters
|
175
|
|
Section 8.11
|
Further Assurances
|
176
|
|
Section 8.12
|
Reserve Reports
|
177
|
|
Section 8.13
|
Title Information
|
177
|
|
Section 8.14
|
Additional Collateral; Additional Guarantors
|
178
|
|
Section 8.15
|
ERISA Compliance
|
178
|
|
Section 8.16
|
[Reserved]
|
179
|
|
Section 8.17
|
[Reserved]
|
179
|
|
Section 8.18
|
Use of Proceeds
|
179
|
|
Section 8.19
|
[Reserved]
|
179
|
|
Section 8.20
|
[Reserved]
|
179
|
|
Section 8.21
|
Affirmative Covenants of the Parent Guarantors
|
179
|
|
Section 8.22
|
[Reserved]
|
179
|
|
Section 8.23
|
Delivery of Proposed DIP Orders
|
179
|
|
Section 8.24
|
Cash Management
|
180
|
Page
|
|||
ARTICLE IX NEGATIVE COVENANTS
|
180
|
||
Section 9.01
|
Financial Covenants
|
180
|
|
Section 9.02
|
Debt
|
180
|
|
Section 9.03
|
Liens
|
181
|
|
Section 9.04
|
Dividends, Distributions and Redemptions
|
182
|
|
Section 9.05
|
Investments, Loans and Advances
|
182
|
|
Section 9.06
|
Nature of Business
|
183
|
|
Section 9.07
|
[Reserved]
|
183
|
|
Section 9.08
|
Proceeds of Loans; OFAC
|
184
|
|
Section 9.09
|
ERISA Compliance
|
184
|
|
Section 9.10
|
Sale or Discount of Receivables
|
185
|
|
Section 9.11
|
Mergers, Divisions, Etc.
|
185
|
|
Section 9.12
|
Sale of Properties
|
185
|
|
Section 9.13
|
Environmental Matters
|
186
|
|
Section 9.14
|
Transactions with Affiliates
|
186
|
|
Section 9.15
|
Subsidiaries
|
186
|
|
Section 9.16
|
Negative Pledge Agreements; Dividend Restrictions
|
186
|
|
Section 9.17
|
Gas Imbalances, Take-or-Pay or Other Prepayments
|
186
|
|
Section 9.18
|
Swap Agreements
|
187
|
|
Section 9.19
|
Marketing Activities
|
187
|
|
Section 9.20
|
Accounting Changes
|
187
|
|
Section 9.21
|
New Accounts
|
187
|
|
Section 9.22
|
Volumetric Production Payment
|
188
|
|
Section 9.23
|
Passive Holding Company Status of Parent Guarantors
|
188
|
|
Section 9.24
|
Negative Covenants of the Parent Guarantors
|
188
|
|
Section 9.25
|
Key Employee Plans
|
188
|
|
Section 9.26
|
[Reserved]
|
188
|
|
Section 9.27
|
Superpriority Claims
|
188
|
|
Section 9.28
|
Bankruptcy Orders
|
|
|
|
|||
ARTICLE X EVENTS OF DEFAULT; REMEDIES
|
189
|
||
|
|||
Section 10.01
|
Events of Default
|
189
|
|
Section 10.02
|
Remedies
|
192
|
Page
|
|||
Section 10.03
|
Disposition of Proceeds
|
193
|
|
|
|||
ARTICLE XI THE AGENTS
|
194
|
||
|
|||
Section 11.01
|
Appointment; Powers
|
194
|
|
Section 11.02
|
Duties and Obligations of Agent
|
194
|
|
Section 11.03
|
Action by Agent
|
195
|
|
Section 11.04
|
Reliance by Agent
|
195
|
|
Section 11.05
|
Subagents
|
195
|
|
Section 11.06
|
Resignation or Removal of Agent
|
196
|
|
Section 11.07
|
Agent and Lenders
|
196
|
|
Section 11.08
|
No Reliance
|
196
|
|
Section 11.09
|
Agent May File Proofs of Claim
|
197
|
|
Section 11.10
|
Authority of Agent to Release Collateral and Liens
|
197
|
|
Section 11.11
|
Secured Cash Management Agreements
|
198
|
|
Section 11.12
|
The Arranger
|
198
|
|
|
|||
ARTICLE XII MISCELLANEOUS
|
198
|
||
|
|||
Section 12.01
|
Notices
|
198
|
|
Section 12.02
|
Waivers; Amendments
|
199
|
|
Section 12.03
|
Expenses, Indemnity; Damage Waiver
|
201 | |
Section 12.04
|
Successors and Assigns
|
204
|
|
Section 12.05
|
Survival; Revival; Reinstatement
|
207
|
|
Section 12.06
|
Counterparts; Integration; Effectiveness
|
207
|
|
Section 12.07
|
Severability
|
208
|
|
Section 12.08
|
Right of Setoff
|
208
|
|
Section 12.09
|
GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS
|
208
|
|
Section 12.10
|
Headings
|
210
|
|
Section 12.11
|
Confidentiality
|
210
|
|
Section 12.12
|
Interest Rate Limitation
|
211
|
|
Section 12.13
|
EXCULPATION PROVISIONS
|
211
|
|
Section 12.14
|
Collateral Matters; Secured Swap Agreements; Secured Cash Management Agreements
|
212
|
|
Section 12.15
|
No Third Party Beneficiaries
|
212
|
Page
|
|||
Section 12.16
|
USA PATRIOT Act Notice
|
212
|
|
Section 12.17
|
Non-Fiduciary Status
|
213
|
|
Section 12.18
|
Cashless Settlement
|
213
|
|
Section 12.19
|
Joinder of Subsidiaries
|
213
|
|
Section 12.20
|
[Reserved]
|
213
|
|
Section 12.21
|
[Reserved]
|
213
|
|
Section 12.22
|
Acknowledgement and Consent to Bail-In of EEA Financial Institutions
|
213
|
|
Section 12.23
|
Acknowledgement Regarding Any Supported QFCs
|
214
|
|
|
|||
ARTICLE XIII LOAN GUARANTEE
|
215
|
||
|
|||
Section 13.01
|
Guarantee
|
215
|
|
Section 13.02
|
Guarantee of Payment
|
216
|
|
Section 13.03
|
No Discharge or Diminishment of Loan Guarantee
|
216
|
|
Section 13.04
|
Defenses Waived
|
217
|
|
Section 13.05
|
Rights of Subrogation
|
217
|
|
Section 13.06
|
Reinstatement; Stay of Acceleration
|
217
|
|
Section 13.07
|
Information
|
217
|
|
Section 13.08
|
Taxes
|
218
|
|
Section 13.09
|
Maximum Liability
|
218
|
|
Section 13.10
|
Contribution
|
218
|
|
Section 13.11
|
Representations and Warranties
|
219
|
|
Section 13.12
|
Subordination of Indebtedness
|
219 | |
Section 13.13
|
Other Terms
|
221
|
Page
|
|
Schedule 1.01
|
Existing Letters of Credit
|
Schedule 7.05
|
Litigation
|
Schedule 7.14
|
Subsidiaries
|
Schedule 7.15
|
Location of Businesses
|
Schedule 7.18
|
Gas Imbalances
|
Schedule 7.19
|
Marketing Contracts
|
Schedule 7.20
|
Swap Agreements
|
Schedule 7.25
|
Accounts
|
Schedule 9.02(e)
|
Existing Debt
|
Schedule 9.02(f)
|
Debt Related to Oil and Gas Operations
|
Schedule 9.03(d)
|
Liens on Property
|
Schedule 9.05(a)
|
Investments
|
Schedule 13.11
|
Guarantor Corporate Information
|
BORROWER:
|
LEGACY RESERVES LP, as a debtor and debtor-in-possession
|
|
By:
|
Legacy Reserves GP, LLC, its general partner
|
|
By:
|
Legacy Reserves Inc., its sole member
|
|
By:
|
||
Name: James Daniel Westcott
|
||
Title: Chief Executive Officer
|
LEGACY RESERVES INC.
|
||
LEGACY RESERVES ENERGY SERVICES LLC
|
||
DEW GATHERING LLC
|
||
PINNACLE GAS TREATING LLC
|
||
LEGACY RESERVES GP, LLC
|
||
LEGACY RESERVES SERVICES LLC
|
||
LEGACY RESERVES FINANCE CORPORATION
|
||
LEGACY RESERVES MARKETING LLC, each as a debtor and debtor-in-possession
|
||
By:
|
||
Name: James Daniel Westcott
|
||
Title: Chief Executive Officer
|
ADMINISTRATIVE AGENT:
|
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Agent and a Lender
|
|
By:
|
||
Name: Brett Steele
|
||
Title: Director
|
LENDERS:
|
[_________________________]
|
|
By:
|
||
[Name]
|
||
[Title]
|
§
|
|||
In re:
|
§
|
Chapter 11
|
|
§
|
|||
LEGACY RESERVES INC.,
et al.
,
1
|
§
|
Case No. 19-_____ (__)
|
|
§
|
|||
|
Debtors.
|
§
|
Jointly Administered
|
§
|
[●]
|
|
UNITED STATES BANKRUPTCY JUDGE
|
Name of Lender
|
Applicable
Percentage
|
New Money DIP Loan
Commitment
|
|
1.
|
|||
2.
|
|||
3.
|
|||
4.
|
|||
5.
|
|||
6.
|
|||
7.
|
|||
8.
|
|
Company
Capital
Structure:
|
|
The Plan of Reorganization contemplates a minimum initial equity value of $[TBD] million, which for purposes hereof will
consist of [TBD]
1
million shares (“
Initial Share Count
”) at $10 per share; such equity value and Initial Share Count would be
adjusted based on the amount of new equity funded on Emergence.
|
|
Incentive
Compensation:
|
|
There will be reserved, exclusively for Employees, a pool of equity (such reserve, the “
MIP Pool
”) having a value equal to:
(i)
5.0% of the
Initial Share Count granted as soon as administratively practicable (but in no event more than 60 days following Emergence) in accordance with this Term Sheet (the “
Emergence Awards
”) in the following form: (A) 2.5%
of the Initial Share Count in Restricted Stock Units (“
RSUs
”), and (B) 2.5% of the Initial Share Count in stock options with a strike price of $10.00 per share (“
Options
”);
(ii)
5.0% of the
Initial Share Count will be reserved for potential future issuance as determined by the new board of directors.
2
Notwithstanding the foregoing, unless otherwise approved by the Plan Sponsor, for purposes of the MIP Pool, the Initial Share Count will not
include any: i) shares issued in excess of [70] million shares (i.e. for shares issued in respect of equity capitalization in excess of $[700] million) or ii) shares issued to Plan Sponsor in respect of its new money funding
in excess of 20 million shares (i.e. for shares issued to Plan Sponsor in excess of $200 million funded).
|
|
Vesting:
|
|
Normal Vesting
. Subject to an Employee’s continued employment through each applicable vesting date, Emergence Awards will vest 25% on each
of the first four (4) anniversaries of the Emergence Date.
RSUs will be settled as soon as practicable following vesting.
Accelerated Vesting Prior to a Change in Control
. If the Employee is terminated by the Company without Cause, by the Employee for Good
Reason or due to death or Disability, and such termination occurs outside of the Change in Control period described below, the Employee will become vested in the Emergence Awards that would have vested if the Employee’s
employment had continued for an additional 12 months.
|
|
|
Accelerated Vesting Upon a Change in Control
. Upon a Change in Control (as will be defined in the applicable equity plan and excluding any
acquisition of the Company by Plan Sponsor and any of its affiliates) following which the Employee is terminated by the Company without Cause or by the Employee for Good Reason within 24 months following the Change in
Control, 100% of an Employee’s unvested Emergence Awards will accelerate and vest.
The definitions of “Cause,” “Without Cause,” “Good Reason” and “Disability” will be on customary terms for similar management arrangements.
|
|
|
Forfeiture:
|
|
100% of any unvested Options or unvested RSUs (determined after giving effect to any accelerated vesting set forth above) will be forfeited for no
consideration upon any termination of employment and, subject to the next sentence, the Employee will be entitled to retain any vested Options that are not yet exercised or any vested RSUs that are not yet settled, and any
shares previously received upon exercise of Options or settlement of RSUs, subject to the exercise of the repurchase rights (discussed below). All Options, whether or not vested, will be forfeited for no consideration upon
a termination for Cause.
|
|
Other Terms:
|
|
The option grants will be subject to customary adjustments with regard to any extraordinary dividends paid. The Options will expire on the
earlier of (a) the tenth (10
th
) anniversary of the Emergence Date or (b) 180 days following the Employee’s termination of employment (other
than for Cause) or one year following his or her Death or Disability. Unvested RSUs will be entitled to dividends on a pro rata basis with outstanding shares and such dividend payments will be retained and will be subject
to vesting provisions set forth above.
Upon the exercise of an Option or the settlement of RSUs, Employees may elect to pay the exercise price and tax withholding through the
withholding of shares by the Company.
If the Company is not publicly traded on a national securities exchange or over the counter market, the Company will agree to provide fair market
valuations to facilitate the exercise of Options.
|
|
Executive
Investments:
|
|
The Executives will have the opportunity to invest in the common stock in a manner to be agreed by the Executives, the Company and Plan Sponsor.
|
|
Employment
Agreements:
|
|
The Company will enter into amended and restated employment agreements with Executives on the same terms as set forth in the existing agreements,
subject to conforming changes associated with this MIP and Change in Control definitions. For the avoidance of doubt, the reorganization of the Company will not constitute a Change in Control under the applicable employment
agreements.
|
Parent:
|
TBD
|
Borrower:
|
Legacy Reserves Inc., a Delaware corporation (the “
Borrower
”), as reorganized pursuant to the Plan and Confirmation Order
.
|
Guarantors:
|
The obligations of (a) the Borrower under the Facilities, (b) any Loan Party under any hedging agreements entered into between such Loan Party and
any counterparty that is a Lender (as defined below) (or any affiliate thereof), and (c) any Loan Party under any cash management arrangements between such Loan Party and a Lender (or any affiliate thereof) (such
obligations, collectively, the “
Obligations
”) will be unconditionally guaranteed, on a joint and several basis, by each other Loan Party (other than, with respect to obligations under clause (a), the Borrower) and
each other wholly-owned direct or indirect subsidiary of the Borrower (as reorganized through the Plan and Confirmation Order) other than Unrestricted Subsidiaries (as defined below) (collectively, such subsidiaries the “
Restricted
Subsidiaries
” or the “
Guarantors
” and, collectively with the Borrower, the “
Loan Parties
”; and such guarantee being referred to as the “
Guarantee
”). All Guarantees shall be guarantees of payment
and not of collection.
|
(a)
RBL Exit Facility
. Pursuant to the Plan, and subject to adjustment for Non-Electing Lenders (as defined and described below) and as
part of the treatment of their Obligations under the Plan, each Existing Lender that is a holder of Existing Loans and elects to become an RBL Lender and each DIP Lender under the DIP Credit Agreement with Refinanced Loans
that have not been paid in cash on the Plan Effective Date (each, an “
Electing Lender
”) shall become revolving lenders (collectively, the “
RBL Lenders
”) on the Plan Effective Date by agreeing to provide a
lending commitment in respect of a senior secured first lien reserve-based revolving credit facility (each such RBL Lender’s commitment, as reduced from time to time in accordance with the terms hereof, its “
Revolving
Commitment
” and such revolving facility, the “
RBL Exit Facility
” and the loans under such RBL Exit Facility, the “
Revolving Loans
”) in an amount equal to such RBL Lender’s pro rata share of an aggregate
$500 million (the aggregate revolving commitments for all RBL Lenders, as reduced from time to time in accordance with the terms hereof, the “
Maximum Revolving Commitments
”), $455 million of which shall be deemed
funded (the “
Funded Revolving Loans
”) on the Plan Effective Date and the balance of $45 million (the “
Initial Availability Amount
”) shall be immediately available in accordance with the terms hereof (subject to
adjustment and approval as provided in Annex A hereto), after giving effect to the transactions contemplated hereby and under the Plan. Each RBL Lender shall also receive, as part of the treatment of its Obligations under
the Plan, a pro rata share of cash in an amount equal to the Initial Availability Amount on the Plan Effective Date (in addition to, and not in lieu of, any other cash payments provided in the Plan). In accordance with the
Plan, the RBL Exit Facility shall be secured
pari passu
with, but senior in payment priority to the New Term Loan Facility (as defined below).
The Maximum Revolving Commitments, the Borrowing Base (as defined below) and the Funded Revolving Loans (but not the Initial Availability Amount)
are subject to proportionate reduction in the event less than 100% of the Existing Lenders elect to become RBL Lenders. For the avoidance of doubt, the aggregate outstanding Maximum Revolving Commitments and New Term Loans
shall not exceed $500 million on the Plan Effective Date.
(b)
New Term Loan Facility
. A first lien term loan facility in an aggregate principal amount equal to $[__] million (the “
New Term
Loan Facility
,” the loans thereunder, the “
New Term Loans
” and the lenders thereunder, the “
New Term Loan Lenders
”). Pursuant to the Plan, each Existing Lender that is a holder of Existing Loans and
declines to participate in the RBL Exit Facility (collectively, the “
Non-Electing Lenders
”), as part of the treatment of their obligations under the Plan, shall become New Term Loan Lenders on the Plan Effective Date
in respect of New Term Loans deemed made by such New Term Loan Lenders on the Plan Effective Date as “take-back” paper (or similar) in an amount equal to such New Term Loan Lender’s pro rata share of the amount of the New
Term Loan Facility. The New Term Loan Facility shall be secured
pari passu
with the other Obligations on a “last-out” basis with respect to the payment priority.
Without limiting the payment priority set forth in the mandatory and optional prepayment provisions below, all proceeds of Collateral (as defined
below) after the occurrence and during the continuance of an Event of Default shall be allocated
first
, pro rata to pay (i) all amounts outstanding under the RBL Exit Facility
(including, without limitation, interest, principal, fees and cash-collateralization of Letters of Credit (as defined below)), (ii) hedging agreements constituting Obligations and (iii) cash management obligations
constituting Obligations and
second
, to pay amounts outstanding under the New Term Loan Facility.
|
Letter of Credit
Sublimit:
|
The RBL Exit Facility will include a sub-facility for standby letters of credit (each, a “
Letter of Credit
”) in the aggregate principal amount not to exceed $5 million.
|
Amortization:
|
There shall be no amortization of the Revolving Loans or the New Term Loans.
|
Borrowing Base and
Borrowing Base
Redetermination:
|
Availability under the RBL Exit Facility shall be subject to a borrowing base (the “
Borrowing Base
”), which shall be initially determined and periodically redetermined in a customary manner (and, for the
avoidance of doubt, giving effect to hedging agreements constituting Obligations) (each such redetermination, a “
Borrowing Base Redetermination
”) and as set forth below.
Initial Borrowing Base
. On the Plan Effective Date, the initial Borrowing Base shall be $500 million. Thereafter, until the First Scheduled Redetermination Date (as defined below), the Borrowing Base shall be
the amount during the corresponding period as set forth in the table below:
|
|
|
Date
|
Borrowing Base
|
||
February 1, 2020 – February 29, 2020
|
$494 million
|
||
March 1, 2020 – March 31, 2020
|
$488 million
|
||
April 1, 2020 – April 30, 2020
|
$482 million
|
||
May 1, 2020 – May 31, 2020
|
$476 million
|
||
June 1, 2020
|
$470 million (subject to redetermination)
|
|
|
Scheduled Borrowing Base Redeterminations
. The first Scheduled Borrowing Base Redetermination shall occur on June 1, 2020 (the “
First Scheduled Redetermination Date
”) and on each April 1 and October 1
thereafter, commencing on October 1, 2020.
|
|
Interim Borrowing Base Redeterminations
. Interim Borrowing Base Redeterminations may be implemented after the First Scheduled Redetermination Date (a) upon the request of the Administrative Agent or the Majority
Lenders (each, a “
Lender Redetermination
”), or (b) upon the request of the Borrower (each, a “
Borrower Redetermination
” and, together with Lender Redeterminations, collectively the “
Interim
Redeterminations
”);
provided
that there shall be no more than one Lender Redetermination and one Borrower Redetermination between each Scheduled Borrowing Base Redeterminations.
|
|
Borrowing Base Deficiency
. If, at any time, the sum of total outstanding balance of the Revolving Loans and other revolving credit exposure
plus
the New Term Loans is greater than the then-effective
Borrowing Base (such excess, a “
Borrowing Base Deficiency
”) as a result of a Borrowing Base Redetermination, an Interim Redetermination, or the adjustment in the Borrowing Base described below, the Borrower shall,
within 120 days after the later of (i) notice of such Borrowing Base Deficiency or (ii) the date of such adjustment, repay the Borrowing Base Deficiency in a single lump sum for application to the Revolving Loans and other
revolving credit exposure until there are no outstanding Revolving Loans and Revolving Commitments, and then to the New Term Loans;
provided
that such payment shall be made before the Revolving Loan Maturity Date
or New Term Loan Maturity Date, as applicable, together with the interest accrued thereunder.
|
Borrowing Base
Reductions:
|
Sale or Disposition Reduction
. Any sale or disposition of any Oil and Gas Properties (as defined in the Existing Credit Agreement), including the net effect of early terminations of hedges, the Borrowing Base
value (as determined in good faith by the Administrative Agent) of which exceeds five percent (5%) of the then applicable Borrowing Base, shall result in a redetermination of the Borrowing Base on a pro forma basis after
giving effect to such sale, disposition or early termination. Any such redetermination shall not constitute, and shall be in addition to, any Interim Redetermination which the Majority Lenders may otherwise elect.
|
Issuance or Refinancing Reduction
. The Borrowing Base will also be automatically reduced by 25% (or a lower percentage approved by the
Required Lenders) of each of (i) the stated principal amount of any permitted senior note issuance (without regard to any OID) or (ii) the excess of the stated principal amount from the original principal amount of any
permitted refinancing debt.
|
|
Closing Date:
|
The Plan Effective Date (the “
Closing Date
”). For the avoidance of doubt, conditions to effectiveness of the RBL Exit Facility shall include the following: (x) the conditions under the headings “
Conditions to Closing
” and “
Conditions to All Extensions of Credit
” below; and (y) entry of an order by the Bankruptcy Court confirming the
Plan, which shall be in form and substance reasonably satisfactory to the Administrative Agent (the “
Confirmation Order
”).
|
Use of Proceeds:
|
The proceeds of the Revolving Loans and other extensions of credit made from time to time under the RBL Exit Facility shall be used to refinance, in part, the Existing Loans and to fund ongoing working capital
requirements and other general corporate purposes of the Borrower and the other Loan Parties. The proceeds of the New Term Loans shall be used to refinance, in part, the Existing Loans.
|
Definitive
Documentation;
Documentation
Principles:
|
The Facilities will be documented on loan documents that are based on the Existing Credit Agreement;
provided
that (i) such documentation shall contain the terms and conditions (a) set forth in this Term Sheet
and (b) as may be mutually agreed by the Borrower and the Administrative Agent, and (ii) in the event that the New Term Loan Facility shall be documented in a separate credit facility, (a) such documentation shall be on
terms no more restrictive than those of the RBL Exit Facility and (b) subject to a collateral agency agreement whereby the Collateral Agent is appointed to act as secured party and hold collateral for the benefit of all
Facilities (and the principles described therein, the “
Documentation Principles
”).
|
Collateral:
|
The Obligations will be secured by valid and perfected first-priority security interests in and liens on all of the following (collectively, the “
Collateral
”):
|
(a) 100% of the equity interests of all present and future Restricted Subsidiaries of any Loan Party (other than equity interests of non-wholly owned Restricted Subsidiaries to the extent a lien in favor of the
Collateral Agent cannot be granted without the consent of one or more third parties (other than the Parent, its Restricted Subsidiaries and their respective affiliates));
|
|
(b) substantially all of the tangible and intangible personal property and assets of the Loan Parties (including, without limitation, all equipment, inventory and other goods, accounts, licenses, contracts, intercompany
loans, intellectual property and other general intangibles, deposit accounts, securities accounts and other investment property and cash); and
|
|
(c) Oil and Gas Properties representing at least 95% of the total value of all Oil and Gas Properties of the Loan Parties included in the most recent reserve report, in each case, subject to customary exceptions to be
agreed.
|
|
All such security interests in personal property and all liens on Oil and Gas Properties and other real property will be created pursuant to the Definitive Documentation and otherwise subject to the Documentation
Principles.
|
|
Interest Rates:
|
At the Borrower’s option, the Revolving Loans will bear interest based on the Base Rate or LIBOR,
plus
the applicable Revolving Interest Margin (as defined below).
|
The interest margin for Revolving Loans (the “
Revolving Interest Margin
”) shall be based upon utilization of the Borrowing Base (expressed as a percentage of outstanding loans and Letters of Credit under the RBL
Exit Facility divided by the Borrowing Base) according to the following grid:
|
|
(a) in the case of the RBL Exit Facility, based upon utilization of the Borrowing Base (expressed as a percentage of outstanding Revolving Loans and Letters of Credit under the RBL Exit Facility divided by the
Borrowing Base) an interest margin according to the following grid:
|
|
|
|
Utilization
|
Revolving Interest Margin
|
Commitment
Fee
|
||
Base Rate
|
LIBOR
|
|||
≥ 90%
|
300 bps
|
400 bps
|
50.0 bps
|
|
< 90% but ≥ 75%
|
275 bps
|
375 bps
|
50.0 bps
|
|
< 75% but ≥ 50%
|
225 bps
|
325 bps
|
50.0 bps
|
|
< 50% but ≥ 25%
|
175 bps
|
275 bps
|
37.5 bps
|
|
< 25%
|
150 bps
|
250 bps
|
37.5 bps
|
|
|
(b) the New Term Loans will bear interest based on LIBOR, plus 200 bps.
“Base Rate” means the highest of (a) the rate of interest publicly announced by Wells Fargo as its prime rate in effect at its principal office in
New York City, (b) the NYFRB Rate (defined as the greater of the federal funds effective rate and the overnight bank funding rate) from time to time (but not less than zero) plus 0.5% and (c) the one-month LIBO Rate plus
1.00%.
|
“LIBOR” means the rate (but not less than zero) at which eurodollar deposits in the London interbank market for one, two, three or six months (or, with the consent of each RBL Lender, twelve months), as selected by the
Borrower, are quoted on the applicable Reuters screen. The Definitive Documentation will contain customary language that provides for the replacement of LIBOR with an alternate rate of interest.
|
|
Default Rate:
|
At any time an event of default has occurred and is continuing (i) all outstanding Base Rate Loans and LIBOR Loans under the Facilities shall bear interest at 2.00% per annum above the rate applicable to Base Rate Loans
or LIBOR Loans, as applicable, and (ii) all other outstanding, overdue amounts under the Facilities shall bear interest at 2.00% per annum above the rate applicable to Base Rate Loans.
|
Fees:
|
(a)
Commitment Fee
.
The Borrower shall pay to the
Administrative Agent, for the account of the RBL Lenders, a commitment fee (the “
Commitment Fee
”) in an
amount per annum equal to the rate set forth in the preceding grid on the average
daily unused portion of the Maximum Revolving Commitments, payable quarterly in arrears.
All accrued Commitment Fees will be fully earned and due and payable
quarterly
in arrears for the account of
the RBL Lenders (other than any defaulting lenders) under the RBL Exit Facility and will accrue from and after the Closing Date.
(b)
Upfront Fees
. The Borrower shall pay to Wells Fargo, for the pro rata account of each of the RBL Lenders as provided herein, upfront
fees as follows: (i) for each RBL Lender that executes the Restructuring Support Agreement prior to entry of the Final DIP Order (as defined in the DIP Credit Agreement), an aggregate amount equal to 15 bps of the aggregate
amount of the RBL Exit Facility, which shall be fully earned and will be due and payable in full in cash on the date of entry of the Final DIP Order, and (ii) an aggregate amount equal to 40 bps of the aggregate amount of
the RBL Exit Facility, which shall be fully earned and will be due and payable in full in cash to each RBL Lender under the RBL Exit Facility on the Closing Date (the “
Upfront Fees
”).
(c)
Letter of Credit Fees
. The Borrower shall pay to the Administrative Agent for the account of the RBL Lenders a Letter of Credit fee
(due quarterly) equal to the product of the LIBOR Margin and the undrawn amount of each Letter of Credit. In addition, Borrower shall pay to the Administrative Agent for the account of any Issuing Bank a fronting fee equal
to the product of 0.50% and the undrawn amount of each Letter of Credit;
provided
that each such fee shall be no less than $500.
(d)
Other Fees
. Such other fees set forth in any fee letter (or similar) between the Administrative Agent, Collateral Agent and/or Lead
Arranger and the Borrower.
|
Maturity Date:
|
(a)
RBL Exit Facility
. The final maturity of the RBL Exit Facility will occur on the two year anniversary of the Closing Date (the “
RBL
Exit Maturity Date
”).
(b)
New Term Loan Facility
. The final maturity of the New Term Loan Facility will occur on the 42 month anniversary of the Closing Date
(the “
New Term Loan Maturity Date
”).
|
Mandatory
Prepayments (RBL
Exit Facility):
|
(a)
Borrowing Base Deficiency
. The Borrower shall prepay any Borrowing Base Deficiency as provided in the paragraph titled “
Borrowing Base Deficiency
” in the “
Borrowing Base and Borrowing Base Redetermination
” section.
(b)
Excess Revolving Credit Exposure
. If, at any time, the revolving credit exposure exceeds the total Revolving Commitments as a result
of any reduction or termination of Revolving Commitments, the Borrower shall make a prepayment in an amount no less than such excess.
(c)
Adjustment of Borrowing Base
. If there is any adjustment to the Borrowing Base that results in the revolving credit exposure
exceeding the total Revolving Commitments, including in connection with any permitted note issuance or permitted refinancing debt (see
Borrowing Base Reductions
–
Issuance or Refinancing Reduction
) the Borrower shall make a prepayment in an amount no less than such excess.
(d)
Asset Sales or Disposition
. If any Loan Party sells or disposes of any Oil and Gas Property (other than in the ordinary course of
business) while a Borrowing Base Deficiency or an Event of Default exists, the Borrower or such other Loan Party shall promptly make a prepayment in an amount equal to the (i) in the case of a Borrowing Base Deficiency, the
amount of net proceeds from such sale so that no Borrowing Base Deficiency exists, or (ii) if there is an Event of Default, all net proceeds of such sale, in each case no later than the next succeeding Business Day after the
net cash proceeds therefor are received by such Loan Party.
(e)
Consolidated Cash Balance
. If, as of the end of any Business Day, the Consolidated Cash Balance of the Loan Parties exceeds $20
million, the Loan Parties shall, within one Business Day thereof, pay such amounts to be applied in accordance with the terms hereof.
All mandatory prepayments will be applied to prepay outstanding Revolving Loans (without a permanent reduction to the Maximum Revolving
Commitments), including any accrued and unpaid interest of such Revolving Loans being prepaid, and, in the case of clauses (a) through (d) above, to cash-collateralize Letters of Credit outstanding under the RBL Exit
Facility.
|
Mandatory
Prepayments (New
Term Loan Facility):
|
None, while Revolving Commitments remain outstanding.
|
Optional
Prepayments and
Commitment
Reductions (RBL
Exit Facility):
|
Revolving Loans under the RBL Exit Facility may be prepaid at any time, in whole or in part, at the option of the Borrower, upon notice to the
Administrative Agent and in minimum principal amounts and in multiples to be agreed upon with the Administrative Agent, without premium or penalty (except LIBOR breakage costs). Any optional prepayment of the RBL Exit
Facility will be applied to prepay outstanding Revolving Loans and cash-collateralize Letters of Credit outstanding under the RBL Exit Facility (except as otherwise set forth herein, without a permanent reduction in Maximum
Revolving Commitments unless so elected by the Loan Parties).
The unutilized portion of the Maximum Revolving Commitments may be terminated, in whole or in part, at the option of the Borrower, upon notice to
the Administrative Agent and in minimum principal amounts and in multiples to be agreed upon with the Administrative Agent.
|
Optional
Prepayments (New
Term Loan Facility):
|
The New Term Loans may be prepaid, in whole or in part, at the option of the Borrower, upon prior notice and in minimum principal amounts and in multiples to be agreed upon, without premium or penalty (except LIBOR
breakage costs), to the extent such prepayments are permitted by the Definitive Documentation;
provided
that the RBL Exit Facility shall have been indefeasibly repaid in full and all Revolving Commitments thereunder
have terminated prior to such prepayment.
|
Conditions to
Closing:
|
See
Annex A
.
|
Conditions to All
Extensions of Credit:
|
Each extension of credit under the Facilities will be subject to satisfaction of the following: (a) all of the representations, warranties, and covenants in the Definitive Documentation shall be true and correct in all
material respects (or if qualified by materiality or material adverse effect, in all respects) as of the date of such extension of credit, or if such representation speaks as of an earlier date, as of such earlier date;
(b) no default or event of default under the Facilities shall have occurred and be continuing or would result from such extension of credit; (c) delivery of a customary borrowing notice; and (d) the Loan Parties shall be
in compliance with the Consolidated Cash Balance limitation, both before and after giving effect to such extension of credit.
|
Cash Management:
|
The Loan Parties shall maintain their cash management system as it existed prior to the Closing Date, with such changes as may be mutually agreed by the Administrative Agent and the Borrower. Each Loan Party will make
all such Loan Party’s deposit accounts subject to an account control agreement other than Excluded Accounts (as defined below) (such deposit accounts, collectively, “
Controlled Accounts
”). Each Controlled Account
shall be subject to a control agreement, in form and substance satisfactory to the Administrative Agent, which agreement shall transfer control of such account to the Collateral Agent upon delivery of notice by the
Collateral Agent to the financial institution maintaining such account.
|
(b) limitation on disposition of assets, other than (i) customary ordinary course dispositions for the energy industry, (ii) any asset sale
consisting of Oil and Gas Properties (including the net unwinding of hedging transactions), subject to the Borrowing Base redetermination right described in the paragraph titled
Borrowing
Base Reductions
if the Borrowing Base value of such Oil and Gas Properties (as determined in good faith by the Administrative Agent) exceeds 5% of the Borrowing Base, and (iii) other asset sales up to $10 million;
provided
that any asset sale permitted hereunder shall be made for (1) fair value and (2) at least 75% cash consideration;
(c) limitation on consolidations, mergers dissolutions and divisions;
(d) subject to customary permitted investments, limitation on loans, investments and acquisitions of property, other than (i) investments in
partnerships up to $5 million, (ii) investments in Unrestricted Subsidiaries up to $5 million, subject to minimum liquidity (unrestricted cash and availability under the RBL Exit Facility) of at least 15% of the Borrowing
Base, (iii) other investments up to $10 million, and (iv) other investments subject to pro forma liquidity (unrestricted cash and availability under the RBL Exit Facility) of at least 15% of the Borrowing Base and pro-forma
Total Leverage Ratio does not exceed 2.75 to 1.00, subject to cash netting up to $20 million;
(e) limitations on indebtedness, including exceptions for (i) capital leases or purchase money indebtedness up to the greater of $30 million and
1.00% of CTA, (ii) unsecured indebtedness up to $400 million, subject to a 25% dollar-for-dollar reduction in the Borrowing Base and pro forma compliance with Financial Covenants, (iii) acquisition indebtedness up to the
greater of $30 million and 1.00% of CTA, (iv) subordinated secured or junior lien indebtedness up to $50 million, subject to a 25% dollar-for-dollar reduction in the Borrowing Base and pro forma compliance with Financial
Covenants (the indebtedness described in this clause (iv) and clause (ii) above, the “
Specified Additional Debt
”), (v) earn-out indebtedness up to $15 million, and (vi) any other indebtedness up to the greater of $30
million and 1.00% of CTA;
(f) limitations on transactions with affiliates;
(g) limitations on margin stock;
(h) limitations on contingent obligations;
(i) limitations on restricted debt payments (including prohibition against any redemption of Specified Additional Debt during the term of the RBL
Exit Facility);
(j) limitations on restricted payments (including any dividends during the term of the RBL Exit Facility) other than (i) permitted tax
distributions, (ii) restricted payments under management or employee stock plans not to exceed $5 million in any fiscal year and (iii) for general corporate purposes not to exceed $1 million in any fiscal year;
(k) limitations on derivative contracts (as set forth in greater detail below);
|
|
(l) limitations on change in business nature, amendments to organization documents, documents governing material indebtedness and corporate
structure;
(m) limitations on accounting changes;
(n) ERISA compliance; and
(o) limitations on restrictions affecting the ability of Restricted Subsidiaries to guarantee the loans, grant liens securing the loans or make
distributions to the Borrower.
|
|
|
Hedging
Requirements:
|
All hedging agreements shall be entered into, on a secured basis, with a Lender (or an affiliate thereof), as the hedging counterparty, or on an unsecured basis with counterparties reasonably acceptable to the
Administrative Agent;
provided
that no Borrowing Base value shall be given to any such unsecured hedging agreements. The Loan Parties shall not enter into any hedging transaction which (i) extends more than twelve
(12) months after the RBL Exit Maturity Date, and (ii) together with all other hedging transactions, exceeds ninety-five percent (95%) of the Loan Parties’ PDP reserves, as set forth in the most recently delivered reserve
report. Other hedging requirements to be mutually agreed.
|
|
|
Financial Covenants
(RBL Exit Facility):
|
The RBL Exit Facility will contain the following financial covenants, calculated as of each fiscal quarter :
First Lien Leverage Ratio: First Lien Debt to EBITDA may not exceed 3.0 to 1.0 as of the last day of any fiscal quarter, subject to cash netting
up to $20 million. EBITDA shall be calculated at the end of each fiscal quarter using the results of the twelve month period ending with that fiscal quarter end.
Total Leverage Ratio: Total Debt to EBITDA for the four fiscal quarters then ending, to be greater than 3.75 to 1.00, subject to cash netting up
to $20 million.
Current Ratio: Consolidated Current Assets divided by Consolidated Current Liabilities may not be less than 1.0 to 1.0 on a fiscal quarter basis.
Maximum Capital Expenditures: If (i) the Total Leverage Ratio (subject to cash netting up to $20 million) for the four fiscal quarters most
recently ended is greater than 2.0 to 1.0 and (ii) liquidity (the sum of unrestricted cash and availability under the RBL Exit Facility) is less than $50 million, then the Borrower will not initiate any drilling or
completion activity of any wells or similar material Capital Expenditures during such fiscal quarter if the sum of (x) the aggregate amount of Capital Expenditures for the three fiscal quarters most recently ended plus (y)
Capital Expenditures to be made during such fiscal quarter would exceed $175 million.
Any reference to EBITDA in this Term Sheet shall include adjustments for among other things, extraordinary and non-recurring items including any
items related to the restructuring (i.e., retention payments, professional fees, etc.).
|
Financial Covenants
(New Term Loan
Facility):
|
The New Term Loan Facility will contain the following financial covenant, calculated on a quarterly basis:
Consolidated Total Leverage Ratio: Total Debt to EBITDA for the four fiscal quarters then ending, to be greater than 4.25 to 1.00, subject to cash
netting up to $20 million.
|
Equity Cure Rights
|
In the event the Borrower fails to comply with the requirements of the Financial Covenants, Parent will have the right to issue common equity
securities for cash or otherwise receive cash contributions to the capital of Parent (in each case, on terms reasonably satisfactory to the Administrative Agent) (any such equity issuance or contribution, a “
Specified
Equity Contribution
”), and contribute any such cash to the capital of the Borrower, and apply the amount of the proceeds thereof to increase on a dollar-for-dollar basis EBITDA (to be defined in a manner to be mutually
agreed) solely for purposes of determining compliance with Financial Covenants (including, for the avoidance of doubt, determining if Maximum Capital Expenditures is applicable) with respect to the then ended fiscal quarter
and any subsequent period that includes such fiscal quarter (the “
Cure Right
”);
provided
that (i) the Cure Right will not be exercised more than five (5) times during the term of the RBL Exit Facility, and
(ii) the Cure Right many not be exercised more than two (2) times in any four (4) consecutive fiscal quarters.
Any amounts used to exercise a Cure Right will be disregarded in calculating EBITDA for all other purposes, including calculation of basket levels
and other items governed by reference to EBITDA and will not result in any pro forma indebtedness reduction (other than the indebtedness under the RBL Exit Facility that is actually prepaid with such Cure Amount) or an
increase in cash.
|
Events of Default:
|
Subject to the Documentation Principles, substantially similar to the events of default in the Existing Credit Agreement, except as mutually agreed with the Administrative Agent and as otherwise set forth in this Term
Sheet, each subject to limitations and modifications as are customary for transactions of this type as mutually agreed (which will be applicable to the Loan Parties).
|
Amendments and
Waivers:
|
Amendments and waivers of the Definitive Documentation will require the approval of the Lenders holding more than 50% of the applicable Facility, except that the consent of (a) RBL Lenders holding more than 66-2/3% of
the Aggregate Commitments of the RBL Lenders shall be required to decrease or maintain the Borrowing Base (and such other matters consistent with the Existing Credit Agreement), (b) each Lender under the applicable
Facility shall be required in connection with (i) changing any provision specifying the number or percentage of Lenders required to amend or waive any Definitive Documentation in respect of the matters described in this
clause
(b)
and
clause (c)
below and (ii) releasing any guarantor (except in connection with a permitted transaction) or all or substantially all of the Collateral, and (c) each affected Lender shall be required in
connection with (i) any increase or extension of its commitment, (ii) the postponement of any scheduled date for payment of principal, interest, fees or other amount payable to such Lender, and (iii) any reduction in the
principal amount of any loan, interest rate, fee or other amount payable to such Lender.
|
Assignments:
|
Customary for facilities of this type.
|
|
|
Expenses and
Indemnification:
|
Subject to the Documentation Principles, customary for facilities of this type.
|
|
|
Governing Law and
Forum:
|
Texas
|
d.
following the Effective Date, for so long as the Plan Sponsor owns more than fifty
percent (50%) of the New Common Stock that the Plan Sponsor owned on the Effective Date, additional directors may be nominated from time-to-time by the Plan Sponsor,
provided
that such directors are mutually acceptable to the Plan Sponsor and the Board.
Each director shall have one (1) vote. All actions of the Board must be
approved by a majority of the Board, and no Board nominee may be subject to a “bad actor” disqualification.
Each Stockholder shall take all actions
reasonably necessary to cause the individuals nominated in accordance with the preceding
clauses (a)
through
(d)
to be appointed as directors of the Board, including voting all their shares
of Company Stock in favor of such nominees.
Unless otherwise agreed to by the Plan
Sponsor, in its sole and absolute discretion, each board of directors, committee or similar governing body of any subsidiary of the Company shall be comprised of a majority of Sponsor Directors (subject to proportionate adjustments
consistent with
clause (c)
above).
For the avoidance of doubt, the Board shall be appointed in compliance with
section 1129(a)(5) of the Bankruptcy Code.
The Company’s and each of its subsidiaries’ organizational documents will include a waiver of
corporate opportunities or similar doctrines to the maximum extent permitted under applicable law.
|
Special Consent
Rights
|
Notwithstanding anything contained herein to the contrary, for so long as the Plan Sponsor owns at least thirty percent (30%) of
the New Common Stock that the Plan Sponsor owned on the Effective Date, consent of the Plan Sponsor, in its sole and absolute discretion, shall be required for each of the actions set forth on
Schedule I
attached hereto to be taken by the Company and/or any of its subsidiaries.
Additionally, the majority of directors that are not Sponsor Directors shall have consent rights to transactions between the
Company and its subsidiaries, on the one hand, and affiliates of the Plan Sponsor, on the other hand, which contemplate the aggregate payment in excess of $[
˜
]
1
during any fiscal year that are also not on an arms’-length basis (which consent shall not be unreasonably withheld, conditioned or delayed). The foregoing consent rights contemplated
by this paragraph shall no longer apply in the event that the Company (or a successor entity or affiliate thereof) is listed on an Established OTC Marketplace or on a national securities exchange.
|
Transfer
Restrictions
|
Subject to the provisions concerning a Drag-Along Sale and Tag-Along Sale discussed below and customary permitted transfers (
e.g.
, transfers to affiliates), each Stockholder shall be permitted to, directly or indirectly, sell,
assign, transfer, convey, pledge or otherwise dispose of (including, without limitation, through the use of derivative securities or other instruments) (collectively, “
Transfer
”) any of its shares of Company Stock;
provided
that, for so long as the Plan Sponsor owns more than fifty percent (50%) of the New Common Stock that the Plan Sponsor owned on the Effective Date, the Plan Sponsor shall have a right
of first offer with respect to the Transfer of such shares of Company Stock, which shall be subject to customary terms.
For the avoidance of doubt, and notwithstanding anything contained herein to the contrary, for so long as the SHA remains in
effect, the acquirer or transferee of Company Stock in connection with any Transfer will be required to become a party to the SHA in order for such Transfer to become effective.
|
Drag-Along Sale
|
After the Effective Date
, the holders of the New Common Equity that own not less than fifty percent (50%) of the
then-outstanding shares of Company Stock (collectively, the “
Drag-Along Seller
”) may elect to require the Company to commence a process for, and require the Company and the other
Stockholders to cooperate with and consummate,
(i) a sale of at least a majority of all of the shares of Company Stock then issued and outstanding to, (ii) a
merger of the Company with, or (iii) a sale of all or substantially all of the Company’s and its subsidiaries’ assets to, in each case, one or more third party purchasers, in one or a series of related transactions (any transaction
in clauses (i) through (iii) above, a “
Company Sale
”, and any Company Sale required by the Drag-Along Seller,
a “
Drag-Along Sale
”). Each Stockholder will consent to, vote in favor of, raise no objection to and waive any
appraisal, dissenters’ or other similar rights in connection with such Drag-Along Sale. If a Drag-Along Sale involves a sale or exchange of Company Stock (including pursuant to a merger), then each holder will transfer its Company
Stock on the same terms and conditions applicable to the Drag-Along Seller subject to customary limitations with respect to required representations, warranties, indemnification and other covenants. In connection with a Drag-Along
Sale involving a sale of all or substantially all of the assets of the Company and its subsidiaries, the Company and its subsidiaries shall enter into such agreements and arrangements with the applicable third party purchaser of such
assets in a form and on terms and conditions reasonably acceptable to the Drag-Along Seller consistent with the foregoing
.
|
1
|
Note to Draft
: Amount to be mutually agreed in SHA.
|
Tag-Along Sale
|
After the Effective Date, in connection with any transfer (or a series of related transfers) by one or more holders (collectively,
the “
Selling Interest Holders
”) of more than ten
percent (10%) of the issued and outstanding shares of Company Stock at the time of such Tag-Along Sale to one or more unaffiliated third party purchasers (a “
Tag-Along Sale
”), each other Stockholder (collectively, the “
Tag-Along Interest Holders
”) shall have the option to participate in such Tag-Along Sale
up to a corresponding percentage of the Company Stock owned by such Tag-Along Interest Holder. Tag-Along Interest Holders shall receive the same form and amount of consideration per share of Company Stock of a particular class that
is being paid to the Selling Interest Holders in connection with the Tag-Along Sale with respect to the Selling Interest Holders’ corresponding shares of Company Stock of such class. The terms and conditions applicable to the
Tag-Along Interest Holder in connection with the Tag-Along Sale shall not be less favorable than those terms and conditions applicable to the Selling Interest Holders
subject to customary limitations with respect to required
representations, warranties, indemnification and other covenants
.
|
Pre-Emptive
Rights
|
If, after the Effective Date, the Company issues (other than pursuant to a management incentive plan, its debt financing
documentation, the exercise of the Warrants, in connection with an M&A transaction, equity issuances of less than 2.5% of the pro forma shares of Company Stock and other customary exceptions) shares of Company Stock (or any
options, warrants or other equity securities that are convertible into, or exchangeable or exercisable for, Company Stock), then each Stockholder that owns more than five percent (5%) of the issued and outstanding shares of Company
Stock at such time shall be entitled to participate in such issuance on a
pro rata
basis at the
same purchase price and subject to the same terms.
|
Initial Public
Offering;
Registration
Rights
|
For so long as the Plan Sponsor owns more than forty percent (40%) of the issued and outstanding New Common Stock, the Plan Sponsor
shall have the right to cause an initial public offering of equity interests of the Company (or a successor entity or affiliate thereof) (an “
IPO
”).
|
If an IPO is undertaken, each Stockholder shall agree, if requested in connection with the IPO, to convert or exchange its shares
of Company Stock into other equity securities of the Company or equity securities of any other entity upon the same terms and conditions as the Plan Sponsor and take such other actions and enter into and modify such agreements
reasonably necessary in order to facilitate the IPO.
Following an IPO, customary registration rights (including demand and piggyback registration rights) will be provided to the Plan
Sponsor and the Equity Backstop Parties to the extent they receive any “restricted” or “control” securities under the terms of the Plan or any agreements entered into in connection with the Plan pursuant to a registration rights
agreement in form and substance reasonably acceptable to the Plan Sponsor and reasonably acceptable to the Debtors (the “
Registration Rights Agreement
”). Each Stockholder that owns more than ten percent (10%) of the outstanding shares of Company Stock will have the right to participate on a
pro rata
basis in any registered public offering initiated by the Company (or by parties exercising demand registration rights,
including the Plan Sponsor), subject to underwriter cutbacks, lockups and other customary exceptions or limitations. In addition, the Company shall use reasonable best efforts to cause its directors and executive officers to enter
into similar lock-up agreements.
Each Stockholder shall enter into a customary lock-up agreement and coordination agreement in connection with an IPO.
The Company shall bear the registration expenses of all piggyback and demand registrations, and shall reimburse the holders of
registrable securities included in each registration (including registrations pursuant to an initial public offering) for the reasonable fees and disbursements of one legal counsel for all holders of registrable securities, which
counsel shall be selected by the largest selling holder participating in such issuance, up to an aggregate amount of $50,000 per issuance.
|
|
SEC Filings;
Equity Listing
|
The Company shall be constituted as a C-corporation after the Effective Date unless otherwise determined by the Plan Sponsor so long as the Plan Sponsor owns twenty-five percent (25%) or more of the New
Common Stock that is held by the Plan Sponsor as of the Effective Date, with prior notice to and in consultation with the Debtors.
The Company and the Debtors shall use commercially reasonable efforts to effectuate the listing of the Company Stock on an established OTC marketplace (i.e., OTCQX or OTCQB, and not, for example, on the
pink sheets) (an “
Established OTC Marketplace
”) or on a national securities exchange within two hundred and seventy (270) days of the Effective Date (the “
Listing Period
”);
provided
that the Board may extend the Listing Period up to an additional two hundred and seventy (270) days in the event that the Board (including a majority of the Independent Directors at such time) determines such extension is in the best
interests of the Company. Unless otherwise directed by the Plan Sponsor, the Debtors agree that the Company will remain a public reporting company with the Securities and Exchange Commission during the pendency of the Chapter 11 Cases
and, at the election of the Plan Sponsor so long as the Plan Sponsor owns more than fifty percent (50%) of the New Common Stock that is owned by the Plan Sponsor as of the Effective Date, upon and after the Effective Date; for the
avoidance of doubt, to the extent the Company is not listed on an Established OTC marketplace or on a national securities exchange, or otherwise
is not filing
periodic reports with the SEC
, the Company will provide the information rights set forth in the “Information Rights” section below to its Stockholders.
|
Beginning no sooner than ninety (90) days after the Effective Date, the Company will participate in quarterly conference calls (which may be a single conference call with other investors) to discuss its
results of operations for each fiscal quarter. The conference call will be following the last day of each fiscal quarter and not later than ten (10) business days following the date on which the Company distributes the quarterly or
annual financial statements described above. No fewer than two (2) business days prior to the conference call, the Company will provide a notice to the Stockholders with the time and date of such conference call as well as the
instructions for obtaining access to the call.
Notwithstanding the foregoing, no information described in this section shall be required
to be provided if and for so long as the Company is filing periodic reports with the SEC.
|
|
Amendments to
SHA
|
Any amendments to the SHA or the organizational documents of the Company or any of its subsidiaries will require the prior approval of the Board;
provided
that any amendment that materially and disproportionately adversely affects the obligations or rights of any Stockholder (or class of Stockholders) relative to other Stockholders (or classes of Stockholders) shall require the consent of
the Stockholders representing a majority of the shares of Company Stock so adversely affected.
|
Governing Law; Jurisdiction
|
Delaware.
|
Parties to the SHA
|
All Stockholders shall be party to the SHA.
|
Termination
|
The SHA shall terminate immediately upon the earlier to occur of (i) an IPO, (ii) the listing of the Company (or a successor entity
or affiliate thereof) on an Established OTC marketplace or on a national securities exchange, and (iii) a Company Sale as a result of which the Plan Sponsor owns less than ten percent (10%) of the equity capitalization of the Company
or the surviving entity following such Company Sale (unless waived by the Plan Sponsor);
provided
that (a)
the Plan Sponsor director nomination rights in “Governance; Board of Directors”, the Plan Sponsor rights in “Special Consent Rights”, and the Registration Rights Agreement and the provisions regarding deregistration of the Company
under the Exchange Act shall survive any termination pursuant to
clause (i)
or
clause (ii)
(other than with respect to the Plan Sponsor director nomination rights in “Governance; Board of Directors”
which shall be limited to the extent necessary to comply with applicable national securities exchange) above and (b) the Drag-Along Sale right shall survive the listing of the Company on an Established OTC Marketplace.
|
Certificate of
Incorporation and
Bylaws
|
Following the Effective Date, the certificate of incorporation and bylaws of the Company shall contain customary defensive
provisions and other terms reasonably acceptable to the Debtors, the Plan Sponsor and the Noteholder Backstop Parties.
|
|
1. |
Create, authorize, issue, purchase, redeem, repurchase or amend the rights, preferences or privileges of, any equity security of the Company or any
of its subsidiaries, including any security convertible into or exchangeable for any equity security of the Company or any of its subsidiaries, including any increase in the authorized number of equity securities of the Company or
any of its subsidiaries, or create, authorize, adopt or modify any option plan, equity incentive plan or phantom stock plan with respect to the Company or any of its subsidiaries (or their respective business);
provided
that the foregoing shall not prohibit required repurchases in connection with incentive plans.
|
|
2. |
Increase the number of equity securities of the Company or any of its subsidiaries reserved for issuance to employees, directors or contractors of
the Issuer or its subsidiaries.
|
|
3. |
Amend, restate, modify or replace the certificate of incorporation, by-laws or any other organizational documents of the Company or any of its
subsidiaries;
|
|
4. |
Liquidate, wind up, dissolve or restructure the Company or any of its subsidiaries or initiate any action relating to bankruptcy (including any
action seeking to take advantage of any bankruptcy laws or any other law providing for the relief of debtors), reorganization or recapitalization with respect to any such entity.
|
|
5. |
Initiate a public offering of the securities of the Company or any of its subsidiaries (or any successor thereto).
|
|
6. |
Merge or consolidate with any other entity or sell all or substantially all of the Company’s or its subsidiaries’ assets, or enter into any
transaction that would result in a change of control.
|
|
7. |
Enter into transactions or agreements with affiliates of the Company (other than wholly-owned subsidiaries of the Company).
|
|
8. |
Incur or guarantee any indebtedness, in each case in an amount greater than $[●] million, in any single transaction, or which would result in
outstanding indebtedness obligations in excess of $[●] million in the aggregate, or amend the material terms of or otherwise refinance such indebtedness.
|
|
9. |
Incur any liens outside of the ordinary course of business beyond those expressly permitted by [
˜
].
|
|
10. |
Change the accounting firm retained to audit the Company’s and its subsidiaries financial statements.
|
|
11. |
Propose, agree or commit to do any of the foregoing.
|
Equity Allocation
|
9/30/19
Emergence
|
$4.2mm of
Additional 2L
Accrued Claim At
10/31 Emergence
|
||
%
|
%
|
|||
Term Loan Claims
|
51.40%
|
51.69%
|
||
Sponsor Backstop Amount
|
31.42%
|
31.24%
|
||
Noteholder Subscription Amount
|
11.01%
|
10.94%
|
||
Sponsor Participation Amount
|
1.69%
|
1.68%
|
||
Sponsor Backstop Fee
|
1.60%
|
1.59%
|
||
Noteholder Backstop Fee
|
0.56%
|
0.56%
|
||
Sponsor portion of Noteholder Backstop Fee
|
0.09%
|
0.09%
|
||
Notes Claims
|
2.50%
|
2.49%
|
||
Participation Premium
|
1.50%
|
1.49%
|
||
Sponsor portion of Participation Premium
|
0.23%
|
0.23%
|
||
Total
|
100.00%
|
100.00%
|
(1) |
Equity allocations shown above are prior to dilution from the MIP.
|
(2) |
If the Effective Date has not occurred on or prior to September 30, 2019, the Allowed amount of the Term Loan Claims shall increase at a
rate of 14.25% per annum. Figures shown above illustrate equity allocations assuming a 9/30/19 Effective Date (left) and assuming a $4.2mm increase in the Term Loan Claims as a result of the accrual of incremental Term Loan Claims
between 9/30/19 and 10/31/19 (right).
|
(3) |
Equity allocations shown above assume $189.8mm Sponsor Backstop Amount by the Plan Sponsor (excluding $10.2mm Sponsor Participation Amount)
and $66.5mm Rights Offering (including $10.2mm Sponsor Participation Amount).
|
(4) |
Equity allocations shown above do not assume any Incremental Equity Investment. Ownership for each category will be adjusted with respect to
any Incremental Equity Investment raised.
|
(5) |
Notes Claims ownership includes all Noteholders (including any notes held by Plan Sponsor).
|
OVERVIEW OF THE RESTRUCTURING
|
In general, the Restructuring contemplates the following, in each case subject to the terms and conditions described more fully herein, the RSA, and the
Equity Backstop Commitment Agreement:
(a) The Debtors will implement the Restructuring in the Bankruptcy Court pursuant to the Plan on the terms set forth in this Term Sheet
(as supplemented by the RSA, Equity Backstop Commitment Agreement, DIP Documents, Exit Facility Term Sheet and MIP Term Sheet).
(b) The Debtors will obtain a debtor-in-possession financing facility (the “
DIP Facility
”)
from certain of the RBL Lenders as set forth in the Senior Secured Superpriority Debtor-In-Possession Credit Agreement attached hereto as
Exhibit B-1
(the “
DIP Credit Agreement
” and the lenders from time to time party thereto, the “
DIP Lenders
”) and the proposed interim order approving the DIP Facility attached
hereto as
Exhibit B-2
(the “
Interim DIP Order
”). The DIP Facility shall consist of (i) a new money revolving loan facility in the
aggregate principal amount of $100 million (“
New Money DIP Claims
”) and (ii) a refinancing term loan facility in the aggregate principal amount of up to $250 million (“
Refinanced DIP Claims
”). The DIP Credit Agreement, the Interim DIP Order, the final order approving the DIP Facility (the “
Final DIP Order
”,
and together with the Interim DIP Order, the “
DIP Orders
”), and other documents related thereto are collectively referred to as, the “
DIP Documents
”.
(c) Certain funds managed or advised by GSO Capital Partners LP (collectively, the “
Plan Sponsor
”)
will agree (i) to consent to the DIP Facility and the use of their cash collateral to fund the Chapter 11 Cases pursuant to the DIP Documents, (ii) to vote all of their prepetition claims (including Term Loan Claims and Notes
Claims) to accept the Plan pursuant to the RSA, (iii) to backstop a $200 million equity commitment (the “
Backstop Commitment
”) pursuant to the Equity Backstop Commitment Agreement and
(iv) in the Plan Sponsor’s sole discretion,
provide additional capital in the form of an unsecured note (the “
New Exit Note
”) subject to documentation, terms, and conditions
to be agreed
between the Plan Sponsor and the Debtors
.
(d) The DIP Lenders will agree (i) to provide the DIP Facility and consent to the use of their cash collateral to fund the Chapter 11
Cases pursuant to the DIP Documents and (ii) to vote all of their RBL Claims and Refinanced DIP Claims to accept the Plan pursuant to the RSA.
(e) The RBL Lenders will agree to provide a senior secured revolving asset-based lending credit facility in a maximum amount of $500
million as set forth in the Exit Facility Term Sheet annexed hereto as
Exhibit D
(the “
Exit Facility
”).
(f) The Debtors may, at the Plan Sponsor’s option, offer an additional $200 million of New Common Equity pursuant to the Incremental
Equity Investment as described below.
(g) All Claims arising under the DIP Facility will be satisfied in full by one or a combination of the following: (i) New Money DIP Claims shall be paid in full in cash not later than the Effective
Date, and (ii) Refinanced DIP Claims (A) will be paid in cash and exchanged into the Exit Facility pursuant to the Exit Facility Term Sheet, or (B) if the Exit Facility is not consummated, will be paid in full in cash not later
than the Effective Date.
|
(h) All RBL Claims will be satisfied in full by one or a combination of the following: (i) distribution of claims under the Exit
Facility in exchange for the RBL Claims; or (ii) if the Exit Facility is not consummated, payment in full in cash not later than the Effective Date. For avoidance of doubt, there shall not be any cash paid on account of the
principal balance of RBL Claims pursuant to any plan unless and until all Refinanced Claims are paid in full in cash on the Effective Date.
(i) In full and final satisfaction of all Term Loan Claims, holders thereof will receive their Pro Rata share of 98.00% of the New
Common Equity Pool.
(j) Holders of Notes Claims will receive (i) their respective Pro Rata share of 2.00% of the New Common Equity Pool and (ii) if and
only if Class 5 (Notes Claims) votes to accept the Plan, all holders of Notes Claims will receive (A) their respective Pro Rata share of subscription rights to participate in an equity rights offering in an amount not to exceed $100
million (the “
Rights Offering
”), and (B) if and only if the Rights Offering is fully subscribed in the amount of $100 million, those holders of Notes Claims that have subscribed to the
maximum amount available to them pursuant to the Rights Offering shall receive their respective pro rata share
(calculated as t
he proportion that the
New Common Stock to be issued to such holders pursuant to their participation in the Rights Offering bears to the aggregate amount of New Common Stock issued pursuant to the Plan) of rights to purchase up to 49% of the New Exit
Note.
(k) Holders of Allowed Convenience Claims will receive payment in full in cash, or such Allowed Convenience Claims shall be reinstated.
(l) Holders of General Unsecured Claims will receive either (i) if Class 5 (Notes Claims) votes to accept the Plan or the Bankruptcy
Court approves of such treatment, payment in in full in cash, or such General Unsecured Claims shall be reinstated, or (ii) if Class 5 (Notes Claims) votes to reject the Plan and the Bankruptcy Court does not approve payment in full
in cash or reinstatement, payment in cash in an amount equal to the product of such General Unsecured Claims times the projected recovery rate for the Notes Claims pursuant to the Plan.
(m) Holders of Allowed Trade Claims will be paid in the ordinary course of business, receive payment in full in cash, or such Allowed
Trade Claims shall be reinstated.
(n) Holders of Interests in Legacy Reserves shall receive no recovery under the Plan, and all such Interests shall be extinguished.
This Term Sheet incorporates the rules of construction as set forth in section 102 of the Bankruptcy Code.
|
GENERAL PROVISIONS REGARDING THE RESTRUCTURING
|
|
The Backstop
Commitment
|
The Plan Sponsor (together with any third parties designated by the Plan Sponsor
and reasonably acceptable to the Debtors, collectively, the “
Equity
Backstop Parties
”) will provide the Backstop Commitment, which shall be $200 million (the “
Equity Backstop Amount
”), subject to certain adjustments as described herein and on the terms set
forth in the Equity Backstop Commitment Agreement attached hereto as
Exhibit E
(including all schedules and exhibits thereto, the “
Equity
Backstop Commitment Agreement
”). The Equity Backstop Commitment Agreement will provide for, among
other things, a commitment fee (the “
Equity Backstop Fee
”) of 6% of the Equity
Backstop Amount (which fee, for the avoidance of doubt, shall be in an amount equal to $12 million) payable to the Equity Backstop Parties (a) in New Common Stock on the Effective Date or (b) in cash, if the Effective Date has not
occurred, upon the earlier of (x) consummation of an alternative transaction or (y) termination of the Equity Backstop Commitment Agreement in certain circumstances in accordance with its terms
.
|
The Rights
Offering
|
If Class 5 votes to accept the Plan, holders of Notes Claims (“
Noteholders
”) shall receive Subscription Rights to participate in the Rights Offering in an amount
equal to $100 million (the “
Maximum Noteholder Subscription Amount
”). To the extent
that Noteholders do not subscribe to their full Pro Rata share of the Maximum Noteholder Subscription Amount, Subscription Rights for such unsubscribed portion shall be made available to Noteholders and the Plan Sponsor (“
Oversubscription Rights
”) according to allocations and procedures in form and substance acceptable
to the Plan Sponsor and the Debtors. For the avoidance of doubt, in the event that Class 5 is entitled to participate in the Rights Offering, the Plan Sponsor shall be entitled to participate in the Rights Offering (including
Oversubscription Rights) on account of its Note Claims. Each dollar of Noteholder subscriptions to the Rights Offering up to the Maximum Noteholder Subscription Amount shall, at the Plan Sponsor’s option, decrease the amount of
the Backstop Commitment to be funded by the Plan Sponsor on a dollar-for-dollar basis up to $100 million (the “
Noteholder Subscription Downsize
”). Subscription Rights, including Oversubscription Rights, shall be transferable to eligible participants subject to the consent of the Plan Sponsor (not to be unreasonably withheld)
and the Debtors based on eligibility criteria in form and substance acceptable to the Plan Sponsor and the Debtors.
|
Exit Financing
|
Exit Facility
: Except as otherwise provided in this section, as a condition precedent to the Effective Date, the Debtors shall enter into the Exit Facility, a senior secured revolving reserve-based lending credit
facility to be arranged and provided by the Lenders under the Prepetition RBL Credit Agreement in the maximum amount of $500 million, as set forth in the Exit Facility Term Sheet, or otherwise on terms acceptable to the Debtors,
the Plan Sponsor and the Prepetition RBL Agent. To the extent not paid in cash, holders of RBL Claims and Refinanced DIP Claims shall receive a
distribution of commitments under the Exit Facility (in the manner set
forth in the Exit Facility Term Sheet) in exchange for such RBL and Refinanced DIP Claims, on a Pro Rata basis
. If the Exit Facility is not consummated, the
Debtors shall enter into an alternative senior secured revolving reserve-based lending credit facility in form and substance acceptable to the Debtors and the Plan Sponsor;
provided
, for the avoidance of doubt, that, if the Exit Facility is not consummated, the RBL Claims
shall be paid in full in cash on the Effective Date.
New Exit Note
: If the Plan Sponsor
and the Debtors determine that post-emergence liquidity from the Exit Facility, the Backstop
Commitment, the Rights Offering, and the Incremental Equity Investment is insufficient (including to account for any potential contingency), the Plan Sponsor may, at its sole option, provide the New Exit Note
in an amount and on terms to be agreed
upon between the Plan Sponsor and the
Debtors. If and only if Class 5 is entitled to participate in the Rights Offering, and the Rights Offering is fully subscribed in the amount of $100 million, Noteholders that subscribe to the maximum amount available to them in
connection with the Rights Offering shall be permitted to participate in funding their pro rata share (calculated as t
he proportion that the New Common Stock to be issued to such holders pursuant to their participation in
the Rights Offering bears to the aggregate amount of New Common Stock issued pursuant to the Plan)
of up to 49% of the aggregate amount of the New Exit
Note.
The Debtors shall timely seek approval from the Bankruptcy Court to obtain
relief necessary to effectuate the Exit Facility and the New Exit Note, as applicable.
|
Third Party
Investor(s)
|
The Plan Sponsor may designate one or more third party investment partners
mutually acceptable to the Plan Sponsor and the Debtors (each a “
Partner
”) to
participate in the funding of the Restructuring, including, without limitation, (a) by purchasing a strip of the Plan Sponsor’s rights in the Term Loan Claims and/or the Notes Claims, (b) through assignment to any such Partner
of any of the Plan Sponsor’s rights, claims or interests with respect to the Term Loan Claims, the Notes Claims, the Backstop Commitment, or subscription rights in connection with the Rights Offering, the Incremental Equity
Investment, or the New Exit Note, or (c) through any combination of the foregoing.
The Debtors shall, without limitation to other terms and conditions to be
agreed between the Debtors, the Plan Sponsor, and any Partner in connection with such Partner’s participation in any of the foregoing,
agree to provide representations
and warranties to any such Partner in form and substance
reasonably acceptable to the Plan Sponsor and the Debtors pursuant to documentation in form and substance
reasonably acceptable to the Plan Sponsor and the Debtors.
|
TREATMENT OF CLAIMS AND INTERESTS OF THE DEBTORS UNDER THE PLAN
|
|||
Class
No.
|
Type of Claim
|
Treatment
|
Impairment
/ Voting
|
Unclassified Non-Voting Claims
|
|||
N/A
|
DIP Claims
|
On the Effective Date, in full satisfaction of each Allowed DIP Claim, each
holder thereof shall receive, in full satisfaction of its Claim
(i) on account of New Money DIP Claims, payment in full in cash; (ii) on account of Refinanced DIP Claims, distribution of cash and commitments under the Exit
Facility in the manner set forth in the Exit Facility Term Sheet; and/or (iii) if the Exit Facility is not consummated, payment in full in cash.
|
Entitled to vote the Refinanced DIP Claims in Class 3
|
N/A
|
Administrative Claims
|
On the Effective Date, except to the extent that a holder of an Allowed
Administrative Claim and the Debtor against which such Allowed Administrative Claim is asserted, with the prior written consent of the Plan Sponsor, agree to less favorable treatment for such holder, each holder of an Allowed
Administrative Claim shall receive, in full satisfaction of its Claim, payment in full in cash.
|
N/A
|
N/A
|
Priority Tax Claims
|
Except to the extent that a holder of an Allowed Priority Tax Claim and the
Debtor against which such Allowed Priority Tax Claim is asserted, with the prior written consent of the Plan Sponsor, agree to less favorable treatment for such holder, each holder of an Allowed Priority Tax Claim shall receive,
in full satisfaction of its Claim, treatment in a manner consistent with section 1129(a)(9)(C) of the Bankruptcy Code.
|
N/A
|
Classified Claims and Interests of the Debtors
|
|||
Class 1
|
Other Secured Claims
|
On the Effective Date, in full satisfaction of each Allowed Other Secured Claim,
each holder thereof shall receive, at the option of the applicable Debtor, with the prior written consent of the Plan Sponsor: (i) payment in full in cash; (ii) the collateral securing its Allowed Other Secured Claim; (iii)
Reinstatement of its Other Secured Claim; or (iv) such other treatment rendering its Allowed Other Secured Claim Unimpaired in accordance with section 1124 of the Bankruptcy Code.
|
Unimpaired; deemed to accept.
|
Class 6A
|
General Unsecured Claims
|
Holders of General Unsecured Claims (excluding Convenience Claims) will receive either (i) if Class 5 (Notes Claims) votes to accept the Plan or the Bankruptcy Court approves
of such treatment, payment in in full in cash, or such General Unsecured Claims shall be reinstated, or (ii) if Class 5 (Notes Claims) votes to reject the Plan and the Bankruptcy Court does not approve payment in full in cash or
reinstatement, payment in cash in an amount equal to the product of such General Unsecured Claims times the projected recovery rate for the Notes Claims pursuant to the Plan.
|
Depending on treatment under the Plan – unimpaired and deemed to accept; impaired and entitled to
vote.
|
Class 6B
|
Convenience Claims
|
On the Effective Date, in full satisfaction of each Allowed Convenience Claim,
each holder thereof shall receive payment in full in cash
,
or such Allowed Convenience Claim shall be reinstated
.
|
Unimpaired; deemed to accept.
|
Class 7
|
Trade Claims
|
Holders of Allowed Trade Claims will be paid in the ordinary course of business, receive payment in full in cash, or such Allowed Trade Claims shall be
reinstated.
|
Unimpaired; deemed to accept.
|
Class 8
|
Intercompany Claims
|
On the Effective Date, Intercompany Claims shall be, at the option of the Debtors, with the consent of the Plan Sponsor, either Reinstated or canceled,
released, and extinguished without any distribution.
|
Impaired; deemed to reject or Unimpaired; deemed to accept
|
Class 9
|
Interests in Debtors other than Legacy Reserves
|
On the Effective Date, Interests in the Debtors other than Legacy Reserves shall be, at the option of the Debtors, with the consent of the Plan Sponsor, either Reinstated or
canceled, released, and extinguished without any distribution.
|
Impaired; deemed to reject or Unimpaired; deemed to accept
|
Class 10
|
Interests in Legacy Reserves
|
All Interests in Legacy Reserves will be canceled, released, and extinguished as of the Effective Date, and will be of no further force or effect.
|
Impaired; deemed to reject.
|
Retention of Jurisdiction
|
The Plan will provide for the retention of jurisdiction by the Bankruptcy Court for usual and customary matters.
|
Discharge of Claims and
Termination of Interests
|
Pursuant to section 1141(d) of the Bankruptcy Code, and except as otherwise specifically provided in the Plan, the Confirmation Order or in any contract,
instrument, or other agreement or document created pursuant to the Plan, the distributions, rights, and treatment that are provided in the Plan shall be in complete satisfaction, discharge, and release, effective as of the Effective
Date, of Claims (including any Intercompany Claims resolved or compromised after the Effective Date by the Reorganized Debtors), Interests, and Causes of Action of any nature whatsoever, including any interest accrued on Claims or
Interests from and after the Petition Date, whether known or unknown, against, liabilities of, liens on, obligations of, rights against, and Interests in, the Debtors or any of their assets or properties, regardless of whether any
property shall have been distributed or retained pursuant to the Plan on account of such Claims and Interests, including demands, liabilities, and Causes of Action that arose before the Effective Date, any liability (including
withdrawal liability) to the extent such Claims or Interests relate to services performed by employees of the Debtors prior to the Effective Date and that arise from a termination of employment, any contingent or non-contingent
liability on account of representations or warranties issued on or before the Effective Date, and all debts of the kind specified in sections 502(g), 502(h), or 502(i) of the Bankruptcy Code, in each case whether or not: (a) a Proof
of Claim based upon such debt or right is filed or deemed filed pursuant to section 501 of the Bankruptcy Code; (b) a Claim or Interest based upon such debt, right, or Interest is Allowed pursuant to section 502 of the Bankruptcy
Code; or (c) the holder of such a Claim or Interest has accepted the Plan. The Confirmation Order shall be a judicial determination of the discharge of all Claims and Interests subject to the occurrence of the Effective Date.
|
Releases by the Debtors
|
Except as provided for in the Plan or the Confirmation Order, pursuant to section 1123(b) of the Bankruptcy Code, for good and valuable consideration, on
and after the Effective Date, each Released Party is deemed released and discharged by the Debtors, the Reorganized Debtors, and their Estates from any and all Causes of Action, including any derivative claims, asserted on behalf of
the Debtors, that the Debtors, the Reorganized Debtors, or their Estates would have been legally entitled to assert in their own right (whether individually or collectively) or on behalf of the holder of any Claim against, or
Interest in, a Debtor or other Entity, based on or relating to, or in any manner arising from, in whole or in part, the Debtors, the Debtors’ in- or out-of-court restructuring efforts, intercompany transactions, the Equity Backstop
Commitment Agreement, the Exit Facility, the New Exit Note (if any), the Chapter 11 Cases, the formulation, preparation, dissemination, negotiation, or filing of the RSA, the Disclosure Statement, the DIP Facility, the Equity
Backstop Commitment Agreement, the Plan, the Exit Facility, the New Exit Note (if any) or any Restructuring Transaction, contract, instrument, release, or other agreement or document created or entered into in connection with the
RSA, the Disclosure Statement, the DIP Facility, or the Plan, the Equity Backstop Commitment Agreement, the filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of Consummation, the administration and
implementation of the Plan, including the issuance or distribution of securities pursuant to the Plan, or the distribution of property under the Plan or any other related agreement, or upon any other act or omission, transaction,
agreement, event, or other occurrence taking place on or before the Effective Date. Notwithstanding anything to the contrary in the foregoing, the releases set forth above do not release obligations of any party or Entity under the
Plan, or any document, instrument, or agreement executed to implement the Plan.
|
Releases by Holders of
Claims and Interests
|
Except as provided for in the Plan or Confirmation Order, as of the Effective Date, each Releasing Party is deemed to have released and discharged each
Released Party from any and all Causes of Action, whether known or unknown, including any derivative claims, asserted on behalf of the Debtors, that such Entity would have been legally entitled to assert (whether individually or
collectively), based on or relating to, or in any manner arising from, in whole or in part, the Debtors, the Debtors’ in- or out-of-court restructuring efforts, intercompany transactions, the Equity Backstop Commitment Agreement,
the Exit Facility, the New Exit Note (if any), the Chapter 11 Cases, the formulation, preparation, dissemination, negotiation, or filing of the RSA, the Disclosure Statement, the DIP Facility, the Plan, the Equity Backstop
Commitment Agreement, the Exit Facility, the New Exit Note (if any) or any Restructuring Transaction, contract, instrument, release, or other agreement or document created or entered into in connection with the RSA, the Disclosure
Statement, the DIP Facility, or the Plan, the filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of Consummation, the administration and implementation of the Plan, including the issuance or distribution of
securities pursuant to the Plan, or the distribution of property under the Plan or any other related agreement, or upon any other related act or omission, transaction, agreement, event, or other occurrence taking place on or before
the Effective Date. Notwithstanding anything to the contrary in the foregoing, the releases set forth above do not release obligations of any party or Entity under the Plan, or any document, instrument, or agreement executed to
implement the Plan.
|
Exculpation
|
Except as provided for in the Plan or Confirmation Order, no Exculpated Party shall have or incur, and each Exculpated Party is released and exculpated
from any Cause of Action for any claim related to any act or omission in connection with, relating to, or arising out of, the Chapter 11 Cases, the formulation, preparation, dissemination, negotiation, or filing of the RSA and
related prepetition transactions, the Disclosure Statement, the Plan, or any Restructuring Transaction, contract, instrument, release or other agreement or document created or entered into in connection with the Disclosure Statement
or the Plan, the filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of Consummation, the administration and implementation of the Plan, including the issuance of securities pursuant to the Plan, or the
distribution of property under the Plan or any other related agreement, except for claims related to any act or omission that is determined in a final order to have constituted actual fraud, gross negligence or willful misconduct,
but in all respects such Entities shall be entitled to reasonably rely upon the advice of counsel with respect to their duties and responsibilities pursuant to the Plan.
The Section 1125(e) Protected Parties have, and upon completion of the Plan shall be deemed to have, participated in good faith and in compliance with the
applicable laws with regard to the solicitation of votes and distribution of consideration pursuant to the Plan and, therefore, are not, and on account of such distributions shall not be, liable at any time for the violation of any
applicable law, rule, or regulation governing the solicitation of acceptances or rejections of the Plan or such distributions made pursuant to the Plan. Each of the Section 1125(e) Protected Parties shall be entitled to and granted
the protections and benefits of section 1125(e) of the Bankruptcy Code.
|
Injunction
|
Except as otherwise expressly provided in the Plan or for obligations issued or required to be paid pursuant to the Plan or the Confirmation Order, all
Entities who have held, hold, or may hold claims or interests that have been released, discharged, or are subject to exculpation are permanently enjoined, from and after the Effective Date, from taking any of the following actions
against, as applicable, the Debtors, the Reorganized Debtors, the Exculpated Parties, or the Released Parties: (a) commencing or continuing in any manner any action or other proceeding of any kind on account of or in connection with
or with respect to any such claims or interests; (b) enforcing, attaching, collecting, or recovering by any manner or means any judgment, award, decree, or order against such Entities on account of or in connection with or with
respect to any such claims or interests; (c) creating, perfecting, or enforcing any encumbrance of any kind against such Entities or the property or the estates of such Entities on account of or in connection with or with respect to
any such claims or interests; (d) asserting any right of setoff, subrogation, or recoupment of any kind against any obligation due from such Entities or against the property of such Entities on account of or in connection with or
with respect to any such claims or interests unless such holder has filed a motion requesting the right to perform such setoff on or before the Effective Date, and notwithstanding an indication of a claim or interest or otherwise
that such holder asserts, has, or intends to preserve any right of setoff pursuant to applicable law or otherwise; and (e) commencing or continuing in any manner any action or other proceeding of any kind on account of or in
connection with or with respect to any such claims or interests released or settled pursuant to the Plan.
|
Taxes
|
The Plan and the Restructuring Transactions contemplated herein and therein shall be implemented in a tax efficient manner satisfactory to the Plan
Sponsor, with prior notice to and in consultation with the Debtors.
|
OTHER MATERIAL PROVISIONS REGARDING THE RESTRUCTURING
|
|
Management
Incentive Plan
|
On the Effective Date, the Reorganized Debtors will continue all existing management compensation plans, and implement a new equity-based management
incentive plan (the “
Management Incentive Plan
”) on terms and conditions set forth in the term sheet attached hereto as
Exhibit
C
(the “
MIP Term Sheet
”) and otherwise acceptable to the Debtors and the Plan Sponsor. For the avoidance of doubt, the Plan will provide for
the establishment of the Management Incentive Plan on the Effective Date in a manner acceptable to the Debtors and the Plan Sponsor.
|
Employment
Obligations
|
Each of the Debtors’ “first day” or “second day” motions and proposed orders relating to wages, compensation, and benefits shall be in form and substance
acceptable to the Debtors and the Plan Sponsor. Wages, compensation and benefit programs that do not relate to insiders shall be continued after the Effective Date, unless otherwise agreed by the Debtors and the Plan Sponsor and
subject to the satisfaction and consent of the Plan Sponsor (such consent not to be unreasonably withheld) following receipt and analysis of satisfactory information from the Debtors regarding such programs, which information the
Debtors shall provide as promptly as practicable.
The Company Parties will enter into amended and restated employment agreements with senior executives on substantially the same terms as set forth in the
existing agreements, subject to conforming changes associated with the MIP Term Sheet, including the Change in Control definitions referenced therein. For the avoidance of doubt, the reorganization of the Company will not
constitute a Change in Control under the applicable employment agreements.
|
Conditions
Precedent to
Restructuring
|
The following shall be conditions to the Effective Date (the “
Conditions Precedent
”):
(a)
the Bankruptcy Court shall
have entered the Confirmation Order, which shall be in form and substance acceptable to the Debtors and the Plan Sponsor, shall be a Final Order, and shall:
(i)
authorize the Debtors to take
all actions necessary to enter into, implement, and consummate the contracts, instruments, releases, leases, indentures, and other agreements or documents created in connection with the Plan;
|
(ii)
decree that the provisions of
the Confirmation Order and the Plan are nonseverable and mutually dependent;
(iii)
authorize the Debtors, as
applicable/necessary, to: (A) implement the Restructuring Transactions, including the Rights Offering; (B) distribute the New Common Stock pursuant to the exemption from registration under the Securities Act provided by section
1145 of the Bankruptcy Code or other exemption from such registration or pursuant to one or more registration statements; (C) make all distributions and issuances as required under the Plan, including cash and the New Common
Stock; and (D) enter into any agreements, transactions, and sales of property as set forth in the Plan Supplement, including the Exit Facility, the Equity Backstop Commitment Agreement, the New Exit Note (if any) and the
Management Incentive Plan;
(iv)
authorize the implementation
of the Plan in accordance with its terms; and
(v)
provide that, pursuant to
section 1146 of the Bankruptcy Code, the assignment or surrender of any lease or sublease, and the delivery of any deed or other instrument or transfer order, in furtherance of, or in connection with the Plan, including any deeds,
bills of sale, or assignments executed in connection with any disposition or transfer of assets contemplated under the Plan, shall not be subject to any stamp, real estate transfer, mortgage recording, or other similar tax.
(b)
the Debtors shall have
obtained all authorizations, consents, regulatory approvals, rulings, or documents that are necessary to implement and effectuate the Plan;
(c)
the final versions of the
Definitive Documentation, the Plan Supplement and all of the schedules, documents, and exhibits contained therein shall have been filed in a manner consistent in all material respects with the RSA, this Term Sheet (including all
Exhibits hereto), and the Plan and shall be in form and substance acceptable to the Plan Sponsor;
(d)
the RSA shall remain in full
force and effect;
|
(e)
all conditions precedent to
the Exit Facility shall have been satisfied or waived in accordance with the Exit Facility Term Sheet and definitive documentation to be entered in connection therewith and satisfactory to the RBL Agent and the Plan Sponsor, or
(in the alternative) all DIP Claims and RBL Claims will be paid in full in cash;
(f)
if the Exit Facility will
not be consummated, all conditions precedent to an alternative
senior secured revolving reserve-based lending credit facility acceptable to the Plan Sponsor
shall have been satisfied or waived in accordance with the definitive documentation to be entered in connection therewith;
(g)
all conditions precedent to
the New Exit Note (if any) shall have been satisfied or waived in accordance with the terms thereof;
(h)
the Bankruptcy Court shall
have entered an order approving the Equity Backstop Fee and authorizing payment thereof as an Administrative Claim;
(i)
all conditions precedent to
(i) the effectiveness of the Equity Backstop Commitment Agreement and (ii) the occurrence of the Rights Offering pursuant to the Equity Backstop Commitment Agreement shall, in each case, have been satisfied or waived in accordance
with the Equity Backstop Commitment Agreement;
(j)
the aggregate amount of the
(i) the Funded Revolving Loans (as defined in the Exit Facility Term Sheet) and any New Term Loans (as defined in the Exit Facility Term Sheet), in each case on the Effective Date, or if the Exit Facility is not consummated, the
aggregate amount of obligations under any alternative senior secured revolving reserve-based lending credit facility as of the Effective Date,
plus
(ii) the Professional Claim Amount shall
not exceed $455 million (the “
Senior Debt Cap
”);
provided
that the Senior Debt Cap shall be reduced dollar for dollar by the amount of equity
financing raised in cash by the Debtors pursuant to the Plan in excess of $200 million on the Effective Date;
(k)
all reasonable and documented
professional fees and expenses of the advisors to the Supporting Creditors payable pursuant to the RSA, the Equity Backstop Commitment Agreement and the DIP Credit Agreement, the Prepetition Term Loan Agent, the Equity Backstop
Parties, the DIP Lenders, the DIP Agent, the Exit Agent, the Exit Lenders, the RBL Agent and the RBL Lenders shall have been paid in full; and
|
(l)
the Debtors shall have implemented the Restructuring Transactions, including the Rights Offering, and all transactions contemplated by this Term Sheet (including all releases and exculpations contemplated
herein), in a manner consistent in all respects with the RSA, this Term Sheet, and the Plan, pursuant to documentation acceptable to the Debtors and the Plan Sponsor.
|
Waiver of
Conditions
Precedent to the
Effective Date
|
The Debtors, with the prior written consent of the Plan Sponsor, may waive any one or more of the Conditions Precedent to the Effective Date;
provided
the Debtors shall waive the Conditions Precedent set forth in clause (i) of the Conditions Precedent section of this Term Sheet to the extent so requested by the Plan Sponsor.
|
CORPORATE GOVERNANCE PROVISIONS/SECTION 1145 EXEMPTION
|
|
Governance
|
The board of directors of the Reorganized Debtors (the “
New Board
”) shall consist of at least seven (7)
members, consisting of (a) Dan Westcott, CEO of Legacy Reserves, (b) Kyle Hammond, President and COO of Legacy Reserves, (c) five (5) other board members, which may include independent directors or current board members of the
Company Parties, to be selected by the Plan Sponsor or, to the extent applicable with the prior written consent of the Plan Sponsor, a Partner, and (d) such additional board members as may be appointed from time to time by the Plan
Sponsor that are mutually acceptable to the Plan Sponsor and the Debtors, including, but not limited to, in connection with any listing considerations and/or any equity investment by a Partner;
provided
that, in the event that Noteholders acquire more than 20% of the New Common Stock (on a fully diluted basis) as of the Effective Date, the Noteholders shall be entitled to select one (1) of the five (5) other board members referred
to in the foregoing clause (c). For the avoidance of doubt, the New Board shall be appointed in compliance with section 1129(a)(5) of the Bankruptcy Code.
Corporate governance for the Reorganized Debtors, including charters, bylaws, operating agreements, or other organization documents, as applicable, shall
be consistent with this Term Sheet and section 1123(a)(6) of the Bankruptcy Code (as applicable) and documentation therefor shall be filed as part of the Plan Supplement and otherwise in form and substance acceptable to the Debtors
and the Plan Sponsor.
|
Equity Listing
|
Reorganized Legacy Reserves shall be constituted as a C-corporation after the Effective Date unless otherwise determined by the Plan Sponsor, with prior
notice to and in consultation with the Debtors.
The Plan Sponsor, with prior notice to and in consultation with the Debtors, shall determine the equity listing and reporting status of Reorganized Legacy
Reserves upon emergence (including, without limitation, whether Reorganized Legacy Reserves will be listed OTC, listed on a national exchange or will emerge as a private company), and the Debtors and Reorganized Legacy Reserves
shall use their best efforts to effectuate such determination on the Effective Date or as soon as possible thereafter. Unless otherwise directed by the Plan Sponsor, the Debtors agree that Legacy Reserves will remain a public
reporting company with the Securities and Exchange Commission during the pendency of the Chapter 11 Cases.
Should the Reorganized Debtors elect on or after the Effective Date to reflect any ownership of the New Common Stock through the facilities of the DTC,
the Reorganized Debtors need not provide any further evidence other than the Plan or the Confirmation Order with respect to the treatment of the New Common Stock under applicable securities laws. Notwithstanding anything to the
contrary in the Plan, no Entity (including, for the avoidance of doubt, DTC) shall be entitled to require a legal opinion regarding the validity of any transaction contemplated by the Plan, including, for the avoidance of doubt,
whether the New Common Stock is exempt from registration and/or eligible for DTC book-entry delivery, settlement, and depository services. DTC shall be required to accept and conclusively rely upon the Plan or Confirmation Order in
lieu of a legal opinion regarding whether the New Common Stock is exempt from registration and/or eligible for DTC book-entry delivery, settlement, and depository services.
|
Exemption from
SEC Registration
|
The issuance of all securities under the Plan will be exempt from SEC registration under applicable law.
Registration rights (including demand and piggyback registration rights) will be provided to the Plan Sponsor and the Equity Backstop Parties to the
extent they receive any “restricted” or “control” securities under the terms of the Plan or any agreements entered into in connection with the Plan pursuant to a registration rights agreement in form and substance acceptable to the
Plan Sponsor and reasonably acceptable to the Debtors (the “
Registration Rights Agreement
”).
|
Shareholders
Agreement
|
The New Common Equity Pool and all equity interests issued in connection with the Management Incentive Plan, the Equity Backstop Fee, and the Rights Offering shall be subject
to a shareholders agreement in form and substance acceptable to the Plan Sponsor and reasonably acceptable to the Debtors (the “
Shareholders Agreement
”).
|
Term
|
Definition
|
Administrative Claim
|
A Claim for costs and expenses of administration of the Chapter 11 Cases pursuant to sections 503(b), 507(a)(2), 507(b), or 1114(e)(2) of the Bankruptcy
Code, including: (a) the actual and necessary costs and expenses incurred on or after the Petition Date until and including the Effective Date of preserving the Estates and operating the Debtors’ businesses; (b) Allowed Professional
Claims; and (c) all fees and charges assessed against the Estates pursuant to section 1930 of chapter 123 of title 28 of the United States Code.
|
Affiliate
|
As defined in section 101(2) of the Bankruptcy Code.
|
Allowed
|
As to a Claim or an Interest, a Claim or an Interest allowed under the Plan, under the Bankruptcy Code, or by a final order, as applicable. For the
avoidance of doubt, (a) there is no requirement to file a Proof of Claim (or move the Bankruptcy Court for allowance) to be an Allowed Claim under the Plan, and (b) the Debtors may affirmatively determine to deem Unimpaired Claims
Allowed to the same extent such Claims would be allowed under applicable nonbankruptcy law.
|
Backstop Commitment
|
As defined in the Term Sheet.
|
Bankruptcy Code
|
As defined in the Introduction.
|
Bankruptcy Court
|
As defined in the Introduction.
|
Cause of Action
|
Any claims, interests, damages, remedies, causes of action, demands, rights, actions, suits, obligations, liabilities, accounts, defenses, offsets,
powers, privileges, licenses, liens, indemnities, guaranties, and franchises of any kind or character whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereinafter arising, contingent or non-contingent,
liquidated or unliquidated, secured or unsecured, assertable, directly or derivatively, matured or unmatured, suspected or unsuspected, in contract, tort, law, equity, or otherwise. Causes of Action also include: (a) all rights of
setoff, counterclaim, or recoupment and claims under contracts or for breaches of duties imposed by law; (b) the right to object to or otherwise contest Claims or Interests; (c) claims pursuant to sections 362, 510, 542, 543, 544
through 550, or 553 of the Bankruptcy Code; and (d) such claims and defenses as fraud, mistake, duress, and usury, and any other defenses set forth in section 558 of the Bankruptcy Code.
|
Term
|
Definition
|
DIP Documents
|
As defined in the Term Sheet.
|
DIP Facility
|
As defined in the Term Sheet.
|
DIP Lenders
|
As defined in the Term Sheet.
|
DIP Credit Agreement
|
As defined in the Term Sheet.
|
DIP Orders
|
As defined in the Term Sheet.
|
Disclosure Statement
|
The disclosure statement for the Plan, including all exhibits and schedules thereto, which shall be in form and substance acceptable to the Debtors and
the Plan Sponsor.
|
Effective Date
|
The date that is the first Business Day after the Confirmation Date on which all Conditions Precedent have been satisfied or waived in accordance with the
Plan.
|
Entity
|
As defined in section 101(15) of the Bankruptcy Code.
|
Equity Backstop Amount
|
As defined in the Term Sheet.
|
Equity Backstop
Commitment Agreement
|
As defined in the Term Sheet.
|
Equity Backstop Fee
|
As defined in the Term Sheet.
|
Equity Backstop Parties
|
As defined in the Term Sheet.
|
Estate
|
The estate of any Debtor created under sections 301 and 541 of the Bankruptcy Code upon the commencement of the applicable Debtor’s Chapter 11 Case.
|
Term
|
Definition
|
Exculpated Parties
|
Collectively, and in each case, in its capacity as such: (a) the Debtors, (b) Reorganized Debtors; (c) any official committees appointed in the Chapter 11
Cases and each of their respective members; (c) such Released Parties that are fiduciaries to the Debtors’ Estates; and (d) with respect to each of the foregoing, such Entity and its current and former affiliates, and such Entity’s
and its current and former affiliates’ current and former equity holders, subsidiaries, officers, directors, managers, principals, members, employees, agents, advisors, advisory board members, financial advisors, partners,
attorneys, accountants, investment bankers, consultants, representatives, and other professionals, each in their capacity as such.
|
Exit Agent
|
The administrative agent appointed under the Exit Facility.
|
Exit Facility
|
As defined in the Term Sheet.
|
Exit Lenders
|
The lenders under the Exit Facility.
|
Final Order
|
As applicable, an order or judgment of the Bankruptcy Court or other court of competent jurisdiction with respect to the relevant subject matter that has
not been reversed, stayed, modified, or amended, and as to which the time to appeal or seek certiorari has expired and no appeal or petition for certiorari has been timely taken, or as to which any appeal that has been taken or any
petition for certiorari that has been or may be filed has been resolved by the highest court to which the order or judgment could be appealed or from which certiorari could be sought or the new trial, reargument, or rehearing shall
have been denied, resulted in no modification of such order, or has otherwise been dismissed with prejudice.
|
General Unsecured
Claims
|
Any Claim other than an Administrative Claim, a Professional Claim, a Secured Tax Claim, an Other Secured Claim, a Priority Tax Claim, an Other Priority
Claim, an RBL Claim, a Term Loan Claim, a Notes Claim, Trade Claim or an Intercompany Claim.
|
Governmental Unit
|
As defined in section 101(27) of the Bankruptcy Code
|
GSO
|
Funds managed or advised by GSO Capital Partners LP.
|
Impaired
|
With respect to any Class of Claims or Interests, a Class of Claims or Interests that is impaired within the meaning of section 1124 of the Bankruptcy
Code.
|
Term
|
Definition
|
Noteholder Subscription
Downsize
|
As defined in the Term Sheet.
|
Notes Claim
|
Any Claim arising under, derived from, or based upon the Prepetition Notes Indentures.
|
Other Priority Claim
|
Any Claim other than an Administrative Claim or a Priority Tax Claim entitled to priority in right of payment under section 507(a) of the Bankruptcy Code.
|
Other Secured Claim
|
Any Secured Claim, including any Secured Tax Claim, other than an RBL Claim, a Term Loan Claim or a DIP Claim. For the avoidance of doubt, Other Secured
Claims includes any Claim arising under, derived from, or based upon any letter of credit issued in favor of one or more Debtors, the reimbursement obligation for which is either secured by a Lien on collateral or is subject to a
valid right of setoff pursuant to section 553 of the Bankruptcy Code.
|
Oversubscription Rights
|
As defined in the Term Sheet.
|
Petition Date
|
The date on which the Chapter 11 Cases were commenced.
|
Plan
|
As defined in the Term Sheet.
|
Plan Sponsor
|
As defined in the Term Sheet.
|
Plan Supplement
|
Any compilation of documents and forms of documents, agreements, schedules, and exhibits to the Plan, which shall be filed by the Debtors no later than
ten (10) days before the Confirmation Hearing or such later date as may be approved by the Bankruptcy Court on notice to parties in interest, and additional documents filed with the Bankruptcy Court prior to the Effective Date as
amendments to the Plan Supplement, each of which shall be consistent in all respects with, and shall otherwise contain, the terms and conditions set forth in the RSA and Term Sheet, where applicable, and shall be in form and
substance acceptable to the Debtors and the Plan Sponsor.
|
Prepetition Intercreditor
Agreement
|
That certain Intercreditor Agreement dated as of October 25, 2016, by and among the Company Parties, Wells Fargo Bank, National Association, as original
priority lien agent, and Cortland Capital Market Services LLC, as original junior lien agent.
|
Term
|
Definition
|
Releasing Parties
|
Collectively, (a) the Debtors; (b) the Reorganized Debtors; (c) the Plan Sponsor, (d) the Supporting Creditors; (e) the Equity Backstop Parties; (f) the
Prepetition Term Loan Agent; (g) the DIP Lenders; (h) the DIP Agent; (i) the Exit Lenders; (j) the Exit Agent; (k) all holders of Claims or Interests who either (1) vote to accept or (2) do not opt out of granting the releases set
forth in Article [●] of the Plan by returning the opt-out election form to be included with the ballot or notice of non-voting status; and (l) with respect to each of the foregoing entities in clauses (a) through (k), such Entity’s
its current and former affiliates and subsidiaries, and such Entities’ and their current and former affiliates’ and subsidiaries’ current and former directors, managers, officers, equity holders (regardless of whether such interests
are held directly or indirectly), predecessors, successors, and assigns, subsidiaries, and each of their respective current and former equity holders (regardless of whether such interests are held directly or indirectly), officers,
directors, managers, principals, members, employees, agents, advisors, advisory board members, financial advisors, partners, attorneys, accountants, investment bankers, consultants, representatives, and other professionals, each in
their capacity as such .
|
Reorganized Debtors
|
A Debtor, or any successor or assign thereto, by merger, consolidation, or otherwise, on and after the Effective Date.
|
Reorganized Legacy
Reserves
|
Legacy Reserves, or any successor or assign, by merger, consolidation, or otherwise, on or after the Effective Date.
|
Restructuring
|
As defined in the Introduction.
|
Restructuring
Transactions
|
As defined in the Term Sheet.
|
Rights Offering
|
As defined in the Term Sheet.
|
Rights Offering
Procedures
|
The procedures governing the Rights Offering attached as an exhibit to the Equity Backstop Commitment Agreement.
|
Rights Offering Shares
|
The shares of New Common Stock distributed pursuant to and in accordance with the Rights Offering.
|
RSA
|
As defined in the Term Sheet.
|
SEC
|
The Securities and Exchange Commission.
|
Secured
|
When referring to a Claim: (a) secured by a Lien on collateral to the extent of the value of such collateral, as determined in accordance with section
506(a) of the Bankruptcy Code or (b) subject to a valid right of setoff pursuant to section 553 of the Bankruptcy Code.
|
Secured Tax Claim
|
Any Secured Claim that, absent its Secured status, would be entitled to priority in right of payment under section 507(a)(8) of the Bankruptcy Code
(determined irrespective of time limitations), including any related Secured Claim for penalties.
|
Term
|
Definition
|
Securities Act
|
The Securities Act of 1933, as amended, 15 U.S.C. §§ 77a-77aa, or any similar federal, state, or local law.
|
Section 1125(e) Protected
Parties
|
The Exculpated Parties and such Released Parties that are fiduciaries other than to the Debtors’ Estates.
|
Senior Debt Cap
|
As defined in the Term Sheet.
|
Sponsor Equity
Downsize
|
As defined in the Term Sheet.
|
Subscription Rights
|
The rights to purchase Rights Offering Shares as set forth in the Rights Offering Procedures.
|
Supporting Creditors
|
As defined in the RSA.
|
Term Loan Claim
|
Any Claim arising under, derived from, or based upon the Prepetition Term Loan Credit Agreement, including any and all fees, interest paid in kind, and
accrued but unpaid interest and fees arising under the Prepetition Term Loan Credit Agreement.
|
Term Loan Secured
Parties
|
Cortland Capital Market Services LLC, as Prepetition Term Loan Agent, and the lenders under the Prepetition Term Loan Credit Agreement.
|
Term Sheet
|
As defined in the Introduction.
|
Trade Claims
|
Claims against the Debtors that are held by an entity (other than operators of oil and gas properties arising under operating agreements to which a Debtor
is a party) arising on account of labor performed, or services, materials, goods or equipment furnished with respect to development, drilling, completion, maintenance, repair, operations or related activity on or with respect to any
lands, material, machinery, supplies, improvements, oil and gas leases, or wells or pipelines owned, in whole or in part, by one or more of the Debtors.
|
Unimpaired
|
With respect to a Class of Claims or Interests, a Class of Claims or Interests that is not Impaired.
|
Page
|
|||
ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS
|
387
|
||
|
|||
Section 1.01
|
Terms Defined Above
|
387 | |
Section 1.02
|
Certain Defined Terms
|
388 | |
Section 1.03
|
Types of Loans and Borrowings
|
416 | |
Section 1.04
|
Terms Generally
|
416
|
|
Section 1.05
|
Accounting Terms and Determinations; GAAP
|
417
|
|
Section 1.06
|
[Reserved]
|
417
|
|
Section 1.07
|
Divisions
|
417
|
|
|
|||
ARTICLE II THE CREDITS
|
417
|
||
|
|||
Section 2.01
|
Commitments
|
417
|
|
Section 2.02
|
Loans and Borrowings
|
418
|
|
Section 2.03
|
Requests for Borrowings
|
419
|
|
Section 2.04
|
Interest Elections
|
420 | |
Section 2.05
|
Funding of Borrowings
|
421 | |
Section 2.06
|
Termination and Reduction of Aggregate Commitments
|
422 | |
Section 2.07
|
[Reserved]
|
422
|
|
Section 2.08
|
Letters of Credit
|
422
|
|
Section 2.09
|
Collateral; Guarantees
|
427
|
|
|
|||
ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES
|
429
|
||
|
|||
Section 3.01
|
Repayment of Loans
|
429
|
|
Section 3.02
|
Interest
|
429
|
|
Section 3.03
|
Alternate Rate of Interest
|
430
|
|
Section 3.04
|
Prepayments
|
431
|
|
Section 3.05
|
Fees
|
432
|
|
|
|||
ARTICLE IV PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS.
|
433
|
||
|
|||
Section 4.01
|
Payments Generally; Pro Rata Treatment; Sharing of Set-offs
|
433 | |
Section 4.02
|
Presumption of Payment by the Borrower
|
434
|
|
Section 4.03
|
Payments and Deductions by the Agent; Defaulting Lenders
|
434 | |
|
|||
ARTICLE V INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY
|
437
|
||
|
|||
Section 5.01
|
Increased Costs
|
437 |
Page
|
|||
Section 5.02
|
Break Funding Payments
|
438
|
|
Section 5.03
|
Taxes
|
439 | |
Section 5.04
|
Designation of Different Lending Office
|
442
|
|
Section 5.05
|
Illegality
|
442
|
|
|
|||
ARTICLE VI CONDITIONS PRECEDENT
|
443
|
||
|
|||
Section 6.01
|
Interim Facility Effective Date
|
443
|
|
Section 6.02
|
Final Facility Effective Date
|
445 | |
Section 6.03
|
Conditions Precedent to Each Borrowing
|
446
|
|
|
|||
ARTICLE VII REPRESENTATIONS AND WARRANTIES
|
448
|
||
|
|||
Section 7.01
|
Organization; Powers
|
448
|
|
Section 7.02
|
Authority; Enforceability
|
448
|
|
Section 7.03
|
Approvals; No Conflicts
|
449
|
|
Section 7.04
|
Financial Position; No Material Adverse Change
|
449
|
|
Section 7.05
|
Litigation
|
449 | |
Section 7.06
|
Environmental Matters
|
450
|
|
Section 7.07
|
Compliance with the Laws and Agreements; No Defaults
|
451
|
|
Section 7.08
|
Investment Company Act
|
451
|
|
Section 7.09
|
Taxes
|
451
|
|
Section 7.10
|
ERISA
|
451
|
|
Section 7.11
|
Disclosure; No Material Misstatements
|
452 | |
Section 7.12
|
Insurance
|
453
|
|
Section 7.13
|
Restriction on Liens
|
453 | |
Section 7.14
|
Subsidiaries
|
453 | |
Section 7.15
|
Location of Business and Offices
|
453
|
|
Section 7.16
|
Properties; Titles, Etc.
|
454
|
|
Section 7.17
|
Maintenance of Properties
|
455
|
|
Section 7.18
|
Gas Imbalances, Prepayments
|
455
|
|
Section 7.19
|
Marketing of Production
|
455
|
|
Section 7.20
|
Swap Agreements
|
455
|
|
Section 7.21
|
Use of Loans and Letters of Credit
|
456
|
|
Section 7.22
|
[Reserved]
|
456
|
|
Section 7.23
|
USA PATRIOT; AML Laws; Anti-Corruption Laws and Sanctions
|
456
|
Page
|
|||
Section 7.24
|
International Operations
|
456 | |
Section 7.25
|
Accounts
|
456
|
|
Section 7.26
|
[Reserved]
|
456
|
|
Section 7.27
|
[Reserved]
|
456
|
|
Section 7.28
|
DIP Orders
|
456
|
|
Section 7.29
|
Budget
|
456
|
|
Section 7.30
|
Representations and Warranties of the Parent Guarantors
|
|
|
|
|||
ARTICLE VIII AFFIRMATIVE COVENANTS
|
457
|
||
|
|||
Section 8.01
|
Financial Statements; Other Information
|
457
|
|
Section 8.02
|
Notices of Material Events
|
460 | |
Section 8.03
|
Existence; Conduct of Business
|
461
|
|
Section 8.04
|
Payment of Obligations
|
461
|
|
Section 8.05
|
Performance of Obligations under Loan Documents
|
462
|
|
Section 8.06
|
Operation and Maintenance of Properties
|
462
|
|
Section 8.07
|
Insurance
|
462
|
|
Section 8.08
|
Books and Records; Inspection Rights
|
463
|
|
Section 8.09
|
Compliance with Laws
|
463
|
|
Section 8.10
|
Environmental Matters
|
463
|
|
Section 8.11
|
Further Assurances
|
464
|
|
Section 8.12
|
Reserve Reports
|
465
|
|
Section 8.13
|
Title Information
|
465
|
|
Section 8.14
|
Additional Collateral; Additional Guarantors
|
466 | |
Section 8.15
|
ERISA Compliance
|
466 | |
Section 8.16
|
[Reserved]
|
467 | |
Section 8.17
|
[Reserved]
|
467
|
|
Section 8.18
|
Use of Proceeds
|
467
|
|
Section 8.19
|
[Reserved]
|
467
|
|
Section 8.20
|
[Reserved]
|
467
|
|
Section 8.21
|
Affirmative Covenants of the Parent Guarantors
|
467
|
|
Section 8.22
|
[Reserved]
|
467
|
|
Section 8.23
|
Delivery of Proposed DIP Orders
|
467
|
|
Section 8.24
|
Cash Management
|
468 |
Page
|
|||
ARTICLE IX NEGATIVE COVENANTS
|
468 | ||
|
|||
Section 9.01
|
Financial Covenants
|
468 | |
Section 9.02
|
Debt
|
468 | |
Section 9.03
|
Liens
|
469
|
|
Section 9.04
|
Dividends, Distributions and Redemptions
|
470
|
|
Section 9.05
|
Investments, Loans and Advances
|
470
|
|
Section 9.06
|
Nature of Business
|
471 | |
Section 9.07
|
[Reserved]
|
471
|
|
Section 9.08
|
Proceeds of Loans; OFAC
|
472
|
|
Section 9.09
|
ERISA Compliance
|
472
|
|
Section 9.10
|
Sale or Discount of Receivables
|
473
|
|
Section 9.11
|
Mergers, Divisions, Etc.
|
473
|
|
Section 9.12
|
Sale of Properties
|
473
|
|
Section 9.13
|
Environmental Matters
|
474
|
|
Section 9.14
|
Transactions with Affiliates
|
474
|
|
Section 9.15
|
Subsidiaries
|
474
|
|
Section 9.16
|
Negative Pledge Agreements; Dividend Restrictions
|
474
|
|
Section 9.17
|
Gas Imbalances, Take-or-Pay or Other Prepayments
|
474
|
|
Section 9.18
|
Swap Agreements
|
475
|
|
Section 9.19
|
Marketing Activities
|
475
|
|
Section 9.20
|
Accounting Changes
|
475
|
|
Section 9.21
|
New Accounts
|
475
|
|
Section 9.22
|
Volumetric Production Payment
|
476
|
|
Section 9.23
|
Passive Holding Company Status of Parent Guarantors
|
476
|
|
Section 9.24
|
Negative Covenants of the Parent Guarantors
|
476
|
|
Section 9.25
|
Key Employee Plans
|
476 | |
Section 9.26
|
[Reserved]
|
476
|
|
Section 9.27
|
Superpriority Claims
|
476 | |
Section 9.28
|
Bankruptcy Orders
|
476
|
|
|
|||
ARTICLE X EVENTS OF DEFAULT; REMEDIES
|
477 | ||
|
|||
Section 10.01
|
Events of Default
|
477
|
|
Section 10.02
|
Remedies
|
480
|
Page
|
|||
Section 10.03
|
Disposition of Proceeds
|
481
|
|
|
|||
ARTICLE XI THE AGENTS
|
482
|
||
|
|||
Section 11.01
|
Appointment; Powers
|
482 | |
Section 11.02
|
Duties and Obligations of Agent
|
482
|
|
Section 11.03
|
Action by Agent
|
483
|
|
Section 11.04
|
Reliance by Agent
|
483 | |
Section 11.05
|
Subagents
|
483
|
|
Section 11.06
|
Resignation or Removal of Agent
|
484
|
|
Section 11.07
|
Agent and Lenders
|
484
|
|
Section 11.08
|
No Reliance
|
484
|
|
Section 11.09
|
Agent May File Proofs of Claim
|
485
|
|
Section 11.10
|
Authority of Agent to Release Collateral and Liens
|
485
|
|
Section 11.11
|
Secured Cash Management Agreements
|
486
|
|
Section 11.12
|
The Arranger
|
486
|
|
|
|||
ARTICLE XII MISCELLANEOUS
|
486 | ||
|
|||
Section 12.01
|
Notices
|
486 | |
Section 12.02
|
Waivers; Amendments
|
487
|
|
Section 12.03
|
Expenses, Indemnity; Damage Waiver
|
489
|
|
Section 12.04
|
Successors and Assigns
|
495 | |
Section 12.05
|
Survival; Revival; Reinstatement
|
495
|
|
Section 12.06
|
Counterparts; Integration; Effectiveness
|
495
|
|
Section 12.07
|
Severability
|
496
|
|
Section 12.08
|
Right of Setoff
|
496 | |
Section 12.09
|
GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS
|
496
|
|
Section 12.10
|
Headings
|
498
|
|
Section 12.11
|
Confidentiality
|
498
|
|
Section 12.12
|
Interest Rate Limitation
|
499
|
|
Section 12.13
|
EXCULPATION PROVISIONS
|
499 | |
Section 12.14
|
Collateral Matters; Secured Swap Agreements; Secured Cash Management Agreements
|
500
|
|
Section 12.15
|
No Third Party Beneficiaries
|
500
|
Page
|
|||
Section 12.16
|
USA PATRIOT Act Notice
|
500 | |
Section 12.17
|
Non-Fiduciary Status
|
501
|
|
Section 12.18
|
Cashless Settlement
|
501
|
|
Section 12.19
|
Joinder of Subsidiaries
|
501
|
|
Section 12.20
|
[Reserved]
|
501
|
|
Section 12.21
|
[Reserved]
|
501
|
|
Section 12.22
|
Acknowledgement and Consent to Bail-In of EEA Financial Institutions
|
501
|
|
Section 12.23
|
Acknowledgement Regarding Any Supported QFCs
|
502
|
|
|
|||
ARTICLE XIII LOAN GUARANTEE
|
503
|
||
|
|||
Section 13.01
|
Guarantee
|
503
|
|
Section 13.02
|
Guarantee of Payment
|
504
|
|
Section 13.03
|
No Discharge or Diminishment of Loan Guarantee
|
504
|
|
Section 13.04
|
Defenses Waived
|
505 | |
Section 13.05
|
Rights of Subrogation
|
505
|
|
Section 13.06
|
Reinstatement; Stay of Acceleration
|
505
|
|
Section 13.07
|
Information
|
505
|
|
Section 13.08
|
Taxes
|
506
|
|
Section 13.09
|
Maximum Liability
|
506
|
|
Section 13.10
|
Contribution
|
506
|
|
Section 13.11
|
Representations and Warranties
|
507
|
|
Section 13.12
|
Subordination of Indebtedness
|
507
|
|
Section 13.13
|
Other Terms
|
509
|
Page
|
|
Schedule 1.01
|
Existing Letters of Credit
|
Schedule 7.05
|
Litigation
|
Schedule 7.14
|
Subsidiaries
|
Schedule 7.15
|
Location of Businesses
|
Schedule 7.18
|
Gas Imbalances
|
Schedule 7.19
|
Marketing Contracts
|
Schedule 7.20
|
Swap Agreements
|
Schedule 7.25
|
Accounts
|
Schedule 9.02(e)
|
Existing Debt
|
Schedule 9.02(f)
|
Debt Related to Oil and Gas Operations
|
Schedule 9.03(d)
|
Liens on Property
|
Schedule 9.05(a)
|
Investments
|
Schedule 13.11
|
Guarantor Corporate Information
|
BORROWER:
|
LEGACY RESERVES LP, as a debtor and debtor-in-possession
|
|
By:
|
Legacy Reserves GP, LLC, its general partner
|
|
By:
|
Legacy Reserves Inc., its sole member
|
|
By:
|
||
Name: James Daniel Westcott
|
||
Title: Chief Executive Officer
|
LEGACY RESERVES INC.
|
||
LEGACY RESERVES ENERGY SERVICES LLC
|
||
DEW GATHERING LLC
|
||
PINNACLE GAS TREATING LLC
|
||
LEGACY RESERVES GP, LLC
|
||
LEGACY RESERVES SERVICES LLC
|
||
LEGACY RESERVES FINANCE CORPORATION
|
||
LEGACY RESERVES MARKETING LLC, each as a debtor and debtor-in-possession
|
||
By:
|
||
Name: James Daniel Westcott
|
||
Title: Chief Executive Officer
|
ADMINISTRATIVE AGENT:
|
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Agent and a Lender
|
|
By:
|
||
Name: Brett Steele
|
||
Title: Director
|
LENDERS:
|
[_________________________]
|
|
By:
|
||
[Name]
|
||
[Title]
|
§
|
|||
In re:
|
§
|
Chapter 11
|
|
§
|
|||
LEGACY RESERVES INC.,
et al.
,
1
|
§
|
Case No. 19-_____ (__)
|
|
§
|
|||
|
Debtors.
|
§
|
Jointly Administered
|
§
|
[●]
|
|
UNITED STATES BANKRUPTCY JUDGE
|
Name of Lender
|
Applicable
Percentage
|
New Money DIP Loan
Commitment
|
|
1.
|
|||
2.
|
|||
3.
|
|||
4.
|
|||
5.
|
|||
6.
|
|||
7.
|
|||
8.
|
|
Company
Capital
Structure:
|
|
The Plan of Reorganization contemplates a minimum initial equity value of $[TBD] million, which for purposes hereof will consist
of [TBD]
1
million shares (“
Initial Share Count
”) at $10 per share; such equity value and Initial Share Count would be adjusted
based on the amount of new equity funded on Emergence.
|
|
Incentive
Compensation:
|
|
There will be reserved, exclusively for Employees, a pool of equity (such reserve, the “
MIP Pool
”) having a value equal to:
(i)
5.0% of the
Initial Share Count granted as soon as administratively practicable (but in no event more than 60 days following Emergence) in accordance with this Term Sheet (the “
Emergence Awards
”) in the following form: (A) 2.5%
of the Initial Share Count in Restricted Stock Units (“
RSUs
”), and (B) 2.5% of the Initial Share Count in stock options with a strike price of $10.00 per share (“
Options
”);
(ii)
5.0% of the
Initial Share Count will be reserved for potential future issuance as determined by the new board of directors.
2
Notwithstanding the foregoing, unless otherwise approved by the Plan Sponsor, for purposes of the MIP Pool, the Initial Share Count will not include
any: i) shares issued in excess of [70] million shares (i.e. for shares issued in respect of equity capitalization in excess of $[700] million) or ii) shares issued to Plan Sponsor in respect of its new money funding in excess
of 20 million shares (i.e. for shares issued to Plan Sponsor in excess of $200 million funded).
|
|
Vesting:
|
|
Normal Vesting
. Subject to an Employee’s continued employment through each applicable vesting date, Emergence Awards will vest 25% on each of
the first four (4) anniversaries of the Emergence Date.
RSUs will be settled as soon as practicable following vesting.
Accelerated Vesting Prior to a Change in Control
. If the Employee is terminated by the Company without Cause, by the Employee for Good
Reason or due to death or Disability, and such termination occurs outside of the Change in Control period described below, the Employee will become vested in the Emergence Awards that would have vested if the Employee’s
employment had continued for an additional 12 months.
|
|
|
Accelerated Vesting Upon a Change in Control
. Upon a Change in Control (as will be defined in the applicable equity plan and excluding any
acquisition of the Company by Plan Sponsor and any of its affiliates) following which the Employee is terminated by the Company without Cause or by the Employee for Good Reason within 24 months following the Change in Control,
100% of an Employee’s unvested Emergence Awards will accelerate and vest.
The definitions of “Cause,” “Without Cause,” “Good Reason” and “Disability” will be on customary terms for similar management arrangements.
|
|
|
Forfeiture:
|
|
100% of any unvested Options or unvested RSUs (determined after giving effect to any accelerated vesting set forth above) will be forfeited for no
consideration upon any termination of employment and, subject to the next sentence, the Employee will be entitled to retain any vested Options that are not yet exercised or any vested RSUs that are not yet settled, and any
shares previously received upon exercise of Options or settlement of RSUs, subject to the exercise of the repurchase rights (discussed below). All Options, whether or not vested, will be forfeited for no consideration upon a
termination for Cause.
|
|
Other Terms:
|
|
The option grants will be subject to customary adjustments with regard to any extraordinary dividends paid. The Options will expire on the earlier
of (a) the tenth (10
th
) anniversary of the Emergence Date or (b) 180 days following the Employee’s termination of employment (other than for
Cause) or one year following his or her Death or Disability. Unvested RSUs will be entitled to dividends on a pro rata basis with outstanding shares and such dividend payments will be retained and will be subject to vesting
provisions set forth above.
Upon the exercise of an Option or the settlement of RSUs, Employees may elect to pay the exercise price and tax withholding through the withholding
of shares by the Company.
If the Company is not publicly traded on a national securities exchange or over the counter market, the Company will agree to provide fair market
valuations to facilitate the exercise of Options.
|
|
Executive
Investments:
|
|
The Executives will have the opportunity to invest in the common stock in a manner to be agreed by the Executives, the Company and Plan Sponsor.
|
|
Employment
Agreements:
|
|
The Company will enter into amended and restated employment agreements with Executives on the same terms as set forth in the existing agreements,
subject to conforming changes associated with this MIP and Change in Control definitions. For the avoidance of doubt, the reorganization of the Company will not constitute a Change in Control under the applicable employment
agreements.
|
Parent:
|
TBD
|
Borrower:
|
Legacy Reserves Inc., a Delaware corporation (the “
Borrower
”), as reorganized pursuant to the Plan and Confirmation Order
.
|
Guarantors:
|
The obligations of (a) the Borrower under the Facilities, (b) any Loan Party under any hedging agreements entered into between such Loan Party and
any counterparty that is a Lender (as defined below) (or any affiliate thereof), and (c) any Loan Party under any cash management arrangements between such Loan Party and a Lender (or any affiliate thereof) (such obligations,
collectively, the “
Obligations
”) will be unconditionally guaranteed, on a joint and several basis, by each other Loan Party (other than, with respect to obligations under clause (a), the Borrower) and each other
wholly-owned direct or indirect subsidiary of the Borrower (as reorganized through the Plan and Confirmation Order) other than Unrestricted Subsidiaries (as defined below) (collectively, such subsidiaries the “
Restricted
Subsidiaries
” or the “
Guarantors
” and, collectively with the Borrower, the “
Loan Parties
”; and such guarantee being referred to as the “
Guarantee
”). All Guarantees shall be guarantees of payment and
not of collection.
|
(a)
RBL Exit Facility
. Pursuant to the Plan, and subject to adjustment for Non-Electing Lenders (as defined and described below) and as
part of the treatment of their Obligations under the Plan, each Existing Lender that is a holder of Existing Loans and elects to become an RBL Lender and each DIP Lender under the DIP Credit Agreement with Refinanced Loans
that have not been paid in cash on the Plan Effective Date (each, an “
Electing Lender
”) shall become revolving lenders (collectively, the “
RBL Lenders
”) on the Plan Effective Date by agreeing to provide a lending
commitment in respect of a senior secured first lien reserve-based revolving credit facility (each such RBL Lender’s commitment, as reduced from time to time in accordance with the terms hereof, its “
Revolving Commitment
”
and such revolving facility, the “
RBL Exit Facility
” and the loans under such RBL Exit Facility, the “
Revolving Loans
”) in an amount equal to such RBL Lender’s pro rata share of an aggregate $500 million (the
aggregate revolving commitments for all RBL Lenders, as reduced from time to time in accordance with the terms hereof, the “
Maximum Revolving Commitments
”), $455 million of which shall be deemed funded (the “
Funded
Revolving Loans
”) on the Plan Effective Date and the balance of $45 million (the “
Initial Availability Amount
”) shall be immediately available in accordance with the terms hereof (subject to adjustment and
approval as provided in Annex A hereto), after giving effect to the transactions contemplated hereby and under the Plan. Each RBL Lender shall also receive, as part of the treatment of its Obligations under the Plan, a pro
rata share of cash in an amount equal to the Initial Availability Amount on the Plan Effective Date (in addition to, and not in lieu of, any other cash payments provided in the Plan). In accordance with the Plan, the RBL Exit
Facility shall be secured
pari passu
with, but senior in payment priority to the New Term Loan Facility (as defined below).
The Maximum Revolving Commitments, the Borrowing Base (as defined below) and the Funded Revolving Loans (but not the Initial Availability Amount)
are subject to proportionate reduction in the event less than 100% of the Existing Lenders elect to become RBL Lenders. For the avoidance of doubt, the aggregate outstanding Maximum Revolving Commitments and New Term Loans
shall not exceed $500 million on the Plan Effective Date.
(b)
New Term Loan Facility
. A first lien term loan facility in an aggregate principal amount equal to $[__] million (the “
New Term Loan
Facility
,” the loans thereunder, the “
New Term Loans
” and the lenders thereunder, the “
New Term Loan Lenders
”). Pursuant to the Plan, each Existing Lender that is a holder of Existing Loans and declines to
participate in the RBL Exit Facility (collectively, the “
Non-Electing Lenders
”), as part of the treatment of their obligations under the Plan, shall become New Term Loan Lenders on the Plan Effective Date in respect of
New Term Loans deemed made by such New Term Loan Lenders on the Plan Effective Date as “take-back” paper (or similar) in an amount equal to such New Term Loan Lender’s pro rata share of the amount of the New Term Loan
Facility. The New Term Loan Facility shall be secured
pari passu
with the other Obligations on a “last-out” basis with respect to the payment priority.
Without limiting the payment priority set forth in the mandatory and optional prepayment provisions below, all proceeds of Collateral (as defined
below) after the occurrence and during the continuance of an Event of Default shall be allocated
first
, pro rata to pay (i) all amounts outstanding under the RBL Exit Facility
(including, without limitation, interest, principal, fees and cash-collateralization of Letters of Credit (as defined below)), (ii) hedging agreements constituting Obligations and (iii) cash management obligations constituting
Obligations and
second
, to pay amounts outstanding under the New Term Loan Facility.
|
Letter of Credit
Sublimit:
|
The RBL Exit Facility will include a sub-facility for standby letters of credit (each, a “
Letter of Credit
”) in the aggregate principal amount not to exceed $5 million.
|
Amortization:
|
There shall be no amortization of the Revolving Loans or the New Term Loans.
|
Borrowing Base and
Borrowing Base
Redetermination:
|
Availability under the RBL Exit Facility shall be subject to a borrowing base (the “
Borrowing Base
”), which shall be initially determined and periodically redetermined in a customary manner (and, for the avoidance
of doubt, giving effect to hedging agreements constituting Obligations) (each such redetermination, a “
Borrowing Base Redetermination
”) and as set forth below.
Initial Borrowing Base
. On the Plan Effective Date, the initial Borrowing Base shall be $500 million. Thereafter, until the First Scheduled Redetermination Date (as defined below), the Borrowing Base shall be the
amount during the corresponding period as set forth in the table below:
|
|
|
Date
|
Borrowing Base
|
||
February 1, 2020 – February 29, 2020
|
$494 million
|
||
March 1, 2020 – March 31, 2020
|
$488 million
|
||
April 1, 2020 – April 30, 2020
|
$482 million
|
||
May 1, 2020 – May 31, 2020
|
$476 million
|
||
June 1, 2020
|
$470 million (subject to redetermination)
|
|
|
Scheduled Borrowing Base Redeterminations
. The first Scheduled Borrowing Base Redetermination shall occur on June 1, 2020 (the “
First Scheduled Redetermination Date
”) and on each April 1 and October 1
thereafter, commencing on October 1, 2020.
|
|
Interim Borrowing Base Redeterminations
. Interim Borrowing Base Redeterminations may be implemented after the First Scheduled Redetermination Date (a) upon the request of the Administrative Agent or the Majority
Lenders (each, a “
Lender Redetermination
”), or (b) upon the request of the Borrower (each, a “
Borrower Redetermination
” and, together with Lender Redeterminations, collectively the “
Interim Redeterminations
”);
provided
that there shall be no more than one Lender Redetermination and one Borrower Redetermination between each Scheduled Borrowing Base Redeterminations.
|
|
Borrowing Base Deficiency
. If, at any time, the sum of total outstanding balance of the Revolving Loans and other revolving credit exposure
plus
the New Term Loans is greater than the then-effective
Borrowing Base (such excess, a “
Borrowing Base Deficiency
”) as a result of a Borrowing Base Redetermination, an Interim Redetermination, or the adjustment in the Borrowing Base described below, the Borrower shall,
within 120 days after the later of (i) notice of such Borrowing Base Deficiency or (ii) the date of such adjustment, repay the Borrowing Base Deficiency in a single lump sum for application to the Revolving Loans and other
revolving credit exposure until there are no outstanding Revolving Loans and Revolving Commitments, and then to the New Term Loans;
provided
that such payment shall be made before the Revolving Loan Maturity Date or
New Term Loan Maturity Date, as applicable, together with the interest accrued thereunder.
|
Borrowing Base
Reductions:
|
Sale or Disposition Reduction
. Any sale or disposition of any Oil and Gas Properties (as defined in the Existing Credit Agreement), including the net effect of early terminations of hedges, the Borrowing Base
value (as determined in good faith by the Administrative Agent) of which exceeds five percent (5%) of the then applicable Borrowing Base, shall result in a redetermination of the Borrowing Base on a pro forma basis after
giving effect to such sale, disposition or early termination. Any such redetermination shall not constitute, and shall be in addition to, any Interim Redetermination which the Majority Lenders may otherwise elect.
|
Issuance or Refinancing Reduction
. The Borrowing Base will also be automatically reduced by 25% (or a lower percentage approved by the
Required Lenders) of each of (i) the stated principal amount of any permitted senior note issuance (without regard to any OID) or (ii) the excess of the stated principal amount from the original principal amount of any
permitted refinancing debt.
|
|
Closing Date:
|
The Plan Effective Date (the “
Closing Date
”). For the avoidance of doubt, conditions to effectiveness of the RBL Exit Facility shall include the following: (x) the conditions under the headings “
Conditions to Closing
” and “
Conditions to All Extensions of Credit
” below; and (y) entry of an order by the Bankruptcy Court confirming the Plan,
which shall be in form and substance reasonably satisfactory to the Administrative Agent (the “
Confirmation Order
”).
|
Use of Proceeds:
|
The proceeds of the Revolving Loans and other extensions of credit made from time to time under the RBL Exit Facility shall be used to refinance, in part, the Existing Loans and to fund ongoing working capital
requirements and other general corporate purposes of the Borrower and the other Loan Parties. The proceeds of the New Term Loans shall be used to refinance, in part, the Existing Loans.
|
Definitive
Documentation;
Documentation
Principles:
|
The Facilities will be documented on loan documents that are based on the Existing Credit Agreement;
provided
that (i) such documentation shall contain the terms and conditions (a) set forth in this Term Sheet and
(b) as may be mutually agreed by the Borrower and the Administrative Agent, and (ii) in the event that the New Term Loan Facility shall be documented in a separate credit facility, (a) such documentation shall be on terms no
more restrictive than those of the RBL Exit Facility and (b) subject to a collateral agency agreement whereby the Collateral Agent is appointed to act as secured party and hold collateral for the benefit of all Facilities
(and the principles described therein, the “
Documentation Principles
”).
|
Collateral:
|
The Obligations will be secured by valid and perfected first-priority security interests in and liens on all of the following (collectively, the “
Collateral
”):
|
(a) 100% of the equity interests of all present and future Restricted Subsidiaries of any Loan Party (other than equity interests of non-wholly owned Restricted Subsidiaries to the extent a lien in favor of the Collateral
Agent cannot be granted without the consent of one or more third parties (other than the Parent, its Restricted Subsidiaries and their respective affiliates));
|
|
(b) substantially all of the tangible and intangible personal property and assets of the Loan Parties (including, without limitation, all equipment, inventory and other goods, accounts, licenses, contracts, intercompany
loans, intellectual property and other general intangibles, deposit accounts, securities accounts and other investment property and cash); and
|
|
(c) Oil and Gas Properties representing at least 95% of the total value of all Oil and Gas Properties of the Loan Parties included in the most recent reserve report, in each case, subject to customary exceptions to be
agreed.
|
|
All such security interests in personal property and all liens on Oil and Gas Properties and other real property will be created pursuant to the Definitive Documentation and otherwise subject to the Documentation
Principles.
|
|
Interest Rates:
|
At the Borrower’s option, the Revolving Loans will bear interest based on the Base Rate or LIBOR,
plus
the applicable Revolving Interest Margin (as defined below).
|
The interest margin for Revolving Loans (the “
Revolving Interest Margin
”) shall be based upon utilization of the Borrowing Base (expressed as a percentage of outstanding loans and Letters of Credit under the RBL
Exit Facility divided by the Borrowing Base) according to the following grid:
|
|
(a) in the case of the RBL Exit Facility, based upon utilization of the Borrowing Base (expressed as a percentage of outstanding Revolving Loans and Letters of Credit under the RBL Exit Facility divided by the Borrowing
Base) an interest margin according to the following grid:
|
|
|
|
Utilization
|
Revolving Interest Margin
|
Commitment
Fee
|
||
Base Rate
|
LIBOR
|
|||
≥ 90%
|
300 bps
|
400 bps
|
50.0 bps
|
|
< 90% but ≥ 75%
|
275 bps
|
375 bps
|
50.0 bps
|
|
< 75% but ≥ 50%
|
225 bps
|
325 bps
|
50.0 bps
|
|
< 50% but ≥ 25%
|
175 bps
|
275 bps
|
37.5 bps
|
|
< 25%
|
150 bps
|
250 bps
|
37.5 bps
|
|
|
(b) the New Term Loans will bear interest based on LIBOR, plus 200 bps.
“Base Rate” means the highest of (a) the rate of interest publicly announced by Wells Fargo as its prime rate in effect at its principal office in
New York City, (b) the NYFRB Rate (defined as the greater of the federal funds effective rate and the overnight bank funding rate) from time to time (but not less than zero) plus 0.5% and (c) the one-month LIBO Rate plus
1.00%.
|
“LIBOR” means the rate (but not less than zero) at which eurodollar deposits in the London interbank market for one, two, three or six months (or, with the consent of each RBL Lender, twelve months), as selected by the
Borrower, are quoted on the applicable Reuters screen. The Definitive Documentation will contain customary language that provides for the replacement of LIBOR with an alternate rate of interest.
|
|
Default Rate:
|
At any time an event of default has occurred and is continuing (i) all outstanding Base Rate Loans and LIBOR Loans under the Facilities shall bear interest at 2.00% per annum above the rate applicable to Base Rate Loans
or LIBOR Loans, as applicable, and (ii) all other outstanding, overdue amounts under the Facilities shall bear interest at 2.00% per annum above the rate applicable to Base Rate Loans.
|
Fees:
|
(a)
Commitment Fee
.
The Borrower shall pay to the Administrative
Agent, for the account of the RBL Lenders, a commitment fee (the “
Commitment Fee
”) in an
amount per annum equal to the rate set forth in the preceding grid on the average daily unused
portion of the Maximum Revolving Commitments, payable quarterly in arrears.
All accrued Commitment Fees will be fully earned and due and payable
quarterly
in arrears for the account of
the RBL Lenders (other than any defaulting lenders) under the RBL Exit Facility and will accrue from and after the Closing Date.
(b)
Upfront Fees
. The Borrower shall pay to Wells Fargo, for the pro rata account of each of the RBL Lenders as provided herein, upfront
fees as follows: (i) for each RBL Lender that executes the Restructuring Support Agreement prior to entry of the Final DIP Order (as defined in the DIP Credit Agreement), an aggregate amount equal to 15 bps of the aggregate
amount of the RBL Exit Facility, which shall be fully earned and will be due and payable in full in cash on the date of entry of the Final DIP Order, and (ii) an aggregate amount equal to 40 bps of the aggregate amount of the
RBL Exit Facility, which shall be fully earned and will be due and payable in full in cash to each RBL Lender under the RBL Exit Facility on the Closing Date (the “
Upfront Fees
”).
(c)
Letter of Credit Fees
. The Borrower shall pay to the Administrative Agent for the account of the RBL Lenders a Letter of Credit fee
(due quarterly) equal to the product of the LIBOR Margin and the undrawn amount of each Letter of Credit. In addition, Borrower shall pay to the Administrative Agent for the account of any Issuing Bank a fronting fee equal to
the product of 0.50% and the undrawn amount of each Letter of Credit;
provided
that each such fee shall be no less than $500.
(d)
Other Fees
. Such other fees set forth in any fee letter (or similar) between the Administrative Agent, Collateral Agent and/or Lead
Arranger and the Borrower.
|
Maturity Date:
|
(a)
RBL Exit Facility
. The final maturity of the RBL Exit Facility will occur on the two year anniversary of the Closing Date (the “
RBL
Exit Maturity Date
”).
(b)
New Term Loan Facility
. The final maturity of the New Term Loan Facility will occur on the 42 month anniversary of the Closing Date
(the “
New Term Loan Maturity Date
”).
|
Mandatory
Prepayments (RBL
Exit Facility):
|
(a)
Borrowing Base Deficiency
. The Borrower shall prepay any Borrowing Base Deficiency as provided in the paragraph titled “
Borrowing Base Deficiency
” in the “
Borrowing Base and Borrowing Base Redetermination
” section.
(b)
Excess Revolving Credit Exposure
. If, at any time, the revolving credit exposure exceeds the total Revolving Commitments as a result
of any reduction or termination of Revolving Commitments, the Borrower shall make a prepayment in an amount no less than such excess.
(c)
Adjustment of Borrowing Base
. If there is any adjustment to the Borrowing Base that results in the revolving credit exposure exceeding
the total Revolving Commitments, including in connection with any permitted note issuance or permitted refinancing debt (see
Borrowing Base Reductions
–
Issuance or Refinancing Reduction
) the Borrower shall make a prepayment in an amount no less than such excess.
(d)
Asset Sales or Disposition
. If any Loan Party sells or disposes of any Oil and Gas Property (other than in the ordinary course of
business) while a Borrowing Base Deficiency or an Event of Default exists, the Borrower or such other Loan Party shall promptly make a prepayment in an amount equal to the (i) in the case of a Borrowing Base Deficiency, the
amount of net proceeds from such sale so that no Borrowing Base Deficiency exists, or (ii) if there is an Event of Default, all net proceeds of such sale, in each case no later than the next succeeding Business Day after the
net cash proceeds therefor are received by such Loan Party.
(e)
Consolidated Cash Balance
. If, as of the end of any Business Day, the Consolidated Cash Balance of the Loan Parties exceeds $20
million, the Loan Parties shall, within one Business Day thereof, pay such amounts to be applied in accordance with the terms hereof.
All mandatory prepayments will be applied to prepay outstanding Revolving Loans (without a permanent reduction to the Maximum Revolving
Commitments), including any accrued and unpaid interest of such Revolving Loans being prepaid, and, in the case of clauses (a) through (d) above, to cash-collateralize Letters of Credit outstanding under the RBL Exit Facility.
|
Mandatory
Prepayments (New
Term Loan Facility):
|
None, while Revolving Commitments remain outstanding.
|
Optional
Prepayments and
Commitment
Reductions (RBL
Exit Facility):
|
Revolving Loans under the RBL Exit Facility may be prepaid at any time, in whole or in part, at the option of the Borrower, upon notice to the
Administrative Agent and in minimum principal amounts and in multiples to be agreed upon with the Administrative Agent, without premium or penalty (except LIBOR breakage costs). Any optional prepayment of the RBL Exit
Facility will be applied to prepay outstanding Revolving Loans and cash-collateralize Letters of Credit outstanding under the RBL Exit Facility (except as otherwise set forth herein, without a permanent reduction in Maximum
Revolving Commitments unless so elected by the Loan Parties).
The unutilized portion of the Maximum Revolving Commitments may be terminated, in whole or in part, at the option of the Borrower, upon notice to
the Administrative Agent and in minimum principal amounts and in multiples to be agreed upon with the Administrative Agent.
|
Optional
Prepayments (New
Term Loan Facility):
|
The New Term Loans may be prepaid, in whole or in part, at the option of the Borrower, upon prior notice and in minimum principal amounts and in multiples to be agreed upon, without premium or penalty (except LIBOR
breakage costs), to the extent such prepayments are permitted by the Definitive Documentation;
provided
that the RBL Exit Facility shall have been indefeasibly repaid in full and all Revolving Commitments thereunder
have terminated prior to such prepayment.
|
Conditions to
Closing:
|
See
Annex A
.
|
Conditions to All
Extensions of Credit:
|
Each extension of credit under the Facilities will be subject to satisfaction of the following: (a) all of the representations, warranties, and covenants in the Definitive Documentation shall be true and correct in all
material respects (or if qualified by materiality or material adverse effect, in all respects) as of the date of such extension of credit, or if such representation speaks as of an earlier date, as of such earlier date; (b)
no default or event of default under the Facilities shall have occurred and be continuing or would result from such extension of credit; (c) delivery of a customary borrowing notice; and (d) the Loan Parties shall be in
compliance with the Consolidated Cash Balance limitation, both before and after giving effect to such extension of credit.
|
Cash Management:
|
The Loan Parties shall maintain their cash management system as it existed prior to the Closing Date, with such changes as may be mutually agreed by the Administrative Agent and the Borrower. Each Loan Party will make
all such Loan Party’s deposit accounts subject to an account control agreement other than Excluded Accounts (as defined below) (such deposit accounts, collectively, “
Controlled Accounts
”). Each Controlled Account
shall be subject to a control agreement, in form and substance satisfactory to the Administrative Agent, which agreement shall transfer control of such account to the Collateral Agent upon delivery of notice by the
Collateral Agent to the financial institution maintaining such account.
|
(b) limitation on disposition of assets, other than (i) customary ordinary course dispositions for the energy industry, (ii) any asset sale
consisting of Oil and Gas Properties (including the net unwinding of hedging transactions), subject to the Borrowing Base redetermination right described in the paragraph titled
Borrowing
Base Reductions
if the Borrowing Base value of such Oil and Gas Properties (as determined in good faith by the Administrative Agent) exceeds 5% of the Borrowing Base, and (iii) other asset sales up to $10 million;
provided
that any asset sale permitted hereunder shall be made for (1) fair value and (2) at least 75% cash consideration;
(c) limitation on consolidations, mergers dissolutions and divisions;
(d) subject to customary permitted investments, limitation on loans, investments and acquisitions of property, other than (i) investments in
partnerships up to $5 million, (ii) investments in Unrestricted Subsidiaries up to $5 million, subject to minimum liquidity (unrestricted cash and availability under the RBL Exit Facility) of at least 15% of the Borrowing
Base, (iii) other investments up to $10 million, and (iv) other investments subject to pro forma liquidity (unrestricted cash and availability under the RBL Exit Facility) of at least 15% of the Borrowing Base and pro-forma
Total Leverage Ratio does not exceed 2.75 to 1.00, subject to cash netting up to $20 million;
(e) limitations on indebtedness, including exceptions for (i) capital leases or purchase money indebtedness up to the greater of $30 million and
1.00% of CTA, (ii) unsecured indebtedness up to $400 million, subject to a 25% dollar-for-dollar reduction in the Borrowing Base and pro forma compliance with Financial Covenants, (iii) acquisition indebtedness up to the
greater of $30 million and 1.00% of CTA, (iv) subordinated secured or junior lien indebtedness up to $50 million, subject to a 25% dollar-for-dollar reduction in the Borrowing Base and pro forma compliance with Financial
Covenants (the indebtedness described in this clause (iv) and clause (ii) above, the “
Specified Additional Debt
”), (v) earn-out indebtedness up to $15 million, and (vi) any other indebtedness up to the greater of $30
million and 1.00% of CTA;
(f) limitations on transactions with affiliates;
(g) limitations on margin stock;
(h) limitations on contingent obligations;
(i) limitations on restricted debt payments (including prohibition against any redemption of Specified Additional Debt during the term of the RBL
Exit Facility);
(j) limitations on restricted payments (including any dividends during the term of the RBL Exit Facility) other than (i) permitted tax
distributions, (ii) restricted payments under management or employee stock plans not to exceed $5 million in any fiscal year and (iii) for general corporate purposes not to exceed $1 million in any fiscal year;
(k) limitations on derivative contracts (as set forth in greater detail below);
|
|
(l) limitations on change in business nature, amendments to organization documents, documents governing material indebtedness and corporate
structure;
(m) limitations on accounting changes;
(n) ERISA compliance; and
(o) limitations on restrictions affecting the ability of Restricted Subsidiaries to guarantee the loans, grant liens securing the loans or make
distributions to the Borrower.
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Hedging
Requirements:
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All hedging agreements shall be entered into, on a secured basis, with a Lender (or an affiliate thereof), as the hedging counterparty, or on an unsecured basis with counterparties reasonably acceptable to the
Administrative Agent;
provided
that no Borrowing Base value shall be given to any such unsecured hedging agreements. The Loan Parties shall not enter into any hedging transaction which (i) extends more than twelve
(12) months after the RBL Exit Maturity Date, and (ii) together with all other hedging transactions, exceeds ninety-five percent (95%) of the Loan Parties’ PDP reserves, as set forth in the most recently delivered reserve
report. Other hedging requirements to be mutually agreed.
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Financial Covenants
(RBL Exit Facility):
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The RBL Exit Facility will contain the following financial covenants, calculated as of each fiscal quarter :
First Lien Leverage Ratio: First Lien Debt to EBITDA may not exceed 3.0 to 1.0 as of the last day of any fiscal quarter, subject to cash netting up
to $20 million. EBITDA shall be calculated at the end of each fiscal quarter using the results of the twelve month period ending with that fiscal quarter end.
Total Leverage Ratio: Total Debt to EBITDA for the four fiscal quarters then ending, to be greater than 3.75 to 1.00, subject to cash netting up to
$20 million.
Current Ratio: Consolidated Current Assets divided by Consolidated Current Liabilities may not be less than 1.0 to 1.0 on a fiscal quarter basis.
Maximum Capital Expenditures: If (i) the Total Leverage Ratio (subject to cash netting up to $20 million) for the four fiscal quarters most
recently ended is greater than 2.0 to 1.0 and (ii) liquidity (the sum of unrestricted cash and availability under the RBL Exit Facility) is less than $50 million, then the Borrower will not initiate any drilling or completion
activity of any wells or similar material Capital Expenditures during such fiscal quarter if the sum of (x) the aggregate amount of Capital Expenditures for the three fiscal quarters most recently ended plus (y) Capital
Expenditures to be made during such fiscal quarter would exceed $175 million.
Any reference to EBITDA in this Term Sheet shall include adjustments for among other things, extraordinary and non-recurring items including any
items related to the restructuring (i.e., retention payments, professional fees, etc.).
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Financial Covenants
(New Term Loan
Facility):
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The New Term Loan Facility will contain the following financial covenant, calculated on a quarterly basis:
Consolidated Total Leverage Ratio: Total Debt to EBITDA for the four fiscal quarters then ending, to be greater than 4.25 to 1.00, subject to cash
netting up to $20 million.
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Equity Cure Rights
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In the event the Borrower fails to comply with the requirements of the Financial Covenants, Parent will have the right to issue common equity
securities for cash or otherwise receive cash contributions to the capital of Parent (in each case, on terms reasonably satisfactory to the Administrative Agent) (any such equity issuance or contribution, a “
Specified
Equity Contribution
”), and contribute any such cash to the capital of the Borrower, and apply the amount of the proceeds thereof to increase on a dollar-for-dollar basis EBITDA (to be defined in a manner to be mutually
agreed) solely for purposes of determining compliance with Financial Covenants (including, for the avoidance of doubt, determining if Maximum Capital Expenditures is applicable) with respect to the then ended fiscal quarter
and any subsequent period that includes such fiscal quarter (the “
Cure Right
”);
provided
that (i) the Cure Right will not be exercised more than five (5) times during the term of the RBL Exit Facility, and
(ii) the Cure Right many not be exercised more than two (2) times in any four (4) consecutive fiscal quarters.
Any amounts used to exercise a Cure Right will be disregarded in calculating EBITDA for all other purposes, including calculation of basket levels
and other items governed by reference to EBITDA and will not result in any pro forma indebtedness reduction (other than the indebtedness under the RBL Exit Facility that is actually prepaid with such Cure Amount) or an
increase in cash.
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Events of Default:
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Subject to the Documentation Principles, substantially similar to the events of default in the Existing Credit Agreement, except as mutually agreed with the Administrative Agent and as otherwise set forth in this Term
Sheet, each subject to limitations and modifications as are customary for transactions of this type as mutually agreed (which will be applicable to the Loan Parties).
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Amendments and
Waivers:
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Amendments and waivers of the Definitive Documentation will require the approval of the Lenders holding more than 50% of the applicable Facility, except that the consent of (a) RBL Lenders holding more than 66-2/3% of the
Aggregate Commitments of the RBL Lenders shall be required to decrease or maintain the Borrowing Base (and such other matters consistent with the Existing Credit Agreement), (b) each Lender under the applicable Facility
shall be required in connection with (i) changing any provision specifying the number or percentage of Lenders required to amend or waive any Definitive Documentation in respect of the matters described in this
clause (b)
and
clause
(c)
below and (ii) releasing any guarantor (except in connection with a permitted transaction) or all or substantially all of the Collateral, and (c) each affected Lender shall be required in connection with (i) any
increase or extension of its commitment, (ii) the postponement of any scheduled date for payment of principal, interest, fees or other amount payable to such Lender, and (iii) any reduction in the principal amount of any
loan, interest rate, fee or other amount payable to such Lender.
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Assignments:
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Customary for facilities of this type.
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Expenses and
Indemnification:
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Subject to the Documentation Principles, customary for facilities of this type.
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Governing Law and
Forum:
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Texas
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Name of Transferor:
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Name of Transferee:
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By:
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Name:
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Title:
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Principal Amount of Term Loan Transferred: $
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Principal Amount of Revolving Loan Transferred: $
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Notice Address:
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Fax:
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Attention:
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With a copy to:
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Fax:
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Attention:
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