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Delaware
|
|
001-33756
|
|
80-0411494
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(State or other jurisdiction of
incorporation)
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(Commission File Number)
|
|
(IRS Employer Identification No.)
|
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VANGUARD NATURAL RESOURCES, INC.
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||||
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Dated: May 3, 2019
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By:
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/s/ R. Scott Sloan
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||
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Name:
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R. Scott Sloan
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||
|
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Title:
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President and Chief Executive Officer
|
Section 1.
|
Amendments to Credit Agreement
.
|
SECTION 4.
|
Conditions Precedent
. The effectiveness of this Agreement is subject to satisfaction of each of the following conditions precedent:
|
SECTION 5.
|
Representations and Warranties
. In order to induce the Administrative Agent, the Issuing Bank, the Existing Lender and the New Lenders to enter into this Agreement, the Borrower and the Guarantors party hereto hereby represent and warrant to the Administrative Agent, the Issuing Bank, the Existing Lender and the New Lenders that:
|
SECTION 6.
|
Miscellaneous
.
|
By:
|
Vanguard Natural Gas, LLC
its Sole Member |
By:
|
Vanguard Natural Gas, LLC
its Sole Member |
By:
|
EAGLE ROCK UPSTREAM DEVELOPMENT COMPANY, INC.,
its general partner |
By:
|
EAGLE ROCK UPSTREAM DEVELOPMENT COMPANY II, INC.,
its general partner |
*
|
This First Amendment to Debtor-in-Possession Credit Agreement (“Agreement”) applies only to the Credit Trading Group of JPMorgan Chase Bank, N.A. (“CTG”) and the New Money Loans and Commitments (collectively, the “Loans”) held by such group under the Credit Agreement (as defined in the Agreement). Accordingly, the terms “New Lender” and “Lender” for all purposes of the Agreement mean and refer only to CTG and such business unit's holdings of the Loans, “Claim”, “Claim/Interest”, “DIP Claims” and “Other Claims” (each term as defined in the Agreement). For the avoidance of doubt, this Agreement does not apply to (i) Loans, Claim, Claim/Interest, DIP Claims, Other Claims, securities, loans, claims, notes, other obligations or any other interests in the Borrower and any Loan Party that may be held, acquired or sold by, or any activities, services or businesses conducted or provided by, any other group or business unit within, or affiliate of, JPMorgan Chase Bank, N.A., (ii) any credit facilities to which JPMorgan Chase & Co. or any of its affiliates (“Morgan”) other than JPMorgan Chase Bank, N.A. is a party in effect as of the date hereof, (iii) any new class of loans or notes, amendment to an existing class of loans or notes, forbearance agreement to an existing class of loans or notes ( other than this Agreement), or debt or equity securities offering involving Morgan, (iv) any direct or indirect principal activities undertaken by any Morgan entity engaged in the venture capital, private equity or mezzanine businesses, or portfolio companies in which they have investments, (v) any ordinary course sales and trading activity undertaken by employees who are not a member of CTG, (vi) any Morgan entity or business engaged in providing private banking or investment management services, or (vii) any Loans, Claim, Claim/Interest, DIP Claims, and Other Claims that may be beneficially owned by non-affiliated clients of JPMorgan Chase Bank, N.A. or any of its affiliates.
|
By:
|
BDCM Strategic Capital Fund I Adviser, L.L.C.
|
By:
|
/s/ Stephen H. Deckoff
|
Name:
|
Stephen H. Deckoff
|
Title:
|
Managing Principal
|
By:
|
Black Diamond Credit Strategies Fund Adviser, L.L.C.,
|
By:
|
/s/ Stephen H. Deckoff
|
Name:
|
Stephen H. Deckoff
|
Title:
|
Managing Principal
|
|
Name of Lender
|
Applicable Percentage
|
Roll-up Loan Amount
|
|||
1
|
CITIBANK, N.A.
|
5.77130
|
%
|
|
$3,751,342.46
|
|
2
|
BANK OF MONTREAL
|
7.42343
|
%
|
|
$4,825,230.93
|
|
3
|
ABN AMRO CAPITAL USA LLC
|
5.39999
|
%
|
|
$3,509,990.66
|
|
4
|
WELLS FARGO BANK NA
|
4.52524
|
%
|
|
$2,941,407.89
|
|
5
|
CAPITAL ONE, N.A. CAPITAL ONE FINANCIAL CORPORATION (PARENT)
|
4.30677
|
%
|
|
$2,799,402.16
|
|
6
|
JPMORGAN CHASE BANK NA (JPM CHASE)
|
4.14514
|
%
|
|
$2,694,341.28
|
|
7
|
HUNTINGTON NATIONAL BANK (HUNTINGTON)
|
3.91222
|
%
|
|
$2,542,943.26
|
|
8
|
ING CAPITAL LLC
|
3.81824
|
%
|
|
$2,481,853.16
|
|
9
|
BANK OF AMERICA NA
|
3.71172
|
%
|
|
$2,412,615.46
|
|
10
|
BARCLAYS BANK PLC(NEW YORK BRANCH) [Bank]
|
3.71172
|
%
|
|
$2,412,615.46
|
|
11
|
CREDIT AGRICOLE
|
3.71172
|
%
|
|
$2,412,615.46
|
|
12
|
FIFTH THIRD BANK (FIFTH THIRD)
|
3.71172
|
%
|
|
$2,412,615.46
|
|
13
|
PNC BANK, N.A.
|
3.71172
|
%
|
|
$2,412,615.46
|
|
14
|
ROYAL BANK OF CANADA
|
3.71172
|
%
|
|
$2,412,615.46
|
|
15
|
SUMITOMO MITSUI BANKING CORP.
|
3.71172
|
%
|
|
$2,412,615.46
|
|
16
|
UBS AG, STAMFORD BRANCH
|
3.71172
|
%
|
|
$2,412,615.46
|
|
17
|
BARCLAYS BANK PLC(NEW YORK BRANCH) [Desk]
|
3.40776
|
%
|
|
$2,215,046.05
|
|
18
|
CIBC INC
|
3.38908
|
%
|
|
$2,202,902.27
|
|
19
|
CITIZENS BANK
|
3.38908
|
%
|
|
$2,202,902.27
|
|
20
|
U.S. BANK NATIONAL ASSOCIATION
|
3.38908
|
%
|
|
$2,202,902.27
|
|
21
|
BLACK DIAMOND CREDIT STRATEGIES MASTER FUND LTD (FKA) BDC FINANCE LTD
|
2.91351
|
%
|
|
$1,893,783.48
|
|
22
|
COMERICA BANK
|
2.79650
|
%
|
|
$1,817,723.98
|
|
23
|
COMMONWEALTH BANK OF AUSTRALIA NEW YORK BRANCH
|
2.55342
|
%
|
|
$1,659,720.89
|
|
24
|
ASSOCIATED BANK NA
|
1.99631
|
%
|
|
$1,297,599.97
|
|
25
|
BANC OF AMERICA CREDIT PRODUCTS INC
|
1.85302
|
%
|
|
$1,204,466.03
|
|
26
|
BDCM Strategic Capital Fund I, L.P.
|
1.75692
|
%
|
|
$1,142,000.34
|
|
27
|
WHITNEY BANK
|
1.67133
|
%
|
|
$1,086,362.76
|
|
28
|
SUNTRUST BANK
|
1.42367
|
%
|
|
$925,386.75
|
|
29
|
CHASE LINCOLN FIRST COMMERCIAL CORPORATION
|
0.46426
|
%
|
|
$301,767.43
|
|
|
TOTAL:
|
100
|
%
|
|
$65,000,000.00
|
|
|
Name of Lender
|
Applicable Percentage
|
New Money DIP Loan Commitment
|
|||
1
|
CITIBANK, N.A.
|
5.77130
|
%
|
|
$3,751,342.46
|
|
2
|
BANK OF MONTREAL
|
7.42343
|
%
|
|
$4,825,230.93
|
|
3
|
ABN AMRO CAPITAL USA LLC
|
5.39999
|
%
|
|
$3,509,990.66
|
|
4
|
WELLS FARGO BANK NA
|
4.52524
|
%
|
|
$2,941,407.89
|
|
5
|
CAPITAL ONE, N.A. CAPITAL ONE FINANCIAL CORPORATION (PARENT)
|
4.30677
|
%
|
|
$2,799,402.16
|
|
6
|
JPMORGAN CHASE BANK NA (JPM CHASE)
|
4.14514
|
%
|
|
$2,694,341.28
|
|
7
|
HUNTINGTON NATIONAL BANK (HUNTINGTON)
|
3.91222
|
%
|
|
$2,542,943.26
|
|
8
|
ING CAPITAL LLC
|
3.81824
|
%
|
|
$2,481,853.16
|
|
9
|
BANK OF AMERICA NA
|
3.71172
|
%
|
|
$2,412,615.46
|
|
10
|
BARCLAYS BANK PLC(NEW YORK BRANCH) [Bank]
|
3.71172
|
%
|
|
$2,412,615.46
|
|
11
|
CREDIT AGRICOLE
|
3.71172
|
%
|
|
$2,412,615.46
|
|
12
|
FIFTH THIRD BANK (FIFTH THIRD)
|
3.71172
|
%
|
|
$2,412,615.46
|
|
13
|
PNC BANK, N.A.
|
3.71172
|
%
|
|
$2,412,615.46
|
|
14
|
ROYAL BANK OF CANADA
|
3.71172
|
%
|
|
$2,412,615.46
|
|
15
|
SUMITOMO MITSUI BANKING CORP.
|
3.71172
|
%
|
|
$2,412,615.46
|
|
16
|
UBS AG, STAMFORD BRANCH
|
3.71172
|
%
|
|
$2,412,615.46
|
|
17
|
BARCLAYS BANK PLC(NEW YORK BRANCH) [Desk]
|
3.40776
|
%
|
|
$2,215,046.05
|
|
18
|
CIBC INC
|
3.38908
|
%
|
|
$2,202,902.27
|
|
19
|
CITIZENS BANK
|
3.38908
|
%
|
|
$2,202,902.27
|
|
20
|
U.S. BANK NATIONAL ASSOCIATION
|
3.38908
|
%
|
|
$2,202,902.27
|
|
21
|
BLACK DIAMOND CREDIT STRATEGIES MASTER FUND LTD (FKA) BDC FINANCE LTD
|
2.91351
|
%
|
|
$1,893,783.48
|
|
22
|
COMERICA BANK
|
2.79650
|
%
|
|
$1,817,723.98
|
|
23
|
COMMONWEALTH BANK OF AUSTRALIA NEW YORK BRANCH
|
2.55342
|
%
|
|
$1,659,720.89
|
|
24
|
ASSOCIATED BANK NA
|
1.99631
|
%
|
|
$1,297,599.97
|
|
25
|
BANC OF AMERICA CREDIT PRODUCTS INC
|
1.85302
|
%
|
|
$1,204,466.03
|
|
26
|
BDCM Strategic Capital Fund I, L.P.
|
1.75692
|
%
|
|
$1,142,000.34
|
|
27
|
WHITNEY BANK
|
1.67133
|
%
|
|
$1,086,362.76
|
|
28
|
SUNTRUST BANK
|
1.42367
|
%
|
|
$925,386.75
|
|
29
|
CHASE LINCOLN FIRST COMMERCIAL CORPORATION
|
0.46426
|
%
|
|
$301,767.43
|
|
|
TOTAL:
|
100
|
%
|
|
$65,000,000.00
|
|
Prepetition Facility:
|
|
The senior secured credit facility (the “
Prepetition Facility
”) provided by Citibank, N.A., as Administrative Agent under and as defined therein (the “
Prepetition Agent
”), and certain lenders (the “
Prepetition Lenders
”) pursuant to that certain Fourth Amended and Restated Credit Agreement dated as of August 1, 2017 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “
Prepetition Credit Agreement
”) by and among the Borrower (together with its affiliated Chapter 11 debtors, the “
Debtors
”), as borrower thereunder, Vanguard Natural Resources, LLC, a Delaware limited liability company (the “
Parent
”), as parent guarantor, the Prepetition Agent and the Prepetition Lenders.
|
Borrower:
|
|
Vanguard Natural Gas, LLC, a Kentucky limited liability company (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 treasury 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 the Parent (as reorganized through the Plan and Confirmation Order), each other entity formed or otherwise continuing through the Plan as a successor to the Debtors (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) (collectively with the Parent, 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.
Notwithstanding the foregoing, Guarantors shall not include, except in the Borrower’s sole discretion, (a) any non-U.S. subsidiary, (b) any direct or indirect subsidiary of (I) a non-U.S. subsidiary or (II) a CFC Holding Company (as defined below), (c) any direct or indirect U.S. organized subsidiary of the Parent that owns no material assets other than (x) equity interests (including, for this purpose, any debt or other instrument treated as equity for U.S. federal income tax purposes) in, or debt issued by, one or more (A) non-U.S. subsidiaries, each of which is a “controlled foreign corporation” within the meaning of Section 957 of the Internal Revenue Code (a “
CFC
”) and/or (B) other CFC Holding Companies and (y) cash, cash equivalents and incidental assets related thereto held on a temporary basis (a “
CFC Holding Company
”) and (d) any other U.S. subsidiary of the Parent with respect to which a guarantee could result in an adverse tax or regulatory consequence to the Parent or any of its subsidiaries as determined in good faith by the Borrower.
|
Chapter 11 Plan:
|
|
The Debtors shall seek confirmation of a chapter 11 plan (the “
Plan
”) in connection with the voluntary cases commenced by the Debtors on March 31, 2019 in the United States Bankruptcy Court for the Southern District of Texas (the “
Bankruptcy Court
”), which Plan shall (a) be consistent in all respects with this Term Sheet, (b) give effect to the transactions contemplated by this Term Sheet, and (c) otherwise be in form and substance reasonably satisfactory to the Majority Lenders.
|
Lead Arranger and Bookrunner
|
|
Citigroup Global Markets Inc. (collectively with certain of its affiliates as may be appropriate to perform the work or consummate the transactions contemplated herein, “
CGMI
”) will act as lead arranger and bookrunner (in such capacity, including any affiliates acting in such capacity, collectively, the “
Lead Arranger
”). For purposes of this Commitment Letter, “
Citi
” means CGMI, Citibank, N.A., Citicorp USA, Inc., Citicorp North America, Inc., and/or any of their affiliates as may be appropriate to consummate the transactions contemplated hereby.
|
Administrative Agent and Issuing Bank:
|
|
Citi, as administrative agent and issuing bank under the Revolving Facility (as defined below) and the Term Loan A Facility (as defined below) (in such capacities, respectively, the “
First-Out Agent
” or “
Issuing Bank
”, as the case may be).
|
Term Loan B Agent:
|
|
Citi, as administrative agent under the Term Loan B Facility or another financial institution designated by Citi (in such capacity, the “
Term Loan B Agent
”, and together with the First-Out Agent, collectively, the “
Agents
”).
|
Collateral Agent:
|
|
Citi or another financial institution designated by Citi, as collateral agent for the secured parties under the Facilities (in such capacity, the “
Collateral Agent
”).
|
Lenders:
|
|
Initially, the Lenders in the First-Out Facility will be each Prepetition Lender holding Prepetition Revolving Loans and electing to participate in the First-Out Facility and the Lenders in the Term Loan B Facility (as described and defined below) will be all Prepetition Lenders, in each case consistent with the Agreement
(collectively, and together with any party that becomes a lender by assignment, the “
Lenders
”).
|
Facilities:
|
|
A senior secured, amended and restated “first-out” facility consisting of the Revolving Facility described below and the Term Loan A Facility (collectively, the “
First-Out Facility
”) and a “last-out” first lien Term Loan B Facility (as defined below, and together with the First-Out Facility, collectively, the “
Facilities
”), in each case, as more fully described below and which shall become effective on the effective date of the Plan (the “
Plan Effective Date
”).
|
|
|
(a)
First-Out
Revolving Facility
. Pursuant to the Plan, and as part of the treatment of their Obligations under the Plan, each Prepetition Lender that is a lender under the Agreement (each, a “
DIP Electing Lender
”) shall become revolving lenders on the Plan Effective Date (collectively, the “
Revolving Lenders
”) by agreeing to provide a lending commitment in respect of a senior secured first lien reserve-based revolving credit facility (each such Revolving Lender’s commitment, as reduced from time to time in accordance with the terms hereof, its “
Revolving Commitment Amount
” and such revolving facility, the “
Revolving Facility
” and the loans under such Revolving Facility, the “
Revolving Loans
”) in an amount equal to such Revolving Lender’s pro rata share of an aggregate $65 million (the aggregate revolving commitments for all Revolving Lenders, as reduced from time to time in accordance with the terms hereof, the “
Maximum Revolving Commitments
”). In accordance with the Plan, but subject to the required Excess Cash sweep on the Closing Date, the Revolving Facility shall be secured
pari passu
with the Term Loan A Facility and the Term Loan B Facility on a “first-out” basis.
(b)
Term Loan A Facilit
y
. A first lien “second-out” term loan facility in an aggregate principal amount equal to up to $65 million (the “
Term Loan A Facility
,” the loans thereunder, the “
Tranche A Term Loans
” and the Lenders thereunder, the “
Term Loan A Lenders
”). Pursuant to the Plan, the DIP Electing Lenders, as part of the treatment of their obligations under the Plan, shall become Term Loan A Lenders on the Plan Effective Date in respect of Tranche A Term Loans deemed made by such Term Loan A Lenders on the Plan Effective Date as “roll-up” paper (or similar) in an amount equal to the lesser of (i) such Term Loan A Lender’s Revolving Commitment Amount and (ii) such Term Loan A Lender’s Commitment in respect of New Money Loans (as such terms are defined in the Agreement). The Term Loan A Facility shall be secured in a manner
pari passu
with the Revolving Facility on a “second-out” basis.
(c)
Term Loan B Facilit
y
. A first lien “last-out” term loan facility in an aggregate principal amount equal to $350
million
minus
the amount of the Term Loan A Facility (the “
Term Loan B Facility
,” the loans thereunder, the “
Tranche B Term Loans
” and the Lenders thereunder, the “
Term Loan B Lenders
”). Pursuant to the Plan, the Prepetition Lenders, as part of the treatment of their obligations under the Plan, shall become Term Loan B Lenders on the Plan Effective Date in respect of Tranche B Term Loans deemed made by such Term Loan B Lenders on the Plan Effective Date as “take-back” paper (or similar) in an amount equal to such Term Loan B Lender’s pro rata share of the amount of the Term Loan B Facility. The Term Loan B Facility shall be secured in a manner
pari passu
with the Revolving Facility on a “last-out” basis.
|
|
|
|
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, to pay all amounts outstanding under the Revolving Facility (including, without limitation, interest, principal, fees and cash-collateralization of Letters of Credit (as defined below)), second, to pay amounts outstanding under the Term Loan A Facility and third to pay amounts outstanding under the Term Loan B Facility.
The Revolving Facility will include a sub-facility for standby letters of credit (each, a “
Letter of Credit
”) in the aggregate principal amount not to exceed the lesser of (x) the Maximum Revolving Commitments, (y) the then-effective Borrowing Base, and (z) $5 million. For the avoidance of doubt, conditions to effectiveness of the Facilities (“
Conditions to Effectiveness of Facilities
”) shall include the following: (x) the conditions under the headings “Conditions to Closing” and “Conditions to All Extensions of Credit” below; (y) entry of an order by the Bankruptcy Court confirming the Plan, which shall be in form and substance reasonably satisfactory to the Agents (the “
Confirmation Order
”); and (z) the occurrence of the Plan Effective Date.
Any assignment under the First-Out Facility shall be required to include a proportional amount of both the Revolving Facility and the Term Loan A Facility.
|
|
Amortization:
|
|
There shall be no amortization of Revolving Loans or Tranche B Term Loans.
Commencing with the first full fiscal quarter following the Closing Date, the Tranche A Term Loans shall be repaid in equal quarterly installments of 1.00% per annum of the original principal amount of the Tranche A Term Loans on each December 31, March 31, June 30 and September 30, with the balance payable on the Term Loan A Maturity Date.
|
Borrowing Base and Borrowing Base Redetermination:
|
|
Availability under the Revolving Facility shall be subject to a reducing borrowing base (the “
Borrowing Base
”), which shall be initially determined and periodically redetermined (each such redetermination a “
Borrowing Base Redetermination
”) and reduced as set forth below.
On the Plan Effective Date, the initial Borrowing Base shall be deemed to equal $65 million. Thereafter, a Borrowing Base Redetermination shall occur on each April 1 and October 1 commencing on April 1, 2020 (the “
First Scheduled Redetermination Date
”).
Interim Borrowing Base Redeterminations shall be implemented (a) upon the request of the First-Out Agent or the requisite Lenders (“
Lender Wild Card Redetermination
”), or (b) after the First Scheduled Redetermination Date, upon the request of the Borrower; provided that (i) that there shall be no Lender Wild Card Redetermination prior to the First Scheduled Redetermination Date, (ii) there shall be no more than one Lender Wild Card Redetermination between each scheduled Borrowing Base Redetermination, and (iii) there shall be no more than one interim Borrowing Base Redetermination made at the request of the Borrower between each scheduled Borrowing Base Redetermination
.
In the event the total outstanding balance of the Revolving Loans and other revolving credit exposure is greater than the then-effective Borrowing Base (such excess, a “
Borrowing Base Deficiency
”) as a result of a Borrowing Base Redetermination, the Borrower shall, within 15 days after notice from First-Out Agent of such Borrowing Base Deficiency, notify First-Out Agent of the Borrower’s election to exercise one, or a combination of, the following options in order to cure such Borrowing Base Deficiency: (a) repay the Borrowing Base Deficiency in a single lump sum for application to the Revolving Loans and other revolving credit exposure or (b) repay the Borrowing Base Deficiency in six monthly installments equal to one-sixth of such Borrowing Base Deficiency with the first such installment due 30 days after notice from First-Out Agent of such Borrowing Base Deficiency and each following installment due 30 days after the preceding installment for application to the Revolving Loans and other revolving credit exposure.
|
Mandatory Borrowing Base Reductions
|
|
Any disposition of Oil and Gas Properties (as defined in the Prepetition Credit Agreement) (including through casualty and condemnation) and the net effect of hedge modifications and early terminations of hedges shall result in an automatic reduction of the Borrowing Base in an amount equal to 75% of the net cash proceeds received by the applicable Loan Party in connection with such disposition, hedge modification or hedge termination, with a corresponding permanent reduction in the Maximum Revolving Commitments.
|
|
|
|
Closing Date:
|
|
The Plan Effective Date (the “
Closing Date
”).
|
Use of Proceeds:
|
|
The proceeds of Revolving Loans and other extensions of credit made (as opposed to Revolving Loans, Tranche A Term Loans or Tranche B Term Loans deemed made on the Plan Effective Date) from time to time under the Revolving Facility shall be used to fund ongoing working capital requirements and other general corporate purposes of the Borrower and its subsidiaries.
|
Financing Documentation:
|
|
The Facilities will be documented on financing documents that are based on the Prepetition Credit Agreement; provided that (i) such documentation shall contain terms and conditions set forth in this term sheet and such other changes as may be mutually agreed by the Borrower and the Agents and (ii) the Term Loan B Facility shall be documented in a separate credit facility, subject to collateral agency agreement whereby the Collateral Agent is appointed to act as secured party and hold collateral for the benefit of all Facilities (collectively, such documentation, the “
Financing Documentation
” and the principles described therein, the “
Documentation Principles
”).
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Collateral:
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The Obligations will be secured by valid and perfected first-priority security interests in and liens on all of the following (collectively, the “
Collateral
”):
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(a) 100% of the equity interests of all present and future subsidiaries of any Loan Party (other than equity interests of non-wholly owned 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 and its subsidiaries and their respective affiliates) of any Loan Party);
(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 not less than (i) 95% of present value of the total proved reserves of the Loan Parties included in the most recent reserve report and (ii) 95% of the total value of all other 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.
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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 Financing Documentation and otherwise subject to the Documentation Principles. Notwithstanding the foregoing, the Collateral shall not include voting capital stock or equity interests of any CFC Holding Company or any non-U.S. subsidiary in excess of 65%.
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Interest Rates:
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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 Revolving Facility divided by the Borrowing Base) according to the following grid:
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(a) in the case of the Revolving Facility, based upon utilization of the Borrowing Base (expressed as a percentage of outstanding Revolving Loans and Letters of Credit under the Revolving Facility divided by the Borrowing Base) an interest margin according to the following grid:
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(b) the Tranche A Term Loans will bear interest based on LIBOR,
plus
400 bps;
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(c) the Tranche B Term Loans will bear interest based on LIBOR,
plus
750 bps;
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Fees:
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(a)
Unused Line Fee
.
The Borrower shall pay to the First-Out Agent, for the account of the Revolving Lenders, an unused line fee (the “
Unused Line 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 Unused Line Fees will be fully earned and due and payable
quarterly
in arrears for the account of the Revolving Lenders (other than any defaulting lenders) under the Revolving Facility and will accrue from and after the Closing Date.
(b)
Upfront Fees
. The Borrower shall pay to Citi, for the pro rata account of each of the Lenders, upfront fees in an aggregate amount equal to 45 bps of the aggregate amount of the Facilities, which shall be fully earned and will be due and payable in full in cash on the Closing Date.
(c)
Letter of Credit Fees
. The Borrower shall pay to the First-Out Agent for the account of the Revolving 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 First-Out Agent for the account of any Issuing Bank a fronting fee equal to the product of 0.375% and the undrawn amount of each Letter of Credit.
(d)
Other Fees
. Such other fees set forth in any fee letter (or similar) between the applicable Agent and/or Lead Arranger and the Borrower.
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Maturity Date:
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(a)
Revolving Facility
. The final maturity of the Revolving Facility will occur on the three year anniversary of the Closing Date.
(b)
Term Loan A Facilit
y
. The final maturity of the Term Loan A Facility will occur on the three year anniversary of the Closing Date (the “
Term Loan A Maturity Date
”).
(c)
Term Loan B Facility
. The final maturity of the Term Loan B Facility will occur on the 42-month anniversary of the Closing Date (the “
Term Loan B Maturity Date
”).
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Mandatory Prepayments (Revolving Facility):
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(a)
Borrowing Base Redeterminations
. The Borrower shall prepay (and/or cash-collateralize Letters of Credit) Revolving Loans and other revolving credit exposure under the Revolving Facility in the amount of any Borrowing Base Deficiency arising or resulting from the circumstances described under the sections titled “
Borrowing Base and Borrowing Base Redetermination
” as set forth in such sections.
(b)
Borrowing Base Reductions
. The Borrower shall prepay (and/or cash-collateralize Letters of Credit) Revolving Loans and other revolving credit exposure under the Revolving Facility in the amount of 100% of any net cash proceeds received by a Loan Party arising or resulting from the circumstances described under the section titled
“Mandatory Borrowing Base Reductions
” above.
(c)
Excess Cash
. The Borrower shall prepay such Revolving Loans (and cash-collateralize Letters of Credit) with 100% of all cash and cash equivalents of the Loan Parties, minus Excluded Funds (to be defined substantially consistent with the Prepetition Credit Agreement), in excess of $25 million on the 15th day of each month (or if the 15th day of the applicable month is not a business day, then the first business day thereafter); provided that if the Borrowing Base is less than $10 million, the preceding $25 million dollar amount shall be increased to $35 million.
All such mandatory prepayments will be applied to prepay outstanding Revolving Loans (without a permanent reduction to the Maximum Revolving Commitments (except as required in connection with any Borrowing Base reduction described in the section titled
“Mandatory Borrowing Base Reductions
”) and, in the case of
clauses (a)
and
(b)
of this section, to cash-collateralize Letters of Credit outstanding under the Revolving Facility.
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Zero Borrowing Base Effective Date:
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The “
Zero Borrowing Base Effective Date
” shall occur when (a) the Revolving Loans have been repaid in full, (b) any Letters of Credit outstanding under the Revolving Facility have been cash collateralized in full, and (c) the Borrowing Base has been reduced to zero.
Upon occurrence of the Zero Borrowing Base Effective Date, Revolving Lenders will have the option to exit the Revolving Facility or remain a Revolving Lender under the Revolving Facility. For avoidance of doubt, the Revolving Facility will not terminate solely due to the occurrence of the Zero Borrowing Base Effective Date, but shall remain in effect and shall continue to secure, on a senior secured “first out” basis the obligations of any Loan Party under any hedging agreements entered into between such Loan Party and any counterparty that is a Lender (as defined herein) (or any affiliate thereof), and any Loan Party under any treasury management arrangements between such Loan Party and a Lender (or any affiliate thereof).
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Mandatory Prepayments (Term Loan A Facility):
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After the Revolving Loans have been repaid in full and any Letters of Credit outstanding under the Revolving Facility have been cash collateralized in full, the Tranche A Term Loans under the Term Loan A Facility shall be prepaid, without premium or penalty or LIBOR breakage costs with:
(a) the proceeds of asset sales, casualty events and indebtedness that is not permitted, pursuant to terms and provisions that are customary for term loans of the type contemplated herein, and
(b) 100% of all cash and cash equivalents of the Loan Parties, minus Excluded Funds, in excess of (i) if a Borrowing Base is in effect under the Revolving Facility, $25 million, and (ii) if no Borrowing Base is in effect under the Revolving Facility, $35 million, in each case, on the 15th day of each month (or if the 15th day of the applicable month is not a business day, then the first business day thereafter).
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Mandatory Prepayments (Term Loan B Facility):
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After indefeasible payment or satisfaction in full, in cash, of (i) the Revolving Loans and other obligations outstanding under the Revolving Facility and cash collateralization (or other arrangement satisfactory to the applicable Issuing Bank) of Letters of Credit outstanding under the Revolving Facility and the occurrence of the Zero Borrowing Base Effective Date, and (ii) the Tranche A Term Loans under the Term Loan A Facility, the Tranche B Term Loans under the Term Loan B Facility shall be prepaid, without premium or penalty or LIBOR breakage costs with:
(a) the proceeds of asset sales, casualty events and indebtedness that is not permitted, pursuant to terms and provisions that are customary for term loans of the type contemplated herein, and
(b) 100% of all cash and cash equivalents of the Loan Parties, minus Excluded Funds, in excess of $35 million, in each case, on the 15th day of each month (or if the 15th day of the applicable month is not a business day, then the first business day thereafter).
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Optional Prepayments and Commitment Reductions (Revolving Facility):
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Loans under the Revolving Facility may be prepaid at any time, in whole or in part, at the option of the Borrower, upon notice to the First-Out Agent and in minimum principal amounts and in multiples to be agreed upon with the First-Out Agent, without premium or penalty (except LIBOR breakage costs). Any optional prepayment of the Revolving Facility will be applied to prepay outstanding loans and cash-collateralize Letters of Credit outstanding under the Revolving 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 First-Out Agent and in minimum principal amounts and in multiples to be agreed upon with the First-Out Agent.
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Optional Prepayments (Term Loan A Facility):
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The Tranche A Term Loans may be prepaid, in whole or in part, at the option of the Borrower, upon 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 Financing Documentation;
provided
that (A) the Revolving Loans have been repaid in full and any Letters of Credit outstanding under the Revolving Facility have been cash collateralized in full, (B) liquidity on a pro forma basis is not less than $35 million and (C) no default or event of default exists or would result from such prepayment.
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Optional Prepayments (Term Loan B Facility):
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The Tranche B Term Loans may be prepaid, in whole or in part, at the option of the Borrower, upon 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 Financing Documentation;
provided
that (i) the Revolving Facility and the Term Loan A Facility have been indefeasibly repaid in full, the occurrence of the Zero Borrowing Base Effective Date and all commitments under the Term Loan A Facility have terminated, and (ii) prior to the first anniversary of the Closing Date optional prepayments shall be required to be accompanied by the payment of a premium equal to 1.00% of the principal prepaid on such date.
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Conditions to Closing:
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In addition to the conditions set forth in the section titled
“Conditions to All Extensions of Credit
”, the closing of the Facilities will be subject to satisfaction of typical and customary conditions precedent, including but not limited to the following:
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1. the Plan, the Confirmation Order, and any related order of the Bankruptcy Court (and any amendments or modifications to any of the foregoing) shall be in form and substance reasonably satisfactory to the Agents, including approval of the Facilities and releases and exculpations;
2. the Confirmation Order shall be Final and in full force and effect (as used herein, “Final” shall mean an order or judgement of the Bankruptcy Court, or other court of competent jurisdiction with respect to the subject matter, which has not been reversed, stayed, modified or amended, and as to which (i) the time to appeal, petition for certiorari, or move for reargument or rehearing (other than a request for a rehearing under Federal Rule of Civil Procedure 60(b), which shall not be considered for purposes of this definition) has expired and no appeal or petition for certiorari has been timely taken, or (ii) any timely appeal that has been taken or any petition for certiorari that has been or may be timely filed has been resolved by the highest court to which the order or judgment was appealed or from which certiorari was sought or has otherwise been dismissed with prejudice;
3. any Order approving the assumption of the same shall not have been stayed, reversed, vacated or otherwise modified in a manner materially adverse to interests of the Agents and the Revolving Lenders or otherwise contrary to this Term Sheet or the Definitive Documentation and all conditions to effectiveness of the Definitive Documentation shall have occurred or been waived by the respective parties thereto having the authority to waive such conditions;
4. the Plan Effective Date shall have occurred, all conditions precedent to the confirmation and effectiveness of the Plan, as set forth in the Plan, shall have been fulfilled or waived as permitted therein, including, without limitation, all transactions contemplated in the Plan or in the Confirmation Order to occur on the Plan Effective Date shall have been substantially consummated in accordance with the terms thereof and in compliance with applicable law, Bankruptcy Court and regulatory approvals;
5. no motion, action, or proceeding by any creditor or other party-in-interest to the Chapter 11 Cases that could materially adversely affect the Plan, the consummation of the Plan, the business or operations of the Borrower, or the transactions contemplated by the Facilities or the Plan shall be pending;
6. the Agents shall have received satisfactory evidence as to the payment in full on the Plan Effective Date of all material administrative expense claims, priority claims and other claims required to be paid upon the Plan Effective Date;
7. there shall have been no material adverse change in, or a material adverse effect upon, the operations, business, properties or financial condition of the Loan Parties taken as a whole (other than as a result of the events leading up to, directly arising from or direct effects of the commencement or continuance of the bankruptcy proceedings) from the date of the execution and delivery by the Lenders of the Agreement through the Closing Date;
8. (a) execution and delivery of the Financing Documentation, and (b) the Agents, the Term Loan A Lenders, the Term Loan B Lenders and Revolving Lenders will have received (i) customary legal opinions as to the Loan Parties and the Financing Documentation (including, without limitation, customary opinions of local counsel), (ii) customary evidence of authority and incumbency, customary officers’ certificates, good standing certificates, in each case with respect to the Borrower and the Guarantors, and a solvency certificate for the Borrower and its subsidiaries on a consolidated basis after giving effect to the transactions contemplated by this Term Sheet and the Plan on the Closing Date, and (iii) flood hazard diligence and documentation as required by the federal Flood Disaster Protection Act of 1973 or otherwise in a manner satisfactory to the Lenders;
9. all documents and filings required to perfect or evidence the Collateral Agent’s first priority security interest in and liens on the Collateral (including, without limitation, all certificates evidencing pledged capital stock or membership or partnership interests, as applicable, with accompanying executed stock powers, all UCC financing statements to be filed in the applicable government UCC filing offices, all intellectual property security agreements to be filed with the United States Copyright Office or the United States Patent and Trademark Office, as applicable, all deposit account and securities account control agreements and all mortgages, deeds of trust and real property filings) shall have been executed and/or delivered and, to the extent applicable, be in proper form for filing;
10. the holders of claims against the Debtors arising under the Prepetition Facility, including, without limitation, the Obligations (as defined in the Prepetition Credit Agreement) (the “
Prepetition Obligations
”) shall receive the treatment outlined in this Term Sheet, the Agreement, and the Plan, and the holders of claims against the Debtors under the Agreement shall have received the treatment under the Plan and the commitments thereunder shall have been terminated, and all security interests related thereto shall have either (a) been terminated or (b) been amended and restated to secure the Obligations under the Facilities, in either case concurrently with the Closing Date;
11. the Agents shall have received an ACORD evidence of insurance certificate evidencing coverage of the Loan Parties and their respective subsidiaries and naming the Collateral Agent in such capacity for the Lenders as additional insured on all liability policies and loss payee on all property insurance policies;
12. all required governmental and third party consents and approvals shall have been obtained and shall be in full force and effect;
13. all fees and, to the extent invoiced at least one (1) business day prior to the Closing Date, out-of-pocket expenses, required to be paid on the Closing Date under the Plan in connection with the Facilities, including the reasonable fees and expenses of one primary counsel, one local counsel in each appropriate jurisdiction, and financial advisors to the Agents, and any audit and appraisal fees and expenses, shall have been paid in full in cash;
14. Debtors shall have paid to the Prepetition Lenders
holding Prepetition Revolving Loans
all other payments as provided for in any final orders entered in connection with the Agreement and/or use of cash collateral, and the Plan, which amounts shall be applied to the repayment of the Prepetition Obligations in accordance with the Plan;
15. the Agents shall be in receipt of one or more collateral agency agreements, which shall, subject to the Documentation Principles, contain terms and provisions satisfactory to the Agents in their sole discretion, duly executed and delivered by the Loan Parties, the Collateral Agent and the Agents;
16. after giving effect to the transactions contemplated hereby and under the Plan on the Closing Date, the Borrower and the other Loan Parties shall not have any Excess Cash, or shall prepay the Revolving Loans on the Closing Date such that, after giving effect to such prepayment, the Borrower and the other Loan Parties do not have any Excess Cash;
17. if the Plan Effective Date occurs on or after September 1, 2019, the First-Out Agent shall have received a reserve report, dated as of June 30, 2019, prepared by a third party petroleum engineers satisfactory to the First-Out Agent, which report shall use economic parameters (including but not limited to, hydrocarbon prices, escalation rates, discount rate assumptions, and other economic assumptions) acceptable to First-Out Agent;
18. the Agents shall have received an updated business plan for the Borrower and its subsidiaries after giving effect to the transactions contemplated hereby and under the Plan on the Closing Date; and
19. the Borrower and the other Loan Parties (other than the Parent) shall demonstrate minimum liquidity on the Closing Date in an amount to be agreed, after giving effect to the transactions contemplated hereby and under the Plan.
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Conditions to All Extensions of Credit:
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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 Financing 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 anti-hoarding requirements, before and after giving effect to such extension of credit.
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Cash Management:
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The Loan Parties and their subsidiaries shall maintain their cash management system as it existed prior to the Closing Date, with such changes as may be mutually agreed by the Agents and the Borrower. Notwithstanding anything to the contrary contained herein, in no event shall any Loan Party be required to make subject to an account control agreement any Excluded Account (all accounts other than (a) Excluded Accounts (as defined below), and (b) accounts not subject to account control agreements pursuant to this sentence, collectively, “
Controlled Accounts
”). Each Controlled Account shall be subject to a control agreement, in form and substance satisfactory to the Agent, which agreement shall transfer control of such account to the Agent upon delivery of notice by the Agent to the financial institution maintaining such account.
As used herein, “
Excluded Accounts
” means with respect to the Borrower or any Subsidiary, each deposit account that is not required to be subject to an account control agreement, to the extent such deposit account is solely (a) a payroll account containing a balance not exceeding the amount of payroll expenses for one payroll period at any time, (b) a tax withholding account, (c) zero balance accounts (other than lockbox accounts, to the extent account control agreements are permitted by the applicable depository bank), (d) a petty cash account containing a balance not exceeding $50,000 per account at any time and not to exceed $250,000 for all such petty cash accounts in the aggregate, or (e) a trust account holding royalty payment and working interest payments solely to the extent constituting property of a third party held in trust.
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Representations and Warranties:
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Subject to the Documentation Principles, the Financing Documentation will contain representations and warranties subject to exceptions are customary for transactions of this type as mutually agreed (which will be applicable to the Loan Parties and their subsidiaries).
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Affirmative Covenants:
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Subject to the Documentation Principles, the Financing Documentation will contain affirmative covenants subject to limitations and modifications as are customary for transactions of this type as mutually agreed (which will be applicable to the Loan Parties and their subsidiaries).
On or before March 1 and September 1 of each year, commencing with the first such date to occur after the Closing Date, the Borrower shall furnish to the First-Out Agent and the Lenders a reserve report evaluating the proved Oil and Gas Properties of the Loan Parties as of the immediately preceding January 1 and July 1. The reserve report as of January 1 of each year shall be prepared by one or more approved petroleum engineers. The July 1 reserve report of each year shall be prepared by or under the supervision of the chief engineer of the Borrower and such reserve report shall be accompanied by customary certifications of such chief engineer and a responsible officer of the Borrower.
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Negative Covenants:
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The Financing Documentation will contain negative covenants subject to exceptions, limitations, baskets and modifications as are reasonably acceptable to the Agents:
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(a) limitation on liens;
(b) limitation on disposition of assets;
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(c) limitation on consolidations, mergers dissolutions and divisions;
(d) limitation on loans, investments and acquisitions of property;
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(e) limitations on indebtedness including, without limitation, a prohibition on the incurrence of third party indebtedness for borrowed money;
(f) limitations on transactions with affiliates;
(g) limitations on margin stock;
(h) limitations on contingent obligations;
(i) limitations on restricted debt payments;
(j) limitations on restricted payments other than permitted tax distributions;
(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 subsidiaries to guarantee the loans, grant liens securing the loans or make distributions to the Borrower.
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Financial Covenants:
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The First-Out Facility will contain the following financial covenants, calculated on a quarterly basis:
Leverage Ratio: consolidated total debt to EBITDA may not exceed 4.0 to 1.0 as of the last day of any fiscal quarter. 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.
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.
The Term Loan B Facility will contain the following financial covenant, calculated on the “as of” date of each semi-annual reserve report:
Proved Developed Producing Reserve Coverage Ratio: present value of proved developed producing reserves to consolidated total debt may not be less than 1.0 to 1.0 as of each January 1 and July 1.
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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 Agents;
provided
that no Borrowing Base value shall be given to any such unsecured hedging agreements. Maximum hedging limitations and minimum hedging requirements to be agreed.
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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 Prepetition Credit Agreement, except as mutually agreed with the 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 and their subsidiaries).
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Amendments and Waivers:
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Amendments and waivers of the Financing Documentation will require the approval of the Lenders holding more than 50% of the applicable Facility, except that the consent of (a) Revolving Lenders holding more than 66-2/3% of the Aggregate Commitments of the Revolving Lenders shall be required to decrease or maintain the Borrowing Base, (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 Financing 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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Any assignment under the First-Out Facility shall be required to include a proportional amount of both the Revolving Facility (if then in effect) and the Term Loan A Facility.
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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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New York.
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Guarantor
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Jurisdiction of Organization
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Vanguard Natural Resources, Inc.
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Delaware
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Vanguard Operating, LLC
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Delaware
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VNR Holdings, LLC
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Delaware
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Escambia Asset Co. LLC
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Delaware
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Escambia Operating Co. LLC
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Delaware
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Eagle Rock Energy Acquisition Co., Inc.
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Delaware
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Eagle Rock Energy Acquisition Co. II, Inc.
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Delaware
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Eagle Rock Upstream Development Company, Inc.
|
Delaware
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Eagle Rock Upstream Development Company II, Inc.
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Delaware
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Eagle Rock Acquisition Partnership, L.P.
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Delaware
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Eagle Rock Acquisition Partnership II, L.P.
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Delaware
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Aggregate Amounts Beneficially Owned or Managed on Account of:
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Revolving Credit Facility
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Senior Secured Swaps
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Term Loans
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Senior Notes
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Equity Interests
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