Item 1.01 Entry into a Material Definitive Agreement.
The Loans will initially bear interest at a per annum rate equal to 9% plus the greater of 1% or LIBOR, for a three month interest period. The interest rate will be automatically lowered if American Shale improves the ratio of the value of its proved developed producing ("PDP PV9") properties to its funded debt, less cash and other liquid assets, as further defined under the Credit Agreement (the "Net Debt Ratio"). Upon the occurrence of certain events of default as defined in the Credit Agreement, the loans will bear interest at an additional 2% per annum above the initial rate, and with respect to other events of default, at the election of the required lenders, may bear interest at the higher default rate. Interest will be due and payable monthly in arrears, on the maturity date, and on the date of any prepayment of principal.
The initial loan was advanced as a single funding of
The principal amount of the Loans may be prepaid, but not reborrowed. If the Loans are prepaid on or prior to the first anniversary of the Funding Date, a make-whole amount equal to 4.0% of the principal balance of the Loans, plus the sum of the remaining scheduled payments of interest prior to the first anniversary of the Funding Date, will be charged. Up to
Also on the Funding Date of the Credit Agreement,
The Credit Agreement contains representations and warranties that are common in such agreements, including, but not limited to
• financial condition; • material adverse effects; • corporate existence; • corporate authorizations and powers; • enforceable obligations; and • existing indebtedness and material litigation.
Other representations and warranties relate to operations such as environmental matters, gas imbalances, hedging agreements, reserve reports, sale of production and contingent obligations. The Credit Agreement also includes typical indemnification provisions.
The Credit Agreement also includes certain customary affirmative covenants such as minimum hedging requirements, delivery of financial information, operation and maintenance of properties, and maintenance of books and records. Financial covenants include a maximum leverage ratio (latest twelve months EBITDA to net debt) and minimum current ratio (consolidated current assets to consolidated current liabilities). The definition of net debt includes funded debt plus accounts payable, offset by cash as well as accounts receivable. American Shale is also required to apply toward approved capital expenditures a minimum of 50% of the proceeds of any equity issuance that occurs subsequent to the first anniversary of the Funding Date.
Negative covenants include limitations on indebtedness, liens, fundamental changes, dispositions of property, payment of dividends or distributions, capital expenditures, investments and transactions with affiliates. There are also limitations on hedging transactions, creation or
acquisition of subsidiaries, use of proceeds, drilling without providing title opinions, amending certain documents and appointing non-approved officers or directors.
Upon the occurrence of a change of control (as defined in the Credit Agreement), the Lenders may require American Shale to pay all of the outstanding interest, make-wholes and fees in addition to 101% of the principal amounts of the Loans under the Credit Agreement.
On the Funding Date, American Shale also entered into a Net Profits Interest Agreement (the "NPI Agreement") with Agent. The NPI Agreement provides that subsequent to the repayment of the Loans, American Shale will pay a net profits interest to Agent (the "NPI"). The NPI is to be calculated based on production revenues less certain expenditures, including operating costs, general and administrative expenses, interest and capital expenditures. The amount of interest expense and general and administrative expenses that can be charged are limited based on the amounts that were previously expensed prior to repayment of the Loans. The NPI is earned based on amounts borrowed under the Credit Agreement. As of the Funding Date, a NPI of 6.5% of the net profits, as defined under the NPI Agreement, has been earned. Agent will earn up to an additional 2.5% of the net profits pro rata for any subsequent borrowing by American Shale under the
The NPI Agreement provides the Agent with the option to sell its NPI for fair value, as defined in the NPI Agreement, alongside American Shale or
On the Funding Date, American Shale also entered into a purchase and sale agreement (the "Republic PSA") with its joint venture partner,
As part of the Republic PSA, Republic also agreed to amend the Amended Joint . . .
Off-Balance Sheet Arrangement of a Registrant.
See Item 1.01 above which is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits Exhibit No. Description Exhibit 10.1 Credit Agreement dated
May 21, 2014by and among American Shale, the lenders thereto and Morgan Stanley Capital Group Inc., as the administrative agent ("Agent "). Exhibit 10.2 Net Profits Interest Agreement dated May 21, 2014, between American Shale and the Agent. Exhibit 10.3 Purchase and Sale Agreement dated May 20, 2014, between American Shale and Republic Energy Ventures