Item 1.01 Entry into a Material Definitive Agreement
The maximum amount Synergy can borrow at any one time is known as the Borrowing Base. The Borrowing Base can increase or decrease based upon the value of the collateral which secures any amounts borrowed under the line of credit. For the most part, the value of the collateral will be derived from the estimated future cash flows of Synergy's proved oil and gas reserves, discounted by 10%. The new Borrowing Base is
Any amounts borrowed from the banks will be used to develop oil and gas properties, acquire new oil and gas properties, and for working capital and other general corporate purposes.
Any amounts borrowed from the banks: o will be due and payable on
May 29, 2019, o are secured by substantially all of Synergy's producing wells and developed oil and gas leases, and o at Synergy's option, will bear interest at either: (i) the prime lending rate plus a margin of 0.5% to 1.5% or, (ii) the LIBO rate plus a margin of 1.75% to 2.75%, or (iii) a minimum interest rate of 2.5% per annum.
In general terms, the LIBO rate means the rate of interest that appears on the relevant page of the Bloomberg Financial Market Information System that displays an average British Bankers Association Interest Settlement Rate for deposits in dollars.
Any of the following are an event of default which would cause any amounts due under the line of credit to become immediately due and payable:
o Synergy fails to make any interest or principal payment when due; o Synergy breaches any representation, warranty or covenant or defaults in the timely performance of any other obligation in its agreements with the banks; 2 o Synergy files for protection from its creditors under the federal bankruptcy code, or a third party files an involuntary bankruptcy petition against Synergy, or o A final judgment is entered against Synergy involving a liability (not paid or fully covered by insurance) of
$200,000or more and the judgment has not been vacated, discharged, or stayed pending appeal within 45 days from the entry of the judgment.
The foregoing description of the line of credit agreement, including events of default, does not purport to be complete and is qualified in its entirety by reference to Exhibit 10.23 to this report.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant
The information included under Item 1.01 is incorporated by reference into this Item 2.03 of this report.
Item 9.01 Financial Statements and Exhibits Number Description 10.23 Fourth Amendment to Credit Agreement, together with Third Amended and Restated Deed of Trust, Mortgage, Security Agreement and Financing Statement. 3