Item 2.03 Creation of a Direct Financial Obligation.
On June 2, 2014, (the "Closing Date"), Miller Energy Resources, Inc., (the
"Company") entered into a credit agreement (the "First Lien Loan Agreement"),
among the Company, as borrower, KeyBank National Association ("KeyBank"), as
administrative agent (in that capacity the "Administrative Agent"), and the
lenders from time to time party thereto (the "Lenders"). In addition to KeyBank,
the syndicate includes CIT Finance LLC, Mutual of Omaha Bank and OneWest Bank
The First Lien Loan Agreement provides for a $250 million senior secured,
reserve-based revolving credit facility (the "First Lien Credit Facility"), $60
million of which was made available the Company on the Closing Date. Amounts
outstanding under the First Lien Credit Facility are priced on a sliding scale,
based on LIBOR plus 300 to 400 basis points, depending upon the level of
borrowing (per the table below).
Borrowing Base Utilization Grid
Percentage 25%, but 50%, but 75%, but 90%, but <100%
LIBOR 3.00% 3.25% 3.50% 3.75% 4.00%
Rate 0.50% 0.50% 0.75% 0.75% 0.75%
The First Lien Credit Facility will expire on the third anniversary of the
closing. It contains customary covenants, including a leverage, interest
coverage, current ratio, minimum gross production, minimum liquidity, asset
coverage and change of management control covenants. Subject to certain
conditions contained in the First Lien Loan Agreement, the First Lien Credit
Facility also allows for the Company to implement a discretionary share
repurchase plan on terms and conditions reasonably satisfactory to the
Administrative Agent and the Lenders. The First Lien Credit Facility
contemplates up-front fees, arrangement fees, and ongoing commitment and other
fees customary for transactions of this nature.
The Company drew $20 million
on the Closing Date under the First Lien Credit
Facility, which will be used to provide working capital for development drilling
. The amounts drawn were subject to an original issue discount equal to
1% of the initial borrowing base.
On the Closing Date, in connection with the First Lien Credit Facility, the
Company, along with all of its consolidated subsidiaries (other than MEI, Miller
Energy Colorado 2014-1, LLC, and Miller Drilling
), entered into a
First Lien Guarantee and Collateral Agreement (the "First Lien Guarantee") with
, for the benefit of the lenders from time to time party to the First
Lien Loan Agreement. Under the terms of the Guarantee and related security
documents each of the consolidated subsidiaries of the Company (other than MEI,
Miller Energy Colorado 2014-1, LLC, and Miller Drilling
guaranteed the Company's obligations under the First Lien Credit Facility and
the Company and those subsidiaries have granted a security interest in
substantially all of their assets to secure the performance of the obligations
arising under the First Lien Credit Facility.
As previously announced, on February 3, 2014
, the Company entered into a second
lien credit facility between the Company, Apollo Investment Corporation
("Apollo"), as Administrative Agent and the lenders from time to time party
thereto (the "Second Lien Credit Facility") and an associate guarantee and
collateral agreement with Apollo (the "Second Lien Guarantee").
On June 2, 2014
, the Company entered into the Amendment No. 1 to Credit
Agreement and Guarantee and Collateral Agreement to the Second Lien Credit
Facility and the Second Lien Guarantee (the "Amendment"). The Amendment conforms
certain of the covenants, terms and conditions in the Second Lien Credit
Facility to match those of the First Lien Credit Facility, including the
The foregoing description is qualified in its entirety by reference to the full
text of the First Lien Loan Agreement which is filed as Exhibit 10.1 hereto and
incorporated by reference herein and the First Lien Guarantee which is filed as
Exhibit 10.2 hereto and incorporated by reference herein and the Amendment which
is filed as Exhibit 10.3 hereto and incorporated by reference herein.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
On July 29, 2013
, the Company entered into an Employment Agreement with Mr.
David J. Voyticky
as President of the Company (the "Executive") which terminates
on July 29, 2014
. On June 3, 2014
, the Company entered into an extension
agreement (the "Agreement") with Executive. The Agreement provides for, among
other things, an extension of the employment period from July 29, 2014
July 29, 2015
(the "Extension Period"), and a change in salary to $500,000.00
per year during the Extension Period. The Agreement also gives the Compensation
Committee of the Company's Board of Directors the discretion to conduct a
detailed review of the Company's compensation and employment practices and
propose additional terms of employment to Executive. The foregoing description
is qualified in its entirety by reference to the Agreement, which is filed as
Exhibit 10.4 to this report.
Item 7.01 Regulation FD Disclosure.
On June 3, 2014
, we issued a press release announcing entry into the First Lien
Credit Facility. Attached as Exhibit 99.1 is our press release relating to the
announcement of the First Lien Credit Facility.
Pursuant to General Instruction B.2 of Form 8-K, the information in this Item
7.01 of Form 8-K, including Exhibit 99.1, is being furnished and shall not be
deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of
1934 or otherwise be subject to the liabilities of that section, nor is it
incorporated by reference into any filing of Miller Energy Resources, Inc.
the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made
before or after the date hereof, regardless of any general incorporation
language in such filing.
Item 9.01. Financial Statements and Exhibits.
Credit Agreement dated as of June 2, 2014 among Miller Energy
Resources, Inc., as Borrower, and KeyBank National Association,
10.1 as Administrative Agent
Guarantee and Collateral Agreement in favor of KeyBank National
10.2 Association, as Administrative Agent
Amendment No. 1 to Credit Agreement and Guarantee and
10.3 Collateral Agreement dated as of June 2, 2014
Extension Agreement dated June 3, 2014 between David J.
10.4 Voyticky and the Company
Press Release dated June 3, 2014 announcing the entry into the
99.1 First Lien Credit Facility