THIRD AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Exhibit 10.3
THIRD AMENDMENT TO THIRD AMENDED
AND RESTATED CREDIT AGREEMENT
AND RESTATED CREDIT AGREEMENT
This Third Amendment to Third Amended and Restated Credit Agreement (this “Third Amendment”)
dated as of July 31, 2007, is by and among PARALLEL PETROLEUM CORPORATION, a Delaware corporation,
individually and as successor by merger to Parallel, L.P. and Parallel, L.L.C. (“Borrower”), and
CITIBANK, N.A., successor by merger to Citibank Texas, N.A., BNP PARIBAS, WESTERN NATIONAL BANK,
COMPASS BANK, COMERICA BANK, BANK OF SCOTLAND and FORTIS CAPITAL CORP. (collectively, “Lenders”),
and CITIBANK, N.A., as Joint Lead Arranger and as Administrative Agent (“Agent”) and BNP PARIBAS,
as Joint Lead Arranger and as Syndication Agent.
RECITALS:
WHEREAS, Borrower and Lenders in the capacities stated above, entered into that certain Third
Amended and Restated Credit Agreement dated as of December 23, 2005, as amended by First Amendment
to Third Amended and Restated Credit Agreement and Consent dated August 18, 2006 and by Second
Amendment to Third Amended and Restated Credit Agreement dated July 10, 2007 (the “Credit
Agreement”);
WHEREAS, on July 12, 2007, Parallel, L.P. and Parallel, L.L.C. merged with and into Borrower;
and
WHEREAS, Borrower and Lenders desire to amend the Credit Agreement in certain respects in
connection with the issuance by Borrower of certain senior unsecured notes under that certain
Indenture dated July 31, 2007, between Borrower, as Issuer, and Xxxxx Fargo Bank, National
Association, as Trustee.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and
other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged
and confessed, the parties hereto agree as follows:
Agreement
Section 1. Definitions. Except as otherwise expressly provided herein, all
terms defined in the Credit Agreement shall have the same meanings herein.
Section 2. Deleted Definitions. The defined terms “Intercreditor Agreement,”
“Subordinated Debt,” “Subordinated Loan Agreement,” and “Subordinated Notes” are hereby deleted
from Section 1 of the Credit Agreement.
Section 3. New Definitions. Section 1 of the Credit Agreement is hereby
amended to include the following additional defined terms in their appropriate alphabetical order:
(a) Indenture means that certain Indenture dated as of July 31, 2007,
between Borrower, as Issuer, and Xxxxx Fargo Bank, National Association, as Trustee,
as the same may be amended, modified or restated from time to time.
(b) Senior Unsecured Debt means all obligations owed by Borrower
pursuant to the Indenture, the Senior Unsecured Notes or any related document or
instrument, as the same may be amended, modified or restated from time to time.
(c) Senior Unsecured Notes means the Senior Unsecured Notes issued by
Borrower pursuant to the Indenture, as the same may be renewed, extended, modified
or amended from time to time.
Section 4. Amendment to Definition of Consolidated Current Liabilities. The
definition of “Consolidated Current Liabilities” in Section 1 of the Credit Agreement is hereby
amended in its entirety to read as follows:
Consolidated Current Liabilities means the total of consolidated
current obligations as determined in accordance with GAAP, excluding therefrom, as
of any date, current maturities due on the Loans and the Senior Unsecured Notes, and
excluding the after-tax net effect of any non-recurring non-cash charges after March
31, 2007, under Financial Accounting Standards Boards Statement No. 133, as amended,
supplemented or modified from time to time.
Section 5. Amendment to Definition of Permitted Liens. Item (xii) in the
definition of “Permitted Liens” in Section 1 of the Credit Agreement reading “(xii) Liens securing
the Subordinated Debt,” is hereby deleted from the definition of “Permitted Liens” in Section 1 of
the Credit Agreement.
Section 6. Amendment to Affirmative Covenant Regarding Prepayments with Asset
Sales Proceeds. Section 12(r) of the Credit Agreement is hereby amended in its entirety to
read as follows:
(r) Sale of Certain Assets/Prepayment of Proceeds. Borrower will
immediately pay over to the Agent for the ratable benefit of the Lenders as a
prepayment of principal on the Notes and a reduction of the Borrowing Base, an
amount equal to 100% of the net proceeds received by Borrower from the sale of Oil
and Gas Properties, which sale has been approved in advance by the Lenders. Any
such prepayment of principal on the Notes required by this Section 12(r) shall not
be in lieu of, but shall be in addition to, any mandatory prepayment of principal
required to be paid pursuant to Section 9(b) hereof.
Section 7. Amendment to Affirmative Covenant Regarding Delivery of
Information. Section 12(x) of the Credit Agreement is hereby amended in its entirety to read
as follows:
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(x) Indenture. Borrower will furnish to Agent copies of all documents,
instruments, notices, reports, certificates or other items which are furnished to or
received from the trustee pursuant to the terms of the Indenture or pursuant to any
document executed in connection with the Indenture, at the same time as the same are
furnished to or received from the trustee pursuant to the terms of the Indenture or
any such other document (except to the extent a copy of any such item has previously
been furnished to Agent).
Section 8. Amendment to Negative Pledge Covenant. Section 13(a)(ii) of the
Credit Agreement is hereby amended in its entirety to read as follows:
(ii) sell, lease, transfer or otherwise dispose of, in any fiscal year, any of
its respective assets except for (A) sales of extracted petroleum hydrocarbons made
in the ordinary course of Borrower’s oil and gas business, (B) to the extent not
otherwise forbidden under the Security Instruments, equipment that is worthless or
obsolete or which is replaced by equipment of equal suitability in value, and
interests in oil and gas leases, or portions thereof, so long as no well situated on
any such lease or located on any unit containing all or any part thereof, is capable
(or is subject to being made capable through commercially feasible operations) of
production oil, gas or other hydrocarbons or minerals in commercial quantities, and
(C) transfers to Borrower or any Subsidiary.
Section 9. Amendment to Funded Debt Ratio Covenant. Section 13(c) of the
Credit Agreement is hereby amended in its entirety to read as follows:
(c) Funded Debt Ratio. Borrower will not allow its ratio of
Consolidated Funded Debt to Consolidated EBITDA to exceed (i) 4.25 to 1.00 during
the year 2007, (ii) 4.00 to 1.00 during the year 2008, or (iii) 3.50 to 1.00 during
the year 2009 and thereafter during the term hereof. This ratio shall be calculated
at the end of each fiscal quarter of Borrower using the results of the twelve-month
period immediately preceding the end of each such fiscal quarter.
Section 10. Amendment to Debt Covenant. Section 13(f)(v) of the Credit
Agreement is hereby amended in its entirety to read as follows:
(v) the Senior Unsecured Debt, not to exceed an aggregate principal amount of
$150,000,000 outstanding at any time; or
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Section 11. Amendment to Dividend and Distributions Covenant. Section 13(g)
of the Credit Agreement is hereby amended in its entirety to read as follows:
(g) Dividend and Distributions. Borrower will not, and will not permit
any Subsidiary to, declare, pay or make any loans, advances, dividends or
distributions of any kind to its stockholders or other equity owners, or make any
other distribution on account of, or purchase, acquired or redeem or retire any
stock or other security issued by it, except that (i) Borrower’s Subsidiaries may
declare, pay or make dividends or distributions to Borrower, and (ii) Borrower may
use “Excess Proceeds” (as defined in the Indenture) to offer to purchase Senior
Unsecured Notes, but only to the extent required by Section 4.7(c) of the Indenture.
Section 12. Amendment to Loans and Advances Covenant. Section 13(h)(iv) of
the Credit Agreement is hereby amended in its entirety to read as follows:
(iv) loans or advances to Borrower or any Subsidiary.
Section 13. Amendment to Investment Covenant. Section 13(m)(iv) of the Credit
Agreement is hereby amended in its entirety to read as follows:
(iv) investments in Borrower or in any Subsidiary.
Section 14. Amendment to Other Debt Covenant. Section 13(r) of the Credit
Agreement is hereby amended in its entirety to read as follows:
(r) Senior Unsecured Debt. Borrower will not (i) amend or enter into
any agreement to amend or otherwise change the Indenture or any agreement or
instrument executed in connection therewith; (ii) fail to comply in any material
respect with the provisions of the Indenture; or (iii) except as specifically
required by the Indenture, make any prepayment of amounts owing under the Senior
Unsecured Notes.
Section 15. Events of Default. Section 14(o) of the Credit Agreement is
hereby deleted from the Credit Agreement and Section 14(n) of the Credit Agreement is hereby
amended in its entirety to read as follows:
(n) an Event of Default (as defined therein) shall occur under the terms of the
Indenture or under any document or instrument executed in connection therewith.
Section 16. Interest Rate Swaps. As a result of the reduction of the
indebtedness of Borrower to Lenders and the repayment of all of the Subordinated Debt in connection
with Borrower’s use of the net proceeds from the issuance of the Senior Unsecured Notes, a portion
of Borrower’s existing interest rate swaps (the “Interest Rate Swaps”) have become speculative in
nature. Lenders have requested, and Borrower covenants and agrees with Lenders that from and
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after December 31, 2007, Borrower will not allow the Interest Rate Swaps to continue to exist to
the extent the same are speculative in nature. The failure of Borrower to comply with the
foregoing covenant shall constitute an Event of Default under the Credit Agreement.
Section 17. Redetermination of Borrowing Base. In accordance with Section
7(c) of the Credit Agreement, an unscheduled redetermination of the Borrowing Base has been made by
Lenders. Pursuant to Section 7(c) of the Credit Agreement, Agent hereby notifies Borrower that
Lenders have redetermined the Borrowing Base and, effective as of the date of this Third Amendment,
the redetermined Borrowing Base is $150,000,000. The amount of the new Borrowing Base shall be
subject to redetermination as provided in the Credit Agreement. The next scheduled semi-annual
determination of the Borrowing Base by Lenders pursuant to the Credit Agreement shall be on or
about October 1, 2007.
Section 18. Representations and Warranties of Borrower. Borrower represents
and warrants to Lenders as follows:
(a) The representations and warranties contained in Section 10 of the Credit Agreement are
true and correct on and as of the date hereof as though made on and as of the date hereof, except
for those representations and warranties which address matters only as of a particular date (which
remain true and correct as of such date).
(b) No Event of Default or Default has occurred and is continuing under the Credit Agreement.
(c) The execution, delivery and performance by Borrower of this Third Amendment are within
Borrower’s corporate powers, have been duly authorized by all necessary action, require no action
by or in respect of, or filing with, any governmental body, agency or official and do not violate
or constitute a default under any provisions of applicable law or any material agreement binding
upon Borrower or its Subsidiaries or result in the creation or imposition of any Lien upon any of
the assets of Borrower or its Subsidiaries, except Permitted Liens.
(d) This Third Amendment constitutes the valid and binding obligation of Borrower enforceable
in accordance with its terms except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditor’s rights generally, and (ii) the availability of
equitable remedies may be limited by equitable principles of general application.
Section 19. Conditions Precedent. This Third Amendment shall be effective as
of the date upon which all of the following conditions have been satisfied:
(a) Agent shall have received counterparts of this Third Amendment duly executed by Borrower
and Lenders;
(b) Borrower shall have received the net proceeds from the senior unsecured debt offering
under the Indenture and applied the same first toward repayment of all of the
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Subordinated Debt and then toward repayment of the Revolving Loans under the Credit Agreement;
(c) Borrower shall have received and provided to Agent (i) copies of the Subordinated Notes
marked “PAID”, and (ii) releases of all Liens securing the Subordinated Debt, or arrangements
therefor satisfactory to Agent shall have been made;
(d) Agent shall have received a copy of the final offering circular in connection with the
Indenture and an executed copy of the Indenture;
(e) Agent shall have received from Borrower for the ratable benefit of Lenders an amendment
fee in the amount of $200,000; and
(f) Agent shall have received any other documents, certificates and opinions in connection
with this Third Amendment that may be requested by Agent, in form and substance satisfactory to
Agent.
Section 20. Ratification of Credit Agreement and Other Loan Documents. Except
as expressly amended hereby, the Credit Agreement and all of the other Loan Documents are and shall
be unchanged and all of the terms, provisions, covenants, conditions, schedules and exhibits
thereof shall remain and continue in full force and effect and are hereby ratified and confirmed by
Borrower and Lenders as of the date of this Third Amendment as if the Credit Agreement and the
other Loan Documents were executed by Borrower and the other parties thereto as of the date of this
Third Amendment. The amendments contemplated hereby shall not limit or impair any Liens securing
the Loans, each of which are hereby ratified, affirmed and extended to secure the Loans as they may
be increased pursuant hereto.
Section 21. No Waiver. Neither the execution by Lenders of this Third
Amendment nor anything contained herein shall in anywise be construed or operate as a waiver by
Lenders of any Default of Event of Default (whether now existing or that may occur hereafter) or of
any of Lenders’ or Agent’s rights under the Credit Agreement as amended hereby or under any of the
other Loan Documents.
Section 22. Miscellaneous.
22.1 Legal Expenses. Borrower hereby agrees to pay on demand all reasonable fees and
expenses of counsel to the Agent incurred by the Agent in connection with the preparation,
negotiation and execution of this Third Amendment and all related documents.
22.2 Multiple Counterparts. This Third Amendment may be executed in a number of
identical separate counterparts (including by facsimile transmission), each of which for all
purposes is to be deemed an original but all of which shall constitute, collectively, one
agreement. No party to this Third Amendment shall be bound hereby until a counterpart of this
Third Amendment has been executed by all parties hereto.
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22.3 Reference to Agreement. Each of the Loan Documents is hereby amended so that any
reference in the Loan Documents to the Credit Agreement shall mean a reference to the Credit
Agreement as amended hereby.
22.4 Governing Law. This Third Amendment is being executed and delivered, and is
intended to be performed, in Midland, Midland County, Texas, and the substantive laws of Texas
shall govern the validity, construction, enforcement and interpretation of this Third Amendment and
all other documents and instruments referred to herein, unless otherwise specified therein.
22.5 Plural and Singular Forms. The definitions given to terms defined hereby shall
be equally applicable to both the singular and plural forms of such terms.
22.6 Final Agreement. THIS THIRD AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
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IN WITNESS THEREOF, Borrower and Lenders have caused this Third Amendment to be duly executed
as of the day and year first above written.
| BORROWER: | PARALLEL PETROLEUM CORPORATION, | |||||||
| a Delaware corporation | ||||||||
| By: | /s/ Xxxxx X. Xxxxxx | |||||||
| Xxxxxx X. Xxxxxx | ||||||||
| Chief Financial Officer | ||||||||
| LENDERS: | CITIBANK, N.A. a national banking association, | |||||||
| as Joint Lead Arranger and Administrative Agent | ||||||||
| and as a Lender | ||||||||
| By: | /s/ Xxxxx X. Xxxxxxx | |||||||
| Xxxxx X. Xxxxxxx | ||||||||
| Vice President | ||||||||
[SIGNATURE PAGE TO THIRD AMENDMENT TO THIRD
AMENDED AND RESTATED CREDIT AGREEMENT]
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| BNP PARIBAS, as Joint Lead Arranger and |
||||
| Syndication Agent and as a Lender | ||||
| By: | /s/ Xxxxxxx Xxxx | |||
| Name: | Xxxxxxx Xxxx | |||
| Title: | Vice President | |||
| By: | /s/ Xxxxxx Xxxx | |||
| Name: | Xxxxxx Xxxx | |||
| Title: | Vice President | |||
[SIGNATURE PAGE TO THIRD AMENDMENT TO THIRD
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| WESTERN NATIONAL BANK, as a Lender |
||||
| By: | /s/ Xxxxxx X. Xxxxxx | |||
| Xxxxxx X. Xxxxxx President |
||||
[SIGNATURE PAGE TO THIRD AMENDMENT TO THIRD
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| COMPASS BANK, | ||||
| as a Lender | ||||
| By: | /s/ Xxxxxxxx X. Xxxxx | |||
| Name: | Xxxxxxxx X. Xxxxx | |||
| Title: | Senior Vice President | |||
[SIGNATURE PAGE TO THIRD AMENDMENT TO THIRD
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| COMERICA BANK, | ||||
| as a Lender | ||||
| By: | /s/ Xxxxxxx Xxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxx | |||
| Title: | Assistant Vice President | |||
[SIGNATURE PAGE TO THIRD AMENDMENT TO THIRD
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| BANK OF SCOTLAND, | ||||
| as a Lender | ||||
| By: | /s/ Xxxxx Xxxx | |||
| Name: | Xxxxx Xxxx | |||
| Title: | Assistant Vice President | |||
[SIGNATURE PAGE TO THIRD AMENDMENT TO THIRD
AMENDED AND RESTATED CREDIT AGREEMENT]
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| FORTIS CAPITAL CORP., | ||||
| as a Lender | ||||
| By: | /s/ Xxxxx Xxxxxxxxxx | |||
| Name: | Xxxxx Xxxxxxxxxx | |||
| Title: | Senior Vice President | |||
| By: | /s/ Xxxxxxx Xxxxxx | |||
| Name: | Xxxxxxx Xxxxxx | |||
| Title: | Managing Director | |||
[SIGNATURE PAGE TO THIRD AMENDMENT TO THIRD
AMENDED AND RESTATED CREDIT AGREEMENT]
AMENDED AND RESTATED CREDIT AGREEMENT]
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