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EXHIBIT 10.9
February 17, 2000
Xxxxxxx Oil & Gas, L.P.
0000 Xxxxxx Xxxxx Xxxxxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxxx, Xxxxx 00000
Re: Certain Fees Pursuant to Credit Agreement Dated as of
February 17, 2000, among Xxxxxxx Oil & Gas, L.P. (the
"Borrower"), Bank of Montreal, as Agent, Shell Capital Inc.
("SCI") and the lenders signatory thereto (the "Credit
Agreement")
Ladies/Gentlemen:
This letter (the "Fee Letter") is written to confirm our mutual
understanding with respect to certain fees in connection with the Credit
Agreement. All capitalized terms not defined herein shall have the meaning
assigned to such terms in the Credit Agreement.
In further consideration of our agreeing to enter into the facility
evidenced by the Credit Agreement, the Borrower does hereby agree to pay
certain additional fees to SCI for its own account as follows:
Borrower shall pay the following fees to SCI:
1. Engineering Fee in the amount of $10,000 to be paid on each
date of valuation of RAPRV and each Borrowing Base
Redetermination Date.
2. If the Target Asset Value of the Borrower, approved by SCI,
is less than the amount of outstanding Loans twelve (12)
months after the Closing Date, the Borrower shall pay SCI a
monthly fee equal to 50 basis points per annum multiplied by
the Convertible Amount (as such term is defined in the Equity
Conversion Agreement) at that time. Such fee shall accrue
beginning twelve (12) months after the Closing Date, shall be
payable monthly in arrears, and will cease to accrue upon the
Scheduled Asset Valuation Date on which the Target Asset
Value, approved by SCI, becomes greater than the amount of
outstanding Loans.
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3. If the Target Asset Value of the Borrower, approved by SCI,
is less than the amount of outstanding Loans eighteen (18)
months after the Closing Date, the Borrower shall pay SCI a
monthly fee equal to 100 basis points per annum (in
replacement of, but not in addition to, the fee described in
item 2 above) multiplied by the Convertible Amount (as such
term is defined in the Equity Conversion Agreement) at that
time. Such fee shall accrue beginning eighteen (18) months
after the Closing Date, shall be payable monthly in arrears,
and will cease to accrue upon the Scheduled Asset Valuation
Date on which the Target Asset Value, approved by SCI,
becomes greater than the amount of outstanding Loans.
Any breach of the terms of items 1, 2 and 3 above shall be an Event of
Default under the Credit Agreement, subject, however, to a ten (10) Business
Day period of grace.
This Fee Letter is further written to outline Borrower's
representation of its hedging strategy as follows:
1. Within five business days of the Closing Date, the Borrower
intends to enter into Hedging Agreements that together
provide a floor price covering (i) at least 70% of PDP
Reserves for no less than twelve (12) months after the
Closing Date, (ii) at least 50% of PDP Reserves for no less
than eighteen (18) months after the Closing Date and (iii) at
least 30% of PDP Reserves for no less than twenty-four (24)
months after the Closing Date.
2. Ongoing: The Borrower intends to use its best efforts to
maintain floor protection at levels in line with those
outlined in item (1) above on an on-going basis.
As with all significant information provided to SCI, the hedging
strategy outlined by Borrower was relied upon by SCI in making its
decision to enter into the Credit Agreement.
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Please evidence your acknowledgment and acceptance of the foregoing by
signing in the space provided below.
SHELL CAPITAL INC.
By:
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Name: Xxxxxx X. Xxxxxxx
Title: Vice President
ACKNOWLEDGED AND AGREED
this 17 day of February, 0000
XXXXXXX OIL & GAS, L.P.
By: Xxxxxxx, Inc., its General Partner
By:
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Name: Xxxxxx X. Xxxxxxx
Title: Chief Financial Officer
