EXHIBIT 10.3
BANK ONE, TEXAS N.A.
TERMS AND CONDITIONS
NOVEMBER 20, 1997
LENDER: Bank One, Texas, National Association ("BOT" or "Bank").
BORROWER: Sheridan Energy, Inc. ("Sheridan" or "Borrower").
FACILITY: Secured reducing revolving credit facility, subject to
semi-annual Borrowing Base reviews.
PURPOSE: To finance acquisition and development of oil and gas
properties, specifically the acquisition of the "Mid-
Continent" and "Gulf Coast" properties from Pioneer
Natural Resources, which properties have been reviewed by
the Bank's engineering staff for purposes of this
financing proposal.
COMMITMENT
AMOUNT: Not to exceed the Borrowing Base.
BORROWING BASE: $40,000,000 effective November 1, 1997. Borrowing Base to
be redetermined semi-annually, or more often if necessary
as determined by Bank in its sole discretion. Next
Borrowing Base determination scheduled for April 1998.
REPAYMENT: Monthly interest payments. Availability of Commitment
Amount will reduce by $625,000 effective December 1,
1997, and by $550,000 effective January 1, 1998 and
continuing each month through the next Borrowing Base
determination. Thereafter, Commitment Amount will reduce
by an amount determined in connection with Borrowing Base
redetermination.
MANDATORY
REPAYMENT: Mandatory prepayments required to extent that
outstandings exceed Borrowing Base.
MATURITY: June 30, 2000.
INTEREST RATE: At the option of Borrower, BOT Base Rate floating or
LIBOR plus 2.50%. Available LIBOR periods are 1, 2, 3 or
4 months.
Sheridan Energy, Inc.
Summary of Terms and Conditions
Page 2
FACILITY FEE: $300,000. $100,000 payable upon delivery of commitment,
with remaining balance payable at closing.
COMMITMENT FEE: 0.375% per annum on unused Commitment Amount payable
quarterly in arrears.
COLLATERAL: Perfected first lien on all assets of Borrower, including
without limitation oil and gas properties, inventory,
account receivable, and equipment owned by Borrower.
LOAN AGREEMENT: This Facility will be subject to the negotiation and
execution of mutually acceptable Loan Documents. The Loan
Documents will include, without limitation, a Loan
Agreement that will contain certain representations and
warranties, affirmative covenants, negative covenants and
events of default that are customary for transactions of
this type.
The covenants will include, but will not necessarily be limited to, the
following:
. The Borrower will be required to hedge the interest
rate risk associated with a minimum of $20,000,000 of
the Commitment Amount for a minimum of 24 months. All
interest rate xxxxxx will be executed with Bank One,
or an entity acceptable to Bank.
. A prepayment fee will be payable in the event this
facility is refinanced by a credit facility from
another commercial bank, or is canceled before
maturity. Such prepayment fee will be $250,000 for
calendar 1997 or 1998 and $150,000 for calendar 1999.
. The Borrower will be required to limit General and
Administration Expenses to a maximum of 14% of gross
revenues as determined on a rolling four quarter
basis.
. The Borrower will be required to maintain a minimum
ratio of Cash Flow to Debt Service 1.10 to 1.00.
Cash Flow will be defined as net income from
operations plus depreciation, amortization, depletion
and other non-cash expenses less non-cash revenues
less mandatory capital expenditures. Debt Service will
be defined as the principal outstanding plus letters
of credit issued under the Note at the end of any
fiscal quarter divided by 20 plus preferred dividends
paid.
. Bank's commitment is contingent upon Xxxxxxxx's
successful placement of a minimum of $20,000,000
preferred or common stock in a form acceptable to the
Bank. Cash dividends will be allowed if Borrower
maintains a minimum ratio of Cash Flow to Debt
Service of 1.20 to 1.00, no uncured events of default
exist, and the payment of such dividends does not
result in an event of default.
Sheridan Energy, Inc.
Summary of Terms and Conditions
Page 3
. Bank's commitment is contingent upon satisfactory
title review by Bank's counsel on properties
comprising a minimum of 85% of the Borrowing Base PW
value.
. All other terms and conditions found in the First
Amended and Restated Credit Agreement between Sheridan
Energy, Inc. and Bank One, Texas, NA effective
September 30, 1007 will continue in full force and
effect.
This represents the terms and conditions on which Bank One, Texas, N.A. is
willing to increase the Available Commitment under the Existing Credit
Agreement. This commitment is subject to the execution of documentation
acceptable to Bank and Borrower. Additional terms and conditions may be
required as the Bank and Sheridan complete their title due diligence and final
documentation. This commitment will expire on November 20, 1997 at 5:00 p.m.
CST unless accepted by Xxxxxxxx evidenced by signing in space below and
accompanied by the $100,000 non-refundable fee referred to herein.
ACCEPTED
this 20th day of November, 1997.
Sheridan Energy, Inc.
By: /s/ X.X. Xxxxxxxx
_________________________________________
Title: President and Chief Executive Officer
_______________________________________
