exv10w1
Exhibit 10.1
May 4, 2011
JPMorgan Chase Bank, N.A.
2200 Ross Avenue, Third Floor
Dallas, Texas 75201
Attention: Kimberly A. Bourgeois
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Re: |
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Tenth Amendment to Credit Agreement dated as of January 18, 2008 among Approach
Resources Inc. (“Borrower”), JPMorgan Chase Bank, N.A. and the institutions named
therein (“Lenders”) and JPMorgan Chase Bank, N.A., as Agent (“Agent”) |
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of January 18, 2008 among
Approach Resources Inc., a Delaware corporation (“Borrower”), JPMorgan Chase Bank, N.A., as Agent
(“Agent”), and the Lenders that are signatory parties hereto (the “Lenders”), as amended by
amendments dated February 19, 2008, May 6, 2008, August 26, 2008, April 8, 2009, July 8, 2009,
October 30, 2009, February 1, 2010, May 3, 2010, October 21, 2010 and as of the date hereof (as
amended, the “Loan Agreement”). All capitalized terms herein shall have the meanings ascribed to
them in the Loan Agreement.
Pursuant to this Tenth Amendment (the “Amendment”), Agent, Lenders and Borrower agree,
effective as of the date hereof, to amend the Loan Agreement according to the terms and provisions
set forth below.
1. Increase to Borrowing Base and Commitment. As of the date hereof, the Borrowing
Base and Commitment under the Loan Agreement are increased to $200,000,000.
2. Amendment to Section 1. Definitions.
(a) Effective as of the date hereof, the definition of “Accounting Principles” is
deleted in its entirety and the following is substituted therefor:
“Accounting Principles means generally accepted accounting principles
(“GAAP”) in effect from time to time, applied in a manner consistent with prior
periods; provided that, if Borrower notifies Agent that Borrower requests an
amendment to any provision hereof to eliminate the effect of any change occurring
after the date hereof in GAAP or in the application thereof on the operation of such
provision (or if Agent notifies Borrower that the Required Lenders request an
amendment to any provision hereof for such purpose), regardless of whether any such
notice is given before or after such change in GAAP or in the application thereof,
then such provision shall be interpreted on the basis of GAAP as in effect and
applied immediately before such change shall
have become effective until such notice shall have been withdrawn or such provision
amended in accordance herewith.”
(b) Effective as of the date hereof, the definition of “Applicable Rate” is deleted in its
entirety and the following is substituted therefor:
“Applicable Rate means, for any day, with respect to any Base Rate Loan or
Eurodollar Loan, or with respect to the Unused Commitment Fees payable hereunder, as
the case may be, the applicable rate per annum set forth below under the caption
“Base Rate Margin”, “Eurodollar Margin” or “Unused Commitment Fee Rate”, as the case
may be, based upon the Borrowing Base Usage applicable on such date:
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| Borrowing Base |
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Base Rate |
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Unused Commitment |
| Usage |
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Eurodollar Margin |
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Margin |
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Fee Rate |
≥ 90%
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275.0 b.p.
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175.0 b.p.
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50.0 b.p. |
≥ 75% < 90%
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250.0 b.p.
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150.0 b.p.
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50.0 b.p. |
≥ 50% < 75%
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225.0 b.p.
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125.0 b.p.
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50.0 b.p. |
≥25% < 50%
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200.0 b.p.
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100.0 b.p.
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50.0 b.p. |
<25%
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175.0 b.p.
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75.0 b.p.
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50.0 b.p. |
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Each change in the Applicable Rate shall apply during the period commencing on the
effective date of such change and ending on the date immediately preceding the effective date of
the next change.”
(c) Effective as of the date hereof, the definition of “Commitment” is deleted in its
entirety and the following is substituted therefor:
“Commitment means (A) for all Lenders, the lesser of (i) the Facility Amount, or
(ii) the Borrowing Base, as reduced or increased from time to time pursuant to Sections 2
and 7 hereof, and (B) as to any Lender, its obligation to make Advances hereunder in amounts
not exceeding, in the aggregate, an amount equal to such Lender’s Commitment Percentage
times the total Commitment as of any date. The Commitment of each Lender hereunder shall be
adjusted from time to time to reflect assignments made by such Lender pursuant to Section 29
hereof. Each reduction in the Commitment shall result in a Pro Rata reduction in each
Lender’s Commitment.”
(d) Effective as of the date hereof, the definition of “Guarantors” is amended by
deleting therefrom the reference to Approach Oil & Gas (Canada) Inc. as a Guarantor.
(e) Effective as of the date hereof, the definition of “Maturity Date” is deleted in
its entirety and the following is substituted therefor:
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“Maturity Date means July 31, 2014.”
(f) Effective as of the date hereof, the following definitions are added to Section 1:
“Facility Amount shall mean $300,000,000.
Sole Bookrunner shall mean JPMorgan Securities LLC.
Sole Lead Arranger shall mean JPMorgan Securities LLC.”
3. Mandatory Borrowing Base Reductions. Section 2(g) of the Loan Agreement is hereby
deleted in its entirety and the following is substituted therefor:
“(g) Mandatory Borrowing Base Reductions. The Borrowing Base shall be reduced from
time to time as follows:
(i) by an amount of any prepayment required by Section 12(r) upon the
sale of assets; and
(ii) by twenty-five percent (25%) of the principal amount of each
issuance of senior unsecured indebtedness permitted under Section
13(d)(viii).
If, as a result of any such reduction in the Borrowing Base, the Total Outstandings ever
exceed the Borrowing Base then in effect, Borrower shall make the mandatory prepayment of principal
required pursuant to Section 9(b) hereof.”
4. Amendment to Section 3, “Notes Evidencing Loans.” Effective the date hereof, the first
sentence of Section 3(a) and the first sentence of Section 3(b) are deleted in their entirety and
the following are substituted therefor:
“(a) Form of Notes. The Loans shall be evidenced by a Note or Notes in the
aggregate face amount of the Facility Amount and shall be in the form of Exhibit “B” hereto
with appropriate insertions.
(b) Issuance of Additional Notes. At the Effective Date there shall be
outstanding Notes in the aggregate face amount of the Facility Amount and shall be in the
form of Exhibit “B” hereto with appropriate insertions.”
5. Amendment to Section 13(b)(ii), “Financial Covenants”. Effective as of the date
hereof, Subsection 13(b)(ii) of the Loan Agreement is hereby amended to provide as follows:
“(ii) Consolidated Funded Debt to Consolidated EBITDAX Ratio.
Commencing with the fiscal quarter ending June 30, 2011, Borrower and
Guarantors will not permit, as of the last day of any fiscal
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quarter, the ratio of the sum of (A) the Consolidated Funded Debt to
(B) the Consolidated EBITDAX (in each case annualized for the fiscal quarter
ending on such date by multiplying such sum by 4), to be greater than 4.0 to
1.0.”
6. Replacement of Exhibit “C,” “Certificate of Compliance”. Exhibit “C” to the Loan
Agreement is hereby deleted in its entirety and the Exhibit “C” attached hereto is substituted
therefor.
7. Amendment to Section 13(d), “Limitation on Additional Indebtedness”. Section 13(d)
of the Loan Agreement is hereby amended by adding the following Subsection (viii) thereto:
“(viii) the issuance of one or more issues of senior unsecured
indebtedness, provided however, that the aggregate principal amount of all
of such issues of such senior unsecured indebtedness shall not exceed
$200,000,000, and provided further that each such issuance shall result in a
reduction in the Borrowing Base then in effect equal to twenty-five percent
(25%) of the principal amount of such issuance.”
8. Amendment to Section 24, “Amendments”. Section 24 of the Loan Agreement is hereby
deleted in its entirety and the following is substituted therefor:
“24. Amendments. This Agreement may be amended only by an instrument in writing executed by
an authorized officer of the party against whom such amendment is sought to be enforced. No
modification or waiver of any provision of the Loan Documents, including this Agreement, or
the Notes nor consent to departure therefrom, shall be effective unless in writing signed by
Borrower and Required Lenders; provided, however, that no amendment, waiver, or other action
shall be effected pursuant to this Section 24 without the consent of all Lenders which: (a)
would increase the Borrowing Base (but excluding any waiver of (i) the Borrowing Base
reduction according to Section 2(g)(ii) hereof or (ii) the decrease in the amount of the
Borrowing Base reduction otherwise provided by Section 2(g)(ii), either of which will
require the consent of Required Lenders), (b) would reduce any fees hereunder, or the
principal of, or the interest on, any Lender’s Note or Notes, (c) would postpone any date
fixed for any payment of any fees hereunder, or any principal or interest of any Lender’s
Note or Notes, (d) would increase the aggregate Commitments or any Lender’s individual
Commitment hereunder or would materially alter Agent’s obligations to any Lender hereunder
(but excluding any waiver of (i) the Borrowing Base reduction according to Section 2(g)(ii)
hereof or (ii) the decrease in the amount of the Borrowing Base reduction otherwise provided
for by Section 2(g)(ii), either of which will require the consent of Required Lenders), (e)
would release Borrower from its obligation to pay any Lender’s Note or Notes or release any
Guarantor from any of its obligations, (f) would release any Collateral (other than the
Collateral that is sold or transferred with the prior consent of Required Lenders pursuant
to Section 13(a)(ii)), (g) would change the definition of Required Lenders (or
without the
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prior consent of Required Lenders if such consent is not required), or (h) would amend this
sentence. No such consent or waiver shall extend beyond the particular case and purpose
involved. No notice or demand given in any case shall constitute a waiver of the right to
take other action in the same, similar or other circumstances without such notice or demand.
No amendment of any provision of this Agreement relating to Agent shall be effective
without the written consent of Agent.”
9. Fees. Borrower shall pay to Agent and to Sole Lead Arranger and Sole Bookrunner
the fees set out in the fee agreement dated the date hereof (the “Fee Agreement”).
10. Assignments of Commitment. Prior to giving effect to this Amendment, JPMorgan
Chase Bank, N.A., BNP Paribas, KeyBank National Association and The Frost National Bank (the
“Existing Lenders”) each has a Commitment Percentage as set out below under the heading “Existing
Lender Commitments.” The Existing Lenders desire to assign to Royal Bank of Canada (the “New
Lender”), a percentage of each Existing Lender’s Commitment Percentage of its obligations as a
Lender under the Loan Agreement, such that after giving effect to such assignments and as of the
date hereof, the respective Commitment Percentages of the Existing Lenders and the New Lender will
be as set forth below under the heading “Revised Lender Commitments” and on Schedule I attached
hereto and made a part hereof and of the Loan Agreement, as amended hereby. Agent and Borrower
hereby consent to the assignments by Existing Lenders of such portion of each of their rights and
obligations as a Lender under the Loan Agreement to the New Lender. Effective as of the date
hereof such acquisition of a portion of the Existing Lenders’ Commitments by the New Lender shall
be deemed to have been consummated pursuant to the terms of the Assignment and Acceptance Agreement
attached as Exhibit D to the Loan Agreement (which is incorporated herein by reference as if fully
set forth herein) as if the Existing Lenders and the New Lender had executed Assignment and
Acceptance Agreements with respect to such assignments.
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Existing Lender Commitments |
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Revised Lender Commitments |
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| Lenders |
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Percentage |
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Amount |
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Percentage |
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Amount |
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JPMorgan Chase Bank, N.A. |
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30 |
% |
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$ |
45,000,000 |
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22.50 |
% |
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$ |
45,000,000 |
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BNP Paribas |
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23.33 |
% |
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$ |
35,000,000 |
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20.00 |
% |
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$ |
40,000,000 |
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KeyBank National Association |
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23.33 |
% |
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$ |
35,000,000 |
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20.00 |
% |
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$ |
40,000,000 |
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Royal Bank of Canada |
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N/A |
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N/A |
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20.00 |
% |
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$ |
40,000,000 |
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The Frost National Bank |
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23.33 |
% |
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$ |
35,000,000 |
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17.50 |
% |
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$ |
35,000,000 |
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TOTAL |
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100.00 |
% |
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$ |
200,000,000 |
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11. Schedule I. Effective as of the date hereof, Schedule I to the Loan Agreement is
deleted in its entirety and Schedule I attached hereto is substituted therefor.
12. Notes. Notwithstanding Sections 3(a) and 3(b) of the Loan Agreement referencing
that the Loans shall be evidenced by Notes payable to each Lender in the aggregate face amount of
the Facility Amount, the delivery of such a Note to the Lenders shall be at each
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Lender’s discretion. Any Lender may request that Loans made by it be evidenced by a Note. In such event, the Borrower shall prepare, execute and
deliver to such Lender a Note payable to the order of such Lender in the form of Exhibit “B” to the Loan Agreement. Thereafter, the Loans evidenced by such
Note and interest thereon shall at all times (including after assignment pursuant to Section 29 of the Loan Agreement) be represented by one or more Notes in such form payable to
the order of the payee named therein. Irrespective of the Facility Amount, no Lender shall ever be obligated to advance on the Commitment any amount in excess of its Commitment then in effect.
13. Release of Guaranty. By executing this Amendment, Agent, on behalf of Lenders,
Borrower and Approach Oil & Gas (Canada) Inc. (“Approach Canada”) hereby agree to terminate the
Restated Guaranty (the “Guaranty”) of Approach Canada. Agent, on behalf of Lenders, does hereby
release Approach Canada from any and all obligations, covenants, representations and warranties
contained in the Guaranty.
14. Conditions Precedent. The effectiveness of this Amendment is subject to the
satisfaction of the following conditions precedent, unless specifically waived in writing by
Lenders:
(a) The Amendment. Borrower, each Guarantor and each Lender shall have duly and
validly executed and delivered this Amendment to Agent.
(b) Replacement Notes. If requested by any Lender, and upon the delivery to
Borrower of the terminated existing Notes, Borrower shall have duly and validly executed the
Notes payable to each of the Lender signatories hereto in termination and replacement of the
existing Notes.
(c) Payment of Fees. Borrower shall have paid to Agent and to JPMorgan Securities LLC
the Fees described in the Fee Agreement.
(d) Representations and Warranties. The representations and warranties contained in
the Loan Agreement and in the other Loan Documents shall be true and correct in all material
respects as of the date hereof, as if made on the date hereof.
(e) No Default. No Default or Event of Default shall have occurred and be continuing.
(f) Corporate/Partnership Proceedings. All corporate and/or partnership proceedings,
taken in connection with the transactions contemplated by this Amendment and all documents,
instruments and other legal matters incident thereto shall be satisfactory to Agent, and its legal
counsel.
15. Ratification by Guarantors. Each Guarantor (with the exception of Approach
Canada) hereby ratifies and reaffirms all of its obligations under its Guaranty Agreement (the
“Guaranty”) of Borrower’s obligations under the Loan Agreement, as amended hereby. Each
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Guarantor also hereby agrees that nothing in this Amendment shall adversely affect any right or
remedy of Lenders under the Guaranty and that the execution and delivery of this Amendment
shall in no way change or modify its obligations as guarantor under the Guaranty. Although
each Guarantor has been informed by Borrower of the matters set forth in this Amendment and
such Guarantor has acknowledged and agreed to the same, such Guarantor understands that
Agent has no duty to notify such Guarantor or to seek such Guarantor’s acknowledgment or
agreement, and nothing contained herein shall create such a duty as to any transaction hereafter.
16. Representations and Warranties. By executing this Amendment, Borrower hereby
represents, warrants and certifies to Lenders that, as of the date hereof, (a) there exists no
Event of Default or events which, with notice or lapse of time, would constitute an Event of
Default; (b) Borrower has performed and complied with all agreements and conditions contained in
the Loan Agreement or the other Loan Documents which are required to be performed or complied with
by Borrower; and (c) the representations and warranties contained in the Loan Agreement and the
other Loan Documents are true in all material respects, with the same force and effect as though
made on and as of the date hereof.
17. Confirmation and Ratification. Except as affected by the provisions set forth
herein, the Loan Agreement shall remain in full force and effect and is hereby ratified and
confirmed by all parties. The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or remedy of Lenders
under the Loan Agreement or the other Loan Documents.
18. Reference to Loan Agreement. Each of the Loan Agreement and the Loan Documents,
and any and all other agreements, documents or instruments now or hereafter executed and delivered
pursuant to the terms hereof or pursuant to the terms of the Loan Agreement, as amended hereby, are
hereby amended so that any reference in the Loan Agreement, the Loan Documents and such other
documents to the Loan Agreement shall mean a reference to the Loan Agreement as amended hereby.
19. Multiple Counterparts. This Amendment may be executed in a number of identical
separate counterparts, 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 Amendment shall be bound hereby
until a counterpart of this Amendment has been executed by all parties hereto. Delivery of an
executed counterpart of a signature page of this Amendment by telecopy shall be effective as
delivery of a manually executed counterpart of this Amendment.
20. Final Agreement. THE LOAN AGREEMENT, AS AMENDED BY THIS AMENDMENT, AND ALL
PROMISSORY NOTES AND OTHER LOAN DOCUMENTS EXECUTED PURSUANT THERETO OR HERETO, REPRESENT THE FINAL
AGREEMENT AMONG 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 OR AMONG
ANY OF THE PARTIES.
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Please signify your acceptance to the foregoing terms and provisions by executing a copy of
this Amendment at the space provided below.
SIGNATURES TO FOLLOW
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Very truly yours,
BORROWER:
APPROACH RESOURCES INC.,
a Delaware corporation
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By: |
/s/ J. Ross Craft
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J. Ross Craft, President and Chief Executive Officer |
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GUARANTORS:
APPROACH OIL & GAS INC.,
a Delaware corporation
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By: |
/s/ J. Ross Craft
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J. Ross Craft, President and Chief Executive Officer |
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APPROACH RESOURCES I, LP,
a Texas limited partnership
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By: |
Approach Operating, LLC,
a Delaware limited liability company,
its general partner
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By: |
Approach Resources Inc.,
a Delaware corporation,
its sole member
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By: |
/s/ J. Ross Craft
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J. Ross Craft, President and Chief Executive Officer |
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RELEASED GUARANTOR:
APPROACH OIL & GAS (CANADA) INC.,
an Alberta, Canada corporation
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By: |
/s/ J. Ross Craft
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J. Ross Craft, President and Chief Executive Officer |
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ACCEPTED AND AGREED TO
effective as of the date and year
first above written:
AGENT:
JPMORGAN CHASE BANK, N.A.
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By: |
/s/ Michael A. Kamauf
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Michael A. Kamauf, Authorized Officer |
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LENDERS:
JPMORGAN CHASE BANK, N.A.
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By: |
/s/ Michael A. Kamauf
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Michael A. Kamauf, Authorized Officer |
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BNP PARIBAS, Lender and Syndication Agent
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By: |
/s/ John A. Clark
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Name: |
John A. Clark |
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Title: |
Managing Director |
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By: |
/s/ Betsy Jocher
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Name: |
Betsy Jocher |
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Title: |
Director |
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KEYBANK NATIONAL ASSOCIATION,
Lender and Documentation Agent
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By: |
/s/ David Morris
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Name: |
David Morris |
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Title: |
Vice President |
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THE FROST NATIONAL BANK
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By: |
/s/ John S. Warren
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John S. Warren, Senior Vice President |
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ROYAL BANK OF CANADA
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By: |
/s/ Don J. McKinnerney
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Name: |
Don J. McKinnerney |
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Title: |
Authorized Signatory |
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EXHIBIT “C”
CERTIFICATE OF COMPLIANCE
The undersigned APPROACH RESOURCES INC., a Delaware corporation (“Borrower”), hereby certifies
that J. Ross Craft is authorized to execute this Certificate of Compliance (in the capacity stated
in his signature below). With reference to that certain Credit Agreement, dated as of January 18,
2008 (as same may be amended, modified, increased, supplemented and/or restated from time to time,
the “Agreement”) entered into between the Borrower and JPMORGAN CHASE BANK, N.A. as “Agent” and
Lender, for itself and the Lenders signatory thereto (the “Lenders”), the undersigned further
certifies, represents and warrants on behalf of Borrower that all of the following statements are
true and correct (each capitalized term used herein having the same meaning given to it in the
Agreement unless otherwise specified):
(a) Borrower has fulfilled in all material respects its obligations under the Notes and
Loan Documents, including the Agreement, and all representations and warranties made herein
and therein continue (except to the extent they relate solely to an earlier date) to be true
and correct in all material respects.
(b) No Default or Event of Default has occurred under the Loan Documents, including the
Agreement.
(c) To the extent requested from time to time by the Agent, the certifying party shall
specifically affirm compliance of Borrower in all material respects with any of its
representations and warranties (except to the extent they relate solely to an earlier date)
or obligations under said instruments.
(d) Financial Computations for the period ending _______________ :
(i) Current Ratio:
(ii) Consolidated Funded Debt to Consolidated
EBITDAX Ratio:
EXECUTED,
DELIVERED AND CERTIFIED TO this __ day of ____, 200___.
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APPROACH RESOURCES INC.,
a Delaware corporation
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By: |
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J. Ross Craft, President and Chief |
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Executive Officer |
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SCHEDULE I
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Commitment Amount |
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Percentage Commitment |
JPMorgan Chase Bank, NA
|
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$ |
45,000,000.00 |
|
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22.50 |
% |
BNP Paribas
|
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$ |
40,000,000.00 |
|
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20.00 |
% |
Key Bank National Association
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$ |
40,000,000.00 |
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20.00 |
% |
Royal Bank of Canada
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$ |
40,000,000.00 |
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20.00 |
% |
The Frost National Bank
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$ |
35,000,000.00 |
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17.50 |
% |
TOTAL
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$ |
200,000,000.00 |
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|
100.00 |
% |
17