Item 1.01 Entry into a Material Definitive Agreement
Empire Louisiana LLC, a Delaware limited liability company d/b/a Empire Louisiana LLC of Delaware ("Empire Louisiana"), is a wholly owned subsidiary of Empire Petroleum Corporation (the "Corporation"). Empire Louisiana entered into a senior revolver loan agreement with CrossFirst Bank ("CrossFirst") dated as of September 20, 2018 (the "Loan Agreement").
Pursuant to the Loan Agreement, (a) the initial revolver commitment amount is $1,350,000, (b) the maximum principal amount that may be advanced is $5,000,000, (c) there are scheduled semiannual borrowing base redeterminations each year on April 1 and October 1 beginning in 2019, (d) the final maturity date is September 20, 2020, (e) outstanding borrowings bear interest at a rate equal to the prime rate of interest plus one hundred fifty basis points (1.50%), and (f) Empire Louisiana has the right to prepay loans under the Loan Agreement at any time without a prepayment penalty.
The Loan Agreement is guaranteed by the Corporation. Empire Louisiana entered into a security agreement, pursuant to which the obligations under the Loan Agreement are secured by liens on substantially all of the assets of Empire Louisiana. Furthermore, the obligations under the Loan Agreement are secured by a continuing, first priority mortgage lien, pledge of and security interest in not less than 80% of Empire Louisiana's producing oil, gas and other leasehold and mineral interests in the State of Louisiana.
The Loan Agreement requires Empire Louisiana to, commencing December 31, 2018, maintain (i) a minimum ratio of EBITDAX to interest expense of 3.00 to 1.00 and (ii) a ratio of funded debt to EBITDAX, calculated quarterly based initially on an annualized basis until twelve months of operations have occurred and thereafter on a trailing twelve months basis, of 4.00 to 1.00 or more.
The Loan Agreement contains customary affirmative and negative covenants, including as to compliance with laws, maintenance of required insurance, delivery of quarterly and annual financial statements, oil and gas engineering reports, maintenance and operation of property (including oil and gas properties), restrictions on the incurrence of liens, indebtedness, asset dispositions, fundamental changes, restricted payments and other customary covenants.
The foregoing summary of the Loan Agreement is qualified in its entirety by reference to the full terms and conditions of such agreement, a copy of which is included as an exhibit to this Current Report on Form 8-K and is incorporated herein by reference.