SECOND AMENDMENT
TO
CREDIT AGREEMENT
among
DUNE ENERGY, INC.,
as the Borrower,
STANDARD BANK PLC,
as Administrative Agent,
and
The Lenders Signatory Hereto
Effective as of May 15, 2006
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this "Second Amendment")
executed effective as of the 15th day of May, 2006 (the "Second Amendment
Effective Date") is among DUNE ENERGY, INC. a corporation formed under the laws
of the State of Delaware (the "Borrower"); the Guarantors signatory hereto; each
of the Lenders that is a signatory hereto; and STANDARD BANK PLC., as
administrative agent for the Lenders (in such capacity, together with its
successors, the "Administrative Agent").
Recitals
A. The Borrower, the Administrative Agent and the Lenders are parties to
that certain Credit Agreement dated as of November 17, 2005, as amended by that
certain letter agreement dated December 16, 2005, (the "Credit Agreement"),
pursuant to which the Lenders have made certain credit available to and on
behalf of the Borrower.
B. The Borrower has requested, and the Borrower, the Administrative Agent
and Lenders have agreed to amend certain provisions and to waive certain other
provisions of the Credit Agreement.
C. NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Defined Terms. Each capitalized term which is defined in the
Credit Agreement, but which is not defined in this Second Amendment, shall have
the meaning ascribed such term in the Credit Agreement. Unless otherwise
indicated, all section references in this Second Amendment refer to the Credit
Agreement.
Section 2. Amendments to Credit Agreement.
2.1 Amendments to Section 1.02.
(a) The definition of "Agreement" is hereby amended and restated in its
entirety as follows:
" 'Agreement' means this Credit Agreement, as amended by that certain
letter agreement dated December 16, 2006 and the Second Amendment to
Credit Agreement, dated May 15, 2006 and as the same may from time to time
be further amended, modified, supplemented or restated."
(b) The following definition of "Second Amendment Effective Date" is
hereby added in the appropriate alphabetical order:
" 'Second Amendment Effective Date' shall mean May 15, 2006."
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(c) The definition of "Tangible Net Worth" is hereby amended and restated
in its entirety as follows effective as of December 31, 2005:
" 'Tangible Net Worth' means, at any date, the sum of (a) the consolidated
net worth of the Borrower and its Subsidiaries after subtracting therefrom
the aggregate amount of treasury stock, goodwill, deferred development
costs, franchises, licenses, patents, trademarks, trade names, copyrights,
service marks and brand names and all other intangible assets (other than
oil and gas leases to the extent classified as intangible assets), the
impact of ceiling test write-downs, the non-cash impact of Swap Agreement
and other comprehensive income of the Borrower and its Subsidiaries
classified as such under GAAP and (b) the principal outstanding on the
Subordinated Debt."
2.2 Amendment to Section 2.07. Section 2.07 is hereby amended and restated
in its entirety as follows:
"Section 2.07 Borrowing Base. From and after the Second Amendment
Effective Date the Borrowing Base is zero and any subsequent decision to
increase the Borrowing Base requires the approval of all the Revolving
Lenders, with such decision being taken by each Revolving Lender in its
sole and absolute discretion. Such decision will not be subject to normal
or reasonable oil and gas lending criteria."
2.3 Amendment to Section 10.01. Section 10.01 is hereby amended by adding
the following Sections 10.01(r), (s), (t) and (u):
"(r) The holders of the Subordinated Debt shall not have amended by May
31, 2006, the Subordinated Debt Documents in form and substance satisfactory to
the Administrative Agent to provide that any interest payments on the
Subordinated Debt on and after the date of such amendment shall not be paid in
cash, but shall only be paid in convertible subordinated notes; or the Borrower
shall fail to comply with such amendment; or the Borrower shall pay any cash
interest, whether accrued or not, on the Subordinated Debt after May 11, 2006.
This Section 10.01(r) shall cease to be effective when the Borrower is in
compliance with Sections 9.01(b) and (c) without giving effect to the waiver
contained in the Second Amendment to this Agreement.
(s) The Borrower has not entered into a drilling contract for the first
XxXxxx well detailed in the forecast provided to the Lenders on or before May
15, 2006 in substantially the form attached as Annex 1 to the Second Amendment
to this Agreement ("first XxXxxx Well").
(t) Drilling on the first XxXxxx well has not commenced by June 1, 2006
unless such date is extended by all of the Lenders.
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(u) Notwithstanding the provisions of Section 8.13 and 8.17, the Borrower
has not provided title opinion (which includes opinions as to any Liens
affecting the Property covered in such opinion) by May 19, 2006, in form and
substance satisfactory to the Administrative Agent and its counsel, covering all
xxxxx located on the Mortgaged Property owned or acquired through May 12, 2006."
Section 3. Waiver of Sections 9.01(b) and (c). Effective as of the date
hereof and continuing until June 15, 2006, the Administrative Agent and the
Lenders hereby waive compliance by the Borrower with Sections 9.01(b) and (c).
This temporary limited waiver shall not be deemed to be a consent to, or waiver
or modification of, any other term or condition of the Credit Agreement or any
other loan document and shall not prejudice any right or rights which the
Administrative Agent or the Lenders may now have or may have in the future under
the Credit Agreement or any other loan document.
Section 4. Conditions Precedent. The effectiveness of this Second
Amendment is subject to the receipt by the Administrative Agent of the following
documents and satisfaction of the other conditions provided in this Section 4,
each of which shall be reasonably satisfactory to the Administrative Agent in
form and substance:
4.1 Outstanding Invoices. Payment by the Borrower to the Administrative
Agent of all other fees and amounts due and payable on or prior to the Second
Amendment Effective Date, including, to the extent invoiced, reimbursement or
payment of all out-of-pocket expenses required to be reimbursed or paid by the
Borrower.
4.2 Second Amendment. The Administrative Agent shall have received
multiple counterparts as requested of this Second Amendment and the attached
confirmation from each Lender, the Borrower and each Guarantor and Itera.
4.3 No Default. No Default or Event of Default shall have occurred and be
continuing as of the Second Amendment Effective Date.
4.4 Opinion. The Administrative Agent shall have received an opinion of
Xxxxx & Xxx Xxxxxx LLP, special New York counsel to the Borrower, in form and
substance satisfactory to the Administrative Agent.
4.5 Representations and Warranties. The representations and warranties
contained in Section 5 are true and correct.
Section 5. Representations and Warranties. Each of the Borrower and each
Guarantor hereby represents and warrants that:
(a) each of the representations and warranties made by it under the
Credit Agreement and each other Loan Document is true and correct in all
material respects on and as of the date hereof, as if made on and as of such
date, except for any representations and warranties made as of a specified date,
which are true and correct in all material respects as of such specified date;
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(b) the execution, delivery and performance by it of this Second
Amendment have been duly authorized by it;
(c) this Second Amendment constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms; and
(d) its execution, delivery and performance of this Second Amendment
(i) do not require any consent or approval of, registration or filing with, or
any other action by, any Governmental Authority or any other third Person
(including shareholders or any class of directors, whether interested or
disinterested, of it or any other Person), nor is any such consent, approval,
registration, filing or other action necessary for the validity or
enforceability of this Second Amendment or any Loan Document or the consummation
of the transactions contemplated thereby, except such as have been obtained or
made and are in full force and effect, (ii) will not violate any applicable law
or regulation or the charter, by-laws or other organizational documents of it or
any of its Subsidiaries or any order of any Governmental Authority, (iii) will
not violate or result in a default under any indenture, agreement or other
instrument binding upon it or any of its Subsidiaries or its Properties, or give
rise to a right thereunder to require any payment to be made by it or such
Subsidiary and (iv) will not result in the creation or imposition of any Lien on
any of its Property or any of its Subsidiaries (other than Liens created by this
Second Amendment or the Loan Documents).
Section 6. Miscellaneous.
6.1 Confirmation. The provisions of the Credit Agreement (as amended by
this Second Amendment) shall remain in full force and effect in accordance with
its terms following the effectiveness of this Second Amendment.
6.2 Ratification and Affirmation of Obligors. The Borrower and each
Guarantor hereby expressly (i) acknowledge the terms of this Second Amendment,
(ii) ratify and affirm their obligations under the Security Instruments to which
they are a party, (iii) acknowledge, renew and extend their continued liability
under the Security Instruments to which they are a party. Without limiting the
generality of the foregoing, the Security Instruments and all of the Collateral
described therein do and shall secure the payment of all obligations under and
in respect of the Loan Documents, as amended and otherwise modified by this
Second Amendment. The execution, delivery and effectiveness of this Second
Amendment shall not operate as a waiver of any right, power or remedy of the
Administrative Agent, the Collateral Agent or any Lender under any of the Loan
Documents, nor constitute a waiver of any provision of the Loan Documents except
as set forth in Section 3 of this Second Amendment. All references to the Credit
Agreement in any other document, instrument, agreement or writing shall
hereafter be deemed to refer to the Credit Agreement as modified by this Second
Amendment.
6.3 Counterparts. This Second Amendment may be executed by one or more of
the parties hereto in any number of separate counterparts, and all of such
counterparts taken together shall be deemed to constitute one and the same
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instrument. Delivery of an executed counterpart of the signature page of this
Second Amendment by facsimile transmission shall be effective as delivery of a
manually executed counterpart hereof.
6.4 Entire Agreement. This Second Amendment and the documents referred to
herein represent the entire understanding of the parties hereto regarding the
subject matter hereof and supersede all prior and contemporaneous oral and
written agreements of the parties hereto with respect to the subject matter
hereof. This Second Amendment is a Loan Document executed under the Credit
Agreement.
6.5 Governing Law. THIS SECOND AMENDMENT, AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER, SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment
to be duly executed effective as of the date first written above.
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BORROWER: DUNE ENERGY, INC.
By:_____________________________________
Xxxx Xxxxxxx, Chief Financial Officer
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ADMINISTRATIVE AGENT & LENDER: STANDARD BANK PLC
By:_____________________________________
Name:___________________________________
Title:__________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
LENDER: DRAWBRIDGE SPECIAL
OPPORTUNITIES FUND, L.P.
By:_____________________________________
Name:___________________________________
Title:
By:_____________________________________
Name:___________________________________
Title:__________________________________
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LENDER: X.X. XXXXX SPECIAL
OPPORTUNITIES FUND, L.P.
By:_____________________________________
Name:___________________________________
Title:__________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
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GUARANTORS: DUNE OPERATING COMPANY
By:_____________________________________
Xxxx Xxxxxxx, Chief Financial Officer
VAQUERO PARTNERS LLC
By:_____________________________________
Xxxx Xxxxxx, Vice President
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ITERA CONFIRMATION
This Itera Confirmation is attached to and is a part of the Second
Amendment to Credit Agreement dated as of May 15, 2006 among Dune Energy, Inc.
Standard Bank PLC as administrative agent and the lenders party thereto, and
this confirmation adopts the definitions used therein. Itera Holdings BV
("Itera") hereby expressly (i) acknowledge the terms of this Second Amendment,
(ii) confirms that the Term Loan Agreement dated as of November 17, 2005 between
Dune Energy, Inc. and Itera and the Convertible Subordinated Note issued in
connection therewith are not in default and are in full force and effect, (iii)
represents that it is the sole holder of 100% of the Subordinated Debt, (iv)
agrees not to accept cash interest payments on the Subordinated Debt from May
11, 2006 until Section 10.01(r) of the Credit Agreement is no longer effective,
(v) agrees to amend the Subordinated Debt Documents to avoid an Event of Default
under Section 10.01(r), [and (vi) understands that the Lenders will consider at
a future date, based on conditions satisfactory to the Lenders in their sole
discretion at that time, allowing Itera to redeem for cash from the Borrower the
Convertible Subordinated Notes that it receives as a result of complying with
clauses (iv) and (v) above].
ITERA HOLDINGS BV
By _________________________
Name:
Title:
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ANNEX I
FORM OF DRILLING CONTRACT
(Exhibit Intentionally Omitted)
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