Third Amended and Restated Forbearance Agreement No. 2
Exhibit 10.4
EXECUTION VERSION
Third Amended and Restated Forbearance Agreement No. 2
THIRD AMENDED AND RESTATED FORBEARANCE AGREEMENT NO. 2, dated as of April 12, 2011 (this
“Agreement”) among DHS HOLDING COMPANY, a Delaware corporation (“Holdings”), DHS DRILLING COMPANY,
a Colorado corporation (the “Borrower”), the other Loan Parties party hereto, and XXXXXX
COMMERCIAL PAPER INC., as administrative agent (in such capacity, the “Administrative Agent”) and
as the Lender (in such capacity, the “Lender”) under that certain Credit Agreement (as defined
below).
WITNESSETH:
WHEREAS, the Borrower, Holdings, the Lender and the Administrative Agent are parties to that
certain Amended and Restated Credit Agreement, dated as of August 15, 2008, as amended by that
certain Amendment No. 1, dated as of September 19, 2008, and further amended by that certain
Waiver and Amendment Xx. 0, xxxxx xx xx Xxxxx 0, 0000 (xx further amended, modified or
supplemented from time to time in accordance with its terms, the “Credit Agreement”; capitalized
terms used but not defined herein shall have the respective meanings ascribed to such terms in the
Credit Agreement);
WHEREAS, the Borrower, Holdings, the Lender and the Administrative Agent are parties to that
certain Second Amended and Restated Forbearance Agreement No. 2, dated as of March 25, 2011 (the
“Existing Forbearance Agreement”), pursuant to which the Lender and the Administrative Agent
agreed to forbear from exercising certain rights under the Credit Agreement and the other Loan
Documents in connection with the Forbearance Default (as defined herein);
WHEREAS, the Borrower has failed in its performance of certain provisions of the Credit
Agreement as further described herein, such failure constituting a default under the Credit
Agreement;
WHEREAS, the Borrower and Holdings have requested that the Lender and the Administrative
Agent amend and restate the Existing Forbearance Agreement, and the Lender and the Administrative
Agent have agreed to do so, to, inter alia, extend the Forbearance Period (as defined herein) and
provide for the Waiver (as defined herein), on the terms and conditions specified; and
WHEREAS, the Borrower and Holdings have requested that the Lender and the Administrative
Agent forbear, and the Lender and the Administrative Agent have agreed, subject to the terms and
conditions of this Agreement, to forbear, from exercising certain rights under the Credit
Agreement and the other Loan Documents during the Forbearance Period (as defined below).
NOW, THEREFORE, in consideration of the premises and the agreements hereinafter contained,
the parties hereto agree as follows:
1. Forbearance.
(a) Acknowledgement. As of the date hereof, each of the Loan Parties party hereto
acknowledge that the failure and anticipated failure, as the case may be, by the Borrower to (a)
on January 3, 2011 and on April 1, 2011, service the amortization payment due and payable pursuant
to Section 2.4(a)(i) of the Credit Agreement (together, the “Payment Default”), (b) on
January 3, 2011 and on April 1, 2011, service the interest payment due and payable pursuant to
Section 2.8(b) of the Credit Agreement (together, the “Interest Default”) and (c) for the fiscal
quarter ending on December 31, 2010, comply with the covenant under Section 6.1(a) of the Credit
Agreement with respect to maintenance of Minimum Consolidated EBITDA (the “Maintenance Default,”
together with the Payment Default and Interest Default, the “Forbearance Default”) constitutes a
default under the Credit Agreement.
(b) Forbearance Period, (i) During the period from the Effective Date (as defined
below) until April 15, 2011 (the “Forbearance Period”), each of the Administrative Agent and the
Lender hereby agrees to forbear (the “Forbearance”) from exercising its rights and remedies under
the Credit Agreement and the other Loan Documents arising as a result of the Forbearance Default;
provided, however, that upon the occurrence of any Event of Default other than the
Forbearance Default, including the Events of Defaults set forth in Section 1(d) hereof, the
Forbearance Period shall automatically and immediately terminate, and the Administrative Agent and
the Lender shall be entitled to exercise any and all of their rights and remedies under the Credit
Agreement, the other Loan Documents and applicable law, without further notice other than as
required therein. Upon termination of the Forbearance Period, (A) the forbearance shall
automatically terminate and be of no further force or effect without any further action by the
Lender, (B) the Forbearance Default is, without further action, reinstated and shall have the same
force and effect as if the Forbearance had not been agreed to by the parties hereto and (C)
subject to the terms of the Credit Agreement, the Loan Documents and applicable law, the Lender
may thereafter, without limitation, xxx, ask for or demand from the Loan Parties payment of the
Obligations due and payable to such Lender, in whole or in part, and otherwise enforce any of its
rights and remedies (including rights of acceleration and foreclosure) provided for under the
Credit Agreement, the Loan Documents or applicable law against any party. Each of the Loan Parties
party hereto agrees that, subject to the agreement of the Lender to forbear from exercising
certain of their rights and remedies as and to the extent expressly set forth in this Agreement,
all rights and remedies of the Lender under the Credit Agreement, the Loan Documents or applicable
law with respect to such Loan Party shall continue to be available to the Lender from and after
the Effective Date.
(ii) It is understood and agreed that interest shall accrue from the Effective Date through
the remainder of the Forbearance Period on the outstanding Obligations at the applicable default
rates provided for pursuant to the Credit Agreement.
(c) Waiver. Each of the Lender and the Administrative Agent hereby agree to waive
compliance by Holdings and the Borrower of their respective obligations under the Credit Agreement
to make payments of principal and interest and to waive compliance with the terms of Section
5.1(a) of the Credit Agreement, solely as such section requires Holdings and the Borrower to
deliver financial statements to each Agent and Lender on March 31, 2011 (the “Waiver”);
provided, that this Waiver shall terminate and be of no further force and effect if such
financial statements are not delivered by Holdings and the Borrower on or prior to April 15, 2011,
in accordance with the terms of the Credit Agreement.
(d) Additional Events of Default. The following events shall constitute Events of
Default under the terms of the Credit Agreement and the other Loan Documents:
(i) any of the Borrower, Holdings or the other Loan Parties shall pledge, encumber, charge,
assign or grant a security interest in, or encumbrance of any kind on, any Collateral; or
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(ii) any of the Borrower, Holdings or the other Loan Parties shall enter into any arrangement
to provide priority or preference with respect thereto, in connection with securing or obtaining
debtor-in-possession financing; or
(iii) any of the Loan Parties shall (x) pay any management fees to either of Delta Petroleum
Corporation (“Parent”) or Chesapeake Energy Corporation (“Chesapeake”) or (y) make any other
payments, distributions or dividends in respect of stock held by either of Parent or Chesapeake in
any Loan Party; or
(iv) Holdings, the Borrower or any other Loan Party shall fail to perform or observe any
term, covenant or agreement set forth in this Agreement; or
(v) any representation or warranty made or deemed made by any Loan Party herein or any
representation or warranty made or deemed made hereafter by any Loan Party in any Loan Document or
which is made in connection with this Agreement or any other Loan Document shall prove to have
been incorrect or misleading in any material respect on or as of the date made or deemed made.
2. Forbearance Requirements.
As consideration for the Forbearance, during the Forbearance Period:
(a) Holdings and Borrower shall permit any third party financial consultant or advisor acting
on behalf of the Lender or Administrative Agent to inspect the property of Holdings and its
Subsidiaries and to conduct such other activity as contemplated in Section 5.7(b) of the Credit
Agreement.
(b) The Borrower shall facilitate such meetings between the Administrative Agent and
Macquarie Capital (USA) Inc., as the Borrower’s financial advisor, as the Administrative Agent may
request from time to time.
(c) The Loan Parties shall provide the Lender with such other certificates, documents and
agreements as the Lender may reasonably request.
3. Representations and Warranties. Each of the Loan Parties party hereto represents
and warrants as follows (which representations and warranties shall survive the execution and
delivery of this Agreement):
(a) Each Loan Party has taken all necessary action to authorize the execution, delivery and
performance of this Agreement.
(b) This Agreement constitutes the legal, valid and binding obligation of each Loan Party,
enforceable against them in accordance with their respective terms, subject to applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws affecting the enforcement of
creditors’ rights generally and to general equity principles.
(c) No consent or approval of any person, firm, corporation or entity, and no consent,
license, approval or authorization of any governmental authority is or will be required in
connection with the execution, delivery, performance, validity or enforcement of this Agreement,
other than any such consent, approval, license or authorization which has been obtained and
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remains in full force and effect or where the failure to obtain such consent, approval, license or
authorization would not result in a Material Adverse Effect.
(d) After giving effect to this Agreement, each of the Borrower, Holdings and the other Loan
Parties is in compliance with all of the various covenants and agreements set forth in the Credit
Agreement and each of the other Loan Documents, other than the Forbearance Default.
(e) After giving effect to this Agreement and the agreements to be delivered in connection
herewith, no event has occurred and is continuing which constitutes a Default or an Event of
Default, other than the Forbearance Default.
(f) After giving effect to this Agreement and the agreements to be delivered in connection
herewith, all representations and warranties contained in the Credit Agreement and each of the
other Loan Documents are true and correct in all material respects as of the date hereof, except
to the extent that any representation or warranty relates to a specified date, in which case such
are true and correct in all material respects as of the specific date to which such
representations and warranties relate, and except to the extent of any inconsistency in such
representations or warranties arising directly out of the Forbearance Default.
(g) Each report delivered and any information provided pursuant to or in connection with this
Agreement has and will be prepared on a reasonable basis and in good faith, and has/will be based
on assumptions believed by the applicable Loan Party to be reasonable at the time made and upon
the best information available to such Loan Party, and such Loan Party is not aware of any facts
or information that would lead the applicable party to believe that any such information or report
is incorrect or misleading in any material respect.
4. Fees and Expenses. The Borrower and Holdings agree to pay on demand all fees,
costs and expenses, including reasonable attorneys’ and consultants’ fees, of the Administrative
Agent and the Lender incurred in connection with this Agreement.
5. Effective Date. This Agreement shall not become effective unless and until (the
latest date upon which such occurs, the “Effective Date”) this Agreement shall have been duly
executed and delivered by the Loan Parties party hereto, the Lender and the Administrative Agent.
6. Reference and Continued Effectiveness of the Loan Documents.
(a) The term “Agreement”, “hereof”, “herein” and similar terms as used in the Credit
Agreement, and references in the other Loan Documents to the Credit Agreement, shall mean and
refer to, from and after the Effective Date, the Credit Agreement as affected by this Agreement.
(b) The Loan Parties hereby agree that all of the covenants and agreements contained in the
Credit Agreement and the Loan Documents are hereby ratified and confirmed in all respects and
confirm the Collateral will remain subject to the security interest of the Administrative Agent
for the benefit of the Secured Parties pursuant to the Loan Documents.
(c) The execution, delivery and effectiveness of this Agreement shall not, except as
expressly provided herein, operate as a forbearance or waiver of any right, power or remedy of the
Administrative Agent or the Lender under any of the Loan Documents, nor
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constitute a forbearance
or waiver of any other provision in any of the Loan Documents, except as expressly provided
herein.
(d) This Agreement constitutes a Loan Document.
7. Counterparts. This Agreement may be executed in counterparts, each of which shall
be an original, and all of which, taken together, shall constitute a single instrument. Delivery
of an executed counterpart of a signature page to this Agreement by telecopier shall be effective
as delivery of a manually executed counterpart of this Agreement.
8. Governing Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York without giving effect to the conflict of laws provisions
thereof.
9. Limitation. Each party hereto hereby agrees that this Agreement does not impose on
Xxxxxx Commercial Paper Inc. affirmative obligations or indemnities not existing, as of the date
of its petition commencing its proceeding under chapter 11 of the United States Code, and that
could give rise to administrative expense claims.
10. Indemnity. The Borrower, Holdings and the other Loan Parties further agree,
jointly and severally, to defend, protect, indemnify and hold harmless the Administrative Agent
and the Lender, each of their respective Affiliates and their respective officers, directors,
employees, attorneys and agents (collectively the “Indemnitees”) from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs,
expenses of any kind or nature whatsoever (including, without limitation, the reasonable fees and
expenses of counsel for such Indemnitees in connection with any investigative, administrative or
judicial proceeding, whether or not such Indemnitees shall be designated as a party thereto),
imposed on, incurred by, or asserted against such Indemnitees in any manner relating to or arising
out of this Agreement or any other Loan Document (collectively the “Indemnified Matters”);
provided, however, that neither the Borrower, Holdings or any Loan Party shall
have an obligation to an Indemnitee hereunder with respect to Indemnified Matters caused or
resulting from (a) a dispute among the Lender or a dispute between the Lender and the
Administrative Agent or (b) the willful misconduct or gross negligence of such Indemnitee. If the
undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it violates any law or public policy, the Borrower, Holdings and the other
Loan Parties shall contribute the maximum portion which it is permitted to pay and satisfy under
the applicable law, to the payment and satisfaction of all Indemnified Matters incurred by
Indemnities. This Section 10 shall survive the payment of the Obligations and the termination of
this Agreement or any other Loan Document.
[Signature Pages Follow]
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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly
executed by their respective officers as of the date first written above.
| DHS DRILLING COMPANY, as the Borrower |
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| By: | /s/ Xxxxx Xxxxx | |||
| Name: | Xxxxx Xxxxx | |||
| Title: Executive Vice President | ||||
| DHS HOLDING COMPANY, as Holdings |
||||
| By: | /s/ Xxxxx Xxxxx | |||
| Name: | Xxxxx Xxxxx | |||
| Title: | Executive Vice President | |||
| XXXXXXX TRUCKING COMPANY, INC., as Guarantor |
||||
| By: | /s/ Xxxxx Xxxxx | |||
| Name: | Xxxxx Xxxxx | |||
| Title: | Executive Vice President | |||
| HASTINGS DRILLING COMPANY, as Guarantor |
||||
| By: | /s/ Xxxxx Xxxxx | |||
| Name: | Xxxxx Xxxxx | |||
| Title: | Executive Vice President | |||
| C&L DRILLING COMPANY, as Guarantor |
||||
| By: | /s/ Xxxxx Xxxxx | |||
| Name: | Xxxxx Xxxxx | |||
| Title: | Executive Vice President | |||
[Signature Page to Agreement]
| XXXXXX COMMERCIAL PAPER, INC, as Administrative Agent and Lender |
||||
| By: | /s/ Xxxxxx Xxx | |||
| Name: | Xxxxxx Xxx | |||
| Title: | Vice President | |||
[Signature Page to Agreement]
