Amended and Restated Forbearance Agreement No. 2
Exhibit 10.38
Amended and Restated Forbearance Agreement No. 2
AMENDED
AND RESTATED FORBEARANCE AGREEMENT NO. 2, dated as of March 15, 2011 (this
“Agreement”) among DHS HOLDING COMPANY, a Delaware corporation (“Holdings”), DHS DRILLING COMPANY,
a Colorado corporation (the “Borrower”) 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).
W I T N E S S E T H:
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 Forbearance Agreement, dated as of February 1, 2011 ( “Existing Forbearance Agreement No.
2”), 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 Existing Forbearance Agreement No. 2, 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 by the Borrower to (a) on January 3, 2011, service the amortization
payment due and payable pursuant to Section 2.4(a)(i) of the Credit Agreement (the “Payment
Default”), (b) on January 3, 2011, service the interest payment due and payable pursuant to Section
2.8(b) of the Credit Agreement (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 March 25, 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 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
(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
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(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, 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.
3. Representations and Warranties. Each of the Borrower and Holdings represents and
warrants as follows (which representations and warranties shall survive the execution and delivery
of this Agreement):
(a) Each of the Borrower and Holdings 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 of the
Borrower, Holdings and the other Loan Parties, as applicable, 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 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
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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”):
(a) this Agreement shall have been duly executed and delivered by the Borrower, Holdings, the
Lender and the Administrative Agent; and
(b) the Lender shall have received such other certificates, documents and agreements as the
Lender may reasonably request.
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 Borrower hereby agrees that all of the covenants and agreements contained in the
Credit Agreement and the Loan Documents are hereby ratified and confirmed in all respects.
(c) 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,
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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 | ||||||
| By: |
/s/ Xxxxxxx X. Xxxxx
|
|||||
| Title: Executive Vice President | ||||||
| DHS HOLDING COMPANY, as Holdings | ||||||
| By: |
/s/ Xxxxxxx X. Xxxxx
|
|||||
| Title: Executive Vice President | ||||||
[Signature Page to Agreement]
| XXXXXX COMMERCIAL PAPER, INC, as | ||||||
| Administrative Agent and Lender | ||||||
| By: |
/s/ Xxxxxx Xxx
|
|||||
| Title: Vice President | ||||||
[Signature Page to Agreement]
