FORBEARANCE
AGREEMENT, dated as of April 22, 2009 (this “
Agreement ”) among DHS HOLDING COMPANY, a Delaware
corporation (“ Holdings ”), DHS DRILLING
COMPANY, a Colorado corporation (“ Borrower ”)
and LEHMAN 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).
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 (as
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 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 Lender failed to fund a borrowing request in the amount of
$16,000,000 submitted by the Borrower under the Credit Agreement on
September 23, 2008 (“ Lender’s Breach
”); 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:
(a)
Acknowledgement . As of the date hereof, each of the Loan
Parties acknowledge that the failure by the Borrower to have
furnished (a) financial statements pursuant to
Section 5.1(a) of the Credit Agreement for the fiscal period
ended December 31, 2008, (including audit reports in respect
thereof without a “going concern” or like
qualification) and (b) the related deliverables as required by
Section 5.3(a) of the Credit Agreement constitutes a default
under the Credit Agreement (the “ Forbearance Default
”). By acknowledging the Forbearance Default, the Loan
Parties do not waive or release any defenses available at law or
equity as a result of Lender’s Breach.
(b)
Forbearance Period . (i) During the period from the
Effective Date (as defined below) until May 15, 2009 (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(c) 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, sue, 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, subject to any
defenses available at law or equity as a result of Lender’s
Breach. Each of the Loan Parties 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)
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
(iii) any
of the Loan Parties shall pay any management fees to Delta
Petroleum Corporation (“ Parent ”) or make any
other payments, distributions or dividends in respect of stock held
by Parent 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.
(d)
No Waiver . Any other provision of this Agreement
notwithstanding, the Loan Parties do not waive or release any
rights or defenses available to them as a result of Lender’s
Breach.
2
2.
Forbearance Requirements . The Borrower, Holdings and the
other Loan Parties agree to the following as consideration for the
Forbearance (the “ Forbearance Requirements
”):
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