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EXHIBIT 10.19
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FINAL EXECUTION VERSION
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06/12/08
TO CREDIT AGREEMENT
THIS
FORBEARANCE AGREEMENT AND AMENDMENT NO. 1 TO CREDIT AGREEMENT
(this “
Agreement ”),
dated as of June 2, 2008, is among Aurora Oil & Gas
Corporation, a Utah corporation (the “
Borrower ”),
BNP PARIBAS, as administrative agent for the Lenders (in such
capacity together with any successors thereto, the “
Administrative Agent ”),
the Lenders and the Secured Swap Providers.
RECITALS
WHEREAS,
the Borrower, the Administrative Agent and the Lenders entered
into that certain Amended and Restated Credit Agreement, dated
as of August 20, 2007 (together with all amendments,
restatements, supplements or other modifications from time to
time made thereto, the “
Credit Agreement ”),
pursuant to which the Lenders have made Loans to the
Borrower;
WHEREAS,
the Borrower has notified the Administrative Agent that it has
suffered certain identified Defaults or Events of Default and
failed or may shortly fail to comply with certain covenants
set forth in the Credit Agreement, with the result being that
certain identified Defaults or Events of Default have occurred
or may occur and be continuing under the Credit
Agreement;
WHEREAS,
the Borrower has requested that the Administrative Agent, the
Secured Swap Providers and the Lenders (1) permanently waive
certain identified Events of Default, and (2) forbear and not
waive, but instead refrain from exercising any available
rights and remedies in respect of certain other potential
identified Defaults or Events of Default, and the
Administrative Agent, the Secured Swap Providers and the
Lenders are willing to do so but only on the terms, conditions
and limitations hereinafter set forth;
WHEREAS,
Borrower, Hudson Pipeline & Processing Co., LLC (the
“
Guarantor ”)
and the other signatories hereto also intend to amend the Credit
Agreement as hereinafter set forth;
NOW,
THEREFORE, in consideration of the foregoing, the mutual
agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as
follows:
SECTION 1.
DEFINED TERMS
.
Unless
expressly defined herein, all defined terms used herein shall
have the same meanings as set forth in the Credit Agreement.
Section references are to sections in the Credit Agreement
unless otherwise noted.
SECTION 2.
WAIVER AND CONSENT.
2.1
Waiver of Defaults .
The Borrower has informed the Administrative Agent and the Lenders
that it has failed to comply with the financial covenant in Section
9.01(a) for the period ending prior to and including March 31,
2008. In addition, the Borrower has informed the Administrative
Agent and the Lenders that it has failed to achieve daily
production required in Section 8.18 as of March 31, 2008. The
Borrower hereby requests, and the Lenders hereby do, permanently
waive any Default or Event of Default under Section 10.01(d) and
(e) resulting from the non-compliance with Sections 9.01(a) and
8.18 for any date of determination occurring on or prior to and
including March 31, 2008 (such Defaults and Events of Default being
referred to herein as the “
Waived Defaults ”).
The waiver in this Section 2.1 is limited to the Waived Defaults
and shall not be construed as a waiver of any Defaults or Events of
Default under such Sections of the Credit Agreement for any periods
other than those specified herein and shall not apply to any other
Defaults or Events of Default that may exist or arise
later.
2.2
Consent to Sale of Woodford Shale Oil and Gas Properties
.
Subject to compliance with the following sentence, the Lenders
hereby consent under Section 9.12 to the sale of certain Oil and
Gas Properties located in Cleveland, Pottawatomie and McClain
Counties in Oklahoma which do not contain any proved reserves as of
the date of this Agreement and which are commonly known as the
Woodford Shale (the “
Woodford Shale Oil and Gas Properties ”)
or all of the Equity Interests of the Wholly-Owned Subsidiary
owning the Woodford Shale Oil and Gas Properties (which owns no
other Properties other than Properties ancillary thereto); provided
that (a) no Default or Event of Default under any Section of the
Credit Agreement (other than the Designated Defaults or the Waived
Defaults) exists at the time of such sale and (b) such sale is for
substantially all cash and results in a gross cash amount in excess
of the aggregate purchase price paid for the Woodford Shale Oil and
Gas Properties. In the event the Borrower sells all or any material
portion of the Woodford Shale Oil and Gas Properties (or the Equity
Interests in the Wholly-Owned Subsidiary owning such Properties),
the Borrower will, on the next Business Day after it receives any
cash proceeds associated therewith, use 50% of the net cash
proceeds to prepay Loans outstanding under the Credit Agreement,
including any Borrowing Base Deficiency, to be applied in
accordance with Section 3.04, as it may be modified by Section
3.2(f) of this Agreement.
SECTION 3.
FORBEARANCE.
3.1
Acknowledgement of Designated Defaults and Borrowing Base
Deficiency .
The Borrower and the Guarantor acknowledge and agree as
follows:
(a)
the
Borrower is or may be in default of, is or may be in or breach
of or has failed or may fail to comply with certain covenants
contained in the Loan Documents, as and to the extent further
described on Schedule I attached hereto (such defaults being
collectively referred to herein as the “
Designated Defaults ”);
(b)
the
Majority Lenders in accordance with, and subject to, the terms
of the Loan Documents have the right to accelerate the Loans
outstanding under the Credit Agreement and to make demands
upon the Borrower and the Guarantor for the payment in full of
the Indebtedness for the Designated Defaults; and
(c)
as
of June 6, 2008, the Administrative Agent sent to the Borrower
a New Borrowing Base Notice which contained a Borrowing Base
Deficiency, but which provided that any amortization of such
deficiency required by the Credit Agreement may be modified by
the subsequent agreement of the Lenders and the
Borrower.
3.2
Agreement to Standstill and Deferral of Amortization of Borrowing
Base Deficiency .
(a)
The
Administrative Agent, for itself and on behalf of the Lenders
and each of the Secured Swap Providers, agrees, subject to the
complete satisfaction of the conditions precedent set forth in
Section 6 hereof, to forbear and refrain during the period
from June 2, 2008, until and including August 15, 2008 (the
“
Standstill Period ”)
from (i) accelerating any Loans outstanding under the Credit
Agreement, (ii) exercising all rights and remedies and (iii) taking
any other enforcement action under the Loan Documents at law or
otherwise, in each case, as a result of the Designated Defaults.
Nothing contained in this Agreement shall prejudice any rights or
remedies that the Administrative Agent, any of the Secured Swap
Providers or any of the Lenders may have to exercise any rights and
remedies during the Standstill Period with respect to any Defaults
or Event of Default (whether now existing or hereafter occurring)
other than the Designated Defaults. Moreover, nothing contained in
this Agreement shall prejudice any rights or remedies the
Administrative Agent, any of the Secured Swap Providers or any of
the Lenders may have to exercise any rights and remedies with
respect to the Designated Defaults (other than the Waived Defaults)
after expiration of the Standstill Period. The Standstill Period
shall terminate upon the occurrence of any Forbearance Termination
Event (as defined below).
(b)
During
the Standstill Period, the Administrative Agent and the
Lenders agree to forbear and refrain from initiating an
Interim Redetermination of the Borrowing Base under Section
2.07(b). The foregoing shall not affect any adjustment
occurring to the Borrowing Base under Section
9.12(d).
(c)
Notwithstanding
Section 2.04(e) to the contrary, during the Standstill Period,
the Designated Defaults shall not serve to prevent the
interest elections of the Borrower otherwise permitted under
Section 2.04. The Lenders will not impose Post-Default Rate
interest for the Designated Defaults during the Standstill
Period or thereafter.
(d)
During
the Standstill Period, the Secured Swap Providers agree to
forbear and refrain from declaring Defaults, Events of Default
or Termination Events (as defined in the Swap Agreements) that
results from any of the Designated Defaults.
(e)
The
Borrower shall continue to have and reserves all rights to
invoke an Interim Redetermination of the Borrowing Base under
the Credit Agreement (provided that any election after August
1, 2008 shall not result in a deferral of the August 18, 2008
Borrowing Base Deficiency payment (if any) resulting from the
New Borrowing Base Notice delivered on or about June 6,
2008).
(f)
The
Lenders acknowledge and agree that, unless otherwise
accelerated under Section 10.02 (to the extent not prohibited
by this Agreement), the first payment (if any) required to
amortize the Borrowing Base Deficiency (if any) noted in the
New Borrowing Base Notice will be deferred until August 18,
2008. For the avoidance of doubt, the parties agree that any
prepayment made under Section 2.2 of this Agreement with the
net cash proceeds from the sale of the Woodford Shale Oil and
Gas Properties (or the Equity Interests of the Wholly-Owned
Subsidiary owning such Properties) may be applied to reduce
the amount of any installment due in respect of such Borrowing
Base Deficiency in direct order of maturity.
3.3
Forbearance Covenants .
The Borrower agrees to comply with each of the following covenants
during the Standstill Period:
(a)
Monthly Financial Reports .
The Borrower shall deliver to the Administrative Agent on or before
the twentieth business day of each month, a detailed monthly
financial reporting package for the previous month that shall
include an account payables aging, status of working capital,
monthly production reports and lease operating
statements.
(b)
Calls with Lenders .
The Borrower and its advisors shall participate in monthly
conference calls with the Administrative Agent, the Secured Swap
Providers, the Lenders and their advisors during which a Financial
Officer of the Borrower shall provide the Administrative Agent with
an update on restructuring and cost reduction efforts.
(c)
Additional Mortgages .
No later than August 18, 2008, the Borrower will execute and
deliver (or cause to be executed and delivered) additional
mortgages in form and substance reasonably satisfactory to the
Administrative Agent such that after giving effect to such
additional mortgages, the Administrative Agent, for the benefit of
the Lenders and the Secured Swap Providers, will have first
priority Liens on not less than 90% of the PV10 of all proved Oil
and Gas Properties evaluated in the Reserve Report most recently
delivered prior to such date.
3.4
Forbearance Termination Events .
Each of the following events shall constitute a “Forbearance
Termination Event”:
(a)
Failure
of the Borrower or the Guarantor to observe or perform any
term, covenant, condition or agreement applicable to it
contained in this Agreement or the failure of any
representation or warranty made in this Agreement to be true
in all material respects when made; or
(b)
The
occurrence of any Event of Default under the Credit Agreement
or any other Loan Document, other than the Designated
Defaults.
The
Borrower and the Guarantor acknowledge and agree that upon the
earlier of (i) the occurrence of a Forbearance Termination
Event, or (ii) August 15, 2008, the Standstill Period shall
terminate without the need for any further action by, or
notice being due from, the Administrative Agent, any of the
Secured Swap Providers or any of the Lenders. Further, upon
the occurrence of a Forbearance Termination Event, the
Administrative Agent, each of the Secured Swap Providers and
each of the Lenders shall be entitled (but not required) to
exercise any or all of their rights and remedies under and in
accordance with the Loan Documents, Swap Agreements or
applicable law as a result of the Designated Defaults (other
than the Waived Defaults) and/or any other Defaults, Events of
Default or Termination Events (as defined in the Swap
Agreements) under the Loan Docu
