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EXHIBIT 10.20
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FINAL EXECUTION VERSION
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06/12/08
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TO SECOND LIEN TERM LOAN AGREEMENT
THIS
FORBEARANCE AGREEMENT AND AMENDMENT NO. 1 TO SECOND LIEN TERM
LOAN 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 ”),
and the Lenders.
RECITALS
WHEREAS,
the Borrower, the Administrative Agent and the Lenders entered
into that certain Second Lien Term Loan Agreement, dated as of
August 20, 2007 (together with all amendments, restatements,
supplements or other modifications from time to time made
thereto, the “
Loan 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 Loan Agreement, with the result being that
certain identified Defaults or Events of Default have occurred
or may occur and be continuing under the Loan
Agreement;
WHEREAS,
the Borrower has requested that the Administrative Agent 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 and the Lenders are
willing to do so but only on the terms, conditions and
limitations hereinafter set forth;
WHEREAS,
the Borrower, Hudson Pipeline & Processing Co., LLC (the
“
Guarantor ”),
the Administrative Agent and the Lenders also intend to amend the
Loan 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 Loan Agreement.
Section references are to sections in the Loan 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(b) 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(b) 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 Loan 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 (and which owns no
other Properties other than Properties ancillary thereto); provided
that (a) no Default or Event of Default under any Section of the
Loan Agreement (other than the Designated Defaults or the Waived
Defaults) exists at the time of such sale, and (b) such sale is
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 Senior Revolving
Credit Agreement, including any Borrowing Base Deficiency, to be
applied in accordance with Section 3.04 of the Senior Revolving
Credit Agreement, as such section may be modified by certain
Forbearance Agreement and Amendment No. 1 to Credit Agreement
related to the Senior Revolving Credit Agreement.
SECTION 3.
FORBEARANCE.
3.1
Acknowledgement of Designated Defaults .
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 ”);
and
(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 Loan Agreement and to make demands upon the
Borrower and the Guarantor for the payment in full of the
Indebtedness for the Designated Defaults.
3.2
Agreement to Standstill .
(a)
The Administrative Agent, for itself and on behalf of the Lenders,
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 Loan
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 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 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)
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.
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 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, will have second 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 Loan 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 or any of the
Lenders. Further, upon the occurrence of a Forbearance
Termination Event, the Administrative Agent 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 or applicable law as a result of the
Designated Defaults (other than the Waived Defaults) and/or
any other Defaults, Events of Default under the Loan
Documents.
SECTION 4.
AMENDMENT TO LOAN AGREEMENT.
4.1
Amendment to Section 1.02 .
Section 1.02 is hereby amended in its entirety to read as
follows:
“
Applicable Margin ”
means, with respect to each Tranche, a rate per annum equal to
9.5%.
4.2
Amendment to Section 3.02(d) .
Section 3.02(d) is hereby amended in its entirety to read as
follows:
(d)
I
nterest
Payment Dates .
Accrued interest on the principal amount of each Loan shall be
payable in arrears on each Interest Payment Date for such
Tranche and on the Maturity Date; provided that (i) 3.5% per
annum of the accrued interest payable shall be capitalized and
added to the aggregate outstanding principal of the Loans, and
such additional principal shall accrue interest compounded
quarterly at a per annum rate equal to the Adjusted LIBO Rate
plus the Applicable Margin, (ii) interest accrued pursuant to
Section 3.02(c) shall be payable on demand and (iii) in the
event of any prepayment or principal of any Loan, accrued
interest on the principal amount prepaid shall be payable on
the date of such prepayment. For the purposes of the interest
rate calculation, in no event shall the Adjusted LIBO Rate be
less than 4%.
4.3
Reaffirmation of Obligations .
The Borrower and the Guarantor ea
