Exhibit 10.3

 

THIRD AMENDMENT TO
SECOND LIEN TERM LOAN CREDIT AGREEMENT
AND LIMITED WAIVER

 

THIS THIRD AMENDMENT TO SECOND LIEN TERM LOAN CREDIT AGREEMENT AND LIMITED
WAIVER (this “Amendment”), effective as of the 2nd day of May, 2012 (the “Third
Amendment Effective Date”), is entered into by and among MAGNUM HUNTER RESOURCES
CORPORATION, a Delaware corporation (the “Borrower”), the guarantors party
hereto (the “Guarantors”), the lenders party hereto (the “Lenders”) and CAPITAL
ONE, NATIONAL ASSOCIATION, as administrative agent for the Lenders (the
“Administrative Agent”).

 

RECITALS

 

WHEREAS, the Borrower, the Lenders and the Administrative Agent entered into
that certain Second Lien Term Loan Credit Agreement dated September 28, 2011 (as
amended by the First Amendment to Second Lien Term Loan Credit Agreement
effective as of December 6, 2011, the Second Amendment to Second Lien Term Loan
Credit Agreement effective as of February 14, 2012, and as further amended or
restated from time to time, the “Credit Agreement”); and

 

WHEREAS, the Borrower has requested that the Lenders and the Administrative
Agent amend certain provisions of the Credit Agreement and make the other
agreements more particularly described below; and

 

WHEREAS, the Borrower has advised the Administrative Agent and the Lenders that
the Borrower anticipates the occurrence of an Event of Default under the Credit
Agreement to arise as a result of the failure of the Borrower to comply with
Section 9.01(a) of the Credit Agreement as of and for the fiscal quarter ended
March 31, 2012; and

 

WHEREAS, the Borrower has requested that the Lenders waive such Event of
Default;

 

WHEREAS, said parties are willing to so amend the Credit Agreement and waive
such Event of Default subject to the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants set
forth in this Amendment, the Borrower, the Guarantors, the Lenders and the
Administrative Agent agree as follows:

 

1.                                      Defined Terms.  Unless otherwise defined
herein, capitalized terms used herein have the meanings assigned to them in the
Credit Agreement.

 

2.                                      Amendments to Section 1.02.

 

(a)                                 Section 1.02 of the Credit Agreement is
hereby amended to restate the definition of “First Lien Credit Facility” in its
entirety as follows:

 

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“First Lien Credit Facility” means senior secured first lien revolving facility
in the aggregate amount of $750,000,000 under the First Lien Credit Agreement.”

 

(b)                                 Section 1.02 of the Credit Agreement is
hereby amended to add the following new definitions in proper alphabetical
order:

 

“Baytex Acquisition” means the acquisition of the Baytex Properties pursuant to
the terms and conditions of the Baytex Acquisition Agreement.

 

“Baytex Acquisition Agreement” means that certain Purchase and Sale Agreement
dated as of April 17, 2012, by and between Baytex Energy USA Ltd., and Bakken
Hunter, LLC, as purchaser, as amended from time to time with the prior written
consent of the Administrative Agent not to be unreasonably withheld.

 

“Baytex Properties” means those certain oil and gas properties located in North
Dakota that are the subject of the Baytex Acquisition.

 

“Third Amendment Effective Date” means                , 2012.

 

3.                                      Amendment to Section 9.01.  Section 9.01
of the Credit Agreement is hereby amended to restate paragraph (a) thereof in
its entirety as follows:

 

“(a)                           Current Ratio.  Commencing with the fiscal
quarter ending March 31, 2011, the Borrower will not permit, as of the last day
of any fiscal quarter, its ratio of (i) consolidated current assets of the
Borrower and the Restricted Subsidiaries (including the unused amount of the
total Commitments, but excluding non-cash assets under FAS 133) to
(ii) consolidated current liabilities of the Borrower and the Restricted
Subsidiaries (excluding non-cash obligations under FAS 133) (such ratio, the
“Current Ratio”) to be less than 1.0 to 1.0; provided, further, that, in the
event the Borrower does not consummate the Baytex Acquisition, then, with
respect to the fiscal quarter ending June 30, 2012 only, the Borrower shall be
permitted to effect an Interim Redetermination by July 31, 2012, utilizing a
Reserve Report dated on or about June 30, 2012, and such redetermined Borrowing
Base shall be used to calculate the Current Ratio as of and for the fiscal
quarter ending June 30, 2012.”

 

4.                                      Amendment to Section 9.04.  Section 9.04
of the Credit Agreement is hereby amended to restate clause (d) thereof in its
entirety as follows, redesignate clauses (e) and (f) as clauses (f) and (g),
respectively, and insert the following new clause (e):

 

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“(d)                           without limiting the dividends permitted by
Section 9.04(b) above, the Borrower may (i) pay cash in lieu of issuing
fractional shares of Series C preferred stock in connection with an exchange of
outstanding Series C preferred stock for newly issued Series D preferred stock,
(ii) redeem its Series C preferred stock with the proceeds of an issuance by the
Borrower of common equity or Series D preferred stock so long as such redemption
takes place immediately upon receipt of such proceeds, (iii) redeem its Series D
preferred stock with the proceeds of an issuance by the Borrower of its common
equity so long as such redemption takes place immediately upon receipt of such
proceeds and (iv) pay cash in lieu of issuing fractional shares of Series C or
Series D preferred stock in connection with an exchange of outstanding Series C
or Series D preferred stock for newly issued common equity;

 

(e)                                  without limiting the redemptions of its
Series C preferred stock permitted by Section 9.04(d)(ii) above, the Borrower
may redeem its Series C preferred stock with the proceeds of issuances by the
Borrower of its Series D preferred stock occurring during the six month period
prior to the date of any such redemption so long as (i) no Event of Default
exists at the time of, or is caused by, such redemption and (ii) after giving
effect to such redemption, availability under the Borrowing Base is equal to or
greater than ten percent (10%) of the Borrowing Base then in effect, except to
the extent such proceeds were previously utilized as Investments pursuant to
Section 9.05(q);”.

 

5.                                      Amendment to Section 9.05.  Section 9.05
of the Credit Agreement is hereby amended to restate clauses (p) and (q) thereof
in their entirety as follows:

 

“(p)                           Investments by the Borrower or any Restricted
Subsidiaries in Unrestricted Subsidiaries (other than Eureka Hunter Holdings,
LLC or its Subsidiaries), not to exceed $2,000,000 in the aggregate at any time
outstanding;

 

(q)                                 Investments in Eureka Hunter Holdings, LLC
(or another direct or indirect Subsidiary of Eureka Hunter Holdings, LLC),
whether such Subsidiaries are Restricted Subsidiaries or Unrestricted
Subsidiaries, in an aggregate amount at any one time outstanding not to exceed,
in the aggregate in any calendar year, (i) the Investments in such Persons
existing on the Effective Date as set forth on Schedule 9.05 and
(ii) $2,000,000; provided that to the extent the Borrower reasonably determines
that funds in excess of such amount are necessary for the construction,
operation, maintenance or expansion of the Eureka Hunter Pipeline or any related
natural gas processing plants (including the financing of the foregoing), the
Borrower may distribute such excess funds to

 

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Eureka Hunter Holdings, LLC or such other Subsidiary for the purpose of paying
any such construction, operation, maintenance or expansion expenses of the
Eureka Hunter Pipeline or such natural gas processing plants (including the
costs, expenses, fees or other amounts relating to the financing of the
foregoing), so long as (A) such funds are net cash proceeds from the offering of
common or preferred equity securities by the Borrower on or after January 1,
2011, except to the extent such funds were previously utilized to make
redemptions of Series C preferred stock pursuant to Section 9.04(e), or such
payment is made in the form of the issuance of stock and (B) after giving effect
to such distribution, availability under the Borrowing Base is equal or greater
than 5% of the Borrowing Base then in effect;”.

 

6.                                      Amendment to Mortgages.  Notwithstanding
any provision in the Mortgages or any other Loan Document to the contrary, the
parties hereto agree that in no event is any Building (as defined in the
applicable Flood Insurance Regulations) or any Manufactured (Mobile) Home (as
defined in the applicable Flood Insurance Regulations) included in the
definition of “Mortgaged Property” or “Collateral”, in each case as defined in
the Mortgages, and no Building or Manufactured (Mobile) Home is encumbered by
the Mortgages or any other Loan Document.  As used herein, “Flood Insurance
Regulations” shall mean (a) the National Flood Insurance Act of 1968, (b) the
Flood Disaster Protection Act of 1973, (c) the National Flood Insurance Reform
Act of 1994 (amending 42 USC 4001, et seq.), and (d) the Flood Insurance Reform
Act of 2004, in each case as now or hereinafter in effect or any successor
statute thereto and including any regulations promulgated thereunder.  Further,
the parties hereto agree that each Mortgage is hereby amended to delete the word
“buildings” from Section 1.01(d) thereof.

 

7.                                      Waiver.  Subject to the terms and
provisions herein, the Lenders signatory hereto hereby permanently waive the
Event of Default arising under the Credit Agreement as a result of the failure
of the Borrower to comply with Section 9.01(a) of the Credit Agreement as of and
for the fiscal quarter ended March 31, 2012.  The waiver set forth in this
Section 8 (the “Default Waiver”) is limited to the extent specifically set forth
above and not other terms, covenants or provisions of the Credit Agreement or
any other Loan Document are intended to be effected hereby.  The Default Waiver
is granted only with respect to the anticipated failure of the Borrower to
comply with Section 9.01(a) as of and for the fiscal quarter ended March 31,
2012, and shall not apply to any violation of Section 9.01(a) with respect to
any fiscal quarter other than the fiscal quarter ended March 31, 2012, or any
actual or prospective default or violation of any other provision of the Credit
Agreement or any other Loan Document.  The Default Waiver shall not in any
manner create a course of dealing or otherwise impair the future ability of the
Administrative Agent or the Lenders to declare a Default or Event of Default
under or otherwise enforce the terms of the Credit Agreement or any other Loan
Document with respect to any matter other than those specifically and expressly
waived in the Default Waiver.

 

8.                                      Ratification.  Each of the Borrower and
the Guarantors hereby ratifies all of its respective obligations under the
Credit Agreement and each of the Loan Documents to which it is a party, and
agrees and acknowledges that the Credit Agreement and each of the Loan Documents
to which it is a party are and shall continue to be in full force and effect as
amended

 

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and modified by this Amendment.  Except as provided herein, nothing in this
Amendment extinguishes, novates or releases any right, claim, lien, security
interest or entitlement of any of the Lenders or the Administrative Agent
created by or contained in any of such documents nor is the Borrower nor any
Guarantor released from any covenant, warranty or obligation created by or
contained herein or therein.

 

9.                                      Representations and Warranties.  The
Borrower and Guarantors hereby represent and warrant to the Administrative Agent
and the Lenders that (a) this Amendment has been duly executed and delivered on
behalf of the Borrower and Guarantors, (b) this Amendment constitutes a valid
and legally binding agreement enforceable against the Borrower and Guarantors in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other laws affecting
creditors’ rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law, (c) the
representations and warranties contained in the Credit Agreement and the Loan
Documents are true and correct on and as of the date hereof in all material
respects as though made as of the date hereof (except to the extent any such
representations and warranties are expressly limited to an earlier date, in
which case, such representations and warranties shall continue to be true and
correct as of such specified earlier date), (d) no Default or Event of Default
exists under the Credit Agreement or under any Loan Document as of the Third
Amendment Effective Date and (e) the execution, delivery and performance of this
Amendment has been duly authorized by the Borrower and Guarantors.

 

10.                               Conditions to Effectiveness.  This Amendment
shall be effective on the Third Amendment Effective Date upon satisfaction of
the following conditions:

 

(a)                                 the Borrower, the Guarantors and the
Required Lenders shall have executed and delivered to the Administrative Agent
counterparts of this Amendment;

 

(b)                                 the Borrower shall have delivered to the
Administrative Agent (i) the Reserve Report supporting the redetermination of
the Borrowing Base effected hereby, (ii) the related certificate required to be
delivered by the Borrower pursuant to Section 8.12(a) and (c) of the Credit
Agreement, (iii) any Engineering Reports as shall have been reasonably requested
by the Required Lenders in connection with the Reserve Report described in
clause (i) above and (iv) title information required to be delivered by the
Borrower pursuant to Section 8.13(a) of the Credit Agreement; and

 

(c)                                  the Borrower shall have paid to the
Administrative Agent and the Lenders all fees and expenses that are due in
connection with this Amendment.

 

11.                               Counterparts.  This Amendment may be signed in
any number of counterparts, which may be delivered in original, electronic or
facsimile form each of which shall be construed as an original, but all of which
together shall constitute one and the same instrument.

 

12.                               Governing Law.  This Amendment, all Notes, the
other Loan Documents and all other documents executed in connection herewith
shall be deemed to be contracts and agreements under the laws of the State of
New York and of the United States of America and for

 

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all purposes shall be construed in accordance with, and governed by, the laws of
New York and of the United States.

 

13.                               Final Agreement of the Parties.  Any previous
agreement among the parties with respect to the subject matter hereof is
superseded by the Credit Agreement, as amended by this Amendment.  Nothing in
this Amendment, express or implied is intended to confer upon any party other
than the parties hereto any rights, remedies, obligations or liabilities under
or by reason of this Amendment.

 

[Signature Pages Follow]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
by their respective officers thereunto duly authorized as of the Third Amendment
Effective Date.

 

 

BORROWER:

 

 

 

MAGNUM HUNTER RESOURCES CORPORATION,

 

a Delaware corporation

 

 

 

 

 

By:

/s/ Ronald D. Ormand

 

 

Ronald D. Ormand

 

 

Chief Financial Officer

 

 

 

 

 

 

 

GUARANTORS:

 

 

 

PRC WILLISTON, LLC,

 

a Delaware limited liability company

 

 

 

By:

Magnum Hunter Resources Corporation,

 

 

its sole member

 

 

 

 

 

 

 

 

 

By:

/s/ Ronald D. Ormand

 

 

 

Ronald D. Ormand

 

 

 

Chief Financial Officer

 

 

 

 

 

 

 

MAGNUM HUNTER RESOURCES LP,

 

a Delaware limited partnership

 

 

 

 

By:

Magnum Hunter Resources GP, LLC,

 

 

its general partner

 

 

 

 

 

By:

Magnum Hunter Resources Corporation,

 

 

 

its sole member

 

 

 

 

 

 

 

 

 

By:

/s/ Ronald D. Ormand

 

 

 

 

Ronald D. Ormand

 

 

 

 

Chief Financial Officer

 

Signature Page to Third Amendment to Credit Agreement

 

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MAGNUM HUNTER RESOURCES GP, LLC,

 

a Delaware limited liability company

 

 

 

By:

Magnum Hunter Resources Corporation,

 

 

its sole member

 

 

 

 

 

 

By:

/s/ Ronald D. Ormand

 

 

 

Ronald D. Ormand

 

 

 

Chief Financial Officer

 

 

 

 

 

TRIAD HUNTER, LLC,

 

a Delaware limited liability company

 

 

 

 

 

By:

/s/  Ronald D. Ormand

 

 

Ronald D. Ormand

 

 

Vice President

 

 

 

 

 

 

EAGLE FORD HUNTER, INC.,

 

a Colorado corporation

 

 

 

 

 

By:

/s/ Ronald D. Ormand

 

 

Ronald D. Ormand

 

 

Secretary

 

 

 

 

 

 

 

MAGNUM HUNTER PRODUCTION INC.,

 

a Kentucky corporation

 

 

 

 

 

By:

/s/ Ronald D. Ormand

 

 

Ronald D. Ormand

 

 

Chief Financial Officer

 

 

 

 

 

 

 

NGAS HUNTER, LLC

 

 

 

 

 

By:

/s/ Ronald D. Ormand

 

 

Ronald D. Ormand

 

 

Vice President and Treasurer

 

Signature Page to Third Amendment to Credit Agreement

 

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MHR CALLCO CORPORATION,

 

a corporation existing under the laws of the Province of Alberta

 

 

 

 

 

By:

/s/ Ronald D. Ormand

 

 

Ronald D. Ormand

 

 

Vice President

 

 

 

 

 

 

MHR EXCHANGECO CORPORATION,

 

a corporation existing under the laws of the Province of Alberta

 

 

 

 

 

By:

/s/ Ronald D. Ormand

 

 

Ronald D. Ormand

 

 

Vice President

 

 

 

 

 

 

WILLISTON HUNTER CANADA, INC.,

 

a corporation existing under the laws of the Province of Alberta

 

 

 

 

 

By:

/s/ Ronald D. Ormand

 

 

Ronald D. Ormand

 

 

Executive Vice President and Chief Financial Officer

 

 

 

 

 

 

WILLISTON HUNTER INC.,

 

a Delaware corporation

 

 

 

 

 

By:

/s/ Ronald D. Ormand

 

 

Ronald D. Ormand

 

 

Executive Vice President and Chief Financial Officer

 

Signature Page to Third Amendment to Credit Agreement

 

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WILLISTON HUNTER ND, LLC,

 

a Delaware limited liability company

 

 

 

 

 

By:

/s/ Ronald D. Ormand

 

 

Ronald D. Ormand

 

 

Vice President and Treasurer

 

 

 

 

 

 

BAKKEN HUNTER, LLC,

 

a Delaware limited liability company

 

 

 

 

 

By:

/s/ Ronald D. Ormand

 

 

Ronald D. Ormand

 

 

Executive Vice President

 

Signature Page to Third Amendment to Credit Agreement

 

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ADMINISTRATIVE AGENT AND LENDER:

 

 

 

CAPITAL ONE, NATIONAL ASSOCIATION

 

 

 

 

 

By:

/s/ Nancy M. Mak

 

Name:

Nancy M. Mak

 

Title:

Vice President

 

Signature Page to Third Amendment to Credit Agreement

 

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LENDER:

 

 

 

BMO HARRIS FINANCING, INC.

 

 

 

 

 

By:

/s/ Gumaro Tijerina

 

Name:

Gumaro Tijerina

 

Title:

Director

 

 

Signature Page to Third Amendment to Credit Agreement

 

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LENDER:

 

 

 

CITIBANK, N.A.

 

 

 

 

 

By:

/s/ Don Dimitrievich

 

Name:

Don Dimitrievich

 

Title:

Vice President

 

Signature Page to Third Amendment to Credit Agreement

 

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LENDER:

 

 

 

CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH

 

 

 

 

 

By:

/s/ Shaheen Malik

 

Name:

Shaheen Malik

 

Title:

Vice President

 

 

 

 

 

 

 

By:

/s/ Michael Spaight

 

Name:

Michael Spaight

 

Title:

Associate

 

Signature Page to Third Amendment to Credit Agreement

 

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LENDER:

 

 

 

SUNTRUST BANK

 

 

 

 

 

By:

/s/ Scott Mackey

 

Name:

Scott Mackey

 

Title:

Director

 

Signature Page to Third Amendment to Credit Agreement

 

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LENDER:

 

 

 

DEUTSCHE BANK TRUST COMPANY AMERICAS

 

 

 

 

 

By:

/s/ Courtney E. Meehan

 

Name:

Courtney E. Meehan

 

Title:

Vice President

 

 

 

 

 

 

 

By:

/s/ Micahel Getz

 

Name:

Michael Getz

 

Title:

Vice President

 

Signature Page to Third Amendment to Credit Agreement

 

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