Document:

Exhibit 10.6

 

EXECUTION VERSION

 

 

SECOND LIEN STOCK PLEDGE AGREEMENT

 

 

dated as of August 30, 2013

 

 

of

 

 

SUNDANCE ENERGY AUSTRALIA LIMITED (ACN 112 202 883)

 

in favor of

 

 

WELLS FARGO ENERGY CAPITAL, INC., as Administrative Agent

 

 

TABLE OF CONTENTS

 

	
 
    	
Page
    
	
 
    	
 
    
	
ARTICLE I   Definitions and References 
    	
1
    
	
 
    	
 
    
	
Section 1.1.
    	
Definitions in Credit Agreement
    	
1
    
	
 
    	
 
    	
 
    
	
Section 1.2.
    	
Definitions in the UCC, etc.
    	
1
    
	
 
    	
 
    	
 
    
	
Section 1.3.
    	
Definitions in this Agreement
    	
2
    
	
 
    	
 
    	
 
    
	
Section 1.4.
    	
Rules of Construction; References and   Titles
    	
3
    
	
 
    	
 
    	
 
    
	
ARTICLE II   Security Interest 
    	
4
    
	
 
    	
 
    
	
Section 2.1.
    	
Grant of Security Interest
    	
4
    
	
 
    	
 
    	
 
    
	
Section 2.2.
    	
Secured Obligations Secured
    	
4
    
	
 
    	
 
    	
 
    
	
ARTICLE III   Representations and Warranties 
    	
4
    
	
 
    	
 
    
	
Section 3.1.
    	
Representations and Warranties
    	
4
    
	
 
    	
 
    	
 
    
	
ARTICLE IV Covenants   
    	
7
    
	
 
    	
 
    
	
Section 4.1.
    	
General Covenants
    	
7
    
	
 
    	
 
    	
 
    
	
Section 4.2.
    	
Covenants Relating Specifically to the   Nature of the Collateral
    	
9
    
	
 
    	
 
    	
 
    
	
ARTICLE V   Voting and Distribution Rights in Respect Of Pledged Equity 
    	
10
    
	
 
    	
 
    
	
Section 5.1. 
    	
Voting Rights
    	
10
    
	
 
    	
 
    	
 
    
	
Section 5.2.
    	
Dividend Rights While No Event of Default   Exists
    	
10
    
	
 
    	
 
    	
 
    
	
Section 5.3.
    	
Actions by Secured Party
    	
10
    
	
 
    	
 
    	
 
    
	
Section 5.4.
    	
Rights While an Event of Default Exists
    	
10
    
	
 
    	
 
    	
 
    
	
ARTICLE VI   Remedies, Powers and Authorizations 
    	
11
    
	
 
    	
 
    
	
Section 6.1.
    	
Normal Provisions Concerning the Collateral
    	
11
    
	
 
    	
 
    	
 
    
	
Section 6.2.
    	
Event of Default Remedies
    	
12
    
	
 
    	
 
    	
 
    
	
Section 6.3.
    	
Application of Proceeds
    	
14
    
	
 
    	
 
    	
 
    
	
Section 6.4.
    	
Deficiency
    	
14
    
	
 
    	
 
    	
 
    
	
Section 6.5.
    	
Private Sales of Pledged Equity
    	
14
    
	
 
    	
 
    	
 
    
	
Section 6.6.
    	
Indemnity and Expenses
    	
15
    
	
 
    	
 
    	
 
    
	
Section 6.7.
    	
Non-Judicial Remedies
    	
16
    
	
 
    	
 
    	
 
    
	
Section 6.8.
    	
Limitation on Duty of the Secured Party in   Respect of Collateral
    	
16
    
	
 
    	
 
    	
 
    
	
Section 6.9.
    	
Appointment of Other Agents
    	
16
    
	
 
    	
 
    	
 
    
	
ARTICLE VII   Miscellaneous 
    	
16
    
	
 
    	
 
    
	
Section 7.1.
    	
Notices
    	
16
    

 

i

 

	
Section 7.2.
    	
Amendments and Waivers
    	
17
    
	
 
    	
 
    	
 
    
	
Section 7.3.
    	
Preservation of Rights
    	
17
    
	
 
    	
 
    	
 
    
	
Section 7.4.
    	
Severability
    	
17
    
	
 
    	
 
    	
 
    
	
Section 7.5.
    	
Survival
    	
17
    
	
 
    	
 
    	
 
    
	
Section 7.6.
    	
Binding Effect and Assignment
    	
17
    
	
 
    	
 
    	
 
    
	
Section 7.7.
    	
Release of Collateral; Termination
    	
17
    
	
 
    	
 
    	
 
    
	
Section 7.8.
    	
Governing Law
    	
18
    
	
 
    	
 
    	
 
    
	
Section 7.9.
    	
Final Agreement
    	
18
    
	
 
    	
 
    	
 
    
	
Section 7.10.   
    	
Facsimile
    	
18
    
	
 
    	
 
    	
 
    
	
Section 7.11.
    	
Acceptance by the Secured Party
    	
19
    
	
 
    	
 
    	
 
    
	
Section 7.12.
    	
Intercreditor Agreement
    	
19
    

 

	
Schedule
    	
 
    	
 
    
	
Schedule 1
    	
Schedule of Pledged Equity
    	
 
    

 

 

THIS SECOND LIEN STOCK PLEDGE AGREEMENT (this “Agreement”) is made as of August 30, 2013, by SUNDANCE ENERGY AUSTRALIA LIMITED (ACN 112 202 883), a company organized under the laws of South Australia (“Grantor”), in favor of WELLS FARGO ENERGY CAPITAL, INC., individually and as administrative agent under the Credit Agreement, as defined below (the “Secured Party”) for the benefit of the Beneficiaries.

 

RECITALS

 

A.                                    Sundance Energy, Inc., a Colorado corporation (“Borrower”), is executing in favor of Lenders those certain promissory notes of even date herewith, payable to the order of Lenders in the aggregate principal amount of up to $100,000,000 (such promissory notes, as from time to time amended, and all promissory notes given in substitution, renewal or extension therefor or thereof, in whole or in part, being herein collectively called the “Note”).

 

B.                                    The Note is being executed pursuant to a Second Lien Credit Agreement of even date herewith, (herein, as from time to time amended, supplemented or restated, called the “Credit Agreement”), by and among Borrower, Administrative Agent and Lenders, pursuant to which Lenders have agreed to advance funds to Borrower under the Note.

 

C.                                    It is a condition precedent to Lenders’ obligations to advance funds pursuant to the Credit Agreement that Grantor shall execute and deliver to Administrative Agent a satisfactory pledge to secure Borrower’s obligations under the Note, the Credit Agreement and the other Loan Documents.

 

D.                                    In order to induce the Beneficiaries to extend such credit, Grantor has agreed to grant to the Secured Party, for the benefit of the Beneficiaries, a security interest in the Collateral.

 

NOW, THEREFORE, in consideration of the premises and for other valuable consideration, the receipt and sufficiency of which the parties acknowledge, Grantor agrees as follows:

 

ARTICLE I

 

Definitions and References

 

Section 1.1.                                 Definitions in Credit Agreement. Capitalized terms used herein and not otherwise defined have the respective meanings specified in the Credit Agreement.

 

Section 1.2.                                 Definitions in the UCC, etc. The following terms have the meanings specified in the UCC:

 

(a)                                 Investment Property.

 

(b)                                 Proceeds.

 

(c)                                  Securities Account.

 

 

(d)                                 Security.

 

(e)                                  Uncertificated Security.

 

Other terms used in this Agreement that are defined in the UCC and not otherwise defined herein or in the Credit Agreement have the meanings specified in the UCC, unless the context otherwise requires.

 

Section 1.3.                                 Definitions in this Agreement.  The following terms have the following meanings:

 

“Agreement” has the meaning specified in the preamble.

 

“Beneficiaries” means the Secured Party, the Lenders, and any other Person to which any Secured Obligation is owed.

 

“Borrower” has the meaning specified in Recital A.

 

“Collateral” means all property described in Section 2.1 in which Grantor has any right, title or interest.

 

“Credit Agreement” has the meaning specified in Recital B.

 

“Credit Parties” means Grantor and all Restricted Persons.

 

“Grantor” has the meaning specified in the preamble.

 

“Lenders” has the meaning specified in Recital A.

 

“Permitted First Lien” has the meaning set forth in clause (n) of the definition of “Permitted Liens” in the Credit Agreement.

 

“Pledged Equity” has the meaning specified in Section 2.1(a).

 

“Secured Obligations” means all Obligations of the Credit Parties now or hereafter arising under the Loan Documents, including all amounts that constitute part of the Secured Obligations and would be owed by any Credit Party to any Beneficiary but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such Credit Party.

 

“Secured Party” has the meaning specified in the preamble.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“UCC” means the Uniform Commercial Code in effect in the State of Colorado from time to time; provided that, if perfection or the effect of perfection or non-perfection or the priority of any security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Colorado, “UCC” means the Uniform

 

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Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.

 

Section 1.4.                                 Rules of Construction; References and Titles. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise:

 

(a)                                 Any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein).

 

(b)                                 Unless otherwise specified, any reference herein to any Person shall be construed to include such Person’s successors and assigns.

 

(c)                                  The words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof.

 

(d)                                 All references herein to Articles, Sections and Schedules shall be construed to refer to Articles and Sections of, and Schedules to, this Agreement.

 

(e)                                  Any reference to any Law herein shall, unless otherwise specified, refer to such law as amended, modified or supplemented from time to time.

 

(f)                                   The words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

 

(g)                                  Except as specified otherwise, references to any document, instrument, or agreement shall include:

 

(i)                                     all exhibits, schedules, and other attachments thereto, and

 

(ii)                                  all documents, instruments, or agreements issued or executed in replacement thereof.

 

(h)                                 A title appearing at the beginning of any subdivision is for convenience only, does not constitute any part of such subdivision and shall be disregarded in construing the language contained in such subdivision.

 

(i)                                     The phrases “this Section” and “this subsection” and similar phrases refer only to the section or subsection hereof in which such phrases occur.

 

(j)                                    The word “or” is not exclusive, and the word “including” (in all of its grammatical variations) means “including without limitation”.

 

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ARTICLE II

 

Security Interest

 

Section 2.1.                                 Grant of Security Interest. As collateral security for the payment and performance of all Secured Obligations, Grantor pledges, collaterally assigns and grants to the Secured Party for the benefit of the Beneficiaries a continuing security interest in all right, title and interest of Grantor in and to all of the following property, whether now owned or existing or hereafter acquired or arising, regardless of where located and howsoever Grantor’s interests therein arise, whether by ownership, security interest, claim or otherwise:

 

(a)                                 All Equity in Borrower including the Equity listed on Schedule 1 and all Equity in Borrower issued after the date hereof, all Equity that it may acquire in the future that is issued by any Person referred to in Schedule 1, all Equity that it may hold at any time in the future that is issued by any of its Domestic Subsidiaries and 65% of the issued and outstanding Equity that it may hold at any time in the future that is issued by any of its First-Tier Foreign Subsidiaries (the “Pledged Equity”).

 

(b)                                 All rights and benefits, but no duty or obligation, of Grantor under all agreements, documents and instruments relating to the Pledged Equity.

 

(c)                                  Proceeds of the foregoing.

 

Section 2.2.                                 Secured Obligations Secured.

 

(a)                                 The security interest created hereby in the Collateral secures the payment and performance of all Secured Obligations.

 

(b)                                 Without limiting the generality of the foregoing, this Agreement secures the payment of all amounts that constitute part of the Secured Obligations and would be owed by any Credit Party to any Beneficiary under the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving a Credit Party.

 

ARTICLE III

 

Representations and Warranties

 

Section 3.1.                                 Representations and Warranties. Grantor represents and warrants to the Beneficiaries as follows:

 

(a)                                 Each representation and warranty made by the Borrower with respect to Grantor in any other Loan Document is correct in all material respects (except that such materiality qualifier shall not be applicable to any representation or warranty that already is qualified or modified by materiality in the text thereof).

 

(b)                                 Grantor has and will have at all times the right, power and authority to grant to the Secured Party as provided herein a security interest in the Collateral, free and clear of any Lien

 

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other than Permitted First Liens. This Agreement creates a valid and binding security interest in favor of the Secured Party in the Collateral, securing the Secured Obligations.

 

(c)                                  With respect to Pledged Equity:

 

(i)                                     All securities constituting Pledged Equity have been duly authorized and validly issued, are fully paid and non-assessable, and were not issued in violation of the preemptive rights of any Person or of any agreement by which Grantor or any issuer of Pledged Equity is bound.

 

(ii)                                  All documentary, stamp or other taxes or fees owing in connection with the issuance, transfer or pledge of any Pledged Equity (or rights in respect thereof) have been paid.

 

(iii)                               No restriction or condition exists with respect to the transfer, voting or capital of any Pledged Equity.

 

(iv)                              Except as disclosed on Schedule 1, neither Grantor nor any issuer of Pledged Equity has any outstanding subscription agreement, option, warrant or convertible security outstanding or any other right outstanding pursuant to which any Person would be entitled to have issued to it units of ownership interest in any issuer of Pledged Equity.

 

(v)                                 Grantor has taken or concurrently herewith is taking all actions necessary to perfect the Secured Party’s security interest in Pledged Equity, including any registration, filing or notice that may be necessary or advisable under Article 8 or 9 of the UCC, and no other Person has any such registration, filing or notice in effect.

 

(vi)                              Schedule 1 correctly and completely reflects all Pledged Equity owned by Grantor as of the date hereof and Schedule 1 accurately sets forth the percentage of each class or series of Equity issued by the issuer of such Pledged Equity that is held by Grantor.

 

(vii)                           Schedule 1 sets forth all agreements, including all operating, management, voting and shareholder agreements to which Grantor is a party or by which it is bound and that relate to Pledged Equity and a correct and complete copy of each such agreement has been delivered to counsel for the Secured Party.

 

(viii)                        No issuer of Pledged Equity has made any call for capital that has not been fully paid by Grantor and each other holder of Equity of such issuer.

 

(ix)                              Neither Grantor nor any other holder of equity issued by any issuer of Pledged Equity is in default under any agreement relating to Pledged Equity.

 

(x)                                 Neither the execution, delivery or performance of this Agreement nor the exercise of any right or remedy of the Secured Party hereunder will cause a default under any agreement in respect of Pledged Equity or otherwise adversely affect or diminish any Pledged Equity.

 

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(xi)                              Grantor’s rights under any agreement in respect of Pledged Equity are enforceable in accordance with their terms, except as such enforcement may be limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors’ rights.

 

(d)                                 The Pledged Equity listed on Schedule 1 constitutes all Equity owned by Grantor in Borrower as of the date hereof. None of such Pledged Equity is certificated.

 

(e)                                  Grantor is an entity of the type specified in the preamble and is organized under the laws of the jurisdiction specified in the preamble. Grantor has not conducted business under any name except the name in which it has executed this Agreement, which is the exact name that appears in Grantor’s Organizational Documents.

 

(f)                                   Grantor has good and marketable title to the Collateral, free and clear of all Liens, except for the security interest created by this Agreement and any Permitted First Liens. No effective financing statement or other registration or instrument similar in effect covering any Collateral is on file in any recording office except any that have been filed in favor of the Secured Party relating to this Agreement and any that has been filed to perfect or protect any Permitted First Liens.

 

(g)                                  Neither the ownership or intended use of the Collateral by Grantor, nor the grant of the security interest by Grantor to the Secured Party hereunder:

 

(i)                                     conflicts with:

 

(A)                               any domestic or foreign Law,

 

(B)                               any Organizational Document of Grantor or any issuer of Pledged Equity, or

 

(C)                               any agreement, judgment, license, order or permit applicable to or binding upon Grantor or any issuer of Pledged Equity, or

 

(ii)                                  results in or requires the creation of any Lien, charge or encumbrance upon any asset of Grantor (other than in favor of the Secured Party).

 

(h)                                 Except as expressly contemplated in the Loan Documents, no consent, approval, authorization or order of, and no notice to or filing with, any court, governmental authority or third party is required under the UCC in connection with the grant by Grantor of the security interest hereunder.

 

(i)                                     This Agreement is the legal, valid and binding obligation of Grantor, enforceable against Grantor in accordance with its terms, except as limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors’ rights and general principles of equity.

 

(j)                                    There is no action, suit or proceeding pending or, to the knowledge of Grantor, threatened against or otherwise affecting Grantor before any court, arbitrator or governmental

 

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department, commission, board, bureau, agency or instrumentality that could reasonably be expected materially and adversely to affect Grantor’s financial condition or its ability to perform its obligations hereunder.

 

(k)                                 There is no condition precedent to the effectiveness of this Agreement that has not been satisfied or waived.

 

(l)                                     Grantor has, independently and without reliance upon any Beneficiary and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and each other Loan Document to which it is or is to be a party, and Grantor has established adequate means of obtaining from each other Credit Party on a continuing basis information pertaining to, and is now and on a continuing basis will be completely familiar with, the business, condition (financial or otherwise), operations, performance, properties and prospects of each other Credit Party.

 

(m)                             The direct or indirect value of the consideration received and to be received by Grantor in connection herewith is reasonably worth at least as much as the liability of Grantor hereunder and under each other Loan Document to which Grantor is a party, and the incurrence of such liability in return for such consideration may reasonably be expected to benefit Grantor, directly or indirectly.

 

ARTICLE IV

 

Covenants

 

Section 4.1.                                 General Covenants. Grantor will at all times perform and observe the covenants contained in the Loan Documents that are applicable to Grantor for so long as any Secured Obligation is outstanding. In addition, Grantor will, so long as this Agreement shall be in effect, perform and observe the following:

 

(a)                                 Without limitation of any other covenant herein, Grantor shall not cause or permit any change in its name, identity or organizational structure, or any change to its jurisdiction of organization, unless Grantor shall have first:

 

(i)                                     notified the Secured Party of such change at least 30 days prior to the effective date of such change (or such shorter notice as the Secured Party may approve),

 

(ii)                                  taken all action reasonably requested by the Secured Party (under the following subsection (b) or otherwise) for the purpose of further confirming and protecting the Secured Party’s security interest and rights under this Agreement and the perfection and priority thereof, and

 

(iii)                               if requested by the Secured Party, provided to the Secured Party a legal opinion to the Secured Party’s satisfaction confirming that such change shall not adversely affect the Secured Party’s security interest and rights under this Agreement or the perfection or priority of such security interest.

 

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In any notice delivered pursuant to this subsection, Grantor will expressly state that the notice is required by this Agreement and contains facts that may require additional filings of financing statements or other notices for the purposes of continuing perfection of the Secured Party’s security interest in the Collateral.

 

(b)                                 Grantor will, at its expense and as from time to time reasonably requested by the Secured Party, promptly execute and deliver all further instruments, agreements, filings and registrations, and take all further action, in order:

 

(i)                                     to confirm and validate this Agreement and the Secured Party’s rights and remedies hereunder;

 

(ii)                                  to correct any error or omission in the description herein of the Secured Obligations or the Collateral or in any other provision hereof;

 

(iii)                               to perfect, register and protect the security interest and rights created or purported to be created hereby or to maintain or upgrade in rank the priority of such security interests and rights;

 

(iv)                              to enable the Secured Party to exercise and enforce its rights and remedies hereunder; or

 

(v)                                 otherwise to give the Secured Party the full benefits of the rights and remedies described in or granted under this Agreement.

 

As part of the foregoing, Grantor will, whenever reasonably requested by the Secured Party:

 

(A)                               execute and file any financing statement, continuation statement or other filing or registration relating to the Secured Party’s security interest and rights hereunder, and any amendment thereto, and

 

(B)                               mark its books and records relating to any Collateral to reflect that such Collateral is subject to this Agreement and the security interests hereunder.

 

(c)                                  Grantor will:

 

(i)                                     Maintain good and marketable title to all Collateral, free and clear of all Liens except for the security interest created by this Agreement and any Permitted First Lien, and not grant or allow any such Lien to exist.

 

(ii)                                  Not allow to remain in effect, and cause to be terminated, any financing statement or other registration or instrument similar in effect covering any Collateral, except any that has been filed in favor of the Secured Party relating to this Agreement and any that has been filed to perfect or protect any Permitted First Lien.

 

(iii)                               Defend the Secured Party’s right, title and special property and security interest in and to the Collateral against the claims of any Person.

 

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(d)                                 Grantor shall not take any action that would, or fail to take any action if such failure would, impair the enforceability, perfection or priority of the Secured Party’s security interest in any Collateral.

 

Section 4.2.                                 Covenants Relating Specifically to the Nature of the Collateral. Grantor will, for so long as any Secured Obligation is outstanding, perform and observe the following:

 

(a)                                 (i) If Grantor shall at any time hold or acquire any certificated Security evidencing Collateral, Grantor will forthwith endorse, assign, and deliver the same to the Secured Party, accompanied by such instruments of transfer or assignment duly executed in blank as the Secured Party may from time to time specify.

 

(ii)                                  If any Pledged Equity is an Uncertificated Security and is issued to Grantor or its nominee directly by the issuer thereof, Grantor will immediately notify the Secured Party of such issuance and, pursuant to an agreement in form and substance satisfactory to the Secured Party, cause the issuer thereof to agree to comply with instructions from the Secured Party as to such Security, without further consent of Grantor or such nominee, or take such other action as the Secured Party may approve in order to perfect the Secured Party’s security interest in such Security.

 

(iii)                               Grantor shall not permit any Pledged Equity to be held by a securities intermediary or held in a Securities Account.

 

(iv)                              Grantor shall not permit any Pledged Equity that is an equity interest in a limited liability company or a limited partnership and that is a General Intangible to become Investment Property unless the Secured Party shall have control of such Investment Property within the meaning of Section 8-106 of the UCC.

 

(v)                                 Grantor shall not:

 

(A)                               adjust, settle, compromise, amend or modify any right in respect of any Pledged Equity or any agreement relating thereto;

 

(B)                               permit the creation of any additional equity interest in any issuer of Pledged Equity, unless immediately upon creation the same is pledged to the Secured Party pursuant hereto to the extent necessary to give the Secured Party a first-priority security interest in such Pledged Equity after such creation that is in the aggregate at least the same percentage of such Pledged Equity as was subject hereto before such issue, whether such additional interest is presently vested or will vest upon the payment of money or the occurrence or nonoccurrence of any other condition; or

 

(C)                               enter into any agreement, other than the Loan Documents, creating, or otherwise permit to exist, any restriction or condition upon the transfer or exercise of any rights in respect of any Pledged Equity, including any restriction or condition upon the transfer, voting or control of any Pledged Equity.

 

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(b)                                 If Grantor shall acquire at any time any additional Equity constituting Collateral, Grantor shall promptly notify the Secured Party in writing of the details thereof and execute and deliver to the Secured Party a supplement to Schedule 1 listing such Equity, which supplement shall take effect without further action on the part of any party hereto or beneficiary hereof.

 

ARTICLE V

 

Voting and Distribution Rights in Respect Of Pledged Equity

 

Section 5.1.                                 Voting Rights. Grantor shall be entitled to exercise all voting and other consensual rights pertaining to the Pledged Equity or any part thereof for any purpose; provided that Grantor shall not exercise or refrain from exercising any such right if such action would have a material adverse effect on the value of any Pledged Equity or on the Secured Party’s security interest or the value thereof.

 

Section 5.2.                                 Dividend Rights While No Event of Default Exists. Grantor shall be entitled to receive and retain all dividends and other distributions paid in respect of the Pledged Equity if and to the extent that the payment thereof is not otherwise prohibited by the Loan Documents; provided that:

 

(a)                                 all dividends, interest and other distributions paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Equity;

 

(b)                                 all dividends and other distributions paid or payable in cash in respect of any Pledged Equity in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in surplus; and

 

(c)                                  all cash paid, payable or otherwise distributed in redemption of, or in exchange for, any Pledged Equity,

 

shall be, and shall be forthwith delivered to the Secured Party to hold as Collateral and shall, if received by Grantor, be received in trust for the benefit of the Secured Party, be segregated from the other property or funds of Grantor and be forthwith delivered by Grantor to the Secured Party as Pledged Equity in the same form as so received (with any necessary indorsement).

 

Section 5.3.                                 Actions by Secured Party. The Secured Party will promptly execute and deliver (or promptly cause to be executed and delivered) to Grantor all such proxies and other instruments as Grantor may reasonably request for the purpose of enabling Grantor to exercise the voting and other rights that it is entitled to exercise pursuant to Section 5.1 above and to receive the dividends or interest payments that it is authorized to receive and retain pursuant to Section 5.2 above.

 

Section 5.4.                                 Rights While an Event of Default Exists. Upon the occurrence and during the continuance of an Event of Default:

 

(a)                                 All rights of Grantor to receive the dividends and other distributions that it would otherwise be authorized to receive and retain pursuant to Section 5.2 shall automatically cease,

 

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and all such rights shall thereupon become vested in the Secured Party, which shall thereupon have the sole right to exercise or refrain from exercising such voting and other consensual rights and to receive and hold as Pledged Equity such dividends and other distributions.

 

(b)                                 All dividends and other distributions that are received by Grantor contrary to subsection (a) above shall be received in trust for the benefit of the Secured Party, shall be segregated from other funds of Grantor and shall be forthwith paid over to the Secured Party as Pledged Equity in the same form as so received (with any necessary indorsement).

 

ARTICLE VI

 

Remedies, Powers and Authorizations

 

Section 6.1.                                 Normal Provisions Concerning the Collateral.

 

(a)                                 Grantor irrevocably authorizes the Secured Party at any time and from time to time to file, without the signature of Grantor, in any jurisdiction any amendments to existing financing statements and any initial financing statements and amendments thereto that:

 

(i)                                     indicate the nature of the Collateral;

 

(ii)                                  contain any other information required for the sufficiency or filing office acceptance of any financing statement or amendment, including whether Grantor is an organization, the type of organization and any organization identification number issued to Grantor; and

 

(iii)                               properly effectuate the transactions described in the Loan Documents, as determined by the Secured Party in its discretion.

 

Grantor will furnish any such information to the Secured Party promptly upon request. A carbon, photographic or other reproduction of this Agreement or any financing statement describing any Collateral is sufficient as a financing statement and may be filed in any jurisdiction by the Secured Party. Grantor ratifies and approves all financing statements heretofore filed by or on behalf of the Secured Party in any jurisdiction in connection with the transactions contemplated hereby.

 

(b)                                 Grantor appoints the Secured Party as Grantor’s attorney in fact and proxy, with full authority in the place and stead of Grantor and in the name of Grantor or otherwise, from time to time after the occurrence and during the continuance of an Event of Default, to take any action and to execute any instrument that the Secured Party may deem necessary or advisable to accomplish the purposes of this Agreement including any action or instrument:

 

(i)                                     to ask for, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any Collateral;

 

(ii)                                  to receive, indorse and collect any drafts or other Instruments or Documents;

 

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(iii)                               to enforce any obligations included in the Collateral; and

 

(iv)                              to file any claims or take any action or institute any proceedings that the Secured Party may deem necessary or desirable for the collection of any Collateral or otherwise to enforce the rights of Grantor or the Secured Party with respect to any Collateral.

 

Such power of attorney and proxy are coupled with an interest, are irrevocable, and are to be used by the Secured Party for the sole benefit of the Beneficiaries.

 

(c)                                  If Grantor fails to perform any agreement or obligation contained herein, the Secured Party may, but shall have no obligation to, itself perform, or cause performance of, such agreement or obligation, and the expenses of the Secured Party incurred in connection therewith shall be payable by Grantor under Section 6.6.

 

(d)                                 The Secured Party shall have the right, at any time upon the occurrence and during the continuance of an Event of Default and without notice to Grantor, to transfer to or to register in the name of the Secured Party or any of its nominees any Pledged Equity, subject only to the revocable rights specified in Section 5.1.

 

(e)                                  Anything herein to the contrary notwithstanding:

 

(i)                                     Grantor shall remain liable to perform all duties and obligations under the agreements included in the Collateral to the same extent as if this Agreement had not been executed.

 

(ii)                                  The exercise by the Secured Party of any right hereunder shall not release Grantor from any duty or obligation under any agreement included in the Collateral.

 

(iii)                               No Beneficiary shall have any obligation or liability under the agreements in respect of the Collateral by reason of this Agreement or any other Loan Document, nor shall any Beneficiary be obligated to perform any duty or obligation of Grantor thereunder or take any action to collect or enforce any claim for payment assigned hereunder.

 

Section 6.2.                                 Event of Default Remedies. If an Event of Default shall have occurred and be continuing, the Secured Party may from time to time in its discretion, without limitation and without notice except as expressly provided below:

 

(a)                                 Exercise in respect of the Collateral, in addition to any other right and remedy provided for herein, under the other Loan Documents, or otherwise available to it, all the rights and remedies of a secured party on default under the UCC (whether or not the UCC applies to the affected Collateral) and any other applicable law.

 

(b)                                 Require Grantor to, and Grantor will at its expense and upon request of the Secured Party forthwith, assemble all or part of the Collateral as directed by the Secured Party and make it (together with all books, records and information of Grantor relating thereto)

 

12

 

available to the Secured Party at a place to be designated by the Secured Party that is reasonably convenient to both parties.

 

(c)                                  Prior to the disposition of any Collateral:

 

(i)                                     to the extent permitted by applicable Law, enter, with or without process of law and without breach of the peace, any premises where any Collateral is or may be located, and without charge or liability to the Secured Party seize and remove such Collateral from such premises;

 

(ii)                                  have access to and use the Company’s books, records, and information relating to the Collateral; and

 

(iii)                               store or transfer any Collateral without charge in or by means of any storage or transportation facility owned or leased by Grantor, process, repair or recondition any Collateral or otherwise prepare it for disposition in any manner and to the extent the Secured Party deems appropriate and, in connection with such preparation and disposition, use without charge any copyright, trademark, trade name, patent or technical process used by Grantor.

 

(d)                                 Reduce its claim to judgment or foreclose or otherwise enforce, in whole or in part, the security interest created hereby by any available judicial procedure.

 

(e)                                  Dispose of, at its office, on the premises of Grantor or elsewhere, any Collateral, as a unit or in parcels, by public or private proceedings, and by way of one or more contracts (but that the sale of any Collateral shall not exhaust the Secured Party’s power of sale, and sales may be made from time to time, and at any time, until all of the Collateral has been sold or until the Secured Obligations have been paid and performed in full), and at any such sale it shall not be necessary to exhibit any Collateral.

 

(f)                                   Buy (or allow any Beneficiary to buy) Collateral, or any part thereof, at any public sale.

 

(g)                                  Buy (or allow any Beneficiary to buy) Collateral, or any part thereof, at any private sale if any Collateral is of a type customarily sold in a recognized market or is of a type that is the subject of widely distributed standard price quotations.

 

(h)                                 Apply by appropriate judicial proceedings for appointment of a receiver for the Collateral, or any part thereof, and Grantor consents to any such appointment.

 

(i)                                     Comply with any applicable state or federal Law requirement in connection with a disposition of Collateral and such compliance shall not be considered to affect adversely the commercial reasonableness of any sale of Collateral.

 

(j)                                    Sell Collateral without giving any warranty with respect to title or any other matter and for cash, on credit or for non-cash consideration as the Secured Party determines is appropriate.

 

13

 

(k)                                 To the extent notice of sale shall be required by law with respect to Collateral, at least 10-days’ notice to Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification; provided that, if the Secured Party fails in any respect to give such notice, its liability for such failure shall be limited to the liability (if any) imposed on it by law under the UCC. The Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

 

Section 6.3.                                 Application of Proceeds. If an Event of Default shall have occurred and be continuing, any cash held by or on behalf of the Secured Party and all cash proceeds received by or on behalf of the Secured Party in respect of any sale of, collection from, or other realization upon any Collateral may, in the discretion of the Secured Party, be held by the Secured Party as collateral for, and/or then or at any time thereafter applied in whole or in part by the Secured Party for the benefit of the Beneficiaries against, any Secured Obligation, in the following manner:

 

(a)                                 First, paid to the Secured Party for any amounts then owing to the Secured Party pursuant to the Credit Agreement or otherwise under the Loan Documents or that has otherwise been incurred by the Secured Party in connection with the payment or other satisfaction of any Lien, encumbrance or adverse claim upon or against any Collateral or any other action that the Secured Party determines is reasonably appropriate in connection with the preservation or maintenance of the Collateral.

 

(b)                                 Second, paid to the Beneficiaries in payment of the Secured Obligations, ratably in accordance with the respective amounts thereof then owing to the Beneficiaries or as otherwise provided in the Credit Agreement.

 

(c)                                  Third, any surplus of such cash or cash proceeds held by or on the behalf of the Secured Party and remaining after payment in full of all the Secured Obligations shall be paid over to Grantor or to whatever Person may be lawfully entitled to receive such surplus.

 

Section 6.4.                                 Deficiency. If the proceeds of any sale, collection or realization of or upon the Collateral of Grantor by the Secured Party are insufficient to pay all Secured Obligations and all other amounts to which the Secured Party is entitled, Grantor shall be liable for the deficiency, together with interest thereon as provided in the Loan Documents or (if no interest is so provided) at such other rate as shall be fixed by applicable law, together with the costs of collection and the reasonable fees of any attorneys employed by the Secured Party (that are not employees of the Secured Party or any Affiliate of the Secured Party) and/or the other Beneficiaries to collect such deficiency. Collateral may be sold at a loss to Grantor, and the Secured Party shall have no liability or responsibility to Grantor for such loss. Grantor acknowledges that a private sale may result in less proceeds than a public sale.

 

Section 6.5.                                 Private Sales of Pledged Equity. The Beneficiaries may deem it impracticable to effect a public sale of any Pledged Equity and may determine to make one or more private sales of such Pledged Equity to a restricted group of purchasers that will be

 

14

 

obligated to agree, among other things, to acquire the same for their own account, for investment and not with a view to the distribution or resale thereof. Any such private sale may be at a price and on other terms less favorable to the seller than the price and other terms that might have been obtained at a public sale. Any such private sale nevertheless shall be deemed to have been made in a commercially reasonable manner, and neither the Secured Party nor any other Beneficiary shall have any obligation to delay sale of any such Pledged Equity for the period of time necessary to permit their registration for public sale under the Securities Act. Any offer to sell any such Collateral that has been:

 

(i)                                     publicly advertised on a bona-fide basis in a newspaper or other publication of general circulation in the financial community of Denver, Colorado (to the extent that such an offer may be so advertised without prior registration under the Securities Act), or

 

(ii)                                  made privately in the manner described above to not less than 15 bona-fide offerees,

 

shall be deemed to involve a “public disposition” under Section 9-610(c) of the UCC, notwithstanding that such sale may not constitute a “public offering” under the Securities Act, and any Beneficiary may bid for such Collateral.

 

Section 6.6.                                 Indemnity and Expenses. In addition to, but not in qualification or limitation of, any similar obligations under other Loan Documents:

 

(a)                                 Grantor will indemnify the Secured Party, each other Beneficiary and any agent appointed pursuant to Section 6.9 from and against all claims, losses and liabilities growing out of or resulting from this Agreement (including enforcement of this Agreement), WHETHER OR NOT SUCH CLAIMS, LOSSES AND LIABILITIES ARE IN ANY WAY OR TO ANY EXTENT CAUSED BY OR ARISING OUT OF SUCH INDEMNIFIED PARTY’S OWN NEGLIGENCE OR STRICT LIABILITY, except to the extent such claims, losses or liabilities are proximately caused by such indemnified party’s individual gross negligence or willful misconduct.

 

(b)                                 Grantor will upon demand pay to the Secured Party the amount of all costs and expenses, including the reasonable fees and disbursements of the Secured Party’s counsel (that are not employees of the Secured Party or any of its Affiliates) and of any experts and agents, that the Secured Party may incur in connection with:

 

(i)                                     the transactions that give rise to this Agreement;

 

(ii)                                  the preparation of this Agreement and the perfection and preservation of this security interest created under this Agreement; or

 

(iii)                               the administration of this Agreement.

 

(c)                                  Grantor will upon demand pay to the Secured Party the amount of all costs and expenses, including the fees and disbursements of the Secured Party’s counsel (that are not

 

15

 

employees of the Secured Party or any of its Affiliates) and of any experts and agents, that the Secured Party may incur in connection with:

 

(i)                                     the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any Collateral;

 

(ii)                                  the exercise or enforcement of any right of the Secured Party hereunder; or

 

(iii)                               the failure by Grantor to perform or observe any of the provisions hereof.

 

Section 6.7.                                 Non-Judicial Remedies. In granting to the Secured Party the power to enforce its rights hereunder without prior judicial process or judicial hearing, to the extent permitted by applicable Law, Grantor waives, renounces and knowingly relinquishes any legal right that might otherwise require the Secured Party to enforce its rights by judicial process and confirms that such remedies are consistent with the usage of trade, are responsive to commercial necessity and are the result of a bargain at arm’s length. The Secured Party may, however, in its discretion, resort to judicial process.

 

Section 6.8.                                 Limitation on Duty of the Secured Party in Respect of Collateral. Beyond the exercise of reasonable care in the custody thereof, the Secured Party shall have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or as to the preservation of rights against prior parties or any other rights pertaining thereto. The Secured Party shall be deemed to have exercised reasonable care in the custody of Collateral in its possession if such Collateral is accorded treatment substantially equal to which that it accords its own property, and the Secured Party shall not be liable or responsible for any loss or damage to any Collateral, or for any diminution in the value thereof, by reason of the act or omission of any warehouseman, carrier, forwarding agency, consignee or other agent or bailee selected by the Secured Party in good faith.

 

Section 6.9.                                 Appointment of Other Agents. At any time, in order to comply with any legal requirement in any jurisdiction, the Secured Party may appoint any bank or trust company or one or more other Persons, either to act as co-agent or co-agents, jointly with the Secured Party, or to act as separate agent or agents on behalf of the Secured Party, with such power and authority as may be necessary for the effective operation of the provisions hereof and may be specified in the instrument of appointment.

 

ARTICLE VII

 

Miscellaneous

 

Section 7.1.                                 Notices. Any notice or communication required or permitted hereunder shall be given in writing, sent in the manner provided in the Second Lien Guaranty of even date herewith by Grantor in favor of Secured Party (“Guaranty”), or to such other address or to the attention of such other individual as hereafter shall be designated in writing by the applicable party sent in accordance herewith. Any such notice or communication shall be deemed to have been given as provided in the Guaranty for notices given thereunder.

 

16

 

Section 7.2.                                 Amendments and Waivers. Except as provided in Section 4.2(b) or 7.3, no amendment of this Agreement shall be effective unless it is in writing and signed by Grantor and the Secured Party, and no waiver of this Agreement or consent to any departure by Grantor herefrom shall be effective unless it is in writing and signed by the Secured Party, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for that given and to the extent specified in such writing. In addition, all such amendments and waivers shall be effective only if given with the necessary approvals required in the Credit Agreement.

 

Section 7.3.                                 Preservation of Rights. No failure on the part of the Secured Party or any other Beneficiary to exercise, and no delay in exercising, any right hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The rights and remedies of the Secured Party provided herein and in the other Loan Documents are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law or otherwise.

 

Section 7.4.                                 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or invalidity without invalidating the remaining portions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction.

 

Section 7.5.                                 Survival. Each representation and warranty, covenant and other obligation of Grantor herein shall survive the execution and delivery of this Agreement, the execution and delivery of any other Loan Document and the creation of the Secured Obligations.

 

Section 7.6.                                 Binding Effect and Assignment. This Agreement shall:

 

(a)                                 be binding on Grantor and its successors and permitted assigns, and

 

(b)                                 inure, together with all rights and remedies of the Secured Party hereunder, to the benefit of the Secured Party and the other Beneficiaries and their respective successors, transferees and assigns who acquire their interests in accordance with the assignment provisions of the Credit Agreement.

 

Without limiting the generality of the foregoing, the Secured Party and any other Beneficiary may (in accordance with the provisions of the Loan Documents) pledge, assign or otherwise transfer any right under any Loan Document to any other Person, and such other Person shall thereupon become vested with all benefits in respect thereof granted herein or otherwise. No right or duty of Grantor hereunder may be assigned or otherwise transferred without the prior written consent of the Secured Party.

 

Section 7.7.                                 Release of Collateral; Termination.

 

(a)                                 Upon any sale, lease, transfer or other disposition of any Collateral of Grantor in accordance with the Loan Documents, the Secured Party will, at Grantor’s expense, execute and deliver to Grantor such documents as Grantor shall reasonably request to evidence the release of such Collateral from the assignment and security interest granted hereby; provided that:

 

17

 

(i)                                     at the time of such request and such release no Default shall have occurred and be continuing,

 

(ii)                                  Grantor shall have delivered to the Secured Party, at least 10 Business Days prior to the date of the proposed release (or by such lesser notice as the Secured Party may approve), a written request for release describing the item of Collateral and the terms of the sale, lease, transfer or other disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a form of release for execution by the Secured Party and a certificate of Grantor to the effect that the transaction is in compliance with the Loan Documents and such other matters as the Secured Party may request, and

 

(iii)                               if any Loan Document provides for any application of the proceeds of any such sale, lease, transfer or other disposition, or any payment to be made, in connection therewith, such proceeds shall have been applied or payment made as provided therein, or arrangements satisfactory to the Administrative Agent for such application or payment have been made.

 

(b)                                 Upon, and only upon the payment and satisfaction in full in cash of the Secured Obligations (other than contingent indemnification obligations) and the termination or expiration of all Commitments of the Lenders under the Credit Agreement, this Agreement and the security interest created hereby shall terminate, all rights in the Collateral shall revert to Grantors and the Secured Party, at a Grantor’s request and at its expense, will:

 

(i)                                     return to Grantor such of Grantor’s Collateral in the Secured Party’s possession as shall not have been sold or otherwise disposed of or applied pursuant to the terms hereof, and

 

(ii)                                  execute and deliver to Grantor such documents as Grantor shall reasonably request to evidence such termination.

 

Notwithstanding the foregoing, Section 6.6 shall survive the termination of this Agreement.

 

(c)                                  No Grantor is authorized to file any financing statement or amendment or termination statement with respect to any financing statement originally filed in connection with this Agreement without the prior written consent of the Secured Party, subject to Grantors’ rights under Sections 9-509(d)(2) and 9-518 of the UCC.

 

Section 7.8.                                 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado.

 

Section 7.9.                                 Final Agreement. This Agreement and the other Loan Documents represent the final agreement between the parties hereto and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties hereto. There are no unwritten oral agreements between the parties hereto.

 

Section 7.10.                          Facsimile. This Agreement may be validly delivered by facsimile or other electronic transmission of an executed counterpart of the signature page hereof.

 

18

 

Section 7.11.                          Acceptance by the Secured Party. By their acceptance of the benefits hereof, the Secured Party and the Beneficiaries shall be deemed to have agreed to be bound hereby and to perform any obligation on their part set forth herein.

 

Section 7.12.                          Intercreditor Agreement. Reference is made to the Intercreditor Agreement dated as of August 30, 2013 (as amended, restated, supplemented or otherwise modified from time to time, the “Intercreditor Agreement”), among the Borrower, Wells Fargo Bank, N.A., as First Lien Administrative Agent (as defined therein), and Wells Fargo Energy Capital, Inc., as Second Lien Administrative Agent (as defined therein). Notwithstanding anything herein to the contrary, the lien and security interest granted to the Administrative Agent, for the benefit of the Secured Parties, pursuant to this Agreement and the exercise of any right or remedy by the Administrative Agent and the other Secured Parties hereunder are subject to the provisions of the Intercreditor Agreement. In the event of any conflict or inconsistency between the provisions of the Intercreditor Agreement and this Agreement, the provisions of the Intercreditor Agreement shall control. Anything herein to the contrary notwithstanding, any obligation of any Grantor hereunder or under any other Loan Document with respect to delivery and control of collateral (including, without limitation, the requirements to endorse, assign and/or deliver any certificates, instruments, documents or other possessory collateral to the Secured Party), the provision of voting rights or the obtaining of any consent of any Person, shall be deemed to be satisfied if the applicable Grantor complies with the requirements of the similar provision of the applicable First Lien Loan Document.

 

[Remainder of page intentionally left blank]

 

19

 

IN WITNESS WHEREOF, Grantor has executed and delivered this Agreement as of the date first-above written.

 

 

	
 
    	
SUNDANCE   ENERGY AUSTRALIA LIMITED
    
	
 
    	
ACN   112 202 883 in accordance with Section 127 of the Corporations Act 2001   (Australia)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
Michael   Hannell
    
	
 
    	
 
    	
Title:
    	
Chairman   of the Board
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
Damien   Connor
    
	
 
    	
 
    	
Title:
    	
Secretary
    

 

S-1

 

	
 
    	
WELLS   FARGO ENERGY CAPITAL INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
Ryan   Sauer 
    
	
 
    	
 
    	
Title:
    	
Vice   President
    

 

S-2Exhibit 10.7

 

EXECUTION VERSION

 

SECOND LIEN GUARANTY

 

 

dated as of August 30, 2013

 

 

of

 

 

the Guarantors listed on the signature pages hereof
 and that otherwise may become a party hereto

 

 

in favor of

 

 

WELLS FARGO ENERGY CAPITAL, INC., as Administrative Agent

 

Subsidiary  Guaranty

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I   Definitions and References
    	
1
    
	
 
    	
 
    	
 
    
	
Section 1.1.
    	
Definitions in Credit Agreement
    	
1
    
	
 
    	
 
    	
 
    
	
Section 1.2.
    	
Definitions in this Guaranty
    	
1
    
	
 
    	
 
    	
 
    
	
Section 1.3.
    	
Rules of Construction; References and   Titles
    	
2
    
	
 
    	
 
    	
 
    
	
ARTICLE II   Guaranty
    	
3
    
	
 
    	
 
    	
 
    
	
Section 2.1.
    	
Guaranty
    	
3
    
	
 
    	
 
    	
 
    
	
Section 2.2.
    	
Obligation as a Guarantor
    	
3
    
	
 
    	
 
    	
 
    
	
Section 2.3.
    	
Fees and Expenses
    	
4
    
	
 
    	
 
    	
 
    
	
Section 2.4.
    	
Limitation of Liability of Certain   Guarantors
    	
4
    
	
 
    	
 
    	
 
    
	
ARTICLE III   Guaranty Absolute
    	
4
    
	
 
    	
 
    	
 
    
	
Section 3.1.
    	
Unconditional Guaranty
    	
4
    
	
 
    	
 
    	
 
    
	
Section 3.2.
    	
No Release Based on Actions of the   Guaranteed Parties
    	
5
    
	
 
    	
 
    	
 
    
	
Section 3.3.
    	
Waivers
    	
5
    
	
 
    	
 
    	
 
    
	
Section 3.4.
    	
Continuing Guaranty; Reinstatement
    	
7
    
	
 
    	
 
    	
 
    
	
ARTICLE IV   Representations and Warranties
    	
8
    
	
 
    	
 
    	
 
    
	
Section 4.1.
    	
Representations and Warranties
    	
8
    
	
 
    	
 
    	
 
    
	
ARTICLE V   Covenants
    	
9
    
	
 
    	
 
    	
 
    
	
Section 5.1.
    	
Covenants
    	
9
    
	
 
    	
 
    	
 
    
	
ARTICLE VI   Remedies of the Guaranteed Parties
    	
10
    
	
 
    	
 
    	
 
    
	
Section 6.1.
    	
Exercise of Remedies
    	
10
    
	
 
    	
 
    	
 
    
	
Section 6.2.
    	
Liability for Deficiencies
    	
10
    
	
 
    	
 
    	
 
    
	
Section 6.3.
    	
Delay not a Waiver; Remedies Cumulative
    	
10
    
	
 
    	
 
    	
 
    
	
Section 6.4.
    	
Right of Set-Off
    	
10
    
	
 
    	
 
    	
 
    
	
ARTICLE VII Subordination; Subrogation; Contribution
    	
11
    
	
 
    	
 
    	
 
    
	
Section 7.1.
    	
Subordination
    	
11
    
	
 
    	
 
    	
 
    
	
Section 7.2.
    	
Limited Right of Subrogation
    	
11
    
	
 
    	
 
    	
 
    
	
Section 7.3.
    	
Right of Contribution
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII   Limitation of Liability
    	
12
    
	
 
    	
 
    	
 
    
	
Section 8.1.
    	
Limitation on Liability of the Indemnified   Parties
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE IX   Miscellaneous
    	
13
    

 

i

 

	
Section 9.1.
    	
Notices
    	
13
    
	
 
    	
 
    	
 
    
	
Section 9.2.
    	
Amendments and Waivers
    	
13
    
	
 
    	
 
    	
 
    
	
Section 9.3.
    	
Additional Guarantors
    	
13
    
	
 
    	
 
    	
 
    
	
Section 9.4.
    	
Severability
    	
13
    
	
 
    	
 
    	
 
    
	
Section 9.5.
    	
Survival of Agreements
    	
13
    
	
 
    	
 
    	
 
    
	
Section 9.6.
    	
Binding Effect and Assignment
    	
13
    
	
 
    	
 
    	
 
    
	
Section 9.7.
    	
Governing Law
    	
14
    
	
 
    	
 
    	
 
    
	
Section 9.8.
    	
Final Agreement
    	
14
    
	
 
    	
 
    	
 
    
	
Section 9.9.
    	
Counterparts; Facsimile
    	
14
    
	
 
    	
 
    	
 
    
	
Section 9.10.   
    	
Acceptance by the Guaranteed Parties
    	
14
    
	
 
    	
 
    	
 
    
	
Section 9.11.   
    	
Limitation on Interest
    	
14
    
	
 
    	
 
    	
 
    
	
Section 9.12.   
    	
Jurisdiction, Etc.
    	
14
    
	
 
    	
 
    	
 
    
	
Section 9.13.   
    	
Waiver of Jury Trial
    	
15
    
	
 
    	
 
    	
 
    
	
Section 9.14.   
    	
Intercreditor Agreement
    	
15
    

 

Schedule 1                                     Guarantor Information

 

Exhibit A                                             Form of Guaranty Supplement

 

ii

 

SECOND LIEN GUARANTY

 

THIS SECOND LIEN GUARANTY is made as of August 30, 2013, by the Persons listed on the signature pages hereof and that may become parties hereto pursuant to Section 9.3, in favor of WELLS FARGO ENERGY CAPITAL, INC., individually and as administrative agent under the Credit Agreement, as defined below (the “Administrative Agent”) for the benefit of the Guaranteed Parties.

 

RECITALS

 

A.                                    Sundance Energy, Inc., a Colorado corporation (“Borrower”), is executing in favor of Lenders those certain promissory notes of even date herewith, payable to the order of Lenders in the aggregate principal amount of up to $100,000,000 (such promissory notes, as from time to time amended, and all promissory notes given in substitution, renewal or extension therefor or thereof, in whole or in part, being herein collectively called the “Note”).

 

B.                                    The Note is being executed pursuant to the Second Lien Credit Agreement of even date herewith, (herein, as from time to time amended, supplemented or restated, called the “Credit Agreement”), by and among Borrower, Administrative Agent and Lenders, pursuant to which Lenders have agreed to advance funds to Borrower under the Note.

 

C.                                    It is a condition precedent to Lenders’ obligations to advance funds to the Borrower that Guarantors shall execute and deliver to Administrative Agent a satisfactory guaranty of Borrower’s obligations under the Note, the Credit Agreement and the other Loan Documents.

 

D.                                    In order to induce the Guaranteed Parties to extend such credit, and to enter into the other Loan Documents, each Guarantor has agreed to enter into this Guaranty.

 

NOW, THEREFORE, in consideration of the premises and for other valuable consideration, the receipt and sufficiency of that the parties acknowledge, the Guarantors agree as follows:

 

ARTICLE I

 

Definitions and References

 

Section 1.1.                                 Definitions in Credit Agreement. Capitalized terms used herein and not otherwise defined have the respective meanings specified in the Credit Agreement.

 

Section 1.2.                                 Definitions in this Guaranty. The following terms have the following meanings:

 

“Administrative Agent” has the meaning specified in the preamble.

 

“Borrower” has the meaning specified in Recital A.

 

“Credit Agreement” has the meaning specified in Recital B.

 

 

“Credit Parties” means SUNDANCE ENERGY AUSTRALIA LIMITED (ACN 112 202 883), a company organized under the laws of South Australia, and all Restricted Persons.

 

“Guaranteed Documents” means each Loan Document.

 

“Guaranteed Obligations” means all Obligations, including all amounts that constitute part of the Guaranteed Obligations and would be owed by any Credit Party to any Guaranteed Party but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such Credit Party.

 

“Guaranteed Parties” means the Administrative Agent, the Lenders and any other Person to which Guaranteed Obligations are owing.

 

“Guarantor” means each Person guarantying the Guaranteed Obligations pursuant to this Guaranty. References to “Guarantor” in this Guaranty are intended to refer to each such Person as if such Person were the only guarantor pursuant to this Guaranty, except:

 

(a)                                 that references to “any Guarantor” or “each Guarantor” or words of similar import are meant to refer to each Person that is a Guarantor,

 

(b)                                 that references to “the Guarantors” are meant to refer collectively to all Persons that are Guarantors and

 

(c)                                  as otherwise may be specifically set forth herein.

 

“Indemnified Party” means each Guaranteed Party and each of its Affiliates, officers, directors, employees, agents and advisors.

 

“Net Worth” has the meaning specified in Section 7.3.

 

“Post-Petition Interest” has the meaning specified in Section 7.1(b).

 

“Subordinated Obligations” has the meaning specified in Section 7.1.

 

Section 1.3.                                 Rules of Construction; References and Titles. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise:

 

(a)                                 Any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein).

 

(b)                                 Any reference herein to any Person shall be construed to include such Person’s successors and assigns.

 

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(c)                                  The words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Guaranty in its entirety and not to any particular provision hereof.

 

(d)                                 All references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Guaranty.

 

(e)                                  Any reference to any Law herein shall, unless otherwise specified, refer to such Law as amended, modified or supplemented from time to time.

 

(f)                                   The words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

 

(g)                                  Except as specified otherwise, references to any document, instrument, or agreement shall include:

 

(i)                                     all exhibits, schedules, and other attachments thereto, and

 

(ii)                                  all documents, instruments, or agreements issued or executed in replacement thereof.

 

(h)                                 A title appearing at the beginning of any subdivision is for convenience only, does not constitute any part of such subdivision and shall be disregarded in construing the language contained in such subdivision.

 

(i)                                     The phrases “this Section” and “this subsection” and similar phrases refer only to the section or subsection hereof in which such phrases occur.

 

(j)                                    The word “or” is not exclusive, and the word “including” (in all of its grammatical variations) means “including without limitation”.

 

(k)                                 Unless otherwise specified, references herein to any particular Person also refer to its successors and permitted assigns.

 

ARTICLE II

 

Guaranty

 

Section 2.1.                                 Guaranty. The Guarantors, jointly and severally, irrevocably, absolutely and unconditionally guarantee to each Guaranteed Party the prompt and complete payment and performance when due, no matter how the same shall become due, of all Guaranteed Obligations.

 

Section 2.2.                                 Obligation as a Guarantor. If the Borrower shall for any reason fail to pay any Guaranteed Obligation, as and when such Guaranteed Obligation shall become due and payable, whether at its stated maturity, as a result of the exercise of any power to accelerate, or otherwise, Guarantor will, upon demand by the Administrative Agent, pay such Guaranteed Obligation in full to the Administrative Agent for the benefit of the Guaranteed Party to which

 

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such Guaranteed Obligation is owed. If the Borrower shall for any reason fail to perform promptly any Guaranteed Obligation that is not for the payment of money, Guarantor will, upon demand by the Administrative Agent, cause such Guaranteed Obligation to be performed or, if specified by the Administrative Agent, provide sufficient funds, in such amount and manner as the Administrative Agent shall in good faith determine, for the prompt, full and faithful performance of such Guaranteed Obligation by the Administrative Agent or such other Person as the Administrative Agent shall designate. Without limiting the generality of the foregoing, Guarantor will pay all amounts that constitute part of the Guaranteed Obligations and would be owing but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding.

 

Section 2.3.                                 Fees and Expenses. The Guarantors, jointly and severally, forthwith upon demand by the Administrative Agent, will pay all expenses (including fees and expenses of counsel that are not employees of the Administrative Agent or any Affiliate of the Administrative Agent) incurred by the Administrative Agent or any other Guaranteed Party in enforcing against any Guarantor any right under this Guaranty or any other Guaranteed Document.

 

Section 2.4.                                 Limitation of Liability of Certain Guarantors. Notwithstanding any other provision of this Guaranty, the liability of any Guarantor for all obligations under this Guaranty and any other Guaranteed Document to which it is a party shall be limited to the maximum liability that can be incurred by such Guarantor without rendering this Guaranty subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of any applicable state or federal Law.

 

ARTICLE III

 

Guaranty Absolute

 

Section 3.1.                                 Unconditional Guaranty.   (a)   Guarantor will pay the Guaranteed Obligations strictly in accordance with the terms of the Guaranteed Documents, to the extent permitted by Law regardless of any Law, regulation or order now or hereafter in effect in any jurisdiction affecting any such term or any right of any Guaranteed Party with respect thereto.

 

(b)                                 This is a guaranty of payment and not of collection. The obligations of Guarantor under or in respect of this Guaranty and each other Guaranteed Document to which Guarantor is a party are independent of the Guaranteed Obligations or any other obligation of any other Credit Party under or in respect of the Guaranteed Documents, and a separate action or actions may be brought and prosecuted against Guarantor to enforce this Guaranty or any other Guaranteed Document to which Guarantor is a party, irrespective of whether any action is brought against the Borrower or any other Credit Party or whether the Borrower or any other Credit Party is joined in any such action or actions.

 

(c)                                  The obligations of Guarantor under this Guaranty and each other Guaranteed Document to which Guarantor is a party shall not be affected by:

 

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(i)                                     any voluntary or involuntary liquidation, dissolution, sale of all or substantially all assets, marshalling of assets or liabilities, receivership, conservatorship, assignment for the benefit of creditors, insolvency, bankruptcy, reorganization, arrangement, or composition of any Credit Party;

 

(ii)                                  any other proceeding involving any Credit Party or any asset of any Credit Party under any Law for the protection of debtors; or

 

(iii)                               any discharge, impairment, modification, release, or limitation of the liability of, or stay of actions or lien enforcement proceeding against, any Credit Party, any property of any Credit Party, or the estate in bankruptcy of any Credit Party in the course of or resulting from any such proceeding.

 

Section 3.2.                                 No Release Based on Actions of the Guaranteed Parties. No action that the Administrative Agent or any other Guaranteed Party may take or omit to take in connection with any Guaranteed Document, any Guaranteed Obligation (or any other indebtedness owing by the Borrower to any Guaranteed Party), or any collateral security, and no course of dealing between any Guaranteed Party and the Borrower, any Guarantor or any other Person, shall release or diminish Guarantor’s Guaranteed Obligations, liabilities, agreements or duties hereunder, affect this Guaranty or any other Guaranteed Document to which Guarantor is a party, or afford Guarantor any recourse against any Guaranteed Party, regardless of whether any such action or inaction may increase any risk to or liability of any Guaranteed Party, the Borrower or any Credit Party or increase any risk to or diminish any safeguard of any collateral security.

 

Section 3.3.                                 Waivers. The liability of Guarantor under this Guaranty and each other Guaranteed Document to which Guarantor is a party shall be irrevocable, absolute and unconditional irrespective of, and Guarantor irrevocably waives, for purposes of this Guaranty and each other Guaranteed Document to which Guarantor is a party, any defense that it may now have or hereafter acquire relating to, any or all of the following, (and Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Guaranteed Documents and that the waivers set forth below and otherwise in this Guaranty are knowingly made in contemplation of such benefits):

 

(a)                                 Any lack of validity or enforceability of any Guaranteed Document, any agreement or instrument relating thereto, any defense arising by reason of any disability or other defense of any other Person or the cessation from any cause whatsoever of the liability of any other Person.

 

(b)                                 Any change in the time, manner or place of payment of, or in any other term of, any Guaranteed Obligation or any other obligation of any other Credit Party in respect of the Guaranteed Documents, or any other amendment or waiver of or any consent to departure from any Guaranteed Document, including any increase in the Guaranteed Obligations resulting from the extension of additional credit to any Credit Party or any of its Subsidiaries or otherwise.

 

(c)                                  Any taking, exchange, release or non-perfection of any collateral security, or any taking, release or amendment or waiver of, or consent to departure from any other guaranty of any Guaranteed Obligation.

 

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(d)                                 Any manner of application of collateral security, or proceeds thereof, to any Guaranteed Obligation, or any manner of sale or other disposition of any collateral security securing any Guaranteed Obligation or any other obligation of any Credit Party under the Guaranteed Documents or any other asset of any Credit Party or any of its Subsidiaries, and any other obligation to marshall assets.

 

(e)                                  Any right to require any Guaranteed Party to proceed against any other Person, to exhaust any collateral security for the Guaranteed Obligations, to have any other Person joined with Guarantor in any suit arising out of the Guaranteed Obligations or this Guaranty or to pursue any other remedy in any Guaranteed Party’s power.

 

(f)                                   Any change or restructuring of the corporate structure or termination of the existence of any Credit Party or any of its Subsidiaries.

 

(g)                                  Any failure of any Guaranteed Party to disclose to any Credit Party any information relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other Credit Party now or hereafter known to such Guaranteed Party (each Guarantor waiving any duty on the part of the Guaranteed Parties to disclose such information).

 

(h)                                 Any failure of any other Person to execute or deliver this Guaranty, any supplement hereto or any other guaranty or agreement.

 

(i)                                     Any release or reduction of the liability of any Guarantor or other guarantor or surety with respect to the Guaranteed Obligations or any other compromise or settlement of the Guaranteed Obligations.

 

(j)                                    Promptness, diligence, notice of acceptance, presentment, demand for performance, notice of non-performance, default, acceleration, protest or dishonor and, to the extent permitted by Law, any other notice with respect to any Guaranteed Obligation and this Guaranty.

 

(k)                                 Any requirement that any Guaranteed Party create or perfect any Lien or protect or insure any property subject thereto.

 

(l)                                     Any right to revoke this Guaranty or any other Guaranteed Document to which Guarantor is a party.

 

(m)                             Any election of remedies by any Guaranteed Party that in any manner impairs, reduces, releases or otherwise adversely affects any collateral security or any subrogation, reimbursement, exoneration, contribution or indemnification right of Guarantor or other right of Guarantor to proceed against any other Credit Party, any other guarantor, any other Person or any collateral security.

 

(n)                                 Any right of set-off or counterclaim against or in respect of the Obligations of Guarantor hereunder or any other Guaranteed Document to which Guarantor is a party.

 

(o)                                 Any neglect, failure or refusal to take any action:

 

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(i)                                     for the collection or enforcement of any Guaranteed Obligation,

 

(ii)                                  to realize on any collateral security,

 

(iii)                               to enforce any Guaranteed Document,

 

(iv)                              to file or enforce a claim in any proceeding described in Section 3.1(c),

 

(v)                                 in connection with the administration of any Guaranteed Document or

 

(vi)                              otherwise concerning the Guaranteed Obligations or the Guaranteed Documents,

 

or any delay in taking any such action.

 

(p)                                 The fact that any Guarantor may have incurred directly any Guaranteed Obligation or is otherwise primarily liable therefor.

 

(q)                                 Any duty of any Guaranteed Party to disclose to Guarantor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other Credit Party or any of its Subsidiaries now or hereafter known by such Guaranteed Party.

 

(r)                                    Any defense to the recovery by any Guaranteed Party against Guarantor of any deficiency after a non-judicial sale and any defense or benefit that may be afforded by applicable Law (and in that connection Guarantor acknowledges that the Administrative Agent may, without notice to or demand upon Guarantor and without affecting the liability of such Guarantor under this Guaranty, foreclose under any mortgage by non-judicial sale).

 

(s)                                   Any statute of limitations applicable to the Guaranteed Obligations.

 

(t)                                    To the extent permitted by Law, any other circumstance or any existence of or reliance on any representation by any Guaranteed Party, except for indefeasible payment in full in cash and performance in full of each Obligation, that might otherwise constitute a defense available to, or a discharge of, Guarantor, any Credit Party or any other guarantor or surety.

 

Section 3.4.                                 Continuing Guaranty; Reinstatement. (a) This Guaranty is a continuing guaranty and shall remain in full force and effect until the latest of:

 

(i)                                     the indefeasible payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty (other than contingent indemnification obligations); and

 

(ii)                                  the date on which all commitments of the Guaranteed Parties under the Credit Agreement shall terminate and all Loans shall be indefeasibly paid in full.

 

(b) This Guaranty and each other Guaranteed Document to which Guarantor is a party shall continue to be effective or be reinstated, as the case may be, if at any time any

 

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payment of any Guaranteed Obligation is rescinded or must otherwise be returned by any Guaranteed Party as a result of the insolvency, bankruptcy or reorganization of any Credit Party or otherwise, all as though such payment had not been made, and the Guarantors jointly and severally will pay such amount to the applicable Guaranteed Party on demand. Any transfer by subrogation that is made as contemplated in Section 7.2 prior to any such payment shall (regardless of the terms of such transfer) be automatically voided upon the making of any such payment or payments, and all rights so transferred shall thereupon automatically revert to and be vested in the Guaranteed Parties.

 

ARTICLE IV

 

Representations and Warranties

 

Section 4.1.                                 Representations and Warranties. Guarantor represents and warrants to the Guaranteed Parties as follows:

 

(a)                                 Each representation and warranty made with respect to it in any other Guaranteed Document is correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof).

 

(b)                                 Guarantor is an entity of the type specified opposite its name on Schedule 1 (or Schedule 1 to any guaranty supplement delivered by it pursuant to Section 9.3) opposite its name and is organized under the Laws of the jurisdiction specified in such Schedule opposite its name.

 

(c)                                  None of the execution, delivery or performance by Guarantor of this Guaranty and each other Guaranteed Document to which Guarantor is a party:

 

(i)                                     conflicts with:

 

(A)                               any domestic or foreign Law,

 

(B)                               any Organizational Document of Guarantor, or

 

(C)                               any material agreement, judgment, license, order or permit applicable to or binding upon Guarantor, or

 

(ii)                                  results in or requires the creation of any Lien, charge or encumbrance upon any asset of Guarantor (except in favor of the Guaranteed Parties).

 

(d)                                 No authorization or approval or other action by, and no notice to or filing with, any governmental authority or other regulatory body or third party is required for the due execution, delivery and performance by Guarantor of this Guaranty or any other Guaranteed Document to which Guarantor is a party.

 

(e)                                  Each of this Guaranty and each other Guaranteed Document to which Guarantor is a party is the legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, except as limited by bankruptcy, insolvency or similar Laws of

 

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general application relating to the enforcement of creditors’ rights and general principles of equity.

 

(f)                                   There is no action, suit or proceeding pending or, to the knowledge of Guarantor, threatened against or otherwise affecting Guarantor before any court, arbitrator or governmental department, commission, board, bureau, agency or instrumentality that could reasonably be expected materially and adversely to affect Guarantor’s financial condition or its ability to perform its Obligations under this Guaranty or any other Guaranteed Document to which Guarantor is a party.

 

(g)                                  There is no condition precedent to the effectiveness of this Guaranty or any other Guaranteed Document to which Guarantor is a party that has not been satisfied or waived.

 

(h)                                 Guarantor has, independently and without reliance upon any Guaranteed Party and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty and each other Guaranteed Document to which it is a party, and Guarantor has established adequate means of obtaining from each other Credit Party on a continuing basis information pertaining to, and is now and on a continuing basis will be completely familiar with, the business, condition (financial or otherwise), operations, performance, properties and prospects of each other Credit Party.

 

(i)                                     The direct or indirect value of the consideration received and to be received by Guarantor in connection herewith is reasonably worth at least as much as the liability and Guaranteed Obligations of Guarantor hereunder and under each other Guaranteed Document to which Guarantor is a party, and the incurrence of such liability in return for such consideration may reasonably be expected to benefit Guarantor, directly or indirectly. To the best of Guarantor’s knowledge, all balance sheets, earning statements, financial data and other information concerning Guarantor which have been furnished to the Administrative Agent and each Lender by or on behalf of Guarantor to induce it to accept this Guaranty (or otherwise furnished to the Administrative Agent and each Lender in connection with the transactions contemplated hereby or associated herewith) fairly represent the financial condition of Guarantor as of the dates and the results of Guarantor’s operations for the periods for which the same are furnished. To the best of Guarantor’s knowledge, none of such balance sheets, earnings and cash flow statements, financial data and other information contains any untrue statement of a material fact or omits to state any material fact that is necessary to make any statements contained therein not misleading as of the respective date(s) thereof.

 

ARTICLE V

 

Covenants

 

Section 5.1.                                 Covenants. Guarantor will, so long as any Guaranteed Obligation shall remain unpaid, or any Guaranteed Party shall have any Commitment, perform and observe, and cause each of its Subsidiaries to perform and observe, all of the terms, covenants and agreements in the Guaranteed Documents on its or their part to be performed or observed or that the Borrower has agreed to cause Guarantor or such Subsidiaries to perform or observe.

 

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ARTICLE VI

 

Remedies of the Guaranteed Parties

 

Section 6.1.                                 Exercise of Remedies. In accordance with the terms of Section 8.2 of the Credit Agreement and of the other Guaranteed Documents, each Guaranteed Party may enforce, from time to time, in any order and at such Guaranteed Party’s sole discretion, any right, power or remedy that such Guaranteed Party may have under the Guaranteed Documents or otherwise, including judicial foreclosure, the exercise of a right of power of sale, the taking of a deed or assignment in lieu of foreclosure, the appointment of a receiver to collect rents, issues and profits, the exercise of remedies against personal property, or the enforcement of any assignment of leases, rentals, oil or gas production or other property or right, whether real or personal, tangible or intangible.

 

Section 6.2.                                 Liability for Deficiencies. Guarantor shall be liable to each Guaranteed Party for any deficiency resulting from the exercise by any Guaranteed Party of any right or remedy, even though any right that Guarantor may have against the Borrower or others may be eliminated or diminished by the exercise of any such right or remedy.

 

Section 6.3.                                 Delay not a Waiver; Remedies Cumulative. No failure on the part of the Administrative Agent or any other Guaranteed Party to exercise, and no delay in exercising, any right under this Guaranty or any other Guaranteed Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The rights and remedies of the Administrative Agent and the other Guaranteed Parties provided in this Guaranty and the Guaranteed Documents are cumulative and are in addition to, and not exclusive of, any other right or remedy provided by Law or otherwise.

 

Section 6.4.                                 Right of Set-Off. Guarantor grants to the Guaranteed Parties and their Affiliates a right of set-off on any and all money, securities and other property (and the proceeds therefrom) of Guarantor now or hereafter held or received by or in transit to any Guaranteed Party from or for the account of Guarantor, whether for safekeeping, custody, pledge, transmission, collection or otherwise, and also upon any and all deposits (general or special), credits and claims of Guarantor at any time existing against any Guaranteed Party. Upon the occurrence and during the continuance of any Event of Default, after obtaining the prior written consent of Administrative Agent, each Guaranteed Party and its Affiliates are authorized at any time and from time to time, without notice to Guarantor, to set-off, appropriate and apply any such items against the Guaranteed Obligations and Guarantor’s obligations and liabilities hereunder irrespective of whether or not such Guaranteed Party shall have made any demand under this Guaranty and although such Guaranteed Obligations and liabilities may be contingent or unmatured. Each Guaranteed Party will notify Guarantor after any such set-off and application made by it; provided that the failure to give such notice shall not affect the validity of such set-off and application.

 

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ARTICLE VII

 

Subordination; Subrogation; Contribution

 

Section 7.1.                                 Subordination. Guarantor subordinates all debts, liabilities and other obligations owed to Guarantor by each other Credit Party (the “Subordinated Obligations”) to the Guaranteed Obligations as follows:

 

(a)                                 Except during the continuance of an Event of Default (including the commencement and continuation of any proceeding under any Debtor Relief Law relating to any other Credit Party), Guarantor may receive regularly scheduled payments from any other Credit Party on account of the Subordinated Obligations. After the occurrence and during the continuance of any Event of Default (including the commencement and continuation of any proceeding under any Debtor Relief Law relating to any other Credit Party), unless the Administrative Agent otherwise agrees, Guarantor shall not demand, accept or take any action to collect any payment on account of any Subordinated Obligation.

 

(b)                                 In any proceeding under any Debtor Relief Law relating to any other Credit Party, the Guaranteed Parties shall be entitled to receive payment in full in cash of all Guaranteed Obligations (including all interest and expenses accruing after the commencement of a proceeding under any Debtor Relief Law, whether or not constituting an allowed claim in such proceeding (“Post-Petition Interest”)) before Guarantor receives payment of any Subordinated Obligation.

 

(c)                                  After the occurrence and during the continuance of any Event of Default (including the commencement and continuation of any proceeding under any Debtor Relief Law relating to any other Credit Party), Guarantor shall, if the Administrative Agent so requests, collect, enforce and receive payments on account of the Subordinated Obligations as trustee for the Guaranteed Parties and deliver such payments to the Administrative Agent on account of the Guaranteed Obligations (including all Post-Petition Interest), together with any necessary endorsements or other instruments of transfer, but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty.

 

Section 7.2.                                 Limited Right of Subrogation. (a) Until all Guaranteed Obligations have been indefeasibly paid in full in cash and otherwise performed in full, and all obligations under each other Guaranteed Document to which Guarantor is a party have been paid and performed in full, Guarantor shall have no right of subrogation, reimbursement, indemnity, exoneration, contribution or any other claim against any Credit Party or any collateral security in connection with this Guaranty. Until such time, Guarantor waives any right to enforce any remedy that Guarantor may have against Borrower and any right to participate in any collateral security.

 

(b)                                 If any amount shall be paid to Guarantor on account of any subrogation or other right, any such other remedy, or any collateral security at any time when all of the Guaranteed Obligations and all other expenses guaranteed pursuant hereto shall not have been paid in full, such amount shall be held in trust for the benefit of the Guaranteed Parties, shall be segregated from the other funds of Guarantor and shall forthwith be paid over to the Administrative Agent to be held by the Administrative Agent for the benefit of the Guaranteed Parties as collateral

 

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security for, or then or at any time thereafter applied in whole or in part by the Administrative Agent against, any Guaranteed Obligation, whether matured or unmatured, in such order as the Administrative Agent shall elect.

 

(c)                                  If Guarantor shall have paid off any Guaranteed Obligation and if all of the Guaranteed Obligations shall have been indefeasibly paid in full in cash, the Administrative Agent will, at Guarantor’s expense and reasonable request, execute and deliver to Guarantor (without recourse, representation or warranty) appropriate documents necessary to evidence the transfer, without representation or warranty, by subrogation to Guarantor of an interest in the Guaranteed Obligations resulting from such payment by Guarantor; provided that:

 

(i)                                     such transfer shall be subject to Section 3.4(b), and

 

(ii)                                  without the consent of the Administrative Agent (which the Administrative Agent may withhold in its discretion) Guarantor shall not have the right to be subrogated to any claim or right against any Credit Party that has become owned by any Guaranteed Party, whose ownership has otherwise changed in the course of enforcement of the Guaranteed Documents, or that the Administrative Agent otherwise has released or wishes to release from its Guaranteed Obligations.

 

Section 7.3.                                 Right of Contribution. After all Guaranteed Obligations have been indefeasibly paid in full in cash and otherwise performed in full, and all obligations under each other Guaranteed Document to which Guarantor is a party have been paid and performed in full, the Guarantors that have made payments in respect of the Guaranteed Obligations shall be entitled to contribution from the other Guarantors, to the end that all such payments upon the Guaranteed Obligations shall be shared among all such Guarantors in proportion to their respective Net Worths; provided that the contribution obligations of each such Guarantor shall be limited to the maximum amount that it can pay at such time without rendering its contribution obligations voidable under applicable Law relating to fraudulent conveyances or fraudulent transfers. “Net Worth” means, at any time and for any Guarantor:

 

(a)                                 the fair value of such Guarantor’s assets (other than such right of contribution), minus

 

(b)                                 the fair value of such Guarantor’s liabilities (other than its liabilities under its guaranty of the Guaranteed Obligations).

 

ARTICLE VIII

 

Limitation of Liability

 

Section 8.1.                                 Limitation on Liability of the Indemnified Parties. No Indemnified Party shall have any liability (whether direct or indirect, in contract, tort or otherwise) to Guarantor or any of its Affiliates, officers, directors, employees, agents and advisors, and Guarantor shall not to assert any claim against any Indemnified Party on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Guaranteed Documents, the actual or proposed use of proceeds of any borrowing or any other transaction contemplated by the Guaranteed Documents.

 

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ARTICLE IX

 

Miscellaneous

 

Section 9.1.                                 Notices. Except as may otherwise be provided in any other Guaranteed Document, any notice or communication required or permitted hereunder or any other Guaranteed Document to which Guarantor is a party shall be given in writing, sent in the manner provided in the Credit Agreement, if to the Administrative Agent, to the address set forth in the Credit Agreement and, for any Guarantor to the address specified opposite its name on Schedule 1, or to such other address or to the attention of such other individual as hereafter shall be designated in writing by the applicable party sent in accordance herewith. Any such notice or communication shall be deemed to have been given as provided in the Credit Agreement for notices given thereunder.

 

Section 9.2.                                 Amendments and Waivers. No amendment of this Guaranty shall be effective unless it is in writing and signed by Guarantor and the Administrative Agent, and no waiver of this Guaranty or consent to any departure by Guarantor herefrom shall be effective unless it is in writing and signed by the Administrative Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for that given and to the extent specified in such writing. In addition, all such amendments and waivers shall be effective only if given with the necessary approvals required in the Credit Agreement. No such amendment shall bind any Guarantor not a party thereto, but no such amendment with respect to any Guarantor shall require the consent of any other Guarantor.

 

Section 9.3.                                 Additional Guarantors. Upon the execution         and delivery, or authentication, by any Person of a Guaranty supplement in substantially the form of Exhibit A, such Person shall become a Guarantor hereunder, and each reference in this Guaranty and the other Guaranteed Documents to “Guarantor” shall also mean and be a reference to such Person.

 

Section 9.4.                                 Severability. Any provision of this Guaranty or any other Guaranteed Document to which Guarantor is a party that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or invalidity without invalidating the remaining portions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction.

 

Section 9.5.                                 Survival of Agreements. All representations, warranties, covenants and agreements of Guarantor herein and in each other Guaranteed Document to which Guarantor is a party shall survive the execution and delivery of this Guaranty, the execution and delivery of any other Guaranteed Document and the creation of the Guaranteed Obligations.

 

Section 9.6.                                 Binding Effect and Assignment. This Guaranty and each Guaranteed Document to which Guarantor is a party shall:

 

(a)                                 be binding on Guarantor and its successors and permitted assigns, and

 

(b)                                 inure, together with all rights and remedies of the Administrative Agent hereunder, to the benefit of the Administrative Agent and the other Guaranteed Parties and their

 

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respective successors, transferees and assigns who acquire their interests in accordance with the assignment provisions of the Credit Agreement.

 

Without limiting the generality of the foregoing, the Administrative Agent and any other Guaranteed Party may (except as otherwise provided in any Guaranteed Document) pledge, assign or otherwise transfer any right under any Guaranteed Document to any other Person, and such other Person shall thereupon become vested with all of the benefits in respect thereof granted herein or otherwise. No right or duty of Guarantor hereunder may be assigned or otherwise transferred without the prior written consent of the Administrative Agent.

 

Section 9.7.                                 Governing Law. This Guaranty shall be governed by and construed in accordance with the Laws of the State of Colorado.

 

Section 9.8.                                 Final Agreement. This Guaranty and the other Guaranteed Documents represent the final agreement of the Guarantors and the Guaranteed Parties and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties hereto. There are no unwritten oral agreements between the Guarantors and the Guaranteed Parties.

 

Section 9.9.                                 Counterparts; Facsimile. This Guaranty and each other Guaranteed Document to which Guarantor is a party may be separately executed in any number of counterparts, all of which when so executed shall be deemed to constitute one and the same Agreement. This Guaranty and each other Guaranteed Document to which Guarantor is a party may be validly delivered by facsimile or other electronic transmission of an executed counterpart of the signature page hereof.

 

Section 9.10.                          Acceptance by the Guaranteed Parties. By their acceptance of the benefits hereof, the Guaranteed Parties shall be deemed to have agreed to be bound hereby and to perform any obligation on their part set forth herein.

 

Section 9.11.                          Limitation on Interest. Section 10.8 of the Credit Agreement, which limits the interest for which Guarantor is obligated, is incorporated herein by reference.

 

Section 9.12.                          Jurisdiction, Etc. Guarantor:

 

(a)                                 irrevocably and unconditionally submits, for itself and its property, to the non- exclusive jurisdiction of any Colorado State court or federal court of the United States of America sitting in Denver County, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Guaranty or any other Guaranteed Document to which Guarantor is a party, or for recognition or enforcement of any judgment;

 

(b)                                 irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such Colorado State court or, to the extent permitted by Law, in such federal court;

 

(c)                                  agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law;

 

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(d)                                 irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Guaranty or any other Guaranteed Document to which Guarantor is a party in any Colorado State or federal court; and

 

(e)                                  irrevocably waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

Nothing in this Guaranty or any other Guaranteed Document to which Guarantor is a party shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Guaranty in the courts of any jurisdiction.

 

Section 9.13.                          Waiver of Jury Trial. Guarantor irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Guaranty or any other Guaranteed Document to which Guarantor is a party or the actions of any Guaranteed Party in the negotiation, administration, performance or enforcement hereof or thereof.

 

Section 9.14.                          Intercreditor Agreement. Reference is made to the Intercreditor Agreement dated as of even date herewith (as amended, restated, supplemented or otherwise modified from time to time, the “Intercreditor Agreement”), among the Borrower, Wells Fargo Bank, N.A., as First Lien Administrative Agent (as defined therein), and Wells Fargo Energy Capital, Inc., as Second Lien Administrative Agent (as defined therein). Notwithstanding anything herein to the contrary, the lien and security interest granted to the Administrative Agent, for the benefit of the Secured Parties, pursuant to this Guaranty and the exercise of any right or remedy by the Administrative Agent and the other Secured Parties hereunder are subject to the provisions of the Intercreditor Agreement. In the event of any conflict or inconsistency between the provisions of the Intercreditor Agreement and this Guaranty, the provisions of the Intercreditor Agreement shall control.

 

(Remainder of page intentionally left blank)

 

15

 

IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty as of the date first written above.

 

 

	
SUNDANCE   ENERGY OKLAHOMA, LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By
    	
 
    
	
Name:   Eric P. McCrady
    	
 
    
	
Title:   Manager
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
SUNDANCE   ROYALTIES, INC.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By
    	
 
    
	
Name:   Eric P. Mccrady
    	
 
    
	
Title:   President and Chief Executive Officer
    	
 
    
	
 
    	
 
    
	
ARMADILLO   EAGLE FORD HOLDINGS, INC.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By
    	
 
    
	
Name:   Eric P. Mccrady
    	
 
    
	
Title:   Chief Executive Officer
    	
 
    
	
 
    	
 
    
	
ARMADILLO   E&P, INC.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By
    	
 
    
	
Name:   Eric P. Mccrady
    	
 
    
	
Title:   Chief Executive Officer
    	
 
    
	
 
    	
 
    
	
SEA   EAGLE FORD, LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By
    	
 
    	
 
    
	
Name:   Eric P. Mccrady
    	
 
    
	
Title:   Manager
    	
 
    
			

 

S-1

 

SCHEDULE 1

to

GUARANTY

 

	
Name of Guarantor
    	
 
    	
Type of
   Organization
    	
 
    	
Jurisdiction of
   Organization
    	
 
    	
Address for Notices
    
	
Sundance   Energy Oklahoma LLC
    	
 
    	
Limited   liability company
    	
 
    	
Delaware
    	
 
    	
633   17th Street, Suite 1950
   Denver, CO 80202
   Attention: Eric P. McCrady
    
	
Sundance   Royalties, Inc.
    	
 
    	
Corporation
    	
 
    	
Colorado
    	
 
    	
633   17th Street, Suite 1950
   Denver, CO 80202
   Attention: Eric P. McCrady
    
	
Armadillo   Eagle Ford Holdings, Inc.
    	
 
    	
Corporation
    	
 
    	
Delaware
    	
 
    	
633   17th Street, Suite   1950
   Denver, CO 80202
   Attention: Eric P. McCrady
    
	
Armadillo   E&P, Inc.
    	
 
    	
Corporation
    	
 
    	
Delaware
    	
 
    	
633   17th Street, Suite   1950
   Denver, CO 80202
   Attention: Eric P. McCrady
    
	
SEA   Eagle Ford, LLC
    	
 
    	
Limited   liability company
    	
 
    	
Texas
    	
 
    	
633   17th Street,   Suite 1950
   Denver, CO 80202
   Attention: Eric P. McCrady
    

 

 

EXHIBIT A

to

SECOND LIEN GUARANTY
 FORM OF GUARANTY SUPPLEMENT

 

         , 20  

 

Wells Fargo Energy Capital, Inc.,

as the Administrative Agent on behalf of the Guaranteed Parties

referred to in the Guaranty referred to below

1000 Louisiana, 9th Floor

Houston, TX 77002

Attn: Ryan Sauer

 

Ladies and Gentlemen: 

 

The undersigned refers to:

 

(i)                                     the Second Lien Credit Agreement dated as of August , 2013 (as from time to time amended, modified or supplemented, the “Credit Agreement”) among Sundance Energy, Inc., a Colorado corporation, the Lenders party thereto, and you, as administrative agent, and

 

(ii)                                  the Second Lien Guaranty dated as of August , 2013 (the “Guaranty”) made by the Guarantors from time to time party thereto in your favor for the benefit of the Guaranteed Parties.

 

Terms defined in the Credit Agreement or the Guaranty and not otherwise defined herein are used herein as defined, and rules regarding construction, references and titles are as provided, in the Credit Agreement or the Guaranty.

 

SECTION 1.  Guaranty. The undersigned, jointly and severally with the other Guarantors, irrevocably, absolutely, and unconditionally guarantees to each Guaranteed Party the prompt and complete payment and performance when due, and no matter how the same shall become due, of all Guaranteed Obligations and otherwise agrees to be bound in all respects by the Guaranty as if an original Guarantor party thereto, subject to any limitation set forth therein. As of the date first-above written, each reference in the Guaranty to a “Guarantor” shall also mean and be a reference to the undersigned.

 

SECTION 2. Information Relating to the Undersigned. The undersigned is an entity of the type specified on Schedule 1 and is organized under the Laws of the jurisdiction specified on Schedule 1 and its address for notices is specified on Schedule 1.

 

SECTION 3. Representations and Warranties. The undersigned as of the date hereof makes each representation and warranty set forth in Section 4.1 of the Guaranty.

 

EXHIBIT A - 1

 

SECTION 4.  Governing Law. This Agreement shall be governed by, and construed in accordance with, the Laws of the jurisdiction whose Laws the Guaranty provides will govern it.

 

	
 
    	
Very truly yours,
    
	
 
    	
 
    
	
 
    	
(GUARANTOR)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

ACCEPTED AND AGREED AS OF THE DATE FIRST-
 ABOVE STATED.

 

WELLS FARGO ENERGY CAPITAL, INC., as Administrative Agent
 on behalf of the Guaranteed Parties

 

 

	
By
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

EXHIBIT A - 2

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