Exhibit 10.3

 

SECOND AMENDMENT TO NINTH RESTATED LOAN AGREEMENT AND WAIVER

 

THIS SECOND AMENDMENT TO NINTH RESTATED LOAN AGREEMENT  AND WAIVER (hereinafter
referred to as the “Second Amendment”) executed as of the     day of December,
2003, by and among CLAYTON WILLIAMS ENERGY, INC., a Delaware corporation (the
“CWE”), WARRIOR GAS CO., a Texas corporation (“Warrior “) (CWE and Warrior being
hereinafter sometimes collectively referred to as “Borrower”), CWEI
ACQUISITIONS, INC., a Delaware corporation (“CWEI”), CWEI ROMERE PASS
ACQUISITION CORP., a Delaware corporation (“CWEIRPA”) and ROMERE PASS
ACQUISITION L.L.C., a Delaware limited liability company (“Romere”) (CWEI,
CWEIRPA and Romere being hereinafter sometimes collectively referred to as
“Guarantors”), BANK ONE, NA, a national banking association (“Bank One”), UNION
BANK OF CALIFORNIA, N.A., a national banking association (“Union”) and BANK OF
SCOTLAND (“BOS”) (Bank One, Union Bank and BOS each in their capacity as a
lender hereunder together with each and every future holder of any note issued
pursuant to this Agreement are hereinafter collectively referred to as “Banks”,
and individually as a “Bank”) and Bank One, as “Agent”.

 

WITNESSETH:

 

WHEREAS, on July 18, 2002, Borrower, CWEI, Romere Pass Acquisition Corp., a
Delaware corporation (“Romere Corp”), Bank One, Union, BOS and Agent entered
into a Ninth Restated Loan Agreement, as amended by that certain First Amendment
to Ninth Restated Loan Agreement dated as of August 9, 2002 (as amended,
restated or modified from time to time, the “Ninth Restated”);

 

WHEREAS, the Borrower has informed the Banks that (i) CWE proposes to contribute
100% of the issued and outstanding capital stock of Romere Corp to CWEIRPA for
100% of the issued and outstanding capital stock of CWEIRPA and (ii) Romere Corp
will convert from a corporation to a limited liability company, Romere Pass
Acquisition L.L.C. (collectively, the “Romere Conversion”);

 

WHEREAS, the Romere Conversion is prohibited pursuant to Sections 13(f) and
13(k) of the Ninth Restated and the Borrower has requested that the Banks
consent to the Romere Conversion and waive the requirements of Sections 13(f)
and 13(k) of the Ninth Restated; and

 

WHEREAS, subject to the conditions set forth herein, the Banks hereby consent to
the Romere Conversion and waive the requirements of Sections 13(f) and (k) of
the Ninth Restated with respect to the Romere Conversion and have agreed to make
certain additional changes to the Ninth Restated.

 

NOW, THEREFORE, the parties hereto agree as follows:

 

1.                                       UNLESS OTHERWISE DEFINED HEREIN, ALL
DEFINED TERMS USED HEREIN SHALL HAVE THE SAME MEANING ASCRIBED TO SUCH TERMS IN
THE NINTH RESTATED.

 

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2.                                       CWEIRPA AND ROMERE HEREBY JOIN THE
NINTH RESTATED AND ACCEPT AND AGREE TO BE BOUND BY ALL OF THE TERMS AND
CONDITIONS THEREOF.  CWEIRPA AND ROMERE SHALL HENCEFORTH BE DEEMED A GUARANTOR,
TOGETHER WITH CWEI, FOR ALL PURPOSES OF THE NINTH RESTATED, THE NOTES AND THE
LOAN DOCUMENTS.

 

3.                                       SECTION 1 OF THE NINTH RESTATED IS
HEREBY AMENDED BY DELETING THE DEFINITION OF “SUBSIDIARIES” AND THE FOLLOWING IS
INSERTED IN LIEU THEREOF:

 

Subsidiaries means Warrior, Clajon Industrial Gas, Inc., Clayton Williams
Venezuela, Inc., Clayton Williams Trading Company, Clayton Williams Pipeline
Corporation, CWEI Acquisitions, Inc., CWEI Romere Pass Acquisition Corp., Romere
Pass Acquisition L.L.C., and any other corporation or entity of which voting
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at any time owned directly or indirectly by Borrower.

 

4.                                       SECTIONS 10(A) AND (T) OF THE NINTH
RESTATED ARE HEREBY AMENDED BY DELETING SUCH SECTIONS AND THE FOLLOWING IS
INSERTED IN LIEU THEREOF:

 

(A)                                  CREATION AND EXISTENCE.  BORROWER AND
GUARANTOR ARE CORPORATIONS OR LIMITED LIABILITY COMPANIES, AS THE CASE MAY BE,
DULY ORGANIZED AND VALIDLY EXISTING IN GOOD STANDING UNDER THE LAWS OF THEIR
STATE OF INCORPORATION OR ORGANIZATION, AS THE CASE MAY BE, AND ARE DULY
QUALIFIED AS A FOREIGN CORPORATION OR LIMITED LIABILITY COMPANY, AS THE CASE MAY
BE, IN ALL JURISDICTIONS WHEREIN FAILURE TO QUALIFY MAY RESULT IN A MATERIAL
ADVERSE EFFECT.  BORROWER AND GUARANTOR HAVE ALL THE POWER AND AUTHORITY TO OWN
THEIR PROPERTIES AND ASSETS AND TO TRANSACT THE BUSINESS IN WHICH THEY ARE
ENGAGED.

 

(T)                                    GUARANTOR.  CWE OWNS, DIRECTLY OR
INDIRECTLY, ONE HUNDRED PERCENT (100%) OF THE ISSUED AND OUTSTANDING EQUITY
SECURITIES AND MEMBERSHIP INTERESTS, AS THE CASE MAY BE, OF GUARANTOR.

 

5.                                       THIS SECOND AMENDMENT SHALL BE
EFFECTIVE AS OF THE DATE FIRST ABOVE WRITTEN, BUT ONLY UPON SATISFACTION OF THE
CONDITIONS PRECEDENT SET FORTH IN PARAGRAPH 5 HERETO (THE “SECOND AMENDMENT
EFFECTIVE DATE”).

 

6.                                       THE OBLIGATIONS OF BANKS UNDER THIS
SECOND AMENDMENT SHALL BE SUBJECT TO THE SATISFACTION OF THE FOLLOWING
CONDITIONS PRECEDENT:

 

(A)                                  EXECUTION AND DELIVERY.  THE BORROWER SHALL
HAVE EXECUTED AND DELIVERED THIS SECOND AMENDMENT AND OTHER REQUIRED DOCUMENTS,
ALL IN FORM AND SUBSTANCE SATISFACTORY TO THE BANKS;

 

(B)                                 GUARANTORS’ EXECUTION AND DELIVERY.  THE
GUARANTORS SHALL HAVE EXECUTED AND DELIVERED THIS SECOND AMENDMENT AND OTHER
REQUIRED DOCUMENTS, AND, IN ADDITION,  CWEIRPA AND ROMERE SHALL EXECUTE THE
SUBSIDIARY GUARANTY IN THE FORM ATTACHED HERETO AS EXHIBIT A, ALL IN FORM AND
SUBSTANCE SATISFACTORY TO THE BANKS;

 

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(C)                                  CONVERSION DOCUMENTS. BANKS SHALL HAVE
RECEIVED APPROPRIATE COPIES OF THE DOCUMENTS CONVERTING ROMERE CORP FROM A
CORPORATION TO A LIMITED LIABILITY COMPANY;

 

(D)                                 RESOLUTIONS.  THE AGENT SHALL HAVE RECEIVED
APPROPRIATE CERTIFIED RESOLUTIONS OF CWEIRPA AND ROMERE;

 

(E)                                  GOOD STANDING.  THE AGENT SHALL HAVE
RECEIVED EVIDENCE OF EXISTENCE AND GOOD STANDING FOR CWEIRPA AND ROMERE;

 

(F)                                    CERTIFICATES OF INCORPORATION AND
BYLAWS.  THE AGENT SHALL HAVE RECEIVED COPIES OF CERTIFICATES OF INCORPORATION,
OR SIMILAR ORGANIZATIONAL DOCUMENTS, FOR EACH OF CWEIRPA AND ROMERE, TOGETHER
WITH ALL AMENDMENTS THERETO, APPROPRIATELY CERTIFIED BY GOVERNMENTAL AUTHORITY
IN THE JURISDICTION OF INCORPORATION OF EACH OF CWEIRPA AND ROMERE, AND A COPY
OF THE BYLAWS, OR SIMILAR GOVERNING DOCUMENTS, OF CWEIRPA AND ROMERE, AND ALL
AMENDMENTS THERETO, CERTIFIED BY ONE OR MORE OFFICERS OF CWEIRPA AND ROMERE, AS
THE CASE MAY BE, AS BEING TRUE, CORRECT AND COMPLETE;

 

(G)                                 INCUMBENCY.  THE AGENT SHALL HAVE RECEIVED A
SIGNED CERTIFICATE OF EACH OF CWEIRPA AND ROMERE, CERTIFYING THE NAMES OF THE
OFFICERS OF CWEIRPA AND ROMERE AUTHORIZED TO SIGN LOAN DOCUMENTS ON BEHALF OF
CWEIRPA AND ROMERE, TOGETHER WITH THE TRUE SIGNATURES OF EACH SUCH OFFICER.  THE
AGENT MAY CONCLUSIVELY RELY ON EACH SUCH CERTIFICATE UNTIL THE AGENT RECEIVES A
FURTHER CERTIFICATE OF SUCH GUARANTOR CANCELING OR AMENDING THE PRIOR
CERTIFICATE AND SUBMITTING SIGNATURES OF THE OFFICERS NAMED IN SUCH FURTHER
CERTIFICATE;

 

(H)                                 REPRESENTATIONS AND WARRANTIES.  THE
REPRESENTATIONS AND WARRANTIES OF BORROWER UNDER THE NINTH RESTATED ARE TRUE AND
CORRECT IN ALL MATERIAL RESPECTS AS OF SUCH DATE, AS IF THEN MADE (EXCEPT TO THE
EXTENT THAT SUCH REPRESENTATIONS AND WARRANTIES RELATED SOLELY TO AN EARLIER
DATE);

 

(I)                                     NO EVENT OF DEFAULT.  NO EVENT OF
DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING NOR SHALL ANY EVENT HAVE OCCURRED
OR FAILED TO OCCUR WHICH, WITH THE PASSAGE OF TIME OR SERVICE OF NOTICE, OR
BOTH, WOULD CONSTITUTE AN EVENT OF DEFAULT;

 

(J)                                     OTHER DOCUMENTS.  EACH BANK SHALL HAVE
RECEIVED SUCH OTHER INSTRUMENTS AND DOCUMENTS INCIDENTAL AND APPROPRIATE TO THE
TRANSACTION PROVIDED FOR HEREIN AS SUCH BANK OR ITS COUNSEL MAY REASONABLY
REQUEST, AND ALL SUCH DOCUMENTS SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO
SUCH BANK; AND

 

(K)                                  LEGAL MATTERS SATISFACTORY.  ALL LEGAL
MATTERS INCIDENT TO THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY
SHALL BE SATISFACTORY TO SPECIAL COUNSEL FOR BANK RETAINED AT THE EXPENSE OF
BORROWER.

 

7.                                       THE BANKS HEREBY WAIVE THE REQUIREMENTS
OF SECTIONS 13(F) AND (K) OF THE NINTH RESTATED WITH RESPECT TO THE ROMERE
CONVERSION.  BORROWER AND BANKS FURTHER AGREE THAT THE

 

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WAIVER SET FORTH HEREIN IS LIMITED SOLELY TO SECTIONS 13(F) AND (K) OF THE NINTH
RESTATED WITH RESPECT TO THE ROMERE CONVERSION.  THE WAIVER SET FORTH HEREIN IS
EXPRESSLY LIMITED AS FOLLOWS: (A) SUCH WAIVER IS LIMITED SOLELY TO THE ROMERE
CONVERSION AND (B) SUCH WAIVER IS A LIMITED ONE-TIME WAIVER, AND NOTHING
CONTAINED HEREIN SHALL OBLIGATE BANKS TO GRANT ANY ADDITIONAL OR FUTURE WAIVERS
OF SECTIONS 13(F) OR (K) OF THE NINTH RESTATED, OR ANY OTHER PROVISION OF THE
NINTH RESTATED OR ANY OTHER LOAN DOCUMENT.

 

8.                                       EXCEPT TO THE EXTENT ITS PROVISIONS ARE
SPECIFICALLY AMENDED, MODIFIED OR SUPERSEDED BY THIS SECOND AMENDMENT, THE
REPRESENTATIONS, WARRANTIES AND AFFIRMATIVE AND NEGATIVE COVENANTS OF THE
BORROWER CONTAINED IN THE NINTH RESTATED ARE INCORPORATED HEREIN BY REFERENCE
FOR ALL PURPOSES AS IF COPIED HEREIN IN FULL.  THE BORROWER HEREBY RESTATES AND
REAFFIRMS EACH AND EVERY TERM AND PROVISION OF THE NINTH RESTATED, AS AMENDED,
INCLUDING, WITHOUT LIMITATION, ALL REPRESENTATIONS, WARRANTIES AND AFFIRMATIVE
AND NEGATIVE COVENANTS.  EXCEPT TO THE EXTENT ITS PROVISIONS ARE SPECIFICALLY
AMENDED, MODIFIED OR SUPERSEDED BY THIS SECOND AMENDMENT, THE NINTH RESTATED, AS
AMENDED, AND ALL TERMS AND PROVISIONS THEREOF SHALL REMAIN IN FULL FORCE AND
EFFECT, AND THE SAME IN ALL RESPECTS ARE CONFIRMED AND APPROVED BY THE BORROWER
AND THE BANKS.

 

9.                                       THIS SECOND AMENDMENT MAY BE EXECUTED
IN ANY NUMBER OF COUNTERPARTS AND ALL OF SUCH COUNTERPARTS TAKEN TOGETHER SHALL
BE DEEMED TO CONSTITUTE ONE AND THE SAME INSTRUMENT.

 

10.                                 THE GUARANTORS HEREBY CONSENT TO THE
EXECUTION OF THIS SECOND AMENDMENT BY THE BORROWER AND REAFFIRM THEIR GUARANTY
OF ALL OF THE OBLIGATIONS OF THE BORROWER TO THE BANK.  BORROWER AND EACH
GUARANTOR ACKNOWLEDGE AND AGREE THAT THE RENEWAL, EXTENSION AND AMENDMENT OF THE
NINTH RESTATED SHALL NOT BE CONSIDERED A NOVATION OF ACCOUNT OR NEW CONTRACT BUT
THAT ALL EXISTING RIGHTS, TITLES, POWERS, LIENS, SECURITY INTERESTS AND ESTATES
IN FAVOR OF THE BANKS CONSTITUTE VALID AND EXISTING OBLIGATIONS AND LIENS AND
SECURITY INTERESTS AS AGAINST THE COLLATERAL IN FAVOR OF THE BANKS.  BORROWER
AND EACH GUARANTOR CONFIRM AND AGREE THAT (A) NEITHER THE EXECUTION OF THIS
SECOND AMENDMENT OR ANY OTHER LOAN DOCUMENT NOR THE CONSUMMATION OF THE
TRANSACTIONS DESCRIBED HEREIN AND THEREIN SHALL IN ANY WAY EFFECT, IMPAIR OR
LIMIT THE COVENANTS, LIABILITIES, OBLIGATIONS AND DUTIES OF THE BORROWER AND
UNDER THE LOAN DOCUMENTS AND (B) THE OBLIGATIONS EVIDENCED AND SECURED BY THE
LOAN DOCUMENTS CONTINUE IN FULL FORCE AND EFFECT.  GUARANTORS HEREBY FURTHER
CONFIRM THAT THEY UNCONDITIONALLY GUARANTEE TO THE EXTENT SET FORTH IN THEIR
GUARANTY THE DUE AND PUNCTUAL PAYMENT AND PERFORMANCE OF ANY AND ALL AMOUNTS AND
OBLIGATIONS OWED TO THE BANKS UNDER THE NINTH RESTATED OR THE OTHER LOAN
DOCUMENTS.

 

[SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, the parties have caused this Second Amendment to Ninth
Restated to be duly executed as of the date first above written.

 

 

BORROWER:

 

 

 

 

CLAYTON WILLIAMS ENERGY, INC.

 

a Delaware corporation

 

 

 

 

 

 

 

By:

 

/s/ MEL G. RIGGS

 

 

 

Mel G. Riggs, Senior Vice President-Finance

 

 

 

 

WARRIOR GAS CO.

 

a Delaware corporation

 

 

 

 

 

 

 

By:

 

/s/ MEL G. RIGGS

 

 

 

Mel G. Riggs, Senior Vice President-Finance

 

 

 

 

GUARANTORS:

 

 

 

 

CWEI ACQUISITIONS, INC.

 

a Delaware corporation

 

 

 

 

 

 

 

By:

 

/s/ MEL G. RIGGS

 

 

 

Mel G. Riggs, Senior Vice President-Finance

 

 

 

 

CWEI ROMERE PASS ACQUISITION CORP.

 

a Delaware corporation

 

 

 

 

 

 

 

By:

 

/s/ MEL G. RIGGS

 

 

Name:

Mel G. Riggs

 

 

Title:

Vice President and Treasurer

 

 

 

 

 

ROMERE PASS ACQUISITION L.L.C.

 

a Delaware limited liability company

 

 

 

 

 

 

 

By:

 

/s/ MEL G. RIGGS

 

 

Name:

Mel G. Riggs

 

 

Title:

Vice President and Treasurer

 

 

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BANKS:

 

 

 

 

BANK ONE, NA

 

a national banking association
as a Bank and as Administrative Agent
(Main Office Chicago)

 

 

 

 

 

 

 

By:

 

/s/ WILLIAM MARK CRANMER

 

 

 

Wm. Mark Cranmer, Director, Capital Markets

 

 

 

 

UNION BANK OF CALIFORNIA, N.A.

 

 

 

 

 

 

 

By:

 

/s/ JOHN CLARK

 

 

Name:

John Clark

 

 

Title:

Vice President

 

 

 

 

 

 

 

 

By:

 

/s/ SEAN MURPHY

 

 

Name:

Sean Murphy

 

 

Title:

Vice President

 

 

 

 

 

BANK OF SCOTLAND

 

 

 

 

 

 

 

By:

 

/s/ JOSEPH FRATUS

 

 

Name:

Joseph Fratus

 

 

Title:

First Vice President

 

 

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EXHIBIT A

 

SUBSIDIARY GUARANTY

 

THIS SUBSIDIARY GUARANTY (this “Guaranty”) is made as of the     day of
DECEMBER, 2003, by CWEI ROMERE PASS ACQUISITION CORP., a Delaware corporation
(“CWEIRPA”) and ROMERE PASS ACQUISITION L.L.C., a Delaware limited liability
company (“Romere”) (collectively, CWEIRPA and Romere are hereinafter referred to
as the “Subsidiary Guarantors”) in favor of the Agent, for the benefit of the
Banks, under the Loan Agreement referred to below;

 

WITNESSETH:

 

WHEREAS, CLAYTON WILLIAMS ENERGY, INC, a Delaware corporation (“CWE”) and
WARRIOR GAS CO., a Texas corporation (“Warrior”) (CWE and Warrior being
hereinafter sometimes collectively referred to as the “Principal”) and Bank One,
NA, a national banking association having its principal office in Dallas, Texas,
as Agent (the “Agent”), and certain other Banks from time to time party thereto
have entered into a certain Ninth Restated Loan Agreement dated as of July 18,
2002 (as same may be amended or modified from time to time, the “Loan
Agreement”), providing, subject to the terms and conditions thereof, for
extensions of credit to be made by the Banks to the Principal;

 

WHEREAS, it is a condition precedent to the Agent and the Banks executing the
Loan Agreement that each of the Subsidiary Guarantors execute and deliver this
Guaranty whereby each of the Subsidiary Guarantors shall guarantee the payment
when due, subject to Section 9 hereof, of all Guaranteed Obligations, as defined
below; and

 

WHEREAS, in consideration of the financial and other support that the Principal
has provided, and such financial and other support as the Principal may in the
future provide, to the Subsidiary Guarantors, and in order to induce the Banks
and the Agent to enter into the Loan Agreement, and the Banks and their
Affiliates to enter into one or more Rate Management Transactions with the
Principal, and because each Subsidiary Guarantor has determined that executing
this Guaranty is in its interest and to its financial benefit, each of the
Subsidiary Guarantors is willing to guarantee the obligations of the Principal
under the Loan Agreement, any Note, any Rate Management Transaction, and the
other Loan Documents;

 

NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

 

SECTION  l.1.  Selected Terms Used Herein.

 

“Guaranteed Obligations” is defined in Section 3 below.

 

“Rate Management Transaction” means any transaction (including an agreement with
respect thereto) now existing or hereafter entered into between the Principal
and any Bank or

 

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Affiliate thereof which is a rate swap, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index swap, equity or equity
index option, bond option, interest rate option, foreign exchange transaction,
cap transaction, floor transaction, collar transaction, forward transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
these transactions) or any combination thereof, whether linked to one or more
interest rates, foreign currencies, commodity prices, equity prices or other
financial measures.

 

“Rate Management Obligations” means any and all obligations of the Principal,
whether absolute or contingent and howsoever and whensoever created, arising,
evidenced or acquired (including all renewals, extensions and modifications
thereof and substitutions therefor), under (i) any and all Rate Management
Transactions, and (ii) any and all cancellations, buy backs, reversals,
terminations or assignments of any Rate Management Transactions.

 

SECTION  1.2.  Terms in Loan Agreement.  Other capitalized terms used herein but
not defined herein shall have the meaning set forth in the Loan Agreement.

 

SECTION  2.1.  Representations and Warranties.  Each of the Subsidiary
Guarantors represents and warrants (which representations and warranties shall
be deemed to have been renewed upon each Borrowing Date under the Loan
Agreement) that:

 

(a)                                  It is a corporation, partnership or limited
liability company duly and properly incorporated or organized, as the case may
be, validly existing and (to the extent such concept applies to such entity) in
good standing under the laws of its jurisdiction of incorporation or
organization and has all requisite authority to conduct its business in each
jurisdiction in which its business is conducted.

 

(b)                                 It has the power and authority and legal
right to execute and deliver this Guaranty and to perform its obligations
hereunder.  The execution and delivery by it of this Guaranty and the
performance of its obligations hereunder have been duly authorized by proper
corporate proceedings, and this Guaranty constitutes a legal, valid and binding
obligation of such Subsidiary Guarantor enforceable against it in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors’ rights
generally.

 

(c)                                  Neither the execution and delivery by it of
this Guaranty, nor the consummation of the transactions herein contemplated, nor
compliance with the provisions hereof will violate (i) any law, rule,
regulation, order, writ, judgment, injunction, decree or award binding on it or
any of its subsidiaries or (ii) its articles or certificate of incorporation,
partnership agreement, certificate of partnership, articles or certificate of
organization, by-laws, or operating or other management agreement, as the case
may be, or (iii) the provisions of any indenture, instrument or agreement to
which it or any of its subsidiaries is a party or is subject, or by which it, or
its Property, is bound, or conflict with or constitute a default thereunder, or
result in, or require, the creation or imposition of any Lien in, of or on the
Property of such Subsidiary Guarantor or a subsidiary thereof pursuant to the
terms of any such indenture, instrument or agreement.  No order, consent,
adjudication, approval, license, authorization, or validation of, or filing,
recording

 

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or registration with, or exemption by, or other action in respect of any
governmental or public body or authority, or any subdivision thereof, which has
not been obtained by it or any of its subsidiaries, is required to be obtained
by it or any of its subsidiaries in connection with the execution and delivery
of this Guaranty or the performance by it of its obligations hereunder or the
legality, validity, binding effect or enforceability of this Guaranty.

 

SECTION  2.2.  Covenants.  Each of the Subsidiary Guarantors covenants that, so
long as any Bank has any Commitment outstanding under the Loan Agreement, any
Rate Management Transaction remains in effect or any of the Guaranteed
Obligations shall remain unpaid, that it will, and, if necessary, will enable
the Principal to, fully comply with those covenants and agreements set forth in
the Loan Agreement.

 

SECTION  3.  The Guaranty.  Subject to Section 9 hereof, each of the Subsidiary
Guarantors hereby absolutely and unconditionally guarantees, as primary obligor
and not as surety, the full and punctual payment (whether at stated maturity,
upon acceleration or early termination or otherwise, and at all times
thereafter) and performance of the Obligations and the Rate Management
Obligations, including without limitation any such Obligations or Rate
Management Obligations incurred or accrued during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, whether or not
allowed or allowable in such proceeding (collectively, subject to the provisions
of Section 9 hereof, being referred to collectively as the “Guaranteed
Obligations”).  Upon failure by the Principal to pay punctually any such amount,
each of the Subsidiary Guarantors agrees that it shall forthwith on demand pay
to the Agent for the benefit of the Banks and, if applicable, their Affiliates,
the amount not so paid at the place and in the manner specified in the Loan
Agreement, any Note, any Rate Management Transaction or the relevant Loan
Document, as the case may be. This Guaranty is a guaranty of payment and not of
collection.  Each of the Subsidiary Guarantors waives any right to require the
Banks to sue the Principal, any other guarantor, or any other person obligated
for all or any part of the Guaranteed Obligations, or otherwise to enforce its
payment against any collateral securing all or any part of the Guaranteed
Obligations.

 

SECTION  4.  Guaranty Unconditional.  Subject to Section 9 hereof, the
obligations of each of the Subsidiary Guarantors hereunder shall be
unconditional and absolute and, without limiting the generality of the
foregoing, shall not be released, discharged or otherwise affected by:

 

(i)                                     any extension, renewal, settlement,
compromise, waiver or release in respect of any of the Guaranteed Obligations,
by operation of law or otherwise, or any obligation of any other guarantor of
any of the Guaranteed Obligations, or any default, failure or delay, willful or
otherwise, in the payment or performance of the Guaranteed Obligations;

 

(ii)                                  any modification or amendment of or
supplement to the Loan Agreement, any Note, any Rate Management Transaction or
any other Loan Document;

 

(iii)                               any release, nonperfection or invalidity of
any direct or indirect security for any obligation of the Principal under the
Loan Agreement, any Note, any Rate

 

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Management Transaction, any other Loan Document, or any obligations of any other
guarantor of any of the Guaranteed Obligations, or any action or failure to act
by the Agent, any Bank or any Affiliate of any Bank with respect to any
collateral securing all or any part of the Guaranteed Obligations;

 

(iv)                              any change in the corporate existence,
structure or ownership of the Principal or any other guarantor of any of the
Guaranteed Obligations, or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting the Principal, or any other guarantor of the
Guaranteed Obligations, or its assets or any resulting release or discharge of
any obligation of the Principal, or any other guarantor of any of the Guaranteed
Obligations;

 

(v)                                 the existence of any claim, setoff or other
rights which the Subsidiary Guarantors may have at any time against the
Principal, any other guarantor of any of the Guaranteed Obligations, the Agent,
any Bank or any other Person, whether in connection herewith or any unrelated
transactions;

 

(vi)                              any invalidity or unenforceability relating to
or against the Principal, or any other guarantor of any of the Guaranteed
Obligations, for any reason related to the Loan Agreement, any Rate Management
Transaction, any other Loan Document, or any provision of applicable law or
regulation purporting to prohibit the payment by the Principal, or any other
guarantor of the Guaranteed Obligations, of the principal of or interest on any
Note or any other amount payable by the Principal under the Loan Agreement, any
Note, any Rate Management Transaction or any other Loan Document; or

 

(vii)                           any other act or omission to act or delay of any
kind by the Principal, any other guarantor of the Guaranteed Obligations, the
Agent, any Bank or any other Person or any other circumstance whatsoever which
might, but for the provisions of this paragraph, constitute a legal or equitable
discharge of any Subsidiary Guarantor’s obligations hereunder.

 

SECTION  5.  Discharge Only Upon Payment In Full: Reinstatement In Certain
Circumstances.  Each of the Subsidiary Guarantor’s obligations hereunder shall
remain in full force and effect until all Guaranteed Obligations shall have been
indefeasibly paid in full, the Commitments under the Loan Agreement shall have
terminated or expired and all Rate Management Transactions have terminated or
expired.  If at any time any payment of the principal of or interest on any Note
or any other amount payable by the Principal or any other party under the Loan
Agreement, any Rate Management Transaction or any other Loan Document is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of the Principal or otherwise, each of the
Subsidiary Guarantor’s obligations hereunder with respect to such payment shall
be reinstated as though such payment had been due but not made at such time.

 

SECTION  6.  Waivers.  Each of the Subsidiary Guarantors irrevocably waives
acceptance hereof, presentment, demand, protest and, to the fullest extent
permitted by law, any

 

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notice not provided for herein, as well as any requirement that at any time any
action be taken by any Person against the Principal, any other guarantor of any
of the Guaranteed Obligations, or any other Person.

 

SECTION  7.  Subrogation.  Each of the Subsidiary Guarantors hereby agrees not
to assert any right, claim or cause of action, including, without limitation, a
claim for subrogation, reimbursement, indemnification or otherwise, against the
Principal arising out of or by reason of this Guaranty or the obligations
hereunder, including, without limitation, the payment or securing or purchasing
of any of the Guaranteed Obligations by any of the Subsidiary Guarantors unless
and until the Guaranteed Obligations are indefeasibly paid in full, any
commitment to lend under the Loan Agreement and any other Loan Documents is
terminated and all Rate Management Transactions have terminated or expired.

 

SECTION  8.  Stay of Acceleration.  If acceleration of the time for payment of
any of the Guaranteed Obligations is stayed upon the insolvency, bankruptcy or
reorganization of the Principal, all such amounts otherwise subject to
acceleration under the terms of the Loan Agreement, any Note, any Rate
Management Transaction or any other Loan Document shall nonetheless be payable
by each of the Subsidiary Guarantors hereunder forthwith on demand by the Agent
made at the request of the Majority Banks.

 

SECTION  9.  Limitation on Obligations.  (a) The provisions of this Guaranty are
severable, and in any action or proceeding involving any state corporate law, or
any state, federal or foreign bankruptcy, insolvency, reorganization or other
law affecting the rights of creditors generally, if the obligations of any
Subsidiary Guarantor under this Guaranty would otherwise be held or determined
to be avoidable, invalid or unenforceable on account of the amount of such
Subsidiary Guarantor’s liability under this Guaranty, then, notwithstanding any
other provision of this Guaranty to the contrary, the amount of such liability
shall, without any further action by the Subsidiary Guarantors, the Agent or any
Bank, be automatically limited and reduced to the highest amount that is valid
and enforceable as determined in such action or proceeding (such highest amount
determined hereunder being the relevant Subsidiary Guarantor’s “Maximum
Liability”). This Section 9(a) with respect to the Maximum Liability of the
Subsidiary Guarantors is intended solely to preserve the rights of the Agent
hereunder to the maximum extent not subject to avoidance under applicable law,
and neither the Subsidiary Guarantor nor any other person or entity shall have
any right or claim under this Section 9(a) with respect to the Maximum
Liability, except to the extent necessary so that the obligations of the
Subsidiary Guarantor hereunder shall not be rendered voidable under applicable
law.

 

(b)                                 Each of the Subsidiary Guarantors agrees
that the Guaranteed Obligations may at any time and from time to time exceed the
Maximum Liability of each Subsidiary Guarantor, and may exceed the aggregate
Maximum Liability of all other Subsidiary Guarantors, without impairing this
Guaranty or affecting the rights and remedies of the Agent hereunder. Nothing in
this Section 9(b) shall be construed to increase any Subsidiary Guarantor’s
obligations hereunder beyond its Maximum Liability.

 

(c)                                  In the event any Subsidiary Guarantor (a
“Paying Subsidiary Guarantor”) shall make any payment or payments under this
Guaranty or shall suffer any loss as a result of any

 

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realization upon any collateral granted by it to secure its obligations under
this Guaranty, each other Subsidiary Guarantor (each a “Non-Paying Subsidiary
Guarantor”) shall contribute to such Paying Subsidiary Guarantor an amount equal
to such Non-Paying Subsidiary Guarantor’s “Pro Rata Share” of such payment or
payments made, or losses suffered, by such Paying Subsidiary Guarantor.  For the
purposes hereof, each Non-Paying Subsidiary Guarantor’s “Pro Rata Share” with
respect to any such payment or loss by a Paying Subsidiary Guarantor shall be
determined as of the date on which such payment or loss was made by reference to
the ratio of (i) such Non-Paying Subsidiary Guarantor’s Maximum Liability as of
such date (without giving effect to any right to receive, or obligation to make,
any contribution hereunder) or, if such Non-Paying Subsidiary Guarantor’s
Maximum Liability has not been determined, the aggregate amount of all monies
received by such Non-Paying Subsidiary Guarantor from the Principal after the
date hereof (whether by loan, capital infusion or by other means) to (ii) the
aggregate Maximum Liability of all Subsidiary Guarantors hereunder (including
such Paying Subsidiary Guarantor) as of such date (without giving effect to any
right to receive, or obligation to make, any contribution hereunder), or to the
extent that a Maximum Liability has not been determined for any Subsidiary
Guarantors, the aggregate amount of all monies received by such Subsidiary
Guarantors from the Principal after the date hereof (whether by loan, capital
infusion or by other means).  Nothing in this Section 9 (c) shall affect any
Subsidiary Guarantor’s several liability for the entire amount of the Guaranteed
Obligations (up to such Subsidiary Guarantor’s Maximum Liability).  Each of the
Subsidiary Guarantors covenants and agrees that its right to receive any
contribution under this Guaranty from a Non-Paying Subsidiary Guarantor shall be
subordinate and junior in right of payment to all the Guaranteed Obligations. 
The provisions of this Section 9(c) are for the benefit of both the Agent and
the Subsidiary Guarantors and may be enforced by any one, or more, or all of
them in accordance with the terms hereof.

 

SECTION  10.  Application of Payments.  All payments received by the Agent
hereunder shall be applied by the Agent to payment of the Guaranteed Obligations
in the following order unless a court of competent jurisdiction shall otherwise
direct:

 

(a)                                  FIRST, to payment of all costs and expenses
of the Agent incurred in connection with the collection and enforcement of the
Guaranteed Obligations or of any security interest granted to the Agent in
connection with any collateral securing the Guaranteed Obligations;

 

(b)                                 SECOND, to payment of that portion of the
Guaranteed Obligations constituting accrued and unpaid interest and fees, pro
rata among the Banks and their Affiliates in accordance with the amount of such
accrued and unpaid interest and fees owing to each of them;

 

(c)                                  THIRD, to payment of the principal of the
Guaranteed Obligations and the net early termination payments and any other Rate
Management Obligations then due and unpaid from the Borrower to any of the Banks
or their Affiliates, pro rata among the Banks and their Affiliates in accordance
with the amount of such principal and such net early termination payments and
other Rate Management Obligations then due and unpaid owing to each of them; and

 

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(d)                                 FOURTH, to payment of any Guaranteed
Obligations (other than those listed above) pro rata among those parties to whom
such Guaranteed Obligations are due in accordance with the amounts owing to each
of them.

 

SECTION  11.  Notices.  All notices, requests and other communications to any
party hereunder shall be given or made by telecopier or other writing and
telecopied, or mailed or delivered to the intended recipient at its address or
telecopier number set forth on the signature pages hereof or such other address
or telecopy number as such party may hereafter specify for such purpose by
notice to the Agent in accordance with the provisions of Article XIII of the
Loan Agreement.  Except as otherwise provided in this Guaranty, all such
communications shall be deemed to have been duly given when transmitted by
telecopier, or personally delivered or, in the case of a mailed notice sent by
certified mail return-receipt requested, on the date set forth on the receipt
(provided, that any refusal to accept any such notice shall be deemed to be
notice thereof as of the time of any such refusal), in each case given or
addressed as aforesaid.

 

SECTION  12.  No Waivers.  No failure or delay by the Agent or any Banks in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.  The rights and remedies provided in this Guaranty, the Loan
Agreement, any Note, any Rate Management Transaction and the other Loan
Documents shall be cumulative and not exclusive of any rights or remedies
provided by law.

 

SECTION  13.  No Duty to Advise.  Each of the Subsidiary Guarantors assumes all
responsibility for being and keeping itself informed of the Principal’s
financial condition and assets, and of all other circumstances bearing upon the
risk of nonpayment of the Guaranteed Obligations and the nature, scope and
extent of the risks that each of the Subsidiary Guarantors assumes and incurs
under this Guaranty, and agrees that neither the Agent nor any Bank has any duty
to advise any of the Subsidiary Guarantors of information known to it regarding
those circumstances or risks.

 

SECTION  14.  Successors and Assigns.  This Guaranty is for the benefit of the
Agent and the Banks and their respective successors and permitted assigns and in
the event of an assignment of any amounts payable under the Loan Agreement, any
Note, any Rate Management Transaction, or the other Loan Documents, the rights
hereunder, to the extent applicable to the indebtedness so assigned, shall be
transferred with such indebtedness. This Guaranty shall be binding upon each of
the Subsidiary Guarantors and their respective successors and permitted assigns.

 

SECTION  15.  Changes in Writing.  Neither this Guaranty nor any provision
hereof may be changed, waived, discharged or terminated orally, but only in
writing signed by each of the Subsidiary Guarantors and the Agent with the
consent of the Majority Banks.

 

SECTION  16.  Costs of Enforcement.  Each of the Subsidiary Guarantors agrees to
pay all costs and expenses including, without limitation, all court costs and
attorneys’ fees and expenses paid or incurred by the Agent or any Bank or any
Affiliate of any Bank in endeavoring to collect all or any part of the
Guaranteed Obligations from, or in prosecuting any action

 

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against, the Principal, the Subsidiary Guarantors or any other guarantor of all
or any part of the Guaranteed Obligations.

 

SECTION  17.  GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. 
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF
THE STATE OF TEXAS.  EACH OF THE SUBSIDIARY GUARANTORS HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF TEXAS AND OF ANY TEXAS STATE COURT SITTING IN DALLAS, TEXAS AND FOR
PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY
(INCLUDING, WITHOUT LIMITATION, ANY OF THE OTHER LOAN DOCUMENTS)  OR THE
TRANSACTIONS CONTEMPLATED HEREBY.  EACH OF THE SUBSIDIARY GUARANTORS IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH ANY OF THEM
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.  EACH OF THE SUBSIDIARY
GUARANTORS, AND THE AGENT AND THE BANKS ACCEPTING THIS GUARANTY, HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

 

SECTION  18.  Taxes. etc.  All payments required to be made by any of the
Subsidiary Guarantors hereunder shall be made without setoff or counterclaim and
free and clear of and without deduction or withholding for or on account of, any
present or future taxes, levies, imposts, duties or other charges of whatsoever
nature imposed by any government or any political or taxing authority thereof
(but excluding Excluded Taxes), provided, however, that if any of the Subsidiary
Guarantors is required by law to make such deduction or withholding, such
Subsidiary Guarantor shall forthwith  (i) pay to the Agent or any Bank, as
applicable, such additional amount as results in the net amount received by the
Agent or any Bank, as applicable, equaling the full amount which would have been
received by the Agent or any Bank, as applicable, had no such deduction or
withholding been made, (ii) pay the full amount deducted to the relevant
authority in accordance with applicable law, and (iii) furnish to the Agent or
any Bank, as applicable, certified copies of official receipts evidencing
payment of such withholding taxes within 30 days after such payment is made.

 

SECTION 19.  Setoff.  Without limiting the rights of the Agent or the Banks
under applicable law, if all or any part of the Guaranteed Obligations is then
due, whether pursuant to the occurrence of a Default or otherwise, then the
Guarantor authorizes the Agent and the Banks to apply any sums standing to the
credit of the Guarantor with the Agent or any Bank or any Lending Installation
of the Agent or any Bank toward the payment of the Guaranteed Obligations.

 

[SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, each of the Subsidiary Guarantors has caused this Guaranty
to be duly executed, under seal, by its authorized officer as of the day and
year first above written.

 

 

 

SUBSIDIARY GUARANTORS:

 

 

 

 

 

CWEI ROMERE PASS ACQUISITION CORP.

 

 

a Delaware corporation

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

ROMERE PASS ACQUISITION L.L.C.

 

 

a Delaware limited liability company

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

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