EXHIBIT 10.5
Form of
NON-RECOURSE GUARANTY
     THIS NON-RECOURSE GUARANTY (this “Guaranty”), dated as of April 4, 2008,
made by CALLON PETROLEUM OPERATING COMPANY, a Delaware corporation
(“Guarantor”), in favor of CIECO ENERGY (ENTRADA) LLC, a Delaware limited
liability company (“Lender”).
WITNESSETH:
     WHEREAS, pursuant to a Credit Agreement, dated as of April 4, 2008
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the “Credit Agreement”), between Callon Entrada
Company, a Delaware corporation (“Borrower”) and Lender, Lender has agreed to
make Loans to Borrower in accordance with the Credit Agreement; and
     WHEREAS, as a condition precedent to the making of the initial Loan under
the Credit Agreement, Guarantor is required to execute and deliver this
Guaranty; and
     WHEREAS, it is in the best interests of Guarantor to execute this Guaranty
inasmuch as Guarantor will derive substantial direct and indirect benefits from
the Loans made to Borrower by Lender pursuant to the Credit Agreement;
     NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce Lender to make the Loans to Borrower
pursuant to the Credit Agreement, Guarantor agrees, for the benefit of Lender,
as follows:
ARTICLE I
DEFINITIONS
     Section 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
     “Borrower” is defined in the first recital.
     “Credit Agreement” is defined in the first recital.
     “Guaranteed Obligations” is defined in Section 2.1.
     “Guarantor” is defined in the preamble.
     “Guaranty” is defined in the preamble.
     “Lender” is defined in the preamble.
     “Solvent” means, with respect to any Person at any time, a condition under
which (a) the fair saleable value of such Person’s assets is, on the date of
determination, greater than the total

 

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amount of such Person’s liabilities (including contingent and unliquidated
liabilities) at such time; (b) such Person is able to pay all of its liabilities
as such liabilities mature; and (c) such Person does not have unreasonably small
capital with which to conduct its business. For purposes of this definition
(i) the amount of a Person’s contingent or unliquidated liabilities at any time
shall be that amount which, in light of all the facts and circumstances then
existing, represents the amount which can reasonably be expected to become an
actual or matured liability; (ii) the “fair saleable value” of an asset shall be
the amount which may be realized within a reasonable time either through
collection or sale of such asset at its regular market value; and (iii) the
“regular market value” of an asset shall be the amount which a capable and
diligent business person could obtain for such asset from an interested buyer
who is willing to purchase such asset under ordinary selling conditions.
     “Taxes” is defined in clause (a) of Section 2.8.
     “U.C.C.” means the Uniform Commercial Code as in effect in the State of
Texas.
     Section 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Guaranty, including its
preamble and recitals, have the meanings provided in the Credit Agreement.
     Section 1.3. U.C.C. Definitions. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the U.C.C.
are used in this Guaranty, including its preamble and recitals, with such
meanings.
ARTICLE II
GUARANTY PROVISIONS
     Section 2.1. Guaranty. Guarantor hereby absolutely, unconditionally and
irrevocably (all of the following guaranteed and indemnified obligations being
collectively called the “Guaranteed Obligations”)
     (a) guarantees the full and punctual payment when due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or
otherwise, of all Obligations of Borrower now or hereafter existing under the
Credit Agreement, the Note, and each other Loan Document, whether for principal,
interest, fees, expenses or otherwise, and all other obligations of Borrower to
Lender, howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent or now or hereafter existing or due or to become due
(including in all cases all such amounts which would become due but for the
operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code, 11 U.S.C. §362(a), and the operation of Sections 502(b) and
506(b) of the United States Bankruptcy Code, 11 U.S.C. §502(b) and §506(b)); and
     (b) indemnifies and holds harmless Lender and any holder of the Note for
any and all costs and expenses (including reasonable attorney’s fees and
expenses) incurred by Lender or such holder, as the case may be, in enforcing
any rights under this Guaranty; PROVIDED THAT IT IS THE INTENTION OF GUARANTOR
THAT THIS INDEMNIFICATION APPLY IN THE CASE OF THE ORDINARY NEGLIGENCE OF LENDER
OR ANY HOLDER OF THE NOTE BUT GUARANTOR SHALL HAVE

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NO OBLIGATION HEREUNDER TO THE EXTENT THAT SUCH COSTS AND EXPENSES ARISE FROM
THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE LENDER OR ANY HOLDER OF THE
NOTE;
This Guaranty constitutes a guaranty of payment when due and not of collection,
and Guarantor specifically agrees that it shall not be necessary or required
that Lender or any holder of the Note exercise any right, assert any claim or
demand or enforce any remedy whatsoever against Borrower (or any other Person)
before or as a condition to the obligations of Guarantor hereunder.
     Section 2.2. Acceleration of Guaranty. Guarantor agrees that in the event
of the death, incompetency, or dissolution or insolvency of Guarantor, or an
assignment by Guarantor for the benefit of creditors, or the commencement of any
case or proceeding in respect of Guarantor under any bankruptcy, insolvency or
similar laws, and if such event shall occur at a time when any of the Guaranteed
Obligations may not then be due and payable, Guarantor will pay to Lender
forthwith the full amount which would be payable hereunder by Guarantor if all
such Guaranteed Obligations were then due and payable.
     Section 2.3. Guaranty Absolute, etc. Except as otherwise provided for in
this Guaranty, this Guaranty shall in all respects be a continuing, absolute,
unconditional and irrevocable guaranty of payment, and shall remain in full
force and effect until all Guaranteed Obligations have been paid in full, all
obligations of Guarantor hereunder shall have been paid in full and all the
obligations of Borrower pursuant to the Credit Agreement, the Note and the other
Loan Documents shall have been paid in full and terminated. Guarantor guarantees
that the Guaranteed Obligations will be paid strictly in accordance with the
terms of the Credit Agreement and each other Loan Document under which they
arise, regardless of any law, regulation or order now or hereafter in effect in
any jurisdiction affecting any of such terms or the rights of Lender or any
holder of the Note with respect thereto. The liability of Guarantor under this
Guaranty shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Credit Agreement,
the Note or any other Loan Document; (b) the failure of Lender or any holder of
the Note (i) to assert any claim or demand or to enforce any right or remedy
against Borrower or any other Person (including any other guarantor) under the
provisions of the Credit Agreement, the Note, any other Loan Document or
otherwise, or (ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Guaranteed Obligations; (c) any change in the
time, manner or place of payment of, or in any other term of, all or any of the
Guaranteed Obligations, or any other extension, compromise or renewal of any
Guaranteed Obligation; (d) any reduction, limitation, impairment or termination
of any Guaranteed Obligations for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to (and
Guarantor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality, nongenuineness, irregularity, compromise, unenforceability of, or
any other event or occurrence affecting, any Guaranteed Obligations; (e) any
amendment to, rescission, waiver, or other modification of, or any consent to
departure from, any of the terms of the Credit Agreement, the Note or any other
Loan Document; (f) any addition, exchange, release, surrender or non-perfection
of any collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by Lender or any holder of
the Note securing any of the Guaranteed Obligations; or (g) any other

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circumstance which might otherwise constitute a defense available to, or a legal
or equitable discharge of, Borrower, any surety or any guarantor.
     Section 2.4. Reinstatement, etc. Guarantor agrees that this Guaranty shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment (in whole or in part) of any of the Guaranteed Obligations is
rescinded or must otherwise be restored by Lender or any holder of the Note,
upon the insolvency, bankruptcy or reorganization of Borrower or otherwise, as
though such payment had not been made.
     Section 2.5. Waiver, etc. Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that Lender or any holder of
the Note protect, secure, perfect or insure any security interest or Lien, or
any property subject thereto, or exhaust any right or take any action against
Borrower or any other Person (including any other guarantor) or entity or any
collateral securing any Guaranteed Obligations.
     Section 2.6. Waiver of Subrogation. Guarantor hereby irrevocably waives any
claim or other rights which it may now or hereafter acquire against Borrower
that arise from the existence, payment, performance or enforcement of
Guarantor’s obligations under this Guaranty or any other Loan Document,
including any right of subrogation, reimbursement, exoneration, or
indemnification, any right to participate in any claim or remedy of Lender
against Borrower or any collateral which Lender now has or hereafter acquires,
whether or not such claim, remedy or right arises in equity, or under contract,
statute or common law, including the right to take or receive from Borrower,
directly or indirectly, in cash or other property or by set-off or in any
manner, payment or security on account of such claim or other rights. If any
amount shall be paid to Guarantor in violation of the preceding sentence and the
Guaranteed Obligations shall not have been paid in cash in full and all the
obligations of Borrower pursuant to the Credit Agreement, the Note and the other
Loan Documents shall not have been terminated, such amount shall be deemed to
have been paid to Guarantor for the benefit of, and held in trust for, Lender,
and shall forthwith be paid to Lender to be credited and applied upon the
Guaranteed Obligations, whether matured or unmatured. Guarantor acknowledges
that it will receive direct and indirect benefits from the financing
arrangements contemplated by the Credit Agreement and that the waiver set forth
in this Section is knowingly made in contemplation of such benefits.
     Section 2.7. Successors, Transferees and Assigns; Transfers of Note, etc.
This Guaranty shall: (a) be binding upon Guarantor, and its successors,
transferees and assigns; and (b) inure to the benefit of and be enforceable by
Lender, any holder of the Note and each of their respective successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(b), Lender may assign or otherwise transfer (in whole or in part) the Note held
by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all rights and benefits in respect thereof granted
to Lender under any Loan Document (including this Guaranty) or otherwise.
     Section 2.8. Payments Free and Clear of Taxes, etc. Guarantor hereby agrees
that:
     (a) All payments by Guarantor hereunder shall be made in accordance with
the Credit Agreement free and clear of and without deduction for any present or
future

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income, excise, stamp or franchise taxes and other taxes, fees, duties,
withholdings or other charges of any nature whatsoever imposed by any taxing
authority, but excluding franchise taxes and taxes imposed on or measured by
Lender’s net income or receipts (such non-excluded items being called “Taxes”).
In the event that any withholding or deduction from any payment to be made by
Guarantor hereunder is required in respect of any Taxes pursuant to any
applicable law, rule or regulation, then Guarantor will (i) pay directly to the
relevant authority the full amount required to be so withheld or deducted,
(ii) promptly forward to Lender an official receipt or other documentation
satisfactory to Lender evidencing such payment to such authority, and (iii) pay
to Lender such additional amount or amounts as is necessary to ensure that the
net amount actually received by Lender will equal the full amount Lender would
have received had no such withholding or deduction been required. Moreover, if
any Taxes are directly asserted against Lender with respect to any payment
received by Lender hereunder, Lender may pay such Taxes and Guarantor will
promptly pay such additional amounts (including any penalties, interest or
expenses) as is necessary in order that the net amount received by Lender after
the payment of such Taxes (including any Taxes on such additional amount) shall
equal the amount Lender would have received had not such Taxes been asserted.
     (b) If Guarantor fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to Lender the required receipts or other required
documentary evidence, Guarantor shall indemnify Lender for any incremental
Taxes, interest or penalties that may become payable by Lender as a result of
any such failure.
     (c) Without prejudice to the survival of any other agreement of Guarantor
hereunder, the agreements and obligations of Guarantor contained in this
Section 2.8 shall survive the payment in full of the principal of and interest
under the Note and any other Guaranteed Obligations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
     Guarantor hereby represents and warrants unto Lender as set forth in this
Section (i) as of the date of this Agreement, (ii) on the date, and both before
and after giving effect to the making of any Loan, and (iii) on the date of
delivery of the financial information required pursuant to Section 7.1.1(c) of
the Credit Agreement, as follows:
     Section 3.1. Organization. Guarantor is a corporation duly incorporated and
is validly existing and in good standing under the laws of the state of its
incorporation; and the Guarantor is duly qualified and in good standing as a
foreign corporation in each jurisdiction where, because of the nature of its
activities or properties, such qualification is required and where the failure
so to qualify would have a material adverse effect on the financial condition,
business, operations and prospects of the Guarantor.
     Section 3.2. Due Authorization. Guarantor has the full legal power, right
and capacity to enter into and perform this Guaranty and the other Loan
Documents. The consummation of the transactions contemplated by this Guaranty
and the other Loan Documents are within Guarantor’s power, have received all
necessary corporate, governmental and other approvals,

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exemptions, authorizations, licenses and permits (if any shall be required), and
(a) do not and will not contravene or conflict with any provision of the
articles of incorporation or bylaws of Guarantor; (b) do not and will not
contravene or conflict with any provision of any law, rule, regulation, order,
writ, judgment, decree, determination or award presently in effect having
applicability to Guarantor, and (c) do not and will not result in the breach or
termination of any provision of, or constitute a default under, any indenture,
mortgage, deed of trust or other agreement or instrument to which Guarantor is a
party or by which Guarantor or its properties may be bound, including, without
limitation, any confidentiality agreement or restrictions or disclosure of
information.
     Section 3.3. Validity and Binding Nature. This Guaranty and any other Loan
Documents to which it is party have been duly executed and delivered and
constitute the legal, valid and binding obligations of Guarantor, enforceable
against Guarantor in accordance with their terms, except as enforcement thereof
may be limited by bankruptcy, insolvency and similar laws applicable to
creditors generally.
     Section 3.4. No Consent. No authorization, consent or approval, or any
formal exemption, of any governmental body or regulatory authority (federal,
state or local) is or will be necessary to the valid execution, delivery or
performance by Guarantor of this Guaranty or any other Loan Documents to which
it is party.
     Section 3.5. Notice of Default. As of the Effective Date, Guarantor has not
received any notice of default and is not in default in any material respect
under and has not breached in any material respect (i) any order, writ,
injunction or decree of any court or of any commission or other administrative
agency, or (ii) any material agreement or material contract or obligation to
which Guarantor is a party or by which Guarantor is bound, or to which Guarantor
may be subject, or affecting the Subject Interests or any portion thereof.
     Section 3.6. Pending Litigation. Except as set forth on Schedule II to the
Credit Agreement, there are no actions, suits or proceedings by or before any
court, arbitrator or any governmental commission, board, bureau or other
administrative agency pending, or to the knowledge of Guarantor threatened,
against Borrower or Guarantor or any of the Subject Interests, which could
reasonably be expected to have a Material Adverse Effect or which purports to
affect the legality, validity or enforceability of this Guaranty or any of the
other Loan Documents.
     Section 3.7. Compliance. Guarantor has complied in all material respects
with all applicable statutes, rules, regulations, orders and restrictions of any
domestic or foreign government or any instrumentality or agency thereof, having
jurisdiction over the conduct of its businesses or any of its properties. As of
the Effective Date, Guarantor has not received any notice to the effect that
Borrower and its Subsidiaries or Guarantor, their operations or their
properties, including, but not limited to, the Subject Interests, are not in
compliance with any of the requirements of applicable Environmental Laws, or are
the subject of any federal or state investigations evaluating whether any
remedial action is needed to respond to a Release of any Hazardous Material,
whether from their properties, including, but not limited to, the Subject
Interests, or elsewhere.

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     Section 3.8. Representation with Respect to True and Complete Disclosure.
All material factual information heretofore or contemporaneously furnished by or
on behalf of Guarantor to Lender for purposes of or in connection with this
Guaranty or the other Loan Documents or any transaction contemplated hereby or
thereby, including, but not limited to, factual data supporting any reserve
reports and financial statements, is, true, correct and accurate in all material
respects on the date as of which such information is dated or certified and does
not contain any material misstatement of fact or omit to state a material fact
or any fact necessary to make the statements contained therein not misleading,
and all estimated material so furnished was prepared on the basis of
assumptions, data, information, tests or conditions believed to be valid or
accurate or to exist at the time such material was prepared and so furnished.
     Section 3.9. SECTION 3.8 Ownership. As of the date hereof, Guarantor is the
legal and beneficial direct owner of one hundred percent (100%) of the
outstanding ownership interests of Borrower, free and clear of all liens,
security interests, options or other charges or encumbrances.
     Section 3.10. Solvency. After giving effect to the Loan under the Credit
Agreement, Guarantor is Solvent.
ARTICLE IV
COVENANTS, ETC.
     Guarantor covenants and agrees that, so long as any portion of the
Guaranteed Obligations shall remain unpaid or so long as any portion of the
obligations of Borrower pursuant to the Credit Agreement, the Note and the other
Loan Documents shall not have been terminated, Guarantor will, unless Lender
shall otherwise consent in writing, perform the obligations set forth in this
Article IV.
     Section 4.1. Other Agreements. Guarantor will not enter into any agreement
containing any provision which would be violated or breached by the performance
of its obligations hereunder or under any instrument or document delivered or to
be delivered by Guarantor hereunder or in connection herewith.
     Section 4.2. Certain Notices. During the term hereof, Guarantor will not
change its name, identity, principal place of business without notifying Lender
of any such change at least 30 days prior to the effective date of such change.
     Section 4.3. Further Assurances. Guarantor and Lender will execute and
deliver all such other and additional instruments, notices, releases and other
documents and will do all such other acts and things as may be necessary or
appropriate more fully to evidence the intent of the parties hereunder.
     Section 4.4. Ownership of Borrower. Guarantor will maintain direct
ownership of no less than one hundred percent (100%) of the outstanding
ownership interests of Borrower or any successor company by merger, free and
clear of all liens, security interests, options or other charges or encumbrances
other than Liens in favor of Lender under the Loan Documents.

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     Section 4.5. Notice of Default. Guarantor shall furnish or cause to be
furnished to Lender copies of the following information: any notice of
Guarantor’s default or breach in any material respect under (i) any order, writ,
injunction or decree of any court or of any commission or other administrative
agency, or (ii) any material agreement or material contract or obligation to
which Guarantor is a party or by which Guarantor is bound, or to which Guarantor
may be subject, or affecting the Subject Interests or any portion thereof.
ARTICLE V
MISCELLANEOUS PROVISIONS
     Section 5.1. Loan Document. This Guaranty is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof.
     Section 5.2. Binding on Successors, Transferees and Assigns; Assignment of
Guaranty. In addition to, and not in limitation of, Section 2.7, this Guaranty
shall be binding upon Guarantor and its successors, transferees and assigns and
shall inure to the benefit of and be enforceable by Lender and any holder of the
Note and their respective successors, transferees and assigns (to the full
extent provided pursuant to Section 2.7); provided, however, that Guarantor may
not assign any of its obligations hereunder without the prior written consent of
Lender and any holder of the Note.
     Section 5.3. Amendments, etc. No amendment to or waiver of any provision of
this Guaranty, nor consent to any departure by Guarantor herefrom, shall in any
event be effective unless the same shall be in writing and signed by Guarantor
and Lender, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
     Section 5.4. Notices. All notices and other communications hereunder to
Guarantor shall be in writing or by facsimile and addressed, delivered or
transmitted to such party at its address or facsimile number set forth below its
signature hereto or at such other address, or facsimile number as may be
designated by such party in a notice to the other parties. Any notice or other
communication shall be effective (i) if given by facsimile transmission, when
transmitted to the facsimile number specified on the signature page hereof and
confirmation of receipt is received (the receipt thereof shall be deemed to have
been acknowledged upon the sending Party’s receipt of its facsimile machine’s
confirmation of successful transmission; provided that if the day on which such
facsimile is received in not a Business Day or is after 4:00 p.m. on a Business
Day, then the receipt of such facsimile shall be deemed to have been
acknowledged on the next following Business Day), (ii) if given by mail, three
(3) Business Days after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid, or (iii) if given by any other
means, when delivered (or, in the case of electronic transmission, received) at
the address specified on the signature page hereof; except that notices to the
Lender shall not be effective until received by the Lender.
     Section 5.5. No Waiver; Remedies. In addition to, and not in limitation of,
Section 2.3 and Section 2.5, no failure on the part of Lender or any holder of
the Note to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or

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partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
     Section 5.6. Section Captions. Section captions used in this Guaranty are
for convenience of reference only, and shall not affect the construction of this
Guaranty.
     Section 5.7. Setoff. In addition to, and not in limitation of, any rights
of Lender or any holder of the Note under applicable law, Lender and each such
holder shall, upon the occurrence of any Default described in Section 8.1.3 of
the Credit Agreement or any Event of Default, have the right to appropriate and
apply to the payment of the obligations of Guarantor owing to it hereunder,
whether or not then due, and Guarantor hereby grants to Lender and each such
holder a continuing security interest in, any and all balances, credits,
deposits, accounts or moneys of Guarantor then or thereafter maintained with
Lender or such holder and any and all property of every kind or description of
or in the name of Guarantor now or hereafter, for any reason or purpose
whatsoever, in the possession or control of, or in transit to, Lender, such
holder or any agent or bailee for Lender or such holder.
     Section 5.8. Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
     Section 5.9. Governing Law, Entire Agreement, etc. THIS GUARANTY SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH INTERNAL LAWS OF THE STATE OF
TEXAS. THIS GUARANTY AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE
UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF
AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
     Section 5.10. Forum Selection And Consent To Jurisdiction. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS GUARANTY OR
ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF LENDER OR GUARANTOR SHALL BE BROUGHT
AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF TEXAS OR IN THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF THE STATE OF TEXAS; PROVIDED,
HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY PROPERTY MAY BE BROUGHT,
AT LENDER’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH PROPERTY MAY BE
FOUND. GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF
THE COURTS OF THE STATE OF TEXAS AND OF THE UNITED STATES DISTRICT COURT FOR THE
STATE OF TEXAS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH SUCH LITIGATION. GUARANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE

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OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR
WITHOUT THE STATE OF TEXAS. GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR
HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY
SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT GUARANTOR HAS OR HEREAFTER
MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL
PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS GUARANTY.
     Section 5.11. WAIVER OF JURY TRIAL. GUARANTOR AND LENDER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF LENDER OR GUARANTOR.
GUARANTOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR LENDER ENTERING INTO THE CREDIT AGREEMENT. LENDER ACKNOWLEDGES
AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS
PROVISION.
     Section 5.12. No Oral Agreements. THIS WRITTEN GUARANTY TOGETHER WITH THE
OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
     THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
     Section 5.13. Non-Recourse Nature of Guaranty; Assignment. Notwithstanding
the terms and provisions of this Guaranty or any other Loan Document, Guarantor
shall not have any liability for any of the Guaranteed Obligations, except for
(i) the rights and remedies of Lender with respect to the “Collateral” as
defined in and pursuant to the Pledge Agreement and applicable law, (ii) the
rights and remedies of Lender with respect to the “Mortgaged Property” as
defined in and pursuant to the Mortgage executed by Guarantor in favor of Lender
and applicable law, and (iii) any liability of Guarantor hereunder or under
applicable law as a result of any breach of or failure to observe or comply with
any of its covenants, representations, warranties and other obligations arising
under this Guaranty, the Pledge Agreement or such Mortgage; and Lender, for
itself and on behalf of its successors and assigns and their respective
Affiliates, hereby acknowledges and agrees that it shall have no claim against
Guarantor for any Guaranteed Obligations except as set forth in the immediately
preceding clauses (i), (ii) and (iii).

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Notwithstanding anything to the contrary in this Guaranty or any other Loan
Document, Guarantor shall perform all acts necessary to effectuate the
acknowledgement by MMS of the assignment and conveyance of the Mortgaged
Property to Borrower in accordance with Section 7.1.15(e) of the Credit
Agreement. Upon receipt by the Lender of satisfactory evidence, in its
reasonable discretion, of the recognition and acknowledgement by the MMS of the
assignment and conveyance of the Mortgaged Property from Guarantor to the
Borrower, Lender agrees to promptly terminate this Guaranty.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

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

                  /s/ CALLON PETROLEUM OPERATING COMPANY, as Guarantor          
       

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