EXHIBIT 99.2
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EXECUTION COPY
SCHEDULE
TO THE
ISDA MASTER AGREEMENT
DATED AS OF MAY 28, 2004
BETWEEN
DEUTSCHE BANK AG ("PARTY A")
AND
CHESAPEAKE EXPLORATION LIMITED PARTNERSHIP ("PARTY B")
PART 1. TERMINATION PROVISIONS.
(a) "SPECIFIED ENTITY" means:
(i) in relation to Party A:
Section 3(c): Party A's Affiliates
Otherwise: Not Applicable
(ii) in relation to Party B: Party B's Affiliates
(b) "SPECIFIED TRANSACTION" will have the meaning specified in Section 14
of this Agreement.
(c) The "CROSS DEFAULT" provisions of Section 5(a)(vi) will apply to both
parties subject to amendment by adding at the end thereof the following
words:
"PROVIDED that, notwithstanding the foregoing, an Event of Default
shall not occur under either clause (1) or (2) above if (A) (I) the
default, or other similar event or condition referred to in clause (1)
or the failure to pay referred to in clause (2) is a failure to pay or
deliver caused by an error or omission of an administrative or
operational nature, and (II) funds or the asset to be delivered were
available to such party to enable it to make the relevant payment or
delivery when due and (III) such payment or delivery is made within
three Local Business Days following receipt of written notice from an
interested party of such failure to pay or such failure to deliver, or
(B) such party was precluded from paying, or was unable to pay, using
reasonable means, through the office of the party through which it was
acting for purposes of the relevant Specified Indebtedness, by reason
of force majeure, act of State, illegality or impossibility."
For such purposes:
"SPECIFIED INDEBTEDNESS" means any obligation (whether present or
future, contingent or otherwise) in respect of (i) borrowed money
(other than indebtedness in respect of bank deposits received in the
ordinary course of business) and (ii) Financial Market Transactions.
For purposes herein, "FINANCIAL MARKET TRANSACTIONS" mean any
transaction of a type specified in clause (a) or (b) of the definition
of "Specified Transaction" which is entered into between such party
and an entity other than the other party to this Agreement, or any
Credit Support Provider or Specified Entity of such party. For the
purposes of determining whether the Threshold Amount has been exceeded
in respect of any Financial Market Transaction, the portion
attributable to Financial Market Transactions shall be the amount owed
and not paid or delivered when due (whether on any regularly scheduled
payment or delivery date, on early termination or otherwise) to the
other party under the terms relating to such Financial Market
Transaction.
With regard to Party A, "THRESHOLD AMOUNT" means 1% of its
shareholders' equity (as calculated in accordance with generally
accepted accounting principles applicable to Party A).
With regard to Party B, any applicable Specified Entity of
Party B or any Credit Support Provider of Party B, "THRESHOLD AMOUNT"
means:
(x) at any time when the shareholders' equity of the Company (as
calculated in accordance with generally accepted accounting
principles applicable to the Company) is greater than
U.S.$1,650,000,000, U.S.$25,000,000; and
(y) at any other time, 1% of the shareholders' equity of the
Company (as so calculated).
(d) The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(v) will
apply to both parties.
(e) The "AUTOMATIC EARLY TERMINATION" provisions of Section 6(a) will not
apply to Party A and will not apply to Party B.
(f) "TERMINATION CURRENCY" means Dollars.
(g) "ADDITIONAL TERMINATION EVENT" will not apply to Party A. Each
Additional Termination Event set forth in Part 6 below or in the Credit
Support Annex will apply to Party B (and, for such Additional
Termination Events, Party B shall be the sole Affected Party).
PART 2. TAX REPRESENTATIONS.
(a) PAYER REPRESENTATIONS. For the purposes of Section 3(e) of this
Agreement, Party A and Party B each make the following representations
to the other:
It is not required by any applicable law, as modified by the practice
of any relevant governmental revenue authority, of any Relevant
Jurisdiction to make any deduction or withholding for or on account of
any Tax from any payment (other than interest under Section 9(h) of
this Agreement) to be made by it to the other party under this
Agreement. In making this representation, each party may rely on:
(i) the accuracy of any representations made by the other party
pursuant to Section 3(f) of this Agreement;
(ii) the satisfaction of the agreement of the other party contained
in Section 4(a)(i) or 4(a)(iii) of this Agreement and the
accuracy and effectiveness of any document provided by the
other party pursuant to Section 4(a)(i) or 4(a)(iii) of this
Agreement; and
(iii) the satisfaction of the agreement of the other party contained
in Section 4(d) of this Agreement,
except that it will not be a breach of this representation where
reliance is placed on clause (ii) and the other party does not deliver
a form or document under Section 4(a)(iii) by reason of material
prejudice to its legal or commercial position.
(b) PAYEE REPRESENTATIONS. For the purpose of Section 3(f) of this
Agreement:
(1) Party A makes the following representations:--
(A) It is a "foreign person" within the meaning of the
applicable United States Treasury Regulations
concerning information reporting and backup withholding
tax (as in effect on January 1, 2001), unless Party A
provides written notice to Party B that it is no longer
a foreign person. In respect of each Transaction it
enters into through an office or discretionary agent in
the United States or which otherwise is allocated for
United States federal income tax purposes to such
United States trade or business, each payment received
or to be received by it under such Transaction will be
effectively connected with its conduct of a trade or
business in the United States.
(B) In respect of all Transactions (other than those
described in (A) above), no payment received or to be
received by it in connection with this Agreement is
attributable to a trade or business carried on by it
through a permanent establishment in the United States.
(2) Party B makes the following representations:--
It is a U.S. person, and it is a limited partnership that is
the beneficial owner of all payments to be made to it under
this Agreement, organized under the laws of the State of
Oklahoma, and its taxpayer identification number is
00-0000000.
2
PART 3. AGREEMENT TO DELIVER DOCUMENTS.
(a) For the purpose of Section 4(a)(i) of this Agreement, the documents
to be delivered are:--
PARTY REQUIRED TO FORM/DOCUMENT/ DATE BY WHICH COVERED BY
DELIVER DOCUMENT CERTIFICATE TO BE DELIVERED SECTION 3(d)
REPRESENTATION
Party A An executed United States (i) Upon execution of this No
Internal Revenue Service Agreement; (ii) promptly
Form W-8ECI (or any upon reasonable demand by
successor thereto) and an Party B; and
executed United States (iii) promptly upon
Internal Revenue Service learning that any such form
Form W-8BEN (or any previously provided by
successor thereto). Party A has become obsolete
or incorrect.
Party B An executed United States (i) Upon execution of this No
Internal Revenue Service W-9 Agreement; (ii) promptly
(or any successor thereto). upon reasonable demand by
Party A; and (iii)
promptly upon learning that
any such form previously
provided by Party B
has become obsolete
or incorrect.
(b) For the purpose of Section 4(a)(ii) of this Agreement, the other
documents to be delivered (which will be covered by the representation
in Section 3(d) of the Agreement if specified) are as follows:--
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PARTY REQUIRED TO FORM/DOCUMENT/ DATE BY WHICH COVERED BY
DELIVER DOCUMENT CERTIFICATE TO BE DELIVERED SECTION 3(d)
REPRESENTATION
Party A and Party B Evidence of the authority, Upon or prior to the Yes
incumbency and specimen execution and delivery of
signature of each person this Agreement and, with
executing this Agreement or respect to any Confirmation,
any Confirmation, Credit upon request by the other
Support Document or other party.
document entered into in
connection with this Agreement
on its behalf or on behalf of
a Credit Support Provider or
otherwise, as the case may be.
Party A and Party B A copy of the most recent Promptly after request by Yes
annual report containing the other party.
consolidated financial
statements of (in the case of
Party A) Party A and (in the
case of Party B) the Company,
and such other public
information respecting the
condition or operations,
financial or otherwise of such
Person, as the other party may
reasonably request from time
to time.
Party B A copy of the resolution of Upon execution of this Yes
Party B's board of directors Agreement
(or other managers of such
entity) approving the entering
into of this Agreement and the
Transactions hereunder and a
board resolution delegating
the powers to named
individuals to enter into any
Transactions under this
Agreement. Party B shall also
deliver to Party A a copy of
its constituent documents,
each certified by an
appropriately authorized
officer of Party B to the
effect that such documents are
up to date and in full force
and effect and that Party A
may continue to rely thereon.
Party B A duly executed and delivered Upon execution of this Yes
copy of each Credit Support Agreement and from time to
Document. time thereafter as required
under Part 6 below
Party B A copy of the resolution of Upon execution of this
each Credit Support Provider's Agreement and from time to Yes
board of directors (or other time thereafter as required
managers of such entity) under Part 6 below
approving the entering into of
the applicable Credit Support
Document and a copy of each
Credit Support Provider's
constituent documents, each
certified by an appropriately
authorized officer of the
Credit Support Provider to the
effect that such documents are
up to date and in full force
and effect and that Party A
may continue to rely thereon.
Party B Each other document required From time to time as Yes, unless otherwise
under Part 6 below required under Part 6 below expressly stated in
Part 6 below
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PART 4. MISCELLANEOUS.
(a) ADDRESSES FOR NOTICES. For the purpose of Section 12(a) of this
Agreement, the addresses for notices and communications to Party A and
Party B shall be as follows:--
TO PARTY A:
All notices to Party A under Section 5 or 6 of this Agreement (other
than notices under Section 5(a)(i)) shall be sent to:
Deutsche Bank AG, Head Office
Xxxxxxxxxxxx 00
00000 Xxxxxxxxx
XXXXXXX
Attention: Legal Department
Fax No: 0000 00 000 00000
With copies to:
Deutsche Bank AG, New York Branch
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Legal Department
Fax No: 000 000 0000
Deutsche Bank AG, New York Branch
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx
Fax No: 000 000 0000
Deutsche Bank Securities Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx
Fax No: 000 000 0000
All other notices to Party A shall be sent to:
Deutsche Bank AG, New York Branch
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx
Fax No: 000 000 0000
With a copy to:
Deutsche Bank Securities Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx
Fax No: 000 000 0000
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TO PARTY B:
With respect to Confirmations and payments:
Chesapeake Exploration Limited Partnership
0000 X. Xxxxxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Attention: Cash Manager
Fax No: 000 000 0000
All other notices to Party B shall be sent to:
Chesapeake Exploration Limited Partnership
0000 X. Xxxxxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Attention: Treasurer
Fax No: 000 000 0000
(b) PROCESS AGENT. For the purpose of Section 13(c) of this Agreement:--
Party A appoints as its Process Agent: Not applicable.
Party B appoints as its Process Agent: Not applicable.
(c) OFFICES. The provisions of Section 10(a) will apply to this Agreement.
(d) MULTIBRANCH PARTY. For the purpose of Section 10(b) of this
Agreement:--
Party A is a Multibranch Party and may act through any of the following
Offices:--
Its New York, London, Tokyo, Paris, Singapore, Brussels,
Sydney, Amsterdam, Vienna, Canada (Toronto), and New Zealand
(Auckland) Branches and its Frankfurt Head Office.
Party B is not a Multibranch Party.
(e) CALCULATION AGENT. The Calculation Agent shall be Party A.
(f) CREDIT SUPPORT DOCUMENTS.
(i) "CREDIT SUPPORT DOCUMENTS" means in relation to Party A: None.
(ii) "CREDIT SUPPORT DOCUMENTS" means in relation to Party B: Each
of the documents stated to be a Credit Support Document in
Part 6 below.
(g) CREDIT SUPPORT PROVIDER.
(i) "CREDIT SUPPORT PROVIDER" means in relation to Party A: None.
(ii) "CREDIT SUPPORT PROVIDER" means in relation to Party B: Each
of the Persons stated to be a Credit Support Provider in Part
6 below.
(h) GOVERNING LAW. This Agreement is governed by, and will be construed and
enforced in accordance with, the laws of the State of New York (without
reference to its choice of law doctrine).
(i) NETTING OF PAYMENTS. "Multiple Transaction Payment Netting" will apply.
(j) ABSENCE OF LITIGATION. For the purpose of Section 3(c):
(i) "SPECIFIED ENTITY" means in relation to Party A: Party A's
Affiliates.
(ii) "SPECIFIED ENTITY" means in relation to Party B: Party B's
Affiliates.
(k) NO AGENCY. The provisions of Section 3(g) will apply to this Agreement.
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(l) ADDITIONAL REPRESENTATION will apply. For the purpose of Section 3 of
this Agreement, each of the following will constitute an Additional
Representation:--
(i) RELATIONSHIP BETWEEN PARTIES. Each party will be deemed to
represent to the other party on the date on which it enters
into a Transaction that (absent a written agreement between
the parties that expressly imposes affirmative obligations to
the contrary for that Transaction):--
(1) NON-RELIANCE. It is acting for its own account, and
it has made its own independent decisions to enter
into that Transaction and as to whether that
Transaction is appropriate or proper for it based
upon its own judgment and upon advice from such
advisers as it has deemed necessary. It is not
relying on any communication (written or oral) of the
other party as investment advice or as a
recommendation to enter into that Transaction, it
being understood that information and explanations
related to the terms and conditions of a Transaction
will not be considered investment advice or a
recommendation to enter into that Transaction. No
communication (written or oral) received from the
other party will be deemed to be an assurance or
guarantee as to the expected results of that
Transaction.
(2) ASSESSMENT AND UNDERSTANDING. It is capable of
assessing the merits of and understanding (on its own
behalf or through independent professional advice),
and understands and accepts, the terms, conditions
and risks of that Transaction. It is also capable of
assuming, and assumes, the risks of that Transaction.
(3) STATUS OF PARTIES. The other party is not acting as a
fiduciary for or an adviser to it in respect of that
Transaction.
(ii) COMMODITY EXCHANGE ACT. Each party represents to the other
party on and as of the date hereof and on each date on which a
Transaction is entered into between them that:
(1) each Transaction is intended to be exempt from, or
otherwise not subject to regulation under, the
Commodity Exchange Act; and
(2) such party is an "eligible contract participant"
within the meaning of the Commodity Exchange Act,
Section 1a(12).
(iii) ADDITIONAL REPRESENTATIONS OF PARTY B. Party B represents to
Party A on and as of the date hereof and at all times until
the termination of this Agreement that:
(1) with respect to each source of funds to be used by it
to enter into such Transactions (each such source
being referred to herein as a "SOURCE"), the Source
is not the assets of any "plan" (as such term is
defined in Section 4975 of the Internal Revenue Code
of 1986, as amended (the "CODE")) subject to Section
4975 of the Code or any "employee benefit plan" (as
such term is defined in Section 3(3) of the employee
Retirement Income Security Act of 1974, as amended
("ERISA")) subject to Title I of ERISA, or otherwise
out of "plan assets" within the meaning of United
States Department of Labor regulation ss. 2510.3-101,
29CFR ss. 0000-0-000; and
(2) each Transaction is intended to be exempt from, or
otherwise not subject to regulation under, the
Investment Company Act of 1940 and Party B is exempt
from regulation under such Act.
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(iv) ADDITIONAL REPRESENTATIONS OF PARTY B. The representations and
warranties set forth in Section 4 of the Credit Agreement,
together with related definitions and ancillary provisions and
schedules and exhibits, are hereby incorporated herein by
reference, as if set forth herein in full, MUTATIS MUTANDIS;
PROVIDED that, as incorporated herein (unless the context
otherwise requires):
(1) each reference therein to "this Agreement", "the
Revolving Loans", "the Letters of Credit" or "the
Revolving Commitments" or the like shall be deemed to
be a reference to this Agreement and the Transactions
hereunder, as the case may be;
(2) each reference therein to any "Agent" or any "Lender"
or the like shall be deemed to be a reference to
Party A hereunder;
(3) each reference therein to the "Loan Documents" or the
like shall be deemed to be a reference to the Secured
Trading Line Documents; and
(4) each reference therein to the "Collateral" or the
like shall be deemed to be a reference to the
Collateral as defined herein.
Party B represents to Party A on and as of the date hereof and
on each date on which a Transaction is entered into between
them that:
(1) Party B and each Credit Support Provider is Solvent;
and
(2) each representation and warranty set forth in Section
4 of the Credit Agreement (as incorporated by
reference above) is true and correct on and as of
such date as if made as of such date.
(m) RECORDING OF CONVERSATIONS. Each party (i) consents to the recording of
telephone conversations between the trading, marketing and other
relevant personnel of it and any personnel employed by any Affiliate or
any third party acting on its behalf in connection with this Agreement
or any potential Transaction, (ii) agrees to obtain any necessary
consent of, and give any necessary notice of such recording to, such
persons and (iii) agrees, to the extent permitted by applicable law,
that recordings may be submitted in evidence in any Proceedings.
8
PART 5. OTHER PROVISIONS
(a) ESCROW. On any date on which both parties are required to make
payments hereunder, either party may at its option and in its sole
discretion notify the other party that payments on that date are to be
made in escrow. In this case deposit of the payment due earlier on
that date will be made by 2.00 p.m. (local time at the place for the
earlier payment if there is a time difference between the cities in
which payments are to be made) on that date with an escrow agent
selected by the party giving the notice and reasonably acceptable to
the other party, accompanied by irrevocable payment instructions (a)
to release the deposited payment to the intended recipient upon
receipt by the escrow agent of the required deposit of the
corresponding payment from the other party on the same date
accompanied by irrevocable payment instructions to the same effect or
(b) if the required deposit of the corresponding payment is not made
on that same date, to return the payment deposited to the party that
paid it into escrow at such party's request. The party that elects to
have payments made in escrow will pay the costs of the escrow
arrangements and will cause those arrangements to provide that the
intended recipient of the payment due to be deposited first will be
entitled to interest on that deposited payment for each day in the
period of its deposit at the rate offered by the escrow agent for that
day for overnight deposits in the relevant currency in the office
where it holds that deposited payment (at 11.00 a.m. local time on
that day) if that payment is not released by 5.00 p.m. local time on
the date it is deposited for any reason other than the intended
recipient's failure to make the escrow deposit it is required to make
hereunder in a timely fashion.
(b) TAX PROVISIONS.
(i) The definition of "Tax Event", in Section 5(b)(iii), is
modified by adding the following at the end thereof:
"PROVIDED that for purposes of clarification, the parties
acknowledge that the introduction or proposal of legislation
will not, in and of itself, give rise to a presumption that a
Tax Event has occurred."
(ii) The definition of the term "Indemnifiable Tax" is amended by
adding the following at the end thereof:
"Notwithstanding the foregoing, "Indemnifiable Tax" also means
any Tax imposed in respect of a payment under this Agreement
by reason of a Change in Tax Law by a government or taxing
authority of a Relevant Jurisdiction of the party making such
payment, unless the other party is incorporated, organized,
managed and controlled or considered to have its seat in such
jurisdiction, or is acting for purposes of this Agreement
through a branch or office located in such jurisdiction."
(c) SET OFF. Section 6(f) of this Agreement is deleted in its entirety
and replaced with the following:
"(f) Upon the designation of any Early Termination Date, the
party that is not the Defaulting Party or Affected Party
("X") may, without prior notice to the Defaulting or
Affected Party ("Y"), set off any sum or obligation (whether
or not arising under this Agreement, whether matured or
unmatured, whether or not contingent and irrespective of the
currency, place of payment or booking office of the sum or
obligation) owed by Y to X or any Affiliate of X (the "X SET
OFF AMOUNT") against any sum or obligation (whether or not
arising under this Agreement, whether matured or unmatured,
whether or not contingent and irrespective of the currency,
place of payment or booking office of the sum or obligation)
owed by X or any Affiliate of X to Y (the "Y SET OFF
AMOUNT"). X will give notice to the other party of any set
off effected under this Section 6(f).
For this purpose, either the X Set Off Amount or the Y Set Off
Amount (or the relevant portion of such set off amounts) may
be converted by X into the currency in which the other set off
amount is denominated at the rate of exchange at which X would
be able, acting in a reasonable manner and in good faith, to
purchase the relevant amount of such currency.
If a sum or obligation is unascertained, X may in good faith
estimate that obligation and set-off in respect of the
estimate, subject to the relevant party accounting to the
other when the obligation is ascertained.
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Nothing in this Section 6(f) will be effective to create a
charge or other security interest. This Section 6(f) will be
without prejudice and in addition to any right of set-off,
combination of accounts, lien or other rights to which any
party is at any time otherwise entitled (whether by operation
of law, contract or otherwise).
Notwithstanding the foregoing provisions of this Section 6(f),
obligations owing under the Credit Agreement may not be set
off hereunder against obligations owing under this Agreement."
(d) ADDITIONAL ACKNOWLEDGMENTS AND AGREEMENTS OF THE PARTIES.
(i) BANKRUPTCY CODE. Without limiting the applicability, if any,
of any other provision of the U.S. Bankruptcy Code as
amended (the "BANKRUPTCY CODE") (including Sections 362,
546, 556, and 560 thereof and the applicable definitions in
Section 101 thereof), the parties acknowledge and agree that
all Transactions entered into hereunder will constitute
"forward contracts" or "swap agreements" as defined in
Section 101 of the Bankruptcy Code or "commodity contracts"
as defined in Section 761 of the Bankruptcy Code, that the
rights of the parties under Section 6 of this Agreement will
constitute contractual rights to liquidate Transactions,
that any margin or collateral provided under any margin,
collateral, security, pledge, or similar agreement related
hereto will constitute a "margin payment" as defined in
Section 101 of the Bankruptcy Code, and that the parties are
entities entitled to the rights under, and protections
afforded by, Sections 362, 546, 556, and 560 of the
Bankruptcy Code.
(ii) WAIVER OF RIGHT TO TRIAL BY JURY. Each of the parties hereby
irrevocably waives any and all right to a trial by jury with
respect to any legal proceeding arising out of or relating to
this Agreement or any Transaction.
(e) AMENDMENTS. Section 9(b) of this Agreement is modified by the deletion
of the words "or confirmed by an exchange of telexes or by an exchange
of electronic messages on an electronic messaging system".
(f) COUNTERPARTS AND CONFIRMATIONS. Section 9(e)(i) of this Agreement is
modified by the deletion of the words "and by electronic messaging
system".
(g) DISCLOSURE. Each party consents to the communication or disclosure by
the other party of information in respect of or relating to this
Agreement and any Transactions hereunder to such other party's
branches, subsidiaries and Affiliates and, to the extent required by
law or regulation, any government or regulatory authority.
PART 6. SPECIFIED NATURAL GAS PROVISIONS
(a) PRELIMINARY STATEMENTS. Party B wishes to enter into certain natural
gas derivative transactions with Party A from time to time to hedge
certain volumes of natural gas production of Party B and certain of its
Affiliates, and Party A has agreed to provide commercially reasonable
pricing to Party B for such transactions, all on and subject to the
terms and conditions set forth herein. To induce Party A to enter into
this Agreement, Party B has agreed to provide credit support to Party A
in the form of mortgages, guaranties and other security documents.
Accordingly, Party A and Party B hereby agree to the terms and
conditions set forth in this Part 6.
(b) CERTAIN DEFINITIONS. Certain terms used in this Agreement have the
meanings assigned to them in clause (u) below. An index of certain
defined terms and the page numbers on which such terms are defined is
attached as Annex A to this Agreement.
(c) SCOPE OF MASTER AGREEMENT. This Agreement shall apply to all Specified
Natural Gas Transactions entered into between Party A and Party B, and
shall not apply to any other Transactions entered into between Party A
and Party B.
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(d) CERTAIN CONDITIONS FOR ENTERING INTO SPECIFIED NATURAL GAS
TRANSACTIONS. The parties acknowledge and agree that Party A and Party
B may enter into Specified Natural Gas Transactions with each other at
any time and from time to time during the Trading Period (if each of
Party A and Party B mutually agree in their sole discretion to do so),
PROVIDED that each of the following conditions are satisfied both prior
to and after giving effect to such Transaction:
(1) Natural Gas PFE is less than or equal to Available Capacity;
(2) the Reserve Collateral Ratio is greater than or equal to the
Minimum Reserve Collateral Ratio;
(3) the Volume Limitations are not exceeded;
(4) each representation of Party B set forth herein is true and
correct on such date as if made on and as of such date; and
(5) no Event of Default or Potential Event of Default has occurred
and is then continuing,
and each entry into a Specified Natural Gas Transaction by Party B
hereunder shall be deemed to be a certification by Party B that each of
the foregoing conditions is satisfied. Party A agrees that all pricing
it provides for Specified Natural Gas Transactions shall be determined
by it in a commercially reasonable manner.
Party A and Party B agree not to enter into any Transaction under this
Agreement that includes a swap that, evaluated in isolation from any
other components of such Transaction (including options, other swaps,
floors, collars and the like), is not based on "costless" swap prices
prevailing at the time of such Transaction. For the avoidance of doubt,
it is understood that Party B may from time to time request Party A to
enter into one or more Transactions under this Agreement with swap
prices above or below the "costless" swap prices prevailing at the time
such Transaction is entered into and if such adjustment to such swap
prices results from an embedded option (sold or purchased) included in
such Transaction then such Transactions (and other similar
transactions) are expressly permitted under this Agreement.
(e) VOLUNTARY TERMINATION. Upon not less than 60 days' prior written notice
to Party A, Party B may (if in its sole discretion it elects to do so)
terminate the Trading Period (and, accordingly, terminate the ability
of the parties to enter into further Specified Natural Gas Transactions
hereunder and the obligations of Party A under clause (d) above)
without any penalty or other damage payment to Party A (such
termination, the "VOLUNTARY TRADING PERIOD TERMINATION", and the
effective date of such termination, the "VOLUNTARY TRADING PERIOD
TERMINATION DATE"), PROVIDED that:
(1) Party B shall pay to Party A the Breakage Fee (if any) in
accordance with clause (f)(2) below; and
(2) such Voluntary Trading Period Termination shall not affect the
rights or obligations of Party A or Party B under any
Specified Natural Gas Transactions then outstanding, which
Transactions shall continue to be governed by all of the terms
and conditions set forth in this Agreement and the other
Secured Trading Line Documents.
(f) SECURED TRADING LINE FEES. Party B hereby agrees to pay to Party A
the following fees:
(1) FACILITY FEES. On each Calculation Date (including the
Effective Date), Party B shall pay to Party A a facility fee
(the "FACILITY FEES") in an amount equal to:
(x) Maximum Total Capacity (or, if such Calculation Date is
on or after the Voluntary Trading Period Termination
Date, the Natural Gas PFE as of the later of the
Voluntary Trading Period Termination Date and the most
recent Quarter End Date falling prior to such
Calculation Date); MULTIPLIED BY
(y) 0.30%,
PROVIDED that payment of Breakage Fees under clause (2) below
on or prior to the Calculation Date in 2005 shall relieve
Party B of its obligation to pay Facility Fees on the
Calculation Date in 2005 (but not on any other Calculation
Date).
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(2) BREAKAGE FEE. If the Voluntary Trading Period Termination Date
occurs on or prior to the Calculation Date in 2005, then on
the Voluntary Trading Period Termination Date Party B shall
pay to Party A a fee (the "BREAKAGE FEE") in an amount equal
to U.S.$1,800,000.
(3) EXPOSURE FEES. On the second Local Business Day following each
Exposure Fee Accrual Period, Party B shall pay to Party A an
exposure fee (the "EXPOSURE FEES") in an amount equal to:
(x) the Daily Average Natural Gas Xxxx-to-Market Amount for
such Exposure Fee Accrual Period; MULTIPLIED BY
(y) 1.00% MULTIPLIED BY the number of days in such Exposure
Fee Accrual Period DIVIDED BY 365 (or 366 in the case
of a leap year).
As used herein:
"DAILY AVERAGE NATURAL GAS XXXX-TO-MARKET AMOUNT"
means, for any Exposure Fee Accrual Period, the average, for
each Local Business Day during such Exposure Fee Accrual
Period, of the greater of (1) the Natural Gas Xxxx-to-Market
Amount for such Local Business Day and (2) zero.
"EXPOSURE FEE ACCRUAL PERIOD" means each calendar
quarter ending on the Quarter End Dates, PROVIDED that the
first such period will begin on the Effective Date and the
last such period will end on the Facility Termination Date.
"QUARTER END DATE" means the last day of March, June,
September and December in each year.
(4) REFUND IF NOT FULLY SYNDICATED. If, as of the 90th day
following the Effective Date:
(x) Syndicated Capacity is less than U.S.$400,000,000; and
(y) no Event of Default or Potential Event of Default has
occurred and either (A) continued for a period of at
least 10 days; or (B) is then continuing,
then on such date Party A shall pay to party B an amount equal
to (I) the amount of Facility Fees paid by Party B to Party A
on the Effective Date MULTIPLIED BY (II) U.S.$400,000,000
MINUS Syndicated Capacity as of such date DIVIDED BY (III)
U.S.$600,000,000.
(5) FEES NON-REFUNDABLE. Subject to clause (4) above, all Facility
Fees, Breakage Fees and Exposure Fees, once paid, are
non-refundable.
(g) VOLUME LIMITATIONS. Party B hereby agrees that it shall not (and it
shall not permit any other CHK Company to) enter into, or have
outstanding, any Natural Gas Xxxxxx other than Natural Gas Xxxxxx
entered into with the purpose and effect of hedging price or basis risk
on natural gas expected to be produced and attributable to the
interests of the CHK Companies, PROVIDED that at all times:
(1) no Price Hedge has, or fixes a price for, a term including any
month later than 60 months from the date such Price Hedge is
entered into;
(2) the Net Volume for all Price Xxxxxx for each single future
month (determined, in the case of Natural Gas Xxxxxx that are
not settled on a monthly basis, by a monthly proration
acceptable to Party A) is greater than or equal to zero and
less than or equal to the Specified Production for such month;
(3) the Net Basis Position for all Basis Xxxxxx for each single
future month (determined, in the case of Natural Gas Xxxxxx
that are not settled on a monthly basis, by a monthly
proration acceptable to Party A) is greater than or equal to
zero and less than or equal to the Specified Production for
such month;
(4) the Net Contract Volume for all Price Xxxxxx under this
Agreement for each single future month (determined, in the
case of Natural Gas Xxxxxx that are not settled on a monthly
basis, by a monthly proration acceptable to Party A) is
greater than or equal to zero and less than or equal to the
Specified Production for such month; and
(5) the Net Contract Basis Position for all Basis Xxxxxx under
this Agreement for each single future month (determined, in
the case of Natural Gas Xxxxxx that are not settled on a
monthly basis, by a monthly proration acceptable to Party A)
is greater than or equal to zero and less than or equal to the
Specified Production for such month.
12
The restrictions set forth in this clause (g) are referred to herein as
the "VOLUME LIMITATIONS".
Party B hereby agrees to deliver to Party A, within five Local Business
Days after the end of each calendar quarter ending in March, June,
September and December, commencing with June 2004, a report (a "VOLUME
REPORT") setting forth in reasonable detail the volumes of natural gas
covered by each Natural Gas Hedge to which each CHK Company is a party,
broken out monthly and separately identifying volumes for each CHK
Company for such month, volumes for Long Price Xxxxxx, Short Price
Xxxxxx, Long Basis Xxxxxx and Short Basis Xxxxxx for such month (each
broken out for Natural Gas Xxxxxx under this Agreement and Natural Gas
Xxxxxx not under this Agreement) and volumes of Specified Production
for such month, all in form, scope and detail satisfactory to Party A
and setting forth such supporting detail as Party A may request.
Each Volume Report shall be accompanied by a certificate of a Financial
Officer of Party B (with such certification under no circumstances
conflicting with any similar certificate provided by Party B or any of
its Affiliates to other parties under any credit agreement or other
financing arrangement) stating that (x) the information set forth
therein is true and correct on and as of the date on which such Volume
Report is delivered and (y) the Budget Basis Projected Production
reported therein is based on reasonable estimates, information and
assumptions and that such Financial Officer has no reason to believe
that such Budget Basis Projected Production is incorrect or misleading
in any material respect.
As used herein:
"BASIS HEDGE" means each Natural Gas Hedge that xxxxxx only
basis differential risk. A Basis Hedge is referred to herein as a "LONG
BASIS HEDGE" if a CHK Company would benefit from an increase in natural
gas basis differentials thereunder and as a "SHORT BASIS HEDGE" if a
CHK Company would benefit from a decrease in natural gas basis
differentials thereunder. For such purposes, the term "NATURAL GAS
BASIS DIFFERENTIALS" will be determined by the Calculation Agent in
accordance with recognized industry practices.
"PRICE HEDGE" means each Natural Gas Hedge (other than a Basis
Hedge). A Price Hedge is referred to herein as a "LONG PRICE HEDGE" if
a CHK Company would benefit from an increase in natural gas prices
thereunder and as a "SHORT PRICE HEDGE" if a CHK Company would benefit
from a decrease in natural gas prices thereunder.
"NATURAL GAS HEDGE" means (a) any agreement (including each
confirmation entered into under a master agreement) providing for
options, swaps, floors, caps, collars, forward sales or forward
purchases involving natural gas or natural gas prices, volumes or basis
differentials, or indexes based on any of the foregoing, (b) any
natural gas option, futures or forward contract traded on an exchange,
and (c) any other derivative agreement or other similar agreement or
arrangement covering or referencing natural gas or natural gas prices,
volumes or basis differentials.
13
"NET BASIS POSITION" means, for each month as at any date of
determination, an amount (which may be less than zero) equal to:
(x) the aggregate notional quantity or volume of natural
gas for that month under all outstanding Short Basis
Xxxxxx; MINUS
(y) the aggregate notional quantity or volume of natural
gas for that month under all outstanding Long Basis
Xxxxxx.
"NET CONTRACT BASIS POSITION" means, for each month as at any
date of determination, an amount (which may be less than zero) equal
to:
(x) the aggregate notional quantity or volume of natural
gas for that month under all outstanding Short Basis
Xxxxxx under this Agreement; MINUS
(y) the aggregate notional quantity or volume of natural
gas for that month under all outstanding Long Basis
Xxxxxx under this Agreement.
"NET VOLUME" means, for each month as at any date of
determination, an amount (which may be less than zero) equal to:
(x) the aggregate notional quantity or volume of natural
gas for that month under all outstanding Short Price
Xxxxxx; MINUS
(y) the aggregate notional quantity or volume of natural
gas for that month under all outstanding Long Price
Xxxxxx.
"NET CONTRACT VOLUME" means, for each month as at any date of
determination, an amount (which may be less than zero) equal to:
(x) the aggregate notional quantity or volume of natural
gas for that month under all outstanding Short Price
Xxxxxx under this Agreement; MINUS
(y) the aggregate notional quantity or volume of natural
gas for that month under all outstanding Long Price
Xxxxxx under this Agreement.
"SPECIFIED PRODUCTION" means, for each month as at any date of
determination:
(x) if such month is or is prior to the 36th month after
the month in which such determination is being made,
100% of Budget Basis Projected Production projected
to be produced during such month, and
(y) if such month is later than the 36th month after the
month in which such determination is being made, 100%
of Adjusted SPE Projected Production projected to be
produced during such month.
14
For such purposes:
"ADJUSTED SPE PROJECTED PRODUCTION" means, for any
month, the sum of:
(A) SPE Basis Projected Production for such
month attributable to reserves that are, at
the time of determination, classified as
Producing Reserves; PLUS
(B) 25% of SPE Basis Projected Production for
such month attributable to Proved Reserves
that are not, at the time of determination,
classified as Producing Reserves.
"BUDGET BASIS PROJECTED PRODUCTION" means, at any
time of determination, the projected production of natural gas
(measured by volume unit or BTU equivalent, not sales price)
from properties and interests owned by any CHK Company which
are located in or offshore of the United States and Canada, as
such production is projected in the most recent reports
delivered by Party B pursuant to this Agreement for purposes
of management planning and budgeting, determined after
deducting projected production from any properties or
interests sold or under contract for sale that had been
included in such report and after adding projected production
from any properties or interests acquired or under contract to
be acquired by any CHK Company that had not been reflected in
such report, all as reported by Party B to Party A hereunder.
"SPE BASIS PROJECTED PRODUCTION" means, at any time
of determination, the projected production of natural gas
(measured by volume unit or BTU equivalent, not sales price)
from properties and interests owned by any CHK Company which
are located in or offshore of the United States and Canada
attributable to the portion of the reserves categorized as
Proved, as such production is projected in the most recent
Reserve Reports delivered pursuant to this Agreement, after
deducting projected production from any properties or
interests sold or under contract for sale that had been
included in such report and after adding projected production
from any properties or interests acquired or under contract to
be acquired by any CHK Company that had not been reflected in
such report, all as reported by Party B to Party A hereunder.
(h) CERTAIN CONDITIONS PRECEDENT. No Specified Natural Gas Transaction may
be entered into, and the obligations of Party A under clause (d) of
this Part 6 shall not become effective, until the date on which Party A
shall have received each of the following, each satisfactory to it in
form and substance:
(1) EXECUTED COUNTERPARTS. From each party hereto a counterpart of
this Agreement (including the Schedule to this Agreement and
the Credit Support Annex) signed on behalf of such party.
(2) PART 3 DOCUMENTS. Each document referred to in Part 3 that is
required to be delivered upon execution of this Agreement.
(3) OPINION OF COUNSEL TO PARTY B. A favorable written opinion
(addressed to Party A and dated the Effective Date) of
Commercial Law Group, P.C., counsel for Party B and the Credit
Support Providers, substantially in the form of Exhibit A to
this Agreement, and covering such other matters relating to
Party B, the Credit Support Providers, this Agreement, the
other Secured Trading Line Documents or the transactions
contemplated hereby and thereby as Party A may reasonably
request (and Party B and each Credit Support Provider hereby
instruct such counsel to deliver such opinion to Party A).
(4) CORPORATE AND PARTNERSHIP DOCUMENTS. Such documents and
certificates as Party A may reasonably request relating to the
organization, existence and good standing of Party B, each
Credit Support Provider and of Party B's general partner, the
authorization of the transactions contemplated hereby and any
other legal matters relating to Party B and the Credit Support
Providers and Party B's general partner, this Agreement, the
other Secured Trading Line Documents or the transactions
contemplated hereby and thereby, all in form and substance
satisfactory to Party A.
15
(5) OFFICER'S CERTIFICATE. A certificate, dated the Effective Date
and signed by a Financial Officer of Party B or the President
or a Vice President of Party B's general partner, acting for
and on behalf of Party B, confirming that each representation
of Party B set forth herein is true and correct on such date
as if made on and as of such date and that no Event of Default
or Potential Event of Default has occurred and is then
continuing.
(6) GUARANTY. The Guaranty, duly executed and delivered by the
Company, each Subsidiary of the Company (other than Party B
and members of the CEMI Group) and Party A.
(7) UCC, TAX LIEN, JUDGMENT AND LITIGATION SEARCHES. Reports
satisfactory to Party A listing the results of Uniform
Commercial Code filing, tax lien, judgment and litigation
searches prepared by one or more firms satisfactory to Party A
with respect to Party B and each of the mortgagors in each
jurisdiction in which it maintains its principal place of
business or in which any of the Mortgaged Properties are
located.
(8) MORTGAGES. One or more Mortgages encumbering Eligible
Properties of Party B and one or more of the other CHK
Companies (the "INITIAL RESERVE COLLATERAL"), each duly
executed and delivered by Party B or another initial Credit
Support Provider and in recordable form in each of the
jurisdictions where Mortgaged Properties covered by such
Mortgage are located and having attached thereto property
descriptions that are in form and substance satisfactory to
Party A.
(9) FILINGS, REGISTRATIONS AND RECORDINGS. Each document
(including any Uniform Commercial Code financing statement)
required by the Credit Support Documents or under law or
reasonably requested by Party A to be filed, registered or
recorded in order to create in favor of Party A a perfected
Lien on the collateral described therein, prior and superior
in right to any other Person (other than with respect to liens
expressly permitted hereunder), and each such document shall
be in proper form for filing, registration or recordation. In
addition, Party B shall have taken such other action as Party
A shall have requested in order to perfect the security
interests created under the Mortgages.
(10) TITLE ASSURANCE. Such information regarding the title of each
mortgagor to the Mortgaged Properties and the priority of the
Lien of the Mortgage as Party A may request (including, if
requested by Party A, title opinions of counsel satisfactory
to Party A with respect to Mortgaged Properties representing
not more than 50% of the Forward Value of the Initial Reserve
Collateral stating that such mortgagor has good and defensible
title to such Mortgaged Properties, free and clear of all
Liens other than Liens permitted by the Mortgages and subject
only to such title defects as shall be acceptable to Party A).
(11) OPINIONS OF LOCAL COUNSEL. A favorable written opinion
(addressed to Party A and dated the Effective Date), in form
and substance and rendered by counsel satisfactory to Party A,
of counsel for Party B and the Credit Support Providers
licensed to practice law in each State in which the Initial
Reserve Collateral is located as to, among other things, the
execution, delivery, recordation and enforceability of each
initial Mortgage in such State (and Party B and each Credit
Support Provider hereby instruct such counsel to deliver such
opinion to Party A).
(12) INSURANCE. Certificates of insurance evidencing the existence
of all insurance required to be maintained by Party B pursuant
to the terms of this Part 6, in form and substance
satisfactory to Party A. In addition, Party B shall have
delivered a certificate, dated the Effective Date, of a
Financial Officer of Party B setting forth the insurance
obtained by it in accordance with the requirements of this
Part 6 and stating that such insurance is in full force and
effect and that all premiums then due and payable thereon have
been paid.
(13) ENVIRONMENTAL DUE DILIGENCE. Results of such environmental due
diligence regarding the properties to be covered by the
Mortgages referred to in clause (8) above as may be reasonably
requested by Party A, the results of which due diligence shall
be satisfactory to Party A.
16
(14) RESERVE REPORTS. Copies of the most recent reserve reports of
Xxx Xxxxxxx and Associates, Xxxxx Xxxxx Company, Netherland
Xxxxxx and Associates and the Company's employee engineers
(the "INITIAL RESERVE REPORTS"), each dated such dates, and
otherwise in form and substance, satisfactory to Party A, and
certified by a Financial Officer of Party B to be a true and
correct copy thereof.
(15) INITIAL RESERVE COLLATERAL. Evidence that, on the Effective
Date, the Forward Value of the Initial Reserve Collateral as
of the Calculation Date in 2005, as projected in good faith by
the Calculation Agent, is not less than U.S.$900,000,000.
(16) SOLVENCY. A Solvency Certificate of Party B and each other
initial Credit Support Provider dated as of the Effective
Date.
(17) FEES. The initial Facility Fee and such other fees and
expenses as Party B shall have agreed to pay to Party A in
connection herewith, including the reasonable fees and
expenses of Milbank, Tweed, Xxxxxx & XxXxxx LLP, special
counsel to Party A, in connection with the negotiation,
preparation, execution and delivery of this Agreement and the
other Secured Trading Line Documents.
(18) CREDIT AGREEMENT DOCUMENTS. Copies of the Credit Agreement and
each other "Loan Document" referred to therein (to the extent,
in the case of security documents, reasonably requested by
Party A), in form and substance satisfactory to Party A and
certified as true, correct and complete by a Financial Officer
of Party B.
(19) OTHER DOCUMENTS. Such other documents as Party A may
reasonably request.
(i) RESERVE REPORTS.
(1) RESERVE REPORTING. Party B hereby agrees to deliver to Party A
the following reserve reports and other information:
(w) ANNUAL REPORTS. Promptly following (but in any event
not later than 90 days after) December 31 in each
year (commencing with December 31, 2004), copies of:
(A) One or more reserve reports as of December
31 from Xxx Xxxxxxx and Associates, Xxxxx
Xxxxx Company, Netherland Xxxxxx and
Associates and/or any other recognized
independent reservoir engineering firms
reasonably acceptable to Party A (each, an
"INDEPENDENT RESERVOIR ENGINEERING REPORT").
Such Independent Reservoir Engineering
Reports shall evaluate not less than (i) 70%
of all reserve volumes of Party B and the
other CHK Companies and (ii) 80% of all
Reserve Collateral reserve volumes
attributable to the properties and interests
of Party B and the other mortgagors under
the Mortgages.
(B) A reserve report as of December 31 certified
by an appropriately authorized officer of
Party B (and subject to the review of
internal reservoir engineers for Party A) (a
"SUPPLEMENTAL RESERVE REPORT"). Each
Supplemental Reserve Report shall cover
those properties and reserves of Party B and
the other CHK Companies not evaluated in the
Independent Reservoir Engineering Reports
delivered pursuant to clause (A) above.
17
(x) SEMI-ANNUAL UPDATES. Promptly following (but in any
event no later than 60 days after) June 30 in each year
(commencing with June 30, 2004, a reserve report as of
such June 30 certified by an appropriately authorized
officer of Party B (and subject to the review of
internal reservoir engineers for Party A) (an "UPDATED
RESERVOIR ENGINEERING REPORT") for all of the
properties and reserves of Party B and the other CHK
Companies.
(y) ACCOMPANYING INFORMATION. Party B shall deliver a
report to Party A, at the time it delivers the reports
under clauses (w) and (x) above, reflecting the
occurrence of the following events since the date of
the most recent Reserve Reports: (I) all properties or
interests sold, transferred, terminated, abandoned or
under contract for sale, transfer or termination that
had been included in such report, together (in the case
of completed or pending sales or transfers) with the
property and sale price therefor; (II) all property
purchases and pending property purchases (unless such
disclosure will violate a confidentiality agreement)
identifying the property and the purchase price
therefor, and (III) all changes in the categories of
Proved Developed Producing Reserves, Proved Developed
Nonproducing Reserves and Proved Undeveloped Reserves
attributable to each Mortgaged Property interest of
Party B and the other CHK Companies.
(z) ADDITIONAL INFORMATION. In addition, Party B shall from
time to time deliver to Party A all other information,
reports and data which Party A has requested in
connection with the Reserve Reports.
As used herein, "RESERVE REPORT" means, collectively, the
Independent Reservoir Engineering Reports, the Supplemental
Reserve Reports and the Updated Reservoir Engineering Reports.
(2) SCOPE OF RESERVE REPORTS. Each Reserve Report (not including
the Initial Reserve Reports) shall be addressed to (among any
other Persons) Party A, shall be accompanied by a certificate
of a Financial Officer of Party B to the effect that such
Reserve Report is a true and correct copy thereof, shall
contain information comparable to the information contained in
the reports delivered on the Effective Date under clause
(h)(14) above and otherwise be in form and scope satisfactory
to Party A in its sole discretion, shall take into account any
"over-produced" status under gas balancing arrangements, shall
clearly delineate each property evaluated and shall
distinguish those properties that constitute Reserve
Collateral from those properties that do not constitute
Reserve Collateral. Without limiting the foregoing, each
Reserve Report shall contain:
(x) for each covered property interest owned by Party B and
the other CHK Companies, (A) Proved Reserves, (2)
Proved Developed Producing Reserves, (3) Proved
Developed Non-Producing Reserves and (4) Proved
Undeveloped Reserves (each, a "CATEGORY OF RESERVES"),
in each case, to the extent properly allocable to such
property interest;
(y) for each covered property interest owned by Party B and
the other CHK Companies for each year during the
remaining commercial operation period for such
property, (1) the projected volume of production
attributable to each category of reserves, (2)
projected gross cash operating revenues to be received
from production attributable to each category of
reserves and (3) projected net operating income to be
earned from production attributable to each category of
reserves, in each case, to the extent properly
allocable to such property interest; and
(z) without limiting clauses (x) and (y) above, sufficient
information to enable Party B to meet the reporting
requirements concerning oil and gas reserves contained
in Regulations S-K and S-X and to ascertain projected
future production attributable to the portion of the
reserves of the Mortgaged Properties categorized as
Producing.
In determining such projected gross cash operating revenues
and projected net operating income, each Reserve Report shall
use price assumptions set forth in Regulations S-K and S-X,
PROVIDED that, upon request of Party A, Party B shall cause
projected gross cash operating revenues and projected net
operating income to be determined using price assumptions
specified by Party A.
17
(j) COLLATERAL RAMP-UP; ADDITIONAL POST-CLOSING TITLE WORK; ADDITIONAL
CALCULATION DATE RESERVE COLLATERAL.
(1) COLLATERAL RAMP-UP. Party B shall, at its own cost and
expense, promptly (and in any event by no later than 90 days)
after the Effective Date:
(x) execute and deliver one or more Mortgages encumbering
Eligible Properties having Proved Developed Producing
Reserves attributed thereto such that the Forward Value
of the Reserve Collateral (including the Initial
Reserve Collateral and the collateral pledged under
this clause (j)(1)), as projected in good faith by the
Calculation Agent, is not less than the Minimum Reserve
Collateral Ratio MULTIPLIED BY Maximum Total Capacity;
(y) in connection with such Mortgages; take the related
actions required under clause (o) below; and
(z) to the extent not delivered to Party A on the Effective
Date pursuant to clause (h)(10) above, deliver to Party
A such information regarding the title of each
mortgagor to the Mortgaged Properties and the priority
of the Lien of the Mortgage as Party A may request
(including, if requested by Party A, title opinions of
counsel satisfactory to Party A stating that such
mortgagor has good and defensible title to such
Mortgaged Properties, free and clear of all Liens other
than Liens permitted by the Mortgages and subject only
to such title defects as shall be acceptable to Party
A).
(2) ESTIMATE OF CALCULATION DATE NATURAL GAS PFE. By no later than
the date (a "PRE-CALCULATION DATE") that is 60 days prior to
each Calculation Date falling after the Effective Date, the
Calculation Agent shall give written notice (a
"PRE-CALCULATION DATE COLLATERAL NOTICE") to Party A and Party
B setting forth:
(w) the Calculation Agent's good faith projection of
Natural Gas PFE as of such Calculation Date and the
Forward Reserve Collateral Value as of such Calculation
Date;
(x) the ratio (the "ESTIMATED RESERVE COLLATERAL RATIO") of
such Forward Reserve Collateral Value to such projected
Natural Gas PFE;
(y) if such Estimated Reserve Collateral Ratio is less than
the Minimum Reserve Collateral Ratio, the Forward Value
of additional Proved Developed Producing Reserves of
Eligible Properties that will need to be pledged to
Party A so that the Estimated Reserve Collateral Ratio
(determined taking into account such additional
collateral) is equal to the Minimum Reserve Collateral
Ratio (a "DEFICIENCY AMOUNT"); and
(z) the Forward Value of additional Proved Developed
Producing Reserves of Eligible Properties (if any)
that, if pledged to Party A, would result in Available
Capacity being equal to Maximum Total Capacity (an
"OPTIONAL AMOUNT"), it being understood that no
properties are required to be pledged to Party A
pursuant to this clause (z).
If the Pre-Calculation Date Collateral Notice with respect to
any Calculation Date specifies a Deficiency Amount, then Party
B shall, at its own cost and expense, promptly (and in any
event by no later than three Local Business Days prior to such
Calculation Date) execute and deliver one or more Mortgages
encumbering Eligible Properties having Proved Developed
Producing Reserves attributed thereto having an aggregate
Forward Value equal to such Deficiency Amount and take the
related actions required under clause (o) below.
In addition, if the Pre-Calculation Date Collateral Notice
with respect to any Calculation Date specifies an Optional
Amount, then Party B may (if in its sole discretion it elects
to do so), at its own cost and expense, on or prior to the
date three Local Business Days prior to such Calculation Date
execute and deliver one or more Mortgages encumbering Eligible
Properties having Proved Developed Producing Reserves
attributed thereto having an aggregate Forward Value equal to
such Optional Amount and take the related actions required
under clause (o) below.
For purposes of this clause (2), determinations of the Forward
Reserve Collateral Value and Forward Value will be made on
each Pre-Calculation Date, but will be made as if such
determinations were in fact being made on the immediately
following Calculation Date. Accordingly, references in the
definitions of "Forward Reserve Collateral Value" and "Forward
Value" to a "date of determination" will mean such Calculation
Date rather than such Pre-Calculation Date.
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(3) RECALCULATION OF CALCULATION DATE NATURAL GAS PFE. On each
Calculation Date, the Calculation Agent shall give written
notice (a "CALCULATION DATE COLLATERAL NOTICE") to Party A and
Party B setting forth:
(w) the Natural Gas PFE as of such Calculation Date and the
Forward Reserve Collateral Value (determined taking
into account the additional collateral (if any) pledged
under clause (2) above) as of such Calculation Date;
(x) the ratio (the "ACTUAL RESERVE COLLATERAL RATIO") of
such Forward Reserve Collateral Value to such Natural
Gas PFE;
(y) if such Actual Reserve Collateral Ratio is less than
the Minimum Reserve Collateral Ratio:
(I) the Forward Value of additional Proved Developed
Producing Reserves of Eligible Properties that
will need to be pledged to Party A so that the
Actual Reserve Collateral Ratio (determined taking
into account such additional collateral) is equal
to the Minimum Reserve Collateral Ratio (also, a
"DEFICIENCY AMOUNT"); and
(II) such Deficiency Amount DIVIDED BY the Minimum
Reserve Collateral Ratio (the "CASH DEFICIENCY
AMOUNT"); and
(z) the Forward Value of additional Proved Developed
Producing Reserves of Eligible Properties (if any)
that, if pledged to Party A, would result in Available
Capacity being equal to Maximum Total Capacity (also,
an "OPTIONAL AMOUNT"), it being understood that no
properties are required to be pledged to Party A
pursuant to this clause (z).
If the Calculation Date Collateral Notice with respect to any
Calculation Date specifies a Deficiency Amount, then Party B
shall, at its own cost and expense:
(A) promptly (and in any event within one Local Business
Day after such Calculation Date) deliver to Party A
Cash or Letters of Credit pursuant to the Credit
Support Annex having an aggregate Value equal to the
Cash Deficiency Amount (such Cash and Letters of
Credit, "TEMPORARY RESERVE COLLATERAL"); and
(B) within 60 days after such Calculation Date, execute and
deliver one or more Mortgages encumbering Eligible
Properties having Proved Developed Producing Reserves
attributed thereto having an aggregate Forward Value
equal to such Deficiency Amount and take the related
actions required under clause (o) below (whereupon
Party A shall return such Temporary Reserve Collateral
to Party B in accordance with the terms set forth in
the Credit Support Annex).
In addition, if the Calculation Date Collateral Notice with
respect to any Calculation Date specifies an Optional Amount,
then Party B may (if in its sole discretion it elects to do
so), at its own cost and expense, on or prior to the date that
is 60 days after such Calculation Date, execute and deliver
one or more Mortgages encumbering Eligible Properties having
Proved Developed Producing Reserves attributed thereto having
an aggregate Forward Value equal to such Optional Amount and
take the related actions required under clause (o) below.
19
(k) ADDITIONAL INTRA-YEAR COLLATERAL. If on any date (other than a
Calculation Date) (x) the Reserve Collateral Ratio is less than the
Minimum Reserve Collateral Ratio and (y) the Intra-Year Deficiency
Amount exceeds U.S.$10,000,000, then, upon request from Party A to
Party B, Party B shall, at its own cost and expense, promptly (and in
any event within one Local Business Day after the date of such request)
deliver to Party A Cash or Letters of Credit pursuant to the Credit
Support Annex having an aggregate Value equal to such Intra-Year
Deficiency Amount. The Cash and Letters of Credit delivered to Party A
pursuant to this clause (k) are referred to as the "INTRA-YEAR
COLLATERAL".
As used herein:
"INTRA-YEAR DETERMINATION DATE" means each date on which the
conditions set forth in clauses (x) and (y) above in this clause (k)
are satisfied.
"INTRA-YEAR DEFICIENCY AMOUNT" means, as of any date of
determination, the positive difference (if any) of:
(1) (A) if the Natural Gas Xxxx-to-Market Amount as of such date
is a positive number, the Natural Gas Xxxx-to-Market Amount or
(B) otherwise, the Intra-Year Natural Gas PFE as of such date;
MINUS
(2) the Current Reserve Collateral Value as of such date DIVIDED
BY the Minimum Reserve Collateral Ratio.
(l) SUBSTITUTION OF COLLATERAL. Party B shall be entitled (at its own cost
and expense) at any time and from time to time to substitute all or any
part of the Reserve Collateral for other Reserve Collateral of equal
Forward Value, PROVIDED that:
(1) no Event of Default or Potential Event of Default shall have
occurred and then be continuing or shall result therefrom;
(2) after giving effect thereto, the Reserve Collateral Ratio is
not less than the Minimum Reserve Collateral Ratio;
(3) the long-term ratings of the Company are not lower than "Ba3"
by Xxxxx'x or "BB-" by Standard & Poor's and are not on watch
for possible downgrade by either such rating agency;
(4) the aggregate Forward Value of Reserve Collateral substituted
in any Transaction Year shall not exceed 15% of Available
Capacity;
(5) Reserve Collateral shall not be substituted pursuant to this
clause (l) more than three times in any Transaction Year; and
(6) for any new Reserve Collateral to be pledged by Party B, Party
B shall take the related actions required under clause (o)
below.
20
(m) COLLATERAL CALL.
(1) If requested by Party B on any Local Business Day, Party A
shall return some or all of the Intra-Year Collateral to Party
B in accordance with the terms set forth herein and in the
Credit Support Annex, PROVIDED that:
(x) such day is not an Intra-Year Determination Date;
(y) the aggregate Value of Intra-Year Collateral returned
to Party B on any Local Business Day will (subject to
the rounding and minimum transfer amount terms of the
Credit Support Annex) equal an amount (the "INTRA-YEAR
EXCESS AMOUNT" for such Local Business Day) equal to
the positive difference (if any) of:
(A) the Current Reserve Collateral Value as of such
date DIVIDED BY the Minimum Reserve Collateral
Ratio; MINUS
(B) (I) if the Natural Gas Xxxx-to-Market Amount as of
such date is a positive number, the Natural Gas
Xxxx-to-Market Amount or (II) otherwise, the
Intra-Year Natural Gas PFE as of such date; and
(z) no Event of Default or Potential Event of Default shall
have occurred and then be continuing or shall result
therefrom.
(2) If requested by Party B within three Local Business Days
following any Calculation Date, Party A shall release one or
more Mortgaged Properties from the Lien of the Mortgages in
accordance with the terms set forth herein and therein,
PROVIDED in each case that:
(x) after giving effect thereto, the Reserve Collateral
Ratio is not less than the Minimum Reserve Collateral
Ratio; and
(y) no Event of Default or Potential Event of Default shall
have occurred and then be continuing or shall result
therefrom.
(n) CHK COMPANY MORTGAGES. Party B will be entitled to deliver Mortgages
executed and delivered by one or more of the other CHK Companies
(rather than by Party B) under clauses (j)(1), (j)(2), (j)(3)(B) and
(l) above, PROVIDED that:
(1) each such CHK Company is Solvent on and as of the date on
which it executes and delivers such Mortgage, and Party B and
such CHK Company each deliver a Solvency Certificate to Party
A with respect to such CHK Company at the time such Mortgage
is delivered;
(2) such CHK Company is not then an Unrestricted Subsidiary;
(3) if such CHK Company is not then a Credit Support Provider,
such CHK Company executes and delivers to Party A an
Assumption and Accession Agreement (whereupon it shall become
a Credit Support Provider of Party B hereunder); and
(4) Party B shall take, and shall cause such CHK Company to take,
the related actions required under clause (o) below.
(o) OTHER REQUIRED ACTIONS. In connection with each delivery of a Mortgage
or pledge of additional Reserve Collateral, Party B shall, and shall
cause each relevant CHK Company to:
(1) execute and deliver documents with respect to Party B or such
CHK Company, such Mortgage and the relevant Mortgaged
Properties (in each case as applicable) that are consistent
with the documents delivered pursuant to clauses (2), (3),
(4), (5), (7), (8), (9), (10), (11), (13), (17) and (19) of
clause (h) of this Part 6 on the Effective Date;
(2) if such CHK Company is not then a Credit Support Provider,
deliver an Assumption and Accession Agreement duly executed
and delivered by such CHK Company; and
(3) take such other action (including executing and delivering
such Uniform Commercial Code financing statements) as shall be
necessary to create and perfect valid and enforceable first
priority Liens on the property to be pledged by Party B or
such CHK Company under such Mortgage or with respect to such
additional Reserve Collateral.
21
(p) ADDITIONAL COVENANTS. Party B covenants and agrees, for the benefit of
Party A, to:
(1) deliver to Party A all of the statements, certificates and
other information delivered to any lender or agent under
Sections 6.1, 6.2, 6.7, 6.8(c) and 6.8(d) of the Credit
Agreement;
(2) perform, comply with and be bound by each of its covenants,
agreements and obligations contained in Sections 6 and 7 of
the Credit Agreement (other than those subsections referred to
in clause (1) above); and
(3) notify Party A of each amendment, modification and supplement
to, and waiver of any provision under, the Credit Agreement
and the other "Loan Documents" referred to therein.
Without limiting the generality of the foregoing, the provisions of the
Credit Agreement referred to in clause (2) above, together with related
definitions and ancillary provisions and schedules and exhibits, are
hereby incorporated herein by reference, as if set forth herein in
full, MUTATIS MUTANDIS; PROVIDED that, as incorporated herein (unless
the context otherwise requires):
(i) each reference therein to "this Agreement", "the Revolving
Loans", "the Letters of Credit" or "the Revolving Commitments"
or the like shall be deemed to be a reference to this
Agreement and the Transactions hereunder, as the case may be;
(ii) each reference therein to any "Agent" or any "Lender" or the
like shall be deemed to be a reference to Party A hereunder;
(iii) each reference therein to the "Loan Documents" or the like
shall be deemed to be a reference to the Secured Trading Line
Documents; and
(iv) each reference therein to the "Collateral" or the like shall
be deemed to be a reference to the Collateral as defined
herein.
(q) SUBSIDIARY GUARANTORS. Party B shall at all time cause each Subsidiary
of the Company that is not an Unrestricted Subsidiary under the CHK
Indentures to be a Subsidiary Guarantor under the Guaranty (and,
accordingly, a Credit Support Provider of Party B hereunder). Without
limiting the foregoing, if any Subsidiary is created or acquired after
the Effective Date by any CHK Company (other than any such Subsidiary
that is then designated an Unrestricted Subsidiary under the CHK
Indentures, but which, for the purposes of this clause (q), shall
include any existing Subsidiary that ceases to be an Unrestricted
Subsidiary under the CHK Indentures), promptly cause such Subsidiary to
become a Subsidiary Guarantor under the Guaranty (and, accordingly, a
Credit Support Provider of Party B hereunder), and to take such actions
and execute and deliver to Party A such documents with respect to such
Subsidiary that are consistent with the actions taken and documents
delivered with respect to Party B pursuant to clauses (2), (3), (4),
(5), (7), (16), (17) and (19) of clause (h) of this Part 6 on the
Effective Date.
Notwithstanding anything to the contrary contained herein or in any
other Secured Trading Line Document, if, after the Effective Date,
Party B shall designate a Subsidiary Guarantor or any newly created or
acquired Subsidiary as an Unrestricted Subsidiary under the CHK
Indentures, and so long as such designation is permitted hereunder
(including under the provisions of the Credit Agreement incorporated
herein by reference) and a Financial Officer of Party B has certified
in writing thereto to Party A, Party A shall release such designated
Subsidiary from its guarantee obligations under the Guaranty.
Notwithstanding any such release, no Subsidiary Guarantor shall be
released from any of its obligations under any Mortgage as to which it
is a mortgagor, nor shall any related Mortgaged Properties be released
from the Lien thereof, unless such release is permitted under clause
(l) or (m) of this Part 6 and, if otherwise required pursuant to the
terms hereof, any related replacement or substitution of Reserve
Collateral occurs simultaneously therewith.
22
(r) FURTHER ASSURANCES. Party B shall from time to time execute and
deliver, or cause to be executed and delivered by other CHK Companies,
such additional mortgages, deeds of trust, chattel mortgages, security
agreements, financing statements, reports (including Reserve Reports),
instruments, legal opinions, certificates or documents, all in form and
substance satisfactory to Party A, and take all such actions as may be
requested hereunder (including in order to comply with clause (q) of
this Part 6) or as Party A may reasonably request, in each case for the
purposes of implementing or further effectuating the provisions of this
Agreement and the other Secured Trading Line Documents (including
clause (q) of this Part 6), or of more fully perfecting or renewing the
rights of Party A with respect to the Collateral (or with respect to
any additions thereto or replacements or proceeds thereof or with
respect to any other property or assets hereafter acquired by Party B
or any Subsidiary Guarantor which may be deemed to be part of the
Collateral) pursuant hereto or thereto. Upon the exercise by Party A of
any power, right, privilege or remedy pursuant to this Agreement or the
other Secured Trading Line Documents that requires any consent,
approval, recording qualification or authorization of any governmental
authority, the Company and Party B shall execute and deliver, or will
cause the execution and delivery of, all applications, certifications,
instruments and other documents and papers that Party A may be required
to obtain from the Company, Party B or any of the Subsidiary Guarantors
for such governmental consent, approval, recording, qualification or
authorization.
(s) ADDITIONAL EVENTS OF DEFAULT. In addition to the Events of Default set
forth in Section 5(a) of this Agreement, the following shall constitute
additional Events of Default as to which Party B shall be the sole
Defaulting Party:
(1) RESERVE COLLATERAL RATIO. Failure by Party B to maintain the
Reserve Collateral Ratio in excess of the Minimum Reserve
Collateral Ratio if such failure is not remedied within one
Local Business Day after receipt of notice from Party A;
(2) ADDITIONAL COLLATERAL. Failure by Party B to deliver the
additional Collateral as and when required under clauses (j)
and (k) of this Part 6 if such failure is not remedied within
five Local Business Days;
(3) VOLUME LIMITATIONS. Party B breaches the Volume Limitations
and such breach is not remedied (whether by unwinding or
liquidating one or more Natural Gas Xxxxxx or otherwise)
within 10 Local Business Days;
(4) REPORTING. Failure by Party B to comply with all the
requirements of clause (i) of this Part 6 if such failure is
not remedied within five Local Business Days (PROVIDED that no
other Event of Default or Potential Event of Default is in
effect after such remediation);
(5) ADDITIONAL AGREEMENTS. Failure by Party B to comply with any
of the other covenants set forth in clause in this Part 6; and
(6) CHANGE IN CONTROL. (i) Any "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the U.S. Securities
Exchange Act of 1934 (the "EXCHANGE ACT"), shall become, or
obtain rights (whether by means of warrants, options or
otherwise) to become, the "beneficial owner" (as defined in
Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or
indirectly, of more than 35% of the outstanding common stock
of the Company; (ii) the board of directors of the Company
shall cease to consist of a majority of Continuing Directors;
(iii) the Company shall cease to own and control, of record
and beneficially, directly or indirectly, 100% of each class
of outstanding Capital Stock of Party B and each other Credit
Support Provider free and clear of all Liens; or (iv) a
Specified Change of Control shall occur.
As used in this clause (6), "CONTINUING DIRECTORS" and
"SPECIFIED CHANGE OF CONTROL" have the meanings given to them
in the Credit Agreement.
23
(t) CERTAIN LETTER OF CREDIT PROVISIONS.
(1) COMMON PROVISIONS. Each Letter of Credit shall be subject to
the following provisions:
(A) Each Letter of Credit provided by Party B shall be an
irrevocable, transferable, standby letter of credit
from an Eligible Financial Institution in form and
substance satisfactory to Party A in its sole
discretion.
(B) Each Letter of Credit shall provide that Party A may
draw upon such Letter of Credit in an amount (up to
the undrawn portion of the stated or face amount of
such Letter of Credit) that is equal to all amounts
that are due and owing from Party B hereunder but
have not been paid to Party A within the time allowed
for such payments under this Agreement (after giving
effect to any applicable notice requirement or grace
period). A Letter of Credit shall provide that a
drawing be made upon such Letter of Credit by
submission to the issuer thereof of one or more
certificates specifying the amounts due and owing to
Party A in accordance with the specific requirements
of such Letter of Credit.
(C) If any issuer of a Letter of Credit (including UBOC)
ceases to be an Eligible Financial Institution, then
Party B shall, by no later than the date 10 Local
Business Days thereafter, replace such Letter of
Credit with Cash or another Letter of Credit whose
issuer is an Eligible Financial Institution (or a
combination thereof) in accordance with and subject
to the terms set forth in this Agreement and the
Credit Support Annex. Each Letter of Credit that is
required to be substituted in accordance with this
clause (C) but that is not so substituted within such
10 Local Business Day period is herein referred to as
an "INELIGIBLE LETTER OF CREDIT".
(2) UBOC PROVISIONS. If Union Bank of California ("UBOC") is at
any time deemed to be an Eligible Financial Institution
pursuant clause (3) of the definition of "Eligible Financial
Institution" in this Agreement, then the following provisions
shall apply to all Letters of Credit issued by UBOC that are
then outstanding at such time (such Letters of Credit, in such
circumstances, the "UBOC LETTERS OF CREDIT"):
(A) the aggregate undrawn face amount of the UBOC Letters
of Credit at such time shall not exceed the UBOC
Sublimit at such time;
(B) no UBOC Letter of Credit shall have an expiry date
later than 120 days after its date of issuance; and
(C) on or prior to the expiry date of each UBOC Letter of
Credit, Party B shall substitute such UBOC Letter of
Credit for Cash or one or more non-UBOC Letters of
Credit (or a combination thereof) in accordance with
and subject to the terms set forth in this Agreement
and the Credit Support Annex (it being understood
that if such UBOC Letter of Credit constitutes
Temporary Reserve Collateral, then Party B may (or
shall) replace such UBOC Letter of Credit with
Mortgages in the manner and to the extent provided in
clause (j)(3) of this Part 6).
As used herein, "UBOC SUBLIMIT" means, at any date of
determination, Maximum Total Capacity (or, if such date of
determination is prior to the 90th day after the Effective
Date, U.S.$200,000,000 PLUS Syndicated Capacity as of such
date) MULTIPLIED BY 10%.
24
(3) PROVISIONS FOR NON-UBOC LETTERS OF CREDIT. The following
provisions shall apply to all Letters of Credit other than
UBOC Letters of Credit:
(A) Each such Letter of Credit shall have an expiry date
that is thirty days following the first Calculation
Date following the date on which such Letter of
Credit is issued (or, if such Letter of Credit is
issued on or following the final Calculation Date,
the date that is thirty days following the latest
Termination Date of the Termination Dates of all
Transactions then outstanding under this Agreement).
(B) No such Letter of Credit may be increased by Party B
without the prior consent of Party A (which Party A
may withhold in its sole discretion) unless the
issuer of such Letter of Credit is an Eligible
Financial Institution at the time of such increase.
(u) CERTAIN DEFINITIONS. 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". The term "date hereof" refers
to the date of this Agreement first above written. Unless the context
requires otherwise (1) 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, restatements, supplements or
modifications set forth therein or herein), (2) references to any law,
constitution, statute, treaty, regulation, rule or ordinance, including
any section or other part thereof (each, for purposes of this
paragraph, a "LAW"), shall refer to that law as amended from time to
time and shall include any successor law, (3) any reference herein to
any Person shall be construed to include such Person's successors and
permitted assigns, (4) 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
and (5) all references herein to Sections, Parts, Annexes, Schedules
and Exhibits shall be construed to refer to Sections and Parts of, and
Annexes, Schedules and Exhibits to, this Agreement.
As used herein, the following terms have the meanings given to them
below:
"ASSUMPTION AND ACCESSION AGREEMENT" means an assumption and
accession agreement between a Subsidiary of the Company and Party A in
substantially the form of Exhibit A to the Guaranty.
"AVAILABLE CAPACITY" means, as of any date of determination,
the lesser of:
(a) the Forward Reserve Collateral Value DIVIDED BY the
Minimum Reserve Collateral Ratio; and
(b) Maximum Total Capacity (or, if such date of
determination is prior to the 90th day after the
Effective Date, U.S.$200,000,000 PLUS Syndicated
Capacity as of such date).
"CALCULATION DATE" means (a) the Effective Date; and (b) each
anniversary of the Effective Date falling prior to the Scheduled
Maturity Date (or, if any such anniversary is not a Local Business Day,
the first following day that is a Local Business Day).
"CASH" means the lawful currency of the United States of
America.
"CEMI GROUP" means Chesapeake Energy Marketing, Inc., Xxxxxxxx
Processing, L.L.C., MidCon Compression, L.P. and each other Subsidiary
which is designated as an Unrestricted Subsidiary under the CHK
Indentures in compliance with the terms of this Agreement and the CHK
Indentures.
"CHK COMPANY" means the Company and each of its Subsidiaries
(including Party B and each other Credit Support Provider).
"CHK INDENTURES" means the Indentures referred to in the
Credit Agreement.
"COLLATERAL" means, collectively, the Reserve Collateral, the
Intra-Year Collateral and the Temporary Reserve Collateral and all
other collateral pledged by Party B and the Credit Support Providers to
Party A under the Secured Trading Line Documents.
"COMPANY" means Chesapeake Energy Corporation.
25
"CREDIT AGREEMENT" means the Fourth Amended and Restated
Credit Agreement, dated as of May 7, 2004, among (INTER ALIA) the
Company, Party B, as Borrower, Union Bank of California, N.A., as
Administrative Agent and Collateral Agent, the co-syndication agents
and co-documentation agents referred to therein and the several lenders
from time to time parties thereto, as such Credit Agreement is in
effect on the date hereof and without giving effect to any amendments,
modifications or supplements thereto, or waiver or termination thereof,
after the date hereof, PROVIDED that if Party A (in its sole
discretion) consents to any such amendment, modification, supplement or
waiver expressly for purposes this Agreement, then the term "Credit
Agreement" shall refer to the Credit Agreement as so amended, modified,
supplemented or waived.
"CREDIT SUPPORT ANNEX" means the Credit Support Annex hereto
between Party A and Party B in substantially the form of Annex B
hereto.
"CREDIT SUPPORT DOCUMENT" means, collectively:
(a) the Credit Support Annex;
(b) the Guaranty;
(c) the Mortgages (together with any related financing
statements); and
(d) the Letters of Credit delivered to Party A pursuant
to the terms of this Agreement and the Credit Support
Annex.
"CREDIT SUPPORT PROVIDER" means, collectively:
(a) the Company; and
(b) each CHK Company (other than Party B) that is a
mortgagor under a Mortgage or a Subsidiary Guarantor
under the Guaranty.
"CURRENT RESERVE COLLATERAL VALUE" means, for any date of
determination, (a) the then-current Value of the Reserve Collateral,
PLUS (b) the then-current Value of the Temporary Reserve Collateral
MULTIPLIED BY the Minimum Collateral Reserve Ratio PLUS (c) unless
otherwise specified herein, the then-current Value of the Intra-Year
Collateral MULTIPLIED BY the Minimum Collateral Reserve Ratio, all as
reasonably determined by the Calculation Agent.
"EFFECTIVE DATE" means the date of this Agreement.
"ELIGIBLE FINANCIAL INSTITUTION" means, at any time:
(1) a financial institution whose long-term unsecured debt
obligations then have a credit rating of "Aa3" or better by
Moody's and "AA-" or better by Standard & Poor's;
(2) a financial institution not referred to in clause (1) above
whose long-term unsecured debt obligations then have a credit
rating of at least "A1" by Moody's and at least "A+" by
Standard & Poor's, but only if such financial institution is
otherwise acceptable to Party A in its sole discretion; and
(3) if UBOC does not qualify as an Eligible Financial Institution
on any date under clause (1) or (2) above, then UBOC shall
nevertheless be deemed to be an Eligible Financial Institution
on such date if its long-term unsecured debt obligations then
have a credit rating of at least "A2" by Moody's and at least
"A-" by Standard & Poor's.
"ELIGIBLE PROPERTIES" means property interests of Party B and
the other CHK Companies to which Proved Developed Producing Reserves
are attributable and which have oil and natural gas production,
diversity and other characteristics acceptable to Party A in its sole
discretion.
26
"FACILITY TERMINATION DATE" means the earlier of:
(a) the Scheduled Maturity Date; and
(b) the first day following the Voluntary Trading Period
Termination Date (if any) on which no Specified
Natural Gas Transaction is outstanding.
"FINANCIAL OFFICER" means, as to Party B or any of the Credit
Support Providers, the chief financial officer, treasurer or other
officer thereof acceptable to Party A.
"FORWARD RESERVE COLLATERAL VALUE" means:
(a) for any date of determination that occurs prior to
the final Calculation Date, the sum of:
(1) the Forward Value of the Reserve Collateral PLUS
(2) the aggregate Value of all Temporary Reserve
Collateral MULTIPLIED BY the Minimum Collateral
Reserve Ratio; and
(b) for any date of determination that occurs on or after
the final Calculation Date, the Current Reserve
Collateral Value (determined without regard to any
Intra-Year Collateral),
in each case as reasonably determined by the Calculation Agent.
"FORWARD VALUE" means, for any Eligible Property:
(a) for any date of determination that occurs prior to
the final Calculation Date, the projected Value of
such Eligible Property as of the next occurring
Calculation Date; and
(b) for any date of determination that occurs on or after
the final Calculation Date, the Value of such
Eligible Property as of such date of determination,
all as reasonably determined by the Calculation Agent. For the
avoidance of doubt:
(1) if a Forward Value calculation is being made under
clause (j)(2) of this Part 6 on or after a
Pre-Calculation Date, then (x) the "date of
determination" for such calculation will be deemed to
be the Calculation Date immediately following such
Pre-Calculation Date, and (y) the reference in clause
(a) above to the "next occurring Calculation Date"
means the second Calculation Date following such
Pre-Calculation Date;
(2) if a Forward Value calculation is being made on a
Calculation Date, then (x) the "date of
determination" for such calculation will be such
Calculation Date, and (y) the reference in clause (a)
above to the "next occurring Calculation Date" means
the Calculation Date following the Calculation Date
on which such calculation is made; and
(3) for each Forward Value calculation other than those
referred to in clauses (1) and (2) above, (x) the
"date of determination" for such calculation will be
the date on which such calculation is made, and (y)
the reference in clause (a) above to the "next
occurring Calculation Date" means the Calculation
Date following the date on which such calculation is
made.
"GUARANTY" means the Guaranty Agreement dated as of the
Effective Date by the Company and each Subsidiary Guarantor in favor of
Party A in substantially the form attached as Exhibit C hereto.
"INTRA-YEAR NATURAL GAS PFE" means, as of any date of
determination, the highest Natural Gas PFE that occurs between such
date of determination and the next occurring Calculation Date (or, if
such date of determination occurs after the final Calculation Date,
between such date of determination and the Facility Termination Date),
as determined by the Calculation Agent taking into account all existing
(and, if relevant, proposed) Specified Natural Gas Transactions.
"LETTER OF CREDIT" means a letter of credit in substantially
the form attached as Exhibit D (or otherwise in form and substance
satisfactory to Party A), issued by an Eligible Financial Institution
for the account of Party B or one of its Affiliates and for the benefit
of Party A hereunder and meeting the requirements set forth herein and
in the Credit Support Annex.
27
"LETTER OF CREDIT DEFAULT" means, with respect to any Letter
of Credit, the related issuing bank (a) becomes subject to any event
analogous to an event specified in Section 5(a)(vii) of this Agreement,
(b) fails to comply with or perform its obligations under such Letter
of Credit if such failure shall continue after the lapse of any
applicable grace period, (c) shall disaffirm, disclaim, repudiate or
reject, in whole or in part, or challenge the validity of such Letter
of Credit or (d) suffers a material adverse change in its financial
condition or prospects (the existence of any such change being
determined by the beneficiary of the Letter of Credit acting in its
sole discretion).
"LIEN" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or
other security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any conditional sale or other title retention agreement and
any capital lease having substantially the same economic effect as any
of the foregoing).
"MAXIMUM TOTAL CAPACITY" means U.S.$600,000,000, PROVIDED that
if Syndicated Capacity on the 90th day after the Effective Date is less
than U.S.$400,000,000, then Maximum Total Capacity shall be reduced on
that date by the amount of such deficiency.
"MINIMUM RESERVE COLLATERAL RATIO" means 1.50 to 1.00.
"MOODY'S" means Xxxxx'x Investors Service, Inc.
"MORTGAGE" shall mean the Mortgage, Deed of Trust, Security
Agreement, Assignment of Production, Financing Statement (Personal
Properties Including Hydrocarbons) and Fixture Filing, dated as of the
date of its execution and delivery and in substantially the form
attached as Exhibit B hereto or otherwise in form and substance
satisfactory to Party A in its sole discretion. Each Mortgage shall
cover all of the relevant mortgagor's right, title and interest in and
to the collateral purported to be covered thereby (including all
proceeds thereof and all related accounts receivable).
"MORTGAGED PROPERTIES" shall mean the "Mortgaged Properties"
as defined in, and subject to the duly recorded Lien of, the Mortgages.
"NATURAL GAS XXXX-TO-MARKET AMOUNT" means the aggregate
xxxx-to-market position of all Specified Natural Gas Transactions as
determined by the Calculation Agent in a commercially reasonable manner
at the close of each Local Business Day. If such position is in favor
of Party A, the Natural Gas Xxxx-to-Market Amount will be stated as a
positive number. If such position is in favor of Party B, the Natural
Gas Xxxx-to-Market Amount will be stated as a negative number.
"NATURAL GAS PFE" means, as of the date of determination, the
peak potential future natural gas trading credit exposure to Party B by
Party A as determined in good faith by the Calculation Agent taking
into account all existing (and, if relevant, proposed) Specified
Natural Gas Transactions. For the avoidance of doubt, the Calculation
Agent's determination of Natural Gas PFE will depend on factors
including (a) changes in NYMEX natural gas futures prices, (b) NYMEX
natural gas futures implied volatility levels, and (c) delivery volumes
remaining at each calendar month until the Facility Termination Date.
"PERSON" means an individual, corporation (including a
business trust), partnership, limited liability company, limited
liability partnership, joint venture, association, joint stock company,
trust (including any beneficiary thereof), unincorporated association
or government or any agency or political subdivision thereof.
"PROVED", "PROVED DEVELOPED PRODUCING RESERVES", "PROVED
RESERVES", "PROVED DEVELOPED NON-PRODUCING RESERVES", "PROVED
UNDEVELOPED RESERVES" and "PRODUCING" have the respective meanings
given to them in the Definitions for Oil and Gas Reserves promulgated
by the Society of Petroleum Engineers (or any generally recognized
successors).
28
"QUALIFIED MORTGAGED PROPERTY" means a Mortgaged Property (a)
which is an Eligible Property; (b) as to which Party B shall have taken
all actions and executed and delivered all documents under clauses (2),
(3), (4), (5), (7), (8), (9), (10), (11), (13), (17) and (19) of clause
(h) of this Part 6 or clause (o) of this Part 6; and (c) which shall be
subject to a first priority perfected Lien in favor of Party A.
"REGULATION S-K" and "REGULATION S-X" mean, respectively,
Regulation S-K and Regulation S-X promulgated by the SEC, as such Rules
are in effect on the date hereof.
"RESERVE COLLATERAL" means the Initial Reserve Collateral and
all other Mortgaged Properties pledged by Party B and the Credit
Support Providers to Party A pursuant to the terms of this Agreement
and the other Secured Trading Line Documents, PROVIDED that Reserve
Collateral shall not include on any date any property that is not then
a Qualified Mortgaged Property.
"RESERVE COLLATERAL RATIO" means:
(a) for any date of determination that is a Calculation
Date, the Forward Reserve Collateral Value DIVIDED BY
the Natural Gas PFE; and
(b) for any other date of determination, (1) the Current
Reserve Collateral Value for such date DIVIDED BY (2)
(x) if the Natural Gas Xxxx-to-Market Amount is a
positive number as of such date, the Natural Gas
Xxxx-to-Market Amount for such date or (y) otherwise,
the Intra-Year Natural Gas PFE.
"SCHEDULED MATURITY DATE" means May 31, 2009, PROVIDED that
the Scheduled Maturity Date may be extended at any time and from time
to time to May 31 in any subsequent year if Party A and Party B so
agree (it being understood that no party shall be obligated to agree to
any such extension of the Scheduled Maturity Date, and may withhold its
consent to any such extension in its sole discretion).
"SEC" means the U.S. Securities and Exchange Commission (or
any governmental agency substituted therefor).
"SECURED TRADING LINE DOCUMENTS" means this Agreement
(including the Schedule and Credit Support Annex and all Confirmations
of Specified Natural Gas Transactions) and the Credit Support
Documents.
"SOLVENCY CERTIFICATE" means a certificate of Party B or one
if its Affiliates (as applicable), addressed to Party A, certifying
that, as of the date of such certificate, Party B or such Affiliate (as
applicable) is Solvent.
"SOLVENT" means that, as of any date of determination as to
any Person, (a) the amount of the "present fair saleable value" of the
assets of such Person will, as of such date, exceed the amount of all
"liabilities of such Person, contingent or otherwise", as of such date,
as such quoted terms are determined in accordance with applicable
federal and state laws governing determinations of the insolvency of
debtors, (b) the present fair saleable value of the assets of such
Person will, as of such date, be greater than the amount that will be
required to pay the liability of such Person on its debts as such debts
become absolute and matured, (c) such Person will not have, as of such
date, an unreasonably small amount of capital with which to conduct its
business, and (d) such Person will be able to pay its debts as they
mature. For purposes of this definition, (1) "debt" means liability on
a "claim", and (2) "claim" means any (x) right to payment, whether or
not such a right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal,
equitable, secured or unsecured or (y) right to an equitable remedy for
breach of performance if such breach gives rise to a right to payment,
whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.
29
"SPECIFIED NATURAL GAS TRANSACTION" means any Transaction
between Party A and Party B that satisfies (in the good faith judgment
of the Calculation Agent) each of the following conditions:
(a) such Transaction is a cash-settled commodity
transaction in which the sole commodity covered is
natural gas;
(b) the effective date of such Transaction falls during
the Trading Period; and
(c) no part of the term of such Transaction falls after
the Scheduled Maturity Date.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services,
a division of The XxXxxx-Xxxx Companies, Inc.
"SUBSIDIARY GUARANTOR" means each Subsidiary of the Company
(other than Party B) that is a "Subsidiary Guarantor" under and as
defined in the Guaranty.
"SYNDICATED CAPACITY" means, as of any date, the portion (if
any) of Maximum Total Capacity that Party A has syndicated to third
parties, all as determined by Party A in its sole discretion and
reported by Party A to Party B from time to time.
"TRADING PERIOD" means the period from and including the
Effective Date to but excluding the earlier of (a) the Scheduled
Maturity Date and (b) the Voluntary Trading Period Termination Date.
"TRANSACTION YEAR" means each period from and including a
Calculation Date (including the Effective Date) through but excluding
the next succeeding Calculation Date, PROVIDED that the final
Transaction Year shall end on and include the Facility Termination
Date.
"UNRESTRICTED SUBSIDIARY" means an "Unrestricted Subsidiary"
as defined in the CHK Indentures.
"VALUE" means, as of any date of determination:
(a) with respect to Cash, the amount thereof;
(b) with respect to a Letter of Credit, the amount then
available to be unconditionally drawn by Party A
under the terms of such Letter of Credit, PROVIDED
that if:
(1) such Letter of Credit is not a UBOC Letter of
Credit and the stated expiry date of such Letter
of Credit is less than 30 days after such date
of determination;
(2) such Letter of Credit is then an Ineligible
Letter of Credit; or
(3) a Letter of Credit Default occurs with respect
to such Letter of Credit,
then the Value of such Letter of Credit as of such
date shall be equal to U.S.$0;
(c) with respect to any Mortgaged Properties, the value
of Proved Developed Producing Reserves attributable
thereto (determined taking into account all remaining
production volumes as of such date of determination),
all as reasonably determined by the Calculation
Agent, and
(d) with respect to any other property, U.S.$0.
30
In making its determination under clause (c) above, the
Calculation Agent will determine the expected nominal future
cash flows of such reserves (based on the then-most recent
Reserve Reports and utilizing commodity prices based on the
Calculation Agent's then-current standard internal commodity
"price decks" used by it for evaluating and making credit
decisions for Party B and other similar commodity exploration
and production companies with which Party A has existing or
prospective credit exposure, PROVIDED that the Calculation
Agent shall be entitled to use its own estimates of, among
other things, natural gas liquids prices and production
volumes), net of expenses estimated by the Calculation Agent
(including the Calculation Agent's estimates of operating
expenses, capital costs and any environmental, remediation and
other costs and expenses related to such reserves), and
discount such net nominal future cash flows back to the date
of determination using a discount rate of 9% per annum.
[signature page follows]
31
DEUTSCHE BANK AG CHESAPEAKE EXPLORATION
LIMITED PARTNERSHIP
By: Chesapeake Operating, Inc.,
its general partner
By: /s/ XXXXXXX XXXXXXX By: /s/ XXXXXX X XXXXXX
---------------------------------- ------------------------------
Name: Xxxxxxx Xxxxxxx Name: Xxxxxx X. Xxxxxx
Title: Vice President and Counsel Title: Treasurer and
Senior Vice President -
Human Resources
By: /s/ XXXXX XXXXXXX
---------------------------------
Name: Xxxxx Xxxxxxx
Title: Vice President and Counsel
32
