COMPANIES' CREDITORS ARRANGEMENT ACT,

Court File No. CV-16-11363-00CL
ONTARIO
SUPERIOR COURT OF JUSTICE - COMMERCIAL LIST
IN THE MA I 1ER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT,
R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF
PACIFIC EXPLORATION & PRODUCTION CORPORATION, PACIFIC E&P
HOLDINGS CORP., META PETROLEUM CORP., PACIFIC STRATUS
INTERNATIONAL ENERGY LTD., PACIFIC STRATUS ENERGY COLOMBIA
CORP., PACIFIC STRATUS ENERGY S.A., PACIFIC OFF SHORE PERU S.R.L.,
PACIFIC RUBIALES GUATEMALA S.A., PACIFIC GUATEMALA ENERGY CORP.,
PRE-PSIE COOPERATIEF U.A., PETROMINERALES COLOMBIA CORP. AND
GRUPO C&C ENERGIA (BARBADOS) LTD.
Applicants
AFFIDAVIT OF KATHRYN ESAW
(Sworn May 9, 2016)
I, KATHRYN ESAW, of the City of Toronto, in the Province of Ontario, MAKE OATH
AND SAY:
1.
I am an associate at Stikeman Elliott LLP, counsel to EIG Pacific Holdings Ltd.
2.
Attached hereto as Exhibit "A" are true copies of a commitment letter, a
restructuring term sheet, a DIP term sheet and a restructuring support agreement
delivered on Monday, May 9, 2016 by EIG Global Energy Partners to counsel to Pacific
Exploration & Production Corporation ("Pacific"), counsel to PricewaterhouseCoopers
Inc. (in its capacity as monitor to the Applicants, the "Monitor") and to a representative
from Lazard Freres & Co. LLC, regarding an order to acquire Pacific pursuant to a
transaction described in greater detail therein (the "Definitive Documents").
3.
As counsel to the Monitor has previously advised that only materials filed with
the Court would be posted to the CCAA Website, I swear this affidavit for the purpose
of filing a copy of the Definitive Documents with the Court in order that the Definitive
Documents may be posted on the CCAA Website.
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SWORN BEFORE ME at the City of
Toronto, on May 9, 2016.
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EXHIBIT "A"
referred to in the Affidavit of
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Sworn May 9, 2016
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Three Allen Center
333 Clay Street
Suite 3500
Houston, TX 77002
713.615.7400
0001
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May 9, 2016
BY ELECTRONIC MAIL
Pacific Exploration and Production Corporation
333 Bay Street, Suite 1100
Toronto, Ontario M5H 2R2
Attn: Board of Directors
With a copy to:
PricewaterhouseCoopers Inc.
PwC Tower
18 York Street, Suite 2600
Toronto, Ontario M5J OB2
Attn: Greg Prince
RE:
PACIFIC EXPLORATION AND PRODUCTION CORPORATION
Ladies and Gentlemen:
EIG Management Company, LLC (on behalf of one or more funds, accounts or companies that it
manages, including Harbour Energy Ltd., collectively, "EIG") is pleased to submit the following
binding proposal (the "Proposal") relating to a proposed restructuring of Pacific Exploration
and Production Corporation (with its various affiliates, the "Company"), including the binding
commitment to provide DIP financing as provided herein.
The terms of the Proposal are set forth below and in the Recapitalization — Summary of Terms
and the Secured DIP and Exit Financing Facility — Summary Term Sheet attached hereto as
Exhibit A (collectively, the "Term Sheet"), the terms and conditions of which are incorporated
fully into our Proposal by reference. No change to the Term Sheet or this Proposal shall be
made without EIG's consent, in its sole discretion. Capitalized terms used but not defined
herein have the respective meanings given them in the Term Sheet.
As detailed herein, the Proposal contemplates the provision of $500.0 million of post-petition
financing for the Restructuring Proceedings, which EIG has committed to provide on an
expedited basis, subject to the terms and conditions hereof, together with an additional $75
million of financing to be contributed at the consummation of the Restructuring Proceedings.
We firmly believe that consummation of the Proposal, on the terms hereof, is in the best
interests of the Company having regard to the reasonable expectations of the holders of
Company Claims (as such term is defined in the restructuring support agreement among, inter
alia, the Company and The Catalyst Capital Group Inc. ("Catalyst")).
-2-
I.
Commitment
In connection with the Restructuring Proceedings contemplated hereby, EIG hereby commits to
purchase the entire amount of the DIP Notes upon the terms set forth in this commitment letter
and the Term Sheet (the "EIG Commitment"); provided that the parties hereby agree that the
EIG Commitment shall be reduced by the amount of applicable DIP Note Purchase
Commitments actually funded by any other DIP Note Purchasers, up to the amount of $250.0
million, under the DIP Notes on the Closing Date. Each of the parties hereto agrees that this
commitment letter (including the EIG Commitment) is a binding and enforceable agreement
with respect to the subject matter contained herein, including a binding and enforceable
agreement to negotiate the DIP Note Documents in good faith.
IL
Identity of Investor.
As set forth in greater detail in the Term Sheet, the DIP Notes shall be fully purchased by us,
together with those other DIP Note Purchasers (if any) that participate up to the amount of
$250.0 million, on the Closing Date, subject to our backstop of such other DIP Note Purchasers'
DIP Note Purchase Commitments.
We are willing and able to purchase the entirety of the DIP Note Purchase Commitments
through immediately available, internal sources.
III.
Transaction Structure.
As set forth in greater detail in the Term Sheet the Proposal contemplates making proceeds of
the first priority, perfected, all-assets senior priming lien DIP Notes available to the Issuer
following the commencement of the Restructuring Proceedings, subject to the Milestones and
other terms and conditions of the Term Sheet.
The Proposal further contemplates the conversion of the DIP Note Obligations at exit into
equity in the Reorganized Company, exit financing, or both, pursuant to the Plan, as described
in greater detail below under "Pro Forma Capital Structure; Stakeholder Treatment."
IV.
New Investment.
EIG also understands there will be a DIP LC Facility, to be provided by the DIP LC Lenders, in
connection with the Company's letters of credit. As set forth in greater detail in the Term Sheet,
the DIP Notes and the DIP LC Facility will be made available, in accordance with and subject to
the Cash Flow Projection then in effect, for: (i) general corporate and working capital purposes,
including, for the avoidance of doubt, (x) letters of credit necessary to the Company's
operations, as identified by the Company and agreed to by the DIP Note Purchasers and
(y) satisfaction of claims of certain prepetition creditors, as provided in the Term Sheet; (ii) the
payment of restructuring costs, including a key employee retention plan approved by the
Independent Committee of the Board of Directors of the Company and agreed to by the DIP
Note Purchasers; and (iii) the payment of the fees, costs and expenses related to the DIP Notes
and DIP LC Facility. For the avoidance of doubt, subject to the Cash Flow Projection then in
effect, all trade creditors would be paid in full.
0002
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V.
-
Pro Forma Capital Structure; Stakeholder Treatment.
As set forth in greater detail in the Term Sheet, the Proposal contemplates the following
treatment of the DIP Note Obligations and other claims against and interests in the Company
under the Plan:
•
The DIP Note Purchasers, as a whole, will be entitled to 25.0% of the common equity of the
Reorganized Company (i.e., common shares or nominal strike price warrants) upon exit;
•
In addition, the $250.0
M DIP Note Obligations to be provided by EIG will be
exchanged pursuant to the terms of the Plan Sponsor Notes for 12.5% of the Reorganized
Common Stock;
•
EIG will forgo any fee for its agreement to backstop the DIP Note Purchase Commitments;
•
In addition, the $250.0 million in DIP Note Obligations contemplated to be provided by the
Company's prepetition lenders and/or bondholders will convert into $250.0 million in fiveyear, 10.0% post-exit notes (with three-year no-call protection);
•
The Company's prepetition loan and/or bond obligations will convert into the remaining
common equity of the Reorganized Company pro rata;
•
EIG will contribute $75.0 million of cash to the Reorganized Company upon the
consummation of the Restructuring for no additional consideration, with $25.0 million
thereof being to compensate the Company for payment of any break fee payable in
connection with agreements between the Company and Catalyst;
•
The Company's trade and commercial obligations will be paid in the ordinary course during
the Restructuring Proceedings and, to the extent unpaid, assumed by the Reorganized
Company; and
•
Pacific's current equity interests will be cancelled or diluted to a nominal amount, with no
distribution made thereon.
In addition to the above, up to 10.0% of the equity of the Reorganized Company will be
allocated to management pursuant to the Management Incentive Plan (as described in the Term
Sheet), diluting the equity distributions discussed above, subject to a three-year vesting period
(on terms and conditions to be discussed, including without limitation appropriate performance
hurdles).
EIG agrees to provide an additional equity facility of at least $200.0 million (backstopped by
EIG) and up to $400.0 million with funding participation by creditors and shareholders of the
Company to enable the Note Parties to offer, pursuant to the Plan, affected creditors the option
to elect to receive cash in lieu of common shares. The purchase price for the election and the
subscription price payable by EIG shall both be based on the implied pre-money equity
valuation of the Reorganized Company equal to $800 million.
0003
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VI.
0004
Financing.
As noted above, although the Proposal contemplates the purchase of up to $250.0 million of DIP
Notes by DIP Note Purchasers other than EIG, EIG hereby commits to fully purchase the
entirety of the DIP Notes and backstop such other DIP Note Purchasers' DIP Note Purchase
Commitments.
VII.
Definitive Agreement.
The Proposal contemplates that the DIP Notes will be evidenced by the DIP Note Agreement
and the other DIP Note Documents, all satisfactory to us in our sole discretion and as more
specifically set forth in the Term Sheet. We agree to work with the Company in good faith
regarding DIP Notes collateral issues (but, for the avoidance of doubt, all such issues shall be
addressed in a manner satisfactory to us in our sole discretion).
VIII. Approvals; Conditions.
We require no further internal approval with respect to the Proposal.
IX.
Access to Information and Management.
We submit the Proposal with understanding that the Company and its advisors will continue to
work to provide us and our advisors reasonable access to requested information and
management.
X.
Due Diligence.
Although the Proposal is subject to our continued access to such information, for the avoidance
of doubt, the Proposal is not conditioned on the completion of any further due diligence.
XI.
Acting as Principal.
We hereby confirm that we are acting alone and not in conjunction with, or as agent or broker
for, any other party (other than funds managed or advised by us).
We further confirm and represent (acknowledging that the Company is relying on this
representation in entering into this letter agreement) that no existing director or officer of any
Note Party is an investor in or limited partner of EIG.
Arrangements or understandings that we have reached with the Company's various
stakeholders, if any, relate solely to the treatment of claims and interests and solely on the terms
set forth in the Term Sheet.
XII.
Contact Details.
Communications with us with respect to the Proposal may be directed to: EIG Management
Company, LLC
0005
-5-
1700 Pennsylvania Avenue, NW
Suite 800
Washington, District of Colombia 20007
Attn: Benjamin Vinocour
[email protected]
(202) 600-3323
With a copy to our legal counsel:
Stikeman Elliott LLP
5300 Commerce Court West
199 Bay Street
Toronto, Ontario M5L 1B9
Attn: Jeffrey Singer and David Byers
[email protected] / [email protected]
(416) 869-5289 / (416) 869-5697
XIII.
Acceptance Period; Firm Offer.
The Proposal and commitments herein shall remain open until 5:00 p.m. (Eastern time) on May
31, 2016 and, if accepted, continue, subject to the prompt termination of the Catalyst RSA and
the commencement of the Restructuring Proceedings on or before the date that is one week
following the date of acceptance of the Proposal; provided, however, that the Proposal shall
automatically terminate upon the Company's acceptance of any alternate proposal.
XIV.
No Shop.
The Company agrees to work in good faith expeditiously towards a closing. The Company
agrees that it will not, for a period of ten weeks from the date these terms are accepted, take any
action to solicit, initiate, encourage or assist the submission of any proposal, negotiation or offer
from any person or entity other than the undersigned relating to the restructuring of the
Company including, without limitation, any recapitalization and/or disposition of the
Company or any material part of the stock or assets of the Company, and shall notify the
undersigned immediately of any inquiries by third parties in regards to the foregoing.
XV.
Break-Up Fee/Expenses.
Upon execution hereof, should the transactions contemplated hereby not timely be effected for
any reason including, without limitation, the Company enters into any alternative DIP facility
and/or any alternative transaction whatsoever, then, the Company immediately shall pay to
EIG in cash an amount equal to five percent (5.0%) of $500.0 million (the "Break-Up Fee"), less
the up-to 40.0% portion of the Break-Up Fee payable to other DIP Note Purchasers, all in
accordance with the Term Sheet.
The Company shall pay, upon execution hereof, and thereafter not less than every fifteen (15)
days, all of EIG's out-of-pocket expenses (x) associated, in any way, with the preparation,
negotiation, execution and delivery of this Proposal, or otherwise associated with the
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0006
preparation, negotiation, execution, delivery and administration of the DIP Note Documents or
any amendment or waiver with respect thereto and (y) incurred by EIG in connection with the
Restructuring Proceedings, in all instances including the fees, costs, disbursements and
expenses of EIG (including attorneys' fees, costs and expenses and other professional fees and
disbursements).
XVI. Miscellaneous.
Subject to the backstop discussed herein, the parties hereto may not assign the Proposal or any
part thereof. Any such purported assignment shall be void ab initio.
The Proposal was prepared for, and is intended to be solely for the benefit of the Company.
Nothing contained herein or in the Term Sheet is intended to or shall confer any benefit on, or
create any right in favor of, any person (including, without limitation, any creditor or other
stakeholder or constituent of the Company) other than the Company itself.
The Company agrees to indemnify and hold harmless EIG, its affiliates, and such affiliates'
partners, members, directors, agents, employees, and controlling persons (if any) (each, an
"Indemnified Person") against any and all actual losses, claims, damages or liabilities to any
such Indemnified Person in connection with or as a result of this commitment letter or the
transactions contemplated hereunder (whether or not such investigation, litigation, claim or
proceeding is brought by you, your equity holders or creditors or an Indemnified Person and
whether or not any such Indemnified Person is otherwise a party thereto), except to the extent
that such loss, claim, damage or liability is found by a final, non-appealable judgment of a court
of competent jurisdiction to have resulted from (a) the gross negligence or willful misconduct of
such Indemnified Person or (b) a material breach of the obligations of such Indemnified Person
under this commitment letter.
You agree that no Indemnified Person shall have any liability (whether direct or indirect, in
contract, tort or otherwise) to the Company for or in connection with the transactions
contemplated hereby, except to the extent such liability is found by a final, non-appealable
judgment of a court of competent jurisdiction to have resulted from (a) the gross negligence or
willful misconduct of such Indemnified Person or (b) a material breach of the obligations of
such Indemnified Person under this commitment letter.
In no event will any party hereto be liable on any theory of liability for any indirect,
consequential, special or punitive damages (including, without limitation, any loss of profits,
business or anticipated savings) in connection with or as a result of such party's or such other
parties' activities related to this proposal letter.
THIS AGREEMENT IS GOVERNED BY AND SHALL BE INTERPRETED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE
PARTIES HERETO AGREE THAT, FOR THE DURATION OF THE RESTRUCTURING
PROCEEDINGS, THE CANADIAN COURT SHALL HAVE THE EXCLUSIVE JURISDICTION
OF ALL MATTERS RELATING TO THE ENFORCEMENT OF THIS PROPOSAL.
0007
-7-
Please indicate your acceptance of the Proposal, on the terms hereof, by signing below.
Very truly yours,
EIG Management Company, LLC
By:
Name:
Title:
R. Blair Thomas
Chairman and Chief Executive Officer
4
By
Name: Linda Z. Cook
Title:
Managing Director and Chief
Executive Officer of Harbour Energy
Ltd.
Accepted and agreed to by:
Pacific Exploration and
Production Corporation,
on behalf of itself and all other Note Parties
By:
Name:
Title:
0008
Exhibit A
See next page.
0009
PACIFIC EXPLORATION & PRODUCTION CORP.
RECAPITALIZATION-SUMMARY OF TERMS
All dollar amounts are in US dollars.
This recapitalization and financing term sheet (the "Recapitalization Term Sheet"), which is
attached as Exhibit A to that certain Restructuring Support Agreement, dated as of •, 2016 (the
"RSA" ) 1 by and among the Company, the Consenting Creditors and the Plan Sponsor, summarizes
certain principal terms and conditions of a proposed restructuring plan and related financing facilities
of Pacific Exploration & Production Corp. ("Pacific") and certain of its direct and indirect affiliates
and subsidiaries that are Parties to the RSA (each, including Pacific, a "Company Party" and
collectively, the "Company").
Pacific, the Company Parties that are Guarantors (as defined in the Note Indentures and/or the Credit
Facilities) (the "Guarantor Debtors"), and any other direct or indirect subsidiaries of Pacific as the
Company, the Requisite Consenting Creditors and the Plan Sponsor may agree (the "Additional
Debtors" and, together with Pacific and the Guarantor Debtors, the "Debtors") will implement the
Restructuring through a prearranged plan of reorganization, which shall be consistent with the Terms
of this Recapitalization Term Sheet and the RSA (as it may be amended or supplemented from time to
time in accordance with the terms of the RSA, the "Plan") to be filed by the Debtors in (i) amended
proceeding under the Companies' Creditors Arrangement Act (the "CCAA") in the Ontario Superior
Court of Justice (Commercial List) (the "Canadian Court"), (ii) an amended ancillary proceeding, or
such other proceeding, acceptable to the Company, the Requisite Consenting Creditors and the Plan
Sponsor to be commenced under Ley 1116 of 2006 in Colombia ("Law 1116") in the court seized of
jurisdiction in a Colombian proceeding under Law 1116 (the "Colombian Court"), and (iii) an
amended proceeding under chapter 15 of title 11 of the United States Code (the "Bankruptcy Code"
and, together with the CCAA and Law 1116, the "Insolvency Laws") in the United States
Bankruptcy Court for the Southern District of New York (the "U.S. Court" and, together with the
Canadian Court and the Colombian Court, the "Insolvency Courts"). If the Company, the Requisite
Consenting Creditors and the Plan Sponsor agree (each acting in their sole discretion), the
Restructuring may be implemented through a Plan filed in a proceeding to be commenced under
chapter 11 of the Bankruptcy Code before the U.S. Court, with such other appropriate proceedings
before each of the Canadian Court and the Colombian Court as agreed by the Company, Requisite
Consenting Creditors and the Plan Sponsor, and the Parties to the RSA shall thereafter negotiate in
good faith to promptly effectuate such modifications to the RSA and to the Definitive Documents as
are reasonably necessary to implement the Restructuring in such manner.
The governing documents with respect to the Restructuring will contain terms and conditions that are
dependent on each other, including those described in the RSA, this Recapitalization Term Sheet and
the secured DIP and exit financing facility term sheet (the "DIP/Exit Note Term Sheet") and secured
DIP and exit LC facility term sheet (the "DIP/Exit LC Term Sheet" and, together with the DIP/Exit
Note Term Sheet, the "DIP/Exit Term Sheets"). This Recapitalization Term Sheet and the DIP/Exit
Term Sheets do not include a description of all of the terms, conditions, and other provisions that are
to be contained in the definitive documentation governing the Restructuring, which remain subject to
discussion and negotiation in accordance with the RSA. The Restructuring will not contain any
material terms or conditions that are inconsistent in any material respect with this Recapitalization
Term Sheet, the DIP/Exit Term Sheets or the RSA, except with the express written consent of the
Company, the Requisite Consenting Creditors and the Plan Sponsor. This Recapitalization Term
1
Capitalized terms used and not defined herein shall have the meanings ascribed to such terms in the RSA.
0010
-2Sheet is entitled to protection from any use or disclosure to any party or person pursuant to Federal
Rule of Evidence 408 and similar laws and regulations in effect in any relevant jurisdiction.
I.
THE REORGANIZED
COMPANY
A reorganized Pacific, which shall be re-listed on a stock
exchange as of the Plan Effective Date, which shall be
reorganized in a manner acceptable to Pacific, the
Requisite Consenting Creditors and the Plan Sponsor, each
in their sole discretion, with respect to jurisdiction of
formation, tax attributes, withholding tax exemptions and
other related matters (the "Reorganized Company").
2.
DIP/EXIT
FINANCING/EQUITY
PURCHASE
In accordance with and subject to the terms and conditions
of the DIP/Exit Term Sheets, up to $634 million secured
financing (the "DIP Financing") to be provided by way of
(i) senior secured first-lien notes (the "DIP Notes") in an
amount of up to (x) $250 million to be provided by certain
funds managed or administered by the Plan Sponsor and
(y) $250 million to be provided by certain of the
Consenting Noteholders (together with the Plan Sponsor,
the "DIP Note Purchasers") and (ii) if agreed by the
Requisite Consenting Creditors, the Plan Sponsor and the
Company, a secured second-lien letter of credit facility in
an amount of up to $134 million (the "DIP LC Facility")
provided by certain of the Consenting Lenders (the "DIP
LC Lenders").
Upon consummation of the Restructuring, (i) the $250
million of the DIP Notes purchased by the DIP Note
Purchasers other than the Plan Sponsor (the "Creditor
DIP Notes") will remain outstanding as $250 million of
exit notes (on the terms set out in Schedule A of the
DIP/Exit Note Term Sheet), (ii) the Plan Sponsor may
exercise its rights in respect of the first $250 million of the
DIP Notes purchased by the Plan Sponsor (the "Plan
Sponsor Notes") to exchange such notes pursuant to the
terms of the Plan Sponsor Notes for 12.5% of the
Reorganized Common Stock (as defined below), failing
which exercise, the Plan Sponsor Notes will be
mandatorily exchanged for 12.5% of the Reorganized
Common Stock, and (iii) the DIP LC Facility will continue
to run until two (2) years following the inception of the
DIP LC Facility on the terms set out in Schedule A
attached to the DIP/Exit LC Term Sheet. Any DIP Notes
purchased by the Plan Sponsor that do not constitute Plan
Sponsor Notes, shall be treated in the same manner as
Creditor DIP Notes.
As part of the Plan, the Plan Sponsor shall be obligated to
subscribe for, with effect as at the Plan Effective Date, at
least $200 million or such larger amount as the Plan
Sponsor may agree (the "Maximum Threshold") of the
Reorganized Common Stock (but, for greater certainty,
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0 1
01
such amount and subscription obligation shall not exceed
the aggregate amount required, if any, to complete the
Cash Out Offer (as defined below)) to enable the
Company to offer Affected Creditors (as defined below)
the option to elect to receive cash in lieu of Reorganized
Common Stock from the Affected Creditor Equity Pool
(as defined below) and the purchase price for the cash
election, and the subscription price payable by the Plan
Sponsor, shall both be based on an implied equity
valuation of the Reorganized Company of at least $800
million in a manner reasonably satisfactory to the Plan
Sponsor and (solely relating to mechanics and not as to
pricing) the Requisite Consenting Creditors (the "Cash
Out Offer"). Affected Creditors may determine, in their
sole discretion, whether to elect to receive cash under the
Cash Out Offer and, for the avoidance of doubt,
consummation of the Restructuring shall not be subject to
any minimum level of participation. If Affected Creditors
elect to receive cash under the Cash Out Offer in excess of
the Maximum Threshold, then such cash participation will
be allocated on a pro rata basis among such Affected
Creditors or the Plan Sponsor may, in its sole discretion,
elect to increase the Maximum Threshold. If Consenting
Creditors who are parties to the RSA at the date hereof
wish to participate as subscribers in the Cash Out Offer on
the same basis as the Plan Sponsor, the Plan Sponsor will
allow them to do so. If shareholders of Pacific (for greater
certainty, being the shareholders of Pacific prior to the
Effective Date and not the shareholders of the
Reorganized Company) wish to participate as subscribers
in the Cash Out Offer on the same basis as the Plan
Sponsor, the Plan Sponsor will also allow them to do so,
provided however that such participation by the
shareholders of Pacific will not adversely impact the rights
of Consenting Creditors (as compared to the rights
available to "Consenting Creditors" under the "Cash Out
Offer" as was contemplated by the Catalyst RSA).
Participation by Consenting Creditors and shareholders of
Pacific as subscribers in the Cash Out Offer will be
permitted to result in a Cash Out Offer pool of up to $400
million. In addition, if agreed by the Requisite Consenting
Creditors, the Plan Sponsor and the Company, the Cash
Out Offer will be implemented by way of a modified
Dutch auction process.
3.
AFFECTED CREDITORS
The affected creditors (the "Affected Creditors") in the
Restructuring are comprised of the following:
1.
Holders of Note Claims (approximately $4.1
billion outstanding principal amount, plus accrued
interest, fees and other claims and obligations
0012
-4arising thereunder);
2. Holders of Bank Debt Claims (approximately $1.2
billion outstanding principal amount, plus accrued
interest, fees, and other claims and obligations
arising thereunder); and
3. Pacific shall promptly commence (or continue) a
claims process for creditors of Pacific holding
unknown, unreported, contingent or contested
claims (the "Other Unsecured Claims"). The
holders of such Other Unsecured Claims of Pacific
may be treated as Affected Creditors, together
with any holders of restructuring claims that may
arise, such as, for example, from the repudiation
of any contracts (e.g., leases) with Pacific. If the
Company, the Requisite Consenting Creditors and
the Plan Sponsor agree, some or all of the other
Debtors shall commence a similar process to
address claims that are unknown, unreported,
contingent or contested, and, in such event,
holders of such claims may be treated as Affected
Creditors. The form and substance of each process
shall be acceptable to the Company, the Requisite
Consenting Creditors and the Plan Sponsor.
4.
TREATMENT OF
CREDITORS
Each Affected Creditor shall receive its pro rata share of
Reorganized Common Stock (as defined below) from the
Affected Creditor Equity Pool (as defined below),
provided, however, that the Plan may provide, with the
consent of the Requisite Consenting Creditors and the Plan
Sponsor, that holders of Other Unsecured Claims shall
instead receive the cash equivalent of the Reorganized
Common Stock attributed to the Affected Creditor Equity
Pool that would otherwise be distributed to such creditors;
provided further, however, (i) that Affected Creditors may
elect, in their sole discretion, to participate in the Cash Out
Offer, and (ii) the pro rata share of the Reorganized
Common Stock from the Affected Creditor Equity Pool
that is allocated to holders of Note Claims shall be reduced
by the Early Consent Consideration (as defined below).
5.
TREATMENT OF EXISTING
EQUITY
All existing equity interests of Pacific shall be canceled,
otherwise extinguished, or significantly diluted in an
amount satisfactory to the Plan Sponsor and the Requisite
Consenting Creditors (such that, following the
Restructuring, such equity interests (and associated voting
power) will constitute in the aggregate only a nominal
amount of Reorganized Common Stock).
6.
EQUITY ALLOCATION
100% of the common equity interests of the Reorganized
Company (the "Reorganized Common Stock") shall be
distributed as follows, in each case in accordance with
0013
-5each holder's pro rata share of the relevant categories of
claims (in each case subject to dilution on a pro rata basis
arising from the New Management Incentive Plan (as
described below)). The allocations of Reorganized
Common Stock set forth below do not include or
otherwise take into account the Cash Out Offer or the
Early Consent Consideration (as defined below).
1. Plan Sponsor: (a) warrants at a nominal strike
price issued together with the Plan Sponsor Notes
and exercisable into 12.5% of the Reorganized
Common Stock on and only on the Plan Effective
Date, on a fully diluted basis; and (b) 12.5% of
the Reorganized Common Stock pursuant to the
exchange of the Plan Sponsor Notes on and only
on the Plan Effective Date, on a fully diluted
basis.
2. DIP Note Purchasers other than the Plan
Sponsor: warrants at a nominal strike price issued
together with the Creditor DIP Notes and
exercisable into 12.5% of the Reorganized
Common Stock on and only on the Plan Effective
Date, on a fully diluted basis.
3. Affected Creditors: 62.5% of the Reorganized
Common Stock on the Plan Effective Date, on a
fully diluted basis (the "Affected Creditor
Equity Pool").
7.
EARLY CONSENT
CONSIDERATION
Each holder of a Note Claim that, on or before 5:00 p.m.
Toronto / New York time on the date that is one week
following the date of the RSA (the "Consent Date"),
executes (i) (x) the RSA or (y) a Joinder Agreement
substantially in the form attached to the RSA (such
"Early Consent Consideration
holders, the
Noteholders") and (ii) votes in favor of the Plan shall
receive its pro rata share (based on the aggregate amount
of Note Claims held by all Early Consent Consideration
Noteholders as of the Consent Date) of the early consent
consideration, which shall equal, in the aggregate, 2.2% of
the Reorganized Common Stock (the "Early Consent
Consideration"), The Early Consent Consideration shall
be payable subject to, and only upon, consummation of the
Plan. If, after the Consent Date, an Early Consent
Consideration Noteholder shall Transfer (as defined in the
RSA), in a manner consistent with the RSA, any Note
Claims that are entitled to the Early Consent
Consideration, the transferee thereof shall be deemed to be
an Early Consent Consideration Noteholder and entitled to
that portion of the Early Consent Consideration
attributable to such transferred Note Claims, subject to the
terms and conditions set forth herein. For the avoidance of
-6doubt, the Early Consent Consideration shall not be earned
or payable if the Plan Effective Date does not occur and no
Early Consent Consideration Noteholder shall be entitled
to the Early Consent Consideration if it terminates its
obligations under the RSA prior to the Plan Effective
Date. For greater certainty, holders of Bank Debt Claims
shall not be entitled to the Early Consent Consideration on
account of their Bank Debt Claims and the distribution of
the Early Consent Consideration to the Early Consent
Consideration Noteholders shall not reduce or otherwise
affect the portion of the Affected Creditor Equity Pool
allocated to holders of Bank Debt Claims.
8.
KERP
The Company has entered into a key employee retention
plan ("KERP") in substantially the form approved by the
Independent Committee of Pacific's Board of Directors
(the "Independent Committee"), The Catalyst Group Inc.
and the Requisite Consenting Creditors as of April 18,
2016. The Company will provide a true and complete copy
of the KERP to the Plan Sponsor. Other than as permitted
pursuant to the KERP, no severance or termination
payments will be made to any of the Company's
employees who are participants in the KERP in connection
with the implementation of the Restructuring and/or
termination or amendment of any of their employment
agreements prior to the Plan Effective Date. The
applicable Debtors have received approval of the KERP
from the Canadian Court..
9.
NEW MANAGEMENT
INCENTIVE PLAN
All terms and conditions of the New Management
Incentive Plan, including the form, amount, allocation and
vesting of grants, shall be determined by the Board of
Directors of the Reorganized Company, as selected by the
Requisite Consenting Noteholders, the Requisite
Consenting Lenders and the Plan Sponsor pursuant to the
new governance procedures set out in ANNEX A hereto.
Any Reorganized Common Stock granted pursuant to the
New Management Incentive Plan shall vest over a threeyear period, and the Reorganized Company shall not issue
Reorganized Common Stock (or instruments that may
under any circumstance be converted into Reorganized
Common Stock) pursuant to the New Management
Incentive Plan in an amount that exceeds 10% of the
Reorganized Common Stock on a post-dilution basis.
10.
GOVERNANCE /
MANAGEMENT / CRO
The governance and management of the Company during
the RSA Effective Period (including with respect to the
appointment of a chief restructuring officer), and of the
Reorganized Company shall thereafter be as set out in
ANNEX A hereto.
0014
-711.
CONDITIONS PRECEDENT
TO IMPLEMENTATION
0015
The conditions precedent to the implementation of Plan
will be set forth in the Plan and will include, without
limitation, the following:
1. No change of control payments will be made to
any of the Company's employees in connection
with implementation of the Restructuring and/or
the termination or amendment of any of their
employment
agreements.
existing
The
employment agreements for employees subject to
the KERP will be amended, revised or replaced on
te ► i ► s that are consistent with the KERP and
otherwise in form and substance acceptable to the
New Board, the Requisite Consenting Creditors
and the Plan Sponsor;
2. The fees payable to the Principal Company
Financial Advisor in connection with the
negotiation
and
implementation
of the
Restructuring, and such other services as
described in the engagement agreement dated as
of December 17, 2015 between the Principal
Company Financial Advisor and the Company,
will be paid subject to and in accordance with the
amendment, dated as of April 18, 2016, to the
terms of the Principal Company Financial
Advisor's engagement agreement with the
Company, which amendment was provided to the
Requisite Consenting Creditors and the Plan
Sponsor contemporaneously herewith. Other than
with respect to those provisions that are amended
in the amendment dated as of April 18, 2016, all
other terms and conditions of the Principal
Company Financial Advisor's engagement
agreement with the Company dated as of
December 17, 2015 remain binding;
3. The Canadian Court shall have entered the Plan
Approval Order, which shall provide, inter alia,
that (i) all common shares of Pacific shall have
been canceled or otherwise significantly diluted to
a nominal amount in accordance with this
Recapitalization Term Sheet, and (ii) any and all
other equity claims and equity interests (as such
terms are defined in the CCAA) of Pacific shall
have been canceled, extinguished and forever
barred, in each case with no consideration
provided to holders of such common shares or
equity claims; and
4. Upon the Plan Effective Date, the Reorganized
0016
-8Company Stock will be publicly listed and traded
on the Toronto Stock Exchange or, if such listing
is not available as a consequence of listing
requirements, on the TSX-V, provided that if
neither such listing is available to the Reorganized
Company as a consequence of the listing
requirements of such exchanges, on such other
stock exchange as is acceptable to Pacific, the
Requisite Consenting Creditors and the Plan
Sponsor (having regard to the listing requirements
of the other stock exchanges and the liquidity
provided thereby).
12.
GOVERNING LAW
New York
13.
ADDITIONAL CASH
INJECTION BY PLAN
SPONSOR
As part of the Plan, the Plan Sponsor will contribute $75
million cash to the Reorganized Company for no
additional consideration. $25 million of such contribution
will compensate the Pacific/the Reorganized Company for
the break-fee paid by Pacific to The Catalyst Group Inc. in
connection with the Catalyst RSA.
14.
OPTIONAL ADDITIONAL
NOTES TO AFFECTED
CREDITORS
If, and only if, approved by the Requisite Consenting
Creditors, the Reorganized Company will, as part of the
Plan, issue $80 million of new notes having the same
terms and conditions as the exit notes (such terms being
set out in Schedule A of the DIP/Exit Note Term Sheet) to
the Affected Creditors on a pro rata basis.
0017
ANNEX A
Governance
•
CRO; Management. During the RSA Effective Period, the Parties to the RSA shall take all
steps reasonably necessary or appropriate to effectuate the following:
o
CRO Appointment/Affirmation. An empowered chief restructuring officer (the
"CRO") with enhanced authority and new deputy chief financial officer (the "Deputy
CFO") shall be appointed (or if either such officer has already been appointed in
connection with the proceedings contemplated in the Catalyst RSA, such
appointment shall be affirmed), each acceptable to Requisite Consenting Creditors,
the Plan Sponsor and the Independent Committee, prior to the date that is one week
following the date of the RSA (with a five business day cure period thereafter), or
such later date as the Requisite Consenting Creditors, the Plan Sponsor and the
Independent Committee may agree. Such CRO will report to the Independent
Committee of the Company's current board of directors (the "Board of Directors")
and will be authorized to provide information directly to the Consenting Creditors (or
their advisors) and the Plan Sponsor. The existing CFO and the Deputy CFO shall
report to the CRO.
o
Selection Process for CRO. Where a CRO has not already been appointed in
connection with proceedings contemplated in the Catalyst RSA or where such CRO's
appointment has not been affirmed, the new CRO shall be selected by the
Independent Committee, the Plan Sponsor and the Requisite Consenting Creditors.
Zolfo Cooper Management LLC shall be eligible for this appointment. Where a
Deputy CFO has not already been appointed in connection with proceedings
contemplated in the Catalyst RSA or where such Deputy CFO's appointment has not
been affirmed, the new Deputy CFO shall be selected via a pitch process, conducted
by a working group composed of the Plan Sponsor and an agreed-upon subset of the
Ad Hoc Noteholder Committee, the Ad Hoc Lender Committee and the Independent
Committee advisors.
o
Prerequisites for CRO and Deputy CFO. The CRO and Deputy CFO must be present
in Bogota five (5) days per week (subject to having to attend meetings concerning
Pacific matters that are scheduled outside of Bogota). The CRO and/or its team
should include individuals with Spanish- language skills and relevant oil and gas
experience.
o
DIP Budget. As soon as practical after his appointment, the CRO shall review the
Cash Flow Projections (as defined in the DIP/Exit Note Term Sheet) and provide
comments to the Requisite Consenting Creditors (or their advisors), the Plan Sponsor,
and the Independent Committee.
o
CR0 Powers. The mandate of the CR0 shall include a full assessment of key
company processes, organizational structure, systems, controls, risks and certain
positions at the Company, as agreed by the Plan Sponsor and Requisite Consenting
Creditors (or their advisors). The CRO is also empowered to retain a leading
international executive search firm to assist in such assessment.
•
New Board Composition: Reorganized Company Management; Shareholder Rights
2
o
001B
Size of Reorganized Company's Board of Directors. The Reorganized Company's
board of directors (the "New Board") shall be composed of seven members upon the
Plan Effective Date.
o New Board Composition. The New Board shall be initially comprised as follows: (i)
four nominees selected by the Plan Sponsor, one of which may be chosen to serve as
the chairman of the New Board; (ii) one independent nominee that is jointly selected
by the Plan Sponsor and the Requisite Consenting Creditors; (iii) one independent
individual proposed by the Requisite Consenting Noteholders and that is reasonably
acceptable to the Requisite Consenting Lenders (the "RCN Proposed Director"); and
(iv) one independent individual proposed by the Requisite Consenting Lenders and
that is reasonably acceptable to the Requisite Consenting Noteholders (the "RCL
Proposed Director"). A majority of the New Board shall nominate directors for reelection at the end of the New Board's term, including directors then in office (if they
consent to election). The Articles or by-laws of the Reorganized Company shall
contain provisions (A) requiring that the Board be comprised of a majority of
"Independent Directors" (to be defined in the Articles or by-laws as directors who are
independent of the Reorganized Company), and (B) requiring the Plan Sponsor to
vote all of its shares in favour of the RCN Proposed Director and the RCL Proposed
Director (if they consent to election) at the two annual meetings of shareholders
immediately following the Plan Effective Date (i.e., in 2017 and 2018), both of which
provisions shall fall away if the Plan Sponsor owns less than 10% of the outstanding
Reorganized Common Stock. The requirement in (A) shall fall away on the date of
the Company's annual meeting in 2019. Additionally, the constating documents of
the Reorganized Company shall contain provisions providing that the Plan Sponsor
has the ability to appoint a majority of the Board of Directors of the Reorganized
Company so long as Plan Sponsor holds, directly or indirectly, at least a 22.5%
ownership interest in the Reorganized Company on a fully diluted basis.
o Reorganized Company Management. Certain positions of the Reorganized Company
in place on the Plan Effective Date (as agreed by the Plan Sponsor and Requisite
Consenting Creditors) shall be affirmed by a supermajority of six members of the
New Board in the case of certain members of senior management, and, with respect
to the remaining positions, by four members of the New Board, including one
nominee from the Plan Sponsor and either the RCN Proposed Director or the RCL
Proposed Director. If the requisite majority does not affirm such management, then
such management shall remain in their respective positions, but a search firm (paid
on a fixed fee basis) shall assess potential alternative management, including existing
management. Following the results of the search process, a vote of only four
members of the New Board shall be required to select any person for a position that
was not affirmed by the requisite votes, provided that the four members needed to
carry an affirmative vote must include one nominee from the Plan Sponsor and either
the RCN Proposed Director or the RCL Proposed Director.
o Negative Control Rights. A majority of the New Board, including (a) at least one of
the RCN Proposed Director or the RCL Proposed Director (for so long as those
individuals are directors), or after such time as either one of the RCN Proposed
Director or the RCL Proposed Director ceases to be a director for any reason, at least
two Independent Directors, and (b) (except with respect to a related party transaction
involving the Plan Sponsor) at least one of the four directors initially chosen by the
Plan Sponsor (or if they are no longer directors, any one director who is an employee
-3of the Plan Sponsor) shall be required to approve any of the following: related party
transactions; material amendments to governing documents; and changes to the size
of the New Board or method of appointment; provided that any vote in favor of any
rights offering shall also require the affirmative vote of each of the RCN Proposed
Director and the RCL Proposed Director, in each case for so long as such directors
are on the New Board. The requirements set forth in this provision shall fall away on
the date of the Company's annual meeting of shareholders in 2019.
o
Shareholder Rights Plan. The Reorganized Company shall adopt a customary
shareholder rights plan on the Plan Effective Date with a trigger for an "Acquiring
Person" being set at 20% or more of the outstanding Reorganized Company Stock
(the Plan Sponsor shall be grandfathered), such that offers to acquire the Reorganized
Common Stock made by an Acquiring Person (or that, if completed, would result in
the offeror becoming an Acquiring Person) must be made to all shareholders on the
same terms. Termination, amendments or waivers under the shareholder rights plan
would require approval by a majority of the Independent Directors.
0019
0020
SECURED DIP AND EXIT FINANCING FACILITY — SUMMARY TERM SHEET
(the "Term Sheet")
U.S. $500 million secured term note facility (the "DIP Note Issuance")
The Issuer (as defined below) agrees that it shall not disclose this
Term Sheet to any person without the prior written consent of the
DIP Note Purchasers (as defined below), except to (i) the Issuer's
and the other Note Parties' directors, senior officers, professional
advisors and (ii) the DIP LC Lenders and their professional advisors
and (iii) the professional advisors of Bank of America, N.A., as
agent under that certain Revolving Credit and Guaranty Agreement
dated as of April 30, 2014 among Pacific, Bank of America, N.A.
as administrative agent, and the lenders and guarantors party
thereto, on a confidential basis, in each case unless required to be
disclosed by law or by a regulatory authority (including a stock
exchange on which the Issuer's shares are listed). Additionally, this
Term Sheet may be disclosed to the extent required to be filed with
a court in connection with any Restructuring Proceedings (as
defined below).
1.
CONFIDENTIALITY
2.
$500 million of debtor-in-possession senior secured notes (the
SUBJECT TO
"DIP Notes") will be issued pursuant to an indenture (the
DEFINITIVE
DOCUMENTATION "Indenture") and a note purchase agreement (the "NPA" and
together with the Indenture, collectively, the "DIP Note
Agreement"). The offer of debtor-in possession financing
contemplated herein is subject to the execution of the DIP Note
Agreement and other definitive documents related thereto
(collectively, the "DIP Note Documents"). The DIP Notes will be
issued in two separate series: (i) senior secured notes in a principal
face amount of $250 million (defined below) (the "Creditor DIP
Notes") and (ii) senior secured notes in a principal face amount of
$250 million, to be issued to the Plan Sponsor (the "Plan Sponsor
Notes") and which, on the Exit Date, the Plan Sponsor may
exchange for 12.5% of the Reorganized Common Stock (as defined
in the Recapitalization Term Sheet and subject to dilution pursuant
to the Management Incentive Plan (as described in the
Recapitalization Term Sheet)), failing which exercise the Plan
Sponsor Notes will be mandatorily exchanged for 12.5% of the
Reorganized Common Stock (subject to dilution pursuant to the
Management Incentive Plan).
The DIP Notes shall be centrally held through DTC and/or
Euroclear or a similar indirect holding system, and (i) the Issuer
shall use commercially reasonable best efforts to obtain a rating
within 10 business days after the Exit Date, (ii) on or prior to the
Exit Date, the Issuer shall have prepared a draft prospectus (subject
to the inclusion of such additional information, including additional
financial information and pro forma statements reflecting the
reorganization of the Issuer that was not reasonably available for
inclusion therein prior to the Exit Date, as may be required by the
2
0021
competent authority of the Euro M FP) for the purpose of applying
for the listing of the Exit Notes on the Official List of the
Luxembourg Stock Exchange): (iii) no later than 10 business days
after the later of the Exit Date or the availability of the additional
required information as set out in item (ii), the Issuer shall have
applied for the listing of the Exit Notes on the Official List of the
Luxembourg Stock Exchange and to trade them on the Euro M'11•
Market of such exchange and (iv) the Issuer will use its
commercially reasonable best efforts to obtain and maintain such
listing of the Exit Notes on the Official List of the Luxembourg
Stock Exchange, failing which, it will use its commercially
reasonable best efforts to promptly obtain and maintain an
alternative listing of the Exit Notes on an equivalent unregulated
stock exchange acceptable to the holders of the Exit Notes.
The Indenture shall be based on the form of indenture dated as of
September 19, 2014 between Pacific Rubiales Energy Corp. (as
predecessor to Pacific (as defined below), as issuer and The Bank of
New York Mellon, as trustee (the "Form of Indenture") subject to
such changes, which will be substantial as are required to give
effect to this Term Sheet and having regard to the Note Parties'
financial situation, the Restructuring Proceedings and the secured
nature of the DIP Notes and such other changes as the DIP Note
Purchasers may reasonably require. The covenants in the Indenture
shall contain such thresholds, limitations, qualifications and baskets
as may be acceptable to the DIP Note Purchasers.
The Indenture shall govern the DIP Notes and may be amended and
restated or otherwise replaced (such amended, restated or replaced
Indenture being, the "Amended Indenture") and the Amended
Indenture shall thereafter govern the Exit Notes (as defined in
Schedule "A") provided that those terms of the DIP Note
Agreement relating to the Restructuring Proceedings (as defined
below) and other matters and covenants relating specifically thereto
shall not apply following the completion of, and emergence of the
Reorganized Company (as defined in the Recapitalization Term
Sheet (as defined below)) from, the Restructuring Proceedings and,
to the extent reasonably practicable and acceptable to the DIP Note
Purchasers, such matters and covenants shall be contained in the
NPA.
3.
DIP LC FACILITY
AND HEDGING
An additional second-lien secured letter of credit facility in an
amount of up to $134 million on terms and conditions acceptable to
the DIP Note Purchasers (the "DIP LC Facility") may be provided
by certain of the existing bank lenders (collectively, together with
their successors and assigns, the "DIP LC Lenders").
A secured first-lien hedging facility with respect to up to 60% of the
production of the Issuer and its affiliates, or such other amount to
be agreed by the DIP Note Purchasers (the "Hedging Facility")
may be provided by a bank acceptable to the DIP Note Purchasers
-3-
- 0022
(the "Hedge Provider"). Any hedges that extend beyond the
Outside Date require the consent of the New Board (as defined in
the Recapitalization Term Sheet).
4.
ISSUER
Pacific Exploration & Production Corporation ("Pacific" or the
"Issuer").
5.
GUARANTORS
Meta Petroleum AG, Pacific E&P Holdings Corp., Pacific E&P
International Holdings, S.a.r.l., Pacific Global Capital, S.A., Pacific
Stratus International Energy Ltd., Pacific Guatemala Energy Corp.,
Pacific Rubiales Guatemala, S.A., Pacific Rubiales PNG Limited,
Pacific Brasil Exploracao e Producao de Oleo e Gas Ltda., Pacific
Stratus Energy S.A., Pacific Marketing International Corp., Pacific
Stratus Energy Colombia Corp., Pacific Off Shore Peru S.R.L,
Pacific Stratus Energy del Peru S.A., Petrominerales Peru Ltd.,
Petro International Ltd., Petrominerales Bermuda Ltd.,
Petrominerales Colombia Corp., C&C Energia Holding SRL Grupo
C&C Energia (Barbados) Ltd., PRE Corporate Services Corp.,
PRE-PSIS Cooperatief U.A., Pacific Midstream Holding Corp.,
Pacinfra Holding Ltd., Major International Oil S.A. and Agro
Cascada S.A.S., and any other wholly owned subsidiaries of the
Issuer as may be reasonably required by the DIP Note Purchasers
(collectively the "Guarantors"). To the extent permitted by
applicable law, all obligations of the Issuer will be unconditionally
guaranteed jointly and severally by the Guarantors and the
obligations of each Issuer will be guaranteed by the other Issuer.
Notwithstanding the foregoing, the Issuer agrees that, to the extent
required by the DIP Note Purchasers and permitted under Swiss
law. Meta Petroleum AG agrees to (i) borrow money from another
Note Party pursuant to secured intercompany notes in an amount to
be agreed with the DIP Note Purchasers (which secured
intercompany notes shall be pledged to the DIP Collateral Agent),
(ii) to the extent the structure described in clause (i) is not
reasonably practicable, to become a co-issuer of the DIP Notes
and/or (iii) otherwise structure its affairs and obligations under the
DIP Notes in a manner reasonably satisfactory to the DIP Note
Purchasers.
The Issuer and the Guarantors are collectively referred to herein as
the "Note Parties" and each a "Note Party".
6.
DIP NOTE
PURCHASERS
The entire amount of the Plan Sponsor Notes will be purchased by
EIG Pacific Holdings Ltd. (together with its successors and
permitted assigns, the "Plan Sponsor") and the entire amount of
the Creditor DIP Notes will be purchased by the parties listed in
confidential Schedule "B" attached hereto (or funds managed or
administered by such parties) (each such party together with its
successors and assigns, and in the case of the Plan Sponsor,
successors and permitted assigns, a "DIP Note Purchaser", and
collectively the "DIP Nate Purchasers" and together with the DIP
LC Lenders and the Hedge Provider, collectively, the "DIP
-4-
0023
Providers") or the Plan Sponsor.
7.
8.
A financial institution acceptable to the DIP Providers and
DIP COLLATERAL
AGENT reasonably acceptable to the Issuer will act as collateral agent for
and on behalf of the DIP Providers under the DIP Note Agreement,
the Hedging Facility (if any) and the DIP LC Agreement (if any), as
applicable (in such capacity, the "DIP Collateral Agent").
COLLATERAL
AGENCY AND
INTERCREDITOR
AGREEMENT
9.
SEPARATE RIGHTS
AND OBLIGATIONS
The DIP Providers will enter into a collateral agency and
intercreditor agreement (the "Intercreditor Agreement") pursuant
to which they shall agree among other things that the DIP Note
Obligations (as defined below) and the obligations under the
Hedging Facility (the "Hedging Obligations") (if any) shall be
secured pari passu on a first-lien basis and the DIP LC Obligations
(as defined below) (if any) shall be secured on a second-lien basis.
Pursuant to the Intercreditor Agreement, (i) if there is a Hedging
Facility, the Hedge Provider will agree to limit setoff rights
provided that it may have priority with respect to monthly payments
under the Hedging Facility to the extent agreed by the DIP Note
Purchasers, in priority to the DIP Note Obligations and the DIP LC
Obligations and (ii) if there is a DIP LC Facility, the DIP LC
Lenders will not be permitted to cause the DIP Collateral Agent to
enforce the security or otherwise take action with respect to the DIP
Collateral except (x) if the DIP Note Obligations have been paid in
full or (y) following the completion of a 90-day standstill period
following the failure by the Issuer to pay any principal, interest or
fees payable in accordance with the terms of the DIP LC Facility;
provided that, following commencement of enforcement, the DIP
Collateral Agent shall be instructed in accordance with the
Intercreditor Agreement. The Borrower shall have the right to enter
into one or more letter of credit facilities with financial institutions
that are secured on a pari passu basis with the DIP LC Obligations
up to a total aggregate amount of $200 million (including the DIP
LC Obligations).
The obligations of each DIP Note Purchaser under the DIP Note
Agreement shall be several (and not joint and several). No DIP
Note Purchaser (other than the Plan Sponsor as provided in item (ii)
below) shall be responsible for the obligations of any other DIP
Note Purchaser under the DIP Note Agreement, and the failure by
any DIP Note Purchaser (other than the Plan Sponsor) to perform
its obligations under the DIP Note Agreement (each a "Defaulting
DIP Note Purchaser") shall not affect the obligations of any other
party under the DIP Note Agreement, provided that, in the event of
any such failure, (i) the DIP Note Purchasers (other than the Plan
Sponsor) shall have the right, at their option and in their sole
discretion, on a pro rata basis in accordance with their respective
DIP Note Purchase Commitments (or in such other proportions as
they may agree), to perform such Defaulting DIP Note Purchaser's
obligations and to acquire any such Defaulting DIP Note
Purchaser's previously purchased Creditor DIP Notes (in which
-5-
0024
case all rights (including all interest and tees, including the Break
Fee) and obligations (including the commitment to with respect to
the Exit Notes), allocable to such Defaulting DIP Note Purchaser
with respect to such obligations and Creditor DIP Notes shall
accrue to the applicable DIP Note Purchasers (other than the Plan
Sponsor) in accordance with their pro rata share of the Creditor DIP
Notes so acquired) and (ii) in the event that the entirety of the
Defaulting DIP Note Purchaser's obligations and Creditor DIP
Notes are not performed and/or purchased by the DIP Note
Purchasers other than the Plan Sponsor prior to close of business on
the business day following the date on which such perfomlance
and/or purchase was to occur, then the Plan Sponsor shall perform
such remaining obligations of the Defaulting Note Purchaser and to
acquire any remaining previously purchased Creditor DIP Notes of
such Defaulting DIP Note Purchaser, in which case all rights
(including all interest and tees, including the Break Fee) and
obligations (including with respect to the Exit Notes), allocable to
such Defaulting DIP Note Purchaser with respect to such
obligations and Creditor DIP Notes shall become rights and
obligations of the Plan Sponsor.
10. RESTRUCTURING
PROCEEDINGS
Pacific and certain other Note Parties and their applicable
subsidiaries (as agreed between Pacific and the DIP Note
Purchasers) will implement the restructuring contemplated by the
Recapitalization Term Sheet attached hereto as Schedule "C" (the
"Recapitalization Term Sheet") through a plan of reorganization,
which shall be consistent with the terms of the Recapitalization
Term Sheet and the RSA (as defined in the Recapitalization Term
Sheet) (as it may be amended or supplemented from time to time in
accordance with the terms of the RSA, the "Plan") to be
implemented pursuant to (i) an amended main Canadian proceeding
(the "Canadian Proceeding") under the Companies. Creditors
Arrangement Act (Canada) (the "CCAA"), in the Ontario Superior
Court of Justice (Commercial List) in Toronto (the "Canadian
Court"), (ii) an amended ancillary proceeding (and not, without the
consent of the DIP Note Purchasers, a main proceeding under
Ley 1116 of 2006 in Colombia ("Law 1116") to be commenced in
Colombia (the "Colombian Proceeding") in the court seized of
jurisdiction in such Colombian Proceeding (the "Colombian
Court") and (iii) an amended proceeding (the "U.S. Proceeding"
and together with the Colombian Proceeding, collectively, the
"Ancillary Proceedings", and together with the Canadian
Proceeding, collectively, the "Restructuring Proceedings"`) under
chapter 15 of title 11 of the United States Code (the "Bankruptcy
Code") in the United States Bankruptcy Court for the Southern
District of New York (the "U.S. Court" and, together with the
Colombian Court the "Ancillary Insolvency Courts" and, together
with the Canadian Court, the "Insolvency Courts").
11. PURPOSE AND
The Issuer shall use proceeds of the purchase of the DIP Notes and
Equity Warrants solely for the following purposes and in the
PERMITTED
-6-
PAYMENTS
following order, in each case in accordance with the Cash Flow
Projection (as defined below):
(a)
to pay the financial advisory fees and expenses and the
legal fees and expenses of (i) a single counsel in each
relevant jurisdiction for the Plan Sponsor, (ii) a single
counsel in each relevant jurisdiction for each of the DIP
Note Purchasers (other than the Plan Sponsor), as a group,
the DIP LC Lenders (as a group) and the Hedging Provider
(provided that for the purposes of local security in
jurisdictions outside of Canada, Colombia and the United
States, all DIP Providers (other than the Plan Sponsor) shall
use a single common counsel), (iii) a single counsel in each
relevant jurisdiction for the prepetition holders of Notes (as
defined in the RSA), as a group, (iv) a single counsel in
each relevant jurisdiction for the holders of Bank Debt (as
defined in the RSA), as a group, and (v) counsel for
PricewaterhouseCoopers Inc. (the "Monitor"); and
(b)
to fund the Note Parties' (and certain permitted subsidiaries
that are not Note Parties subject to an aggregate threshold
to be agreed by the DIP Note Purchasers) immediate
funding requirements during the Restructuring Proceedings,
including funding of (i) professional fees and expenses
payable in accordance with the RSA (as defined in the
Recapitalization Term Sheet), (ii) Pacific's key employee
retention plan as previously approved by the Canadian
Court (the "KERP"), (iii) working capital and (iv) other
general corporate purposes of the Note Parties (and certain
permitted subsidiaries that are not Note Parties subject to an
aggregate threshold to be agreed by the DIP Note
Purchasers), in each case in accordance with the Cash Flow
Projection and the DIP Note Agreement.
For greater certainty, the Issuer may not use the proceeds of the
purchase of the DIP Notes and the Equity Warrants to pay any prefiling obligations of the Issuer or any other Note Parties (or their
respective subsidiaries or affiliates) without the prior written
consent of the DIP Note Purchasers; it being agreed that such
consent will not be needed for the Note Parties (and certain
permitted subsidiaries that are not Note Parties subject to an
aggregate threshold to be agreed by the DIP Note Purchasers) to
pay (i) amounts due to trade creditors in the ordinary course of
business, (ii) amounts owing or permitted under the KERP and (iii)
taxes, accrued payroll and other ordinary course liabilities, provided
in each case that such amounts are included in the Cash Flow
Projection.
12. COMMITMENT AND
AVAILABILITY OF
The DIP Note Purchasers will purchase DIP Notes in an aggregate
principal amount of $500 million (the "DIP Note Issuance
Amount") and Equity Warrants (as defined below), subject to the
0025
0026
-7DIP NOTES
conditions precedent set out in Section 25, provided that the DIP
Note Purchase Commitments and all other obligations of the DIP
Note Purchasers under the DIP Note Documents shall terminate if
such conditions precedent are not met or waived in accordance with
Section 25 on or before June 15, 2016. The proceeds of the DIP
Notes and the Equity Warrants in an aggregate amount (net of 01D)
of $480 million shall be funded on the Closing Date to the Issuer's
Cash Collateral Account and amounts from the Cash Collateral
Accounts may be released as follows:
(a)
an amount of up to $288 million of the proceeds of the
purchase of the DIP Notes and the Equity Warrants plus
any additional amounts deposited into the Cash Collateral
Accounts (such amount being the "Initial Amount") may
be released from the Cash Collateral Accounts on a weekly
basis on the first business day of each week in an amount
(if A is greater than B) equal to A minus B where A is $100
million and B is the amount of Unrestricted Operating Cash
(as defined below) as at the last business day of the
immediately preceding week (such amount being the
"Required Release Amount"), all such amounts and
calculations to be reviewed by the CRO (as defined below)
and certified by the Issuer to the DIP Collateral Agent prior
to any such release from the Cash Collateral Accounts; and
(b)
an amount of up to $192 million of the proceeds of the
purchase of the DIP Notes and the Equity Warrants (the
"Subsequent Amount") may, following the release in full
of the Initial Amount, be released from the Issuer's Cash
Collateral Account following satisfaction of the additional
conditions precedent set out in Section 26 on a weekly basis
on the first business day of each week in an amount equal
to the Required Release Amount for such week, all such
amounts and calculations to be reviewed by the CRO and
certified by the Issuer to the DIP Collateral Agent prior to
any such release from the Issuer's Cash Collateral Account;
provided that any amount remaining in the Cash Collateral
Accounts on the Exit Date shall be automatically released to the
Note Parties and be used to fund the Note Parties' working capital
and general corporate purposes.
13. EXIT NOTES AND
THE PLAN SPONSOR
EQUITY
By committing to provide its portion of the DIP Note Purchase
Commitments (as defined below), each DIP Note Purchaser (other
than the Plan Sponsor) concurrently commits to its pro rata share of
the Exit Notes equal to its pro rata share of the aggregate amount of
the Creditor DIP Notes. On the Exit Date, all outstanding Creditor
DIP Notes will be amended, restated or replaced pursuant to the
Amended Indenture and shall thereafter be evidenced by the Exit
Notes. See Schedule "A" for terms and conditions of Exit Notes.
-8-
0027
By committing to provide its portion of the DIP Note Purchase
Commitments, the Plan Sponsor concurrently commits that, on the
Exit Date, it may exercise its right, conferred on it under the term of
the Plan Sponsor Notes, to exchange the Plan Sponsor Notes for
12.5% of the Reorganized Common Stock (subject to dilution
pursuant to the Management Incentive Plan), failing which exercise
the Plan Sponsor Notes will be mandatorily exchanged for 12.5% of
the Reorganized Common Stock (subject to dilution pursuant to the
Management Incentive Plan). Any Creditor DIP Notes purchased
by Plan Sponsor as contemplated in Section 9 shall, for greater
certainty, treated as Creditor DIP Notes and not as Plan Sponsor
Notes.
14.
DIP NOTE
PURCHASER
COMMITMENTS
The respective commitment of each DIP Note Purchaser to
purchase the DIP Notes is the amount set opposite its name in
Schedule "B" hereto, in each case to the extent not transferred in
accordance with the DIP Note Agreement (the "DIP Note
Purchase Conunitments").
15.
MATURITY DATE
AND REPAYMENT
The outstanding obligations (including the principal amount of the
DIP Notes and all accrued interest and fees thereon) under the DIP
Notes and the DIP Note Documents (the "DIP Note Obligations")
shall be repayable in full on the earliest to occur of the following
dates (the "DIP Maturity Date"):
(a)
the date on which a demand by the DIP Note Purchasers is
made following the occurrence of any Event of Default (as
defined below) which is continuing;
(b)
the date that a restructuring, refinancing or sale transaction
(with respect to a material amount of stock or assets of the
Borrower and any of its subsidiaries), other than the Plan
and other than any Permitted Asset Disposition, (each, a
"Transaction") is approved by the applicable court or
consummated without the requisite consent of the DIP Note
Purchasers;
(c)
the date on which any stay of proceedings ordered pursuant
to one or more of the Restructuring Proceedings expires
without being extended or on which one or more of the
Restructuring Proceedings are terminated or converted to a
liquidation proceeding: and
(d)
the date that is six (6) months following the Closing Date
(as defined below), or such later date as may be agreed by
the DIP Note Purchasers in their sole discretion (the
"Outside Date");
provided that, if none of the foregoing events have occurred on or
prior to the date on which the Plan is implemented, then on the date
on which the Plan is implemented (the "Exit Date"): (i) the
0328
-9Creditor DIP Notes will be governed by the Amended Indenture
and thereafter be evidenced by the Exit Notes until the Exit
Maturity Date (as defined in Schedule "A") and (ii) the Plan
Sponsor may exercise its rights conferred on it under the Plan
Sponsor Notes to exchange the Plan Sponsor Notes for 12.5% of
the Reorganized Common Stock (subject to dilution pursuant to the
Management Incentive Plan), failing which exercise the Plan
Sponsor Notes will be mandatorily exchanged for 12.5% of the
Reorganized Common Stock (subject to dilution pursuant to the
Management Incentive Plan).
For greater certainty, in the event that the Exit Date has not
occurred on or prior to the DIP Maturity Date, the Equity Warrants
(as defined below) will automatically expire and the Break Fee and
all other DIP Note Obligations shall become immediately due and
payable to the holders of the DIP Notes.
16. ASSET
DISPOSITIONS
Except for Permitted Asset Dispositions, Note Parties may not sell,
assign, transfer or otherwise dispose of any material property or
assets (except the sale of hydrocarbons in the ordinary course of
business) without the prior consent of the DIP Note Purchasers and
provided that all proceeds of any sale, assignment, transfer or
disposition shall be deposited in the Cash Collateral Accounts (as
defined below) which shall be subject to an account control
agreement in favour of the DIP Collateral Agent for and on behalf
of the DIP Providers and proceeds from which shall be disbursed in
accordance with the procedure described in Section 12.
"Permitted Asset Dispositions" means the following: (i) the sale
of nearly 87 km of pipes that were going to be used to build La
Creciente pipeline which pipes are owned by the Colombian branch
of Pacific Stratus Energy Colombia Corp. and stored in the La
Creciente field in Colombia, (ii) the sale of tax refunds or credits
(including Titulos de Devolucion de Impuestos Nacionales) and
(iii) the sale of any equity interest in Pacific Infrastructure Ventures
Inc. or the sale of the oil terminal and the dry cargo business by
Pacific Infrastructure Ventures Inc. (the "Port Facility Sale"),
provided that, the proceeds of each such sale shall be no less than
the amount set out in respect thereof in the Cash Flow Projection
and provided further that prior to the consummation of each such
sale:
(a)
the relevant Note Party consummating such transaction
delivers to the DIP Note Purchasers' advisors (and/or
Restricted DIP Note Purchasers) an officer's certificate
certifying that such transaction is with a party that deals at
arm's length with the relevant Note Party; and
(b)
in the case of item (iii), the relevant Note Party
consummating such transaction delivers to the DIP Note
Purchasers' advisors (and/or Restricted DIP Note
- 10-
Purchasers) with respect to any such transaction, a
resolution of the board of directors of such Note Party, set
forth in an officer's cel tificate, stating that such transaction
complies with this covenant and that such transaction has
been approved by Pacific's independent committee of
directors.
17.
OPTIONAL
REDEMPTION
Prior to the Exit Date, if the Company (as defined in the RSA) has
terminated the RSA pursuant to Section 5.06(a) thereof, then the
DIP Notes may be redeemed in whole by the Issuer on three (3)
business days' prior written notice, subject to the concurrent
payment of all interest payable through the then-current Outside
Date on the amounts so prepaid and payment of the Break Fee.
Upon any such optional redemption and the payment of the Break
Fee, (i) all rights and obligations of the DIP Note Purchasers (other
than the Plan Sponsor) in respect of the Exit Notes, (ii) all rights
and obligations of the Plan Sponsor to exchange the Plan Sponsor
Notes into 12.5% of the Reorganized Common Stock (subject to
dilution pursuant to the Management Incentive Plan). and (iii) all
rights of the DIP Note Purchasers to receive Reorganized Common
Stock pursuant to the exercise of the Equity Warrants shall be
automatically cancelled. Following the Exit Date, the Exit Notes
may be redeemed subject to the redemption premiums set out in
Schedule "A".
18.
INTEREST AND
DEFAULT
INTEREST
Interest shall be payable in cash on the aggregate amount of
outstanding DIP Notes from the Closing Date at a rate equal to 12%
per annum, compounded monthly and payable monthly in arrears in
cash on the last business day of each month. Upon the occurrence
and during the continuation of an Event of Default, all overdue
amounts shall bear interest at the applicable interest rate plus 2%
per annum payable on demand in arrears in cash. All interest shall
be computed on the basis of a 360-day year of twelve 30-day
months, provided that whenever any interest is calculated on the
basis of a period of time other than a calendar year, the annual rate
of interest to which each rate of interest determined pursuant to
such calculation is equivalent for the purposes of the Interest Act
(Canada) is such rate as so determined multiplied by the actual
number of days in the calendar year in which the same is to be
ascertained and divided by the number of days used in the basis for
such determination.
19.
ORIGINAL ISSUE
DISCOUNT
In consideration of the DIP Note Purchasers purchasing the DIP
Notes and the Equity Warrants, each DIP Note shall be issued with
an original issue discount of 4%.
20.
BREAK FEE
Following the execution of the Commitment Letter, a break fee
equal to 5% of the DIP Note Issuance Amount (the "Break Fee")
shall be payable to the DIP Note Purchasers in cash in the event that
(i) the DIP Note Issuance does not occur or (ii) the Plan (including
the Equity Warrants) and the recapitalization contemplated by the
CO29
003C
Recapitalization Term Sheet is not fully consummated, on or before
the DIP Maturity Date. 60% of the Break Fee shall be payable to
the Plan Sponsor and 40% of the Break Fee shall be payable to the
DIP Note Purchasers (other than the Plan Sponsor), provided that
the Plan Sponsor shall be entitled to its pro rata portion of such 40%
of the Break Fee to the extent it purchases Creditor DIP Notes
originally committed or held by another DIP Note Purchaser.
21.
WARRANTS FOR
EQUITY ISSUANCE
ON EXIT DA
Pacific shall issue warrants on the Closing Date to the DIP Note
Purchasers (the "Equity Warrants") exercisable in the aggregate
into 25% of the total outstanding equity interests of the Reorganized
Company (as defined in the Recapitalization Term Sheet)
outstanding on the Exit Date on a fully diluted basis, subject to
dilution from the Management Incentive Plan (as defined in the
Recapitalization Term Sheet). The Equity Warrants shall be issued
at a nominal strike price and shall be exercisable on the Exit Date.
Each DIP Note Purchaser shall be entitled to its pro rata share of the
Equity Warrants based on its share of the aggregate DIP Note
Purchase Commitments, which Equity Warrants shall be issued to
each DIP Note Purchaser as a unit together with its DIP Notes. In
the event that the Plan is not consummated on or before the DIP
Maturity Date, the Equity Warrants shall automatically expire. The
Equity Warrants shall be detachable from the DIP Notes and shall
be transferable and assignable either together with or separate from
the DIP Notes, in accordance with Section 35. A portion of the
subscription price of the DIP Notes will be allocated to the purchase
of the Equity Warrants equal to the fair market value of the Equity
Warrants.
22.
CASH FLOW
PROJECTIONS /
VARIANCE
Pacific shall prepare a cash flow projection which shall be in form
and substance satisfactory to the CRO, the DIP Note Purchasers and
their advisors (the "Cash Flow Projection"), reflecting the
projected cash requirements (including, without limitation, with
respect to projected payment of professional expenses on an advisor
by advisor basis (but aggregating legal advisors for jurisdictions
outside of the United States and Canada) of Pacific and its direct
and indirect subsidiaries for the period commencing with the date
on which the Canadian Proceeding is to be commenced (the
"Commencement Date") and ending with the Outside Date,
Pacific shall prepare and present to the financial advisors to the DIP
Note Purchasers (and to any DIP Note Purchaser that has agreed to
receive material non-public information on a restricted basis
pursuant to a non-disclosure agreement substantially in the form of
the non-disclosure agreements in place between the company and
certain of its existing noteholders on the date hereof, (each a
"Restricted DIP Note Purchaser")) a cumulative variance report
in form and substance satisfactory to the DIP Note Purchasers'
financial advisors (each, a "Variance Report") as at the end of
each four week period set out in the Cash Flow Projection, in each
case, in respect of the period beginning on the Commencement
Date and ending on the last day of the applicable cumulative period
-12-
• 0031
(each such period being a "Test Period"), which Variance Report
shall show the line-by-line variance between the projected cash
flows set out in the Cash Flow Projection in respect of the relevant
Test Period and actual cash flows during such Test Period. Each
Variance Report shall be prepared and presented to the Restricted
DIP Note Purchasers by no later than the last business day of the
week following the end of the relevant Test Period and shall be
reviewed by the CRO and shall include a certification from a senior
officer of the Issuer that the actual cash flows are within the
permitted variances set out in Section 30 below.
The Cash Flow Projection shall be publicly disclosed on or prior to
the Closing Date and all Variance Reports shall be publicly
disclosed on or prior to the Exit Date.
23. DIP SECURITY AND Subject to the Intercreditor Agreement, the DIP Note Obligations,
PRIORITY the Hedging Obligations and the obligations under the DIP LC
Facility (the "DIP LC Obligations" and together with the DIP
Note Obligations and the Hedging Obligations, collectively, the
"DIP Obligations") shall be secured by first-priority security
interests (collectively, the "DIP Liens") over all of the present and
future property and assets, real and personal, of each Note Party,
including, but not limited to all equity interests owned by any such
Note Party in material subsidiaries and joint ventures, machinery
and equipment, inventory and other goods, accounts receivable,
material fee-owned real estate, leases, licenses, concessions,
fixtures, bank accounts (subject to certain customary exceptions),
intangibles (including rights under exploration and production
contracts, concessions and hedge agreements), financial assets,
investment property, license rights. Patents, trademarks, trade
names, copyrights, chattel paper, insurance proceeds, documents,
instruments, indemnification rights, tax refunds, tax 'credits
(including Titulos de Devolucion de Impuestos Nacionales), cash,
any avoidance actions available to the Note Parties' bankruptcy
estates pursuant to the Bankruptcy and Insolvency Act (Canada), the
CCAA or otherwise (collectively, the "Collateral"), in each case,
perfected pursuant to court orders and security documentation
governed under the laws of applicable jurisdictions satisfactory to
the DIP Note Purchasers. The security shall consist of the security
documents set out in Schedule "D" hereto and such additional
security documents as the DIP Note Purchasers (or their counsel)
may reasonably request.
All security will be granted in favour of the DIP Collateral Agent
for and on behalf of the DIP Providers, subject to the lntercreditor
Agreement.
The DIP Liens shall be given effect as follows, in each case subject
to the provisions of the Intercreditor Agreement:
-13-
0032
(a)
with respect to the Issuer and each guarantor under its
existing Notes (as defined in the RSA) and any other direct
or indirect subsidiaries of the Issuer as the Issuer and the
DIP Note Purchasers may agree (the "Filing Parties") by a
superpriority charge pursuant to the terms of an order in the
Canadian Proceeding approving the DIP Obligations and
the DIP Liens (the "DIP Order"), which shall provide that
the DIP Liens and the DIP Obligations rank only behind
administrative charges (the "Administrative Charges"),
rank pan passu with the passive and silent KERP charge
(the "KERP Charge") and shall rank ahead of the passive
and silent directors' and officers' charge (the "D&O
Charge") (provided that the KERP Charge and the D&O
Charge shall rank ahead of the DIP LC Obligations), in
each case in amounts approved by the DIP Note
Purchasers; provided that the DIP Liens shall constitute
junior perfected liens on, and security interests in, all
Collateral of the Note Parties, wherever located, that is
subject to an existing valid, perfected, enforceable and
unavoidable lien or security interest on the date of such
order, in each case, that is expressly permitted to be senior
to the DIP Liens pursuant to the DIP Order and the DIP
Note Documents;
(b)
by such priority or recognition status as may be required by
the DIP Note Purchasers in their reasonable discretion in
the Ancillary Proceedings pursuant to an order of the
applicable Ancillary Court, as applicable (each such order
being an "Ancillary Priority Order" and together with the
DIP Order, collectively, the "DIP Priority Orders"); and
(c)
by such security document, filings and registrations as may
be necessary or desirable in any relevant jurisdiction, the
DIP Liens shall constitute first- priority perfected liens on,
and security interests in, all Collateral of the Note Parties,
wherever located.
The DIP Note Purchasers may, in their sole discretion, require the
execution, filing, or recording of any mortgages, security
agreements, pledge agreements, control agreements, financing
statements or other agreements or instruments, or the taking of any
action to obtain possession or control of any Collateral in order to
obtain a lien on such Collateral; provided, that the local grant of
security and perfection of Collateral of any Note Party may be
excluded to the extent that the DIP Note Purchasers reasonably
determine that the costs of obtaining a security interest in or
perfection of such assets outside of the Restructuring Proceedings is
excessive in relation to the value to the DIP Note Purchasers of the
DIP Liens to be afforded thereby.
-14-
-
0033
The security granted by the Note Parties shall contain certain
exclusions from Collateral (including exclusions from the Initial
Collateral and the Subsequent Collateral as set out in Schedule "D")
as shall be reasonably agreed between the Note Parties and the DIP
Note Purchasers (or their counsel).
24. CASH
MANAGEMENT
The Note Parties shall maintain a cash management system
reasonably satisfactory to the DIP Note Purchasers which shall
include the direct payment of, or daily transfer of, cash proceeds of
all receivables (including cash proceeds of intercompany
receivables) and the deposit of all cash into bank accounts which
are subject to springing-dominion control agreements (or local
equivalents) in favour of the DIP Collateral Agent.
All receivables owing to any Colombian Note Party or the
Colombian branch of any Note Party shall be assigned to a trust
(fiducia) to be established in favour of the DIP Collateral Agent.
Similar arrangements with respect to receivables shall be
implemented in other foreign jurisdictions where a similar trust
structure is available.
All (i) in the case of the Issuer, net proceeds of the purchase of DIP
Notes and Equity Warrants, (ii) all Unrestricted Operating Cash (as
defined below) in excess of $100 million as at the last business day
of any week and (iii) all extraordinary receipts (including receipts
from asset sales, tax credits or refunds, casualty events or the
repayment of any intercompany loans or dividends received from
the net cash proceeds of any sale of Collateral), with exceptions to
be agreed to permit ordinary course payments and cash
management by the Note Parties and giving due consideration to
mitigation of foreign exchange costs, shall be deposited into one or
more bank accounts located in Canada in the name of the applicable
Note Parry that is the recipient of such proceeds, except in the case
of Meta Petroleum AG and/or Pacific E&P Holdings Corp. to the
extent not permitted by Swiss law, (each a "Cash Collateral
Account" and collectively, the "Cash Collateral Accounts"),
which Cash Collateral Accounts shall be subject to sole-dominion
control agreements in favor of the DIP Collateral Agent to be
released in accordance with Section 12.
"Unrestricted Operating Cash" means an amount equal to the
amount of (i) all cash of the Issuer and its subsidiaries, (ii) less the
amount of cash or cash equivalents deposited in the Cash Collateral
Accounts, (iii) less, to the extent included in clause (i) above, the
Joint Venture Cash (as defined below), (iv) less, to the extent
included in clause (i) above, Non-Wholly Owned Subsidiary Cash
and (v) less, to the extent included in clause (i) above, any
Restricted Cash (as defined below) (up to a maximum amount of
such Restricted Cash of $70 million).
- 15 "Joint Venture Cash" means all cash and cash equivalents held in
any accounts required under joint venture agreements or joint
operating agreements.
"Non Wholly Owned Subsidiary Cash" means all cash and cash
equivalents held in accounts of the Issuer's non-wholly owned
subsidiaries.
-
"Restricted Cash" means cash or cash equivalents that would
appear as "restricted" on the consolidated balance sheet of the
Issuer and its direct or indirect subsidiaries.
25. CONDITIONS
PRECEDENT TO
PURCHASE OF DIP
NOTES
The purchase of the DIP Notes from the Issuer shall be conditional
on, and shall be completed by the DIP Note Purchasers by no later
than 2 business days following (or, with respect to those conditions
that by their nature are to be satisfied on the Closing Date, on the
business day of), the satisfaction of conditions precedent to
borrowing customary and usual for financings in such
circumstances and to be agreed upon by the DIP Note Purchasers
and the Note Parties, which conditions precedent shall include,
without limitation, the following conditions precedent to be
satisfied on or prior to the purchase of the DIP Notes (the date on
which all such conditions are satisfied being the "Closing Date"),
each of which conditions shall be for the sole benefit of the DIP
Note Purchasers and may be waived by holders of not less than
75% of the aggregate DIP Note Purchase Commitments as of the
Closing Date, provided that if such conditions are not met or
waived on or before June 15, 2016, the DIP Note Purchase
Commitments and all other obligations of the DIP Note Purchasers
under the DIP Note Documents shall terminate:
(a)
The applicable Note Parties shall have commenced the
Restructuring Proceedings.
(b)
The Canadian Court shall have granted an amended
"initial" order (which shall include the DIP Order) in
respect of the Filing Parties, in form and substance
satisfactory to the DIP Note Purchasers (the "Initial
Canadian Order").
(c)
The Colombian Court shall have granted a recognition
order in respect of the relevant Note Parties, in form and
substance satisfactory to the DIP Note Purchasers (the
"Initial Colombian Order" and together with the Initial
Canadian Order, the "Initial Orders")).
(d)
The Insolvency Courts, as applicable, shall have granted the
DIP Priority Orders.
(e)
If required, the Superintendencia de Sociedades (the
"Superintendencia") shall have approved the granting or
0034
-16-
0035
the DIP Liens under Colombian law.
(f)
Each Colombian Note Party and each Note Party with a
Colombian branch shall have amended its bylaws to
provide that the incurrence of any additional indebtedness
(other than under the DIP Note Issuance, the Hedging
Facility (if applicable), the DIP LC Facility (if applicable),
the Exit Notes and the Exit LC Facility (as defined below)
(if applicable), and guarantees thereof as contemplated
herein) by such Note Party (or its Colombian branch) shall
require the prior approval of the DIP Note Purchasers.
(g)
Intentionally Deleted.
(h)
The DIP Note Agreement, each of the other DIP Note
Documents (other than the security documents in respect of
the Subsequent Collateral (as set out on Schedule "D") and
all other documentation relating to the DIP Note Issuance
shall be in form and substance consistent with this Term
Sheet and otherwise satisfactory to the DIP Note Purchasers
in their sole discretion and shall have been executed and
delivered by each Note Party party thereto and shall
constitute valid and enforceable obligations of each of the
Note Parties, as confirmed pursuant to the Initial Orders
and the DIP Priority Orders.
(i)
If applicable, the Hedging Facility and/or the DIP LC
Facility and all documents relating thereto shall be in form
and substance satisfactory to the DIP Note Purchasers and
the Company and shall have been executed and delivered
by each Note Party party thereto and shall constitute valid
and enforceable obligations of each of the Note Parties as
confirmed pursuant to the Initial Orders and the DIP
Priority Orders.
All "first day orders"-type entered in each Restructuring
Proceeding at the time of commencement of the
Restructuring Proceedings shall be satisfactory in form and
substance to the DIP Note Purchasers in their sole
discretion.
(k)
The Note Parties shall have obtained all governmental
(including any required consents from the Superintendencia
(if any)), regulatory and third party approvals required to be
obtained in any other relevant jurisdiction to enable the DIP
Collateral Agent to obtain the DIP Liens (excluding any
consents in respect of joint operating agreements and
concessions).
(1)
The DIP Collateral Agent shall have a valid and perfected
security interest in the Initial Collateral (as set out Schedule
- 17 -
0036
"D"), with the priority described herein, for the benefit of
the DIP Providers.
(m)
The purchase of the DIP Notes shall not violate any
requirement of law and shall not be enjoined, temporarily,
preliminarily or permanently.
(n)
All fees and expenses required to be paid to (i) the financial
advisors to the DIP Providers, (ii) a single counsel in each
relevant jurisdiction for the Plan Sponsor, (iii) a single
counsel in each relevant jurisdiction for each of the DIP
Note Purchasers (other than the Plan Sponsor), as a group,
the DIP LC Lenders (as a group) and the Hedging Provider
(provided that for the purposes of local security in
jurisdictions outside of Canada, Columbia and the United
States, all DIP Providers (other than the Plan Sponsor) shall
use a single common counsel), (iv) a single counsel in each
relevant jurisdiction for the prepetition holders of Notes (as
defined in the RSA), as a group, (v) a single counsel in each
relevant jurisdiction for the holders of Bank Debt (as
defined in the RSA), as a group, and (vi) counsel for the
Monitor, incurred on or before the Closing Date shall have
been paid (including as a deduction from the proceeds of
the purchase of the DIP Notes and the Equity Warrants
prior to disbursement to the Issuer).
(o)
The DIP Note Purchasers shall have received customary
legal opinions of (i) Garrigues, Colombian counsel to the
Note Parties, (ii) Norton Rose Fulbright Canada LLP,
Canadian counsel to the Note Parties, and (iii) such other
local counsel opinions requested by the DIP Note
Purchasers, in each case addressing such matters as the DIP
Note Purchasers shall request. Including, without
limitation, the enforceability of all DIP Note Documents
and the validity and perfection of all security interests in the
Initial Collateral.
(p)
There shall exist no default or Event of Default under the
DIP Note Documents and the representations and
warranties or the Note Parties therein shall be true and
correct in all respects (other than any such representation
and warranty that by its terms refers to a specified earlier
date which shall be true and correct in all material respects
or, with respect to representations and warranties qualified
by materiality, in all respects, as of such earlier date).
(q)
Since April 6, 2016, there shall not have occurred any
change, development, effect, event, circumstance, fact or
occurrence that individually or in the aggregate with other
such changes, developments, effects, events, circumstances,
facts or occurrences, (a) is or would reasonably be expected
- 18 -
to be material and adverse to the business, financial
condition, properties, assets (tangible or intangible),
liabilities (including any contingent liabilities), or results of
operations of the Note Parties or (b) prevents or materially
adversely affects the ability of the Note Parties to timely
perform their obligations under the DIP Note Documents,
in each case other than any change, development, effect,
event, circumstance, fact or occurrence resulting from
(i) the effect of any change in the United States or foreign
economies or securities, commodities or financial markets,
(ii) the effect of any action taken by DIP Note Purchasers
or their affiliates with respect to the DIP Note Documents
or with respect to the Note Parties (including through such
persons' participation in the Restructuring Proceedings),
(iii) any effect resulting from the filing or public
announcement
of
the
restructuring
proceedings
contemplated in the Catalyst RSA (as defined in the RSA)
or the Restructuring Proceedings, including the actions
taken by Colombia's Superintendencia de Sociedades to
take "control" of certain Colombian branches of the
Company (as defined in the RSA); or (iv) developments in
the oil and gas exploration, development and/or production
industry or industries (including actual or expected industry
wide changes in oil, gas or other commodity prices);
provided, however, that with respect to clauses (i), (ii) or
(iv), such changes, developments, effects, events,
circumstances, facts or occurrences shall be taken into
account to the extent they disproportionately and adversely
affect Pacific and its subsidiaries, taken as a whole,
compared to other companies operating in the industries
and regions in which Pacific and its subsidiaries operate
(each a "Material Adverse Change").
(r)
Other than as disclosed in Pacific's 2015 annual financial
statements, there shall exist no unstayed action, suit,
investigation, litigation or proceeding pending or threatened
in writing in any court or before any arbitrator or
governmental authority (other than the Restructuring
Proceedings) that could reasonably be expected to have a
material adverse effect with respect to the Note Parties and
their subsidiaries taken as a whole.
(s)
The Cash Flow Projection shall have been delivered to the
DIP Note Purchasers in form and substance satisfactory to
the DIP Note Purchasers and shall have been publicly
disclosed.
(t)
There shall not have occurred any payment, prepayment,
redemption, purchase or exchange of any prepetition
indebtedness or equity, or amendment or modification of
any of the terms of any such prepetition indebtedness or
0037
0038
-19-
equity, except as expressly provided for in the Cash Flow
Projection.
26. CONDITIONS
PRECEDENT TO
RELEASE OF
SUBSEQUENT
AMOUNT
(u)
Pacific shall have appointed a chief restructuring officer
whose mandate shall include a full assessment of key
company processes, organizational structure, systems,
controls, risks and certain positions at the Issuer, as agreed
by the DIP Note Purchasers and who shall also be
empowered to retain a leading international executive
search firm to assist in such assessment (the "CRO").
(v)
The Note Parties shall have established a cash management
system satisfactory to the DIP Note Purchasers (including
establishment of the Cash Collateral Account), and all
material accounts of the Note Parties (including the Cash
Collateral Account) shall be subject to control agreements
in favour of the DIP Collateral Agent, in form and
substance reasonably satisfactory to the DIP Note
Purchasers), consistent with the terms of this Term Sheet.
(w)
The DIP Note Purchasers shall be satisfied in their sole
discretion that no additional insolvency proceedings are
required or advisable to ensure that the Collateral is
perfected on a first priority basis in connection with the
Restructuring Proceedings.
(x)
The Note Parties shall have completed reasonable "know
your client" procedures to the satisfaction of the DIP Note
Purchasers.
(y)
The Note Parties shall have appointed agents for service of
process in New York.
The availability of the Subsequent Amount to the Issuer from its
Cash Collateral Account to be drawn in accordance with the Cash
Flow Projections as set out in Section 12 shall be conditional on the
continuing satisfaction of the conditions precedent set out in
Section 25 above, as well as satisfaction of the following additional
conditions precedent, each of which must be met on or before June
30, 2016 (or such later date as the DIP Note Purchasers may agree
in their sole discretion):
(a)
The DIP Collateral Agent shall have a valid and perfected
security interest in the Subsequent Collateral (as set out
Schedule "D") with the priority described herein, for the
benefit of the DIP Providers (other than Collateral which is
not of material value, provided that the Issuer and the
relevant Note Parties shall continue to use their
commercially reasonable efforts to provide such valid and
perfected security interest in such Collateral in favour of
- 20 -
0039
the DIP Collateral Agent).
(b)
The DIP Note Purchasers shall have received customary
legal opinions of such local counsel as may be requested by
the DIP Note Purchasers, in each case addressing such
matters as the DIP Note Purchasers shall request, including,
without limitation, the enforceability of all DIP Note
Documents and the validity and perfection of all security
interests in the Subsequent Collateral (as set out on
Schedule "D").
(c)
The U.S. Court shall have granted a recognition order under
chapter 15 of title 11 of the United States Code (the
"Chapter 15 Order").
(d)
27. REPRESENTATIONS
AND WARRANTIES
The Initial Orders, the Chapter 15 Order and the DIP
Priority Orders issued by the Insolvency Courts, as
applicable, shall remain in full force and effect and shall
not have been stayed, reversed, vacated, rescinded,
modified or amended in any respect (except as may be
acceptable to the DIP Note Purchasers), and shall be final
orders and any applicable appeal period in respect thereof
shall have expired or, if an appeal was filed, that such
appeal shall have been dismissed on a final basis without
further appeal (the "Final Orders").
The DIP Note Agreement will contain representations and
warranties customary and usual for financings in such
circumstances, subject to thresholds, limitations, exclusions and
qualifications as may be reasonably agreed between the DIP Note
Purchasers and the Note Parties, having regard to the Note Parties
and their circumstances including without limitation:
(a)
a representation and warranty that each Note Party has
disclosed to the DIP Note Purchasers all existing material
liabilities, including trade creditors, pension liabilities,
employee liabilities, and tax liabilities;
(b)
a representation that no Note Party is, or will be, after
giving effect to the DIP Note Issuance and the transactions
contemplated hereunder, an "investment company" for the
purposes of the Investment Company Act of 1940;
(c)
a representation and warranty from the Plan Sponsor that
no existing director or officer of any Note Party nor any of
the parties disclosed as principal holders of voting shares
on page 35 of the Issuer's information circular dated June
10, 2015, nor any person or entity known to the Plan
Sponsor to be acting on behalf of any of the foregoing, is a
direct or indirect investor in or limited partner of the Plan
-21-
0040
Sponsor or any fund managed by it; and
(d)
28. AFFIRMATIVE
COVENANTS
a representation that the factual statements contained in all
certificates and documents furnished to the DIP Note
Purchasers, taken as a whole, do not contain any untrue
statement of a material fact or omit to state a material fact
necessary in order to make such statements not misleading
in light of the circumstances in which they were made;
provided, that with respect to projected, estimated or pro
forma financial information, the representation shall be
limited to the fact that such information has been prepared
in good faith based upon assumptions believed by the
Issuer or the relevant Note Party to be reasonable at the
time made, it being understood that no assurance can be
given that any such assumption or the results of such
projections will be realized.
The DIP Note Agreement will contain affirmative covenants which
are customary and usual for financings in such circumstances,
subject to thresholds, limitations, exclusions and qualifications as
may be reasonably agreed by the DIP Note Purchasers and the Note
Parties, having regard to the Note Parties and their circumstances,
including without limitation:
(a)
delivery of Variance Reports in accordance with Section
22.
(b)
delivery to the DIP Note Purchasers' advisors (and any
Restricted DIP Note Purchasers) of weekly reports by the
Chief Financial Officer with respect to revenues, operating
expenses, asset sales, cost savings, key hires, and other
matters reasonably requested by DIP Note Purchasers'
advisors;
(c)
delivery to counsel to the DIP Note Purchasers, as soon as
practicable in advance of the commencement of the
Canadian Proceeding or filing with the Canadian Court, as
the case may be, of drafts of the Initial Orders, the Chapter
15 Order, the DIP Priority Orders, Plan, Plan Approval
Order, and all other proposed orders, motions, pleadings,
and other documents filed in or related to the Restructuring
Proceedings, and not filing any such document with the
Insolvency Courts without obtaining prior approval thereof
from such counsel;
(d)
provide access to the DIP Note Purchasers' advisors (and
any Restricted DIP Note Purchasers) and the CRO to
information (including historical information and books and
records) and personnel and facilitate (i) regularly scheduled
meetings as mutually agreed with senior management, the
Chief Financial Officer, and other company advisors and
- 22 -
0041
the DIP Note Purchasers' advisors (and any Restricted DIP
Note Purchasers) who shall be provided with access to all
infomlation they shall reasonably request and (ii) such
additional meetings as the DIP Note Purchasers (or their
advisors) shall reasonably request;
(e)
compliance in all material respects with applicable laws
(including without limitation, the CCAA, the Bankruptcy
Code, ERISA (or its equivalent), and environmental laws),
payment of taxes, maintenance of all necessary licenses and
permits and trade names, trademarks, patents, preserve
corporate existence, and maintenance of appropriate and
adequate insurance coverage;
maintenance of a cash management system acceptable in all
respects to the DIP Note Purchasers;
29. NEGATIVE
COVENANTS
(g)
maintenance of a minimum amount of Unrestricted
Operating Cash together with the amount of cash deposited
in the Cash Collateral Accounts of at least (i) $200 million
at any time prior to the completion of the Port Facility Sale
(in whole or in part) and (ii) $200 million plus the net cash
proceeds of the Port Facility Sale (in whole or in part) at
any time following the completion of the Port Facility Sale
(in whole or in part),
(h)
compliance with certain material contracts subject to a
materiality threshold to be agreed in the DIP Note
Agreement ("Material Contracts"); and
(i)
The Issuer and any applicable Note Parties shall achieve the
milestones set out in the RSA as in effect on the date of this
Term Sheet, without amendment (each a "Milestone" and
collectively the "Milestones").
The DIP Note Agreement will contain negative covenants which
are customary and usual for financings in such circumstances
subject to thresholds, limitations, exclusions and qualifications as
may be reasonably agreed by the DIP Note Purchasers and the Note
Parties, having regard to the Note Parties and their circumstances,
including without limitation:
(a)
the commencement or imposition of any insolvency
proceeding by or against any of the Note Parties, or any
other affiliate thereof, other than the Restructuring
Proceedings;
(b)
creating or permitting to exist any lien or encumbrance on
any Collateral, other than liens securing the DIP Notes and
any permitted lien reasonably agreed by the DIP Note
- 23 -
0C42
Purchasers in the DIP Note Documents;
(c)
creating or permitting to exist any other superpriority claim
that is pan passu with or senior to the claims of the DIP
Note Purchasers, except as provided herein;
(d)
except for the Permitted Asset Dispositions and the sale of
hydrocarbons in the ordinary course of business, disposing
of assets having a value in excess of $5,000,000;
(e)
modifying or altering (i) in any material manner the nature
and type of its business or the manner in which such
business is conducted or (ii) its organizational documents,
except as required herein or by the CCAA, the Bankruptcy
Code and applicable law in any ancillary jurisdiction, as
applicable:
(f)
paying, prepaying, redeeming, purchasing, or exchanging
any prepetition indebtedness or equity, or amending or
modifying any of the terms of any such prepetition
indebtedness or equity, except as expressly provided for in
the Cash Flow Projection, the Plan or pursuant to "first
day" or other orders entered in form and substance
acceptable to the DIP Note Purchasers or their counsel in
their sole discretion;
(g)
asserting any right of subrogation or contribution against
any of other Note Party until all borrowings under the DIP
Notes are paid in full in cash and teml inated:
(h)
merging or consolidating with any other person, changing
the corporate structure, or creating or acquiring new
subsidiaries, giving a negative pledge on any asset in favor
of any person other than the DIP Providers; or permitting to
exist any consensual encumbrance on the ability of any
domestic or foreign subsidiary to make loans, pay
dividends or other distributions to the Note Parties;
(i)
incurring or assuming any additional debt or contingent
obligations or giving any guarantee other than (i) the
Hedging Facility (if any), (ii) letters of credit secured on a
second lien basis (including the DIP LC Facility) in an
aggregate amount not to exceed $200 million, which letters
of credit may be secured by the Collateral on a pari passu
basis with the liens securing the DIP LC Facility (provided
that each financial institution providing any such letters of
credit on a pari passu basis with the liens securing the DTP
LC Facility shall become a party to the Intercreditor
Agreement on terms, including with respect to the exercise
of remedies, reasonably satisfactory to the DIP Note
Purchasers), (iii) unsecured letters of credit and (iv) cash
-24-
0043
collateralized letters of credit outstanding as of the Closing
Date and unsecured or cash-collateralized renewals or
extensions thereof and additional unsecured letters of
credit);
30. EVENTS OF
DEFAULT
(1)
making any loan, advance, capital contribution, or
acquisition, forming any joint venture or partnership, or
making any other investment in any subsidiary or other
person, subject to exceptions as may be agreed to in the
DIP Note Documents:
(k)
making or committing to make any payment in respect of
warrants, options, repurchases of stock, dividends, earn-out
payments, contingent payments, or any other distributions;
(1)
making, committing to make, or permitting to be made any
payment to any executive officer or director of any Note
Party, or any entity beneficially owned or controlled by
them or related to them, including parties described in the
related party note to Pacific's financial statements, or any
subsidiary thereof, other than normal course remuneration
and amounts owing or permitted under the KERP and any
other amounts included in the Cash Flow Projection and
specifically identified as payments to a related party;
(m)
without the p 1 for consent of the DIP Note Purchasers or
their counsel, making or permitting to be made any change
to the Initial Orders, the Chapter 15 Order or the DIP
Priority Orders or any other order of the Insolvency Courts
with respect to the DIP Notes or the charges or security
therefor; or
(n)
permitting any change in ownership or control of any Note
Party, or any subsidiary thereof, or any change in
accounting treatment or reporting practices, except as may
be required by U.S. generally accepted accounting
principles and as otherwise permitted by the DIP Note
Documents.
The DIP Note Agreement will contain events of default (each an
"Event of Default") customary and usual for financings in such
circumstances subject to thresholds, limitations, exclusions and
qualifications as may be reasonably agreed by the DIP Note
Purchasers and the Note Parties, having regard to the Note Parties
and their circumstances, including without limitation:
(a)
failure by the Issuer to pay any principal, interest or fees
payable pursuant to the DIP Note Documents;
(b)
failure by any Note Party to comply with any terms,
conditions, covenants or obligations contained in the DIP
- 25 -
0044
Note Documents;
(c)
any Note Party shall incur indebtedness to any other Note
Party that is not unsecured and expressly subordinated to
the DIP Obligations and evidenced by a note (which can be
a master note) in the form and substance satisfactory to the
DIP Note Purchasers, which note shall be assigned by way
of security and delivered to the DIP Collateral Agent
together with an allonge executed in blank in respect of
such note (including any master note);
(d)
the entry of an order (i) terminating, dismissing, staying,
vacating or amending in a manner adverse to the DIP Note
Purchasers (as determined in their sole discretion) any of
the Initial Orders, the Chapter 15 Order, the DIP Priority
Orders or the Plan, or dismissing any of the Restructuring
Proceedings or (ii) converting any of the Restructuring
Proceedings into receivership, bankruptcy, liquidation,
asset sale, distribution, or similar proceedings in any
jurisdiction, without the prior written consent of the DIP
Note Purchasers;
(e)
the filing of any pleading by any Note Party seeking, or
otherwise consenting to, any of the matters set forth in
clause (d) above or the granting of any other relief that if
granted would give rise to an Event of Default;
(f)
the Initial Orders, the Chapter 15 Order and the DIP
Priority Orders shall not have become Final Orders on or
before June 30, 2016 (or such later date as agreed to by the
DIP Note Purchasers), or there shall he a breach by any
Note Party of any provisions of the Initial Orders, the
Chapter 15 Order or the DIP Priority Orders (prior to such
orders becoming Final Orders), or the Final Orders shall
cease to be in full force and effect or shall have been
reversed, modified, amended, stayed, vacated or subject to
stay pending appeal, in the case of any modification or
amendment, without the prior written consent of the DIP
Note Purchasers;
(g)
if the requisite majority of creditors in each relevant
jurisdiction do not vote in favour of the Plan, or the Plan is
amended in a manner not acceptable to the DIP Note
Purchasers, or the RSA is terminated with respect to the
Company (as defined in the RSA) or becomes
unenforceable;
(h)
the Note Parties shall fail to meet any Milestone on the date
set out therefor;
-26-
(i)
the appointment of any receiver, receiver manager, interim
receiver, monitor (other than the monitor in connection
with the Canadian Proceeding and the Superintendencia),
liquidator, assignee, custodian, trustee, sequestrator or
other similar entity in respect of the Note Parties (or any of
their subsidiaries) or all or any part of their respective
property, assets or undertaking other than as approved by
the DIP Note Purchasers:
(1)
the entry of (i) an order in the Restructuring Proceedings
charging any Collateral (other than the DIP Liens) under
which any person takes action against the Collateral or that
becomes a final non-appealable order, or the
commencement of other actions or entry of other orders
that are adverse to the DIP Collateral Agent or the DIP
Note Purchasers or their respective rights and remedies
under the DIP Note Documents in any of the Restructuring
Proceedings or inconsistent with the DIP Note Documents,
the Initial Orders, the Chapter 15 Order or the DIP Priority
Orders, (ii) one or more final judgments, writs of execution,
garnishment or attachment representing a claim against any
Note Party or the Collateral that is not released, bonded,
satisfied, discharged, vacated, stayed or accepted for
payment by an insurer within thirty (30) days after their
entry, commencement or levy, (iii) an order granting relief
from any stay of proceeding (including, without limitation,
the automatic stay) so as to allow a third party to proceed
with foreclosure (or granting of a deed in lieu of
foreclosure) or other enforcement action against any asset
or (iv) any post-petition judgment against any Note Party,
in each case with a value in excess of $5 million (to the
extent not covered by insurance), in each case, other than
by or in respect of an Affected Creditor (as defined in the
Recapitalization Term Sheet);
(k)
other than the proceedings in progress as of the date hereof
and as contemplated under the Catalyst RSA (as defined in
the RSA), the commencement of any bankruptcy,
insolvency, restructuring, reorganization or similar
proceedings in any jurisdiction (other than the
Restructuring Proceedings) without the prior written
consent of the DIP Note Purchasers, except to the extent
that Meta Petroleum AG or Pacific E&P Holding Corp.,
respectively, file for insolvency proceedings pursuant to
sec. 293 et seq. of the Swiss Debt Enforcement and
Bankruptcy Act, which tiling may be commenced by the
board of directors of either company acting reasonably and
after consultation with the DIP Note Purchasers;
(1)
any DIP Lien shall cease to be (or shall be asserted by any
Note Party not to be) valid, perfected (if applicable) and
0045
- 27 -
0046
enforceable in all respects in any Restructuring Proceeding
or to have the priority contemplated under the DIP Priority
Orders and the Final Orders whether or not such DIP Lien
is created pursuant to such DIP Priority Orders or Final
Orders or pursuant to applicable security documents in each
relevant jurisdiction;
(m)
(i) except as set out in the DIP Order, the existence of any
claims, liens or charges, or the entry of any order or any
court authorizing any claims, liens or charges on any
Collateral, other than the DIP Liens or as otherwise
permitted under the applicable DIP Note Documents or (ii)
the granting of superpriority, priority or administrative
claim status to any claim in the Restructuring Proceedings
pari passu with or senior to the ranking of the DIP
Obligations (other than the Administrative Charge and the
KERP Charge) established under the DIP Priority Orders;
(n)
the Note Parties or any of their subsidiaries, shall obtain
court authorization to commence, or shall commence, join
in, assist or otherwise participate as an adverse pm l y in any
suit or other proceeding against the DIP Collateral Agent or
any of the DIP Note Purchasers relating to the DIP Note
Issuance;
(o)
a Transaction or a plan of arrangement or compromise
(other than the Plan) shall be confirmed in any of the
Restructuring Proceedings that has not been previously
consented to in writing by the DIP Note Purchasers, or the
Note Parties shall seek to approve or consummate any
Transaction or a plan of arrangement or compromise which
does not have the prior consent of the DIP Note Purchasers;
the filing of any motion by the Note Parties or their
subsidiaries in any of the Restructuring Proceedings
seeking authority to consummate, or support the
consummation of a sale of assets of the Note Parties or the
Collateral having a value in excess of $5 million outside the
ordinary course of business except for the Permitted Asset
Dispositions or unless otherwise permitted under the DIP
Note Documents or consented to by the DIP Note
Purchasers:
(q)
the cessation of all or any material part of the business
operations of the Note Patties and their subsidiaries (other
than the Piriri Rubiales contracts);
(r)
any Note Party shall make any payment of principal or
interest on account of any prepetition indebtedness other
than (i) amounts due to trade creditors in the ordinary
course of business and (ii) permitted termination and
- 28 -
-
severance payments due to employees and amounts owing
under the KERP, and (iii) taxes, accrued payroll and other
ordinary course liabilities, provided in each case that such
amounts are included in the Cash Flow Projection;
(s)
the existence of a cumulative adverse variance of 125% or
more in total disbursements (exclusive of joint-venture
funding and professional fees paid during such period) on
an aggregate basis from the projected amount of such
disbursements set out in the Cash Flow Projection in
respect of any Test Period;
(t)
the existence of a cumulative adverse variance of 130% or
more in total disbursements on an aggregate basis in respect
of joint-venture funding from the projected amount of such
joint venture funding set out in the Cash flow Projection in
respect of any Test Period:
(u)
the existence of a cumulative adverse variance of 125% or
more in total disbursements on an aggregate basis in respect
of professional fees (other than professional fees of the
advisors to the DIP Providers and the prepetition holders of
Notes and Bank Debt) from the projected amount of such
professional fees set out in the Cash Flow Projection in
respect of any Test Period: or
(v)
the Issuer or any of its direct or indirect subsidiaries or
affiliates (or any branch thereof) shall be declared subject
to (either voluntarily or involuntarily) (a) main insolvency
proceedings under Law 1116 or (b) proceedings under
chapter 11 of the Bankruptcy Code and, only if such
proceeding is an involuntary insolvency proceeding, it is
not dismissed within ten (10) calendar days of such
declaration, in each case without the consent of the DIP
Note Purchasers.
31.
REMEDIES
Upon the occurrence and during the continuance of any Event of
Default, the DIP Collateral Agent acting at the direction of the DIP
Note Purchasers, shall be free to exercise all rights, accelerate the
DIP Note Obligations and to take action with respect to the
Collateral, following an order of the Canadian Court upon five
days' notice to the Note Parties.
32.
EXPENSES AND
INDEMNITY
The Issuer will reimburse the DIP Collateral Agent and the DIP
Providers for the fees and expenses of (i) their financial advisors,
(ii) a single counsel in each relevant jurisdiction for the Plan
Sponsor, (iii) a single counsel in each relevant jurisdiction for each
of the DIP Note Purchasers (other than the Plan Sponsor), as a
group, the DIP LC Lenders (as a group) and the Hedging Provider
(provided that for the purposes of local security in jurisdictions
outside of Canada, Colombia and the United States, all DIP
0047
0048
- 29 -
Providers (other than the Plan Sponsor) shall use a single common
counsel), (iv) a single counsel in each relevant jurisdiction for the
prepetition holders of Notes, as a group and (v) a counsel in each
relevant jurisdiction for the holders of Bank Debt, as a group, all on
a full indemnity basis. The Issuer will reimburse the Monitor for the
fees and expenses of its counsel (on a full indemnity basis). All
such fees, disbursements and expenses shall be included in the DIP
Obligations and secured by the DIP Liens.
The Issuer agrees to indemnify and hold harmless the DIP
Collateral Agent, the trustee under the Indenture, the Amended
Indenture and the warrant indenture and any common depositary in
respect thereof, and any other similar service provider (together
with their respective partners, members directors, agents and
employees, each, an "Indemnified Party") in connection with the
DIP Notes and the Equity Warrants, in each case against any and all
losses, claims, damages or liabilities to any such person in
connection with the DIP Notes or as a result of any transactions
contemplated under by the DIP Note Issuance, the Plan and the
Restructuring Proceedings (whether or not such investigation,
litigation, claim or proceeding is brought by the Issuer, its equity
holders or creditors or any other party and whether or not any such
Indemnified Party is otherwise a parry thereto), except to the extent
that such loss, claim, damage or liability has been found by a final
non-appealable judgment of a court of competent jurisdiction to
have resulted from the gross negligence or willful misconduct of
such Indemnified Party in performing its obligations under the
relevant documents to which it is a party. The foregoing indemnity
shall have the benefit of the DIP Liens and any court order made in
respect thereof.
33. FURTHER
ASSURANCES
The Note Parties shall, from time to time do, execute and deliver, or
cause to be done, executed and delivered, all such further acts,
documents (including, without limitation, certificates, declamations,
affidavits, reports and opinions) and things as the DIP Note
Purchasers may reasonably request for the purpose of giving effect
to this Term Sheet, the DIP Note Documents and the DIP Liens.
34. ACTIONS BY DIP
NOTE PURCHASERS
Except as otherwise specifically set out in Section 25, any actions
taken or not taken, or consents, approvals, amendments or waivers
provided, by the DIP Note Purchasers under the DIP Note
Documents may be taken, delivered or provided upon the direction
of DIP Note Purchasers who hold DIP Note Purchase Commitments
in an aggregate principal amount greater than 66 2/3% of the
aggregate principal amount of all DIP Note Purchase
Commitments.
Notwithstanding the foregoing, without the consent of each DIP
Note Purchaser, no consent, approval, amendment or waiver shall
be made to the extent it has the effect of (A) extending the Outside
Date past the one-year anniversary of the Closing Date,
0049
-30-
(B) amending the time for payment of any DIP Obligations
(including any interest or fees), (C) waiving payment of any
interest, tees or other amounts owing under the DIP Notes or the
issuance or the Equity Warrants (other than a waiver or default
interest), (D) decreasing the amount of principal, interest or fees
payable in respect of the DIP Notes, (E) decreasing the amount or
amending the economic terms of, the Equity Warrants required to
be issued hereunder, (F) decreasing the interest rate on the Exit
Notes or (G) altering the call protection of the Exit Notes or
extending the Exit Maturity Date.
In addition to the foregoing requirements, no (i) increase in the
principal amount of DIP Notes, (ii) increase in interest or fees
payable in respect of the DIP Notes, (iii) increase in the amount of
Reorganized Common Stock issued pursuant to the exercise of
Equity Warrants or (iv) increase in the number of Equity Warrants
issued pursuant to the DIP Note Documents, shall be permitted
without the consent of the Issuer and the requisite majority of the
DIP Note Purchasers plus the consent of either (A) the Requisite
Consenting Creditors (as defined in the RSA) or (B) approval of the
Canadian Court.
35.
TRANSFER
The Note Parties may not transfer or assign their rights or
obligations under the DIP Note Documents (including the Equity
Warrants).
36.
CURRENCY
The DIP Notes shall be issued in United States Dollars and all DIP
Note Obligations shall be repaid by the Note Parties in United
States Dollars. All references to dollar amounts in this Term Sheet
are references to United States Dollars unless otherwise indicated.
37. GOVERNING LAW
This Term Sheet, the Commitment Letter in respect hereof and the
DIP Note Documents (other than local law guarantee and security
documents) shall be governed by the laws of the State of New
York.
0050
SCHEDULE "A"
EXIT NOTES TERM SHEET
1. EXIT ISSUER
The Reorganized Company (as defined in the Recapitalization
Term Sheet) (the "Exit Issuer").
2.
GUARANTORS
Same as under the DIP Notes.
3.
EXIT NOTE
PURCHASERS
DIP Note Purchasers other than the Plan Sponsor (the "Exit
4.
EXIT COLLATERAL
AGENT
Same as DIP Collateral Agent.
5.
EXIT FINANCING AND
EQUITY CONVERSION
The Creditor DIP Notes shall become evidenced by the Exit
Notes (the "Exit Notes") and shall be governed by the Amended
Indenture. On the Exit Dare, the Plan Sponsor may exercise its
rights conferred on it under the Plan Sponsor Notes to exchange
the Plan Sponsor Notes for 12.5% of the Reorganized Common
Stock (subject to dilution pursuant to the Management Incentive
Plan), failing which exercise the Plan Sponsor Notes will be
mandatorily exchanged for 12.5% of the Reorganized Common
Stock (subject to dilution pursuant to the Management Incentive
Plan). The DIP LC Facility (if any) will become a two (2) year
facility (starting as of the Closing Date) on terms and conditions
acceptable to the DIP Note Purchasers (the "Exit LC Facility").
37.
CONDITIONS
PRECEDENT TO EXIT
NOTES
The Exit Notes will be subject to customary and usual conditions
precedent, including (i) maintenance of a minimum amount of
Unrestricted Operating Cash together with the amount of cash
deposited in the Cash Collateral Accounts of at least (A) $200
million at any time prior to the completion of the Port Facility
Sale (in whole or in part) and (B) $200 million plus the net cash
proceeds of the Port Facility Sale (in whole or in part) at any
time following the completion of the Port Facility Sale (in whole
or in pafi), (ii) achievement (or waiver in accordance with the
DIP Note Documents) of each Milestone required to be achieved
on or prior to the Exit Date and (iii) the implementation of the
Plan (including satisfaction of all conditions precedent thereto)
or such other plan as has been consented to by the Plan Sponsor
and the Exit Note Purchasers.
38.
DEFINITIVE
DOCUMENTATION
The Exit Notes shall be governed by the Amended Indenture,
and (i) the Reorganized Company shall use its commercially
reasonable best efforts to obtain a rating within 10 business days
after the Exit Date, (ii) on or prior to the Exit Date, the Company
shall have prepared a draft prospectus (subject to the inclusion of
such additional information, including additional financial
information and pro forma statements reflecting the
reorganization of the Company that was not reasonably available
Note Purchasers").
-2-
0 T5 1
for inclusion therein prior to the Exit Date, as may be required
by the competent authority of the Euro MTh') for the purpose of
applying for the listing of the Exit Notes on the Official List of
the Luxembourg Stock Exchange); (iii) no later than 1 0 business
days after the later of the Exit Date or the availability of the
additional required information as set out in item (ii), the
Reorganized Company shall have applied for the listing of the
Exit Notes on the Official List of the Luxembourg Stock
Exchange and to trade them on the Euro MTF Market of such
exchange, (iv) the Reorganized Company will use its
commercially reasonable best efforts to obtain and maintain such
listing of the Exit Notes on the Official List of the Luxembourg
Stock Exchange, tailing which, it will use its commercially
reasonable best efforts to promptly obtain and maintain an
alternative listing of the Exit Notes on an equivalent unregulated
stock exchange acceptable to the holders of the Exit Notes and
(v) certain terms of the documents with respect to the
Restructuring Proceedings shall not apply following the
completion of, and emergence of the Reorganized Company
from, the Restructuring Proceedings.
The Amended Indenture shall govern the Exit Notes provided
that those terms of the DIP Note Agreement relating to the
Restructuring Proceedings and other matters and covenants
relating specifically thereto shall not apply following the
completion of, and emergence of the Reorganized Company (as
defined in the Recapitalization Term Sheet) from, the
Restructuring Proceedings.
8. INTEREST AND
DEFAULT INTEREST
Interest shall be payable in cash on the aggregate amount of
outstanding obligations under the Exit Notes at a rate equal to
10% per annum, compounded monthly and payable monthly in
arrears in cash on the last business day of each month. Upon the
occurrence and during the continuation of an Event of Default,
all amounts shall bear interest at the applicable interest rate plus
2% per annum payable on demand in arrears in cash.
On and after the Exit Date, for a period of not less than two (2)
years following the Exit Date (or such longer period as may be
agreed by each of the Exit Note Purchasers in its sole
discretion), to the extent that the Company's Unrestricted
Operating Cash (to be defined in the Amended Indenture) is less
than $150 million, at the Company's election, it shall have the
option to make "payments-in-kind" with respect to any interest
payment owed on the principal amount of the Exit Notes
provided that any such "payment-in-kind" interest shall be at a
rate of 14% per annum.
9.
EXIT MATURITY DATE
The Exit Notes will mature five years after the Exit Date (the
"Exit Maturity Date"), provided that the Exit Issuer may
redeem at any time following the third anniversary of the Exit
-3-
Date, subject to the following redemption premiums:
(a)
following the third anniversary of the Exit Date up to
and including the fourth anniversary of the Exit Date,
105% of the aggregate principal amount of the Exit
Notes; and
(b)
following the fourth anniversary of the Exit Date up to
and including the fifth anniversary of the Exit Date,
102.5% of the aggregate principal amount of the Exit
Notes.
10. SECURITY
The DIP Liens shall continue to secure the obligations under the
Exit Notes and any outstanding hedging contracts under the
Hedging Facility (if any) on the Exit Date until expiry thereof,
and the refinanced DIP LC Facility (if any) which shall continue
to rank second behind the Exit Notes.
11.
REPRESENTATIONS
AND WARRANTIES
Same as DIP Note Documents, subject to such amendments as
may be agreed and provided that certain terms of the DIP Note
Documents with respect to the Restructuring Proceedings shall
not apply following the completion of, and emergence of the
Reorganized Company from, the Restructuring Proceedings.
12.
AFFIRMATIVE,
NEGATIVE AND
FINANCIAL
COVENANTS
Same as DIP Note Documents, subject to such amendments as
may be agreed and provided that (i) certain terms of the DIP
Note Documents with respect to the Restructuring Proceedings
shall not apply following the completion of, and emergence of
the Reorganized Company from, the Restructuring Proceedings
and (ii) the Exit Notes shall contain restrictions on incurrence of
debt and liens (permitting the funded debt set out in Section 13
below) on terms to be agreed between the Issuer and the DIP
Note Purchasers and (iii) the Amended Indenture shall permit
the Note Parties to merge, amalgamate, consolidate, wind-up
into or transfer assets to any other Note Party on terms and
conditions to be reasonably agreed between the DIP Note
Purchasers (including the Plan Sponsor) and the Reorganized
Company.
13.
OTHER FUNDED DEBT
After the Exit Date, in addition to the Exit Notes and the Exit LC
Facility, the Note Parties will not be pemlitted to incur any
indebtedness that ranks senior to or pari passu with the Exit
Notes but shall be entitled to incur (i) unsecured hedging
obligations (subject to the DIP Liens continuing to secure the
outstanding hedging contracts under the Hedging Facility (if
any) on the Exit Date until expiry thereof), (ii) unsecured letters
of credit, (iii) letters of credit secured on a second lien basis
(including the Exit LC Facility) in an aggregate amount not to
exceed $200 million, which letters of credit may be secured by
the Collateral on a pari passu basis with the liens securing the
Exit LC Facility (provided that each financial institution
-4-
0053
providing any such letters of credit on a pari passu basis with
the liens securing the Exit LC Facility shall become a party to
the Intercreditor Agreement on terms, including with respect to
the exercise of remedies, reasonably satisfactory to the Exit Note
Purchasers), (iv) cash collateralized letters of credit outstanding
as of the Closing Date and unsecured or cash-collateralized
renewals or extensions thereof and (v) unsecured debt with a
maturity date that is at least 90 days following the maturity of
the Exit Notes.
14.
EVENTS OF DEFAULT
Same as DIP Note Documents, subject to such amendments as
may be agreed and provided that certain terms of the DIP Note
Documents with respect to the Restructuring Proceedings and
the Plan shall not apply following the completion of, and
emergence of the Reorganized Company from, the Restructuring
Proceedings.
15.
ACTIONS BY EXIT
NOTE PURCHASERS
Any actions taken or not taken, or consents, approvals,
amendments or waivers provided, by the Exit Note Purchasers
under the Amended Indenture may be taken, delivered or
provided upon the direction of Exit Note Purchasers who hold
Exit Notes in an aggregate principal amount greater than 66%%
of the aggregate principal amount of all Exit Notes.
Notwithstanding the foregoing, without the consent of each Exit
Note Purchaser, no consent, approval, amendment or waiver
shall be made to the extent it has the effect of (A) increasing the
amount of the Exit Notes, (B) amending the time for payment of
any obligations under the Exit Notes (including any interest or
fees), (C) waiving payment of any interest, fees or other amounts
owing under the Exit Notes (other than a waiver of default
interest), (D) decreasing the interest rate on the Exit Notes,
(E) amending any provision with respect to the payment of
interest "in-kind" or (F) altering the call protection of the Exit
Notes or extending the Exit Maturity Date.
16.
GOVERNING LAW
New York.
0054
SCHEDULE "B"
DIP AND NOTE PURCHASER COMMITMENTS
[Excluded]
0055
SCHEDULE "C"
RECAPITALIZATION TERM SHEET
[Attached]
0056
SCHEDULE "D"
SECURITY DOCUMENTS
Colombia
1.
Guarantee Trust Agreement establishing a fiducia in favour of the DIP Collateral Agent
into which all Colombian assets of the Note Parties will be transferred, other than such
contractual rights which require counterparty consent. The Guarantee Trust Agreement
will be registered before the Movables Guarantees Registry (Registro de Garantias
Mobiliarias) managed by the Confederation of Chambers of Commerce (Confederacion
de Carnaras de Comercio Confecamaras) (the "MGR"). This will include, among other
things, accounts in the name of the fiduciaria into which all Colombian receivables will
be directed.
2.
Commercial Establishment Pledge Agreement over all present and future movable assets
which will be registered before the MGR.
3.
Conditional Assignment of Economic Rights under Contracts which will be registered
before the MGR.
4.
Account Control Agreements (or local equivalents) over all accounts of the Note Parties.
The Account Control Agreements will be registered before the MGR.
5.
Share pledge agreements over the shares or Agrocascada S.A.S. and any other Note Party
formed under Colombian law, which share pledge agreements will be registered before
the MGR and in the relevant Note Party's stock-ledger.
Canada
1.
General security agreement over all Canadian assets of each applicable Note party which
will be registered in the personal property security registries of British Columbia, Ontario
and any other province in which Canadian assets of a Note Party are located.
2.
The parties will establish one or more Cash Collateral Accounts which shall be subject to
a sole-dominion account control agreement in favour of the DIP Collateral Agent.
3.
Springing-dominion account control agreements will be entered in respect of all other
Canadian bank accounts.
Other jurisdictions
1.
Equity pledge agreements in each jurisdiction (other than Canada and Colombia) in
which a Note Party is organized (Switzerland, Netherlands, Luxembourg, Panama,
Barbados, Peru, Bermuda and British Virgin Islands).
2.
Springing-dominion account control agreements will be entered into in each jurisdiction
in which jurisdiction outside of Canada in which the Note Parties have material bank
accounts to which receivables are deposited (e.g. proceeds of foreign crude oil sales).
-2-
3.
-
0057
Additional security documents as reasonably required in each jurisdiction in which a
Note Party has material assets (if any), including, without limitation specific pledge
agreements over all equity interests, notes and other interests and investments held in any
subsidiaries of the Note Parties (including joint ventures and non-wholly owned
subsidiaries).
"Initial Collateral" means (i) all Collateral owned by any Note Party located in Canada and the
United States, (ii) all Collateral located in Colombia owned by each of Meta Petroleum AG
(including its Colombian Branch), Pacific Stratus Energy Colombia Corp. (including its Colombian
branch), Grupo C&C Energia (Barbados) Ltd. (including its Colombian branch), Petrominerales
Colombia Corp. (including its Colombian branch) and Agro Cascada S.A.S., (iii) all Collateral owned
by each entity in item (ii) located in its jurisdiction of organization, (iv) an assignment of all
intercompany debt owed by or owing to each entity in item (ii) validly perfected in Colombia and in
such entity's jurisdiction of organization (v) a pledge of the stock or other equity interests in each
entity in item (ii), (vi) a pledge of the stock or other equity interests in each of Pacific E&P Holdings
Corp. and Pacific E&P International Holdings, S.a.r.l., Pacific Infrastructure Ventures Inc., Pacinfra
Holding Ltd., Pacific Midstream Holding Corp. and Pacific Midstream Ltd. and (vii) a pledge of
stock of, and a pledge of all assets of, any direct or indirect wholly-owned subsidiary of the Issuer
holding material cash deposits or intercompany claims.
"Subsequent Collateral" means all Collateral other than the Initial Collateral.
Three Allen Center
333 Clay Street
Suite 3500
Houston, TX 77002
713.615.7400
58
May 9, 2016
BY ELECTRONIC MAIL
Pacific Exploration and Production Corporation
333 Bay Street, Suite 1100
Toronto, Ontario M5H 2R2
Attn: Board of Directors
With a copy to:
PricewaterhouseCoopers Inc.
PwC Tower
18 York Street, Suite 2600
Toronto, Ontario M5J OB2
Attn: Greg Prince
RE:
PACIFIC EXPLORATION AND PRODUCTION CORPORATION
Ladies and Gentlemen:
EIG Management Company, LLC (on behalf of one or more funds, accounts or companies that it
manages, including Harbour Energy Ltd., collectively, "EIG") is pleased to submit the following
binding proposal (the "Proposal") relating to a proposed restructuring of Pacific Exploration
and Production Corporation (with its various affiliates, the "Company"), including the binding
commitment to provide DIP financing as provided herein.
The terms of the Proposal are set forth below and in the Recapitalization — Summary of Terms
and the Secured DIP and Exit Financing Facility — Summary Term Sheet attached hereto as
Exhibit A (collectively, the "Term Sheet"), the terms and conditions of which are incorporated
fully into our Proposal by reference. No change to the Term Sheet or this Proposal shall be
made without EIG's consent, in its sole discretion. Capitalized terms used but not defined
herein have the respective meanings given them in the Term Sheet.
As detailed herein, the Proposal contemplates the provision of $500.0 million of post-petition
financing for the Restructuring Proceedings, which EIG has committed to provide on an
expedited basis, subject to the terms and conditions hereof, together with an additional $75
million of financing to be contributed at the consummation of the Restructuring Proceedings.
We firmly believe that consummation of the Proposal, on the terms hereof, is in the best
interests of the Company having regard to the reasonable expectations of the holders of
Company Claims (as such term is defined in the restructuring support agreement among, inter
alia, the Company and The Catalyst Capital Group Inc. ("Catalyst")).
-2-
•
0059
Commitment
In connection with the Restructuring Proceedings contemplated hereby, EIG hereby commits to
purchase the entire amount of the DIP Notes upon the terms set forth in this commitment letter
and the Term Sheet (the "EIG Commitment"); provided that the parties hereby agree that the
EIG Commitment shall be reduced by the amount of applicable DIP Note Purchase
Commitments actually funded by any other DIP Note Purchasers, up to the amount of $250.0
million, under the DIP Notes on the Closing Date. Each of the parties hereto agrees that this
commitment letter (including the EIG Commitment) is a binding and enforceable agreement
with respect to the subject matter contained herein, including a binding and enforceable
agreement to negotiate the DIP Note Documents in good faith.
II.
Identity of Investor.
As set forth in greater detail in the Term Sheet, the DIP Notes shall be fully purchased by us,
together with those other DIP Note Purchasers (if any) that participate up to the amount of
$250.0 million, on the Closing Date, subject to our backstop of such other DIP Note Purchasers'
DIP Note Purchase Commitments.
We are willing and able to purchase the entirety of the DIP Note Purchase Commitments
through immediately available, internal sources.
III.
Transaction Structure.
As set forth in greater detail in the Term Sheet the Proposal contemplates making proceeds of
the first priority, perfected, all-assets senior priming lien DIP Notes available to the Issuer
following the commencement of the Restructuring Proceedings, subject to the Milestones and
other terms and conditions of the Term Sheet.
The Proposal further contemplates the conversion of the DIP Note Obligations at exit into
equity in the Reorganized Company, exit financing, or both, pursuant to the Plan, as described
in greater detail below under "Pro Forma Capital Structure; Stakeholder Treatment."
IV.
New Investment.
EIG also understands there will be a DIP LC Facility, to be provided by the DIP LC Lenders, in
connection with the Company's letters of credit. As set forth in greater detail in the Term Sheet,
the DIP Notes and the DIP LC Facility will be made available, in accordance with and subject to
the Cash Flow Projection then in effect, for: (i) general corporate and working capital purposes,
including, for the avoidance of doubt, (x) letters of credit necessary to the Company's
operations, as identified by the Company and agreed to by the DIP Note Purchasers and
(y) satisfaction of claims of certain prepetition creditors, as provided in the Term Sheet; (ii) the
payment of restructuring costs, including a key employee retention plan approved by the
Independent Committee of the Board of Directors of the Company and agreed to by the DIP
Note Purchasers; and (iii) the payment of the fees, costs and expenses related to the DIP Notes
and DIP LC Facility. For the avoidance of doubt, subject to the Cash Flow Projection then in
effect, all trade creditors would be paid in full.
-3V.
-
0060
Pro Forma Capital Structure; Stakeholder Treatment.
As set forth in greater detail in the Term Sheet, the Proposal contemplates the following
treatment of the DIP Note Obligations and other claims against and interests in the Company
under the Plan:
•
The DIP Note Purchasers, as a whole, will be entitled to 25.0% of the common equity of the
Reorganized Company (i.e., common shares or nominal strike price warrants) upon exit;
•
In addition, the $250.0 million in DIP Note Obligations to be provided by EIG will be
exchanged pursuant to the terms of the Plan Sponsor Notes for 12.5% of the Reorganized
Common Stock;
•
EIG will forgo any fee for its agreement to backstop the DIP Note Purchase Commitments;
•
In addition, the $250.0 million in DIP Note Obligations contemplated to be provided by the
Company's prepetition lenders and/ or bondholders will convert into $250.0 million in fiveyear, 10.0% post-exit notes (with three-year no-call protection);
•
The Company's prepetition loan and/ or bond obligations will convert into the remaining
common equity of the Reorganized Company pro rata;
•
EIG will contribute $75.0 million of cash to the Reorganized Company upon the
consummation of the Restructuring for no additional consideration , with $25.0 million
thereof being to compensate the Company for payment of any break fee payable in
connection with agreements between the Company and Catalyst;
•
The Company's trade and commercial obligations will be paid in the ordinary course during
the Restructuring Proceedings and, to the extent unpaid, assumed by the Reorganized
Company; and
•
Pacific's current equity interests will be cancelled or diluted to a nominal amount, with no
distribution made thereon.
In addition to the above, up to 10.0% of the equity of the Reorganized Company will be
allocated to management pursuant to the Management Incentive Plan (as described in the Term
Sheet), diluting the equity distributions discussed above, subject to a three-year vesting period
(on terms and conditions to be discussed, including without limitation appropriate performance
hurdles).
EIG agrees to provide an additional equity facility of at least $200.0 million (backstopped by
EIG) and up to $400.0 million with funding participation by creditors and shareholders of the
Company to enable the Note Parties to offer, pursuant to the Plan, affected creditors the option
to elect to receive cash in lieu of common shares. The purchase price for the election and the
subscription price payable by EIG shall both be based on the implied pre-money equity
valuation of the Reorganized Company equal to $800 million.
-4VI.
Financing.
0061
As noted above, although the Proposal contemplates the purchase of up to $250.0 million of DIP
Notes by DIP Note Purchasers other than EIG, EIG hereby commits to fully purchase the
entirety of the DIP Notes and backstop such other DIP Note Purchasers' DIP Note Purchase
Commitments.
VII.
Definitive Agreement.
The Proposal contemplates that the DIP Notes will be evidenced by the DIP Note Agreement
and the other DIP Note Documents, all satisfactory to us in our sole discretion and as more
specifically set forth in the Term Sheet. We agree to work with the Company in good faith
regarding DIP Notes collateral issues (but, for the avoidance of doubt, all such issues shall be
addressed in a manner satisfactory to us in our sole discretion).
VIII.
Approvals; Conditions.
We require no further internal approval with respect to the Proposal.
IX.
Access to Information and Management.
We submit the Proposal with understanding that the Company and its advisors will continue to
work to provide us and our advisors reasonable access to requested information and
management.
X.
Due Diligence.
Although the Proposal is subject to our continued access to such information, for the avoidance
of doubt, the Proposal is not conditioned on the completion of any further due diligence.
XI.
Acting as Principal.
We hereby confirm that we are acting alone and not in conjunction with, or as agent or broker
for, any other party (other than funds managed or advised by us).
We further confirm and represent (acknowledging that the Company is relying on this
representation in entering into this letter agreement) that no existing director or officer of any
Note Party is an investor in or limited partner of EIG.
Arrangements or understandings that we have reached with the Company's various
stakeholders, if any, relate solely to the treatment of claims and interests and solely on the terms
set forth in the Term Sheet.
XII.
Contact Details.
Communications with us with respect to the Proposal may be directed to: EIG Management
Company, LLC
-51700 Pennsylvania Avenue, NW
Suite 800
Washington, District of Colombia 20007
A
0062
t: Benjamin Vinocour
[email protected]
(202) 600-3323
With a copy to our legal counsel:
Stikeman Elliott LLP
5300 Commerce Court West
199 Bay Street
Toronto, Ontario M5L 1B9
Attn: Jeffrey Singer and David Byers
[email protected] / [email protected]
(416) 869-5289 / (416) 869-5697
XIII. Acceptance Period; Firm Offer.
The Proposal and commitments herein shall remain open until 5:00 p.m. (Eastern time) on May
31, 2016 and, if accepted, continue, subject to the prompt termination of the Catalyst RSA and
the commencement of the Restructuring Proceedings on or before the date that is one week
following the date of acceptance of the Proposal; provided, however, that the Proposal shall
automatically terminate upon the Company's acceptance of any alternate proposal.
XIV. No Shop.
The Company agrees to work in good faith expeditiously towards a closing. The Company
agrees that it will not, for a period of ten weeks from the date these terms are accepted, take any
action to solicit, initiate, encourage or assist the submission of any proposal, negotiation or offer
from any person or entity other than the undersigned relating to the restructuring of the
Company including, without limitation, any recapitalization and/or disposition of the
Company or any material part of the stock or assets of the Company, and shall notify the
undersigned immediately of any inquiries by third parties in regards to the foregoing.
XV.
Break-Up Fee/Expenses.
Upon execution hereof, should the transactions contemplated hereby not timely be effected for
any reason including, without limitation, the Company enters into any alternative DIP facility
and/or any alternative transaction whatsoever, then, the Company immediately shall pay to
EIG in cash an amount equal to five percent (5.0%) of $500.0 million (the "Break-Up Fee"), less
the up-to 40.0% portion of the Break-Up Fee payable to other DIP Note Purchasers, all in
accordance with the Term Sheet.
The Company shall pay, upon execution hereof, and thereafter not less than every fifteen (15)
days, all of EIG's out-of-pocket expenses (x) associated, in any way, with the preparation,
negotiation, execution and delivery of this Proposal, or otherwise associated with the
-6-
0063
preparation, negotiation, execution, delivery and administration of the DIP Note Documents or
any amendment or waiver with respect thereto and (y) incurred by FIG in connection with the
Restructuring Proceedings, in all instances including the fees, costs, disbursements and
expenses of EIG (including attorneys' fees, costs and expenses and other professional fees and
disbursements).
XVI. Miscellaneous.
Subject to the backstop discussed herein, the parties hereto may not assign the Proposal or any
part thereof. Any such purported assignment shall be void ab initio.
The Proposal was prepared for, and is intended to be solely for the benefit of the Company.
Nothing contained herein or in the Term Sheet is intended to or shall confer any benefit on, or
create any right in favor of, any person (including, without limitation, any creditor or other
stakeholder or constituent of the Company) other than the Company itself.
The Company agrees to indemnify and hold harmless EIG, its affiliates, and such affiliates'
partners, members, directors, agents, employees, and controlling persons (if any) (each, an
"Indemnified Person") against any and all actual losses, claims, damages or liabilities to any
such Indemnified Person in connection with or as a result of this commitment letter or the
transactions contemplated hereunder (whether or not such investigation, litigation, claim or
proceeding is brought by you, your equity holders or creditors or an Indemnified Person and
whether or not any such Indemnified Person is otherwise a party thereto), except to the extent
that such loss, claim, damage or liability is found by a final, non-appealable judgment of a court
of competent jurisdiction to have resulted from (a) the gross negligence or willful misconduct of
such Indemnified Person or (b) a material breach of the obligations of such Indemnified Person
under this commitment letter.
You agree that no Indemnified Person shall have any liability (whether direct or indirect, in
contract, tort or otherwise) to the Company for or in connection with the transactions
contemplated hereby, except to the extent such liability is found by a final, non-appealable
judgment of a court of competent jurisdiction to have resulted from (a) the gross negligence or
willful misconduct of such Indemnified Person or (b) a material breach of the obligations of
such Indemnified Person under this commitment letter.
In no event will any party hereto be liable on any theory of liability for any indirect,
consequential, special or punitive damages (including, without limitation, any loss of profits,
business or anticipated savings) in connection with or as a result of such party's or such other
parties' activities related to this proposal letter.
THIS AGREEMENT IS GOVERNED BY AND SHALL BE INTERPRETED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE
PARTIES HERETO AGREE THAT, FOR THE DURATION OF THE RESTRUCTURING
PROCEEDINGS, THE CANADIAN COURT SHALL HAVE THE EXCLUSIVE JURISDICTION
OF ALL MATTERS RELATING TO THE ENFORCEMENT OF THIS PROPOSAL.
-7Please'indicate your acceptance of the Proposal, on the terms hereof, by signing below.
Very truly yours,
EIG Management Company, LLC
By:
Name: R. Blair Thomas
Chairman and Chief Executive Officer
Title:
By:
Name: Linda Z. Cook
Managing Director and Chief
Title:
Executive Officer of Harbour Energy
Ltd.
Accepted and agreed to by:
Pacific Exploration and
Production Corporation,
on behalf of itself and all other Note Parties
By:
Name:
Title:
D064
Exhibit A
See next page.
0065
0066
SECURED DIP AND EXIT FINANCING FACILITY — SUMMARY TERM SHEET
(the "Term Sheet")
U.S. $500 million secured term note facility (the "DIP Note Issuance")
1.
CONFIDENTIALITY
The Issuer (as defined below) agrees that it shall not disclose this
Term Sheet to any person without the prior written consent of the
DIP Note Purchasers (as defined below), except to (i) the Issuer's
and the other Note Parties' directors, senior officers, professional
advisors and (ii) the DIP LC Lenders and their professional advisors
and (iii) the professional advisors of Bank of America, N.A., as
agent under that certain Revolving Credit and Guaranty Agreement
dated as of April 30, 2014 among Pacific, Bank of America, N.A.
as administrative agent, and the lenders and guarantors party
thereto, on a confidential basis, in each case unless required to be
disclosed by law or by a regulatory authority (including a stock
exchange on which the Issuer's shares are listed). Additionally, this
Term Sheet may be disclosed to the extent required to be filed with
a court in connection with any Restructuring Proceedings (as
defined below).
2.
SUBJECT TO
DEFINITIVE
DOCUMENTATION
$500 million of debtor-in-possession senior secured notes (the
"DIP Notes") will be issued pursuant to an indenture (the
"Indenture") and a note purchase agreement (the "NPA" and
together with the Indenture, collectively, the "DIP Note
Agreement"). The offer of debtor-in possession financing
contemplated herein is subject to the execution of the DIP Note
Agreement and other definitive documents related thereto
(collectively, the "DIP Note Documents"). The DIP Notes will be
issued in two separate series: (i) senior secured notes in a principal
face amount of $250 million (defined below) (the "Creditor DIP
Notes") and (ii) senior secured notes in a principal face amount of
$250 million, to be issued to the Plan Sponsor (the "Plan Sponsor
Notes") and which, on the Exit Date, the Plan Sponsor may
exchange for 12.5% of the Reorganized Common Stock (as defined
in the Recapitalization Term Sheet and subject to dilution pursuant
to the Management Incentive Plan (as described in the
Recapitalization Term Sheet)), failing which exercise the Plan
Sponsor Notes will be mandatorily exchanged for 12.5% of the
Reorganized Common Stock (subject to dilution pursuant to the
Management Incentive Plan).
The DIP Notes shall be centrally held through DTC and/or
Euroclear or a similar indirect holding system, and (i) the Issuer
shall use commercially reasonable best efforts to obtain a rating
within 10 business days after the Exit Date, (ii) on or prior to the
Exit Date, the Issuer shall have prepared a draft prospectus (subject
to the inclusion of such additional information, including additional
financial information and pro forma statements reflecting the
reorganization of the Issuer that was not reasonably available for
inclusion therein prior to the Exit Date, as may be required by the
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OiJ67
competent authority of the Euro M IF) for the purpose of applying
for the listing of the Exit Notes on the Official List of the
Luxembourg Stock Exchange): (iii) no later than 10 business days
after the later of the Exit Date or the availability of the additional
required information as set out in item (ii), the Issuer shall have
applied for the listing of the Exit Notes on the Official List of the
Luxembourg Stock Exchange and to trade them on the Euro MTF
Market of such exchange and (iv) the Issuer will use its
commercially reasonable best efforts to obtain and maintain such
listing of the Exit Notes on the Official List of the Luxembourg
Stock Exchange, failing which, it will use its commercially
reasonable best efforts to promptly obtain and maintain an
alternative listing of the Exit Notes on an equivalent unregulated
stock exchange acceptable to the holders of the Exit Notes.
The Indenture shall be based on the form of indenture dated as of
September 19, 2014 between Pacific Rubiales Energy Corp. (as
predecessor to Pacific (as defined below), as issuer and The Bank of
New York Mellon, as trustee (the "Form of Indenture") subject to
such changes, which will be substantial as are required to give
effect to this Term Sheet and having regard to the Note Parties'
financial situation, the Restructuring Proceedings and the secured
nature of the DIP Notes and such other changes as the DIP Note
Purchasers may reasonably require. The covenants in the Indenture
shall contain such thresholds, limitations, qualifications and baskets
as may be acceptable to the DIP Note Purchasers.
The Indenture shall govern the DIP Notes and may be amended and
restated or otherwise replaced (such amended, restated or replaced
Indenture being, the "Amended Indenture") and the Amended
Indenture shall thereafter govern the Exit Notes (as defined in
Schedule "A") provided that those terms of the DIP Note
Agreement relating to the Restructuring Proceedings (as defined
below) and other matters and covenants relating specifically thereto
shall not apply following the completion of, and emergence of the
Reorganized Company (as defined in the Recapitalization Term
Sheet (as defined below)) from, the Restructuring Proceedings and,
to the extent reasonably practicable and acceptable to the DIP Note
Purchasers, such matters and covenants shall be contained in the
NPA.
3.
DIP LC FACILITY
AND HEDGING
An additional second-lien secured letter of credit facility in an
amount of up to $134 million on terms and conditions acceptable to
the DIP Note Purchasers (the "DIP LC Facility") may be provided
by certain of the existing bank lenders (collectively, together with
their successors and assigns, the "DIP LC Lenders").
A secured first-lien hedging facility with respect to up to 60% of the
production of the Issuer and its affiliates, or such other amount to
be agreed by the DIP Note Purchasers (the "Hedging Facility")
may be provided by a bank acceptable to the DIP Note Purchasers
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0068
(the "Hedge Provider"). Any hedges that extend beyond the
Outside Date require the consent of the New Board (as defined in
the Recapitalization Term Sheet).
4.
ISSUER
Pacific Exploration & Production Corporation ("Pacific" or the
"Issuer").
5.
GUARANTORS
Meta Petroleum AG, Pacific E&P Holdings Corp., Pacific E&P
International Holdings, S.a.r.l., Pacific Global Capital, S.A., Pacific
Stratus International Energy Ltd., Pacific Guatemala Energy Corp.,
Pacific Rubiales Guatemala, S.A., Pacific Rubiales PNG Limited,
Pacific Brasil Exploracao e Producao de Oleo e Gas Ltda., Pacific
Stratus Energy S.A., Pacific Marketing International Corp., Pacific
Stratus Energy Colombia Corp., Pacific Off Shore Peru S.R.L,
Pacific Stratus Energy del Peru S.A., Petrominerales Peru Ltd.,
Petro International Ltd., Petrominerales Bermuda Ltd.,
Petrominerales Colombia Corp., C&C Energia Holding SRL Grupo
C&C Energia (Barbados) Ltd., PRE Corporate Services Corp.,
PRE-PSIE Cooperatief U.A., Pacific Midstream Holding Corp.,
Pacinfra Holding Ltd., Major International Oil S.A. and Agro
Cascada S.A.S., and any other wholly owned subsidiaries of the
Issuer as may be reasonably required by the DIP Note Purchasers
(collectively the "Guarantors"). To the extent permitted by
applicable law, all obligations of the Issuer will be unconditionally
guaranteed jointly and severally by the Guarantors and the
obligations of each Issuer will be guaranteed by the other Issuer.
Notwithstanding the foregoing, the Issuer agrees that, to the extent
required by the DIP Note Purchasers and permitted under Swiss
law. Meta Petroleum AG agrees to (i) borrow money from another
Note Party pursuant to secured intercompany notes in an amount to
be agreed with the DIP Note Purchasers (which secured
intercompany notes shall be pledged to the DIP Collateral Agent),
(ii) to the extent the structure described in clause (i) is not
reasonably practicable, to become a co-issuer of the DIP Notes
and/or (iii) otherwise structure its affairs and obligations under the
DIP Notes in a manner reasonably satisfactory to the DIP Note
Purchasers.
The Issuer and the Guarantors are collectively referred to herein as
the "Note Parties" and each a "Note Party".
6.
DIP NOTE
PURCHASERS
The entire amount of the Plan Sponsor Notes will be purchased by
EIG Pacific Holdings Ltd. (together with its successors and
permitted assigns, the "Plan Sponsor") and the entire amount of
the Creditor DIP Notes will be purchased by the parties listed in
confidential Schedule "B" attached hereto (or funds managed or
administered by such parties) (each such party together with its
successors and assigns, and in the case of the Plan Sponsor,
successors and permitted assigns, a "DIP Note Purchaser", and
collectively the "DIP Nate Purchasers" and together with the DIP
LC Lenders and the Hedge Provider, collectively, the "DIP
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0069
Providers") or the Plan Sponsor.
7.
DIP COLLATERAL
AGENT
A financial institution acceptable to the DIP Providers and
reasonably acceptable to the Issuer will act as collateral agent for
and on behalf of the DIP Providers under the DIP Note Agreement,
the Hedging Facility (if any) and the DIP LC Agreement (if any), as
applicable (in such capacity, the "DIP Collateral Agent").
8.
COLLATERAL
AGENCY AND
INTERCREDITOR
AGREEMENT
The DIP Providers will enter into a collateral agency and
intercreditor agreement (the "Intercreditor Agreement") pursuant
to which they shall agree among other things that the DIP Note
Obligations (as defined below) and the obligations under the
Hedging Facility (the "Hedging Obligations") (if any) shall be
secured pari passu on a first-lien basis and the DIP LC Obligations
(as defined below) (if any) shall be secured on a second-lien basis.
Pursuant to the Intercreditor Agreement, (i) if there is a Hedging
Facility, the Hedge Provider will agree to limit setoff rights
provided that it may have priority with respect to monthly payments
under the Hedging Facility to the extent agreed by the DIP Note
Purchasers, in priority to the DIP Note Obligations and the DIP LC
Obligations and (ii) if there is a DIP LC Facility, the DIP LC
Lenders will not be permitted to cause the DIP Collateral Agent to
enforce the security or otherwise take action with respect to the DIP
Collateral except (x) if the DIP Note Obligations have been paid in
full or (y) following the completion of a 90-day standstill period
following the failure by the Issuer to pay any principal, interest or
fees payable in accordance with the terms of the DIP LC Facility;
provided that, following commencement of enforcement, the DIP
Collateral Agent shall be instructed in accordance with the
Intercreditor Agreement. The Borrower shall have the right to enter
into one or more letter of credit facilities with financial institutions
that are secured on a pari passu basis with the DIP LC Obligations
up to a total aggregate amount of $200 million (including the DIP
LC Obligations).
9.
SEPARATE RIGHTS
AND OBLIGATIONS
The obligations of each DIP Note Purchaser under the DIP Note
Agreement shall be several (and not joint and several). No DIP
Note Purchaser (other than the Plan Sponsor as provided in item (ii)
below) shall be responsible for the obligations of any other DIP
Note Purchaser under the DIP Note Agreement, and the failure by
any DIP Note Purchaser (other than the Plan Sponsor) to perform
its obligations under the DIP Note Agreement (each a "Defaulting
DIP Note Purchaser") shall not affect the obligations of any other
party under the DIP Note Agreement, provided that, in the event of
any such failure, (i) the DIP Note Purchasers (other than the Plan
Sponsor) shall have the right, at their option and in their sole
discretion, on a pro rata basis in accordance with their respective
DIP Note Purchase Commitments (or in such other proportions as
they may agree), to perform such Defaulting DIP Note Purchaser's
obligations and to acquire any such Defaulting DIP Note
Purchaser's previously purchased Creditor DIP Notes (in which
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0070
case all rights (including all interest and tees, including the Break
Fee) and obligations (including the commitment to with respect to
the Exit Notes), allocable to such Defaulting DIP Note Purchaser
with respect to such obligations and Creditor DIP Notes shall
accrue to the applicable DIP Note Purchasers (other than the Plan
Sponsor) in accordance with their pro rata share of the Creditor DIP
Notes so acquired) and (ii) in the event that the entirety of the
Defaulting DIP Note Purchaser's obligations and Creditor DIP
Notes are not performed and/or purchased by the DIP Note
Purchasers other than the Plan Sponsor prior to close of business on
the business day following the date on which such perfom lance
and/or purchase was to occur, then the Plan Sponsor shall perform
such remaining obligations of the Defaulting Note Purchaser and to
acquire any remaining previously purchased Creditor DIP Notes of
such Defaulting DIP Note Purchaser, in which case all rights
(including all interest and tees, including the Break Fee) and
obligations (including with respect to the Exit Notes), allocable to
such Defaulting DIP Note Purchaser with respect to such
obligations and Creditor DIP Notes shall become rights and
obligations of the Plan Sponsor.
10.
RESTRUCTURING
PROCEEDINGS
Pacific and certain other Note Parties and their applicable
subsidiaries (as agreed between Pacific and the DIP Note
Purchasers) will implement the restructuring contemplated by the
Recapitalization Term Sheet attached hereto as Schedule "C" (the
"Recapitalization Term Sheet") through a plan of reorganization,
which shall be consistent with the terms of the Recapitalization
Term Sheet and the RSA (as defined in the Recapitalization Term
Sheet) (as it may be amended or supplemented from time to time in
accordance with the terms of the RSA, the "Plan") to be
implemented pursuant to (i) an amended main Canadian proceeding
(the "Canadian Proceeding") under the Companies. Creditors
Arrangement Act (Canada) (the "CCAA"), in the Ontario Superior
Court of Justice (Commercial List) in Toronto (the "Canadian
Court"), (ii) an amended ancillary proceeding (and not, without the
consent of the DIP Note Purchasers, a main proceeding under
Ley 1116 of 2006 in Colombia ("Law 1116") to be commenced in
Colombia (the "Colombian Proceeding") in the court seized of
jurisdiction in such Colombian Proceeding (the "Colombian
Court") and (iii) an amended proceeding (the "U.S. Proceeding"
and together with the Colombian Proceeding, collectively, the
"Ancillary Proceedings", and together with the Canadian
Proceeding, collectively, the "Restructuring Proceedings') under
chapter 15 of title 11 of the United States Code (the "Bankruptcy
Code") in the United States Bankruptcy Court for the Southern
District of New York (the "U.S. Court" and, together with the
Colombian Court the "Ancillary Insolvency Courts" and, together
with the Canadian Court, the "Insolvency Courts").
11.
PURPOSE AND
PERMITTED
The Issuer shall use proceeds of the purchase of the DIP Notes and
Equity Warrants solely for the following purposes and in the
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0071
PAYMENTS
following order, in each case in accordance with the Cash Flow
Projection (as defined below):
(a)
to pay the financial advisory fees and expenses and the
legal fees and expenses of (i) a single counsel in each
relevant jurisdiction for the Plan Sponsor, (ii) a single
counsel in each relevant jurisdiction for each of the DIP
Note Purchasers (other than the Plan Sponsor), as a group,
the DIP LC Lenders (as a group) and the Hedging Provider
(provided that for the purposes of local security in
jurisdictions outside of Canada, Colombia and the United
States, all DIP Providers (other than the Plan Sponsor) shall
use a single common counsel), (iii) a single counsel in each
relevant jurisdiction for the prepetition holders of Notes (as
defined in the RSA), as a group, (iv) a single counsel in
each relevant jurisdiction for the holders of Bank Debt (as
defined in the RSA), as a group, and (v) counsel for
PricewaterhouseCoopers Inc. (the "Monitor"); and
(b)
to fund the Note Parties' (and certain permitted subsidiaries
that are not Note Parties subject to an aggregate threshold
to be agreed by the DIP Note Purchasers) immediate
funding requirements during the Restructuring Proceedings,
including funding of (i) professional fees and expenses
payable in accordance with the RSA (as defined in the
Recapitalization Term Sheet), (ii) Pacific's key employee
retention plan as previously approved by the Canadian
Court (the "KERP"), (iii) working capital and (iv) other
general corporate purposes of the Note Parties (and certain
permitted subsidiaries that are not Note Parties subject to an
aggregate threshold to be agreed by the DIP Note
Purchasers), in each case in accordance with the Cash Flow
Projection and the DIP Note Agreement.
For greater certainty, the Issuer may not use the proceeds of the
purchase of the DIP Notes and the Equity Warrants to pay any prefiling obligations of the Issuer or any other Note Parties (or their
respective subsidiaries or affiliates) without the prior written
consent of the DIP Note Purchasers; it being agreed that such
consent will not be needed for the Note Parties (and certain
permitted subsidiaries that are not Note Parties subject to an
aggregate threshold to be agreed by the DIP Note Purchasers) to
pay (i) amounts due to trade creditors in the ordinary course of
business, (ii) amounts owing or permitted under the KERP and (iii)
taxes, accrued payroll and other ordinary course liabilities, provided
in each case that such amounts are included in the Cash Flow
Projection.
12. COMMITMENT AND
AVAILABILITY OF
The DIP Note Purchasers will purchase DIP Notes in an aggregate
principal amount of $500 million (the "DIP Note Issuance
Amount") and Equity Warrants (as defined below), subject to the
GO72.
-7DIP NOTES
conditions precedent set out in Section 25, provided that the DIP
Note Purchase Commitments and all other obligations of the DIP
Note Purchasers under the DIP Note Documents shall terminate if
such conditions precedent are not met or waived in accordance with
Section 25 on or before June 15, 2016. The proceeds of the DIP
Notes and the Equity Warrants in an aggregate amount (net of OID)
of $480 million shall be funded on the Closing Date to the Issuer's
Cash Collateral Account and amounts from the Cash Collateral
Accounts may be released as follows:
(a)
an amount of up to $288 million of the proceeds of the
purchase of the DIP Notes and the Equity Warrants plus
any additional amounts deposited into the Cash Collateral
Accounts (such amount being the "Initial Amount") may
be released from the Cash Collateral Accounts on a weekly
basis on the first business day of each week in an amount
(if A is greater than B) equal to A minus B where A is $100
million and B is the amount of Unrestricted Operating Cash
(as defined below) as at the last business day of the
immediately preceding week (such amount being the
"Required Release Amount"), all such amounts and
calculations to be reviewed by the CRO (as defined below)
and certified by the Issuer to the DIP Collateral Agent prior
to any such release from the Cash Collateral Accounts; and
(b)
an amount of up to $192 million of the proceeds of the
purchase of the DIP Notes and the Equity Warrants (the
"Subsequent Amount") may, following the release in full
of the Initial Amount, be released from the Issuer's Cash
Collateral Account following satisfaction of the additional
conditions precedent set out in Section 26 on a weekly basis
on the first business day of each week in an amount equal
to the Required Release Amount for such week, all such
amounts and calculations to be reviewed by the CRO and
certified by the Issuer to the DIP Collateral Agent prior to
any such release from the Issuer's Cash Collateral Account;
provided that any amount remaining in the Cash Collateral
Accounts on the Exit Date shall be automatically released to the
Note Parties and be used to fund the Note Parties' working capital
and general corporate purposes.
By committing to provide its portion of the DIP Note Purchase
13. EXIT NOTES AND
THE PLAN SPONSOR Commitments (as defined below), each DIP Note Purchaser (other
than the Plan Sponsor) concurrently commits to its pro rata share of
EQUITY
the Exit Notes equal to its pro rata share of the aggregate amount of
the Creditor DIP Notes. On the Exit Date, all outstanding Creditor
DIP Notes will be amended, restated or replaced pursuant to the
Amended Indenture and shall thereafter be evidenced by the Exit
Notes. See Schedule "A" for terms and conditions of Exit Notes.
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0 73
By committing to provide its portion of the DIP Note Purchase
Commitments, the Plan Sponsor concurrently commits that, on the
Exit Date, it may exercise its right, conferred on it under the term of
the Plan Sponsor Notes, to exchange the Plan Sponsor Notes for
12.5% of the Reorganized Common Stock (subject to dilution
pursuant to the Management Incentive Plan), failing which exercise
the Plan Sponsor Notes will be mandatorily exchanged for 12.5% of
the Reorganized Common Stock (subject to dilution pursuant to the
Management Incentive Plan). Any Creditor DIP Notes purchased
by Plan Sponsor as contemplated in Section 9 shall, for greater
certainty, treated as Creditor DIP Notes and not as Plan Sponsor
Notes.
14.
DIP NOTE
PURCHASER
COMMITMENTS
The respective commitment of each DIP Note Purchaser to
purchase the DIP Notes is the amount set opposite its name in
Schedule "B" hereto, in each case to the extent not transferred in
accordance with the DIP Note Agreement (the "DIP Note
Purchase Commitments").
15.
MATURITY DATE
AND REPAYMENT
The outstanding obligations (including the principal amount of the
DIP Notes and all accrued interest and fees thereon) under the DIP
Notes and the DIP Note Documents (the "DIP Note Obligations")
shall be repayable in full on the earliest to occur of the following
dates (the "DIP Maturity Date"):
(a)
the date on which a demand by the DIP Note Purchasers is
made following the occurrence of any Event of Default (as
defined below) which is continuing;
(b)
the date that a restructuring, refinancing or sale transaction
(with respect to a material amount of stock or assets of the
Borrower and any of its subsidiaries), other than the Plan
and other than any Permitted Asset Disposition, (each, a
"Transaction") is approved by the applicable court or
consummated without the requisite consent of the DIP Note
Purchasers;
(c)
the date on which any stay of proceedings ordered pursuant
to one or more of the Restructuring Proceedings expires
without being extended or on which one or more of the
Restructuring Proceedings are terminated or converted to a
liquidation proceeding: and
(d)
the date that is six (6) months following the Closing Date
(as defined below), or such later date as may be agreed by
the DIP Note Purchasers in their sole discretion (the
"Outside Date");
provided that, if none of the foregoing events have occurred on or
prior to the date on which the Plan is implemented, then on the date
on which the Plan is implemented (the "Exit Date"): (i) the
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0074
Creditor DIP Notes will be governed by the Amended Indenture
and thereafter be evidenced by the Exit Notes until the Exit
Maturity Date (as defined in Schedule "A") and (ii) the Plan
Sponsor may exercise its rights conferred on it under the Plan
Sponsor Notes to exchange the Plan Sponsor Notes for 12.5% of
the Reorganized Common Stock (subject to dilution pursuant to the
Management Incentive Plan), failing which exercise the Plan
Sponsor Notes will be mandatorily exchanged for 12.5% of the
Reorganized Common Stock (subject to dilution pursuant to the
Management Incentive Plan).
For greater certainty, in the event that the Exit Date has not
occurred on or prior to the DIP Maturity Date, the Equity Warrants
(as defined below) will automatically expire and the Break Fee and
all other DIP Note Obligations shall become immediately due and
payable to the holders of the DIP Notes.
16. ASSET
DISPOSITIONS
Except for Permitted Asset Dispositions, Note Parties may not sell,
assign, transfer or otherwise dispose of any material property or
assets (except the sale of hydrocarbons in the ordinary course of
business) without the prior consent of the DIP Note Purchasers and
provided that all proceeds of any sale, assignment, transfer or
disposition shall be deposited in the Cash Collateral Accounts (as
defined below) which shall be subject to an account control
agreement in favour of the DIP Collateral Agent for and on behalf
of the DIP Providers and proceeds from which shall be disbursed in
accordance with the procedure described in Section 12.
"Permitted Asset Dispositions" means the following: (i) the sale
of nearly 87 km of pipes that were going to be used to build La
Creciente pipeline which pipes are owned by the Colombian branch
of Pacific Stratus Energy Colombia Corp. and stored in the La
Creciente field in Colombia, (ii) the sale of tax refunds or credits
(including Titulos de Devolucion de Impuestos Nacionales) and
(iii) the sale of any equity interest in Pacific Infrastructure Ventures
Inc. or the sale of the oil teiminal and the dry cargo business by
Pacific Infrastructure Ventures Inc. (the "Port Facility Sale"),
provided that, the proceeds of each such sale shall be no less than
the amount set out in respect thereof in the Cash Flow Projection
and provided further that prior to the consummation of each such
sale:
(a)
the relevant Note Party consummating such transaction
delivers to the DIP Note Purchasers' advisors (and/or
Restricted DIP Note Purchasers) an officer's certificate
certifying that such transaction is with a party that deals at
arm's length with the relevant Note Party; and
(b)
in the case of item (iii), the relevant Note Party
consummating such transaction delivers to the DIP Note
Purchasers' advisors (and/or Restricted DIP Note
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0075
Purchasers) with respect to any such transaction, a
resolution of the board of directors of such Note Party, set
forth in an officer's ce ltificate, stating that such transaction
complies with this covenant and that such transaction has
been approved by Pacific's independent committee of
directors.
17.
OPTIONAL
REDEMPTION
Prior to the Exit Date, if the Company (as defined in the RSA) has
terminated the RSA pursuant to Section 5.06(a) thereof, then the
DIP Notes may be redeemed in whole by the Issuer on three (3)
business days' prior written notice, subject to the concurrent
payment of all interest payable through the then-current Outside
Date on the amounts so prepaid and payment of the Break Fee.
Upon any such optional redemption and the payment of the Break
Fee, (i) all rights and obligations of the DIP Note Purchasers (other
than the Plan Sponsor) in respect of the Exit Notes, (ii) all rights
and obligations of the Plan Sponsor to exchange the Plan Sponsor
Notes into 12.5% of the Reorganized Common Stock (subject to
dilution pursuant to the Management Incentive Plan). and (iii) all
rights of the DIP Note Purchasers to receive Reorganized Common
Stock pursuant to the exercise of the Equity Warrants shall be
automatically cancelled. Following the Exit Date, the Exit Notes
may be redeemed subject to the redemption premiums set out in
Schedule "A".
18.
INTEREST AND
DEFAULT
INTEREST
Interest shall be payable in cash on the aggregate amount of
outstanding DIP Notes from the Closing Date at a rate equal to 12%
per annum, compounded monthly and payable monthly in arrears in
cash on the last business day of each month. Upon the occurrence
and during the continuation of an Event of Default, all overdue
amounts shall bear interest at the applicable interest rate plus 2%
per annum payable on demand in arrears in cash. All interest shall
be computed on the basis of a 360 day year of twelve 30 day
months, provided that whenever any interest is calculated on the
basis of a period of time other than a calendar year, the annual rate
of interest to which each rate of interest determined pursuant to
such calculation is equivalent for the purposes of the Interest Act
(Canada) is such rate as so determined multiplied by the actual
number of days in the calendar year in which the same is to be
ascertained and divided by the number of days used in the basis for
such determination.
-
-
19.
ORIGINAL ISSUE
DISCOUNT
In consideration of the DIP Note Purchasers purchasing the DIP
Notes and the Equity Warrants, each DIP Note shall be issued with
an original issue discount of 4%.
20.
BREAK FEE
Following the execution of the Commitment Letter, a break fee
equal to 5% of the DIP Note Issuance Amount (the "Break Fee")
shall be payable to the DIP Note Purchasers in cash in the event that
(i) the DIP Note Issuance does not occur or (ii) the Plan (including
the Equity Warrants) and the recapitalization contemplated by the
0076
Recapitalization Term Sheet is not fully consummated, on or before
the DIP Maturity Date. 60% of the Break Fee shall be payable to
the Plan Sponsor and 40% of the Break Fee shall be payable to the
DIP Note Purchasers (other than the Plan Sponsor), provided that
the Plan Sponsor shall be entitled to its pro rata portion of such 40%
of the Break Fee to the extent it purchases Creditor DIP Notes
originally committed or held by another DIP Note Purchaser.
21.
WARRANTS FOR
EQUITY ISSUANCE
ON EXIT DATE
Pacific shall issue warrants on the Closing Date to the DIP Note
Purchasers (the "Equity Warrants") exercisable in the aggregate
into 25% of the total outstanding equity interests of the Reorganized
Company (as defined in the Recapitalization Term Sheet)
outstanding on the Exit Date on a fully diluted basis, subject to
dilution from the Management Incentive Plan (as defined in the
Recapitalization Term Sheet). The Equity Warrants shall be issued
at a nominal strike price and shall be exercisable on the Exit Date.
Each DIP Note Purchaser shall be entitled to its pro rata share of the
Equity Warrants based on its share of the aggregate DIP Note
Purchase Commitments, which Equity Warrants shall be issued to
each DIP Note Purchaser as a unit together with its DIP Notes. In
the event that the Plan is not consummated on or before the DIP
Maturity Date, the Equity Warrants shall automatically expire. The
Equity Warrants shall be detachable from the DIP Notes and shall
be transferable and assignable either together with or separate from
the DIP Notes, in accordance with Section 35. A portion of the
subscription price of the DIP Notes will be allocated to the purchase
of the Equity Warrants equal to the fair market value of the Equity
Warrants.
22.
CASH FLOW
PROJECTIONS /
VARIANCE
Pacific shall prepare a cash flow projection which shall be in form
and substance satisfactory to the CRO, the DIP Note Purchasers and
their advisors (the "Cash Flow Projection"), reflecting the
projected cash requirements (including, without limitation, with
respect to projected payment of professional expenses on an advisor
by advisor basis (but aggregating legal advisors for jurisdictions
outside of the United States and Canada) of Pacific and its direct
and indirect subsidiaries for the period commencing with the date
on which the Canadian Proceeding is to be commenced (the
"Commencement Date") and ending with the Outside Date,
Pacific shall prepare and present to the financial advisors to the DIP
Note Purchasers (and to any DIP Note Purchaser that has agreed to
receive material non-public information on a restricted basis
pursuant to a non-disclosure agreement substantially in the form of
the non-disclosure agreements in place between the company and
certain of its existing noteholders on the date hereof, (each a
"Restricted DIP Note Purchaser")) a cumulative variance report
in form and substance satisfactory to the DIP Note Purchasers'
financial advisors (each, a "Variance Report") as at the end of
each four week period set out in the Cash Flow Projection, in each
case, in respect of the period beginning on the Commencement
Date and ending on the last day of the applicable cumulative period
- 12 -
*
0077
(each such period being a "Test Period"), which Variance Report
shall show the line-by-line variance between the projected cash
flows set out in the Cash Flow Projection in respect of the relevant
Test Period and actual cash flows during such Test Period. Each
Variance Report shall be prepared and presented to the Restricted
DIP Note Purchasers by no later than the last business day of the
week following the end of the relevant Test Period and shall be
reviewed by the CRO and shall include a certification from a senior
officer of the Issuer that the actual cash flows are within the
permitted variances set out in Section 30 below.
The Cash Flow Projection shall be publicly disclosed on or prior to
the Closing Date and all Variance Reports shall be publicly
disclosed on or prior to the Exit Date.
23. DIP SECURITY AND
PRIORITY
Subject to the Intercreditor Agreement, the DIP Note Obligations,
the Hedging Obligations and the obligations under the DIP LC
Facility (the "DIP LC Obligations" and together with the DIP
Note Obligations and the Hedging Obligations, collectively, the
"DIP Obligations") shall be secured by first-priority security
interests (collectively, the "DIP Liens") over all of the present and
future property and assets, real and personal, of each Note Party,
including, but not limited to all equity interests owned by any such
Note Party in material subsidiaries and joint ventures, machinery
and equipment, inventory and other goods, accounts receivable,
material fee-owned real estate, leases, licenses, concessions,
fixtures, bank accounts (subject to certain customary exceptions),
intangibles (including rights under exploration and production
contracts, concessions and hedge agreements), financial assets,
investment property, license rights. Patents, trademarks, trade
names, copyrights, chattel paper, insurance proceeds, documents,
instruments, indemnification rights, tax refunds, tax credits
(including Titulos de Devolucion de Impuestos Nacionales), cash,
any avoidance actions available to the Note Parties' bankruptcy
estates pursuant to the Bankruptcy and Insolvency Act (Canada), the
CCAA or otherwise (collectively, the "Collateral"), in each case,
perfected pursuant to court orders and security documentation
governed under the laws of applicable jurisdictions satisfactory to
the DIP Note Purchasers. The security shall consist of the security
documents set out in Schedule "D" hereto and such additional
security documents as the DIP Note Purchasers (or their counsel)
may reasonably request.
All security will be granted in favour of the DIP Collateral Agent
for and on behalf of the DIP Providers, subject to the lntercreditor
Agreement.
The DIP Liens shall be given effect as follows, in each case subject
to the provisions of the Intercreditor Agreement:
-13-
0078
(a)
with respect to the Issuer and each guarantor under its
existing Notes (as defined in the RSA) and any other direct
or indirect subsidiaries of the Issuer as the Issuer and the
DIP Note Purchasers may agree (the "Filing Parties") by a
superpriority charge pursuant to the terms of an order in the
Canadian Proceeding approving the DIP Obligations and
the DIP Liens (the "DIP Order"), which shall provide that
the DIP Liens and the DIP Obligations rank only behind
administrative charges (the "Administrative Charges"),
rank pari passu with the passive and silent KERP charge
(the "KERP Charge") and shall rank ahead of the passive
and silent directors' and officers' charge (the "D&O
Charge") (provided that the KERP Charge and the D&O
Charge shall rank ahead of the DIP LC Obligations), in
each case in amounts approved by the DIP Note
Purchasers; provided that the DIP Liens shall constitute
junior perfected liens on, and security interests in, all
Collateral of the Note Parties, wherever located, that is
subject to an existing valid, perfected, enforceable and
unavoidable lien or security interest on the date of such
order, in each case, that is expressly permitted to be senior
to the DIP Liens pursuant to the DIP Order and the DIP
Note Documents;
(b)
by such priority or recognition status as may be required by
the DIP Note Purchasers in their reasonable discretion in
the Ancillary Proceedings pursuant to an order of the
applicable Ancillary Court, as applicable (each such order
being an "Ancillary Priority Order" and together with the
DIP Order, collectively, the "DIP Priority Orders"); and
(c)
by such security document, filings and registrations as may
be necessary or desirable in any relevant jurisdiction, the
DIP Liens shall constitute first- priority perfected liens on,
and security interests in, all Collateral of the Note Parties,
wherever located.
The DIP Note Purchasers may, in their sole discretion, require the
execution, filing, or recording of any mortgages, security
agreements, pledge agreements, control agreements, financing
statements or other agreements or instruments, or the taking of any
action to obtain possession or control of any Collateral in order to
obtain a lien on such Collateral; provided, that the local grant of
security and perfection of Collateral of any Note Party may be
excluded to the extent that the DIP Note Purchasers reasonably
determine that the costs of obtaining a security interest in or
perfection of such assets outside of the Restructuring Proceedings is
excessive in relation to the value to the DIP Note Purchasers of the
DIP Liens to be afforded thereby.
- 14 -
0079
The security granted by the Note Parties shall contain certain
exclusions from Collateral (including exclusions from the Initial
Collateral and the Subsequent Collateral as set out in Schedule "D")
as shall be reasonably agreed between the Note Parties and the DIP
Note Purchasers (or their counsel).
24. CASH
MANAGEMENT
The Note Parties shall maintain a cash management system
reasonably satisfactory to the DIP Note Purchasers which shall
include the direct payment of, or daily transfer of, cash proceeds of
all receivables (including cash proceeds of intercompany
receivables) and the deposit of all cash into bank accounts which
are subject to springing-dominion control agreements (or local
equivalents) in favour of the DIP Collateral Agent.
All receivables owing to any Colombian Note Party or the
Colombian branch of any Note Party shall be assigned to a trust
(fiducia) to be established in favour of the DIP Collateral Agent.
Similar arrangements with respect to receivables shall be
implemented in other foreign jurisdictions where a similar trust
structure is available.
All (i) in the case of the Issuer, net proceeds of the purchase of DIP
Notes and Equity Warrants, (ii) all Unrestricted Operating Cash (as
defined below) in excess of $100 million as at the last business day
of any week and (iii) all extraordinary receipts (including receipts
from asset sales, tax credits or refunds, casualty events or the
repayment of any intercompany loans or dividends received from
the net cash proceeds of any sale of Collateral), with exceptions to
be agreed to permit ordinary course payments and cash
management by the Note Parties and giving due consideration to
mitigation of foreign exchange costs, shall be deposited into one or
more bank accounts located in Canada in the name of the applicable
Note Parry that is the recipient of such proceeds, except in the case
of Meta Petroleum AG and/or Pacific E&P Holdings Corp. to the
extent not permitted by Swiss law, (each a "Cash Collateral
Account" and collectively, the "Cash Collateral Accounts"),
which Cash Collateral Accounts shall be subject to sole-dominion
control agreements in favor of the DIP Collateral Agent to be
released in accordance with Section 12.
"Unrestricted Operating Cash" means an amount equal to the
amount of (i) all cash of the Issuer and its subsidiaries, (ii) less the
amount of cash or cash equivalents deposited in the Cash Collateral
Accounts, (iii) less, to the extent included in clause (i) above, the
Joint Venture Cash (as defined below), (iv) less, to the extent
included in clause (i) above, Non-Wholly Owned Subsidiary Cash
and (v) less, to the extent included in clause (i) above, any
Restricted Cash (as defined below) (up to a maximum amount of
such Restricted Cash of $70 million).
-
15
-
"Joint Venture Cash" means all cash and cash equivalents 41015 0
any accounts required under joint venture agreements or joint
operating agreements.
"Non-Wholly Owned Subsidiary Cash" means all cash and cash
equivalents held in accounts of the Issuer's non-wholly owned
subsidiaries.
"Restricted Cash" means cash or cash equivalents that would
appear as "restricted" on the consolidated balance sheet of the
Issuer and its direct or indirect subsidiaries.
25. CONDITIONS
PRECEDENT TO
PURCHASE OF DIP
NOTES
The purchase of the DIP Notes from the Issuer shall be conditional
on, and shall be completed by the DIP Note Purchasers by no later
than 2 business days following (or, with respect to those conditions
that by their nature are to be satisfied on the Closing Date, on the
business day of), the satisfaction of conditions precedent to
borrowing customary and usual for financings in such
circumstances and to be agreed upon by the DIP Note Purchasers
and the Note Parties, which conditions precedent shall include,
without limitation, the following conditions precedent to be
satisfied on or prior to the purchase of the DIP Notes (the date on
which all such conditions are satisfied being the "Closing Date"),
each of which conditions shall be for the sole benefit of the DIP
Note Purchasers and may be waived by holders of not less than
75% of the aggregate DIP Note Purchase Commitments as of the
Closing Date, provided that if such conditions are not met or
waived on or before June 15, 2016, the DIP Note Purchase
Commitments and all other obligations of the DIP Note Purchasers
under the DIP Note Documents shall terminate:
(a)
The applicable Note Parties shall have commenced the
Restructuring Proceedings.
(b)
The Canadian Court shall have granted an amended
"initial" order (which shall include the DIP Order) in
respect of the Filing Parties, in form and substance
satisfactory to the DIP Note Purchasers (the "Initial
Canadian Order").
(c)
The Colombian Court shall have granted a recognition
order in respect of the relevant Note Parties, in form and
substance satisfactory to the DIP Note Purchasers (the
"Initial Colombian Order" and together with the Initial
Canadian Order, the "Initial Orders")).
(d)
The Insolvency Courts, as applicable, shall have granted the
DIP Priority Orders.
(e)
If required, the Superintendencia de Sociedades (the
"Superintendencia") shall have approved the granting or
- 16 -
0081
the DIP Liens under Colombian law.
(f)
Each Colombian Note Party and each Note Party with a
Colombian branch shall have amended its bylaws to
provide that the incurrence of any additional indebtedness
(other than under the DIP Note Issuance, the Hedging
Facility (if applicable), the DIP LC Facility (if applicable),
the Exit Notes and the Exit LC Facility (as defined below)
(if applicable), and guarantees thereof as contemplated
herein) by such Note Party (or its Colombian branch) shall
require the prior approval of the DIP Note Purchasers.
(g)
Intentionally Deleted.
(h)
The DIP Note Agreement, each of the other DIP Note
Documents (other than the security documents in respect of
the Subsequent Collateral (as set out on Schedule "D") and
all other documentation relating to the DIP Note Issuance
shall be in form and substance consistent with this Term
Sheet and otherwise satisfactory to the DIP Note Purchasers
in their sole discretion and shall have been executed and
delivered by each Note Party party thereto and shall
constitute valid and enforceable obligations of each of the
Note Parties, as confirmed pursuant to the Initial Orders
and the DIP Priority Orders.
(i)
If applicable, the Hedging Facility and/or the DIP LC
Facility and all documents relating thereto shall be in form
and substance satisfactory to the DIP Note Purchasers and
the Company and shall have been executed and delivered
by each Note Party party thereto and shall constitute valid
and enforceable obligations of each of the Note Parties as
confirmed pursuant to the Initial Orders and the DIP
Priority Orders.
(j)
All "first day orders"-type entered in each Restructuring
Proceeding at the time of commencement of the
Restructuring Proceedings shall be satisfactory in form and
substance to the DIP Note Purchasers in their sole
discretion.
(k)
The Note Parties shall have obtained all governmental
(including any required consents from the Superintendencia
(if any)), regulatory and third party approvals required to be
obtained in any other relevant jurisdiction to enable the DIP
Collateral Agent to obtain the DIP Liens (excluding any
consents in respect of joint operating agreements and
concessions).
(I)
The DIP Collateral Agent shall have a valid and perfected
security interest in the Initial Collateral (as set out Schedule
- 17 -
0082
"D"), with the priority described herein, for the benefit of
the DIP Providers.
(m)
The purchase of the DIP Notes shall not violate any
requirement of law and shall not be enjoined, temporarily,
preliminarily or permanently.
(n)
All fees and expenses required to be paid to (i) the financial
advisors to the DIP Providers, (ii) a single counsel in each
relevant jurisdiction for the Plan Sponsor, (iii) a single
counsel in each relevant jurisdiction for each of the DIP
Note Purchasers (other than the Plan Sponsor), as a group,
the DIP LC Lenders (as a group) and the Hedging Provider
(provided that for the purposes of local security in
jurisdictions outside of Canada, Columbia and the United
States, all DIP Providers (other than the Plan Sponsor) shall
use a single common counsel), (iv) a single counsel in each
relevant jurisdiction for the prepetition holders of Notes (as
defined in the RSA), as a group, (v) a single counsel in each
relevant jurisdiction for the holders of Bank Debt (as
defined in the RSA), as a group, and (vi) counsel for the
Monitor, incurred on or before the Closing Date shall have
been paid (including as a deduction from the proceeds of
the purchase of the DIP Notes and the Equity Warrants
prior to disbursemen 1 to the Issuer).
(o)
The DIP Note Purchasers shall have received customary
legal opinions of (i) Garrigues, Colombian counsel to the
Note Parties, (ii) Norton Rose Fulbright Canada LLP,
Canadian counsel to the Note Parties, and (iii) such other
local counsel opinions requested by the DIP Note
Purchasers, in each case addressing such matters as the DIP
Note Purchasers shall request. Including, without
limitation, the enforceability of all DIP Note Documents
and the validity and perfection of all security interests in the
Initial Collateral.
There shall exist no default or Event of Default under the
DIP Note Documents and the representations and
warranties or the Note Parties therein shall be true and
correct in all respects (other than any such representation
and warranty that by its terms refers to a specified earlier
date which shall be true and correct in all material respects
or, with respect to representations and warranties qualified
by materiality, in all respects, as of such earlier date).
(q)
Since April 6, 2016, there shall not have occurred any
change, development, effect, event, circumstance, fact or
occurrence that individually or in the aggregate with other
such changes, developments, effects, events, circumstances,
facts or occurrences, (a) is or would reasonably be expected
- 18 -
0083
to be material and adverse to the business, financial
condition, properties, assets (tangible or intangible),
liabilities (including any contingent liabilities), or results of
operations of the Note Parties or (b) prevents or materially
adversely affects the ability of the Note Parties to timely
perform their obligations under the DIP Note Documents,
in each case other than any change, development, effect,
event, circumstance, fact or occurrence resulting from
(i) the effect of any change in the United States or foreign
economies or securities, commodities or financial markets,
(ii) the effect of any action taken by DIP Note Purchasers
or their affiliates with respect to the DIP Note Documents
or with respect to the Note Parties (including through such
persons' participation in the Restructuring Proceedings),
(iii) any effect resulting from the filing or public
announcement of the restructuring proceedings
contemplated in the Catalyst RSA (as defined in the RSA)
or the Restructuring Proceedings, including the actions
taken by Colombia's Superintendencia de Sociedades to
take "control" of certain Colombian branches of the
Company (as defined in the RSA); or (iv) developments in
the oil and gas exploration, development and/or production
industry or industries (including actual or expected industry
wide changes in oil, gas or other commodity prices);
provided, however, that with respect to clauses (i), (ii) or
(iv), such changes, developments, effects, events,
circumstances, facts or occurrences shall be taken into
account to the extent they disproportionately and adversely
affect Pacific and its subsidiaries, taken as a whole,
compared to other companies operating in the industries
and regions in which Pacific and its subsidiaries operate
(each a "Material Adverse Change").
(r)
Other than as disclosed in Pacific's 2015 annual financial
statements, there shall exist no unstayed action, suit,
investigation, litigation or proceeding pending or threatened
in writing in any court or before any arbitrator or
governmental authority (other than the Restructuring
Proceedings) that could reasonably be expected to have a
material adverse effect with respect to the Note Parties and
their subsidiaries taken as a whole.
(s)
The Cash Flow Projection shall have been delivered to the
DIP Note Purchasers in form and substance satisfactory to
the DIP Note Purchasers and shall have been publicly
disclosed.
(t)
There shall not have occurred any payment, prepayment,
redemption, purchase or exchange of any prepetition
indebtedness or equity, or amendment or modification of
any of the terms of any such prepetition indebtedness or
-19-
0084
equity, except as expressly provided for in the Cash Flow
Projection.
26. CONDITIONS
PRECEDENT TO
RELEASE OF
SUBSEQUENT
AMOUNT
(u)
Pacific shall have appointed a chief restructuring officer
whose mandate shall include a full assessment of key
company processes, organizational structure, systems,
controls, risks and certain positions at the Issuer, as agreed
by the DIP Note Purchasers and who shall also be
empowered to retain a leading international executive
search firm to assist in such assessment (the "CRO").
(v)
The Note Parties shall have established a cash management
system satisfactory to the DIP Note Purchasers (including
establishment of the Cash Collateral Account), and all
material accounts of the Note Parties (including the Cash
Collateral Account) shall be subject to control agreements
in favour of the DIP Collateral Agent, in form and
substance reasonably satisfactory to the DIP Note
Purchasers), consistent with the terms of this Term Sheet.
(w)
The DIP Note Purchasers shall be satisfied in their sole
discretion that no additional insolvency proceedings are
required or advisable to ensure that the Collateral is
perfected on a first priority basis in connection with the
Restructuring Proceedings.
(x)
The Note Parties shall have completed reasonable "know
your client" procedures to the satisfaction of the DIP Note
Purchasers.
(y)
The Note Parties shall have appointed agents for service of
process in New York.
The availability of the Subsequent Amount to the Issuer from its
Cash Collateral Account to be drawn in accordance with the Cash
Flow Projections as set out in Section 12 shall be conditional on the
continuing satisfaction of the conditions precedent set out in
Section 25 above, as well as satisfaction of the following additional
conditions precedent, each of which must be met on or before June
30, 2016 (or such later date as the DIP Note Purchasers may agree
in their sole discretion):
(a)
The DIP Collateral Agent shall have a valid and perfected
security interest in the Subsequent Collateral (as set out
Schedule "D") with the priority described herein, for the
benefit of the DIP Providers (other than Collateral which is
not of material value, provided that the Issuer and the
relevant Note Parties shall continue to use their
commercially reasonable efforts to provide such valid and
perfected security interest in such Collateral in favour of
0085
- 20 -
the DIP Collateral Agent).
27. REPRESENTATIONS
AND WARRANTIES
(b)
The DIP Note Purchasers shall have received customary
legal opinions of such local counsel as may be requested by
the DIP Note Purchasers, in each case addressing such
matters as the DIP Note Purchasers shall request, including,
without limitation, the enforceability of all DIP Note
Documents and the validity and perfection of all security
interests in the Subsequent Collateral (as set out on
Schedule "D").
(c)
The U.S. Court shall have granted a recognition order under
chapter 15 of title 11 of the United States Code (the
"Chapter 15 Order").
(d)
The Initial Orders, the Chapter 15 Order and the DIP
Priority Orders issued by the Insolvency Courts, as
applicable, shall remain in full force and effect and shall
not have been stayed, reversed, vacated, rescinded,
modified or amended in any respect (except as may be
acceptable to the DIP Note Purchasers), and shall be final
orders and any applicable appeal period in respect thereof
shall have expired or, if an appeal was filed, that such
appeal shall have been dismissed on a final basis without
further appeal (the "Final Orders").
The DIP Note Agreement will contain representations and
warranties customary and usual for financings in such
circumstances, subject to thresholds, limitations, exclusions and
qualifications as may be reasonably agreed between the DIP Note
Purchasers and the Note Parties, having regard to the Note Parties
and their circumstances including without limitation:
(a)
a representation and warranty that each Note Party has
disclosed to the DIP Note Purchasers all existing material
liabilities, including trade creditors, pension liabilities,
employee liabilities, and tax liabilities;
(b)
a representation that no Note Party is, or will be, after
giving effect to the DIP Note Issuance and the transactions
contemplated hereunder, an "investment company" for the
purposes of the Investment Company Act of 1940;
(c)
a representation and warranty from the Plan Sponsor that
no existing director or officer of any Note Party nor any of
the parties disclosed as principal holders of voting shares
on page 35 of the Issuer's information circular dated June
10, 2015, nor any person or entity known to the Plan
Sponsor to be acting on behalf of any of the foregoing, is a
direct or indirect investor in or limited partner of the Plan
- 21 -
0086
Sponsor or any fund managed by it; and
(d)
28. AFFIRMATIVE
COVENANTS
a representation that the factual statements contained in all
certificates and documents furnished to the DIP Note
Purchasers, taken as a whole, do not contain any untrue
statement of a material fact or omit to state a material fact
necessary in order to make such statements not misleading
in light of the circumstances in which they were made;
provided, that with respect to projected, estimated or pro
forma financial information, the representation shall be
limited to the fact that such information has been prepared
in good faith based upon assumptions believed by the
Issuer or the relevant Note Party to be reasonable at the
time made, it being understood that no assurance can be
given that any such assumption or the results of such
projections will be realized.
The DIP Note Agreement will contain affirmative covenants which
are customary and usual for financings in such circumstances,
subject to thresholds, limitations, exclusions and qualifications as
may be reasonably agreed by the DIP Note Purchasers and the Note
Parties, having regard to the Note Parties and their circumstances,
including without limitation:
(a)
delivery of Variance Reports in accordance with Section
22.
(b)
delivery to the DIP Note Purchasers' advisors (and any
Restricted DIP Note Purchasers) of weekly reports by the
Chief Financial Officer with respect to revenues, operating
expenses, asset sales, cost savings, key hires, and other
matters reasonably requested by DIP Note Purchasers'
advisors;
(c)
delivery to counsel to the DIP Note Purchasers, as soon as
practicable in advance of the commencement of the
Canadian Proceeding or filing with the Canadian Court, as
the case may be, of drafts of the Initial Orders, the Chapter
15 Order, the DIP Priority Orders, Plan, Plan Approval
Order, and all other proposed orders, motions, pleadings,
and other documents filed in or related to the Restructuring
Proceedings, and not filing any such document with the
Insolvency Courts without obtaining prior approval thereof
from such counsel;
(d)
provide access to the DIP Note Purchasers' advisors (and
any Restricted DIP Note Purchasers) and the CRO to
information (including historical information and books and
records) and personnel and facilitate (i) regularly scheduled
meetings as mutually agreed with senior management, the
Chief Financial Officer, and other company advisors and
• 0087
- 22 -
the DIP Note Purchasers' advisors (and any Restricted DIP
Note Purchasers) who shall be provided with access to all
infom 1 ation they shall reasonably request and (ii) such
additional meetings as the DIP Note Purchasers (or their
advisors) shall reasonably request;
29. NEGATIVE
COVENANTS
(e)
compliance in all material respects with applicable laws
(including without limitation, the CCAA, the Bankruptcy
Code, ERISA (or its equivalent), and environmental laws),
payment of taxes, maintenance of all necessary licenses and
permits and trade names, trademarks, patents, preserve
corporate existence, and maintenance of appropriate and
adequate insurance coverage;
(1)
maintenance of a cash management system acceptable in all
respects to the DIP Note Purchasers;
(g)
maintenance of a minimum amount of Unrestricted
Operating Cash together with the amount of cash deposited
in the Cash Collateral Accounts of at least (i) $200 million
at any time prior to the completion of the Port Facility Sale
(in whole or in part) and (ii) $200 million plus the net cash
proceeds of the Port Facility Sale (in whole or in part) at
any time following the completion of the Port Facility Sale
(in whole or in part),
(h)
compliance with certain material contracts subject to a
materiality threshold to be agreed in the DIP Note
Agreement ("Material Contracts"); and
(i)
The Issuer and any applicable Note Parties shall achieve the
milestones set out in the RSA as in effect on the date of this
Term Sheet, without amendment (each a "Milestone" and
collectively the "Milestones").
The DIP Note Agreement will contain negative covenants which
are customary and usual for financings in such circumstances
subject to thresholds, limitations, exclusions and qualifications as
may be reasonably agreed by the DIP Note Purchasers and the Note
Parties, having regard to the Note Parties and their circumstances,
including without limitation:
(a)
the commencement or imposition of any insolvency
proceeding by or against any of the Note Parties, or any
other affiliate thereof, other than the Restructuring
Proceedings;
(b)
creating or permitting to exist any lien or encumbrance on
any Collateral, other than liens securing the DIP Notes and
any permitted lien reasonably agreed by the DIP Note
- 23 -
-
0088
Purchasers in the DIP Note Documents;
(c)
creating or permitting to exist any other superpriority claim
that is pari passu with or senior to the claims of the DIP
Note Purchasers, except as provided herein;
(d)
except for the Permitted Asset Dispositions and the sale of
hydrocarbons in the ordinary course of business, disposing
of assets having a value in excess of $5,000,000;
(e)
modifying or altering (i) in any material manner the nature
and type of its business or the manner in which such
business is conducted or (ii) its organizational documents,
except as required herein or by the CCAA, the Bankruptcy
Code and applicable law in any ancillary jurisdiction, as
applicable:
(f)
paying, prepaying, redeeming, purchasing, or exchanging
any prepetition indebtedness or equity, or amending or
modifying any of the terms of any such prepetition
indebtedness or equity, except as expressly provided for in
the Cash Flow Projection, the Plan or pursuant to "first
day" or other orders entered in form and substance
acceptable to the DIP Note Purchasers or their counsel in
their sole discretion;
(g)
asserting any right of subrogation or contribution against
any of other Note Party until all borrowings under the DIP
Notes are paid in full in cash and ternlinated:
(h)
merging or consolidating with any other person, changing
the corporate structure, or creating or acquiring new
subsidiaries, giving a negative pledge on any asset in favor
of any person other than the DIP Providers; or permitting to
exist any consensual encumbrance on the ability of any
domestic or foreign subsidiary to make loans, pay
dividends or other distributions to the Note Parties;
(i)
incurring or assuming any additional debt or contingent
obligations or giving any guarantee other than (i) the
Hedging Facility (if any), (ii) letters of credit secured on a
second lien basis (including the DIP LC Facility) in an
aggregate amount not to exceed $200 million, which letters
of credit may be secured by the Collateral on a pari passu
basis with the liens securing the DIP LC Facility (provided
that each financial institution providing any such letters of
credit on a pari passu basis with the liens securing the DTP
LC Facility shall become a party to the Intercreditor
Agreement on tei ills, including with respect to the exercise
of remedies, reasonably satisfactory to the DIP Note
Purchasers), (iii) unsecured letters of credit and (iv) cash
- 0089
- 24 collateralized letters of credit outstanding as of the Closing
Date and unsecured or cash-collateralized renewals or
extensions thereof and additional unsecured letters of
credit);
(j)
making any loan, advance, capital contribution, or
acquisition, farming any joint venture or partnership, or
making any other investment in any subsidiary or other
person, subject to exceptions as may be agreed to in the
DIP Note Documents:
30. EVENTS OF
DEFAULT
(k)
making or committing to make any payment in respect of
warrants, options, repurchases of stock, dividends, earn-out
payments, contingent payments, or any other distributions;
(I)
making, committing to make, or permitting to be made any
payment to any executive officer or director of any Note
Party, or any entity beneficially owned or controlled by
them or related to them, including parties described in the
related party note to Pacific's financial statements, or any
subsidiary thereof, other than normal course remuneration
and amounts owing or permitted under the KERP and any
other amounts included in the Cash Flow Projection and
specifically identified as payments to a related party;
(m)
without the p 1 for consent of the DIP Note Purchasers or
their counsel, making or permitting to be made any change
to the Initial Orders, the Chapter 15 Order or the DIP
Priority Orders or any other order of the Insolvency Courts
with respect to the DIP Notes or the charges or security
therefor; or
(n)
permitting any change in ownership or control of any Note
Party, or any subsidiary thereof, or any change in
accounting treatment or reporting practices, except as may
be required by U.S. generally accepted accounting
principles and as otherwise permitted by the DIP Note
Documents.
The DIP Note Agreement will contain events of default (each an
"Event of Default") customary and usual for financings in such
circumstances subject to thresholds, limitations, exclusions and
qualifications as may be reasonably agreed by the DIP Note
Purchasers and the Note Parties, having regard to the Note Parties
and their circumstances, including without limitation:
(a)
failure by the Issuer to pay any principal, interest or fees
payable pursuant to the DIP Note Documents;
(b)
failure by any Note Party to comply with any terms,
conditions, covenants or obligations contained in the DIP
- 25 -
0090
Note Documents;
(c)
any Note Party shall incur indebtedness to any other Note
Party that is not unsecured and expressly subordinated to
the DIP Obligations and evidenced by a note (which can be
a master note) in the form and substance satisfactory to the
DIP Note Purchasers, which note shall be assigned by way
of security and delivered to the DIP Collateral Agent
together with an allonge executed in blank in respect of
such note (including any master note);
(d)
the entry of an order (i) terminating, dismissing, staying,
vacating or amending in a manner adverse to the DIP Note
Purchasers (as determined in their sole discretion) any of
the Initial Orders, the Chapter 15 Order, the DIP Priority
Orders or the Plan, or dismissing any of the Restructuring
Proceedings or (ii) converting any of the Restructuring
Proceedings into receivership, bankruptcy, liquidation,
asset sale, distribution, or similar proceedings in any
jurisdiction, without the prior written consent of the DIP
Note Purchasers;
(e)
the filing of any pleading by any Note Party seeking, or
otherwise consenting to, any of the matters set forth in
clause (d) above or the granting of any other relief that if
granted would give rise to an Event of Default;
(f)
the Initial Orders, the Chapter 15 Order and the DIP
Priority Orders shall not have become Final Orders on or
before June 30, 2016 (or such later date as agreed to by the
DIP Note Purchasers), or there shall he a breach by any
Note Party of any provisions of the Initial Orders, the
Chapter 15 Order or the DIP Priority Orders (prior to such
orders becoming Final Orders), or the Final Orders shall
cease to be in full force and effect or shall have been
reversed, modified, amended, stayed, vacated or subject to
stay pending appeal, in the case of any modification or
amendment, without the prior written consent of the DIP
Note Purchasers;
(g)
if the requisite majority of creditors in each relevant
jurisdiction do not vote in favour of the Plan, or the Plan is
amended in a manner not acceptable to the DIP Note
Purchasers, or the RSA is terminated with respect to the
Company (as defined in the RSA) or becomes
unenforceable;
(h)
the Note Parties shall fail to meet any Milestone on the date
set out therefor;
- 26 -
0091
(i)
the appointment of any receiver, receiver manager, interim
receiver, monitor (other than the monitor in connection
with the Canadian Proceeding and the Superintendencia),
liquidator, assignee, custodian, trustee, sequestrator or
other similar entity in respect of the Note Parties (or any of
their subsidiaries) or all or any part of their respective
property, assets or undertaking other than as approved by
the DIP Note Purchasers:
(j)
the entry of (i) an order in the Restructuring Proceedings
charging any Collateral (other than the DIP Liens) under
which any person takes action against the Collateral or that
becomes a final non-appealable order, or the
commencement of other actions or entry of other orders
that are adverse to the DIP Collateral Agent or the DIP
Note Purchasers or their respective rights and remedies
under the DIP Note Documents in any of the Restructuring
Proceedings or inconsistent with the DIP Note Documents,
the Initial Orders, the Chapter 15 Order or the DIP Priority
Orders, (ii) one or more final judgments, writs of execution,
garnishment or attachment representing a claim against any
Note Party or the Collateral that is not released, bonded,
satisfied, discharged, vacated, stayed or accepted for
payment by an insurer within thirty (30) days after their
entry, commencement or levy, (iii) an order granting relief
from any stay of proceeding (including, without limitation,
the automatic stay) so as to allow a third party to proceed
with foreclosure (or granting of a deed in lieu of
foreclosure) or other enforcement action against any asset
or (iv) any post-petition judgment against any Note Party,
in each case with a value in excess of $5 million (to the
extent not covered by insurance), in each case, other than
by or in respect of an Affected Creditor (as defined in the
Recapitalization Term Sheet);
(k)
other than the proceedings in progress as of the date hereof
and as contemplated under the Catalyst RSA (as defined in
the RSA), the commencement of any bankruptcy,
insolvency, restructuring, reorganization or similar
proceedings in any jurisdiction (other than the
Restructuring Proceedings) without the prior written
consent of the DIP Note Purchasers, except to the extent
that Meta Petroleum AG or Pacific E&P Holding Corp.,
respectively, file for insolvency proceedings pursuant to
sec. 293 et seq. of the Swiss Debt Enforcement and
Bankruptcy Act, which tiling may be commenced by the
board of directors of either company acting reasonably and
after consultation with the DIP Note Purchasers;
(1)
any DIP Lien shall cease to be (or shall be asserted by any
Note Party not to be) valid, perfected (if applicable) and
- 27 -
0092
enforceable in all respects in any Restructuring Proceeding
or to have the priority contemplated under the DIP Priority
Orders and the Final Orders whether or not such DIP Lien
is created pursuant to such DIP Priority Orders or Final
Orders or pursuant to applicable security documents in each
relevant jurisdiction;
(m)
(i) except as set out in the DIP Order, the existence of any
claims, liens or charges, or the entry of any order or any
court authorizing any claims, liens or charges on any
Collateral, other than the DIP Liens or as otherwise
permitted under the applicable DIP Note Documents or (ii)
the granting of superpriority, priority or administrative
claim status to any claim in the Restructuring Proceedings
pari passu with or senior to the ranking of the DIP
Obligations (other than the Administrative Charge and the
KERP Charge) established under the DIP Priority Orders;
(n)
the Note Parties or any of their subsidiaries, shall obtain
court authorization to commence, or shall commence, join
in, assist or otherwise participate as an adverse pm I y in any
suit or other proceeding against the DIP Collateral Agent or
any of the DIP Note Purchasers relating to the DIP Note
Issuance;
(o)
a Transaction or a plan of arrangement or compromise
(other than the Plan) shall be confi ied in any of the
Restructuring Proceedings that has not been previously
consented to in writing by the DIP Note Purchasers, or the
Note Parties shall seek to approve or consummate any
Transaction or a plan of arrangement or compromise which
does not have the prior consent of the DIP Note Purchasers;
the filing of any motion by the Note Parties or their
subsidiaries in any of the Restructuring Proceedings
seeking authority to consummate, or support the
consummation of a sale of assets of the Note Parties or the
Collateral having a value in excess of $5 million outside the
ordinary course of business except for the Permitted Asset
Dispositions or unless otherwise permitted under the DIP
Note Documents or consented to by the DIP Note
Purchasers:
(q)
the cessation of all or any material part of the business
operations of the Note Patties and their subsidiaries (other
than the Piriri Rubiales contracts);
(r)
any Note Party shall make any payment of principal or
interest on account of any prepetition indebtedness other
than (i) amounts due to trade creditors in the ordinary
course of business and (ii) permitted termination and
-28-
• 0093
severance payments due to employees and amounts owing
under the KERP, and (iii) taxes, accrued payroll and other
ordinary course liabilities, provided in each case that such
amounts are included in the Cash Flow Projection;
(s)
the existence of a cumulative adverse variance of 125% or
more in total disbursements (exclusive of joint-venture
funding and professional fees paid during such period) on
an aggregate basis from the projected amount of such
disbursements set out in the Cash Flow Projection in
respect of any Test Period;
(t)
the existence of a cumulative adverse variance of 130% or
more in total disbursements on an aggregate basis in respect
of joint-venture funding from the projected amount of such
joint venture funding set out in the Cash flow Projection in
respect of any Test Period:
(u)
the existence of a cumulative adverse variance of 125% or
more in total disbursements on an aggregate basis in respect
of professional fees (other than professional fees of the
advisors to the DIP Providers and the prepetition holders of
Notes and Bank Debt) from the projected amount of such
professional fees set out in the Cash Flow Projection in
respect of any Test Period: or
(v)
the Issuer or any of its direct or indirect subsidiaries or
affiliates (or any branch thereof) shall be declared subject
to (either voluntarily or involuntarily) (a) main insolvency
proceedings under Law 1116 or (b) proceedings under
chapter 11 of the Bankruptcy Code and, only if such
proceeding is an involuntary insolvency proceeding, it is
not dismissed within ten (10) calendar days of such
declaration, in each case without the consent of the DIP
Note Purchasers.
31.
REMEDIES
Upon the occurrence and during the continuance of any Event of
Default, the DIP Collateral Agent acting at the direction of the DIP
Note Purchasers, shall be free to exercise all rights, accelerate the
DIP Note Obligations and to take action with respect to the
Collateral, following an order of the Canadian Court upon five
days' notice to the Note Parties.
23.
EXPENSES AND
INDEMNITY
The Issuer will reimburse the DIP Collateral Agent and the DIP
Providers for the fees and expenses of (i) their financial advisors,
(ii) a single counsel in each relevant jurisdiction for the Plan
Sponsor, (iii) a single counsel in each relevant jurisdiction for each
of the DIP Note Purchasers (other than the Plan Sponsor), as a
group, the DIP LC Lenders (as a group) and the Hedging Provider
(provided that for the purposes of local security in jurisdictions
outside of Canada, Colombia and the United States, all DIP
-29-
0 0 94
Providers (other than the Plan Sponsor) shall use a single common
counsel), (iv) a single counsel in each relevant jurisdiction for the
prepetition holders of Notes, as a group and (v) a counsel in each
relevant jurisdiction for the holders of Bank Debt, as a group, all on
a full indemnity basis. The Issuer will reimburse the Monitor for the
fees and expenses of its counsel (on a full indemnity basis). All
such fees, disbursements and expenses shall be included in the DIP
Obligations and secured by the DIP Liens.
The Issuer agrees to indemnify and hold harmless the DIP
Collateral Agent, the trustee under the Indenture, the Amended
Indenture and the warrant indenture and any common depositary in
respect thereof, and any other similar service provider (together
with their respective partners, members directors, agents and
employees, each, an "Indemnified Party") in connection with the
DIP Notes and the Equity Warrants, in each case against any and all
losses, claims, damages or liabilities to any such person in
connection with the DIP Notes or as a result of any transactions
contemplated under by the DIP Note Issuance, the Plan and the
Restructuring Proceedings (whether or not such investigation,
litigation, claim or proceeding is brought by the Issuer, its equity
holders or creditors or any other party and whether or not any such
Indemnified Party is otherwise a parry thereto), except to the extent
that such loss, claim, damage or liability has been found by a final
non-appealable judgment of a court of competent jurisdiction to
have resulted from the gross negligence or willful misconduct of
such Indemnified Party in performing its obligations under the
relevant documents to which it is a party. The foregoing indemnity
shall have the benefit of the DIP Liens and any court order made in
respect thereof.
33. FURTHER
ASSURANCES
The Note Parties shall, from time to time do, execute and deliver, or
cause to be done, executed and delivered, all such further acts,
documents (including, without limitation, certificates, declamations,
affidavits, reports and opinions) and things as the DIP Note
Purchasers may reasonably request for the purpose of giving effect
to this Term Sheet, the DIP Note Documents and the DIP Liens.
Except as otherwise specifically set out in Section 25, any actions
34. ACTIONS BY DIP
NOTE PURCHASERS taken or not taken, or consents, approvals, amendments or waivers
provided, by the DIP Note Purchasers under the DIP Note
Documents may be taken, delivered or provided upon the direction
of DIP Note Purchasers who hold DIP Note Purchase Commitments
in an aggregate principal amount greater than 66 2/3% of the
aggregate principal amount of all DIP Note Purchase
Commitments.
Notwithstanding the foregoing, without the consent of each DIP
Note Purchaser, no consent, approval, amendment or waiver shall
be made to the extent it has the effect of (A) extending the Outside
Date past the one-year anniversary of the Closing Date,
- 30 -
0095
(B) amending the time for payment of any DIP Obligations
(including any interest or fees), (C) waiving payment of any
interest, tees or other amounts owing under the DIP Notes or the
issuance or the Equity Warrants (other than a waiver or default
interest), (D) decreasing the amount of principal, interest or fees
payable in respect of the DIP Notes, (E) decreasing the amount or
amending the economic terms of, the Equity Warrants required to
be issued hereunder, (F) decreasing the interest rate on the Exit
Notes or (G) altering the call protection of the Exit Notes or
extending the Exit Maturity Date.
In addition to the foregoing requirements, no (i) increase in the
principal amount of DIP Notes, (ii) increase in interest or fees
payable in respect of the DIP Notes, (iii) increase in the amount of
Reorganized Common Stock issued pursuant to the exercise of
Equity Warrants or (iv) increase in the number of Equity Warrants
issued pursuant to the DIP Note Documents, shall be permitted
without the consent of the Issuer and the requisite majority of the
DIP Note Purchasers plus the consent of either (A) the Requisite
Consenting Creditors (as defined in the RSA) or (B) approval of the
Canadian Court.
35.
TRANSFER
The Note Parties may not transfer or assign their rights or
obligations under the DIP Note Documents (including the Equity
Warrants).
36.
CURRENCY
The DIP Notes shall be issued in United States Dollars and all DIP
Note Obligations shall be repaid by the Note Parties in United
States Dollars. All references to dollar amounts in this Term Sheet
are references to United States Dollars unless otherwise indicated.
37. GOVERNING LAW
This Term Sheet, the Commitment Letter in respect hereof and the
DIP Note Documents (other than local law guarantee and security
documents) shall be governed by the laws of the State of New
York.
0096
SCHEDULE "A"
EXIT NOTES TERM SHEET
1. EXIT ISSUER
The Reorganized Company (as defined in the Recapitalization
Term Sheet) (the "Exit Issuer").
2.
GUARANTORS
Same as under the DIP Notes.
3.
EXIT NOTE
PURCHASERS
DIP Note Purchasers other than the Plan Sponsor (the "Exit
Note Purchasers").
4.
EXIT COLLATERAL
AGENT
Same as DIP Collateral Agent.
5.
EXIT FINANCING AND
EQUITY CONVERSION
The Creditor DIP Notes shall become evidenced by the Exit
Notes (the "Exit Notes") and shall be governed by the Amended
Indenture. On the Exit Dare, the Plan Sponsor may exercise its
rights conferred on it under the Plan Sponsor Notes to exchange
the Plan Sponsor Notes for 12.5% of the Reorganized Common
Stock (subject to dilution pursuant to the Management Incentive
Plan), failing which exercise the Plan Sponsor Notes will be
mandatorily exchanged for 12.5% of the Reorganized Common
Stock (subject to dilution pursuant to the Management Incentive
Plan). The DIP LC Facility (if any) will become a two (2) year
facility (starting as of the Closing Date) on terms and conditions
acceptable to the DIP Note Purchasers (the "Exit LC Facility").
37.
CONDITIONS
PRECEDENT TO EXIT
NOTES
The Exit Notes will be subject to customary and usual conditions
precedent, including (i) maintenance of a minimum amount of
Unrestricted Operating Cash together with the amount of cash
deposited in the Cash Collateral Accounts of at least (A) $200
million at any time prior to the completion of the Port Facility
Sale (in whole or in part) and (B) $200 million plus the net cash
proceeds of the Port Facility Sale (in whole or in part) at any
time following the completion of the Port Facility Sale (in whole
or in pari), (ii) achievement (or waiver in accordance with the
DIP Note Documents) of each Milestone required to be achieved
on or prior to the Exit Date and (iii) the implementation of the
Plan (including satisfaction of all conditions precedent thereto)
or such other plan as has been consented to by the Plan Sponsor
and the Exit Note Purchasers.
38.
DEFINITIVE
DOCUMENTATION
The Exit Notes shall be governed by the Amended Indenture,
and (i) the Reorganized Company shall use its commercially
reasonable best efforts to obtain a rating within 10 business days
after the Exit Date, (ii) on or prior to the Exit Date, the Company
shall have prepared a draft prospectus (subject to the inclusion of
such additional information, including additional financial
information and pro forma statements reflecting the
reorganization of the Company that was not reasonably available
-2-
0097
for inclusion therein prior to the Exit Date, as may be required
by the competent authority of the Euro MTF) for the purpose of
applying for the listing of the Exit Notes on the Official List of
the Luxembourg Stock Exchange); (iii) no later than 1 0 business
days after the later of the Exit Date or the availability of the
additional required information as set out in item (ii), the
Reorganized Company shall have applied for the listing of the
Exit Notes on the Official List of the Luxembourg Stock
Exchange and to trade them on the Euro MTF Market of such
exchange, (iv) the Reorganized Company will use its
commercially reasonable best efforts to obtain and maintain such
listing of the Exit Notes on the Official List of the Luxembourg
Stock Exchange, tailing which, it will use its commercially
reasonable best efforts to promptly obtain and maintain an
alternative listing of the Exit Notes on an equivalent unregulated
stock exchange acceptable to the holders of the Exit Notes and
(v) certain terms of the documents with respect to the
Restructuring Proceedings shall not apply following the
completion of, and emergence of the Reorganized Company
from, the Restructuring Proceedings.
The Amended Indenture shall govern the Exit Notes provided
that those terms of the DIP Note Agreement relating to the
Restructuring Proceedings and other matters and covenants
relating specifically thereto shall not apply following the
completion of, and emergence of the Reorganized Company (as
defined in the Recapitalization Term Sheet) from, the
Restructuring Proceedings.
8. INTEREST AND
DEFAULT INTEREST
Interest shall be payable in cash on the aggregate amount of
outstanding obligations under the Exit Notes at a rate equal to
10% per annum, compounded monthly and payable monthly in
arrears in cash on the last business day of each month. Upon the
occurrence and during the continuation of an Event of Default,
all amounts shall bear interest at the applicable interest rate plus
2% per annum payable on demand in arrears in cash.
On and after the Exit Date, for a period of not less than two (2)
years following the Exit Date (or such longer period as may be
agreed by each of the Exit Note Purchasers in its sole
discretion), to the extent that the Company's Unrestricted
Operating Cash (to be defined in the Amended Indenture) is less
than $150 million, at the Company's election, it shall have the
option to make "payments-in-kind" with respect to any interest
payment owed on the principal amount of the Exit Notes
provided that any such "payment-in-kind" interest shall be at a
rate of 14% per annum.
9.
EXIT MATURITY DATE The Exit Notes will mature five years after the Exit Date (the
"Exit Maturity Date"), provided that the Exit Issuer may
redeem at any time following the third anniversary of the Exit
3
Date, subject to the following redemption premiums:
00 98
(a)
following the third anniversary of the Exit Date up to
and including the fourth anniversary of the Exit Date,
105% of the aggregate principal amount of the Exit
Notes; and
(b)
following the fourth anniversary of the Exit Date up to
and including the fifth anniversary of the Exit Date,
102.5% of the aggregate principal amount of the Exit
Notes.
10. SECURITY
The DIP Liens shall continue to secure the obligations under the
Exit Notes and any outstanding hedging contracts under the
Hedging Facility (if any) on the Exit Date until expiry thereof,
and the refinanced DIP LC Facility (if any) which shall continue
to rank second behind the Exit Notes.
11.
REPRESENTATIONS
AND WARRANTIES
Same as DIP Note Documents, subject to such amendments as
may be agreed and provided that certain terms of the DIP Note
Documents with respect to the Restructuring Proceedings shall
not apply following the completion of, and emergence of the
Reorganized Company from, the Restructuring Proceedings.
12.
AFFIRMATIVE,
NEGATIVE AND
FINANCIAL
COVENANTS
Same as DIP Note Documents, subject to such amendments as
may be agreed and provided that (i) certain terms of the DIP
Note Documents with respect to the Restructuring Proceedings
shall not apply following the completion of, and emergence of
the Reorganized Company from, the Restructuring Proceedings
and (ii) the Exit Notes shall contain restrictions on incurrence of
debt and liens (permitting the funded debt set out in Section 13
below) on terms to be agreed between the Issuer and the DIP
Note Purchasers and (iii) the Amended Indenture shall pel
the Note Parties to merge, amalgamate, consolidate, wind-up
into or transfer assets to any other Note Party on terms and
conditions to be reasonably agreed between the DIP Note
Purchasers (including the Plan Sponsor) and the Reorganized
Company.
13.
OTHER FUNDED DEBT After the Exit Date, in addition to the Exit Notes and the Exit LC
Facility, the Note Parties will not be pem 1 itted to incur any
indebtedness that ranks senior to or pari passu with the Exit
Notes but shall be entitled to incur (i) unsecured hedging
obligations (subject to the DIP Liens continuing to secure the
outstanding hedging contracts under the Hedging Facility (if
any) on the Exit Date until expiry thereof), (ii) unsecured letters
of credit, (iii) letters of credit secured on a second lien basis
(including the Exit LC Facility) in an aggregate amount not to
exceed $200 million, which letters of credit may be secured by
the Collateral on a pari passu basis with the liens securing the
Exit LC Facility (provided that each financial institution
-4-
0099
providing any such letters of credit on a pari passu basis with
the liens securing the Exit LC Facility shall become a party to
the Intercreditor Agreement on terms, including with respect to
the exercise of remedies, reasonably satisfactory to the Exit Note
Purchasers), (iv) cash collateralized letters of credit outstanding
as of the Closing Date and unsecured or cash-collateralized
renewals or extensions thereof and (v) unsecured debt with a
maturity date that is at least 90 days following the maturity of
the Exit Notes.
14.
EVENTS OF DEFAULT Same as DIP Note Documents, subject to such amendments as
may be agreed and provided that certain terms of the DIP Note
Documents with respect to the Restructuring Proceedings and
the Plan shall not apply following the completion of, and
emergence of the Reorganized Company from, the Restructuring
Proceedings.
15.
ACTIONS BY EXIT
NOTE PURCHASERS
Any actions taken or not taken, or consents, approvals,
amendments or waivers provided, by the Exit Note Purchasers
under the Amended Indenture may be taken, delivered or
provided upon the direction of Exit Note Purchasers who hold
Exit Notes in an aggregate principal amount greater than 66 2/3%
of the aggregate principal amount of all Exit Notes.
Notwithstanding the foregoing, without the consent of each Exit
Note Purchaser, no consent, approval, amendment or waiver
shall be made to the extent it has the effect of (A) increasing the
amount of the Exit Notes, (B) amending the time for payment of
any obligations under the Exit Notes (including any interest or
fees), (C) waiving payment of any interest, fees or other amounts
owing under the Exit Notes (other than a waiver of default
interest), (D) decreasing the interest rate on the Exit Notes,
(E) amending any provision with respect to the payment of
interest "in-kind" or (F) altering the call protection of the Exit
Notes or extending the Exit Maturity Date.
16.
GOVERNING LAW
New York.
SCHEDULE "B"
DIP AND NOTE PURCHASER COMMITMENTS
[Excluded]
01 CO
SCHEDULE "C"
RECAPITALIZATION TERM SHEET
[Attached]
SCHEDULE "D"
SECURITY DOCUMENTS
Colombia
1.
Guarantee Trust Agreement establishing a fiducia in favour of the DIP Collateral Agent
into which all Colombian assets of the Note Parties will be transferred, other than such
contractual rights which require counterparty consent. The Guarantee Trust Agreement
will be registered before the Movables Guarantees Registry (Registro de Garantias
Mobiliarias) managed by the Confederation of Chambers of Commerce (Confederacion
de Camaras de Comercio Confecamaras) (the "MGR"). This will include, among other
things, accounts in the name of the fiduciaria into which all Colombian receivables will
be directed.
2.
Commercial Establishment Pledge Agreement over all present and future movable assets
which will be registered before the MGR.
3.
Conditional Assignment of Economic Rights under Contracts which will be registered
before the MGR.
4.
Account Control Agreements (or local equivalents) over all accounts of the Note Parties.
The Account Control Agreements will be registered before the MGR.
5.
Share pledge agreements over the shares or Agrocascada S.A.S. and any other Note Party
formed under Colombian law, which share pledge agreements will be registered before
the MGR and in the relevant Note Party's stock-ledger.
Canada
1.
General security agreement over all Canadian assets of each applicable Note party which
will be registered in the personal property security registries of British Columbia, Ontario
and any other province in which Canadian assets of a Note Party are located.
2.
The parties will establish one or more Cash Collateral Accounts which shall be subject to
a sole-dominion account control agreement in favour of the DIP Collateral Agent.
3.
Springing-dominion account control agreements will be entered in respect of all other
Canadian bank accounts.
Other jurisdictions
1.
Equity pledge agreements in each jurisdiction (other than Canada and Colombia) in
which a Note Party is organized (Switzerland, Netherlands, Luxembourg, Panama,
Barbados, Peru, Bermuda and British Virgin Islands).
2.
Springing-dominion account control agreements will be entered into in each jurisdiction
in which jurisdiction outside of Canada in which the Note Parties have material bank
accounts to which receivables are deposited (e.g. proceeds of foreign crude oil sales).
-2-
0103
3.
Additional security documents as reasonably required in each jurisdiction in which a
Note Party has material assets (if any), including, without limitation specific pledge
agreements over all equity interests, notes and other interests and investments held in any
subsidiaries of the Note Parties (including joint ventures and non-wholly owned
subsidiaries).
"Initial Collateral" means (i) all Collateral owned by any Note Party located in Canada and the
United States, (ii) all Collateral located in Colombia owned by each of Meta Petroleum AG
(including its Colombian Branch), Pacific Stratus Energy Colombia Corp. (including its Colombian
branch), Grupo C&C Energia (Barbados) Ltd. (including its Colombian branch), Petrominerales
Colombia Corp. (including its Colombian branch) and Agro Cascada S.A.S., (iii) all Collateral owned
by each entity in item (ii) located in its jurisdiction of organization, (iv) an assignment of all
intercompany debt owed by or owing to each entity in item (ii) validly perfected in Colombia and in
such entity's jurisdiction of organization (v) a pledge of the stock or other equity interests in each
entity in item (ii), (vi) a pledge of the stock or other equity interests in each of Pacific E&P Holdings
Corp. and Pacific E&P International Holdings, S.a.r.l., Pacific Infrastructure Ventures Inc., Pacinfra
Holding Ltd., Pacific Midstream Holding Corp. and Pacific Midstream Ltd. and (vii) a pledge of
stock of, and a pledge of all assets of, any direct or indirect wholly-owned subsidiary of the Issuer
holding material cash deposits or intercompany claims.
"Subsequent Collateral" means all Collateral other than the Initial Collateral.
0104
PACIFIC EXPLORATION & PRODUCTION CORP.
RECAPITALIZATION-SUMMARY OF TERMS
All dollar amounts are in US dollars.
This recapitalization and financing term sheet (the "Recapitalization Term Sheet"), which is
attached as Exhibit A to that certain Restructuring Support Agreement, dated as of •, 2016 (the
"RSA")' by and among the Company, the Consenting Creditors and the Plan Sponsor, summarizes
certain principal terms and conditions of a proposed restructuring plan and related financing facilities
of Pacific Exploration & Production Corp. ("Pacific") and certain of its direct and indirect affiliates
and subsidiaries that are Parties to the RSA (each, including Pacific, a "Company Party" and
collectively, the "Company").
Pacific, the Company Parties that are Guarantors (as defined in the Note Indentures and/or the Credit
Facilities) (the "Guarantor Debtors"), and any other direct or indirect subsidiaries of Pacific as the
Company, the Requisite Consenting Creditors and the Plan Sponsor may agree (the "Additional
Debtors" and, together with Pacific and the Guarantor Debtors, the "Debtors") will implement the
Restructuring through a prearranged plan of reorganization, which shall be consistent with the Tel nis
of this Recapitalization Term Sheet and the RSA (as it may be amended or supplemented from time to
time in accordance with the terms of the RSA, the "Plan") to be filed by the Debtors in (i) amended
proceeding under the Companies' Creditors Arrangement Act (the "CCAA") in the Ontario Superior
Court of Justice (Commercial List) (the "Canadian Court"), (ii) an amended ancillary proceeding, or
such other proceeding, acceptable to the Company, the Requisite Consenting Creditors and the Plan
Sponsor to be commenced under Ley 1116 of 2006 in Colombia ("Law 1116") in the court seized of
jurisdiction in a Colombian proceeding under Law 1116 (the "Colombian Court"), and (iii) an
amended proceeding under chapter 15 of title 11 of the United States Code (the "Bankruptcy Code"
and, together with the CCAA and Law 1116, the "Insolvency Laws") in the United States
Bankruptcy Court for the Southern District of New York (the "U.S. Court" and, together with the
Canadian Court and the Colombian Court, the "Insolvency Courts"). If the Company, the Requisite
Consenting Creditors and the Plan Sponsor agree (each acting in their sole discretion), the
Restructuring may be implemented through a Plan filed in a proceeding to be commenced under
chapter 11 of the Bankruptcy Code before the U.S. Court, with such other appropriate proceedings
before each of the Canadian Court and the Colombian Court as agreed by the Company, Requisite
Consenting Creditors and the Plan Sponsor, and the Parties to the RSA shall thereafter negotiate in
good faith to promptly effectuate such modifications to the RSA and to the Definitive Documents as
are reasonably necessary to implement the Restructuring in such manner.
The governing documents with respect to the Restructuring will contain terms and conditions that are
dependent on each other, including those described in the RSA, this Recapitalization Term Sheet and
the secured DIP and exit financing facility term sheet (the "DIP/Exit Note Term Sheet") and secured
DIP and exit LC facility term sheet (the "DIP/Exit LC Term Sheet" and, together with the DIP/Exit
Note Term Sheet, the "DIP/Exit Term Sheets"). This Recapitalization Term Sheet and the DIP/Exit
Term Sheets do not include a description of all of the terms, conditions, and other provisions that are
to be contained in the definitive documentation governing the Restructuring, which remain subject to
discussion and negotiation in accordance with the RSA. The Restructuring will not contain any
material terms or conditions that are inconsistent in any material respect with this Recapitalization
Term Sheet, the DIP/Exit Term Sheets or the RSA, except with the express written consent of the
Company, the Requisite Consenting Creditors and the Plan Sponsor. This Recapitalization Term
1
Capitalized terms used and not defined herein shall have the meanings ascribed to such terms in the RSA.
-2-
0105
Sheet is entitled to protection from any use or disclosure to any party or person pursuant to Federal
Rule of Evidence 408 and similar laws and regulations in effect in any relevant jurisdiction.
1.
THE REORGANIZED
COMPANY
A reorganized Pacific, which shall be re-listed on a stock
exchange as of the Plan Effective Date, which shall be
reorganized in a manner acceptable to Pacific, the
Requisite Consenting Creditors and the Plan Sponsor, each
in their sole discretion, with respect to jurisdiction of
formation, tax attributes, withholding tax exemptions and
other related matters (the "Reorganized Company").
2.
DIP/EXIT
FINANCING/EQUITY
PURCHASE
In accordance with and subject to the terms and conditions
of the DIP/Exit Term Sheets, up to $634 million secured
financing (the "DIP Financing") to be provided by way of
(i) senior secured first-lien notes (the "DIP Notes") in an
amount of up to (x) $250 million to be provided by certain
funds managed or administered by the Plan Sponsor and
(y) $250 million to be provided by certain of the
Consenting Noteholders (together with the Plan Sponsor,
the "DIP Note Purchasers") and (ii) if agreed by the
Requisite Consenting Creditors, the Plan Sponsor and the
Company, a secured second-lien letter of credit facility in
an amount of up to $134 million (the "DIP LC Facility")
provided by certain of the Consenting Lenders (the "DIP
LC Lenders").
Upon consummation of the Restructuring, (i) the $250
million of the DIP Notes purchased by the DIP Note
Purchasers other than the Plan Sponsor (the "Creditor
DIP Notes") will remain outstanding as $250 million of
exit notes (on the terms set out in Schedule A of the
DIP/Exit Note Term Sheet), (ii) the Plan Sponsor may
exercise its rights in respect of the first $250 million of the
DIP Notes purchased by the Plan Sponsor (the "Plan
Sponsor Notes") to exchange such notes pursuant to the
terms of the Plan Sponsor Notes for 12.5% of the
Reorganized Common Stock (as defined below), failing
which exercise, the Plan Sponsor Notes will be
mandatorily exchanged for 12.5% of the Reorganized
Common Stock, and (iii) the DIP LC Facility will continue
to run until two (2) years following the inception of the
DIP LC Facility on the terms set out in Schedule A
attached to the DIP/Exit LC Term Sheet. Any DIP Notes
purchased by the Plan Sponsor that do not constitute Plan
Sponsor Notes, shall be treated in the same manner as
Creditor DIP Notes.
As part of the Plan, the Plan Sponsor shall be obligated to
subscribe for, with effect as at the Plan Effective Date, at
least $200 million or such larger amount as the Plan
Sponsor may agree (the "Maximum Threshold") of the
Reorganized Common Stock (but, for greater certainty,
-3-
0106
such amount and subscription obligation shall not exceed
the aggregate amount required, if any, to complete the
Cash Out Offer (as defined below)) to enable the
Company to offer Affected Creditors (as defined below)
the option to elect to receive cash in lieu of Reorganized
Common Stock from the Affected Creditor Equity Pool
(as defined below) and the purchase price for the cash
election, and the subscription price payable by the Plan
Sponsor, shall both be based on an implied equity
valuation of the Reorganized Company of at least $800
million in a manner reasonably satisfactory to the Plan
Sponsor and (solely relating to mechanics and not as to
pricing) the Requisite Consenting Creditors (the "Cash
Out Offer"). Affected Creditors may determine, in their
sole discretion, whether to elect to receive cash under the
Cash Out Offer and, for the avoidance of doubt,
consummation of the Restructuring shall not be subject to
any minimum level of participation. If Affected Creditors
elect to receive cash under the Cash Out Offer in excess of
the Maximum Threshold, then such cash participation will
be allocated on a pro rata basis among such Affected
Creditors or the Plan Sponsor may, in its sole discretion,
elect to increase the Maximum Threshold. If Consenting
Creditors who are parties to the RSA at the date hereof
wish to participate as subscribers in the Cash Out Offer on
the same basis as the Plan Sponsor, the Plan Sponsor will
allow them to do so. If shareholders of Pacific (for greater
certainty, being the shareholders of Pacific prior to the
Effective Date and not the shareholders of the
Reorganized Company) wish to participate as subscribers
in the Cash Out Offer on the same basis as the Plan
Sponsor, the Plan Sponsor will also allow them to do so,
provided however that such participation by the
shareholders of Pacific will not adversely impact the rights
of Consenting Creditors (as compared to the rights
available to "Consenting Creditors" under the "Cash Out
Offer" as was contemplated by the Catalyst RSA).
Participation by Consenting Creditors and shareholders of
Pacific as subscribers in the Cash Out Offer will be
permitted to result in a Cash Out Offer pool of up to $400
million. In addition, if agreed by the Requisite Consenting
Creditors, the Plan Sponsor and the Company, the Cash
Out Offer will be implemented by way of a modified
Dutch auction process.
3.
AFFECTED CREDITORS
The affected creditors (the "Affected Creditors") in the
Restructuring are comprised of the following:
1. Holders of Note Claims (approximately $4.1
billion outstanding principal amount, plus accrued
interest, fees and other claims and obligations
-4-
0107
arising thereunder);
2. Holders of Bank Debt Claims (approximately $1.2
billion outstanding principal amount, plus accrued
interest, fees, and other claims and obligations
arising thereunder); and
3. Pacific shall promptly commence (or continue) a
claims process for creditors of Pacific holding
unknown, unreported, contingent or contested
claims (the "Other Unsecured Claims"). The
holders of such Other Unsecured Claims of Pacific
may be treated as Affected Creditors, together
with any holders of restructuring claims that may
arise, such as, for example, from the repudiation
of any contracts (e.g., leases) with Pacific. If the
Company, the Requisite Consenting Creditors and
the Plan Sponsor agree, some or all of the other
Debtors shall commence a similar process to
address claims that are unknown, unreported,
contingent or contested, and, in such event,
holders of such claims may be treated as Affected
Creditors. The form and substance of each process
shall be acceptable to the Company, the Requisite
Consenting Creditors and the Plan Sponsor.
4.
TREATMENT OF
CREDITORS
Each Affected Creditor shall receive its pro rata share of
Reorganized Common Stock (as defined below) from the
Affected Creditor Equity Pool (as defined below),
provided, however, that the Plan may provide, with the
consent of the Requisite Consenting Creditors and the Plan
Sponsor, that holders of Other Unsecured Claims shall
instead receive the cash equivalent of the Reorganized
Common Stock attributed to the Affected Creditor Equity
Pool that would otherwise be distributed to such creditors;
provided further, however, (i) that Affected Creditors may
elect, in their sole discretion, to participate in the Cash Out
Offer, and (ii) the pro rata share of the Reorganized
Common Stock from the Affected Creditor Equity Pool
that is allocated to holders of Note Claims shall be reduced
by the Early Consent Consideration (as defined below).
5.
TREATMENT OF EXISTING
EQUITY
All existing equity interests of Pacific shall be canceled,
otherwise extinguished, or significantly diluted in an
amount satisfactory to the Plan Sponsor and the Requisite
Consenting Creditors (such that, following the
Restructuring, such equity interests (and associated voting
power) will constitute in the aggregate only a nominal
amount of Reorganized Common Stock).
6.
EQUITY ALLOCATION
100% of the common equity interests of the Reorganized
Company (the "Reorganized Common Stock") shall be
distributed as follows, in each case in accordance with
-5-
010
each holder's pro rata share of the relevant categories of
claims (in each case subject to dilution on a pro rata basis
arising from the New Management Incentive Plan (as
described below)). The allocations of Reorganized
Common Stock set forth below do not include or
otherwise take into account the Cash Out Offer or the
Early Consent Consideration (as defined below).
1. Plan Sponsor: (a) warrants at a nominal strike
price issued together with the Plan Sponsor Notes
and exercisable into 12.5% of the Reorganized
Common Stock on and only on the Plan Effective
Date, on a fully diluted basis; and (b) 12.5% of
the Reorganized Common Stock pursuant to the
exchange of the Plan Sponsor Notes on and only
on the Plan Effective Date, on a fully diluted
basis.
2. DIP Note Purchasers other than the Plan
Sponsor: warrants at a nominal strike price issued
together with the Creditor DIP Notes and
exercisable into 12.5% of the Reorganized
Common Stock on and only on the Plan Effective
Date, on a fully diluted basis.
3. Affected Creditors: 62.5% of the Reorganized
Common Stock on the Plan Effective Date, on a
fully diluted basis (the "Affected Creditor
Equity Pool").
7.
EARLY CONSENT
CONSIDERATION
Each holder of a Note Claim that, on or before 5:00 p.m.
Toronto / New York time on the date that is one week
following the date of the RSA (the "Consent Date"),
executes (i) (x) the RSA or (y) a Joinder Agreement
substantially in the form attached to the RSA (such
"Early Consent Consideration
holders, the
Noteholders") and (ii) votes in favor of the Plan shall
receive its pro rata share (based on the aggregate amount
of Note Claims held by all Early Consent Consideration
Noteholders as of the Consent Date) of the early consent
consideration, which shall equal, in the aggregate, 2.2% of
the Reorganized Common Stock (the "Early Consent
Consideration"). The Early Consent Consideration shall
be payable subject to, and only upon, consummation of the
Plan. If, after the Consent Date, an Early Consent
Consideration Noteholder shall Transfer (as defined in the
RSA), in a manner consistent with the RSA, any Note
Claims that are entitled to the Early Consent
Consideration, the transferee thereof shall be deemed to be
an Early Consent Consideration Noteholder and entitled to
that portion of the Early Consent Consideration
attributable to such transferred Note Claims, subject to the
terms and conditions set forth herein. For the avoidance of
-6-
0 09
doubt, the Early Consent Consideration shall not be earned
or payable if the Plan Effective Date does not occur and no
Early Consent Consideration Noteholder shall be entitled
to the Early Consent Consideration if it terminates its
obligations under the RSA prior to the Plan Effective
Date. For greater certainty, holders of Bank Debt Claims
shall not be entitled to the Early Consent Consideration on
account of their Bank Debt Claims and the distribution of
the Early Consent Consideration to the Early Consent
Consideration Noteholders shall not reduce or otherwise
affect the portion of the Affected Creditor Equity Pool
allocated to holders of Bank Debt Claims.
8.
KERP
The Company has entered into a key employee retention
plan ("KERP") in substantially the form approved by the
Independent Committee of Pacific's Board of Directors
(the "Independent Committee"), The Catalyst Group Inc.
and the Requisite Consenting Creditors as of April 18,
2016. The Company will provide a true and complete copy
of the KERP to the Plan Sponsor. Other than as permitted
pursuant to the KERP, no severance or termination
payments will be made to any of the Company's
employees who are participants in the KERP in connection
with the implementation of the Restructuring and/or
termination or amendment of any of their employment
agreements prior to the Plan Effective Date. The
applicable Debtors have received approval of the KERP
from the Canadian Court..
9.
NEW MANAGEMENT
INCENTIVE PLAN
All terms and conditions of the New Management
Incentive Plan, including the form, amount, allocation and
vesting of grants, shall be determined by the Board of
Directors of the Reorganized Company, as selected by the
Requisite Consenting Noteholders, the Requisite
Consenting Lenders and the Plan Sponsor pursuant to the
new governance procedures set out in ANNEX A hereto.
Any Reorganized Common Stock granted pursuant to the
New Management Incentive Plan shall vest over a threeyear period, and the Reorganized Company shall not issue
Reorganized Common Stock (or instruments that may
under any circumstance be converted into Reorganized
Common Stock) pursuant to the New Management
Incentive Plan in an amount that exceeds 10% of the
Reorganized Common Stock on a post-dilution basis.
10.
GOVERNANCE /
MANAGEMENT / CRO
The governance and management of the Company during
the RSA Effective Period (including with respect to the
appointment of a chief restructuring officer), and of the
Reorganized Company shall thereafter be as set out in
ANNEX A hereto.
-7-
11.
CONDITIONS PRECEDENT
TO IMPLEMENTATION
The conditions precedent to the implementation of Plan
will be set forth in the Plan and will include, without
limitation, the following:
1. No change of control payments will be made to
any of the Company's employees in connection
with implementation of the Restructuring and/or
the termination or amendment of any of their
existing
The
agreements.
employment
employment agreements for employees subject to
the KERP will be amended, revised or replaced on
terms that are consistent with the KERP and
otherwise in form and substance acceptable to the
New Board, the Requisite Consenting Creditors
and the Plan Sponsor;
2. The fees payable to the Principal Company
Financial Advisor in connection with the
of the
implementation
and
negotiation
Restructuring, and such other services as
described in the engagement agreement dated as
of December 17, 2015 between the Principal
Company Financial Advisor and the Company,
will be paid subject to and in accordance with the
amendment, dated as of April 18, 2016, to the
tet Ins of the Principal Company Financial
Advisor's engagement agreement with the
Company, which amendment was provided to the
Requisite Consenting Creditors and the Plan
Sponsor contemporaneously herewith. Other than
with respect to those provisions that are amended
in the amendment dated as of April 18, 2016, all
other terms and conditions of the Principal
Company Financial Advisor's engagement
agreement with the Company dated as of
December 17, 2015 remain binding;
3. The Canadian Court shall have entered the Plan
Approval Order, which shall provide, inter alia,
that (i) all common shares of Pacific shall have
been canceled or otherwise significantly diluted to
a nominal amount in accordance with this
Recapitalization Term Sheet, and (ii) any and all
other equity claims and equity interests (as such
terms are defined in the CCAA) of Pacific shall
have been canceled, extinguished and forever
barred, in each case with no consideration
provided to holders of such common shares or
equity claims; and
4. Upon the Plan Effective Date, the Reorganized
-8Company Stock will be publicly listed and traded
on the Toronto Stock Exchange or, if such listing
is not available as a consequence of listing
requirements, on the TSX-V, provided that if
neither such listing is available to the Reorganized
Company as a consequence of the listing
requirements of such exchanges, on such other
stock exchange as is acceptable to Pacific, the
Requisite Consenting Creditors and the Plan
Sponsor (having regard to the listing requirements
of the other stock exchanges and the liquidity
provided thereby).
12.
GOVERNING LAW
New York
13.
ADDITIONAL CASH
INJECTION BY PLAN
SPONSOR
As part of the Plan, the Plan Sponsor will contribute $75
million cash to the Reorganized Company for no
additional consideration. $25 million of such contribution
will compensate the Pacific/the Reorganized Company for
the break-fee paid by Pacific to The Catalyst Group Inc. in
connection with the Catalyst RSA.
14.
OPTIONAL ADDITIONAL
NOTES TO AFFECTED
CREDITORS
If, and only if, approved by the Requisite Consenting
Creditors, the Reorganized Company will, as part of the
Plan, issue $80 million of new notes having the same
terms and conditions as the exit notes (such terms being
set out in Schedule A of the DIP/Exit Note Term Sheet) to
the Affected Creditors on a pro rata basis.
ANNEX A
Governance
•
•
CRO; Management. During the RSA Effective Period, the Parties to the RSA shall take all
steps reasonably necessary or appropriate to effectuate the following:
o
CRO Appointment/Affirmation. An empowered chief restructuring officer (the
"CRO") with enhanced authority and new deputy chief financial officer (the "Deputy
CFO") shall be appointed (or if either such officer has already been appointed in
connection with the proceedings contemplated in the Catalyst RSA, such
appointment shall be affirmed), each acceptable to Requisite Consenting Creditors,
the Plan Sponsor and the Independent Committee, prior to the date that is one week
following the date of the RSA (with a five business day cure period thereafter), or
such later date as the Requisite Consenting Creditors, the Plan Sponsor and the
Independent Committee may agree. Such CRO will report to the Independent
Committee of the Company's current board of directors (the "Board of Directors")
and will be authorized to provide information directly to the Consenting Creditors (or
their advisors) and the Plan Sponsor. The existing CFO and the Deputy CFO shall
report to the CRO.
o
Selection Process for CRO. Where a CRO has not already been appointed in
connection with proceedings contemplated in the Catalyst RSA or where such CRO's
appointment has not been affirmed, the new CRO shall be selected by the
Independent Committee, the Plan Sponsor and the Requisite Consenting Creditors.
Zolfo Cooper Management LLC shall be eligible for this appointment. Where a
Deputy CFO has not already been appointed in connection with proceedings
contemplated in the Catalyst RSA or where such Deputy CFO's appointment has not
been affirmed, the new Deputy CFO shall be selected via a pitch process, conducted
by a working group composed of the Plan Sponsor and an agreed-upon subset of the
Ad Hoc Noteholder Committee, the Ad Hoc Lender Committee and the Independent
Committee advisors.
o
Prerequisites for CRO and Deputy CFO. The CRO and Deputy CFO must be present
in Bogota five (5) days per week (subject to having to attend meetings concerning
Pacific matters that are scheduled outside of Bogota). The CRO and/or its team
should include individuals with Spanish- language skills and relevant oil and gas
experience.
o
DIP Budget. As soon as practical after his appoint„ ent, the CRO shall review the
Cash Flow Projections (as defined in the DIP/Exit Note Term Sheet) and provide
comments to the Requisite Consenting Creditors (or their advisors), the Plan Sponsor,
and the Independent Committee.
o
CRO Powers. The mandate of the CRO shall include a full assessment of key
company processes, organizational structure, systems, controls, risks and certain
positions at the Company, as agreed by the Plan Sponsor and Requisite Consenting
Creditors (or their advisors). The CRO is also empowered to retain a leading
international executive search fl_1111 to assist in such assessment.
New Board Composition: Reorganized Company Management; Shareholder Rights
-2-
01 1 3
o
Size of Reorganized Company's Board of Directors. The Reorganized Company's
board of directors (the "New Board") shall be composed of seven members upon the
Plan Effective Date.
o
New Board Composition. The New Board shall be initially comprised as follows: (i)
four nominees selected by the Plan Sponsor, one of which may be chosen to serve as
the chairman of the New Board; (ii) one independent nominee that is jointly selected
by the Plan Sponsor and the Requisite Consenting Creditors; (iii) one independent
individual proposed by the Requisite Consenting Noteholders and that is reasonably
acceptable to the Requisite Consenting Lenders (the "RCN Proposed Director"); and
(iv) one independent individual proposed by the Requisite Consenting Lenders and
that is reasonably acceptable to the Requisite Consenting Noteholders (the "RCL
Proposed Director"). A majority of the New Board shall nominate directors for reelection at the end of the New Board's term, including directors then in office (if they
consent to election). The Articles or by-laws of the Reorganized Company shall
contain provisions (A) requiring that the Board be comprised of a majority of
"Independent Directors" (to be defined in the Articles or by-laws as directors who are
independent of the Reorganized Company), and (B) requiring the Plan Sponsor to
vote all of its shares in favour of the RCN Proposed Director and the RCL Proposed
Director (if they consent to election) at the two annual meetings of shareholders
immediately following the Plan Effective Date (i.e., in 2017 and 2018), both of which
provisions shall fall away if the Plan Sponsor owns less than 10% of the outstanding
Reorganized Common Stock. The requirement in (A) shall fall away on the date of
the Company's annual meeting in 2019. Additionally, the constating documents of
the Reorganized Company shall contain provisions providing that the Plan Sponsor
has the ability to appoint a majority of the Board of Directors of the Reorganized
Company so long as Plan Sponsor holds, directly or indirectly, at least a 22.5%
ownership interest in the Reorganized Company on a fully diluted basis.
o
Reorganized Company Management. Certain positions of the Reorganized Company
in place on the Plan Effective Date (as agreed by the Plan Sponsor and Requisite
Consenting Creditors) shall be affirmed by a supermajority of six members of the
New Board in the case of certain members of senior management, and, with respect
to the remaining positions, by four members of the New Board, including one
nominee from the Plan Sponsor and either the RCN Proposed Director or the RCL
Proposed Director. If the requisite majority does not affirm such management, then
such management shall remain in their respective positions, but a search firm (paid
on a fixed fee basis) shall assess potential alternative management, including existing
management. Following the results of the search process, a vote of only four
members of the New Board shall be required to select any person for a position that
was not affirmed by the requisite votes, provided that the four members needed to
carry an affirmative vote must include one nominee from the Plan Sponsor and either
the RCN Proposed Director or the RCL Proposed Director.
o
Negative Control Rights. A majority of the New Board, including (a) at least one of
the RCN Proposed Director or the RCL Proposed Director (for so long as those
individuals are directors), or after such time as either one of the RCN Proposed
Director or the RCL Proposed Director ceases to be a director for any reason, at least
two Independent Directors, and (b) (except with respect to a related party transaction
involving the Plan Sponsor) at least one of the four directors initially chosen by the
Plan Sponsor (or if they are no longer directors, any one director who is an employee
-3of the Plan Sponsor) shall be required to approve any of the following: related part
transactions; material amendments to governing documents; and changes to the size
of the New Board or method of appointment; provided that any vote in favor of any
rights offering shall also require the affirmative vote of each of the RCN Proposed
Director and the RCL Proposed Director, in each case for so long as such directors
are on the New Board. The requirements set forth in this provision shall fall away on
the date of the Company's annual meeting of shareholders in 2019.
o Shareholder Rights Plan. The Reorganized Company shall adopt a customary
shareholder rights plan on the Plan Effective Date with a trigger for an "Acquiring
Person" being set at 20% or more of the outstanding Reorganized Company Stock
(the Plan Sponsor shall be grandfathered), such that offers to acquire the Reorganized
Common Stock made by an Acquiring Person (or that, if completed, would result in
the offeror becoming an Acquiring Person) must be made to all shareholders on the
same teims. Termination, amendments or waivers under the shareholder rights plan
would require approval by a majority of the Independent Directors.
0115
EIG DRAFT: MAY 9, 2016
RESTRUCTURING SUPPORT AGREEMENT
This RESTRUCTURING SUPPORT AGREEMENT (as amended, supplemented or
otherwise modified from time to time, this "Agreement" or "RSA"), dated as of May S.
• 2016, is
entered into by and among:
(a) Pacific Exploration & Production Corporation ("Pacific"), incorporated in the
Province of British Columbia, Canada and its undersigned direct and indirect affiliates and
subsidiaries (each, including Pacific, a "Company Party" and collectively, the "Company");
(b) the beneficial holders, investment advisors or managers for the beneficial holders
and/or discretionary accounts of such beneficial holders signatory to this Agreement by way of
execution of this Agreement or a Joinder Agreement (as defined below) (collectively, the
"Consenting Noteholders") of claims under (i) the 5.375% senior unsecured notes due January 26,
2019 issued by the Company (the "2019 Notes"); (ii) the 7.25% senior unsecured notes due
December 12, 2021 issued by the Company (the "2021 Notes"); (iii) the 5.125% senior unsecured
notes due March 28, 2023 issued by the Company (the "2023 Notes"); and/or (iv) the 5.625% senior
unsecured notes due January 19, 2025 (the "2025 Notes," and together with the 2019 Notes, 2021
Notes and 2023 Notes, the "Notes," and the claims and other obligations arising thereunder, the "Note
Claims," and the indentures and supplemental indentures governing the Notes, collectively, the "Note
Indentures");
(c) the undersigned lenders (collectively, the "Consenting Lenders" and, together with
the Consenting Noteholders and each entity that becomes a Joining Party (as defined below) in
accordance with the tel His and conditions of this Agreement, the "Consenting Creditors") under each
of (i) the $109,000,000 Credit and Guaranty Agreement dated as of May 2, 2013 among the
Company, as borrower, the guarantors party thereto, and Bank of America, N.A. as lender (as
amended, modified, restated or supplemented from time to time, the "BofA Facility"); (ii) the
$250,000,000 Credit and Guaranty Agreement dated as of April 8, 2014 among the Company, as
borrower, the guarantors party thereto, the lenders party thereto and HSBC Bank USA, N.A., as
administrative agent (as amended, modified, restated or supplemented from time to time, the "HSBC
Facility"); and/or (iii) the $1,000,000,000 Revolving Credit and Guaranty Agreement dated April 30,
2014 among the Company, as borrower, the guarantors party thereto, Bank of America, N.A. as
administrative agent and the lenders party thereto (as amended, modified, restated or supplemented
from time to time, the "Revolving Facility," and together with the BofA Facility and the HSBC
Facility, the "Credit Facilities" and the loans, commitments, and other obligations held by the
applicable Lenders pursuant to the Credit Facilities, collectively, the "Bank Debt Claims," and
together with the Note Claims, the "Company Claims"); provided, however, that as used herein,
"Note Claim," "Bank Debt Claim," and "Company Claim," shall not include any claim held in a
fiduciary capacity or held by any other distinct business unit of a Consenting Creditor other than the
business unit expressly identified on the signature pages hereto unless such other business unit is or
becomes party to this Agreement, and "Consenting Noteholder," "Consenting Lender," "Consenting
Creditor" and "Party" shall not include any distinct business unit of a Consenting Creditor other than
the business unit expressly identified on the signature pages hereto unless such other business unit is
or becomes party to this Agreement; provided further that any custodian, depositary, agent or
management company that executes this Agreement or any Joinder Agreement (as defined below) for
and on behalf of any Consenting Creditor, in circumstances where the relevant Consenting Creditor is
or becomes a Party to this Agreement and such custodian, depositary, agent or management company
0116
merely executes this Agreement or the relevant Joinder Agreement on its behalf, shall have no
obligations or liability under this Agreement or the relevant Joinder Agreement; and
(d) EIG Pacific Holdings Ltd. (the "Plan Sponsor").
Each of the Company Parties, the Consenting Creditors and the Plan Sponsor is referred to
herein as a "Party" and, collectively, as the "Parties."
RECITALS
WHEREAS, the Company, an ad hoc committee of certain Consenting Noteholders (the "Ad
Hoc Noteholder Committee"), a steering committee of certain Consenting Lenders (the "Lender
Committee") and the Plan Sponsor and their respective counsel and other advisors have engaged in
arm's-length, good-faith negotiations regarding a comprehensive restructuring of certain financial
obligations of the Company (the "Restructuring"), including the Company's indebtedness and
obligations under the Notes and the Credit Facilities pursuant to a plan of arrangement or compromise
(as amended and supplemented with the consent of the Requisite Consenting Creditors (as defined
below) and the Plan Sponsor and in accordance with this RSA, the "Plan") contemplated by the
recapitalization Term sheet (the "Recapitalization Term Sheet") attached as Exhibit Error!
Reference source not found. hereto;
WHEREAS, the Company intends to implement the Restructuring in accordance with the
terms and conditions set forth in the Recapitalization Term Sheet and this RSA through amended (i)
voluntary main proceedings (the "Canadian Proceedings") pursuant to the Companies' Creditors
Arrangement Act (the "CCAA"), in the Ontario Superior Court of Justice (Commercial List) (the
"Canadian Court") and (ii) ancillary recognition proceedings (together with the Canadian
Proceedings, the "Insolvency Cases"), or such other proceedings, acceptable to the Company, the
Requisite Consenting Creditors and the Plan Sponsor, each acting in their sole discretion, to be
commenced under (a) Ley 1116 of 2006 in Colombia ("Law 1116") in the court seized of jurisdiction
(the "Colombian Court") in a Colombian proceeding under Law 1116 and (b) chapter 15 of title 11 of
the United States Code (the "Bankruptcy Code" and, together with the CCAA and Law 1116, the
"Insolvency Laws") in the United States Bankruptcy Court for the Southern District of New York (the
"U.S. Court" and, together with the Colombian Court and the Canadian Court, the "Insolvency
Courts"), or as may be otherwise agreed by the Company, the Requisite Consenting Creditors (as
defined below) and the Plan Sponsor, to effect the Restructuring as set forth herein and in the
Recapitalization Term Sheet and the Plan;
WHEREAS, if the Company, the Requisite Consenting Creditors and the Plan Sponsor agree
(each acting in their sole discretion), the Restructuring may be implemented through a plan of
reorganization filed in a proceeding to be commenced under chapter 11 of the Bankruptcy Code
before the U.S. Court, with such other appropriate proceedings before each of the Canadian Court and
the Colombian Court as agreed by the Company, Requisite Consenting Creditors and the Plan
Sponsor; and
WHEREAS, each Party and its respective counsel and other advisors has reviewed or has
had the opportunity to review the Recapitalization Term Sheet and this RSA and each Party has
agreed to the Restructuring on the terms and conditions set forth in the Recapitalization Term Sheet
and this RSA.
2
0117
NOW, THEREFORE, in consideration of the covenants and agreements contained herein,
and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
each Party, intending to be legally bound hereby, agrees as follows:
Section 1. RSA Effective Date. This Agreement shall be effective and binding on each of the
Parties upon the satisfaction of each of the following conditions (the date upon which all such
conditions have been satisfied, the "RSA Effective Date"):
(a) each of the Company Parties shall have executed and delivered counterpart
signature pages to this RSA to counsel to the Consenting Creditors and the Plan Sponsor;
(b) Intentionally Deleted.
(c) the Plan Sponsor shall have executed and delivered its counterpart signature
page to this RSA to counsel to the Consenting Creditors and the Company;
(d) the execution of commitment letters (the "Commitment Letters") in connection
with (i) the DIP Note Facility (as defined below) by the Plan Sponsor and each of the other DIP Note
Purchasers (as defined in the DIP/Exit Term Sheet, defined below), which in the aggregate provide
for commitments to purchase $500 million of DIP Notes (as defined in the DIP/Exit Term Sheet),
subject to the terms and conditions set forth in such Commitment Letters; and (ii) the DIP LC Facility
(as defined below), which in the aggregate provides for letter of credit commitments up to a
maximum amount of $134 million, in each case subject to the terms and conditions set forth in such
Commitment Letters; and
(e) Company Parties shall have terminated the restructuring support agreement
dated April 20, 2016 among, inter alia, the Company Parties and The Catalyst Group Inc. (the
"Catalyst RSA").
Section 2. Definitive Documents; Exhibits.
Definitive Documents. The definitive documents (the "Definitive Documents") with
2.01
respect to the Restructuring shall include all documents (including any related orders, agreements,
instruments, schedules or exhibits) that are contemplated by the Plan and that are reasonably
necessary to implement the Restructuring, including, without limitation: (i) the Plan; (ii) the
documents to be filed in the supplement to the Plan (collectively, the "Plan Supplement"); (iii) the
information circular for the Plan (the "Information Circular"); (iv) the motion seeking approval of the
Information Circular (the "Meeting Order Motion") and calling a meeting of the Company's creditors
to consider and vote on the Plan (the "Meeting Order"); (v) any other materials to be distributed to
creditors for the purpose of soliciting votes on the Plan (the "Solicitation Materials"); (vi) the order of
the Canadian Court sanctioning the Plan (the "Plan Approval Order"); (vii) all motions or
applications and other "first day"-type documents filed by the Company with any of the Insolvency
Courts providing for the pursuit of the Restructuring, the DIP Note Facility and the DIP LC Facility
instead of the current proceedings in the Insolvency Courts involving the Company and The Catalyst
Group Inc. as contemplated in the Catalyst RSA (the "First Day Documents"); (viii) all other material
motions, orders, rulings and other pleadings filed by the Company with any of the Insolvency Courts
(the "Other Pleadings"); (ix) each Commitment Letter; (x) the indenture or note purchase agreement
governing the Company's $500 million debtor-in-possession financing satisfactory in all respects to
(i) the Company, (ii) the Consenting Noteholders that are members of the Ad Hoc Noteholder
Committee holding at least sixty per cent (60%) in aggregate principal amount of the Note Claims
held by all Consenting Noteholders that are members of the Ad Hoc Noteholder Committee (the
"Requisite Consenting Noteholders"), (iii) the Consenting Lenders holding at least a majority in
aggregate principal amount of Bank Debt Claims held by all Consenting Lenders (the "Requisite
Consenting Lenders" and, together with the Requisite Consenting Noteholders, the "Requisite
3
0113
Consenting Creditors"), and (iv) the Plan Sponsor, including, in each case, with respect to any
modifications, amendments, or supplements to such Definitive Documents made at any time during
the period commencing on the RSA Effective Date and ending on the date that this RSA is terminated
as to the applicable Party pursuant to Section 5 hereof (such period as to each Party, the "RSA
Effective Period"). For the avoidance of doubt, the Requisite Consenting Creditors shall not include,
and shall not be calculated taking into account, any Parties that have validly terminated their
obligations under this Agreement. If the Company, the Requisite Consenting Creditors and the Plan
Sponsor agree, each acting in their sole discretion, the Restructuring may be implemented through a
plan of reorganization filed in a proceeding to be commenced under chapter 11 of the Bankruptcy
Code before the U.S. Court, with such other appropriate proceedings before each of the Canadian
Court and the Colombian Court as agreed by the Company, Requisite Consenting Creditors and the
Plan Sponsor.
Exhibits. Each of the exhibits attached hereto is expressly incorporated herein in its
2.02
entirety and is made part of this RSA as if set forth herein, and all references to this RSA shall include
the exhibits. In the event of any inconsistency between this RSA (without reference to the exhibits)
and the exhibits, this RSA (without reference to the exhibits) shall govern.
Section 3. Commitments Regarding the Restructuring.
Consenting Creditor Commitments. During the RSA Effective Period applicable to
3.01
such Consenting Creditor, subject to the terms and conditions set forth herein and in the
Recapitalization Term Sheet, each Consenting Creditor, severally and not jointly, agrees that it shall:
(a) take all commercially reasonable actions that are reasonably necessary or
appropriate to consummate the Restructuring in accordance with the terms and conditions set forth in
the Recapitalization Term Sheet, including the governance mechanics set forth on Error! Reference
source not found. of the Recapitalization Term Sheet, and this RSA;
(b) vote any Note Claims and Bank Debt Claims, as applicable, that it beneficially
owns or for which it serves as the nominee, investment manager or advisor for beneficial holders
thereof, inclusive of any claims acquired after it executes this Agreement and that are required to be
subject to this Agreement pursuant to Section 3.04(d) hereof, to accept the Plan by taking such
actions as are necessary to accept the Plan on a timely basis following the commencement of any
solicitation in accordance with this RSA and any applicable Insolvency Laws and its actual receipt of
Solicitation Materials (as defined herein) that have been approved by the applicable Insolvency
Courts;
(c) not change or withdraw (or cause to be changed or withdrawn) such vote;
provided, however, that the vote or proxy of any Consenting Creditor shall be immediately revoked
and deemed void ab initio upon a termination of this Agreement as to such Consenting Creditor;
(d) not, in its capacity as a Consenting Creditor, (i) object to, delay, impede or take
any other action, including initiating any legal proceedings or enforcing rights as a holder of the Note
Claims or Bank Debt Claims, to interfere with the acceptance, approval or implementation of the
Restructuring or the Plan (including approval of the DIP Facilities); (ii) propose, file, participate in or
knowingly facilitate, support or vote for, or enter into any letter of intent or other agreement regarding
any restructuring, workout, liquidation, plan of arrangement or plan of reorganization for the
Company under any applicable bankruptcy or insolvency laws other than the Restructuring or the
Plan; (iii) exercise any right or remedy for the enforcement, collection or recovery of any claim
against the Company or any direct or indirect subsidiaries of the Company that do not seek relief or
protection under applicable Insolvency Law except in a manner consistent with this Agreement; or
(iv) solicit or direct any person, including, without limitation, the indenture trustee under the
4
0119
Indentures and the bank agent under the Credit Facilities, to undertake any action prohibited by the
foregoing clauses (i)-(iii) of this paragraph (d); provided, however, that, except as otherwise set forth
in this RSA, the foregoing prohibition will not limit any Consenting Creditor's rights under any
applicable indenture, credit agreement, other loan document (including, without limitation, enforcing
rights under the DIP Facilities) or applicable law to appear and participate as a party in interest in any
matter to be adjudicated in any case under the CCAA, the Bankruptcy Code or under the laws of any
other applicable jurisdiction concerning the Company in any forum, so long as such appearance and
the positions advocated in connection therewith are consistent with the Recapitalization Term Sheet,
this RSA, and the Restructuring and do not materially hinder, delay, or prevent consummation of the
Restructuring set forth in the Recapitalization Term Sheet; and
(e) not seek or support any amendment or supplement to the KERP without the
consent of the Plan Sponsor and the Company.
3.02
Plan Sponsor Commitments. During the RSA Effective Period, subject to the terms
and conditions set forth herein and in the Recapitalization Term Sheet, the Plan Sponsor agrees that it
shall:
(a) take all commercially reasonable actions that are reasonably necessary or
appropriate to promptly consummate the Restructuring in accordance with the terms and conditions
set forth in the Recapitalization Term Sheet, including the governance mechanics set forth on Error!
Reference source not found. of the Recapitalization Tel In Sheet, and this RSA;
(b) subject to the terms and conditions of the Plan Sponsor's Commitment Letter,
take all actions required to be taken thereunder to purchase the DIP Notes (as defined the in the
DIP/Exit Term Sheet) and consummate the transactions set forth therein on the timeline set forth in
such Commitment Letter;
(c) vote any Note Claims and Bank Debt Claims, as applicable, that it beneficially
owns or for which it serves as the nominee, investment manager or advisor for beneficial holders
thereof, inclusive of any claims acquired pursuant to Section 3.04(d) hereof, to accept the Plan by
taking such actions as are necessary to accept the Plan on a timely basis following the commencement
of any solicitation in accordance with this RSA and any applicable Insolvency Laws and its actual
receipt of Solicitation Materials that have been approved by the applicable Insolvency Courts;
(d) not change or withdraw (or cause to be changed or withdrawn) such vote;
provided, however, that the vote of the Plan Sponsor shall be immediately revoked and deemed void
ab initio upon a termination of this Agreement as to the Plan Sponsor;
(e) not (i) object to, delay, impede or take any other action, including initiating any
legal proceedings or enforcing rights as a holder of the Note Claims or Bank Debt Claims, to interfere
with acceptance, approval or implementation of the Restructuring or the Plan (including approval of
the DIP Facilities); (ii) propose, file, participate in or knowingly facilitate, support or vote for, or
enter into any letter of intent or other agreement regarding any restructuring, workout, liquidation,
plan of arrangement or plan of reorganization for the Company under any applicable bankruptcy or
insolvency laws other than the Restructuring or the Plan; (iii) exercise any right or remedy for the
enforcement, collection or recovery of any claim against the Company or any direct or indirect
subsidiaries of the Company that do not seek relief or protection under applicable Insolvency Law
except in a manner consistent with this Agreement; or (iv) solicit or direct any person, including,
without limitation, the indenture trustee under the Indentures and the bank agent under the Credit
Facilities, to undertake any action prohibited by the foregoing clauses (i)-(iii) of this paragraph (e);
provided, however, that, except as otherwise set forth in this RSA, the foregoing prohibition will not
limit the Plan Sponsor's rights under any applicable indenture, credit agreement, other loan document
or applicable law to appear and participate as a party in interest in any matter to be adjudicated in any
5
0120
case under the CCAA, the Bankruptcy Code or under the Jaws of any other applicable jurisdiction
concerning the Company in any forum, so long as such appearance and the positions advocated in
connection therewith are consistent with the Recapitalization Term Sheet, this RSA, and the
Restructuring and do not materially hinder, delay, or prevent consummation of the Restructuring set
forth in the Recapitalization Term Sheet;
(f) take no actions, directly or indirectly, and not encouraging any other person to
take any actions, that are inconsistent with or are reasonably likely to interfere with, frustrate, delay or
prevent the timely approval and consummation of the Plan in accordance with the terms and
conditions of the Recapitalization Term Sheet and this RSA; and
(g) not seek or support any amendment or supplement to the KERP without the
consent of the Requisite Consenting Creditors and the Company.
3.03 Company Commitments.
(a) Consummation of the Restructuring. During the RSA Effective Period
applicable to the Company Parties, subject to the terms and conditions set forth herein and in the
Recapitalization Term Sheet, each of the Company Parties shall take all actions reasonably necessary
or appropriate to consummate the Restructuring as soon as possible in accordance with the terms and
conditions set forth in the Recapitalization Term Sheet, including the governance mechanics set forth
on Error! Reference source not found. of the Recapitalization Term Sheet, and this RSA, including,
without limitation:
(i) upon execution of this RSA, (x) causing to be issued a press release or
other public disclosure, in each case consistent with Section 8, that discloses the material provisions
of this RSA and (y) filing a copy of this RSA (subject to the redactions required by Section 8) under
the Company's profile with the System for Electronic Document Analysis and Retrieval;
(ii) providing to counsel to the Consenting Creditors and the Plan Sponsor
an initial draft of all First Day Documents that the Company intends to file with any of the Insolvency
Courts as early as reasonably practicable, but in no event fewer than three (3) days (other than a
Saturday or Sunday) on which banks are open for general business in Toronto (such day, a "Business
Day") prior to the date on which the Company intends to file such First Day Documents and
incorporating in good faith any reasonable comments provided by counsel to the Consenting
Creditors or the Plan Sponsor;
(iii) providing to counsel to the Consenting Creditors and the Plan Sponsor
draft copies of all Other Pleadings the Company intends to file with any of the Insolvency Courts as
early as reasonably practicable, but in no event fewer than two (2) Business Days prior to the date on
which the Company intends to file such Other Pleadings and incorporating in good faith any
reasonable comments provided by counsel to the Consenting Creditors or the Plan Sponsor;
(iv) providing the advisors to the Consenting Creditors and the Plan
Sponsor with (a) reasonable access to the books and records of the Company, as applicable, and (b)
reasonable access to the respective management and advisors of the Company for the purposes of
evaluating the Company's respective business plans and participating in the plan process with respect
to the Restructuring;
(v) commencing the Canadian Proceedings by the date set forth in Section
5.02(b)(i) of this Agreement (such date, the "New Petition Date");
6
0121
(vi) filing (x) the First Day Documents on the New Petition Date and (y)
the Plan, Information Circular and Meeting Order Motion with the Canadian Court by the date set
forth in Section 5.02(b)(viii) of this Agreement;
(vii) taking all steps reasonably necessary or desirable to obtain a bar date
order, in form and substance reasonably acceptable to the Requisite Consenting Creditors and the
Plan Sponsor, (the "Bar Date Order") for the claims process for the creditors of Pacific by the date set
forth in Section 5.02(b)(iii) of this Agreement;
(viii) taking all steps reasonably necessary or desirable to obtain the Plan
Approval Order from the Canadian Court in a manner that is consistent in all respects with the terms
and conditions set forth herein and in the Recapitalization Term Sheet, by the date set forth in Section
5.02(b)(xii) of this Agreement;
(ix) if requested by the Requisite Consenting Creditors or the Plan Sponsor,
taking all commercially reasonable actions to obtain entry of the U.S. Plan Recognition Order, and if
the Requisite Consenting Creditors or the Plan Sponsor make such request, then entry of the U.S.
Plan Recognition Order shall be a condition to the occurrence of the Plan Effective Date;
(x) taking all steps reasonably necessary to cause the effective date of the
Plan (the "Plan Effective Date") to occur by the date set forth in Section 5.02(b)(xiii) of this
Agreement;
(xi) taking no actions, directly or indirectly, and not encouraging any other
person to take any actions, that are inconsistent with or are reasonably likely to interfere with,
frustrate, delay or prevent the timely approval and consummation of the Plan in accordance with the
terms and conditions of the Recapitalization Term Sheet and this RSA;
(xii) promptly making all securities and other filings and announcements
and promptly publishing all documents and making all submissions required in connection with the
matters contemplated by this Agreement as and when necessary to comply with all applicable laws;
(xiii) promptly notifying the Consenting Creditors and the Plan Sponsor if,
following the RSA Effective Date, there have been any changes, events, or circumstances which
could adversely affect the business, operations, or condition (financial or otherwise) of the Company
or any constituent member thereof such that the Company may not be able to perform its material
obligations in accordance with the terms of the Restructuring, whether before or after the Plan
Effective Date; provided that the notification requirements of this Section 3.03(a)(xiii) shall not
require notification of commodity prices;
(xiv) executing and/or delivering, as soon as is practicable, all other
documents, agreements, instructions, proxies, directions, consents, ballots, votes, or other materials
required to be submitted, or that the Requisite Consenting Creditors or the Plan Sponsor reasonably
request that the Company submit, in connection with a vote on, solicitation of votes for,
implementation of or in pursuit of the Plan, and file all other notices, and take such other action that is
consistent with or reasonably required to implement the Restructuring;
(xv) ensuring any relevant instruments issued to the Consenting Creditors or
the Plan Sponsor as part of the Restructuring do not contain any representations or warranties or other
statements in relation to ERISA;
7
0122
(xvi) taking no steps to amend or supplement the KERP without the consent
of the Requisite Consenting Creditors and the Plan Sponsor; and
(xvii) upon the occurrence of the Plan Effective Date, promptly causing to be
issued a press release or other public disclosure, in each case consistent with Section 8 of this
Agreement, announcing that the Plan Effective Date has occurred.
(b) Payment of Fees and Expenses. In addition and without prejudice to the
Company's obligations under the Initial CCAA Order, the Company shall reimburse, within ten (10)
Business Days of receipt of an applicable invoice, which may be redacted as appropriate, all of the
currently outstanding and future fees and documented expenses incurred before and during the
applicable RSA Effective Period in connection with the Restructuring by (a) the legal and financial
advisors to the Company, including without limitation (i) Norton Rose Fulbright Canada LLP, (ii)
Proskauer Rose LLP, (iii) J&A Garrigues S.L.P., (iv) Lazard Freres & Co. LLC (the "Principal
Company Financial Advisor"), (v) Zolfo Cooper Management LLC, (vi) Osler Hoskin & Harcourt
LLP (for the Independent Committee), and (vii) UBS Securities Canada Inc. (for the Independent
Committee) (collectively, the "Company Advisors"); (b) the Monitor and its legal advisors
(collectively, the "Monitor Advisors"), which shall include Thornton Grout Finnigan LLP; (c) the
legal and financial advisors to the Ad Hoc Noteholder Committee, including, without limitation, (i)
Goodmans LLP ("Goodmans"), (ii) Paul, Weiss, Rifkind, Wharton & Garrison LLP ("Paul, Weiss"),
(iii) Cardenas & Cardenas Abogados ("Cardenas") and (iv) Evercore Partners Inc. ("Evercore," and
together with Goodmans, Paul, Weiss, and Cardenas, the "Consenting Noteholder Advisors"); (d) the
legal and financial advisors to each administrative agent under the Credit Facilities, including,
without limitation, (i) Torys LLP ("Torys"), (ii) Davis Polk & Wardwell LLP ("Davis Polk"), (iii)
Gomez-Pinzon Zuleta Abogados ("GPZ"), (iv) Seward & Kissel LLP ("S&K") and (v) FTI
Consulting Inc. ("FTI.," and together with Davis Polk, Torys, GPZ, and S&K the "Consenting Lender
Advisors"); and (e) the legal and financial advisors to the Plan Sponsor, including, without limitation,
(i) Stikeman Elliott LLP ("Stikeman"), (ii) Kirkland & Ellis LLP ("Kirkland"), (iii) Centerview
Partners ("Centerview") and (iv) Citigroup ("Citi" and together with Stikeman, Kirkland, and
Centerview, the "Plan Sponsor Advisors"), in each case regardless of whether the Restructuring
contemplated herein is actually consummated or the documentation related to the Restructuring is
executed; provided that the fees of the Principal Company Financial Advisor shall be payable subject
to and only in accordance with the amendment effective as of April 18, 2016 to the terms of the
Principal Company Financial Advisor's engagement agreement with the Company (which shall not
be further amended after the date hereof without the prior written consent of the Requisite Consenting
Creditors, the Plan Sponsor and the Company), which was provided to the Plan Sponsor and the
Requisite Consenting Creditors. Without prejudice to the foregoing, prior to the New Petition Date,
the Company shall indefeasibly pay in full in cash all fees and expenses submitted in accordance with
this RSA to the Company pursuant to this Section 3.03(b) prior to such date.
(c) Monthly Professional Fee Reporting. No later than ten (10) calendar days
following the end of any calendar month that occurs after the RSA Effective Date, the Company shall
deliver a detailed statement of the professional fees and expenses paid during the prior month, in
substantially the same format prepared and delivered by the Company on April 5, 2016, to the
Consenting Noteholder Advisors, the Consenting Lender Advisors and the Plan Sponsor Advisors.
(d) Release of Blocked Notes. Following a vote on the Plan, the Company shall take
all commercially reasonable steps to release any held and blocked Notes in Euroclear or Clearstream
(collectively, the "Clearing Systems") to the applicable Consenting Noteholder if (i) the Plan
Approval Order is not made by the date set forth in Section 5.02(b)(xii) of this Agreement; (ii) the
8
X123
Plan Effective Date does not occur by the date set forth in Section 5.02(b)(xiii) of this Agreement; or
(iii) following termination of this Agreement as to such Consenting Noteholder.
3.04 Transfer of Company Claims.
(a) Except as expressly provided herein, this RSA shall not in any way restrict the
right or ability of any Consenting Creditor or the Plan Sponsor to sell, use, assign, transfer, pledge,
participate, hypothecate or otherwise dispose of, directly or indirectly (each, a "Transfer") any or all
of its Company Claims; provided, however, that during the RSA Effective Period as to such
Consenting Creditor or the Plan Sponsor, as applicable, neither any of the Consenting Creditors nor
the Plan Sponsor shall Transfer any Company Claims, and any purported Transfer of any such
Company Claims shall (subject to Section 3.04(c)) be void and without effect, unless (i) the transferee
is a Consenting Creditor or the Plan Sponsor (in which case, such transferee shall provide notice to
(a) Goodmans in respect of any Company Claims transferred by a Consenting Noteholder and (b)
Davis Polk in respect of Company Claims transferred by a Consenting Lender, within one (1)
Business Day of the proposed Transfer) or (ii) if the transferee is not a Consenting Creditor or the
Plan Sponsor prior to the Transfer, such transferee delivers by e-mail to the Company, with a copy to
(a) Goodmans in respect of any Company Claims transferred by a Consenting Noteholder and (b)
Davis Polk in respect of Company Claims transferred by a Consenting Lender, within one (1)
Business Day of the proposed Transfer, an executed copy of the joinder agreement (each, a "Joinder
Agreement") in the form attached as Exhibit A hereto in respect of the Company Claims being
transferred by such Consenting Creditor or the Plan Sponsor.
(b) Upon consummation of any Transfer in compliance with this Section 3.04, (i)
any person or entity that is a transferee (a "Joining Party") shall be fully bound by this RSA as a
"Consenting Creditor" and shall be a "Party" hereunder, and (ii) the transferor shall no longer be
bound by this RSA or the obligations, nor have any rights, hereunder with respect to the Company
Claims that have been Transferred; provided, however, that if the Transfer occurs after the record date
set for voting on the Plan and prior to the deadline for voting on the Plan, the transferor's obligations
under Section 3.01(b) and 3.01(c) or Section 3.02(c) and 3.02(d) herein, as applicable, with respect to
the Company Claims that have been transferred shall survive such Transfer. For the avoidance of
doubt, if the Plan Sponsor transfers any Company Claims to a transferee that is not already a
Consenting Creditor, such transferee shall be deemed to be a Consenting Creditor upon its execution
of a Joinder Agreement. For greater certainty, in addition to any person or entity that is a transferee in
connection with any Transfer, the term Joining Party shall also refer to any Consenting Creditor that
is not already a party hereto as of the date hereof (or a transferee pursuant to a Transfer) but that
becomes a Joining Party upon execution of a Joinder Agreement pursuant to Section 7.07 of this
Agreement.
(c) Notwithstanding anything to the contrary herein, (i) the foregoing provisions
shall not preclude any Consenting Creditor or the Plan Sponsor from settling or delivering any
Company Claims to settle any confirmed transaction pending as of the date such Consenting Creditor
or the Plan Sponsor entered into this RSA (subject to compliance with applicable securities laws and
it being understood that such Company Claims so acquired and held (i.e., not as a part of a short
transaction) shall be subject to the terms of this RSA), (ii) a Qualified Marketmaker (as defined
below) that acquires any of the Company Claims with the purpose and intent of acting as a Qualified
Marketmaker for such Company Claims, shall not be required to execute and deliver to counsel a
Joinder Agreement or otherwise agree to be bound by the terms and conditions set forth in this RSA if
such Qualified Marketmaker transfers such Company Claims (by purchase, sale, assignment,
participation or otherwise) within ten (10) Business Days of its acquisition to a Consenting Creditor,
the Plan Sponsor or to a transferee who executes and delivers a Joinder Agreement to the Company in
accordance with Section 3.04(a)(ii), and (iii) to the extent any Consenting Creditor is acting solely in
9
01,
its capacity as a Qualified Marketmaker, it may Transfer any ownership interest in the Company
Claims that it acquires from a holder that is not a Consenting Creditor to a transferee that is not a
Consenting Creditor at the time of such Transfer without the requirement that such transferee be or
become a signatory to this Agreement or execute a Joinder Agreement. As used herein, the term
"Qualified Marketmaker" means an entity that (a) holds itself out to the public or the applicable
private markets as standing ready in the ordinary course of business to purchase from customers, and
sell to customers, Note Claims and/or Bank Debt Claims (or enter with customers into long and short
positions in respect of Note Claims and/or Bank Debt Claims), in its capacity as a dealer or market
maker in the Note Claims and/or Bank Debt Claims and (b) is, in fact, regularly in the business of
making a market in claims against issuers or borrowers (including debt securities or other debt).
(d) This RSA shall in no way be construed to preclude the Consenting Creditors or
the Plan Sponsor from acquiring Company Claims; provided, however, that (i) such Company Claims
shall automatically and immediately be deemed subject to all of the terms of this RSA upon
acquisition by such Consenting Creditor or the Plan Sponsor and (ii) the Plan Sponsor or any
Consenting Creditor that acquires Company Claims after executing this RSA shall promptly notify by
e-mail counsel to the Company, with a copy to (a) Goodmans in respect of any Company Claims
acquired by a Consenting Noteholder and (b) Davis Polk in respect of Company Claims acquired by a
Consenting Lender, of such acquisition.
Section 4. Representations and Warranties.
Representations, Warranties and Covenants of the Company. Each of the Company
4.01
Parties represents, warrants and covenants to each of the Consenting Creditors and the Plan Sponsor
that:
(a) Accuracy of Statements. The information, reports, financial statements,
certificates, memoranda and schedules (other than financial projections, forward-looking infoiniation
and Information of a general economic or industry-specific nature) furnished (or to be furnished) in
writing by or on behalf of the Company in connection with the negotiation, preparation, or delivery
and performance of the Restructuring (as modified or supplemented by other information so
furnished) do not, as of the time they were made, contain any untrue statement of any material fact or
omit to state any material fact necessary to make such information, reports, financial statements,
certificates, memoranda and schedules, taken as a whole and in light of the circumstances under
which they were made and as of the time at which they were made, not materially misleading.
(b) Notifications. During the RSA Effective Period as to any of the Consenting
Creditors and the Plan Sponsor, the Company shall promptly notify or update counsel to the
Consenting Creditors and the Plan Sponsor upon becoming aware of any of the following
occurrences: (i) a Termination Event (as defined herein) has occurred or any event that is reasonably
likely to give rise to the Termination Event set forth in Section 5.02(n) has occurred; (ii) any person
has challenged the validity or priority of, or has sought to avoid or alter, any claim held by any
Consenting Creditor or the Plan Sponsor pursuant to a pleading filed with any Insolvency Court or
another forum of competent jurisdiction; (iii) material developments, negotiations, or proposals
relating to any pending case or controversy or any case or controversy that may be hereafter
commenced against the Company in a court of competent jurisdiction or brought before a state or
federal regulatory, licensing, or similar board, authority, or tribunal that would reasonably be
expected to impede or prevent consummation of the Restructuring on the time-frame contemplated
herein.
Representations and Warranties of the Consenting Creditors and the Plan Sponsor.
4.02
Each of the Consenting Creditors and the Plan Sponsor, severally and not jointly, represents and
10
0125
warrants that, as of the date such Consenting Creditor or Plan Sponsor executes and delivers this RSA
or a Joinder Agreement, as applicable, such Consenting Creditor or Plan Sponsor (i) is either (A) the
sole beneficial owner of the principal amount of the Note Claims or Bank Debt Claims, as applicable,
set forth below its signature hereto, or (B) has sole investment or voting discretion with respect to the
principal amount of the Note Claims or Bank Debt Claims, as applicable, set forth below its signature
hereto and has the power and authority to bind the beneficial owner(s) of the Note Claims or Bank
Debt Claims to the terms of this RSA, (ii) has full power and authority to act on behalf of, vote on and
consent to matters concerning such Note Claims or Bank Debt Claims, as applicable, and to dispose
of, exchange, assign and transfer such Note Claims or Bank Debt Claims, as applicable and (iii) holds
no other Note Claims or Bank Debt Claims (other than Note Claims or Bank Debt Claims held
through a business unit other than the business unit expressly identified on the Consenting Creditor's
signature page hereto). The Plan Sponsor also represents and warrants that no existing director or
officer of any Note Party (as defined in the DIP/Exit Term Sheet), nor any of the parties disclosed as
principal shareholders in the Company's information circular dated June 10, 2015, at page 35 therein,
nor any person or entity known to the Plan Sponsor to be affiliated with or related to any of the
foregoing, is a direct or indirect investor in or limited partner of the Plan Sponsor or any fund
managed by it.
4.03
Mutual Representations and Warranties. Each of the Parties represents and warrants,
severally and not jointly, to each of the other Parties that the following statements are true and correct
as of the RSA Effective Date, or, with respect to any Joining Party, as of the date it executes a Joinder
Agreement:
(a) Existence; Enforceability. It is validly existing and in good standing under the
laws of the jurisdiction of its organization, and this RSA is a legal, valid, and binding obligation of
such Party, enforceable against it in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to enforceability.
(b) No Consent or Approval. Except as expressly provided in this RSA or under
applicable Insolvency Law or under laws relating to foreign investment, competition or merger
control, and except as disclosed with respect to certain consents of International Finance Corporation
(or its affiliates) that are required, no consent or approval is required by any other person or entity in
order for it to carry out the Restructuring contemplated by, and perform its respective obligations
under, this RSA.
(c) Power and Authority. Except as expressly provided in this RSA, it has all
requisite corporate, partnership, limited liability company or similar power and authority to enter into
this RSA and to carry out the Restructuring contemplated by, and perform its respective obligations
under, this RSA.
(d) Authorization: Execution. The execution, delivery and performance of this RSA
and the performance of its obligations hereunder have been duly authorized by all necessary
corporate, partnership, limited liability company or similar action on its part. This RSA has been duly
executed and delivered by it.
(e) No Conflicts. The execution, delivery, and performance of this RSA by it do not
and will not violate any provision of law, rule, or regulation applicable to it or of its certificate of
incorporation or by-laws (or other organizational documents).
11
-
0126
(f) Governmental Consents. The execution, delivery and performance by it of this
RSA does not and will not (so far as each Party is aware) require any registration or filing with,
consent or approval of, or notice to, or any other action to, with, or by, any federal, state, or other
governmental authority or regulatory body, except, solely in the case of the Company, any filings in
connection with the Insolvency Cases, including the approval of the Solicitation Materials, the
confirmation of the Plan, and any approvals of or filings with regulatory authorities as required by
applicable law or regulation (including under laws relating to foreign investment, competition or
merger control).
(g) Representation by Counsel. It has been represented by counsel (or has
knowingly waived the right to counsel) in connection with this RSA and the transactions
contemplated by this RSA.
(h) Proceedings. No litigation or proceeding before any court, arbitrator, or
administrative or governmental body is pending against it that would materially and adversely affect
its ability to enter into this RSA or perform its obligations hereunder.
Section 5. Termination Events.
Automatic Termination Events. This RSA shall automatically terminate as to all
5.01
Parties, without any further required action or notice by any Party, immediately upon the occurrence
of any of the following events:
(a) Intentionally Deleted.
(b) the Canadian Court denies approval of the Plan Approval Order or, if the
Canadian Court enters the Plan Approval Order, if such Order is subsequently reversed, vacated or
otherwise materially modified in a manner inconsistent with this Agreement, the Recapitalization
Term Sheet and the Restructuring;
(c) if the Plan Effective Date shall not have occurred on or before the date that is
two hundred and seventy (270) calendar days after the April 27, 2016 (the "Petition Date"); or
(d) the Plan Effective Date.
5.02 Consenting Noteholder Termination Events. This RSA may be terminated as between
the Consenting Noteholders and all other Parties by the delivery of a written notice in accordance
with Section 7.09 hereof by the Requisite Consenting Noteholders to the Company and the other
Parties upon the occurrence and continuation of any of the following events (each, a "Consenting
Noteholder Termination Event"):
(a) the material breach by the Company or any other Party (other than any
Consenting Noteholder) of any of the representations, warranties, or covenants of such Party, as
applicable, set forth in this RSA, that adversely affects the Plan or consummation of the
Restructuring, and such breach shall continue for five (5) Business Days after receipt by the
breaching Party, as applicable, of written notice thereof from the Requisite Consenting Noteholders in
accordance with Section 7.09 hereof;
(b) upon the occurrence of any of the following:
(i) the Company has failed to commence the Canadian Proceedings in the
Canadian Court on or before the date that is one week following the date hereof;
12
0127
(ii) the Initial CCAA Order shall not have been made by the Canadian
Court on or before the third Business Day following the date referred to in (i) above;
(iii) the Bar Date Order shall not have been made by the Canadian Court
within ten (10) calendar days after the New Petition Date;
(iv) the Company shall not have retained a CRO (as defined in the
Recapitalization Term Sheet), in a manner consistent with the terms and conditions set forth in the
Recapitalization Term Sheet, on or before the date that is one week following the date hereof (which
date may be extended with the prior written consent of the Requisite Consenting Creditors and the
Plan Sponsor), and such failure to retain a CRO is not cured within five (5) Business Days after
receipt by the Company of written notice thereof from the Requisite Consenting Noteholders or the
Plan Sponsor;
(v) the U.S. CCAA Recognition Order shall not have been entered by the
U.S. Court on or before June 15, 2016;
(vi) the Colombian CCAA Recognition Order shall not have been entered
by the Colombian Court on or before June 15, 2016;
(vii) the Initial CCAA Order shall not be in full force and effect, final and
binding with no appeal or motion to vary or amend outstanding in respect thereof and all such appeals
and motions finally determined within thirty (30) calendar days after any such appeal or motion;
(viii) the Company shall not have filed the Plan, Information Circular, and
Meeting Order Motion with the Canadian Court within sixty (60) calendar days after the Petition
Date;
(ix) the Meeting Order shall not have been made by the Canadian Court
within sixty-five (65) calendar days after the Petition Date;
(x) the Company has failed to commence solicitation of the Plan and
distribute the Solicitation Materials within seventy (70) calendar days after the Petition Date;
(xi) the Company has failed to hold a meeting of creditors to vote on the
Plan within one hundred (100) calendar days after the Petition Date;
(xii) the Plan Approval Order shall not have been made by the Canadian
Court within one hundred and ten (110) calendar days after the Petition Date; or
(xiii) the Plan Effective Date shall not have occurred within one hundred and
eighty (180) calendar days after the Petition Date.
(c) any of the Company Parties shall have filed, propounded, solicited votes upon,
sought confirmation of, or otherwise supported any plan of reorganization under any applicable law,
other than the Plan;
(d) the issuance, promulgation, or enactment by any competent governmental entity
or agent thereof, including any regulatory or licensing authority or court of competent jurisdiction, of
any statute, regulation, ruling or order declaring this Agreement or any material portion hereof to be
unenforceable or enjoining or otherwise restricting the consummation of a material portion of the
Restructuring (including with respect to the regulatory approvals or tax treatment required for
13
0128
completion of the Restructuring), which action remains uncured for a period of five (5) Business
Days after the issuance of such issuance, enactment, statute, regulation, ruling or order;
(e) an examiner, trustee, administrator, receiver or similar individual (other than a
monitor appointed pursuant to the CCAA) shall have been appointed in any of the Insolvency Cases,
or any of the Insolvency Cases shall have been converted to liquidation cases under applicable
Insolvency Law, or any of the Insolvency Cases shall have been dismissed by an order of any
applicable Insolvency Court or converted to liquidation cases under applicable Insolvency Law, or
any of the Company Parties files or encourages a motion seeking any of the foregoing, in each case
without the consent of the Requisite Consenting Noteholders;
(f) any of the Company Parties announces its intention to terminate the
Restructuring or not to consummate the Restructuring on the terms and conditions set forth in this
RSA and the Recapitalization Term Sheet;
(g) any of the Company Parties shall be declared the subject of any insolvency,
bankruptcy, liquidation or reorganization proceeding (other than the Insolvency Cases contemplated
herein or as required by the DIP Note Purchasers (as defined in the DIP/Exit Term Sheet) to perfect
their security interests under the DIP Note Facility) under the laws of any jurisdiction and, only if
such proceeding is an involuntary insolvency proceeding, it is not dismissed, stayed, reversed or lifted
within ten (10) calendar days of such declaration;
(h) any of the Definitive Documents filed or entered with any Insolvency Court is
not in form and substance acceptable to the Requisite Consenting Noteholders and consistent with
this RSA and the Recapitalization Term Sheet or shall have been amended, modified, vacated,
terminated or otherwise is not in full force and effect in each case except to the extent otherwise
permitted by Section 2 hereof; provided that, for the avoidance of doubt, it is understood that any Plan
that does not include customary releases for Consenting Noteholders shall be deemed unacceptable to
the Requisite Consenting Noteholders and inconsistent with this RSA and the Recapitalization Term
Sheet;
(i) any Insolvency Court or any court of competent jurisdiction grants relief that is
(a) materially inconsistent with this RSA or the Recapitalization Term Sheet, (b) in a form materially
different than a Definitive Document approved by the Requisite Consenting Noteholders or (c)
materially and adversely affects the rights of the Consenting Noteholders under this RSA, without the
consent of the Requisite Consenting Noteholders, or any of the Company Parties requests or
encourages any of the foregoing, and the Company has not obtained an order amending or modifying
the relief in form and substance reasonably acceptable to the Requisite Consenting Noteholders
within five (5) Business Days following entry of an order granting such relief;
(j) the material breach by the Plan Sponsor of its obligations under either its
Commitment Letter or the DIP Note Facility;
(k) the occurrence of an event of default under any of the DIP Facilities or any
amendment or change to the Initial CCAA Order that adversely affects the approval of any of the DIP
Facilities and any related charges therein or priorities thereof, in each case, that is not cured or waived
within five (5) Business Days after the receipt by the Company of written notice of such event of
default;
(1) any of the Company Parties shall (i) agree to the restructuring of any of the Note
Claims or Bank Debt Claims (whether pursuant to a voluntary out-of-court exchange offer or
settlement, a voluntary or involuntary proceeding or otherwise) on terms and conditions that are more
favorable to the holder thereof than any of the terms of the Restructuring, unless the terms of this
RSA or the Recapitalization Term Sheet are amended to provide such terms and conditions to all
14
Consenting Creditors, or (ii) repudiate or reject, in whole or in part, or challenge the validity of this
RSA or the Plan;
(m) the Company fails to timely pay the fees and expenses of the Consenting
Noteholders Advisors as provided herein, which such failure remains uncured for a period of ten (10)
Business Days after the receipt by the Company of written notice of such event from the Requisite
Consenting Noteholders Advisors;
(n) if there shall have been, since April 6, 2016, any change, development, effect,
event, circumstance, fact or occurrence, individually or in the aggregate with other such changes,
developments, effects, events, circumstances, facts or occurrences, other than as a result of those
events resulting from the commencement of the Insolvency Cases, that (i) is or would reasonably be
expected to be material and adverse to the business, financial condition, properties, assets (tangible or
intangible), liabilities (including any contingent liabilities), or results of operations of the Company or
(ii) prevents or materially adversely affects the ability of the Company to timely perform its
obligations under this RSA, in each case other than any change, development, effect, event,
circumstance, fact or occurrence resulting from (a) the effect of any change in the United States or
foreign economies or securities, commodities or financial markets; (b) the effect of any action taken
by DIP Providers with respect to the Definitive Documents or with respect to the Debtors (including
through such persons' participation in the Insolvency Cases); (c) any effect resulting from the filing
or public announcement of the restructuring proceedings contemplated in the Catalyst RSA or the
Insolvency Cases; or (d) developments in the oil and gas exploration, development and/or production
industry or industries (including actual or expected industry wide changes in oil, gas or other
commodity prices);
(o) any of the Insolvency Courts grants relief terminating, annulling, or modifying
any automatic stay or similar provision in applicable Insolvency Law with regard to any assets of the
Company having an aggregate value in excess of US$20,000,000;
(p) Pacific or any of its direct or indirect subsidiaries (or any branch thereof) shall
be declared subject to (either voluntarily or involuntarily) (a) main insolvency proceedings under Law
1116 or (b) proceedings under chapter 11 of the Bankruptcy Code, in each case without the consent of
the Requisite Consenting Creditors and the Plan Sponsor and, only if such proceeding is an
involuntary insolvency proceeding, it is not dismissed within ten (10) calendar days of such
declaration;
(q) funding of the DIP Note Facility has not occurred on the terms set out in the
DIP/Exit Term Sheet on or before June 22, 2016, unless such failure to fund results from a breach by
any Consenting Noteholder; or
(r)
this RSA is terminated by the Consenting Lenders pursuant to Section 5.03
hereof.
Consenting Lender Termination Events. This RSA may be terminated as between the
5.03
Consenting Lenders and all other Parties by the delivery of a written notice in accordance with
Section 7.09 hereof by the Requisite Consenting Lenders to the Company and the other Parties upon
the occurrence and continuation of any of the following events (each, a "Consenting Lender
Termination Event"):
(a) the material breach by the Company or any other Party (other than any
Consenting Lender) of any of the representations, warranties, or covenants of such Party, as
applicable, set forth in this RSA, that adversely affects the Plan or consummation of the
Restructuring, and such breach shall continue for five (5) Business Days after receipt by the
15
0130
breaching Party, as applicable, of written notice thereof from the Requisite Consenting Lenders in
accordance with Section 7.09 hereof;
(b) upon the occurrence of any of the following:
(i) the Company has failed to commence the Canadian Proceedings in the
Canadian Court on or before the date that is one week following the date hereof;
(ii) the Initial CCAA Order shall not have been made by the Canadian
Court on or before the third Business Day following the date referred to in (i) above;
(iii) the Bar Date Order shall not have been made by the Canadian Court
within twenty (20) calendar days after the Petition Date;
(iv) the Company shall not have retained a CRO (as defined in the
Recapitalization Term Sheet), in a manner consistent with the terms and conditions set forth in the
Recapitalization Term Sheet, on or before the date that is one week following the date hereof (which
date may be extended with the prior written consent of the Requisite Consenting Creditors and the
Plan Sponsor), and such failure to retain a CRO is not cured within five (5) Business Days after
receipt by the Company of written notice thereof from the Requisite Consenting Lenders or the Plan
Sponsor;
(v) the U.S. CCAA Recognition Order shall not have been entered by the
U.S. Court on or before June 15, 2016;
(vi) the Colombian CCAA Recognition Order shall not have been entered
by the Colombian Court on or before June 15, 2016;
(vii) the Initial CCAA Order shall not be in full force and effect, final and
binding with no appeal or motion to vary or amend outstanding in respect thereof and all such appeals
and motions finally determined within thirty (30) calendar days after any such appeal or motion;
(viii) the Company shall not have filed the Plan, Information Circular, and
Meeting Order Motion with the Canadian Court within sixty (60) calendar days after the Petition
Date;
(ix) the Meeting Order shall not have been made by the Canadian Court
within sixty-five (65) calendar days after the Petition Date;
(x) the Company has failed to commence solicitation of the Plan and
distribute the Solicitation Materials within seventy (70) calendar days after the Petition Date;
(xi) the Company has failed to hold a meeting of creditors to vote on the
Plan within one hundred (100) calendar days after the Petition Date;
(xii) the Plan Approval Order shall not have been made by the Canadian
Court within one hundred and ten (110) calendar days after the Petition Date; or
(xiii) the Plan Effective Date shall not have occurred within one hundred and
eighty (180) calendar days after the Petition Date.
16
01 3 1
(c) any of the Company Parties shall have filed, propounded, solicited votes upon,
sought confirmation of, or otherwise supported any plan of reorganization under any applicable law,
other than the Plan;
(d) the issuance, promulgation, or enactment by any competent governmental entity
or agent thereof, including any regulatory or licensing authority or court of competent jurisdiction, of
any statute, regulation, ruling or order declaring this Agreement or any material portion hereof to be
unenforceable or enjoining or otherwise restricting the consummation of a material portion of the
Restructuring (including with respect to the regulatory approvals or tax treatment required for
completion of the Restructuring), which action remains uncured for a period of five (5) Business
Days after the issuance of such issuance, enactment, statute, regulation, ruling or order;
(e) an examiner, trustee, administrator, receiver or similar individual (other than a
monitor appointed pursuant to the CCAA) shall have been appointed in any of the Insolvency Cases,
or any of the Insolvency Cases shall have been converted to liquidation cases under applicable
Insolvency Law, or any of the Insolvency Cases shall have been dismissed by an order of any
applicable Insolvency Court or converted to liquidation cases under applicable Insolvency Law, or
any of the Company Parties files or encourages a motion seeking any of the foregoing, in each case
without the consent of the Requisite Consenting Lenders;
(f) any of the Company Parties announces its intention to terminate the
Restructuring or not to consummate the Restructuring on the terms and conditions set forth in this
RSA and the Recapitalization Term Sheet;
(g) any of the Company Parties shall be declared the subject of any insolvency,
bankruptcy, liquidation or reorganization proceeding (other than the Insolvency Cases contemplated
herein or as required by the DIP Note Purchasers (as defined in the DIP/Exit Term Sheet) to perfect
their security interests under the DIP Note Facility) under the laws of any jurisdiction and, only if
such proceeding is an involuntary insolvency proceeding, it is not dismissed, stayed, reversed or lifted
within ten (10) calendar days of such declaration;
(h) any of the Definitive Documents filed or entered with any Insolvency Court is
not in form and substance acceptable to the Requisite Consenting Lenders and consistent with this
RSA and the Recapitalization Term Sheet or shall have been amended, modified, vacated, terminated
or otherwise is not in full force and effect in each case except to the extent otherwise permitted by
Section 2 hereof; provided that, for the avoidance of doubt, it is understood that any Plan that does
not include customary releases for Consenting Lenders shall be deemed unacceptable to the Requisite
Consenting Lenders and inconsistent with this RSA and the Recapitalization Term Sheet;
(i) any Insolvency Court or any court of competent jurisdiction grants relief that is
(a) materially inconsistent with this RSA or the Recapitalization Term Sheet, (b) in a form materially
different than a Definitive Document approved by the Requisite Consenting Lenders or (c) materially
and adversely affects the rights of the Consenting Lenders under this RSA, without the consent of the
Requisite Consenting Lenders, or any of the Company Parties requests or encourages any of the
foregoing, and the Company has not obtained an order amending or modifying the relief in form and
substance reasonably acceptable to the Requisite Consenting Lenders within five (5) Business Days
following entry of an order granting such relief;
(j) the material breach by the Plan Sponsor of its obligations under either its
Commitment Letter or the DIP Note Facility;
(k) the occurrence of an event of default under any of the DIP Facilities or any
amendment or change to the Initial CCAA Order that adversely affects the approval of any of the DIP
Facilities and any related charges therein or priorities thereof, in each case, that is not cured or waived
17
0132
within five (5) Business Days after the receipt by the Company of written notice of such event of
default;
(1) any of the Company Parties shall (i) agree to the restructuring of any of the Note
Claims or Bank Debt Claims (whether pursuant to a voluntary out-of-court exchange offer or
settlement, a voluntary or involuntary proceeding or otherwise) on terms and conditions that are more
favorable to the holder thereof than any of the terms of the Restructuring, unless the terms of this
RSA or the Recapitalization Term Sheet are amended to provide such terms and conditions to all
Consenting Creditors, or (ii) repudiate or reject, in whole or in part, or challenge the validity of this
RSA or the Plan;
(m) the Company fails to timely pay the fees and expenses of the Consenting
Lenders Advisors as provided herein, which such failure remains uncured for a period often (10)
Business Days after the receipt by the Company of written notice of such event from the Requisite
Consenting Lenders Advisors;
(n) if there shall have been, since April 6, 2016, any change, development, effect,
event, circumstance, fact or occurrence, individually or in the aggregate with other such changes,
developments, effects, events, circumstances, facts or occurrences, other than as a result of those
events resulting from the commencement of the Insolvency Cases, that (i) is or would reasonably be
expected to be material and adverse to the business, financial condition, properties, assets (tangible or
intangible), liabilities (including any contingent liabilities), or results of operations of the Company or
(ii) prevents or materially adversely affects the ability of the Company to timely perform its
obligations under this RSA, in each case other than any change, development, effect, event,
circumstance, fact or occurrence resulting from (a) the effect of any change in the United States or
foreign economies or securities, commodities or financial markets; (b) the effect of any action taken
by DIP Providers with respect to the Definitive Documents or with respect to the Debtors (including
through such persons' participation in the Insolvency Cases); (c) any effect resulting from the filing
or public announcement of the restructuring proceedings contemplated in the Catalyst RSA or the
Insolvency Cases; or (d) developments in the oil and gas exploration, development and/or production
industry or industries (including actual or expected industry wide changes in oil, gas or other
commodity prices);
(o) any of the Insolvency Courts grants relief terminating, annulling, or modifying
any automatic stay or similar provision in applicable Insolvency Law with regard to any assets of the
Company having an aggregate value in excess of US$20,000,000;
(p) Pacific or any of its direct or indirect subsidiaries (or any branch thereof) shall
be declared subject to (either voluntarily or involuntarily) (a) main insolvency proceedings under Law
1116 or (b) proceedings under chapter 11 of the Bankruptcy Code, in each case without the consent of
the Requisite Consenting Creditors and the Plan Sponsor and, only if such proceeding is an
involuntary insolvency proceeding, it is not dismissed within ten (10) calendar days of such
declaration;
(q) funding of the DIP Note Facility has not occurred on the terms set out in the
DIP/Exit Term Sheet on or before June 22, 2016, unless such failure to fund results from a breach by
any Consenting Lender; or
(r)
this RSA is terminated by the Consenting Noteholders pursuant to Section 5.02
hereof.
Plan Sponsor Termination Events. This RSA may be terminated as to all Parties by
5.04
the delivery of a written notice in accordance with Section 7.09 hereof by the Plan Sponsor to the
Company and the other Parties upon the occurrence and continuation of any of the following event
(each, a "Plan Sponsor Termination Event"):
18
0 1 33
(a) the occurrence of an event of default under any of the DIP Facilities or any
amendment or change to the Initial CCAA Order that adversely affects the approval of any of the DIP
Facilities and any related charges therein or priorities thereof, in each case, that is not cured or waived
within five (5) Business Days after the receipt by the Company of written notice of such event of
default;
(b) any of the Company Parties shall have filed, propounded, solicited votes upon,
sought confirmation of, or otherwise supported any plan of reorganization under any applicable law,
other than the Plan;
(c) any of the Company Parties announces its intention to terminate the
Restructuring or not to consummate the Restructuring on the terms and conditions set forth in this
RSA and the Recapitalization Term Sheet;
(d) the Company fails to timely pay the fees and expenses of the Plan Sponsor
Advisors as provided herein, which such failure remains uncured for a period of ten (10) Business
Days after the receipt by the Company of written notice of such event from the Plan Sponsor
Advisors;
(e) funding of the DIP Note Facility has not occurred on the terms set out in the
DIP/Exit Term Sheet on or before June 22, 2016, unless such failure to fund results from a breach by
the Plan Sponsor;
(f) Pacific or any of its direct or indirect subsidiaries (or any branch thereof) shall
be declared subject to (either voluntarily or involuntarily) (a) main insolvency proceedings under Law
1116 or (b) proceedings under chapter 11 of the Bankruptcy Code, in each case without the consent of
the Requisite Consenting Creditors and the Plan Sponsor and, only if such proceeding is an
involuntary insolvency proceeding, it is not dismissed within ten (10) calendar days of such
declaration;
(g) this RSA is terminated by the Consenting Noteholders pursuant to Section 5.02
hereof;
(h) this RSA is terminated by the Consenting Lenders pursuant to Section 5.03
hereof; or
(i) the issuance, promulgation, or enactment by any competent governmental entity
or agent thereof, including any regulatory or licensing authority or court of competent jurisdiction, of
any statute, regulation, ruling or order declaring this Agreement or any material portion hereof to be
unenforceable or enjoining or otherwise restricting the consummation of a material portion of the
Restructuring (including with respect to the regulatory approvals or tax treatment required for
completion of the Restructuring), which action remains uncured for a period of five (5) Business
Days after the issuance of such issuance, enactment, statute, regulation, ruling or order.
Individual Consenting Creditor Termination Events. This RSA may be terminated as
5.05
between any Consenting Creditor and all other Parties by the delivery of a written notice in
accordance with Section 7.09 hereof by such Consenting Creditor to the Company and the other
Parties upon the occurrence and continuation of any of the following events (each, an "Individual
Consenting Creditor Termination Event"):
(a) the DIP Facilities and/or DIP/Exit Term Sheet shall have been amended or
modified without such Consenting Creditor's consent to (i) increase the interest rate of the DIP
Facilities, (ii) increase the amount of Reorganized Common Stock (as defined in the DIP/Exit Term
Sheet) that is to be distributed on account of the DIP Note Facility, or (iii) alter the Company's
reimbursement obligation under the DIP LC Facility;
19
0134
(b) the Exit Note Facility and/or the DIP/Exit Term Sheet shall have been amended
or modified without such Consenting Creditor's consent to (i) increase the interest rate on the Exit
Notes (as defined in the DIP/Exit Term Sheet) or (ii) alter the call protection or maturity date of the
Exit Notes (each as set forth in the DIP/Exit Term Sheet);
(c) Section 3.04 of this Agreement shall have been amended or modified without
such Consenting Creditor's consent;
(d) the amount of Reorganized Common Stock to be distributed to Affected
Creditors, or the allocation of such Reorganized Common Stock among Affected Creditors, is
modified from the amount and allocation set forth in the Recapitalization Term Sheet as of the date
hereof;
(e) the issuance, promulgation, or enactment by any competent governmental entity
or agent thereof, including any regulatory or licensing authority or court of competent jurisdiction, of
any statute, regulation, ruling or order declaring this Agreement or any material portion hereof to be
unenforceable or enjoining or otherwise restricting the consummation of a material portion of the
Restructuring (including with respect to the regulatory approvals or tax treatment required for
completion of the Restructuring), which action remains uncured for a period of five (5) Business
Days after the issuance of such issuance, enactment, statute, regulation, ruling or order;
(f) Pacific or any of its direct or indirect subsidiaries (or any branch thereof) shall
be declared subject to (either voluntarily or involuntarily) (a) main insolvency proceedings under Law
1116 or (b) proceedings under chapter 11 of the Bankruptcy Code, in each case without such
Consenting Creditor's consent and, only if such proceeding is an involuntary insolvency proceeding,
it is not dismissed within ten (I 0) calendar days of such declaration;
(g) any of the Company Parties shall be declared the subject of any insolvency,
bankruptcy, liquidation or reorganization proceeding (other than the Insolvency Cases contemplated
herein or as required by the DIP Note Purchasers (as defined in the DIP/Exit Term Sheet) to perfect
their security interests under the DIP Note Facility) under the laws of any jurisdiction and, only if
such proceeding is an involuntary insolvency proceeding, it is not dismissed, stayed, reversed or lifted
within ten (10) calendar days of such declaration; or
(h) if the Plan Effective Date shall not have occurred on or before the date that is
two hundred and seventy (270) calendar days after the Petition Date.
5.06 Company Termination Events. The Company may terminate this RSA as to all
Parties by the delivery to the other Parties of a written notice in accordance with Section 7.09 hereof
upon the occurrence and continuation of any of the following events (each, a "Company Termination
Event" and, together with the Consenting Noteholder Termination Events, the Consenting Lender
Termination Events, the Plan Sponsor Termination Events and the Individual Consenting Creditor
Termination Events, the "Termination Events"):
(a) if the board of directors of Pacific reasonably determines in good faith that,
having received the advice of outside counsel to Pacific and the recommendation of the Independent
Committee, the Restructuring and the Plan are not in the best interests of the Company having regard
to the reasonable expectations of the holders of Company Claims and continued support of the
Restructuring and the Plan pursuant to this RSA would be inconsistent with such directors' fiduciary
obligations having regard to the reasonable expectations of the holders of Company Claims; or
(b) the issuance, promulgation, or enactment by any competent governmental
entity, including any regulatory or licensing authority or court of competent jurisdiction, of any
statute, regulation, ruling or order declaring this Agreement or any material portion hereof to be
unenforceable or enjoining or otherwise restricting the consummation of a material portion of the
20
Restructuring (including with respect to the regulatory approvals or tax treatment requirePfor 35
completion of the Restructuring), which action remains uncured for a period of five (5) Business
Days after the issuance of such issuance, enactment, statute, regulation, ruling or order; provided, that
the Company used commercially reasonable efforts to lift or otherwise reverse the effect of the
governmental action giving rise to such Company Termination Event.
5.07
Mutual Termination. This RSA, and the obligations of all Parties hereunder, may be
terminated by mutual agreement in writing among the Parties.
5.08
Effect of Tel Inination.
(a) Upon termination of this RSA under Sections 5.02, 5.03 and 5.05 hereof, this
RSA shall be of no further force and effect as to the applicable terminating Party (each, a
"Terminating Consenting Party") and such Terminating Consenting Party shall be released from its
commitments, undertakings, and agreements under or related to this RSA and shall have the rights
and remedies that it would have had had it not entered into this RSA, and shall be entitled to take all
actions, whether with respect to the Restructuring or otherwise, that it would have been entitled to
take had it not entered into this RSA, and all Parties to this Agreement shall be released from any
commitments, undertakings and agreements owed to such Terminating Consenting Party under this
Agreement; provided, however, that such termination shall not relieve such Terminating Consenting
Party of its breach or non-performance of its obligations hereunder prior to the date of such
termination. For the avoidance of doubt, all Parties to this Agreement other than any such
Terminating Consenting Party shall continue to be bound by the terms and conditions of this
Agreement in all respects notwithstanding such termination. Upon the occurrence of any termination
of this RSA as to any Terminating Consenting Party, (i) any and all consents, votes or proxies
tendered prior to such termination by such Terminating Consenting Party shall be deemed, for all
purposes, to be null and void ab initio and shall not be considered or otherwise used in any manner by
the Parties in connection with the Restructuring and this RSA or otherwise and (ii) any and all Notes
held by such Terminating Consenting Party and blocked in the relevant Clearing System shall be
released to such Terminating Consenting Party.
(b) Upon Termination of this RSA under Sections 5.01, 5.04, 5.06 or 5.07 hereof,
this RSA shall be of no further force and effect and each Party shall be released from its
commitments, undertakings, and agreements under or related to this RSA and shall have the rights
and remedies that it would have had had it not entered into this RSA, and shall be entitled to take all
actions, whether with respect to the Restructuring or otherwise, that it would have been entitled to
take had it not entered into this RSA; provided, however, that such termination shall not relieve any
Party of its breach or non-performance of its obligations hereunder prior to the date of such
termination. Upon the occurrence of any termination of this RSA, (i) any and all consents, votes or
proxies tendered prior to such tei mination by the Consenting Creditors and the Plan Sponsor shall be
deemed, for all purposes, to be null and void ab initio and shall not be considered or otherwise used in
any manner by the Parties in connection with the Restructuring and this RSA or otherwise and (ii) any
and all Notes held by any Consenting Noteholder and blocked in the relevant Clearing System shall
be released to such Consenting Noteholder.
5.09 No Termination for Own Breach. Notwithstanding anything contained herein to the
contrary, nothing herein shall allow any Party to terminate this Agreement as a result of its own
breach.
Section 6. Amendments, Waivers. This RSA may not be modified, amended, or supplemented
except in writing signed by the Company, the Requisite Consenting Creditors and the Plan Sponsor;
provided, that (a) the consent of each Consenting Noteholder shall be required with respect to any
21
0136
amendment to the definition of the Requisite Consenting Noteholders, (b) the consent of each
Consenting Lender shall be required with respect to any amendment to the definition of the Requisite
Consenting Lenders, and (c) the consent of each Consenting Creditor shall be required with respect to
any amendment that (i) changes the definition of Requisite Consenting Creditors, or (ii) amends or
modifies in any way Section 5.05 or Section 6 of this Agreement; provided further that, if the
amendment at issue materially and adversely impacts the treatment or rights of any Consenting
Creditor in a manner different from any other Consenting Creditor, the agreement in writing of any
such Consenting Creditor whose treatment or rights are materially and adversely impacted in a
different manner than other Consenting Creditors shall also be required for any such amendment to be
effective. As used in this RSA, any consent, waiver or other form of approval by or from any of the
Consenting Creditors or the Plan Sponsor shall be exercised or withheld in the sole discretion of such
Parties.
The Company shall be permitted to rely upon any written confirmation (including by e-mail)
from counsel to the Consenting Noteholders, the Consenting Lenders, and/or the Plan Sponsor
expressly confirming any applicable Termination Event, consent, waiver or other form of approval by
the applicable Consenting Creditors or the Plan Sponsor, as the case may be.
Section 6A.
Additional Colombian Matters.
6A.01 Consultations. The Plan Sponsor and the Company covenant and agree to engage in
ongoing consultation with, and seek input from, applicable Colombian regulatory authorities,
including Colombia's Superintendencia de Sociedades, in connection with the implementation of the
Restructuring during the term of this Agreement.
6A.02 Compensation Fund. The Plan Sponsor shall, in connection with the completion of
the Restructuring, but for greater certainty not as part of the Restructuring or as part of any of the
Insolvency Cases, pay to holders of record of common shares of Pacific (as of the date hereof) that
are properly domiciled in Colombia (but excluding any executives of the Company) a Social
Harmony fee not to exceed the lesser of $0.15 per share and $4 million in the aggregate (divided
equally on a per share basis).
Section 7. Miscellaneous.
Swiss Proceedings. If, after consultation with the Plan Sponsor and the Requisite
7.01
Consenting Creditors, the board of directors of either Meta Petroleum AG or Pacific E&P Holding
Corp., respectively, in each case acting reasonably, file either Meta Petroleum AG or Pacific E&P
Holding Corp. for insolvency proceedings pursuant to sec. 293 et seq. of the Swiss Debt Enforcement
and Bankruptcy Act, such a filing in either case shall not constitute a breach of this Agreement.
Further Assurances. Subject to the other terms of this RSA, the Parties agree to use
7.02
their commercially reasonable efforts to negotiate, document, execute (as applicable) and deliver such
other instruments and perform such acts, in addition to the matters herein specified, as may be
commercially reasonable, from time to time, to effectuate the Restructuring in accordance with the
terms and conditions set forth in this RSA and the Definitive Documents, as applicable.
Complete Agreement. This RSA and the exhibits, schedules and other attachments
7.03
hereto represent the entire agreement between the Parties with respect to the subject matter hereof and
supersede all prior agreements, oral or written, among the Parties with respect thereto. No claim of
waiver, modification, consent, or acquiescence with respect to any provision of this RSA shall be
22
0137
made against any Party, except on the basis of a written instrument executed by or on behalf of such
Party or as may be carried out in accordance with Section 6.
7.04
Parties; Successors and Assigns. This RSA shall be binding upon, and inure to the
benefit of, the Parties. No rights or obligations of any Party under this RSA may be assigned or
transferred to any other person or entity except as provided in Section 3.04 hereof. Nothing in this
RSA, express or implied, shall give to any person or entity, other than the Parties, any benefit or any
legal or equitable right, remedy, or claim under this RSA.
7.05
Headings. The headings of all sections of this RSA are inserted solely for the
convenience of reference and are not a part of and are not intended to govern, limit, or aid in the
construction or interpretation of any term or provision hereof.
7.06 GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF
FORUM; WAIVER OF TRIAL BY JURY.
(a) THIS RSA IS TO BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.
(b) All actions and claims arising out of or relating to this RSA shall be heard and
determined in the Canadian Court, the U.S. Court or any federal or state court sitting in the Borough
of Manhattan, the city of New York (collectively, the "Chosen Courts"). Consistent with the
preceding sentence, the Parties hereby (i) irrevocably submit to the exclusive jurisdiction of the
Chosen Courts, (ii) waive any objection to laying of venue in any such action or proceeding in the
Chosen Courts, and (iii) waive any objection that the Chosen Courts are an inconvenient forum or do
not have jurisdiction over any Party; provided, however, that each of the Parties hereby agrees that,
for the duration of any Insolvency Cases, the Canadian Court shall have exclusive jurisdiction of all
matters relating to the enforcement of this Agreement. The foregoing shall not limit the rights of any
Party to introduce this Agreement in any court in any jurisdiction in order to prosecute or defend
against a cause of action that has been brought against it or any of its affiliates or representatives in
such court.
(c) EACH PARTY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
RSA OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Counterparts; Additional Support Parties. This Agreement may be executed in
7.07
several identical counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same agreement. Execution copies of this Agreement may
be delivered by facsimile, electronic mail or otherwise, each of which shall be deemed to be an
original for the purposes of this paragraph. Any Consenting Creditor that is not already an existing
Party hereto may become a Joining Party by executing a Joinder Agreement, the foul' of which is
attached hereto as Exhibit A, and, in doing so, such Joining Party shall thereafter be deemed to be a
Party for all purposes under this Agreement. With respect to the Company Claims held by such
Joining Party, such Joining Party hereby makes the representations and warranties applicable to such
Joining Party set forth in Section 4 of this Agreement to the other Parties, as of the date such Joining
Party executes the Joinder Agreement.
7.08
Interpretation. This RSA is the product of negotiations between the Company, the
Plan Sponsor, and the Consenting Creditors, and in the enforcement or interpretation hereof, is to be
interpreted in a neutral manner, and any presumption with regard to interpretation for or against any
23
0136
Party by reason of that Party having drafted or caused to be drafted this RSA, or any portion hereof,
shall not be effective in regard to the interpretation hereof.
7.09
Notices. All notices hereunder shall be deemed given if in writing and delivered, if
sent by electronic mail, courier, or registered or certified mail (return receipt requested) to the
following addresses (or at such other addresses as shall be specified by like notice):
(a) in the case of the Company:
Pacific Exploration & Production Corporation
333 Bay Street, Suite 1100
Toronto, Ontario MSH 2R2
Attention: Peter Volk and Michael Galego
E-mail: [email protected] / [email protected]
With copies (which shall not be deemed notice) to:
Proskauer Rose LLP
Eleven Times Square
Eighth Avenue & 41st Street
New York, NY 10036-8299
Attention: Martin J. Bienenstock and Geoffrey T. Raicht
E-mail: [email protected] / [email protected]
and
Norton Rose Fulbright Canada LLP
Suite 3800, Royal Bank Plaza, South Tower, 200 Bay Street, P.O. Box 84
Toronto, Ontario M5J 2Z4
Attention: Tony Reyes and Terence S. Dobbin
E-mail: [email protected]/
[email protected]
(b) in the case of each Consenting Noteholder, at the address set forth for the
Consenting Noteholder on its signature page hereto or on a Joinder Agreement (as applicable), or any
substitute address, e-mail address or department or officer as the Consenting Noteholder may notify
to the Company by not less than five (5) Business Days' notice, with a required copy to the following
addressees:
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019
Attention: Alan W. Kornberg and Jacob A. Adlerstein
E-mail: [email protected] / [email protected]
And
24
0 139
Goodmans LLP
333 Bay St #3400
Toronto, Ontario M5H 2S7
Attention: Brendan O'Neill and Celia Rhea
E-mail: [email protected] / [email protected]
(c) in the case of each Consenting Lender, at the address set forth for the
Consenting Lender on its signature page hereto or on a Joinder Agreement (as applicable), or any
substitute address, e-mail address or department or officer as the Consenting Lender may notify to the
Company by not less than five (5) Business Days' notice, with a required copy to the following
addressees:
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, New York 10017
Attention: Damian Schaible and Angela Libby
E-mail: [email protected] /
[email protected]
and
Torys LLP
79 Wellington St. W., 30th Floor, Box 270, TD South Tower
Toronto, Ontario M5K 1N2
Attention: Tony DeMarinis and Scott Bomhof
E-mail: [email protected] / [email protected]
(d) in the case of the Plan Sponsor:
EIG Pacific Holdings Ltd.
EIG Harbour Energy Advisor, L.P.
1700 Pennsylvania Avenue, NW
Suite 800
Washington, District of Colombia 20007
Attention: Benjamin Vinocour, General Counsel
E-mail: [email protected]
and
Stikeman Elliott LLP
5300 Commerce Court West
199 Bay Street
Toronto, Ontario M5L 1B9
Attention: Jeffery Singer and David Byers
E-mail: [email protected] / [email protected]
25
0140
and
Kirkland & Ellis LLP
300 North LaSalle
Chicago, Illinois 60654
Attention: Ross M. Kwasteniet
E-mail: [email protected]
(e) in the case of the Monitor:
PricewaterhouseCoopers Inc.
Court-appointed Monitor of Pacific Exploration & Production Corporation
PwC Tower, 18 York Street, Suite 2600
Toronto, ON M5J OB2
Attention: Gregory Prince and Mica Arlene
E-mail: [email protected] /
[email protected]
and
Thornton Grout Finnigan LLP
TD West Tower, 100 Wellington Street West, Suite 3200
Toronto, Ontario
M5K1K7
Attention: Robert I. Thornton
E-mail: [email protected]
Any notice given by delivery, electronic mail, or courier shall be effective when received.
Reservation of Rights; Waiver. Except as expressly provided in this RSA, nothing
7.10
herein is intended to, or does, in any manner waive, limit, impair, or restrict any right of any
Consenting Creditors or the Plan Sponsor or the ability of each of the Consenting Creditors and the
Plan Sponsor to protect and preserve its rights, remedies, and interests, including, without limitation,
its claims against or interests in the Company under the Note Indentures, Credit Facilities and other
agreements and documents relating thereto or hereto, as well as under applicable law. If the
Restructuring is not consummated in accordance with the terms of the Plan and this RSA, or if this
RSA is terminated for any reason, the Parties fully reserve any and all of their rights. Pursuant to Rule
408 of the Federal Rules of Evidence and any other applicable rules of evidence, this RSA and all
negotiations relating hereto shall not be admissible into evidence in any proceeding other than a
proceeding to enforce its terms. Each Consenting Creditor and the Plan Sponsor may, subject to any
express provision to the contrary herein, enforce its rights hereunder separately.
Specific Performance. It is understood and agreed by the Parties that money damages
7.11
would be an insufficient remedy for any breach of this RSA by any Party and each non-breaching
Party shall be entitled to specific performance and injunctive or other equitable relief (without the
requirement to secure or post any bond in connection therewith) as a remedy of any such breach,
including, without limitation, an order of the applicable Insolvency Court, the Chosen Court or other
26
0141
court of competent jurisdiction requiring any Party to comply promptly with any of its obligations
hereunder.
7.12
Several, Not Joint, Obligations. The agreements, representations, and obligations of
the each Consenting Creditor and the Plan Sponsor under this RSA are, in all respects, several and not
joint. The agreements, representations and obligations of the Company Parties under this RSA are
joint and several.
7.13
Remedies Cumulative. All rights, powers, and remedies provided under this RSA or
otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and
the exercise of any right, power, or remedy thereof by any Party shall not preclude the simultaneous
or later exercise of any other such right, power, or remedy by such Party.
7.14
No Third-Party Beneficiaries. This RSA shall be solely for the benefit of the Parties,
and no other person or entity shall be a third-party beneficiary hereof.
7.15
Relationship Among Parties. It is understood and agreed that no Consenting Creditor
or the Plan Sponsor has any duty of trust or confidence in any form with any other Consenting
Creditor or the Plan Sponsor, and, except as provided in this RSA or any of the Definitive
Documents, there are no commitments among or between them. In this regard, it is understood and
agreed that any Consenting Creditor or the Plan Sponsor may trade in the Note Claims, Bank Debt
Claims or equity securities of the Company without the consent of any other Patty, subject to
applicable securities laws and the terms of this RSA, including, specifically, Section 3.04; provided
that no Consenting Creditor or the Plan Sponsor shall have any responsibility for any such trading by
any other entity by virtue of this RSA. No prior history, pattern or practice of sharing confidences
among or between the Consenting Creditors and/or the Plan Sponsor shall in any way affect or negate
this understanding and agreement.
Automatic Stay. The Parties acknowledge that the giving of notice or the disclosure
7.16
of information, including under Section 8 hereof, or Termination by any Party, including under
Section 5 hereof, shall not be stayed by the automatic stay under section 362 of the Bankruptcy Code
or any similar provision under the CCAA or applicable Insolvency Law, to the extent applicable, and
to the extent the applicable Insolvency Court determines otherwise, the delivering Party shall not be
subject to any damages on account of the giving of such notice or disclosure or with respect to
Termination.
Survival. Notwithstanding anything contained herein to the contrary, upon the
7.17
termination of this RSA (whether as a result of the consummation of the Restructuring, or its
termination pursuant to Section 5 hereof or otherwise), the agreements and obligations of the Parties
set forth in Section 3.03(b), Section 3.03(d), Section 5.08, Sections 7.03-7.17, Section 8.02 and
Section 9 hereof shall survive the termination of this RSA.
Section 8. Disclosure and Publicity.
8.01
Press Releases. During the RSA Effective Period:
(a) Any press release to be issued by the Company concerning this Agreement or
the transactions described herein shall require the consent of the Requisite Consenting Creditors and
the Plan Sponsor, which consent shall not be unreasonably withheld; provided, however, that, subject
to Section 8.02 hereof, the Company shall not, without receiving the prior written consent of any
applicable Consenting Creditor, (i) use the name of any Consenting Creditor or the name of any such
27
0142
parties' affiliates in any press release or (ii) disclose to any person, other than the Company's counsel,
the principal amount or percentage of Note Claims or Bank Debt Claims held by any Consenting
Creditor or any of its respective subsidiaries or affiliates.
(b) Without limiting Section 8.02 hereof, from and after the date hereof, the
Company shall submit to counsel for the Consenting Creditors and the Plan Sponsor all press
releases, public filings, public announcements or other public communications regarding the
Restructuring, whether in Spanish, English or any other language, proposed to be made by such
Parties, no less than twenty-four (24) hours prior to the time at which such press release, public filing,
public announcement or other communication is proposed to be made, for prior consent by the
Requisite Consenting Creditors (not to be unreasonably conditioned, withheld or delayed). Nothing
set forth in this Section 8.01 shall limit, in any way, the Company's ability to comply with its
obligations under applicable law, including securities law and stock exchange rules.
Holdings. The Parties agree that the holdings information provided by each
8.02
Consenting Creditor with respect to its respective holdings of Note Claims or Bank Debt Claims and
the identity of such Consenting Creditor shall be kept confidential, and such information shall not be
disclosed to any person other than to the Company and (i) Goodmans in respect of the holdings of the
Consenting Noteholders and (b) Davis Polk in respect of the holdings of the Consenting Lenders;
provided, however, (i) the Company shall be permitted to disclose at any time (and in the case of the
Plan Sponsor, shall disclose upon its request) the aggregate principal amount of, and aggregate
percentage of, the Company Claims held by the Consenting Creditors and (ii) the legal and financial
advisors to the Company may disclose the names of holders (or nominees, investment managers or
advisors of beneficial holders of) of Company Claims (but shall be prohibited from disclosing the
principal amount or percentage of the Note Claims or Bank Debt Claims held by any particular
person or entity) solely to the extent such advisors deem necessary to satisfy any court order or
governmental request under any provisions of applicable Insolvency Law; provided further, however,
that upon the public filing of this RSA, the Company shall redact any signature pages hereto or file
such signature pages under seal.
Section 9.
Nothing herein shall be construed to create any obligation on the part of any Consenting
Creditor or the Plan Sponsor to (a) pay any fees or expenses associated with the Restructuring,
including, but not limited to, any of the Consenting Creditors' professional or advisory fees or (b)
indemnify the Company or any other party in connection with any action contemplated hereby.
[Remainder of Page Intentionally Left Blank]
28
PACIFIC EXPLORATION &
PRODUCTION CORPORATION
By:
Name:
Title:
[Signature page to Restructuring Support Agreement]
0 14
0144
META PRETROLEUM CORP.
By:
Name:
Title:
[Signature page to Restructuring Support Agreement]
PACIFIC E&P HOLDINGS CORPQ
By:
Name:
Title:
[Signature page to Restructuring Support Agreement]
145
0146
PACIFIC STRATUS INTERNATIONAL
ENERGY LTD.
By:
Name:
Title:
[Signature page to Restructuring Support Agreement]
0147
PACIFIC GUATEMALA ENERGY CORP.
By:
Name:
Title:
[Signature page to Restructuring Support Agreement]
01
PACIFIC RUBIALES GUATEMALA S.A.
By:
Name:
Title:
[Signature page to Restructuring Support Agreement]
PACIFIC STRATUS ENERGY S.A.
By:
Name:
Title:
[Signature page to Restructuring Support Agreement]
0149
015C
PACIFIC STRATUS ENERGY
COLOMBIA CORP.
By:
Name:
Title:
[Signature page to Restructuring Support Agreement]
UIJI
PACIFIC OFF SHORE PERU S.R.L.
By:
Name:
Title:
[Signature page to Restructuring Support Agreement]
0 1 5 t_
PETROMINERALES COLOMBIA CORP.
By:
Name:
Title:
[Signature page to Restructuring Support Agreement]
0 1 53
PRE-PSIE COOPERATIEF U.A.
By:
Name:
Title:
[Signature page to Restructuring Support Agreement]
C154
[NAME OF CREDITOR]
By:
Name:
Title:
Tel. No.
Fax. No.
Address:
E-mail Address:
STRICTLY CONFIDENTIAL
CLAIMS SUBJECT TO THIS AGREEMENT
Principal Amount of 2019 Notes subject to this
Agreement
Principal Amount of 2021 Notes subject to this
Agreement:
Principal Amount of 2023 Notes subject to this
Agreement:
Principal Amount of 2025 Notes subject to this
Agreement:
Principal Amount of BofA Facility Indebtedness
subject to this Agreement:
Principal Amount of HSBC Facility Indebtedness
subject to this Agreement:
Principal Amount of Revolving Facility
Indebtedness subject to this Agreement:
[Signature page to Restructuring Support Agreement]
0155
EXHIBIT A
JOINDER
The undersigned ("Joining Party") hereby acknowledges that it has read and understands the
Restructuring Support Agreement, dated as of May •, 2016 (the "Agreement"), by and among Pacific
Exploration & Production Corporation and certain of its direct and indirect subsidiaries (collectively,
the "Company"), the Plan Sponsor, and certain holders of claims against the Company signatory
thereto, and agrees to be bound by the terms and conditions thereof, and shall be deemed a
"Consenting Creditor" under the terms of the Agreement with respect to any and all Company
Claims. The Joining Party hereby makes the representations and warranties applicable to the Joining
Party in the capacity set forth herein and as set forth in Section 4 of the Agreement to the other Parties
thereto, as of the date hereof (and not as of any earlier date that the representations and warranties
were given by other Parties pursuant to the Agreement). This joinder shall be governed by, and
construed in accordance with, the internal laws of the State of New York, without giving effect to the
principles of conflict of laws that would require the application of the law of any other jurisdiction.
Upon the execution of this joinder in the case of a proposed Transfer (as defined in the
Agreement), the Joining Party shall (i) deliver by e-mail, to the Company, with a copy to (a)
Goodmans at [email protected] and [email protected] in respect of any Company Claims
transferred by a Consenting Noteholder; and (b) Davis Polk in respect of any Company Claims
transferred by a Consenting Lender, within one (1) business day of the proposed Transfer, an
executed copy of this joinder and (ii) if any Note Claims are subject to such Transfer, indicate in the
e-mail notification required by clause (i) above whether, and to what extent, such Note Claims are
entitled to the Early Consent Consideration pursuant to the tel ills of the Recapitalization Term Sheet.
If a Joining Party fails to indicate whether the Note Claims subject to the proposed Transfer are
entitled to the Early Consent Consideration, and if the transferee thereof holds both Note Claims that
are entitled to the Early Consent Consideration and Note Claims that are not entitled to the Early
Consent Consideration, then the Note Claims that are subject to the proposed Transfer shall be
deemed to first include any Note Claims held by the transferee that are entitled to the Early Consent
Consideration and, if that amount is less than the amount of Note Claims that is subject to the
proposed Transfer, thereafter any other Note Claims.
Upon the execution of this joinder other than in the case of a proposed Transfer, the Joining
Party shall immediately deliver by e-mail, to the Company, with a copy to (a) Goodmans at
[email protected] and [email protected] in respect of any Note Claims and (b) Davis Polk
in respect of any Bank Debt Claims, an executed copy of this joinder.
[Remainder of Page Intentionally Left Blank]
[Signature page to Joinder Agreement]
0156
Date Executed:
[JOINING PARTY]
By:
Name:
Title:
Tel. No.
Fax. No.
Address:
E-mail Address:
STRICTLY CONFIDENTIAL
CLAIMS SUBJECT TO THIS AGREEMENT
Principal Amount of 2019 Notes subject to this
Agreement
Principal Amount of 2021 Notes subject to this
Agreement:
Principal Amount of 2023 Notes subject to this
Agreement:
Principal Amount of 2025 Notes subject to this
Agreement:
Principal Amount of BofA Facility Indebtedness
subject to this Agreement:
Principal Amount of HSBC Facility Indebtedness
subject to this Agreement:
Principal Amount of Revolving Facility
Indebtedness subject to this Agreement:
[Signature page to Joinder Agreement]
Clearing System through
which the Notes are held
Clearing System Participant
Name
[Signature page to Joinder Agreement]
Clearing System Particippvt
Account Number U 1
5,
IN THE MA1 f ER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED
Court File No. CV-16-11363-00CL
AND IN THE MA ITER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF PACIFIC EXPLORATION & PRODUCTION
CORPORATION, PACIFIC E&P HOLDINGS CORP., META PETROLEUM CORP., PACIFIC STRATUS INTERNATIONAL
ENERGY LTD., PACIFIC STRATUS ENERGY COLOMBIA CORP., PACIFIC STRATUS ENERGY S.A., PACIFIC OFF SHORE
PERU S.R.L., PACIFIC RUBIALES GUATEMALA S.A., PACIFIC GUATEMALA ENERGY CORP., PRE-PSIE COOPERATIEF U.A.,
PETROMINERALES COLOMBIA CORP. AND GRUPO C&C ENERGIA (BARBADOS) LTD.
Applicants
ONTARIO
SUPERIOR COURT OF JUSTICE - COMMERCIAL LIST
Proceeding commenced at Toronto
AFFIDAVIT OF KATHRYN ESAW
(Sworn May 9, 2016)
STIKEMAN ELLIOTT LLP
Barristers & Solicitors
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Maria Konyukhova LSUC# 52880V
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