GUARANTY
This
GUARANTY
(as
amended, restated, supplemented, or otherwise modified and in effect from time
to time, this “Guaranty”)
is
made as of this 13th
day of
November, 2008, jointly and severally, by NORTH
TEXAS DRILLING SERVICES, INC.,
a Texas
corporation (“North
Texas”),
SONTERRA
OPERATING, INC.,
a
Delaware corporation (“Operating”),
VELOCITY
ENERGY LIMITED LLC,
a Texas
limited liability company (“Limited”),
VELOCITY
ENERGY INC.,
a
Delaware corporation (“Velocity”),
VELOCITY
ENERGY OFFSHORE LP, a
Delaware limited partnership (“Offshore”),
VELOCITY
ENERGY PARTNERS LP,
a
Delaware limited partnership (“Onshore”;
North
Texas, Operating, Limited, Velocity, Offshore and Onshore, together with each
other person or entity who becomes a party to this Guaranty by execution of
a
joinder in the form of Exhibit
A
attached
hereto, is referred to individually as a “Guarantor”
and
collectively as the “Guarantors”;
provided, that the parties hereto agree that, as of the date hereof, North
Texas, Operating, Limited, Velocity, Offshore and Onshore are the only
Guarantors) in favor of LONGVIEW
MARQUIS MASTER FUND, L.P., a
British
Virgin Island limited partnership (“Marquis”)
and
THE
LONGVIEW FUND, L.P.,
a
California limited partnership (“Longview”;
together with Marquis, collectively, “Holders”).
WITNESSETH:
WHEREAS,
as of
the date hereof, Holders have made loans and certain other financial
accommodations (collectively, the “Loans”)
to
SONTERRA
RESOURCES, INC., a
Delaware corporation (the “Company”),
as
evidenced by (i) that certain Subordinated Note of even date herewith in an
original aggregate principal amount of $2,210,550.92 issued by the Company
in
favor of Longview (as the same may be amended, supplemented, restated or
otherwise modified from time to time as permitted hereunder and including any
notes issued in exchange or substitution therefor, collectively, the
“Longview
Note”)
and
(ii) that certain Subordinated Note of even date herewith in an original
aggregate principal amount of $9,440,000 issued by the Company in favor of
Marquis (as the same may be amended, supplemented, restated or otherwise
modified from time to time as permitted hereunder and including any notes issued
in exchange or substitution therefor, collectively, the “Marquis
Note”;
Longview Note and Marquis Note, each a “Note”
and,
together, “Notes”).
WHEREAS,
the
Notes are being acquired by Holders pursuant to a Securities Exchange Agreement
dated as of even date herewith among the Holders and the Company (as the same
may be amended, restated, supplemented or otherwise modified from time to time,
the “Exchange
Agreement”)
WHEREAS,
the
Guarantors are direct or indirect subsidiaries of the Company and, as such,
will
derive substantial benefit and advantage from the Loans, the Notes and the
other
Transaction Documents, and it will be to each Guarantor’s direct interest and
economic benefit to assist the Company in procuring said Loans and other
financial accommodations from Holders.
NOW,
THEREFORE,
for and
in consideration of the premises and in order to induce Holders to make the
Loans, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each Guarantor hereby jointly
and
severally agrees as follows:
1. Definitions:
Capitalized
terms used herein without definition and defined in the Notes are used herein
as
defined therein. In addition, as used herein:
“Bankruptcy
Code”
shall
mean
the
Federal Bankruptcy Reform Act of 1978 (11 U.S.C. §101, et
seq.),
as
amended and in effect from time to time thereunder.
“Obligations”
shall
mean (i) all obligations, liabilities and indebtedness of every nature of the
Company from time to time owed or owing to the Holders, including, without
limitation, all obligations, liabilities and indebtedness of every nature of
the
Company under the Notes, the Loans, the Warrants, and the other Transaction
Documents, including, without limitation, the principal amount of all debts,
claims and indebtedness, accrued and unpaid interest and all fees, taxes,
indemnities, costs and expenses, whether primary, secondary, direct, contingent,
fixed or otherwise, heretofore, now and/or from time to time hereafter owing,
due or payable, whether before or after the filing of a bankruptcy, insolvency
or similar proceeding under applicable federal, state, foreign or other law
and
whether or not an allowed claim in any such proceeding, and (ii) all
obligations, liabilities and indebtedness of every nature of any subsequent
Guarantor from time to time owed or owing to the Holders, including, without
limitation, all obligations, liabilities and indebtedness of every nature of
the
Guarantors under or in respect of this Guaranty, the Exchange Agreement, the
Notes, the Loans, the Warrants and the other Transaction Documents, as the
case
may be, including, without limitation, the principal amount of all debts, claims
and indebtedness, accrued and unpaid interest and all fees, taxes, indemnities,
costs and expenses, whether primary, secondary, direct, contingent, fixed or
otherwise, heretofore, now and/or from time to time hereafter owing, due or
payable, whether before or after the filing of a bankruptcy, insolvency or
similar proceeding under applicable federal, state, foreign or other law and
whether or not an allowed claim in any such proceeding.
2. Guaranty
of Payment.
(a) Each
Guarantor, jointly and severally, hereby unconditionally and irrevocably
guarantees the full and prompt payment and performance to Holders, when due,
upon demand, at maturity or by reason of acceleration or otherwise and at all
times thereafter, of any and all of the Obligations.
(b) Each
Guarantor acknowledges that valuable consideration supports this Guaranty,
including, without limitation, the consideration set forth in the recitals
above, as well as any commitment to lend, extension of credit or other financial
accommodation, whether heretofore or hereafter made by Holders to the Company;
any extension, renewal or replacement of any of the Obligations; any forbearance
with respect to any of the Obligations or otherwise; any cancellation of an
existing guaranty; any purchase of any of the Company’s assets by any Holder; or
any other valuable consideration.
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(c) Each
Guarantor agrees that all payments under this Guaranty shall be made in United
States currency and in the same manner as provided for the
Obligations.
(d) Notwithstanding
any provision of this Guaranty to the contrary, it is intended that this
Guaranty not constitute a “Fraudulent Conveyance” (as defined below) in the
event that this Guaranty or such interest is subject to the Bankruptcy Code
or
any applicable fraudulent conveyance or fraudulent transfer law or similar
law
of any state. Consequently, Guarantors and Holders agree that if this Guaranty
would, but for the application of this sentence, constitute a Fraudulent
Conveyance, this Guaranty shall be valid and enforceable only to the maximum
extent that would not cause this Guaranty to constitute a Fraudulent Conveyance,
and this Guaranty shall automatically be deemed to have been amended accordingly
at all relevant times. For purposes hereof, “Fraudulent
Conveyance”
means
a
fraudulent conveyance under Section 548 of the Bankruptcy Code or a fraudulent
conveyance or fraudulent transfer under the provisions of any applicable
fraudulent conveyance or fraudulent transfer law or similar law of any state,
as
in effect from time to time.
3. Costs
and Expenses. Each
Guarantor, jointly and severally, agrees to pay on demand, all costs and
expenses of every kind incurred by any Holder: (a) in enforcing this Guaranty,
(b) in collecting any of the Obligations from the Company or any Guarantor,
(c)
for payment of any of the Obligations, and (d) in connection with any amendment
of, modification to, waiver or forbearance granted under, or enforcement or
administration of any Transaction Document or for any other purpose in
connection with any Transaction Document, in each case, to the extent Holder
may
take such action pursuant to the terms and conditions of this Agreement.
“Costs
and expenses”
as
used
in the preceding sentence shall include, without limitation, reasonable
attorneys’ fees incurred by any Holder in retaining legal counsel for advice,
suit, appeal, any insolvency or other proceedings under the Bankruptcy Code
or
otherwise, or for any purpose specified in the preceding sentence.
4. Nature
of Guaranty: Continuing, Absolute and Unconditional.
(a) This
Guaranty is and is intended to be a continuing guaranty of payment of the
Obligations, and not of collectibility, and is intended to be independent of
and
in addition to any other guaranty, endorsement, or other agreement held by
Holders therefor or with respect thereto, whether or not furnished by a
Guarantor. None of Holders shall be required to prosecute collection,
enforcement or other remedies against Company, any other Guarantor or guarantor
of the Obligations or any other person or entity, or to enforce or resort to
other rights or remedies pertaining thereto, before calling on a Guarantor
for
payment. The obligations of each Guarantor to repay the Obligations hereunder
shall be unconditional. Guarantor shall have no right to exercise any right
of
subrogation, reimbursement, indemnity, exoneration, contribution or any other
claim which it may now or hereafter have against the Company in connection
with
this Guaranty until the termination of this Guaranty in accordance with
Section
8
below,
and each Guarantor agrees that it will not take any action to enforce any
obligations of the Company to such Guarantor prior to the Obligations being
finally paid in full in cash, provided
that, in
the event of the bankruptcy or insolvency of the Company, to the extent the
Obligations have not been finally paid in full in cash, Holders shall be
entitled notwithstanding the foregoing, to file in the name of any Guarantor
or
in its own name a claim for any and all indebtedness owing to a Guarantor by
the
Company (exclusive of this Guaranty), vote such claim and to apply the proceeds
of any such claim to the Obligations.
3
(b) Without
in any way diminishing the liability of the Guarantors, following the occurrence
of an Event of Default, all debts and liabilities, present or future of the
Company to the Guarantors and all monies received from the Company or for its
account by the Guarantors in respect thereof shall be received in trust for
Holders and promptly following receipt shall be paid over to Holders, until
all
of the Obligations have been paid in full in cash.
(c) This
Guaranty shall not be changed or affected by any representation, oral agreement,
act or thing whatsoever, except as herein provided. This Guaranty is intended
by
the Guarantors to be the final, complete and exclusive expression of the
guaranty agreement between the Guarantors and Holders. No modification or
amendment of any provision of this Guaranty shall be effective against any
party
hereto unless in writing and signed by a duly authorized officer of such party.
This Agreement, together with the other Transaction Documents, supersedes all
other prior oral or written agreements between each Holder, the Guarantors,
the
Subsidiaries, their Affiliates and Persons acting on their behalf with respect
to the matters discussed herein, and this Agreement, together with the other
Transaction Documents and the other instruments referenced herein and therein,
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither any Guarantor nor any Holder makes any representation,
warranty, covenant or undertaking with respect to such matters. As of the date
of this Agreement, there are no unwritten agreement between the parties with
respect to the matters discussed herein. No provision of this Agreement may
be
amended, modified or supplemented other than by an instrument in writing signed
by the parties hereto.
(d) Each
Guarantor hereby releases the Company from all, and agrees not to assert or
enforce (whether by or in a legal or equitable proceeding or otherwise) any
“claims” (as defined in Section 101(5) of the Bankruptcy Code), whether arising
under any law, ordinance, rule, regulation, order, policy or other requirement
of any domestic or foreign government or any instrumentality or agency thereof,
having jurisdiction over the conduct of its business or assets or otherwise,
to
which the Guarantors are or would at any time be entitled by virtue of its
obligations hereunder or any payment made pursuant hereto, including any such
claims to which such Guarantors may be entitled as a result of any right of
subrogation, exoneration or reimbursement.
5. Certain
Rights and Obligations.
(a) Each
Guarantor acknowledges and agrees that Holders may, without notice, demand
or
any reservation of rights against such Guarantor and without affecting such
Guarantor’s obligations hereunder, from time to time:
(i) renew,
extend, increase, accelerate or otherwise change the time for payment of, the
terms of or the interest on the Obligations or any part thereof or grant other
indulgences to the Company or others;
4
(ii) accept
and hold any endorsement or guaranty of payment of the Obligations or any part
thereof, and discharge, release or substitute any such obligation of any such
endorser or guarantor, or discharge, release or compromise any Guarantor, or
any
other person or entity in any way obligated to pay the Obligations or any part
thereof, and enforce or refrain from enforcing, or compromise or modify, the
terms of any obligation of any such endorser, guarantor, or person or
entity;
(iii) direct
the enforcement of any and all endorsements and guaranties relating to the
Obligations or any part thereof as Holders in their sole discretion may
determine;
(iv) subject
to the terms of the Notes, determine the manner, amount and time of application
of payments and credits, if any, to be made on all or any part of any component
or components of the Obligations (whether principal, interest, fees, costs,
and
expenses, or otherwise), including, without limitation, the application of
payments received from any source to the payment of indebtedness other than
the
Obligations even though Holders might lawfully have elected to apply such
payments to the Obligations or to amounts which are not covered by this
Guaranty; and
(v) accept
or
make or refrain from accepting or making any compositions or arrangements when
and in such manner as Holders, in their sole discretion, may deem
appropriate;
and
generally do or refrain from doing any act or thing which might otherwise,
at
law or in equity, release the liability of such Guarantor as a guarantor or
surety in whole or in part; provided any such sale was conducted in a
commercially reasonable manner (to the extent required under applicable
law).
(b) Following
the occurrence and during the continuance of an Event of Default, and upon
demand by any Holder, each Guarantor, jointly and severally, hereby agrees
to
pay the Obligations to the extent hereinafter provided and to the extent
unpaid:
(i) without
deduction by reason of any setoff, defense (other than payment) or counterclaim
of the Company or any other Guarantor;
(ii) without
requiring presentment, protest or notice of nonpayment or notice of default
to
any Guarantor, to the Company or to any other person or entity;
(iii) without
demand for payment or proof of such demand or filing of claims with a court
in
the event of receivership, bankruptcy or reorganization of the Company or any
other Guarantor;
(iv) without
requiring Holders to resort first to the Company (this being a guaranty of
payment and not of collection), to any other Guarantor, or to any other
guaranty;
(v) without
requiring notice of acceptance hereof or assent hereto by any Holder;
and
5
(vi) without
requiring notice that any of the Obligations has been incurred, extended or
continued or of the reliance by any Holder upon this Guaranty;
all
of
which each Guarantor hereby waives.
(c) Each
Guarantor’s obligation hereunder shall not be affected by any of the following,
all of which such Guarantor hereby waives:
(i) any
defense arising by reason of the cessation from any cause whatsoever of
liability of the Company including, without limitation, any failure, negligence
or omission by any Holder in enforcing its claims against the
Company;
(ii) any
release, settlement or compromise of any obligation of the Company, any other
Guarantor or any other guarantor of the Obligations;
(iii) the
invalidity or unenforceability of any of the Obligations;
(iv) any
change of ownership of the Company, any other Guarantor or any other guarantor
of the Obligations or the insolvency, bankruptcy or any other change in the
legal status of the Company, any other Guarantor or any other guarantor of
the
Obligations;
(v) any
change in, or the imposition of, any law, decree, regulation or other
governmental act which does or might impair, delay or in any way affect the
validity, enforceability or the payment when due of the
Obligations;
(vi) the
existence of any claim, setoff or other rights which the Guarantor, Company,
any
other Guarantor or guarantor of the Obligations or any other person or entity
may have at any time against any Holder or the Company in connection herewith
or
any unrelated transaction;
(vii) any
Holder’s election in any case instituted under chapter 11 of the Bankruptcy
Code, of the application of section 1111(b)(2) of the Bankruptcy
Code;
(viii) any
use
of cash collateral, as debtor in possession, under sections 363 or 364 of the
Bankruptcy Code;
(ix) the
disallowance of all or any portion of any of any Holder’s claims for repayment
of the Obligations under sections 502 or 506 of the Bankruptcy
Code;
(x) any
stay
or extension of time for payment by the Company or any other Guarantor resulting
from any proceeding under the Bankruptcy Code or any similar law; or
(xi) any
other
fact or circumstance which might otherwise constitute grounds at law or equity
for the discharge or release of a Guarantor from its obligations hereunder,
all
whether or not such Guarantor shall have had notice or knowledge of any act
or
omission referred to in the foregoing clauses (i) through (xiv) of this
Section
5(c).
6
6. Representations
and Warranties. Each
Guarantor further represents and warrants to Holders that: (a) such Guarantor
is
a corporation or other entity duly incorporated or organized, as applicable,
validly existing and in good standing under the laws of the jurisdiction of
its
incorporation or formation, as applicable, and has full power, authority and
legal right to own its property and assets and to transact the business in
which
it is presently engaged; (b) such Guarantor has full power, authority and legal
right to execute and deliver, and to perform its obligations under, this
Guaranty, and has taken all necessary action to authorize the guarantee
hereunder on the terms and conditions of this Guaranty and to authorize the
execution, delivery and performance of this Guaranty; (c) this Guaranty has
been
duly executed and delivered by such Guarantor and constitutes a legal, valid
and
binding obligation of such Guarantor enforceable against such Guarantor in
accordance with its terms, except to the extent that such enforceability is
subject to applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance and moratorium laws and other laws of general application affecting
enforcement of creditors’ rights generally, or the availability of equitable
remedies, which are subject to the discretion of the court before which an
action may be brought; and (d) the execution, delivery and performance by each
Guarantor of this Guaranty do not require any action by or in respect of, or
filing with, any governmental body, agency or official and do not violate,
conflict with or cause a breach or a default under any provision of (i)
applicable law or regulation, (ii) the organizational documents of any
Guarantor, (iii) any judgment, injunction, order, decree or other instrument
binding upon it, or (iv) any agreement binding upon it, to the extent, solely
with respect to this clause (iv), such violation could not reasonably be
expected to have a Material Adverse Effect.
7. Negative
Covenants. Each
Guarantor covenants with Holders that such Guarantor shall not grant any
security interest in or permit any lien, claim or encumbrance upon any of its
assets in favor of any person or entity other than Permitted Liens.
8. Termination. This
Guaranty shall not terminate until such
time, if any, as (i) all Indebtedness under the Notes secured hereby shall
be
finally paid in full in cash, (ii) no Notes shall remain outstanding and (iii)
there shall exist no other outstanding payment or reimbursement obligations
(other than contingent indemnification obligations for which no claims shall
have been asserted) of the Borrower or the Guarantors to any Holder under any
of
the Transaction Documents. Thereafter, but subject to the following, each Holder
shall take such action and execute such documents as the Guarantors may request
(and at the Guarantors’ cost and expense) in order to evidence the termination
of this Guaranty. Each Guarantor further agrees that, to the extent that the
Company makes a payment or payments to Holders on the Obligations, which payment
or receipt of proceeds or any part thereof is subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be returned or repaid
to the Company, its estate, trustee, receiver, debtor in possession or any
other
person or entity, including, without limitation, the Guarantors, under any
insolvency or bankruptcy law, state or federal law, common law or equitable
cause, then to the extent of such payment, return or repayment, the obligation
or part thereof which has been paid, reduced or satisfied by such amount shall
be reinstated and continued in full force and effect as of the date when such
initial payment, reduction or satisfaction occurred, and this Guaranty shall
continue in full force notwithstanding any contrary action which may have been
taken by any Holder in reliance upon such payment, and any such contrary action
so taken shall be without prejudice to any Holder’s rights under this Guaranty
and shall be deemed to have been conditioned upon such payment having become
final.
7
9. Guaranty
of Performance. Each
Guarantor also guarantees the full, prompt and unconditional performance of
all
obligations and agreements of every kind owed or hereafter to be owed by the
Company to Holders under the Exchange Agreement, the Warrants and the Notes.
Every provision for the benefit of Holders contained in this Guaranty shall
apply to the guaranty of performance given in this paragraph.
10. Miscellaneous.
(a) The
terms
“Company” and “Guarantor” as used in this Guaranty shall include: (i) any
successor individual or individuals, association, partnership, limited liability
company or corporation to which all or substantially all of the business or
assets of the Company or such Guarantor shall have been transferred and (ii)
any
other association, partnership, limited liability company, corporation or entity
into or with which the Company or such Guarantor shall have been merged,
consolidated, reorganized, or absorbed.
(b) Without
limiting any other right of any Holder, whenever any Holder has the right to
declare any of the Obligations to be immediately due and payable (whether or
not
it has been so declared), such Holder, at its sole election without notice
to
the undersigned may appropriate and set off against the
Obligations:
(i) any
and
all indebtedness or other moneys due or to become due to any Guarantor by any
Holder in any capacity; and
(ii) any
credits or other property belonging to any Guarantor (including all account
balances, whether provisional or final and whether or not collected or
available) at any time held by or coming into the possession of any Holder,
or
any affiliate of any Holder, whether for deposit or otherwise;
whether
or not the Obligations or the obligation to pay such moneys owed by any Holder
is then due, and the applicable Holder shall be deemed to have exercised such
right of set off immediately at the time of such election even though any charge
therefor is made or entered on such Holder’s records subsequent thereto. Each
Holder agrees to notify such Guarantor in a reasonably practicable time of
any
such set-off; however, failure to so notify such Guarantor shall not affect
the
validity of any set-off.
(c) No
course
of dealing between the Company or any Guarantor and Holders and no act, delay
or
omission by Holders in exercising any right or remedy hereunder or with respect
to any of the Obligations shall operate as a waiver thereof or of any other
right or remedy, and no single or partial exercise thereof shall preclude any
other or further exercise thereof or the exercise of any other right or remedy.
Any Holder may remedy any default by the Company under any agreement with the
Company or with respect to any of the Obligations in any reasonable manner
without waiving the default remedied and without waiving any other prior or
subsequent default by the Company. All rights and remedies of Holders hereunder
are cumulative.
(d) This
Guaranty shall inure to the benefit of the parties hereto and their respective
successors and assigns.
8
(e) Each
Holder may assign its rights hereunder without the consent of Guarantors, in
which event such assignee shall be deemed to be a Holder hereunder with respect
to such assigned rights; provided such assignment shall not relieve such Holder
of any liability it may have to the Guarantor.
(f) Captions
of the sections of this Guaranty are solely for the convenience of the parties
hereto, and are not an aid in the interpretation of this Guaranty and do not
constitute part of the agreement of the parties set forth herein.
(g) If
any
provision of this Guaranty is unenforceable in whole or in part for any reason,
the remaining provisions shall continue to be effective.
(h) All
questions concerning the construction, validity, enforcement and interpretation
of this Guaranty shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision
or
rule (whether of the State of New York or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State
of
New York. Each Guarantor hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding
is
improper. Each Guarantor hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding
by
mailing a copy thereof to such party at the address for such notices to it
under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
The parties hereto acknowledge that each of the Holders has executed each of
the
Transaction Documents to be executed by it in the State of New
York.
(i) Notices.
All
notices, approvals, requests, demands and other communications hereunder shall
be delivered or made in the manner set forth in, and shall be effective in
accordance with the terms of, the Exchange Agreement or, in the case of
communications to the any Holder, directed to the notice address set forth
in
the Exchange Agreement; provided, that any communication shall be effective
as
to any Guarantor if made or sent to the Company in accordance with the
foregoing.
11. WAIVERS.
(a) EACH
GUARANTOR WAIVES THE BENEFIT OF ALL VALUATION, APPRAISAL AND EXEMPTION
LAWS.
(b) EACH
GUARANTOR ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL OF ITS CHOICE WITH
RESPECT TO THIS TRANSACTION AND THIS GUARANTY.
9
(c) EACH
GUARANTOR WAIVES ITS RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS GUARANTY, OR THE TRANSACTIONS
CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY HOLDER. EACH GUARANTOR AGREES THAT ANY SUCH CLAIM OR CAUSE OF
ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, EACH GUARANTOR FURTHER AGREES THAT ITS RIGHT TO A TRIAL BY JURY
IS
WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS GUARANTY OR ANY PROVISION HEREOF. THIS WAIVER SHALL
APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
GUARANTY.
12. Payments
Free of Taxes.
(a) Definitions.
In this
Section
12:
(i) “Excluded
Taxes”
means,
with respect to the Holders, or any other recipient of any payment to be made
by
or on account of any obligations of any Guarantor under this Guaranty, income
or
franchise taxes imposed on (or measured by) its net income by the United States
of America or such other jurisdiction under the laws of which such recipient
is
organized or in which its principal office is located.
(ii) “Governmental
Authority”
means
the government of the United States of America or any other nation, or any
political subdivision thereof, whether state or local, or any agency, authority,
instrumentality, regulatory body, court, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers
or
functions of or pertaining to government over the Company or any of its
Subsidiaries, or any of their respective properties, assets or
undertakings.
(iii) “Indemnified
Taxes”
means
Taxes other than Excluded Taxes.
(iv) “Taxes”
means
any and all present or future taxes, levies, imposts, duties, deductions,
charges or withholdings imposed by any Governmental Authority.
(b) Any
and
all payments by or on account of any obligation of any of the Guarantors under
this Guaranty shall be made without any set-off, counterclaim or deduction
and
free and clear of and without deduction for any Indemnified Taxes; provided
that
if any Guarantor shall be required to deduct any Indemnified Taxes from such
payments, then (i) the sum payable shall be increased as necessary so that
after
making all required deductions (including deductions applicable to additional
sums payable under this Section
12(b)),
the
Holders receive an amount equal to the sum they would have received had no
such
deductions been made, (ii) such Guarantor shall make such deductions and (iii)
such Guarantor shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
10
(c) Indemnification
by the Guarantors.
Each
Guarantor shall indemnify the Holders, within ten (10) days after written demand
therefor, for the full amount of any Indemnified Taxes paid by the Holders
on or
with respect to any payment by or on account of any obligation of such Guarantor
under this Guaranty (including Indemnified Taxes or imposed or asserted on
or
attributable to amounts payable under this Section
12)
and any
penalties, interest and reasonable expenses arising therefrom or with respect
thereto, whether or not such Indemnified Taxes were correctly or legally imposed
or asserted by the relevant Governmental Authority. A certificate of any Holder
as to the amount of such payment or liability under this Section
12
shall be
delivered to such Guarantor and shall be conclusive absent manifest
error.
13. Counterparts;
Headings.
This
Guaranty may be executed in two or more identical counterparts, all of which
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
each
other party; provided that a facsimile, .pdf or similar electronically
transmitted signature shall be considered due execution and shall be binding
upon the signatory thereto with the same force and effect as if the signature
were an original signature. The headings in this Guaranty are for convenience
of
reference only and shall not alter or otherwise affect the meaning
hereof.
14. Rights
of Contribution.
The
Guarantors hereby agree as among themselves that, if any Guarantor shall make
an
Excess Payment (as defined below), such Guarantor shall have a right of
contribution from each other Guarantor in an amount equal to such other
Guarantor’s Contribution Share (as defined below) of such Excess Payment. The
payment obligations of any Guarantor under this Section
14
shall be
subordinate and subject in right of payment to the Obligations until such time
as the Obligations have been paid in full in cash, and none of the Guarantors
shall exercise any right or remedy under this Section
14
against
any other Guarantor until such Obligations have been paid in full in cash.
For
purposes of this Section
14,
(a)
“Excess
Payment”
shall
mean the amount paid by any Guarantor in excess of its Ratable Share of any
Obligations; (b) “Ratable
Share”
shall
mean, for any Guarantor in respect of any payment of Obligations, the ratio
(expressed as a percentage) as of the date of such payment of Obligations of
(i)
the amount by which the aggregate present fair salable value of all of its
assets and properties exceeds the amount of all debts and liabilities of such
Guarantor (including contingent, subordinated, unmatured, and unliquidated
liabilities, but excluding the obligations of such Guarantor hereunder) to
(ii)
the amount by which the aggregate present fair salable value of all assets
and
other properties of Company and Guarantors exceeds the amount of all of the
debts and liabilities (including contingent, subordinated, unmatured, and
unliquidated liabilities, but excluding the obligations of the Guarantors
hereunder) of the Company and Guarantors, provided, however, that, for purposes
of calculating the Ratable Shares of the Guarantors in respect of any payment
of
Obligations, any Guarantor that became a Guarantor subsequent to the date of
any
such payment shall be deemed to have been a Guarantor on the date of such
payment and the financial information for such Guarantor as of the date such
Guarantor became a Guarantor shall be utilized for such Guarantor in connection
with such payment; and (c) “Contribution
Share”
shall
mean, for any Guarantor in respect of any Excess Payment made by any other
Guarantor, the ratio (expressed as a percentage) as of the date of such Excess
Payment of (i) the amount by which the aggregate present fair salable value
of
all of its assets and properties exceeds the amount of all debts and liabilities
of such Guarantor (including contingent, subordinated, unmatured, and
unliquidated liabilities, but excluding the obligations of the Loan Parties)
of
Company and Guarantors other than the maker of such Excess Payment; provided,
however, that, for purposes of calculating the Contribution Shares of the
Guarantors in respect of any Excess Payment, any Guarantor that became a
Guarantor subsequent to the date of any such Excess Payment shall be deemed
to
have been a Guarantor on the date of such Excess Payment and the financial
information for such Guarantor as of the date such Guarantor became a Guarantor
shall be utilized for such Guarantor in connection with such Excess Payment.
This Section
14
shall
not be deemed to affect any right of subrogation, indemnity, reimbursement
or
contribution that any Guarantor may have under law against the Company in
respect of any payment of Obligations.
[rest
of
page intentionally left blank; signature page follows]
11
IN
WITNESS WHEREOF, Guarantors have executed this Guaranty as of the date first
written above.
|
GUARANTORS:
|
|||
|
NORTH
TEXAS DRILLING SERVICES,
a
Texas
corporation
|
|||
|
By:
|
|||
|
Name:
|
|||
|
Title:
|
|||
|
SONTERRA
OPERATING, INC.,
a
Delaware
corporation
|
|||
|
By:
|
|||
|
Name:
|
|||
|
Title:
|
|||
|
VELOCITY
ENERGY LIMITED LLC,
a
Texas
limited
liability company
|
|||
|
By:
|
|||
|
Name:
|
|||
|
Title:
|
|||
|
VELOCITY
ENERGY INC.,
a
Delaware
corporation
|
|||
|
By:
|
|||
|
Name:
|
|||
|
Title:
|
|||
|
VELOCITY
ENERGY OFFSHORE LP,
a
Delaware
limited partnership
|
|||
|
By:
|
|||
|
Name:
|
|||
|
Title:
|
|||
|
VELOCITY
ENERGY PARTNERS LP,
a
Delaware
limited partnership
|
|||
|
By:
|
|||
|
Name:
|
|||
|
Title:
|
|||
|
VELOCITY
ENERGY INC.,
a
Delaware
corporation
|
|||
|
By:
|
|||
|
Name:
|
|||
|
Title:
|
|||
EXHIBIT
A
Form
of Joinder
Joinder
to Guaranty
This
Joinder Agreement is made by the undersigned, [__________] a [__________] (the
“New
Subsidiary”),
under
that certain Guaranty dated as of November 13, 2008 among NORTH TEXAS DRILLING
SERVICES, INC., a Texas corporation, SONTERRA OPERATING, INC., a Delaware
corporation, VELOCITY ENERGY LIMITED LLC, a Texas limited liability company,
VELOCITY ENERGY INC., a Delaware corporation, VELOCITY ENERGY OFFSHORE LP,
a
Delaware limited partnership, VELOCITY ENERGY PARTNERS LP, a Delaware limited
partnership, and each other person or entity that becomes a Guarantor thereunder
after the date and pursuant to the terms thereof, to and in favor of LONGVIEW
MARQUIS MASTER FUND, L.P., a British Virgin Island limited partnership
(“Marquis”) and THE LONGVIEW FUND, L.P., a California limited partnership
(“Longview”; together with Marquis, collectively, “Holders”), as amended,
restated, supplemented or otherwise modified from time to time (the
“Guaranty”).
Capitalized terms herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Guaranty.
1. The
New
Subsidiary hereby acknowledges, agrees and confirms that, by its execution
of
this Agreement, the New Subsidiary will be deemed to be a party to the Guaranty
and a “Guarantor” for all purposes of the Guaranty, and shall have all of the
obligations of a Guarantor thereunder as if it had executed the Guaranty. The
New Subsidiary hereby ratifies, as of the date hereof, and agrees to be bound
by, all of the terms, provisions and conditions applicable to the Guarantors
contained in the Guaranty. Without limiting the generality of the foregoing
terms of this paragraph 1, the New Subsidiary hereby jointly and severally
together with the other Guarantors, guarantees to Holders, as provided in the
Guaranty, the prompt payment and performance of the obligations in full when
due
(whether at stated maturity, as a mandatory prepayment, by acceleration or
otherwise) strictly in accordance with the terms thereof.
2. The
New
Subsidiary represents and warrants that the representations and warranties
set
forth in Section 6 of the Guaranty are, with respect to the undersigned, true
and correct as of the date hereof.
3. From
and
after the date hereof, each reference to a Guarantor in the Guaranty shall
be
deemed to include the undersigned.
4. This
Agreement may be executed in multiple counterparts, each of which shall
constitute an original but all of which when taken together shall constitute
one
contract.
5. THIS
AGREEMENT SHALL BE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION
OR
RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD
CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE
OF
NEW YORK.
In
Witness Whereof, the undersigned has executed this Joinder this ___ day of
_________, 200_.
___________________________
