GUARANTY
Exhibit
99.27
This
GUARANTY
(as
amended, restated, supplemented, or otherwise modified and in effect from time
to time, this “Guaranty”)
is
made as of this 14th
day of
February 2008 (this “Guaranty”),
jointly and severally, by
Sonterra Oil & Gas, Inc. (f/k/a
Sonterra Resources, Inc.), a Delaware corporation (“Sonterra”),
Sonterra
Operating, Inc., a
Delaware corporation (“Operations”;
each
of Sonterra and Operations, 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, Sonterra
and Operations are the
only
Guarantors) in favor of Viking
Asset Management LLC,
a
California limited liability company in its capacity as collateral agent
(together with its successors and assigns in such capacity, the “Collateral
Agent”)
for
the benefit of Buyer (as hereinafter defined).
WITNESSETH:
WHEREAS,
Sonterra, The Longview Fund, L.P., a California limited partnership
(“Buyer”)
and
certain officers of Sonterra are parties to that certain Amended and Restated
Securities Purchase Agreement, dated effective as of July 9, 2007 (as amended,
restated, supplemented, or otherwise modified from time to time, the
“Purchase
Agreement”),
pursuant to which Buyer purchased (i) 333 shares (the “New
Sonterra Shares”)
of
common stock, no par value, of Sonterra (“Sonterra
Common Stock”);
for
an aggregate amount of $9,990, which shares constitute 100% of the issued and
outstanding Capital Stock of Sonterra, and (ii) a senior secured note of
Sonterra in the initial principal amount of $322,500 (the “Deposit
Note”);
WHEREAS,
contemporaneously with the execution and delivery of that certain Securities
Exchange and Additional Note Purchase Agreement, dated as of August 3, 2007
(as
amended by the February 2008 Amendment Agreement, dated as of February 14,
2008,
and as may be further amended, modified, restated or supplemented and in effect
from time to time, the “Exchange
Agreement”),
between Sonterra Resources, Inc. (f/k/a River Capital Group, Inc.), a Delaware
corporation (the “Company”),
and
Buyer, the transactions contemplated by the Purchase Agreement to occur at
the
Equity Closing (as defined in the Purchase Agreement) and the transactions
contemplated by the Cinco Purchase Agreement were consummated; without limiting
the foregoing, pursuant to the Purchase Agreement, Buyer purchased from Sonterra
a senior secured note of Sonterra in the initial principal amount of $5,990,010
(of which $322,500 represents refinancing of the Deposit Note, which is now
being surrendered to Sonterra) (as amended, restated, supplemented, or otherwise
modified from time to time, the “Sonterra
Equity Note”)
and a
warrant to purchase 50 shares of Sonterra Common Stock (as amended, restated,
supplemented, or otherwise modified from time to time, the “Sonterra
Warrants”);
WHEREAS,
at the Flash Acquisition Closing (as defined in the Purchase Agreement), the
transactions contemplated by the Purchase Agreement to occur at the Flash
Acquisition Closing and the transactions contemplated by the Flash Purchase
Agreement were consummated subject to the terms and conditions of the Purchase
Agreement; without limiting the foregoing, pursuant to the Purchase Agreement,
at the Flash Acquisition Closing Buyer purchased an additional senior secured
note of Sonterra in the initial principal amount of $2,000,000 (as amended,
restated, supplemented, or otherwise modified from time to time, the
“Sonterra
Non-Equity Note”);
WHEREAS,
at the Exchange Closing, subject to the terms and conditions thereof, Buyer
(i)
is exchanging all of its Sonterra Common Stock and the Sonterra Equity Note
for
common stock of the Company, par value $0.001 per share (the common stock of
the
Company being referred to herein as “RCGI
Common Stock”;
and
any shares thereof being referred to herein as “RCGI
Common Shares”)
(the
RCGI Common Shares received by Buyer in such exchange being referred to as
the
“New
RCGI Common Shares”),
(ii)
is exchanging the Sonterra Warrant for a warrant (such warrant, together with
any warrants or other securities issued in exchange or substitution therefor
or
replacement thereof, and as any of the same may be amended or modified and
in
effect from time to time, the “RCGI
Warrant”)
to
purchase RCGI Common Shares (subject to adjustment as provided in the RCGI
Warrant) (the “Warrant
Shares”),
which
RCGI Warrant shall have a term of five years and be exercisable into the Warrant
Shares at a price per Warrant Share (the “Warrant
Exercise Price”)
equal
to 110% of the quotient of $6,000,000 divided by the number of New RCGI Common
Shares issued to Buyer at the Exchange Closing (subject to adjustment as
provided in the RCGI Warrant); and (iii) is exchanging the Sonterra Non-Equity
Note for a senior secured note of the Company in an initial principal amount
equal to the principal amount owing under the Sonterra Non-Equity Note on the
Exchange Closing Date (such note, together with any promissory notes or other
securities issued in exchange or substitution therefor or replacement thereof,
and as any of the same may be amended or modified from time to time, the
“Initial
RCGI Note”);
WHEREAS,
subject to the terms and conditions set forth in the Exchange Agreement, during
the Additional Note Issuance Period (as defined therein), the Company will
have
the option to sell, and if the Company exercises such option Buyer shall be
obligated to purchase, additional senior secured notes (including any promissory
notes or other securities issued in exchange or substitution for such senior
secured notes or replacement thereof, and as any of the same may be amended,
restated, modified or supplemented and in effect from time to time, the
“Additional
RCGI Notes”;
and,
collectively with any Initial RCGI Note, the “Notes”),
each
with a maturity date of August 31, 2010, in an original aggregate principal
amount of up to the result of $10,000,000 minus the original principal amount
of
the Initial RCGI Note;
WHEREAS,
pursuant to a Pledge Agreement of even date herewith (as the same may be
amended, restated, supplemented or otherwise modified and in effect from time
to
time, the “Company
Pledge Agreement”)
by the
Company in favor of the Collateral Agent, the Company has pledged a lien on
and
security interest in all of the issued and outstanding Capital Stock of
Sonterra;
WHEREAS,
pursuant to a Pledge Agreement of even date herewith (as the same may be
amended, restated, supplemented or otherwise modified and in effect from time
to
time, the “Sonterra
Pledge Agreement”)
by
Sonterra in favor of the Collateral Agent, Sonterra has pledged a lien on and
security interest in all of the issued and outstanding Capital Stock of
Operations;
2
WHEREAS,
pursuant to a Security Agreement dated as of July 9, 2007 (as amended by a
First
Amendment to Security Agreement dated August 3, 2007, and as may be further
amended, restated, supplemented or otherwise modified and in effect from time
to
time, the “Security
Agreement”)
between Sonterra as “Debtor” (as defined therein and the Collateral Agent named
therein, such Debtor has granted the Collateral Agent, for the benefit of Buyer,
a first priority security interest in, lien upon and pledge of its rights in
the
Collateral (as defined in the Security Agreement); and
WHEREAS,
the Guarantors are direct and indirect subsidiaries of the Company and, as
such,
will derive substantial benefit and advantage from the loans and other financial
accommodations available to the Company set forth in the Exchange Agreement,
the
Notes and the other Transaction Documents, and it will be to the Guarantors’
direct interest and economic benefit to assist the Company in procuring said
Loans and other financial accommodations from Buyer.
NOW,
THEREFORE,
for and
in consideration of the premises and in order to induce Buyer 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:
Definitions:
Capitalized
terms used herein without definition and defined in the Exchange Agreement
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 Buyer and Collateral Agent,
including, without limitation, all obligations, liabilities and indebtedness
of
every nature of the Company under the Security Documents, the Exchange
Agreement, the Notes, the Loans, the Warrants, the Registration Rights Agreement
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 Buyer
and/or Collateral Agent, including, without limitation, all obligations,
liabilities and indebtedness of every nature of the Guarantors under or in
respect of this Guaranty, the Pledge Agreement, the Security Agreement, the
Exchange Agreement, the Notes, the Loans, the Warrants, the Registration Rights
Agreement, the other Security Documents 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.
3
Guaranty
of Payment.
Each
Guarantor, jointly and severally, hereby unconditionally and irrevocably
guaranties the full and prompt payment and performance to Buyer and Collateral
Agent, on behalf of itself and in its capacity as agent for the benefit of
Buyer, 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.
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 Buyer 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 Buyer or
Collateral Agent; or any other valuable consideration.
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.
Notwithstanding
any provision of this Guaranty to the contrary, it is intended that this
Guaranty, and any interests, liens and security interests granted by Guarantors
as security for 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, Collateral
Agent and Buyer agree that if this Guaranty, or any such interests, liens or
security interests securing this Guaranty, would, but for the application of
this sentence, constitute a Fraudulent Conveyance, this Guaranty and each such
lien and security interest shall be valid and enforceable only to the maximum
extent that would not cause this Guaranty or such interest, lien or security
interest 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.
Costs
and Expenses. Each
Guarantor, jointly and severally, agrees to pay on demand, all costs and
expenses of every kind incurred by Buyer or Collateral Agent: (a) in enforcing
this Guaranty, (b) in collecting any of the Obligations from the Company or
any
Guarantor, (c) in realizing upon or protecting or preserving any collateral
for
this Guaranty or 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
Buyer or Collateral Agent 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 Buyer or Collateral Agent 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.
This
Guaranty is and is intended to be a continuing guaranty of payment of the
Obligations, and not of collectibility, and is and is intended to be independent
of and in addition to any other guaranty, indorsement, collateral or other
agreement held by Buyer or Collateral Agent therefor or with respect thereto,
whether or not furnished by a Guarantor. None of Buyer and Collateral Agent
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 any of the Collateral or 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. Each Guarantor shall have no right of subrogation with respect
to
any payments made by any Guarantor hereunder until the termination of this
Guaranty in accordance with Section
8
below,
and hereby waives any benefit of, and any right to participate in, any security
or collateral given to Buyer to secure payment of the Obligations, 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, Collateral Agent, for
the benefit of itself and Buyer, and Buyer 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.
For
the
further security of Buyer and 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 Buyer and Collateral Agent and promptly
following receipt shall be paid over to Collateral Agent, for its benefit and
in
its capacity as collateral agent for the benefit of Buyer, until all of the
Obligations have been paid in full in cash.
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 Buyer. 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.
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, any payment made pursuant hereto or the exercise by
Buyer
or Collateral Agent of its rights with respect to the Collateral, 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.
Each
Guarantor acknowledges and agrees that Buyer and Collateral Agent, for its
benefit and as collateral agent for the benefit of Buyer, may, without notice,
demand or any reservation of rights against such Guarantor and without affecting
such Guarantor’s obligations hereunder, from time to time:
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;
accept
from any person or entity and hold collateral for the payment of the Obligations
or any part thereof, and modify, exchange, enforce or refrain from enforcing,
or
release, compromise, settle, waive, subordinate or surrender, with or without
consideration, such collateral or any part thereof;
accept
and hold any indorsement or guaranty of payment of the Obligations or any part
thereof, and discharge, release or substitute any such obligation of any such
indorser or guarantor, or discharge, release or compromise any Guarantor, or
any
other person or entity who has given any security interest in any collateral
as
security for the payment of the Obligations or any part thereof, 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 indorser, guarantor, or person or
entity;
dispose
of any and all collateral securing the Obligations in any commercially
reasonable manner (to the extent required under applicable law) as the
Collateral Agent, in its reasonable discretion may consider appropriate and
direct the order or manner of such disposition and the enforcement of any and
all endorsements and guaranties relating to the Obligations or any part thereof
as Collateral Agent in its sole discretion may determine;
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 Buyer might lawfully have elected to apply such payments
to the Obligations or to amounts which are not covered by this Guaranty;
and
take
advantage or refrain from taking advantage of any security or accept or make
or
refrain from accepting or making any compositions or arrangements when and
in
such manner as Collateral Agent, in its 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, and in no case shall Buyer or Collateral Agent
be
responsible or shall any Guarantor be released either in whole or in part for
any act or omission in connection with Buyer or Collateral Agent having sold
any
security at less than its value; provided
any such
sale was conducted in a commercially reasonable manner (to the extent required
under applicable law).
6
Following
the occurrence and during the continuance of an Event of Default, and upon
demand by Collateral Agent, each Guarantor, jointly and severally, hereby agrees
to pay the Obligations to the extent hereinafter provided and to the extent
unpaid:
without
deduction by reason of any setoff, defense (other than payment) or counterclaim
of the Company or any other Guarantor;
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;
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;
without
requiring Buyer or Collateral Agent 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 or any collateral which Buyer or Collateral Agent may
hold;
without
requiring notice of acceptance hereof or assent hereto by Buyer or Collateral
Agent; and
without
requiring notice that any of the Obligations has been incurred, extended or
continued or of the reliance by Buyer or Collateral Agent upon this
Guaranty;
all
of
which each Guarantor hereby waives.
Each
Guarantor’s obligation hereunder shall not be affected by any of the following,
all of which such Guarantor hereby waives:
any
failure to perfect or continue the perfection of any security interest in or
other lien on any collateral securing payment of any of the Obligations or
any
Guarantor’s obligation hereunder;
the
invalidity, unenforceability, propriety of manner of enforcement of, or loss
or
change in priority of any document or any such security interest or other lien
or guaranty of the Obligations;
any
failure to protect, preserve or insure any such collateral;
failure
of a Guarantor to receive notice of any intended disposition of such
collateral;
7
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 Buyer or Collateral Agent in enforcing its claims against the
Company;
any
release, settlement or compromise of any obligation of the Company, any other
Guarantor or any other guarantor of the Obligations;
the
invalidity or unenforceability of any of the Obligations;
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;
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;
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 Buyer, Collateral Agent or the Company in
connection herewith or any unrelated transaction;
Buyer’s
or Collateral Agent’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;
any
use
of cash collateral, or grant of a security interest by the Company, as debtor
in
possession, under sections 363 or 364 of the Bankruptcy Code;
the
disallowance of all or any portion of any of Buyer’s or Collateral Agent’s
claims for repayment of the Obligations under sections 502 or 506 of the
Bankruptcy Code;
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
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).
Representations
and Warranties. Each
Guarantor further represents and warrants to Buyer and Collateral Agent 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.
8
Negative
Covenants. Each
Guarantor covenants with Buyer and Collateral Agent 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 liens and security
interests in favor of Buyer and Collateral Agent and Permitted
Liens.
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, (iii)
all
commitments to lend under the Exchange Agreement (including, without limitation,
any and all commitments of Buyer to purchase Additional Notes) shall have
terminated and (iv) 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
the Collateral Agent under any of the Transaction Documents. Thereafter, but
subject to the following, Collateral Agent, on its behalf and as agent for
Buyer, 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 Buyer or Collateral Agent on
the
Obligations, or Buyer or Collateral Agent receive any proceeds of collateral
securing the Obligations or any other payments with respect to 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 Buyer or Collateral Agent in reliance upon such payment, and
any
such contrary action so taken shall be without prejudice to Buyer’s or
Collateral Agent’s rights under this Guaranty and shall be deemed to have been
conditioned upon such payment having become final.
9
Guaranty
of Performance. Each
Guarantor also guaranties the full, prompt and unconditional performance of
all
obligations and agreements of every kind owed or hereafter to be owed by the
Company to Buyer and Collateral Agent under the Exchange Agreement, Registration
Rights Agreement, the Warrants, Security Documents and the Notes. Every
provision for the benefit of Buyer and Collateral Agent contained in this
Guaranty shall apply to the guaranty of performance given in this
paragraph.
Assumption
of Liens and Obligations. To
the extent that a Guarantor has received or shall hereafter receive
distributions or transfers from the Company of property or cash that are
subject, at the time of such contribution, to liens and security interests
in
favor of Buyer and/or the Collateral Agent in accordance with the Notes, the
Security Agreement or any other Security Document, such Guarantor hereby
expressly agrees that (i) it shall hold such assets subject to such liens and
security interests, and (ii) it shall be liable for the payment of the
Obligations secured thereby. Each Guarantor’s obligations under this
Section
10
shall be in addition to its obligations as set forth in other sections of this
Guaranty and not in substitution therefor or in lieu
thereof.
Miscellaneous.
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.
Without
limiting any other right of Buyer or Collateral Agent, whenever Buyer or
Collateral Agent has the right to declare any of the Obligations to be
immediately due and payable (whether or not it has been so declared), Collateral
Agent, on its behalf and in its capacity as agent for the benefit of Buyer,
at
its sole election without notice to the undersigned may appropriate and set
off
against the Obligations:
any
and
all indebtedness or other moneys due or to become due to any Guarantor by Buyer
or Collateral Agent in any capacity; and
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 Buyer or
Collateral Agent, or any affiliate of Buyer or Collateral Agent, whether for
deposit or otherwise;
whether
or not the Obligations or the obligation to pay such moneys owed by Buyer or
Collateral Agent is then due, and Buyer or Collateral Agent 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 Buyer’s or Collateral
Agent’s records subsequent thereto. Collateral Agent 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.
10
No
course
of dealing between the Company or any Guarantor and Buyer or Collateral Agent
and no act, delay or omission by Buyer or Collateral Agent 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. Buyer or Collateral Agent 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 Buyer and Collateral Agent hereunder are
cumulative.
This
Guaranty shall inure to the benefit of the parties hereto and their respective
successors and assigns.
Collateral
Agent may assign its rights hereunder without the consent of Guarantors, in
which event such assignee shall be deemed to be Collateral Agent hereunder
with
respect to such assigned rights; provided
such
assignment shall not relieve the Collateral Agent of any liability it may have
to the Guarantor.
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.
If
any
provision of this Guaranty is unenforceable in whole or in part for any reason,
the remaining provisions shall continue to be effective.
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 non-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 Buyer has executed each of the Transaction
Documents to be executed by it in the State of New York.
11
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 Collateral Agent, directed to the notice address set
forth
in the Security Agreement; provided, that any communication shall be effective
as to any Guarantor if made or sent to the Company in accordance with the
foregoing.
WAIVERS.
EACH
GUARANTOR WAIVES THE BENEFIT OF ALL VALUATION, APPRAISAL AND EXEMPTION
LAWS.
UPON
THE OCCURRENCE OF A DEFAULT OR EVENT OF DEFAULT, EACH GUARANTOR HEREBY WAIVES
ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY BUYER
OR
COLLATERAL AGENT, ON ITS BEHALF AND IN ITS CAPACITY AS AGENT FOR THE BENEFIT
OF
BUYER, OF ITS RIGHTS TO REPOSSESS THE COLLATERAL WITHOUT JUDICIAL PROCESS OR
TO
REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL WITHOUT PRIOR NOTICE OR HEARING.
EACH GUARANTOR ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL OF ITS CHOICE
WITH RESPECT TO THIS TRANSACTION AND THIS GUARANTY.
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 BUYER OR COLLATERAL AGENT. 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.
Collateral
Agent.
The terms and provisions of Section 5.12 of the Security Agreement which set
forth the appointment of the Collateral Agent and the indemnifications by Buyer
to which the Collateral Agent is entitled are hereby incorporated by reference
herein as if fully set forth therein.
Payments
Free of Taxes.
Definitions.
In this
Section
14:
“Excluded
Taxes”
means,
with respect to the Collateral Agent or Buyer, or any other recipient of any
payment to be made by or on account of any obligations of any Guarantor under
this Guaranty, or under any other Security Document, 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.
12
“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.
“Indemnified
Taxes”
means
Taxes other than Excluded Taxes.
“Taxes”
means
any and all present or future taxes, levies, imposts, duties, deductions,
charges or withholdings imposed by any Governmental Authority.
Any
and
all payments by or on account of any obligation of any of the Guarantors under
this Guaranty or any other Security Document 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
14(b)),
the
Collateral Agent or Buyer, as applicable, receives an amount equal to the sum
it
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.
Indemnification
by the Guarantors.
Each
Guarantor shall indemnify the Collateral Agent and Buyer, within ten (10) days
after written demand therefor, for the full amount of any Indemnified Taxes
paid
by the Collateral Agent or Buyer, as applicable, on or with respect to any
payment by or on account of any obligation of such Guarantor under this Guaranty
and the other Security Documents (including Indemnified Taxes or imposed or
asserted on or attributable to amounts payable under this Section
14)
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 the
Collateral Agent or Buyer as to the amount of such payment or liability under
this Section
14
shall be
delivered to such Guarantor and shall be conclusive absent manifest
error.
Counterparts;
Headings.
This
Agreement may be executed in two or more identical counterparts, all of which
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 Agreement are for convenience of reference only and shall
not alter or otherwise affect the meaning hereof.
13
IN
WITNESS WHEREOF, Guarantors have executed this Guaranty as of the date first
written above.
GUARANTORS:
Sonterra
Oil & Gas, Inc. (f/k/a
Sonterra Resources, Inc.),
a
Delaware corporation
| |
|
|
| By: /s/ Xxxxxxx X. Xxxxxxx | ||
|
Name: Xxxxxxx X. Xxxxxxx |
||
Title:
President
Sonterra
Operating, Inc.,
a
Delaware corporation
| |
|
|
| By: /s/ Xxxxx X. Xxxxxxx | ||
|
Name: Xxxxx X. Xxxxxxx |
||
Title:
President
[Signature
Page to Guaranty]
EXHIBIT
A
Form
of Joinder
Joinder
to Guaranty
The
undersigned, [__________] a [__________], hereby joins in the execution of
that
certain Guaranty dated as of February 14, 2008 (the “Guaranty”),
by
each of Sonterra
Oil & Gas, Inc.
(f/k/a
Sonterra Resources, Inc.),
a
Delaware corporation, Sonterra
Operating, Inc.,
a
Delaware corporation, 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
Viking Asset Management L.L.C., a California limited liability company, as
collateral agent. By executing this Joinder, the undersigned hereby agrees
that
it is a Guarantor thereunder with the same force and effect as if originally
named therein as a Guarantor. The undersigned agrees to be bound by all of
the
terms and provisions of the Guaranty and 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. Each reference to a Guarantor in the Guaranty shall be deemed to include
the undersigned.
In
Witness Whereof, the undersigned has executed this Joinder this ___ day of
_________, 200_.
___________________________
