FORM OF GUARANTY AGREEMENT
Exhibit
4.5
FORM
OF
THIS
GUARANTY AGREEMENT (“Guaranty”)
dated
______________, 2008, is executed and delivered by KENTUCKY
USA ENERGY, INC.,
a
Delaware corporation (“Guarantor”),
to
NSES 12, LLC, a Delaware limited liability company (“Lender”),
pursuant to the Credit Agreement (defined below). Capitalized terms used but
not
defined in this Guaranty have the meanings given them in the Credit Agreement
(defined below).
Background
A. Guarantor
owns, directly or indirectly, one hundred percent (100%) of the Equity Interest
in KY USA Energy, Inc., a Kentucky corporation (“Borrower”).
B. Borrower
is a party to that certain $10,000,000 Senior Secured Credit Agreement, dated
the date hereof, with Lender (as amended or supplemented from time to time,
the
“Credit
Agreement”).
The
Obligations are secured by the Security Documents and the liens, security
interests and collateral assignment arising under and evidenced by those
documents.
C. As
a
condition to the making of an Advance to Borrower under the Credit Agreement,
Lender requires that Guarantor unconditionally guaranty to Lender the full
and
final payment and performance of the Obligations of Borrower, as set forth
herein.
D. Guarantor
will benefit, directly or indirectly, from the making of the loans to Borrower
by Lender under the terms and conditions of the Credit Agreement and the other
Loan Documents.
Agreements
For
and
in consideration of the financial accommodations made and to be made to Borrower
by Lender under the Credit Agreement or otherwise and for other good and
valuable consideration, the receipt and sufficiency of which are acknowledged
by
each of the parties, Guarantor and Lender agree as follows:
ARTICLE
I
GUARANTY
OF PAYMENT
Section
1.1 Guaranty
of Payment.
Guarantor unconditionally guarantees to Lender the prompt, complete and full
payment of the Obligations of Borrower when due (whether at the stated maturity,
by acceleration or otherwise) in accordance with the terms of the Loan
Documents. This Guaranty is irrevocable, unconditional and absolute, and if
for
any reason any portion of the Obligations is not paid promptly when due,
Guarantor will immediately pay the full amount owed to Lender and/or the other
Persons to whom such amount is owed, regardless of any defense, right of set-off
or counterclaim Borrower may have or assert, and regardless of whether Lender
or
any other Person has taken any steps to enforce any rights against Borrower
or
any other Person to collect such sum, and regardless of any other condition
or
contingency. This Guaranty will also cover interest on the Obligations (as
provided for in the Loan Documents) and all reasonable expenses (including
attorneys’ fees) incurred by Lender in enforcing the payment of the Obligations
as provided for in the Loan Documents and the performance of this Guaranty.
Notwithstanding any contrary provision in this Guaranty, however, Guarantor’s
maximum liability under this Guaranty is limited to the extent, if any, required
so that its liability is not subject to avoidance under applicable Debtor Relief
Laws (as defined in the Credit Agreement).
Section
1.2 Guaranty
Not Affected by Actions Under Loan Documents.
The
obligations, covenants, agreements and duties of Guarantor under this Guaranty
will in no way be affected or impaired by the occurrence from time to time
of
any of the following with respect to the Loan Documents, without the necessity
of any notice to, or further consent of, Guarantor:
(a) the
release or waiver, by operation of law or otherwise, of the performance or
observance by Borrower or any co-guarantor, surety, endorser or other obligor
(collectively, an “Obligor”)
of any
express or implied agreement, covenant, term or condition in any of the Loan
Documents to be performed or observed by such party;
(b) the
extension of the time for the payment of all or any portion of the Obligations
or any other sums payable under the Loan Documents or the extension of time
for
the performance of any other obligation under, arising out of, or in connection
with any of the Loan Documents;
(c) the
supplementation, modification or amendment (whether material or otherwise)
of
any of the Loan Documents or any of the Obligations of Borrower or the
obligations of Guarantor or any other Obligor under, arising out of or in
connection with any of the Loan Documents;
(d) any
failure, omission, delay or lack of diligence on the part of Lender, or any
other Person to enforce, assert or exercise any right, privilege, power or
remedy conferred on Lender or any other Person in any of the Loan Documents,
or
any action on the part of Lender or such other Person granting indulgence or
extension of any kind;
(e) the
release of any Collateral under any Mortgage, any other Security Document or
any
of the other Loan Documents, or the release, modification, waiver or failure
to
enforce any pledge, security device, insurance agreement, bond or other
guaranty, surety or indemnity agreement whatsoever;
(f) the
release, modification, waiver or failure to enforce any right, benefit,
privilege or interest under any contract or agreement, under which the rights
of
Borrower or any other Obligor have been collaterally or absolutely assigned,
or
in which a security interest has been granted, to Lender as direct or indirect
security for payment or performance of any Obligations;
(g) the
voluntary or involuntary liquidation, dissolution, sale of any collateral,
marshaling of assets and liabilities, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt of, or other similar proceedings affecting,
Borrower, or any other Obligor or any of the assets of Borrower or of any other
Obligor or any allegation or contest of the validity of this Guaranty in any
such proceeding;
2
(h) any
invalidity of or defect or deficiency in any of the Loan Documents or failure
to
acquire, perfect or maintain perfection of any lien on or security interest
in
any collateral securing payment or performance of all or any portion of
(i)
the
Obligations, (ii)
any
other Person’s obligations under any of the Loan Documents or (iii)
the
obligations of Guarantor under this Guaranty;
(i) the
settlement or compromise of any obligation guaranteed by or incurred in
connection with this Guaranty;
(j) the
failure to give notice to Guarantor of the occurrence of an event of default
under the Loan Documents;
(k) any
defense based upon any legal disability of Borrower or, to the extent permitted
by law, any release, discharge, reduction or limitation of or with respect
to
any sums owing by Borrower or any other liability of Borrower to Lender or
its
Affiliates;
(l) to
the
extent permitted by law, the release or discharge by operation of law of
Guarantor from the performance or observance of any obligation, covenant or
agreement contained in this Guaranty;
(m) the
default or failure of Guarantor fully to perform any of its obligations set
forth in this Guaranty; or
(n) any
change in the corporate structure, existence or ownership of Guarantor or
Borrower.
Section
1.3 Waiver
of Certain Rights.
Guarantor hereby waives marshaling of assets and liabilities, sale in inverse
order of alienation, notice of acceptance of this Guaranty and of any liability
to which it applies or may apply, presentment, demand for payment, protest,
notice of nonpayment, notice of dishonor, notice of acceleration, notice of
intent to accelerate and all other notices and demands, collection suit and
the
taking of any other action by Lender.
Section
1.4 Obligations
of Guarantor are Severable.
This is
a guaranty of payment and not of collection, and Guarantor waives any right
to
require that any action be brought against Borrower or any other Person. If
Lender seeks to enforce the obligations of Guarantor under this Guaranty by
action in any court, Guarantor waives any necessity, substantive or procedural,
that a judgment be previously rendered against Borrower or any other Person
or
that Borrower or any other Person be joined in that cause or that a separate
action be brought against Borrower or any other Person. The obligations of
Guarantor under this Guaranty are several from the Obligations of Borrower
or
the obligations of any other Person, including any other Obligor, and are
primary obligations of Guarantor and on which it is the principal obligor.
All
waivers in this Section
1.4
are and
will be without prejudice to Lender to proceed, at its option, against Borrower
or any other Person, whether by separate action or by joinder. Guarantor agrees
that this Guaranty cannot be discharged except by (a) the full and final payment
of the Obligations, (b) the termination of all obligations, if any, of Lender to
make any Advance or extend any other accommodation (financial or otherwise)
to
or on behalf of Borrower and (c) the complete performance of all obligations
of
Guarantor arising under or in connection with this Guaranty.
3
Section
1.5 No
Right of Subrogation Until Guaranty Terminates.
Notwithstanding any payment or payments made by Guarantor under this Guaranty
or
any set-off or application of any funds of Guarantor by Lender, Guarantor will
not be entitled to be subrogated to any of the rights of Lender against Borrower
or any collateral, security rights or rights of offset held by Lender for the
payment of the Obligations until all amounts owing to Lender by Borrower for
or
on account of the Obligations are paid in full and this Guaranty has
terminated.
Section
1.6 All
Credit Granted in Reliance On Guaranty.
All
Loans, extensions of credit and other financial accommodations made or to be
made to Borrower by Lender under the Credit Agreement or any of the other Loan
Documents will be conclusively presumed to have been made in acceptance of
and
in reliance on this Guaranty.
Section
1.7 Debt.
Guarantor
shall not create, incur, assume or suffer to exist any Debt,
except:
(a) the
Obligations;
(b) accounts
payable and accrued expenses, liabilities or other obligations to pay the
deferred purchase price of property or services, from time to time incurred
in
the ordinary course of business, any of which is not greater than ninety (90)
days past the date of invoice and is not delinquent unless it is being contested
in good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP; provided,
however,
Guarantor may incur Debt not to exceed Fifty Thousand Dollars ($50,000) per
transaction and an aggregate amount not to exceed One Hundred Fifty Thousand
Dollars ($150,000) at any time outstanding with regard to direct costs and
expenses relating to Guarantor Operations (as defined in Section
2.7);
(c) Debt
arising in connection with purchase money liens incident to the purchase of
new
Equipment;
(d) in
connection with a capital raise relating to Guarantor Operations, Debt entitling
the holder thereof to purchase, acquire or exchange such debt for any Equity
Interest in the Guarantor, which Debt shall be subordinate in all respects
to
the Debt created pursuant to the Credit Agreement;
(e) endorsements
of negotiable instruments for collection in the ordinary course of business;
or
(f) Debt
owed
by Guarantor to any other Person that has entered into a Subordination
Agreement
with
Guarantor and Lender.
Section
1.8 Information. Guarantor
assumes responsibility for being and remaining informed of the financial
condition of Borrower, and of all other circumstances bearing upon the risk
of
nonpayment of amounts owing under the Loan Documents, and agrees that neither
Borrower nor Lender shall have any duty to advise Guarantor of information
known
to it regarding such condition or any such circumstances.
4
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES
Guarantor
warrants and represents that:
Section
2.1 Organization;
Good Standing.
Guarantor is duly formed, validly existing and in good standing under the laws
of the jurisdiction of its formation and has the power and authority to carry
on
its business as presently conducted and to enter into and perform its
obligations under this Guaranty and each instrument given to secure this
Guaranty. The execution, delivery and performance by Guarantor of this Guaranty
and each instrument given to secure this Guaranty have each been duly authorized
by all necessary company or corporate action, as applicable.
Section
2.2 Binding
Obligations.
This
Guaranty and each instrument given to secure this Guaranty have each been duly
and validly executed, issued and delivered by Guarantor, and each constitutes
the valid and legally binding obligations of Guarantor, enforceable in
accordance with its terms except as the enforceability thereof may be limited
or
affected by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors rights generally and by general equitable
principles.
Section
2.3 No
Violation.
The
execution, delivery and performance of this Guaranty and of each instrument
given to secure this Guaranty do not and will not (1) violate any applicable
law; (2) conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any agreement or instrument to
which Guarantor is now a party or by which Guarantor or any of its properties
may be bound, except where any such conflict or breach would not reasonably
be
expected to have a Material Adverse Effect; (3) except with respect to any
Debt
provided for under Section
1.7,
result
in the creation of any lien, charge or encumbrance upon any of Guarantor’s
property or assets; (4) violate Guarantor’s charter documents; or (5) except as
required by any applicable law, require (a) any consent of any other Person
or
(b) any consent, license, permit, authorization or other approval of, any giving
of notice to, any exemption by, any registration, declaration or filing with,
or
any taking of any other action in respect of, any court, arbitrator,
administrative agency or other Governmental Authority.
Section
2.4 Litigation.
Except
as disclosed on Schedule
2.4
hereto,
there is no action, suit or proceeding pending or, to Guarantor’s knowledge,
threatened against or affecting Guarantor, at law or in equity, or before or
by
any Governmental Authority, which might result in any material adverse change
in
Guarantor’s business or financial position or in Guarantor’s interest in any of
its properties.
Section
2.5 No
Defaults.
To its
knowledge, Guarantor is not in default in any material respect with respect
to
any applicable law or in the payment of any indebtedness for borrowed money
or
under the terms or provisions of any agreement or instrument evidencing or
securing any such indebtedness.
Section
2.6 Benefits.
The
execution and delivery of this Guaranty to Lender will benefit, directly or
indirectly, Guarantor.
5
Section
2.7 Guarantor
Operations.
Guarantor has not and will not engage in any business other than (a) acquiring,
owning, and developing oil and gas resource properties and (b) acquiring,
owning, and obtaining capital for, and providing capital to, Borrower
(“Guarantor
Operations”).
Guarantor is not a party to any contract or agreement except for those that
directly relate to Guarantor Operations
Section
2.8 Solvency.
Guarantor is solvent and will continue to be solvent after giving effect to
the
transactions hereunder.
ARTICLE
III
TERMINATION
Except
as
provided herein, this Guaranty shall terminate and be of no further force and
effect upon (a) the full and final payment of the Obligations, (b) the
termination of all obligations, if any, of Lender to make any Loan or extend
any
other accommodation (financial or otherwise) to or on behalf of Borrower and
(c)
the complete performance of all obligations of Guarantor arising under or in
connection with this Guaranty. If any monies paid to Lender by or on behalf
of
Borrower are recovered from Lender for any reason, Guarantor shall pay all
such
sums to Lender on demand, together with interest thereon from date of recovery
until paid at the same rate provided in the Note for interest on past due
principal.
ARTICLE
IV
MISCELLANEOUS
Section
4.1 Assignment.
All
guarantees, warranties, representations, covenants and agreements contained
in
this Guaranty shall bind the successors, assigns, receivers, trustees and
representatives of Guarantor and shall inure to the benefit of Lender, its
successors and assigns, and any holder of the Obligations or any part thereof.
Guarantor shall not assign its obligations hereunder without the prior written
consent of Lender.
Section
4.2 Waiver
of Certain Rights.
By its
execution hereof, to the extent such laws and rules could be deemed to be
applicable to this Guaranty, Guarantor expressly waives each and every right
to
which it may be entitled by virtue of the suretyship law of the State of New
York.
Section
4.3 Amendment.
This
Guaranty will be amended, waived (in whole or in part) or otherwise modified
only by an agreement in writing signed by all the parties to this
Guaranty.
Section
4.4 Notices.
Any
notice, demand or document which either party is required or may desire to
give
hereunder shall be in writing and, except to the extent provided in the other
provisions of this Agreement, given by messenger, telecopy or other electronic
transmission, or United States registered or certified mail, postage prepaid,
return receipt requested, addressed to such party at its address and telecopy
number shown below, or at such other address as either party shall have
furnished to the other by notice given in accordance with this
provision:
6
If
to Guarantor:
Kentucky
USA Energy Inc.
000
Xxxxxxxx Xxxx
Xxxxxx,
XX 00000
Attention:
Xxxxxx
X.
Xxxxxxxx
Telephone:
(000)
000-0000
Facsimile:
(606)
878-[____]
with
copies to:
Xxxxxx
X.
Fieldstone, P.A.
Fieldstone
Xxxxxx Xxxxx & Xxxxxxx
000
Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx
Xxxxxx, XX 00000
Telephone:
(000) 000-0000
Telecopy:
If
to
Lender:
NSES
12,
LLC
00
Xxxxx
Xxxxxx, Xxxxxxxx X
Xxxxxxxxxx,
Xxxxxxxxxxx 00000
Attention:
Xxxxx
Xxxxxxxx
Telephone:
(000) 000-0000 xxx.000
Telecopy:
[______________]
with
copies to:
Xxxxxxxxx
Xxxxxxx, LLP
0000
Xxxxxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxx 00000
Attention:
Xxxxxxx
X. Xxxxxx
Telephone:
(000)
000-0000
Facsimile:
(713)
_________
Any
notice delivered or made by messenger, telecopy, electronic mail or United
States mail will be deemed to be given on the date of actual delivery as shown
by messenger receipt, the sender’s facsimile machine confirmation or other
verifiable electronic receipt, or the registry or certification receipt.
Notwithstanding the previous sentence, if either party receives from the other
any message via electronic mail that purports to be a notice under this
Agreement but that contains information that is syntactically incorrect, garbled
or otherwise unintelligible, the recipient will notify the sender and the
message containing the unintelligible information will not be deemed to be
given
until it is successfully delivered (including redelivery by electronic mail)
pursuant to this Section
4.4.
If
Lender receives oral notice of any event from an authorized officer of
Guarantor, Lender will not be required to delay the exercise of any rights
arising from the occurrence of that event until it receives written confirmation
of the oral notice. In the event that a discrepancy exists between the notice
received by Lender orally and the written confirmation, or in the absence of
a
written confirmation, the oral notice, as understood by Lender will be deemed
the controlling and proper notice.
7
Section
4.5
(a) CHOICE
OF LAW.
THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ITS PRINCIPLES
OF CONFLICTS OF LAWS.
(b) VENUE.
ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT MAY BE BROUGHT IN XXX XXXXXX XX XXX XXXXX XX XXX XXXX SITTING IN NEW
YORK COUNTY OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE,
AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, GUARANTOR, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, AND LENDER CONSENT TO THE NON-EXCLUSIVE JURISDICTION
OF
THOSE COURTS. GUARANTOR AND LENDER IRREVOCABLY WAIVE ANY OBJECTION, INCLUDING
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS,
WHICH
EITHER PARTY MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER
DOCUMENT RELATED THERETO. GUARANTOR AND LENDER WAIVE PERSONAL SERVICE OF ANY
SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY THE LAW OF SUCH STATE.
(c) Process
Agent.
Guarantor shall have irrevocably appointed, for a period of not less than one
(1) year, and shall maintain such appointment so long as any Obligations remain
outstanding, Borrower as its agent, or another agent satisfactory to Lender,
for
service of process in connection with any action or proceeding arising under
or
relating to this Guaranty or the Loan Documents, and Lender shall have received
a copy of such written appointment by Guarantor, and a letter, addressed to
Lender and in form and substance satisfactory to Lender, from such agent for
service of process accepting such appointment in writing.
(d) Failure
to Comply.
Should
Guarantor fail to appear or answer any summons, complaint, process or papers
so
served within thirty (30) days after the mailing thereof, Guarantor shall be
deemed in breach of this Guaranty and an order and/or judgment may be entered
against Guarantor as demanded or prayed for in such summons, complaint, process
or papers.
Section
4.6 WAIVER
OF JURY TRIAL.
TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVES ANY RIGHT WHICH IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF,
UNDER OR IN CONNECTION WITH THE NOTE, THIS GUARANTY OR ANY OF THE OTHER LOAN
DOCUMENTS, OR ANY TRANSACTION CONTEMPLATED THEREBY, BEFORE OR AFTER
MATURITY.
8
Section
4.7 No
Usurious Interest.
It is
the intention of the parties hereto to comply strictly to usury laws applicable
to Lender. Interest on the Obligations is expressly limited so that in no
contingency or event whatsoever, whether by acceleration of the maturity of
the
Promissory Note or otherwise, shall the interest taken, reserved, contracted
for, charged or received by Lender exceed the maximum amount permissible under
applicable law. If, from any circumstances whatsoever, fulfillment of any
provisions of this Guaranty, the Promissory Note or the other Security Documents
or of any other document evidencing, securing or pertaining to the indebtedness
evidenced by the Promissory Note, at the time performance of such provision
shall be due, would be usurious under applicable law, then, ipso facto, the
obligation to be fulfilled shall be reduced to the limit of such validity so
that the aggregate consideration which constitutes interest that is contracted
for, taken, reserved, charged for, or received shall not exceed the maximum
amount allowed by applicable law and such amount that would otherwise be
excessive interest shall be applied to the reduction of the principal amount
owing under the Promissory Note or on account of any other indebtedness of
the
Borrowers or Guarantor to Lender, or if principal of the Promissory Note and
such other indebtedness has been paid in full, refunded to the Borrower or
Guarantor, as applicable. In determining whether or not the interest paid or
agreed to be paid for the use, forbearance, or detention of sums hereunder
exceeds the highest lawful rate, the Borrower and Lender shall, to the maximum
extent permitted by applicable law, (a) characterize any non-principal payment
as an expense, fee or premium rather than as interest, (b) exclude voluntary
prepayments and the effects thereof, (c) amortize, prorate, allocate and spread
the total amount of interest throughout the full term of such indebtedness
so
that the actual rate of interest on account of such indebtedness does not exceed
the highest lawful rate, and/or (d) allocate interest between portions of such
indebtedness, to the end that no such portion shall bear interest at a rate
greater than that permitted by applicable law.
Section
4.8 FINAL
AGREEMENT.
THIS
GUARANTY AND THE SECURITY DOCUMENTS TO WHICH GUARANTOR IS A PARTY REPRESENT
THE
FINAL AGREEMENT BETWEEN GUARANTOR AND LENDER AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
[SIGNATURE
PAGE FOLLOWS]
9
IN
WITNESS WHEREOF, the undersigned have caused this Guaranty to be duly executed
and delivered as of the date first above written.
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GUARANTOR:
a
Delaware corporation
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Xxxxxx
X. Xxxxxxxx
President
and Chief Executive Officer
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LENDER:
NSES
12, LLC,
a
Delaware limited liability company
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| By: |
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| Name: |
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| Title: |
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[Signature
page to the Guaranty Agreement]
