WAIVER AND AMENDMENT TO SENIOR SECURED NOTE
WAIVER
AND AMENDMENT TO SENIOR SECURED NOTE
THIS
WAIVER AND AMENDMENT TO SENIOR SECURED NOTE (this “Agreement”)
is
made as of May 15, 2008, among Sonterra Resources, Inc. (f/k/a River Capital
Group, Inc.) (the “Company”),
the
Subsidiaries and The Longview Fund, L.P. (“Buyer”).
Any
capitalized terms used but not otherwise defined herein shall have the meaning
given thereto in the Note (as defined below) or, if not defined in the Note,
in
the Exchange Agreement (as defined below).
WITNESSETH:
WHEREAS,
the Company and Buyer and entered into that certain Securities Exchange and
Additional Note Purchase Agreement, dated as of August 3, 2007 (as amended
by
that certain February 2008 Amendment Agreement, dated as of February 14, 2008,
and as may be further amended, restated, supplemented or otherwise modified
and
in effect from time to time, the “Exchange
Agreement”),
pursuant to which the Company issued to Buyer an RCGI Note, dated February
14,
2008, in an original principal amount of $2,000,000 (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,
restated, supplemented or otherwise modified and in effect from time to time,
the “Note”);
WHEREAS,
as of December 31, 2007, the last day of the year covered by the Company’s
annual report on Form 10-KSB filed with the SEC on April 14, 2008 (the
“10-KSB”),
(i)
the Total Proved Reserves were less than the Required Total Proved Reserves
as
of such date, and (ii) the PRV Ratio was less than the Required PRV Ratio as
of
such date, meaning that there was a Financial Covenant Test Failure as of
December 31, 2007 (the “December Failure”);
WHEREAS,
as of March 31, 2008, the last day of the three-month period to be covered
by
the Company’s quarterly report on Form 10-Q to be filed with the SEC on or about
May 15, 2008 (the “March
10-Q”), (i)
the
Revenue from the sale of hydrocarbons and the provision of related services
for
the three-month period ending on such date was less than the Required Revenue
as
of such date, (ii) the Total Proved Reserves were less than the Required Total
Proved Reserves as of such date, and/or (iii) the PRV Ratio was less than the
Required PRV Ratio as of such date, meaning that, following the filing of the
March 10-Q, there would be another Financial Covenant Test Failure (the
“March Failure”);
WHEREAS,
pursuant to the Section 3(b)(i) of the Note, as a result of the December
Failure, the Company was required to pay Buyer an amount equal to Buyer’s Pro
Rata Financial Covenant Test Failure Amount as of December 31, 2007 (the
“December
Failure Amount”),
but
the Company has not made such payment;
WHEREAS,
pursuant to Section 3(b)(i) of the Note, as a result of the March Failure,
following the filing of the March 10-Q, the Company would be required to pay
Buyer an amount equal to Buyer’s Pro Rata Financial Covenant Test Failure Amount
as of March 31, 2008 (the “March
Failure Amount”);
WHEREAS,
the Company’s failure to pay the December Failure Amount constitutes an Event of
Default pursuant to Section 4(a)(i) of the Note (the “December
Default”);
and
WHEREAS,
in light of the current condition of the Company, the Company and Buyer hereby
deem it advisable and in the best interests of the parties to amend the Note
and
take other actions, all as provided herein.
NOW,
THEREFORE, in consideration of the agreements, provisions and covenants
contained herein and for other good and valuable consideration, the receipt
and
sufficiency of which are hereby acknowledged, each of the undersigned agrees
as
follows:
1. Amendment
to the Note and Form of Note.
a. Buyer
hereby agrees with the Company that, as of the date first above written, the
definition of “Financial Covenant Test Failure Amount” contained in Section 2 of
each of the Note and the form of note attached to the Exchange Agreement as
Exhibit A (for purposes of Additional RCGI Notes) is hereby amended by adding
the following at the end thereof:
“;
provided,
however,
that
solely for purposes of determining the Financial Covenant Test Failure Amount
as
of a determination date from and including March 31, 2008 through and including
December 31, 2008, (X) the Required Revenue as of such date shall be deemed
to
be $50,000, (Y) the Required Total Proved Reserves as of such date shall be
deemed to be 0.70 BCFE, and (Z) the Required PRV Ratio as of such date shall
be
deemed to be 0.75; and, provided,
further,
that,
if any of the products calculated pursuant to clauses (i), (ii) and (iii) of
this definition is less than zero (0), such product shall, for purposes of
determining the Financial Covenant Test Failure Amount, be deemed to be zero
(0).”
b. As
amended hereby, the Note remains in full force and effect.
2. Limited
Waivers.
a. Buyer
hereby waives (i) the Company’s obligation to pay, and Buyer’s right to receive,
the mandatory prepayment due pursuant to Section 3(b)(i) of the Note with
respect to the December Failure Amount and (ii) the occurrence of the December
Default.
b. Solely
for purposes of the Company’s issuance and sale to Buyer of up to an aggregate
of $750,000 in principal amount of Additional RCGI Notes in accordance with,
and
subject to the terms and conditions of, the Exchange Agreement, Buyer hereby
waives: (i) the Additional Note Issuance Amount Limitation set forth in clause
(B) of Section 1(b) of the Exchange Agreement to the extent (and only to the
extent) relating to the PRV Ratio at December 31, 2007, (ii) the Company’s
failure to satisfy the Additional Sale Notice Election Conditions set forth
in
clauses (i)(Y), (ii) and (vi) of Section 1(d) of the Exchange Agreement to
the
extent (and only to the extent) resulting from the December Failure and there
having been a Financial Covenant Test Failure at December 31, 2007 and March
31,
2008.
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c. The
limited waivers set forth in Sections 2(a) and 2(b) hereof are not, nor shall
be
deemed to be, a waiver under any other circumstance or a waiver of any other
condition, requirement, provision or breach of any provision of any RCGI Note,
this Agreement, the Exchange Agreement or any other agreement or instrument,
and
shall not be deemed to establish a custom or course of dealing.
3. Representations
and Warranties of the Company.
The
Company represents and warrants to Buyer that:
a. Authorization;
Enforcement; Validity.
Each of
the Company and the Subsidiaries has the requisite corporate power and authority
to enter into and perform its obligations under this Agreement, the RCGI Notes
(as amended hereby) and the other Transaction Documents. The execution and
delivery of this Agreement has been duly authorized by the board of directors
of
the Company, and no further consent or authorization is required by the Company,
the Subsidiaries or their respective boards of directors or stockholders. This
Agreement has been duly executed and delivered by each of the Company and the
Subsidiaries, and each of this Agreement and the Note constitutes a valid and
binding obligation of the Company and each of the Subsidiaries (as applicable),
enforceable against the Company and each of the Subsidiaries (as applicable)
in
accordance with its terms.
b. No
Conflicts.
The
execution and delivery of this Agreement by each of the Company and the
Subsidiaries, the performance by each of the Company and the Subsidiaries (as
applicable) of its obligations hereunder and under the RCGI Notes (as amended
hereby) and the other Transaction Documents, and the consummation by the Company
and the Subsidiaries (as applicable) of the transactions contemplated hereby
and
thereby have not and will not (i) result in a violation of the certificate
of
incorporation or the bylaws of the Company or the or the organizational
documents of any of the Subsidiaries; (ii) conflict with, or constitute a breach
or default (or an event which, with the giving of notice or lapse of time or
both, constitutes or would constitute a breach or default) under, or give to
others any right of termination, amendment, acceleration or cancellation of,
or
other remedy with respect to, any agreement, indenture or instrument to which
the Company or any of the Subsidiaries is a party; or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations) applicable to the Company
or
any of the Subsidiaries or by which any property or asset of the Company or
any
of the Subsidiaries is bound or affected. Neither the Company nor any of the
Subsidiaries is required to obtain any consent, authorization or order of,
or
make any filing or registration with, any court or governmental agency or any
regulatory or self-regulatory agency in order for it to execute, deliver or
perform any of its obligations under, or contemplated by, this Agreement in
accordance with the terms hereof.
c. No
Violation of Security Documents.
Neither
the Company nor any of the Subsidiaries has breached or violated any of the
provisions of the Security Documents or taken any action that would impair,
or
otherwise adversely affect, the rights of Buyer or the Collateral Agent under
the Security Documents or otherwise with respect to the Collateral (as defined
in the Security Documents).
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4. Representations
and Warranties of Buyer.
Buyer
hereby represents and warrants to the Company that (a) Buyer is a validly
existing limited partnership and has the requisite partnership power and
authority to enter into and perform its obligations under this Amendment, and
(b) this Amendment has been duly and validly authorized, executed and delivered
on behalf of Buyer and is a valid and binding agreement of Buyer, enforceable
against Buyer in accordance with its terms.
5. Acknowledgement
of the Company.Each
of
the Company and the Subsidiaries hereby irrevocably and unconditionally
acknowledges, affirms and covenants to Buyer that:
a. Buyer
is
not in default under any of the Transaction Documents nor otherwise has breached
any obligations to the Company or any of the Subsidiaries; and
b. there
are
no offsets, counterclaims or defenses to the Liabilities (as such term is
defined in the Security Agreement), including the liabilities and obligations
of
the Company under the Exchange Agreement (as amended hereby), or to the rights,
remedies or powers of Buyer in respect of any of the Liabilities or any of
the
Transaction Documents, and the Company agrees not to interpose (and does hereby
waive and release) any such defense, set-off or counterclaim in any action
brought by such Buyer with respect thereto.
6. Disclosure
of Transactions and Other Material Information.
On or
prior to 5:30 p.m., New York City time, on the fourth (4th)
Business Day following the date hereof, the Company shall file a Form 8-K (the
“Form
8-K”)
with
the SEC, describing this Amendment, and the transactions contemplated thereby,
providing any other information required to be disclosed pursuant to the rules
and regulations of the SEC, and including as an exhibit this Amendment, in
the
form required by the 1934 Act. From and after the filing of this Form 8-K with
the SEC, Buyer shall not be in possession of any material nonpublic information
received from the Company, any of the Subsidiaries or any of their respective
officers, directors, employees, agents or Affiliates. The Company shall provide
Buyer and its counsel with a reasonable opportunity to review and comment upon
the Form 8-K prior to the filing thereof.
7. Issuance
of Amended and Restated Note.
Promptly following the date hereof, and in no event later than three (3)
Business Days following the date hereof, the Company shall issue to Buyer an
amended and restated RCGI Note, in a form acceptable to Buyer, reflecting the
terms of the Note as amended hereby (the “New
Note”).
Upon
the issuance by the Company to Buyer of the New Note, the Note previously held
by Buyer (the “Original
Note”)
will
be void and of no further force and effect, and Buyer shall promptly return
the
Original Note to the Company for cancellation.
8. Expenses.
In
accordance with Section 4(i) of the Exchange Agreement, contemporaneously with
the execution and delivery of this Amendment, the Company shall reimburse Buyer
for all of its out-of-pocket fees, costs and expenses, including attorneys’ fees
and expenses, incurred in connection with the drafting, negotiation and
execution of this Amendment.
9. Reservation
of Rights.
Except
as specifically set forth in Section 2, Buyer has not waived (a) any breach,
default or event of default that may be continuing under any of the Transaction
Documents or (b) any of Buyer’s rights or remedies arising from any such breach,
default or event of default or otherwise available under the Transaction
Documents or at law or in equity. Buyer expressly reserves all such rights
and
remedies.
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10. Successors
and Assigns.
This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns. The successors
and
assigns of such entities shall include their respective receivers, trustees
or
debtors-in-possession.
11. Further
Assurances.
The
Company hereby agrees from time to time, as and when requested by Buyer, to
execute and deliver or cause to be executed and delivered, all such documents,
instruments and agreements, including secretary’s certificates, stock powers and
irrevocable transfer agent instructions, and to take or cause to be taken such
further or other action, as Buyer may reasonably deem necessary or desirable
in
order to carry out the intent and purposes of this Agreement, the RCGI Notes
(as
amended hereby) and the other Transaction Documents.
12. Rules
of Construction.
All
words in the singular or plural include the singular and plural and pronouns
stated in either the masculine, the feminine or neuter gender shall include
the
masculine, feminine and neuter, and the use of the word “including” in this
Agreement shall be by way of example rather than limitation. The language used
in this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied
against any party.
13. Governing
Law; Jurisdiction; Jury Trial.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement 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 party 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 party 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.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT
TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
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14. Counterparts.
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.
In
the
event that any signature to this Agreement or any amendment hereto is delivered
by facsimile transmission or by e-mail delivery of a “.pdf” format data file,
such signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force
and effect as if such facsimile or “.pdf” signature page were an original
thereof. No party hereto shall raise the use of a facsimile machine or e-mail
delivery of a “.pdf” format data file to deliver a signature to this Agreement
or any amendment hereto or the fact that such signature was transmitted or
communicated through the use of a facsimile machine or e-mail delivery of a
“.pdf” format data file as a defense to the formation or enforceability of a
contract, and each party hereto forever waives any such defense.
15. Section
Headings.
The
section headings herein are for convenience of reference only, and shall not
affect in any way the interpretation of any of the provisions
hereof.
16. Merger.
This
Agreement, the Exchange Agreement, the RCGI Notes (as amended hereby) and the
other Transaction Documents represent the final agreement of each of the parties
hereto with respect to the matters contained herein and may not be contradicted
by evidence of prior or contemporaneous agreements, or prior or subsequent
oral
agreements, among any of the parties hereto.
17. Ratification
by Guarantors.
By
execution hereof, each of the Subsidiaries hereby acknowledges and agrees that
it has reviewed this Agreement and hereby ratifies and confirms its respective
obligations under the Transaction Documents, including the Note and the other
RCGI Notes (each as amended hereby).
[Remainder
of page intentionally left blank; Signature page follows]
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IN
WITNESS WHEREOF, this Waiver and Amendment to Senior Secured Note has been
duly
executed and delivered by each of the undersigned as of the date first above
written.
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By:
/s/
Xxxxxxx X.
Xxxxxxx
Name:
Xxxxxxx
X. Xxxxxxx
Title:
President
and Chief Executive Officer
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SONTERRA
OIL & GAS, INC.
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By:
/s/
Xxxxxxx X.
Xxxxxxx
Name: Xxxxxxx
X. Xxxxxxx
Title:
President
and Chief Executive Officer
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SONTERRA
OPERATING, INC.
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By: /s/
Xxxxx X.
Xxxxxxx
Name: Xxxxx
X. Xxxxxxx
Title: President
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THE
LONGVIEW FUND, L.P., a
California
limited partnership
By:
Viking Asset Management, LLC
Its:
Investment Adviser
By:
/s/
S. Xxxxxxx
Xxxxxxx
Name:
S.
Xxxxxxx Xxxxxxx
Title:
Chief
Financial Officer
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