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GUARANTY
(Parent Company)
This Guaranty dated as of December 29, 1997 ("Agreement"), is made by
Queen Sand Resources, Inc., a Delaware corporation ("Guarantor"), in favor of
Enron Capital & Trade Resources Corp., a Delaware corporation, in its capacity
as agent for the lenders described below ("Agent").
INTRODUCTION
This Agreement is given in connection with the Subordinated Revolving
Credit Loan Agreement dated as of December 29, 1997 (as modified from time to
time, the "Loan Agreement"), among Queen Sand Resources, Inc., a Nevada
corporation ("Borrower"), the lenders who are or may become party thereto, and
the Agent, the defined terms of which are used herein unless otherwise defined
herein. It is a condition precedent to the effectiveness of the Loan Agreement
that the Guarantor executes and delivers this Agreement to the Agent. The
Borrower is a Subsidiary of the Guarantor. The Guarantor expects that, as a
result of its ownership of the Borrower, it will obtain substantial benefit from
the extensions of credit expected to be made to the Borrower under the Loan
Agreement.
Therefore, to induce the Agent and the Lenders to enter into the Loan
Agreement, the Guarantor agrees with the Agent as follows:
Section 1. Guaranty.
1.1 The Guarantor irrevocably guarantees to the Agent the full payment
when due of (a) all principal, interest, fees, reimbursements, indemnifications,
and other amounts now or hereafter owed by the Borrower to the Agent or any
Lender (and with respect to the Interest Hedge Agreements, any Affiliates of any
Lender) under the terms of the Loan Agreement and the other Loan Documents,
including amounts owed under the terms of the Loan Agreement and the other Loan
Documents for which the Borrower has obtained relief under bankruptcy or other
laws providing for relief from creditors, and (b) any increases, extensions, and
rearrangements of the foregoing obligations under any amendments, supplements,
and other modifications of the documents and agreements creating the foregoing
obligations (collectively, the "Guaranteed Obligations"). This is a guaranty of
payment and not merely a guaranty of collection, and the Guarantor is liable as
a primary obligor. If any of the Guaranteed Obligations are not punctually paid
when due, whether by maturity, acceleration, or otherwise, and the Agent shall
notify the Guarantor of such default and make demand for payment hereunder, the
Guarantor shall immediately pay to the Agent the full amount of the Guaranteed
Obligations which are due and payable. The Guarantor shall make each payment to
the Agent in U.S. Dollars in immediately available funds as directed by the
Agent. The Agent is hereby authorized at any time following any demand for
payment hereunder to set off and apply any indebtedness owed by the Agent to the
Guarantor against any and all of the obligations of the Guarantor under this
Agreement. The Agent agrees to promptly notify the Guarantor after any such
setoff and application, but the failure to give such notice shall not affect the
validity of such setoff and application.
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1.2 This Agreement is subordinate to the Senior Debt in accordance with
the terms of the Subordination Agreement.
Section 2. Guaranty Absolute.
2.1 This Agreement shall be deemed accepted by the Agent upon receipt,
and the obligations of the Guarantor under this Agreement are effective
immediately and are continuing and cover all Guaranteed Obligations arising
prior to and after the date hereof. This Agreement may not be revoked by the
Guarantor and shall continue to be effective with respect to Guaranteed
Obligations arising or created after any attempted revocation by the Guarantor.
2.2 The Guarantor guarantees that the Guaranteed Obligations will be
paid strictly in accordance with the terms of the Loan Agreement and the other
Loan Documents, regardless of any law, regulation, or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Agent or the Lenders with respect thereto. The Guarantor agrees that the
Guarantor's obligations under this Agreement shall not be released, diminished,
or impaired by, and waives any rights which the Guarantor might otherwise have
which relate to:
(a) Any lack of validity or enforceability of the Guaranteed
Obligations, any Loan Document, or any other agreement or instrument relating
thereto; any increase, reduction, extension, or rearrangement of the Guaranteed
Obligations; any amendment, supplement, or other modification of the Loan
Documents; any waiver or consent granted under the Loan Documents, including
waivers of the payment and performance of the Guaranteed Obligations; or any
sale, assignment, delegation, or other transfer of the Guaranteed Obligations or
the Loan Documents;
(b) Any grant of any security or support for the Guaranteed
Obligations or any impairment of any security or support for the Guaranteed
Obligations, including any full or partial release, exchange, subordination, or
waste of any collateral for the Guaranteed Obligations or any full or partial
release of the Borrower, the Guarantor, or any other Person liable for the
payment or performance of the Guaranteed Obligations; any change in the
organization or structure of the Borrower, the Guarantor, or any other Person
liable for the payment or performance of the Guaranteed Obligations; or the
insolvency, bankruptcy, liquidation, or dissolution of the Borrower, the
Guarantor, or any other Person liable for the payment or performance of the
Guaranteed Obligations;
(c) The manner of applying payments on the Guaranteed
Obligations or the proceeds of any security or support for the Guaranteed
Obligations against the Guaranteed Obligations;
(d) The failure to give notice of the occurrence of any of the
events or actions referred to in this Section 2.2, notice of any default or
event of default, however denominated, under the Loan Documents, notice of
intent to demand, notice of demand, notice of presentment for payment, notice of
nonpayment, notice of intent to protest, notice of protest, notice of grace,
notice of dishonor, notice of intent to accelerate, notice of acceleration,
notice of bringing of action to enforce the payment or performance of the
Guaranteed Obligations, notice of any sale or foreclosure
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of any collateral for the Guaranteed Obligations, notice of any transfer of the
Guaranteed Obligations, notice of the financial condition of or other
circumstances regarding the Borrower, the Guarantor, or any other Person liable
for the Guaranteed Obligations, or any other notice of any kind relating to the
Guaranteed Obligations (and the parties intend that no Guarantor by execution of
this Agreement shall be considered a "Debtor" as defined in Section 9.105 of the
UCC for the purpose of notices required to be given to a Debtor thereunder); or
(e) Any other action taken or omitted which affects the
Guaranteed Obligations, whether or not such action or omission prejudices the
Guarantor or increases the likelihood that the Guarantor will be required to pay
the Guaranteed Obligations pursuant to the terms hereof--it is the unambiguous
and unequivocal intention of the Guarantor that the Guarantor shall be obligated
to pay the Guaranteed Obligations when due, notwithstanding any occurrence,
circumstance, event, action, or omission whatsoever, whether contemplated or
uncontemplated, and whether or not particularly described herein.
2.3 This Agreement shall continue to be effective or be reinstated, as
the case may be, if any payment on the Guaranteed Obligations must be refunded
for any reason including any bankruptcy proceeding. In the event that the Agent
or any Lender must refund any payment received against the Guaranteed
Obligations, any prior release from the terms of this Agreement given to the
Guarantor by the Agent shall be without effect, and this Agreement shall be
reinstated in full force and effect. It is the intention of the Guarantor that
the Guarantor's obligations hereunder shall not be discharged except by final
payment of the Guaranteed Obligations.
Section 3. Unimpaired Collection.
3.1 There are no conditions precedent to the enforcement of this
Agreement, except as expressly contained herein. It shall not be necessary for
the Agent, in order to enforce payment by the Guarantor under this Agreement, to
show any proof of the Borrower's default, to exhaust the Agent's remedies
against the Borrower, the Guarantor, or any other Person liable for the payment
or performance of the Guaranteed Obligations, to enforce any security or support
for the payment or performance of the Guaranteed Obligations, or to enforce any
other means of obtaining payment or performance of the Guaranteed Obligations.
The Guarantor waives any statutory or common law procedural or substantive
rights related to the foregoing. Neither the Agent nor any Lender shall be
required to mitigate damages or take any other action to reduce, collect, or
enforce the Guaranteed Obligations.
3.2 With respect to the Guarantor, all Subordinated Obligations of the
Guarantor (as defined below) shall be subordinate and junior in right of payment
and collection to the payment and collection in full of all Guaranteed
Obligations as described below:
(a) As used herein, the term "Subordinated Obligations" for
the Guarantor means: (i) all present and future indebtedness, liabilities, and
obligations of any kind owed by the Borrower, any other Guarantor (as defined in
the Loan Agreement), or any other Person liable for the payment or performance
of the Guaranteed Obligations to the Guarantor, including (A) debt obligations,
equity obligations, and other contractual obligations requiring payments of any
kind to be made to
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the Guarantor and including (B) any right of subrogation (including any
statutory rights of subrogation under Section 509 of the Bankruptcy Code, 11
U.S.C. Section 509, or under state statutes), contribution, indemnification,
reimbursement, exoneration, or any right to participate in any claim or remedy
of the Agent against the Borrower, the Guarantor, or any Person liable for the
payment or performance of the Guaranteed Obligations, or any collateral which
the Agent now has or may acquire, and (ii) any increases, extensions, and
rearrangements of the foregoing obligations under any amendments, supplements,
and other modifications of the documents and agreements creating the foregoing
obligations.
(b) Until all Guaranteed Obligations have been irrevocably
paid in full (and therefore the payment thereof is no longer subject to being
set aside or returned under the law), the Guarantor agrees not to take any
action to enforce payment of the Subordinated Obligations of the Guarantor, but
this standstill is not intended as a permanent waiver of the subrogation,
contribution, indemnification, reimbursement, exoneration, participation, or
other rights of the Guarantor.
(c) Upon any receivership, insolvency proceeding, bankruptcy
proceeding, assignment for the benefit of creditors, reorganization, arrangement
with creditors, sale of assets for creditors, dissolution, liquidation, or
marshaling of the assets of the Borrower, the Guarantor, or any other Person
liable for the payment or performance of the Guaranteed Obligations, (i) all
amounts due with respect to the Guaranteed Obligations shall be paid in full
before the Guarantor shall be entitled to collect or receive any payment with
respect to the Subordinated Obligations of the Guarantor, and (ii) all payments
to which the Guarantor would be entitled to collect or receive on the
Subordinated Obligations of the Guarantor shall be paid over to the Agent for
application to the Guaranteed Obligations.
(d) Following notice from the Agent to the Borrower that an
Event of Default exists and that no further payments shall be made on the
Subordinated Obligations of the Guarantor, all amounts due with respect to the
Guaranteed Obligations shall be paid in full before the Guarantor shall be
entitled to collect or receive any payment with respect to the Subordinated
Obligations of the Guarantor.
(e) Any lien, security interest, or assignment securing the
repayment of the Subordinated Obligations of the Guarantor shall be fully
subordinate to any lien, security interest, or assignment in favor of the Agent
or any Lender which secures the Guaranteed Obligations. At the request of the
Agent, the Guarantor will take any and all steps necessary to fully evidence the
subordination granted hereunder, including amending or terminating financing
statements and executing and recording subordinations of liens.
(f) This is an absolute and irrevocable agreement of
subordination and the Agent may, without notice to the Guarantor, take any
action described in Section 2.2 without impairing or releasing the obligations
of the Guarantor hereunder.
(g) Except for assignments made pursuant to guaranties of the
Senior Debt, the Guarantor shall not assign or otherwise transfer to any other
Person any interest in the Subordinated Obligations of the Guarantor without the
prior written permission of the Lender and except for
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assignments made pursuant to guaranties of the Senior Debt, unless the Guarantor
causes the assignee or other transferee to execute and deliver to the Agent a
subordination agreement in substantially the form of the subordination
provisions in this Agreement.
(h) If any amount shall be paid to the Guarantor in violation
of this Section 3.2, such amount shall be held in trust for the benefit of the
Agent and immediately turned over to the Agent, with any necessary endorsement,
to be applied to the Guaranteed Obligations.
Section 4. Miscellaneous.
4.1 The Guarantor hereby affirms and shall comply with the
representations, warranties, and covenants made by the Borrower in the Loan
Agreement to the extent that such representations, warranties, and covenants are
applicable to the Guarantor, including all of the covenants in Articles 4 and 5
of the Loan Agreement.
4.2 The Guarantor shall take all actions necessary to comply with the
Borrower's obligations under Section 2.11 of the Loan Agreement and to
effectuate any exchange made thereunder. The Guarantor shall at all times
reserve and keep available, free from preemptive rights, as part of the
authorized but unissued common stock of the Guarantor ("Parent Company Common
Stock"), solely for the purpose of issuance upon an exchange pursuant to Section
2.11 of the Loan Agreement, such number of shares of Parent Company Common Stock
as shall then be issuable upon the exchange of the entire amount of the
outstanding principal balance of the Note and accrued but unpaid interest
thereon. The Guarantor covenants that all shares of Parent Company Common Stock
which shall be so issuable shall, upon issuance, be duly and validly issued,
fully paid and nonassessable. The Guarantor shall from time to time, in
accordance with applicable law, increase the authorized amount of Parent Company
Common Stock if at any time the authorized amount of Parent Company Common Stock
remaining unissued shall not be sufficient to permit the exchange of the entire
amount of the outstanding principal balance of the Note and accrued but unpaid
interest thereon. The Guarantor covenants that it shall not permit the par value
of the Parent Company Common Stock to be increased from $0.0015 per share. The
issuance of certificates representing shares of Parent Company Common Stock upon
an exchange pursuant to Section 2.11 of the Loan Agreement shall be made without
charge to the Lenders for any tax in respect of the issuance of such
certificates, and such certificates shall be issued in the name of, or in such
names as may be directed by, the Agent; provided that in no event shall the
Guarantor be required to pay or reimburse any Lender or the holder of any such
certificate for any income tax payable by such Lender or such holder as a result
of such issuance. The Guarantor agrees that any Parent Company Common Stock
issued pursuant to Section 2.11 of the Loan Agreement shall be "Registrable
Securities" for the purposes of the Registration Rights Agreement.
4.3 The Guarantor agrees that this Agreement shall be governed by the
laws of the State of New York. If any provision in this Agreement is held to be
unenforceable, such provision shall be severed and the remaining provisions
shall remain in full force and effect. All representations, warranties, and
covenants of the Guarantor in this Agreement shall survive the execution of this
Agreement and any other contract or agreement. If a due date for an amount
payable is not specified in this Agreement, the due date shall be the date on
which the Agent demands payment therefor.
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The Agent's and the Lenders' remedies under this Agreement and the Loan
Documents to which the Guarantor is a party shall be cumulative, and no delay in
enforcing this Agreement and the Loan Documents to which the Guarantor is a
party shall act as a waiver of the Agent's or any Lenders' rights thereunder.
The provisions of this Agreement may be waived or amended only in a writing
signed by the party against whom enforcement is sought. This Agreement shall
bind and inure to the benefit of the Guarantor and the Lender and their
respective successors and assigns. The Guarantor may not assign its rights or
delegate its duties under this Agreement. The Agent and the Lenders may assign
their rights and delegate its duties under this Agreement in accordance with the
terms of the Loan Agreement. This Agreement may be executed in multiple
counterparts each of which shall constitute one and the same agreement. Unless
otherwise specified, all notices and other communications between the Guarantor
and the Agent provided for in this Agreement and the Loan Documents to which the
Guarantor is a party shall be in writing and shall be mailed by first class or
express mail, postage prepaid, or sent by telex, telegram, telecopy or other
similar form of rapid transmission, or personally delivered to the receiving
party. Any communication so addressed and mailed shall be deemed to be given
when so mailed and any notice so sent by rapid transmission shall be deemed to
be given when receipt of such transmission is acknowledged or confirmed, and any
communication so delivered in person shall be deemed to be given when receipted
for by, or actually received by, an authorized officer of the Borrower or the
Agent, as the case may be. All such communications shall be mailed, sent or
delivered,
If to the Guarantor:
Queen Sand Resources, Inc.
0000 Xxx Xxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Queen Sand Resources, Inc.
00 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxx XXX 5Y7
Attn: Xxxxxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
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Xxxxxx and Xxxxx LLP
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Boeing
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Agent:
Enron Capital & Trade Resources Corp.
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
4.4 The Guarantor hereby designates all Indebtedness outstanding under
this Agreement, the Loan Agreement, the Note and the other Loan Documents to be
"Designated Senior Indebtedness" (as defined in the Offering Memorandum dated
July 15, 1995 relating to the DEM Subordinated Debt) for purposes of the DEM
Subordinated Debt.
THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
EXECUTED as of the date first above written.
QUEEN SAND RESOURCES, INC., a
Delaware corporation
By:
Xxxxxx X. Xxxxxxx
Chief Operating Officer & Executive
Vice President
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