THIS
GUARANTY (this “Guaranty”) is made as of the 23rd
day of December, 2005, by PARALLEL, L.L.C. , a Delaware
limited liability company (the “Guarantor”) in favor of
the Agent, for the benefit of the Lenders, under the Credit
Agreement referred to below;
WHEREAS ,
PARALLEL PETROLEUM CORPORATION, a Delaware corporation
(“PPC”) and PARALLEL, L.P., a Texas limited partnership
(“PLP”) (PPC and PLP collectively are hereinafter
referred to as the “Principal”), Guarantor, CITIBANK
TEXAS, N.A., a national banking association, having its principal
office in Midland, Texas, as Joint Lead Arranger and Administrative
Agent (the “Agent”), BNP PARIBAS, as Joint Lead
Arranger and Syndication Agent, and certain other financial
institutions from time to time parties thereto (the
“Lenders”) have entered into a certain Third Amended
and Restated Credit Agreement dated of even date herewith (as same
may be amended, modified or restated from time to time, the
“Credit Agreement”), providing, subject to the terms
and conditions thereof, for extensions of credit to be made by the
Lenders to the Principal;
WHEREAS ,
it is a condition precedent to the Agent and the Lenders executing
the Credit Agreement that Guarantor execute and deliver this
Guaranty whereby the Guarantor shall guarantee the payment when
due, subject to Section 9 hereof, of all Guaranteed
Obligations and Rate Management Obligations, as defined below;
and
WHEREAS ,
in consideration of the financial and other support that the
Principal has provided, and such financial and other support as the
Principal may in the future provide, to the Guarantor, and in order
to induce the Lenders and the Agent to enter into the Credit
Agreement, and the Lenders and their Affiliates to enter into one
or more Rate Management Transactions with the Principal, and
because the Guarantor has determined that executing this Guaranty
is in its interest and to its financial benefit, the Guarantor is
willing to guarantee the obligations of the Principal under the
Credit Agreement, any Note, any Rate Management Transaction, and
the other Loan Documents;
NOW,
THEREFORE , in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as
follows:
SECTION l.1.
Selected Terms Used Herein .
“Guaranteed
Obligations” is defined to mean (i) all indebtedness,
obligations and liabilities of either Principal to Agent or any
Lender arising out of or pursuant to the provisions of the Credit
Agreement, the Notes and other Loan Documents, (ii) all Rate
Management Obligations, (iii) all indebtedness, obligations and
liabilities of either Principal to any Lender of any kind or
character now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several or joint and several, and regardless
of whether such indebtedness, obligations and liabilities may,
prior to their acquisition by any Lender, be or have been payable
to or in favor of a
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third party and
subsequently acquired by any Lender (it being contemplated that any
Lender may make such acquisitions from third parties), including
without limitation all indebtedness, obligations and liabilities of
either Principal to any Lender now existing or hereafter arising by
note, draft, acceptance, guaranty, endorsement, letter of credit,
assignment, purchase, overdraft, discount, indemnity agreement or
otherwise, (iv) all accrued but unpaid interest on any of the
indebtedness described in (i), (ii) and (iii) above,
(v) all obligations of either Principal to any Lender under
any documents evidencing, securing, governing and/or pertaining to
all or any part of the indebtedness described in (i), (ii),
(iii) or (iv) above, (vi) all costs and expenses
incurred by any Lender in connection with the collection and
administration of all or any part of the indebtedness and
obligations described in (i), (ii), (iii), (iv) or
(v) above or the protection or preservation of, or realization
upon, the collateral securing all or any part of such indebtedness
and obligations, including without limitation all reasonable
attorneys’ fees, and (vii) all renewals, extensions,
modifications and rearrangements of the indebtedness and
obligations described in (i), (ii), (iii), (iv), (v) and
(vi) above.
“Rate
Management Obligations” means any and all obligations of
either Principal, whether absolute or contingent and howsoever and
whensoever created, arising, evidenced or acquired (including all
renewals, extensions and modifications thereof and substitutions
therefor), under (i) any and all Rate Management Transactions
with Agent or a Lender or an Affiliate of Agent or a Lender, and
(ii) any and all cancellations, buy backs, reversals,
terminations or assignments of any Rate Management
Transactions.
SECTION 1.2.
Terms in Credit Agreement. Other capitalized terms used
herein but not defined herein shall have the meaning set forth in
the Credit Agreement.
SECTION 2.1.
Representations and Warranties . The Guarantor represents
and warrants (which representations and warranties shall be deemed
to have been renewed upon each Borrowing Date under the Credit
Agreement) that:
(a) It is a
limited liability company duly and properly organized, validly
existing and in good standing under the laws of the State of
Delaware and has all requisite authority to conduct its business in
each jurisdiction in which its business is conducted.
(b) It has the
power and authority and legal right to execute and deliver this
Guaranty and to perform its obligations hereunder. The execution
and delivery by it of this Guaranty and the performance of its
obligations hereunder have been duly authorized by proper
corporate, partnership or limited liability company proceedings,
and this Guaranty constitutes a legal, valid and binding obligation
of Guarantor enforceable against it in accordance with its terms,
except as enforceability may be limited by general principles of
equity and bankruptcy, insolvency or similar laws affecting the
enforcement of creditors’ rights generally.
(c) Neither the
execution and delivery by it of this Guaranty, nor the consummation
of the transactions herein contemplated, nor compliance with the
provisions hereof will violate (i) any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on it or
any of its subsidiaries or (ii) its articles or certificate of
incorporation, partnership agreement, limited liability company
agreement, certificate of partnership, articles or certificate of
organization, by-laws, or operating or other management agreement,
as the case may be, or
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(iii) the
provisions of any indenture, instrument or agreement to which it or
any of its subsidiaries is a party or is subject, or by which it,
or its Property, is bound, or conflict with or constitute a default
thereunder, or result in, or require, the creation or imposition of
any Lien in, of or on the property of Guarantor or a subsidiary
thereof pursuant to the terms of any such indenture, instrument or
agreement. No order, consent, adjudication, approval, license,
authorization, or validation of, or filing, recording or
registration with, or exemption by, or other action in respect of
any governmental or public body or authority, or any subdivision
thereof, which has not been obtained by it or any of its
subsidiaries, is required to be obtained by it or any of its
subsidiaries in connection with the execution and delivery of this
Guaranty or the performance by it of its obligations hereunder or
the legality, validity, binding effect or enforceability of this
Guaranty.
SECTION 2.2.
Covenants . The Guarantor covenants that, so long as any
Lender has any Commitment outstanding under the Credit Agreement,
any Reimbursement Obligations remain outstanding, any Rate
Management Transaction remains in effect or any of the Guaranteed
Obligations shall remain unpaid, that it will, and, if necessary,
will enable the Principal to, fully comply with those covenants and
agreements set forth in the Credit Agreement.
SECTION 3. The
Guaranty . Subject to Section 9 hereof, the Guarantor
hereby absolutely and unconditionally guarantees, as primary
obligor and not as surety, the full and punctual payment (whether
at stated maturity, upon acceleration or early termination or
otherwise, and at all times thereafter) and performance of the
Guaranteed Obligations, including without limitation any such
Guaranteed Obligations incurred or accrued during the pendency of
any bankruptcy, insolvency, receivership or other similar
proceeding, whether or not allowed or allowable in such proceeding.
Upon failure by the Principal to pay punctually any such amount,
the Guarantor agrees that it shall forthwith on demand pay to the
Agent for the benefit of the Lenders and, if applicable, their
Affiliates, the amount not so paid at the place and in the manner
specified in the Credit Agreement, any Note, any Rate Management
Transaction or the relevant Loan Document, as the case may be. This
Guaranty is a guaranty of payment and not of collection. The
Guarantor waives any right to require any Lender, or any Affiliate
of any Lender, to sue the Principal, any other guarantor, or any
other Person obligated for all or any part of the Guaranteed
Obligations, or otherwise to enforce its payment against any
Collateral securing all or any part of the Guaranteed
Obligations.
SECTION 4.
Guaranty Unconditional . Subject to Section 9
hereof,
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