Exhibit 10.10
SUBORDINATED GUARANTY
AGREEMENT
This Subordinated Guaranty Agreement
dated as of December 17, 2008 (this “ Guaranty
”) is executed by each of the undersigned (individually a
“ Guarantor ” and collectively, the “
Guarantors ”), in favor of UnionBanCal
Equities, Inc., as Administrative Agent for the ratable
benefit of itself, the Lenders (as defined below) (together with
the Administrative Agent and the Lenders, individually a “
Beneficiary ”, and collectively, the “
Beneficiaries ”).
INTRODUCTION
A.
This Guaranty is given in connection
with that certain Subordinated Credit Agreement dated as of
December 17, 2008 (as it has been or may be amended,
supplemented, restated or otherwise modified from time to time, the
“ Credit Agreement ”), among Cano
Petroleum, Inc., a Delaware corporation (the “
Borrower ”), the lenders party thereto from time to
time (individually a “ Lender ” and
collectively, the “ Lenders ”), and UnionBanCal
Equities, Inc. as administrative agent (“
Administrative Agent ”) for such Lenders.
B.
Each Guarantor is a subsidiary of
the Borrower and will derive substantial direct and indirect
benefit from the transactions contemplated by the Credit Agreement
and the other Loan Documents (as defined in the Credit
Agreement).
C.
Each Guarantor is executing and
delivering this Guaranty (i) to induce the Lenders to provide
the Advances and the other considerations under the Credit
Agreement, and (ii) intending it to be a legal, valid,
binding, enforceable and continuing obligation of such Guarantor,
whether or not such Guarantor derives any benefit from the Credit
Agreement or from any other Loan Document.
NOW, THEREFORE, in consideration of
the premises, each Guarantor hereby agrees as follows:
Section 1.
Definitions.
All capitalized terms not
otherwise defined in this Guaranty that are defined in the Credit
Agreement shall have the meanings assigned to such terms by the
Credit Agreement.
Section 2.
Guaranty .
(a)
Each Guarantor hereby absolutely,
unconditionally and irrevocably guarantees the punctual payment and
performance, when due, whether at stated maturity, by acceleration
or otherwise, of all Obligations, whether absolute or contingent
and whether for principal, interest (including, without limitation,
interest that but for the existence of a bankruptcy, reorganization
or similar proceeding would accrue), fees, amounts required to be
provided as collateral, indemnities, expenses or otherwise
(collectively, the “ Guaranteed Obligations ”).
Without limiting the generality of the foregoing, each
Guarantor’s liability shall extend to all amounts that
constitute part of the Guaranteed Obligations and would be owed by
the Borrower to the Administrative Agent or any Lender under the
Loan Documents and by the Borrower or any of its Subsidiaries but
for the fact that they are unenforceable or not allowable due to
insolvency or the existence of a bankruptcy, reorganization or
similar proceeding involving the Borrower or such other
Subsidiary.
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(b)
It is the intention of the
Guarantors and each Beneficiary that the amount of the Guaranteed
Obligations guaranteed by each Guarantor shall be in, but not in
excess of, the maximum amount permitted by fraudulent conveyance,
fraudulent transfer or similar Legal Requirements applicable to
such Guarantor. Accordingly, notwithstanding anything to the
contrary contained in this Guaranty or in any other agreement or
instrument executed in connection with the payment of any of the
Guaranteed Obligations, the amount of the Guaranteed Obligations
guaranteed by a Guarantor under this Guaranty shall be limited to
an aggregate amount equal to the largest amount that would not
render such Guarantor’s obligations hereunder subject to
avoidance under Section 548 of the United States Bankruptcy
Code or any comparable provision of any other applicable
law.
Section 3.
Guaranty Absolute
. Each Guarantor guarantees
that the Guaranteed Obligations will be paid strictly in accordance
with the terms of the 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 Administrative
Agent or any Lender with respect thereto but subject to
Section 2(b) above. The obligations of each
Guarantor under this Guaranty are independent of the Guaranteed
Obligations or any other obligations of any other Person under the
Loan Documents, and a separate action or actions may be brought and
prosecuted against any Guarantor to enforce this Guaranty,
irrespective of whether any action is brought against the Borrower,
any other Guarantor or any other Person or whether the Borrower,
any other Guarantor or any other Person is joined in any such
action or actions. The liability of each Guarantor under this
Guaranty shall be irrevocable, absolute and unconditional
irrespective of, and each Guarantor hereby irrevocably waives any
defenses it may now or hereafter have in any way relating to, any
or all of the following:
(a)
any lack of validity or
enforceability of any Loan Document or any agreement or instrument
relating thereto or any part of the Guaranteed Obligations being
irrecoverable;
(b)
any change in the time, manner or
place of payment of, or in any other term of, all or any of the
Guaranteed Obligations or any other obligations of any Person under
the Loan Documents, or any other amendment or waiver of or any
consent to departure from any Loan Document, including, without
limitation, any increase in the Guaranteed Obligations resulting
from the extension of additional credit to the Borrower or
otherwise;
(c)
any taking, exchange, release or
non-perfection of any collateral, or any taking, release or
amendment or waiver of or consent to departure from any other
guaranty, for all or any of the Guaranteed Obligations;
(d)
any manner of application of
collateral, or proceeds thereof, to all or any of the Guaranteed
Obligations, or any manner of sale or other disposition of any
collateral for all or any of the Guaranteed Obligations or any
other obligations of any other Person under the Loan Documents or
any other assets of the Borrower or any of its
Subsidiaries;
(e)
any change, restructuring or
termination of the corporate structure or existence of the Borrower
or any of its Subsidiaries;
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(f)
any failure of any Beneficiary to
disclose to the Borrower or any Guarantor any information relating
to the business, condition (financial or otherwise), operations,
properties or prospects of any Person now or in the future known to
any Beneficiary (and each Guarantor hereby irrevocably waives any
duty on the part of any Beneficiary to disclose such
information);
(g)
any signature of any officer of the
Borrower or any other Person being mechanically reproduced in
facsimile or otherwise; or
(h)
any other circumstance or any
existence of or reliance on any representation by any Beneficiary
that might otherwise constitute a defense available to, or a
discharge of, the Borrower, any Guarantor or any other guarantor,
surety or other Person.
Section 4.
Continuation and Reinstatement,
Etc. Each
Guarantor agrees that, to the extent that payments of any of the
Guaranteed Obligations are made, or any Lender or the
Administrative Agent receives any proceeds of collateral, and such
payments or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside,
or otherwise required to be repaid, then to the extent of such
repayment the Guaranteed Obligations shall be reinstated and
continued in full force and effect as of the date such initial
payment or collection of proceeds occurred. EACH GUARANTOR
SHALL DEFEND AND INDEMNIFY EACH BENEFICIARY FROM AND AGAINST ANY
CLAIM, DAMAGE, LOSS, LIABILITY, COST OR EXPENSE UNDER THIS
SECTION 4 (INCLUDING REASONABLE ATTORNEYS’ FEES AND
EXPENSES) IN THE DEFENSE OF ANY SUCH ACTION OR SUIT INCLUDING SUCH
CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE ARISING AS A
RESULT OF THE INDEMNIFIED BENEFICIARY’S OWN NEGLIGENCE BUT
EXCLUDING SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE
THAT IS FOUND IN A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF
COMPETENT JURISDICTION TO HAVE RESULTED FROM SUCH INDEMNIFIED
BENEFICIARY’S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.
Section 5.
Waivers and
Acknowledgments .
(a)
Each Guarantor hereby waives
promptness, diligence, presentment, notice of acceptance and any
other notice with respect to any of the Guaranteed Obligations and
this Guaranty and any requirement that any Beneficiary protect,
secure, perfect or insure any Lien or any Property or exhaust any
right or take any action against the Borrower or any other Person
or any collateral.
(b)
Each Guarantor hereby irrevocably
waives any right to revoke this Guaranty, and acknowledges that
this Guaranty is continuing in nature and applies to all Guaranteed
Obligations, whether existing now or in the future.
(c)
Each Guarantor acknowledges that it
will receive substantial direct and indirect benefits from the
financing arrangements involving the Borrower and its Subsidiaries
contemplated by the Loan Documents and that the waivers set forth
in this Guaranty are knowingly made in contemplation of such
benefits.
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Section 6.
Subrogation
. No Guarantor will exercise any
rights that it may now have or hereafter acquire against the
Borrower or any other Person to the extent that such rights arise
from the existence, payment, performance or enforcement of such
Guarantor’s obligations under this Guaranty or any other Loan
Document, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any
right to participate in any claim or remedy of any Beneficiary
against the Borrower or any other Person, whether or not such
claim, remedy or right arises in equity or under contract, statute
or common law, including, without limitation, the right to take or
receive from the Borrower or any other Person, directly or
indirectly, in cash or other property or by set-off or in any other
manner, payment or security on account of such claim, remedy or
right, unless and until all of the Guaranteed Obligations and any
and all other amounts payable by the Guarantors under this Guaranty
shall have been paid in full in cash, all Commitments shall have
expired or terminated, and the Credit Agreement has been terminated
in writing. If any amount shall be paid to a Guarantor in
violation of the preceding sentence at any time prior to
(a) the payment in full in cash of the Guaranteed Obligations
and any and all other amounts payable by the Guarantors under this
Guaranty, and (b) the termination of the Commitments, such
amount shall be held in trust for the benefit of the Beneficiaries
and shall forthwith be paid to the Administrative Agent to be
credited and applied to the Guaranteed Obligations and any and all
other amounts payable by the Guarantors under this Guaranty,
whether matured or unmatured, in accordance with the terms of the
Loan Documents.
Section 7.
Representations and
Warranties. Each
Guarantor hereby represents and warrants as follows:
(a)
There are no conditions precedent to
the effectiveness of this Guaranty. Such Guarantor benefits
from executing this Guaranty.
(b)
Such Guarantor has, independently
and without reliance upon the Administrative Agent or any Lender
and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter
into this Guaranty, and such Guarantor has established adequate
means of obtaining from the Borrower and each other relevant Person
on a continuing basis information pertaining to, and is now and on
a continuing basis will be completely familiar with, the business,
condition (financial and otherwise), operations, properties and
prospects of the Borrower and each other relevant
Person.
(c)
The obligations of such Guarantor
under this Guaranty are the valid, binding and legally enforceable
obligations of such Guarantor, and the execution and delivery of
this Guaranty by such Guarantor has been duly and validly
authorized in all respects by such Guarantor, and the Person who is
executing and delivering this Guaranty on behalf of such Guarantor
has full power, authority and legal right to so do, and to observe
and perform all of the terms and conditions of this Guaranty on
such Guarantor’s part to be observed or performed.
Section 8.
Right of Set-Off
. Upon the occurrence and
during the continuance of any Event of Default, any Beneficiary is
hereby authorized at any time, to the fullest extent permitted by
law, to set off and apply any deposits (general or special, time or
demand, provisional or final) and other indebtedness owing by such
Beneficiary to the account of each Guarantor against any and all of
the obligations of the Guarantors under this Guaranty, irrespective
of whether or
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not such Beneficiary shall have made any demand
under this Guaranty and although such obligations may be contingent
and unmatured. Such Beneficiary shall promptly notify the
affected Guarantor after any such set-off and application is made,
provided that the failure to give such notice shall not affect the
validity of such set-off and application.&
