SUBSIDIARY GUARANTY
SUBSIDIARY
GUARANTY, dated as of May 29, 2008, made by each of the
undersigned (each a “
Guarantor ”,
and collectively, the “
Guarantors ”),
in favor of ________________________, a company organized under the
laws of the Bahamas (the “
Investor ”)
for the “Buyers” (as defined below) party to the
Securities Purchase Agreement, dated as of even date herewith (as
amended, restated or otherwise modified from time to time, the
“
Securities Purchase Agreement ”).
W
I
T
NE
S
S
ET
H
:
WHEREAS,
Kentucky USA Energy, Inc., a Delaware corporation (the
“
Parent ”),
and each party listed as a “Buyer” on the Schedule of
Note Buyers attached thereto (each a “
Buyer ”,
and collectively, the “
Buyers ”)
are parties to the Securities Purchase Agreement;
WHEREAS,
it is a condition precedent to the Buyers purchasing the Notes
(as defined below) that the Guarantors execute and deliver to
the Investor a guaranty guaranteeing all of the obligations of
the Parent under the Securities Purchase Agreement, the Notes
and the Transaction Documents (as defined in the Securities
Purchase Agreement, the “
Transaction Documents ”);
and
WHEREAS,
each Guarantor has determined that the execution, delivery and
performance of this Guaranty directly benefits, and is in the
best interest of, such Guarantor;
NOW,
THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Buyers to perform under the
Securities Purchase Agreement, each Guarantor hereby agrees
with each Buyer as follows:
SECTION
1.
Definitions .
Reference is hereby made to the Securities Purchase Agreement and
the “Notes” (as defined therein) issued pursuant
thereto (as such Notes may be amended, restated, replaced or
otherwise modified from time to time in accordance with the terms
thereof, collectively, the “
Notes ”)
for a statement of the terms thereof. All terms used in this
Guaranty, which are defined in the Securities Purchase Agreement or
the Notes and not otherwise defined herein, shall have the same
meanings herein as set forth therein.
SECTION
2.
Guaranty .
The Guarantors, jointly and severally, hereby unconditionally and
irrevocably, guaranty the punctual payment, as and when due and
payable, by stated maturity or otherwise, of all Obligations (as
defined in the Security Agreement) of the Parent from time to time
owing by it in respect of the Securities Purchase Agreement, the
Notes and the other Transaction Documents, including, without
limitation, all interest that accrues after the commencement of any
Insolvency Proceeding (as defined in the Security Agreement) of the
Parent or any Guarantor, whether or not the payment of such
interest is unenforceable or is not allowable due to the existence
of such Insolvency Proceeding, and all fees, commissions, expense
reimbursements, indemnifications and all other amounts due or to
become due under any of the Transaction Documents (such
obligations, to the extent not paid by the Parent, being the
“
Guaranteed Obligations ”),
and agrees to pay any and all expenses (including reasonable
counsel fees and expenses) reasonably incurred by the Investor in
enforcing any rights under this Guaranty. Without limiting the
generality of the foregoing, each Guarantor’s liability
hereunder shall extend to all amounts that constitute part of the
Guaranteed Obligations and would be owed by the Parent to the
Investor under the Securities Purchase Agreement and the Notes but
for the fact that they are unenforceable or not allowable due to
the existence of an Insolvency Proceeding involving any Guarantor
or the Parent (each, a “
Transaction Party ”).
SECTION
3.
Guaranty Absolute; Continuing Guaranty; Assignments
.
(a)
The
Guarantors, jointly and severally, guaranty that the
Guaranteed Obligations will be paid strictly in accordance
with the terms of the Transaction 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
Investor with respect thereto. The obligations of each
Guarantor under this Guaranty are independent of the
Guaranteed Obligations, and a separate action or actions may
be brought and prosecuted against any Guarantor to enforce
such obligations, irrespective of whether any action is
brought against any Transaction Party or whether any
Transaction Party is joined in any such action or actions. The
liability of any Guarantor under this Guaranty shall be
irrevocable, absolute and unconditional irrespective of, and
each Guarantor hereby irrevocably waives, to the extent
permitted by law, any defenses it may now or hereafter have in
any way relating to, any or all of the following:
(i)
any
lack of validity or enforceability of any Transaction Document
or any agreement or instrument relating thereto;
(ii)
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 amendment or waiver of or any consent to departure
from any Transaction Document, including, without limitation,
any increase in the Guaranteed Obligations resulting from the
extension of additional credit to any Transaction Party or
otherwise;
(iii)
any
taking, exchange, release or non-perfection of any Collateral
(as defined in the Security Documents), 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;
(iv)
any
change, restructuring or termination of the corporate, limited
liability company or partnership structure or existence of any
Transaction Party; or
(v)
any
other circumstance (including any statute of limitations) or
any existence of or reliance on any representation by the
Investor that might otherwise constitute a defense available
to, or a discharge of, any Transaction Party or any other
guarantor or surety.
This
Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any of the
Guaranteed Obligations is rescinded or must otherwise be
returned by the Investor
or
any other Person upon the insolvency, bankruptcy or
reorganization of any Transaction Party or otherwise, all as
though such payment had not been made.
(b)
This
Guaranty is a continuing guaranty and shall (i) remain in full
force and effect until the indefeasible cash payment in full
of the Guaranteed Obligations (other than inchoate indemnity
obligations) and/or complete conversion of all of the
Company’s obligations under the Notes to equity
securities of the Company and payment of all other amounts
payable under this Guaranty (other than inchoate indemnity
obligations) and shall not terminate for any reason prior to
the respective Maturity Date of each Note (other than payment
in full of the Notes and/or complete conversion of all of the
Company’s obligations under the Notes to equity
securities of the Company) and (ii) be binding upon each
Guarantor and its respective successors and assigns. This
Guaranty shall inure to the benefit of and be enforceable by
the Investor
and
its successors, and permitted pledgees, transferees and
assigns. Without limiting the generality of the foregoing
sentence, the Investor or any Buyer may pledge, assign or
otherwise transfer all or any portion of its rights and
obligations under and subject to the terms of any Transaction
Document to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect
thereof granted to such Buyer herein or otherwise, in each
case as provided in the Securities Purchase Agreement or such
Transaction Document.
SECTION
4.
Waivers .
To the extent permitted by applicable law, each Guarantor hereby
waives promptness, diligence, notice of acceptance and any other
notice with respect to any of the Guaranteed Obligations and this
Guaranty and any requirement that the Investor exhaust any right or
take any action against any Transaction Party or any other Person
or any Collateral. The Guarantor acknowledges that it will receive
direct and indirect benefits from the financing arrangements
contemplated herein and that the waiver set forth in this Section 4
is knowingly made in contemplation of such benefits. The Guarantors
hereby waive 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.
SECTION
5.
Subrogation .
No Guarantor may exercise any rights that it may now or hereafter
acquire against any Transaction Party or any other guarantor that
arise from the existence, payment, performance or enforcement of
any Guarantor’s obligations under this Guaranty, including,
without limitation, any right of subrogation, reimbursement,
exoneration, contribution or indemnification and any right to
participate in any claim or remedy of the Investor against any
Transaction Party or any other guarantor or any Collateral, 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 any Transaction Party or any other
guarantor, directly or indirectly, in cash or other property or by
set-off or in any other manner, payment or security solely on
account of such claim, remedy or right, unless and until all of the
Guaranteed Obligations (other than inchoate indemnity obligations)
and all other amounts payable under this Guaranty (other than
inchoate indemnity obligations) shall have indefeasibly been paid
in full in cash. If any amount shall be paid to the Guarantor in
violation of the immediately preceding sentence at any time prior
to the later of the payment in full in cash of the Guaranteed
Obligations and all other amounts payable under this Guaranty, such
amount shall be held in trust for the benefit of the Investor and
shall forthwith be paid to the Investor to be credited and applied
to the Guaranteed Obligations and all other amounts payable under
this Guaranty, whether matured or unmatured, in accordance with the
terms of the Transaction Document, or to be held as Collateral for
any Guaranteed Obligations or other amounts payable under this
Guaranty thereafter arising. If (a) any Guarantor shall make
payment to the Investor of all or any part of the Guaranteed
Obligations, and (b) all of the Guaranteed Obligations (other
than inchoate indemnity obligations) and all other amounts payable
under this Guaranty (other than inchoate indemnity obligations)
shall indefeasibly be paid in full in cash, the Investor will, at
such Guarantor’s request and expense, execute and deliver to
such Guarantor appropriate documents, without recourse and without
representation or warranty, necessary to evidence the transfer by
subrogation to such Guarantor of an interest in the Guaranteed
Obligations resulting from such payment by such
Guarantor.
SECTION
6.
Representations, Warranties and Covenants .
(a)
Each
Guarantor hereby represents and warrants as of the date first
written above as follows:
(i)
The
Guarantor (A) is a corporation, limited liability company or
limited partnership duly organized, validly existing and in
good standing under the laws of the jurisdiction of its
organiz
|
