OR PRIOR
TO THE TENTH (10TH) BUSINESS DAY OF EACH MONTH, THE BORROWER SHALL DELIVER TO
ROYAL A BORROWING BASE CERTIFICATE AS OF THE LAST BUSINESS DAY OF THE
IMMEDIATELY PRECEDING MONTH (EACH SUCH DATE A "RE-MARGIN DATE"). ON AND FROM THE
DATE THAT THE BORROWER ELECTS AS AFORESAID TO CASH COLLATERALIZE UNTIL THE
COLLATERAL RELEASE DATE, AS DEFINED BELOW IN SECTION 3.14(C), (THE "CASH
COLLATERAL PERIOD") IF TOTAL BORROWINGS UNDER THE CREDIT FACILITY PROVIDED FOR
IN SECTION 3.1(A) EXCEED THE LESSER OF $10,000,000 AND THE COLLATERAL VALUE OF
THE BORROWING BASE, THE BORROWER SHALL DEPOSIT OR DIRECT ROYAL IN WRITING TO
DEPOSIT INTO THE RESTRICTED CASH COLLATERAL ACCOUNT AN AMOUNT EQUAL TO SUCH
EXCESS ON OR PRIOR TO SUCH TENTH (10TH) BUSINESS DAY. IF, AS OF ANY RE-MARGIN
DATE, THE COLLATERAL VALUE OF THE BORROWING BASE EXCEEDS THE THEN OUTSTANDING
BORROWINGS UNDER THE CREDIT FACILITY PROVIDED FOR IN SECTION 3.1(A), ROYAL
PROVIDED NO EVENT OF DEFAULT EXISTS AS OF SUCH RE-MARGIN DATE, SHALL, UPON
WRITTEN REQUEST BY THE BORROWER MADE IN THE RELATED BORROWING BASE CERTIFICATE,
REMIT THE AMOUNT OF SUCH EXCESS (THE "EXCESS AMOUNT") FROM THE RESTRICTED CASH
COLLATERAL ACCOUNT TO THE BORROWER PROMPTLY IF THE EXCESS AMOUNT CONSISTS OF
CANADIAN FUNDS OR U.S. FUNDS AND PROMPTLY ON MATURITY OF EACH CASH EQUIVALENT IF
THE EXCESS AMOUNT CONSISTS OF CERTIFICATES OF DEPOSIT OR TERM DEPOSITS. THE
EXCESS AMOUNT WILL BE FREE AND CLEAR OF THE LIEN GRANTED IN THE RESTRICTED CASH
COLLATERAL AGREEMENT AS OF SUCH RE-MARGIN DATE. THE BORROWER SHALL COMPLY WITH
ALL OF ITS OBLIGATIONS UNDER THIS SECTION 3.14 SO LONG AS ROYAL SHALL HAVE ANY
COMMITMENT UNDER THE AGREEMENT, ANY OBLIGATION HEREUNDER FOR THE PAYMENT OF
MONEY THAT HAS ACCRUED AND IS PAYABLE SHALL REMAIN UNPAID OR UNSATISFIED, OR ANY
DOCUMENTARY CREDIT SHALL REMAIN OUTSTANDING.
(B)
THE BORROWER SHALL MAINTAIN THE RESTRICTED
CASH COLLATERAL ACCOUNT AT ALL TIMES DURING THE CASH COLLATERAL PERIOD.
(C)
THE BORROWER MAY, AT ANY TIME FOLLOWING ANY
RE-MARGIN DATE BUT ONLY ONCE DURING THE TERM OF THE AGREEMENT, ELECT TO RELEASE
THE RESTRICTED CASH COLLATERAL AND TERMINATE THE REQUIREMENTS OF SECTION 3.14(A)
HEREOF; PROVIDED, THAT (I) AS OF THE EFFECTIVE DATE OF SUCH ELECTION (THE
"COLLATERAL RELEASE DATE"), THE GUARANTOR SHALL BE ABLE TO DEMONSTRATE TO THE
REASONABLE SATISFACTION OF ROYAL THAT FOR THE TWELVE MONTH PERIOD IMMEDIATELY
PRECEDING THE COLLATERAL RELEASE DATE (A) THE CONSOLIDATED LEVERAGE RATIO FOR
SUCH PERIOD WAS LESS THAN OR EQUAL TO 2.50 TO 1.00 AND (B) THE CONSOLIDATED
INTEREST COVERAGE RATIO FOR SUCH PERIOD WAS
44
GREATER THAN OR EQUAL TO 4.25 TO 1.00, (II) NO DEFAULT OR EVENT OF DEFAULT SHALL
HAVE OCCURRED AND BE CONTINUING PRIOR TO, AS OF OR IMMEDIATELY AFTER THE
COLLATERAL RELEASE DATE (FOR THE AVOIDANCE OF DOUBT, THE DETERMINATION OF THE
EXISTENCE OF A DEFAULT OR AN EVENT OF DEFAULT IMMEDIATELY AFTER THE COLLATERAL
RELEASE DATE SHALL TAKE INTO ACCOUNT THE EFFECTIVENESS OF THE COVENANTS SET
FORTH IN SECTION 6 OF THE AGREEMENT WHICH ARE EFFECTIVE ONLY