Document:

Exhibit 10.7

 

SECOND
AMENDMENT TO DEED OF TRUST, LINE OF CREDIT MORTGAGE,

ASSIGNMENT,
SECURITY AGREEMENT, FIXTURE FILING

AND
FINANCING STATEMENT

 

A CARBON, PHOTOGRAPHIC,
FACSIMILE, OR OTHER REPRODUCTION OF THIS INSTRUMENT IS SUFFICIENT AS A
FINANCING STATEMENT.

 

THIS INSTRUMENT CONTAINS
AFTER-ACQUIRED PROPERTY PROVISIONS, SECURES PAYMENT OF FUTURE ADVANCES, AND
COVERS PROCEEDS OF COLLATERAL.

 

THIS INSTRUMENT COVERS,
AMONG OTHER THINGS, (A) GOODS WHICH ARE OR ARE TO BECOME FIXTURES RELATED
TO THE REAL PROPERTY AND (B) AS-EXTRACTED COLLATERAL RELATED TO THE REAL
PROPERTY (INCLUDING WITHOUT LIMITATION OIL, GAS, OTHER MINERALS AND OTHER
SUBSTANCES OF VALUE WHICH MAY BE EXTRACTED FROM THE EARTH AND ACCOUNTS
ARISING OUT OF THE SALE AT THE WELLHEAD OR MINEHEAD THEREOF).  THIS INSTRUMENT IS TO BE FILED FOR RECORD,
AMONG OTHER PLACES, IN THE REAL ESTATE OR COMPARABLE RECORDS OF THE COUNTIES
REFERENCED IN ANNEX I HERETO AND SUCH FILING SHALL SERVE, AMONG OTHER PURPOSES,
AS A FIXTURE FILING AND AS A FINANCING STATEMENT COVERING AS-EXTRACTED
COLLATERAL.  THE MORTGAGOR HAS AN
INTEREST OF RECORD IN THE REAL ESTATE CONCERNED.

 

A POWER OF SALE HAS BEEN GRANTED
IN THE MORTGAGE (AS HEREINAFTER DEFINED). 
A POWER OF SALE MAY ALLOW AGENT (AS HEREINAFTER DEFINED) OR THE
TRUSTEE (AS HEREINAFTER DEFINED) TO TAKE THE MORTGAGED PROPERTIES AND SELL THEM
WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE MORTGAGOR
(AS HEREINAFTER DEFINED) UNDER THE MORTGAGE.

 

	
  WHEN RECORDED OR FILED
  RETURN TO:

  	
  THIS DOCUMENT PREPARED
  BY:

  
	
  Vinson &
  Elkins LLP

  	
  Amy Branch

  
	
  1001 Fannin,
  Suite 2300

  	
  Vinson &
  Elkins LLP

  
	
  Houston, Texas
  77002-6760

  	
  1001 Fannin,
  Suite 2300

  
	
  Attention: Linda
  Daugherty

  	
  Houston, Texas
  77002-6760

  

 

The
rights, remedies and obligations of Mortgagor and Agent hereunder are limited
by and subject to the terms of one or more Intercreditor and Collateral Agency
Agreements among Mortgagor, Agent and Approved Hedge Counterparties.

 

 

This SECOND AMENDMENT TO DEED
OF TRUST, LINE OF CREDIT MORTGAGE, ASSIGNMENT, SECURITY AGREEMENT, FIXTURE
FILING AND FINANCING STATEMENT (this “Second Amendment”) is entered into
as of June 26, 2009 by RESACA EXPLOITATION, INC., a Texas corporation and
CIT CAPITAL USA INC., as collateral agent (“Agent”) for the Secured
Creditors (as defined below).

 

RECITALS

 

A.                                   On May 1, 2006, Resaca Exploitation,
LP (“Original Mortgagor”) executed a Deed of Trust, Line of Credit Mortgage,
Assignment, Security Agreement, Fixture Filing and Financing Statement (the “Original
Mortgage”) in favor of John Homier, Trustee, and NGP Capital Resources
Company, as Agent (the “Original Agent”), counterparts of which are
recorded as set forth on Annex I hereto.

 

B.                                     On July 10, 2008, Original Mortgagor
converted from “Resaca Exploitation, LP, a Delaware limited partnership” into “Resaca
Exploitation, Inc., a Texas corporation” (“Mortgagor”).

 

C.                                     On July 11, 2008, Mortgagor and
Original Agent amended the Original Mortgage by First Amendment to Deed of
Trust, Line of Credit Mortgage, Assignment, Security Agreement, Fixture Filing
and Financing Statement (the “First Amendment” and together with the
Original Mortgage, collectively called the “Mortgage”), counterparts of
which are recorded as set forth on Annex I hereto.

 

D.                                    Pursuant to that certain Assignment of
Deeds of Trust, Line of Credit Mortgages, Assignments, Security Agreements,
Fixture Filings and Financing Statements of even date herewith, Original Agent
has assigned the Mortgage to CIT Capital USA Inc., a Delaware corporation, as
successor Agent (the “Agent”).

 

E.                                      Mortgagor has entered into that certain Second
Amended and Restated Credit Agreement (the “Restated Credit Agreement”) of
even date herewith with the Agent and the lenders named therein (the “Lenders”),
amending and restating that certain Amended and Restated Credit Agreement dated
July 11, 2008 described in the Secured Indebtedness set forth in the
Mortgage, such Amended and Restated Credit Agreement amended and restated that
certain Credit Agreement dated May 1, 2006.

 

F.                                      Pursuant to such Restated Credit
Agreement, Mortgagor has executed in favor of Lenders restated promissory notes
of even date herewith renewing and given in replacement of (but not novating or
extinguishing) the Notes described in the Secured Indebtedness set forth in the
Mortgage (such notes, together with any and all amendments, modifications,
extensions, renewals and replacements thereof, and substitutes therefor, in
whole or in part, are herein collectively called the “Restated Notes”).

 

G.                                     In connection with the Restated Credit
Agreement, Mortgagor and the Agent desire to amend the Mortgage to reflect of
record that (a) all indebtedness and other obligations arising under or
with respect to the Restated Credit Agreement and the Restated 

 

2

 

Notes are a part of the
indebtedness secured by the Mortgage, as amended hereby, and (b) the
events described in the Recitals D through F have occurred.

 

FOR A GOOD AND VALUABLE
CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, Agent
and Mortgagor do hereby covenant, act and/or agree as follows:

 

1.                                       Note, Loan Documents, Other Obligations.  Section 1.3(a) and
(b) of the Original Mortgage is hereby amended in its
entirety to read as follows:

 

(a)                                  All indebtedness and other obligations now
or hereafter incurred or arising pursuant to the provisions of that certain
Second Amended and Restated Credit Agreement dated June 26, 2009 among
Mortgagor, CIT Capital USA Inc., in its capacity as administrative agent for
the benefit of the lenders thereunder, and such lenders, amending and restating
that certain Amended and Restated Credit Agreement dated July 11, 2008
among Mortgagor, NGP Capital Resources Company, as prior administrative agent,
and the lenders named therein, and all supplements thereto and amendments or
modifications thereof, and all agreements given in substitution therefor or in
restatement, renewal or extension thereof, in whole or in part (such Credit
Agreement, as the same may from time to time be supplemented, amended or modified,
and all other agreements given in substitution therefor or in restatement,
renewal or extension thereof, in whole or in part, being herein collectively
called the “Credit Agreement” and such lenders from time to time a party
thereto, being herein collectively called the “Lenders”) (CIT Capital
USA Inc., in such capacity collateral agent for the Secured Parties (as defined
in the Credit Agreement), is herein called “Agent”);

 

(b)                                 Those certain Restated Promissory Notes
dated June 26, 2009, in the principal amount of $50,000,000 made by
Mortgagor and payable to the order of the Lenders on or before July 1,
2012, and bearing interest as therein provided, given in renewal and
replacement (but not novation or extinguishment) of those certain Promissory
Notes dated July 11, 2008 in the principal amount of $60,000,000 made by
Mortgagor and payable to the order of the lenders named therein, and containing
a provision for the payment of a reasonable additional amount as attorneys’
fees, as the same may from time to time be supplemented, amended or modified,
and all other notes given in substitution therefor or in modification, renewal
or extension thereof, in whole or in part;

 

2.                                       Defined Terms and References.

 

(a) All references in the Mortgage to “this Mortgage” shall be deemed to mean
and refer to the Original Mortgage as amended by the First Amendment and this
Second Amendment, as the same may from time to time be further amended or
supplemented.

 

3

 

(b) All
references in the Mortgage to the “Credit Agreement” shall be deemed to mean
and refer to the Second Amended and Restated Credit Agreement, dated as of June 26,
2009, by and among the Borrower, the Agent, and the lenders and agents from
time to time party thereto, as the same may from time to time be amended or
supplemented.

 

(c) All references to “John Homier” in his capacity as Trustee
shall be deemed to
mean and refer to “David M. Bornstein”.

 

(d) All references to “NGP Capital Resources Company” are hereby deleted and replaced with “CIT Capital
USA Inc.” and all references to “Agent” shall be deemed to mean and refer to “CIT
Capital USA, Inc.” in its capacity as administrative agent for the lenders
under the Credit Agreement.

 

3.                                       Amendments to Addresses.

 

(a) The
signature page to the Deed of Trust is hereby amended to delete the name
and address listed under “The address of the Agent is:” and to replace such
name and address with the following name and address:

 

CIT Capital USA Inc.

505 Fifth Avenue, 10th Floor

New York, NY 10017

Attn: Marc Theisinger

Telecopy No.: (212) 771-9675

 

with a copy to:

 

CIT Capital USA Inc.

700 Louisiana Street, Suite 5200

Houston, TX 77002

Attn: David Bornstein

Telecopy No. (713) 237-8156

 

(a) The
signature page to the Deed of Trust is hereby amended to delete the name
and address listed under “The address of the Trustee is:” and to replace such
name and address with the following name and address:

 

c/o CIT Capital USA Inc.

700 Louisiana Street, Suite 5200

Houston, TX 77002

Attn: David Bornstein

Telecopy No. (713) 237-8156

 

4.                                       Miscellaneous,
Representations and Warranties.  This Second Amendment
constitutes a “Loan Document”, as such term is defined in the Restated Credit
Agreement.  

 

4

 

Mortgagor
hereby acknowledges and agrees that except as specifically amended, changed or
modified hereby, the Original Mortgage as amended by the First Amendment and
this Second Amendment shall remain in full force and effect in accordance with
its terms.  None of the rights, titles
and interests existing and to exist under the Original Mortgage are hereby
released, diminished or impaired, and Mortgagor hereby reaffirms all covenants,
representations and warranties made in the Original Mortgage as amended by the
First Amendment and this Second Amendment.

 

5.                                       Counterparts.  This Second Amendment may be executed in
several counterparts and all of such counterparts together shall constitute one
and the same instrument.

 

6.                                       Successors and
Assigns.  The terms, provisions, covenants, representations,
indemnifications and conditions hereof shall be binding upon Mortgagor, and the
successors and assigns of Mortgagor, and shall inure to the benefit of Agent,
Trustee and each person constituting Lender and their respective successors and
assigns, and shall constitute covenants running with the Mortgaged
Properties.  All references in this
Second Amendment to Mortgagor, Agent, Trustee or Lenders shall be deemed to
include all such successors and assigns.

 

[SIGNATURES BEGIN NEXT PAGE]

 

5

 

IN WITNESS WHEREOF, this
instrument is executed by Mortgagor and Agent this       
day of June, 2009.

 

 

	
  MORTGAGOR:

  	
  RESACA EXPLOITATION, INC.

  
	
   

  	
  (f/k/a Resaca
  Exploitation, LP)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Chris Work

  
	
   

  	
   

  	
  Chris
  Work, as Vice President and

  
	
   

  	
   

  	
  Chief
  Financial Officer

  

 

 

	
  STATE OF TEXAS

  	
  §

  
	
   

  	
  §

  
	
  COUNTY OF HARRIS

  	
  §

  

 

This instrument was
acknowledged before me this        day of June,
2009 by Chris Work, Vice President and Chief Financial officer of Resaca
Exploitation, Inc., a Texas corporation, on behalf of such corporation.

 

 

	
   

  	
   

  
	
   

  	
  NOTARY PUBLIC, State of
  Texas

  

 

SEAL:

 

 

Signature Page to

Second Amendment to Deed of Trust

(New
Mexico & Texas)

 

 

	
  AGENT:

  	
  CIT CAPITAL
  USA INC., AS AGENT

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David M. Bornstein

  
	
   

  	
   

  	
  David
  M. Bornstein, as Vice President

  

 

 

	
  STATE OF TEXAS

  	
  §

  
	
   

  	
  §

  
	
  COUNTY OF HARRIS

  	
  §

  

 

This instrument was
acknowledged before me this        day of June,
2009 by David M. Bornstein, Vice President of CIT Capital USA Inc., a Delaware
corporation, on behalf of such corporation.

 

 

	
   

  	
   

  
	
   

  	
  NOTARY PUBLIC, State of
  Texas

  

 

SEAL:

 

 

Signature Page to

Second Amendment to Deed of Trust

(New Mexico & Texas)

 

 

ANNEX I

 

RECORDING
INFORMATION

 

1.                                       Deed of Trust, Line of Credit Mortgage, Assignment, Security
Agreement, Fixture Filing and Financing Statement dated as of May 1, 2006
from Resaca Exploitation, LP for the benefit of NGP Capital Resources Company,
as Agent, filed as follows:

 

	
  JURISDICTION

  	
   

  	
  FILING INFORMATION

  	
   

  	
  FILE DATE

  
	
  Eddy
  County, New Mexico

  	
   

  	
  Book
  642 Pg 1065

  	
   

  	
  5/08/06

  
	
  Lea
  County, New Mexico

  	
   

  	
  Doc
  # 21694 Book 1441 Pg 670

  	
   

  	
  05/08/06

  
	
  Crane
  County, Texas

  	
   

  	
  Doc
  # 0087094 Vol. 0477 Pg 219

  	
   

  	
  05/06/06

  
	
  Ector
  County, Texas

  	
   

  	
  Doc
  # 00007413 Vol. 2028 Pg 21

  	
   

  	
  05/10/06

  
	
  Howard
  County, Texas

  	
   

  	
  Doc
  # 00002197 Vol. 1007 Pg 154

  	
   

  	
  05/08/06

  
	
  Mitchell
  County, Texas

  	
   

  	
  Vol.
  719 Pg 723

  	
   

  	
  05/08/06

  
	
  Pecos
  County, Texas

  	
   

  	
  Vol.
  346 Pg 309

  	
   

  	
  05/08/06

  
	
  Winkler
  County, Texas

  	
   

  	
  Vol.
  537 Pg 661

  	
   

  	
  05/08/06

  

 

2.                                       First Amendment to Deed of Trust, Line of Credit Mortgage,
Assignment, Security Agreement, Fixture Filing and Financing Statement dated as
of July 11, 2008 from Resaca Exploitation, Inc. for the benefit of
NGP Capital Resources Company, as Agent, filed as follows:

 

	
  JURISDICTION

  	
   

  	
  FILING INFORMATION

  	
   

  	
  FILE DATE

  
	
  Eddy
  County, New Mexico

  	
   

  	
  Book
  0752 Pg 0296

  	
   

  	
  09/11/08

  
	
  Lea
  County, New Mexico

  	
   

  	
  Doc
  # 61041 Book 1600 Pg 799

  	
   

  	
  09/11/08

  
	
  Crane
  County, Texas

  	
   

  	
  Vol.
  498 Pg 651

  	
   

  	
  09/12/08

  
	
  Ector
  County, Texas

  	
   

  	
  Vol.
  2281 Pg 646

  	
   

  	
  09/12/08

  
	
  Howard
  County, Texas

  	
   

  	
  Vol.
  1110 Pg 642

  	
   

  	
  09/11/08

  
	
  Mitchell
  County, Texas

  	
   

  	
  Vol.
  746 Pg 493

  	
   

  	
  09/11/08

  
	
  Pecos
  County, Texas

  	
   

  	
  Vol.
  364 Pg 38

  	
   

  	
  09/11/08

  
	
  Winkler
  County, Texas

  	
   

  	
  Doc
  # C1101

  	
   

  	
  09/11/08Exhibit 10.8

 

	
   

  	
   

  

 

GUARANTY

 

 

made by

 

RESACA OPERATING COMPANY

 

 

in favor of

 

 

CIT CAPITAL USA INC.,

as Agent

 

 

Dated as of June 26, 2009

	
   

  	
   

  

 

 

TABLE OF CONTENTS

 

	
  1.1

  	
  Defined Terms

  	
  1

  
	
  SECTION 2
  GUARANTY

  	
  2

  
	
  2.1

  	
  Guaranty

  	
  2

  
	
  2.2

  	
  Right of Set-off

  	
  3

  
	
  2.3

  	
  No Subrogation

  	
  4

  
	
  2.4

  	
  Amendments, etc. with respect to the Borrower’s Obligations; Waiver
  of Rights

  	
  4

  
	
  2.5

  	
  Guaranty Absolute and
  Unconditional

  	
  4

  
	
  2.6

  	
  Reinstatement

  	
  5

  
	
  2.7

  	
  Payments

  	
  5

  
	
  SECTION 3
  REPRESENTATIONS AND WARRANTIES

  	
  6

  
	
  3.1

  	
  Representations and
  Warranties

  	
  6

  
	
  SECTION 4
  COVENANTS

  	
  6

  
	
  4.1

  	
  Covenants

  	
  6

  
	
  4.2

  	
  Authority of Agent

  	
  6

  
	
  SECTION 5
  MISCELLANEOUS

  	
  7

  
	
  5.1

  	
  Notices

  	
  7

  
	
  5.2

  	
  Counterparts

  	
  7

  
	
  5.3

  	
  Severability

  	
  7

  
	
  5.4

  	
  Integration

  	
  7

  
	
  5.5

  	
  Amendments in Writing; No
  Waiver; Cumulative Remedies

  	
  7

  
	
  5.6

  	
  Loan Documents

  	
  7

  
	
  5.7

  	
  Section Headings

  	
  8

  
	
  5.8

  	
  Successors and Assigns

  	
  8

  
	
  5.9

  	
  GOVERNING
  LAW

  	
  8

  
	
  5.10

  	
  Submission to
  Jurisdiction; Waivers

  	
  8

  
	
  5.11

  	
  Acknowledgments

  	
  8

  
	
  5.12

  	
  WAIVERS OF JURY TRIAL

  	
  9

  
	
   

  	
   

  	
   

  
	
  SCHEDULES

  	
   

  
	
  Schedule
  1           Address
  for Notices

  	
   

  

 

i

 

GUARANTY

 

THIS
GUARANTY, dated as of June 26, 2009, is made by RESACA OPERATING COMPANY (the “Guarantor”),
in favor of CIT CAPITAL USA, INC., as collateral agent (in such capacity, the “Agent”)
for the benefit of the Guaranteed Creditors (as defined below).

 

RECITALS

 

A.                                   The Borrower and the financial institutions named and
defined therein as lenders and agents entered into that certain Credit
Agreement dated May 1, 2006, as amended and restated by that certain
Amended and Restated Credit Agreement dated as of July 11, 2008 pursuant
to which such lenders provided certain loans to the Borrower (as amended, the “Existing
Credit Agreement”).

 

B.                                     The Borrower and the Lenders have agreed to amend and
restate the Existing Credit Agreement, subject to the terms and conditions set
forth in the Second Amended and Restated Credit Agreement dated as of even date
herewith (as such may be amended, supplemented or otherwise modified from time
to time, the “Credit Agreement”), among RESACA EXPLOITATION, INC., a
Texas corporation (the “Borrower”), the financial institutions now or
hereafter signatory thereto (the “Lenders”) and CIT Capital USA Inc. as
the administrative agent for the Lenders (the “Administrative Agent”).

 

C.                                     It is a condition precedent to the obligation of the Lenders
to make their respective extensions of credit to the Borrower under the Credit
Agreement that the Guarantor shall have executed and delivered this Guaranty to
the Agent for the ratable benefit of the Guaranteed Creditors (as defined
below).

 

D.                                    Now, therefore, in consideration of the premises herein and
to induce the Administrative Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrower thereunder, the Guarantor hereby agrees with the Agent,
for the ratable benefit of the Guaranteed Creditors (as defined below), as
follows:

 

DEFINITIONS

 

1.1                                 Defined Terms.

 

(a)                                  Unless otherwise defined herein, each term defined in the
Credit Agreement and used herein shall have the meaning given to it in the
Credit Agreement.

 

(b)                                 As used herein, “Borrower’s Obligations” means the
collective reference to the payment and performance of all Obligations of the
Borrower under the Guaranteed Documents, including, without limitation, the
unpaid principal of and interest on the Loans and all other obligations and
liabilities of the Borrower (including, without limitation, interest accruing
at the then applicable rate provided in the Credit Agreement after the maturity
of the Loans and interest accruing after the filing of any petition in
bankruptcy, or the commencement

 

 

of any insolvency, reorganization or
like proceeding, relating to the Borrower, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding) to the
Guaranteed Creditors, whether direct or indirect, absolute or contingent, due
or to become due, or now existing or hereafter incurred, which may arise under,
out of, or in connection with, the Guaranteed Documents, whether on account of
principal, interest, reimbursement obligations, payments in respect of an early
termination date, reasonable fees, indemnities, reasonable costs, reasonable
expenses or otherwise (including, without limitation, all reasonable fees and
disbursements of counsel to the Guaranteed Creditors that are required to be
paid by the Borrower pursuant to the terms of any Guaranteed Documents).

 

(c)                                  “Guaranteed Creditors” shall have the meaning
assigned to the term Secured Creditors (as defined in the Credit Agreement).

 

(d)                                 As used herein, “Guaranteed Document” means the
collective reference to this Guaranty, the Credit Agreement, any Note, the
other Loan Documents and any other document made, delivered or given in
connection with any of the foregoing.

 

(e)                                  The words “hereof,” “herein” and “hereunder” and words of
similar import when used in this Guaranty shall refer to this Guaranty as a
whole and not to any particular provision of this Guaranty and section and
paragraph references are to this Guaranty unless otherwise specified.

 

(f)                                    The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.

 

SECTION 2

GUARANTY

 

2.1                                 Guaranty.

 

(a)                                  Subject to the provisions of subsection 2.1(b), the Guarantor
hereby, jointly and severally, unconditionally and irrevocably, guarantees to
the Agent and the Guaranteed Creditors and their respective successors,
indorsees, transferees and assigns, the prompt and complete payment and
performance by the Borrower when due (whether at the stated maturity, by
acceleration or otherwise) of the Borrower’s Obligations up to but not
exceeding the amount of the loan obligations plus interest and costs of
enforcement.

 

(b)                                 Anything herein or in any other Loan Document to the
contrary notwithstanding, the maximum liability of the Guarantor hereunder and
under the other Loan Documents shall in no event exceed the amount which can be
guaranteed by the Guarantor under applicable federal and state laws relating to
the insolvency of debtors.

 

(c)                                  The Guarantor further agrees to pay any
and all expenses (including, without limitation, all reasonable fees and
disbursements of counsel) which may be paid or incurred by the Agent or any
Guaranteed Creditor in enforcing, or obtaining advice of counsel in respect of,
any rights with respect to, or collecting, any or all of the Borrower’s
Obligations and/or enforcing any rights with
respect to, or collecting against, the Guarantor under this Guaranty.  This Guaranty shall remain in full force and
effect until the Borrower’s Obligations

 

2

 

are paid in full, notwithstanding that
from time to time prior thereto no amounts may be outstanding under the Credit
Agreement.

 

(d)                                 The Guarantor agrees that the Borrower’s Obligations may at
any time and from time to time exceed the amount of the liability of the
Guarantor hereunder without impairing this Guaranty or affecting the rights and
remedies of the Agent or any Guaranteed Creditor hereunder.

 

(e)                                  No payment or payments made by the Borrower, the Guarantor,
any other guarantor or any other Person or received or collected by the Agent
or any Guaranteed Creditor from the Borrower, the Guarantor, any other
guarantor or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Borrower’s Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of the Guarantor
hereunder which shall, notwithstanding any such payment or payments (other than
payments made by the Borrower or the Guarantor in respect of the Borrower’s
Obligations or payments received or collected from the Guarantor in respect of
the Borrower’s Obligations), remain liable for the Borrower’s Obligations up to
the maximum liability of the Guarantor hereunder until the Borrower’s
Obligations are paid in full.

 

(f)                                    The Guarantor agrees that whenever, at any time, or from
time to time, it shall make any payment to the Agent or any Guaranteed Creditor
on account of its liability hereunder, it will notify the Agent in writing that
such payment is made under this Guaranty for such purpose.

 

2.2                                 Right of Set-off.  During the
continuance of any Event of Default, the Guarantor hereby irrevocably
authorizes each Guaranteed Creditor at any time and from time to time without
notice to the Guarantor, any such notice being expressly waived by the
Guarantor, to set-off and appropriate and apply any and all deposits (general
or special, time or demand, provisional or final, but excluding deposits held
by the Guarantor as a fiduciary for others), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct
or indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Guaranteed Creditor to or for the credit or the account of the
Guarantor, or any part thereof in such amounts as such Guaranteed Creditor may
elect, against and on account of the obligations and liabilities of the
Guarantor to such Guaranteed Creditor hereunder and claims of every nature and
description of such Guaranteed Creditor against the Guarantor, in any currency,
whether arising hereunder, under the Credit Agreement, any Note, any Loan
Documents or otherwise, as such Guaranteed Creditor may elect, whether or not
the Agent or any Guaranteed Creditor has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured.  Such Guaranteed Creditor
shall notify the Guarantor and the Agent promptly of any such set-off and the
application made by such Guaranteed Creditor, provided that the failure to give
such notice shall not affect the validity of such set-off and application.  The rights of each Guaranteed Creditor under
this subsection are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which the Agent or such Guaranteed
Creditor may have.

 

3

 

2.3                                 No Subrogation. 
Notwithstanding any payment or payments made by the Guarantor hereunder
or any set-off or application of funds of the Guarantor by any Guaranteed
Creditor, the Guarantor shall not be entitled to be subrogated to any of the
rights of the Agent or any Guaranteed Creditor against the Borrower or any
collateral security or guarantee or right of offset held by any Guaranteed
Creditor for the payment of the Borrower’s Obligations until all amounts owing
to the Agent and the Guaranteed Creditors by the Borrower on account of the
Borrower’s Obligations are paid in full, nor shall the Guarantor seek or be
entitled to seek any contribution or reimbursement from the Borrower in respect
of payments made by the Guarantor hereunder until all amounts owing to the
Agent and the Guaranteed Creditors by the Borrower on account of the Borrower’s
Obligations are paid in full.  If any
amount shall be paid to the Guarantor on account of such subrogation rights at
any time when all of the Borrower’s Obligations shall not have been paid in
full, such amount shall be held by the Guarantor in trust for the Agent and the
Guaranteed Creditors, segregated from other funds of the Guarantor, and shall,
forthwith upon receipt by the Guarantor, be turned over to the Agent in the
exact form received by the Guarantor (duly indorsed by the Guarantor to the
Agent, if required), to be applied against the Borrower’s Obligations, whether
matured or unmatured, in such order as the Agent may determine.

 

2.4                                 Amendments,
etc. with respect to the Borrower’s Obligations; Waiver of Rights.  The Guarantor shall remain obligated
hereunder notwithstanding that, without any reservation of rights against the
Guarantor and without notice to or further assent by the Guarantor: (a) any demand
for payment of any of the Borrower’s Obligations made by the Agent or any
Guaranteed Creditor may be rescinded by such party and any of the Borrower’s
Obligations continued; (b) the Borrower’s Obligations, or the liability of any
other party upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Agent or any
Guaranteed Creditor; (c) the Credit Agreement, the Notes and the other Loan
Documents and any other documents executed and delivered in connection
therewith may be amended, modified, supplemented or terminated, in whole or in
part, as the Agent may deem advisable from time to time; and (d) any collateral
security, guarantee or right of offset at any time held by the Agent or any
Guaranteed Creditor for the payment of the Borrower’s Obligations may be sold,
exchanged, waived, surrendered or released. 
Neither the Agent nor any Guaranteed Creditor shall have any obligation
to protect, secure, perfect or insure any Lien at any time held by it as
security for the Borrower’s Obligations or for this Guaranty or any property
subject thereto.  When making any demand
hereunder against the Guarantor, the Agent or any Guaranteed Creditor may, but
shall be under no obligation to, make a similar demand on the Borrower, and any
failure by the Agent or any Guaranteed Creditor to make any such demand or to
collect any payments from the Borrower or any release of the Borrower shall not
relieve the Guarantor in respect of which a demand or collection is not made,
and shall not impair or affect the rights and remedies, express or implied, or
as a matter of law, of the Agent or any Guaranteed Creditor against the
Guarantors.  For the purposes hereof
“demand” shall include the commencement and continuance of any legal
proceedings.

 

2.5                                 Guaranty Absolute and Unconditional.  The Guarantor waives any and all notice of
the creation, renewal, extension or accrual of any of the Borrower’s
Obligations and notice of or proof of reliance by the Agent or any Guaranteed
Creditor upon this Guaranty or acceptance

 

4

 

of this Guaranty, the Borrower’s
Obligations, and any of them, shall conclusively be deemed to have been
created, contracted or incurred, or renewed, extended, amended or waived, in
reliance upon this Guaranty.  All
dealings between the Borrower and the Guarantor, on the one hand, and the Agent
and the Guaranteed Creditors, on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon this Guaranty.  The Guarantor waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Borrower with respect to the Borrower’s Obligations.  The Guarantor understands and agrees that
this Guaranty shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity, regularity or
enforceability of the Credit Agreement, any Note or any other Loan Document,
any of the Borrower’s Obligations or any other collateral security therefor or
guarantee or right of offset with respect thereto at any time or from time to
time held by the Agent or any Guaranteed Creditor, (b) any defense,
set-off or counterclaim (other than a defense of payment or performance) which
may at any time be available to or be asserted by the Borrower against the
Agent or any Guaranteed Creditor, or (c) any other circumstance whatsoever
(with or without notice to or knowledge of the Borrower or the Guarantor) which
constitutes, or might be construed to constitute, an equitable or legal
discharge of the Borrower for the Borrower’s Obligations, or of the Guarantor
under this Guaranty, in bankruptcy or in any other instance.  When pursuing its rights and remedies
hereunder against the Guarantor, the Agent and any Guaranteed Creditor may, but
shall be under no obligation to, pursue such rights and remedies as it may have
against the Borrower or any other Person or against any collateral security or
guarantee for the Borrower’s Obligations or any right of offset with respect
thereto, and any failure by the Agent or any Guaranteed Creditor to pursue such
other rights or remedies or to collect any payments from the Borrower or any
such other Person or to realize upon any such collateral security or guarantee
or to exercise any such right of offset, or any release of the Borrower or any
such other Person or any such collateral security, guarantee or right of
offset, shall not relieve the Guarantor of any liability hereunder, and shall
not impair or affect the rights and remedies, whether express, implied or
available as a matter of law, of the Agent and the Guaranteed Creditors against
the Guarantor.  This Guaranty shall
remain in full force and effect and be binding in accordance with and to the
extent of its terms upon the Guarantor and the successors and assigns thereof,
and shall inure to the benefit of the Agent and the Guaranteed Creditors, and
their respective successors, indorsees, transferees and assigns, until all the
Borrower’s Obligations and the obligations of the Guarantor under this Guaranty
shall have been satisfied by payment in full, notwithstanding that from time to
time during the term of the Credit Agreement no amounts may be outstanding
under the Credit Agreement.

 

2.6                                 Reinstatement.  This Guaranty shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Borrower’s Obligations is rescinded
or must otherwise be restored or returned by the Agent or any Guaranteed
Creditor upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or the Guarantor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Borrower or the Guarantor or any substantial part of its
property, or otherwise, all as though such payments had not been made.

 

2.7                                 Payments.  The Guarantor
hereby guarantees that payments hereunder will be paid to the Agent, for the
ratable benefit of the Guaranteed Creditors, without set-off, deduction

 

5

 

or counterclaim, in dollars, in
immediately available funds, at the offices of the Agent specified in Section 12.3
of the Credit Agreement.

 

2.8                                 Release.  Upon full payment of all of the Borrower’s
Obligations, the Agent, on behalf of the Guaranteed Creditors, shall execute a
release of the Guarantor from any further obligations under this Guaranty or
with regard to the Borrower’s Obligations.

 

SECTION 3

REPRESENTATIONS
AND WARRANTIES

 

3.1                                 Representations and Warranties.  The Guarantor
hereby represents and warrants that the representations and warranties set
forth in Article VII of the Credit Agreement as they relate to the
Guarantor or to the other Loan Documents to which the Guarantor is a party,
each of which is hereby incorporated herein by reference, are true and correct,
and the Agent and each Guaranteed Creditor shall be entitled to rely on each of
them as if they were fully set forth herein, provided that each reference in
each such representation and warranty to the Borrower’s knowledge shall, for the
purposes of this Section 3, be deemed to be a reference to the Guarantor’s
knowledge.

 

The
Guarantor agrees that the foregoing representations and warranties shall be
deemed to have been made by such Guarantor on the date of each Loan (except to
the extent that such representations and warranties are expressly made only as
of an earlier date, in which case such representations and warranties shall
have been true and correct on and as of such earlier date).

 

SECTION 4

COVENANTS

 

4.1                                 Covenants.  The Guarantor
hereby covenants and agrees with the Agent and each Guaranteed Creditor that,
from and after the date of this Guaranty until the Borrower’s Obligations are
paid in full, the Guarantor shall take, or shall refrain from taking, as the
case may be, each action that is necessary to be taken or not taken, as the
case may be, so that no Default or Event of Default is caused by the failure to
take such action or to refrain from taking such action by such Guarantor.

 

4.2                                 Authority of Agent.  The Guarantor acknowledges that the rights
and responsibilities of the Agent under this Guaranty with respect to any
action taken by the Agent or the exercise or non-exercise by the Agent of any
option, right, request, judgment or other right or remedy provided for herein
or resulting or arising out of this Guaranty shall, as between the Agent and
the other Guaranteed Creditors, be governed by the Credit Agreement and by such
other agreements with respect thereto as may exist from time to time among
them, but, as between the Agent and the Guarantor, the Agent shall be
conclusively presumed to be acting as agent for the Guaranteed Creditors with
full and valid authority so to act or refrain from acting in the manner set
forth in Article XI of the Credit Agreement, and the Guarantor shall not
be under any obligation, or entitlement, to make any inquiry respecting such
authority.

 

6

 

SECTION 5

MISCELLANEOUS

 

5.1           Notices.  All notices and
other communications provided for herein shall be given in the manner and
subject to the terms of Section 12.3 of the Credit Agreement; provided
that any such notice, request or demand to or upon the Guarantor shall be
addressed to the Guarantor at its notice address set forth on Schedule 1.

 

5.2           Counterparts.  (a) This Guaranty may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract.

 

5.3           Severability.  Any provision of
this Guaranty which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.

 

5.4           Integration.  This Guaranty
represents the agreement of the Guarantor with respect to the subject matter
hereof and there are no promises, undertakings, representations or warranties
by the Agent or any Guaranteed Creditor relative to the subject matter hereof
not reflected herein.

 

5.5           Amendments in Writing; No
Waiver; Cumulative Remedies.

 

(a)           None
of the terms or provisions of this Guaranty may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Guarantor and the Agent in accordance with subsection 12.1 of the Credit
Agreement.

 

(b)           Neither
the Agent nor any Guaranteed Creditor shall by any act (except by a written
instrument pursuant to subsection 5.5(a) hereof), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Default or Event of Default or in any breach of any
of the terms and conditions hereof.  No
failure to exercise and no delay in exercising, on the part of the Agent or any
Guaranteed Creditor, any right, remedy, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege.  A waiver by the Agent or any
Guaranteed Creditor of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the Agent or such
Guaranteed Creditor would otherwise have on any future occasion.

 

(c)           The
rights and remedies herein provided are cumulative and not exclusive of any
other rights, remedies, powers and privileges provided by law.

 

5.6           Loan Documents.  The Guarantor
agrees that this Guaranty shall constitute a “Loan Document” under the Credit
Agreement.

 

7

 

5.7           Section Headings.  The section
headings used in this Guaranty are for convenience of reference only and are
not to affect the construction hereof or be taken into consideration in the
interpretation hereof.

 

5.8           Successors and Assigns.  This Guaranty shall
be binding upon the successors and assigns of the Guarantor and shall inure to
the benefit of the Agent and the Guaranteed Creditors and their successors and
assigns.

 

5.9           GOVERNING LAW.  THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS
OF LAW PRINCIPLES THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF A
DIFFERENT JURISDICTION.

 

5.10         Submission to Jurisdiction;
Waivers.  The Guarantor hereby irrevocably and
unconditionally:

 

(a)           submits
for itself and its Property in any legal action or proceeding relating to this
Guaranty and the other Loan Documents to which it is a party, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive jurisdiction of the state and federal courts sitting in the State
of New York;

 

(b)           consents
that any such action or proceeding may be brought in such courts and waives any
objection that it may now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or proceeding was brought in
an inconvenient court and agrees not to plead or claim the same;

 

(c)           agrees
that service of process in any such action or proceeding may be effected by
mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to the Guarantor at its address set
forth in Schedule 1 hereto or at such other address of which the Agent shall
have been notified pursuant to subsection 5.1;

 

(d)           agrees
that nothing herein shall affect the right to effect service of process in any
other manner permitted by law or shall limit the right to sue in any other
jurisdiction; and

 

(e)           waives,
to the maximum extent not prohibited by law, any right it may have to claim or
recover in any legal action or proceeding referred to in this subsection any
special, exemplary, punitive or consequential damages.

 

5.11         Acknowledgments.  The Guarantor
hereby acknowledges that:

 

(a)           it
has been advised by counsel in the negotiation, execution and delivery of this
Guaranty and the other Loan Documents;

 

(b)           no
agent nor any Guaranteed Creditor has any fiduciary relationship with or duty
to such Guarantor arising out of or in connection with this Guaranty or any of
the other Loan Documents, and the relationship between the agents and the
Guaranteed Creditors, on one

 

8

 

hand,
and such Guarantor, on the other hand, in connection herewith or therewith is
solely that of guarantor and creditor; and

 

(c)           no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated hereby
among the agents and the other Guaranteed Creditors or among the Borrower, the
agents and the other Guaranteed Creditors.

 

5.12         WAIVERS
OF JURY TRIAL.  THE PARTIES HERETO HEREBY KNOWINGLY AND
INTENTIONALLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT AND
FOR ANY COUNTERCLAIM THEREIN.

 

[Remainder of page intentionally left blank; signature pages follow]

 

9

 

IN WITNESS WHEREOF, each of the
undersigned has caused this Guaranty to be duly executed and delivered by its
duly authorized officer as of the day and year first above written.

 

	
   

  	
  RESACA
  OPERATING COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Dennis Hammond

  
	
   

  	
   

  	
  Dennis
  Hammond, as Director and

  
	
   

  	
   

  	
  President

  

 

 

SIGNATURE
PAGE

GUARANTY
AGREEMENT

(RESACA
OPERATING COMPANY)

 

 

Acknowledged
and Agreed to as

of
the date hereof by:

 

	
  AGENT:

  	
  CIT CAPITAL USA INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  David M. Bornstein

  
	
   

  	
   

  	
  David
  M. Bornstein, as Vice President

  
				

 

 

SIGNATURE PAGE

GUARANTY AGREEMENT

(RESACA OPERATING COMPANY)

 

 

SCHEDULE 1

ADDRESS FOR NOTICES

 

	
  Resaca
  Operating Company

  	
   

  
	
   

  	
   

  
	
  1331 Lamar, Suite 1450

  	
   

  
	
  Houston,
  TX 77010

  	
   

  
	
  Attention:
  Mr. Dennis Hammond

  	
   

  
	
  Telephone:
  713.753.1281

  	
   

  
	
  Fax: 713.655.1711

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