EX-10.10

EX-10.10 8 d261388dex1010.htm EX-10.10 EX-10.10

Exhibit 10.10

Execution Version

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL. [ * * * ] INDICATES THAT INFORMATION HAS BEEN REDACTED.

CONSENT AND SECOND AMENDING AGREEMENT

THIS AGREEMENT is made effective as of December 15, 2022

BETWEEN:

HAMMERHEAD RESOURCES INC., a corporation subsisting under the laws of the Province of Alberta (hereinafter referred to as the “Borrower”),

OF THE FIRST PART,

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CANADIAN IMPERIAL BANK OF COMMERCE, ROYAL BANK OF CANADA, ATB FINANCIAL, BUSINESS DEVELOPMENT BANK OF CANADA AND CANADIAN WESTERN BANK (hereinafter referred to collectively as the “Lenders” and individually as a “Lender”),

OF THE SECOND PART,

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CANADIAN IMPERIAL BANK OF COMMERCE, a Canadian chartered bank, as agent of the Lenders (hereinafter referred to as the “Agent”),

OF THE THIRD PART.

WHEREAS pursuant to a lender assignment agreement dated as of the date hereof, which became effective immediately prior to the effectiveness of this Agreement, National Bank of Canada assigned all of its Commitments and all of its right, title and interest in, to and under each of the outstanding Loans and other Obligations to Royal Bank of Canada (“RBC”) and, accordingly, RBC became a Lender in accordance with the terms of the Credit Agreement; in connection with the aforementioned assignment, RBC’s Affiliate, RBC Capital Markets, replaced National Bank of Canada’s Affiliate, National Bank Financial Markets, as a Co-Lead Arranger and Joint Bookrunner;

AND WHEREAS pursuant to a letter from the Borrower addressed to the Agent dated November 28, 2022 the Borrower advised the Agent that (a) the Borrower, Decarbonization Plus Acquisition Corporation IV, Hammerhead Energy Inc. and 2453729 Alberta ULC have entered into a business combination agreement dated as of September 25, 2022 (as in effect on the date hereof, the “BCA”), which provides for the terms of a business combination that will result in the Borrower becoming an Alberta unlimited liability company and a Wholly-Owned Subsidiary of New SPAC (as defined in the BCA), which will be a publicly traded company listed on the Nasdaq Capital Market and (b) the transactions contemplated by the BCA will be effected through the plan of arrangement scheduled to the BCA (as in effect on the date hereof, the “POA”) under section 193 of the Business Corporations Act (Alberta) (collectively, the “Transaction”);

AND WHEREAS the Borrower has requested that the Lenders consent to the Transaction notwithstanding the terms of the Credit Agreement;

AND WHEREAS the Lenders have agreed to consent to the Transaction on the terms and conditions as hereinafter set forth, and the parties hereto have agreed to amend and supplement certain provisions of the Credit Agreement as hereinafter set forth;

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby conclusively acknowledged by each of the parties hereto, the parties hereto covenant and agree as follows:

1. Interpretation

1.1 In this Agreement and the recitals hereto, unless something in the subject matter or context is inconsistent therewith:

“Agreement” means this agreement, as amended, modified, supplemented or restated from time to time.

“Amalco Borrower” means the Amalgamated Company (as defined in the BCA).

“Credit Agreement” means the fourth amended and restated credit agreement made as of June 9, 2022 between the Borrower, the Lenders (originally excluding, for certainty, Royal Bank of Canada and originally including, for certainty, National Bank of Canada) and the Agent, as amended by a first amending agreement made as of September 14, 2022 and as otherwise amended, supplemented or otherwise modified prior to the effectiveness of this Agreement.

1.2 Capitalized terms used herein without express definition shall have the same meanings herein as are ascribed thereto in the Credit Agreement, as amended by this Agreement.

1.3 The division of this Agreement into Sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. Unless the context otherwise requires, references herein to “Sections” are to Sections of this Agreement. The terms “this Agreement”, “hereof”, “hereunder” and similar expressions refer to this Agreement and not to any particular Section or other portion hereof and include any agreements supplemental hereto.

1.4 This Agreement shall be governed by and construed in accordance with the laws of the Province of Alberta and the federal laws of Canada applicable therein.

1.5 The following Exhibits are annexed hereto and are incorporated by reference and deemed to be part hereof:

Exhibit 1 – Lenders and Commitments

Exhibit 2 – Compliance Certificate

Exhibit 3 – Form of Confirmation of Guarantee and Security

2. Consent to Transaction

2.1 Subject to Section 2.2, the Agent and each Lender hereby consents to the Transaction (the “Transaction Consent”), provided that:

(a)

the Transaction Consent is limited solely to, and shall be effective only with respect to, the Transaction; and

(b)

except as expressly provided herein and for the limited purposes herein, nothing contained herein shall waive, limit or affect (i) any Secured Obligations or (i) any provision of the Credit Agreement or any other Documents, the Lender Financial Instruments or the Cash Management Documents, all of which continue in full force and effect and all of which are hereby ratified and confirmed by the Borrower.

2.2 The Transaction Consent shall be effective upon, and shall be subject to, the satisfaction of the following conditions precedent having been satisfied:

(a)

receipt by the Agent of a fully executed copy of a confirmation of guarantee and security, in form and substance satisfactory to the Agent, from the Amalco Borrower;

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(b)

the Amalco Borrower shall have delivered to the Agent and the Lenders true, correct and complete copies of the BCA and the POA, together with an Officer’s Certificate certifying the same to the Agent and the Lenders;

(c)

the Agent and the Lenders shall have received a legal opinion from legal counsel to the Amalco Borrower, which shall be in form and substance satisfactory to the Agent and the Lenders’ Counsel, each acting reasonably;

(d)

the Amalco Borrower shall have delivered to the Agent: (i) as and if applicable, a current certificate of status, good standing or compliance, as the case may be, in respect of its jurisdiction of formation; (ii) certified copies of its articles and by-laws or equivalent constating documents or governing agreements; (iii) certified copies of all applicable resolutions authorizing the Credit Facilities, the Documents to which it is a party and the transactions thereunder; and (iv) certificates of incumbency in respect of the persons executing and delivering the Documents to which it is a party and which are being executed and delivered to satisfy the conditions precedent set forth in Section 2 of this Agreement;

(e)

each of the representations and warranties set forth in Section 9.1 of the Credit Agreement (other than those expressed to be given as of a specific date) shall be true and accurate in all respects, in each case, as of the date hereof, and the Amalco Borrower shall have delivered to the Agent and the Lenders an Officer’s Certificate certifying the same to the Agent and the Lenders; and

(f)

no Default or Event of Default shall have occurred and be continuing or shall result from or exist immediately after the coming into effect of the Transaction Consent and the Amalco Borrower shall have delivered to the Agent and the Lenders an Officer’s Certificate certifying the same to the Agent and the Lenders.

3. Amendments and Supplements

3.1 Redetermination of the Borrowing Base. The Lenders hereby confirm and agree that as of the date hereof the Borrowing Base has been determined to be Cdn.$350,000,000, and that the foregoing shall constitute the November 30, 2022 Borrowing Base determination for the purposes of Section 2.23(2) of the Credit Agreement.

3.2 Increase of Syndicated Facility Commitment.

(a) The definition of “Syndicated Facility” in Section 1.1 of the Credit Agreement is hereby amended by deleting the reference to “$280,000,000” and substituting “$330,000,000” therefor.

(b) The parties hereto hereby confirm and agree that the maximum principal amount of the Syndicated Facility is hereby increased from Cdn.$280,000,000 to Cdn.$330,000,000.

3.3 Amendments Regarding Repayment of 2024 Unsecured Notes and Permitted Distributions.

(a)

Section 1.1 of the Credit Agreement is hereby amended by adding the following defined terms in the appropriate alphabetical order:

“Forecasted First Lien Debt to EBITDA Ratio” means, as at each Quarter End (to the extent that a Pricing and Availability Forecast has been delivered for such Quarter End pursuant to Section 10.1(e)(iv.2)), the forecasted First Lien Debt to EBITDA Ratio of the Borrower for the 12-month period following such Quarter End (which, for certainty, shall be calculated using the lower of (a) strip pricing or (b) budgeted pricing as provided to the Lenders pursuant to the Pricing and Availability Forecast delivered for such Quarter End in accordance with Section 10.1(e)(iv.2)).

“Forecasted Undrawn Availability” means, as at each Quarter End (to the extent that a Pricing and Availability Forecast has been delivered for such Quarter End pursuant to Section 10.1(e)(iv.2)), the forecasted undrawn availability under the Credit Facilities for the 12-month period following such Quarter End based on the Pricing and Availability Forecast delivered for such Quarter End in accordance with Section 10.1(e)(iv.2).

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“Junior Debt Repayment” has the meaning ascribed to such term in the definition of “Permitted Junior Debt Repayment”.

“ROC Distribution” has the meaning ascribed to such term in the definition of “Permitted Distributions”.

(a)

The definition of “Permitted Distributions” in Section 1.1 of the Credit Agreement is hereby deleted in its entirety and the following is substituted therefor:

“Permitted Distributions” means, in respect of the Borrower or any of its Subsidiaries, any one or more of the following:

(a)

any Distribution by a Subsidiary to the Borrower, by a Subsidiary to a Guarantor and by the Borrower to a Guarantor;

(b)

Distributions directly or indirectly to a Related Party in respect of obligations under the 2024 Unsecured Notes and 2024 Unsecured Note Documentation to the extent (x) such obligations relate to outstanding 2024 Unsecured Notes held by such Related Party, and (y) any Distribution in respect of the preceding clause (x) is otherwise permitted under Section 10.2(l); or

(c)

any Distribution of the type referred to in clauses (a) or (b) of the definition thereof (each, a “ROC Distribution”); provided that:

(i)

the Borrower shall have delivered a Pricing and Availability Forecast covering the period in which such Distribution is to be made, pursuant to Section 10.1(e)(iv.2);

(ii)

as at the immediately preceding Quarter End for which a Compliance Certificate has been delivered by the Borrower, the Forecasted First Lien Debt to EBITDA Ratio and the First Lien Debt to EBITDA Ratio shall each have been less than or equal to 1.5:1.0, on a pro forma basis giving effect to such Distribution;

(iii)

as at the immediately preceding Quarter End for which a Compliance Certificate has been delivered by the Borrower, the Borrower shall have had undrawn availability and Forecasted Undrawn Availability under the Credit Facilities, in each case, of not less than 30% of the aggregate Commitments of all Lenders, on a pro forma basis giving effect to such Distribution; and

(iv)

no Borrowing Base Shortfall, Default or Event of Default exists or is expected to result therefrom.

(b)

The definition of “Permitted Junior Debt Repayment” in Section 1.1 of the Credit Agreement is hereby deleted in its entirety and the following is substituted therefor:

“Permitted Junior Debt Repayment” means any repayment, repurchase, redemption or other retirement (or any combination thereof) of principal amounts in respect of the 2024 Unsecured Notes (each, a “Junior Debt Repayment”); provided that:

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(a)

the Borrower shall have delivered a Pricing and Availability Forecast covering the period in which such Junior Debt Repayment is to be made, pursuant to Section 10.1(e)(iv.2);

(b)

(c)

(d)

no Borrowing Base Shortfall, Default or Event of Default exists or is expected to result therefrom,

and at least 5 Banking Days prior to giving effect to such repayment, repurchase, redemption or other retirement of 2024 Unsecured Notes, the Borrower has delivered an Officer’s Certificate to the Agent attaching any amendments or supplements to the 2024 Unsecured Note Documentation permitted by Section 10.2(n)(iii).

(c)

The definition of Permitted Junior Debt Repayment Mandatory Hedge in Section 1.1 of the Credit Agreement is hereby deleted in its entirety.

(d)

The definition of “Pricing and Availability Forecast” in Section 1.1 of the Credit Agreement is hereby deleted in its entirety and the following is substituted therefor:

“Pricing and Availability Forecast” means, as at each applicable Quarter End, a commodity pricing and credit availability forecast for the 12-month period following such Quarter End delivered by the Borrower in accordance with Section 10.1(e)(iv.2).

(b)

Section 10.1(e) of the Credit Agreement is hereby amended by adding a new subparagraph (iv.2) immediately following the existing subparagraph (iv), as follows:

“(iv.2) Pricing and Availability Forecast – concurrently with furnishing the financial statements pursuant to Sections 10.1(e)(iii) and 10.1(e)(iv), a Pricing and Availability Forecast to the extent that a ROC Distribution and/or Junior Debt Repayment is intended to be made during the forecasted period (for certainty, subject to Sections 10.2(g) and 10.2(l));”

(c)

Section 10.1(e)(v) of the Credit Agreement is hereby amended by deleting “First Lien Debt to EBITDA Ratio or Debt to EBITDA Ratio” and substituting “First Lien Debt to EBITDA Ratio or Debt to EBITDA Ratio and, to the extent that a Pricing and Availability Forecast has been delivered for the applicable Quarter End pursuant to Section 10.1(e)(iv.2), the First Lien Debt to EBITDA Ratio, the undrawn availability under the Credit Facilities, the Forecasted First Lien Debt to EBITDA Ratio and the Forecasted Undrawn Availability under the Credit Facilities, in each case, pro forma all ROC Distributions and Junior Debt Repayments” therefor.

(d)

Section 10.2(l) of the Credit Agreement is hereby amended by deleting the reference to “Other than the Permitted Junior Debt Repayment” and substituting “Other than Permitted Junior Debt Repayments” therefor.

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3.4 Replacement of National Bank Financial Markets with RBC Capital Markets as Co-Lead Arranger and Joint Bookrunner. The definition of “Co-Lead Arrangers” in Section 1.1 of the Credit Agreement is hereby amended by deleting “National Bank Financial Markets” and substituting “RBC Capital Markets” therefor.

3.5 Replacement of Schedule A. Schedule A to the Credit Agreement is hereby deleted in its entirety and replaced with Exhibit 1 attached hereto to, inter alia, provide that the Operating Facility Commitment and the Syndicated Facility Commitment of each Lender shall be the amount set forth opposite its name on such new Schedule A.

3.6 Replacement of Schedule C. Schedule C to the Credit Agreement is hereby deleted in its entirety and replaced with Exhibit 2 attached hereto.

3.7 Amendments re: Conforming Changes to Schedules. Each of Schedules D, E, F, G, H-4-H-7 and I of the Credit Agreement is hereby amended by deleting each of the references to “National Bank of Canada” therein and substituting “Royal Bank of Canada” therefor.

4. Funding of Loans to Reflect Revised Commitments

4.1 Funding of Outstanding Loans. In order to give effect to the new and revised Commitments under the Syndicated Facility contemplated hereby, upon, and with effect from, the satisfaction of the conditions precedent set forth in Section 7, the Lenders hereby agree to take all steps and actions and execute and deliver all agreements, instruments and other documents as may be required by the Agent or any of the Lenders (including the assignment of interests in, or the purchase of participations in, existing Loans) to give effect to the increase in the Syndicated Facility and the revised Commitments under the Syndicated Facility and to ensure that the aggregate Obligations owing to each Lender under the Syndicated Facility are outstanding in proportion to each Lender’s Rateable Portion of all outstanding Obligations under such Credit Facility after giving effect to such revised Commitments; provided that, the foregoing provisions of this Section 4.1 shall not apply to Bankers’ Acceptances outstanding on the date hereof, such Bankers’ Acceptances being subject to and dealt with pursuant to Section 4.2 hereof.

4.2 Outstanding Bankers’ Acceptances.

(a) The parties hereby acknowledge that, on the date hereof, Bankers’ Acceptances under the Syndicated Facility having terms to maturity ending after the date hereof may be outstanding (the “Outstanding BAs”). Notwithstanding any provision of the Credit Agreement or this Agreement to the contrary, it is acknowledged and agreed by the parties hereto that all rights and interests of the Lenders in respect of, and any obligation of the Borrower to pay or reimburse the Lenders in respect of, the Outstanding BAs are solely a risk and for the account of the Lenders based upon their respective Rateable Portions under the Syndicated Facility as in effect prior to and without regard to the provisions of this Agreement.

(b) Notwithstanding the foregoing, from time to time, as the Outstanding BAs mature and Rollovers and Conversions are made by the Borrower in respect thereof, each of the Lenders shall participate in the Loans effecting such Rollovers and Conversions to the full extent of its Syndicated Facility Commitment and Rateable Portion therein after giving effect to the provisions of this Agreement.

5. Representations and Warranties

The Borrower hereby represents and warrants to the Agent and to each Lender, and the Borrower acknowledges and confirms that the Agent and each Lender are relying upon such representations and warranties, as follows:

(a)

Capacity, Power and Authority

It is duly amalgamated and is validly subsisting under the laws of the Province of Alberta and has all the requisite corporate capacity, power and authority to carry on its business as presently conducted and to own its property.

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(b)

Authorization; Enforceability

It has taken or caused to be taken all necessary action to authorize, and has duly executed and delivered, this Agreement, and this Agreement is a legal, valid and binding obligation of it enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, winding up, insolvency, moratorium or other laws of general application affecting the enforcement of creditors’ rights generally and to the equitable and statutory powers of the courts having jurisdiction with respect thereto.

(c)

Compliance with Other Instruments

The execution, delivery and performance by the Borrower of this Agreement and the consummation of the transactions contemplated herein do not conflict with, result in any breach or violation of, or constitute a default under the terms, conditions or provisions of the charter or constating documents or by-laws of, or any unanimous shareholder agreement relating to, the Borrower or of any law, regulation, judgment, decree or order binding on or applicable to the Borrower or to which its property is subject or of any material agreement, lease, license, permit or other instrument to which the Borrower is a party or is otherwise bound or by which the Borrower benefits or to which its property is subject and do not require the consent or approval of any Governmental Authority or any other party.

(d)

No Default

No Default or Event of Default has occurred or is continuing or will occur immediately after giving effect to the amendments and supplements to the Credit Agreement contemplated hereby and the other provisions of this Agreement.

(e)

Credit Agreement Representations and Warranties

Each of the representations and warranties of the Borrower set forth in Article 9 of the Credit Agreement, as amended by this Agreement is true and accurate in all respects as of the date hereof except those made as of a specified date.

The representations and warranties set out herein shall survive the execution and delivery of this Agreement and the making of each Drawdown under the Credit Agreement, notwithstanding any investigations or examinations which may be made by or on behalf of the Agent, the Lenders or Lenders’ Counsel. Such representations and warranties shall survive until the Credit Agreement has been terminated.

6. Fees

6.1 The Borrower hereby agrees to pay to the Agent for each Lender (other than RBC) which will have increased its aggregate Commitments under the Credit Facilities (after giving effect hereto) from such aggregate Commitments as in effect under the Credit Agreement immediately prior to the date hereof, in each case, a fee in Canadian Dollars in an amount equal to [***]% per annum of such increased amount of each such Lender’s aggregate Commitments under the Credit Facilities after giving effect hereto.

6.2 The Borrower hereby agrees to pay to the Agent for RBC a fee in Canadian Dollars in an amount equal to [***]% per annum of RBC’s aggregate Commitments under the Credit Facilities after giving effect hereto.

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7. Conditions Precedent

The amendments and supplements to the Credit Agreement contained in Section 3 of this Agreement shall be effective upon, and shall be subject to, the satisfaction of the following conditions precedent:

(a) the Borrower shall have paid to the Agent, for each Lender (as applicable), the fees required to be paid pursuant to Section 6;

(b) receipt by the Agent of a fully executed copy of:

(i) this Agreement; and

(ii) a Confirmation of Guarantee and Security, in the form attached hereto as Exhibit 3, from each Guarantor;

(c) the Agent and the Lenders shall have received a legal opinion from legal counsel to the Borrower and the Guarantors, which shall be in form and substance satisfactory to the Agent and the Lenders’ Counsel, each acting reasonably;

(d) the Borrower and each Guarantor shall have delivered to the Agent: (i) as and if applicable, a current certificate of status, good standing or compliance, as the case may be, in respect of its jurisdiction of formation; (ii) certified copies of its articles and by-laws or equivalent constating documents or governing agreements to the extent not previously delivered in connection with the Credit Agreement or, if previously delivered, a certification that there has been no amendment, modification or supplement thereto since the previous delivery thereof; (iii) certified copies of all applicable resolutions authorizing the Credit Facilities, the Documents to which it is a party and the transactions thereunder to the extent not previously delivered in connection with the Credit Agreement, or, if previously delivered, a certification that there has been no amendment, modification or supplement thereto since the previous delivery thereof; and (iv) certificates of incumbency in respect of the persons executing and delivering the Documents to which it is a party and which are being executed and delivered to satisfy the conditions precedent set forth in Section 7 of this Agreement;

(e) each of the representations and warranties set forth in Section 9.1 of the Credit Agreement (other than those expressed to be given as of a specific date) shall be true and accurate in all respects, in each case, as of the date hereof, and the Borrower shall have delivered to the Agent and the Lenders an Officer’s Certificate certifying the same to the Agent and the Lenders; and

(f) no Default or Event of Default shall have occurred and be continuing or shall result from or exist immediately after the coming into effect of the amendments and supplements to the Credit Agreement contemplated by Section 3 of this Agreement and the Borrower shall have delivered to the Agent and the Lenders an Officer’s Certificate certifying the same to the Agent and the Lenders.

The foregoing conditions precedent are inserted for the sole benefit of the Lenders and the Agent and may be waived in writing by the Lenders, in whole or in part (with or without terms and conditions).

8. Confirmation of Credit Agreement and other Documents

The Credit Agreement and the other Documents to which the Borrower is a party and all covenants, terms and provisions thereof, except as expressly amended and supplemented by this Agreement, shall be and continue to be in full force and effect and the Credit Agreement as amended and supplemented by this Agreement and each of the other Documents to which the Borrower is a party is hereby ratified and confirmed and shall from and after the date hereof continue in full force and effect as herein amended and supplemented, with such amendments and supplements being effective from and as of the date hereof upon satisfaction of the conditions precedent set forth in Section 7 hereof.

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9. Further Assurances

The parties hereto shall from time to time do all such further acts and things and execute and deliver all such documents as are required in order to effect the full intent of and fully perform and carry out the terms of this Agreement.

10. Enurement

This Agreement shall enure to the benefit of and shall be binding upon the parties hereto and their respective successors and permitted assigns.

11. Counterparts

This Agreement may be executed in one or more counterparts (and by different parties hereto in different counterparts), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery by fax or other electronic transmission of an executed counterpart of a signature page to this Agreement shall be effective as delivery of an original executed counterpart of this Agreement. The words “execution”, “execute”, “signed”, “signature”, and words of like import in or related to any document to be signed in connection with this Agreement shall be deemed to include electronic signatures, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, as provided in Parts 2 and 3 of the Personal Information Protection and Electronic Documents Act (Canada), the Electronic Commerce Act, 2000 (Ontario), the Electronic Transactions Act (British Columbia), the Electronic Transactions Act (Alberta), or any other similar laws based on the Uniform Electronic Commerce Act of the Uniform Law Conference of Canada. The Agent may, in its discretion, require that any such documents and signatures executed electronically or delivered by fax or other electronic transmission be confirmed by a manually-signed original thereof; provided that the failure to request or deliver the same shall not limit the effectiveness of any document or signature executed electronically or delivered by fax or other electronic transmission.

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IN WITNESS WHEREOF the parties hereto have executed this Agreement.


BORROWER:

HAMMERHEAD RESOURCES INC.

By:		/s/ Michael Kohut
		Name: Michael Kohut
		Title: Chief Financial Officer

By:		/s/ Scott Sobie
		Name: Scott Sobie
		Title: President and Chief Executive Officer