EXHIBIT 10.25
AMENDED AND RESTATED SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT ("Agreement") dated as of
April 1, 2008, among South Texas Oil Company, a Nevada corporation ("Company"),
Southern Texas Oil Company, a Texas corporation ("Southern Texas"), STO
Operating Company, a Texas corporation formerly known as Leexus Operating
Company ("STO Operating"), STO Properties LLC, a Texas limited liability
company ("STO Properties"), STO Drilling Company, a Texas corporation ("STO
Drilling"; each such corporation or limited liability company, including
Company, and together with each other Person who becomes a party to this
Agreement by execution of a joinder in the form of Exhibit A attached hereto,
is referred to individually as a "Debtor" and, collectively, as the "Debtors"),
and Viking Asset Management, LLC, a California limited liability company, in
its capacity as collateral agent for the Buyers on Schedule B attached hereto
(together with its successors and assigns in such capacity, the "Secured
Party") and as the successor lienholder to The Longview Fund, L.P., a
California limited partnership ("Longview") and Longview Marquis Master Fund,
L.P., a British Virgin Islands limited partnership ("Marquis"), under each of
the Company Security Agreement and the Subsidiary Security Agreement (each as
defined below).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Loan Agreement (as amended, restated,
supplemented or otherwise modified from time to time and in effect immediately
prior to the effectiveness of the Purchase Agreement (as defined below), the
"Original Loan Agreement"), dated January 31, 2007, between Company and
Longview, Company initially had the right to borrow from Longview an aggregate
amount not to exceed $15,000,000, which obligation was represented in and
evidenced by that certain Revolving Credit Note (as amended, restated,
supplemented or otherwise modified from time to time and in effect immediately
prior to the effectiveness of the Purchase Agreement, the "Revolving Note"),
dated January 31, 2007, issued by the Company in favor of Longview in
connection with the Original Loan Agreement;
WHEREAS, Company and Longview entered into that certain Security
Agreement (as amended, restated, supplemented or otherwise modified from time
to time and in effect immediately prior to the effectiveness of this Agreement,
the "Company Security Agreement"), dated as of January 31, 2007, pursuant to
which the Company granted to Longview a security interest in the collateral
described therein, on the terms and conditions more specifically set forth
therein;
WHEREAS, Company and Longview entered into that certain First Amendment
to Loan Agreement and Revolving Credit Note (the "First Amendment"), dated as
of September 25, 2007, pursuant to which (i) Company and Longview agreed to
amend and restate the Original Loan Agreement and the Revolving Note to
increase the aggregate amount that Company was entitled to borrow from Longview
(subject to the terms and conditions of the Original Loan Agreement), and the
principal amount of the Revolving Note, to $30,000,000, and (ii) Debtors agreed
to enter into, as applicable, (a) a guaranty of all obligations, liabilities
and indebtedness of Company under the Original Loan Agreement and the Revolving
Note (as amended, restated supplemented or otherwise modified from time to
time, the "Subsidiary Guaranty" and the guarantees under the Subsidiary
Guaranty, including any such guarantee added after the date hereof, the
"Guarantees"), and (b) security and pledge agreements and such other documents
and instruments as were necessary to provide Secured Party, for the benefit of
itself and the Buyers, with a valid, perfected, first priority security
interest in substantially all of the assets of Company and each of the other
Debtors;
WHEREAS, as required by the First Amendment, prior to the date hereof,
the Debtors (other than Company) and Longview executed and delivered a Security
Agreement (as amended, restated, supplemented or otherwise modified from time
to time and in effect immediately prior to the effectiveness of this Agreement,
the "Subsidiary Security Agreement"; together with the Company Security
Agreement, the "Original Security Agreements"), pursuant to which the Debtors
(other than Company) have provided to Longview perfected, first priority
security interests in substantially all of the assets of such Debtors;
WHEREAS, prior to the date hereof, Marquis acquired an interest in, and
became party to, the Original Loan Agreement, Original Security Agreement and
certain other related documents;
WHEREAS, Company and Buyers have entered into that certain Securities
Purchase Agreement dated as of the date hereof (as amended, restated,
supplemented or otherwise modified from time to time, the "Purchase
Agreement"), pursuant to which, among other things, (i) Company and Buyers are
amending and restating in its entirety the Original Loan Agreement, (ii)
Company is issuing to Buyers the Initial Notes (as defined in the Purchase
Agreement) in replacement of, and as an amendment and restatement in the
entirety of, the Revolving Note, and (iii) Company may from time to time, in
accordance with the terms of the Purchase Agreement, issue Additional Notes (as
defined in the Purchase Agreement) to the Buyers (the Revolving Note, Initial
Notes and the Additional Notes are referred to herein collectively as the
"Notes");
WHEREAS, Debtors (other than Company) are direct or indirect
subsidiaries or affiliates of Company and, as such, will derive substantial
benefit and advantage from the funds borrowed under the Purchase Agreement, and
it will be to each such Debtor's direct interest and economic benefit to assist
the Company in procuring such funds; and
WHEREAS, the Debtors, Secured Party and Buyers have agreed to amend and
restate in their entirety the Original Security Agreements to read as this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Definitions. Capitalized terms used herein without
definition and defined in the Purchase Agreement are used herein as defined
therein. In addition, as used herein:
"Accounts" means any "account," as such term is defined in the
Uniform Commercial Code, and, in any event, shall include, without
limitation, "supporting obligations" as defined in the Uniform
Commercial Code.
"As-extracted Collateral" means any "as-extracted collateral," as
such term is defined in the Uniform Commercial Code.
"Chattel Paper" means any "chattel paper," as such term is defined
in the Uniform Commercial Code.
"Collateral" shall have the meaning ascribed thereto in Section 3
hereof.
"Commercial Tort Claims" means "commercial tort claims", as such
term is defined in the Uniform Commercial Code.
"Contracts" means all contracts, undertakings, or other agreements
(other than rights evidenced by Chattel Paper, Documents or Instruments)
in or under which a Debtor may now or hereafter have any right, title or
interest, including without limitation with respect to an Account, any
agreement relating to the terms of payment or the terms of performance
thereof.
"Copyrights" means any copyrights, rights and interests in
copyrights, works protectable by copyrights, copyright registrations and
copyright applications, including, without limitation, the copyright
registrations and applications listed on Schedule III attached hereto,
and all renewals of any of the foregoing, all income, royalties, damages
and payments now and hereafter due and/or payable under or with respect
to any of the foregoing, including without limitation damages and
payments for past, present and future infringements of any of the
foregoing and the right to xxx for past, present and future
infringements of any of the foregoing.
"Deposit Accounts" means all "deposit accounts" as such term is
defined in the Uniform Commercial Code, now or hereafter held in the
name of a Debtor.
"Documents" means any "documents," as such term is defined in the
Uniform Commercial Code, and shall include without limitation all
documents of title (as defined in the Uniform Commercial Code), bills of
lading or other receipts evidencing or representing Inventory or
Equipment.
"Equipment" means any "equipment," as such term is defined in the
Uniform Commercial Code and, in any event, shall include, Motor
Vehicles.
"Event of Default" shall have the meaning set forth in the Notes.
"General Intangibles" means any "general intangibles," as such
term is defined in the Uniform Commercial Code, and, in any event, shall
include without limitation all right, title and interest in or under any
Contract, models, drawings, materials and records, claims, literary
rights, goodwill, rights of performance, Copyrights, Trademarks,
Patents, warranties, rights under insurance policies and rights of
indemnification.
"Goods" means any "goods", as such term is defined in the Uniform
Commercial Code, including without limitation fixtures and embedded
Software to the extent included in "goods" as defined in the Uniform
Commercial Code .
"Governmental Authority" means the government of the United States
of America or any other nation, or any political subdivision thereof,
whether state or local, or any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administration
powers or functions of or pertaining to government or any Debtor of any
of their Subsidiaries, or any of their respective properties, assets or
undertakings.
"Instruments" means any "instrument," as such term is defined in
the Uniform Commercial Code, and shall include without limitation
promissory notes, drafts, bills of exchange, trade acceptances, letters
of credit, letter of credit rights (as defined in the Uniform Commercial
Code), and Chattel Paper.
"Inventory" means any "inventory," as such term is defined in the
Uniform Commercial Code.
"Investment Property" means any "investment property", as such
term is defined in the Uniform Commercial Code.
"Majority Buyers" means, at any date of determination, Buyers
individually or collectively holding fifty percent (50%) or more of the
then aggregate outstanding principal amount of the Notes (or, if no
Notes are then outstanding, fifty percent (50%) or more of the then
aggregate outstanding amount of Obligations).
"Motor Vehicles" shall mean motor vehicles, tractors, trailers and
other like property, whether or not the title thereto is governed by a
certificate of title or ownership.
"Obligations" shall mean all obligations, liabilities and
indebtedness of every nature of Debtors from time to time owed or owing
under or in respect of this Agreement, the Original Loan Agreement, the
Purchase Agreement, the Notes, the Replacement Override Conveyances, the
Warrants, the Subsidiary Guaranty, any and all Guarantees, the Pledge
Agreement referred to in Section 5.15 hereof, and any of the other
Security Documents, as the case may be, including without limitation the
principal amount of all debts, claims and indebtedness, accrued and
unpaid interest and all fees, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now
and/or from time to time hereafter owing, due or payable whether before
or after the filing of a bankruptcy, insolvency or similar proceeding
under applicable federal, state, foreign or other law.
"Patents" means any patents and patent applications, including
without limitation the inventions and improvements described and claimed
therein, all patentable inventions and those patents and patent
applications listed on Schedule IV attached hereto, and the reissues,
divisions, continuations, renewals, extensions and continuations-in-part
of any of the foregoing, and all income, royalties, damages and payments
now or hereafter due and/or payable under or with respect to any of the
foregoing, including, without limitation, damages and payments for past,
present and future infringements of any of the foregoing and the right
to xxx for past, present and future infringements of any of the
foregoing.
"Proceeds" means "proceeds," as such term is defined in the
Uniform Commercial Code and, in any event includes without limitation,
(a) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable with respect to any of the Collateral, (b) any and all
payments (in any form whatsoever) made or due and payable from time to
time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by any
governmental body, authority, bureau or agency (or any person acting
under color of governmental authority), and (c) any and all other
amounts from time to time paid or payable under, in respect of or in
connection with any of the Collateral.
"Representative" means any Person acting as agent, representative
or trustee on behalf of the Secured Party from time to time.
"Software" means all "software" as such term is defined in the
Uniform Commercial Code, now owned or hereafter acquired by a Debtor,
other than software embedded in any category of Goods, including without
limitation all computer programs and all supporting information provided
in connection with a transaction related to any program.
"Subsidiary Guaranty" shall have the meaning set forth in the
recitals to this Agreement and shall include that certain Guaranty dated
as of the date hereof, as amended, restated, supplemented or otherwise
modified from time to time, by Debtors (other than Company) in favor of
the Buyers.
"Trademarks" means any trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos, other business identifiers, prints and labels on
which any of the foregoing have appeared or appear, all registrations
and recordings thereof, and all applications in connection therewith,
including without limitation the trademarks and applications listed in
Schedule V attached hereto and renewals thereof, and all income,
royalties, damages and payments now or hereafter due and/or payable
under or with respect to any of the foregoing, including without
limitation damages and payments for past, present and future
infringements of any of the foregoing and the right to xxx for past,
present and future infringements of any of the foregoing.
"Uniform Commercial Code" shall mean the Uniform Commercial Code
as in effect from time to time in the State of New York; provided, that
to the extent that the Uniform Commercial Code is used to define any
term herein and such term is defined differently in different Articles
or Divisions of the Uniform Commercial Code, the definition of such term
contained in Article or Division 9 shall govern.
Section 2. Representations, Warranties and Covenants of Debtors. Each
Debtor represents and warrants to, and covenants with, the Secured Party as
follows:
(a) Such Debtor has or will have rights in and the power to
transfer the Collateral in which it purports to grant a security
interest pursuant to Section 3 hereof (subject, with respect to after
acquired Collateral, to such Debtor acquiring the same) and no Lien
other than Permitted Liens exists or will exist upon such Collateral at
any time;
(b) This Agreement is effective to create in favor of Secured
Party a valid security interest in and Lien upon all of such Debtor's
right, title and interest in and to the Collateral, and, upon (i) the
filing of appropriate Uniform Commercial Code financing statements in
the jurisdictions listed on Schedule I attached hereto, and (ii) each
Deposit Account being subject to an Account Control Agreement (as
hereinafter defined) between the applicable Debtor and depositary
institution and the Secured Party on behalf of the Secured Party, such
security interest will be a duly perfected first priority perfected
security interest in all the Collateral (other than Instruments not
constituting Chattel Paper), and upon delivery of the Instruments to the
Secured Party or its Representative, duly endorsed by such Debtor or
accompanied by appropriate instruments of transfer duly executed by such
Debtor, the security interest in the Instruments will be duly perfected;
(c) All of the Equipment, Inventory and Goods owned by such
Debtor is located at the places as specified on Schedule I attached
hereto. Except as disclosed on Schedule I, none of the Collateral is in
the possession of any bailee, warehousemen, processor or consignee.
Schedule I discloses such Debtor's name as of the date hereof as it
appears in official filings in the state of its incorporation, formation
or organization, the type of entity of such Debtor (including
corporation, partnership, limited partnership or limited liability
company), organizational identification number issued by such Debtor's
state of incorporation, formation or organization (or a statement that
no such number has been issued), such Debtor's state or province, as
applicable, of incorporation, formation or organization and the chief
place of business, chief executive office and the office where such
Debtor keeps its books and records. Such Debtor has only one state of
incorporation, formation or organization. Such Debtor (including any
Person acquired by such Debtor) does not do business and has not done
business during the past five (5) years under any trade name or
fictitious business name, except as disclosed on Schedule II attached
hereto;
(d) No Copyrights, Patents or Trademarks listed on Schedules
III, IV and V, respectively, if any, have been adjudged invalid or
unenforceable or have been canceled, in whole or in part, or are not
presently subsisting. Each of such Copyrights, Patents and Trademarks
is valid and enforceable. Such Debtor is the sole and exclusive owner
of the entire and unencumbered right, title and interest in and to each
of such Copyrights, Patents and Trademarks, identified on Schedules III,
IV and V, as applicable, as being owned by such Debtor, free and clear
of any liens, charges and encumbrances, including without limitation
licenses, shop rights and covenants by such Debtor not to xxx third
persons. Such Debtor has adopted, used and is currently using, or has a
current bona fide intention to use, all of such Trademarks and
Copyrights. Such Debtor has no notice of any suits or actions commenced
or threatened with reference to the Copyrights, Patents or Trademarks
owned by it;
(e) Each Debtor agrees to deliver to the Secured Party an
updated Schedule I, II, III, IV and/or V within five (5) Business Days
of any change thereto;
(f) All depositary and other accounts including, without
limitation, Deposit Accounts, securities accounts, brokerage accounts
and other similar accounts, maintained by each Debtor are described on
Schedule VI hereto, which description includes for each such account the
name of the Debtor maintaining such account, the name, address and
telephone and telecopy numbers of the financial institution at which
such account is maintained, the account number and the account officer,
if any, of such account. No Debtor shall open any new Deposit Accounts,
securities accounts, brokerage accounts or other accounts unless such
Debtor shall have given Secured Party ten (10) Business Days' prior
written notice of its intention to open any such new accounts. Each
Debtor shall deliver to Secured Party a revised version of Schedule VI
showing any changes thereto within five (5) Business Days of any such
change. Each Debtor hereby authorizes the financial institutions at
which such Debtor maintains an account to provide Secured Party with
such information with respect to such account as Secured Party from time
to time reasonably may request, and each Debtor hereby consents to such
information being provided to Secured Party. In addition, all of
Debtor's depositary, brokerage, security and other accounts including
without limitation Deposit Accounts shall be subject to the provisions
of Section 4.5 hereof;
(g) Such Debtor does not own any Commercial Tort Claim except
for those disclosed on Schedule VII hereto;
(h) Such Debtor does not have any interest in real property or
mining rights with respect to real property except as disclosed on Schedule
VIII. Each Debtor shall deliver to Secured Party a revised version of Schedule
VIII showing any changes thereto within twenty (20) Business Days of any such
change. Except as otherwise agreed to by Secured Party, all such interests in
real property or mining rights with respect to such real property are subject
to a mortgage, deed of trust and assignment of production proceeds (in form and
substance satisfactory to Secured Party) in favor of Secured Party
(hereinafter, a "Mortgage"). Each debtor acknowledges that each such Mortgage
contains an Exhibit A (or other applicable Exhibit) listing the properties in
which Debtor has an interest, and to the extent that Schedule VIII is updated
pursuant to this Section 2(h), the applicable Debtor shall be obligated to
execute an amendment to the applicable Exhibit to the applicable Mortgage such
that, after giving effect to such Mortgage amendment, Secured Party will have a
first priority perfected security interest in such new real property or mining
rights;
(i) Each Debtor shall duly and properly record each interest in
real property held by such Debtor except with respect to easements, rights of
way, access agreements, surface damage agreements, surface use agreement or
similar agreements that such Debtor, using prudent customs and practices in the
industry in which it operates, does not believe are of material value or
material to the operation of such Debtor's business or, with respect to certain
local, state and federal rights of way, are not capable of being recorded as a
matter of local, state or federal law; and
(j) All Equipment (including without limitation Motor Vehicles)
owned by a Debtor and subject to a certificate of title or ownership statute is
described on Schedule IX hereto.
Section 3. Collateral. As collateral security for the prompt payment
in full when due (whether at stated maturity, by acceleration or otherwise) of
the Obligations, each Debtor hereby pledges and grants to the Secured Party,
for its benefit and the benefit of the Buyers, a Lien on and security interest
in and to all of such Debtor's right, title and interest in the personal
property and assets of such Debtor, whether now owned by such Debtor or
hereafter acquired and whether now existing or hereafter coming into existence
and wherever located (all being collectively referred to herein as
"Collateral"), including, without limitation:
(a) all Instruments, together with all payments thereon or
thereunder:
(b) all Accounts;
(c) all Inventory;
(d) all General Intangibles (including payment intangibles (as
defined in the Uniform Commercial Code) and Software);
(e) all Equipment;
(f) all Documents;
(g) all Contracts;
(h) all Goods;
(i) all Investment Property;
(j) all Deposit Accounts, including, without limitation, the
balance from time to time in all bank accounts maintained by such
Debtor;
(k) Commercial Tort Claims specified on Schedule VII;
(l) all As-extracted Collateral;
(m) all Trademarks, Patents and Copyrights; and
(n) all other tangible and intangible property of such Debtor,
including, without limitation, all interests in real property, Proceeds,
tort claims, products, accessions, rents, profits, income, benefits,
substitutions, additions and replacements of and to any of the property
of such Debtor described in the preceding clauses of this Section 3
(including, without limitation, any proceeds of insurance thereon,
insurance claims and all rights, claims and benefits against any Person
relating thereto), other rights to payments not otherwise included in
the foregoing, and all books, correspondence, files, records, invoices
and other papers, including without limitation all tapes, cards,
computer runs, computer programs, computer files and other papers,
documents and records in the possession or under the control of such
Debtor or any computer bureau or service company from time to time
acting for such Debtor.
Section 4. Covenants; Remedies. In furtherance of the grant of the
pledge and security interest pursuant to Section 3 hereof, each Debtor hereby
agrees with the Secured Party as follows:
4.1. Delivery and Other Perfection; Maintenance, etc.
(a) Delivery of Instruments, Documents, Etc. Each Debtor shall
deliver and pledge to the Secured Party or its Representative any and
all Instruments, negotiable Documents, Chattel Paper and certificated
securities (accompanied by stock powers executed in blank) duly endorsed
and/or accompanied by such instruments of assignment and transfer
executed by such Debtor in such form and substance as the Secured Party
or its Representative may request; provided, that so long as no Event of
Default shall have occurred and be continuing, each Debtor may retain
for collection in the ordinary course of business any Instruments,
negotiable Documents and Chattel Paper received by such Debtor in the
ordinary course of business, and the Secured Party or its Representative
shall, promptly upon request of a Debtor, make appropriate arrangements
for making any other Instruments, negotiable Documents and Chattel Paper
pledged by such Debtor available to such Debtor for purposes of
presentation, collection or renewal (any such arrangement to be
effected, to the extent deemed appropriate by the Secured Party or its
Representative, against a trust receipt or like document). If a Debtor
retains possession of any Chattel Paper, negotiable Documents or
Instruments pursuant to the terms hereof, such Chattel Paper, negotiable
Documents and Instruments shall be marked with the following legend:
"This writing and the obligations evidenced or secured hereby are
subject to the security interest of Viking Asset Management, LLC, in its
capacity as collateral agent for the benefit of the Buyers, as secured
party."
(b) Other Documents and Actions. Each Debtor shall give,
execute, deliver, file and/or record any financing statement, notice,
instrument, document, agreement or other papers that may be necessary or
desirable (in the reasonable judgment of the Secured Party or its
Representative) to create, preserve, perfect or validate the security
interest granted pursuant hereto (or any security interest or mortgage
contemplated or required hereunder, including with respect to Section
2(h) of this Agreement) or to enable the Secured Party or its
Representative to exercise and enforce the rights of the Secured Party
hereunder with respect to such pledge and security interest, provided
that notices to account debtors in respect of any Accounts or
Instruments shall be subject to the provisions of clause (e) below.
Notwithstanding the foregoing, each Debtor hereby irrevocably authorizes
the Secured Party at any time and from time to time to file in any
filing office in any jurisdiction any initial financing statements and
amendments thereto that (a) indicate the Collateral (i) as all assets of
such Debtor or words of similar effect, regardless of whether any
particular asset comprised in the Collateral falls within the scope of
Article 9 of the Uniform Commercial Code of the State of New York or
such jurisdiction, or (ii) as being of an equal or lesser scope or with
greater detail, and (b) contain any other information required by part 5
of Article 9 of the Uniform Commercial Code of the State of New York or
any other State for the sufficiency or filing office acceptance of any
financing statement or amendment, including (i) whether such Debtor is
an organization, the type of organization and any organization
identification number issued to such Debtor, and (ii) in the case of a
financing statement filed as a fixture filing or indicating Collateral
as As-extracted Collateral or timber to be cut, a sufficient description
of real property to which the Collateral relates. Each Debtor agrees to
furnish any such information to the Secured Party promptly upon request.
Each Debtor also ratifies its authorization for the Secured Party to
have filed in any jurisdiction any like initial financing statements or
amendments thereto if filed prior to the date hereof.
(c) Books and Records. Each Debtor shall maintain, at its own
cost and expense, complete and accurate books and records of the
Collateral, including without limitation a record of all payments
received and all credits granted with respect to the Collateral and all
other dealings with the Collateral. Upon the occurrence and during the
continuation of any Event of Default, each Debtor shall deliver and turn
over any such books and records (or true and correct copies thereof) to
the Secured Party or its Representative at any time on demand. Each
Debtor shall permit any representative of the Secured Party to inspect
such books and records at any time during reasonable business hours and
will provide photocopies thereof at such Debtor's expense to the Secured
Party upon request of the Secured Party.
(d) Motor Vehicles. Each Debtor shall, promptly upon the
request of the Secured Party or its Representative, cause the Secured
Party to be listed as the lienholder on each certificate of title or
ownership covering any items of Equipment, including Motor Vehicles
having a value in excess of $50,000 in the aggregate for all such items
of Equipment of the Debtors, or otherwise comply with the certificate of
title or ownership laws of the relevant jurisdiction issuing such
certificate of title or ownership in order to properly evidence and
perfect Secured Party's security interest in the assets represented by
such certificate of title or ownership.
(e) Notice to Account Debtors; Verification. (i) Upon the
occurrence and during the continuance of any Event of Default (or if any
rights of set-off (other than set-offs against an Account arising under
the Contract giving rise to the same Account) or contra accounts may be
asserted), upon request of the Secured Party or its Representative, each
Debtor shall promptly notify (and each Debtor hereby authorizes the
Secured Party and its Representative so to notify) each account debtor
in respect of any Accounts or Instruments or other Persons obligated on
the Collateral that such Collateral has been assigned to the Secured
Party hereunder, and that any payments due or to become due in respect
of such Collateral are to be made directly to the Secured Party, and
(ii) the Secured Party and its Representative shall have the right at
any time or times to make direct verification with the account debtors
or other Persons obligated on the Collateral of any and all of the
Accounts or other such Collateral.
(f) Intellectual Property. Each Debtor represents and warrants
that the Copyrights, Patents and Trademarks listed on Schedules III, IV
and V, respectively, constitute all of the registered Copyrights and all
of the Patents and Trademarks now owned by such Debtor. If such Debtor
shall (i) obtain rights to any new patentable inventions, any registered
Copyrights or any Patents or Trademarks, or (ii) become entitled to the
benefit of any registered Copyrights or any Patents or Trademarks or any
improvement on any Patent, the provisions of this Agreement above shall
automatically apply thereto and such Debtor shall give to Secured Party
prompt written notice thereof. Each Debtor hereby authorizes Secured
Party to modify this Agreement by amending Schedules III, IV and V, as
applicable, to include any such registered Copyrights or any such
Patents and Trademarks. Each Debtor shall have the duty (i) to
prosecute diligently any patent, trademark, or service xxxx applications
pending as of the date hereof or hereafter, (ii) to make application on
unpatented but patentable inventions and on trademarks, copyrights and
service marks, as appropriate, (iii) to preserve and maintain all rights
in the Copyrights, Patents and Trademarks, to the extent material to the
operations of the business of such Debtor and (iv) to ensure that the
Copyrights, Patents and Trademarks are and remain enforceable, to the
extent material to the operations of the business of such Debtor. Any
expenses incurred in connection with such Debtor's obligations under
this Section 4.1(f) shall be borne by such Debtor. Except for any such
items that a Debtor reasonably believes (using prudent industry customs
and practices) are no longer necessary for the on-going operations of
its business, no Debtor shall abandon any right to file a patent,
trademark or service xxxx application, or abandon any pending patent,
application or any other Copyright, Patent or Trademark without the
written consent of Secured Party, which consent shall not be
unreasonably withheld.
(g) Further Identification of Collateral. Each Debtor will,
when and as often as requested by the Secured Party or its
Representative, furnish to the Secured Party or such Representative,
statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as
the Secured Party or its Representative may reasonably request, all in
reasonable detail.
(h) Investment Property. Each Debtor will take any and all
actions required or requested by the Secured Party, from time to time,
to (i) cause the Secured Party to obtain exclusive control of any
Investment Property owned by such Debtor in a manner acceptable to the
Secured Party and (ii) obtain from any issuers of Investment Property
and such other Persons, for the benefit of the Secured Party, written
confirmation of the Secured Party's control over such Investment
Property. For purposes of this Section 4.1(h), the Secured Party shall
have exclusive control of Investment Property if (i) such Investment
Property consists of certificated securities and a Debtor delivers such
certificated securities to the Secured Party (with appropriate
endorsements if such certificated securities are in registered form);
(ii) such Investment Property consists of uncertificated securities and
either (x) a Debtor delivers such uncertificated securities to the
Secured Party or (y) the issuer thereof agrees, pursuant to
documentation in form and substance satisfactory to the Secured Party,
that it will comply with instructions originated by the Secured Party
without further consent by such Debtor, and (iii) such Investment
Property consists of security entitlements and either (x) the Secured
Party becomes the entitlement holder thereof or (y) the appropriate
securities intermediary agrees, pursuant to the documentation in form
and substance satisfactory to the Secured Party, that it will comply
with entitlement orders originated by the Secured Party without further
consent by any Debtor.
(i) Reserved.
(j) Commercial Tort Claims. Each Debtor shall promptly notify
Secured Party of any Commercial Tort Claim (as defined in the Uniform
Commercial Code) acquired by it that concerns a claim in excess of
$50,000 and, unless otherwise consented to by Secured Party, such Debtor
shall enter into a supplement to this Agreement granting to Secured
Party a Lien on and security interest in such Commercial Tort Claim.
4.2 Other Liens. Debtors will not create, permit or suffer to exist,
and will defend the Collateral against and take such other action as is
necessary to remove, any Lien on the Collateral, and will defend the right,
title and interest of the Secured Party in and to the Collateral and in and to
all Proceeds thereof against the claims and demands of all Persons whatsoever.
4.3 Preservation of Rights. Whether or not any Event of Default has
occurred or is continuing, the Secured Party and its Representative may, but
shall not be required to, take any steps the Secured Party or its
Representative deems necessary or appropriate to preserve any Collateral or any
rights against third parties to any of the Collateral, including obtaining
insurance for the Collateral at any time when a Debtor has failed to do so, and
Debtors shall promptly pay, or reimburse the Secured Party for, all expenses
incurred in connection therewith.
4.4 Formation of Subsidiaries; Name Change; Location; Bailees.
(a) No Debtor shall form any subsidiary unless (i) such Debtor
pledges all of the stock of such subsidiary to the Secured Party
pursuant to the existing pledge agreement in favor of the Secured Party,
and (ii) such subsidiary becomes a party to this Agreement and all other
applicable Security Documents.
(b) No Debtor shall (i) reincorporate or reorganize itself
under the laws of any jurisdiction other than the jurisdiction in which
it is incorporated or organized as of the date hereof without the prior
written consent of Secured Party, or (ii) otherwise change its name,
identity or corporate structure, in each case, without the prior written
consent of Secured Party. Each Debtor will notify Secured Party promptly
in writing prior to any such change in the proposed use by such Debtor
of any trade name or fictitious business name other than any such name
set forth on Schedule II attached hereto.
(c) Except for the sale of Inventory in the ordinary course of
business and other sales of assets expressly permitted in the Purchase
Agreement, each Debtor will keep the Collateral at the locations
specified in Schedule I. Each Debtor will give Secured Party thirty
(30) day's prior written notice of any change in such Debtor's chief
place of business or of any new location for any of the Collateral.
(d) If any Collateral is at any time in the possession or
control of any warehousemen, bailee, consignee or processor, such Debtor
shall, upon the request of Secured Party or its Representative, notify
such warehousemen, bailee, consignee or processor of the Lien and
security interest created hereby and shall instruct such Person to hold
all such Collateral for Secured Party's account, subject to Secured
Party's instructions.
(e) Each Debtor acknowledges that it is not authorized to file
any financing statement or amendment or termination statement with
respect to any financing statement without the prior written consent of
Secured Party and each Debtor agrees that it will not do so without the
prior written consent of Secured Party, subject to such Debtor's rights
under Section 9-509(d)(2) to the Uniform Commercial Code.
(f) No Debtor shall enter into any Contract that restricts or
prohibits the grant to Secured Party of a security interest in Accounts,
Chattel Paper, Instruments or payment intangibles or the proceeds of the
foregoing to the Uniform Commercial Code.
4.5 Bank Accounts and Securities Accounts.
(a) On or prior to the date hereof, the Secured Party and each
Debtor shall enter into an account control agreement or securities
account control agreement, as applicable, (each an "Account Control
Agreement"), in a form specified by the Secured Party, with each
financial institution with which such Debtor maintains from time to time
any Deposit Accounts (general or special), securities accounts,
brokerage accounts or other similar accounts, which financial
institutions are set forth on Schedule VI attached hereto. Pursuant to
the Account Control Agreements and pursuant hereto, each such Debtor
grants and shall grant to the Secured Party a continuing lien upon, and
security interest in, all such accounts and all funds at any time paid,
deposited, credited or held in such accounts (whether for collection,
provisionally or otherwise) or otherwise in the possession of such
financial institutions, and each such financial institution shall act as
the Secured Party's agent in connection therewith. Following the date
hereof, no Debtor shall establish any Deposit Account, securities
account, brokerage account or other similar account with any financial
institution, unless the Secured Party and such Debtor shall have
previously entered into an Account Control Agreement with such financial
institution which purports to cover such account. Other than xxxxx cash
not exceeding $10,000 in the aggregate for all Debtors, each Debtor
shall deposit and keep on deposit all of its funds into a Deposit
Account which is subject to an Account Control Agreement.
(b) Upon the Secured Party's request following the occurrence
and during the continuance of an Event of Default, each Debtor shall
establish lock-box or blocked accounts (collectively, "Blocked
Accounts") in such Debtor's name with such banks as are reasonably
acceptable to the Secured Party ("Collecting Banks"), subject to
irrevocable instructions in a form reasonably acceptable to the Secured
Party, to which the obligors of all Accounts shall directly remit all
payments on Accounts and in which such Debtor will immediately deposit
all cash payments for Inventory or other cash payments constituting
proceeds of Collateral in the identical form in which such payment was
made, whether by cash or check. In addition, the Secured Party may
establish one or more depository accounts at each Collecting Bank or at
a centrally located bank (collectively, the "Depository Account"). All
amounts held or deposited in the Blocked Accounts held by such
Collecting Bank shall be transferred to the Depository Account without
any further notice or action required by Secured Party. Subject to the
foregoing, each Debtor hereby agrees that all payments received by the
Secured Party, whether by cash, check, wire transfer or any other
instrument, made to such Blocked Accounts or otherwise received by the
Secured Party, and whether in respect of the Accounts or as proceeds of
other Collateral or otherwise, will be the sole and exclusive property
of the Secured Party. Each Debtor, and any of its Affiliates,
employees, agents and other Persons acting for or in concert with such
Debtor, shall, acting on behalf of and as trustee for the Secured Party,
receive, as the sole and exclusive property of the Secured Party, any
moneys, checks, notes, drafts or other payments relating to and/or
proceeds of Accounts or other Collateral which come into the possession
or under the control of such Debtor or any Affiliates, employees, agent
or other Persons acting for or in concert with such Debtor, and
immediately upon receipt thereof, such Debtor or Persons shall deposit
the same or cause the same to be deposited in kind, in a Blocked
Account.
4.6 Events of Default, Etc. During the period during which an Event of
Default shall have occurred and be continuing:
(a) Each Debtor shall, at the request of the Secured Party or
its Representative, assemble the Collateral and make it available to
Secured Party or its Representative at a place or places designated by
the Secured Party or its Representative which are reasonably convenient
to Secured Party or its Representative, as applicable, and such Debtor;
(b) The Secured Party or its Representative may make any
reasonable compromise or settlement deemed desirable with respect to any
of the Collateral and may extend the time of payment, arrange for
payment in installments, or otherwise modify the terms of any of the
Collateral;
(c) The Secured Party shall have all of the rights and remedies
with respect to the Collateral of a secured party under the Uniform
Commercial Code (whether or not said Uniform Commercial Code is in
effect in the jurisdiction where the rights and remedies are asserted)
and such additional rights and remedies to which a secured party is
entitled under the laws in effect in any jurisdiction where any rights
and remedies hereunder may be asserted, including without limitation the
right, to the maximum extent permitted by law, to: (i) exercise all
voting, consensual and other powers of ownership pertaining to the
Collateral as if the Secured Party were the sole and absolute owner
thereof (and each Debtor agrees to take all such action as may be
appropriate to give effect to such right) and (ii) to the appointment of
a receiver or receivers for all or any part of the Collateral or
business of a Debtor, whether such receivership is incident to a
proposed sale or sales of such Collateral or otherwise and without
regard to the value of the Collateral or the solvency of any person or
persons liable for the payment of the Obligations secured by such
Collateral. Each Debtor hereby consents to the appointment of such
receiver or receivers, waives any and all defenses to such appointment,
and agrees that such appointment shall in no manner impair, prejudice or
otherwise affect the rights of Secured Party under this Agreement. Each
Debtor hereby expressly waives notice of a hearing for appointment of a
receiver and the necessity for bond or an accounting by the receiver;
(d) The Secured Party or its Representative in their discretion
may, in the name of the Secured Party or in the name of a Debtor or
otherwise, demand, xxx for, collect or receive any money or property at
any time payable or receivable on account of or in exchange for any of
the Collateral, but shall be under no obligation to do so;
(e) The Secured Party or its Representative may take immediate
possession and occupancy of any premises owned, used or leased by a
Debtor and may exercise all other rights and remedies of an assignee
which may be available to the Secured Party;
(f) The Secured Party may, upon ten (10) Business Days' prior
written notice to Debtors of the time and place (which notice Debtors
hereby agree is commercially reasonable notification for purposes
hereof), with respect to the Collateral or any part thereof which shall
then be or shall thereafter come into the possession, custody or control
of the Secured Party or its Representative, sell, lease, license, assign
or otherwise dispose of all or any part of such Collateral, at such
place or places as the Secured Party deems best, and for cash or for
credit or for future delivery (without thereby assuming any credit
risk), at public or private sale, without demand of performance or
notice of intention to effect any such disposition or of the time or
place thereof (except such notice as is required above or by applicable
statute and cannot be waived), and the Secured Party or anyone else may
be the purchaser, lessee, licensee, assignee or recipient of any or all
of the Collateral so disposed of at any public sale (or, to the extent
permitted by law, at any private sale) and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including
any right or equity of redemption (statutory or otherwise), of Debtors,
any such demand, notice and right or equity being hereby expressly
waived and released. The Secured Party may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed
for the sale, and such sale may be made at any time or place to which
the sale may be so adjourned; and
(g) The rights, remedies and powers conferred by this Section
4.6 are in addition to, and not in substitution for, any other rights,
remedies or powers that the Secured Party may have under any Transaction
Document, at law, in equity or by or under the Uniform Commercial Code
or any other statute or agreement. The Secured Party may proceed by way
of any action, suit or other proceeding at law or in equity and no
right, remedy or power of the Secured Party will be exclusive of or
dependent on any other. The Secured Party may exercise any of its
rights, remedies or powers separately or in combination and at any time.
The proceeds of each collection, sale or other disposition under this Section
4.6 shall be applied in accordance with Section 4.9 hereof.
Notwithstanding the foregoing, the Debtors shall not be required to deliver the
fully-executed Mortgages, Account Control Agreements and Additional Security
Documents (each as defined in the Purchase Agreement) prior to the Mortgage
Delivery Deadline (as defined in the Purchase Agreement).
4.7 Deficiency. If the proceeds of sale, collection or other
realization of or upon the Collateral are insufficient to cover the costs and
expenses of such realization and the payment in full of the Obligations,
Debtors shall remain liable for any deficiency.
4.8 Private Sale. Each Debtor recognizes that the Secured Party may be
unable to effect a public sale of any or all of the Collateral consisting of
securities by reason of certain prohibitions contained in the Securities Act of
1933, as amended (the "Act"), and applicable state securities laws, but may be
compelled to resort to one or more private sales thereof to a restricted group
of purchasers who will be obliged to agree, among other things, to acquire such
Collateral for their own account for investment and not with a view to the
distribution or resale thereof. Each Debtor acknowledges and agrees that any
such private sale may result in prices and other terms less favorable to the
seller than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner. The Secured Party shall be under no
obligation to delay a sale of any of the Collateral to permit a Debtor to
register such Collateral for public sale under the Act, or under applicable
state securities laws, even if Debtors would agree to do so. The Secured Party
shall not incur any liability as a result of the sale of any such Collateral,
or any part thereof, at any private sale provided for in this Agreement
conducted in a commercially reasonable manner, and each Debtor hereby waives
any claims against the Secured Party arising by reason of the fact that the
price at which the Collateral may have been sold at such a private sale was
less than the price which might have been obtained at a public sale or was less
than the aggregate amount of the Obligations, even if the Secured Party accepts
the first offer received and does not offer the Collateral to more than one
offeree.
Each Debtor further agrees to do or cause to be done all such other acts
and things as may be necessary to make such sale or sales of any portion or all
of any such Collateral valid and binding and in compliance with any and all
applicable laws, regulations, orders, writs, injunctions, decrees or awards of
any and all courts, arbitrators or governmental instrumentalities, domestic or
foreign, having jurisdiction over any such sale or sales, all at such Debtor's
expense, provided that Debtors shall be under no obligation to take any action
to enable any or all of such Collateral to be registered under the provisions
of the Act. Each Debtor further agrees that a breach of any of the covenants
contained in this Section 4.8 will cause irreparable injury to the Secured
Party, that the Secured Party has no adequate remedy at law in respect of such
breach and, as a consequence, agrees that each and every covenant contained in
this Section 4.8 shall be specifically enforceable against Debtors, and each
Debtor hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that no Event
of Default has occurred and is continuing.
4.9 Application of Proceeds. The proceeds of any collection, sale or
other realization of all or any part of the Collateral, and any other cash at
the time held by the Secured Party under this Agreement, shall be applied in
the manner set forth in the Notes (or, if not so set forth, in a manner
acceptable to, and at the election of, the Secured Party).
4.10 Attorney-in-Fact. Each Debtor hereby irrevocably constitutes and
appoints the Secured Party, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of such Debtor and in the name of such Debtor or in its own name,
from time to time in the discretion of the Secured Party, for the purpose of
carrying out the terms of this Agreement, to take any and all appropriate
action, and to execute and deliver any and all documents and instruments which
may be necessary or desirable to perfect or protect any security interest
granted hereunder, to maintain the perfection or priority of any security
interest granted hereunder and to otherwise accomplish the purposes of this
Agreement and, without limiting the generality of the foregoing, hereby gives
the Secured Party the power and right, on behalf of such Debtor, without notice
to or assent by such Debtor, to do the following upon the occurrence and during
the continuation of any Event of Default:
(a) to take any and all appropriate action and to execute and
deliver any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement;
(b) to ask, demand, collect, receive and give acquittance and
receipts for any and all moneys due and to become due under any
Collateral and, in the name of such Debtor or its own name or otherwise,
to take possession of and endorse and collect any checks, drafts, notes,
acceptances or other Instruments for the payment of moneys due under any
Collateral and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed appropriate
by the Secured Party for the purpose of collecting any and all such
moneys due under any Collateral whenever payable and to file any claim
or to take any other action or proceeding in any court of law or equity
or otherwise deemed appropriate by the Secured Party for the purpose of
collecting any and all such moneys due under any Collateral whenever
payable;
(c) to pay or discharge charges or liens levied or placed on or
threatened against the Collateral, to effect any insurance called for by
the terms of this Agreement and to pay all or any part of the premiums
therefor;
(d) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due, and to become due
thereunder, directly to the Secured Party or as the Secured Party shall
direct, and to receive payment of and receipt for any and all moneys,
claims and other amounts due, and to become due at any time, in respect
of or arising out of any Collateral;
(e) to sign and indorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with accounts and
other Documents constituting or relating to the Collateral;
(f) to commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any part thereof and to enforce any other right in respect
of any Collateral;
(g) to defend any suit, action or proceeding brought against a
Debtor with respect to any Collateral;
(h) to settle, compromise or adjust any suit, action or proceeding
described above and, in connection therewith, to give such discharges or
releases as the Secured Party may deem appropriate;
(i) to the extent that a Debtor's authorization given to Section
4.1(b) of this Agreement is not sufficient to file such financing
statements with respect to this Agreement, with or without such Debtor's
signature, or to file a photocopy of this Agreement in substitution for
a financing statement, as the Secured Party may deem appropriate and to
execute in such Debtor's name such financing statements and amendments
thereto and continuation statements which may require such Debtor's
signature; and
(j) generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though the Secured Party were the absolute owners thereof
for all purposes, and to do, at the Secured Party's option and at such
Debtor's expense, at any time, or from time to time, all acts and things
which the Secured Party reasonably deems necessary to protect, preserve
or realize upon the Collateral and the Secured Party's lien therein, in
order to effect the intent of this Agreement, all as fully and
effectively as such Debtor might do.
Each Debtor hereby ratifies, to the extent permitted by law, all that
such attorneys lawfully do or cause to be done by virtue hereof. The power of
attorney granted hereunder is a power coupled with an interest and shall be
irrevocable until the Obligations are indefeasibly paid in full in cash.
Each Debtor also authorizes the Secured Party, at any time from and
after the occurrence and during the continuation of any Event of Default, (x)
to communicate in its own name with any party to any Contract with regard to
the assignment of the right, title and interest of such Debtor in and under the
Contracts hereunder and other matters relating thereto and (y) to execute, in
connection with any sale of Collateral provided for in Section 4.5 hereof, any
endorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral.
4.11 Perfection. Prior to or concurrently with the execution and
delivery of this Agreement, each Debtor shall:
(a) file such financing statements, assignments for security and
other documents in such offices as may be necessary or as the Secured
Party or the Representative may request to perfect the security
interests granted by Section 3 of this Agreement;
(b) at Secured Party's request, deliver to the Secured Party or
its Representative the originals of all Instruments, together with, in
the case of Instruments constituting promissory notes, allonges attached
thereto showing such promissory notes to be payable to the order of a
blank payee; and
(c) at Secured Party's request, deliver to the Secured Party or
its Representative the originals of all Motor Vehicle titles, duly
endorsed indicating the Secured Party's interest therein as lienholder.
4.12 Termination. This Agreement and the Liens and security interests
granted hereunder shall not terminate until the termination of the Purchase
Agreement, the Replacement Override Conveyances and the Notes and the full and
complete performance and indefeasible satisfaction of all of the Obligations,
whereupon the Secured Party shall forthwith cause to be assigned, transferred
and delivered, against receipt but without any recourse, warranty or
representation whatsoever, any remaining Collateral to or on the order of
Debtors. The Secured Party shall also execute and deliver to Debtors upon such
termination and at Debtors' expense such Uniform Commercial Code termination
statements, certificates for terminating the liens on the Motor Vehicles (if
any), and such other documentation as shall be reasonably requested by Debtors
to effect the termination and release of the Liens and security interests in
favor of the Secured Party affecting the Collateral.
4.13 Further Assurances. (a) At any time and from time to time, upon
the written request of the Secured Party or its Representative, and at the sole
expense of Debtors, Debtors will promptly and duly execute and deliver any and
all such further instruments, documents and agreements and take such further
actions as the Secured Party or its Representative may reasonably require in
order for the Secured Party to obtain the full benefits of this Agreement and
of the rights and powers herein granted in favor of the Secured Party,
including, without limitation, using Debtors' best efforts to secure all
consents and approvals necessary or appropriate for the assignment to the
Secured Party of any Collateral held by Debtors or in which a Debtor has any
rights not heretofore assigned, the filing of any financing or continuation
statements under the Uniform Commercial Code with respect to the liens and
security interests granted hereby, transferring Collateral to the Secured
Party's possession (if a security interest in such Collateral can be perfected
by possession), placing the interest of the Secured Party as lienholder on the
certificate of title of any Motor Vehicle and obtaining waivers of liens from
landlords and mortgagees. Each Debtor also hereby authorizes the Secured Party
and its Representative to file any such financing or continuation statement
without the signature of such Debtor to the extent permitted by applicable law.
(b) Upon the request of the Secured Party, each Debtor shall procure
insurers' acknowledgments of any assignments of key man life insurance policies
which may be assigned to the Secured Party as additional security for the
Obligations (if any) and will take all such further action as required by any
insurer or the Secured Party in connection with any such assignment.
4.14 Limitation on Duty of Secured Party. The powers conferred on the
Secured Party under this Agreement are solely to protect the Secured Party's
interest on behalf of itself and the Buyers in the Collateral and shall not
impose any duty upon it to exercise any such powers. The Secured Party shall
be accountable only for amounts that it actually receives as a result of the
exercise of such powers and neither the Secured Party nor its Representative
nor any of their respective officers, directors, employees or agents shall be
responsible to Debtors for any act or failure to act, except for willful
misconduct. Without limiting the foregoing, the Secured Party and any
Representative shall be deemed to have exercised reasonable care in the custody
and preservation of the Collateral in their possession if such Collateral is
accorded treatment substantially equivalent to that which the relevant Secured
Party or any Representative, in its individual capacity, accords its own
property consisting of the type of Collateral involved, it being understood and
agreed that neither the Secured Party nor any Representative shall have any
responsibility for taking any necessary steps (other than steps taken in
accordance with the standard of care set forth above) to preserve rights
against any Person with respect to any Collateral.
Also without limiting the generality of the foregoing, neither the
Secured Party nor any Representative shall have any obligation or liability
under any Contract or license by reason of or arising out of this Agreement or
the granting to the Secured Party of a security interest therein or assignment
thereof or the receipt by the Secured Party or any Representative of any
payment relating to any Contract or license pursuant hereto, nor shall the
Secured Party or any Representative be required or obligated in any manner to
perform or fulfill any of the obligations of Debtors under or pursuant to any
Contract or license, or to make any payment, or to make any inquiry as to the
nature or the sufficiency of any payment received by it or the sufficiency of
any performance by any party under any Contract or license, or to present or
file any claim, or to take any action to collect or enforce any performance or
the payment of any amounts which may have been assigned to it or to which it
may be entitled at any time or times.
Section 5. Miscellaneous.
5.1 No Waiver. No failure on the part of the Secured Party or any of
its Representatives to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Secured Party
or any of its Representatives of any right, power or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy. The rights and remedies hereunder provided are cumulative and may
be exercised singly or concurrently, and are not exclusive of any rights and
remedies provided by law.
5.2 Governing Law. All questions concerning the construction, validity
enforcement and interpretation of this Agreement shall be governed by and
construed in accordance with the internal laws and decisions of the State of
New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of New York.
5.3 Notices. All notices, approvals, requests, demands and other
communications hereunder shall be delivered or made in the manner set forth in,
and shall be effective in accordance with the terms of, the Purchase Agreement;
provided, that, to the extent any such communication (i) is being made or sent
to a Debtor that is not the Company, such communication shall be effective as
to such Debtor if made or sent to the Company in accordance with the foregoing
or (ii) is being made or sent to Secured Party, such communication shall be
made to Secured Party at the address set forth below Secured Party's signature
hereto. Debtors and Secured Party may change their respective notice addresses
by written notice given to each other party five (5) days prior to the
effectiveness of such change.
5.4 Amendments, Etc. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by the Debtor
sought to be charged or benefited thereby and the Secured Party. Any such
amendment or waiver shall be binding upon the Secured Party and the Debtor
sought to be charged or benefited thereby and their respective successors and
assigns.
5.5 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of each of the
parties hereto, provided, that no Debtor shall assign or transfer its rights
hereunder without the prior written consent of the Secured Party. Secured
Party, in such capacity as collateral agent, may assign its rights hereunder
without the consent of Debtors, in which event such assignee shall be deemed to
be Secured Party hereunder with respect to such assigned rights.
5.6 Counterparts; Headings. This Agreement may be authenticated in any
number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties hereto may authenticate this
Agreement by signing any such counterpart. This Agreement may be authenticated
by manual signature, facsimile or, if approved in writing by Secured Party,
electronic means, all of which shall be equally valid. The headings in this
Agreement are for convenience of reference only and shall not alter or
otherwise affect the meaning hereof.
5.7 Severability. If any provision hereof is invalid and unenforceable
in any jurisdiction, then, to the fullest extent permitted by law, (a) the
other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Secured Party and
its Representative in order to carry out the intentions of the parties hereto
as nearly as may be possible and (b) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
5.9 SUBMISSION TO JURISDICTION; WAIVER OF VENUE; SERVICE OF PROCESS.
(A) EACH DEBTOR HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION
OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN THE CITY OF NEW
YORK, BOROUGH OF MANHATTAN, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND EACH DEBTOR HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER
HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT
THE RIGHT OF SECURED PARTY TO BRING PROCEEDINGS AGAINST ANY DEBTOR IN THE
COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY A DEBTOR AGAINST
SECURED PARTY OR ANY AFFILIATE THEREOF INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTION WITH THIS AGREEMENT
SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK .
(B) EACH DEBTOR DESIGNATES AND APPOINTS CT CORPORATION SYSTEM AND SUCH
OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY IT (AFTER PRIOR WRITTEN NOTICE TO
SECURED PARTY) WHICH IRREVOCABLY AGREES IN WRITING TO SO SERVE AS ITS AGENT TO
RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY
SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY EACH DEBTOR TO BE
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO
SERVED SHALL BE MAILED BY REGISTERED MAIL TO SUCH DEBTOR AT ITS ADDRESS
PROVIDED IN THIS AGREEMENT EXCEPT THAT, UNLESS OTHERWISE PROVIDED BY APPLICABLE
LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF
PROCESS. IF ANY AGENT APPOINTED BY A DEBTOR REFUSES TO ACCEPT SERVICE, SUCH
DEBTOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT
NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW.
5.10 WAIVER OF RIGHT TO TRIAL BY JURY. EACH DEBTOR AND SECURED PARTY
EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION
OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES,
WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH
DEBTOR AND SECURED PARTY AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT.
5.11 Joint and Several. The obligations, covenants and agreements of
Debtors hereunder shall be the joint and several obligations, covenants and
agreements of each Debtor, whether or not specifically stated herein.
5.12 Collateral Agent. (a)Each of the Buyers hereby irrevocably
appoints and authorizes the Secured Party to act as collateral agent hereunder
(the "Collateral Agent"), to enter into each of the instruments, documents and
agreements, including any pledge agreement, guaranty, financing statements,
mortgage, Account Control Agreement or any other Security Documents
(collectively with this Agreement, the "Financing Documents"), to which it is a
party as agent (including as a collateral agent) on Buyers' behalf and to take
such actions as Collateral Agent on Buyers' behalf under the Financing
Documents and to exercise such powers under the Financing Documents as are
delegated to Collateral Agent (as agent, secured party or otherwise) by the
terms thereof, together with all such powers as are reasonably incidental
thereto. The Collateral Agent shall take such action under this Agreement
and/or any other Transaction Documents as the Collateral Agent shall reasonably
be directed by Buyers in accordance with the terms of the Transaction Documents
(and, in any event, as reasonably directed by written direction of Majority
Buyers). Secured Party is authorized and empowered to amend, modify, or waive
any provisions of this Agreement or the other Financing Documents to which it
is a party or which run in its favor on behalf of the Buyers; provided,
however, that the parties hereto hereby agree that no such amendment,
modification or waiver shall be effective without the unanimous written consent
of the Buyers. Each Buyer hereby assigns to Secured Party, without recourse,
representation or warranty of any kind whatsoever, all of its right, title and
interest in and to any Liens and security interests granted to such Buyer
pursuant to the Original Security Agreements.
(b) Whether or not the transactions contemplated hereby shall be
consummated, upon demand therefor, the Buyers shall indemnify the Collateral
Agent (to the extent not reimbursed by or on behalf of the Company and without
limiting the obligation of the Company to do so), ratably (based on the ratio
of the amount of Obligations a Buyer holds to the aggregate Obligations held by
all Buyers) from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind whatsoever, including, for purposes of clarification,
all taxes, which may at any time (including at any time following the payment
in full of the Notes and the termination or resignation of the Collateral
Agent) be imposed on, incurred by or asserted against the Collateral Agent in
any way relating to or arising out of this Agreement, any other Transaction
Document or any document contemplated hereby or referred to herein or the
transactions contemplated hereby or thereby or any action taken or omitted by
the Collateral Agent under or in connection with any of the foregoing;
provided, however, that Buyers shall not be liable for the payment to the
Collateral Agent of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Collateral Agent's gross negligence or willful
misconduct. In addition, Buyers shall reimburse the Collateral Agent upon
demand for its ratable share (based on the ratio of the amount of Obligations a
Buyer holds to the aggregate Obligations held by all Buyers) of any costs or
out-of-pocket expenses (including attorney costs) incurred by the Collateral
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Transaction Document, or any
document contemplated hereby or referred to herein to the extent that the
Collateral Agent is not reimbursed for such expenses by or on behalf of the
Company. Without limiting the generality of the foregoing, if any Governmental
Authority of any jurisdiction asserts a claim that the Collateral Agent did not
properly withhold tax from amounts paid to or for the account of a Buyer
(because the appropriate form was not delivered, was not properly executed, or
because such Buyer failed to notify the Collateral Agent of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason), Buyers shall indemnify the
Collateral Agent fully for all amounts paid, directly or indirectly, by the
Collateral Agent as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to the
Collateral Agent under this Section 5.12(b), together with all related costs
and expenses (including attorney costs). The obligation of Buyers in this
Section 5.12(b) shall survive the payment of all Obligations.
(c) The Collateral Agent shall not be deemed to have knowledge or
notice of the occurrence of any Event of Default or any event that with the
giving of notice or passage of time would constitute an Event of Default unless
the Collateral Agent shall have received written notice from Buyers describing
such Event of Default or event that with the giving of notice or passage of
time would constitute an Event of Default and stating that such notice is a
"notice of default". Upon the occurrence and continuance of an Event of
Default, or an event that with the giving of notice or passage of time would
constitute an Event of Default, the Collateral Agent shall take such action
under this Agreement and/or any other Transaction Documents with respect to
such Event of Default or event that with the giving of notice or passage of
time would constitute an Event of Default as Collateral Agent shall reasonably
be directed by Buyers in accordance with the terms of the Transaction Documents
(and, in any event, as reasonably directed by written direction of Majority
Buyers); provided that, unless and until the Collateral Agent shall have
received such directions, the Collateral Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Event of Default or event that with the giving of notice or passage of time
would constitute an Event of Default as the Collateral Agent shall deem
advisable in the best interests of Buyers. In taking such action or refraining
from taking such action without specific direction from Buyers, the Collateral
Agent shall use the same degree of care and skill as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(d) Nothing in this Section 5.12 shall be deemed to limit or otherwise
affect the rights of Secured Party or Buyers to exercise any remedy provided in
this Agreement or any other Transaction Document.
(e) The Collateral Agent may resign from the performance of all of its
functions and duties hereunder and/or under the other Transaction Documents at
any time by giving thirty (30) Business Days' prior written notice to Buyers.
Such resignation shall take effect upon the appointment of a successor
Collateral Agent pursuant to clause (f) below or as otherwise provided below.
(f) Upon (i) Buyers' receipt of a notice of resignation by the
Collateral Agent in accordance with clause (e) above, or (ii) written notice by
Buyers to Collateral Agent of Buyers' election to remove the existing
Collateral Agent and appoint a successor Collateral Agent, Buyers shall have
the right to appoint a successor Collateral Agent. Upon the acceptance of a
successor's appointment as Collateral Agent hereunder and notice of such
acceptance to the retiring Collateral Agent, such successor shall succeed to
and become vested with all of the rights, powers, privileges and duties of the
retiring (or retired) Collateral Agent, the retiring Collateral Agent's
resignation shall become immediately effective and the retiring Collateral
Agent shall be discharged from all of its duties and obligations hereunder and
under the other Transaction Documents (if such resignation was not already
effective and such duties and obligations not already discharged, as provided
below in this paragraph). If no such successor shall have been so appointed by
Buyers and shall have accepted such appointment within thirty (30) days after
the retiring Collateral Agent gives notice of its resignation or Buyers give
notice of their election to replace the retiring Collateral Agent, then the
retiring Collateral Agent may, on behalf of Buyers (but without any obligation)
appoint a successor Collateral Agent without the consent of Buyers. From and
following the expiration of such thirty (30) day period, Collateral Agent shall
have the exclusive right without any Person's consent, upon one (1) Business
Days' notice to Buyers, to make its resignation or removal effective
immediately. From and following the effectiveness of such notice, (i) the
retiring Collateral Agent shall be discharged from its duties and obligations
hereunder and under the other Transaction Documents and (ii) all actions,
payments, communications and determinations provided to be made by, to or
through Collateral Agent shall instead be made by or to Buyers directly, until
such time as Buyers appoint a Collateral Agent as provided for above in this
paragraph. The provisions of this Agreement shall continue in effect for the
benefit of any retiring Collateral Agent and its sub-agents after the
effectiveness of its resignation or removal hereunder and under the other
Transaction Documents in respect of any actions taken or omitted to be taken by
any of them while the retiring Collateral Agent was acting or was continuing to
act as Collateral Agent.
(g) If pursuant to any Financing Document the Collateral Agent is
given the discretion to allocate proceeds received by Collateral Agent pursuant
to the exercise of remedies under the Financing Documents or at law or in
equity (including without limitation with respect to any secured creditor
remedies exercised against the Collateral and any other collateral security
provided for under any Financing Document), Collateral Agent shall apply such
proceeds to the then outstanding Obligations in the following order of priority
(with amounts received being applied in the numerical order set forth below
until exhausted prior to the application to the next succeeding category and
each of the Buyers or other Persons entitled to payment shall receive an amount
equal to its pro rata share of amounts available to be applied pursuant to
clauses second, third and fourth below):
first, to payment of fees, costs and expenses (including
reasonable attorney's fees) owing to the Collateral Agent;
second, to payment of all accrued unpaid interest and fees (other
than fees owing to Collateral Agent) on the Obligations;
third, to payment of principal of the Obligations;
fourth, to payment of any other amounts owing constituting
Obligations; and
fifth, any remainder shall be for the account of and paid to
whoever may be lawfully entitled thereto.
5.13 No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
5.14 Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between each Debtor, Secured Party, the Buyers
and their affiliates and persons acting on their behalf with respect to the
matters discussed herein, and this Agreement and the Transaction Documents and
instruments referenced herein and therein contain the entire understanding of
the parties with respect to the matters covered herein and therein.
5.15 Amendment and Restatement. This Agreement, taken together
with the Pledge Agreement dated as of the date hereof executed by Company and
STO Operating in favor of Secured Party, amends and restates the Original
Security Agreements in their entirety and shall not be deemed to constitute a
novation of the Original Security Agreements or any obligations of any Debtor
thereunder. Each Debtor acknowledges, ratifies, confirms and reaffirms the
grant of Liens and security interests granted pursuant to the Original Security
Agreements, and acknowledges and agrees that (i) all of such Liens and security
interests are intended and shall be deemed and construed to secure, to the
fullest extent set forth therein, all now existing and hereafter arising
Obligations and (ii) all of such Liens and security interests shall continue
hereunder in favor of Secured Party uninterrupted from the date of the original
grant thereof.
#
60626080
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed and delivered as of the day and year first above
written.
DEBTORS:
SOUTH TEXAS OIL COMPANY, a Nevada
corporation
By:_______________________________
Name:_____________________________
Title: ______________________________
FEIN:_____________________________
SOUTHERN TEXAS OIL COMPANY, a Texas
corporation
By:_______________________________
Name:_____________________________
Title: ______________________________
FEIN:_____________________________
STO OPERATING COMPANY, a Texas
corporation
By:_______________________________
Name:_____________________________
Title: ______________________________
FEIN:_____________________________
STO PROPERTIES LLC, a Texas limited
liability company
By:_______________________________
Name:_____________________________
Title: ______________________________
FEIN:_____________________________
STO DRILLING COMPANY, a Texas
corporation
By:_______________________________
Name:_____________________________
Title: ______________________________
FEIN:_____________________________
60626080
SECURED PARTY:
VIKING ASSET MANAGEMENT, LLC, a
California limited liability company,
in its capacity as Collateral Agent for
the Buyers
By:________________________________
Name:______________________________
Title: _______________________________
Notice Address:
Viking Asset Management, LLC
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxx
Telecopy: (000) 000-0000
and
Viking Asset Management, LLC
00 Xxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
60626080
BUYERS:
Solely for the purposes of Section 5.12
LONGVIEW MARQUIS MASTER FUND, L.P.,
a British Virgin Islands limited
partnership
By: Viking Asset Management, LLC
Its: Investment Advisor
By:________________________________
Name: S. Xxxxxxx Xxxxxxx
Title:Chief Financial Officer
THE LONGVIEW FUND, L.P.,
a California limited partnership
By: Viking Asset Management, LLC
Its: Investment Adviser
By:________________________________
Name: S. Xxxxxxx Xxxxxxx
Title:Chief Financial Officer
EXHIBIT A
Form of Joinder
Joinder to Subsidiary Security Agreement
The undersigned, ______________________________, hereby joins in the
execution of that certain Amended and Restated Security Agreement dated as of
April 1, 2008 (the "Security Agreement"), by South Texas Oil Company, a Nevada
corporation ("Company"), Southern Texas Oil Company, a Texas corporation
("Southern Texas"), STO Operating Company, a Texas corporation formerly known
as Leexus Operating Company ("STO Operating"), STO Properties LLC, a Texas
limited liability company ("STO Properties"), STO Drilling Company, a Texas
corporation, the Buyers (as defined therein), and each other Person that
becomes a Debtor thereunder after the date hereof and pursuant to the terms
thereof, to and in favor of Viking Asset Management, LLC, in its capacity as
agent for the Buyers. By executing this Joinder, the undersigned hereby agrees
that it is a Debtor thereunder and agrees to be bound by all of the terms and
provisions of the Security Agreement.
The undersigned represents and warrants to Secured Party that:
(a) all of the Equipment, Inventory and Goods owned by such Debtor is
located at the places as specified on Schedule I attached hereto;
(b) except as disclosed on Schedule I, none of such Collateral is in
the possession of any bailee, warehousemen, processor or consignee;
(c) the chief place of business, chief executive office and the office
where such Debtor keeps its books and records are located at the place
specified on Schedule I;
(d) such Debtor (including any Person acquired by such Debtor) does
not do business or has not done business during the past five years under any
tradename or fictitious business name, except as disclosed on Schedule II;
(e) all Copyrights, Patents and Trademarks owned by the undersigned
are listed in Schedules III, IV and V, respectively;
(f) all Deposit Accounts, securities accounts, brokerage accounts and
other similar accounts maintained by such Debtor, and the financial
institutions at which such accounts are maintained, are listed on Schedule VI;
(g) all Commercial Tort Claims of such Debtor are listed on Schedule
VII;
(h) all interests in real property and mining rights held by such
Debtor are listed on Schedule VIII;
(i) all Equipment (including Motor Vehicles) owned by such debtors are
listed on Schedule IX; and
(j) all other representations and warranties made by the Debtors in
the Security Agreement are true, complete and correct in all respects as of the
date hereof.
________________, a _____ corporation
By:______________________________
Title:___________________________
FEIN:____________________________
SCHEDULE B
BUYER'S NAME BUYER'S ADDRESS
AND FACSIMILE NUMBER
The Longview Fund, L.P. 000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxxxx,
XX 00000
Longview Marquis Master 000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxxxx,
Xxxx, X.X. XX 00000
