EXHIBIT 10.18
MASTER SECURITY AGREEMENT
To: Laurus Master Fund, Ltd.
c/o M&C Corporate Services Limited
X.X. Xxx 000 XX
Xxxxxx House
South Church Street
Xxxxxx Town
Grand Cayman, Cayman Islands
Date: May 31, 2006
To Whom It May Concern:
1. To secure the payment of all Obligations (as hereafter defined),
Carneros Energy, Inc., a Delaware corporation ("Carneros"), Gotland Oil, Inc., a
Texas corporation ("Gotland"), Carneros Acquisition Corp., a Delaware
corporation ("Holdings", and collectively with Carneros and Gotland, the
"Companies" and each a "Company"), each of the other undersigned parties (other
than Laurus Master Fund, Ltd. ("Laurus")) and each other entity that is required
to enter into this Master Security Agreement (each an "Assignor" and,
collectively, the "Assignors") hereby assigns and grants to Laurus a continuing
security interest in all of the following property now owned or at any time
hereafter acquired by such Assignor, or in which such Assignor now has or at any
time in the future may acquire any right, title or interest:
(a) all cash, cash equivalents, accounts, accounts receivable,
deposit accounts (including, without limitation, (x) any and all
restricted accounts over which any Company has granted Laurus control
(collectively, the "Restricted Accounts") and (y) Lockbox Deposit
Accounts), inventory, equipment, goods, fixtures, documents,
instruments (including, without limitation, promissory notes), contract
rights, general intangibles (including, without limitation, payment
intangibles and an absolute right to license on terms no less favorable
than those currently in effect among such Assignor's affiliates),
chattel paper, supporting obligations, investment property (including,
without limitation, all equity interests owned by any Assignor),
letter-of-credit rights, all commercial tort claims set forth on
SCHEDULE A, trademarks, trademark applications, tradestyles, patents,
patent applications, copyrights, copyright applications and other
intellectual property in which such Assignor now has or hereafter may
acquire any right, title or interest, all proceeds and products thereof
(including, without limitation, proceeds of insurance) and all
additions, accessions and substitutions thereto or therefor.
(b) All of those certain Oil and Gas Leases and Lands (all
such Oil and Gas Leases and Lands being herein called the "Subject
Interests", as hereinafter further defined) which are described in
EXHIBIT A and/or to which reference may be made in EXHIBIT A and/or
which are covered by any of the leases described on EXHIBIT A hereto;
(c) All rights, titles, interests and estates now owned or
hereafter acquired by such Assignor in and to (i) any and all
properties now or hereafter pooled or unitized with any of the Subject
Interests, and (ii) all presently existing or future operating
agreements and unitization, communitization and pooling agreements and
the units operated thereby to the extent the same relate to all or any
part of the Subject Interests, including, without limitation, all units
formed under or pursuant to any applicable laws (the rights, titles,
interests and estates described in this clause (c) also being included
within the term "Subject Interests" as used herein);
(d) All presently existing and future agreements entered into
between such Assignor and any third party that provide for the
acquisition by such Assignor of any interest in any of the properties
or interests specifically described in EXHIBIT A or which relate to any
of the properties and interests specifically described in EXHIBIT A;
(e) The Hydrocarbons (including inventory) which are in,
under, upon, produced or to be produced from or attributable to the
Lands;
(f) The Accounts and Contract Rights;
(g) The Operating Equipment;
(h) The Well Data;
(i) The rights and security interests of such Assignor held by
such Assignor to secure the obligation of the first purchaser to pay
the purchase price of the Hydrocarbons;
(j) All surface leases, rights-of-way, franchises, easements,
servitudes, licenses, privileges, tenements, hereditaments and
appurtenances now existing or in the future obtained in connection with
any of the aforesaid, and all other items of value and incident thereto
which such Assignor may, at any time, have or be entitled; and
(k) All and any different and additional rights of any nature,
of value or convenience in the enjoyment, development, operation or
production, in any way, of any property or interest included in any of
the foregoing clauses, and in all revenues, income, rents, issues,
profits and other benefits arising therefrom or from any contract now
in existence or hereafter entered into pertaining thereto, and in all
rights and claims accrued or to accrue for the removal by anyone of
Hydrocarbons from, or other act causing damage to, any of such
properties or interests.
All the aforesaid properties, rights and interests, together with any
and all substitutions, replacements, corrections or amendments thereto, or
renewals, extensions or ratifications thereof, or of any instrument relating
thereto, and together with any additions thereto which may be subjected to
Laurus' Lien, being hereinafter called the "COLLATERAL".
As used herein, the following terms shall have the following meanings:
"ACCOUNTS AND CONTRACT RIGHTS" shall mean all accounts (including
accounts in the form of joint interest xxxxxxxx under applicable operating
agreements), contract rights and general intangibles of any Assignor now or
hereafter existing, or hereafter acquired by, or on behalf of, any Assignor, or
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any Assignor's successors in interest, relating to or arising from the
ownership, operation and development of the Collateral and to the production,
processing, treating, sale, purchase, exchange or transportation of Hydrocarbons
(defined below) produced or to be produced from or attributable to the
Collateral or any units or pooled interest units in which all or a portion of
the Collateral forms a part, together with all accounts and proceeds accruing to
any Assignor attributable to the sale of Hydrocarbons produced from the
Collateral or any units or pooled interest units in which all or a portion of
the Collateral forms a part.
"HYDROCARBONS" shall mean oil, gas, coalbed methane gas, casinghead
gas, drip gasolines, natural gasoline, condensate, distillate, as-extracted
collateral and all other liquid or gaseous hydrocarbons produced or to be
produced in conjunction therewith, and all products, byproducts and all other
substances derived therefrom or the processing thereof, and all other minerals
and substances, including, but not limited to, sulphur, lignite, coal, uranium,
thorium, iron, geothermal steam, water, carbon dioxide, helium and any and all
other minerals, ores, or substances of value and the products and proceeds
therefrom, including, without limitation, all gas resulting from the in-situ
combustion of coal or lignite.
"LANDS" shall mean the lands described in EXHIBIT A and shall include
any lands, the description of which is contained in EXHIBIT A or incorporated in
EXHIBIT A by reference to another instrument or document, including, without
limitation, all lands described in the Oil and Gas Leases listed on EXHIBIT A
hereto, and shall also include any lands now or hereafter unitized, pooled,
spaced or otherwise combined, whether by statute, order, agreement, declaration
or otherwise, with lands the description of which is contained in EXHIBIT A or
is incorporated in EXHIBIT A by reference.
"LIEN" shall mean any mortgage, deed of trust, collateral assignment,
lien, pledge, charge, security interest or other encumbrance.
"OIL AND GAS LEASES" shall mean oil, gas and mineral leases, oil and
gas leases, oil leases, gas leases, other mineral leases, subleases, top leases,
any rights resulting in an ownership interest in Hydrocarbons and all operating
rights relating to any of the foregoing (whether operated by virtue of such
leases, or assignments or applicable operating agreements), and all other
interests pertaining to any of the foregoing, including, without limitation, all
royalty and overriding royalty interests, production payments and net profit
interests, production payments and net profit interests, mineral fee interests,
and all reversionary, remainder, carried and contingent interests relating to
any of the foregoing and all other rights therein which are described and/or to
which reference may be made on EXHIBIT A.
"OPERATING EQUIPMENT" shall mean all Personal Property and fixtures
affixed or situated upon all or any part of the Collateral, including, without
limitation, all surface or subsurface machinery, equipment, facilities or other
property of whatsoever kind or nature now or hereafter located on any of the
Lands which are useful for the production, treatment, storage or transportation
of oil or gas, including, but not by way of limitation, all oil xxxxx, gas
xxxxx, water xxxxx, injection xxxxx, casing, tubing, rods, pumping units and
engines, Christmas trees, derricks, separators, gun barrels, flow lines, tanks,
gas systems (for gathering, treating and compression), water systems (for
treating, disposal and injection), power plants, poles, lines, transformers,
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starters and controllers, machine shops, tools, storage yards and equipment
stored therein, buildings and camps, telegraph, telephone and other
communication systems, roads, loading racks and shipping facilities.
"PERSONAL PROPERTY" shall mean that portion of the Collateral that is
personal property.
"WELL DATA" shall mean all logs, drilling reports, division orders,
transfer orders, operating agreements, contracts and other agreements,
abstracts, title opinions, files, records, seismic data, memoranda and other
information in the possession or control of any Assignor or to which any
Assignor has access relating to the Lands and/or any xxxxx located thereon.
2. Except as otherwise defined herein, all capitalized terms used
herein shall have the meanings provided such terms in the Securities Purchase
Agreement referred to below. All items of Collateral which are defined in the
UCC shall have the meanings set forth in the UCC. For purposes hereof, the term
"UCC" means the Uniform Commercial Code as the same may, from time to time, be
in effect in the State of New York; provided, that in the event that, by reason
of mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to, Laurus' security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of New York, the term "UCC" shall mean the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions of this Master Security Agreement relating to such attachment,
perfection, priority or remedies and for purposes of definitions related to such
provisions; provided further, that to the extent that the UCC is used to define
any term herein and such term is defined differently in different Articles or
Divisions of the UCC, the definition of such term contained in Article or
Division 9 shall govern.
3. The term "Obligations" as used herein shall mean and include all
debts, liabilities and obligations owing by each Assignor to Laurus arising
under, out of, or in connection with: (i) that certain Securities Purchase
Agreement dated as of the date hereof by and between the Companies and Laurus
(the "Securities Purchase Agreement"), (ii) the Related Agreements referred to
in the Securities Purchase Agreement, (iii) each guaranty agreement made from
time to time by each Assignor in favor of Laurus (each of the foregoing
documents, instruments and agreements, as each may be amended, modified,
restated or supplemented from time to time, collectively, the "Documents"), and
in connection with any documents, instruments or agreements relating to or
executed in connection with the Documents or any documents, instruments or
agreements referred to therein or otherwise, and in connection with any other
indebtedness, obligations or liabilities of each such Assignor to Laurus,
whether now existing or hereafter arising, direct or indirect, liquidated or
unliquidated, absolute or contingent, due or not due and whether under, pursuant
to or evidenced by a note, agreement, guaranty, instrument or otherwise,
including, without limitation, obligations and indebtedness of each Assignor for
post-petition interest, fees, costs and charges that accrue after the
commencement of any case by or against such Assignor under any bankruptcy,
insolvency, reorganization or like proceeding (collectively, the "Debtor Relief
Laws") in each case, irrespective of the genuineness, validity, regularity or
enforceability of such Obligations, or of any instrument evidencing any of the
Obligations or of any collateral therefor or of the existence or extent of such
collateral, and irrespective of the allowability, allowance or disallowance of
any or all of the Obligations in any case commenced by or against any Assignor
under any Debtor Relief Law.
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4. Each Assignor hereby jointly and severally represents, warrants and
covenants to Laurus that:
(a) it is a corporation, partnership or limited liability
company, as the case may be, validly existing, in good standing and
formed under the respective laws of its jurisdiction of formation set
forth on SCHEDULE B, and each Assignor will provide Laurus thirty (30)
days' prior written notice of any change in any of its respective
jurisdiction of formation;
(b) its legal name is as set forth in its Certificate of
Incorporation or other organizational document (as applicable) as
amended through the date hereof and as set forth on SCHEDULE B, and it
will provide Laurus thirty (30) days' prior written notice of any
change in its legal name;
(c) its organizational identification number (if applicable)
is as set forth on SCHEDULE B hereto, and it will provide Laurus thirty
(30) days' prior written notice of any change in its organizational
identification number;
(d) it is the lawful owner of the Collateral and it has the
sole right to grant a security interest therein and will defend the
Collateral against all claims and demands of all persons and entities;
(e) it will keep the Collateral free and clear of all
attachments, levies, taxes, liens, security interests and encumbrances
of every kind and nature ("Encumbrances"), except (i) Encumbrances
securing the Obligations and (ii) Encumbrances securing indebtedness of
each such Assignor not to exceed $50,000 in the aggregate for all such
Assignors so long as all such Encumbrances are removed or otherwise
released to Laurus' satisfaction within ten (10) business days of the
creation thereof, (iii) Encumbrances that arise by operation of law in
the ordinary course of business and not created in connection with the
borrowing of money or the obtaining of credit, which do not detract
materially from the value or reduce the ability to use the property on
which there is an Encumbrance, so long as the obligations supported by
the Encumbrance (x) are not overdue by more than ten (10) days or (y)
if overdue, are being contested continuously and in good faith by
appropriate proceedings and with respect to which adequate reserves are
maintained by such Assignor in accordance with GAAP, (iv) Encumbrances
relating to final judgments or awards or attachments remaining
undischarged or unstayed for not longer than ten (10) days from
incurrence so long as they and/or the judgment they are securing do not
constitute or result in an Event of Default, and (v) Permitted
Encumbrances (as defined in each Deed of Trust, Security Agreement,
Financing Statement and Assignment of Production dated the date hereof
made by Carneros and/or Gotland in favor of Laurus);
(f) it will, at its and the other Assignors' joint and several
cost and expense keep the Collateral in good state of repair (ordinary
wear and tear excepted) and will not waste or destroy the same or any
part thereof other than ordinary course discarding of items no longer
used or useful in its or such other Assignors' business;
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(g) it will not, without Laurus' prior written consent, sell,
exchange, lease or otherwise dispose of any Collateral, whether by
sale, lease or otherwise, except for the sale of inventory in the
ordinary course of business and for the disposition or transfer in the
ordinary course of business during any fiscal year of obsolete and
worn-out equipment or equipment no longer necessary for its ongoing
needs, having an aggregate fair market value of not more than $25,000
and only to the extent that:
(i) the proceeds of each such disposition are used to
acquire replacement Collateral which is subject to Laurus'
first priority perfected security interest, or are used to
repay the Obligations or to pay general corporate expenses; or
(ii) following the occurrence of an Event of Default
which continues to exist, the proceeds of each such
disposition are remitted to Laurus to be held as cash
collateral for the Obligations;
(h) it will insure or cause the Collateral to be insured in
Laurus' name (as additional insured and loss payee) against loss or
damage by fire, theft, burglary, pilferage, loss in transit and such
other hazards as Laurus shall specify in amounts and under policies by
insurers acceptable to Laurus and all premiums thereon shall be paid by
such Assignor and the policies delivered to Laurus. If any such
Assignor fails to do so, Laurus may procure such insurance and the cost
thereof shall be promptly reimbursed by the Assignors, jointly and
severally, and shall constitute Obligations;
(i) it will at all reasonable times during normal business
hours and with advance notice to Assignor in accordance with Section 14
allow Laurus or Laurus' representatives free access to and the right of
inspection of the Collateral, provided that no such notice shall be
required to be given in the event Laurus believes such access is
necessary to preserve or protect the Collateral or following the
occurrence and during the continuance of an Event of Default;
(j) such Assignor (jointly and severally with each other
Assignor) hereby indemnifies and saves Laurus harmless from all loss,
costs, damage, liability and/or expense, including reasonable
attorneys' fees, that Laurus may sustain or incur to enforce payment,
performance or fulfillment of any of the Obligations and/or in the
enforcement of this Master Security Agreement or in the prosecution or
defense of any action or proceeding either against Laurus or any
Assignor concerning any matter growing out of or in connection with
this Master Security Agreement, and/or any of the Obligations and/or
any of the Collateral except to the extent caused by Laurus' own gross
negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final and nonappealable decision) In addition, each
Assignor hereby indemnifies and saves Laurus harmless from any claim,
cost, expense, liability, obligation, loss or damage (including
reasonable legal fees) of any nature, incurred by or imposed upon
Laurus which results, arises out of or is based upon: (i) any
misrepresentation by any Assignor or breach of any warranty by any
Assignor in this Agreement or any Document or any agreement between any
Assignor and Laurus relating hereto or thereto; or (ii) any breach or
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default in performance by the Assignors of any covenant or undertaking
to be performed by the Assignors hereunder or under any Document, or
any other agreement entered into by any Assignor and Laurus relating
hereto or thereto or (iii) (a) the violation of any local, state or
federal law, rule or regulation pertaining to environmental regulation,
contamination or cleanup (collectively, "Environmental Laws"),
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. ss.9601 et seq. and
40 CFR ss.302.1 et seq.), the Resource Conservation and Recovery Act of
1976 (42 U.S.C. ss.6901 et seq.), the Federal Water Pollution Control
Act (33 U.S.C. ss.1251 et seq., and 40 CFR ss.116.1 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. ss.1801 et seq.) and
the regulations promulgated pursuant to said laws, all as amended and
relating to or affecting any Assignor and/or any Assignor's properties,
whether or not caused by or within the control of Laurus and/or (b) the
presence, release or threat of release of any hazardous, toxic or
harmful substances, wastes, materials, pollutants or contaminants
(including, without limitation, asbestos, polychlorinated biphenyls,
petroleum products, flammable explosives, radioactive materials,
infectious substances or raw materials which include hazardous
constituents) or any other substances or raw materials which are
included under or regulated by Environmental Laws on, in, under or
affecting all or any portion of any property of any Assignor or any
surrounding areas, regardless of whether or not caused by or within the
control of Laurus;
(k) it will promptly, and in any event within five (5)
business days after the same is acquired by it, notify Laurus of any
commercial tort claim acquired by it and unless otherwise consented to
in writing by Laurus, it shall enter into a supplement to this Master
Security Agreement granting to Laurus a security interest in such
commercial tort claim; and
(l) Not later than June 30, 2006, each Assignor will (x)
irrevocably direct all of its present and future Account Debtors (as
defined below) and other persons or entities obligated to make payments
constituting Collateral to make such payments directly to the lockboxes
maintained by such Assignor (the "Lockboxes") with North Fork Bank or
such other financial institution accepted by Laurus in writing as may
be selected by the applicable Assignor (the "Lockbox Bank") (each such
direction pursuant to this clause (x), a "Direction Notice") and (y)
provide Laurus with copies of each Direction Notice, each of which
shall be agreed to and acknowledged by the respective Account Debtor.
Upon receipt of such payments, the Lockbox Bank shall agree to deposit
the proceeds of such payments in a deposit account (under which Laurus
has been granted control) maintained at the Lockbox Bank and evidenced
by the account name of Carneros Energy, Inc., or such other deposit
account accepted by Laurus in writing (the "Lockbox Deposit Account").
Not later than June 30, 2006, the applicable Assignor shall and shall
cause the Lockbox Bank to enter into all such documentation acceptable
to Laurus pursuant to which, among other things, the Lockbox Bank
agrees to, following notification by Laurus (which notification Laurus
shall only give following the occurrence and during the continuance of
an Event of Default), comply only with the instructions or other
directions of Laurus concerning the Lockbox and the Lockbox Deposit
Account. All of each Assignor's invoices, account statements and other
written or oral communications directing, instructing, demanding or
requesting payment of any Account (as hereinafter defined) of any such
Assignor or any other amount constituting Collateral shall
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conspicuously direct that all payments be made to the Lockbox or such
other address as Laurus may direct in writing. If, notwithstanding the
instructions to Account Debtors, any Assignor receives any payments,
such Assignor shall immediately remit such payments to the Lockbox
Deposit Account in their original form with all necessary endorsements.
Until so remitted, the Assignors shall hold all such payments in trust
for and as the property of Laurus and shall not commingle such payments
with any of its other funds or property. For the purpose of this Master
Security Agreement, (x) "Accounts" shall mean all "accounts", as such
term is defined in the UCC as in effect in the State of New York on the
date hereof, now owned or hereafter acquired by any Assignor and (y)
"Account Debtor" shall mean any person or entity who is or may be
obligated with respect to, or on account of, an Account.
5. The occurrence of any of the following events or conditions shall
constitute an "Event of Default" under this Master Security Agreement:
(a) any covenant or any other term or condition of this Master
Security Agreement is breached in any material respect and such breach,
if subject to cure, shall continue for a period of fifteen (15) days
after the occurrence thereof;
(b) any representation or warranty, or statement made or
furnished to Laurus under this Master Security Agreement by any
Assignor or on any Assignor's behalf should prove at any time to be
false or misleading in any material respect;
(c) the loss, theft, substantial damage, destruction, sale
(other than the sale by any Assignor of oil, gas and other hydrocarbons
and minerals in the ordinary course of its business consistent with
past practice) or encumbrance (other than in favor of Laurus) to or of
any of the Collateral or the making of any levy, seizure or attachment
thereof or thereon except to the extent:
(i) such loss is covered by insurance proceeds which
are used to replace the item or repay Laurus; or
(ii) said levy, seizure or attachment does not secure
indebtedness in excess of $100,000 in the aggregate for all
Assignors and such levy, seizure or attachment has been
removed or otherwise released within ten (10) days of the
creation or the assertion thereof;
(d) any Assignor shall become insolvent, cease operations,
dissolve, terminate its business existence (except as to any of the
foregoing, in connection with a business combination between or among
Assignors so long as at least one Assignor remains the surviving entity
of such business combination), make an assignment for the benefit of
creditors, suffer the appointment of a receiver, trustee, liquidator or
custodian of all or any part of any Assignor's property;
(e) any proceedings under any bankruptcy or insolvency law
shall be commenced by or against any Assignor and if commenced against
any Assignor shall not be dismissed within forty-five (45) days;
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(f) any Assignor shall repudiate, purport to revoke or fail to
perform any of its obligations under any Note (after passage of
applicable cure period, if any) or any document, instrument or
agreement executed in connection therewith; or
(g) an Event of Default (or similar term) shall have occurred
under and as defined in any Document or any document, instrument or
agreement entered into in connection therewith.
6. Upon the occurrence of any Event of Default and at any time
thereafter, Laurus may declare all Obligations immediately due and payable and
Laurus shall have the remedies of a secured party provided in the UCC as in
effect in the State of New York, this Agreement and other applicable law. Upon
the occurrence of any Event of Default and at any time thereafter, Laurus will
have the right to receive one-hundred percent of all accounts receivable of each
Company, whether attributable to oil, gas, other hydrocarbon production or
otherwise, take possession of the Collateral and to maintain such possession on
any Assignor's premises or to remove the Collateral or any part thereof to such
other premises as Laurus may desire. Upon Laurus' request, each Assignor shall
assemble or cause the Collateral to be assembled and make it available to Laurus
at a place designated by Laurus. If any notification of intended disposition of
any Collateral is required by law, such notification, if mailed, shall be deemed
properly and reasonably given if mailed at least ten (10) days before such
disposition, postage prepaid, addressed to the applicable Assignor either at
such Assignor's address shown herein or at any address appearing on Laurus'
records for such Assignor. Any proceeds of any disposition of any of the
Collateral shall be applied by Laurus to the payment of all expenses in
connection with the sale of the Collateral, including reasonable attorneys' fees
and other legal expenses and disbursements and the reasonable expenses of
retaking, holding, preparing for sale, selling, and the like, and any balance of
such proceeds may be applied by Laurus toward the payment of the Obligations in
such order of application as Laurus may elect, and each Assignor shall be liable
for any deficiency. For the avoidance of doubt, following the occurrence and
during the continuance of an Event of Default, Laurus shall have the immediate
right to withdraw any and all monies contained in the Restricted Accounts or any
other deposit accounts in the name of any Assignor and controlled by Laurus and
apply same to the repayment of the Obligations (in such order of application as
Laurus may elect). The parties hereto each hereby agree that the exercise by any
party hereto of any right granted to it or the exercise by any party hereto of
any remedy available to it (including, without limitation, the issuance of a
notice of redemption, a borrowing request and/or a notice of default) shall not
constitute confidential information and no party shall have any duty to the
other party to maintain such information as confidential.
7. If any Assignor defaults in the performance or fulfillment of any of
the terms, conditions, promises, covenants, provisions or warranties on such
Assignor's part to be performed or fulfilled under or pursuant to this Master
Security Agreement, Laurus may, at its option without waiving its right to
enforce this Master Security Agreement according to its terms, immediately or at
any time thereafter and without notice to any Assignor, perform or fulfill the
same or cause the performance or fulfillment of the same for each Assignor's
joint and several account and at each Assignor's joint and several cost and
expense, and the cost and expense thereof (including reasonable attorneys' fees)
shall be added to the Obligations and shall be payable on demand with interest
thereon at the highest rate permitted by law, or, at Laurus' option, debited by
Laurus from the Restricted Accounts or any other deposit accounts in the name of
any Assignor and controlled by Laurus.
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8. Each Assignor appoints Laurus, any of Laurus' officers, employees or
any other person or entity whom Laurus may designate as such Assignor's
attorney, with power to execute such documents in each such Assignor's behalf
and to supply any omitted information and correct patent errors in any documents
executed by any Assignor or on any Assignor's behalf; to file financing
statements against such Assignor covering the Collateral (and, in connection
with the filing of any such financing statements, describe the Collateral as
"all assets and all personal property, whether now owned and/or hereafter
acquired" (or any substantially similar variation thereof)); to sign such
Assignor's name on public records related to perfecting its security interest
in, or foreclosing upon the Collateral; and to do all other things Laurus deem
necessary to carry out this Master Security Agreement. Each Assignor hereby
ratifies and approves all acts of the attorney and neither Laurus nor the
attorney will be liable for any acts of commission or omission, nor for any
error of judgment or mistake of fact or law other than gross negligence or
willful misconduct (as determined by a court of competent jurisdiction in a
final and non-appealable decision). This power being coupled with an interest,
is irrevocable so long as any of the Obligations remain unpaid.
9. No delay or failure on Laurus' part in exercising any right,
privilege or option hereunder shall operate as a waiver of such or of any other
right, privilege, remedy or option, and no waiver whatsoever shall be valid
unless in writing, signed by Laurus and then only to the extent therein set
forth, and no waiver by Laurus of any default shall operate as a waiver of any
other default or of the same default on a future occasion. Laurus' books and
records containing entries with respect to the Obligations shall be admissible
in evidence in any action or proceeding, shall, absent manifest error, be
binding upon each Assignor for the purpose of establishing the items therein set
forth and shall constitute prima facie proof thereof. Laurus shall have the
right to enforce any one or more of the remedies available to Laurus,
successively, alternately or concurrently. Each Assignor agrees to join with
Laurus in executing such documents or other instruments to the extent required
by the UCC in form satisfactory to Laurus and in executing such other documents
or instruments as may be required or deemed necessary by Laurus for purposes of
affecting or continuing Laurus' security interest in the Collateral.
10. The Assignors shall jointly and severally pay all of Laurus'
out-of-pocket costs and expenses, including reasonable fees and disbursements of
in-house or outside counsel and appraisers, in connection with the preparation,
execution and delivery of the Documents, and in connection with the prosecution
or defense of any action, contest, dispute, suit or proceeding concerning any
matter in any way arising out of, related to or connected with any Document. The
Assignors shall also jointly and severally pay all of Laurus' reasonable fees,
charges, out-of-pocket costs and expenses, including fees and disbursements of
counsel and appraisers, in connection with (a) the preparation, execution and
delivery of any waiver, any amendment thereto or consent proposed or executed in
connection with the transactions contemplated by the Documents, (b) Laurus'
obtaining performance of the Obligations under the Documents, including, but not
limited to the enforcement or defense of Laurus' security interests, assignments
of rights and liens hereunder as valid perfected security interests, (c) any
attempt to inspect or verify Collateral, provided, however, that so long as no
Event of Default shall have occurred and then be continuing, Laurus shall not
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conduct any such inspections and/or verifications at Assignors' expense more
often than quarterly, (d) any attempt to protect, collect, sell, liquidate or
otherwise dispose of any Collateral, (e) any appraisals or re-appraisals of any
property (real or personal) pledged to Laurus by any Assignor as Collateral for,
or any other Person as security for, the Obligations hereunder, provided,
however, that so long as no Event of Default shall have occurred and then be
continuing, Laurus shall not conduct any such appraisals and/or re-appraisals at
Assignors' expense more often than quarterly and (f) any consultations in
connection with any of the foregoing. The Assignors shall also jointly and
severally pay Laurus' customary bank charges for all bank services (including
wire transfers) performed or caused to be performed by Laurus for any Assignor
at any Assignor's request or in connection with any Assignor's loan account (if
any) with Laurus. All such costs and expenses together with all filing,
recording and search fees, taxes and interest payable by the Assignors to Laurus
shall be payable on demand and shall be secured by the Collateral. If any tax by
any nation or government, any state or other political subdivision thereof, and
any agency, department or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
(each, a "Governmental Authority"), other than any tax based on or measured by
Laurus' net income, is or may be imposed on or as a result of any transaction
between any Assignor, on the one hand, and Laurus on the other hand, which
Laurus is or may be required to withhold or pay, the Assignors hereby jointly
and severally indemnify and hold Laurus harmless in respect of such taxes, and
the Assignors will repay to Laurus the amount of any such taxes which shall be
charged to the Assignors' account; and until the Assignors shall furnish Laurus
with indemnity therefor (or supply Laurus with evidence satisfactory to it that
due provision for the payment thereof has been made), Laurus may hold without
interest any balance standing to each Assignor's credit (if any) and Laurus
shall retain its liens in any and all Collateral.
11. THIS MASTER SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS. All of the rights, remedies, options, privileges and
elections given to Laurus hereunder shall inure to the benefit of Laurus'
successors and assigns. The term "Laurus" as herein used shall include Laurus,
any parent of Laurus', any of Laurus' subsidiaries and any co-subsidiaries of
Laurus' parent, whether now existing or hereafter created or acquired, and all
of the terms, conditions, promises, covenants, provisions and warranties of this
Agreement shall inure to the benefit of each of the foregoing, and shall bind
the representatives, successors and assigns of each Assignor.
12. Each Assignor hereby consents and agrees that the state or federal
courts located in the County of New York, State of New York shall have exclusive
jurisdiction to hear and determine any claims or disputes between Assignor, on
the one hand, and Laurus, on the other hand, pertaining to this Master Security
Agreement or to any matter arising out of or related to this Master Security
Agreement, provided, that Laurus and each Assignor acknowledges that any appeals
from those courts may have to be heard by a court located outside of the County
of New York, State of New York, and further provided, that nothing in this
Master Security Agreement shall be deemed or operate to preclude Laurus from
bringing suit or taking other legal action in any other jurisdiction to collect,
the Obligations, to realize on the Collateral or any other security for the
Obligations, or to enforce a judgment or other court order in favor of Laurus.
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Each Assignor expressly submits and consents in advance to such jurisdiction in
any action or suit commenced in any such court, and each Assignor hereby waives
any objection which it may have based upon lack of personal jurisdiction,
improper venue or FORUM NON CONVENIENS. Each Assignor hereby waives personal
service of the summons, complaint and other process issues in any such action or
suit and agrees that service of such summons, complaint and other process may be
made by registered or certified mail addressed to such assignor at the address
set forth on the signature lines hereto and that service so made shall be deemed
completed upon the earlier of such Assignor's actual receipt thereof or three
(3) days after deposit in the U.S. mails, proper postage prepaid.
The parties desire that their disputes be resolved by a judge applying
such applicable laws. Therefore, to achieve the best combination of the benefits
of the judicial system and of arbitration, the parties hereto waive all rights
to trial by jury in any action, suit, or proceeding brought to resolve any
dispute, whether arising in contract, tort, or otherwise between Laurus, and/or
any Assignor arising out of, connected with, related or incidental to the
relationship established between them in connection with this Master Security
Agreement or the transactions related hereto.
13. It is understood and agreed that any person or entity that desires
to become an Assignor hereunder, or is required to execute a counterpart of this
Master Security Agreement after the date hereof pursuant to the requirements of
any Document, shall become an Assignor hereunder by (x) executing a Joinder
Agreement in form and substance satisfactory to Laurus, (y) delivering
supplements to such exhibits and annexes to such Documents as Laurus shall
reasonably request and (z) taking all actions as specified in this Master
Security Agreement as would have been taken by such Assignor had it been an
original party to this Master Security Agreement, in each case with all
documents required above to be delivered to Laurus and with all documents and
actions required above to be taken to the reasonable satisfaction of Laurus.
14. Whenever this Master Security Agreement requires or permits any
consent, approval, notice, request or demand from one party to another, such
consent, approval, notice or demand shall, unless otherwise required under
applicable law, be given in accordance with the provisions of the Securities
Purchase Agreement, addressed to the party to be notified at the address stated
below (or such other address as may have been designated in accordance with the
provisions of the Securities Purchase Agreement):
ASSIGNORS LAURUS
c/o Carneros Acquisition Corp. Laurus Master Fund, Ltd.
0000 Xxxx Xxxx X Street c/o M&C Corporate Services Limited
Xxxx Xxxxx, Xxxxxxxxxx 00000-0000 XX Xxx 000 G.T.
Attention: Xxxxxx Xxxxx, President Xxxxxx Xxxxx, Xxxxx Xxxxxx Xxxxxx
Facsimile: 000-000-0000 Xxxxxx Town
Grand Cayman, Cayman Islands
Attention:____________________
Facsimile: 000-000-0000
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WITH A COPY TO: WITH COPIES TO:
Xxxxx & Xxxxxx, LLP
000 Xxxxx Xxxxxxxxx, 14th Floor Xxxx X. Xxxxxx, Esq.
Xxxxx Xxxx, Xxxxxxxxxx 00000 000 Xxxxx Xxxxxx, 00xx Xxxxx
Attention: Xxxxx Xxxxx, Xxx. Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000 Facsimile: 000-000-0000
Loeb & Loeb LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Facsimile: 000-000-0000
[Remainder of this page intentionally left blank]
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15. This Master Security Agreement may be executed by facsimile
signatures and in any number of counterparts, each of which shall be an
original, but all of which together shall constitute one agreement.
Very truly yours,
CARNEROS ENERGY, INC.
By: *
-----------------------------------
Name:
Title:
Address: 0000 Xxxx Xxxx X Xxxxxx
Xxxx Xxxxx, XX 00000-0000
GOTLAND OIL, INC.
By: *
-----------------------------------
Name:
Title:
Address:
CARNEROS ACQUISITION CORP.
By: /S/ Xxxxxx Xxxxx
-----------------------------------
Name: Xxxxxx Xxxxx
Title: President
Address: 0000 Xxxx Xxxx X Xxxxxx
Xxxx Xxxxx, Xxxxxxxxxx 00000-0000
ACKNOWLEDGED:
LAURUS MASTER FUND, LTD.
By: /S/ Xxxxxx Grin
-----------------------------------
Name: Xxxxxx Grin
Title: Director
Address: c/o Laurus Capital Management LLC
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
* See Joinder and Amendment Agreement dated June 29, 2006 among the Company and
Laurus pursuant to which Gotland and Carneros join the Master Security Agreement
as Companies.
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