DEPOSIT ACCOUNT CONTROL AGREEMENT
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Dated
as of:
November
13, 2008
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Company:
Sonterra
Operating, Inc., a Delaware corporation
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The
Bank:
Sterling
Bank, a Texas banking corporation
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|
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Address
of Bank:
0000
Xxxxxxxx, Xxxxx 000
Xxx
Xxxxxxx, Xxxxx 00000
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Secured
Party/Pledgee:
Summerline
Asset Management, LLC,
a
Delaware limited liability company, in its capacity as Collateral
Agent
for the benefit of itself and Buyers referred to
below
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This
DEPOSIT
ACCOUNT CONTROL AGREEMENT (as
amended, restated, supplemented or otherwise modified from time to time, this
“Agreement”),
by
and among the Bank identified above, the Company identified above, and the
Secured Party/Pledgee identified above (the “Collateral
Agent”)
is
dated as of the date written above.
WHEREAS:
A. Sonterra
Resources, Inc., a Delaware corporation (“Sonterra”),
and
the Buyers (as defined in the Purchase Agreement described below) have entered
into that certain Securities Purchase Agreement dated as of November 13, 2008
(as amended, restated, supplemented or otherwise modified and in effect from
time to time, the “Purchase
Agreement”)
pursuant to which Buyers have purchased certain senior secured notes dated
as of
November 13, 2008 in the aggregate original principal amount of $8,800,000
(such
note, together with any promissory notes or other securities issued in exchange
or substitution therefor or replacement thereof, and as any of the same may
be
amended, supplemented, restated or modified and in effect from time to time,
the
“Notes”)
and
made certain financial accommodations to the Sonterra .
B. Pursuant
to a Security Agreement dated as of November 13, 2008 (as the same may be
amended, restated, modified or supplemented and in effect from time to time,
the
“Security
Agreement”),
entered into among the Company and Collateral Agent, the Company has granted
the
Collateral Agent, for its benefit and the benefit of Buyers, a first priority
security interest in, lien upon and pledge of all of its right, title and
interest in and to the Account(s) (as defined below) and the Account Collateral
(as defined below), including, without limitation, all free credit balances,
cash and cash balances contained or on deposit in the Accounts and all proceeds
thereof, whether now existing or hereafter arising.
C. This
Agreement is intended to perfect Collateral Agent’s and Buyers’ security
interest in the Account(s) and the Account Collateral pursuant to Sections
9.104, 9.312 and 9.314 of the Uniform Commercial Code and shall also serve
as
instructions regarding the operation of and procedures for all deposit accounts
now or hereafter maintained at Bank by, or for the deposit, credit or custody
of
property of, the Company.
NOW
THEREFORE,
the
Bank, the Company and Collateral Agent hereby agree as follows:
1. Account
Identification.
This
Agreement applies to the accounts identified below that have been established
at
the Bank on behalf of and in the name of the Company and to each other deposit
account hereafter established at the Bank on behalf of the Company
(collectively, the “Accounts”).
The
Bank represents and warrants to the Company and the Collateral Agent, on its
behalf and on behalf of Buyers, that (a) the Bank is a “Bank”
(within
the meaning of Article 9 of the Uniform Commercial Code) with which the Accounts
are maintained, (b) each of the Accounts is a “Deposit
Account”
(within
the meaning of Article 9 of the Uniform Commercial Code) and (c) the Company
is
the only “Customer”
(within
the meaning of Article 4 of the Uniform Commercial Code) of the Bank with
respect to the Accounts.
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Account
Holder
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Name
of Account
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Account
Number
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Sonterra
Operating, Inc.
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Company
Checking Account
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2. Security
Interest; Agency.
(a) Each
of
Bank, the Company and Collateral Agent acknowledges that, in order to secure
the
prompt and complete payment, performance and observance of all “Liabilities”
(as
defined in the Security Agreement), the Company has granted, and for avoidance
of doubt and without limiting any prior grant, does hereby grant, to Collateral
Agent, for the benefit of itself and Buyers, a continuing lien upon, and
security interest in, the Accounts and all funds, checks, cash, items,
instruments, investments, securities and other things of value at any time
paid,
deposited, credited or held in, payable or withdrawable from or in transit
to
any Account (whether for collection, provisionally or otherwise), and all other
property of the Company from time to time in the possession or under the control
of, or in transit to, the Bank or any agent, bailee or custodian therefor,
and
all proceeds of all of the foregoing (collectively, the “Account
Collateral”).
(b) The
Bank
agrees to comply with instructions originated by Collateral Agent directing
disposition of the funds in the Accounts or any other Account Collateral or
to
take such other action as shall from time to time be specified in writing from
Collateral Agent, in all cases without notice to or the consent of the Company.
The Bank shall follow the instructions of Collateral Agent as to the holding,
investment and transfer of all Account Collateral. The Company hereby
irrevocably authorizes and directs the Bank to comply with any such instructions
by Collateral Agent without further action or consent by the Company and
notwithstanding any subsequent objection or contrary direction the Bank may
receive from the Company. In addition, the Company agrees that the Bank may
act
as the agent of Collateral Agent in exercising any rights of set-off provided
by
applicable law or by any Transaction Document (as defined in the Purchase
Agreement) as to any Account Collateral. The Company agrees that the Bank shall
be entitled to rely, without independent investigation, on any written notice
in
the form of Exhibit
A
from
Collateral Agent to the effect that an Event of Default (each as defined in
the
Notes) has occurred and is continuing or any other statement of Collateral
Agent
to the effect that any exercise of set-off requested by Collateral Agent is
permitted under applicable law, the Security Agreement or any applicable
Transaction Document.
(c) Without
limiting or qualifying the provisions of clause (b) above, Collateral Agent,
on
its behalf and on behalf of Buyers, hereby appoints the Bank as Collateral
Agent’s and Buyers’ agent and pledgee-in-possession for the Accounts and all
Account Collateral, for the purpose of perfecting Collateral Agent’s and Buyers’
security interest therein; and the Bank by its execution and delivery of this
Agreement hereby accepts such appointment and agrees to be bound by the terms
of
this Agreement. The Company hereby agrees to such appointment of the Bank and
further agrees that the Bank, on behalf of Collateral Agent and Buyers, shall
be
entitled to exercise, upon the instructions of Collateral Agent, any and all
rights that the Collateral Agent and Buyers may have under the Purchase
Agreement, the Security Agreement and all other agreements, documents and
instruments executed pursuant thereto, or under applicable law, with respect
to
the Accounts and the Account Collateral.
2
3. Debtor’s
Access to Accounts.
Collateral Agent agrees that, until such time as Bank receives written notice
in
the form of Exhibit
A
from
Collateral Agent of the occurrence of any Event of Default, the Company shall
be
allowed full use of, and access to, the Accounts and the Account Collateral
without Collateral Agent’s further consent (including, without limitation,
presenting items drawn on the Accounts or giving Bank instructions as to the
withdrawal or other disposition of any funds from time to time credited to
the
Accounts); provided, that the Company shall not be permitted to close any of
the
Accounts. Upon receipt by Bank of notice by Collateral Agent of the occurrence
of an Event of Default, and at all times thereafter, the Company shall not
be
entitled use of, or access to, the Accounts or the Account Collateral and the
Bank shall not comply with any instructions or directions originated by the
Company or otherwise permit the Company access to or control over the Accounts
or the Account Collateral, including without limitation giving stop payment
orders, presenting items for payment or making withdrawals therefrom.
4. Irrevocable
Agreement.
The
Company hereby agrees and acknowledges that the agreements made by it and the
authorizations granted by it herein are irrevocable and that the authorizations
granted herein are powers coupled with an interest.
5. Set-off.
The
Bank hereby waives all existing and future rights of recoupment or set-off
and
banker’s liens against the Accounts and the Account Collateral, except those
rights of set-off and banker’s liens arising in connection with (a) items
deposited in the Accounts that are subsequently returned to the Bank unpaid
and
(b) any compensation and expenses owing and payable to Bank with respect to
the
Accounts which are assessed in accordance with the Bank’s standard account
documentation.
6. Account
Information.
The
Bank shall provide Collateral Agent, at the address indicated in Section 11
below, with such information with respect to the Accounts and Account Collateral
as Collateral Agent may from time to time reasonably request, including, without
limitation and duplicate copies of all bank statements which are sent to the
Company. The Company hereby consents to such information being provided to
Collateral Agent.
7. Exculpation.
The
Company
and the Collateral Agent agree that Bank shall have no liability to either
of
them for any loss or damage that one or both may claim to have suffered or
incurred, either directly or indirectly, by reason of this Agreement or any
transaction or service contemplated by the provisions hereof, other than any
loss or damage incurred as a result of the gross negligence or willful
misconduct of, or breach of this Agreement by, the Bank or its officers, agents
or employees. Without limitation of the preceding sentence, the Company agrees
that Bank shall have no liability to Company for any wrongful dishonor in
connection with the execution by Bank of any Collateral Agent instructions,
as
authorized by and in accordance with Paragraph 2, and the Banks subsequent
dishonor of any items presented for payment.
In no
event shall Bank
be
liable
for
losses or delays resulting from computer malfunction, interruption of
communication facilities, labor difficulties or other causes beyond Bank’s
reasonable control or
for
indirect, special or consequential damages.
8. Indemnity.
The
Company agrees to indemnify the Bank and hold it harmless against any loss,
damage, or expense (including reasonable attorneys’ fees and other litigation
expenses) that it may suffer as a direct result of the Bank’s entering into this
Agreement and performing its obligation hereunder, including, honoring any
instructions or direction it receives from Collateral Agent with respect to
the
Accounts during the term of this Agreement, other than any loss, damage or
expense incurred as a result of the gross negligence or willful misconduct
of,
or breach of this Agreement by, the Bank or its officers, agents or
employees.
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9. No
Other Assignments.
Bank
represents and warrants to Collateral Agent, on its behalf and on behalf of
Buyers, that no other notices of assignment of, lien upon or security interest
in the Accounts or the Account Collateral are reflected in Bank’s records
concerning the Accounts, and Bank has no knowledge of any such assignment or
lien. The Company hereby instructs Bank and Bank hereby agrees to record in
Bank’s records concerning the Accounts any such notice of assignment of the
Accounts that it receives, including the notice conferred by this Agreement.
Bank agrees with and covenants to Collateral Agent, on its behalf and on behalf
of Buyers, that it shall not enter into any other agreement with any Person
which would obligate Bank to follow such Person’s instructions with respect to
the Account or the Account Collateral, or which would otherwise confer control
of the Accounts or the Account Collateral upon such Person.
10. Termination.
This
Agreement shall remain in full force and effect until such time as Collateral
Agent shall deliver written notice to the Bank that all of the Liabilities
have
been indefeasibly paid in full in cash and the Security Agreement has been
terminated, whereupon this Agreement shall terminate. All rights of the Bank
under Sections 7 and 8 for the period prior to any such termination shall
survive such termination.
11. Notices.
Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one (1) business day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
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Collateral
Agent:
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Summerline
Asset Management, LLC
00
Xxxx Xxx Xxx Xxxx, 0xx Xxxxx
Xxxxx
Xxxxxx, Xxx Xxxx 00000
Attention:
Xxxxxx Xxxxxxxx
Telecopy:
(000) 000-0000
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Bank:
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Sterling
Bank
0000
Xxxxxxxx, Xxxxx 000
Xxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx
Xxxx
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
With
a copy to:
Sterling
Bank
0000
Xxxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxx,
Xxxxx 00000
Attention: Xxxxx
X. Xxxxxxx
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
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4
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Company:
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Sonterra
Operating , Inc.
000
Xxxxx Xxx Xxxxxxx Xxxx Xxxx
Xxxxx
000
Xxxxxxx,
Xxxxx 00000
Attention: X.
X. Xxxxxxxxxx
Telephone: (281)
_______
Facsimile: (000)
000-0000
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If
to any
party named above, at such other address and/or facsimile number and/or to
the
attention of such other person as the recipient party has specified by written
notice given to each other party five (5) days prior to the effectiveness of
such change. Written confirmation of receipt (A) given by the recipient of
such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service shall be rebuttable evidence of personal service, receipt by facsimile
or deposit with a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
12. Applicable
Law.
TEXAS
LAW
WITHOUT
REGARD TO ITS CONFLICT OF LAW
PRINCIPLES GOVERNS THIS AGREEMENT. BEXAR COUNTY, TEXAS IS THE PLACE OF
PERFORMANCE OF THIS AGREEMENT AND IS THE PROPER VENUE FOR ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT, WHETHER SUCH ACTION IS IN CONTRACT,
TORT,
OR OTHERWISE.
13. Miscellaneous
Provisions.
This
Agreement shall supersede any other agreement (to the extent conflicting
herewith) relating to the matters referred to herein, including any conflicting
provision of the Bank’s customary account documentation or any other account
agreement between the Company and the Bank. This Agreement is binding upon
the
parties hereto and their respective successors and assigns (including any
trustee of the Company appointed or elected in any action under the Bankruptcy
Reform Act of 1978, as amended) and shall inure to their benefit. This Agreement
may not be changed, amended, modified or waived, except by a writing signed
by
the parties hereto, provided that any such writing need be signed only by the
Bank and Collateral Agent if it does not change any rights or obligations of,
or
authorizations granted by, the Company hereunder and notice thereof is provided
to the Company by Collateral Agent. Any provision of this Agreement that may
prove unenforceable under any law or regulation shall not affect the validity
of
any other provision hereof. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by
each
party and delivered to each other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original,
not
a facsimile signature.
-
Remainder of Page Intentionally Left Blank; Signature Page Follows
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5
IN
WITNESS WHEREOF, the undersigned have executed this Deposit Account Control
Agreement by their respective duly authorized officers as of the date first
forth above.
Company:
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SONTERRA
OPERATING, INC.,
a
Delaware corporation
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By:
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Name:
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Title:
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Account
Control Agreement
Secured
Party/Pledgee:
SUMMERLINE
ASSET MANAGEMENT, LLC,
a
Delaware
limited liability company, in its
capacity
as Collateral Agent
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By:
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Name:
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Xxxxxx
X. Xxxxxxxx
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Title:
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Co-Managing
Member
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Account
Control Agreement
Bank:
STERLING
BANK,
a Texas
banking corporation
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By:
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Name:
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Title:
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Account
Control Agreement
EXHIBIT
A
Form
of Notification of Event of Default
Sterling
Bank
0000
Xxxxxxxx, Xxxxx 000
Xxx
Xxxxxxx, Xxxxx 00000
Attention:
Xxxxx Xxxx
Ladies
and Gentlemen:
Reference
is made to the Deposit Account Control Agreement, dated as of November __,
2008
(the “Account
Control Agreement”)
among
Sterling Bank, a Texas banking corporation, Sonterra Operating, Inc., a Delaware
corporation, and Summerline Asset Management, LLC, in its capacity as Collateral
Agent. Capitalized terms used and not otherwise defined in this notification
letter are used with the meanings set forth in the Account Control Agreement.
You
are
hereby notified, in accordance with Section 3 of the Account Control Agreement,
that an Event of Default has occurred. In light of the foregoing, you are hereby
instructed not to allow Company to access the Accounts or the Account Collateral
and not to comply with any instructions or directions originated by Company
or
otherwise permit Company access to or control over the Accounts or the Account
Collateral, including without limitation giving stop payment orders, presenting
items for payment or making withdrawals therefrom.
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SUMMERLINE
ASSET MANAGEMENT, LLC,
in
its capacity as Collateral Agent
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By:
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Name:
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Title:
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