CONTROL ACCOUNT AGREEMENT (Deposit Account)
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Exhibit
10.5
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Bank
Account Control Agreement for HYD Resources
Corporation.
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(Deposit
Account)
This
Control Account Agreement (“Agreement”) is
entered into effective the ______ day of February 2008, by, between, and among
The Frost National Bank, a national banking association (“Bank”), HYD
Resources, a Texas Corporation (“Debtor”) and YA
Global Investments, L.P., a Cayman Islands exempt partnership (“Secured
Party”).
RECITALS
A. Debtor
maintains with Bank the deposit account (the “Control Account”)
described on Schedule 1 attached hereto and incorporated herein by
reference.
B. Debtor
has granted to Secured Party a security interest in the Control Account and all
amounts or items of value deposited, credited or held in, and proceeds of, the
Control Account (collectively, the “Deposits”) pursuant
to a Security Agreement and certain other documents signed by Debtor and/or
certain affiliates of Debtor in connection with the loan to be made by Secured
Party to Debtor and/or certain affiliates of Debtor (herein called the “Collateral
Documents”).
C. Debtor
has requested that Bank enter into this Agreement to provide for Secured Party's
control of, and to perfect the security interest of Secured Party in, the
Control Account, and Bank has agreed to Debtor’s request, subject to the terms
and conditions of this Agreement.
AGREEMENT
NOW THEREFORE, in
consideration of the foregoing and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties to this
Agreement hereby agree as follows:
1. Control. Bank
shall comply with written instructions (“Notice”) in the form
as set forth on Exhibit "A" attached hereto and incorporated herein by
reference, originated by Secured Party and given to Bank in accordance with this
Agreement, directing disposition of the Deposits in the Control Account,
provided such Deposits are available for withdrawal in accordance with the Funds Availability Policy
Disclosure as set forth in the Deposit Account Agreement between Debtor
and the Bank (the “Deposit Account
Agreement”), without the further consent by the
Debtor. Without limiting the generality or legal effect of the
foregoing, if Secured Party instructs Bank in writing to pay the balance of the
Control Account to or for the benefit of the Secured Party, Bank shall pay the
balance of such Control Account as and when such funds are available for
withdrawal in accordance with the Funds Availability Policy
Disclosure as set forth in the Deposit Account Agreement to or for the
benefit of Secured Party in accordance with such written
instructions.
2. Debtor’s
Rights in Control Account. Notwithstanding the foregoing, the Debtor
shall be entitled to dispose of funds in the Control Account unless and until
the Bank has received the Notice to the contrary from the Secured Party;
provided, however, that the Debtor acknowledges that its disposition privileges
may be revoked solely by the Secured Party. The Debtor and the Bank
agree that upon the Bank's receipt of such Notice from the Secured Party (which
Notice shall be deemed to be a representation by the Secured Party that Secured
Party's giving of such instructions is permitted by agreement of the Debtor)
directing the Bank not to permit the Debtor to dispose of any funds from the
Control Account, the Debtor (and/or its affiliates and its manager) cannot and
will not, and the Bank will not permit the Debtor (and/or its affiliates or its
manager) to, dispose of any funds from the Control Account and will not honor
any checks or other items drawn by the Debtor (and/or its affiliates or its
manager) on the Control Account, until such time as Secured Party advises Bank
in writing that Secured Party no longer claims any interest in the Control
Account, or until this Agreement is terminated.
3. Account
Information. The Bank agrees, that if so directed on Schedule
1, in addition to the original statement which will be provided to the Debtor,
that the Bank will provide the Secured Party with a duplicate statement with
respect to the Control Account substantially concurrently with the delivery
thereof to the Debtor and such other account information reasonably requested in
writing by the Secured Party from time to time. The Debtor hereby
authorizes the Bank to provide any account information requested by the Secured
Party. Debtor further authorizes Bank to disclose to Secured Party,
upon request, any other agreement relating to the Control
Account, that purports to allow any other person or entity (other
than the Debtor owning such Control Account) to provide instructions directing
disposition of funds in the Control Account without the further consent of the
Debtor. Bank agrees that it will not enter into any agreement with
any person or entity in connection with the Control Account by which Bank is
obligated to comply with instructions from such person or entity which conflict
with this Agreement.
4. Charges
to Control Account. The Bank may debit the Control Account for
reasonable fees, costs, charges, and expenses incurred in the ordinary course of
operating and maintaining the Control Account, including without limitation, the
costs, expenses, and liability associated with returned items, in accordance
with its Deposit Account Agreement, and for any costs and expenses set forth in
Paragraph 13 herein. Bank may also debit the Control Account for its customary
charges for duplicate statements and other information furnished to Secured
Party.
5. Returned
Items. If any items previously credited to the Control Account should be
returned to the Bank, then the Bank shall have the right to charge any or all of
such returned items to the Control Account or an alternative account maintained
by Debtor with Bank as specified on Schedule 1, hereinafter called the "Charge
Account." However, if after delivery by the Bank to the
Secured Party of any funds in the Control Account pursuant to this Agreement
there are insufficient collected funds in the Control Account or the Charge
Account to reimburse the Bank for the full amount of all such returned items,
then upon written demand by Bank to the Secured Party, the Secured Party shall
wire transfer to the Bank immediately available funds in an amount equal to the
lesser of (i) the full amount of the unreimbursed portion of such returned
items, or (ii) the amount of the funds representing returned items delivered by
Bank to and received by Secured Party. Bank shall never be required
hereunder to pay Debtor or Secured Party from uncollected funds (i.e., funds
that are not available for withdrawal in accordance with the Funds Availability Policy
Disclosure as set forth in the Deposit Account Agreement), in the Control
Account.
6. Proper
Application. Upon distribution of any funds to or for the benefit of the
Secured Party hereunder, Bank shall have no duty to see to the proper
application or use of such funds by the Secured Party, and Bank shall not in any
manner whatsoever be answerable to Debtor for any loss, misapplication or
non-application of any such funds by Secured Party.
7. Other
Encumbrances and Setoff. The Debtor agrees that it will not permit the
Control Account to become subject to any other pledge, assignment, security
interest, lien, charge or encumbrance of any kind, nature or description, other
than the Collateral Documents. The Bank agrees that, except as
provided in Sections 4, 5, 11, and 13 of this Agreement, it will subordinate any
right of setoff against the Deposits credited to the Control Account or the
monies or instruments relating thereto or held therein and will not otherwise
apply the Deposits credited to the Control Account or the monies or instruments
relating thereto or held therein to satisfy any indebtedness, liability or
obligation of the Debtor or any other person or entity to the
Bank. If Bank, notwithstanding this subordination of right of
set-off, creates or asserts any lien, encumbrance or claim on or security
interest in the Control Account or Deposits, Bank agrees that such lien,
encumbrance or claim or security interest shall be subordinate and junior to
Secured Party's security interest in the Control Account and
Deposits.
8. Representations
by Bank. The Bank represents and warrants that (i) the Control Account is
not evidenced by any instrument, (ii) the Debtor is the record owner of the
Control Account, (iii) as of the date of this Agreement, the books and records
of the Bank do not disclose the existence of any claim or interest in the
Control Account other than the interests of the Debtor and the Secured Party,
and (iv) the Bank has not entered into any control agreement with any person or
entity with respect to the Control Account or the funds deposited therein or the
proceeds thereof.
9. Termination. This
Agreement shall terminate and be of no force and effect upon receipt by the Bank
of written notice from the Secured Party that the Secured Party no longer claims
an interest in the Control Account. This Agreement may be terminated
by Bank, with or without cause, upon its delivery of thirty (30) days prior
written notice thereof to Debtor and Secured Party, and upon the expiration of
such thirty (30) day period, all of Bank’s obligations hereunder shall
cease. Upon the effective date of such termination, Bank will
simultaneously transmit to the Secured Party all collected funds, if any, then
on deposit in the Control Account. All rights of Bank under paragraphs 4, 5, 11,
and 13 shall survive any termination of this Agreement.
10. Reliance.
Bank, without liability to any party, may act in reliance upon any writing or
instrument or signature which it, in good faith, believes to be genuine, may
assume the validity and accuracy of any statement or assertion contained in such
a writing or instrument, and may assume that any person purporting to give any
writing, notice, advice or instructions in connection with the provisions of
this Agreement has been so duly authorized. In the event of a conflict between
any instruction or direction given to the Bank by the Secured Party and any
instruction or direction given to the Bank by or on behalf of the Debtor, Bank
shall comply with the instruction or direction given by the Secured Party.
Without limiting the generality of the foregoing, Bank shall be conclusively
entitled to assume that Secured Party's giving of a Notice is permitted by
agreement of the Debtor.
11. Indemnification
of the Bank; Exculpation. Except in
cases of the Bank's gross negligence or willful misconduct, Debtor hereby agrees
to indemnify the Bank and hold it harmless from any and all claims, liabilities,
losses, actions, suits or proceedings at law or in equity (collectively,
“Claims”), or any other expenses, fees or charges of any character or nature
which Bank may incur or with which it may be threatened by reason of the Bank's
actions under this Agreement, including but not limited to, any Claims caused or
alleged to be caused by the sole or concurrent negligence of Bank, its employees
or agents; and, in connection therewith, to indemnify Bank against any and all
expenses, including without limitation, reasonable attorneys' fees and expenses
incurred by Bank. Bank may itself defend any suit brought against it and
shall be equally entitled to receive reimbursement from the Debtor, its
reasonable attorneys' fees, expenses, and all fees and costs incident to any
appeals which may result. Debtor
and Secured Party agree that Bank shall have no liability to either of them for
any loss or damage that either 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 this Agreement, regardless of whether such loss or
damage is caused or alleged to be caused by the sole or concurrent negligence of
Bank, its employees or agents, unless occasioned solely by the gross negligence
or willful misconduct of Bank. 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 the Bank's
reasonable control or for indirect, special or consequential
damages.
12. Duties.
Bank undertakes to perform only such duties as are expressly set forth in this
Agreement, and no implied duties or obligations shall be read into this
Agreement against the Bank. Bank shall have no duty to investigate or determine
whether an event of default exists under the Collateral Documents or if Debtor
has agreed that Secured Party has the right to send a Notice prior to complying
with any Notice. Except for this Agreement, the Bank is not a party
to, and is not bound by, or charged with notice of, any of the terms and
conditions of any agreements, including without limitation, the Collateral
Documents, between the Secured Party and Debtor or any other party, and the Bank
has not assumed any obligation or liability under such agreements, arrangements
or understandings.
13. Disputes;
Interpleader. If there is any disagreement or dispute in
connection with this Agreement or the subject matter hereof, or in the event of
adverse or inconsistent claims or demands upon, or inconsistent instructions to,
the Bank, other than with respect to Debtor, or if the Bank in good faith is in
doubt as to what action to take pursuant to this Agreement, the Bank may, at its
election, refuse to comply with any such claims, demands, or instructions, or
refuse to take any other action pursuant to this Agreement until:
(a) the
rights of all persons involved in the dispute have been fully and finally
adjudicated by a court of competent jurisdiction or the Bank has resolved any
such doubts to its good faith satisfaction; or
(b) all
disputes have been resolved between the parties involved, and the Bank has
received written notice thereof satisfactory to it signed by all
parties.
Without
limiting the generality of the foregoing, the Bank may, at its election,
interplead the funds in the Control Account or any portion thereof with a court
of competent jurisdiction in Bexar County, Texas, or commence judicial
proceedings for declaratory judgment, and the Bank shall be entitled to recover
from Debtor or the Control Account, its reasonable attorneys' fees and costs in
connection with any such interpleader or declaratory judgment
action.
14. Court
Orders. The Bank is expressly authorized to comply with and
obey any orders, judgments, or decrees of any court with respect to the Control
Account or any matter relating to this Agreement. In the event the
Bank obeys or complies with any such order, judgment or decree of any court, the
Bank shall not be liable to any of the parties hereto or to any other person by
reason of such compliance, notwithstanding any such order, judgment or decree
being subsequently reversed, modified, annulled, set aside, vacated or found to
have been entered without jurisdiction.
15. Notices. All
notices, instructions, requests, demands or other communications required or
permitted to be given pursuant to this Agreement shall be in writing and given
by (i) personal delivery, (ii) expedited delivery service with proof
of delivery, or (iii) United States mail, postage prepaid, registered or
certified mail, return receipt requested, sent to the intended addressee at the
address set forth on Schedule 1 and shall be deemed to have been received
either, in the case of personal delivery, as of the time of personal delivery,
in the case of expedited delivery service, as of the date of first attempted
delivery at the address and in the manner provided herein, or in the case of
mail, upon actual receipt. Any party shall have the right to change
its address for notice hereunder to any other location within the continental
United States by notice to the other parties of such new address at least thirty
(30) days prior to the effective date of such new address. Bank shall have a
reasonable period of time, not to exceed two business days (any date the bank is
open for business), to comply with and implement any Notice actually received by
Bank from Secured Party.
16. Unenforceability. If
any portion of this Agreement shall be held invalid or unenforceable, then so
far as is reasonable and possible, the remainder of this Agreement shall be
considered valid and operative and effect shall be given to the intent
manifested by the portion held invalid or unenforceable.
17. Amendments;
Entire Agreement. The provisions of this Agreement may
not be amended, supplemented, waived, or changed orally, except by a writing
signed by all of the parties to this Agreement. This Agreement, together with
all schedules attached hereto represent the entire agreement by and between the
parties hereto concerning the subject matter hereof and supersedes any prior
oral or written agreements by and between the parties respecting the subject
matter of this Agreement. In the event of a conflict between the
provisions of this Agreement and any other agreement between Bank and Debtor (or
any of its affiliates), the provisions of this Agreement shall
control.
18. Headings. The
headings, captions and arrangements used in this Agreement are for convenience
only, and shall not affect the interpretation of this Agreement.
19. Successors
and Assigns. This Agreement may not be assigned by any party hereto
without the prior written consent of Bank. The rights created by this
Agreement shall inure to the benefit of, and the obligations created hereby
shall be binding upon, the successors and assigns (where permitted) of the Bank,
Debtor, and the Secured Party.
20. Governing
Law. This Agreement is being executed and delivered, and is
intended to be performed, in the State of Texas, which is Bank’s jurisdiction
for purposes of Article 9 of the Uniform Commercial Code, as adopted in
Texas. The laws of the State of Texas shall govern the validity,
construction, enforcement and interpretation of this Agreement. This
Agreement is performable in Bexar County, Texas.
21. Counterparts. This Agreement
may be executed in any number of counterparts, all of which when taken together
shall constitute one and the same agreement, and any of the parties to this
Agreement may execute the Agreement by signing any of the
counterparts.
22. WAIVER
OF JURY TRIAL. Each
party to this Agreement waives all right to trial by jury of any and all claims
relating in any way to this Agreement or the transactions contemplated by this
Agreement. Each party to this Agreement acknowledges that this is a waiver of a
legal right and is made knowingly and voluntarily after consultation with
counsel. Each party to this Agreement agrees that all such claims shall be tried
before a judge of a court having jurisdiction, without a
jury.
[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
EXECUTED as of the date first
above written.
SECURED
PARTY:
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YA
GLOBAL INVESTMENTS, L.P.
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By:
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Yorkville
Advisors, LLC
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Its:
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Investment
Manager
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By:
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/s/
Xxxx Xxxxxx
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Name:
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Xxxx
Xxxxxx
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Its:
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Portfolio
Manager
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II. BANK:
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THE
FROST NATIONAL BANK
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By:
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Printed
Name:
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Title:
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III. DEBTOR:
HYD
Resources
By: /s/
Xxxx Xxxxx
Printed
Name: Xxxx Xxxxx
Title:
President and CEO
