Contract
SECURITY
AGREEMENT, dated as of February 27, 2008 (this "Agreement"), made by
BLAST ENERGY SERVICES, INC., a Texas corporation (“Blast”), and EAGLE
DOMESTIC DRILLING OPERATIONS LLC, a Texas limited liability company (“Eagle”; Blast and
Eagle are referred to herein individually as a “Grantor” and
collectively as the “Grantors”) in favor
of LAURUS MASTER FUND, LTD (the "Secured
Party").
Recitals
A) On
February 26 2008, the United States Bankruptcy Court for the Southern District
of Texas (the “Bankruptcy Court”)
entered its order confirming the Second Amended Joint Plan of Reorganization of
Blast Energy Services, Inc. Debtor, and Eagle Domestic Drilling Operations LLC
Debtor (the “Plan”) filed by Blast
and Eagle.
B) The
Plan, among other things, implemented the terms and agreements between the
Grantors and the Secured Party that were embodied in the Settlement Agreement
and the Sale Order.
C) Pursuant
to the Plan, the Settlement Agreement and the Sale Order, the Secured Party has
retained against the Grantors a first priority secured claim in the amount of
$2.1 million (the “Laurus Retained
Claim”). The obligation of the Grantors to pay the
Laurus Retained Claim is, pursuant to the Plan, the Settlement Agreement, the
Sale Order and the Confirmation Order, secured by the Laurus
Collateral.
D) The
execution and delivery of this Agreement to the Secured Lender is a condition to
the effectiveness of the Plan.
ACCORDINGLY,
the Grantors and the Secured Party (and each of their respective successors or
assigns) hereby agree as follows:
ARTICLE
I
DEFINITIONS
SECTION
1.01. Definition of Terms Used
Herein. Unless the context otherwise requires, all capitalized
terms used but not defined herein shall have the meanings set forth in the Plan
and all references to the Uniform Commercial Code shall mean the Uniform
Commercial Code as in effect in the State of Texas from time to time; provided,
in the event, 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 Texas, the term “Uniform
Commercial Code” shall mean the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions of this Agreement relating to
such attachment, perfection, priority or remedies and for purposes of
definitions related to such provisions; provided further, 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
1.02. Definition of Certain Terms
Used Herein. As used herein, the following terms shall have
the following meanings:
"Account Debtor" shall
mean any person who is or who may become obligated to the Grantor under, with
respect to or on account of an Account.
"Accounts" shall mean
any and all right, title and interest of each Grantor existing as of the
Petition Date in and to all "accounts", as such term is defined in the Uniform
Commercial Code, and any other payment intangibles or rights to payment, and
including without limitation, any amounts owed to each Grantor by Hallwood,
Quicksilver and Saddle Creek.
"Chattel Paper" shall
mean all "chattel paper", as such term is defined in the Uniform Commercial
Code, owned by each Grantor as of the Petition Date.
"Collateral" shall
mean all (a) Accounts, (b) Documents, (c) Equipment, (d) General Intangibles,
(e) Inventory, (f) Chattel Paper, (g) Goods, (h) Intellectual Property, (i)
Commercial Tort Claims, (j) Investment Property, (k) Letter of Credit Rights and
Supporting Obligations, (l) Instruments, and (m) any
Proceeds. Collateral shall also mean and shall include, to the extent
not included in the above categories, all rights, title and interest of the
Grantors in and to (i) the contracts with Hallwood, Quicksilver and Saddle Creek
executed on or prior to the Petition Date, (ii) all claims and causes of action
against Hallwood, Quicksilver and Saddle Creek, including the Hallwood
Litigation, the Quicksilver Litigation and the Saddle Creek Litigation, and
(iii) all Proceeds of the foregoing, including any and all payments or
recoveries, including from any settlement, received by the Grantors from the
Hallwood Litigation, the Quicksilver Litigation and the Saddle Creek
Litigation.
"Commercial Tort
Claims" shall mean all "commercial tort claims", as such term is defined
in the Uniform Commercial Code, held or owned by each Grantor as of the Petition
Date, including to the extent applicable all claims and causes of action held
and/or asserted by either Grantor in connection with the Hallwood Litigation,
the Quicksilver Litigation and the Saddle Creek Litigation.
“Confirmation Order”
shall mean the order of the Bankruptcy Court entered by the Bankruptcy Court on
February 26, 2008 entitled Order Confirming Second Amended Joint Plan of
Reorganization of Blast Energy Services, Inc. Debtor and Eagle Domestic Drilling
Operations LLC Debtor.
"Copyright License"
shall mean any written agreement executed on or prior to the Petition Date
granting any right to any third party under any Copyright owned by either
Grantor or which either Grantor otherwise has the right to license, or granting
any right to either Grantor under any Copyright owned by any third party, and
all rights of the Grantors under any such agreement.
"Copyrights" shall
mean all of the following owned by either Grantor as of the Petition Date: (a)
all copyright rights in any work subject to the copyright laws of the United
States or any other country, whether as author, assignee or transferee, and (b)
all registrations and applications for registration of any such copyright in the
United States or any other country, including registrations, recordings,
supplemental registrations and pending applications for registration in the
United States Copyright Office.
"Documents" shall mean
all instruments, files, books, records, ledger sheets, data processing records,
computer software, manuals and documents covering or relating to any of the
Collateral, owned by either Grantor as of the Petition Date.
"Equipment" shall mean
all machinery, equipment, cables, furniture and furnishings, and all tangible
present and future personal property similar to any of the foregoing, including
embedded software, motor vehicles, office equipment, tools, parts and supplies
of every kind and description (as well as all such types of property leased by
either Grantor and all of such Grantor's rights and interests with respect
thereto) and all improvements, additions, accessions or appurtenances thereto,
that were owned by the Grantors on the Petition Date. The term Equipment shall
include Fixtures.
“Event of Default”
shall mean (a) the failure of the Grantors to pay when and as due the amounts
due and to be paid to the Secured Party on account of the Laurus Retained Claim
as required by the terms of the Sale Order, the Plan and the Confirmation Order,
(b) any event shall occur under any agreement, document or instrument, including
under the Note and Security Agreement provided in the Plan in favor of Xxxx
McAfee (Class 3 under the Plan), which allows any person or entity to declare an
event of default under any such agreement, document, instrument, Note or
Security Agreement and/or to foreclose, or commence to foreclose, on the
Collateral, and/or (c) the failure of either Grantor to perform or observe, in
any material respect, any covenant set forth in this Agreement.
"Fixtures" shall mean
all items of Equipment, owned as of the Petition Date, of either Grantor that
become so related to particular real estate that an interest in them arises
under any real estate law applicable thereto.
"General Intangibles"
shall mean all general intangibles, choses in action and causes of action and
all other intangible personal property of either Grantor of every kind and
nature held or owned as of the Petition Date, including all payment intangibles,
software, rights and interests in partnerships, limited partnerships, limited
liability companies and other unincorporated entities, corporate or other
business records, indemnification claims, contracts and contract rights
(including rights under customer contracts, leases, whether entered into as
lessor or lessee, and other agreements), Intellectual Property, goodwill,
registrations, franchises, permits, tax refund claims, commercial tort claims,
goodwill and any letter of credit, guarantee, claim, security interest or other
security, whether voluntary or involuntary, held by or granted to either Grantor
to secure payment by an Account Debtor of any Account.
"Goods" shall mean all
"goods", as such term is defined in the Uniform Commercial Code, owned by either
Grantor as of the Petition Date.
“Hallwood” shall mean
Hallwood Petroleum LLC and Hallwood Energy, LP and their respective
affiliates.
“Hallwood Litigation”
shall mean the court proceedings ongoing as of the date of this Agreement,
Adversary case no. 07-03282, in the Bankruptcy Court, or any similar
proceedings, between Hallwood and Eagle pertaining to an early termination and
resulting breach of two IADC standard form drilling contracts, and any claims,
causes of action and counterclaims asserted or to be asserted by Eagle against
Hallwood in such proceedings.
"Intellectual
Property" shall mean all intellectual and similar property of either
Grantor of every kind and nature owned or licensed as of the Petition Date,
including inventions, permits, designs, Patents, Copyrights, Licenses,
Trademarks, trade secrets, confidential or proprietary technical and business
information, know-how, show-how or other data or information, software and
databases and all embodiments or fixations thereof and related documentation,
registrations and franchises, and all additions, improvements and accessions to,
and books and records describing or used in connection with, any of the
foregoing, and including, without limitation, all rights, title and interest of
the Grantors in, to and with respect to the Abrasive Fluid Jet technology, any
Patents or patent applications with respect thereto, and that certain Abrasive
Fluid Jet Technology Purchase Agreement, dated August 25, 2005, between the
Grantors and Alberta Energy Partners.
"Instruments" shall
mean all "instruments", as such term is defined in the Uniform Commercial Code,
owned by either Grantor as of the Petition Date.
"Inventory" shall mean
all inventory, goods and merchandise of either Grantor, owned as of the Petition
Date, held for sale or lease, or furnished or to be furnished by either Grantor
under contracts of service, or consumed in either Grantor’s respective business,
including raw materials, intermediates, work in process, packaging materials,
finished goods, semi-finished inventory, scrap inventory, manufacturing supplies
and spare parts, all such goods that have been returned to or repossessed by or
on behalf of either Grantor and all documents of title representing such
collateral.
"Investment Property"
shall mean all "investment property", as such term is defined in the Uniform
Commercial Code, owned by either Grantor as of the Petition Date, and all
interests of Blast in Eagle, including all rights, title and interest of Blast
in and to any membership interests, and any distributions with respect thereto,
in Eagle.
"Letter-of-Credit
Rights" shall mean all "letter-of-credit rights", as such term is defined
in the Uniform Commercial Code, owned by either Grantor as of the Petition
Date.
"License" shall mean
any Patent License, Trademark License, Copyright License or other license or
sublicense to which either Grantor is a party executed on or prior to the
Petition Date (other than those license agreements in existence on the date
hereof and those license agreements entered into after the date hereof, which by
their terms prohibit assignment or a grant of a security interest by the Grantor
as licensee thereunder so long as such prohibition
remains in effect and is valid notwithstanding the provisions of the Uniform
Commercial Code or the provisions of any other applicable federal or state
law).
"Obligations" shall
mean the payment by the Grantors, when and as due, of the Laurus Retained
Claim.
"Patent License" shall
mean any written agreement, executed on or prior to the Petition Date, granting
to any third party any right to make, use or sell any invention on which a
Patent, owned by either Grantor or which either Grantor otherwise has the right
to license, is in existence, or granting to either Grantor any right to make,
use or sell any invention on which a Patent is in existence, and all rights of
either Grantor under any such agreement, including all such agreements and
licenses related to a method of an apparatus for horizontal well drilling,
patent registration numbers 5,413,184 and 5,853,056.
"Patents" shall mean
all of the following owned by either Grantor as of the Petition Date: (a) all
letters patent of the United States or any other country, all registrations and
recordings thereof, and all applications for letters patent of the United States
or any other country, including registrations, recordings and pending
applications in the United States Patent and Trademark Office or any similar
offices in any other country, including patent application # 60/527,308 relating
to a method and apparatus for Jet-Fluid Abrasive Cutting and any patent issued
with respect thereto and (b) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof, and the inventions
disclosed or claimed therein, including the right to make, use and/or sell the
inventions disclosed or claimed therein.
“Petition
Date” shall mean January 19, 2007.
"Proceeds" shall mean
all proceeds and products of any of the Collateral, including, but not limited
to, any consideration received from the sale, exchange, license, lease or other
disposition of any asset or property that constitutes Collateral, any value
received as a consequence of the possession of any Collateral and any payment
received from any insurer or other person or entity as a result of the
destruction, loss, theft, damage or other involuntary conversion of whatever
nature of any asset or property which constitutes Collateral, and shall include
(a) any claim of either Grantor against any third party for (and the right to
xxx and recover for and the rights to damages or profits due or accrued arising
out of or in connection with) or with respect to (i) any Intellectual Property,
including for infringement or breach, and (ii) a commercial tort and (b)
any and all other amounts from time to time paid or payable under or in
connection with any of the Collateral.
“Quicksilver” shall
mean Quicksilver Resources, Inc. and its affiliates.
“Quicksilver
Litigation” shall mean the court proceedings ongoing as of the date of
this Agreement, Adversary case no. 07-03292, in the Bankruptcy Court, or any
similar proceedings, between Quicksilver and Eagle pertaining to an early
termination and resulting breach of three IADC standard form drilling contracts,
and any claims, causes of action and counterclaims asserted or to be asserted by
Eagle against Quicksilver in such proceedings.
“Saddle Creek” shall
mean Saddle Creek Energy Development, LP.
“Saddle Creek
Litigation” shall mean all claims and causes of action against Saddle
Creek, including with respect to the litigation commenced by the Grantors in the
Bankruptcy Court, relating to or involving that certain IADC Day Rate Drilling
Contract dated October 24, 2006, as amended.
“Sale Order” shall
mean the “Order Under 11 U.S.C. Sections 105(A) And 363 and Fed. R. Bankr. P.
2002 And 6004 Authorizing and Approving (I) Asset Purchase Agreement; (II) Asset
Sale Free And Clear Of Liens, Claims, Interests And Encumbrances; and (III)
Certain Related Relief” entered by the Court on May 11, 2007
"Security Interest"
shall have the meaning assigned to such term in Section 2.01.
“Settlement Agreement”
shall mean the global settlement agreement among the numerous signatory parties,
including the Grantors and the Secured Party, approved by order of the
Bankruptcy Court entered on May 11, 2007.
"Supporting
Obligations" shall mean all "supporting obligations", as such term is
defined in the Uniform Commercial Code, owned by either Grantor as of the
Petition Date.
"Trademark License"
shall mean any written agreement, executed on or prior to the Petition Date,
granting to any third party any right to use any Trademark owned by either
Grantor or which either Grantor otherwise has the right to license, or granting
to either Grantor any right to use any Trademark owned by any third party, and
all rights of either Grantor under any such agreement.
"Trademarks" shall
mean all of the following owned by either Grantor as of the Petition Date: (a)
all trademarks, service marks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, trade dress, logos,
other source or business identifiers, designs and general intangibles of like
nature, all registrations and recordings thereof, and all registration and
recording applications filed in connection therewith, including registrations
and registration applications in the United States Patent and Trademark Office,
any State of the United States or any similar offices in any other country or
any political subdivision thereof, and all extensions or renewals thereof, (b)
all goodwill associated therewith or symbolized thereby and (c) all other
assets, rights and interests that uniquely reflect or embody such
goodwill.
ARTICLE
II
SECURITY
INTEREST
SECTION
2.01. Security Interest. As
security for the payment in full of the Obligations, each Grantor hereby grants
to the Secured Party, its successors and assigns, a continuing security interest
in all of each such Grantor's right, title and interest in, to and under the
Collateral (the "Security
Interest"). Without limiting the foregoing, the Secured Party
is hereby authorized to file one or more financing statements (including fixture
filings), amendments thereto, continuation statements, filings with the United
States Patent and Trademark Office or United States Copyright Office (or any
successor office or any similar office in any other country) or other documents,
including a copy of the Sale Order and the Confirmation Order, for the purpose
of perfecting, confirming, continuing, enforcing or protecting the Security
Interest granted by the Grantors, without the signature of the Grantors, and
naming the Grantors as debtor and the Secured Party as secured
party. The Secured Party is authorized to include any information
required by part 5 of Article 9 of the Uniform Commercial Code, or its
equivalent in any other applicable jurisdiction, for the sufficiency or filing
office acceptance of any financing statement, amendment or continuation
statement.
SECTION
2.02. No Assumption of
Liability. The Security Interest is granted as security only and shall
not subject the Secured Party to, or in any way alter or modify, any obligation
or liability of either Grantor with respect to or arising out of the
Collateral.
ARTICLE
III
COVENANTS
SECTION
3.01. Change of Name; Location of
Collateral; Records; Place of Business. (a) Each Grantor agrees promptly
to notify the Secured Party in writing of any change (i) in its corporate name
or in any trade name used to identify it in the conduct of its business or in
the ownership of its properties, (ii) its state of incorporation, (iii) in the
location of its chief executive office, its principal place of business, any
office in which it maintains books or records relating to Collateral owned by it
or any office or facility at which Collateral owned by it is located (including
the establishment of any such new office or facility), (iv) in its identity or
corporate structure, (v) in its organizational number or (vi) in its Federal
Taxpayer Identification Number. Each Grantor agrees not to effect or
permit any change referred to in the preceding sentence unless it shall have
given the Secured Party ten (10) Business Days prior written notice of such
change and shall promptly execute all documents that are required in order for
the Secured Party to continue at all times following such change to have a
valid, legal and perfected security interest in all the
Collateral. Each Grantor agrees promptly to notify the Secured Party
if any material portion of the Collateral owned or held by such Grantor is
damaged or destroyed.
SECTION
3.02. Further
Assurances. Each Grantor agrees, at its own expense, to
execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as the Secured Party may
from time to time reasonably request to better assure, preserve, protect and
perfect the Security Interest and the rights and remedies created
hereby.
SECTION
3.03. First Priority Lien/Other
Liens/Disposition of Collateral. As provided in the Sale Order, Plan and
Confirmation Order, the Security Interest provided for in this Agreement is a
continuing first priority fully perfected security interest in and lien against
the Collateral. Each Grantor shall not make or permit to be made an
assignment, pledge or hypothecation of the Collateral or shall grant any other
lien or security interest in respect of the Collateral, except for the liens and
security interests authorized in the Plan and the Confirmation
Order. Unless and until the Secured Party shall notify the Grantors
that an Event of Default shall have occurred and be continuing, each Grantor
shall be entitled to sell, convey, lease, assign, transfer or otherwise dispose
of any Collateral, subject to the consent rights of the Secured Party set forth
in the Plan and the Confirmation Order and provided that the proceeds of any
such sale, conveyance, lease, assignment, transfer or disposition are
distributed to the Secured Party in the manner and amount as provided in the
Sale Order, the Plan and the Confirmation Order.
ARTICLE
IV
REMEDIES
SECTION
4.01. Remedies upon
Default. In addition to all other rights and remedies granted to the
Secured Party under this Agreement, upon the occurrence and continuance of an
Event of Default, the Obligations shall become immediately due and payable and
the Secured Party may exercise all rights and remedies of a secured party under
the Uniform Commercial Code or other applicable law. Without limiting
the generality of the foregoing, upon the occurrence and during the continuance
of an Event of Default, each Grantor agrees to deliver each item of Collateral
to the Secured Party on demand, and it is agreed that the Secured Party shall
have the right to take any of or all the following actions at the same or
different times: (a) with respect to any Collateral consisting of Intellectual
Property, on demand, to cause the Security Interest to become an assignment,
transfer and conveyance of any of or all such Collateral by the Grantor to the
Secured Party (other than Licenses that are not assignable), and/or to issue any
license or sublicense, whether general, special or otherwise, and whether on an
exclusive or non-exclusive basis, to use any such Collateral throughout the
world on such terms and conditions and in such manner as the Secured Party shall
determine (other than in violation of any then-existing licensing arrangements
to the extent that waivers cannot be obtained), and (b) with or without legal
process and with or without prior notice or demand for performance, to take
possession of the Collateral and without liability for trespass to enter any
premises where the Collateral may be located for the purpose of taking
possession of or removing the Collateral and, generally, to exercise any and all
rights afforded to a secured party under the Uniform Commercial Code or other
applicable law. Without limiting the generality of the foregoing,
each Grantor agrees that the Secured Party shall have the right, subject to the
mandatory requirements of applicable law, to sell or otherwise dispose of all or
any part of the Collateral, at any public or private sale or at any broker's
board or on any securities exchange, for cash, upon credit or for future
delivery as the Secured Party shall deem appropriate. The Secured
Party shall be authorized at any such sale (if it deems it advisable to do so)
to restrict the prospective bidders or purchasers to persons who will represent
and agree that they are purchasing the Collateral for their own account for
investment and not with a view to the distribution or sale thereof, and upon
consummation of any such sale the Secured Party shall have the right to assign,
transfer and deliver to the purchaser or purchasers thereof the Collateral so
sold. Each such purchaser at any such sale shall hold the property
sold absolutely, free from any claim or right on the part of either Grantor, and
each Grantor hereby waives (to the extent permitted by law) all rights of
redemption, stay, valuation and appraisal which either Grantor now has or may at
any time in the future have under any rule of law or statute now existing or
hereafter enacted.
The
Secured Party shall give the Grantors 10 days' written notice (which the
Grantors agree is reasonable notice within the meaning of the Uniform Commercial
Code) of the Secured Party's intention to make any sale of
Collateral. Such notice, in the case of a public sale, shall state
the time and place for such sale and, in the case of a sale at a broker's board
or on a securities exchange, shall state the board or exchange at which such
sale is to be made and the day on which the Collateral, or portion thereof, will
first be offered for sale at such board or exchange. Any such public
sale shall be held at such time or times within ordinary business hours and at
such place or places as the Secured Party may fix and state in the notice (if
any) of such sale. At any
such sale, the Collateral, or portion thereof, to be sold may be sold in one lot
as an entirety or in separate parcels, as the Secured Party may (in its sole and
absolute discretion) determine. The Secured Party shall not be
obligated to make any sale of any Collateral if it shall determine not to do so,
regardless of the fact that notice of sale of such Collateral shall have been
given. 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 sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is
made on credit or for future delivery, the Collateral so sold may be retained by
the Secured Party until the sale price is paid by the purchaser or purchasers
thereof, but the Secured Party shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public (or, to the extent permitted by law, private)
sale made pursuant to this Section, the Secured Party may bid for or purchase,
free (to the extent permitted by law) from any right of redemption, stay,
valuation or appraisal on the part of either Grantor (all said rights being also
hereby waived and released to the extent permitted by law), the Collateral or
any part thereof offered for sale and may make payment on account thereof by
using any claim then due and payable to the Secured Party from the Grantors as a
credit against the purchase price, and the Secured Party may, upon compliance
with the terms of sale, hold, retain and dispose of such property without
further accountability to the Grantors therefor. For purposes hereof,
a written agreement to purchase the Collateral or any portion thereof shall be
treated as a sale thereof; the Secured Party shall be free to carry out such
sale pursuant to such agreement and the Grantors shall not be entitled to the
return of the Collateral or any portion thereof subject thereto, notwithstanding
the fact that after the Secured Party shall have entered into such an agreement
all Events of Default shall have been remedied and the Obligations paid in
full. As an alternative to exercising the power of sale herein
conferred upon it, the Secured Party may proceed by a suit or suits at law or in
equity to foreclose this Agreement and to sell the Collateral or any portion
thereof pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed
receiver.
SECTION
4.02. Application of
Proceeds. The Secured Party shall apply the proceeds of any collection or
sale of the Collateral, as well as any Collateral consisting of cash, as
follows:
FIRST, to
the payment of all costs and expenses incurred by the Secured Party in
connection with such collection or sale or with the exercise of any right or
remedy hereunder, including all court costs and the reasonable fees and expenses
of its agents and legal counsel;
SECOND,
to the payment in full of the Obligations; and
THIRD, to
the Grantors, and its successors or assigns, or as a court of competent
jurisdiction may otherwise direct.
ARTICLE
V
MISCELLANEOUS
SECTION
5.01. Notices. All
communications and notices hereunder shall (except as otherwise expressly
permitted herein) be in writing, first class mail postage
prepaid, and shall be mailed or electronically transmitted
to:
The
Grantors:
Attn: Xxxx
X’Xxxxx
00000
Xxxxxx Xxxxx Xxxxxxxxx
Xxxxx
000
Xxxxxxx,
XX 00000
Email: xxxx@xxxxx-xx.xxx
with a
copy to:
X. Xxx
Xxxxxxx, III
00000
Xxxxxxxxx Xxxxxxxxx
Xxxxxxx,
Xxxxx 00000
(000)
000-0000 (phone & fax)
xxxxxxxx0@xxxxxxxxx.xxx
If to the
Secured Party to:
Laurus
Master Fund Ltd.
Attn:
Xxxxxxx Xxxxxx
000
Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx,
XX 00000
Telephone:
000-000-0000
Facsimile:
000-000-0000
Email: xxxxxxx@xxxxxxxxxxx.xxx
with a
copy to:
Xxxxxx
Xxxxxxxx, Esq.
Cole,
Schotz, Meisel, Xxxxxx & Xxxxxxx, P.A.
00 Xxxx
Xxxxxx
Xxxxxxxxxx,
XX 00000
000.000.0000
direct dial
201.678-6331
direct fax
Email:
xxxxxxxxx@xxxxxxxxxx.xxx
SECTION
5.02. Security Interest
Absolute. All rights of the Secured Party hereunder, the Security
Interest and all obligations of each Grantor hereunder shall be absolute and
unconditional irrespective of (a) any lack of validity or enforceability of any
agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, (b) any change in the time, manner
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to any departure from any
other agreement or instrument, (c) any exchange, release or non-perfection of
any security interest or lien on other collateral, or any release or amendment
or waiver of or consent under or departure from any guarantee, securing or
guaranteeing all or any of the Obligations, or (d) any other circumstance that
might otherwise constitute a defense available to, or a discharge of, either
Grantor in respect of the Obligations.
SECTION
5.03. Survival of
Agreement. All covenants, agreements, representations and warranties made
by each Grantor herein shall be considered to have been relied upon by the
Secured Party and shall survive the execution and delivery to the Secured Party
of this Agreement, regardless of any investigation made by the Secured Party or
on its behalf, and shall continue in full force and effect until this Agreement
shall terminate.
SECTION
5.04. Binding Effect; Several
Agreement. This Agreement shall become effective as to each Grantor upon
entry of the Confirmation Order and when a counterpart hereof executed on behalf
of each Grantor shall have been delivered to the Secured Party and a counterpart
hereof shall have been executed on behalf of the Secured Party, and thereafter
shall be binding upon each Grantor and the Secured Party and their respective
successors and assigns, and shall inure to the benefit of the Grantors, the
Secured Party and their respective successors and assigns, except that the
Grantors shall not have the right to assign or transfer its rights or
obligations hereunder or any interest herein or in the Collateral (and any such
assignment or transfer shall be void) except as expressly contemplated by this
Agreement.
SECTION
5.05. GOVERNING LAW. THIS
AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF TEXAS.
SECTION
5.06. VENUE. The
Grantors and the Secured Creditor consent and agree that the Bankruptcy Court
shall have exclusive jurisdiction to hear and determine, while the bankruptcy
cases of the Grantors are still pending, any claims and disputes between the
Grantors and the Secured Creditor pertaining to this Agreement or any matter
arising out of or related to this Agreement. To the extent the
Bankruptcy Court declines to exercise such jurisdiction or no longer has such
jurisdiction, the Grantors and the Secured Creditor consent and agree
that any federal court located in the County of Xxxxxx, State of Texas shall
have exclusive jurisdiction to hear and determine any claims and disputes
between the Grantors and the Secured Creditor pertaining to this Agreement or
any matter arising out of or related to this Agreement, provided, that nothing
in this Agreement shall be deemed or operate to preclude the Secured Creditor
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 the
Secured Creditor. Each Grantor expressly submits and consents in
advance to such jurisdiction in any action or suit commenced in any such court,
and each Grantor hereby waives any objection which it may have based upon lack
of personal jurisdiction, improper venue or forum non
conveniens. Each Grantor 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 Grantor at the address set forth
in Section 5.01 and that service so made shall be deemed completed upon the
earlier of such Grantor’s actual receipt thereof or three (3) days after deposit
in the U.S. mails, proper postage prepaid.
SECTION
5.07. Waivers; Amendment.
(a) No failure or delay of the Secured Party in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and
remedies of the Secured Party hereunder are cumulative and are not exclusive of
any rights or remedies that they would otherwise have. No waiver of
any provisions of this Agreement or consent to any departure by the Grantors
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice
to or demand on either Grantor in any case shall entitle each such Grantor to
any other or further notice or demand in similar or other
circumstances.
(b)
Neither this Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by the Secured Party and the Grantors with respect to which such waiver,
amendment or modification is to apply.
SECTION
5.08. WAIVER OF JURY TRIAL.
EACH PARTY HERETO. HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 5.08.
SECTION
5.09. Severability. In the
event any one or more of the provisions contained in this Agreement should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not in any
way be affected or impaired thereby (it being understood that the invalidity of
a particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The
parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION
5.10. Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall
constitute an original but all of which when taken together shall constitute but
one contract (subject to Section 5.04), and shall become effective as provided
in Section 5.04. Delivery of an executed signature page to this
Agreement by facsimile transmission shall be effective as delivery of a manually
executed counterpart hereof.
SECTION
5.11. Headings. Article and
Section headings used herein are for the purpose of reference only, are not part
of this Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
SECTION
5.12. Termination. (a) This
Agreement and the Security Interest shall terminate when all the Obligations
have been indefeasibly paid in full, at which time the Secured Party shall
either deliver to the Grantors in proper form for filing, at the Grantors’
expense, all Uniform Commercial Code termination statements and similar
documents which the Grantors shall reasonably request to evidence such
termination or an authenticated record authorizing the Grantors to prepare and
file the same. Any execution and delivery of termination statements
or documents pursuant to this Section 5.12 shall be without recourse to or
warranty by the Secured Party.
(b) This
Security Agreement shall remain in full force and effect and continue to be
effective should any petition be filed by or against either Grantor for
liquidation or reorganization, should either Grantor become insolvent or make an
assignment for the benefit of any creditor or creditors or should a receiver or
trustee be appointed for all or any significant part of either Grantor’s assets,
and shall continue to be effective or be reinstated, as the case may be, if at
any time payment and performance of the Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned, whether as a “voidable preference,” “fraudulent
conveyance,” or otherwise, all as though such payment or performance had not
been made. In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, the Obligations shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
SECTION
5.13. Conflict. In the
event of any conflict between the terms of this Agreement and the terms of the
Sale Order, the Plan or the Confirmation Order, the terms of the Sale Order, the
Plan or the Confirmation Order shall control.
IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the
day and year first above written.
as
Grantor,
By: /s/ Xxxx
X’Xxxxx
Name:
Xxxx X’Xxxxx
Title:
CEO
EAGLE
DOMESTIC DRILLING OPERATIONS LLC,
as
Grantor,
By: /s/Xxxx
XxxXxxxxx
Name:
Xxxx XxxXxxxxx
Title:
CFO
LAURUS
MASTER FUND, LTD.
as
Secured Party,
By: /s/Xxxxx
Xxxxxxxxx
Name:
Xxxxx Xxxxxxxxx
Title:
