EXHIBIT 10.28
Viking Asset Management, L.L.C.
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
April 1, 0000
Xxxxx Xxxxx Oil Company
000 Xxxxxxx 00 X.
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxxxxx, Chief Executive Officer
RE: DEPOSIT ACCOUNT CONTROL AGREEMENTS
Ladies and Gentlemen:
Reference is hereby made to that certain Securities Purchase Agreement,
dated as of April 1, 2008 (as amended, restated, supplemented or otherwise
modified and in effect from time to time, and including all rights, claims and
remedies with respect thereto, the "PURCHASE AGREEMENT"), among South Texas Oil
Company, a Nevada corporation (the "COMPANY"), The Longview Fund, L.P., a
California limited partnership ("LONGVIEW FUND"), and Longview Marquis Master
Fund, L.P., a British Virgin Islands limited partnership ("MARQUIS FUND" and,
together with Longview Fund, the "BUYERS"). Capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to them in the
Purchase Agreement
Notwithstanding (A) the provisions in the Purchase Agreement and the
other Transaction Documents which require (i) that the Company and the
Subsidiaries execute and deliver Account Control Agreements contemporaneously
with the execution and delivery of the Purchase Agreement, and (ii) that all
funds of the Company and each of the Subsidiaries be held in deposit accounts
that are subject to Account Control Agreements, and (B) the provisions in the
Pledge Agreement and the other Transaction Documents which require that the
Company and the Subsidiaries, as applicable, to deliver certificates
representing the Company's and the Subsidiaries', as applicable, equity
interests in each of the Subsidiaries (the "PLEDGED CERTIFICATES")
contemporaneously with the execution and delivery of the Pledge Agreement,
Collateral Agent, each of the Buyers, the Company and each of the Subsidiaries
hereby agree as follows:
1. The Company and each of the Subsidiaries, as applicable, may
collectively hold in those certain accounts with Washington Mutual
Bank set forth on Exhibit A hereto (each an "EXCLUDED ACCOUNT" and
collectively, the "EXCLUDED ACCOUNTS"), not more than an aggregate
amount of $120,000 at any time during the period commencing on the
Amendment Date and ending on the thirtieth (30th) day after the
Amendment Date. The Company and each of the Subsidiaries, as
applicable, shall deliver, or cause to be delivered, to the
Collateral Agent on or prior to the thirtieth (30th) day after the
Amendment Date evidence of the closing of each of the Excluded
Accounts, in form and substance satisfactory to the Collateral
Agent, and transfer of all funds on deposit in each of the Excluded
Accounts to one or more deposit account(s) that are subject to an
Account Control Agreement to which the Collateral Agent is a party
and which is in form and substance satisfactory to the Collateral
Agent.
2. Neither the Company nor any of the Subsidiaries shall, on or after
the Amendment Date, (i) deposit any funds into any of the Excluded
Accounts, or (ii) direct any customer or remitter of funds to the
Company or any of the Subsidiaries to remit payments to any of the
Excluded Accounts.
3. The Company and each of the Subsidiaries, as applicable, shall
direct, and use its reasonable efforts to cause, every customer or
remitter of funds to the Company or any of the Subsidiaries as of
the Amendment Date to thereafter pay all amounts payable by such
customer or remitter if funds to a deposit account of the Company
or such Subsidiary which is not an Excluded Account and shall
require that every Person that becomes a customer or remitter of
funds to the Company or any of the Subsidiaries after the Amendment
Date to pay, at all times, all amounts payable by such customer,
client or remitter of the Company or such Subsidiary to a deposit
account of the Company or such Subsidiary which is not the Excluded
Account.
4. The Company may deliver, to the Collateral Agent, Account Control
Agreements, covering deposit accounts of the Company and/or the
Subsidiaries, as applicable, that are not Excluded Accounts (all
such deposit accounts that are not Excluded Accounts, the "COVERED
ACCOUNTS"), and maintain funds in such Covered Accounts, after the
Amendment Date, so long as all such Account Control Agreements are
duly executed by the Company and/or the Subsidiaries, as
applicable, and the applicable Bank and, as so executed, are
delivered to the Company by no later than April 4, 2008 (the
"DELIVERY DEADLINE"). If the Company fails to deliver any of such
Account Control Agreements, so executed, by the Delivery Deadline,
such failure shall constitute (i) an immediate breach of each of
the Purchase Agreement and the Amended and Restated Security
Agreement, and (ii) an immediate Event of Default (as defined in
the Initial Notes) under the Initial Notes. Further, upon any such
failure, each of the Buyers' obligations and the Company's rights
under Section 1(b) of the Purchase Agreement shall immediately
terminate and be of no further force and effect.
5. The Company and the applicable Subsidiaries may deliver, to the
Collateral Agent, the Pledged Certificates, after the Amendment
Date, so long as all of the Pledged Certificate, duly executed in
accordance with the applicable charter documents and applicable
law, are delivered to the Colateral Agent by no later than the
Delivery Deadline. If the Company fails to deliver any of such
Pledged Certificates, so executed, by the Delivery Deadline, such
failure shall constitute (i) an immediate breach of each of the
Pledge Agreement, the Purchase Agreement and the Amended and
Restated Security Agreement, and (ii) an immediate Event of Default
(as defined in the Initial Notes) under the Initial Notes.
Further, upon any such failure, each of the Buyers' obligations and
the Company's rights under Section 1(b) of the Purchase Agreement
shall immediately terminate and be of no further force and effect.
6. The Company and each of the Subsidiaries hereby represent, warrant
and covenant that (a) on the Amendment Date, the aggregate amount
of funds in the Excluded Accounts is $116,333.92, and (b) on the
Amendment Date the only Covered Accounts are, and on each day
thereafter through and including the Delivery Deadline the only
Covered Accounts will be, maintained at Xxxxx Fargo Bank, N.A.
7. Section 12 of the Purchase Agreement is hereby incorporated herein
mutatis mutandis.
IN WITNESS WHEREOF, the parties hereto have caused this Letter Agreement
to be duly executed as of the date first written above.
VIKING ASSET MANAGEMENT, LLC, a California
limited liability company, in its capacity
as Collateral Agent
By: ___________________________
Name: S. Xxxxxxx Xxxxxxx
Title: Chief Financial Officer
THE LONGVIEW FUND, L.P.,
a California limited partnership
By: Viking Asset Management, LLC
Its: Investment Adviser
By: ___________________________
Name: S. Xxxxxxx Xxxxxxx
Title: Chief Financial Officer
LONGVIEW MARQUIS MASTER FUND, L.P.,
a British Virgin Islands limited
partnership
By: Viking Asset Management, LLC
Its: Investment Advisor
By: ___________________________
Name: S. Xxxxxxx Xxxxxxx
Title: Chief Financial Officer
60637738
Acknowledged and Agreed to this 1st
day of April, 2008.
SOUTH TEXAS OIL COMPANY,
a Nevada corporation
By:________________________________
Name: _____________________________
Title:_______________________________
STO OPERATING COMPANY,
a Texas corporation
By:________________________________
Name: _____________________________
Title:_______________________________
STO DRILLING COMPANY,
a Texas corporation
By:________________________________
Name: _____________________________
Title:_______________________________
STO PROPERTIES LLC,
a Texas limited liability company
By:________________________________
Name: _____________________________
Title:_______________________________
SOUTHERN TEXAS OIL COMPANY,
a Texas corporation
By:
By:________________________________
Name: _____________________________
Title:_______________________________
EXHIBIT A
EXCLUDED ACCOUNTS
ACCOUNT ACCOUNT NUMBER BALANCE AT
APRIL 1, 2008
Operating (Texas) Drilling Account 395-0000000 $18,693.36
Operating (Texas) 3120173012 $696.52
Operating (Texas) 395-2167358 $4,129.94
Drilling (Texas) 395-2167233 $41,496.78
Savings (Texas) 1818725301 $51,317.32
TOTAL $116,333.92
