Exhibit 10.2

 

Reference is made to the Intercreditor Agreement described below.  Each Secured
Party, by accepting the benefits of the security provided hereby, (i) consents
(or is deemed to consent), to the subordination of Liens provided for in the
Intercreditor Agreement, (ii) agrees (or is deemed to agree) that it will be
bound by, and will take no actions contrary to, the provisions of the
Intercreditor Agreement, (iii) authorizes (or is deemed to authorize) the
Collateral Trustee on behalf of such Person to enter into, and perform under,
the Intercreditor Agreement and (iv) acknowledges (or is deemed to acknowledge)
that a copy of the Intercreditor Agreement was delivered, or made available, to
such Secured Party.

 

Notwithstanding any other provision contained herein, this Agreement, the Liens
created hereby and the rights, remedies, duties and obligations provided for
herein are subject in all respects to the provisions of the Intercreditor
Agreement.  In the event of any conflict or inconsistency between the provisions
of this Agreement and the Intercreditor Agreement, the provisions of the
Intercreditor Agreement shall control.

 

THIRD LIEN SECURITY AGREEMENT

 

made by

 

each of the Grantors (as defined herein)

 

in favor of

 

U.S. BANK NATIONAL ASSOCIATION,

 

as Collateral Trustee

 

Dated as of September 10, 2015

 

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TABLE OF CONTENTS

 

 

 

Page

ARTICLE I Definitions

2

 

 

Section 1.01

Definitions

2

Section 1.02

Other Definitional Provisions; References

3

 

 

 

ARTICLE II [RESERVED]

3

 

 

ARTICLE III Grant of Security Interest

3

 

 

Section 3.01

Grant of Security Interest

3

Section 3.02

Transfer of Pledged Securities

4

Section 3.03

Grantors Remain Liable under Accounts, Chattel Paper and Payment Intangibles

5

 

 

 

ARTICLE IV Acknowledgments, Waivers and Consents

5

 

 

Section 4.01

Acknowledgments, Waivers and Consents

5

Section 4.02

No Subrogation, Contribution or Reimbursement

7

 

 

 

ARTICLE V Representations and Warranties

8

 

 

Section 5.01

Reserved

8

Section 5.02

Validity, Etc.

8

Section 5.03

Authorization, Approval, Etc.

8

Section 5.04

Title; No Other Liens

8

Section 5.05

Perfected Liens

9

Section 5.06

Legal Name, Organizational Status, Chief Executive Office

9

Section 5.07

Prior Names, Addresses, Locations of Tangible Assets

9

Section 5.08

Pledged Securities

9

Section 5.09

Goods

9

Section 5.10

Instruments and Chattel Paper

9

Section 5.11

Truth of Information; Accounts

10

Section 5.12

Governmental Obligors

10

 

 

 

ARTICLE VI Covenants

10

 

 

Section 6.01

Reserved

10

Section 6.02

Maintenance of Perfected Security Interest; Further Documentation

10

Section 6.03

Maintenance of Records

11

Section 6.04

Reserved

11

Section 6.05

Further Identification of Collateral

11

Section 6.06

Changes in Locations, Name, etc.

11

Section 6.07

Reserved

12

 

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Section 6.08

Reserved

12

Section 6.09

Pledged Securities

12

Section 6.10

Limitations on Modifications, Waivers, Extensions of Agreements Giving Rise to
Accounts

13

Section 6.11

Reserved

14

Section 6.12

Instruments and Tangible Chattel Paper

14

Section 6.13

Reserved

14

Section 6.14

Commercial Tort Claims

14

 

 

 

ARTICLE VII Remedial Provisions

14

 

 

Section 7.01

Pledged Securities

14

Section 7.02

Collections on Accounts, Etc.

16

Section 7.03

Proceeds

16

Section 7.04

NY UCC and Other Remedies

16

Section 7.05

Private Sales of Pledged Securities

18

Section 7.06

Waiver; Deficiency

18

Section 7.07

Non-Judicial Enforcement

18

 

 

 

ARTICLE VIII The Collateral Trustee

18

 

 

Section 8.01

Collateral Trustee’s Appointment as Attorney-in-Fact, Etc.

18

Section 8.02

Duty of Collateral Trustee

20

Section 8.03

Execution of Financing Statements

21

Section 8.04

Authority of Collateral Trustee

21

 

 

 

ARTICLE IX Subordination of Indebtedness

21

 

 

Section 9.01

Subordination of All Grantor Claims

21

Section 9.02

Claims in Bankruptcy

22

Section 9.03

Payments Held in Trust

22

Section 9.04

Liens Subordinate

22

Section 9.05

Notation of Records

22

 

 

 

ARTICLE X Miscellaneous

22

 

 

Section 10.01

Waiver

22

Section 10.02

Notices

23

Section 10.03

Payment of Expenses, Indemnities, Etc.

23

Section 10.04

Amendments in Writing

23

Section 10.05

Successors and Assigns

23

Section 10.06

Invalidity

24

Section 10.07

Counterparts

24

Section 10.08

Survival

24

Section 10.09

Captions

24

Section 10.10

No Oral Agreements

24

Section 10.11

Governing Law; Submission to Jurisdiction

24

Section 10.12

Acknowledgments

25

 

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Section 10.13

Additional Grantors

26

Section 10.14

Set-Off

26

Section 10.15

Releases

26

Section 10.16

Reinstatement

27

Section 10.17

Acceptance

27

Section 10.18

Intercreditor Agreement Controls

27

 

SCHEDULES:

 

1.              Notice Addresses of Grantors

2.              Description of Pledged Securities

3.              Filings and Other Actions Required to Perfect Security Interests

4.              Legal Name, Location of Jurisdiction of Organization,
Organizational Identification Number, Taxpayer Identification Number and Chief
Executive Office

5.              Prior Names, Prior Chief Executive Office, Location of Tangible
Assets

 

ANNEX:

 

I.                Form of Assumption Agreement

 

iii

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This THIRD LIEN SECURITY AGREEMENT, dated as of September 10, 2015, is made by
Halcón Resources Corporation, a corporation duly formed and existing under the
laws of the State of Delaware (the “Company”), and each of the other signatories
hereto other than the Collateral Trustee (the Company and each of the other
signatories hereto other than the Collateral Trustee, together with any other
Subsidiary of the Company that becomes a party hereto from time to time after
the date hereof, the “Grantors”), in favor of U.S. Bank National Association, as
Collateral Trustee (the “Collateral Trustee”), for the ratable benefit of the
Secured Parties (as defined below).

 

W I T N E S S E T H:

 

A. The Company will issue its 13% Third Lien Senior Secured Notes due 2022 in an
initial aggregate principal amount of up to $1,020,000,000, pursuant to an
Indenture dated as of the date hereof (as amended, supplemented, amended and
restated or otherwise modified from time to time, the “Indenture”) by and among
the Company, the guarantors party thereto from time to time and U.S. Bank
National Association, as the Trustee.

 

B. The Indenture requires the Grantors to enter into this Agreement and grant to
the Collateral Trustee, for the ratable benefit of the Secured Parties, a
security interest in the Collateral (as hereinafter defined).

 

C. In connection with the Indenture, the Grantors, the Trustee and the
Collateral Trustee are entering into that certain Collateral Trust Agreement
dated as of the date hereof (as amended, supplemented, amended and restated or
otherwise modified from time to time, the “Collateral Trust Agreement”), which
sets forth the terms on which the Collateral Trustee will receive, hold,
administer, maintain, enforce and distribute the proceeds of all liens upon any
property of any Grantor at any time held by the Collateral Trustee, in trust for
the benefit of the current and future holders of the Third Lien Obligations,
including the Secured Parties.

 

D. Certain Priority Lien Obligations and Second Lien Obligations may be
outstanding from time to time and, as such, to set forth the relative rights of
the holders of the Priority Lien Obligations, the holders of the Second Lien
Obligations, and the holders of the Third Lien Obligations (including the
Secured Parties), JPMorgan Chase Bank, N.A., as the Priority Lien Agent, and
U.S. Bank National Association, as the Second Lien Collateral Trustee entered
into that certain Intercreditor Agreement dated as of May 1, 2015 (as amended,
supplemented, amended and restated or otherwise modified from time to time,
including pursuant to that certain Priority Confirmation Joinder dated as of the
date hereof, pursuant to which the Collateral Trustee has agreed to join the
Intercreditor Agreement and be subject to the terms and conditions thereof, the
“Intercreditor Agreement”).

 

E. The board of directors or equivalent governing body of each Grantor, as
applicable, has determined that such Grantor’s execution, delivery and
performance of this Agreement may reasonably be expected to provide substantial
benefit to such Grantor, directly or indirectly, and are in the best interests
of such Grantor.

 

F. Each Grantor has duly authorized the execution, delivery and performance of
this Agreement.

 

1

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NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I
DEFINITIONS

 

Section 1.01                             Definitions.

 

(a)                                 As used in this Agreement, each term defined
above shall have the meaning indicated above.  Unless otherwise defined herein,
terms defined in the Indenture and used herein shall have the meanings given to
them in the Indenture, and the following terms as well as all uncapitalized
terms which are defined in the NY UCC on the date hereof are used herein as so
defined:  Accounts, As-Extracted Collateral, Chattel Paper, Commercial Tort
Claims, Deposit Accounts, Documents, Electronic Chattel Paper, Equipment,
Fixtures, General Intangibles, Goods, Instruments, Inventory, Investment
Property, Letter-of-Credit Rights, Payment Intangibles, Proceeds, Supporting
Obligations, and Tangible Chattel Paper.

 

(b)                                 The following terms shall have the following
meanings:

 

“Account Debtor” means a Person (other than any Grantor) obligated on an
Account, Chattel Paper, or General Intangible.

 

“Agreement” means this Third Lien Security Agreement, as the same may be
amended, supplemented, amended and restated or otherwise modified from time to
time.

 

“Collateral” shall have the meaning assigned such term in Section 3.01.

 

“Collateral Trust Agreement” has the meaning set forth in the recitals.

 

“Indenture” has the meaning set forth in the recitals.

 

“Intercreditor Agreement” has the meaning set forth in the recitals.

 

“Issuers” means, collectively, each issuer of a Pledged Security.

 

“NY UCC” means the Uniform Commercial Code, as it may be amended, from time to
time in effect in the State of New York.

 

“Pledged Securities” means: (i) the Equity Interests described or referred to in
Schedule 2; and (ii) (a) the certificates or instruments, if any, representing
such Equity Interests, (b) all dividends (cash, stock or otherwise), cash,
instruments, rights to subscribe, purchase or sell and all other rights and
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such Equity Interests, (c) all
replacements, additions to and substitutions for any of the property referred to
in this definition, including, without limitation, claims against third parties,
(d) the proceeds, interest, profits and other income of or on any of the
property referred to in this definition and (e) all books and records relating
to any of the property referred to in this definition.

 

2

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“Secured Obligation” means any and all Notes Obligations now or hereafter
existing under this Agreement, the Indenture or any other Note Document, whether
for principal, interest, costs, fees, expenses or otherwise, howsoever created,
arising or evidenced, whether direct or indirect, primary or secondary, fixed or
absolute or contingent, joint or several, or now or hereafter existing under
this Agreement and each other Note Document.

 

“Secured Parties” means, collectively, the Trustee, the Collateral Trustee, the
Holders, any other holder of any Secured Obligation and any other Third Lien
Secured Party (as defined in the Collateral Trust Agreement).

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Subsidiary Grantor” means, collectively, each Grantor other than the Company.

 

Section 1.02                             Other Definitional Provisions;
References.  The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.  The gender of
all words shall include the masculine, feminine, and neuter, as appropriate. 
The words “herein,” “hereof,” “hereunder” and other words of similar import when
used in this Agreement refer to this Agreement as a whole, and not to any
particular article, section or subsection.  Any reference herein to a
Section shall be deemed to refer to the applicable Section of this Agreement
unless otherwise stated herein.  Any reference herein to an exhibit, schedule or
annex shall be deemed to refer to the applicable exhibit, schedule or annex
attached hereto unless otherwise stated herein.  Where the context requires,
terms relating to the Collateral or any part thereof, when used in relation to a
Grantor, shall refer to such Grantor’s Collateral or the relevant part thereof.

 

ARTICLE II
[RESERVED]

 

ARTICLE III
GRANT OF SECURITY INTEREST

 

Section 3.01                             Grant of Security Interest.  Each
Grantor hereby pledges, assigns and transfers to the Collateral Trustee, and
grants to the Collateral Trustee, for the ratable benefit of the Secured
Parties, a security interest in all of the following property now owned or at
any time hereafter acquired by such Grantor or in which such Grantor now has or
at any time in the future may acquire any right, title or interest and whether
now existing or hereafter coming into existence (collectively, the
“Collateral”), as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Secured Obligations:

 

(1)                                 all Accounts;

 

(2)                                 all Chattel Paper (whether Tangible Chattel
Paper or Electronic Chattel Paper);

 

(3)                                 all Commercial Tort Claims;

 

3

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(4)                                 all Deposit Accounts other than payroll,
withholding tax and other fiduciary Deposit Accounts;

 

(5)                                 all Documents;

 

(6)                                 all General Intangibles (including, without
limitation, rights in and under any agreements in respect of Hedging
Obligations);

 

(7)                                 all Goods (including, without limitation,
all Inventory and all Equipment, but excluding all Fixtures);

 

(8)                                 all Instruments;

 

(9)                                 all Investment Property;

 

(10)                          all Letter-of-Credit Rights (whether or not the
letter of credit is evidenced by a writing);

 

(11)                          all Pledged Securities;

 

(12)                          all Supporting Obligations;

 

(13)                          all books and records pertaining to the
Collateral;

 

(14)                          to the extent not otherwise included, any other
property insofar as it consists of personal property of any kind or character
defined in and subject to the NY UCC; and

 

(15)                          to the extent not otherwise included, all Proceeds
and products of any and all of the foregoing and all collateral security,
income, royalties and other payments now or hereafter due and payable with
respect to, and guarantees and supporting obligations relating to, any and all
of the Collateral and, to the extent not otherwise included, all payments of
insurance (whether or not the Collateral Trustee is the loss payee thereof), or
any indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral, all other claims,
including all cash, guarantees and other Supporting Obligations given with
respect to any of the foregoing.

 

Section 3.02                             Transfer of Pledged Securities. 
Subject to the terms of the Intercreditor Agreement, all certificates and
instruments, if any, representing or evidencing the Pledged Securities shall be
delivered to and held pursuant hereto by the Collateral Trustee or a Person
designated by the Collateral Trustee and, in the case of an instrument or
certificate in registered form, shall be duly indorsed to the Collateral Trustee
or in blank by an effective endorsement (whether on the certificate or
instrument or on a separate writing), and accompanied by any required transfer
tax stamps to effect the pledge of the Pledged Securities to the Collateral
Trustee.  Notwithstanding the preceding sentence, all Pledged Securities must be
delivered or transferred in such manner, and each Grantor shall take all such
further action as may be requested by the Collateral Trustee, as to permit the
Collateral Trustee to be a “protected

 

4

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purchaser” to the extent of its security interest as provided in Section 8-303
of the NY UCC (if the Collateral Trustee otherwise qualifies as a protected
purchaser).

 

Section 3.03                             Grantors Remain Liable under Accounts,
Chattel Paper and Payment Intangibles.  Anything herein to the contrary
notwithstanding, each Grantor shall remain liable under each of the Accounts,
Chattel Paper and Payment Intangibles to observe and perform all the conditions
and obligations to be observed and performed by it thereunder, all in accordance
with the terms of any agreement giving rise to each such Account, Chattel Paper
or Payment Intangible.  Neither the Collateral Trustee nor any other Secured
Party shall have any obligation or liability under any Account, Chattel Paper or
Payment Intangible (or any agreement giving rise thereto) by reason of or
arising out of this Agreement or the receipt by the Collateral Trustee or any
such other Secured Party of any payment relating to such Account, Chattel Paper
or Payment Intangible, pursuant hereto, nor shall the Collateral Trustee or any
other Secured Party be obligated in any manner to perform any of the obligations
of any Grantor under or pursuant to any Account, Chattel Paper or Payment
Intangible (or any agreement giving rise thereto), to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party under any Account, Chattel
Paper or Payment Intangible (or any agreement giving rise thereto), to present
or file any claim, to take any action to enforce any performance or to collect
the payment of any amounts which may have been assigned to it or to which it may
be entitled at any time or times.

 

ARTICLE IV
ACKNOWLEDGMENTS, WAIVERS AND CONSENTS

 

Section 4.01                             Acknowledgments, Waivers and Consents.

 

(a)                                 Each Subsidiary Grantor acknowledges and
agrees that the obligations undertaken by it under this Agreement involve the
provision of collateral security for the obligations of Persons other than such
Subsidiary Grantor and that such Subsidiary Grantor’s provision of collateral
security for the Secured Obligations are absolute, irrevocable and unconditional
under any and all circumstances.  In full recognition and furtherance of the
foregoing, each Subsidiary Grantor understands and agrees, to the fullest extent
permitted under applicable law and except as may otherwise be expressly and
specifically provided in the Note Documents, that each Subsidiary Grantor shall
remain obligated hereunder (including, without limitation, with respect to the
collateral security provided by such Subsidiary Grantor herein) and the
enforceability and effectiveness of this Agreement and the liability of such
Subsidiary Grantor, and the rights, remedies, powers and privileges of the
Collateral Trustee and the other Secured Parties under this Agreement and the
other Note Documents shall not be affected, limited, reduced, discharged or
terminated in any way:

 

(i)                                     notwithstanding that, without any
reservation of rights against any Subsidiary Grantor and without notice to or
further assent by any Subsidiary Grantor, (A) any demand for payment of any of
the Secured Obligations made by the Collateral Trustee or any other Secured
Party may be rescinded by the Collateral Trustee or such other Secured Party and
any of the Secured Obligations continued; (B) the Obligations, the liability of
any other Person upon or for any part thereof or any collateral security
therefore or right of offset with respect thereto, may, from time to time, in
whole or in part, be renewed, extended, amended, modified,

 

5

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accelerated, compromised, waived, surrendered or released by, or any indulgence
or forbearance in respect thereof granted by, the Collateral Trustee or any
other Secured Party; (C) the Indenture, the other Note Documents and any other
documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Collateral
Trustee (or the Holders, as the case may be) may deem advisable from time to
time; (D) the Company, any Subsidiary Grantor or any other Person may from time
to time accept or enter into new or additional agreements, security documents,
guarantees or other instruments in addition to, in exchange for or relative to,
any Note Document, all or any part of the Secured Obligations or any Collateral
now or in the future serving as security for the Secured Obligations; (E) any
collateral security, guarantee or right of offset at any time held by the
Collateral Trustee or any other Secured Party for the payment of the Secured
Obligations may be sold, exchanged, waived, surrendered or released; and (F) any
other event shall occur which constitutes a defense or release of sureties
generally; and

 

(ii)                                  without regard to, and each Subsidiary
Grantor hereby expressly waives to the fullest extent permitted by law any
defense now or in the future arising by reason of, (A) the illegality,
invalidity or unenforceability of the Indenture, any other Note Document, any of
the Secured Obligations or any other collateral security therefore or guarantee
or right of offset with respect thereto at any time or from time to time held by
the Collateral Trustee or any other Secured Party; (B) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any
time be available to or be asserted by any Subsidiary Grantor or any other
Person against the Collateral Trustee or any other Secured Party; (C) the
insolvency, bankruptcy arrangement, reorganization, adjustment, composition,
liquidation, disability, dissolution or lack of power of any Subsidiary Grantor
or any other Person at any time liable for the payment of all or part of the
Secured Obligations or the failure of the Collateral Trustee or any other
Secured Party to file or enforce a claim in bankruptcy or other proceeding with
respect to any Person; or any sale, lease or transfer of any or all of the
assets of the any Subsidiary Grantor, or any changes in the partners of any
Subsidiary Grantor; (D) the fact that any Collateral or Lien contemplated or
intended to be given, created or granted as security for the repayment of the
Secured Obligations shall not be properly perfected or created, or shall prove
to be unenforceable or subordinate to any other Lien, it being recognized and
agreed by each of the Subsidiary Grantors that it is not entering into this
Agreement in reliance on, or in contemplation of the benefits of, the validity,
enforceability, collectability or value of any of the Collateral for the Secured
Obligations; (E) any failure of the Collateral Trustee or any other Secured
Party to marshal assets in favor of any Subsidiary Grantor or any other Person,
to exhaust any collateral for all or any part of the Secured Obligations, to
pursue or exhaust any right, remedy, power or privilege it may have against any
Subsidiary Grantor or any other Person or to take any action whatsoever to
mitigate or reduce any Subsidiary Grantor’s liability under this Agreement or
any other Note Document; (F) any law which provides that the obligation of a
surety or Subsidiary Grantor must neither be larger in amount nor in other
respects more burdensome than that of the principal or which reduces a surety’s
or Subsidiary Grantor’s obligation in proportion to the principal obligation;
(G) the possibility that the Secured Obligations may at any time and from time
to time exceed the aggregate liability of such Subsidiary Grantor under this
Agreement; or (H) any other circumstance or act whatsoever, including any action
or omission of the type described in Section 4.01(a)(i) (with or without notice
to or knowledge of any Subsidiary Grantor), which constitutes, or might be
construed to constitute, an equitable or legal discharge or defense of the
Company for the Secured Obligations, or with respect to the collateral security

 

6

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provided by such Subsidiary Grantor herein, or which might be available to a
surety or Subsidiary Grantor, in bankruptcy or in any other instance.

 

(b)                                 Each Subsidiary Grantor hereby waives to the
extent permitted by law:  (i) except as expressly provided otherwise in any Note
Document, all notices to such Subsidiary Grantor, or to any other Person,
including but not limited to, notices of the acceptance of this Agreement, or
the provision of collateral security provided herein, or the creation, renewal,
extension, modification, accrual of any Secured Obligations, or notice of or
proof of reliance by the Collateral Trustee or any other Secured Party upon the
collateral security provided herein, or of default in the payment or performance
of any of the Secured Obligations owed to the Collateral Trustee or any other
Secured Party and enforcement of any right or remedy with respect thereto; or
notice of any other matters relating thereto; the Secured Obligations, and any
of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
collateral security provided herein and no notice of creation of the Secured
Obligations or any extension of credit already or hereafter contracted by or
extended to the Company need be given to any Subsidiary Grantor; and all
dealings between the Company and any of the Subsidiary Grantors, on the one
hand, and the Collateral Trustee and the other Secured Parties, on the other
hand, likewise shall be conclusively presumed to have been had or consummated in
reliance upon the collateral security provided herein; (ii) diligence and demand
of payment, presentment, protest, dishonor and notice of dishonor; (iii) any
statute of limitations affecting any Subsidiary Grantor’s liability hereunder or
the enforcement thereof; (iv) all rights of revocation with respect to the
Secured Obligations and the provision of collateral security herein; and (v) all
principles or provisions of law which conflict with the terms of this Agreement
and which can, as a matter of law, be waived.

 

(c)                                  When making any demand hereunder or
otherwise pursuing its rights and remedies hereunder against any Subsidiary
Grantor, the Collateral Trustee or any other Secured Party may, but shall be
under no obligation to, join or make a similar demand on or otherwise pursue or
exhaust such rights and remedies as it may have against the Company, any other
Subsidiary Grantor or any other Person or against any collateral security or
guarantee for the Secured Obligations or any right of offset with respect
thereto, and any failure by the Collateral Trustee or any other Secured Party to
make any such demand, to pursue such other rights or remedies or to collect any
payments from the Company, any other Subsidiary Grantor or any other Person or
to realize upon any such collateral security or guarantee or to exercise any
such right of offset, or any release of the Company, any Subsidiary Grantor or
any other Person or any such collateral security, guarantee or right of offset,
shall not relieve any Subsidiary Grantor of any obligation or liability
hereunder, and shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law, of the Collateral Trustee or
any other Secured Party against any Subsidiary Grantor.  For the purposes hereof
“demand” shall include the commencement and continuance of any legal
proceedings.  Neither the Collateral Trustee nor any other Secured Party shall
have any obligation to protect, secure, perfect or insure any Lien at any time
held by it as security for the Secured Obligations or any property subject
thereto.

 

Section 4.02                             No Subrogation, Contribution or
Reimbursement.  Notwithstanding any payment made by any Subsidiary Grantor
hereunder or any set-off or application of funds of any Subsidiary Grantor by
the Collateral Trustee or any other Secured Party, no Subsidiary Grantor shall
be entitled to be subrogated to any of the rights of the Collateral Trustee or
any other

 

7

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Secured Party against the Company or any other Subsidiary Grantor or any
collateral security or guarantee or right of offset held by the Collateral
Trustee or any other Secured Party for the payment of the Secured Obligations,
nor shall any Subsidiary Grantor seek or be entitled to seek any indemnity,
exoneration, participation, contribution or reimbursement from the Company or
any other Subsidiary Grantor in respect of payments made by such Subsidiary
Grantor hereunder, and each Subsidiary Grantor hereby expressly waives,
releases, and agrees not to exercise any all such rights of subrogation,
reimbursement, indemnity and contribution.  Each Subsidiary Grantor further
agrees that to the extent that such waiver and release set forth herein is found
by a court of competent jurisdiction to be void or voidable for any reason, any
rights of subrogation, reimbursement, indemnity and contribution such Subsidiary
Grantor may have against the Company, any other Subsidiary Grantor or against
any collateral or security or guarantee or right of offset held by the
Collateral Trustee or any other Secured Party shall be junior and subordinate to
any rights the Collateral Trustee and the other Secured Parties may have against
the Company and such Subsidiary Grantor and to all right, title and interest the
Collateral Trustee and the other Secured Parties may have in any collateral or
security or guarantee or right of offset.  The Collateral Trustee, for the
benefit of the Secured Parties, may use, sell or dispose of any item of
Collateral or security as it sees fit without regard to any subrogation rights
any Subsidiary Grantor may have, and upon any disposition or sale, any rights of
subrogation any Subsidiary Grantor may have shall terminate.

 

ARTICLE V
REPRESENTATIONS AND WARRANTIES

 

Each Grantor hereby represents and warrants to the Collateral Trustee and each
other Secured Party that:

 

Section 5.01                             Reserved.

 

Section 5.02                             Validity, Etc.  This Agreement and the
other Security Documents to which such Grantor is a party constitute the legal,
valid and binding obligations of such Grantor, enforceable against such Grantor
in accordance with their respective terms (except, in any case, as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors’ rights generally and by
principles of equity).

 

Section 5.03                             Authorization, Approval, Etc.  Except
as have been obtained or made and are in full force and effect, no consent,
authorization, approval or other action by, and no notice to or filing with, any
Governmental Authority or any other third party is required either (a) for the
grant by such Grantor of the security interest granted hereby or for the
execution, delivery and performance of this Agreement by such Grantor, (b) for
the perfection or maintenance of the security interests hereunder, or (c) for
the exercise by the Administrative Agent of the voting or other rights provided
for in this Agreement.

 

Section 5.04                             Title; No Other Liens.  Except for the
security interest granted to the Collateral Trustee for the ratable benefit of
the Secured Parties pursuant to this Agreement and Permitted Liens, such Grantor
is the legal and beneficial owner of, and has good and defensible title to (and
has full right and authority to pledge, grant and assign), its respective items
of the Collateral free and clear of any and all Liens.  No financing statement
or other public notice with

 

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respect to all or any part of the Collateral is on file or of record in any
public office, except such as have been filed in favor of the Collateral
Trustee, for the ratable benefit of the Secured Parties, pursuant to this
Agreement, the Security Documents or as are filed to secure Priority Liens or
Second Liens.

 

Section 5.05                             Perfected Liens.  The security
interests granted pursuant to this Agreement (a) upon completion of the filings
and other actions specified on Schedule 3 (which, in the case of all filings and
other documents referred to on said Schedule, have been delivered to the
Collateral Trustee in completed and duly executed form) will constitute valid
perfected security interests in all of the Collateral in favor of the Collateral
Trustee, for the ratable benefit of the Secured Parties, as collateral security
for such Grantor’s obligations, enforceable in accordance with the terms hereof
against all creditors of such Grantor and any Persons purporting to purchase any
Collateral from such Grantor and (b) are prior to all other Liens on the
Collateral in existence on the date hereof except for (i) Permitted Liens which
have priority over the Liens on the Collateral by operation of law, (ii) the
Priority Liens and (iii) the Second Liens.

 

Section 5.06                             Legal Name, Organizational Status,
Chief Executive Office.  On the date hereof, the correct legal name of such
Grantor, such Grantor’s jurisdiction of organization, organizational number,
taxpayer identification number and the location of such Grantor’s chief
executive office or sole place of business are specified on Schedule 4.

 

Section 5.07                             Prior Names, Addresses, Locations of
Tangible Assets.  Schedule 5 correctly sets forth (a) all names and trade names
that such Grantor has used in the last five years and (b) the chief executive
officer of such Grantor over the last five years (if different from that which
is set forth in Section 5.06 above).

 

Section 5.08                             Pledged Securities.  The shares (or
such other interests) of Pledged Securities pledged by such Grantor hereunder
constitute all the issued and outstanding shares (or such other interests) of
all classes of the capital stock or other Equity Interests of each Issuer owned
by such Grantor.  All the shares (or such other interests) of the Pledged
Securities have been duly and validly issued and, in the case of shares of stock
of a corporation, are fully paid and nonassessable; and such Grantor is the
record and beneficial owner of, and has good title to, the Pledged Securities
pledged by it hereunder, free of any and all Liens except Permitted Liens or
options, warrants, puts, calls or other rights of any other Person, and
restrictions or options in favor of, or claims of, any other Person, except the
security interest created by this Agreement.  The pledged LLC interests and the
pledged partnership interests do not, by their terms, provide that they are
securities to be governed by Article 8 of the NY UCC.

 

Section 5.09                             Goods.  No portion of the Collateral
constituting Goods is in the possession of a bailee that has issued a negotiable
or non-negotiable document covering such Collateral.

 

Section 5.10                             Instruments and Chattel Paper.  Such
Grantor has delivered to the Collateral Trustee (or to the Priority Lien Agent
or Second Lien Collateral Trustee, as applicable, pursuant to the terms of the
Intercreditor Agreement) all Collateral constituting Instruments and Chattel
Paper having in value in excess of $1,000,000.  No Collateral constituting
Chattel Paper or Instruments contains any statement therein to the effect that
such Collateral has been assigned

 

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to an identified party other than the Collateral Trustee, and the grant of a
security interest in such Collateral in favor of the Collateral Trustee
hereunder does not violate the rights of any other Person as a secured party.

 

Section 5.11                             Truth of Information; Accounts.  All
information with respect to the Collateral set forth in any schedule,
certificate or other writing at any time heretofore or hereafter furnished by
such Grantor to the Collateral Trustee or any other Secured Party, and all other
written information heretofore or hereafter furnished by such Grantor to the
Collateral Trustee or any other Secured Party is and will be true and correct in
all material respects as of the date furnished.  The amount represented by such
Grantor to the Collateral Trustee and the Lenders from time to time as owing by
each Account Debtor or by all Account Debtors in respect of the Accounts,
Chattel Paper and Payment Intangibles will at such time be the correct amount
actually owing by such Account Debtor or Account Debtors thereunder.  The place
where each Grantor keeps its records concerning the Accounts, Chattel Paper and
Payment Intangibles is 1000 Louisiana St., Suite 6700, Houston, TX 77002.

 

Section 5.12                             Governmental Obligors.  None of the
Account Debtors on such Grantor’s Accounts, Chattel Paper or Payment Intangibles
is a Governmental Authority.

 

ARTICLE VI
COVENANTS

 

Each Grantor covenants and agrees with the Collateral Trustee and the other
Secured Parties that, from and after the date of this Agreement until the
Secured Obligations shall have been paid in full:

 

Section 6.01                             Reserved.

 

Section 6.02                             Maintenance of Perfected Security
Interest; Further Documentation.

 

(a)                                 Such Grantor shall maintain the security
interest created by this Agreement as a perfected security interest having at
least the priority described in Section 5.05 and shall defend such security
interest against the claims and demands of all Persons whomsoever except for
Permitted Liens.

 

(b)                                 Subject to the terms of the Intercreditor
Agreement, at any time and from time to time, upon the request of the Collateral
Trustee or any other Secured Party, and at the sole expense of such Grantor,
such Grantor will promptly and duly give, execute, deliver, indorse, file or
record any and all financing statements, continuation statements, amendments,
notices (including, without limitation, notifications to financial institutions
and any other Person), contracts, agreements, assignments, certificates, stock
powers or other instruments, obtain any and all governmental approvals and
consents and take or cause to be taken any and all steps or acts that may be
necessary or advisable or as the Collateral Trustee may reasonably request to
create, perfect, establish the priority of, or to preserve the validity,
perfection or priority of, the Liens granted by this Agreement or to enable the
Collateral Trustee or any other Secured Party to enforce its rights, remedies,
powers and privileges under this Agreement with respect to such Liens or to
otherwise obtain or preserve the full benefits of this Agreement and the rights,
powers and privileges herein granted.

 

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(c)                                  Without limiting the obligations of the
Grantors under Section 6.02(b), but subject in each case to the terms of the
Intercreditor Agreement:  (i) upon the request of the Collateral Trustee or any
other Secured Party, such Grantor shall take or cause to be taken all actions
(other than any actions required to be taken by the Collateral Trustee)
requested by the Collateral Trustee to cause the Collateral Trustee to (A) have
“control” (within the meaning of Sections 9-104, 9-105, 9-106, and 9-107 of the
NY UCC) over any Collateral constituting Deposit Accounts, Electronic Chattel
Paper, Investment Property (including the Pledged Securities), or
Letter-of-Credit Rights, including, without limitation, executing and delivering
any agreements, in form and substance satisfactory to the Collateral Trustee,
with securities intermediaries, Issuers or other Persons in order to establish
“control”, and each Grantor shall promptly notify the Collateral Trustee and the
other Secured Parties of such Grantor’s acquisition of any such Collateral, and
(B) be a “protected purchaser” (as defined in Section 8-303 of the NY UCC);
(ii) with respect to Collateral other than certificated securities and goods
covered by a document in the possession of a Person other than such Grantor or
the Collateral Trustee, such Grantor shall obtain written acknowledgment that
such Person holds possession for the Collateral Trustee’s benefit; and
(iii) with respect to any Collateral constituting Goods that are in the
possession of a bailee, such Grantor shall provide prompt notice to the
Collateral Trustee and the other Secured Parties of any such Collateral then in
the possession of such bailee, and such Grantor shall take or cause to be taken
all actions (other than any actions required to be taken by the Collateral
Trustee or any other Secured Party) necessary or requested by the Collateral
Trustee to cause the Collateral Trustee to have a perfected security interest in
such Collateral under applicable law.

 

(d)                                 This Section 6.02 and the obligations
imposed on each Grantor by this Section 6.02 shall be interpreted as broadly as
possible in favor of the Collateral Trustee and the other Secured Parties in
order to effectuate the purpose and intent of this Agreement.

 

Section 6.03                             Maintenance of Records.  Such Grantor
will keep and maintain at its own cost and expense satisfactory and complete
records of the Collateral, including, without limitation, a record of all
payments received and all credits granted with respect to the Accounts.  For the
Collateral Trustee’s and the other Secured Parties’ further security, the
Collateral Trustee, for the ratable benefit of the Secured Parties, shall have a
security interest in all of such Grantor’s books and records pertaining to the
Collateral, and such Grantor shall turn over any such books and records to the
Collateral Trustee or to its representatives during normal business hours at the
request of the Collateral Trustee and shall provide such clerical and other
assistance as may be reasonably requested with regard thereto.

 

Section 6.04                             Reserved.

 

Section 6.05                             Further Identification of Collateral. 
Such Grantor will furnish to the Collateral Trustee from time to time, at such
Grantor’s sole cost and expense, statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as the Collateral Trustee may reasonably request, all in reasonable
detail.

 

Section 6.06                             Changes in Locations, Name, etc.  Such
Grantor recognizes that financing statements pertaining to the Collateral have
been or may be filed where such Grantor maintains any Collateral or is
organized.  Without limitation of any other covenant herein, such Grantor

 

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will not cause or permit (i) any change to be made in its name, identity or
corporate structure or (ii) any change to the identity of any warehouseman,
common carrier, other third-party transporter, bailee or any agent or processor
in possession or control of any Collateral or (iii) such Grantor’s jurisdiction
of organization or (iv) the location of any Collateral, unless such Grantor
shall have first (1) notified the Collateral Trustee of such change at least ten
(10) days prior to the effective date of such change, and (2) taken all action
reasonably requested by the Collateral Trustee for the purpose of maintaining
the perfection and priority of the Collateral Trustee’s security interests under
this Agreement.  In any notice furnished pursuant to this Section 6.06, such
Grantor will expressly state in a conspicuous manner that the notice is required
by this Agreement and contains facts that may require additional filings of
financing statements or other notices for the purposes of continuing perfection
of the Collateral Trustee’s security interest in the Collateral.

 

Section 6.07                             Reserved.

 

Section 6.08                             Reserved.

 

Section 6.09                             Pledged Securities.

 

(a)                                 If such Grantor shall become entitled to
receive or shall receive any stock certificate or other instrument (including,
without limitation, any certificate or instrument representing a dividend or a
distribution in connection with any reclassification, increase or reduction of
capital or any certificate or instrument issued in connection with any
reorganization), option or rights in respect of the capital stock or other
Equity Interests of any Issuer, whether in addition to, in substitution of, as a
conversion of, or in exchange for, any shares (or such other interests) of the
Pledged Securities, or otherwise in respect thereof, such Grantor shall accept
the same as the agent of the Collateral Trustee and the other Secured Parties,
hold the same in trust for the Collateral Trustee and the other Secured Parties
and deliver the same forthwith to the Collateral Trustee in the exact form
received, duly indorsed by such Grantor to the Collateral Trustee, if required,
together with an undated stock power or other equivalent instrument of transfer,
if applicable, acceptable to the Collateral Trustee covering such certificate or
instrument duly executed in blank by such Grantor and with, if the Collateral
Trustee so requests, signature guaranteed, to be held by the Collateral Trustee,
subject to the terms hereof, as additional collateral security for the Secured
Obligations.

 

(b)                                 Subject in each case to the Intercreditor
Agreement, without the prior written consent of the Collateral Trustee or as
expressly permitted by the Indenture, such Grantor will not (i) unless otherwise
permitted hereby, vote to enable, or take any other action to permit, any Issuer
to issue any stock or other Equity Interests of any nature or to issue any other
securities or interests convertible into or granting the right to purchase or
exchange for any stock or other Equity Interests of any nature of any Issuer,
(ii) sell, assign, transfer, exchange or otherwise dispose of, or grant any
option with respect to, the Pledged Securities or Proceeds thereof (except
pursuant to a transaction expressly permitted by the Indenture), (iii) create,
incur or permit to exist any Lien except for Permitted Liens or option in favor
of, or any claim of any Person with respect to, any of the Pledged Securities or
Proceeds thereof, or any interest therein, except for the security interests
created by this Agreement or (iv) enter into any agreement or

 

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undertaking restricting the right or ability of such Grantor or the Collateral
Trustee to sell, assign or transfer any of the Pledged Securities or Proceeds
thereof.

 

(c)                                  In the case of each Grantor which is an
Issuer, such Issuer agrees that (i) it will be bound by the terms of this
Agreement relating to the Pledged Securities issued by it and will comply with
such terms insofar as such terms are applicable to it, (ii) it will notify the
Collateral Trustee promptly in writing of the occurrence of any of the events
described in Section 6.09(a) with respect to the Pledged Securities issued by it
and (iii) the terms of Section 7.01(c) and Section 7.05 shall apply to it,
mutatis mutandis, with respect to all actions that may be required of it
pursuant to Section 7.01(c) or Section 7.05 with respect to the Pledged
Securities issued by it.

 

(d)                                 Subject to the terms of the Intercreditor
Agreement, such Grantor shall furnish to the Collateral Trustee such stock
powers and other equivalent instruments of transfer, if applicable, as may be
required by the Collateral Trustee to assure the transferability of and the
perfection of the security interest in the Pledged Securities when and as often
as may be reasonably requested by the Collateral Trustee.

 

(e)                                  The Pledged Securities will at all times
constitute not less than 100% of the capital stock or other Equity Interests of
the Issuer thereof owned by any Grantor.  Each Grantor will not permit any
Issuer of any of the Pledged Securities to issue any new shares (or other
interests) of any class of capital stock or other Equity Interests of such
Issuer without the prior written consent of the Collateral Trustee or as
expressly permitted by the Indenture.

 

(f)                                   Each Pledgor shall not agree to any
amendment of a partnership agreement, LLC agreement or other organic document
relating to any Pledged Security that in any way adversely affects the
perfection of the security interest of the Collateral Trustee in the Pledged
Securities, including any amendment electing to treat the membership interest or
partnership interest of such Pledgor as a security under Section 8-103 of the NY
UCC.  In the event of a foreclosure or a taking of Pledged Securities consisting
of partnership interests or LLC interests in lieu of foreclosure pursuant to any
Security Document executed in connection with the Indenture, the Collateral
Trustee or its assignee or transferee, at any of their option, will, without any
further action or consent, become a member or partner upon the exercise of such
option by the Collateral Trustee, its assignee or transferee, having all of the
rights, powers and privileges of a member or partner with respect to such Equity
Interest, including, without limitation, the right to participate in the
management of the business, to vote such Equity Interest and to receive
distributions hereunder.

 

Section 6.10                             Limitations on Modifications, Waivers,
Extensions of Agreements Giving Rise to Accounts.  Such Grantor will not
(i) amend, modify, terminate or waive any provision of any Chattel
Paper, Instrument or any agreement giving rise to an Account or Payment
Intangible in any manner which could reasonably be expected to materially
adversely affect the value of such Chattel Paper, Instrument, Payment Intangible
or Account as Collateral, or (ii) fail to exercise promptly and diligently each
and every material right which it may have under any Chattel Paper, Instrument
and each agreement giving rise to an Account or Payment Intangible (other than
any right of termination).  Such Grantor shall deliver to the Collateral Trustee
a copy

 

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of each material demand, notice or document received by it relating in any way
to any Chattel Paper, Instrument or any agreement giving rise to an Account or
Payment Intangible.

 

Section 6.11                             Reserved.

 

Section 6.12                             Instruments and Tangible Chattel
Paper.  If any amount payable under or in connection with any of the Collateral
shall be or become evidenced by any Instrument or Tangible Chattel Paper, such
Instrument or Tangible Chattel Paper shall be immediately delivered to the
Collateral Trustee (or to the Priority Lien Agent or Second Lien Collateral
Trustee, as applicable, pursuant to the terms of the Intercreditor Agreement),
duly endorsed in a manner satisfactory to the Collateral Trustee, to be held as
Collateral pursuant to this Agreement.

 

Section 6.13                             Reserved.

 

Section 6.14                             Commercial Tort Claims.  If such
Grantor shall at any time hold or acquire a Commercial Tort Claim that satisfies
the requirements of the following sentence, such Grantor shall, within thirty
(30) days after such Commercial Tort Claim satisfies such requirements, notify
the Collateral Trustee in a writing signed by such Grantor containing a brief
description thereof, and granting to the Collateral Trustee in such writing (for
the benefit of the Secured Parties) a security interest therein and in the
Proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance satisfactory to the Collateral Trustee.  The provisions of
the preceding sentence shall apply only to a Commercial Tort Claim that
satisfies the following requirements:  (i) the monetary value claimed by or
payable to the relevant Grantor in connection with such Commercial Tort Claim
shall exceed $1,000,000, and either (ii) (A) such Grantor shall have filed a law
suit or counterclaim or otherwise commenced legal proceedings (including,
without limitation, arbitration proceedings) against the Person against whom
such Commercial Tort Claim is made, or (B) such Grantor and the Person against
whom such Commercial Tort Claim is asserted shall have entered into a settlement
agreement with respect to such Commercial Tort Claim.  In addition, to the
extent that the existence of any Commercial Tort Claim held or acquired by any
Grantor is disclosed by such Grantor in any public filing with the Securities
Exchange Commission or any successor thereto or analogous Governmental
Authority, or to the extent that the existence of any such Commercial Tort Claim
is disclosed in any press release issued by any Grantor, then, upon the request
of the Collateral Trustee, the relevant Grantor shall, within thirty (30) days
after such request is made, transmit to the Collateral Trustee a writing signed
by such Grantor containing a brief description of such Commercial Tort Claim and
granting to the Collateral Trustee in such writing (for the benefit of the
Secured Parties) a security interest therein and in the Proceeds thereof, all
upon the terms of this Agreement, with such writing to be in form and substance
satisfactory to the Collateral Trustee.

 

ARTICLE VII
REMEDIAL PROVISIONS

 

Section 7.01                             Pledged Securities.

 

(a)                                 Unless an Event of Default shall have
occurred and be continuing and the Collateral Trustee shall have given notice to
the relevant Grantor of the Collateral Trustee’s

 

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intent to exercise its corresponding rights pursuant to Section 7.01(b), each
Grantor shall be permitted to receive all cash dividends paid in respect of the
Pledged Securities paid in the normal course of business of the relevant Issuer,
to the extent permitted in the Indenture, and to exercise all voting and
corporate rights with respect to the Pledged Securities.

 

(b)                                 If an Event of Default shall occur and be
continuing, then at any time in the Collateral Trustee’s discretion without
notice but in each case subject to the terms of the Intercreditor Agreement,
(i) the Collateral Trustee shall have the right to receive any and all cash
dividends, payments or other Proceeds paid in respect of the Pledged Securities
and make application thereof to the Secured Obligations in accordance with the
Collateral Trust Agreement, and (ii) any or all of the Pledged Securities shall
be registered in the name of the Collateral Trustee or its nominee, and the
Collateral Trustee or its nominee may thereafter exercise (x) all voting,
corporate and other rights pertaining to such Pledged Securities at any meeting
of shareholders (or other equivalent body) of the relevant Issuer or Issuers or
otherwise and (y) any and all rights of conversion, exchange and subscription
and any other rights, privileges or options pertaining to such Pledged
Securities as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged
Securities upon the merger, consolidation, reorganization, recapitalization or
other fundamental change in the organizational structure of any Issuer, or upon
the exercise by any Grantor or the Collateral Trustee of any right, privilege or
option pertaining to such Pledged Securities, and in connection therewith, the
right to deposit and deliver any and all of the Pledged Securities with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as the Collateral Trustee may determine), all without
liability except to account for property actually received by it, but the
Collateral Trustee shall have no duty to any Grantor to exercise any such right,
privilege or option and shall not be responsible for any failure to do so or
delay in so doing.

 

(c)                                  Each Grantor hereby authorizes and
instructs each Issuer of any Pledged Securities pledged by such Grantor
hereunder (and each Issuer party hereto hereby agrees) to (i) comply with any
instruction received by it from the Collateral Trustee in writing that
(x) states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of the Intercreditor Agreement and this
Agreement, without any other or further instructions from such Grantor, and each
Grantor agrees that each Issuer shall be fully protected in so complying, and
(ii) unless otherwise expressly prohibited by the Intercreditor Agreement, pay
any dividends or other payments with respect to the Pledged Securities directly
to the Collateral Trustee.

 

(d)                                 After the occurrence and during the
continuation of an Event of Default, if the Issuer of any Pledged Securities is
the subject of bankruptcy, insolvency, receivership, custodianship or other
proceedings under the supervision of any Governmental Authority, then all rights
of the Grantor in respect thereof to exercise the voting and other consensual
rights which such Grantor would otherwise be entitled to exercise with respect
to the Pledged Securities issued by such Issuer shall cease, and all such rights
shall, subject to the Intercreditor Agreement, thereupon become vested in the
Collateral Trustee who shall thereupon have the sole right to exercise such
voting and other consensual rights, but the Collateral Trustee shall have no
duty to exercise any such voting or other consensual rights and shall not be
responsible for any failure to do so or delay in so doing.

 

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Section 7.02                             Collections on Accounts, Etc.  The
Collateral Trustee hereby authorizes each Grantor to collect upon the
Accounts, Instruments, Chattel Paper and Payment Intangibles subject to the
Collateral Trustee’s direction and control, and the Collateral Trustee may
curtail or terminate said authority at any time after the occurrence and during
the continuance of an Event of Default.  Upon the request of the Collateral
Trustee at any time after the occurrence and during the continuance of an Event
of Default but subject to the terms of the Intercreditor Agreement, each Grantor
shall notify the Account Debtors that the applicable Accounts, Chattel Paper and
Payment Intangibles have been assigned to the Collateral Trustee for the ratable
benefit of the Secured Parties and that payments in respect thereof shall be
made directly to the Collateral Trustee.  The Collateral Trustee may in its own
name or in the name of others communicate with the Account Debtors to verify
with them to its satisfaction the existence, amount and terms of any Accounts,
Chattel Paper or Payment Intangibles.

 

Section 7.03                             Proceeds.  If required by the
Collateral Trustee at any time after the occurrence and during the continuance
of an Event of Default but subject to the terms of the Intercreditor Agreement,
any payments of Accounts, Instruments, Chattel Paper and Payment Intangibles,
when collected or received by each Grantor, and any other cash or non-cash
Proceeds received by each Grantor upon the sale or other disposition of any
Collateral, shall be forthwith (and, in any event, within two Business Days)
deposited by such Grantor in the exact form received, duly indorsed by such
Grantor to the Collateral Trustee if required, in a special collateral account
maintained by the Collateral Trustee, subject to withdrawal by the Collateral
Trustee for the ratable benefit of the Secured Parties only, as hereinafter
provided, and, until so turned over, shall be held by such Grantor in trust for
the Collateral Trustee for the ratable benefit of the Secured Parties,
segregated from other funds of any such Grantor.  Each deposit of any such
Proceeds shall be accompanied by a report identifying in reasonable detail the
nature and source of the payments included in the deposit.  All Proceeds
(including, without limitation, Proceeds constituting collections of Accounts,
Chattel Paper, Instruments) while held by the Collateral Trustee (or by any
Grantor in trust for the Collateral Trustee for the ratable benefit of the
Secured Parties) shall continue to be collateral security for all of the Secured
Obligations and shall not constitute payment thereof until applied as
hereinafter provided.  At such intervals as may be agreed upon by each Grantor
and the Collateral Trustee, or, if an Event of Default shall have occurred and
be continuing, at any time at the Collateral Trustee’s election, the Collateral
Trustee shall apply all or any part of the funds on deposit in said special
collateral account on account of the Secured Obligations in such order as the
Collateral Trustee may elect, and any part of such funds which the Collateral
Trustee elects not so to apply and deems not required as collateral security for
the Secured Obligations shall be paid over from time to time by the Collateral
Trustee to each Grantor or to whomsoever may be lawfully entitled to receive the
same.

 

Section 7.04                             NY UCC and Other Remedies.

 

(a)                                 If an Event of Default shall occur and be
continuing, the Collateral Trustee, on behalf of the Secured Parties, may
exercise in its discretion, in addition to all other rights, remedies, powers
and privileges granted to them in this Agreement, the other Note Documents and
in any other instrument or agreement securing, evidencing or relating to the
Secured Obligations, all rights, remedies, powers and privileges of a secured
party under the NY UCC (whether the NY UCC is in effect in the jurisdiction
where such rights, remedies, powers or

 

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privileges are asserted) or any other applicable law or otherwise available at
law or equity.  Without limiting the generality of the foregoing, the Collateral
Trustee, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon any Grantor or any other Person (all and each of which
demands, defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker’s
board or office of the Collateral Trustee or any other Secured Party or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk.  The Collateral Trustee or any other Secured
Party shall have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of
redemption in any Grantor, which right or equity is hereby waived and released. 
If an Event of Default shall occur and be continuing, each Grantor further
agrees, at the Collateral Trustee’s request, to assemble the Collateral and make
it available to the Collateral Trustee at places which the Collateral Trustee
shall reasonably select, whether at such Grantor’s premises or elsewhere.  Any
such sale or transfer by the Collateral Trustee either to itself or to any other
Person shall be absolutely free from any claim of right by Grantor, including
any equity or right of redemption, stay or appraisal which Grantor has or may
have under any rule of law, regulation or statute now existing or hereafter
adopted.  Upon any such sale or transfer, the Collateral Trustee shall have the
right to deliver, assign and transfer to the purchaser or transferee thereof the
Collateral so sold or transferred.  The Collateral Trustee shall apply the net
proceeds of any action taken by it pursuant to this Section 7.04, after
deducting all reasonable costs and expenses of every kind incurred in connection
therewith or incidental to the care or safekeeping of any of the Collateral or
in any way relating to the Collateral or the rights of the Collateral Trustee
and the other Secured Parties hereunder, including, without limitation,
reasonable attorneys’ fees and disbursements, to the payment in whole or in part
of the Secured Obligations, in accordance with the Collateral Trust Agreement,
and only after such application and after the payment by the Collateral Trustee
of any other amount required by any provision of law, including, without
limitation, Section 9-615 of the NY UCC, need the Collateral Trustee account for
the surplus, if any, to any Grantor.  To the extent permitted by applicable law,
each Grantor waives all claims, damages and demands it may acquire against the
Collateral Trustee or any other Secured Party arising out of the exercise by
them of any rights hereunder.  If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition.

 

(b)                                 In the event that the Collateral Trustee
elects not to sell the Collateral, the Collateral Trustee retains its rights to
dispose of or utilize the Collateral or any part or parts thereof in any manner
authorized or permitted by law or in equity, and to apply the proceeds of the
same towards payment of the Secured Obligations.  Each and every method of
disposition of the Collateral described in this Agreement shall constitute
disposition in a commercially reasonable manner.  The Collateral Trustee may
appoint any Person as agent to perform any act or acts necessary or incident to
any sale or transfer of the Collateral.

 

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Section 7.05                             Private Sales of Pledged Securities. 
Each Grantor recognizes that the Collateral Trustee may be unable to effect a
public sale of any or all the Pledged Securities, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof.  Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner.  The Collateral
Trustee shall be under no obligation to delay a sale of any of the Pledged
Securities for the period of time necessary to permit the Issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such Issuer would agree to do so. 
Each Grantor agrees to use its best efforts to do or cause to be done all such
other acts as may reasonably be necessary to make such sale or sales of all or
any portion of the Pledged Securities pursuant to this Section 7.05 valid and
binding and in compliance with any and all other applicable Governmental
Requirements.  Each Grantor further agrees that a breach of any of the covenants
contained in this Section 7.05 will cause irreparable injury to the Collateral
Trustee and the other Secured Parties, that the Collateral Trustee and the other
Secured Parties have no adequate remedy at law in respect of such breach and, as
a consequence, that each and every covenant contained in this Section 7.05 shall
be specifically enforceable against such Grantor, and such Grantor hereby waives
and agrees not to assert any defenses against an action for specific performance
of such covenants.

 

Section 7.06                             Waiver; Deficiency.  Each Grantor
waives and agrees not to assert any rights or privileges which it may acquire
under the NY UCC or any other applicable law.  Each Grantor shall remain liable
for any deficiency if the proceeds of any sale or other disposition of the
Collateral are insufficient to pay its Secured Obligations and the fees and
disbursements of any attorneys employed by the Collateral Trustee or any other
Secured Party to collect such deficiency.

 

Section 7.07                             Non-Judicial Enforcement.  The
Collateral Trustee may enforce its rights hereunder without prior judicial
process or judicial hearing, and to the extent permitted by law, each Grantor
expressly waives any and all legal rights which might otherwise require the
Collateral Trustee to enforce its rights by judicial process.

 

ARTICLE VIII
THE COLLATERAL TRUSTEE

 

Section 8.01                             Collateral Trustee’s Appointment as
Attorney-in-Fact, Etc.

 

(a)                                 Each Grantor hereby irrevocably constitutes
and appoints the Collateral Trustee and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of such Grantor and in
the name of such Grantor or in its own name, for the purpose of carrying out the
terms of this Agreement, to take any and all reasonably appropriate action and
to execute any and all documents and instruments which may be reasonably
necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, each Grantor

 

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hereby gives the Collateral Trustee the power and right, on behalf of such
Grantor, without notice to or assent by such Grantor, to do any or all of the
following subject to the terms of the Intercreditor Agreement:

 

(i)                                     unless being disputed, pay or discharge
taxes and Liens levied or placed on or threatened against the Collateral, effect
any repairs or any insurance called for by the terms of this Agreement and pay
all or any part of the premiums therefore and the costs thereof;

 

(ii)                                  execute, in connection with any sale
provided for in Section 7.04 or Section 7.05, any endorsements, assignments or
other instruments of conveyance or transfer with respect to the Collateral; and

 

(iii)                               (A) direct any party liable for any payment
under any of the Collateral to make payment of any and all moneys due or to
become due thereunder directly to the Collateral Trustee or as the Collateral
Trustee shall direct; (B) take possession of and indorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of moneys due
under any Account, Instrument, General Intangible, Chattel Paper or Payment
Intangible or with respect to any other Collateral, and to file any claim or to
take any other action or proceeding in any court of law or equity or otherwise
deemed appropriate by the Collateral Trustee for the purpose of collecting any
and all such moneys due under any Account, Instrument or General Intangible or
with respect to any other Collateral whenever payable; (C) ask or demand for,
collect, and receive payment of and receipt for, any and all moneys, claims and
other amounts due or to become due at any time in respect of or arising out of
any Collateral; (D) sign and indorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in connection with any
of the Collateral; (E) receive, change the address for delivery, open and
dispose of mail addressed to any Grantor, and to execute, assign and indorse
negotiable and other instruments for the payment of money, documents of title or
other evidences of payment, shipment or storage for any form of Collateral on
behalf of and in the name of any Grantor; (F) commence and prosecute any suits,
actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any portion thereof and to enforce any
other right in respect of any Collateral; (G) defend any suit, action or
proceeding brought against such Grantor with respect to any Collateral;
(H) settle, compromise or adjust any such suit, action or proceeding and, in
connection therewith, give such discharges or releases as the Collateral Trustee
may deem appropriate; and (I) generally, sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though the Collateral Trustee were the absolute owner thereof
for all purposes, and do, at the Collateral Trustee’s option and such Grantor’s
expense, at any time, or from time to time, all acts and things which the
Collateral Trustee deems necessary to protect, preserve or realize upon the
Collateral and the Collateral Trustee’s and the other Secured Parties’ security
interests therein and to effect the intent of this Agreement, all as fully and
effectively as such Grantor might do.

 

Anything in this Section 8.01(a) to the contrary notwithstanding, the Collateral
Trustee agrees that it will not exercise any rights under the power of attorney
provided for in this Section 8.01(a) unless an Event of Default shall have
occurred and be continuing.

 

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(b)                                 If any Grantor fails to perform or comply
with any of its agreements contained herein within the applicable grace periods,
the Collateral Trustee, at its option, but without any obligation so to do, may
perform or comply, or otherwise cause performance or compliance, with such
agreement.

 

(c)                                  The expenses of the Collateral Trustee
incurred in connection with actions undertaken as provided in this Section 8.01,
together with interest thereon from the date of payment by the Collateral
Trustee to the date reimbursed by the relevant Grantor, shall be payable by such
Grantor to the Collateral Trustee on demand.

 

(d)                                 Each Grantor hereby ratifies all that said
attorneys shall lawfully do or cause to be done by virtue and in compliance
hereof.  All powers, authorizations and agencies contained in this Agreement are
coupled with an interest and are irrevocable until this Agreement is terminated
and the security interests created hereby are released.

 

Section 8.02                             Duty of Collateral Trustee.  The
Collateral Trustee’s sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the NY UCC or otherwise, shall be to deal with it in the same manner as the
Collateral Trustee deals with similar property for its own account and shall be
deemed to have exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which comparable secured parties accord comparable
collateral.  Neither the Collateral Trustee, any other Secured Party nor any of
their respective officers, directors, employees or agents shall be liable for
failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of any Grantor or any other Person or to take
any other action whatsoever with regard to the Collateral or any part thereof. 
The powers conferred on the Collateral Trustee and the other Secured Parties
hereunder are solely to protect the Collateral Trustee’s and the other Secured
Parties’ interests in the Collateral and shall not impose any duty upon the
Collateral Trustee or any other Secured Party to exercise any such powers.  The
Collateral Trustee and the other Secured Parties shall be accountable only for
amounts that they actually receive as a result of the exercise of such powers,
and neither they nor any of their officers, directors, employees or agents shall
be responsible to any Grantor for any act or failure to act hereunder, except
for their own gross negligence or willful misconduct.  To the fullest extent
permitted by applicable law, the Collateral Trustee shall be under no duty
whatsoever to make or give any presentment, notice of dishonor, protest, demand
for performance, notice of non-performance, notice of intent to accelerate,
notice of acceleration, or other notice or demand in connection with any
Collateral or the Secured Obligations, or to take any steps necessary to
preserve any rights against any Grantor or other Person or ascertaining or
taking action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relative to any Collateral, whether or not it has or is deemed
to have knowledge of such matters.  Each Grantor, to the extent permitted by
applicable law, waives any right of marshaling in respect of any and all
Collateral, and waives any right to require the Collateral Trustee or any other
Secured Party to proceed against any Grantor or other Person, exhaust any
Collateral or enforce any other remedy which the Collateral Trustee or any other
Secured Party now has or may hereafter have against each Subsidiary Grantor, any
Grantor or other Person.

 

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Section 8.03                             Execution of Financing Statements. 
Pursuant to the NY UCC and any other applicable law, each Grantor authorizes the
Collateral Trustee, its counsel or its representative, at any time and from time
to time, to file or record financing statements, continuation statements,
amendments thereto and other filing or recording documents or instruments with
respect to the Collateral without the signature of such Grantor in such form and
in such offices as the Collateral Trustee reasonably determines appropriate to
perfect the security interests of the Collateral Trustee under this Agreement. 
Additionally, each Grantor authorizes the Collateral Trustee, its counsel or its
representative, at any time and from time to time, to file or record such
financing statements that describe the collateral covered thereby as “all assets
of the Grantor”, “all personal property of the Grantor” or words of similar
effect.  A photographic or other reproduction of this Agreement shall be
sufficient as a financing statement or other filing or recording document or
instrument for filing or recording in any jurisdiction.

 

Section 8.04                             Authority of Collateral Trustee.  Each
Grantor acknowledges that the rights and responsibilities of the Collateral
Trustee under this Agreement with respect to any action taken by the Collateral
Trustee or the exercise or non-exercise by the Collateral Trustee of any option,
voting right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Collateral
Trustee and the other Secured Parties, be governed by the Collateral Trust
Agreement and by such other agreements with respect thereto as may exist from
time to time among them, but, as between the Collateral Trustee and the
Grantors, the Collateral Trustee shall be conclusively presumed to be acting as
agent for the Secured Parties with full and valid authority so to act or refrain
from acting, and no Grantor shall be under any obligation, or entitlement, to
make any inquiry respecting such authority.

 

ARTICLE IX
SUBORDINATION OF INDEBTEDNESS

 

Section 9.01                             Subordination of All Grantor Claims. 
As used herein, the term “Grantor Claims” means all debts and obligations of the
Company or any other Grantor to any Grantor, whether such debts and obligations
now exist or are hereafter incurred or arise, or whether the obligation of the
debtor thereon be direct, contingent, primary, secondary, several, joint and
several, or otherwise, and irrespective of whether such debts or obligations be
evidenced by note, contract, open account, or otherwise, and irrespective of the
Person or Persons in whose favor such debts or obligations may, at their
inception, have been, or may hereafter be created, or the manner in which they
have been or may hereafter be acquired by. After and during the continuation of
an Event of Default, no Grantor shall receive or collect, directly or
indirectly, from any obligor in respect thereof any amount upon the Grantor
Claims.

 

Section 9.02                             Claims in Bankruptcy.  In the event of
receivership, bankruptcy, reorganization, arrangement, debtor’s relief or other
insolvency proceedings involving any Grantor, the Collateral Trustee on behalf
of the Secured Parties shall have the right to prove their claim in any
proceeding, so as to establish their rights hereunder and receive directly from
the receiver, trustee or other court custodian, dividends and payments which
would otherwise be payable upon Grantor Claims.  Each Grantor hereby assigns
such dividends and payments to the Collateral Trustee for the benefit of the
Secured Parties for application against the Secured Obligations as provided
under the Collateral Trust Agreement.  Should any Agent or Secured

 

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Party receive, for application upon the Secured Obligations, any such dividend
or payment which is otherwise payable to any Grantor, and which, as between such
Grantor, shall constitute a credit upon the Grantor Claims, then upon payment in
full of the Secured Obligations, the intended recipient shall become subrogated
to the rights of the Collateral Trustee and the other Secured Parties to the
extent that such payments to the Collateral Trustee and the other Secured
Parties on the Grantor Claims have contributed toward the liquidation of the
Secured Obligations, and such subrogation shall be with respect to that
proportion of the Secured Obligations which would have been unpaid if the
Collateral Trustee and the other Secured Parties had not received dividends or
payments upon the Grantor Claims.

 

Section 9.03                             Payments Held in Trust.  In the event
that notwithstanding Section 9.01 and Section 9.02, any Grantor should receive
any funds, payments, claims or distributions which is prohibited by such
Sections, then it agrees: (a) to hold in trust for the Collateral Trustee and
the other Secured Parties an amount equal to the amount of all funds, payments,
claims or distributions so received, and (b) that it shall have absolutely no
dominion over the amount of such funds, payments, claims or distributions except
to pay them promptly to the Collateral Trustee, for the benefit of the Secured
Parties; and each Grantor covenants promptly to pay the same to the Collateral
Trustee.

 

Section 9.04                             Liens Subordinate.  Each Grantor agrees
that, until the Secured Obligations are paid in full, any Liens securing payment
of the Grantor Claims shall be and remain inferior and subordinate to any Liens
securing payment of the Secured Obligations, regardless of whether such
encumbrances in favor of such Grantor, the Collateral Trustee or any other
Secured Party presently exist or are hereafter created or attach.  Without the
prior written consent of the Collateral Trustee, no Grantor, during the period
in which any of the Secured Obligations are outstanding, shall (a) exercise or
enforce any creditor’s right it may have against any debtor in respect of the
Grantor Claims, or (b) foreclose, repossess, sequester or otherwise take steps
or institute any action or proceeding (judicial or otherwise, including without
limitation the commencement of or joinder in any liquidation, bankruptcy,
rearrangement, debtor’s relief or insolvency proceeding) to enforce any Lien
held by it.

 

Section 9.05                             Notation of Records.  Upon the request
of the Collateral Trustee, all promissory notes and all accounts receivable
ledgers or other evidence of the Grantor Claims accepted by or held by any
Grantor shall contain a specific written notice thereon that the indebtedness
evidenced thereby is subordinated under the terms of this Agreement.

 

ARTICLE X
MISCELLANEOUS

 

Section 10.01                      Waiver.  No failure on the part of the
Collateral Trustee or any other Secured Party to exercise and no delay in
exercising, and no course of dealing with respect to, any right, remedy, power
or privilege under any of the Note Documents shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power or privilege under
any of the Note Documents preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.  The rights, remedies,
powers and privileges provided herein are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.  The exercise by the
Collateral Trustee of any one or more of the rights, powers and remedies

 

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herein shall not be construed as a waiver of any other rights, powers and
remedies, including, without limitation, any rights of set-off.

 

Section 10.02                      Notices.  All notices and other
communications provided for herein shall be given in the manner and subject to
the terms of Section 11.2 of the Indenture; provided that any such notice,
request or demand to or upon any Subsidiary Grantor shall be addressed to such
Subsidiary Grantor at its notice address set forth on Schedule 1.

 

Section 10.03                      Payment of Expenses, Indemnities, Etc.

 

(a)                                 Each Grantor agrees to pay or promptly
reimburse the Collateral Trustee and each other Secured Party for all advances,
charges, costs and expenses (including, without limitation, all costs and
expenses of holding, preparing for sale and selling, collecting or otherwise
realizing upon the Collateral and all attorneys’ fees, legal expenses and court
costs) incurred by any Secured Party in connection with the exercise of its
respective rights and remedies hereunder, including, without limitation, any
advances, charges, costs and expenses that may be incurred in any effort to
enforce any of the provisions of this Agreement or any obligation of any Grantor
in respect of the Collateral or in connection with (i) the preservation of the
Lien of, or the rights of the Collateral Trustee or any other Secured Party
under this Agreement, (ii) any actual or attempted sale, lease, disposition,
exchange, collection, compromise, settlement or other realization in respect of,
or care of, the Collateral, including all such costs and expenses incurred in
any bankruptcy, reorganization, workout or other similar proceeding, or
(iii) otherwise enforcing or preserving any rights under this Agreement and the
other Note Documents to which such Grantor is a party.

 

(b)                                 Each Grantor agrees to pay, and to save the
Collateral Trustee and the other Secured Parties harmless from, any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever (including,
without limitation, court costs and attorneys’ fees, any and all liabilities
with respect to, or resulting from any delay in paying, any and all stamp,
excise, sales or other taxes which may be payable or determined to be payable
with respect to any of the Collateral or in connection with any of the
transactions contemplated by this Agreement) incurred because of, incident to,
or with respect to, the Collateral (including, without limitation, any exercise
of rights or remedies in connection therewith) or the execution, delivery,
enforcement, performance and administration of this Agreement, to the extent the
Company would be required to do so pursuant to Sections 7.7 or 10.1 of the
Indenture.  All amounts for which any Grantor is liable pursuant to this
Section 10.03 shall be due and payable by such Grantor to the Secured Parties
upon demand.

 

Section 10.04                      Amendments in Writing.  None of the terms or
provisions of this Agreement may be waived, amended, supplemented or otherwise
modified except in accordance with the Collateral Trust Agreement.

 

Section 10.05                      Successors and Assigns.  This Agreement shall
be binding upon the successors and assigns of each Grantor and shall inure to
the benefit of the Collateral Trustee and the other Secured Parties and their
successors and assigns; provided that except as set forth in the Indenture, no
Grantor may assign, transfer or delegate any of its rights or obligations under
this Agreement without the prior written consent of the Collateral Trustee.

 

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Section 10.06                      Invalidity.  In the event that any one or
more of the provisions contained in this Agreement or in any of the Note
Documents to which a Grantor is a party shall, for any reason, be held invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement or such
other Note Document.

 

Section 10.07                      Counterparts.  This Agreement may be executed
in any number of counterparts, all of which taken together shall constitute one
and the same instrument and any of the parties hereto may execute this Agreement
by signing any such counterpart.

 

Section 10.08                      Survival.  The obligations of the parties
under Section 10.03 shall survive the repayment of the Notes and the termination
of the Indenture.  To the extent that any payments on the Secured Obligations or
proceeds of any Collateral are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
debtor in possession, receiver or other Person under any bankruptcy law, common
law or equitable cause, then to such extent, the Secured Obligations so
satisfied shall be revived and continue as if such payment or proceeds had not
been received and the Collateral Trustee’s and the other Secured Parties’ Liens,
security interests, rights, powers and remedies under this Agreement and each
Security Document shall continue in full force and effect.  In such event, each
Security Document shall be automatically reinstated and each Grantor shall take
such action as may be reasonably requested by the Collateral Trustee and the
other Secured Parties to effect such reinstatement.

 

Section 10.09                      Captions.  Captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.

 

Section 10.10                      No Oral Agreements.  The Note Documents
embody the entire agreement and understanding between the parties and supersede
all other agreements and understandings between such parties relating to the
subject matter hereof and thereof.  The Note Documents represent the final
agreement between the parties and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the parties.  There are no
unwritten oral agreements between the parties.

 

Section 10.11                      Governing Law; Submission to Jurisdiction.

 

(a)                                 This Agreement shall be governed by, and
construed in accordance with, the laws of the state of New York.

 

(b)                                 Any legal action or proceeding with respect
to this Agreement or any other Note Documents to which a Grantor is a party
shall be brought in the courts of the State of New York or of the United States
of America for the Southern District of New York, and each of the Collateral
Trustee and the Grantors hereby accepts for itself and (to the extent permitted
by law) in respect of its Property, generally and unconditionally, the
jurisdiction of the aforesaid courts.  Each of the Collateral Trustee and the
Grantors hereby irrevocably waives any objection, including, without limitation,
any objection to the laying of venue or based on the grounds of forum non
conveniens, which it may now or hereafter have to the bringing of any such
action or

 

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proceeding in such respective jurisdictions.  This submission to jurisdiction is
non-exclusive and does not preclude the Collateral Trustee from obtaining
jurisdiction over such Grantor in any court otherwise having jurisdiction.

 

(c)                                  Each of the Collateral Trustee and the
Grantors irrevocably consents to the service of process of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to such Person at the
address specified on Schedule 1 of this Agreement or in the Indenture, as
applicable, such service to become effective thirty (30) days after such
mailing.  Nothing herein shall affect the right of the Collateral Trustee or any
holder of a Note or Grantor to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against such Grantor
in any other jurisdiction.

 

(d)                                 Each Grantor hereby (i) irrevocably and
unconditionally waive, to the fullest extent permitted by law, trial by jury in
any legal action or proceeding relating to this Agreement or any other Note
Document and for any counterclaim therein; (ii) irrevocably waive, to the
maximum extent not prohibited by law, any right it may have to claim or recover
in any such litigation any special, exemplary, punitive or consequential
damages, or damages other than, or in addition to, actual damages; (iii) certify
that no party hereto nor any representative or agent or counsel for any party
hereto has represented, expressly or otherwise, or implied that such party would
not, in the event of litigation, seek to enforce the foregoing waivers, and
(iv) acknowledge that it has been induced to enter into this Agreement, the Note
Documents and the transactions contemplated hereby and thereby by, among other
things, the mutual waivers and certifications contained in this Section 10.11.

 

Section 10.12                      Acknowledgments.  Each Grantor hereby
acknowledges that:

 

(a)                                 it has been advised by counsel in the
negotiation, execution and delivery of this Agreement and the other Note
Documents to which it is a party;

 

(b)                                 neither the Collateral Trustee nor any other
Secured Party has any fiduciary relationship with or duty to any Grantor arising
out of or in connection with this Agreement or any of the other Note Documents,
and the relationship between the Grantors, on the one hand, and the Collateral
Trustee and the other Secured Parties, on the other hand, in connection herewith
or therewith is solely that of debtor and creditor; and

 

(c)                                  no joint venture is created hereby or by
the other Note Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Secured Parties or among the Grantors and the
Lenders.

 

(d)                                 each of the parties hereto specifically
agrees that it has a duty to read this Agreement and the Security Documents and
agrees that it is charged with notice and knowledge of the terms of this
Agreement and the Security Documents; that it has in fact read this Agreement
and is fully informed and has full notice and knowledge of the terms, conditions
and effects of this Agreement; that it has been represented by independent legal
counsel of its choice throughout the negotiations preceding its execution of
this Agreement and the Security Documents; and has received the advice of its
attorney in entering into this Agreement and the

 

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Security Documents; and that it recognizes that certain of the terms of this
Agreement and the Security Documents result in one party assuming the liability
inherent in some aspects of the transaction and relieving the other party of its
responsibility for such liability.  Each party hereto agrees and covenants that
it will not contest the validity or enforceability of any exculpatory provision
of this Agreement and the Security Documents on the basis that the party had no
notice or knowledge of such provision or that the provision is not
“conspicuous.”

 

(e)                                  each Grantor warrants and agrees that each
of the waivers and consents set forth in this Agreement are made voluntarily and
unconditionally after consultation with outside legal counsel and with full
knowledge of their significance and consequences, with the understanding that
events giving rise to any defense or right waived may diminish, destroy or
otherwise adversely affect rights which such Grantor otherwise may have against
the Company, any other Grantor, the Secured Parties or any other Person or
against any collateral.  If, notwithstanding the intent of the parties that the
terms of this Agreement shall control in any and all circumstances, any such
waivers or consents are determined to be unenforceable under applicable law,
such waivers and consents shall be effective to the maximum extent permitted by
law.

 

Section 10.13                      Additional Grantors.  Each Subsidiary of the
Company that becomes a Guarantor under the Indenture and is not a signatory
hereto shall become a Grantor for all purposes of this Agreement upon execution
and delivery by such Subsidiary of an Assumption Agreement in the form of Annex
I hereto.

 

Section 10.14                      Set-Off.  Each Grantor agrees that, in
addition to (and without limitation of) any right of set-off, bankers’ lien or
counterclaim a Secured Party may otherwise have, each Secured Party shall have
the right and be entitled (after consultation with the Collateral Trustee), at
its option, to offset balances held by it or by any of its Affiliates for
account of any Grantor or any Subsidiary at any of its offices, in Dollars or in
any other currency, against any principal of or interest on any of the Secured
Obligations owed to such Secured Party, or any other amount due and payable to
such Secured Party hereunder, which is not paid when due (regardless of whether
such balances are then due to such Person), in which case it shall promptly
notify the Company and the Collateral Trustee thereof, provided that such
Secured Party’s failure to give such notice shall not affect the validity
thereof.

 

Section 10.15                      Releases.

 

(a)                                 Release upon Payment in Full.  The grant of
a security interest hereunder and all of rights, powers and remedies in
connection herewith shall remain in full force and effect until the Collateral
Trustee has (i) retransferred and delivered all Collateral in its possession to
the Grantors, and (ii) executed a written release or termination statement and
reassigned to the Grantors without recourse or warranty any remaining Collateral
and all rights conveyed hereby.  Upon the complete payment of the Secured
Obligations, the termination of the Indenture and the compliance by the Grantors
with all covenants and agreements hereof, the Collateral Trustee, at the written
request and expense of the Company, will promptly release, reassign and transfer
the Collateral to the Grantors and declare this Agreement to be of no further
force or effect.

 

26

--------------------------------------------------------------------------------

 

(b)                                 Further Assurances.  If any of the
Collateral shall be sold, transferred or otherwise disposed of by any Grantor in
a transaction permitted by the Indenture or to the extent that such Collateral
is permitted to be released pursuant to the terms of the Indenture and the
Collateral Trust Agreement, then the Collateral Trustee, at the request and sole
expense of such Grantor, shall promptly execute and deliver to such Grantor all
releases or other documents reasonably necessary or desirable for the release of
the Liens created hereby on such Collateral and the capital stock of such
Grantor.  At the request and sole expense of the Company, a Grantor shall be
released from its obligations hereunder in the event that all the capital stock
of such Grantor shall be sold, transferred or otherwise disposed of in a
transaction permitted by the Indenture; provided that the Company shall have
delivered to the Collateral Trustee, at least ten Business Days prior to the
date of the proposed release, a written request for release identifying the
relevant Grantor and the terms of the sale or other disposition in reasonable
detail, including the price thereof and any expenses in connection therewith,
together with a certification by the Company stating that such transaction is in
compliance with the Indenture and the other Note Documents.

 

(c)                                  Retention in Satisfaction.  Except as may
be expressly applicable pursuant to Section 9-620 of the NY UCC, no action taken
or omission to act by the Collateral Trustee or the other Secured Parties
hereunder, including, without limitation, any exercise of voting or consensual
rights or any other action taken or inaction, shall be deemed to constitute a
retention of the Collateral in satisfaction of the Secured Obligations or
otherwise to be in full satisfaction of the Secured Obligations, and the Secured
Obligations shall remain in full force and effect, until the Collateral Trustee
and the other Secured Parties shall have applied payments (including, without
limitation, collections from Collateral) towards the Secured Obligations in the
full amount then outstanding or until such subsequent time as is provided in
Section 10.15(a).

 

Section 10.16                      Reinstatement.  The obligations of each
Grantor under this Agreement (including, without limitation, with respect to the
provision of collateral herein) shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Secured Obligations is rescinded or must otherwise be restored or
returned by the Collateral Trustee or any other Secured Party upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company or any Grantor, or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, the Company or
any Grantor or any substantial part of its property, or otherwise, all as though
such payments had not been made.

 

Section 10.17                      Acceptance.  Each Grantor hereby expressly
waives notice of acceptance of this Agreement, acceptance on the part of the
Collateral Trustee and the other Secured Parties being conclusively presumed by
their request for this Agreement and delivery of the same to the Collateral
Trustee.

 

Section 10.18                      Intercreditor Agreement Controls.

 

(a)                                 Each Secured Party, by accepting the
benefits of the security provided hereby, (i) consents (or is deemed to
consent), to the subordination of Liens provided for in the Intercreditor
Agreement, (ii) agrees (or is deemed to agree) that it will be bound by, and
will take no actions contrary to, the provisions of the Intercreditor Agreement,
(iii) authorizes (or is

 

27

--------------------------------------------------------------------------------

 

deemed to authorize) the Collateral Trustee on behalf of such Person to enter
into, and perform under, the Intercreditor Agreement and (iv) acknowledges (or
is deemed to acknowledge) that a copy of the Intercreditor Agreement was
delivered, or made available, to such Secured Party.

 

(b)                                 Notwithstanding any other provision
contained herein, this Agreement, the Liens created hereby and the rights,
remedies, duties and obligations provided for herein are subject in all respects
to the provisions of the Intercreditor Agreement. In the event of any conflict
or inconsistency between the provisions of this Agreement and the Intercreditor
Agreement, the provisions of the Intercreditor Agreement shall control.

 

(c)                                  Without limiting the foregoing, at any time
prior to the Discharge of Priority Lien Obligations (as defined in the
Intercreditor Agreement) and the Discharge of the Second Lien Obligations (as
defined in the Intercreditor Agreement), any provision hereof requiring any
Grantor to deliver possession of any Collateral to the Collateral Trustee, or to
cause the Collateral Trustee to control any Collateral, shall be deemed to have
been complied with, if and for so long as (i) the Intercreditor Agreement is in
full force and effect and (ii) the Priority Lien Agent or the Second Lien
Collateral Trustee, as applicable, shall have such possession or control for the
benefit of the Secured Parties and as bailee or sub-agent of the Collateral
Trustee as provided in the Intercreditor Agreement.

 

[SIGNATURE PAGES FOLLOW]

 

28

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, each of the undersigned has caused this Third Lien Security
Agreement to be duly executed and delivered as of the date first above written.

 

COMPANY:

HALCÓN RESOURCES CORPORATION

 

 

 

 

 

By:

/s/ Mark J. Mize

 

Name:

Mark J. Mize

 

Title:

Executive Vice President, Chief Financial Officer and Treasurer

 

 

 

 

 

 

SUBSIDIARY GRANTORS:

HALCÓN ENERGY PROPERTIES, INC.

 

HALCÓN FIELD SERVICES, LLC

 

HALCÓN HOLDINGS, INC.

 

HALCÓN OPERATING CO., INC.

 

HALCÓN RESOURCES OPERATING, INC.

 

HALCÓN LOUISIANA OPERATING, L.P.

 

 

By: HALCÓN GULF STATES, LLC,

 

 

its General Partner

 

HALCÓN GULF STATES, LLC

 

HRC ENERGY LOUISIANA, LLC

 

HRC ENERGY, LLC

 

HRC OPERATING, LLC

 

HRC ENERGY RESOURCES (WV), INC.

 

HALCÓN ENERGY HOLDINGS, LLC

 

HALCÓN WILLISTON I, LLC

 

HALCÓN WILLISTON II, LLC

 

HRC PRODUCTION COMPANY

 

HK OIL & GAS, LLC

 

HK ENERGY OPERATING, LLC

 

HK LOUISIANA OPERATING, LLC

 

HK ENERGY, LLC

 

HK RESOURCES, LLC

 

THE 7711 CORPORATION

 

 

 

 

 

By:

/s/ Mark J. Mize

 

Name:

Mark J. Mize

 

Title:

Executive Vice President, Chief Financial Officer and Treasurer

 

SIGNATURE PAGE
THIRD LIEN SECURITY AGREEMENT

 

--------------------------------------------------------------------------------

 

 

Acknowledged and Agreed to as of the date hereof by:

 

 

 

 

 

 

COLLATERAL TRUSTEE:

U.S. BANK NATIONAL ASSOCIATION

 

 

 

 

 

By:

/s/ Steven A. Finklea

 

Name:

Steven A. Finklea

 

Title:

Vice President

 

SIGNATURE PAGE
THIRD LIEN SECURITY AGREEMENT

 

--------------------------------------------------------------------------------

 

Schedule 1

 

NOTICE ADDRESSES OF GRANTORS

 

Halcón Resources Corporation

 

Halcón Energy Holdings, LLC

 

Halcón Energy Properties, Inc.

 

Halcón Field Services, LLC

 

Halcón Gulf States, LLC

 

Halcón Holdings, Inc.

 

Halcón Louisiana Operating, L.P.

 

Halcón Operating Co., Inc.

 

Halcón Resources Operating, Inc.

 

Halcón Williston I, LLC

 

Halcón Williston II, LLC

 

HK Energy, LLC

 

HK Energy Operating, LLC

 

HK Louisiana Operating, LLC

 

HK Oil & Gas, LLC

 

HK Resources, LLC

 

HRC Energy, LLC

 

HRC Energy Louisiana, LLC

 

HRC Energy Resources (WV), Inc.

 

HRC Operating, LLC

 

HRC Production Company

 

The 7711 Corporation

 

Notice Address:

1000 Louisiana St., Suite 6700

 

Houston, TX 77002

 

Attn: Mark J. Mize

 

Phone: 832-538-0303

 

Fax: 832-538-0220

 

Schedule 1 - 1

--------------------------------------------------------------------------------

 

Schedule 2

 

DESCRIPTION OF PLEDGED SECURITIES

 

Pledged Securities:

 

Owner

 

Issuer

 

Class of Stock or
other Equity Interest

 

No. of Shares

 

Certificate No.

 

Halcón Resources Corporation

 

Halcón Energy Holdings, LLC

 

LLC Membership Interest

 

100

%

n/a

 

Halcón Holdings, Inc.

 

Halcón Energy Properties, Inc.

 

Common Stock

 

1,000

 

1

 

Halcón Holdings, Inc.

 

Halcón Field Services, LLC

 

LLC Membership Interest

 

100

%

n/a

 

Halcón Holdings, Inc.

 

Halcón Gulf States, LLC

 

LLC Membership Interest

 

100

%

n/a

 

Halcón Resources Corporation

 

Halcón Holdings, Inc.

 

Common Stock

 

1,000

 

1

 

Halcón Gulf States, LLC

 

Halcón Louisiana Operating, L.P.

 

General Partnership Interest

 

1

%

n/a

 

Halcón Operating Co., Inc.

 

Halcón Louisiana Operating, L.P.

 

Limited Partnership Interest

 

99

%

n/a

 

Halcón Energy Properties, Inc.

 

Halcón Operating Co., Inc.

 

Common Stock

 

1,000

 

1

 

Halcón Resources Corporation

 

Halcón Resources Operating, Inc.

 

Common Stock

 

1,000

 

1

 

Halcón Energy Properties, Inc.

 

Halcón Williston I, LLC

 

LLC Membership Interest

 

100

%

n/a

 

Halcón Energy Properties, Inc.

 

Halcón Williston II, LLC

 

LLC Membership Interest

 

100

%

n/a

 

Halcón Energy Holdings, LLC

 

HK Energy, LLC

 

LLC Membership Interest

 

100

%

n/a

 

HK Energy, LLC

 

HK Energy Operating, LLC

 

LLC Membership Interest

 

100

%

n/a

 

HK Energy, LLC

 

HK Louisiana Operating, LLC

 

LLC Membership Interest

 

100

%

n/a

 

HK Energy, LLC

 

HK Oil & Gas, LLC

 

LLC Membership Interest

 

100

%

n/a

 

Halcón Holdings, Inc.

 

HK Resources, LLC

 

LLC Membership Interest

 

100

%

n/a

 

Halcón Energy Holdings, LLC

 

HRC Energy, LLC

 

LLC Membership Interest

 

100

%

n/a

 

Halcón Resources Operating, Inc.

 

HRC Energy Louisiana, LLC

 

LLC Membership Interest

 

100

%

n/a

 

Halcón Resources Operating, Inc.

 

HRC Energy Resources (WV), Inc.

 

Common Stock

 

1,000

 

1

 

Halcón Energy Holdings, LLC

 

HRC Operating, LLC

 

LLC Membership Interest

 

100

%

n/a

 

Halcón Resources Operating, Inc.

 

HRC Production Company

 

Common Stock

 

1,000

 

1

 

HK Resources, LLC

 

The 7711 Corporation

 

Common Stock

 

1,000

 

7

 

 

Schedule 2 - 1

--------------------------------------------------------------------------------

 

 

Schedule 3

 

FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS

 

Uniform Commercial Code Filings

 

1.                                      Financing Statements in respect of the
Third Lien Security Agreement dated as of September 10, 2015 by the Company, the
Restricted Subsidiaries party thereto as Subsidiary Grantors, in favor of the
Collateral Trustee for the following entities:

 

(a)                                 Company (Delaware)

 

(b)                                 Halcón Energy Holdings, LLC (Delaware)

 

(c)                                  Halcón Energy Properties, Inc. (Delaware)

 

(d)                                 Halcón Field Services, LLC (Delaware)

 

(e)                                  Halcón Gulf States, LLC (Oklahoma)

 

(f)                                   Halcón Holdings, Inc. (Delaware)

 

(g)                                  Halcón Louisiana Operating, L.P. (Delaware)

 

(h)                                 Halcón Operating Co., Inc. (Texas)

 

(i)                                     Halcón Resources Operating, Inc.
(Delaware)

 

(j)                                    Halcón Williston I, LLC (Texas)

 

(k)                                 Halcón Williston II, LLC (Texas)

 

(l)                                     HK Energy, LLC (Texas)

 

(m)                             HK Energy Operating, LLC (Texas)

 

(n)                                 HK Louisiana Operating, LLC (Texas)

 

(o)                                 HK Oil & Gas, LLC (Texas)

 

(p)                                 HK Resources, LLC (Delaware)

 

(q)                                 HRC Energy, LLC (Colorado)

 

(r)                                    HRC Energy Louisiana, LLC (Delaware)

 

(s)                                   HRC Energy Resources (WV), Inc. (Delaware)

 

(t)                                    HRC Operating, LLC (Colorado)

 

(u)                                 HRC Production Company (Texas)

 

(v)                                 The 7711 Corporation (Texas)

 

Schedule 3 - 1

--------------------------------------------------------------------------------

 

Schedule 4

 

CORRECT LEGAL NAME, LOCATION OF JURISDICTION OF ORGANIZATION, ORGANIZATIONAL
IDENTIFICATION NUMBER, TAXPAYER IDENTIFICATION NUMBER AND CHIEF EXECUTIVE OFFICE

 

Halcón Resources Corporation, a Delaware corporation

Organizational Identification Number:

3761452

Taxpayer Identification Number:

20-0700684

 

 

Halcón Energy Holdings, LLC, a Delaware limited liability company

Organizational Identification Number:

5137784

Taxpayer Identification Number:

80-0840538

 

 

Halcón Energy Properties, Inc., a Delaware corporation

Organizational Identification Number:

3643530

Taxpayer Identification Number:

02-0685292

 

 

Halcón Field Services, LLC, a Delaware limited liability company

Organizational Identification Number:

5142987

Taxpayer Identification Number:

45-5240280

 

 

Halcón Gulf States, LLC, a Oklahoma limited liability company

Organizational Identification Number:

3500587288

Taxpayer Identification Number:

73-1522976

 

 

Halcón Holdings, Inc., a Delaware corporation

Organizational Identification Number:

2139048

Taxpayer Identification Number:

52-1535102

 

 

Halcón Louisiana Operating, L.P., a Delaware limited partnership

Organizational Identification Number:

5155725

Taxpayer Identification Number:

45-5409727

 

 

Halcón Operating Co., Inc., a Texas corporation

Organizational Identification Number:

157984000

Taxpayer Identification Number:

75-2883588

 

 

Halcón Resources Operating, Inc., a Delaware corporation

Organizational Identification Number:

3823574

Taxpayer Identification Number:

03-0544856

 

 

Halcón Williston I, LLC, a Texas limited liability company

Organizational Identification Number:

801690854

Taxpayer Identification Number:

80-0869550

 

 

Halcón Williston II, LLC, a Texas limited liability company

Organizational Identification Number:

801690872

Taxpayer Identification Number:

46-1459676

 

Schedule 4 - 1

--------------------------------------------------------------------------------

 

HK Energy, LLC, a Texas limited liability company

 

Organizational Identification Number:

800707128

Taxpayer Identification Number:

26-0418956

 

 

HK Energy Operating, LLC, a Texas limited liability company

Organizational Identification Number:

800387104

Taxpayer Identification Number:

35-2238107

 

 

HK Louisiana Operating, LLC, a Texas limited liability company

Organizational Identification Number:

800697019

Taxpayer Identification Number:

42-1654549

 

 

HK Oil & Gas, LLC, a Texas limited liability company

Organizational Identification Number:

800756317

Taxpayer Identification Number:

32-0190502

 

 

HK Resources, LLC, a Delaware limited liability company

Organizational Identification Number:

5448363

Taxpayer Identification Number:

46-4369194

 

 

HRC Energy, LLC, a Colorado limited liability company

Organizational Identification Number:

20061374654

Taxpayer Identification Number:

20-8875010

 

 

HRC Energy Louisiana, LLC, a Delaware limited liability company

Organizational Identification Number:

3823142

Taxpayer Identification Number:

84-1651433

 

 

HRC Energy Resources (WV), Inc., a Delaware corporation

Organizational Identification Number:

3990621

Taxpayer Identification Number:

84-1682713

 

 

HRC Operating, LLC, a Colorado limited liability company

Organizational Identification Number:

20071117034

Taxpayer Identification Number:

20-8875129

 

 

HRC Production Company, a Texas corporation

Organizational Identification Number:

0073647200

Taxpayer Identification Number:

74-2353501

 

 

The 7711 Corporation, a Texas corporation

Organizational Identification Number:

140061700

Taxpayer Identification Number:

74-2784003

 

 

Chief Executive Office of each Grantor:

1000 Louisiana Street, Suite 6700

 

Houston, TX 77002

 

Schedule 4 - 2

--------------------------------------------------------------------------------

 

Schedule 5

 

PRIOR AND/OR TRADE NAMES AND PRIOR CHIEF EXECUTIVE OFFICE

 

1.

Halcón Resources Corporation

 

 

Prior Name:

RAM Energy Resources, Inc.

 

Prior Chief Executive Office:

5100 East Skelly Dr., Ste. 650, Tulsa, OK 74135

 

 

 

2.

Halcón Energy Holdings, LLC

 

 

Prior Names:

Halcón Geo Holdings, LLC

 

 

Leopard Sub II, LLC

 

 

 

3.

Halcón Energy Properties, Inc.

 

 

Prior Name:

RWG Energy, Inc.

 

Prior Chief Executive Office:

5100 East Skelly Dr., Ste. 650, Tulsa, OK 74135

 

 

 

4.

Halcón Field Services, LLC

 

 

Trade Name:

Hawk Clean Fuels

 

 

 

5.

Halcón Gulf States, LLC

 

 

Prior Names:

HLP Gulf States, LLC

 

 

RLP Gulf States, L.L.C.

 

Prior Chief Executive Office:

5100 East Skelly Dr., Ste. 650, Tulsa, OK 74135

 

 

 

6.

Halcón Holdings, Inc.

 

 

Prior Names:

RAM Energy, Inc.

 

Prior Chief Executive Office:

5100 East Skelly Dr., Ste. 650, Tulsa, OK 74135

 

 

 

7.

Halcón Louisiana Operating, L.P.

 

Prior Name:

None.

 

 

 

8.

Halcón Operating Co., Inc.

 

 

Prior Name:

WG Operating, Inc.

 

Prior Chief Executive Office:

5100 East Skelly Dr., Ste. 650, Tulsa, OK 74135

 

 

 

9.

Halcón Resources Operating, Inc.

 

Prior Names:

RAM Operating Company, Inc.

 

Prior Chief Executive Office:

5100 East Skelly Dr., Ste. 650, Tulsa, OK 74135

 

 

 

10.

Halcón Williston I, LLC

 

 

Prior Names:

None.

 

 

 

11.

Halcón Williston II, LLC

 

 

Prior Names:

None.

 

 

 

12.

HK Energy, LLC

 

 

Prior Names:

Southern Bay Energy, LLC

 

Prior Chief Executive Office:

110 Cypress Station Dr., Ste. 220 Houston, TX 77090

 

 

 

13.

HK Energy Operating, LLC

 

 

Prior Names:

Southern Bay Operating, L.L.C.

 

Prior Chief Executive Office:

110 Cypress Station Dr., Ste. 220 Houston, TX 77090

 

 

 

14.

HK Louisiana Operating, LLC

 

 

Prior Names:

Southern Bay Louisiana, LLC

 

Prior Chief Executive Office:

110 Cypress Station Dr., Ste. 220 Houston, TX 77090

 

Schedule 5 - 1

--------------------------------------------------------------------------------

 

15.

HK Oil & Gas, LLC

 

 

Prior Names:

Catena Oil & Gas, LLC

 

Prior Chief Executive Office:

110 Cypress Station Dr., Ste. 220 Houston, TX 77090

 

 

 

16.

HK Resources, LLC

 

 

Prior Names:

None.

 

 

 

17.

HRC Energy, LLC

 

 

Prior Names:

G3 Energy, LLC

 

Prior Chief Executive Office:

110 Cypress Station Dr., Ste. 220 Houston, TX 77090

 

 

 

18.

HRC Energy Louisiana, LLC

 

 

Prior Names:

RAM Energy Louisiana, LLC

 

Prior Chief Executive Office:

5100 East Skelly Dr., Ste. 650, Tulsa, OK 74135

 

 

 

19.

HRC Energy Resources (WV), Inc.

 

 

Prior Names:

RAM Energy Resources (WV), Inc.

 

Prior Chief Executive Office:

5100 East Skelly Dr., Ste. 650, Tulsa, OK 74135

 

 

 

20.

HRC Operating, LLC

 

 

Prior Names:

G3 Operating, LLC

 

Trade Name:

Halcón Williston Operating, LLC

 

 

 

21.

HRC Production Company

 

 

Prior Names:

Pontotoc Production Company, Inc.

 

Prior Chief Executive Office:

5100 East Skelly Dr., Ste. 650, Tulsa, OK 74135

 

 

 

22.

The 7711 Corporation

 

 

Prior Names:

None.

 

Prior Chief Executive Office:

P.O. Box BJ, College Station, TX 77841

 

Schedule 5 - 2

--------------------------------------------------------------------------------

 

ACKNOWLEDGMENT AND CONSENT

 

The undersigned hereby acknowledges receipt of a copy of the Third Lien Security
Agreement dated as of September 10, 2015 (the “Agreement”), made by the Grantors
parties thereto for the benefit of U.S. Bank National Association, as Collateral
Trustee.  The undersigned agrees for the benefit of the Collateral Trustee and
the Secured Parties as follows:

 

1.                                      The undersigned will be bound by the
terms of the Agreement and will comply with such terms insofar as such terms are
applicable to the undersigned.

 

2.                                      The terms of Sections 7.01(c) and 7.03
of the Agreement shall apply to it, mutatis mutandis, with respect to all
actions that may be required of it pursuant to Sections 7.01(c) or 7.03 of the
Agreement.

 

 

[NAME OF ISSUER]

 

 

 

 

 

By:

 

 

Title:

 

 

 

 

Address for Notices:

 

 

 

 

 

 

 

Fax:

 

--------------------------------------------------------------------------------

*This consent is necessary only with respect to any Issuer which is not also a
Grantor.  This consent may be modified or eliminated with respect to any Issuer
that is not controlled by a Grantor.

 

--------------------------------------------------------------------------------

 

Annex I

 

Assumption Agreement

 

ASSUMPTION AGREEMENT, dated as of [            ], 201[  ], made by
                              , a [                    ] duly formed and
existing under the laws of the state of [        ] (the “Additional Grantor”),
in favor of U.S. Bank National Association, as Collateral Trustee (in such
capacity, the “Collateral Trustee”) for the Secured Parties (as defined in the
Third Lien Security Agreement referred to below.  All capitalized terms not
defined herein shall have the meaning assigned to them in such Indenture.

 

W I T N E S S E T H:

 

WHEREAS, Halcón Resources Corporation (the “Company”), the guarantors party
thereto from time to time and U.S. Bank National Association, as the Trustee (as
defined therein), have entered into an Indenture, dated as of September 10, 2015
(as amended, supplemented or otherwise modified from time to time, the
“Indenture”);

 

WHEREAS, in connection with the Indenture, the Company and certain of its
Subsidiaries have entered into the Third Lien Security Agreement, dated as of
September 10, 2015 (as amended, supplemented or otherwise modified from time to
time, the “Third Lien Security Agreement”) in favor of the Collateral Trustee
for the benefit of the Secured Parties (as defined therein);

 

WHEREAS, the Indenture requires the Additional Grantor to become a party to the
Third Lien Security Agreement; and

 

WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Third Lien Security
Agreement;

 

NOW, THEREFORE, IT IS AGREED:

 

1.                                      Third Lien Security Agreement.  By
executing and delivering this Assumption Agreement, the Additional Grantor, as
provided in Section 10.13 of the Third Lien Security Agreement, hereby becomes a
party to the Third Lien Security Agreement as a Grantor thereunder with the same
force and effect as if originally named therein as a Grantor and, without
limiting the generality of the foregoing, hereby expressly assumes all
obligations and liabilities of a Grantor thereunder and expressly grants to the
Collateral Trustee, for the benefit of the Secured Parties, a security interest
in all Collateral owned by such Additional Grantor to secure all of such
Additional Grantor’s obligations and liabilities thereunder.  The information
set forth in Annex 1-A hereto is hereby added to the information set forth in
Schedules 1 through 5 to the Third Lien Security Agreement.  The Additional
Grantor hereby represents and warrants that each of the representations and
warranties contained in Article IV of the Third Lien Security Agreement is true
and correct on and as the date hereof (after giving effect to this Assumption
Agreement) as if made on and as of such date.

 

Annex I - 1

--------------------------------------------------------------------------------

 

2.                                      Governing Law.  THIS ASSUMPTION
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK.

 

IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be
duly executed and delivered as of the date first above written.

 

 

[ADDITIONAL GRANTOR]

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

Annex I - 2

--------------------------------------------------------------------------------