EXHIBIT 10.23.4
AMENDED AND RESTATED
SECURITY AGREEMENT
BETWEEN
PRIMEENERGY CORPORATION
PRIMEENERGY MANAGEMENT CORPORATION
PRIME OPERATING COMPANY
EASTERN OIL WELL SERVICE COMPANY
SOUTHWEST OILFIELD CONSTRUCTION COMPANY
EOWS MIDLAND COMPANY
(DEBTOR)
AND
GUARANTY BANK, FSB, AS AGENT
(SECURED PARTY)
DECEMBER 28, 2006

 

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TABLE OF CONTENTS

                      Page  
ARTICLE I
  DEFINITIONS AND INTERPRETATION     1  
1.1
  Terms Defined Above     1  
1.2
  Terms Defined in Credit Agreement     1  
1.3
  Additional Defined Terms     1  
1.4
  Undefined Financial Accounting Terms     2  
1.5
  References     2  
1.6
  Articles and Sections     2  
1.7
  Number and Gender     2  
 
           
ARTICLE II
  GRANT OF SECURITY INTEREST     2  
 
           
ARTICLE III
  REPRESENTATIONS AND WARRANTIES     3  
3.1
  Validity, Perfection and Priority     3  
3.2
  No Liens; Other Financing Statements     3  
3.3
  Location of Debtor     3  
3.4
  Tradenames; Prior Names     3  
 
           
ARTICLE IV
  COVENANTS     3  
4.1
  Further Assurances     4  
4.2
  Change of Chief Executive Office     4  
4.3
  Change of Name or Corporate Structure     4  
4.4
  Title, Prohibited Liens and Filings     4  
4.5
  Possession of Collateral     5  
4.6
  Inspection of Collateral     5  
4.7
  Financing Statement Filings; Notifications     5  
 
           
ARTICLE V
  POWER OF ATTORNEY     5  
5.1
  Appointment as Attorney-in-Fact     5  
5.2
  No Duty on the Part of Secured Party     6  
 
           
ARTICLE VI
  REMEDIES; RIGHTS UPON DEFAULT     7  
6.1
  Rights and Remedies Generally     7  
6.2
  Proceeds     7  
6.3
  Disposition of Collateral     7  
6.4
  Possession of Collateral     7  
6.5
  Disposition of the Collateral     8  
6.6
  Recourse     9  
6.7
  Expenses; Attorneys’ Fees     9  
6.8
  Application of Proceeds     9  
6.9
  Limitation on Duties Regarding Preservation of Collateral     9  
6.10
  Waiver of Claims     10  
6.11
  Discontinuance of Proceedings     10  

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                      Page  
ARTICLE VII
  INDEMNITY     10  
7.1
  INDEMNITY     10  
7.2
  Indemnity Obligations Secured by Collateral; Survival     11  
 
           
ARTICLE VIII
  MISCELLANEOUS     12  
8.1
  No Waiver; Remedies Cumulative     12  
8.2
  Termination; Release     12  
8.3
  Counterparts     12  
8.4
  Marshalling     12  
8.5
  Severability     12  
8.6
  Financing Statement Filing     12  
8.7
  Notices and Other Communications     13  
8.8
  Parties in Interest     13  
8.9
  Amendments     13  
8.10
  ENTIRE AGREEMENT     13  
8.11
  GOVERNING LAW     13  
8.12
  JURISDICTION AND VENUE     13  

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AMENDED AND RESTATED
SECURITY AGREEMENT
     This AMENDED AND RESTATED SECURITY AGREEMENT (this “Agreement”), dated as
of December 28, 2006, is by and between PRIMEENERGY CORPORATION, a Delaware
corporation (“PEC”), PRIMEENERGY MANAGEMENT CORPORATION, a New York corporation,
PRIME OPERATING COMPANY, a Texas corporation, EASTERN OIL WELL SERVICE COMPANY,
a West Virginia corporation, SOUTHWEST OILFIELD CONSTRUCTION COMPANY, an
Oklahoma corporation, and EOWS MIDLAND COMPANY, a Texas corporation
(collectively, the “Debtor”), and GUARANTY BANK, FSB, a federal savings bank, as
Agent for the benefit of the Lenders (“Secured Party”).
W I T N E S S E T H:
     WHEREAS, pursuant to the terms and conditions of the Amended and Restated
Credit Agreement dated December 28, 2006, by and among Debtor, et al., and the
Secured Party and the Lenders signatory thereto (as amended, restated, or
supplemented from time to time, the “Credit Agreement”), the Secured Party and
the Lenders have agreed to extend credit to or for the benefit of Debtor; and
     WHEREAS, the Debtor and the Secured Party entered into a Security Agreement
dated as of February 3, 2003, and the parties hereto desire to amend and restate
such Security Agreement;
     WHEREAS, pursuant to the Credit Agreement and as an inducement to the
Secured Party and the Lenders to extend credit to or for the benefit of the
Debtor pursuant to the Credit Agreement, Debtor has agreed to execute this
Agreement in favor of the Secured Party;
     NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
     1.1 Terms Defined Above. As used herein, each of the terms “Agreement,”
“Credit Agreement,” “Debtor,” and “Secured Party” shall have the meaning
assigned to such term hereinabove.
     1.2 Terms Defined in Credit Agreement. Each capitalized term used but not
defined herein shall have the meaning assigned to such term in the Credit
Agreement.
     1.3 Additional Defined Terms. As used herein, each of the following terms
shall have the following meanings:
          “Collateral” shall have the meaning assigned to it in Article II.

 

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     “Equipment” shall mean all of Debtor’s equipment, as defined in
Section 9.102(a)(33) of the UCC, in any form, whether now owned or hereinafter
acquired and wherever located including all parts thereof and all accessories or
additions thereto, whether now owned or hereafter acquired.
     “Indemnitees” shall mean the Secured Party and its shareholders, officers,
directors, employees, agents, attorneys-in-fact, and affiliates.
     “Proceeds” shall mean proceeds (as such term is defined in Section
9-306(a)of the UCC).
     “Secured Obligations” shall mean the Obligations.
     “UCC” shall mean the Uniform Commercial Code as in effect from time to time
in the State of Texas.
     1.4 Undefined Financial Accounting Terms. Undefined financial accounting
terms used in this Agreement shall have the meanings assigned to such terms
according to GAAP.
     1.5 References. The words “hereby,” “herein,” “hereinabove,” “hereinafter,”
“hereinbelow,” “hereof,” “hereunder,” and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular Article, Section, or provision of this Agreement. References in this
Agreement to Articles, Sections, or Exhibits are to such Articles, Sections, or
Exhibits of this Agreement unless otherwise specified.
     1.6 Articles and Sections. This Agreement, for convenience only, has been
divided into Articles and Sections; and it is understood that the rights and
other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
     1.7 Number and Gender. Whenever the context requires, reference herein made
to the single number shall be understood to include the plural; and likewise,
the plural shall be understood to include the singular. Words denoting sex shall
be construed to include the masculine, feminine and neuter, when such
construction is appropriate; and specific enumeration shall not exclude the
general but shall be construed as cumulative. Definitions of terms defined in
the singular or plural shall be equally applicable to the plural or singular, as
the case may be, unless otherwise indicated.
ARTICLE II
GRANT OF SECURITY INTEREST
     As security for the prompt and complete payment and performance in full of
all Secured Obligations, Debtor hereby assigns and transfers for the purpose of
security and pledges to the Secured Party and grants to the Secured Party a
security interest in and continuing lien on all right, title, and interest of
Debtor in, to, and under the following, in each case, whether now

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owned or existing or hereafter acquired or arising, and wherever located (all of
which is herein collectively called the “Collateral”):

  (a)   all Equipment; and     (b)   all accessions and additions to any or all
of the foregoing, all substitutions and replacements for any or all of the
foregoing, and all Proceeds and products of any or all of the foregoing.

ARTICLE III
REPRESENTATIONS AND WARRANTIES
     Debtor hereby represents and warrants to the Secured Party, which
representations and warranties shall survive execution and delivery of this
Agreement, as follows:
     3.1 Validity, Perfection and Priority. The security interests in the
Collateral granted to the Secured Party hereunder constitute valid and
continuing security interests in the Collateral. Upon the filing of financing
statements, naming Debtor as “debtor” and the Secured Party as “secured party”
and describing the Collateral, in the filing offices set forth on Exhibit A, the
security interests granted to the Secured Party hereunder will constitute valid
first-priority perfected security interests in all Collateral with respect to
which a security interest can be perfected by the filing of a financing
statement, subject only to Permitted Liens.
     3.2 No Liens; Other Financing Statements. (a) Except for the Lien granted
to the Secured Party hereunder and Permitted Liens, Debtor owns each item of the
Collateral free and clear of any and all Liens, rights, or claims of all other
Persons, and Debtor shall defend the Collateral against all claims and demands
of all Persons at any time claiming the same or any interest therein adverse to
the Secured Party.
          (b) No financing statement or other evidence of Lien covering or
purporting to cover any of the Collateral is on file in any public office other
than (i) financing statements in favor of the Secured Party, (ii) financing
statements for which proper termination statements have been delivered to the
Secured Party for filing, and (iii) financing statements filed in connection
with Permitted Liens.
     3.3 Location of Debtor. The chief executive office of Debtor is located at
One Landmark Square, Stamford, Connecticut 06901.
     3.4 Tradenames; Prior Names. Debtor has not conducted business under any
name other than its current name during the last five years.
ARTICLE IV
COVENANTS
     Debtor covenants and agrees with the Secured Party that from and after the
date of this Agreement:

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     4.1 Further Assurances. At any time and from time to time, upon the request
of the Secured Party, and at the sole expense of Debtor, Debtor will promptly
and duly execute and deliver any and all such further instruments, endorsements,
powers of attorney, and other documents, make such filings, give such notices,
and take such further action as the Secured Party may reasonably deem desirable
in obtaining the full benefits of this Agreement and the rights, remedies, and
powers herein granted, including, without limitation, the following:
     (a) the filing of financing statements, in form acceptable to the Secured
Party under the Uniform Commercial Code in effect in any jurisdiction with
respect to the liens and security interests granted hereby;
     (b) the performance of all searches of public records deemed necessary by
the Secured Party to establish and determine the priority of the security
interests of the Secured Party or to determine the presence or priority of other
secured parties; and
     (c) the furnishing to the Secured Party from time to time of reports and
schedules in connection with the Collateral as required pursuant to the Credit
Agreement, all in reasonable detail and in form reasonably satisfactory to the
Secured Party.
     4.2 Change of Chief Executive Office. Debtor will not move its chief
executive office except to such new location as Debtor may establish in
accordance with the last sentence of this Section. Debtor shall not establish a
new location for its chief executive office or such activities (or move any such
activities from the locations referred to in Section 3.3) until it shall have
given to the Secured Party not less than ten days’ prior written notice of its
intention to do so, clearly describing such new location and providing such
other information in connection therewith as the Secured Party may reasonably
request.
     4.3 Change of Name or Corporate Structure. Debtor shall not change its name
or corporate structure or conduct business under any name other than its current
name without giving notice thereof to the Secured Party within ten days
thereafter, clearly describing such new name, or corporate structure or such new
tradename and providing such other information in connection therewith as the
Secured Party may reasonably request. With respect to such new name, corporate
structure, or tradename, promptly upon the request of the Secured Party, Debtor
shall take all such action as the Secured Party may reasonably request to
maintain the security interest of the Secured Party in the Collateral granted
hereby at all times fully perfected with the same or better priority and in full
force and effect.
     4.4 Title, Prohibited Liens and Filings. Debtor agrees to protect the title
to the Collateral. Debtor will not pledge, mortgage, otherwise encumber, create
or suffer a Lien to exist on any of the Collateral (other than in favor of the
Secured Party) or sell, assign or otherwise transfer any of the Collateral to or
in favor of any Person other than the Secured Party without the Secured Party’s
written consent. Debtor will not file or permit to be filed or recorded any
financing statement or other security instrument with respect to the Collateral
other than in favor of Secured Party.

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     4.5 Possession of Collateral. The Collateral shall remain in Debtor’s
possession or control at all times at Debtor’s risk of loss.
     4.6 Inspection of Collateral. Secured Party may from time to time, open
request, inspect the Equipment.
     4.7 Financing Statement Filings; Notifications. Debtor recognizes that
financing statements pertaining to the Collateral have been or will be filed
with the offices of the Secretary of State for the States listed in Exhibit A
hereto. Debtor will immediately notify the Secured Party of any condition or
event that may change the proper location for the filing of any financing
statement or other public notice or recording for the purpose of perfecting a
security interest in the Collateral. Without limiting the generality of the
foregoing, Debtor will (a) notify the Secured Party within a reasonable period
of time in advance of any change to a jurisdiction other than as represented in
Section 3.3 hereof, and (b) immediately notify Secured Party of any change in
Debtor’s name. In any notice furnished pursuant to this Section, Debtor will
expressly state that the notice is required by this Agreement and contains facts
that will or may require additional filings of financing statements or other
notices for the purpose of continuing perfection of the Secured Party’s security
interest in the Collateral.
ARTICLE V
POWER OF ATTORNEY
     5.1 Appointment as Attorney-in-Fact. Debtor hereby irrevocably constitutes
and appoints the Secured Party 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 Debtor and in the name of Debtor
or in its own name, from time to time in the discretion of the Secured Party,
for the purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, Debtor hereby gives the
Secured Party the power and right, on behalf of Debtor, without notice to or
assent by the Debtor, to do the following:
     (a) in the case of any Collateral, at any time when any Event of Default
shall have occurred and be continuing, in the name of Debtor or its own name, or
otherwise, to take possession of and indorse and collect any checks, drafts,
notes, acceptances, or other instruments for the payment of moneys due under, or
with respect to, any Collateral; in the name of Debtor or otherwise to 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 Secured Party
or as the Secured Party shall direct; to ask or demand for, collect, 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;

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     (b) at any time when an Event of Default shall have occurred and be
continuing, to prepare, sign, and file financing statements and amendments
thereto in the name of Debtor;
     (c) at any time when an Event of Default shall have occurred and be
continuing, to take or cause to be taken all actions necessary to perform or
comply or cause performance or compliance with the terms of this Agreement,
including, without limitation, actions to pay or discharge taxes and Liens
levied or placed on or threatened against the Collateral, to effect any repairs
or obtain any insurance called for by the terms of this Agreement, and to pay
all or any part of the premiums therefor and the costs thereof;
     (d) upon the occurrence and during the continuance of any Event of Default,
(i) to sign and indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtor, assignments,
verifications, notices, and other documents in connection with any of the
Collateral, (ii) to 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, (iii) to defend any suit, action, or proceeding brought against
Debtor with respect to any Collateral, (iv) to settle, compromise, or adjust any
suit, action, or proceeding described in the preceding clause and, in connection
therewith, to give such discharges or releases as the Secured Party may deem
appropriate, and (v) generally, to sell or transfer and make any agreement with
respect to or otherwise deal with any of the Collateral as fully and completely
as though the Secured Party were the absolute owner thereof for all purposes,
and to do, at the option of the Secured Party and the expense of Debtor, at any
time, or from time to time, all acts and things which the Secured Party deems
necessary to protect, preserve, or realize upon the Collateral and the Liens of
the Secured Party thereon and to effect the intent of this Agreement, all as
fully and effectively as Debtor might do; and
     (e) at any time when an Event of Default shall have occurred and be
continuing, to execute, in connection with any foreclosure, any endorsements,
assignments, or other instruments of conveyance or transfer with respect to the
Collateral.
     Debtor hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable so long as any Obligation remains outstanding
or any Commitment exists. Debtor hereby acknowledges and agrees that in acting
pursuant to this power-of-attorney the Secured Party shall be acting in its own
interest and shall have no fiduciary duties to the Debtor, and Debtor hereby
waives any claims to the rights of a beneficiary of a fiduciary relationship
hereunder.
     5.2 No Duty on the Part of Secured Party. The powers conferred on the
Secured Party hereunder are solely to protect the interests of the Secured Party
in the Collateral and shall not impose any duty upon the Secured Party to
exercise any such powers. The Secured Party

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shall be accountable only for amounts that it actually receives as a result of
the exercise of such powers, and, except for its own gross negligence, neither
it nor any of its officers, directors, employees, or agents shall be responsible
to the Debtor for any act or failure to act hereunder.
ARTICLE VI
REMEDIES; RIGHTS UPON DEFAULT
     6.1 Rights and Remedies Generally. If an Event of Default shall occur and
be continuing, then and in every such case, the Secured Party shall have all the
rights of a secured party under the UCC, all rights now or hereafter existing
under all other applicable laws, and, subject to any mandatory requirements of
applicable law then in effect, all rights set forth in this Agreement and the
other Loan Documents. No enumeration of rights in this Section or elsewhere in
this Agreement or in any other Loan Document or other agreement shall be deemed
to in any way limit the rights of the Secured Party as described in this
Section.
     6.2 Proceeds. If an Event of Default shall occur and be continuing (a) all
Proceeds received by Debtor consisting of cash, checks, and other near-cash
items shall be held by Debtor in trust for the Secured Party, segregated from
other funds of Debtor, and shall forthwith upon receipt by Debtor, be turned
over to the Secured Party, in the same form received by Debtor (appropriately
indorsed or assigned by the Debtor to the order of the Secured Party or in such
other manner as shall be satisfactory to the Secured Party), and (b) any and all
such Proceeds received by the Secured Party (whether from Debtor or otherwise),
or any part thereof, shall be applied by the Secured Party as provided in
Section 6.8 hereof.
     6.3 Disposition of Collateral. If an Event of Default shall occur and be
continuing:
     (a) the Secured Party may direct Debtor to sell, assign, or otherwise
liquidate or dispose of all or from time to time any portion of the Collateral,
and Debtor shall do so, and the Secured Party may take possession of the
Proceeds of such Collateral. The Secured Party may direct Debtor to direct that
all Proceeds of such Collateral be paid directly to the Secured Party or may
permit the Proceeds of such Collateral to be paid to Debtor and all such
Proceeds consisting of cash, checks, or near-cash items shall be held by Debtor
in trust for the Secured Party, segregated from other funds of Debtor in a
separate deposit account containing only Proceeds and shall forthwith upon
receipt by Debtor, be turned over to the Secured Party, in the same form
received by Debtor (appropriately indorsed or assigned by Debtor to the order of
the Secured Party or in such other manner as shall be satisfactory to the
Secured Party); and
     (b) any and all such Proceeds received by the Secured Party (whether from
Debtor or otherwise), shall be applied by the Secured Party as provided in
Section 7.10 hereof.
     6.4 Possession of Collateral. If an Event of Default shall occur and be
continuing, (a) the Secured Party may, personally or by agents or attorneys,
immediately retake possession of the Collateral or any part thereof, from Debtor
or any other Person which then has possession of

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any part thereof with or without notice or judicial process, and for that
purpose may enter upon Debtor’s premises where any of the Collateral is located
and remove the same and may make reasonable use in connection with such removal
of any and all services, supplies, aids, and other facilities of Debtor, and
(b) upon three days’ notice to Debtor, Debtor shall, at its own expense,
assemble the Collateral, and make it available to the Secured Party by delivery
to the Secured Party at any location designated by the Secured Party which is
reasonably convenient to both parties, whether at the premises of Debtor or the
Secured Party or elsewhere. Debtor shall, at its sole expense, store and keep
any Collateral so assembled at such place or places pending further action by
the Secured Party and while the Collateral shall be so stored and kept, provide
such guards and maintenance services as shall be reasonably necessary to protect
the same and to preserve and maintain the Collateral in good condition. Debtor’s
obligation to so assemble and deliver the Collateral is of the essence of this
Agreement and, accordingly, upon application to a court of equity having
jurisdiction, the Secured Party shall be entitled to a decree requiring specific
performance by the Debtor of such obligation.
     6.5 Disposition of the Collateral. If an Event of Default shall occur and
be continuing, the Secured Party may sell, assign, lease, give an option or
options to purchase, or otherwise dispose of the Collateral (or contract to do
any of the foregoing) under one or more contracts or as an entirety, and, to the
extent permitted by applicable law, without the necessity of gathering at the
place of sale the property to be sold, at public or private sale or sales,
conducted by any officer, nominee or agent of, or auctioneer or attorney for the
Secured Party at any location of any third party conducting or otherwise
involved in such sale or any office of the Secured Party or elsewhere and in
general in such manner, at such time or times and upon such terms and conditions
and at such price as may be commercially reasonable, for cash or on credit or
for future delivery without assumption of any credit risk. Any of the Collateral
may be sold, leased, assigned, or options or contracts entered to do so, or
otherwise disposed of, in the condition in which the same existed when taken by
the Secured Party or after any overhaul or repair which may be commercially
reasonable. Any such disposition which shall be a private sale or other private
proceeding shall be made upon not less than ten days’ written notice to Debtor
specifying the time after which such disposition is to be made and the intended
sale price or other consideration therefor. Any such disposition which shall be
a public sale shall be made upon not less than ten days’ written notice to
Debtor (which Debtor agrees to be commercially reasonable) specifying the time
and place of such sale and, in the absence of applicable requirements of law to
the contrary, shall be by public auction (which may, at the option or the
Secured Party, be subject to reserve), after publication of commercially
reasonable notice of such auction. To the extent permitted by applicable law,
the Secured Party may bid for and become the purchaser of the Collateral or any
item thereof, offered for sale in accordance with this Section without
accountability to Debtor (except to the extent of surplus money received) as
provided below. In the payment of the purchase price of the Collateral, the
purchaser shall be entitled to have credit on account of the purchase price
thereof of amounts owing to such purchaser on account of any of the Secured
Obligations and any such purchaser may deliver notes, claims for interest, or
claims for other payment with respect to such Secured Obligations in lieu of
cash up to the amount which would, upon distribution of the net proceeds of such
sale, be payable thereon. Such notes, if the amount payable hereunder shall be
less than the amount due thereon, shall be returned to the holder thereof after
being appropriately stamped to show partial payment. Notwithstanding the
foregoing, if the Collateral or any portion thereof is

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perishable or threatens to decline speedily in value or is of a type customarily
sold in a recognized market only such notice as shall be reasonably practicable
shall be required.
     6.6 Recourse. Debtor shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Collateral are insufficient to satisfy
the Secured Obligations. Debtor shall also be liable for all reasonable expenses
of the Secured Party incurred in connection with collecting such deficiency,
including, without limitation, the reasonable fees and disbursements of any
attorneys employed by the Secured Party to collect such deficiency.
     6.7 Expenses; Attorneys’ Fees. Debtor shall reimburse the Secured Party for
all its reasonable expenses in connection with the exercise of its rights and
remedies hereunder, including, without limitation, reasonable attorneys’ fees
and legal expenses incurred by the Secured Party.
     6.8 Application of Proceeds. The proceeds of any disposition of Collateral
shall be applied as follows:

  (a)   first, to payment or reimbursement of that portion of the Obligations
constituting fees, expenses and indemnities payable to the Agent in its capacity
as such;     (b)   second, pro rata to payment or reimbursement of that portion
of the Obligations constituting fees, expenses and indemnities payable to the
Lenders;     (c)   third, pro rata to payment of accrued interest on the Loans;
    (d)   fourth, pro rata to payment of principal outstanding on the Loans and
Obligations owed to any Lender or affiliate of any Lender under any Commodity
Hedge Agreement or Rate Management Transaction;     (e)   fifth, pro rata to any
other Obligations;     (f)   sixth, to serve as cash collateral to be held by
the Agent to secure the LC Exposure; and     (g)   seventh, any excess, after
all of the Obligations shall have been indefeasibly paid in full in cash, shall
be paid to the Borrower or as otherwise required by any Governmental Authority.

     6.9 Limitation on Duties Regarding Preservation of Collateral. The Secured
Party’s sole duty with respect to the custody, safekeeping, and physical
preservation of the Collateral in its possession, under Section 9.207 of the UCC
or otherwise, shall be to deal with it in the same manner as the Secured Party
deals with similar property for its own account. The Secured Party shall have no
obligation to take any steps to preserve rights against prior parties to any
Collateral. Except for matters constituting gross negligence, neither the
Secured Party nor any of its directors, officers, employees, or agents shall be
liable for failure to demand, collect, or realize upon all or any part of the
Collateral or for any delay in doing so or shall be under any

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obligation to sell or otherwise dispose of any Collateral upon the request of
the Debtor or otherwise.
     6.10 Waiver of Claims. Except as otherwise provided in this Agreement,
Debtor hereby waives, to the extent permitted by applicable law, notice of and
judicial hearing in connection with the Secured Party’s taking possession or the
Secured Party’s disposition of any of the Collateral in accordance herewith,
including, without limitation, any and all prior notice and hearing for any
prejudgment remedy or remedies and any such right which the Debtor would
otherwise have under the constitution or any statute of the United States or any
state, and Debtor hereby further waives, to the extent permitted by law:
     (a) all damages occasioned by such taking of possession except any damages
which are the direct result of the gross negligence of the Secured Party;
     (b) all other requirements as to the time, place, and terms of sale or
other requirements with respect to the enforcement of the rights of the Secured
Party hereunder;
     (c) demand of performance or other demand, notice of intent to demand or
accelerate, notice of acceleration, presentment, protest, advertisement, or
notice of any kind to or upon Debtor or any other Person, except as may be
required by the Credit Agreement; and
     (d) all rights of redemption, appraisement, valuation, diligence, stay,
extension, or moratorium now or hereafter in force under any applicable law in
order to stay or delay the enforcement of this Agreement, including the absolute
sale of the Collateral or any portion thereof, and Debtor, for itself and all
who may claim under it, insofar as it or they now or hereafter lawfully may,
hereby waives the benefit of all such laws.
     6.11 Discontinuance of Proceedings. In case the Secured Party shall have
instituted any proceeding to enforce any right, power, or remedy under this
Agreement by foreclosure, sale, entry, or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason, then and in every such case,
Debtor and the Secured Party shall be returned to their former positions and
rights hereunder with respect to the Collateral subject to the security interest
created under this Agreement, and all rights, remedies, and powers of the
Secured Party shall continue as if no such proceeding had been instituted.
ARTICLE VII
INDEMNITY
     7.1 INDEMNITY. (a) DEBTOR AGREES TO INDEMNIFY, REIMBURSE, AND HOLD THE
INDEMNITEES HARMLESS FROM ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, CLAIMS, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS
(INCLUDING REASONABLE ATTORNEYS’ FEES AND EXPENSES) (FOR THE PURPOSES OF

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THIS SECTION ALL OF THE FOREGOING ARE COLLECTIVELY CALLED “EXPENSES”) OF
WHATSOEVER KIND OR NATURE WHICH MAY BE IMPOSED ON, ASSERTED AGAINST, OR INCURRED
BY ANY OF SUCH INDEMNITEES IN ANY WAY RELATING TO OR ARISING OUT OF THIS
AGREEMENT OR THE DOCUMENTS EXECUTED IN CONNECTION HEREWITH OR IN ANY OTHER WAY
CONNECTED WITH THE ADMINISTRATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THE
ENFORCEMENT OF ANY OF THE TERMS OF OR THE PRESERVATION OF ANY RIGHTS HEREUNDER,
INCLUDING, WITHOUT LIMITATION, THOSE ARISING FROM THE NEGLIGENCE, WHETHER SOLE
OR CONCURRENT, OF ANY INDEMNITEE; PROVIDED THAT NO SUCH INDEMNITEE SHALL BE
INDEMNIFIED PURSUANT TO THIS SECTION FOR EXPENSES TO THE EXTENT ARISING FROM THE
GROSS NEGLIGENCE OF SUCH INDEMNITEE.
          (b) Debtor agrees that upon written notice by any such Indemnitee of
any assertion that could give rise to an Expense, Debtor shall assume full
responsibility for the defense thereof. Without limiting the application of part
(a) of this Section, Debtor agrees to pay or reimburse such Indemnitee on demand
for any and all reasonable fees, costs, and expenses of whatever kind or nature
incurred in connection with the creation, preservation, or protection of the
Secured Party’s Liens on, and security interests in, the Collateral, including,
without limitation, all reasonable fees and taxes in connection with the
recording or filing of instruments and documents in public offices, payment, or
discharge of any taxes or Liens or security interests upon or in respect of the
Collateral, premiums for insurance with respect to the Collateral, all
reasonable expenses incurred in the custody, preservation, use, or operation of
the Collateral when Collateral is in the Secured Party’s possession, and all
other reasonable fees, costs, and expenses in connection with protecting,
maintaining, or preserving the Collateral and the Secured Party’s interest
therein, whether through judicial proceedings or otherwise, or in defending or
prosecuting any actions, suits, or proceedings arising out of or relating to the
Collateral.
          (c) Without limiting the application of parts (a) or (b) of this
Section, Debtor agrees to pay, indemnify, and hold each Indemnitee harmless from
and against any Expenses which such Indemnitee may suffer, expend, or incur in
consequence of or growing out of any misrepresentation by any Debtor in this
Agreement or in any statement or writing contemplated by or made or delivered
pursuant to or in connection with this Agreement.
          (d) If and to the extent that the obligations of Debtor under this
Section are unenforceable for any reason, Debtor hereby agrees to make the
maximum contribution to the payment and satisfaction of such obligations which
is permissible under applicable law.
     7.2 Indemnity Obligations Secured by Collateral; Survival. Any amounts paid
by any Indemnitee as to which such Indemnitee has the right to reimbursement
shall constitute Secured Obligations secured by the Collateral. The indemnity
obligations of the Debtor contained in this Article VIII shall continue in full
force and effect notwithstanding the full payment and performance of the Secured
Obligations and the termination of this Agreement.

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ARTICLE VIII
MISCELLANEOUS
     8.1 No Waiver; Remedies Cumulative. No failure or delay on the part of the
Secured Party in exercising any right, power, or privilege hereunder and no
course of dealing between any Debtor and the Secured Party shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power, or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power, or privilege. A waiver by the Secured Party
of any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Secured Party would otherwise have on any
future occasion. The rights and remedies herein expressly provided are
cumulative, may be exercised singly or concurrently and as often and in such
order as the Secured Party deems expedient, and are not exclusive of any rights
or remedies which the Secured Party would otherwise have whether by agreement or
now or hereafter existing under applicable law. No notice to or demand on Debtor
in any case shall entitle Debtor to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the
Secured Party to any other or further action in any circumstances without notice
or demand.
     8.2 Termination; Release. When the Secured Obligations have been
indefeasibly paid and performed in full and the Commitment has terminated, this
Agreement shall terminate, and the Secured Party, at the request and sole
expense of Debtor, will execute and deliver to Debtor the proper instruments
(including Uniform Commercial Code termination statements) acknowledging the
termination of this Agreement, and will duly assign, transfer, and deliver to
Debtor, without recourse, representation, or warranty of any kind whatsoever,
such of the Collateral as may be in possession of the Secured Party and has not
theretofore been disposed of, applied, or released.
     8.3 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
     8.4 Marshalling. The Secured Party shall not be under any obligation to
marshall any assets in favor of Debtor or any other Person or against or in
payment of any or all of the Secured Obligations.
     8.5 Severability. In case any provision in or obligation under this
Agreement or the Secured Obligations shall be invalid, illegal, or unenforceable
in any jurisdiction, the validity, legality, and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
     8.6 Financing Statement Filing. A photocopy or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in lieu
of the original to the extent permitted by applicable law.

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     8.7 Notices and Other Communications. Except as to oral notices expressly
authorized herein, all notices, requests, and communications under this
Agreement shall be in writing (including by telecopy). Unless otherwise
expressly provided herein, any such notice, request, or communication shall be
deemed to have been duly given or made when provided in accordance with the
terms of the Credit Agreement.
     8.8 Parties in Interest. This Agreement shall be binding upon and inure to
the benefit of Debtor, the Secured Party, and their respective legal
representatives, successors, and assigns. No other Person shall have any right,
benefit, priority, or interest hereunder or as a result hereof or have standing
to require satisfaction of provisions hereof in accordance with their terms, and
any or all of such provisions may be freely waived in whole or in part by the
Secured Party at any time if the Secured Party in its sole discretion deems it
advisable to do so.
     8.9 Amendments. Neither this Agreement nor any provision hereof may be
amended, supplemented, modified, discharged, or terminated orally, but only by
an instrument in writing signed by the party against whom enforcement of the
amendment, supplement, modification, discharge, or termination is sought.
     8.10 ENTIRE AGREEMENT. THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT
BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL
SUPERSEDE ANY PRIOR AGREEMENTS, WHETHER WRITTEN OR ORAL, BETWEEN THE PARTIES
HERETO RELATING TO THE SUBJECT HEREOF. FURTHERMORE, IN THIS REGARD, THIS
AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE
FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.
     8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAWS).
     8.12 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO,
ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO OR FROM
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT TO WHICH ANY DEBTOR IS A PARTY MAY BE
LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE SECURED PARTY, IN COURTS
HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. DEBTOR HEREBY SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS
COUNTY, TEXAS, AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE
THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY THE SECURED
PARTY IN ACCORDANCE WITH THIS SECTION.

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     IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.

                  DEBTOR:
 
                PRIMEENERGY CORPORATION
PRIMEENERGY MANAGEMENT
CORPORATION, PRIME OPERATING
COMPANY, EASTERN OIL WELL SERVICE
COMPANY, SOUTHWEST OIL FIELD
CONSTRUCTION COMPANY
EOWS MIDLAND COMPANY
 
           
 
  By:   /s/ Beverly A. Cummings    
 
           
 
      Beverly A. Cummings    
 
      Executive Vice President, Treasurer, and    
 
      Chief Financial Officer    

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                  SECURED PARTY:    
 
                GUARANTY BANK, FSB, as Agent    
 
           
 
  By:   /s/ David M. Butler    
 
           
 
      David M. Butler    
 
      Vice President    

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EXHIBIT A

     
Section 3.1:
  FILING LOCATIONS  
 
  Secretary of State of Delaware  
 
  Secretary of State of New York  
 
  Secretary of State of Texas  
 
  Secretary of State of West Virginia  
 
  County Clerk of Oklahoma County, Oklahoma  

A-i