Exhibit 10.2

Execution Version

 

 

 

SECURITY AGREEMENT

Dated as of October 2, 2018

among

BASIC ENERGY SERVICES, INC.

and the other Debtors parties hereto

in favor of

UMB BANK, N.A.,

as Collateral Agent

 

 

 

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TABLE OF CONTENTS

 

         

PAGE

 

ARTICLE 1 Definitions

     1  

Section 1.01

   Terms Generally      1  

Section 1.02

   Defined Terms      2  

ARTICLE 2 Grant of Security Interest

     8  

Section 2.01

   Grant of Security Interest      8  

Section 2.02

   Avoidance Limitation      8  

ARTICLE 3 Representations and Warranties

     9  

Section 3.01

   Title; No Other Liens      9  

Section 3.02

   Perfected First Priority Liens      9  

Section 3.03

   Debtor’s Legal Name; Jurisdiction of Organization; Chief Executive Office   
  9  

Section 3.04

   Certain Collateral      10  

Section 3.05

   Investment Property and Instruments      10  

Section 3.06

   Intellectual Property      11  

Section 3.07

   Certificates of Title      11  

Section 3.08

   Location of Collateral      11  

ARTICLE 4 Covenants and Agreements

     12  

Section 4.01

   Covenants in Priority Lien Debt Documents      12  

Section 4.02

   Maintenance of Insurance      12  

Section 4.03

   Maintenance of Collateral; Maintenance of Perfected Security Interest;
Further Documentation; Filing Authorization; Further Assurances; Power of
Attorney      12  

Section 4.04

   Delivery of Instruments and Documents      14  

Section 4.05

   Investment Property      15  

Section 4.06

   Collateral Accounts      17  

Section 4.07

   Intellectual Property      17  

Section 4.08

   Equipment      19  

Section 4.09

   Actions With Respect to Certain Collateral      20  

ARTICLE 5 Limitation on Perfection of Security Interest

     20  

Section 5.01

   Instruments      20  

Section 5.02

   Documents      20  

Section 5.03

   Letter of Credit Rights      21  

Section 5.04

   Fixtures      21  

Section 5.05

   Actions Outside United States      21  

ARTICLE 6 Remedial Provisions

     21  

Section 6.01

   General Interim Remedies      21  

Section 6.02

   Instruments and Payment Intangibles      22  

Section 6.03

   Pledged Equity      22  

Section 6.04

   Foreclosure      23  

 

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Section 6.05

   Application of Proceeds      24  

Section 6.06

   Waiver of Certain Rights      24  

Section 6.07

   Remedies Cumulative      25  

Section 6.08

   Reinstatement      25  

ARTICLE 7 Miscellaneous

     25  

Section 7.01

   Amendments      25  

Section 7.02

   Notices      25  

Section 7.03

   No Waiver by Course of Conduct; Cumulative Remedies; No Duty      25  

Section 7.04

   Enforcement Expenses; Indemnification      25  

Section 7.05

   Successors and Assigns      26  

Section 7.06

   Counterparts      26  

Section 7.07

   Severability      26  

Section 7.08

   Section Headings      27  

Section 7.09

   Integration      27  

Section 7.10

   GOVERNING LAW ETC      27  

Section 7.11

   Additional Debtors      27  

Section 7.12

   Termination; Releases      27  

Section 7.13

   Intercreditor Agreement      28  

Section 7.14

   Collateral Agent      28  

 

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SCHEDULES

 

Schedule 3.3(a)

   Organization & Location Information

Schedule 3.3(b)

   Notice Information

Schedule 3.4

   Certain Collateral

Schedule 3.5(a)

   Pledged Equity

Schedule 3.5(c)

   Instruments

Schedule 3.6

   Intellectual Property

ANNEXES

  

Annex I

   Security Agreement Supplement

Annex II

   Patent Security Agreement Supplement

Annex III

   Trademark Security Agreement Supplement

Annex IV

   Copyright Security Agreement Supplement

 

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SECURITY AGREEMENT

This SECURITY AGREEMENT dated as of October 2, 2018 (this “Agreement”), is among
BASIC ENERGY SERVICES, INC., a Delaware corporation (the “Issuer”), the
undersigned subsidiaries of the Issuer (the Issuer and such undersigned
subsidiaries collectively being the “Debtors”), and UMB BANK, N.A. in its
capacity as collateral agent (in such capacity, the “Collateral Agent”) for the
benefit of the holders of the Secured Obligations (as defined below).

INTRODUCTION

Reference is made to (i) the Indenture dated as of October 2, 2018 (as amended,
restated or otherwise modified from time to time, the “Indenture”), among the
Issuer, the other Debtors, and UMB Bank, N.A., as indenture trustee (in such
capacity, the “Indenture Trustee”) and collateral agent pursuant to which the
Issuer is issuing its 10.75% Senior Secured Notes due 2023 (the “Notes”) and the
other Debtors have agreed to guarantee, among other things, the full payment and
performance of all of the Issuer’s obligations under the Notes and the Indenture
and (ii) the Collateral Agency Agreement dated as of October 2, 2018 (as
amended, restated or otherwise modified from time to time, the “Collateral
Agency Agreement”), among the Debtors, UMB Bank, N.A., as Indenture Trustee,
representatives of the other holders of the Secured Obligations (as defined
below) from time to time party thereto and UMB Bank, N.A., as collateral agent
(in such capacity, the “Collateral Agent”).

In connection with the Indenture and the Collateral Agency Agreement, the
Debtors are entering into this Agreement in order to secure the Debtors’
obligations under the Priority Lien Debt Documents and all other Secured
Obligations (as defined below).

The Debtors share an identity of interest as members of a combined group of
companies and will derive substantial direct and indirect economic and other
benefits from the issuance of the Notes and incurrence of other Secured
Obligations. Therefore, in consideration of the issuance of the Notes and other
extensions of credit with respect to other Secured Obligations, the Debtors
jointly and severally agree with the Collateral Agent as follows:

ARTICLE 1

DEFINITIONS

Section 1.01 Terms Generally.

(a) Terms defined above and elsewhere in this Agreement shall have their
specified meanings. Capitalized terms used herein but not defined herein shall
have the meanings specified by the Collateral Agency Agreement and, to the
extent not defined in the Collateral Agency Agreement, the Indenture. All terms
used herein and defined in the UCC shall have the same definitions herein as
specified therein.

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(b) Where the context requires, terms relating to the Collateral or any part
thereof, when used in relation to a Debtor, shall refer to such Debtor’s
Collateral or the relevant part thereof.

Section 1.02 Defined Terms. The following terms shall have the following
meanings:

“ABL Collateral” means all of each Debtor’s right, title, and interest in and to
the following property, in each case whether now owned or existing or hereafter
acquired or arising:

(a) all Receivables (including unbilled accounts but excluding Accounts arising
solely from the sale, assignment or other disposition of Collateral), Contracts,
Chattel Paper and Inventory;

(b) all Specified ABL Collateral;

(c) all Deposit Accounts (other than Excluded Accounts) with any bank or other
financial institution (including all cash, cash equivalents, financial assets,
negotiable instruments and other evidence of payment, and other funds on deposit
therein or credited thereto);

(d) all Securities Accounts (other than Securities Accounts that contain only
the identifiable Proceeds of Collateral) with any securities intermediary
(including any and all Investment Property and all funds or other property held
therein or credited thereto);

(e) all Commodity Accounts (other than Commodity Accounts that contain only the
identifiable Proceeds of Collateral) with any commodities intermediary
(including any and all commodity contracts and all funds and other property held
therein or credited thereto);

(f) all Records relating to the foregoing and all accessions to, substitutions
for and replacements of the foregoing, together with all customer lists, credit
files, computer files, programs, printouts and other computer materials and
records related thereto; and

(g) to the extent not otherwise included, all Proceeds (including without
limitation, all business interruption insurance and other insurance proceeds
related to the above), Supporting Obligations and products of any and all of the
foregoing and all collateral security and guarantees given by any Person with
respect to any of the foregoing.

“Collateral” has the meaning specified in Section 2.01.

“Collateral Account” means, collectively, any Deposit or Securities Account that
is maintained solely to hold identifiable cash and cash equivalents received
from Asset Sales of Collateral, an event of loss relating to Collateral,
foreclosures on or sales of Collateral or any other awards or proceeds of
Collateral pursuant to the Security Documents, including earnings, revenues,
rents, issues, profits and income from the Collateral received pursuant to the
Security Documents, and interest earned thereon.

 

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“Contracts” means all contracts, undertakings, or agreements (other than rights
evidenced by Chattel Paper, Documents or Instruments) with any customer of any
Debtor to which any Debtor now is, or hereafter will be, bound or a party,
beneficiary or assignee thereof or thereto, in any event, including all
contracts, undertakings, or agreements in or under which any Debtor may now or
hereafter have any right, title or interest, including any agreement relating to
the terms of payment or the terms of performance of any Receivable.

“Control Agreement” means an agreement, in form and substance satisfactory to
the Collateral Agent, among any Debtor, a banking institution or securities
intermediary, as applicable, holding such Debtor’s funds and/or securities, and
the Collateral Agent with respect to collection and control of all deposits,
securities and other balances held in an account maintained by such Debtor with
such banking institution or securities intermediary.

“Copyrights” means all of the following now owned or hereafter acquired by any
Debtor: (a) all copyright rights in any work subject to the copyright laws of
the United States or any other country, whether as author, assignee, transferee
or otherwise, and (b) all registrations and applications for registration of any
such copyright in the United States or any other country and all extensions and
renewals thereof, including registrations, recordings, supplemental
registrations and pending applications for registration in the United States
Copyright Office, including, without limitation, those listed in Schedule 3.6.

“Copyright Licenses” means any written agreement naming any Debtor as licensor
or licensee (including, without limitation, those listed in Schedule 3.6),
granting any right under any Copyright, including, without limitation, the grant
of rights to manufacture, distribute, exploit and sell materials derived from
any Copyright.

“Copyright Security Agreement Supplement” means a supplement to this Agreement
by each applicable Debtor in favor of the Collateral Agent (for the benefit of
the holders of the Secured Obligations), substantially in the form of Annex IV
hereto.

“Deposit Accounts” means all “deposit accounts” (as defined in the UCC) now or
hereafter held in the name of any Debtor.

“Equipment” means all of each Debtor’s present or future owned or leased
fixtures and equipment wherever located, including drilling platforms and Rigs
and remotely operated vehicles, trenchers, and other equipment used by any
Debtor for the provision of construction services, well operations services, oil
and gas production services, contract drilling services, fluid services or other
services, trucks, vehicles, motor vehicles, rolling stock, vessels, aircraft,
tanks, well service units and equipment, fracturing test tanks, pumping
equipment, fluid services equipment, disposal facilities and any manuals,
instructions, blueprints, computer software (including software that is imbedded
in and part of the equipment) and similar items which relate to the above,
together with all parts thereof and all accessions and additions thereto.

 

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“Excluded Accounts” means, collectively, (a) Collateral Accounts, (b) Deposit
Accounts exclusively used for payroll, payroll taxes or employee benefits and
(c) Deposit Accounts that have a balance of less than $250,000 at all times;
provided that the aggregate balance of all such Deposit Accounts described under
this clause (c) shall not exceed $2,000,000 in the aggregate at any time.

“Excluded Property” means the “Excluded Property” as defined in the Indenture.

“Fixtures” means any fixture or fixtures now or hereafter owned or leased by any
of the Debtors, or in which any of the Debtors holds or acquires any other
right, title or interest, constituting “fixtures” under the UCC.

“Intellectual Property” means all intellectual and similar property of any
Debtor of every kind and nature now owned or hereafter acquired by any Debtor,
including inventions, designs, Patents, Patent Licenses, Trademarks, Trademark
Licenses, Copyrights, Copyright Licenses, domain names and domain name
registrations, trade secrets, confidential or proprietary technical and business
information, know-how or other data or information, software and databases and
all embodiments or fixations thereof and related documentation, registrations
and franchises, licenses for any of the foregoing and all license rights, and
all additions, improvements and accessions to, and books and records describing
or used in connection with, any of the foregoing.

“Inventory” means all of each Debtor’s present and future inventory, wherever
located, including inventory, merchandise, goods and other personal property
that are held by or on behalf of any Debtor for sale or lease or are furnished
or are to be furnished under a contract of service, or that constitute raw
materials, work in process, finished goods, returned goods, or materials or
supplies of any kind, nature or description used or consumed or to be used or
consumed in such Debtor’s business or in the processing, production, packaging,
promotion, delivery or shipping of the same, including all supplies, and
embedded software. “Inventory” shall also include inventory in joint production
with another person, inventory in which any Debtor has an interest as consignor,
and inventory that is returned to or stopped in transit by any Debtor, and all
combinations and products thereof; provided, that, for the avoidance of doubt,
Inventory does not include Titled Equipment.

“Investment Property” means, other than any investment property constituting
Excluded Property, all Equity Interests and other investment property now owned
or hereafter acquired by any Debtor, including all securities, whether
certificated or uncertificated.

“Licenses” means any Patent License, Trademark License, Copyright License or
other license or sublicense to which any Debtor is a party, including any
franchises, permits, certificates, licenses, authorizations and the like and any
other requirements of any government or any commission, board, court, agency,
instrumentality or political subdivision thereof.

 

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“Material Real Property” has the meaning ascribed to this term in the Indenture.

“Patents” means all of the following now owned or hereafter acquired by any
Debtor:

(a) all letters patent of the United States or any other country, all
registrations and recordings thereof, and all applications for letters patent of
the United States or any other country, including registrations, recordings and
pending applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof, or any other
country, including, without limitation, any of the foregoing referred to in
Schedule 3.6, and

(b) all reissues, continuations, divisions, continuations-in-part, renewals or
extensions thereof, and the inventions disclosed or claimed therein, including
the right to make, use and/or sell the inventions disclosed or claimed therein.

“Patent License” means all agreements, whether written or oral, providing for
the grant by or to any Debtor of any right to manufacture, use or sell any
invention covered in whole or in part by a Patent, including, without
limitation, any of the foregoing referred to in Schedule 3.6).

“Patent Security Agreement Supplement” means a supplement to this Agreement by
each applicable Debtor in favor of the Collateral Agent (for the benefit of the
holders of the Secured Obligations), substantially in the form of Annex II
hereto.

“Payment Item” each check, draft or other item of payment payable to a Debtor
that constitutes proceeds of any Collateral.

“Perfection Certificate” means that certain Perfection Certificate dated as of
October 2, 2018, delivered by the Debtors to the Collateral Agent.

“Permitted Liens” means any Liens that are permitted under Section 3.6 of the
Indenture and each of the other Priority Lien Debt Documents (for the avoidance
of doubt, no Lien shall be a Permitted Lien if it is not permitted under
Section 3.6 of the Indenture or any of the other Priority Lien Debt Documents).

“Permitted Prior Liens” has the meaning ascribed to this term in the Indenture.

“Permitted Titled Equipment Lien” means a Permitted Prior Lien on Titled
Equipment for which the lienholder has perfected its security interest by
notation of the certificate of title with respect to such Titled Equipment.

“Pledged Equity” means, with respect to each Debtor, (a) other than any shares
or equity interests constituting Excluded Property, all shares or other Equity
Interests held by such Debtor in any corporations or other entities (including,
without limitation, those corporations or other entities described in
Schedule 3.5(a) that are directly held by such Debtor), together with all
warrants to purchase, all depositary shares and all other rights of such Debtor
in respect of such equity interests, (b) all certificates, instruments or other
documents evidencing same and registered or held in the name of, or otherwise in
the

 

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possession of, such Debtor, and (c) all present and future payments, dividend
distributions, instruments, compensation, property, assets, interests and rights
in connection with or related to the equity interests described in clause (a)
above, and all monies due or to become due and payable to such Debtor in
connection with or related to such equity interests or otherwise paid, issued or
distributed in respect of or in exchange therefor (including, without
limitation, all proceeds of dissolution or liquidation).

“Priority Lien Obligations” has the meaning ascribed to this term in the
Collateral Agency Agreement.

“Proceeds” means all of each Debtor’s present and future (a) proceeds of the
Collateral, whether arising from the collection, sale, lease, exchange,
assignment, licensing, or other disposition of the Collateral, (b) any and all
payments (in any form whatsoever) made or due and payable from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any person acting under color of governmental authority), (c) claims against
third parties for impairment, loss, damage, or impairment of the value of such
property, and (d) any and all proceeds of, and all claims for, any insurance
(other than business interruption insurance), indemnity, warranty or guaranty
payable from time to time with respect to any of the Collateral.

“Receivables” means all of each Debtor’s present and future Accounts, Accounts
from Governmental Authorities, and Payment Intangibles, including those arising
from the provision of services, sale of Inventory, or renting of equipment to
the customers of any Debtor, and rights to payment under all Contracts, income
tax refunds, and other rights to the payment of money, together with all of the
right, title and interest of any of the Debtors in and to (a) all security
pledged, assigned, hypothecated or granted to or held by any of the Debtors to
secure the foregoing, (b) all of any of the Debtors’ right, title and interest
in and to any goods or services, the sale of which gave rise thereto, (c) all
guarantees, endorsements and indemnifications on, or of, any of the foregoing,
(d) all powers of attorney granted to any of the Debtors for the execution of
any evidence of indebtedness or security or other writing in connection
therewith, (e) all credit information, reports and memoranda relating thereto,
and (f) all other writings related in any way to the foregoing.

“Records” means all of each Debtor’s present and future books, accounting
records, files, computer files, computer programs, correspondence, credit files,
records, ledger cards, invoices, and other records primarily related to any
other items of Collateral, including without limitation all similar information
stored on a magnetic medium or other similar storage device and other papers and
documents in the possession or under the control of any of the Debtors or any
computer bureau from time to time acting for any of the Debtors.

“Rigs” means all of each Debtor’s present and future well service rigs, contract
drilling rigs and any other onshore or offshore rigs of each Debtor.

 

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“Secured Obligations” means (a) all principal, interest, premium (including any
prepayment premiums, fees and make-whole amounts), fees, reimbursements,
indemnifications, and other amounts now or hereafter owed by the Issuer and the
other Debtors that constitute Priority Lien Obligations (including any
additional obligations that are from time to time designated as Priority Lien
Obligations) and (b) any increases, extensions, renewals, replacements, and
rearrangements of the foregoing Priority Lien Obligations under any amendments,
supplements, and other modifications of the agreements creating the foregoing
obligations, in each case, whether direct or indirect, absolute or contingent.

“Securities Accounts” means all securities accounts (as defined in the UCC) now
or hereafter held in the name of any Debtor.

“Specified ABL Collateral” means all General Intangibles (excluding Trademarks,
Patents, Copyrights and other Intellectual Property), Investment Property,
Instruments, Documents, Letter-of-Credit Rights, Commercial Tort Claims and
Supporting Obligations, in each case pertaining to the property described in
clause (a) of the definition of ABL Collateral.

“State of Organization” means the jurisdiction of organization of each of the
Debtors as listed on Schedule 3.3(a).

“Supporting Obligations” means all supporting obligations, including letters of
credit and guaranties issued in support of Documents, General Intangibles,
Instruments, or Investment Property.

“Titled Equipment” means any and all Equipment represented (or required to be
represented) by a certificate of title issued under the laws of a State in the
United States.

“Trademarks” means all of the following now owned or hereafter acquired by any
Debtor: all trademarks, service marks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, trade dress,
logos, other source or business identifiers, designs and general intangibles of
like nature, now existing or hereafter adopted or acquired, all registrations
and recordings thereof, and all registration and recording applications filed in
connection therewith, including registrations and registration applications in
the United States Patent and Trademark Office, any State of the United States or
any similar offices in any other country or any political subdivision thereof,
and all extensions or renewals thereof, including, without limitation, any of
the foregoing referred to in Schedule 3.6.

“Trademark License” means any agreement, whether written or oral, providing for
the grant by or to any Debtor of any right to use any Trademark, including,
without limitation, any of the foregoing referred to in Schedule 3.6.

“Trademark Security Agreement Supplement” means a supplement to this Agreement,
by each applicable Debtor in favor of the Collateral Agent (for the benefit of
the holders of the Secured Obligations), substantially in the form of Annex III
hereto.

“UCC” means the Uniform Commercial Code as in effect on the date hereof in the
State of New York, as amended from time to time, and any successor statute.

 

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ARTICLE 2

GRANT OF SECURITY INTEREST

Section 2.01 Grant of Security Interest. Each Debtor hereby grants to the
Collateral Agent, for the benefit of the holders of the Secured Obligations, a
security interest in all of such Debtor’s right, title, and interest in and to
the following property, whether now owned or hereafter acquired (the
“Collateral”) to secure the payment and performance of the Secured Obligations:

(a) all Equipment;

(b) all Fixtures related to Material Real Property;

(c) all Intellectual Property;

(d) all Investment Property (including without limitation the Pledged Equity),
all Commercial Tort Claims, all Documents, all General Intangibles, all
Instruments and all Letter of Credit Rights, in each case, for the avoidance of
doubt, not constituting ABL Collateral;

(e) all Collateral Accounts;

(f) all Records relating to the foregoing and all additions, accessions and
improvements to, all substitutions and replacements of the foregoing, and

(g) to the extent not otherwise included, all Proceeds of the foregoing,
Supporting Obligations and products of any and all of the foregoing and all
collateral security and guarantees given by any Person with respect to any of
the foregoing;

provided, however, that notwithstanding anything to the contrary contained
herein or in any other Priority Lien Debt Document, this Agreement shall not
constitute nor evidence a grant of a security interest, collateral assignment or
any other type of Lien in Excluded Property provided further, that the Proceeds
of Excluded Property shall not constitute Excluded Property solely by virtue of
being Proceeds thereof but only to the extent that such Proceeds otherwise
independently constitute Excluded Property hereunder.

To the extent that the Collateral is not subject to the UCC, each Debtor
collaterally assigns all of such Debtor’s right, title, and interest in and to
such Collateral to the Collateral Agent, for the benefit of the holders of the
Secured Obligations, to secure the payment and performance of the Secured
Obligations to the full extent that such a collateral assignment is possible
under the relevant Law.

Section 2.02 Avoidance Limitation. Notwithstanding Section 2.01 above, the
amount of any Debtor’s Secured Obligations that are secured by its rights in
Collateral subject to a Lien in favor of the Collateral Agent hereunder or under
any other Security Document shall be limited to the extent, if any, required so
that the Liens it has granted under this Agreement shall not be subject to
avoidance under Section 548 of the Bankruptcy Code of the United States or to
being set aside or annulled under any applicable Law relating to fraud on
creditors. In determining the limitations, if any, on the amount of any Debtor’s
Secured Obligations that are subject to the Lien on such Debtor’s Collateral
hereunder pursuant to the preceding sentence, it is the intention of the parties
hereto that any rights of subrogation or contribution which such Debtor may have
under the Guaranty, any other agreement or applicable Law shall be taken into
account.

 

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ARTICLE 3

REPRESENTATIONS AND WARRANTIES

To induce the Holders to purchase Notes from the Issuer under the Indenture and
each other holder of Secured Obligations to extent credit under Priority Lien
Debt Documents, each Debtor hereby represents and warrants to the Collateral
Agent, for the benefit of the holders of the Secured Obligations, that:

Section 3.01 Title; No Other Liens. Except for the security interests granted to
the Collateral Agent for the benefit of the holders of the Secured Obligations
pursuant to this Agreement and the other Permitted Liens, such Debtor owns each
item of the Collateral free and clear of any and all Liens or claims of others.
No financing statement or other public notice with respect to all or any part of
the Collateral is on file or of record in any public office, except such (a) as
have been filed in favor of the Collateral Agent, for the benefit of the holders
of the Secured Obligations, pursuant to this Agreement, and (b) as are permitted
by the Priority Lien Debt Documents.

Section 3.02 Perfected First Priority Liens. The security interests granted
pursuant to this Agreement (a) upon completion of the filing of a financing
statement with respect to each Debtor describing the Collateral in the office
located in the jurisdiction listed on Schedule 3.3(a) opposite such Debtor, the
recording in the United States Patent and Trademark Office of the Trademark
Security Agreement Supplement and the Patent Security Agreement Supplement and
in the United States Copyright Office of the Copyright Security Agreement
Supplement, as applicable, and the taking of all applicable actions in respect
of perfection contemplated by Sections 4.04, 4.05, 4.06, 4.08 and 4.09 in
respect of Collateral (in which a security interest cannot be perfected by the
filing of a financing statement or such recordings in the United States Patent
and Trademark Office or the United States Copyright Office), will constitute
valid perfected security interests in all of the Collateral subject to Article 9
of the UCC in favor of the Collateral Agent, for the benefit of the holders of
the Secured Obligations, as collateral security for such Debtor’s Secured
Obligations, enforceable in accordance with the terms hereof and the UCC against
all creditors of such Debtor and any Persons purporting to purchase any
Collateral from such Debtor and (b) are prior to all other Liens on the
Collateral except for Permitted Prior Liens (and subject to the limitations on
perfection and method of perfection provided in Article 5).

Section 3.03 Debtor’s Legal Name; Jurisdiction of Organization; Chief Executive
Office. On the date of this Agreement, each Debtor’s exact legal name is set
forth on the signature page hereof, and from and after an amendment or
modification thereto, on a written notification delivered to the Collateral
Agent pursuant to Section 11.4(a) of the Indenture. On the date hereof, such
Debtor’s jurisdiction of organization, type of legal entity, organizational
identification number from the jurisdiction of organization (if any), and the
location of such Debtor’s chief executive office or sole place of business or
principal residence, as the case may be, are specified on Schedule 3.3(a).

 

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Section 3.04 Certain Collateral. None of the Collateral constitutes, or is the
Proceeds of, farm products and none of the Collateral has been purchased for, or
will be used by any Debtor primarily for personal, family or household purposes.
Except as set forth on Schedule 3.4 or Schedule 3.6 or otherwise notified to the
Collateral Agent pursuant to Sections 4.07, 4.08 or 4.09, respectively:

(a) such Debtor holds no Commercial Tort Claims;

(b) such Debtor holds no interest in, title to or power to transfer, any
Patents, Trademarks or Copyrights;

(c) such Debtor holds no interest in, title to or power to transfer any
Intellectual Property that is registered or for which an application has been
filed in the United States Patent and Trademark Office or the United States
Copyright Office;

(d) such Debtor owns no vessels or aircraft.

Section 3.05 Investment Property and Instruments. (a) Each Debtor is the legal
and beneficial owner of the Pledged Equity as set forth on Schedule 3.5(a). The
Pledged Equity has been duly authorized and validly issued, is fully paid and
non-assessable and is not subject to the rights of any person to acquire such
Pledged Equity, and none of the Pledged Equity constitutes margin stock (within
the meaning of Regulation U issued by the FRB). Except as set forth on
Schedule 3.5(a), on the date hereof, the Pledged Equity constitutes all of the
issued and outstanding shares of stock or other equity interests of each of the
respective issuers thereof and no such issuer has any obligation to issue any
additional shares of stock or other equity interests or rights or options
thereto.

(b) Except for filings contemplated by this Agreement and as may be required in
connection with any disposition of any portion of the Pledged Equity by laws
affecting the offering and sale of securities generally, no consent of any
Person and no license, permit, approval or authorization of, exemption by,
notice or report to, or registration, filing or declaration with, any
Governmental Authority is required in connection with (i) the execution,
delivery, performance, validity or enforceability of this Agreement, (ii) the
perfection or maintenance of the security interest created hereby (including the
first or second priority nature thereof), or (iii) the exercise by the
Collateral Agent of the rights provided for in this Agreement.

(c) Each of the Instruments pledged by such Debtor hereunder constitutes the
legal, valid and binding obligation of the obligor with respect thereto,
enforceable in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors’ rights generally, and general
principles of equity. Schedule 3.5(c) lists all of the Instruments issued to or
held by each Debtor as of the date hereof.

 

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(d) Such Debtor is the record and beneficial owner of, and has good title to the
Investment Property pledged by it hereunder, free of any and all Liens or
options in favor of, or claims of, any other Person, except the security
interest created by this Agreement and other Permitted Liens.

Section 3.06 Intellectual Property. (a) Schedule 3.6 lists all Intellectual
Property necessary for the conduct of such Debtor’s business as currently
conducted that is owned by such Debtor in its own name on the date hereof.

(b) On the date hereof, all material Intellectual Property of such Debtor
described on Schedule 3.6 is valid, subsisting, unexpired and enforceable, has
not been abandoned and does not infringe the intellectual property rights of any
other Person in any material respect.

(c) Except as set forth in Schedule 3.6, on the date hereof, none of such
Intellectual Property is the subject of any licensing or franchise agreement
pursuant to which such Debtor is the licensor or franchisor.

(d) No holding, decision or judgment has been rendered by any Governmental
Authority which would limit, cancel or question the validity of, or such
Debtor’s rights in, any such Intellectual Property in any respect that could
reasonably be expected to have a Material Adverse Effect.

Section 3.07 Certificates of Title. The Perfection Certificate delivered to the
Collateral Agent lists each item of Titled Equipment owned by a Debtor as of the
date set forth therein which is located in a state where applicable Law requires
the issuance of a certificate of title for such item of Titled Equipment and, to
the extent listed therein, the owner, jurisdiction of registration, make, model
and serial or vehicle identification number of each item of such Titled
Equipment. The Collateral Agent may conclusively rely on such Perfection
Certificate.

Section 3.08 Location of Collateral. All tangible items of Collateral, other
than Equipment which is located at customer job sites, being used by employees
in the ordinary course of business or being refurbished or repaired, shall at
all times be kept by the Debtors at the business locations set forth in the
Perfection Certificate delivered to the Collateral Agent as of the date set
forth therein or such other locations inside the United States as the Issuer may
specify in a written notice to the Collateral Agent, except that Debtors may
(a) make dispositions of Collateral in accordance with Section 4.09(b) hereof,
Section 3.5 of the Indenture and similar provisions of each of the other
Priority Lien Debt Documents (provided, for the avoidance of doubt, that no
disposition of Collateral shall be permitted hereunder unless it is made in
accordance with each of Section 4.09(b) hereof, Section 3.5 of the Indenture and
similar provisions of each of the other Priority Lien Debt Documents); and
(b) move Collateral to another location in the United States, upon ten
(10) Business Days prior written notice to the Collateral Agent.

 

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ARTICLE 4

COVENANTS AND AGREEMENTS

Each Debtor covenants and agrees with the Collateral Agent and the holders of
the Secured Obligations that, from and after the date of this Agreement until
this Agreement terminates in accordance with Section 7.12(a):

Section 4.01 Covenants in Priority Lien Debt Documents. Such Debtor shall take,
or shall refrain from taking, as the case may be, each action that is necessary
to be taken or not taken, as the case may be, so that no Priority Lien Debt
Default and no event that is or with the passage of time or the giving of notice
(or both) would be a Priority Lien Debt Default is caused by the failure to take
such action or to refrain from taking such action by such Debtor or any of its
Restricted Subsidiaries.

Section 4.02 Maintenance of Insurance. Such Debtor will comply with the
provisions of the Indenture and the other Priority Lien Debt Documents governing
the maintenance of insurance for any of its assets constituting Collateral. All
policies representing liability insurance of the Debtors shall name the
Collateral Agent as additional insured in a form reasonably satisfactory to the
Collateral Agent and all policies representing casualty insurance of the Debtors
insuring Collateral shall name the Collateral Agent as loss payee in a form
reasonably satisfactory to the Collateral Agent.

Section 4.03 Maintenance of Collateral; Maintenance of Perfected Security
Interest; Further Documentation; Filing Authorization; Further Assurances; Power
of Attorney. (a) Such Debtor shall maintain the Collateral that is material to
the conduct of their respective businesses in good and insurable operating
order, condition and repair. The Debtors shall pay all real estate and other
taxes (except such as are contested in good faith and by appropriate
negotiations or proceedings), and maintain in full force and effect all material
permits, except, in each case, where the failure to effect such payment or
maintain such permits is not adverse in any material respect to the holders of
the Secured Obligations.

(b) Such Debtor shall maintain the security interest created by this Agreement
as a perfected first priority security interest prior to all other Liens other
than Permitted Prior Liens (and subject to the limitations on perfection and
method of perfection provided in Article 5) and shall defend such security
interest against the claims and demands of all Persons whomsoever.

(c) Such Debtor will furnish to the Collateral Agent from time to time (as set
forth in the Indenture and the other Priority Lien Debt Documents) statements,
schedules and perfection certificates (or supplements thereto) further
identifying and describing the assets and property of such Debtor and such other
reports in connection with the Collateral as the Collateral Agent may reasonably
request, all in reasonable detail.

(d) Subject in each case to Article 5 and the Intercreditor Agreement (if
applicable), each Debtor further agrees to take any other action reasonably
requested by the Collateral Agent to ensure the attachment, perfection and
priority of, and the ability of the Collateral Agent to enforce, the security
interest in any and all of the Collateral

 

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including, without limitation, (i) executing, delivering and, where appropriate,
filing financing statements and amendments relating thereto under the UCC, to
the extent, if any, that any Debtor’s signature thereon is required therefor;
(ii) causing the Collateral Agent’s name to be noted as secured party on any
certificate of title for a titled good if such notation is a condition to
attachment, perfection or priority of, or ability of the Collateral Agent to
enforce, the security interest in such Collateral; (iii) complying with any
provision of any statute, regulation or treaty of the United States or any other
country as to any Collateral if compliance with such provision is a condition to
the attachment, perfection or priority of, or the ability of the Collateral
Agent to enforce, the security interest in such Collateral; and (iv) taking all
actions required by the UCC or by other law, as applicable in any relevant
Uniform Commercial Code jurisdiction, or by other law as applicable in any
foreign jurisdiction.

(e) Each Debtor hereby irrevocably authorizes the Collateral Agent, as directed
by an Act of Required Priority Lien Debtholders, or its designee at any time and
from time to time to file in any jurisdiction in which the Uniform Commercial
Code has been adopted any initial financing statements and amendments thereto
that describe the Collateral and contain any other information required by the
UCC for the sufficiency or filing office acceptance of any initial financing
statement or amendment. Each Debtor agrees to furnish any such information to
the Collateral Agent promptly upon request. Each Debtor also ratifies its
authorization for the Collateral Agent or its designee to have filed in any
Uniform Commercial Code jurisdiction any like initial financing statements or
amendments thereto if filed prior to the date hereof and in respect of this
Agreement. Notwithstanding the authorization provided to the Collateral Agent in
this Section 4.03(e), each Debtor shall be responsible for filing (and in
furtherance of such obligation, each Debtor is hereby authorized to file) (i)
any and all financing statements, (ii) continuations thereof and
(iii) amendments thereto approved or requested by the Collateral Agent and, in
each case, shall promptly furnish copies of the filed statements to the
Collateral Agent.

(f) During the existence of a Priority Lien Debt Default, subject to the
Intercreditor Agreement:

(i) At the Collateral Agent’s request, each Debtor shall take any actions
reasonably requested by the Collateral Agent with respect to such Priority Lien
Debt Default, including diligently endeavoring to cure any material defect
existing or claimed with respect to any Collateral, and taking all reasonably
necessary and desirable steps for the defense of any legal proceedings affecting
any Collateral, including the employment of counsel, the prosecution or defense
of litigation, and the release or discharge of all adverse claims;

(ii) The Collateral Agent, whether or not named as a party to any legal
proceedings, is authorized to take any additional steps as the Collateral Agent
deems necessary or desirable for the defense of any such legal proceedings or
the protection of the validity or priority of this Agreement and the liens,
security interests, and assignments created hereunder, including the employment
of independent counsel, the prosecution or defense of litigation, the compromise
or discharge of any adverse claims made with respect to any Collateral and the
payment or removal of prior liens or security interests, and the reasonable
expenses of the Collateral Agent in taking such action shall be paid by the
Debtors; and

 

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(iii) Each Debtor agrees that, if such Debtor fails to perform under this
Agreement or any other Priority Lien Debt Document, the Collateral Agent may,
but shall not be obligated to, perform such Debtor’s obligations under this
Agreement or such other Priority Lien Debt Document, and any reasonable expenses
incurred by the Collateral Agent in performing such Debtor’s obligations shall
be paid by such Debtor. Any such performance by the Collateral Agent may be made
in good faith by the Collateral Agent in reliance on any statement, invoice, or
claim, without inquiry into the validity or accuracy thereof. The amount and
nature of any expense of the Collateral Agent hereunder shall be conclusively
established by a certificate of any officer of the Collateral Agent absent
manifest error.

(g) Each Debtor hereby irrevocably constitutes and appoints the Collateral Agent
(and all Persons designated by the Collateral Agent) as such Debtor’s true and
lawful attorney (and agent-in-fact) for the purposes provided in this
clause (g). The Collateral Agent, or the Collateral Agent’s designee, may,
without notice and in either its or a Debtor’s name, but at the cost and expense
of Debtors:

(i) Endorse a Debtor’s name on any Payment Item constituting Proceeds of
Collateral or other Proceeds of Collateral (including proceeds of insurance)
that come into the Collateral Agent’s possession or control; and

(ii) During a Priority Lien Debt Default, (A) sell or assign any Collateral upon
such terms, for such amounts and at such times as the Collateral Agent deems
advisable; (B) collect, liquidate and receive balances in Collateral Accounts
and take control, in any manner, of proceeds of Collateral; (C) endorse any
Document, Instrument, bill of lading, or other document or agreement relating to
any Equipment or other Collateral; (D) use information contained in any data
processing, electronic or information systems relating to Collateral; (E) make
and adjust claims under insurance policies that insure Collateral; (F) take any
action as may be necessary or appropriate to obtain payment under any letter of
credit, banker’s acceptance or other instrument for which a Debtor is a
beneficiary and that constitutes Collateral; and (G) take all other actions as
Collateral Agent deems appropriate to fulfill any Debtor’s obligations under the
Priority Lien Debt Documents.

Section 4.04 Delivery of Instruments and Documents. If any amount payable under
or in connection with any of the Collateral is or becomes evidenced by any
Instrument, such Instrument shall, to the extent required by Article 5 and
subject to the Intercreditor Agreement (if applicable), be immediately delivered
to the Collateral Agent, duly indorsed, to be held as Collateral pursuant to
this Agreement. If any good constituting Collateral are or become covered by a
negotiable Document, such Document shall, to the extent required by Article 5,
be immediately delivered to the Collateral Agent to be held as Collateral
pursuant to this Agreement.

 

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Section 4.05 Investment Property. With respect to Investment Property (other
than Excluded Property) and Pledged Equity:

(a) If any Debtor shall at any time hold or acquire any Pledged Equity which
consists of certificated securities, whether as a stock split, stock dividend,
or other distribution with respect to Pledged Equity, or otherwise, such Debtor
shall promptly, and in any event within thirty (30) days after receipt thereof,
subject to the Intercreditor Agreement (if applicable), deliver the same to the
Collateral Agent, accompanied by such instruments of transfer or assignment duly
executed in blank as the Collateral Agent may from time to time specify. If any
Pledged Equity now owned or hereafter acquired by any Debtor consists of
uncertificated securities and is issued to such Debtor or its nominee directly
by the issuer thereof, such Debtor shall immediately notify the Collateral Agent
in writing thereof, and, subject to the Intercreditor Agreement (if applicable),
shall take any actions reasonably requested by the Collateral to enable the
Collateral Agent to obtain “control” (within the meaning of Section 8-106 of the
UCC) with respect thereto. If any Pledged Equity, whether certificated
securities or uncertificated securities, or other Investment Property
constituting Collateral now or hereafter acquired by any Debtor is held or
acquired by such Debtor or its nominee through a securities intermediary or
commodity intermediary, such Debtor shall immediately notify the Collateral
Agent in writing thereof and, subject to the Intercreditor Agreement (if
applicable), shall take any actions reasonably requested by the Collateral Agent
to enable the Collateral Agent to obtain “control” (within the meaning of
Section 8-106 and/or Section 9-106 of the UCC, as applicable) with respect
thereto, including the execution of Control Agreements reasonably acceptable to
the Collateral Agent. To the extent that the Collateral Agent has the right
pursuant to the foregoing to give entitlement orders or instructions or
directions to any issuer, securities intermediary or commodity intermediary or
to withhold its consent to the exercise of any withdrawal or dealing rights by
any Debtor, the Collateral Agent agrees with each Debtor that the Collateral
Agent shall not give any such entitlement orders or instructions or directions
to any such issuer, securities intermediary or commodity intermediary, and shall
not withhold its consent to the exercise of any withdrawal or dealing rights by
any Debtor, unless a Priority Lien Debt Default has occurred and is continuing.

(b) So long as no Priority Lien Debt Default has occurred and is continuing,
each Debtor shall be entitled:

(i) to exercise, in a manner not inconsistent with the terms hereof, the voting
power with respect to the Pledged Equity of such Debtor, and for that purpose
the Collateral Agent shall (if any Pledged Equity shall be registered in the
name of the Collateral Agent or its nominee) execute or cause to be executed
from time to time, at the expense of the Issuer, such proxies or other
instruments in favor of such Debtor or its nominee, in such form and for such
purposes as shall be reasonably requested by such Debtor, to enable it to
exercise such voting power with respect to the Pledged Equity; and

(ii) except as otherwise provided herein or in the Indenture, to receive and
retain for its own account any and all payments, proceeds, dividends,
distributions, property, assets, or rights to the extent such are permitted
pursuant to the terms of the Indenture, other than (x) stock or liquidating
dividends or (y) other

 

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dividends or other amounts payable under or in connection with any
recapitalization, restructuring, or other non-ordinary course event (the
dividends and amounts in this clause (y) being “Extraordinary Payments”), paid,
issued or distributed from time to time in respect of the Pledged Equity. During
the continuation of a Priority Lien Debt Default, if any Extraordinary Payment
is paid or payable, then, subject to the Intercreditor Agreement (if
applicable), such sum shall be paid by each such Debtor to the Collateral Agent
promptly, and in any event within ten (10) Business Days after receipt thereof,
to be held by the Collateral Agent, for the benefit of the holders of the
Secured Obligations, as additional collateral hereunder.

(c) Upon the occurrence and during the continuance of any Priority Lien Debt
Default, all rights of each Debtor to exercise or refrain from exercising the
voting and other consensual rights that it would otherwise be entitled to
exercise pursuant to Section 4.05(b) and to receive the payments, proceeds,
dividends, distributions, property, assets, or rights that the Debtor would
otherwise be authorized to receive and retain pursuant to Section 4.05(b) shall
cease, and thereupon the Collateral Agent, at the direction of the Required
Priority Lien Debtholders by an Act of Required Priority Lien Debtholders (or
otherwise, as set forth in the Collateral Agency Agreement), subject to the
Intercreditor Agreement (if applicable), shall be entitled to exercise all
voting power with respect to the Pledged Equity and to receive and retain, as
additional collateral hereunder, any and all payments, proceeds, dividends,
distributions, property, assets, or rights at any time declared or paid upon any
of the Pledged Equity during such a Priority Lien Debt Default and otherwise to
act with respect to the Pledged Equity as outright owner thereof. In the event
that the Collateral Agent, at the direction of the Required Priority Lien
Debtholders by an Act of Required Priority Lien Debtholders (or otherwise, as
set forth in the Collateral Agency Agreement), exercises its rights under this
Section 4.05(c), it shall concurrently deliver notice thereof to the Issuer.

(d) All payments, proceeds, dividends, distributions, property, assets,
instruments or rights that are received by each Debtor contrary to the
provisions of this Section 4.05 shall be received and held in trust for the
benefit of the Collateral Agent, for the benefit of the holders of the Secured
Obligations, shall be segregated by each Debtor from other funds of such Debtor
and shall be forthwith paid over to the Collateral Agent as Pledged Equity in
the same form as so received (with any necessary endorsement).

(e) If such Debtor is an issuer of Pledged Equity, such Debtor agrees that
(i) it will be bound by the terms of this Agreement relating to the Pledged
Equity issued by it and will comply with such terms insofar as such terms are
applicable to it and (ii) it will comply with instructions received by it
pursuant to the terms of Section 4.05(f) with respect to the Pledged Equity
issued by it. In addition, if any such Debtor is a partnership or a limited
liability company, such Debtor (i) confirms that none of the terms of any equity
interest issued by it provides that such equity interest is a “security” within
the meaning of the UCC, (ii) agrees that it will take no action to cause or
permit any such equity interest to become a security, (iii) agrees that it will
not issue any certificate representing any such equity interest and (iv) agrees
that if, notwithstanding the foregoing, any such equity interest shall be or
become a security, such Debtor will (and the Debtor that holds such equity
interest hereby instructs such issuing Debtor to) comply with reasonable
instructions originated by the Collateral Agent without further consent by such
Debtor.

 

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(f) Each Debtor hereby authorizes and instructs each issuer of any Pledged
Equity pledged by such Debtor hereunder to (i) comply with any instruction
received by it from the Collateral Agent in writing that (x) states that a
Priority Lien Debt Default has occurred and is continuing and (y) is otherwise
in accordance with the terms of this Agreement, without any other or further
instructions from such Debtor, and each Debtor agrees that each such issuer
shall be fully protected in so complying, and (ii) unless otherwise expressly
permitted hereby, pay any dividends or other payments with respect to the
Pledged Equity directly to the Collateral Agent for the benefit of the holders
of the Secured Obligations.

Section 4.06 Collateral Accounts. The Debtors shall request in writing and
otherwise take all necessary steps to ensure that all payments constituting
Proceeds of the sale of Collateral are made directly to a Collateral Account. If
any Debtor receives cash or Cash Equivalents that are identifiable proceeds of
any Collateral, subject to the Intercreditor Agreement (if applicable), it shall
hold same in trust for the Collateral Agent, for the benefit of the holders of
the Secured Obligations, and promptly (not later than the next Business Day)
deposit same into a Collateral Account.

Section 4.07 Intellectual Property. With respect to Intellectual Property:

(a) Such Debtor (either itself or through licensees) will (i) continue to use
each Trademark necessary to the conduct of its business in order to maintain
such Trademark in full force free from any claim of abandonment for non-use,
(ii) use such Trademark with the appropriate notice of registration and
substantially all other notices and legends required by applicable Laws,
(iii) not knowingly adopt or use any mark which is confusingly similar or a
colorable imitation of such Trademark unless the Collateral Agent, for the
ratable benefit of the Secured Parties, shall obtain a perfected security
interest in such mark pursuant to this Agreement, and (iv) not (and not
knowingly permit any licensee or sublicensee thereof to) do any act or knowingly
omit to do any act whereby such Trademark necessary to the conduct of its
business may become invalidated or impaired in any way;

(b) Such Debtor (either itself or through licensees) will not do any act, or
omit to do any act, whereby any Patent necessary for the conduct of its business
may become forfeited, abandoned or dedicated to the public;

(c) Such Debtor (either itself or through licensees) (i) will employ each
Copyright necessary for the conduct of its business and (ii) will not (and will
not knowingly permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby any material portion of such Copyrights may
become invalidated or otherwise impaired. Such Debtor will not (either itself or
through licensees) do any act whereby any material portion of such Copyrights
may fall into the public domain;

 

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(d) Such Debtor (either itself or through licensees) will not do any act that
knowingly uses any Intellectual Property necessary for the conduct of its
business to materially infringe the intellectual property rights of any other
Person;

(e) Such Debtor will notify the Collateral Agent and each Priority Lien
Representative in writing immediately if it knows, or has reason to know, that
any application or registration relating to any Intellectual Property necessary
for the conduct of its business may become forfeited, abandoned or dedicated to
the public, or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, the United States
Copyright Office) regarding such Debtor’s ownership of, or the validity of, any
such Intellectual Property or such Debtor’s right to register the same or to own
and maintain the same;

(f) Whenever such Debtor, either by itself or through any agent, employee,
licensee or designee, shall file or acquire a registration of any Intellectual
Property or an application for the registration therefor with the United States
Patent and Trademark Office, the United States Copyright Office or any similar
Governmental Authority of the United States, any State thereof or any other
country, such Debtor shall report such filing or acquisition to the Collateral
Agent within 30 days after the date on which such filing or acquisition occurs,
and any such Intellectual Property shall automatically constitute Collateral and
shall be subject to the security interest created by this Agreement. Upon
request of the Collateral Agent, subject to the Intercreditor Agreement (if
applicable), such Debtor shall promptly execute and deliver, and have recorded,
any and all agreements, instruments, documents, and papers as the Collateral
Agent may reasonably request to evidence the security interest granted hereunder
to the Collateral Agent for the benefit of the holders of the Secured
Obligations in any Copyright, Patent or Trademark necessary for the conduct of
its business and the goodwill and general intangibles of such Debtor relating
thereto or represented thereby;

(g) Such Debtor will take commercially reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office and the United States Copyright Office, to maintain and
pursue each application relating to any Intellectual Property necessary for the
conduct of its business (and to obtain the relevant registration) and to
maintain each registration of such Intellectual Property, including, without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability; and

(h) In the event that any Intellectual Property necessary for the conduct of its
business is infringed, misappropriated or diluted by a third party, such Debtor
shall (i) take such actions as such Debtor shall reasonably deem appropriate
under the circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the
Collateral Agent in writing after it learns thereof and take such actions as
such Debtor shall reasonably deem appropriate under the circumstances, including
filing suit for infringement, misappropriation or dilution, to seek injunctive
relief where appropriate and to recover any and all damages for infringement,
misappropriation or dilution.

 

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Section 4.08 Equipment. (a) Each Debtor shall keep accurate and complete records
of its Equipment, including kind, quality, quantity, cost, acquisitions and
dispositions thereof, and shall submit to the Collateral Agent, on such periodic
basis as the Collateral Agent may request, a current schedule thereof, in form
satisfactory to the Collateral Agent. Promptly upon request, the Debtors shall
deliver to the Collateral Agent evidence of their ownership or interests in any
Equipment.

(b) No Debtor shall sell, lease or otherwise dispose of any Equipment without
prior written notice to the Collateral Agent, other than as permitted under the
Indenture.

(c) The Equipment of each Debtor is in good operating condition and repair, and
all necessary replacements and repairs have been made so that the value and
operating efficiency of the Equipment is preserved at all times, in each case
except for (i) reasonable wear and tear and (ii) Equipment that is being
repaired or replaced in the ordinary course of business. Each Debtor shall
ensure that the Equipment is mechanically and structurally sound, and capable of
performing the functions for which it was designed, in accordance with
manufacturer specifications, except where the failure to ensure the foregoing is
not adverse in any material respect to the holders of the Secured Obligations.
No Debtor shall permit any Equipment to become affixed to, or located at, real
property leased by such Debtor if the aggregate amount of payments due by such
Debtor during any fiscal year pursuant to the term of such lease exceeds
$100,000, unless the Debtor shall have delivered prior written notice thereof to
the Collateral Agent and shall use commercially reasonable efforts to cause the
landlord of such real property to deliver to the Collateral Agent a lien waiver
to the Collateral Agent. With respect to any real property leased by any Debtor
upon which any Equipment is affixed or located as of the date hereof, if the
terms of the lease for such real property provide for aggregate payments by such
Debtor during any fiscal year in excess of $100,000, such Debtor shall use
commercially reasonable efforts to cause the landlord of such real property to
deliver to the Collateral Agent a lien waiver in a form reasonably acceptable to
the Collateral Agent (which will not require the expenditure of any consent fee,
other than reimbursement of costs, to the landlord). If a Debtor is unable to
comply with the foregoing requirements of the third and fourth sentences of this
Section 4.08(c) after using commercially reasonable efforts to do so, the Debtor
shall deliver an Officers’ Certificate to the Collateral Agent certifying that
it is unable to comply with such requirements after using commercially
reasonable efforts to do so with a brief description of such efforts. The
Collateral Agent may conclusively rely on such Certificate.

(d) Subject to Section 11.3(c) of the Indenture and the terms of the
Intercreditor Agreement (if applicable), with respect to any item of Titled
Equipment now or hereafter owned by a Debtor and with respect to which
perfection must be effected by a means other than the filing of an appropriate
financing statement under the applicable Uniform Commercial Code, such Debtor
agrees to take such action (or cause its Subsidiaries to take such action),
including endorsing certificates of title or executing applications for transfer
of title, as is reasonably required by the Collateral to enable the Collateral
Agent to properly perfect and protect its Lien on such Titled Equipment and to
transfer the same.

 

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Section 4.09 Actions With Respect to Certain Collateral. (a) If any Debtor shall
at any time hold or acquire a Commercial Tort Claim with a value in excess of
$500,000, such Debtor shall promptly notify the Collateral Agent in a writing
signed by such Debtor of the brief details thereof and, subject to the
Intercreditor Agreement (if applicable), grant to the Collateral Agent in such
writing 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
reasonably satisfactory to the Collateral Agent.

(b) If any Debtor shall at any time hold or acquire any vessel, aircraft,
aircraft engines, or aircraft propellers, such Debtor shall promptly notify the
Collateral Agent in a writing signed by such Debtor, and shall take all actions
reasonably requested by the Collateral Agent, subject to the Intercreditor
Agreement (if applicable), to ensure the attachment, perfection and priority of,
and the ability of the Collateral Agent to enforce, a security interest therein.

(c) If any goods that constitute Collateral with a value in excess of $250,000
are at any time in the possession of a bailee, the applicable Debtor or Debtors
shall promptly notify the Collateral Agent in writing thereof and, if requested
by the Collateral Agent and subject to the terms of the Intercreditor Agreement
(if applicable), shall promptly use all commercially reasonable efforts to
obtain a landlord’s agreement from such bailee, or a similar agreement in form
and substance reasonably satisfactory to the Collateral Agent.

ARTICLE 5

LIMITATION ON PERFECTION OF SECURITY INTEREST

Section 5.01 Instruments. The perfection of the security interest granted in
Article 2 above in Instruments will, prior to the occurrence of a Priority Lien
Debt Default (and after the occurrence of a Priority Lien Debt Default unless
the Collateral Agent has required that further actions are taken with respect to
the perfection thereof), be effected solely by filing an appropriate financing
statement under the applicable Uniform Commercial Code so long as (a) with
respect to all Instruments, the aggregate face amount of all such Instruments
does not exceed $500,000 and (b) with respect to any individual Instrument, the
face amount thereof does not exceed $500,000. Notwithstanding the foregoing, if
no Priority Lien Debt Default exists, then upon the request of any Debtor the
Collateral Agent shall deliver any Instrument in its possession to that Debtor
if that Debtor requires possession in order to collect such Instrument. In the
event that the aggregate face amount of such Instruments exceeds $500,000
individually or in the aggregate, the Debtors shall provide prompt written
notice thereof to the Collateral Agent.

Section 5.02 Documents. The perfection of the security interest granted in
Article 2 above in Documents will, prior to the occurrence of a Priority Lien
Debt Default (and after the occurrence of a Priority Lien Debt Default unless
the Collateral Agent has required that further actions are taken with respect to
the perfection thereof), be effected solely by filing an appropriate financing
statement under the applicable Uniform Commercial Code so long as (a) the
aggregate value of the goods covered by all such Documents does not exceed
$500,000 and (b) the value of the goods covered by any individual Document does
not exceed $500,000. In the event that the value of goods constituting
Collateral covered by such Documents exceeds $500,000 individually or in the
aggregate, the Debtors shall provide prompt written notice thereof to the
Collateral Agent.

 

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Section 5.03 Letter of Credit Rights. The perfection of the security interest
granted in Article 2 above in Letter-of-Credit Rights will be required only with
respect to (a) solely following the occurrence of a Priority Lien Debt Default
and request by the Collateral Agent, any individual Letter-of-Credit Right the
face amount of which exceeds $2,500,000 and (b) any Letter-of-Credit-Rights
constituting Supporting Obligations. In the event that the face amount of any
individual Letter-of-Credit Right exceeds $2,500,000 or that any
Letter-of-Credit-Rights constitute Supporting Obligations, the Debtors shall
provide prompt written notice thereof to the Collateral Agent.

Section 5.04 Fixtures. The perfection of the security interest granted in
Article 2 above in Fixtures will, prior to the occurrence of a Priority Lien
Debt Default (and after the occurrence of a Priority Lien Debt Default unless
the Collateral Agent has required that further actions are taken with respect to
the perfection thereof), be effected by, at the option of the Collateral Agent,
either (1) filing an appropriate financing statement with the appropriate
Secretary of State under the applicable Uniform Commercial Code or (2) filing a
Mortgage constituting an appropriate Fixture filing in the real property records
of the applicable jurisdiction.

Section 5.05 Actions Outside United States. Notwithstanding anything to the
contrary herein, no Debtor shall be required to take any actions under any laws
outside of the United States to grant, perfect or provide for the enforcement of
any security interest granted or created under this Agreement.

ARTICLE 6

REMEDIAL PROVISIONS

During the existence of a Priority Lien Debt Default, the Collateral Agent,
subject to the Intercreditor Agreement, at the direction of the Required
Priority Lien Debtholders by an Act of Required Priority Lien Debtholders (or as
otherwise set forth in the Collateral Agency Agreement), exercise one or more of
the remedies specified elsewhere in this Agreement or the following remedies:

Section 6.01 General Interim Remedies. (a) To the extent permitted by Law, the
Collateral Agent may exercise all the rights and remedies of a secured party
under the UCC.

(b) The Collateral Agent may prosecute actions in equity or at law for the
specific performance of any covenant or agreement herein contained or in aid of
the execution of any power herein granted or for the enforcement of any other
appropriate legal or equitable remedy without posting a bond or providing other
security.

(c) The Collateral Agent may require any Debtor to promptly assemble any
tangible Collateral of such Debtor and make it available to the Collateral Agent
at a place to be designated by the Collateral Agent. The Collateral Agent or its
designee may occupy any premises owned or leased by any Debtor where the
Collateral is assembled for a reasonable period in order to effectuate the
Collateral Agent’s rights and remedies hereunder or under law, without
obligation to any Debtor with respect to such occupation.

 

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Section 6.02 Instruments and Payment Intangibles. Without limiting any other
rights of the Collateral Agent under the Priority Lien Debt Documents, during
the existence of a Priority Lien Debt Default, the Collateral Agent, at the
direction of the Required Priority Lien Debtholders by an Act of Required
Priority Lien Debtholders (or as otherwise set forth in the Collateral Agency
Agreement), shall, establish Collateral Accounts for the purpose of collecting
the payments due to the Debtors with respect to Instruments and/or Payment
Intangibles that constitute Collateral and holding the proceeds thereof, and
may, or may direct the Debtors to, instruct all makers and/or all obligors with
respect thereto to make all payments with respect to such Collateral directly to
the Collateral Agent, for the benefit of the holders of the Secured Obligations,
for deposit into such Collateral Account. After such direction to the Debtors,
all payments, whether of principal, interest, or other amounts with respect to
Instruments and/or Payment Intangibles that constitute Collateral shall be
directed to such Collateral Accounts until such direction is revoked in writing
by the Collateral Agent. All such payments which may from time to time come into
the possession of any Debtor shall be held in trust for the Collateral Agent for
the benefit of the holders of the Secured Obligations, segregated from the other
funds of such Debtor, and delivered to the Collateral Agent immediately in the
form received with any necessary endorsement for deposit into such Collateral
Account, such delivery in no event to be later than one Business Day after
receipt thereof by the applicable Debtor. Each Debtor agrees to execute any
documents reasonably requested by the Collateral Agent to create any Collateral
Account and pledge it to the Collateral Agent for the benefit of the holders of
the Secured Obligations. In connection with the foregoing, the Collateral Agent
shall have the right at any time during the existence of a Priority Lien Debt
Default to take any of the following actions, in the Collateral Agent’s own name
or in the name of the applicable Debtor: compromise or extend the time for
payment of any payments due with respect to any Instrument upon such terms as
the Collateral Agent may reasonably determine; endorse the name of the
applicable Debtor, on checks, instruments, or other evidences of payment with
respect to any such Collateral; make written or verbal requests for verification
of amount owing on any such Collateral from the maker thereof or obligor
thereunder; open mail addressed to such Debtor which the Collateral Agent
reasonably believes relates to any such Collateral, and, to the extent of checks
or other payments with respect to any such Collateral, dispose of same in
accordance with this Agreement; take action in the Collateral Agent’s name or
the applicable Debtor’s name, to enforce collection; and take all other action
necessary to carry out this Agreement and give effect to the Collateral Agent’s
rights hereunder. Costs and expenses incurred by the Collateral Agent in
collection and enforcement of amounts owed under any Contracts or otherwise with
respect to Instruments and/or Payment Intangibles that constitute Collateral,
including attorneys’ fees and out-of-pocket expenses, shall be reimbursed by the
applicable Debtor to the Collateral Agent on demand.

Section 6.03 Pledged Equity. (a) Each Debtor recognizes that the Collateral
Agent may be unable to effect a public sale of any or all the Pledged Equity, by
reason of certain prohibitions contained in the Securities Act of 1933, as
amended, and applicable state securities laws or otherwise, and may be compelled
to resort to one or more private

 

22

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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
Debtor 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
Agent shall be under no obligation to delay a sale of any of the Pledged Equity
for the period of time necessary to permit the issuer thereof to register such
securities for public sale under the Securities Act of 1933, as amended, or
under applicable state securities laws, even if such issuer would agree to do
so.

(b) Each Debtor agrees to use its commercially reasonable efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Pledged Equity pursuant to this Section 6.03 valid and
binding and in compliance with any and all other applicable Laws; provided that,
notwithstanding the foregoing, each Debtor agrees to use its best efforts to
obtain all Affiliate consents and approvals and cause to be done all such other
acts by any Affiliate as may be necessary to make such sale or sales of all or
any portion of the Pledged Equity pursuant to this Section 6.03 valid and
binding and in compliance with any and all other applicable Laws. Each Debtor
further agrees that a breach of any of the covenants contained in this
Section 6.03 will cause irreparable injury to the Collateral Agent and the
holders of the Secured Obligations, that the Collateral Agent and the holders of
the Secured Obligations have no adequate remedy at law in respect of such breach
and, as a consequence, that each and every covenant contained in this
Section 6.03 shall be specifically enforceable against such Debtor, and such
Debtor hereby waives and agrees not to assert any defenses against an action for
specific performance of such covenants except for a defense that no Priority
Lien Debt Default has occurred.

Section 6.04 Foreclosure. (a) The Collateral Agent may foreclose on the
Collateral in any manner permitted by the courts of or in the State of New York
or the jurisdiction in which any Collateral is located. If the Collateral Agent
should institute a suit for the collection of the Secured Obligations and for
the foreclosure of this Agreement, the Collateral Agent may at any time before
the entry of a final judgment dismiss the same, and take any other action
permitted by this Agreement.

(b) To the extent permitted by law, the Collateral Agent may exercise all the
foreclosure rights and remedies of a secured party under the UCC. In connection
therewith, the Collateral Agent may sell any Collateral at public or private
sale, at the office of the Collateral Agent or elsewhere, for cash or credit and
upon such other terms as the Collateral Agent deems commercially reasonable. The
Collateral Agent may sell any Collateral at one or more sales, and the security
interest granted hereunder shall remain in effect as to the unsold portion of
the Collateral. Each Debtor agrees that to the extent permitted by law such
sales may be made without notice. If notice is required by law, each Debtor
hereby deems ten days advance notice of the time and place of any public or
private sale reasonable notification, recognizing that if any portion of the
Collateral is perishable or threatens to decline speedily in value or is of a
type customarily sold on a recognized market, shorter notice may be reasonable.
The Collateral Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Collateral Agent may

 

23

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adjourn any sale by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it was
adjourned. In the event that any sale hereunder is not completed or is defective
in the opinion of the Collateral Agent, the Collateral Agent shall have the
right to cause subsequent sales to be made hereunder. Any statements of fact or
other recitals made in any bill of sale, assignment, or other document
representing any sale hereunder, including statements relating to the occurrence
of a Priority Lien Debt Default, acceleration of the Secured Obligations, notice
of the sale, the time, place, and terms of the sale, and other actions taken by
the Collateral Agent in relation to the sale may be conclusively relied upon by
the purchaser at any sale hereunder. The Collateral Agent may delegate to any
agent the performance of any acts in connection with any sale hereunder,
including the sending of notices and the conduct of the sale.

Section 6.05 Application of Proceeds. (a) Unless otherwise specified herein, any
cash proceeds received by the Collateral Agent from the sale of, collection of,
or other realization upon any part of the Collateral or any other amounts
received by the Collateral Agent hereunder may be, at the discretion of the
Collateral Agent (i) held by the Collateral Agent in one or more Collateral
Accounts as cash collateral for the Secured Obligations or (ii) subject to the
terms of the Collateral Agency Agreement and, if applicable, the Intercreditor
Agreement, applied to the Secured Obligations.

(b) Amounts applied to the Secured Obligations shall be applied in the following
order:

First, to the payment of the costs and expenses of exercising the Collateral
Agent’s rights hereunder, whether expressly provided for herein or otherwise;
and

Second, to the payment of the Secured Obligations in the order set forth in
Section 3.4 of the Collateral Agency Agreement and the Priority Lien Debt
Documents.

Any surplus cash collateral or cash proceeds held by the Collateral Agent after
payment in full of the Secured Obligations shall be paid over to such Debtor or
to whomever may be lawfully entitled to receive such surplus.

Section 6.06 Waiver of Certain Rights. To the full extent each Debtor may do so,
such Debtor shall not insist upon, plead, claim, or take advantage of any law
providing for any appraisement, valuation, stay, extension, or redemption, and
such Debtor hereby waives and releases the same, and all rights to a marshaling
of the assets of such Debtor, including the Collateral of such Debtor, or to a
sale in inverse order of alienation in the event of foreclosure of the liens and
security interests hereby created. Such Debtor shall not assert any right under
any law pertaining to the marshaling of assets, sale in inverse order of
alienation, the administration of estates of decedents or other matters whatever
to defeat, reduce, or affect the right of the Collateral Agent under the terms
of this Agreement.

 

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Section 6.07 Remedies Cumulative. The Collateral Agent’s remedies under this
Agreement and the Priority Lien Debt Documents to which any Debtor is a party
shall be cumulative, and no delay in enforcing this Agreement and the Priority
Lien Debt Documents to which any Debtor is a party shall act as a waiver of the
Collateral Agent’s rights hereunder.

Section 6.08 Reinstatement. The obligations of each Debtor under this Agreement
shall continue to be effective or automatically be reinstated, as the case may
be, if at any time payment of any of the Secured Obligations is rescinded or
otherwise must be restored or returned by the Collateral Agent upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of any Debtor
or any other obligor or otherwise, all as though such payment had not been made.

ARTICLE 7

MISCELLANEOUS

Section 7.01 Amendments. None of the terms or provisions of this Agreement may
be waived, amended, supplemented or otherwise modified except in accordance with
Section 7.1 of the Collateral Agency Agreement.

Section 7.02 Notices. All notices, requests and demands to or upon the
Collateral Agent hereunder shall be in writing and effected in the manner
provided for in Section 7.5 of the Collateral Agency Agreement. All notices,
requests and demands hereunder to any Debtor shall be in writing delivered by
United States mail, telecopy number, personal delivery or nationally established
overnight courier service set forth in Schedule 3.3(b) attached hereto or at
such other address in the United States as may be specified by such Debtor in a
written notice delivered to the Collateral Agent in accordance with Section 7.5
of the Collateral Agency Agreement.

Section 7.03 No Waiver by Course of Conduct; Cumulative Remedies; No Duty. No
failure to exercise, nor any delay in exercising, on the part of the Collateral
Agent, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Collateral Agent of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy that the Collateral Agent would otherwise have on any future
occasion. The rights and remedies provided herein and in the other Priority Lien
Debt Document are cumulative, may be exercised singly or concurrently and are
not exclusive of any other rights or remedies provided by law. The powers
conferred on the Collateral Agent under this Agreement are solely to protect the
Collateral Agent’s rights under this Agreement and shall not impose any duty
upon it to exercise any such powers. Except as elsewhere provided hereunder, the
Collateral Agent shall have no duty as to any of the Collateral or as to the
taking of any necessary steps to preserve rights against prior parties or any
other rights pertaining to the Collateral.

Section 7.04 Enforcement Expenses; Indemnification. (a) Each Debtor agrees to
pay, or reimburse the Collateral Agent for, all costs and expenses incurred in
connection with the enforcement, attempted enforcement, exercise, or
preservation of any rights or remedies under this Agreement or the other
Priority Lien Debt Document to which such Debtor is a party (including all such
costs and expenses incurred during any “workout” or restructuring in respect of
the Secured Obligations and during any legal proceeding, including any
proceeding under any Bankruptcy Law), including all attorney fees.

 

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(b) Each Debtor agrees, jointly and severally, to pay, and to indemnify and hold
the Collateral Agent and each holder of the Secured Obligations harmless from,
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.

(c) Each Debtor agrees to pay, and to indemnify and hold the Collateral Agent,
each holder of the Secured Obligations, and their respective Affiliates,
directors, officers, employees, counsel, agents and attorneys-in-fact
(collectively the “Indemnitees”) harmless from, any and all liabilities,
obligations, losses, damages, penalties, claims, demands, actions, judgments,
suits, costs, expenses and disbursements (including the fees, charges and
disbursements of any counsel for any Indemnitee) of any kind or nature
whatsoever which may at any time be imposed on, incurred by or asserted against
any such Indemnitee in any way relating to or arising out of or in connection
with the execution, delivery, enforcement, performance or administration of any
Guaranty, this Agreement, or any Priority Lien Debt Document to which such
Debtor is a party, in all cases, whether or not caused by or arising, in whole
or in part, out of the negligence of the Indemnitee; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
liabilities, obligations, losses, damages, penalties, claims, demands, actions,
judgments, suits, costs, expenses or disbursements are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or willful misconduct of such Indemnitee.

(d) All amounts due under this Section 7.04 shall be payable upon demand
therefor. The agreements in this Section shall survive repayment of the Secured
Obligations and all other amounts payable under the Indenture and the other
Priority Lien Debt Documents and the resignation and removal of the Collateral
Agent.

Section 7.05 Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of each Debtor and shall inure to the benefit of the
Collateral Agent and the holders of the Secured Obligations and their successors
and assigns; provided that no Debtor may assign, transfer or delegate any of its
rights or obligations under this Agreement without the prior written consent of
the Collateral Agent.

Section 7.06 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Delivery of an executed
counterpart of a signature page of this Agreement by facsimile or other
electronic communication (including via email PDF) shall be effective as
delivery of a manually executed counterpart of this Agreement.

Section 7.07 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable, (a) the legality, validity and enforceability
of the remaining provisions of this Agreement shall not be affected or impaired
thereby and (b) the parties

 

26

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shall endeavor in good faith negotiations to replace the illegal, invalid or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the illegal, invalid or unenforceable
provisions. The invalidity of a provision in a particular jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.

Section 7.08 Section Headings. The Section headings used in this Agreement are
included for convenience of reference only and shall not affect the
interpretation of this Agreement.

Section 7.09 Integration. This Agreement, together with the other Priority Lien
Debt Documents, comprises the complete and integrated agreement of the parties
on the subject matter hereof and thereof and supersedes all prior agreements,
written or oral, on such subject matter.

Section 7.10 GOVERNING LAW ETC. Sections 7.12 (Governing Law), 7.13 (Consent to
Jurisdiction; Waivers), and 7.14 (Waiver of Jury Trial) of the Collateral Agency
Agreement are hereby incorporated by reference herein mutatis mutandis, as if
set forth verbatim herein as agreements of the parties hereto.

Section 7.11 Additional Debtors. Each Restricted Subsidiary of the Issuer that
is required to become a party to this Agreement after the date hereof pursuant
to Section 7.17 of the Collateral Agency Agreement shall become a Debtor for all
purposes of this Agreement upon execution and delivery by such Restricted
Subsidiary of an instrument in the form of Annex I hereto.

Section 7.12 Termination; Releases. (a) This Agreement and the security interest
created hereby shall terminate upon payment in full of all Secured Obligations
(other than contingent indemnification obligations), at which time the
Collateral Agent shall, subject to the Intercreditor Agreement, execute and
deliver to the Debtors or the Debtors’ designee, at the Debtors’ expense, all
Uniform Commercial Code termination statements and similar documents which the
Debtors shall reasonably request from time to time to evidence such termination,
shall deliver to the Debtors or the Debtors’ designee all Collateral then in its
possession, and shall authorize the Issuer to remove the Collateral Agent as an
additional insured or loss payee under the Debtor’s insurance policies. Any
execution and delivery of termination statements or documents pursuant to this
Section 7.12(a) shall be without recourse to or warranty by the Collateral
Agent.

(b) Any Debtor other than the Issuer shall automatically be released from its
obligations hereunder and the security interest granted hereby in the Collateral
of such Debtor shall be automatically released as set forth in the Collateral
Agency Agreement, the Indenture and the other Priority Lien Debt Documents. If
any of the Collateral shall be sold, transferred or otherwise disposed of by any
Debtor in a transaction permitted by the Permitted Lien Debt Documents the
security interest created hereby in any Collateral that is so sold, transferred
or otherwise disposed of shall automatically terminate and be released upon the
closing of such sale, transfer or other disposition, as set forth in the
Collateral Agency Agreement, Indenture and the other Priority Lien Debt
Documents; provided, however, that such security interest will continue to
attach to all Proceeds of such

 

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sales or other dispositions. In connection with any of the foregoing, subject to
the Intercreditor Agreement (if applicable), the Collateral Agent, upon receipt
of an Officers’ Certificate stating that such termination is in compliance with
the applicable provisions of the Priority Lien Debt Documents and that the
Debtor is not required by the Priority Lien Debt Documents to grant any lien
upon such property, shall deliver to the Debtors any Collateral then in its
possession and shall execute and deliver to the Debtors or the Debtors’
designee, at the Debtors’ expense, all Uniform Commercial Code termination
statements and similar documents that the Debtors shall reasonably request from
time to time to evidence such termination. Any execution and delivery of
termination statements or documents pursuant to this Section 7.12(b) shall be
without recourse to or warranty by the Collateral Agent.

(c) Each Debtor acknowledges that it is not authorized to file any financing
statement or amendment or termination statement with respect to any financing
statement originally filed in connection herewith without the prior written
consent of the Collateral Agent subject to such Debtor’s rights under
Section 9-509(d)(2) of the UCC.

(d) The Collateral Agent shall have no liability whatsoever to any other
Priority Lien Secured Party as the result of any release of Collateral by it in
accordance with (or which the Collateral Agent in good faith believed to be in
accordance with) this Section 7.12.

Section 7.13 Intercreditor Agreement. Notwithstanding anything herein to the
contrary, (i) the Liens and security interests granted to the Collateral Agent
pursuant to this Agreement and (ii) the exercise of any right or remedy by the
Collateral Agent hereunder or the application of Proceeds (including insurance
proceeds) of any Collateral, are subject to the provisions of the Intercreditor
Agreement. In the event of any conflict between the terms of the Intercreditor
Agreement and the terms of this Agreement, the terms of the Intercreditor
Agreement shall govern.

Section 7.14 Collateral Agent. The rights, privileges, immunities and
protections of the Collateral Agent are contained in the Collateral Agency
Agreement, which rights, privileges, immunities and protections are incorporated
herein by reference. This Agreement is subject to the terms and conditions of
the Collateral Agency Agreement.

[Signature pages follow.]

 

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EXECUTED as of the date first above written.

 

UMB BANK, N.A., as Collateral Agent By:   /s/ Shazia Flores Name:   Shazia
Flores Title:   Vice President

[Signature Page to Security Agreement]

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ACID SERVICES, LLC

ADMIRAL WELL SERVICE, INC.

BASIC ESA, INC.

BASIC MARINE SERVICES, INC.

CHAPARRAL SERVICE, INC.

FIRST ENERGY SERVICES COMPANY

GLOBE WELL SERVICE, INC.

JETSTAR ENERGY SERVICES, INC

JETSTAR HOLDINGS, INC.

JS ACQUISITION LLC

LEBUS OIL FIELD SERVICE CO.

MAVERICK COIL TUBING SERVICES, LLC

MAVERICK SOLUTIONS, LLC

MAVERICK STIMULATION COMPANY, LLC

MAVERICK THRU-TUBING SERVICES, LLC

MCM HOLDINGS, LLC

MSM LEASING, LLC

PERMIAN PLAZA, LLC

PLATINUM PRESSURE SERVICES, INC.

SCH DISPOSAL, L L C

SLEDGE DRILLING CORP.

THE MAVERICK COMPANIES, LLC

XTERRA FISHING & RENTAL TOOLS CO.

By:   /s/ T.M. “Roe” Patterson Name:   T.M. “Roe” Patterson Title:   President

[SIGNATURE PAGE TO SECURITY AGREEMENT]

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

BASIC ENERGY SERVICES, INC. By:   /s/ T.M. “Roe” Patterson Name:   T.M. “Roe”
Patterson Title:   President and Chief Executive Officer BASIC ENERGY SERVICES
LP, LLC By:   /s/ T.M. “Roe” Patterson Name:   T.M. “Roe” Patterson Title:  
President and Chief Executive Officer BASIC ENERGY SERVICES GP, LLC By:   /s/
T.M. “Roe” Patterson Name:   T.M. “Roe” Patterson Title:   President and Chief
Executive Officer BASIC ENERGY SERVICES, L.P. By:   BASIC ENERGY SERVICES GP,
LLC,   its General Partner By:   Basic Energy Services, Inc., its sole member
By:   /s/ T.M. “Roe” Patterson Name:   T.M. “Roe” Patterson Title:   President
and Chief Executive Officer TAYLOR INDUSTRIES, LLC By:   /s/ T.M. “Roe”
Patterson Name:   T.M. “Roe” Patterson Title:   Chief Executive Officer

[SIGNATURE PAGE TO SECURITY AGREEMENT]

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

SCHEDULE 3.3(a)

ORGANIZATION & LOCATION INFORMATION

 

Debtor

  

Jurisdiction &

Type of

Organization

  

Organizational

ID#

  

Chief Executive

Office, Sole Place of

Business, or

Principal Residence

Basic Energy Services, Inc.    Delaware corporation    3611854   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

Acid Services, LLC    Kansas limited liability company    2347722   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

Admiral Well Service, Inc.    Texas corporation    0801050244   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

Basic Energy Services GP, LLC    Delaware limited liability company    3611876
  

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

Basic Energy Services LP, LLC    Delaware limited liability company    3611879
  

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

Basic Energy Services, L.P.    Delaware limited partnership    2307778   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

Basic ESA, Inc.    Texas corporation    57139400   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

Basic Marine Services, Inc.    Delaware corporation    3917169   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

Chaparral Service, Inc.    New Mexico corporation    642181   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

First Energy Services Company    Delaware corporation    3215172   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

Globe Well Service, Inc.    Texas corporation    46471700   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

JetStar Energy Services, Inc.    Texas corporation    800481218   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

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

Debtor

  

Jurisdiction &

Type of

Organization

  

Organizational

ID#

  

Chief Executive

Office, Sole Place of

Business, or

Principal Residence

JetStar Holdings, Inc.    Delaware corporation    3954247   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

JS Acquisition LLC    Delaware corporation    4278935   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

LeBus Oil Field Service Co.    Texas corporation    77931600   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

Maverick Coil Tubing Services, LLC    Colorado limited liability company   
20001207071   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

Maverick Solutions, LLC    Colorado limited liability company    20031245775   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

Maverick Stimulation Company, LLC    Colorado limited liability company   
19961105940   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

Maverick Thru-Tubing Services, LLC    Colorado limited liability company   
20091658924   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

MCM Holdings, LLC    Colorado limited liability company    20011090566   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

MSM Leasing, LLC    Colorado limited liability company    20091399908   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

Permian Plaza, LLC    Texas limited liability company    800859993   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

Platinum Pressure Services, Inc.    Texas corporation    0800888088   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

SCH Disposal, L.L.C.    Texas limited liability company    704317322   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

Sledge Drilling Corp.    Texas corporation    800575730   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

Taylor Industries, LLC    Texas limited liability company    801259923   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

 

Schedule 3.3(a) to Security Agreement

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

Debtor

  

Jurisdiction &

Type of

Organization

  

Organizational

ID#

  

Chief Executive

Office, Sole Place of

Business, or

Principal Residence

The Maverick Companies, LLC    Colorado limited liability company    20061298717
  

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

XTERRA Fishing & Rental Tools Co.    Texas corporation    158550700   

801 Cherry Street,

Suite 2100,

Fort Worth, TX 76102

 

Schedule 3.3(a) to Security Agreement

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

SCHEDULE 3.3(b)

NOTICE INFORMATION

 

Debtor

  

Notice Information

Basic Energy Services, Inc.   

801 Cherry Street,

Suite 2100 Fort Worth, Texas 76102

Attention: T.M. “Roe” Patterson

Telephone: (432) 620-5500

Telecopier: (432) 620-5501

Electronic Mail:

Roe.Patterson@basicenergyservices.com

Acid Services, LLC Admiral Well Service, Inc. Basic Energy Services GP, LLC
Basic Energy Services LP, LLC Basic Energy Services, L.P. Basic ESA, Inc. Basic
Marine Services, Inc. Chaparral Service, Inc. First Energy Services Company
Globe Well Service, Inc. JetStar Energy Services, Inc. JetStar Holdings, Inc. JS
Acquisition LLC LeBus Oil Field Service Co. Maverick Coil Tubing Services, LLC
Maverick Solutions, LLC Maverick Stimulation Company, LLC Maverick Thru-Tubing
Services, LLC MCM Holdings, LLC MSM Leasing, LLC Permian Plaza, LLC Platinum
Pressure Services, Inc. SCH Disposal, L.L.C. Sledge Drilling Corp. Taylor
Industries, LLC The Maverick Companies, LLC XTERRA Fishing & Rental Tools Co.

 

Schedule 3.3(b) to Security Agreement

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

SCHEDULE 3.4

CERTAIN COLLATERAL

PATENTS/ TRADEMARKS

Schedule 3.6 of this Agreement is incorporated herein as if fully set forth
herein.

 

Schedule 3.4 to Security Agreement

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

SCHEDULE 3.5(a)

PLEDGED EQUITY

 

Pledgor

  

Pledged Entity

  

Certificate #

  

Number & Type of Shares

  

Percentage of Shares

Basic Energy Services, Inc.    Basic Energy Services GP, LLC    002    1,000
Units of membership interest    100% Basic Energy Services, Inc.    Basic Energy
Services LP, LLC    002    1,000 Units of membership interest    100% Basic
Energy Services GP, LLC    Basic Energy Services, L.P.    *    0.10% GP interest
   100% Basic Energy Services, Inc.    Basic ESA, Inc.    135 & 136    510,000
shares of common stock    100% Basic Energy Services, L.P.    Basic Energy
Services International, LLC    *    1,000 Units of membership interest    100%
Basic ESA, Inc.    ESA de Mexico S.A. de C.v    *    1% partes sociales    100%
Basic Energy Services, L.P.    Basic Marine Services, Inc.    2    10 shares of
common stock    100% Basic Energy Services, L.P.    Chaparral Service, Inc.   
10    13,000 shares of common stock    100% Basic Energy Services, L.P.    First
Energy Services Company    29    1,000 shares of common stock    100% Basic
Energy Services, L.P.    Globe Well Service, Inc.    21    4,521 shares of
common stock    100% Basic Energy Services, L.P.    JS Acquisition LLC    001   
100 units of membership interest    100% Basic Energy Services, L.P.    LeBus
Oil Field Service Co.    42    1,000 shares of common stock    100%

 

Schedule 3.5(a) to Security Agreement

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

Pledgor

  

Pledged Entity

  

Certificate #

  

Number & Type of Shares

  

Percentage of Shares

Basic Energy Services, L.P.    Maverick Coil Tubing Services, LLC    *   
Membership interests    100% Basic Energy Services, L.P.    Maverick Solutions,
LLC    *    Membership interests    100% Basic Energy Services, L.P.    Maverick
Stimulation Company, LLC    *    Membership interests    100% Basic Energy
Services, L.P.    Maverick Thru-Tubing Services, LLC    *    Membership
interests    100% Basic Energy Services, L.P.    MCM Holdings, LLC    *   
Membership interests    100% Basic Energy Services, L.P    MSM Leasing, LLC    *
   Membership interests    100% Basic Energy Services, L.P    The Maverick
Companies, LLC    *    Membership interests    100% Basic Energy Services, L.P.
   Permian Plaza, LLC    1    Membership interest    100% Basic Energy Services,
L.P.    Platinum Pressure Services, Inc.    12    9,642,862 shares of common
stock    100% Basic Energy Services, L.P.    SCH Disposal, L.L.C.    6   
Membership interest    100% Basic Energy Services, L.P.    Sledge Drilling Corp.
   7    650,000 shares of common stock    100% Basic Energy Services, L.P.   
Taylor Industries, LLC    1    Membership interest    100% Basic Energy
Services, L.P.    XTERRA Fishing & Rental Tools Co.    6    68,000 shares of
common stock    100% Basic Energy Services, L.P.    Robota Energy Equipment, LLC
   1    Membership interest    80%

 

Schedule 3.3(a) to Security Agreement

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

Pledgor

  

Pledged Entity

  

Certificate #

  

Number & Type of Shares

  

Percentage of Shares

Basic Energy Services, LP, LLC    Basic Energy Services, L.P.    *    99.9%
Limited Partnership Interest    100% JetStar Holdings, Inc.    JetStar Energy
Services, Inc.    C001    100 shares of common stock    100% JS Acquisition LLC
   Acid Services, LLC    23    Membership interest    100% JS Acquisition LLC
(successor by merger to JetStar Consolidated Holdings, Inc.)    JetStar
Holdings, Inc.    C002    100 shares of common stock    100% Platinum Pressure
Services, Inc.    Admiral Well Service, Inc.    2    100 shares of common stock
   100% Basic Energy Services, L.P.    Robota Energy Equipment, LLC    6    20
units of membership interest    20%

 

*

The membership interest in each of the entities are not currently represented by
certificates issued to the membership interest owner.

 

Schedule 3.3(a) to Security Agreement

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

SCHEDULE 3.5(c)

INSTRUMENTS

Intercompany Note.

 

Schedule 3.5(c) to Security Agreement