EXHIBIT 10.23.3
 
AMENDED AND RESTATED SECURITY AGREEMENT
(Membership Pledge)
BY
PRIMEENERGY CORPORATION
IN FAVOR OF
GUARANTY BANK, FSB, as Agent
December 28, 2006
 
CREDIT FACILITY TO PRIMEENERGY CORPORATION
PRIMEENERGY MANAGEMENT CORPORATION
PRIME OPERATING COMPANY
EASTERN OIL WELL SERVICE COMPANY
SOUTHWEST OILFIELD CONSTRUCTION COMPANY
EOWS MIDLAND COMPANY

 
 

 

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TABLE OF CONTENTS

                                      Page ARTICLE 1 DEFINITIONS AND
INTERPRETATION     1  
 
    1.1     Terms Defined Above     1  
 
    1.2     Terms Defined in Credit Agreement     1  
 
    1.3     Additional Defined Terms     2  
 
    1.4     Undefined Financial Accounting Terms     2  
 
    1.5     Terms Defined in Texas Business and Commerce Code     2  
 
    1.6     References     2  
 
    1.7     Articles and Sections     2  
 
    1.8     Number and Gender     2  
 
                    ARTICLE 2 SECURITY INTEREST     3  
 
    2.1     Grant of Security Interest in Collateral     3  
 
    2.2     Delivery of Collateral     3  
 
    2.3     Power of Attorney     3     ARTICLE 3 REPRESENTATIONS AND WARRANTIES
    4  
 
    3.1     Status of Collateral     4  
 
    3.2     No Material Misstatements     4  
 
    3.3     Ownership and Liens     4  
 
                    ARTICLE 4 COVENANTS AND AGREEMENTS     5  
 
    4.1     Payment of Assessments and Charges     5  
 
    4.2     Delivery of Collateral     5  
 
    4.3     Further Assurances     5  
 
    4.4     Prohibited Liens and Filings     5  
 
                    ARTICLE 5 RIGHTS AND REMEDIES     5  
 
    5.1     Remedies Upon Default     5  
 
    5.2     Voting Rights, Dividends, Etc. Prior to Default     6  
 
    5.3     Voting Rights, Dividends, Etc. After Default     7  
 
    5.4     Proceeds     7  
 
    5.5     Agent Duties     8  
 
    5.6     The Agent’s Actions     8  
 
                    ARTICLE 6 MISCELLANEOUS     8  
 
    6.1     Transfer of Obligations and Collateral     8  
 
    6.2     Cumulative Security     9  
 
    6.3     Continuing Agreement     9  
 
    6.4     Cumulative Rights     9  
 
    6.5     Exercise of Rights     9  
 
    6.6     Remedy and Waiver     9  
 
    6.7     Non-Judicial Remedies     9  
 
    6.8     Preservation of Liability     10  

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                                      Page
 
    6.9     Notices and Other Communications     10  
 
    6.10     Parties in Interest     10  
 
    6.11     Amendment and Waiver     10  
 
    6.12     Invalidity     10  
 
    6.13     Governing Law     11  
 
    6.14     Jurisdiction and Venue     11  
 
    6.15     Waiver of Rights to Jury Trial     11  
 
    6.16     Entire Agreement     11  
 
    6.17     Counterparts     11  

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AMENDED AND RESTATED SECURITY AGREEMENT
(MEMBERSHIP PLEDGE)
     THIS AMENDED AND RESTATED SECURITY AGREEMENT (Membership Pledge) (this
“Security Agreement”) dated as of December 28, 2006, is entered into by and
between PRIMEENERGY CORPORATION, a Delaware corporation (the “Pledgor”), and
GUARANTY BANK, FSB, a federal savings bank as agent for the benefit of the
Lenders (the “Agent”).
W I T N E S S E T H:
     WHEREAS, pursuant to the terms and conditions of the Credit Agreement dated
December 19, 2002, executed in connection with a revolving loan extended to
PRIMEENERGY CORPORATION, et al., by Agent and the Lenders, as amended by First
Amendment dated June 1, 2003 and Second Amendment dated September 22, 2003, as
amended by Third Amendment to Credit Agreement dated effective as of
February 17, 2004, as amended by Fourth Amendment to Credit Agreement dated
December 28, 2004, as amended by Fifth Amendment to Credit Agreement dated
March 18, 2005, and as amended by Letter Amendments to Credit Agreement dated
August 4, 2005, December 16, 2005 and May 12, 2006, as amended by Amended and
Restated Credit Agreement dated December 28, 2006, as such agreement may be
amended, restated, or supplemented from time to time (the “Credit Agreement”),
the Agent and the Lenders have agreed to extend credit to or for the benefit of
the Pledgor;
     WHEREAS, the Pledgor is the owner of the shares of issued and outstanding
membership interest described in Schedule I hereof (the “Securities”); and
     WHEREAS, the Pledgor and Agent entered into a Security Agreement
(Membership Pledge) dated as of June 6, 2006, and the parties hereto desire to
amend and restate such Security Agreement (Membership Pledge);
     WHEREAS, pursuant to the terms of the Credit Agreement, and as an
inducement to the Agent and the Lenders to extend credit to or for the benefit
of the Pledgor pursuant to the Credit Agreement the Pledgor has agreed to
execute this Security Agreement in favor of the Agent for the benefit of the
Lenders;
     NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
     1.1 Terms Defined Above. As used in this Security Agreement, the terms
“Agent,” “Credit Agreement,” “Pledgor,” “Security Agreement,” and “Securities”
will have the meanings indicated above.
     1.2 Terms Defined in Credit Agreement. Each capitalized term used but not
defined herein shall have the meaning assigned to such term in the Credit
Agreement.

 

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     1.3 Additional Defined Terms. As used in this Security Agreement, the
following terms will have the meanings indicated:
     (a) “Collateral” will mean the Securities and all certificates or
agreements representing or granting rights in the Securities; all dividends,
cash, instruments and other Property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the
Securities, including, without limitation, all additional shares of stock of the
entities listed on Schedule I from time to time acquired by the Pledgor by way
of stock dividend or stock split; the certificates representing such additional
shares; all dividends, cash, instruments or other Property from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such additional shares; and all proceeds of any of the foregoing
in this definition.
     (b) “Event of Default” shall mean any Event of Default, as defined in the
Credit Agreement, or the failure of the Pledgor to comply with Regulations G, T,
U or X of the Board of Governors of the Federal Reserve System, as amended.
     1.4 Undefined Financial Accounting Terms. Undefined financial accounting
terms used in this Security Agreement shall have the meanings assigned to such
terms according to GAAP.
     1.5 Terms Defined in Texas Business and Commerce Code. Any term used herein
that is defined in the Texas Business and Commerce Code shall have the meaning
assigned to such term therein, unless the context otherwise requires or such
term is otherwise defined herein.
     1.6 References. The words “hereby,” “herein,” “hereinabove,” “hereinafter,”
“hereinbelow,” “hereof,” “hereunder,” and words of similar import when used in
this Security Agreement shall refer to this Security Agreement as a whole and
not to any particular Article, Section, or provision of this Security Agreement.
References in this Security Agreement to Article or Section numbers are to such
Articles or Sections of this Security Agreement unless otherwise specified.
     1.7 Articles and Sections. This Security Agreement, for convenience only,
has been divided into Articles and Sections; and it is understood that the
rights and other legal relations of the parties hereto shall be determined from
this instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
     1.8 Number and Gender. Whenever the context requires, reference herein made
to the single number shall be understood to include the plural; and likewise,
the plural shall be understood to include the singular. Words denoting sex shall
be construed to include the masculine, feminine and neuter, when such
construction is appropriate; and specific enumeration shall not exclude the
general but shall be construed as cumulative. Definitions of terms defined in
the singular or plural shall be equally applicable to the plural or singular, as
the case may be, unless otherwise indicated.

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ARTICLE 2
SECURITY INTEREST
     2.1 Grant of Security Interest in Collateral. The Pledgor, for value
received, the receipt and sufficiency of which are hereby acknowledged, and to
induce the Agent to extend credit to or for the benefit of the Pledgor, hereby
pledges to the Agent, and its successors and assigns, and hereby grants to the
Agent, and its successors and assigns, a first lien on and a security interest
in the membership interest described on Schedule I (“Collateral”) to secure the
Obligations.
     2.2 Delivery of Collateral. All certificates or instruments representing or
evidencing the Securities shall be delivered to and held by the Agent for the
sole purpose of possession of the Collateral or any portion thereof pursuant to
this Security Agreement, and shall be in suitable form for transfer by delivery,
or shall be accompanied by duly executed instruments of transfer or assignment
in blank, all in form and substance satisfactory to the Agent. The Agent shall
at all times have actual possession of the Securities and shall be deemed to
have possession of any of the Collateral in transit to it or set apart for it.
     2.3 Power of Attorney. The Pledgor hereby irrevocably constitutes and
appoints the Agent and any authorized officer or agent thereof, with full power
of substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Pledgor and in the name of the
Pledgor or in its own name, from time to time in the discretion of the Agent,
for the purpose of carrying out the terms of this Security Agreement, and
without notice to the Pledgor, to take any and all appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Security Agreement, including,
without limitation, the following:
     (a) to transfer to or register any or all of the Collateral in the name of
the Agent or any of its nominees;
     (b) to exchange the certificates or instruments representing or evidencing
the Collateral for certificates or instruments of smaller or larger
denominations;
     (c) upon the occurrence and during the continuance of any Event of Default,
(i) to receive payment of and receipt for any and all moneys, claims and other
amounts due and to become due at any time in respect of or arising out of any
Collateral, (ii) to commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any part thereof and to enforce any other right in respect of any
Collateral, (iii) to defend any suit, action or proceeding brought against the
Pledgor with respect to any Collateral, (iv) to settle, compromise or adjust any
suit, action or proceeding described above and, in connection therewith, to give
such discharges or releases as the Agent may deem appropriate, and (v) to
complete any blanks contained in any instruments of transfer or assignment
appended to or delivered with the certificates representing the Securities; and
     (d) to exchange any of the Collateral for other Property upon
reorganization, recapitalization or other readjustment of any of the issuers of
the Securities and in

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connection therewith to deposit any of the Collateral with any committee or
depository upon such terms as the Agent may determine; and, subsequent to any
Event of Default, to exercise, at the option of the Agent, voting rights as to
any of the Collateral;
all without notice and without liability except to account for Property actually
received by the Agent.
     The Pledgor hereby ratifies all that said attorney shall lawfully do or
cause to be done within the scope of the power of attorney granted hereunder.
This power of attorney is a power coupled with an interest and shall be
irrevocable so long as any Obligation remains outstanding or any Commitment
exists. The powers conferred on the Agent hereunder are solely to protect the
interests of the Agent in the Collateral and shall not impose any duty upon it
to exercise any such powers. The Agent shall be accountable only for amounts
that it actually receives as a result of the exercise of such powers, and
neither it nor any of its officers, directors, employees, or agents shall be
responsible to the Pledgor for any act or failure to act, except for gross
negligence.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
     To induce the Agent to enter into the Credit Agreement and to make Loans to
or for the benefit of the Pledgor, the Pledgor represents and warrants to the
Agent (which representations and warranties shall survive the delivery of this
Security Agreement and the other Loan Documents) that:
     3.1 Status of Collateral. All signatures on the certificates evidencing the
Securities are genuine or authorized; the transfer of the Securities by the
Pledgor to the Agent are effective; and the Pledgor knows of no fact that might
impair the validity of the Securities. The Securities (a) have been duly
authorized, validly issued, drawn, made, and/or accepted, (b) are genuine,
validly outstanding, fully paid, and nonassessable, (c) were not issued in
violation of the preemptive rights of any Person or any agreement by which the
Pledgor or any issuer of such Collateral is bound, and (d) have not been
materially altered.
     3.2 No Material Misstatements. No information, exhibit, or report furnished
by the Pledgor to the Agent in connection with the negotiation of this Security
Agreement contained or contains any material misstatement of fact or omitted to
state a material fact or any fact necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading.
     3.3 Ownership and Liens. Except for the security interest in favor of the
Agent, the Pledgor owns (and at the time of transfer or delivery of the
Collateral to the Agent owned or will own) good and indefeasible title to the
Collateral free and clear of any other security interests, liens, adverse
claims, or options; the Pledgor has (and at the time of transfer or delivery of
the Collateral to the Agent had or will have) full right, power, and authority
to convey, assign, transfer, and deliver the Collateral to the Agent and to
grant a security interest in the Collateral to the Agent in the manner provided
herein.

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ARTICLE 4
COVENANTS AND AGREEMENTS
     Unless agreed in writing by the Agent to the contrary, the Pledgor agrees,
so long as any Obligation remains outstanding or unpaid or any Commitment
exists:
     4.1 Payment of Assessments and Charges. To pay all taxes, charges, liens
and assessments against the Collateral; and upon the failure of the Pledgor to
do so, the Agent at its option may, but will not be obligated to, pay any of
them.
     4.2 Delivery of Collateral. That any and all (a) dividends paid or payable
other than in cash and all instruments and other property received, receivable
or otherwise distributed in respect of or in exchange for any Collateral,
(b) dividends and other distributions paid or payable in cash in respect of any
Collateral in connection with a partial or total liquidation or dissolution or
in connection with a reduction of capital, capital surplus or paid-in surplus,
and (c) cash paid, payable or otherwise distributed in respect of principal of,
in redemption of or in exchange for any Collateral, shall be forthwith delivered
to the Agent to hold as Collateral for the benefit of the Agent and shall, if
received by the Pledgor, be received in trust for the benefit of the Agent, be
segregated from the other property or funds of the Pledgor, and be forthwith
delivered to the Agent as Collateral in the same form as so received (with any
necessary endorsement).
     4.3 Further Assurances. To promptly cure any defects in the execution and
delivery of this Security Agreement and execute, acknowledge, and deliver such
other assurances and instruments and take such other action as shall, in the
opinion of the Agent, be necessary to fulfill the terms of this Security
Agreement and to confirm, perfect, and preserve the security interest created
and intended to be created hereby and to vest more completely in and assure to
the Agent its rights under this Security Agreement.
     4.4 Prohibited Liens and Filings. That it will not pledge, mortgage, or
otherwise encumber, create, or suffer a security interest to exist in any of the
Collateral (other than in favor of the Agent) or sell, assign, or otherwise
transfer any of the Collateral to anyone other than the Agent or file or permit
to be filed any financing statement or other security instrument with respect to
the Collateral other than in favor of the Agent.
ARTICLE 5
RIGHTS AND REMEDIES
     5.1 Remedies Upon Default. Upon the occurrence and during the continuance
of an Event of Default, the Agent may, at its option, declare all Obligations
immediately due and payable, without presentment, demand, protest, notice of
protest, default or dishonor, notice of intent to accelerate maturity, notice of
acceleration of maturity or other notice of any kind, all of which are hereby
expressly waived by the Pledgor, and may exercise any and all other remedies
provided by law or pursuant to the Loan Documents.
     (a) If all or any part of the Obligations shall become due and payable, the
Agent may then, or at any time thereafter, apply, set-off, collect, sell in one
or more sales, or otherwise dispose of, any or all of the Collateral, in its
then condition or following any

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commercially reasonable preparation or processing, in such order as the Agent
may elect. Any such sale may be made either at public or private sale at the
place of business of the Agent, any brokers’ board or securities exchange or
elsewhere, either for cash or upon credit or for future delivery, at such price
as the Agent may deem fair. The Agent may be the purchaser of any or all
Collateral so sold and may hold the same thereafter in its own right free from
any claim of the Pledgor or right of redemption. No such purchase or holding by
the Agent shall be deemed a retention by the Agent in satisfaction of the
Obligations. All demands, notices, and advertisements, and the presentment of
property at sale are hereby waived. If, notwithstanding the foregoing
provisions, any applicable provision of the Uniform Commercial Code or other law
requires the Agent to give reasonable notice of any such sale or disposition or
other action, ten days’ prior written notice shall constitute reasonable notice.
The Agent may require the Pledgor to assemble the Collateral and make it
available to the Agent at a place designated by the Agent that is reasonably
convenient to the Agent and the Pledgor. Any sale hereunder may be conducted by
an auctioneer or any officer or agent of the Agent.
     (b) In connection with the sale of Collateral which is stock or other
investment securities, the Agent must limit prospective purchasers to the extent
deemed necessary or advisable by the Agent to render such sale exempt from the
registration requirements of the Securities Act of 1933, as amended (the “Act”),
and any applicable state securities laws. No sale so made in good faith by the
Agent shall be deemed not to be “commercially reasonable” because so made;
provided, however, that nothing in this Security Agreement shall be deemed to
impose any obligation whatsoever to file a registration statement under the Act
or any state securities law with respect to any sale of Collateral by the Agent.
     5.2 Voting Rights, Dividends, Etc. Prior to Default. So long as no Event of
Default shall have occurred and be continuing:
     (a) the Pledgor will be entitled to exercise any and all voting and other
consensual rights pertaining to the Collateral or any part thereof for any
purpose not inconsistent with the terms of this Security Agreement;
     (b) subject to the further provisions of this Security Agreement, the
Pledgor shall be entitled to receive and retain any and all dividends paid in
respect of the Collateral; provided, however, that any and all

  (1)   dividends paid or payable other than in cash and all instruments and
other Property received, receivable, or otherwise distributed in respect of or
in exchange for any Collateral,     (2)   dividends and other distributions paid
or payable in cash in respect of any Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of capital,
capital surplus or paid-in surplus, and

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     (3) cash paid, payable or otherwise distributed in respect of principal of,
in redemption of or in exchange for any Collateral,
shall be forthwith delivered to the Agent to hold as Collateral and shall, if
received by the Pledgor, be received in trust for the benefit of the Agent, be
segregated from the other property or funds of the Pledgor, and be forthwith
delivered to the Agent as Collateral in the same form as so received (with any
necessary endorsement); and
     (c) the Agent shall execute and deliver (or cause to be executed and
delivered) to the Pledgor all such proxies and other instruments as the Pledgor
may reasonably request for the purpose of enabling the Pledgor to exercise the
voting and other rights which it is entitled to exercise pursuant to
Section 5.2(a) above and to receive the dividends which it is authorized to
receive and retain.
     5.3 Voting Rights, Dividends, Etc. After Default. Upon the occurrence and
during the continuance of an Event of Default:
     (a) at the option of the Agent with notice to the Pledgor, all rights of
the Pledgor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 5.2(a) above and to
receive the dividends which it would otherwise be authorized to receive and
retain pursuant to Section 5.2(b) above shall cease and shall thereupon become
vested in the Agent, who shall thereupon have the sole right to exercise such
voting and other consensual rights and to receive and hold as Collateral such
dividends; and
     (b) all dividends which are received by the Pledgor contrary to the
provisions of Section 5.3(a) above shall be received in trust for the benefit of
the Agent, shall be segregated from other funds of the Pledgor and shall be
forthwith paid over to the Agent as Collateral in the same form as so received
(with any necessary endorsement).
     5.4 Proceeds. Prior to all or any part of the Obligations becoming due and
payable as specified in Section 5.1, all cash sums or other property received by
the Agent on account of the Collateral shall be held as Collateral. After all or
any part of the Obligations shall become due and payable as specified in
Section 5.1, the proceeds of any sale or other disposition of the Collateral and
all sums received or collected by the Agent from or on account of the Collateral
shall be applied by the Agent as follows:
     (a) first, to payment or reimbursement of that portion of the Obligations
constituting fees, expenses and indemnities payable to the Agent in its capacity
as such;
     (b) second, pro rata to payment or reimbursement of that portion of the
Obligations constituting fees, expenses and indemnities payable to the Lenders;
     (c) third, pro rata to payment of accrued interest on the Loans;
     (d) fourth, pro rata to payment of principal outstanding on the Loans and
Obligations owed to any Lender or affiliate of any Lender under any Commodity
Hedge Agreement or Rate Management Transaction;

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     (e) fifth, pro rata to any other Obligations;
     (f) sixth, to serve as cash collateral to be held by the Agent to secure
the LC Exposure; and
     (g) seventh, any excess, after all of the Obligations shall have been
indefeasibly paid in full in cash, shall be paid to the Borrower or as otherwise
required by any Governmental Authority.
     5.5 Agent Duties. The Agent shall be under no duty whatsoever to make or
give any presentment, demand for performance, notice of nonperformance, protest,
notice of protest, notice of dishonor, or other notice or demand in connection
with any Collateral or the Obligations, or to take any steps necessary to
preserve any rights against prior parties. The Agent shall not be liable for
failure to collect or realize upon any or all of the Obligations or Collateral,
or for any delay in so doing, nor shall the Agent be under any duty to take any
action whatsoever with regard thereto. The Agent shall use reasonable care in
the custody and preservation of any Collateral in its possession. The Agent
shall have no duty to comply with any recording, filing, or other legal
requirements necessary to establish or maintain the validity, priority, or
enforceability of, or the rights of the Agent in or to, any of the Collateral.
     5.6 The Agent’s Actions. The Pledgor waives any right to require the Agent
to proceed against any Person, exhaust any collateral or pursue any other remedy
in the power of the Agent; waives any and all notice of acceptance of this
Security Agreement or of creation, modification, renewal, or extension for any
period of any Obligations; and waives any defense arising by reason of any
disability or other defense of any guarantor or other Person primarily or
secondarily liable with respect to all or any portion of the Obligations (“Other
Liable Party”), or by reason of the cessation from any cause whatsoever of the
liability of any Other Liable Party. All dealings between the Pledgor and the
Agent shall conclusively be presumed to have been had or consummated in reliance
upon this Security Agreement. Until all Obligations shall have been paid and/or
performed in full and the Commitment shall have terminated, the Pledgor
(a) shall have no right to subrogation, (b) waives any right to enforce any
remedy that the Agent now has or may hereafter have against any Other Liable
Party, and (c) except as otherwise expressly provided in this Security
Agreement, waives any benefit of and right to participate in any collateral or
security whatsoever now or hereafter held by the Agent.
ARTICLE 6
MISCELLANEOUS
     6.1 Transfer of Obligations and Collateral. Subject to the terms of the
Credit Agreement, the Pledgor hereby agrees that the Agent may transfer any or
all of the Obligations. Upon any such transfer, the Agent may transfer its
rights in the Collateral and shall be fully discharged thereafter from all
liability with respect to the Collateral so transferred, and the transferee
shall be vested with all rights, powers, and remedies of the Agent hereunder
with respect to Collateral so transferred. With respect to any Collateral not so
transferred, the Agent shall retain all rights, powers, and remedies hereby
given. The Agent may at any time deliver any or all of the Collateral to the
Pledgor, whose receipt shall be a complete and full acquittance

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for the Collateral so delivered, and the Agent shall thereafter be discharged
from any liability therefor.
     6.2 Cumulative Security. The execution and delivery of this Security
Agreement in no manner shall impair or affect any other security (by endorsement
or otherwise) for the payment of the Obligations. No security taken hereafter as
security for payment of all or any portion of the Obligations shall impair in
any manner or affect this Security Agreement. All such present and future
additional security is to be considered as cumulative security.
     6.3 Continuing Agreement. This is a continuing agreement and the conveyance
hereunder shall remain in full force and effect and all the rights, powers, and
remedies of the Agent hereunder shall continue to exist until the Obligations
shall be paid in full as the same become due and payable, the Commitment has
terminated, and the Agent, upon request of the Pledgor, has executed a written
termination statement, reassigned to the Pledgor, without recourse, the
Collateral and all rights and liens conveyed hereby and returned possession of
the Collateral to the Pledgor. Furthermore, it is contemplated by the parties
hereto that there may be times when no Obligations shall be owing.
Notwithstanding such occurrences, this Security Agreement shall remain valid and
shall be in full force and effect as to subsequent Obligations provided that the
Agent has not executed a written termination statement and returned possession
of the Collateral to the Pledgor. Otherwise, this Security Agreement shall
continue irrespective of the fact that the liability of the Pledgor or any Other
Liable Party may have ceased and notwithstanding the death or incapacity of the
Pledgor or any Other Liable Party or any other event or proceeding affecting the
Pledgor and/or any Other Liable Party.
     6.4 Cumulative Rights. The rights, powers, and remedies of the Agent
hereunder shall be in addition to all rights, powers, and remedies given by
statute or rule of law and are cumulative. The exercise of any one or more of
the rights, powers, and remedies provided herein shall not be construed as a
waiver of any other rights, powers, and remedies. The Agent shall have the
rights, powers, and remedies of a secured party under the Texas Business and
Commerce Code, as amended.
     6.5 Exercise of Rights. Time shall be of the essence for the performance of
any act under this Security Agreement by the Pledgor, but neither the Agent’s
acceptance of partial or delinquent payments nor any forbearance, failure, or
delay by the Agent in exercising any right, power or remedy shall be deemed a
waiver of any obligation of the Pledgor or any Other Liable Party or of any
right, power, or remedy of the Agent or preclude any other or further exercise
thereof; and no single or partial exercise of any right, power, or remedy shall
preclude any other or further exercise thereof or the exercise of any other
right, power, or remedy.
     6.6 Remedy and Waiver. The Agent may remedy or waive any default hereunder
without waiving the default remedied or waiving any prior or subsequent default.
     6.7 Non-Judicial Remedies. The Agent may enforce its rights hereunder
without prior judicial process or judicial hearing. The Pledgor expressly
waives, renounces, and knowingly relinquishes any and all legal rights which
might otherwise require the Agent to enforce its rights by judicial process. In
so providing for non-judicial remedies, the Pledgor recognizes and concedes that
such remedies are consistent with the usage of the trade, are

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responsive to commercial necessity and are the result of bargain at arm’s
length. Nothing herein is intended to prevent the Agent or the Pledgor from
resorting to judicial process at such party’s option.
     6.8 Preservation of Liability. Neither this Security Agreement nor the
exercise by the Agent of (or the failure to so exercise) any right, power, or
remedy conferred herein or by law shall be construed as relieving the Pledgor or
any Other Liable Party from full liability thereon and for any deficiency
thereon.
     6.9 Notices and Other Communications. Except as to verbal notices expressly
authorized herein, which verbal notices shall be confirmed in writing, all
notices, requests, and communications hereunder shall be in writing (including
by telecopy). Unless otherwise expressly provided herein, any such notice,
request, demand, or other communication shall be deemed to have been duly given
or made when delivered by hand, or, in the case of delivery by mail, when
deposited in the mail, certified mail, return receipt requested, postage
prepaid, or, in the case of telecopy notice, when receipt thereof is
acknowledged orally or by written confirmation report, addressed as follows:
     (a)   if to the Agent, to:
Guaranty Bank, FSB
333 Clay Street, Suite 4400
Houston, Texas 77002
Attention: Kelly L. Elmore, III
Telecopy: (713) 890-8868
     (b)   if to the Pledgor, to:
PrimeEnergy Corporation
One Landmark Square
Stamford, Connecticut 06901
Attention: Ms. Beverly A. Cummings
Telecopy: (203) 358-5786
Any party may, by proper written notice hereunder to the others, change the
individuals or addresses to which such notices to it shall thereafter be sent.
     6.10 Parties in Interest. All covenants and agreements herein contained by
or on behalf of the Pledgor or the Agent shall be binding upon and inure to the
benefit of the Pledgor or the Agent, as the case may be, and their respective
legal representatives, successors, and assigns.
     6.11 Amendment and Waiver. This Security Agreement may not be amended nor
may any of its terms be waived except in writing duly signed by the party
against whom enforcement of the amendment or waiver is sought.
     6.12 Invalidity. If any provision of this Security Agreement is rendered or
declared illegal, invalid, or unenforceable by reason of any existing or
subsequently enacted legislation or

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by a judicial decision that has become final, the Pledgor and the Agent shall
promptly meet and negotiate substitute provisions for those rendered illegal,
invalid, or unenforceable, but all of the remaining provisions shall remain in
full force and effect.
     6.13 Governing Law. This Security Agreement shall be deemed to be a
contract made under and shall be construed in accordance with and governed by
the laws of the State of Texas without giving effect to principles thereof
relating to conflicts of law, provided, however, that Vernon’s Texas Civil
Statutes, Article 5069, Chapter 15 (which regulates certain revolving credit
loan accounts and revolving tri-party accounts) shall not apply.
     6.14 Jurisdiction and Venue. All actions or proceedings with respect to,
arising directly or indirectly in connection with, out of, related to, or from
this Security Agreement or any other Loan Document to which the Pledgor is a
party may be litigated, at the sole discretion and election of the agent, in
courts having situs in Houston, Harris County, Texas. The Pledgor hereby submits
to the jurisdiction of any local, state, or federal court located in Houston,
Harris County, Texas, and hereby waives any rights it may have to transfer or
change the jurisdiction or venue of any litigation brought against it by the
agent in accordance with this section.
     6.15 Waiver of Rights to Jury Trial. The Pledgor and the Agent hereby
knowingly, voluntarily, intentionally, irrevocably, and unconditionally waive
all rights to trial by jury in any action, suit, proceeding, counterclaim, or
other litigation that relates to or arises out of any of this security agreement
or any other loan document or the acts or omissions of the agent in the
enforcement of any of the terms or provisions of this Security Agreement or any
other loan document or otherwise with respect thereto. The provisions of this
Section are a material inducement for the Agent entering into the Credit
Agreement.
     6.16 Entire Agreement. This Security Agreement constitutes the entire
Agreement between the parties hereto with respect to the subject hereof and
shall supersede any prior agreements, whether written or oral, between the
parties hereto relating to the subject hereof. Furthermore, in this regard, this
Security Agreement and the other written loan documents represent, collectively,
the final agreement among the parties thereto and may not be contradicted by
evidence of prior, contemporaneous, or subsequent oral agreements of such
parties. There are no unwritten oral agreements among such parties.
     6.17 Counterparts. For the convenience of the parties, this Security
Agreement may be executed in multiple counterparts and by different parties
hereto in separate counterparts, each of which for all purposes shall be deemed
to be an original and all of which together shall constitute one and the same
Security Agreement.
     IN WITNESS WHEREOF, this Security Agreement is executed as of the date
first above written.

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            PLEDGOR:

PRIMEENERGY CORPORATION
      By:   /s/ Beverly A. Cummings        Beverly A. Cummings        Executive
Vice President, Treasurer, and
Chief Financial Officer     

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            AGENT AND LENDER:

GUARANTY BANK, FSB
      By:   /s/ David M. Butler         David M. Butler         Vice President 
   

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SCHEDULE I

                  Class of   Membership   Number of Issuer   Stock   Certificate
No.   Shares
Prime Offshore L.L.C.
  Common shares   1   7,745,032

Schedule I - i