exv10w2






Exhibit 10.2




[Execution Version]




SECURITY AGREEMENT




Dated as of September 28, 2010



among



BASIC ENERGY SERVICES, INC.



and the other Debtors parties hereto



in favor of



CAPITAL ONE, NATIONAL ASSOCIATION,



as Collateral Agent



 









 






TABLE OF CONTENTS



	 	 	 	 	 
	 	 	Page	 
	SECTION 1. DEFINITIONS
	 	 	1	 
	SECTION 2. GRANT OF SECURITY INTEREST
	 	 	3	 
	2.1 Grant of Security Interest
	 	 	3	 
	2.2 Avoidance Limitation
	 	 	4	 
	2.3 Debtors Remain Liable
	 	 	4	 
	SECTION 3. REPRESENTATIONS AND WARRANTIES
	 	 	4	 
	3.1 Title; No Other Liens
	 	 	4	 
	3.2 Perfected First Priority Liens
	 	 	5	 
	3.3 Debtor’s Legal Name; Jurisdiction of Organization; Chief Executive Office
	 	 	5	 
	3.4 Certain Collateral
	 	 	5	 
	3.5 Receivables
	 	 	5	 
	SECTION 4. COVENANTS AND AGREEMENTS
	 	 	6	 
	4.1 Covenants in Credit Agreement
	 	 	6	 
	4.2 Maintenance of Insurance
	 	 	6	 
	4.3 Maintenance of Perfected Security Interest; Further Documentation;
Filing Authorization; Further Assurances; Power of Attorney
	 	 	6	 
	4.4 Changes in Name, etc.
	 	 	7	 
	4.5 Delivery of Instruments and Chattel Paper
	 	 	8	 
	4.6 Deposit Accounts
	 	 	8	 
	4.7 Modifications of Receivables, Chattel Paper, Instruments and Payment
Intangibles
	 	 	8	 
	4.8 Actions With Respect to Certain Collateral
	 	 	8	 
	SECTION 5. LIMITATION ON PERFECTION OF SECURITY INTEREST
	 	 	9	 
	5.1 Chattel Paper and Instruments
	 	 	9	 
	SECTION 6. REMEDIAL PROVISIONS
	 	 	9	 
	6.1 General Interim Remedies
	 	 	9	 
	6.2 Receivables, Chattel Paper, Instruments and Payment Intangibles
	 	 	10	 
	6.3 Foreclosure
	 	 	10	 
	6.4 Application of Proceeds
	 	 	11	 
	6.5 Waiver of Certain Rights
	 	 	12	 
	6.6 Remedies Cumulative
	 	 	12	 
	6.7 Reinstatement
	 	 	12	 






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TABLE OF CONTENTS

(CONTINUED)




	 	 	 	 	 
	 	 	Page	 
	SECTION 7. MISCELLANEOUS
	 	 	12	 
	7.1 Amendments
	 	 	12	 
	7.2 Notices
	 	 	12	 
	7.3 No Waiver by Course of Conduct; Cumulative Remedies; No Duty
	 	 	12	 
	7.4 Enforcement Expenses; Indemnification
	 	 	13	 
	7.5 Successors and Assigns
	 	 	13	 
	7.6 Set-Off
	 	 	14	 
	7.7 Counterparts
	 	 	14	 
	7.8 Severability
	 	 	14	 
	7.9 Section Headings
	 	 	14	 
	7.10 Integration
	 	 	14	 
	7.11 GOVERNING LAW ETC
	 	 	14	 
	7.12 Additional Debtors
	 	 	16	 
	7.13 Termination; Releases
	 	 	16	 






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TABLE OF CONTENTS

(CONTINUED)




	 	 	 	 	 

	SCHEDULES
	 	 	 	 
	 
	 	 	 	 
	Schedule 3.3
	 	—	 	Organization Information
	Schedule 3.4
	 	—	 	Certain Collateral
	Schedule 3.5
	 	—	 	Instruments
	Schedule 4.6
	 	—	 	Deposit Accounts
	 
	 	 	 	 
	ANNEXES
	 	 	 	 
	 
	 	 	 	 
	Annex I
	 	—	 	Security Agreement Supplement






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SECURITY AGREEMENT




     This SECURITY AGREEMENT dated as of September 28, 2010 (this “Agreement”), is among
BASIC ENERGY SERVICES, INC., a Delaware corporation (the “Borrower”), the undersigned
subsidiaries of the Borrower (the Borrower and such undersigned subsidiaries collectively being the
“Debtors”), and CAPITAL ONE, NATIONAL ASSOCIATION, 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 the Credit Agreement dated as of September 28, 2010 (as amended or
otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the
Lenders from time to time parties thereto, and Capital One, National Association, as Administrative
Agent, Collateral Agent and Issuing Bank. Pursuant to Article VII of the Credit Agreement (the
“Guarantee”), the Debtors (other than the Borrower) have agreed to guarantee, among other
things, the full payment and performance of all of the Borrower’s obligations under the Credit
Agreement. It is a condition precedent to the effectiveness of the Credit Agreement and the making
of credit extensions thereunder that the Debtors shall have entered into this Agreement in order to
secure the Borrower’s and Debtors’ obligations under the Credit Agreement (including the Guarantee)
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 extensions of credit
under the Credit Agreement. Therefore, in consideration of the credit expected to be received in
connection with the Credit Agreement, the Debtors jointly and severally agree with the Collateral
Agent as follows:



SECTION 1.




DEFINITIONS



     1.1 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
Credit Agreement. All terms used herein and defined in the UCC shall have the same definitions
herein as specified therein.



     1.2 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.



     1.3 The following terms shall have the following meanings:



     “Chattel Paper” means all of each Debtor’s present and future chattel paper, including
electronic chattel paper.



     “Collateral” has the meaning specified in Section 2.1.



 









 





     “Collateral Account” means any deposit account with the Collateral Agent which is
designated, maintained, and under the sole control of the Collateral Agent and is pledged to the
Collateral Agent which has been established pursuant to the provisions of this Agreement for the
purposes described in this Agreement including collecting, holding, disbursing, or applying certain
funds, all in accordance with this Agreement.



     “Control Agreement” means any deposit account control agreement entered into pursuant
to Section 4.6 of this Agreement as of the date hereof with respect to a Deposit Account.



     “Deposit Accounts” means the deposit accounts held in the names of Debtors and listed
on Schedule 4.6, and any other accounts into which Receivables are paid.



     “Event of Default” means any “Event of Default” under the Credit Agreement.



     “Instruments” means all of each Debtor’s instruments, including all promissory notes
and other evidences of indebtedness, including intercompany instruments, other than instruments
that constitute, or are a part of a group of writings that constitute, Chattel Paper.



     “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.



     “Permitted Prior Liens” means Liens permitted by Section 6.02(a) through (b) and (e)
through (j) of the Credit 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 any of the Collateral, and (d) any and all
proceeds of, and all claims for, any insurance, indemnity, warranty or guaranty payable from time
to time with respect to any of the Collateral, including any credit insurance with respect to
Receivables, in each case whether represented as money, deposit accounts, accounts, general
intangibles, securities, instruments, documents, chattel paper, or inventory.



     “Receivables” means all of each Debtor’s present and future accounts, accounts from
Governmental Authorities, and payment intangibles (a) arising from the provision of services, sale
of Inventory, or renting of equipment to the customers of any Debtor or (b) arising otherwise and,
in the case of this clause (b), not consisting of accounts, chattel Paper, instruments, or



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payment intangibles that constitute proceeds, supporting obligations or products of the
collateral under the Senior Secured Notes Security Agreement as in effect on the date hereof,
together with, in the case of clauses (a) and (b), all of the right, title and interest of any of
the Debtors in and to (i) all supporting obligations and security provided, pledged, assigned,
hypothecated or granted to or held by any of the Debtors to secure the foregoing, (ii) all of any
of the Debtors’ right, title and interest in and to any goods or services, the sale or leasing of
which gave rise thereto, (iii) all guarantees, endorsements and indemnifications on, or of, any of
the foregoing, (iv) 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, (v) all credit
information, reports and memoranda relating thereto, and (vi) all Instruments and Chattel Paper
evidencing 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, in each case, 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.



     “Secured Obligations” means (a) all principal, interest, premium, fees,
reimbursements, indemnifications, and other amounts now or hereafter owed by the Borrower under the
Credit Agreement, this Agreement, and the other Loan Documents; (b) all amounts now or hereafter
owed by the other Debtors under the Guarantee, this Agreement, and the other Loan Documents; (c)
all Obligations now or hereafter owed by any Debtor to any Lender or Affiliate of a Lender with
respect to any Hedging Agreement, (d) all Obligations now or hereafter owed by any Debtor to any
Lender or Affiliate of a Lender with respect to any treasury, depository or cash management
agreement, and (e) any increases, extensions, renewals, replacements, and rearrangements of the
foregoing 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.



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



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



SECTION 2.




GRANT OF SECURITY INTEREST



     2.1 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 (the “Collateral”) to
secure the payment and performance of the Secured Obligations: (a) all Inventory, all Receivables,
all Records, and all Deposit Accounts, (b) any and all additions, accessions and improvements to,
all substitutions



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and replacements for and all products of or derived from the foregoing, and (c) all Proceeds
of the foregoing.



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.




     2.2 Avoidance Limitation. Notwithstanding Section 2.1 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 Security 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 Guarantee, any other agreement or applicable law shall be taken into
account.



     2.3 Debtors Remain Liable. Anything herein to the contrary notwithstanding: (a) each
Debtor shall remain liable under the contracts included in the Collateral to the extent set forth
therein to perform such Debtor’s obligations thereunder to the same extent as if this Agreement had
not been executed; (b) the exercise by the Collateral Agent of any rights hereunder shall not
release any Debtor from any obligations under the contracts included in the Collateral; and (c) the
Collateral Agent shall not have any obligation under the contracts included in the Collateral by
reason of this Agreement, nor shall the Collateral Agent be obligated to perform or fulfill any of
the obligations of any Debtor thereunder, including any obligation to make any inquiry as to the
nature or sufficiency of any payment any Debtor may be entitled to receive thereunder, to present
or file any claim, or to take any action to collect or enforce any claim for payment thereunder.



SECTION 3.




REPRESENTATIONS AND WARRANTIES


To induce the Lenders to make credit extentions to the Borrower under the Credit Agreement, each
Debtor hereby represents and warrants to the Collateral Agent, for the benefit of the holders of
the Secured Obligations, that:




     3.1 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 ratable benefit of the
holders of the Secured Obligations, pursuant to this Agreement or (b) as are permitted by the
Credit Agreement.



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     3.2 Perfected First Priority Liens. The security interests granted pursuant to this
Agreement (a) upon completion of the filing of financing statements describing the Collateral in
the offices located in the jurisdictions listed on Schedule 3.3 and the taking of all
applicable actions in respect of perfection contemplated by Sections 4.5, 4.6 and
4.8 in respect of the applicable Collateral, will constitute valid perfected security
interests in all of the Collateral in favor of the Collateral Agent, for the benefit of the holders
of the Secured Obligations, as collateral security for such Debtor’s Obligations, enforceable in
accordance with the terms hereof 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 Section 5).



     3.3 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 4.4. On the date hereof, such Debtor’s jurisdiction
of organization, type of organization, 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.



     3.4 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 otherwise notified to the Collateral Agent pursuant to Section 4.8, none of the account
debtors or other persons obligated on any of the Collateral of such Debtor is a Governmental
Authority subject to the Federal Assignment of Claims Act or like federal or state statute or rule
in respect of such Collateral of the type described in Section 4.8(a).



     3.5 Receivables.



          (a) No amount payable to such Debtor under or in connection with any Receivable is evidenced
by any Instrument or Chattel Paper which has not been delivered to the Collateral Agent to the
extent required by Section 5. Each of the Instruments and Chattel Paper 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
lists all of the Instruments issued to or held by each Debtor as of the Closing Date.




          (b) The amounts represented by such Debtor to the Secured Parties from time to time as owing
to such Debtor in respect of the Receivables will at such times be accurate in all material
respects.




          (c) All Receivables of such Debtor existing on the Closing Date arise from bona fide sales or
leases by such Debtor of goods and services.







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SECTION 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 7.13(a):




     4.1 Covenants in Credit Agreement. 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 Default or Event of Default is caused by the failure to take such action or to
refrain from taking such action by such Debtor or any of its Subsidiaries.



     4.2 Maintenance of Insurance. Such Debtor will comply with the provisions of the
Credit Agreement governing the maintenance of insurance for any of its assets constituting
Collateral.



     4.3 Maintenance of Perfected Security Interest; Further Documentation; Filing
Authorization; Further Assurances; Power of Attorney.



          (a) Such Debtor shall maintain the security interest created by this Agreement as a perfected
first priority security interest subject only to Permitted Liens (and the limitations on perfection
and method of perfection provided in Section 5) and shall defend such security interest
against the claims and demands of all persons whomsoever.




          (b) Such Debtor will furnish to the Collateral Agent from time to time statements and
schedules 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.




          (c) Subject in each case to Section 5, each Debtor further agrees to take any other
action reasonably requested by the Collateral Agent to insure 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 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.




          (d) Each Debtor hereby irrevocably authorizes the Collateral Agent 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 (a) describe the






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Collateral and (b) 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 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.




          (e) During the existence of an Event of Default,





          (i) At Collateral Agent’s request, each Debtor shall take any actions reasonably
requested by Collateral Agent with respect to such Event of 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) Collateral Agent, whether or not named as a party to any legal proceedings, is
authorized to take any additional steps as 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
Collateral Agent in taking such action shall be paid by the Debtors; and




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



          (f) Debtor irrevocably appoints Collateral Agent as Debtor’s attorney in fact, with full
authority to act during the existence of an Event of Default for Debtor and in the name of Debtor,
to take any action and execute any agreement which Collateral Agent deems necessary or advisable to
accomplish the purposes of this Agreement, including the matters that Collateral Agent is expressly
authorized to take pursuant to this Agreement (including the matters described in paragraph (c)
above), and instituting proceedings Collateral Agent deems necessary or desirable to enforce the
rights of Collateral Agent with respect to this Agreement.




     4.4 Changes in Name, etc. Such Debtor will not, except upon 10 days’ prior written
notice to the Collateral Agent (or such shorter period as may be agreed to by the Collateral Agent
in its sole discretion) and the taking of all actions and the execution of all documents reasonably



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requested by the Collateral Agent to maintain the validity, perfection and priority of the
security interests provided for herein: (a) change its type of organization, jurisdiction of
organization or other legal structure from that referred to in Section 3.3, (b) change its
organizational number if it has one, or (c) change its name.




     4.5 Delivery of Instruments and Chattel Paper. If any amount payable under or in
connection with any of the Collateral is or becomes evidenced by any Instrument or Chattel Paper,
such Instrument or Chattel Paper shall, to the extent required by Section 5, be immediately
delivered to the Collateral Agent, duly indorsed in a manner reasonably satisfactory to the
Collateral Agent, to be held as Collateral pursuant to this Agreement.



     4.6 Deposit Accounts. Subject to the requirements of Section 5, for each
Deposit Account the Debtor maintaining such Deposit Account will, at the Collateral Agent’s request
and option, take any actions requested by the Collateral Agent to enable the Collateral Agent to
obtain “control” (within the meaning of Section 9.104 of the UCC) with respect thereto, including
the execution of Control Agreements reasonably acceptable to the Collateral Agent. The Collateral
Agent agrees with each Debtor that the Collateral Agent will not give any instructions to a
depositary bank directing the disposition of funds from time to time credited to any Deposit
Account or withhold any withdrawal rights from any Debtor, unless an Event of Default has occurred
and is continuing.



     4.7 Modifications of Receivables, Chattel Paper, Instruments and Payment Intangibles.
No Debtor will, without the Collateral Agent’s prior written consent (which consent shall not be
unreasonably withheld or delayed): (a) compromise or grant any extension of the time of payment of
any of the Collateral consisting of Receivables, Chattel Paper, Instruments or payment intangibles,
(b) settle the same for less than the full amount thereof, (c) release, wholly or partly, any
obligor liable for the payment thereof or (d) allow any credit or discount whatsoever thereon;
provided, that so long as no Event of Default has occurred and is continuing, this
Section 4.7 shall not restrict any extensions, credits, discounts, compromises or
settlements granted or made by any Debtor in the ordinary course of such Debtor’s business [and
consistent with such prudent practices used in industries that are the same as or similar to those
which such Debtor is engaged]. [NOTE: BES TO CONFIRM]



     4.8 Actions With Respect to Certain Collateral.



          (a) If any of the account debtors or other persons obligated on any of the Receivables or
Chattel Paper, Instruments or payment intangibles constituting Collateral with a value in excess of
$1,000,000 or on any contract with a value in excess of $1,000,000 in any twelve month period, is
or becomes a governmental authority subject to the Federal Assignment of Claims Act or like federal
or state statute or rule in respect of such Collateral, Debtor shall promptly (i) notify the
Collateral Agent in a writing signed by such Debtor that such account debtor or other person
obligated on such Collateral or contract is a Governmental Authority subject to the Federal
Assignment of Claims Act or like federal or state statute or rule and (ii) take all actions
reasonably required by the Collateral Agent to insure the attachment, perfection or priority of, or
the ability of the Collateral Agent to enforce, the security interest in such Collateral.







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          (b) If any goods that constitute Collateral with a value in excess of $1,000,000 are at any
time in the possession of a bailee, the applicable Debtor or Debtors shall promptly notify the
Collateral Agent thereof and, if requested by the Collateral Agent, 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.




SECTION 5.




LIMITATION ON PERFECTION OF SECURITY INTEREST



     5.1 Chattel Paper and Instruments. The perfection of the security interest granted in
Section 2 above in, respectively, Chattel Paper (whether tangible or electronic) and
Instruments will, prior to the occurrence of an Event of Default (and after the occurrence of an
Event of 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 Chattel Paper and
Instruments, the aggregate face amount of all such Chattel Paper and Instruments does not exceed
$2,500,000 and (b) with respect to any individual Chattel Paper or Instrument, the face amount
thereof does not exceed $1,000,000. Notwithstanding the foregoing, if no Event of Default exists,
then upon the request of any Debtor the Collateral Agent shall deliver any Chattel Paper or
Instrument in its possession to that Debtor if that Debtor requires possession in order to collect
such Chattel Paper or Instrument.



SECTION 6.




REMEDIAL PROVISIONS


During the existence of an Event of Default, the Collateral Agent may, at the Collateral Agent’s
option, exercise one or more of the remedies specified elsewhere in this Agreement or the following
remedies:




     6.1 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.




          (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 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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     6.2 Receivables, Chattel Paper, Instruments and Payment Intangibles. During the
existence of an Event of Default, the Collateral Agent may establish Collateral Accounts for the
purpose of collecting the payments due to the Debtors under any contracts or otherwise with respect
to the Receivables and the Chattel Paper, Instruments and/or payment intangibles constituting
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 deposit into such Collateral Account. After such
direction to the Debtors, all payments, whether of principal, interest, or other amounts, under any
contracts or otherwise with respect to the Receivables and the Chattel Paper, Instruments and/or
payment intangibles constituting 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, 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. In
connection with the foregoing, the Collateral Agent shall have the right at any time during the
existence of an Event of 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 or Chattel Paper 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 the Receivables and the Chattel Paper, Instruments
and/or payment intangibles constituting Collateral, including attorneys’ fees and out-of-pocket
expenses, shall be reimbursed by the applicable Debtor to the Collateral Agent on demand. If at
any time no Event of Default exists, then upon request of the Borrower the Collateral Agent shall
promptly revoke any instructions to account debtors to make payment to the Collateral Accounts.



     6.3 Foreclosure.



          (a) The Collateral Agent may foreclose on the Collateral in any manner permitted by the courts
of or in the State of Texas 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.







-10-









 








          (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 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 an Event of
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.




     6.4 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 reasonable 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) 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 8.02 of the Credit Agreement.


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







-11-









 








     6.5 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.



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



     6.7 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.



SECTION 7.




MISCELLANEOUS



     7.1 Amendments. None of the terms or provisions of this Agreement may be waived,
amended, supplemented or otherwise modified except in accordance with Section 11.02 of the Credit
Agreement. No consent of any Lender or Affiliate of a Lender party to a treasury, depository or
cash management agreement or Hedging Agreement secured hereby (except in such person’s capacity as
a Lender, if applicable) shall be required for any waiver, amendment, supplement or other
modification to this Agreement.



     7.2 Notices. All notices, requests and demands to or upon the Collateral Agent or any
Debtor hereunder shall be effected in the manner provided for in Section 11.01 of the Credit
Agreement. All notices, requests and demands hereunder to any Debtor shall be given to it at its
address or telecopy number provided in Schedule 11.01 of the Credit Agreement.



     7.3 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 Loan Documents 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
Collateral Agent under this Agreement are solely to protect Collateral Agent’s



-12-









 




rights under this Agreement and shall not impose any duty upon it to exercise any such powers.
Except as elsewhere provided hereunder, 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.




     7.4 Enforcement Expenses; Indemnification.



          (a) Each Debtor agrees to pay, or reimburse the Collateral Agent and each holder of the
Secured Obligations for, all reasonable 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 Loan Documents to which such Debtor is a party (including all such costs and
expenses incurred during any “workout” or restructuring in respect of the Obligations and during
any legal proceeding, including any proceeding under any state corporate law, or any state, federal
or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors
generally), including all attorney fees.




          (b) Each Debtor agrees 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 reasonable 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 the
Guarantee, this Agreement, or any Loan 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 7.4 shall be payable upon demand therefor. The
agreements in this Section shall survive repayment of the Obligations and all other amounts payable
under the Credit Agreement and the other Loan Documents.




     7.5 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.



-13-









 





     7.6 Set-Off. Each Debtor hereby irrevocably authorizes the Collateral Agent and each
Lender at any time and from time to time upon the occurrence and during the continuance of any
Event of Default, without prior notice to such Debtor or any other Loan Party, any such notice
being waived by such Debtor to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any time held by, and
other indebtedness at any time owing by, such Lender to or for the credit or the account of the
respective Debtor against any and all Obligations owing to such Lender under the Credit Agreement,
the Guarantee, or under any other Loan Document, now or hereafter existing, irrespective of whether
or not the Collateral Agent or such Lender shall have made demand for payment and although such
Obligations may be contingent or unmatured or denominated in a currency different from that of the
applicable deposit or indebtedness. The Collateral Agent or any Lender exercising such set-off
rights shall deliver to the Borrower prompt written notice of any exercise of those rights;
provided that the failure to give such notice shall not affect the validity of such set-off and
application.



     7.7 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.



     7.8 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 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.



     7.9 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.



     7.10 Integration. This Agreement, together with the other Loan 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.



     7.11 GOVERNING LAW ETC.



          (a) GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAW OF THE STATE OF TEXAS, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THAT WOULD REQUIRE
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.




          (b) SUBMISSION TO JURISDICTION. EACH DEBTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY
SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF TEXAS
SITTING IN HARRIS COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF TEXAS,
AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO






-14-









 







ANY LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION
OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH TEXAS STATE OR, TO THE EXTENT PERMITTED BY LAW,
IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION
OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, THE ISSUING BANK OR ANY LENDER MAY
OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.




          (c) WAIVER OF VENUE. EACH DEBTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO
THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF
THIS SECTION 7.11. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT.




          (d) SERVICE OF PROCESS. EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE
OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 7.2. NOTHING IN THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.




          (e) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
IN THIS SECTION.







-15-









 








     7.12 Additional Debtors. Each Subsidiary of the Borrower that is required to become a
party to this Agreement after the date hereof pursuant to Sections 5.10 of the Credit Agreement
shall become a Debtor for all purposes of this Agreement upon execution and delivery by such
Subsidiary of an instrument in the form of Annex I hereto.



     7.13 Termination; Releases.



          (a) This Security Agreement and the security interest created hereby shall terminate upon
termination of the Commitments of all Lenders and payment in full of all Obligations (other than
(A) contingent indemnification obligations and (B) obligations and liabilities under treasury,
deposit, or cash management agreements and Hedging Agreements as to which arrangements satisfactory
to the applicable Lender shall have been made) and the expiration or termination of all Letters of
Credit (other than Letters of Credit as to which other arrangements satisfactory to the Collateral
Agent and the Issuing Bank shall have been made), at which time the Collateral Agent shall 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. Any execution and delivery of termination
statements or documents pursuant to this Section 7.13(a) shall be without recourse to or
warranty by the Collateral Agent.




          (b) Any Debtor other than the Borrower shall automatically be released from its obligations
hereunder and the security interest granted hereby in the Collateral of such Debtor shall be
automatically released in the event that all the Equity Interests of such Debtor shall be sold,
transferred or otherwise disposed of to a person other than a Loan Party or a Subsidiary of a Loan
Party in a transaction permitted by the Credit Agreement; provided that, to the extent
required by the Credit Agreement, the Required Lenders or, if required by the terms of the Credit
Agreement, such other requisite number of Lenders, shall have consented to such sale, transfer or
other disposition and the terms of such consent did not provide otherwise. If any of the
Collateral shall be sold, transferred or otherwise disposed of by any Debtor in a transaction
permitted by the Credit Agreement 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, and such Collateral shall be sold free and
clear of the Lien and security interest created hereby; provided, however, that
such security interest will continue to attach to all proceeds of such sales or other dispositions.
In connection with any of the foregoing, the Collateral Agent 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 7.13(b) shall be without recourse to or warranty by the Collateral
Agent.




          (c) No consent of any Lender or Affiliate of a Lender party to a treasury, depository or cash
management agreement or Hedging Agreement secured hereby (except in such person’s capacity as a
Lender, if applicable) shall be required for any release of Collateral or Debtors pursuant to this
Section.




          (d) Each Debtor acknowledges that it is not authorized to file any financing statement or
amendment or termination statement with respect to any financing statement






-16-









 







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.




[Signature pages follow.]




-17-











 





     EXECUTED as of the date first above written.



	 	 	 	 	 
	 	CAPITAL ONE, NATIONAL 
ASSOCIATION, as
Collateral Agent

 	 
	 	By:  	/s/ Don Backer
 	 
	 	 	Don Backer 	 
	 	 	Senior Vice President 	 
	 



Signature Page to Security Agreement














 





	 	 	 	 	 
	 	BASIC ENERGY SERVICES, INC.

BASIC ENERGY SERVICES GP, LLC, 

as a Subsidiary Guarantor


ACID SERVICES, LLC, as a Subsidiary 

Guarantor


BASIC MARINE SERVICES, INC., as a 

Subsidiary Guarantor


CHAPARRAL SERVICE, INC., as a 

Subsidiary Guarantor


JETSTAR ENERGY SERVICES, INC., 

as a Subsidiary Guarantor


JETSTAR HOLDINGS, INC., as a 

Subsidiary Guarantor


JS ACQUISITION LLC, as a Subsidiary

Guarantor


PERMIAN PLAZA, LLC, as a Subsidiary 

Guarantor


SLEDGE DRILLING CORP., as a Subsidiary

Guarantor


WILDHORSE SERVICES, INC., as a 

Subsidiary Guarantor


XTERRA FISHING & RENTAL TOOLS 

CO., as a Subsidiary Guarantor


 	 
	 	By:  	/s/ Kenneth V. Huseman
 	 
	 	 	Kenneth V. Huseman 	 
	 	 	President and Chief Executive Officer 	 
	 
	 	BASIC ENERGY SERVICES LP, LLC, 

as a Subsidiary Guarantor

 	 
	 	By:  	/s/ Jerry Tufly
 	 
	 	 	Jerry Tufly 	 
	 	 	Sole Manager 	 
	 



Signature Page to Security Agreement














 





	 	 	 	 	 
	 	BASIC ENERGY SERVICES, L.P., as a 

Subsidiary Guarantor

 	 
	 	By:  	                                                     BASIC ENERGY SERVICES GP, 
LLC, its General Partner
 	 
	 	 	 
	 	By:  	                                                     BASIC ENERGY SERVICES, 
INC., its Sole Member
 	 
	 	 	 
	 	By:  	                                                     /s/ Kenneth V. Huseman
 	 
	 	 	Kenneth V. Huseman 	 
	 	 	President 	 
	 
	 	BASIC ESA, INC., as a Subsidiary 

Guarantor


FIRST ENERGY SERVICES 

COMPANY, as a Subsidiary Guarantor


GLOBE WELL SERVICE, INC., as a 

Subsidiary Guarantor


HENNESSEY RENTAL TOOLS, INC., as a 

Subsidiary Guarantor


LEBUS OIL FIELD SERVICE CO., as a 

Subsidiary Guarantor


OILWELL FRACTURING SERVICES, INC., as a

Subsidiary Guarantor


SCH DISPOSAL, L.L.C., as a Subsidiary

Guarantor


 	 
	 	By:  	/s/ Kenneth V. Huseman
 	 
	 	 	Kenneth V. Huseman 	 
	 	 	President 	 
	 
	 	TAYLOR INDUSTRIES, LLC, as a 

Subsidiary Guarantor

 	 
	 	By:  	/s/ Kenneth V. Huseman
 	 
	 	 	Kenneth V. Huseman 	 
	 	 	Chief Executive Officer 	 
	 



Signature Page to Security Agreement














 





SCHEDULE 3.3




ORGANIZATION & LOCATION INFORMATION



	 	 	 	 	 	 	 	 	 
	 	 	Jurisdiction &	 	 	 	 	 	 
	 	 	Type of	 	 	 	 	 	 
	 	 	Organization;	 	 	 	 	 	Chief Executive Office,
	 	 	UCC Filing	 	Organizational	 	Sole Place of Business, or
	Debtor	 	Office	 	ID#	 	Principal Residence
	Basic Energy Services, Inc.

	 	Delaware corporation
	 	 	3611854	 	 	500 W Illinois, Midland, TX 79701
	 

	 	Delaware Secretary of State	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Acid Services, LLC

	 	Kansas limited liability company
	 	 	2347722	 	 	112 SW 7th St Ste 3c, Topeka, KS 66603
	 
	 	 	 	 	 	 	 	 
	 

	 	Kansas Secretary of State	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Basic Energy Services GP, LLC

	 	Delaware limited liability company
	 	 	3611876	 	 	500 W Illinois, Midland, TX 79701
	 
	 	 	 	 	 	 	 	 
	 

	 	Delaware Secretary of State	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Basic Energy Services LP, LLC

	 	Delaware limited liability company
	 	 	3611879	 	 	500 W Illinois, Midland, TX 79701
	 
	 	 	 	 	 	 	 	 
	 

	 	Delaware Secretary of State	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Basic Energy Services, L.P.

	 	Delaware limited partnership
	 	 	2307778	 	 	500 W Illinois, Midland, TX 79701
	 
	 	 	 	 	 	 	 	 
	 

	 	Delaware Secretary of State	 	 	 	 	 	 





 Schedule 3.3 to Security Agreement



-1-









 






	 	 	 	 	 	 	 	 	 
	 	 	Jurisdiction &	 	 	 	 	 	 
	 	 	Type of	 	 	 	 	 	 
	 	 	Organization;	 	 	 	 	 	Chief Executive Office,
	 	 	UCC Filing	 	Organizational	 	Sole Place of Business, or
	Debtor	 	Office	 	ID#	 	Principal Residence
	Basic ESA, Inc.

	 	Texas corporation
	 	 	57139400	 	 	350 N St. Paul St, Ste 2900, Dallas, TX 75201
	 

	 	Texas Secretary of State	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Basic Marine Services, Inc.

	 	Delaware corporation
	 	 	3917169	 	 	500 W Illinois, Midland, TX 79701
	 

	 	Delaware Secretary of State	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Chaparral Service, Inc.

	 	New Mexico corporation
	 	 	642181	 	 	123 E Marcy St, Santa Fe, NM 87501
	 
	 	 	 	 	 	 	 	 
	 

	 	New Mexico Secretary of State	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	First Energy Services Company

	 	Delaware corporation
	 	 	3215172	 	 	1209 Orange St., Wilmington, DE 19801
	 

	 	Delaware Secretary of State	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Globe Well Service, Inc.

	 	Texas corporation
	 	 	46471700	 	 	350 N St. Paul St, Ste 2900, Dallas, TX 75201
	 

	 	Texas Secretary of State	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Hennessey Rental Tools, Inc.

	 	Oklahoma corporation
	 	 	1900529237	 	 	1833 S Morgan Rd, Oklahoma City, OK 73128
	 
	 	 	 	 	 	 	 	 
	 

	 	Oklahoma County Clerk, Oklahoma,

Central Filing	 	 	 	 	 	 





 Schedule 3.3 to Security Agreement





-2-









 






	 	 	 	 	 	 	 	 	 
	 	 	Jurisdiction &	 	 	 	 	 	 
	 	 	Type of	 	 	 	 	 	 
	 	 	Organization;	 	 	 	 	 	Chief Executive Office,
	 	 	UCC Filing	 	Organizational	 	Sole Place of Business, or
	Debtor	 	Office	 	ID#	 	Principal Residence
	JetStar Energy Services, Inc.

	 	Texas corporation
	 	 	800481218	 	 	350 N St. Paul St, Ste 2900, Dallas, TX 75201
	 

	 	Texas Secretary of State	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	JetStar Holdings, Inc.

	 	Delaware corporation
	 	 	3954247	 	 	1209 Orange St., Wilmington, DE 19801
	 
	 	 	 	 	 	 	 	 
	 

	 	Delaware Secretary of State	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	JS Acquisition LLC

	 	Delaware limited liability company
	 	 	4278935	 	 	1209 Orange St., Wilmington, DE 19801
	 
	 	 	 	 	 	 	 	 
	 

	 	Delaware Secretary of State	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	LeBus Oil Field Service Co.

	 	Texas corporation
	 	 	77931600	 	 	350 N St. Paul St, Ste 2900, Dallas, TX 75201
	 

	 	Texas Secretary of State	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Oilwell Fracturing Services, Inc.

	 	Oklahoma corporation
	 	 	1900377946	 	 	1833 S Morgan Rd, Oklahoma City, OK 73128
	 
	 	 	 	 	 	 	 	 
	 

	 	Oklahoma County Clerk, Oklahoma,

Central Filing	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Permian Plaza, LLC

	 	Texas limited liability company
	 	 	800859993	 	 	350 N St. Paul St, Ste 2900, Dallas, TX 75201
	 

	 	Texas Secretary of State	 	 	 	 	 	 




 Schedule 3.3 to Security Agreement





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	 	 	Jurisdiction &	 	 	 	 	 	 
	 	 	Type of	 	 	 	 	 	 
	 	 	Organization;	 	 	 	 	 	Chief Executive Office,
	 	 	UCC Filing	 	Organizational	 	Sole Place of Business, or
	Debtor	 	Office	 	ID#	 	Principal Residence
	SCH Disposal, L.L.C.

	 	Texas limited liability company
	 	 	704317322	 	 	350 N St. Paul St, Ste 2900, Dallas, TX 75201
	 
	 	 	 	 	 	 	 	 
	 

	 	Texas Secretary of State	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Sledge Drilling Corp.

	 	Texas corporation
	 	 	800575730	 	 	350 N St. Paul St, Ste 2900, Dallas, TX 75201
	 

	 	Texas Secretary of State	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Taylor Industries, LLC

	 	Texas limited liability company
	 	 	801259923	 	 	350 N St. Paul St, Ste 2900, Dallas, TX 75201
	 
	 	 	 	 	 	 	 	 
	 

	 	Texas Secretary of State	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Wildhorse Services, Inc.

	 	Oklahoma corporation
	 	 	1900694769	 	 	1833 S Morgan Rd, Oklahoma City, OK 73128
	 
	 	 	 	 	 	 	 	 
	 

	 	Oklahoma County Clerk, Oklahoma,

Central Filing	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	XTERRA Fishing & Rental Tools Co.

	 	Texas corporation
	 	 	158550700	 	 	350 N St. Paul St, Ste 2900, Dallas, TX 75201
	 

	 	Texas Secretary of State	 	 	 	 	 	 






Schedule 3.3 to Security Agreement



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SCHEDULE 3.4




CERTAIN COLLATERAL


None.




Schedule 3.4 to Security Agreement



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SCHEDULE 3.5




INSTRUMENTS


None.




Schedule 3.5 to Security Agreement



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SCHEDULE 4.6




DEPOSIT ACCOUNTS



	 	 	 	 	 	 	 
	 	 	Type of	 	Account	 	 
	Depositor	 	Account	 	Number	 	Name & Address of Bank
	Basic Energy Services, Inc.
	 	Depository	 	4810624083	 	Bank of America, N.A.
	 	 	 	 	700 Louisiana St. 7th Fl
	 	 	 	 	Houston, TX 77002
	 
	 	 	 	 	 	 
	Basic Marine Services, Inc.
	 	Depository	 	488029554463	 	Bank of America, N.A.
	 	 	 	 	700 Louisiana St. 7th Fl
	 	 	 	 	Houston, TX 77002
	 
	 	 	 	 	 	 
	Taylor Industries, LLC
	 	Depository	 	4810624119	 	Bank of America, N.A.
	 	 	 	 	700 Louisiana St. 7th Fl
	 	 	 	 	Houston, TX 77002







Schedule 4.6 to Security Agreement



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     Annex I to the



     Security Agreement



     This SUPPLEMENT NO. [ ] dated as of [               ] (this
“Supplement”), is delivered in connection with (a) the Security Agreement dated as of
September 28, 2010 (as amended or otherwise modified from time to time, the “Security
Agreement”), among Basic Energy Services, Inc., a Delaware corporation (the
“Borrower”), certain subsidiaries of the Borrower (such subsidiaries together with the
Borrower, the “Debtors”) and Capital One, National Association (“Capital One”), as
Collateral Agent (in such capacity, the “Collateral Agent”) for the benefit of the holders
of the Secured Obligations (as defined therein) and (b) Article VII of the Credit Agreement (as
defined below) (the “Guarantee”).



     A Reference is made to the Credit Agreement dated as of September 28, 2010 (as amended or
otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the
lenders from time to time party thereto (the “Lenders”), the Collateral Agent and others.
Pursuant to the Guarantee, the Guarantors have agreed to guarantee, among other things, the full
payment and performance of all of the Borrower’s obligations under the Credit Agreement.



     B. The Debtors have entered into the Security Agreement and the Guarantors have entered into
the Guarantee as a condition precedent to the effectiveness of the Credit Agreement. Section
7.12 of the Security Agreement and Section 5.10 of the Credit Agreement provide that additional
Subsidiaries of the Borrower may become Debtors under the Security Agreement and Guarantors under
the Guarantee by execution and delivery of an instrument in the form of this Supplement. The
undersigned Subsidiary (the “New Debtor”) is executing this Supplement in accordance with
the requirements of the Credit Agreement to become a Debtor under the Security Agreement and a
Guarantor under the Guarantee.



     C. Capitalized terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Security Agreement, the Guarantee, and the Credit Agreement.



     Accordingly, the Collateral Agent and the New Debtor agree as follows:



     SECTION 1. In accordance with Section 7.12 of the Security Agreement and Section 5.10
of the Credit Agreement, the New Debtor by its signature below becomes a Debtor under the Security
Agreement with the same force and effect as if originally named therein as a Debtor, and the New
Debtor hereby (a) agrees to all the terms and provisions of the Security Agreement applicable to it
as a Debtor thereunder and (b) represents and warrants that the representations and warranties made
by it as a Debtor thereunder are true and correct in all material respects on and as of the date
hereof. The Schedules to the Security Agreement are hereby supplemented by the Schedules attached
hereto with respect to the New Debtor. In furtherance of the foregoing, the New Debtor, as
security for the payment and performance in full of the Secured Obligations (as defined in the
Security Agreement), does hereby create and grant to the Collateral Agent, for the benefit of the
holders of the Secured Obligations, a security interest in and lien on all of the New Debtor’s
right, title and interest in and to the Collateral of the New Debtor. Each reference to a “Debtor”
in the Security Agreement shall be deemed to include the New Debtor.



Annex I to Security Agreement



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     SECTION 2. In accordance with Section 5.10 of the Credit Agreement, the New Debtor by its
signature below becomes a Guarantor under the Guarantee with the same force and effect as if
originally named therein as a Guarantor, and the New Debtor hereby (a) agrees to all the terms and
provisions of the Guarantee applicable to it as a Guarantor thereunder and (b) represents and
warrants that the representations and warranties made by it as a Guarantor thereunder are true and
correct on and as of the date hereof. Each reference to a “Guarantor” in the Guarantee shall be
deemed to include the New Debtor.



     SECTION 3. The New Debtor represents and warrants to the Collateral Agent that this
Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid
and binding obligation, enforceable against it in accordance with its terms.



     SECTION 4. This Supplement may be executed by one or more of the parties to this Agreement on
any number of separate counterparts (including by telecopy), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.



     SECTION 5. Except as expressly supplemented hereby, the Security Agreement and the Guarantee
shall remain in full force and effect.



     SECTION 6. THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF
THE STATE OF TEXAS, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THAT WOULD REQUIRE THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.



     SECTION 7. All communications and notices to the New Debtor under the Security Agreement or
the Guarantee shall be in writing and given as provided in Section 7.2 of the Security
Agreement to the address for the New Debtor set forth under its signature below.



     SECTION 8. The New Debtor agrees to reimburse the Collateral Agent for its reasonable
out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other
charges and disbursements of counsel for the Collateral Agent.



Annex I to Security Agreement



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     IN WITNESS WHEREOF, the New Debtor and the Collateral Agent have duly executed this Supplement
to the Security Agreement as of the day and year first above written.



	 	 	 	 	 
	 	[Name of New Debtor],

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 	 	Address:  	 	 
	 	 	 	 	 
	 	 	 	 	 
	 
	 	CAPITAL ONE, NATIONAL 

ASSOCIATION, as Collateral Agent

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 	 	Address:  	 	 
	 	 	 	 	 
	 	 	 	 	 
	 



Annex I to Security Agreement




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