Unassociated Document


    
      Exhibit
        10.35

       

      DEFAULT
        DEPOSIT ACCOUNT CONTROL AGREEMENT


    

    This
      Default Deposit Account Default Control Agreement dated as of May 11, 2007
      (this
“Agreement”)
      among
TEKOIL
      AND GAS GULF COAST, LLC,
      a
      Delaware limited liability company (the “Debtor”),
      J.
      ARON & COMPANY,
      as
      administrative agent for the beneficiaries (the “Secured
      Party”)
      and
AMEGY
      BANK NATIONAL ASSOCIATION,
      a
      national banking association, in its capacity as a “bank” as defined in Section
      9-102 of the UCC (in such capacity, the “Financial
      Institution”).
      Capitalized terms used but not defined herein shall have the meaning assigned
      thereto in the Pledge and Security Agreement, dated as of May 11, 2007, among
      the Debtor, the other Grantors party thereto, and the Secured Party (as amended,
      restated, supplemented or otherwise modified from time to time, the
“Security
      Agreement”).
      Capitalized terms used but not otherwise defined herein or in the Security
      Agreement shall have the meaning assigned thereto in the Credit and Guaranty
      Agreement, dated as of May 11, 2007, among the Debtor, Tekoil & Gas
      Corporation, other guarantors party thereto, various lenders, and the Secured
      Party, as administrative agent for the various lenders. All references herein
      to
      the “UCC” shall mean the Uniform Commercial Code as in effect in the State of
      New York.

     

    Section
      1. Establishment
      of Deposit Account.
      The
      Financial Institution hereby confirms and agrees that:

     


(a) The
  Financial Institution has established account number XXXXXXX
  in the name “Tekoil
  and Gas Gulf Coast - Master/Operating Account”
  and account number XXXXXXXXX
  in
  the name of “Tekoil
  and Gas Gulf Coast - Controlled Disbursement/Check Disbursements”
  (each such account and any successor account to each such account, a “Deposit
  Account”,
  and collectively, the “Deposit
  Accounts”)
  and the Financial Institution shall not change the name or account number of
  the Deposit Accounts without the prior written consent of the Secured Party;
  and

     

    (b) Each
      Deposit Account is a “deposit account” within the meaning of Section
      9-102(a)(29) of the UCC.

     

    Section
      2. Control
      of the Deposit Account.

     

    (a) The
      Deposit Accounts shall be under the control of the Secured Party. The Secured
      Party shall at all times have "control" (as defined in Section 9-104 of the
      Uniform Commercial Code as adopted in the state of Texas) of the Deposit
      Accounts. The Financial Institution shall comply with instructions originated
      by
      the Secured Party directing disposition of funds in the Depository Account
      without further consent by the Debtor.

     

    (b) Unless
      the Financial Institution shall have received written notice of a default from
      the Secured Party (a "Default Notice") that an "event of default" has occurred
      under the loan documents between the Debtor and the Secured Party (an "Event
      of
      Default") (subject to paragraph (d) below), the Debtor shall have full right
      of
      access to and withdrawal from the Deposit Accounts.

     

    DEFAULT
      DEPOSIT
      ACCOUNT
      CONTROL
      AGREEMENT

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (c) Subject
      to paragraph (d) below, from and after the receipt by the Financial Institution
      of a Default Notice (and until the Financial Institution receives a written
      withdrawal of such notice), (i) the Secured Party shall have exclusive dominion
      and control over the Deposit Accounts, (ii) neither the Debtor nor any person
      acting through or on behalf of the Debtor shall have any right of access to
      or
      withdrawal from the Deposit Accounts, and (iii) the Financial Institution shall
      not comply with any instructions originated by the Debtor or any such person
      directing disposition of funds in the Deposit Accounts.

     

    (d) Any
      Default Notice shall be in writing, shall refer to this Agreement and shall
      include clear and specific instruction with respect to the disposition of funds
      in the Deposit Accounts. The Financial Institution shall act on a Default Notice
      from the Secured Party, upon effective delivery thereof, pursuant to the terms
      of this Agreement within a reasonable period of time not to exceed one (1)
      Business Day (hereinafter defined) following the date on which the Financial
      Institution receives such Default Notice to act on such Default Notice. The
      Financial Institution may rely on a Default Notice notwithstanding any other
      or
      conflicting information it may receive from the Debtor. With limiting the
      foregoing, upon receipt of a Default Notice, the Financial Institution shall
      have no obligation to determine whether an Event of Default has occurred. As
      used in this Agreement, the term "Business Day" means any day on which the
      Financial Institution and the Secured Party are not authorized or required
      to
      close.

     

    Section
      3. Subordination
      of Lien; Waiver of Set-Off.
      In the
      event that the Financial Institution has or subsequently obtains by agreement,
      by operation of law or otherwise a security interest in the Deposit Accounts
      or
      any funds credited thereto, the Financial Institution hereby agrees that such
      security interest shall be subordinate to the security interest of the Secured
      Party. Money and other items credited to the Deposit Accounts will not be
      subject to deduction, set-off, banker’s lien, or any other right in favor of any
      person other than the Secured Party (except that the Financial Institution
      may
      set off (i) all amounts due to the Financial Institution in respect of customary
      fees and expenses for the routine maintenance and operation of the Deposit
      Accounts and (ii) the face amount of any checks which have been credited to
      such
      Deposit Accounts but are subsequently returned unpaid because of uncollected
      or
      insufficient funds).

     

    Section
      4. Certain
      Matters Affecting Financial Institution.

     

    (a) Neither
      this Agreement nor the Security Agreement imposes or creates any obligation
      or
      duty of the Financial Institution except for those expressly set forth in this
      Agreement, and no implied obligations shall be read into this Agreement against
      the Financial Institution.

    


    (b) Financial
      Institution may rely on notices and communications it reasonably believes have
      been given by an authorized representative of the Secured Party or the Debtor,
      and the Financial Institution shall have no obligation to review or confirm
      that
      actions taken pursuant to any such notice in accordance with this Agreement
      comply with any other agreement or document.

    


    (c) If
      the
      Debtor becomes subject to a bankruptcy proceeding or if the Financial
      Institution is otherwise served with legal process which the Financial
      Institution believes affects funds deposited in the Deposit Account, the
      Financial Institution shall have the right to place a hold on funds in the
      Deposit Account until such time as the Financial Institution receives an
      appropriate court order or other assurances satisfactory to the Financial
      Institution establishing that funds may continue to be disbursed in accordance
      with this Agreement. 

     

    DEFAULT
      DEPOSIT
      ACCOUNT
      CONTROL
      AGREEMENT


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (d) If
      at any
      time the Financial Institution, in good faith, is in doubt as to the action
      it
      should take under this Agreement, the Financial Institution shall have the
      right
      (i) to place a hold on funds in the Deposit Account until such time as the
      Financial Institution receives an appropriate court order or other assurances
      satisfactory to the Financial Institution as to the disposition of funds in
      the
      Deposit Account, or (ii) to commence an interpleader action in an appropriate
      court and to take no further action except in accordance with joint instructions
      from the Secured Party and the Debtor or in accordance with the final order
      of
      the court in such action.

    


    (e) All
      of
      the Financial Institution's obligations under this Agreement shall be subject
      to
      applicable laws and regulations. Nothing in this Agreement shall require the
      Financial Institution to act in violation of any law or regulation.

    


    (f) The
      Financial Institution will not be liable to any party hereunder for any expense,
      claim, cause of action, liability, loss, damage or cost arising out of or
      relating to the Deposit Account or this Agreement other than those resulting
      from the Financial Institution’s acts or omissions constituting gross negligence
      or willful misconduct, and the Debtor agrees to indemnify and hold the Financial
      Institution harmless from any such expense, claim, cause of action, liability,
      loss, damages or cost. 

    


    (g) The
      Financial Institution shall not be liable for losses or delays resulting from
      computer malfunction, interruption of communication facilities, labor
      difficulties, acts of God, terrorist acts, and other causes beyond the Financial
      Institution’s reasonable control. In no event shall the Financial Institution be
      liable for any indirect, special, consequential, exemplary or punitive damages
      including, without limitation, lost profits.

     

    Section
      5. Choice
      of Law.
      This
      Agreement and each Deposit Account shall each be governed by the laws of the
      State of New York. Regardless of any provision in any other agreement, for
      purposes of the UCC, New York shall be deemed to be the Financial Institution’s
      jurisdiction (within the meaning of Section 9-304 of the UCC) and each Deposit
      Account shall be governed by the laws of the State of New York.

     

    Section
      6. Interpleader.
      If at
      any time the Financial Institution receives conflicting claims to or demands
      regarding the Deposit Accounts and reasonably believes it may become subject
      to
      liability as a result of complying with this Agreement or any instructions
      from
      the Secured Party, the Financial Institution may (a) freeze and hold all funds
      in the Deposit Accounts pending resolution of such issues, and/or (b) interplead
      all Deposit Account funds and deposits in an action commenced in a court of
      competent jurisdiction naming the Debtor, the Secured Party, and any competing
      claimants as defendants. Upon interpleading such funds, the Financial
      Institution will be released from all further liability under this Agreement
      and
      the costs and expenses of the Financial Institution relating to the interpleader
      action, including filling fees and reasonable attorneys fees, shall be paid
      by
      the Debtor and, if the Debtor fails to pay, the Secured Party shall pay such
      fees.

     

    DEFAULT
      DEPOSIT
      ACCOUNT
      CONTROL
      AGREEMENT

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    Section
      7. Conflict
      with Other Agreements.
      

     

    (a) In
      the
      event of any conflict between this Agreement (or any portion thereof) and any
      other agreement now existing or hereafter entered into, the terms of this
      Agreement shall prevail;

     

    (b) No
      amendment or modification of this Agreement or waiver of any right hereunder
      shall be binding on any party hereto unless it is in writing and is signed
      by
      all of the parties hereto; and

     

    (c) The
      Financial Institution hereby confirms and agrees that: 

     

    (i) There
      are
      no other agreements entered into between the Financial Institution and the
      Debtor with respect to the Deposit Accounts; and

     

    (ii) It
      has
      not entered into, and until the termination of this Agreement, will not enter
      into, any agreement with any other person relating the Deposit Accounts and/or
      any funds credited thereto pursuant to which it has agreed to comply with
      instructions originated by such persons as contemplated by Section 9-104 of
      the
      UCC.

     

    Section
      8. Adverse
      Claims.
      The
      Financial Institution does not know of any liens, claims or encumbrances
      relating to the Deposit Accounts. If any person asserts any lien, encumbrance
      or
      adverse claim (including any writ, garnishment, judgment, warrant of attachment,
      execution or similar process) against the Deposit Accounts, the Financial
      Institution will promptly notify the Secured Party and the Debtor thereof.
      

     

    Section
      9. Maintenance
      of Deposit Account.
      In
      addition to, and not in lieu of, the obligation of the Financial Institution
      to
      honor instructions as set forth in Section 2 hereof, the Financial Institution
      agrees to maintain the Deposit Accounts as follows:

     

    (a) Statements
      and Confirmations.
      Upon
      receipt of a written request by Secured Party, the Financial Institution will
      promptly send copies of all statements, confirmations and other correspondence
      concerning the Deposit Accounts simultaneously to each of the Debtor and the
      Secured Party at the address for each set forth in Section 11 of this Agreement;
      and

     

    (b) Tax
      Reporting.
      All
      interest, if any, relating to the Deposit Accounts, shall be reported to the
      Internal Revenue Service and all state and local taxing authorities under the
      name and taxpayer identification number of the Debtor. 

     

    Section
      10. Representations,
      Warranties and Covenants of the Financial Institution.
      The
      Financial Institution hereby makes the following representations, warranties
      and
      covenants:

     

    (a) The
      Deposit Accounts have been established as set forth in Section 1 and each such
      Deposit Account will be maintained in the manner set forth herein until
      termination of this Agreement; and 

     

    DEFAULT
      DEPOSIT
      ACCOUNT
      CONTROL
      AGREEMENT

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (b) This
      Agreement is the valid and legally binding obligation of the Financial
      Institution.

     

    Section
      11. Indemnification
      of Financial Institution.
      The
      Debtor and the Secured Party hereby agree that (a) the Financial Institution
      is
      released from any and all liabilities to the Debtor and the Secured Party
      arising from the terms of this Agreement and the compliance of the Financial
      Institution with the terms hereof, except to the extent that such liabilities
      arise from the Financial Institution’s negligence and (b) the Debtor, its
      successors and assigns shall at all times indemnify and save harmless the
      Financial Institution from and against any and all claims, actions and suits
      of
      others arising out of the terms of this Agreement or the compliance of the
      Financial Institution with the terms hereof, except to the extent that such
      arises from the Financial Institution’s negligence, and from and against any and
      all liabilities, losses, damages, costs, charges, counsel fees and other
      expenses of every nature and character arising by reason of the same, until
      the
      termination of this Agreement.

     

    Section
      12. Successors;
      Assignment.
      The
      terms of this Agreement shall be binding upon, and shall inure to the benefit
      of, the parties hereto and their respective corporate successors or heirs and
      personal representatives who obtain such rights solely by operation of law.
      The
      Secured Party may assign its rights hereunder only with the express written
      consent of the Financial Institution and by sending written notice of such
      assignment to the Debtor.

     

    Section
      13. Notices.
      Any
      notice, request or other communication required or permitted to be given under
      this Agreement shall be in writing and deemed to have been properly given when
      delivered in person, or when sent by telecopy or other electronic means and
      electronic confirmation of error free receipt is received or two (2) days after
      being sent by certified or registered United States mail, return receipt
      requested, postage prepaid, addressed to the party at the address set forth
      below.

     

    
      	Debtor:	 	Tekoil and Gas Gulf Coast, LLC
	 	 	25045 I-45 North, Suite 525
	 	 	The Woodlands, Texas 77380
	 	 	Attention: Mark Western
	 	 	Telecopier: 281-364-8007
	 	 	 
	Secured Party: 	 	J. Aron & Company
	 	 	85 Broad Street
	 	 	New York, New York 10004
	 	 	Attention: Steve Bunkin
	 	 	Telecopier: 212-428-3675
	 	 	 
	with a copy to:	 	Goldman Sachs E&P Capital
	 	 	1000 Louisiana, Suite 550
	 	 	Houston, Texas 77002
	 	 	Attention: John K. Howie
	 	 	Telecopier:
              713-658-2603


    

     

    DEFAULT
      DEPOSIT
      ACCOUNT
      CONTROL
      AGREEMENT

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    
      	Financial Institution:	 	Amegy Bank National Association
	 	 	Five Post Oak Park
	 	 	4400 Post Oak Parkway
	 	 	Houston, TX 77027
	 	 	Attention: Mark Serice
	 	 	Telecopier: ______________
	 	 	 
	 	 	And
	 	 	 
	 	 	Amegy Bank National Association
	 	 	Five Post Oak Park
	 	 	4400 Post Oak Parkway
	 	 	Houston, TX 77027
	 	 	Attention: Kacy Karl
	 	 	Telecopier:
              713-561-0186


    

     

    Any
      party
      may change its address for notices in the manner set forth above.

     

    Section
      14. Termination.
      The
      obligations of the Financial Institution to the Secured Party pursuant to this
      Agreement shall continue in effect until the security interest of the Secured
      Party in each Deposit Account has been terminated pursuant to the terms of
      the
      Security Agreement and the Secured Party has notified the Financial Institution
      of such termination in writing. The Secured Party agrees to provide Notice
      of
      Termination in substantially the form of Exhibit
      A
      hereto
      to the Financial Institution upon the request of the Debtor on or after the
      termination of the Secured Party’s security interest in each Deposit Account
      pursuant to the terms of the Security Agreement. The termination of this
      Agreement shall not terminate the Deposit Accounts or alter the obligations
      of
      the Financial Institution to the Debtor pursuant to any other agreement with
      respect to the Deposit Accounts.

     

    Section
      15. Counterparts.
      This
      Agreement may be executed in any number of counterparts, all of which shall
      constitute one and the same instrument, and any party hereto may execute this
      Agreement by signing and delivering one or more counterparts.

     

    [Remainder
      of page intentionally left blank.]

     

    DEFAULT
      DEPOSIT
      ACCOUNT
      CONTROL
      AGREEMENT

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the parties hereto have caused this Default Deposit Account
      Control Agreement to be executed as of the date first above written by their
      respective officers thereunto duly authorized.

    
      	 	 	 
	 	
              TEKOIL
                AND GAS GULF COAST, LLC

            
	 
 	 
 	 
 
	 	By:	Tekoil & Gas Corporation, its Managing
              Member
	 	 	 
	 	 	 
	
            	By:  	/s/
              Mark
              Western 
	 	
              
Name:
              Mark Western
	 	Title:
              CEO and Chairman of the Board of
              Directors


    

     

    
      SIGNATUREPAGE
        TO
        DEFAULT
        DEPOSIT
        ACCOUNT
        CONTROL
        AGREEMENT

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	
              J.
                ARON & COMPANY,

            
	 	as Secured Party
	 
 	 
 	 
 
	
            	By:  	/s/
              Colleen Foster 
	 	
              
Name:
              Colleen Foster
	 	Title:
              Managing Director


    

     

    SIGNATUREPAGE
      TO
      DEFAULT
      DEPOSIT
      ACCOUNT
      CONTROL
      AGREEMENT

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	
              AMEGY
                BANK NATIONAL ASSOCIATION

            
	 	
              as
                Financial Institution

            
	 
 	 
 	 
 
	
            	By:  	/s/
              Kenneth R. Batson, III 
	 	
              
Name:
              Kenneth R. Batson, III
	 	Title:
              Vice President. Energy Lending


    

     

    SIGNATUREPAGE
      TO
      DEFAULT
      DEPOSIT
      ACCOUNT
      CONTROL
      AGREEMENT

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    EXHIBIT
      A

    TO
      DEFAULT DEPOSIT ACCOUNT CONTROL AGREEMENT

     

    [Letterhead
      of the Secured Party]

     

    [Date]

     

    [Name
      and
      Address of the Financial Institution]

     

    Attention:

     

    
      	 	
              Re:

            	
              Termination
                of Default Deposit Account Control
                Agreement

            


    

     

    You
      are
      hereby notified that the Default Deposit Account Control Agreement dated as
      of
      May 11, 2007 among Tekoil and Gas Gulf Coast, LLC, you and the undersigned
      (a
      copy of which is attached) is terminated and you have no further obligations
      to
      the undersigned pursuant to such Agreement. Notwithstanding any previous
      instructions to you, you are hereby instructed to accept all future directions
      with respect to account number(s) __________________from Tekoil and Gas Gulf
      Coast, LLC. This notice terminates any obligations you may have to the
      undersigned with respect to such account, however nothing contained in this
      notice shall alter any obligations which you may otherwise owe to Tekoil and
      Gas
      Gulf Coast, LLC pursuant to any other agreement.

     

    You
      are
      instructed to deliver a copy of this notice by facsimile transmission to Tekoil
      and Gas Gulf Coast, LLC.

    
      	 	 	 
	 	
              Very
                truly yours,

            
	 	 
	 	
              J.
                ARON & COMPANY,

            
	 	as Secured Party
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              
                

              

               

              Name: 

              
                

              

            
	 	
              Title:

              
                

              

            


    

    
      EXHIBIT
        A TO
        DEFAULT
        DEPOSIT
        ACCOUNT
        CONTROL
        AGREEMENT