Document:

Exhibit 10.2

 

COLLATERAL TRUST AGREEMENT

 

dated as of May 1, 2015

 

among

 

HALCÓN RESOURCES CORPORATION,

as the Company,

 

the Guarantors from time to time party hereto,

 

U.S. BANK NATIONAL ASSOCIATION,

as Trustee under the Indenture,

 

the other Parity Lien Debt Representatives from time to time party hereto

 

and

 

U.S. BANK NATIONAL ASSOCIATION,

as Collateral Trustee

 

 

TABLE OF CONTENTS

 

	
ARTICLE 1 
    	
DEFINITIONS; PRINCIPLES OF   CONSTRUCTION
    	
 
    
	
 
    	
 
    	
 
    
	
Section 1.1                                            Defined Terms
    	
1
    
	
Section 1.2                                            Rules of Interpretation
    	
9
    
	
 
    	
 
    
	
ARTICLE 2
    	
THE TRUST ESTATE
    	
 
    
	
 
    	
 
    	
 
    
	
Section 2.1                                            Declaration of Trust
    	
10
    
	
Section 2.2                                            Collateral Shared Equally and Ratably
    	
11
    
	
Section 2.3                                            Similar Collateral and Agreements
    	
11
    
	
 
    	
 
    	
 
    
	
ARTICLE 3
    	
OBLIGATIONS AND POWERS OF COLLATERAL TRUSTEE
    	
 
    
	
 
    	
 
    	
 
    
	
Section 3.1                                            Appointment and Undertaking of the Collateral Trustee
    	
11
    
	
Section 3.2                                            Release or Subordination of Liens
    	
12
    
	
Section 3.3                                            Enforcement of Liens
    	
13
    
	
Section 3.4                                            Application of Proceeds
    	
13
    
	
Section 3.5                                            Powers of the Collateral Trustee
    	
14
    
	
Section 3.6                                            Documents and Communications
    	
14
    
	
Section 3.7                                            For Sole and Exclusive Benefit of Holders of Parity Lien Obligations
    	
15
    
	
Section 3.8                                            Additional Parity Lien Debt
    	
15
    
	
 
    	
 
    	
 
    
	
ARTICLE 4
    	
OBLIGATIONS ENFORCEABLE BY THE COMPANY AND THE OTHER   GRANTORS
    	
 
    
	
 
    	
 
    	
 
    
	
Section 4.1                                            Release of Liens on Collateral
    	
17
    
	
Section 4.2                                            Delivery of Copies to Parity Lien Representatives
    	
19
    
	
Section 4.3                                            Collateral Trustee not Required to Serve, File or Record
    	
19
    
	
Section 4.4                                            Release of Liens in Respect of Notes
    	
20
    
	
Section 4.5                                            Release of Liens in Respect of any Series of Parity Lien Debt other   than the Notes
    	
20
    
	
 
    	
 
    	
 
    
	
ARTICLE 5
    	
IMMUNITIES OF THE COLLATERAL TRUSTEE
    	
 
    
	
 
    	
 
    	
 
    
	
Section 5.1                                            No Implied Duty
    	
20
    
	
Section 5.2                                            Appointment of Agents and Advisors
    	
20
    
	
Section 5.3                                            Other Agreements
    	
20
    
	
Section 5.4                                            Solicitation of Instructions
    	
21
    
	
Section 5.5                                            Limitation of Liability
    	
21
    
	
Section 5.6                                            Documents in Satisfactory Form
    	
21
    
	
Section 5.7                                            Entitled to Rely
    	
21
    
	
Section 5.8                                            Parity Lien Debt Default
    	
22
    
	
Section 5.9                                            Actions by Collateral Trustee
    	
22
    
	
Section 5.10                                     Security   or Indemnity in favor of the Collateral Trustee
    	
22
    
	
Section 5.11                                     Rights of   the Collateral Trustee
    	
22
    
	
Section 5.12                                     Limitations   on Duty of Collateral Trustee in Respect of Collateral
    	
23
    
	
Section 5.13                                     Assumption   of Rights, Not Assumption of Duties
    	
23
    

 

i

 

	
Section 5.14                                     No   Liability for Clean Up of Hazardous Materials
    	
24
    
	
Section 5.15                                     Other   Relationships with the Company or Guarantors
    	
24
    
	
 
    	
 
    	
 
    
	
ARTICLE 6
    	
RESIGNATION AND REMOVAL OF THE COLLATERAL TRUSTEE
    	
 
    
	
 
    	
 
    	
 
    
	
Section 6.1                                            Resignation or Removal of Collateral Trustee
    	
24
    
	
Section 6.2                                            Appointment of Successor Collateral Trustee
    	
25
    
	
Section 6.3                                            Succession
    	
25
    
	
Section 6.4                                            Merger, Conversion or Consolidation of Collateral Trustee
    	
25
    
	
Section 6.5                                            Concerning the Collateral Trustee and the Parity Lien Representatives
    	
26
    
	
 
    	
 
    	
 
    
	
ARTICLE 7
    	
MISCELLANEOUS PROVISIONS
    	
 
    
	
 
    	
 
    	
 
    
	
Section 7.1                                            Amendment
    	
27
    
	
Section 7.2                                            Voting
    	
28
    
	
Section 7.3                                            Further Assurances
    	
29
    
	
Section 7.4                                            Successors and Assigns
    	
30
    
	
Section 7.5                                            Delay and Waiver
    	
30
    
	
Section 7.6                                            Notices
    	
30
    
	
Section 7.7                                            Entire Agreement
    	
31
    
	
Section 7.8                                            Compensation; Expenses
    	
31
    
	
Section 7.9                                            Indemnity
    	
32
    
	
Section 7.10                                     Severability
    	
33
    
	
Section 7.11                                     Headings
    	
33
    
	
Section 7.12                                     Obligations   Secured
    	
33
    
	
Section 7.13                                     Governing   Law
    	
33
    
	
Section 7.14                                     Consent to   Jurisdiction
    	
33
    
	
Section 7.15                                     Waiver of   Jury Trial
    	
34
    
	
Section 7.16                                     Counterparts,   Electronic Signatures
    	
35
    
	
Section 7.17                                     Effectiveness
    	
35
    
	
Section 7.18                                     Grantors   and Additional Grantors
    	
35
    
	
Section 7.19                                     Insolvency
    	
35
    
	
Section 7.20                                     Rights   and Immunities of Parity Lien Representatives
    	
35
    
	
Section 7.21                                     Intercreditor   Agreement
    	
35
    
	
Section 7.22                                     Force   Majeure
    	
36
    
	
 
    	
 
    	
 
    
	
Exhibit A
    	
[Form of]
    	
 
    
	
 
    	
Additional Parity Lien Debt Certificate
    	
 
    
	
Exhibit B
    	
[Form of]
    	
 
    
	
 
    	
Collateral Trust Joinder — Additional Debt
    	
 
    
	
Exhibit C
    	
[Form of]
    	
 
    
	
 
    	
Collateral Trust Joinder — Additional Grantor
    	
 
    

 

ii

 

This Collateral Trust Agreement (as amended, supplemented, amended and restated or otherwise modified form time to time in accordance with Section 7.1 hereof, this “Agreement”) is dated as of May 1, 2015 and is by and among Halcón Resources Corporation (the “Company”), the Guarantors from time to time party hereto, U.S. Bank National Association, as Trustee (as defined below), and U.S. Bank National Association, as Collateral Trustee (in such capacity and together with its successors in such capacity, the “Collateral Trustee”).

 

RECITALS

 

The Company intends to issue 8.625% Senior Secured Notes due 2020 (the “Initial Notes”) in an aggregate principal amount of $700,000,000 pursuant to an Indenture dated as of the date hereof (as amended, supplemented, amended and restated or otherwise modified and in effect from time to time, the “Indenture”) among the Company, the guarantors party thereto and U.S. Bank National Association, as trustee (in such capacity and together with its successors in such capacity, the “Trustee”).

 

The Company and the Guarantors intend to secure their Obligations under the Indenture, any future Parity Lien Debt and any other Parity Lien Obligations, with Liens on all present and future Collateral to the extent that such Liens have been provided for in the applicable Parity Lien Security Documents.

 

This Agreement sets forth the terms on which each Parity Lien Secured Party (other than the Collateral Trustee) has appointed the Collateral Trustee to act as the collateral trustee for the present and future holders of the Parity Lien Obligations to receive, hold, maintain, administer and distribute the Collateral at any time delivered to the Collateral Trustee or the subject of the Parity Lien Security Documents, and to enforce the Parity Lien Security Documents and all interests, rights, powers and remedies of the Collateral Trustee with respect thereto or thereunder and the proceeds thereof.

 

Capitalized terms used in this Agreement have the meanings assigned to them above or in Article 1 below.

 

AGREEMENT

 

In consideration of the premises and the mutual agreements herein set forth, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:

 

ARTICLE 1
 DEFINITIONS; PRINCIPLES OF CONSTRUCTION

 

Section 1.1                              Defined Terms. The following terms will have the following meanings:

 

“Act of Parity Lien Debtholders” means, as to any matter at any time, a direction in writing delivered to the Collateral Trustee by or with the written consent of the holders of Parity Lien Debt representing the Required Parity Lien Debtholders.

 

1

 

“Additional Notes” has the meaning given to the term “Additional Securities” in the Indenture as in effect on the date hereof.

 

“Additional Parity Lien Debt” has the meaning set forth in Section 3.8(b).

 

“Additional Parity Lien Debt Certificate” means a notice in substantially the form of Exhibit A.

 

“Additional Secured Debt Designation” means the written agreement of the holders of any Series of Parity Lien Debt or their Parity Lien Representative, as set forth in the indenture, credit agreement or other agreement governing such Series of Parity Lien Debt, for the benefit of each existing and future holder of Priority Lien Debt, the Priority Lien Collateral Agent and each existing and future holder of Priority Liens:

 

(1)                                 that all Parity Lien Obligations will be and are secured equally and ratably by all Parity Liens at any time granted by the Company or any Guarantor to secure any Obligations in respect of such Series of Parity Lien Debt, whether or not upon property otherwise constituting collateral for such Series of Parity Lien Debt, and that all such Parity Liens will be enforceable by the Collateral Trustee for the benefit of all holders of Parity Lien Obligations equally and ratably;

 

(2)                                 that the holders of Obligations in respect of such Series of Parity Lien Debt are bound by the provisions of this Agreement, including the provisions relating to the ranking of Parity Liens and the order of application of proceeds from the enforcement of Parity Liens; and

 

(3)                                 consenting to and directing the Collateral Trustee to perform its obligations under this Agreement and the Parity Lien Security Documents.

 

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control,” as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to be control. For purposes of this definition, the terms “controlling,” “controlled by” and “under common control with” have correlative meanings.

 

“Agreement” has the meaning set forth in the preamble.

 

“Board of Directors” means: (1) with respect to a corporation, the board of directors of the corporation; (2) with respect to a partnership, the Board of Directors of the general partner of the partnership; and (3) with respect to any other Person, the board or committee of such Person serving a similar function.

 

“Business Day” means each day that is not a Saturday, Sunday or other day on which banking institutions in Houston, Texas or in New York, New York are authorized or required by law to close.

 

2

 

“Capital Stock” means:

 

(1)                                 in the case of a corporation, corporate stock;

 

(2)                                 in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

 

(3)                                 in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and

 

(4)                                 any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

 

“Collateral” means all properties and assets of the Company and the Guarantors now owned or at any time hereafter acquired in which Liens have been granted, or purported to be granted, to the Collateral Trustee to secure any or all of the Parity Lien Obligations, and from and after the time the Collateral Trustee is required to release its Liens pursuant to Section 3.2 upon any properties or assets, shall exclude such properties or assets; provided that if such Liens are required to be released as a result of the sale, transfer or other disposition of any properties or assets of the Company or any Guarantor, such assets or properties will cease to be excluded from the Collateral if the Company or any Guarantor thereafter acquires or reacquires such assets or properties.

 

“Collateral Trustee” has the meaning set forth in the preamble.

 

“Collateral Trust Joinder” means (i) with respect to the provisions of this Agreement relating to any Additional Parity Lien Debt, an agreement substantially in the form of Exhibit B, and (ii) with respect to the provisions of this Agreement relating to the addition of additional Grantors, an agreement substantially in the form of Exhibit C.

 

“Company” has the meaning set forth in the preamble.

 

“Credit Agreement” means the “Priority Credit Agreement” as defined in the Intercreditor Agreement.

 

“Credit Facilities” means one or more debt facilities, indentures or commercial paper facilities (including, without limitation, the Credit Agreement), in each case with banks or other financial institutions providing for revolving credit loans, term loans, capital markets financings, private placements, receivables financings (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit or letter of credit guarantees, in each case, as amended, restated, modified, supplemented, extended, renewed, refunded, replaced or refinanced in whole or in part from time to time.

 

“Grantor” means each of and “Grantors” means, collectively, the Company and the Guarantors and any other Person (if any) that at any time provides collateral security for any Parity Lien Obligations.

 

3

 

“Guarantee” means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness. When used as a verb, “Guarantee” has a correlative meaning.

 

“Guarantor” means each Subsidiary of the Company who has Guaranteed payment of any Parity Lien Obligations, and their respective successors and assigns, in each case until their respective Guarantee of all Parity Lien Obligations is released in accordance with the terms of the applicable Parity Lien Documents.

 

“Indebtedness” has the meaning assigned to such term in the Indenture or to such term or other similar term in any applicable Parity Lien Document.

 

“Indemnified Liabilities” means any and all liabilities (including all environmental liabilities), obligations, losses, damages, penalties, actions, judgments, suits, costs, taxes, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, performance, administration or enforcement of this Agreement or any of the other Parity Lien Security Documents, including any of the foregoing relating to the use of proceeds of any Parity Lien Debt or the violation of, noncompliance with or liability under, any law (including environmental laws) applicable to or enforceable against the Company, any Subsidiary of the Company or any Guarantor or any of the Collateral and all reasonable costs and expenses (including reasonable fees and expenses of legal counsel selected by the Indemnitee) incurred by any Indemnitee in connection with any claim, action, investigation or proceeding in any respect relating to any of the foregoing, whether or not suit is brought.

 

“Indemnitee” has the meaning set forth in Section 7.9(a).

 

“Indenture” has the meaning set forth in the recitals.

 

“Initial Notes” has the meaning set forth in the recitals.

 

“Insolvency or Liquidation Proceeding” means:

 

(1)                                 any case commenced by or against the Company or any Guarantor under Title 11, U.S. Code or any similar federal or state law for the relief of debtors, any other proceeding for the reorganization, recapitalization or adjustment or marshalling of the assets or liabilities of the Company or any Guarantor, any receivership or assignment for the benefit of creditors relating to the Company or any Guarantor or any similar case or proceeding relative to the Company or any Guarantor or its creditors, as such, in each case whether or not voluntary;

 

(2)                                 any liquidation, dissolution, marshalling of assets or liabilities or other winding up of or relating to the Company or any Guarantor, in each case whether or not voluntary and whether or not involving bankruptcy or insolvency; or

 

(3)                                 any other proceeding of any type or nature in which substantially all claims of creditors of the Company or any Guarantor are determined and any payment or distribution is or may be made on account of such claims.

 

4

 

“Intercreditor Agreement” means that certain Intercreditor Agreement, dated as of the date hereof, among the Company, the Guarantors, the Collateral Trustee, on behalf of itself and the holders of the Notes and any other Parity Lien Obligations, the Priority Lien Collateral Agent, and the other parties from time to time party thereto, as the same may be amended, restated, supplemented or otherwise modified or replaced from time to time.

 

“Junior Lien” has the meaning assigned to the term “Third Lien” in the Intercreditor Agreement.

 

“Junior Lien Debt” has the meaning assigned to the term “Third Lien Debt” in the Intercreditor Agreement.

 

“Junior Lien Documents” has the meaning assigned to the term “Third Lien Documents” in the Intercreditor Agreement.

 

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest, hypothecation, or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any agreement to give a security interest therein and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

 

“Notes” means, collectively, the Initial Notes and the Additional Notes for which the requirements set forth in Section 3.8 of this Agreement have been satisfied.

 

“Note Documents” means the Indenture, the Notes, the Intercreditor Agreement and the Notes Security Documents.

 

“Notes Security Agreement” means the Second Lien Security Agreement, dated as of the date hereof, among the Company, the Guarantors party thereto and the Collateral Trustee, on behalf of itself and the holders of the Notes, as the same may be amended, supplemented or otherwise modified or replaced from time to time.

 

“Notes Security Documents” means this Agreement, each Collateral Trust Joinder, the Notes Security Agreement and all other security agreements, pledge agreements, collateral assignments, mortgages, deeds of trust, collateral agency agreements, control agreements or other grants or transfers for security executed and delivered by the Company or any Guarantor creating (or purporting to create) a Lien upon Collateral in favor of the Collateral Trustee, for the benefit of the holders of the Notes, in each case, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time, in accordance with its terms and Section 7.1.

 

“Obligations” means any principal (including reimbursement obligations with respect to letters of credit whether or not drawn), interest (including, to the extent legally permitted, all interest accrued thereon after the commencement of any Insolvency or Liquidation Proceeding at the rate, including any applicable post-default rate, specified in the Parity Lien Documents, even if such interest is not enforceable, allowable or allowed as a claim in such proceeding), premium (if any), fees, indemnifications, reimbursements, expenses and other liabilities payable under the documentation governing any Indebtedness.

 

5

 

“Officers’ Certificate” means a certificate with respect to compliance with a condition or covenant provided for in this Agreement, signed on behalf of the Company by two officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, including:

 

(a)                                 a statement that the Person making such certificate has read such covenant or condition;

 

(b)                                 a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate are based;

 

(c)                                  a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been satisfied; and

 

(d)                                 a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied.

 

“Parity Lien” means a Lien granted by the Company or any Grantor in favor of the Collateral Trustee pursuant to a Parity Lien Security Document, at any time, upon any property of the Company or such Grantor to secure Parity Lien Obligations.

 

“Parity Lien Debt” means:

 

(1)                                 the Initial Notes and Guarantees thereof; and

 

(2)                                 any other Indebtedness (other than intercompany indebtedness) of the Company or any Guarantor (including Additional Notes and Guarantees thereof) that is secured equally and ratably with the Notes by a Parity Lien that was permitted to be incurred and so secured under each applicable Secured Debt Document; provided that in the case of any Indebtedness referred to in clause (2) of this definition, that:

 

(a)                                 on or before the date on which such Indebtedness is incurred by the Company or any Guarantor, such Indebtedness is designated by the Company, in an Additional Parity Lien Debt Certificate executed and delivered in accordance with Section 3.8(b), as “Parity Lien Debt” for the purposes of the Indenture and this Agreement; provided further that no such Indebtedness may be designated as both Parity Lien Debt and Priority Lien Debt or Junior Lien Debt;

 

(b)                                 other than in the case of any Additional Notes, such Indebtedness is governed by an indenture, credit agreement or other agreement that includes an Additional Secured Debt Designation;

 

(c)                                  the Parity Lien Representative for such Indebtedness executes and delivers a Collateral Trust Joinder in accordance with Section 3.8(b); and

 

(d)                                 all other requirements set forth in Section 3.8 have been complied with;

 

6

 

provided, further that in the case of any Additional Notes, on or before the date on which Indebtedness in respect of Additional Notes is incurred, the Company will deliver to the Collateral Trustee an Officers’ Certificate stating that such Indebtedness is permitted by each applicable Parity Lien Document to be incurred and secured with a Parity Lien equally and ratably with all previously existing and future Parity Lien Debt.

 

“Parity Lien Debt Default” means any “Event of Default” as defined in the Indenture, or any similar event or condition set forth in any other Parity Lien Document that causes, or permits holders of the applicable Series of Parity Lien Debt outstanding thereunder (with or without the giving of notice or lapse of time, or both, and whether or not notice has been given or time has lapsed) to cause, the Parity Lien Debt outstanding thereunder to become immediately due and payable.

 

“Parity Lien Documents” means, collectively, the Note Documents and any additional indenture, credit agreement or other agreement governing each other Series of Parity Lien Debt and the Parity Lien Security Documents.

 

“Parity Lien Obligations” means Parity Lien Debt and all other Obligations in respect thereof.

 

“Parity Lien Representative” means:

 

(1)                                 in the case of the Notes, the Trustee; or

 

(2)                                 in the case of any other Series of Parity Lien Debt, the trustee, agent or representative of the holders of such Series of Parity Lien Debt who (A) is appointed to act for the holders of such Series of Parity Lien Debt (for purposes related to the administration of the Parity Lien Security Documents) pursuant to the indenture, credit agreement or other agreement governing such Series of Parity Lien Debt, together with its successors in such capacity, and (B) that has executed a Collateral Trust Joinder.

 

“Parity Lien Secured Parties” means the holders of Parity Lien Obligations, the Collateral Trustee and each Parity Lien Representative.

 

“Parity Lien Security Documents” means this Agreement, each Collateral Trust Joinder, the Indenture (insofar as the same grants a Lien on the Collateral), the Notes Security Documents, and all other security agreements, pledge agreements, collateral assignments, mortgages, deeds of trust, collateral agency agreements, control agreements or other grants or transfers for security executed and delivered by the Company or any Guarantor creating (or purporting to create) a Lien upon Collateral in favor of the Collateral Trustee, for the benefit of any of the Parity Lien Secured Parties, in each case, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time, in accordance with its terms and Section 7.1.

 

“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

 

“Priority Lien” has the meaning assigned to such term in the Intercreditor Agreement.

 

7

 

“Priority Lien Collateral Agent” means JPMorgan Chase Bank, N.A., as agent under the Credit Agreement and any successor thereof in such capacity under the Credit Agreement, or if the Credit Agreement ceases to exist, the collateral agent or other representative of lenders or holders of Priority Lien Obligations designated pursuant to the terms of the Priority Lien Documents pursuant to which such Priority Lien Obligations were issued and the Intercreditor Agreement.

 

“Priority Lien Debt” has the meaning assigned to such term in the Intercreditor Agreement.

 

“Priority Lien Documents” has the meaning assigned to such term in the Intercreditor Agreement.

 

“Priority Lien Obligations” has the meaning assigned to such term in the Intercreditor Agreement.

 

“Reaffirmation Agreement” means an agreement reaffirming the security interests granted to the Collateral Trustee in substantially the form attached as Exhibit 1 to Exhibit A of this Agreement

 

“Required Parity Lien Debtholders” means, at any time, the holders of a majority in aggregate principal amount of all Parity Lien Debt then outstanding, calculated in accordance with the provisions of Section 7.2.

 

“Responsible Officer”, when used with respect to the Collateral Trustee, means any officer within the corporate trust department of the Collateral Trustee (or any successor group of the Collateral Trustee) or any other officer of the Collateral Trustee customarily performing functions similar to those performed by any of the above designated officers, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject.

 

“Secured Debt” means Priority Lien Debt, Parity Lien Debt and Junior Lien Debt.

 

“Secured Debt Document” means the Priority Lien Documents, the Parity Lien Documents and the Junior Lien Documents.

 

“Series of Parity Lien Debt” means, severally, the Notes and each other issue or series of Parity Lien Debt for which a single transfer register is maintained.

 

“Subsidiary” means, with respect to any specified Person: (1) any corporation, association or other business entity (other than a partnership) of which more than 50% of the total voting power of Voting Stock is at the time owned or controlled, directly or through another Subsidiary, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof), or (c) as to which such Person and its Subsidiaries are entitled to receive more than 50% of the assets of such partnership upon its dissolution.

 

8

 

“Trustee” has the meaning set forth in the recitals.

 

“Trust Estate” has the meaning set forth in Section 2.1.

 

“UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York or any other applicable jurisdiction.

 

“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled (without regard to the occurrence of any contingency) to vote in the election of the Board of Directors of such Person.

 

Section 1.2                              Rules of Interpretation.

 

(a)                                 All capitalized terms used in this Agreement and not otherwise defined herein have the meanings assigned to them in the Indenture.

 

(b)                                 Unless otherwise indicated, any reference to any agreement or instrument will be deemed to include a reference to that agreement or instrument as assigned, amended, supplemented, amended and restated, or otherwise modified and in effect from time to time or replaced in accordance with the terms of this Agreement.

 

(c)                                  The use in this Agreement or any of the other Parity Lien Security Documents, the word “include” or “including,” when following any general statement, term or matter, will not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto, but will be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. The word “will” shall be construed to have the same meaning and effect as the word “shall.”

 

(d)                                 References to “Sections,” “clauses,” “recitals” and the “preamble” will be to Sections, clauses, recitals and the preamble, respectively, of this Agreement unless otherwise specifically provided. References to “Articles” will be to Articles of this Agreement unless otherwise specifically provided. References to “Exhibits” and “Schedules” will be to Exhibits and Schedules, respectively, to this Agreement unless otherwise specifically provided.

 

(e)                                  Notwithstanding anything to the contrary in this Agreement, any references contained herein to any section, clause, paragraph, definition or other provision of the Indenture (including any definition contained therein) shall be deemed to be a reference to such section, clause, paragraph, definition or other provision as in effect on the date of this Agreement; provided that any reference to any such section, clause, paragraph or other provision shall refer to such section, clause, paragraph or other provision of the Indenture (including any definition contained therein) as amended or modified from time to time if such amendment or modification has been made in accordance with the Indenture. Unless otherwise set forth herein, references to principal amount shall include, without duplication, any reimbursement obligations with respect to a letter of credit and the face amount of any outstanding letter of credit (whether or not such amount is, at the time of determination, drawn or available to be drawn).

 

9

 

This Agreement and the other Parity Lien Security Documents will be construed without regard to the identity of the party who drafted it and as though the parties participated equally in drafting it. Consequently, each of the parties acknowledges and agrees that any rule of construction that a document is to be construed against the drafting party will not be applicable either to this Agreement or the other Parity Lien Security Documents.

 

ARTICLE 2
 THE TRUST ESTATE

 

Section 2.1                              Declaration of Trust.

 

To secure the payment of the Parity Lien Obligations and in consideration of the premises and the mutual agreements set forth herein, each of the Grantors hereby confirms the grant of Liens in favor of the Collateral Trustee, and the Collateral Trustee hereby accepts and agrees to hold, in trust under this Agreement for the benefit of all current and future Parity Lien Secured Parties, on all of such Grantor’s right, title and interest in, to and under all Collateral and on all Liens now or hereafter granted to the Collateral Trustee by each Grantor under any Parity Lien Security Document for the benefit of the Parity Lien Secured Parties, together with all of the Collateral Trustee’s right, title and interest in, to and under the Parity Lien Security Documents, and all interests, rights, powers and remedies of the Collateral Trustee thereunder or in respect thereof and all cash and non-cash proceeds thereof (collectively, the “Trust Estate”).

 

The Collateral Trustee and its successors and assigns under this Agreement will hold the Trust Estate in trust for the benefit solely and exclusively of all current and future Parity Lien Secured Parties as security for the payment of all present and future Parity Lien Obligations.

 

Notwithstanding the foregoing, if at any time:

 

(1)                                 all Liens securing the Parity Lien Obligations have been released as provided in Section 4.1;

 

(2)                                 the Collateral Trustee holds no other property in trust as part of the Trust Estate;

 

(3)                                 no monetary obligation (other than indemnification and other contingent obligations not then due and payable and letters of credit that have been cash collateralized at the lower of (A) 105% of the aggregate undrawn amount and (B) the percentage of the aggregate undrawn amount required for release of Liens under the terms of the applicable Parity Lien Documents) is outstanding and payable under this Agreement to the Collateral Trustee or any of its co-trustees or agents (whether in an individual or representative capacity); and

 

(4)                                 the Company delivers to the Collateral Trustee an Officers’ Certificate stating that all Parity Liens of the Collateral Trustee have been released in compliance with all applicable provisions of the Parity Lien Documents and that the Grantors are not required by any Parity Lien Document to grant any Parity Lien upon any property, then the Trust Estate arising hereunder will terminate, except that all provisions set forth in Sections 7.8 and 7.9 that are enforceable by the Collateral Trustee or any of

 

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its co-trustees or agents (whether in an individual or representative capacity) will remain enforceable in accordance with their terms.

 

The parties further declare and covenant that the Trust Estate will be held and distributed by the Collateral Trustee subject to the further agreements herein.

 

Section 2.2                              Collateral Shared Equally and Ratably.  The parties to this Agreement agree that the payment and satisfaction of all of the Parity Lien Obligations will be secured equally and ratably by the Parity Lien established in favor of the Collateral Trustee for the benefit of the Parity Lien Secured Parties, notwithstanding the time of incurrence of any Parity Lien Obligations or time or method of creation or perfection of any Parity Liens securing such Parity Lien Obligations.

 

Section 2.3                              Similar Collateral and Agreements.  The parties to this Agreement agree that it is their intention that the Parity Liens be identical. In furtherance of the foregoing, the parties hereto agree that the Parity Lien Security Documents (other than the Notes Security Documents) shall be in all material respects the same forms of documents as the respective Notes Security Documents creating Liens on the Collateral.

 

ARTICLE 3
 OBLIGATIONS AND POWERS OF COLLATERAL TRUSTEE

 

Section 3.1                              Appointment and Undertaking of the Collateral Trustee.

 

(a)                                 Each Parity Lien Secured Party (other than the Collateral Trustee) acting through its respective Parity Lien Representative hereby appoints the Collateral Trustee to serve as collateral trustee hereunder on the terms and conditions set forth herein. Subject to, and in accordance with, this Agreement, the Collateral Trustee will, as collateral trustee, for the benefit solely and exclusively of the present and future Parity Lien Secured Parties:

 

(1)                                 accept, enter into, hold, maintain, administer and enforce all Parity Lien Security Documents, including all Collateral subject thereto, and all Liens created thereunder, perform its obligations hereunder and under the Parity Lien Security Documents and protect, exercise and enforce the interests, rights, powers and remedies granted or available to it under, pursuant to or in connection with the Parity Lien Security Documents;

 

(2)                                 take all lawful and commercially reasonable actions permitted under the Parity Lien Security Documents that it may deem necessary or advisable to protect or preserve its interest in the Collateral subject thereto and such interests, rights, powers and remedies;

 

(3)                                 deliver and receive notices pursuant to this Agreement and the Parity Lien Security Documents;

 

(4)                                 sell, assign, collect, assemble, foreclose on, institute legal proceedings with respect to, or otherwise exercise or enforce the rights and remedies of a secured party (including a mortgagee, trust deed beneficiary and insurance beneficiary or

 

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loss payee) with respect to the Collateral under the Parity Lien Security Documents and its other interests, rights, powers and remedies;

 

(5)                                 remit as provided in Section 3.4 all cash proceeds received by the Collateral Trustee from the collection, foreclosure or enforcement of its interest in the Collateral under the Parity Lien Security Documents or any of its other interests, rights, powers or remedies;

 

(6)                                 execute and deliver amendments to the Parity Lien Security Documents as from time to time authorized pursuant to Section 7.1 accompanied by an Officers’ Certificate to the effect that the amendment was permitted under Section 7.1;

 

(7)                                 release or subordinate any Lien granted to it by any Parity Lien Security Document upon any Collateral if and as required by Section 3.2; and

 

(8)                                 enter into and perform its obligations and protect, exercise and enforce its interest, rights, powers and remedies under the Intercreditor Agreement.

 

(b)                                 Each party to this Agreement acknowledges and consents to the undertaking of the Collateral Trustee set forth in Section 3.1(a) and agrees to each of the other provisions of this Agreement applicable to the Collateral Trustee.

 

(c)                                  Notwithstanding anything to the contrary contained in this Agreement, the Collateral Trustee will not commence any exercise of remedies or any foreclosure actions or otherwise take any action or proceeding against any of the Collateral (other than actions as necessary to prove, protect or preserve the Liens securing the Parity Lien Obligations to the extent permitted pursuant to the Intercreditor Agreement) unless and until it shall have been directed by written notice of an Act of Parity Lien Debtholders and then only in accordance with the provisions of this Agreement and the Intercreditor Agreement.

 

(d)                                 Notwithstanding anything to the contrary contained in this Agreement, neither the Company nor any of its Affiliates may serve as Collateral Trustee.

 

Section 3.2                              Release or Subordination of Liens.  The Collateral Trustee will not release or subordinate any Lien of the Collateral Trustee or consent to the release or subordination of any Lien of the Collateral Trustee, except:

 

(a)                                 as directed by an Act of Parity Lien Debtholders accompanied by an Officers’ Certificate to the effect that the release or subordination was permitted by each applicable Parity Lien Document and otherwise setting forth the requirements of Section 4.1(b)(1) and 4.1(b)(2);

 

(b)                                 as required by Article 4;

 

(c)                                  to release or subordinate Liens on Collateral to the extent permitted by each applicable Parity Lien Document; provided that the Collateral Trustee receives an Officers’ Certificate confirming the foregoing;

 

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(d)                                 as ordered pursuant to applicable law under a final and nonappealable order or judgment of a court of competent jurisdiction; or

 

(e)                                  for the subordination of the Trust Estate and the Parity Liens to the extent required by the Intercreditor Agreement.

 

Section 3.3                              Enforcement of Liens. If the Collateral Trustee at any time receives written notice from a Parity Lien Representative stating that any event has occurred that constitutes a default under any Parity Lien Document entitling the Collateral Trustee to foreclose upon, collect or otherwise enforce its Liens under the Parity Lien Security Documents, the Collateral Trustee will promptly deliver written notice thereof to each Parity Lien Representative. Thereafter, the Collateral Trustee may await direction by an Act of Parity Lien Debtholders and, subject to the terms of the Intercreditor Agreement, will act, or decline to act, as directed by an Act of Parity Lien Debtholders, in the exercise and enforcement of the Collateral Trustee’s interests, rights, powers and remedies in respect of the Collateral or under the Parity Lien Security Documents or applicable law and, following the initiation of such exercise of remedies, the Collateral Trustee will act, or decline to act, with respect to the manner of such exercise of remedies as directed by an Act of Parity Lien Debtholders. Unless it has been directed to the contrary by an Act of Parity Lien Debtholders, the Collateral Trustee in any event may (but will not be obligated to) take or refrain from taking such action with respect to any default under any Parity Lien Document as it may deem advisable and in the best interest of the holders of Parity Lien Obligations.

 

Section 3.4                              Application of Proceeds.

 

(a)                                 Subject to the terms of the Intercreditor Agreement, the Collateral Trustee will apply the proceeds of any collection, sale, foreclosure or other realization upon, or exercise of any right or remedy with respect to, any Collateral and the proceeds of any title insurance or other insurance policy required under any Parity Lien Document or otherwise covering the Collateral, and any condemnation proceeds with respect to the Collateral, in the following order of application:

 

FIRST, to the payment of all amounts payable under this Agreement on account of the Collateral Trustee’s fees and any reasonable legal fees, costs and expenses or other liabilities of any kind incurred by the Collateral Trustee or any co-trustee or agent of the Collateral Trustee in connection with any Parity Lien Security Document (including, but not limited to, indemnification obligations);

 

SECOND, to the respective Parity Lien Representatives equally and ratably for application to the payment of all outstanding Parity Lien Debt and any other Parity Lien Obligations that are then due and payable in such order as may be provided in the Parity Lien Documents in an amount sufficient to pay in full in cash all outstanding Parity Lien Debt and all other Parity Lien Obligations that are then due and payable (including, to the extent legally permitted, all interest accrued thereon after the commencement of any Insolvency or Liquidation Proceeding at the rate, including any applicable post-default rate, specified in the Parity Lien Documents, even if such interest is not enforceable, allowable or

 

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allowed as a claim in such proceeding), and including the discharge or cash collateralization (at the lower of (1) 105% of the aggregate undrawn amount and (2) the percentage of the aggregate undrawn amount required for release of Liens under the terms of the applicable Parity Lien Document) of all outstanding letters of credit constituting Parity Lien Debt;

 

THIRD, to the repayment of Indebtedness and other Obligations secured by a permitted Junior Lien on the Collateral sold or realized upon;

 

FOURTH, any surplus remaining after the payment in full in cash of the amounts described in the preceding clauses will be paid to the Company or the applicable Guarantor, as the case may be, and as directed in writing by the Company, its successors or assigns, or as a court of competent jurisdiction may direct.

 

(b)                                 This Section 3.4 is intended for the benefit of, and will be enforceable as a third party beneficiary by, each present and future holder of Parity Lien Obligations, each present and future Parity Lien Representative and the Collateral Trustee as holder of Parity Liens. The Parity Lien Representative of each future issuance of Additional Notes and each future Series of Parity Lien Debt will be required to deliver a Collateral Trust Joinder including an Additional Secured Debt Designation as provided in Section 3.8 at the time of incurrence of such Series of Parity Lien Debt.

 

(c)                                  In connection with the application of proceeds pursuant to Section 3.4(a), except as otherwise directed by an Act of Parity Lien Debtholders, the Collateral Trustee may sell any non-cash proceeds for cash prior to the application of the proceeds thereof.

 

(d)                                 In making the determinations and allocations in accordance with Section 3.4(a), the Collateral Trustee may conclusively rely upon information supplied by the relevant Parity Lien Representative as to the amounts of unpaid principal and interest and other amounts outstanding with respect to its respective Parity Lien Debt and any other Parity Lien Obligations.

 

Section 3.5                              Powers of the Collateral Trustee.

 

(a)                                 The Collateral Trustee is irrevocably authorized and empowered to enter into and perform its obligations and protect, perfect, exercise and enforce its interest, rights, powers and remedies under the Parity Lien Security Documents and applicable law and in equity and to act as set forth in this Article 3 or, subject to the other provisions of this Agreement, as requested in any lawful directions given to it from time to time in respect of any matter by an Act of Parity Lien Debtholders.

 

(b)                                 No Parity Lien Representative or holder of Parity Lien Obligations (other than the Collateral Trustee) will have any liability whatsoever for any act or omission of the Collateral Trustee, and the Collateral Trustee will have no liability whatsoever for any act or omission of any Parity Lien Representative or any holder of Parity Lien Obligations.

 

Section 3.6                               Documents and Communications.  The Collateral Trustee will permit each Parity Lien Representative and each holder of Parity Lien Obligations upon reasonable written

 

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notice and at reasonable times from time to time to inspect and copy, at the cost and expense of the party requesting such copies, any and all Parity Lien Security Documents and other documents, notices, certificates, instructions or communications received by the Collateral Trustee in its capacity as such.

 

Section 3.7                              For Sole and Exclusive Benefit of Holders of Parity Lien Obligations.  The Collateral Trustee will accept, hold, administer and enforce all Liens on the Collateral at any time transferred or delivered to it and all other interests, rights, powers and remedies at any time granted to or enforceable by the Collateral Trustee and all other property of the Trust Estate solely and exclusively for the benefit of the present and future holders of present and future Parity Lien Obligations, and will distribute all proceeds received by it in realization thereon or from enforcement thereof solely and exclusively pursuant to the provisions of Section 3.4.

 

Section 3.8                              Additional Parity Lien Debt.

 

(a)                                 The Collateral Trustee will, as trustee hereunder, perform its undertakings set forth in Section 3.1(a) with respect to any Parity Lien Obligations constituting Additional Notes or a Series of Parity Lien Debt that is issued or incurred after the date hereof that:

 

(1)                                 such Parity Lien Obligations are identified as Parity Lien Debt in accordance with the procedures set forth in Section 3.8(b); and

 

(2)                                 the designated Parity Lien Representative identified pursuant to Section 3.8(b) signs a Collateral Trust Joinder and delivers the same to the Collateral Trustee.

 

(b)                                 The Company will be permitted to designate as an additional holder of Parity Lien Debt hereunder each Person who is, or who becomes, the registered holder of Parity Lien Debt incurred by the Company or any Guarantor after the date of this Agreement in accordance with the terms of all applicable Parity Lien Documents. The Company may only effect such designation by delivering to the Collateral Trustee an Additional Parity Lien Debt Certificate that:

 

(1)                                 states that the Company or applicable Grantor intends to incur additional Parity Lien Debt (“Additional Parity Lien Debt”) that is permitted by each applicable Parity Lien Document to be secured with a Parity Lien equally and ratably with all previously existing and future Parity Lien Debt;

 

(2)                                 specifies the name, address and contact information of the Parity Lien Representative for such series of Additional Parity Lien Debt for purposes of Section 7.6;

 

(3)                                 attaches as Exhibit 1 to such Additional Parity Lien Debt Certificate a Reaffirmation Agreement in substantially the form attached as Exhibit 1 to Exhibit A of this Agreement, which Reaffirmation Agreement has been duly executed by the Company and each Guarantor; and

 

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(4)                                 states that the Company has caused a copy of the Additional Parity Lien Debt Certificate and the related Collateral Trust Joinder to be delivered to each then existing Parity Lien Representative.

 

Although the Company shall be required to deliver a copy of each Additional Parity Lien Debt Certificate and each Collateral Trust Joinder to each then existing Parity Lien Representative, the failure to so deliver a copy of the Additional Parity Lien Debt Certificate and/or Collateral Trust Joinder to any then existing Parity Lien Representative shall not affect the status of such debt as Additional Parity Lien Debt if the other requirements of this Section 3.8 are complied with. Each of the Collateral Trustee and the other then existing Parity Lien Representatives shall have the right to request that the Company provide a legal opinion or opinions of counsel (subject to customary assumptions and qualifications) as to the Additional Parity Lien Debt being secured by a valid and perfected security interest in the Collateral; provided that (i) such legal opinion or opinions need not address any collateral of a type not previously covered by any legal opinion delivered by or on behalf of the Company and (ii) nothing shall preclude such legal opinion or opinions from being delivered on a post-closing basis after the incurrence of such Additional Parity Lien Debt if permitted by the Parity Lien Representative for such Additional Parity Lien Debt. Notwithstanding the foregoing, nothing in this Agreement will be construed to allow the Company or any Guarantor to incur additional Indebtedness (including Additional Notes) unless otherwise permitted by the terms of all applicable Parity Lien Documents.

 

(c)                                  With respect to any Parity Lien Obligations constituting Additional Notes or a Series of Parity Lien Debt that is issued or incurred after the date hereof, the Company and each of the Guarantors agrees to take such actions (if any) as may from time to time reasonably be requested by the Collateral Trustee, any Parity Lien Representative or any Act of Parity Lien Debtholders, and enter into such technical amendments, modifications and/or supplements to the then existing Guarantees and Parity Lien Security Documents (or execute and deliver such additional Parity Lien Security Documents) as may from time to time be reasonably requested by such Persons (including as contemplated by clause (d) below), to ensure that the Additional Notes or the Additional Parity Lien Debt, as applicable, is secured by, and entitled to the benefits of, the Parity Lien Security Documents, and each Parity Lien Secured Party (by its acceptance of the benefits hereof) hereby agrees to, and authorizes the Collateral Trustee to enter into, any such technical amendments, modifications and/or supplements (and additional Parity Lien Security Documents). The Company and each Guarantor hereby further agrees that, if there are any recording, filing or other similar fees payable in connection with any of the actions to be taken pursuant to this Section 3.8(c) or Section 3.8(d), all such amounts shall be paid by, and shall be for the account of, the Company and the respective Guarantors, on a joint and several basis.

 

(d)                                 Without limitation of the foregoing, upon reasonable request of the Collateral Trustee, any Parity Lien Representative or any Act of Parity Lien Debtholders, each Grantor agrees to take the following actions with respect to any real property Collateral (including Oil and Gas Properties (as defined in the Indenture as in effect on the date hereof)) with respect to all Additional Parity Lien Debt (it being understood that any such actions may be taken following the incurrence of any such Additional Parity Lien Debt on a post-closing basis if permitted by the Parity Lien Representative for such Additional Parity Lien Debt):

 

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(1)                                 each applicable Grantor shall enter into, and deliver to the Collateral Trustee a mortgage modification or new mortgage or deed of trust with regard to each real property subject to a mortgage or deed of trust (each such mortgage or deed of trust a “Mortgage” and each such property a “Mortgaged Property”), in proper form for recording in all applicable jurisdictions, in a form and substance reasonably satisfactory to the Collateral Trustee;

 

(2)                                 each applicable Grantor will cause to be delivered a local counsel opinion (subject to customary assumptions and qualifications) to the effect that the Collateral Trustee has a valid and perfected Lien with respect to each such Mortgaged Property; and

 

(3)                                 each applicable Grantor will cause a title company to have delivered to the Collateral Trustee an endorsement to each title insurance policy for any real property Collateral (excluding Oil and Gas Properties), if any, then in effect for the benefit of the Parity Lien Secured Parties, date down(s) or other evidence (which may include a new title insurance policy) (each such delivery, a “Title Datedown Product”), in each case insuring that (i) the priority of the Liens of the applicable Mortgage(s) as security for the Parity Lien Obligations has not changed and, if a new Mortgage is entered into, that the Lien of such new Mortgage securing the Parity Lien Debt then being incurred shall have the same priority as any existing Mortgage securing then existing Parity Lien Obligations, (ii) since the later of the original date of such title insurance product and the date of the Title Datedown Product delivered most recently prior to (and not in connection with) such additional Indebtedness, there has been no change in the condition of title and (iii) there are no intervening liens or encumbrances which may then or thereafter take priority over the Lien of the applicable Mortgage(s), in each case other than with respect to Liens permitted by each Parity Lien Document.

 

The Company will deliver an Officers’ Certificate to the Collateral Trustee confirming that the foregoing conditions have been satisfied.

 

ARTICLE 4
 OBLIGATIONS ENFORCEABLE BY THE COMPANY AND THE OTHER GRANTORS

 

Section 4.1                              Release of Liens on Collateral.

 

(a)                                 The Collateral Trustee’s Liens upon the Collateral will be automatically released:

 

(1)                                 in whole, upon (A) payment in full in cash and discharge of all outstanding Parity Lien Debt and all other Parity Lien Obligations that are outstanding, due and payable at the time all of the Parity Lien Debt is paid in full in cash and discharged, (B) termination or expiration of all commitments to extend credit under all Parity Lien Documents and (C) the cancellation or termination or cash collateralization (at the lower of (1) 105% of the aggregate undrawn amount and (2) the percentage of the aggregate undrawn amount required for release of Liens under the terms of the applicable

 

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Parity Lien Documents) of all outstanding letters of credit issued pursuant to any Parity Lien Documents;

 

(2)                                 as to any Collateral of a Guarantor that is (A) released as a Guarantor under each Parity Lien Document and (B) is not obligated (as primary obligor or guarantor) with respect to any other Parity Lien Obligations and so long as the respective release does not violate the terms of any Parity Lien Document which then remains in effect;

 

(3)                                 as to any Collateral of the Company or a Guarantor that is sold, transferred or otherwise disposed of by the Company or any Guarantor to a Person that is not (either before or after such sale, transfer or disposition) the Company or a Restricted Subsidiary (as defined in the Indenture) of the Company in a transaction or other circumstance that complies with Section 4.7 of the Indenture (other than the obligation to apply proceeds of such Asset Sale (as defined in the Indenture) as provided in such Section) and is permitted by all of the other Parity Lien Documents, at the time of such sale, transfer or other disposition or to the extent of the interest sold, transferred or otherwise disposed of; provided that the Collateral Trustee’s Liens upon the Collateral will not be released if the sale or other disposition is subject to Section 5.1 of the Indenture;

 

(4)                                 as to a release of less than all or substantially all of the Collateral, if consent to the release of all Parity Liens on such Collateral has been given by an Act of Parity Lien Debtholders;

 

(5)                                 in whole, if the Liens on such Collateral have been released in accordance with the terms of each Series of Parity Lien Debt;

 

(6)                                 as to a release of all or substantially all of the Collateral, if (A) consent to the release of that Collateral has been given by the requisite percentage or number of holders of each Series of Parity Lien Debt at the time outstanding as provided for in the applicable Parity Lien Documents and (B) the Company has delivered an Officers’ Certificate to the Collateral Trustee certifying that all such necessary consents have been obtained; or

 

(7)                                 if and to the extent, and in the manner, required by Section 4.01(a) of the Intercreditor Agreement.

 

(b)                                 The Collateral Trustee agrees for the benefit of the Company and the other Grantors that if the Collateral Trustee at any time receives:

 

(1)                                 an Officers’ Certificate stating that (A) the signing officer has read Article 4 of this Agreement and understands the provisions and the definitions relating hereto, (B) such officer has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not the conditions precedent in this Agreement, the Intercreditor Agreement and all other Parity Lien Documents, if any, relating to the release of the Collateral have been complied with and

 

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(C) in the opinion of such officer, such conditions precedent, if any, have been complied with; and

 

(1)                                 the proposed instrument or instruments releasing such Lien as to such property in recordable form, if applicable; then, promptly following receipt by the Collateral Trustee of the items required by this Section 4.1(b), upon request of the Company, the Collateral Trustee will execute (with such acknowledgements and/or notarizations as are required) and deliver evidence of such release to the Company or other applicable Grantor; provided that, in the case of a release of Liens under Section 4.1(a)(7), the Collateral Trustee shall execute and deliver such proposed instruments releasing its Liens contemporaneously with the execution and delivery of such similar instruments by the Priority Lien Collateral Agent in accordance with the terms of the Intercreditor Agreement.

 

(c)                                  The Collateral Trustee hereby agrees that:

 

(1)                                 in the case of any release pursuant to Section 4.1(a)(3), if the terms of any such sale, transfer or other disposition require the payment of the purchase price to be contemporaneous with the delivery of the applicable release, then, subject to the Intercreditor Agreement and at the written request of and at the expense of the Company or other applicable Grantor, the Collateral Trustee will either (A) be present at and deliver the release at the closing of such transaction or (B) deliver the release under customary escrow arrangements that permit such contemporaneous payment and delivery of the release; and

 

(2)                                 at any time when a Parity Lien Debt Default has occurred and is continuing, within one Business Day of the receipt by it of any Act of Parity Lien Debtholders pursuant to Section 4.1(a)(4), the Collateral Trustee will deliver a copy of such Act of Parity Lien Debtholders to each Parity Lien Representative.

 

Section 4.2                              Delivery of Copies to Parity Lien Representatives.  The Company will deliver to each Parity Lien Representative a copy of each Officers’ Certificate delivered to the Collateral Trustee pursuant to Section 4.1(b), together with copies of all documents delivered to the Collateral Trustee with such Officers’ Certificate. The Parity Lien Representatives will not be obligated to take notice thereof or to act thereon. Each Parity Lien Representative shall, within one Business Day of the receipt by it of the Officers’ Certificate and proposed release instrument(s) delivered to the Collateral Trustee pursuant to Section 4.1(b), deliver a copy of such notice to each registered holder of the Series of Parity Lien Debt for which it acts as Parity Lien Representative.

 

Section 4.3                              Collateral Trustee not Required to Serve, File or Record.  Subject to Section 3.2, the Collateral Trustee is not required to serve, file, register or record any instrument releasing or subordinating its Liens on any Collateral; provided that if the Company or any other Grantor shall make a written demand for a termination statement under Section 9-513(c) of the UCC, the Collateral Trustee shall comply with the  written request of the Company or Grantor to comply with the requirements of such UCC provision; provided, further, that the Collateral

 

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Trustee must first confirm with the Parity Lien Representatives that the requirements of such UCC provisions have been satisfied.

 

Section 4.4                              Release of Liens in Respect of Notes.  In addition to any release pursuant to Section 4.1 hereof, the Collateral Trustee’s Parity Liens will no longer secure the Notes outstanding under the Indenture or any other Obligations under the Note Documents, and the right of the holders of the Notes to the benefits and proceeds of the Collateral Trustee’s Parity Liens on the Collateral will terminate and be discharged as provided for in Section 12.6 of the Indenture.

 

Section 4.5                              Release of Liens in Respect of any Series of Parity Lien Debt other than the Notes.  In addition to any release pursuant to Section 4.1 hereof, as to any Series of Parity Lien Debt other than the Notes, the Collateral Trustee’s Parity Lien will no longer secure such Series of Parity Lien Debt if such Parity Lien Debt has been paid in full, all commitments to extend credit in respect of such Series of Parity Lien Debt have been terminated and all other Parity Lien Obligations related thereto that are outstanding and unpaid at the time such Series of Parity Lien Debt is paid are also paid in full, or if otherwise required by the terms of such Parity Lien Debt or the Intercreditor Agreement.

 

ARTICLE 5
 IMMUNITIES OF THE COLLATERAL TRUSTEE

 

Section 5.1                              No Implied Duty.  The Collateral Trustee will not have any fiduciary duties nor will it have responsibilities or obligations other than those expressly assumed by it in this Agreement, the other Parity Lien Security Documents and the Intercreditor Agreement. No implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement, the other Parity Lien Documents or the Intercreditor Agreement, or otherwise exist against the Collateral Trustee. Without limiting the generality of the foregoing sentences, the use of the term “trustee” in this Agreement with reference to the Collateral Trustee is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. The Collateral Trustee will not be required to take any action that is contrary to applicable law or any provision of this Agreement, the other Parity Lien Security Documents or the Intercreditor Agreement.

 

Section 5.2                              Appointment of Agents and Advisors.  The Collateral Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, accountants, appraisers or other experts or advisors selected by it in good faith as it may reasonably require and will not be responsible for any misconduct or negligence on the part of any of them.

 

Section 5.3                              Other Agreements.  The Collateral Trustee has accepted its appointment as collateral trustee hereunder and is bound by the Parity Lien Security Documents executed by the Collateral Trustee as of the date of this Agreement, and the Collateral Trustee shall at the request of the Company execute additional Parity Lien Security Documents delivered to it after the date of this Agreement (including to secure Obligations arising under Additional Parity Lien Debt to

 

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the extent such Obligations are permitted to be incurred and secured under the Parity Lien Documents); provided that such additional Parity Lien Security Documents do not adversely affect the rights, privileges, benefits and immunities of the Collateral Trustee or conflict with the terms of the Intercreditor Agreement. The Collateral Trustee will not otherwise be bound by, or be held obligated by, the provisions of any credit agreement, indenture or other agreement governing Parity Lien Debt (other than this Agreement and the other Parity Lien Security Documents to which it is a party).

 

Section 5.4                              Solicitation of Instructions.

 

(a)                                 The Collateral Trustee may at any time solicit written confirmatory instructions, in the form of an Act of Parity Lien Debtholders, an Officers’ Certificate or an order of a court of competent jurisdiction, as to any action that it may be requested or required to take, or that it may propose to take, in the performance of any of its obligations under this Agreement or the other Parity Lien Security Documents.

 

(b)                                 No written direction given to the Collateral Trustee by an Act of Parity Lien Debtholders that in the sole judgment of the Collateral Trustee imposes, purports to impose or might reasonably be expected to impose upon the Collateral Trustee any obligation or liability not set forth in or arising under this Agreement and the other Parity Lien Security Documents will be binding upon the Collateral Trustee unless the Collateral Trustee elects, at its sole option, to accept such direction.

 

(c)                                  The Collateral Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement at the request, order or direction of the Required Parity Lien Debtholders pursuant to the provisions of this Agreement, unless such holders shall have furnished to the Collateral Trustee reasonable security or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby.

 

Section 5.5                              Limitation of Liability.  The Collateral Trustee will not be responsible or liable for any action taken or omitted to be taken by it hereunder or under any other Parity Lien Security Document, except for its own negligence, bad faith or willful misconduct as determined by a court of competent jurisdiction.

 

Section 5.6                              Documents in Satisfactory Form.  The Collateral Trustee will be entitled to require that all agreements, certificates, opinions, instruments and other documents at any time submitted to it, including those expressly provided for in this Agreement, be delivered to it in a form and with substantive provisions reasonably satisfactory to it.

 

Section 5.7                              Entitled to Rely.  The Collateral Trustee may seek and rely upon, and shall be fully protected in relying upon, any judicial order or judgment, upon any advice, opinion or statement of legal counsel, independent consultants and other experts selected by it in good faith and upon any certification, instruction, notice or other writing delivered to it by the Company or any Guarantor in compliance with the provisions of this Agreement or delivered to it by any Parity Lien Representative as to the holders of Parity Lien Obligations for whom it acts, without being required to determine the authenticity thereof or the correctness of any fact stated therein or the propriety or validity of service thereof. The Collateral Trustee may act in reliance upon

 

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any instrument comporting with the provisions of this Agreement or any signature believed by it in good faith to be genuine and may assume that any Person purporting to give notice or receipt or advice or make any statement or execute any document in connection with the provisions hereof or the other Parity Lien Security Documents has been duly authorized to do so. To the extent an Officers’ Certificate or opinion of counsel is required or permitted under this Agreement to be delivered to the Collateral Trustee in respect of any matter, the Collateral Trustee may rely conclusively on an Officers’ Certificate or opinion of counsel as to such matter and such Officers’ Certificate or opinion of counsel shall be full warranty and protection to the Collateral Trustee for any action taken, suffered or omitted by it under the provisions of this Agreement and the other Parity Lien Security Documents.

 

Section 5.8                              Parity Lien Debt Default.  The Collateral Trustee will not be required to inquire as to the occurrence or absence of any Parity Lien Debt Default and will not be affected by or required to act upon any notice or knowledge as to the occurrence of any Parity Lien Debt Default unless and until it is directed by an Act of Parity Lien Debtholders.

 

Section 5.9                              Actions by Collateral Trustee.  As to any matter not expressly provided for by this Agreement or the other Parity Lien Security Documents, the Collateral Trustee will act or refrain from acting as directed by an Act of Parity Lien Debtholders and will be fully protected if it does so, and any action taken, suffered or omitted pursuant to hereto or thereto shall be binding on the holders of Parity Lien Obligations.

 

Section 5.10                       Security or Indemnity in favor of the Collateral Trustee.  The Collateral Trustee will not be required to advance or expend any funds or otherwise incur any financial liability in the performance of its duties or the exercise of its powers or rights hereunder unless it has been provided with security or indemnity reasonably satisfactory to it against any and all liability or expense which may be incurred by it by reason of taking or continuing to take such action.

 

Section 5.11                       Rights of the Collateral Trustee.  In the event of any conflict between any terms and provisions set forth in this Agreement and those set forth in any other Parity Lien Security Document, the terms and provisions of this Agreement shall supersede and control the terms and provisions of such other Parity Lien Security Document. In the event there is any bona fide, good faith disagreement between the other parties to this Agreement or any of the other Parity Lien Security Documents resulting in adverse claims being made in connection with Collateral held by the Collateral Trustee and the terms of this Agreement or any of the other Parity Lien Security Documents do not unambiguously mandate the action the Collateral Trustee is to take or not to take in connection therewith under the circumstances then existing, or the Collateral Trustee is in doubt as to what action it is required to take or not to take hereunder or under the other Parity Lien Security Documents, it will be entitled to refrain from taking any action (and will incur no liability for doing so) until directed otherwise in writing by a request signed jointly by the parties hereto entitled to give such direction or by order of a court of competent jurisdiction.

 

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Section 5.12                       Limitations on Duty of Collateral Trustee in Respect of Collateral.

 

(a)                                 Beyond the exercise of reasonable care in the custody of Collateral in its possession, the Collateral Trustee will have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to preservation of rights against prior parties or any other rights pertaining thereto and the Collateral Trustee will not be responsible for filing any financing or continuation statements or recording any documents or instruments in any public office at any time or times or otherwise perfecting or maintaining the perfection of any Liens on the Collateral; provided that, notwithstanding the foregoing, the Collateral Trustee will execute, file or record UCC-3 continuation statements and other documents and instruments to preserve, protect or perfect the security interests granted to the Collateral Trustee (subject to the priorities set forth herein) if it shall receive a specific written request to execute, file or record the particular continuation statement or other specific document or instrument by any Parity Lien Representative. The Collateral Trustee shall deliver to each other Parity Lien Representative a copy of any such written request. The Collateral Trustee will be deemed to have exercised reasonable care in the custody of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property, and the Collateral Trustee will not be liable or responsible for any loss or diminution in the value of any of the Collateral by reason of the act or omission of any carrier, forwarding agency or other agent or bailee selected by the Collateral Trustee in good faith.

 

(b)                                 Except as provided in paragraph 5.12(a), the Collateral Trustee will not be responsible for the existence, genuineness or value of any of the Collateral or for the validity, perfection, priority or enforceability of the Liens in any of the Collateral, for the validity or sufficiency of the Collateral or any agreement or assignment contained therein, for the validity of the title of any Grantor to the Collateral, for insuring the Collateral or for the payment of taxes, charges, assessments or Liens upon the Collateral or otherwise as to the maintenance of the Collateral. The Collateral Trustee hereby disclaims any representation or warranty to the current and future holders of the Parity Lien Obligations concerning the perfection of the security interests granted to it or in the value of any Collateral. The Collateral Trustee shall not be under any obligation to the Trustee or any holder of Parity Lien Debt to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this or any other Parity Lien Security Document or the Intercreditor Agreement or to inspect the properties, books or records of the Company or any Guarantor.

 

Section 5.13                       Assumption of Rights, Not Assumption of Duties.  Notwithstanding anything to the contrary contained herein:

 

(1)                                 each of the parties thereto will remain liable under each of the Parity Lien Security Documents (other than this Agreement) to the extent set forth therein to perform all of their respective duties and obligations thereunder to the same extent as if this Agreement had not be executed;

 

(2)                                 the exercise by the Collateral Trustee of any of its rights, remedies or powers hereunder will not release such parties from any of their respective duties or obligations under the other Parity Lien Security Documents; and

 

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(3)                                 the Collateral Trustee will not be obligated to perform any of the obligations or duties of the Company or any Grantor.

 

Section 5.14                       No Liability for Clean Up of Hazardous Materials.  In the event that the Collateral Trustee is required to acquire title to an asset for any reason, or take any managerial action of any kind in regard thereto, in order to carry out any fiduciary or trust obligation for the benefit of another, which in the Collateral Trustee’s sole discretion may cause the Collateral Trustee to be considered an “owner or operator” under any environmental laws or otherwise cause the Collateral Trustee to incur, or be exposed to, any environmental liability or any liability under any other federal, state or local law, the Collateral Trustee reserves the right, instead of taking such action, either to resign as Collateral Trustee or to arrange for the transfer of the title or control of the asset to a court appointed receiver. The Collateral Trustee will not be liable to any Person for any environmental liability or any environmental claims or contribution actions under any federal, state or local law, rule or regulation by reason of the Collateral Trustee’s actions and conduct as authorized, empowered and directed hereunder or relating to any kind of discharge or release or threatened discharge or release of any hazardous materials into the environment.

 

Section 5.15                       Other Relationships with the Company or Guarantors.  U.S. Bank National Association and its Affiliates (and any successor Collateral Trustee and its Affiliates) may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Company or any Guarantor and its Affiliates as though it was not the Collateral Trustee hereunder and without notice to or consent of the Trustee. The Trustee and the holders of the Parity Lien Obligations acknowledge that, pursuant to such activities, U.S. Bank National Association or its Affiliates (and any successor Collateral Trustee and its Affiliates) may receive information regarding the Company or any Guarantor or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Company, such Guarantor or such Affiliate) and acknowledge that the Collateral Trustee shall not be under any obligation to provide such information to the Trustee or the holders of the Parity Lien Obligations. Nothing herein shall impose or imply any obligation on the part of U.S. Bank National Association (or any successor Collateral Trustee) to advance funds.

 

ARTICLE 6
 RESIGNATION AND REMOVAL OF THE COLLATERAL TRUSTEE

 

Section 6.1                              Resignation or Removal of Collateral Trustee.  Subject to the appointment of a successor Collateral Trustee as provided in Section 6.2 and the acceptance of such appointment by the successor Collateral Trustee:

 

(a)                                 the Collateral Trustee may resign at any time by giving not less than 30 days’ notice of resignation to each Parity Lien Representative and the Company; and

 

(b)                                 the Collateral Trustee may be removed at any time, with or without cause, by an Act of Parity Lien Debtholders.

 

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Section 6.2                              Appointment of Successor Collateral Trustee.  Upon any such resignation or removal, a successor Collateral Trustee may be appointed by an Act of Parity Lien Debtholders. If no successor Collateral Trustee has been so appointed and accepted such appointment within 30 days after the predecessor Collateral Trustee gave notice of resignation or was removed, the retiring Collateral Trustee may (at the expense of the Company), at its option, appoint a successor Collateral Trustee, or petition a court of competent jurisdiction for appointment of a successor Collateral Trustee, which must be a bank or trust company:

 

(1)                                 authorized to exercise corporate trust powers; and

 

(2)                                 having a combined capital and surplus of at least $250,000,000.

 

The Collateral Trustee will fulfill its obligations hereunder until a successor Collateral Trustee meeting the requirements of this Section 6.2 has accepted its appointment as Collateral Trustee and the provisions of Section 6.3 have been satisfied.

 

Section 6.3                              Succession.  When the Person so appointed as successor Collateral Trustee accepts such appointment:

 

(1)                                 such Person will succeed to and become vested with all the rights, powers, privileges and duties of the predecessor Collateral Trustee, and the predecessor Collateral Trustee will be discharged from its duties and obligations hereunder; and

 

(2)                                 the predecessor Collateral Trustee will (at the expense of the Company) promptly transfer all Liens and collateral security and other property of the Trust Estate within its possession or control to the possession or control of the successor Collateral Trustee and will execute instruments and assignments as may be necessary or desirable or reasonably requested by the successor Collateral Trustee to transfer to the successor Collateral Trustee all Liens, interests, rights, powers and remedies of the predecessor Collateral Trustee in respect of the Parity Lien Security Documents or the Trust Estate.

 

Thereafter the predecessor Collateral Trustee will remain entitled to enforce the immunities granted to it in Article 5 and the provisions of Sections 7.8 and 7.9, and said provisions will survive termination of this Agreement for the benefit of the predecessor of the Collateral Trustee.

 

Section 6.4                              Merger, Conversion or Consolidation of Collateral Trustee.  Any Person into which the Collateral Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Collateral Trustee shall be a party, or any Person succeeding to the business of the Collateral Trustee shall be the successor of the Collateral Trustee pursuant to Section 6.3, provided that (i) without the execution or filing of any paper with any party hereto or any further act on the part of any of the parties hereto, except where an instrument of transfer or assignment is required by law to effect such succession, anything herein to the contrary notwithstanding, such Person satisfies the eligibility requirements specified in clauses (1) through (4) of Section 6.2 and (ii) prior to any such merger, conversion or consolidation, the Collateral Trustee shall have notified the Company and each Parity Lien Representative thereof in writing.

 

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Section 6.5                              Concerning the Collateral Trustee and the Parity Lien Representatives.

 

(a)                                 Notwithstanding anything contained herein to the contrary, it is expressly understood and agreed by the parties hereto that this Agreement has been signed by each Parity Lien Representative not in its individual capacity or personally but solely in its capacity as trustee, representative or agent for the benefit of the related holders of the applicable Series of Parity Lien Debt in the exercise of the powers and authority conferred and vested in it under the related Parity Lien Documents, and in no event shall such Parity Lien Representative, in its individual capacity, have any liability for the representations, warranties, covenants, agreements or other obligations of any other party under this Agreement, any Parity Lien Document or in any of the certificates, reports, documents, data notices or agreements delivered by such other party pursuant hereto or thereto.

 

(b)                                 Notwithstanding anything contained herein to the contrary, it is expressly understood and agreed by the parties hereto that this Agreement has been signed by U.S. Bank National Association, not in its individual capacity or personally but solely in its capacity as Collateral Trustee, and in no event shall U.S. Bank National Association, in its individual capacity, have any liability for the representations, warranties, covenants, agreements or other obligations of any other party under this Agreement, any Parity Lien Document or in any of the certificates, reports, documents, data notices or agreements delivered by such other party pursuant hereto or thereto.

 

(c)                                  Notwithstanding anything contained herein to the contrary, it is expressly understood and agreed by the parties hereto that this Agreement has been signed by U.S. Bank National Association not in its individual capacity or personally but solely in its capacity as Trustee, and in no event shall U.S. Bank National Association or any other Parity Lien Representative, in its individual capacity, have any liability for the representations, warranties, covenants, agreements or other obligations of any other party under this Agreement, any Parity Lien Document or in any of the certificates, reports, documents, data notices or agreements delivered by such other party pursuant hereto or thereto.

 

(d)                                 In entering into this Agreement, the Collateral Trustee shall be entitled to the benefit of every provision of the Indenture relating to the rights, exculpations or conduct of, affecting the liability of or otherwise affording protection to the “Collateral Trustee” thereunder. In no event will the Collateral Trustee be liable for any act or omission on the part of the Grantors or any Parity Lien Representative.

 

(e)                                  Except as otherwise set forth herein, neither the Collateral Trustee nor any Parity Lien Representative shall be required to exercise any discretion or take any action, but shall be required to act or refrain from acting (and shall be fully protected in so acting or refraining from acting) solely upon the instructions of the applicable Required Parity Lien Debtholders as provided in the Indenture or the related Parity Lien Document; provided that neither the Collateral Trustee nor any Parity Lien Representative shall be required to take any action that (i) it in good faith believes exposes it to personal liability unless it receives an indemnification satisfactory to it from the applicable holders of the Parity Lien Obligations with respect to such action or (ii) is contrary to this Agreement, the Intercreditor Agreement or applicable law.

 

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ARTICLE 7
 MISCELLANEOUS PROVISIONS

 

Section 7.1                              Amendment.

 

(a)                                 Except as provided in the Intercreditor Agreement, no amendment or supplement to the provisions of any Parity Lien Security Document will be effective without the approval of the Collateral Trustee acting as directed by an Act of Parity Lien Debtholders, except that:

 

(1)                                 any amendment or supplement that has the effect solely of:

 

(A)                               adding or maintaining Collateral, securing additional Parity Lien Debt that was otherwise permitted by the terms of the Parity Lien Documents to be secured by the Collateral or preserving, perfecting or establishing the Liens thereon or the rights of the Collateral Trustee therein; or

 

(B)                               providing for the assumption of the Company or any Guarantor’s obligations under any Parity Lien Document in the case of a merger or consolidation or sale of all or substantially all of the properties or assets of the Company or such Guarantor to the `extent permitted by the terms of the Indenture and the other Parity Lien Documents, as applicable;

 

will become effective when executed and delivered by the Company or any other applicable Grantor party thereto and the Collateral Trustee;

 

(2)                                 no amendment or supplement that reduces, impairs or adversely affects the right of any holder of Parity Lien Obligations:

 

(A)                               to vote its outstanding Parity Lien Debt as to any matter described as subject to an Act of Parity Lien Debtholders or direction by the Required Parity Lien Debtholders (or amends the provisions of this clause (2) or the definition of “Act of Parity Lien Debtholders” or “Required Parity Lien Debtholders”),

 

(B)                               to share in the order of application described in Section 3.4 in the proceeds of enforcement of or realization on any Collateral; or

 

(C)                               to require that Liens securing Parity Lien Obligations be released only as set forth in the provisions described in Sections 4.1, 4.4 or 4.5,

 

will become effective without the consent of the requisite percentage or number of holders of each Series of Parity Lien Debt so adversely affected under the applicable Parity Lien Document; and

 

(3)                                 no amendment or supplement that imposes any obligation upon the Collateral Trustee or any Parity Lien Representative or adversely affects the rights of the Collateral Trustee or any Parity Lien Representative, respectively, in its individual

 

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capacity as such will become effective without the consent of the Collateral Trustee or such Parity Lien Representative, respectively.

 

(b)                                 Notwithstanding Section 7.1(a) but subject to Sections 7.1(a)(2) and 7.1(a)(3):

 

(1)                                 any mortgage or other Parity Lien Security Document may be amended or supplemented with the approval of the Collateral Trustee acting as directed in writing by the Required Parity Lien Debtholders, unless such amendment or supplement would not be permitted under the terms of this Agreement, the Intercreditor Agreement or any Priority Lien Document;

 

(2)                                 any amendment or waiver of, or any consent under, any provision of any security document that secures Priority Lien Obligations will apply automatically to any comparable provision of any comparable Parity Lien Security Document without the consent of or notice to any holder of Parity Lien Obligations and without any action by the Company or any Guarantor or any holder of Notes or other Parity Lien Obligations; and

 

(3)                                 any mortgage or other Parity Lien Security Document may be amended or supplemented with the approval of the Collateral Trustee (but without the consent of or notice to any holder of Parity Lien Obligations and without any action by any holder of Notes or other Parity Lien Obligations) (i) to cure any ambiguity, defect or inconsistency, or (ii) to make other changes that do not have an adverse effect on the validity of the Lien created thereby.

 

(c)                                  The Collateral Trustee will not enter into any amendment or supplement unless it has received an Officers’ Certificate to the effect that such amendment or supplement will not result in a breach of any provision or covenant contained in the Intercreditor Agreement or any of the Parity Lien Documents. Prior to executing any amendment or supplement pursuant to this Section 7.1, the Collateral Trustee will be entitled to receive an opinion of counsel of the Company to the effect that the execution of such document is authorized or permitted hereunder, and with respect to amendments adding Collateral, an opinion of counsel of the Company addressing customary creation and perfection, and if such additional Collateral consists of equity interests of any Person which equity interests constitute certificated securities, priority matters with respect to such additional Collateral (which opinion may be subject to customary assumptions and qualifications).

 

Section 7.2                              Voting.  In connection with any matter under this Agreement requiring a vote of holders of Parity Lien Debt, each Series of Parity Lien Debt will cast its votes in accordance with the Parity Lien Documents governing such Series of Parity Lien Debt. The amount of Parity Lien Debt to be voted by a Series of Parity Lien Debt will equal (1) the aggregate principal amount of Parity Lien Debt held by such Series of Parity Lien Debt (including outstanding letters of credit whether or not then available or drawn), plus (2) other than in connection with an exercise of remedies, the aggregate unfunded commitments to extend credit which, when funded, would constitute Indebtedness of such Series of Parity Lien Debt (to the extent such unfunded commitments have not been terminated by the holders of such Series of

 

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Parity Lien Debt). Following and in accordance with the outcome of the applicable vote under its Parity Lien Documents, the Parity Lien Representative of each Series of Parity Lien Debt will vote the total amount of Parity Lien Debt under that Series of Parity Lien Debt as a block in respect of any vote under this Agreement.

 

Section 7.3                              Further Assurances.

 

(a)                                 The Company and each of the Guarantors will do or cause to be done all acts and things that may be required, or that the Collateral Trustee from time to time may reasonably request, to assure and confirm that the Collateral Trustee holds, for the benefit of the holders of Parity Lien Obligations, duly created and enforceable and perfected Liens upon the Collateral (including any property or assets that are acquired or otherwise become, or are required by any Parity Lien Document to become, Collateral after the date hereof), in each case, as contemplated by, and with the Lien priority required under, the Parity Lien Documents and in connection with any merger, consolidation or sale of assets of the Company or any Guarantor, the property and assets of the Person which is consolidated or merged with or into the Company or any Guarantor, to the extent that they are property or assets of the types which would constitute Collateral under the security documents, shall be treated as after-acquired property and the Company or such Guarantor shall take such action as may be reasonably necessary to cause such property and assets to be made subject to the Parity Liens, in the manner and to the extent required under the Parity Lien Documents.

 

(b)                                 Upon the reasonable request of the Collateral Trustee or any Parity Lien Representative at any time and from time to time, the Company and each of the Guarantors will promptly execute, acknowledge and deliver such security documents, instruments, certificates, notices and other documents, and take such other actions as may be reasonably required, or that the Collateral Trustee may reasonably request, to create, perfect, protect, assure or enforce the Liens and benefits intended to be conferred, in each case as contemplated by the Parity Lien Documents for the benefit of holders of Parity Lien Obligations; provided that no such security document, instrument or other document shall be materially more burdensome upon the Company and the Guarantors than the Parity Lien Document executed and delivered (or required to be executed and delivered promptly after the date hereof) by the Company and the Guarantors in connection with the issuance of the Notes on or about the date hereof.

 

(c)                                  From and after the date hereof, the Company shall, or shall cause the applicable Guarantor to, deliver such documents and takes such actions as are required by Article XII of the Indenture.

 

(d)                                 Upon the request of the Collateral Trustee, the Company and the Guarantors will permit the Collateral Trustee or any of its agents or representatives, at reasonable times and intervals upon reasonable prior notice, to visit their offices and sites and inspect any of the Collateral and to discuss matters relating to the Collateral with their respective officers and independent public accountants. The Company and the Guarantors shall, at any reasonable time and from time to time upon reasonable prior notice, permit the Collateral Trustee or any of its agents or representatives to examine and make copies of and abstracts from the records and books of account of the Company and the Guarantors and their Subsidiaries, all at the Company’s expense.

 

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Section 7.4                              Successors and Assigns.

 

(a)                                 Except as provided in Section 5.2, the Collateral Trustee may not, in its capacity as such, delegate any of its duties or assign any of its rights hereunder, and any attempted delegation or assignment of any such duties or rights will be null and void. All obligations of the Collateral Trustee hereunder will inure to the sole and exclusive benefit of, and be enforceable by, each Parity Lien Representative and each present and future holder of Parity Lien Obligations, each of whom will be entitled to enforce this Agreement as a third-party beneficiary hereof, and all of their respective successors and assigns.

 

(b)                                 Neither the Company nor any Guarantor may delegate any of its duties or assign any of its rights hereunder, and any attempted delegation or assignment of any such duties or rights will be null and void. All obligations of the Company and the Guarantors hereunder will inure to the sole and exclusive benefit of, and be enforceable by, the Collateral Trustee, each Parity Lien Representative and each present and future holder of Parity Lien Obligations, each of whom will be entitled to enforce this Agreement as a third-party beneficiary hereof, and all of their respective successors and assigns.

 

Section 7.5                              Delay and Waiver.  No failure to exercise, no course of dealing with respect to the exercise of, and no delay in exercising, any right, power or remedy arising under this Agreement or any of the other Parity Lien Security Documents will impair any such right, power or remedy or operate as a waiver thereof. No single or partial exercise of any such right, power or remedy will preclude any other or future exercise thereof or the exercise of any other right, power or remedy. The remedies herein are cumulative and are not exclusive of any remedies provided by law.

 

Section 7.6                              Notices.  Any communications, including notices and instructions, between the parties hereto or notices provided herein to be given may be given to the following addresses:

 

	
If   to the Collateral Trustee:
    	
U.S.   Bank National Association
    
	
 
    	
Global   Corporate Trust Services
    
	
 
    	
5555   San Felipe, Suite 1150
    
	
 
    	
Houston,   TX 77056
    
	
 
    	
Telephone:   (713) 235-9208
    
	
 
    	
Facsimile:   (713) 235-9213
    
	
 
    	
Attention:   Steven Finklea
    
	
 
    	
 
    
	
 
    	
with   a copy to:
    
	
 
    	
 
    
	
 
    	
Bracewell &   Giuliani LLP
    
	
 
    	
711   Louisiana Street, Suite 2300
    
	
 
    	
Houston,   TX 77002
    
	
 
    	
Telephone:   (713) 221-1456
    
	
 
    	
Fax:   (713) 437-5349
    
	
 
    	
Attention:   Troy Harder
    

 

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If   to the Company or any other Grantor:
    	
Halcón   Resources Corporation
    
	
 
    	
1000   Louisiana St., Suite 6905
    
	
 
    	
Houston,   TX 77002
    
	
 
    	
Telephone:   (832) 538-0303
    
	
 
    	
Facsimile:   (832) 538-0220
    
	
 
    	
Attention:   Mark J. Mize
    
	
 
    	
 
    
	
If   to the Trustee:
    	
U.S.   Bank National Association
    
	
 
    	
Global   Corporate Trust Services
    
	
 
    	
5555   San Felipe, Suite 1150
    
	
 
    	
Houston,   TX 77057
    
	
 
    	
Telephone:   (713) 235-9208
    
	
 
    	
Facsimile:   (713) 235-9213
    
	
 
    	
Attention:   Steven Finklea
    
	
 
    	
 
    
	
 
    	
with   a copy to:
    
	
 
    	
 
    
	
 
    	
Bracewell &   Giuliani LLP
    
	
 
    	
711   Louisiana Street, Suite 2300
    
	
 
    	
Houston,   TX 77002
    
	
 
    	
Telephone:   (713) 221-1456
    
	
 
    	
Fax:   (713) 437-5349
    
	
 
    	
Attention:   Troy Harder
    

 

and if to any other Parity Lien Representative, to such address as it may specify by written notice to the parties named above.

 

All notices and communications will be mailed by first class mail, certified or registered, return receipt requested, by overnight air courier guaranteeing next day delivery, or delivered by facsimile to the relevant address or number set forth above or, as to holders of Parity Lien Debt, its address shown on the register kept by the office or agency where the relevant Parity Lien Debt may be presented for registration of transfer or for exchange. Failure to mail or delivery by facsimile a notice or communication to a holder of Parity Lien Debt or any defect in it will not affect its sufficiency with respect to other holders of Parity Lien Debt.

 

If a notice or communication is mailed or delivered by facsimile in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.

 

Section 7.7                              Entire Agreement.  This Agreement states the complete agreement of the parties relating to the undertaking of the Collateral Trustee set forth herein and supersedes all oral negotiations and prior writings in respect of such undertaking.

 

Section 7.8                              Compensation; Expenses.  The Grantors jointly and severally agree to pay, promptly upon demand:

 

(1)                                 such compensation to the Collateral Trustee and its agents as the Company and the Collateral Trustee may agree in writing from time to time;

 

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(2)                                 all reasonable costs and expenses incurred by the Collateral Trustee and its agents in the preparation, execution, delivery, filing, recordation, administration or enforcement of this Agreement or any other Parity Lien Security Document or any consent, amendment, waiver or other modification relating hereto or thereto;

 

(3)                                 all reasonable fees, expenses and disbursements of legal counsel and any auditors, accountants, consultants or appraisers or other professional advisors and agents engaged by the Collateral Trustee or any Parity Lien Representative incurred in connection with the negotiation, preparation, closing, administration, performance or enforcement of this Agreement and the other Parity Lien Security Documents or any consent, amendment, waiver or other modification relating hereto or thereto and any other document or matter requested by the Company or any Guarantor;

 

(4)                                 all reasonable costs and expenses incurred by the Collateral Trustee and its agents in creating, perfecting, preserving, releasing or enforcing the Collateral Trustee’s Liens on the Collateral, including filing and recording fees, expenses and taxes, stamp or documentary taxes, search fees, and title insurance premiums;

 

(5)                                 all other reasonable costs and expenses incurred by the Collateral Trustee and its agents in connection with the negotiation, preparation and execution of the Parity Lien Security Documents and any consents, amendments, waivers or other modifications thereto and the transactions contemplated thereby or the exercise of rights or performance of obligations by the Collateral Trustee thereunder; and

 

(6)                                 after the occurrence of any Parity Lien Debt Default, all costs and expenses incurred by the Collateral Trustee, its agents and any Parity Lien Representative in connection with the preservation, collection, foreclosure or enforcement of the Collateral subject to the Parity Lien Security Documents or any interest, right, power or remedy of the Collateral Trustee or in connection with the collection or enforcement of any of the Parity Lien Obligations or the proof, protection, administration or resolution of any claim based upon the Parity Lien Obligations in any Insolvency or Liquidation Proceeding, including all fees and disbursements of attorneys, accountants, auditors, consultants, appraisers and other professionals engaged by the Collateral Trustee, its agents or the Parity Lien Representatives.

 

The agreements in this Section 7.8 will survive repayment of all other Parity Lien Obligations and the removal or resignation of the Collateral Trustee and termination of this Agreement.

 

Section 7.9                              Indemnity.

 

(a)                                 The Grantors jointly and severally agree to defend, indemnify, pay and hold harmless the Collateral Trustee, each Parity Lien Representative, each holder of Parity Lien Obligations and each of their respective Affiliates and each and all of the directors, officers, partners, trustees, employees, attorneys and agents, and (in each case) their respective heirs, representatives, successors and assigns (each of the foregoing, an “Indemnitee”) from and against any and all Indemnified Liabilities; provided that no Indemnitee will be entitled to

 

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indemnification hereunder with respect to any Indemnified Liability to the extent such Indemnified Liability is found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee. THIS INDEMNITY COVERS ORDINARY NEGLIGENCE OF ANY OF THE FOREGOING PARTIES.

 

(b)                                 All amounts due under this Section 7.9 will be payable within 10 days upon written demand.

 

(c)                                  To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in Section 7.9(a) may be unenforceable in whole or in part because they violate any law or public policy, each of the Grantors will contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them.

 

(d)                                 No Grantor will ever assert any claim against any Indemnitee, on any theory of liability, for any lost profits or special, indirect or consequential damages or (to the fullest extent a claim for punitive damages may lawfully be waived) any punitive damages arising out of, in connection with, or as a result of, this Agreement or any other Parity Lien Document or any agreement or instrument or transaction contemplated hereby or relating in any respect to any Indemnified Liability, and each of the Grantors hereby forever waives, releases and agrees not to sue upon any claim for any such lost profits or special, indirect, consequential or (to the fullest extent lawful) punitive damages, whether or not accrued and whether or not known or suspected to exist in its favor.

 

(e)                                  The agreements in this Section 7.9 will survive repayment of all other Parity Lien Obligations and the removal or resignation of the Collateral Trustee and termination of this Agreement.

 

Section 7.10                       Severability.  If any provision of this Agreement is invalid, illegal or unenforceable in any respect or in any jurisdiction, the validity, legality and enforceability of such provision in all other respects and of all remaining provisions, and of such provision in all other jurisdictions, will not in any way be affected or impaired thereby.

 

Section 7.11                       Headings.  Section headings herein have been inserted for convenience of reference only, are not to be considered a part of this Agreement and will in no way modify or restrict any of the terms or provisions hereof.

 

Section 7.12                       Obligations Secured.  All obligations of the Grantors set forth in or arising under this Agreement will be Parity Lien Obligations and are secured by all Liens granted by the Parity Lien Security Documents.

 

Section 7.13                       Governing Law.  THE INTERNAL LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THIS AGREEMENT.

 

Section 7.14                       Consent to Jurisdiction.  All judicial proceedings brought against any party hereto arising out of or relating to this Agreement or any of the other Parity Lien Security Documents may be brought in any state or federal court of competent jurisdiction in the State,

 

33

 

County and City of New York. By executing and delivering this Agreement, each party hereto irrevocably:

 

(1)                                 accepts generally and unconditionally the exclusive jurisdiction and venue of such courts;

 

(2)                                 waives any defense of forum non conveniens;

 

(3)                                 agrees that service of all process in any such proceeding in any such court may be made by registered or certified mail, return receipt requested, to such party at its address provided in accordance with Section 7.6;

 

(4)                                 agrees that service as provided in clause (3) above is sufficient to confer personal jurisdiction over such party in any such proceeding in any such court and otherwise constitutes effective and binding service in every respect; and

 

(5)                                 agrees each party hereto retains the right to serve process in any other manner permitted by law or to bring proceedings against any party in the courts of any other jurisdiction.

 

Section 7.15                       Waiver of Jury Trial.  EACH PARTY TO THIS AGREEMENT WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER PARITY LIEN SECURITY DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT OR THE INTENTS AND PURPOSES OF THE OTHER PARITY LIEN SECURITY DOCUMENTS. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE OTHER PARITY LIEN SECURITY DOCUMENTS, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH PARTY HERETO HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH PARTY HERETO WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 7.15 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER WILL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF OR TO THIS AGREEMENT OR ANY OF THE OTHER PARITY LIEN SECURITY DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING THERETO. IN THE EVENT OF

 

34

 

LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

Section 7.16                       Counterparts, Electronic Signatures.  This Agreement may be executed in any number of counterparts (including by facsimile), each of which when so executed and delivered will be deemed an original, but all such counterparts together will constitute but one and the same instrument. The parties hereto may sign this Agreement and any Collateral Trust Joinder and transmit the executed copy by electronic means, including facsimile or noneditable *.pdf files. The electronic copy of the executed Agreement and any Collateral Trust Joinder is and shall be deemed an original signature.

 

Section 7.17                       Effectiveness.  This Agreement will become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by each party of written notification of such execution and written or telephonic authorization of delivery thereof.

 

Section 7.18                       Grantors and Additional Grantors.  Each Grantor represents and warrants that it has duly executed and delivered this Agreement. The Company will cause each Person that hereafter becomes a Grantor or is required by any Parity Lien Document to become a party to this Agreement to become a party to this Agreement, for all purposes of this Agreement, by causing such Person to execute and deliver to the Collateral Trustee a Collateral Trust Joinder, whereupon such Person will be bound by the terms hereof to the same extent as if it had executed and delivered this Agreement as of the date hereof. The Company shall promptly provide each Parity Lien Representative with a copy of each Collateral Trust Joinder executed and delivered pursuant to this Section 7.18; provided that the failure to so deliver a copy of the Collateral Trust Joinder to any then existing Parity Lien Representative shall not affect the inclusion of such Person as a Grantor if the other requirements of this Section 7.18 are complied with.

 

Section 7.19                       Insolvency.  This Agreement will be applicable both before and after the commencement of any Insolvency or Liquidation Proceeding by or against any Grantor. The relative rights, as provided for in this Agreement, will continue after the commencement of any such Insolvency or Liquidation Proceeding on the same basis as prior to the date of the commencement of any such case, as provided in this Agreement.

 

Section 7.20                       Rights and Immunities of Parity Lien Representatives.  The Trustee and the Collateral Trustee will be entitled, to the extent applicable to such entity, to all of the rights, protections, immunities and indemnities set forth in the Indenture and any future Parity Lien Representative will be entitled to all of the rights, protections, immunities and indemnities set forth in the credit agreement, indenture or other agreement governing the applicable Parity Lien Debt with respect to which such Person will act as representative, in each case as if specifically set forth herein. In no event will any Parity Lien Representative be liable for any act or omission on the part of the Grantors or the Collateral Trustee hereunder.

 

Section 7.21                       Intercreditor Agreement. Each Person that is secured hereunder, by accepting the benefits of the security provided hereby, (i) consents (or is deemed to consent), to the subordination of Liens in favor of the Collateral Trustee as provided for in the Intercreditor Agreement, (ii) agrees (or is deemed to agree) that it will be bound by, and will take no actions contrary to, the provisions of the Intercreditor Agreement, (iii) authorizes (or is deemed to

 

35

 

authorize) and instructs (or is deemed to instruct) the Collateral Trustee on behalf of such Person to enter into, and perform under, the Intercreditor Agreement as “Second Lien Collateral Trustee” (as defined in the Intercreditor Agreement). The Collateral Trustee agrees to enter into any amendments or joinders to the Intercreditor Agreement, without the consent of any Holder or the Trustee, to add additional Indebtedness as Priority Lien Debt, Parity Lien Debt or Junior Lien Debt (to the extent permitted to be incurred and secured by the applicable Secured Debt Documents) and add other parties (or any authorized agent or trustee therefor) holding such Indebtedness thereto and to establish that the Lien on any Collateral securing such Indebtedness ranks equally with the Liens on such Collateral securing the other Priority Lien Debt, Parity Lien Debt or Junior Lien Debt, as applicable, then outstanding. The foregoing provisions are intended as an inducement to the lenders under the Credit Agreement to extend credit to the Company, as the borrower under the Credit Agreement, and such lenders are intended third party beneficiaries of this provision and the provisions of the Intercreditor Agreement. Notwithstanding anything to the contrary contained herein, to the extent that any Lien on any Collateral is perfected by the possession or control of such Collateral or of any account in which such Collateral is held, and if such Collateral or any such account is in fact in the possession or under the control of the Priority Lien Representative, or of agents or bailees of the Priority Lien Representative, the perfection actions and related deliverables described in this Agreement or the other Parity Lien Security Documents shall not be required.

 

Section 7.22                       Force Majeure.  The Collateral Trustee shall not be liable for delays or failures in performance resulting from acts of God, strikes, lockouts, riots, acts of war, epidemics, governmental regulations superimposed after the fact, fire, communication line failures, computer viruses, power failures, earthquakes or other disasters or similar acts beyond its control.

 

36

 

IN WITNESS WHEREOF, the parties hereto have caused this Collateral Trust Agreement to be executed by their respective officers or representatives as of the day and year first above written.

 

	
COMPANY:
    	
HALCÓN RESOURCES CORPORATION
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Mark J. Mize
    
	
 
    	
Name: 
    	
Mark   J. Mize
    
	
 
    	
Title:
    	
Executive   Vice President, Chief Financial Officer and Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
GUARANTORS:
    	
HALCÓN ENERGY PROPERTIES, INC.
    
	
 
    	
HALCÓN FIELD SERVICES, LLC
    
	
 
    	
HALCÓN HOLDINGS, INC.
    
	
 
    	
HALCÓN OPERATING CO., INC.
    
	
 
    	
HALCÓN RESOURCES OPERATING, INC.
    
	
 
    	
HALCÓN LOUISIANA OPERATING, L.P.
    
	
 
    	
 
    	
By: HALCÓN GULF   STATES, LLC,
    
	
 
    	
 
    	
its General Partner
    
	
 
    	
HALCÓN GULF STATES, LLC
    
	
 
    	
HRC ENERGY LOUISIANA, LLC
    
	
 
    	
HRC ENERGY, LLC
    
	
 
    	
HRC OPERATING, LLC
    
	
 
    	
HRC ENERGY RESOURCES (WV), INC.
    
	
 
    	
HALCÓN ENERGY HOLDINGS, LLC
    
	
 
    	
HALCÓN WILLISTON I, LLC
    
	
 
    	
HALCÓN WILLISTON II, LLC
    
	
 
    	
HRC PRODUCTION COMPANY
    
	
 
    	
HK OIL & GAS, LLC
    
	
 
    	
HK ENERGY OPERATING, LLC
    
	
 
    	
HK LOUISIANA OPERATING, LLC
    
	
 
    	
HK ENERGY, LLC
    
	
 
    	
HK RESOURCES, LLC
    
	
 
    	
THE 7711 CORPORATION
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Mark J. Mize
    
	
 
    	
Name:
    	
Mark J. Mize
    
	
 
    	
Title:
    	
Executive Vice President, Chief Financial Officer   and Treasurer, for and on behalf of each of the foregoing Subsidiary   Guarantors
    
					

 

[Signature Page to Collateral Trust Agreement]

 

 

	
 
    	
U.S. BANK NATIONAL ASSOCIATION, as Trustee   under the Indenture
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Steven A. Finklea
    
	
 
    	
Name:
    	
Steven   A. Finklea
    
	
 
    	
Title:
    	
Vice   President
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
U.S. BANK NATIONAL ASSOCIATION, as   Collateral Trustee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Steven A. Finklea
    
	
 
    	
Name:
    	
Steven   A. Finklea
    
	
 
    	
Title:
    	
Vice   President
    

 

[Signature Page to Collateral Trust Agreement]

 

 

EXHIBIT A

 

[FORM OF]
 ADDITIONAL PARITY LIEN DEBT CERTIFICATE

 

Reference is made to the Collateral Trust Agreement, dated as of May 1, 2015 (as amended, supplemented, amended and restated or otherwise modified and in effect from time to time, the “Collateral Trust Agreement”), among Halcón Resources Corporation, a Delaware corporation (the “Company”), the Guarantors from time to time party thereto, U.S. Bank National Association, as Trustee under the Indenture (as defined therein), and U.S. Bank National Association, as Collateral Trustee. Capitalized terms used but not otherwise defined herein have the meanings assigned to them in the Collateral Trust Agreement. This Additional Parity Lien Debt Certificate is being executed and delivered in order to designate additional secured debt as Parity Lien Debt entitled to the benefit of the Collateral Trust Agreement.

 

The undersigned, the duly appointed [specify title] of the Company hereby certifies on behalf of [the Company or applicable Grantor] that:

 

(A)                               [the Company or applicable Grantor] intends to incur additional Parity Lien Debt (“Additional Parity Lien Debt”) which will be permitted by each applicable Parity Lien Document to be secured by a Parity Lien equally and ratably with all previously existing and future Parity Lien Debt;

 

(B)                               the name and address of the Parity Lien Debt Representative for the Additional Parity Lien Debt for purposes of Section 7.6 of the Collateral Trust Agreement is:

 

 

Telephone:

 

Fax:

 

(C)                               Attached as Exhibit 1 hereto is a Reaffirmation Agreement duly executed by the Company and each Guarantor, and

 

(D)                               the Company has caused a copy of this Additional Parity Lien Debt Certificate and the related Collateral Trust Joinder to be delivered to each existing Parity Lien Representative.

 

A-1

 

IN WITNESS WHEREOF, the Company has caused this Additional Parity Lien Debt Certificate to be duly executed by the undersigned officer as of                           , 20        .

 

	
 
    	
HALCÓN   RESOURCES CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

ACKNOWLEDGEMENT OF RECEIPT

 

The undersigned, the duly appointed Collateral Trustee under the Collateral Trust Agreement, hereby acknowledges receipt of an executed copy of this Additional Parity Lien Debt Certificate.

 

	
 
    	
U.S.   Bank National Association,
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

A-2

 

EXHIBIT 1 TO ADDITIONAL PARITY LIEN DEBT CERTIFICATE

 

[FORM OF]
 REAFFIRMATION AGREEMENT

 

Reference is made to the Collateral Trust Agreement, dated as of May 1, 2015 (as amended, supplemented, amended and restated or otherwise modified and in effect from time to time, the “Collateral Trust Agreement”), among Halcón Resources Corporation, a Delaware corporation (the “Company”), the Guarantors from time to time party thereto, U.S. Bank National Association, as Trustee under the Indenture (as defined therein), and U.S. Bank National Association, as Collateral Trustee. Capitalized terms used but not otherwise defined herein have the meanings assigned to them in the Collateral Trust Agreement. This Reaffirmation Agreement is being executed and delivered as of                             , 20     in connection with an Additional Parity Lien Debt Certificate of even date herewith which Additional Parity Lien Debt Certificate has designated additional Parity Lien Debt entitled to the benefit of the Collateral Trust Agreement.

 

Each of the undersigned hereby consents to the designation of additional secured debt as Parity Lien Debt as set forth in the Additional Parity Lien Debt Certificate of even date herewith and hereby confirms its respective guarantees, pledges, grants of security interests and other obligations, as applicable, under and subject to the terms of each of the Parity Lien Documents to which it is party, and agrees that, notwithstanding the designation of such additional indebtedness or any of the transactions contemplated thereby, such guarantees, pledges, grants of security interests and other obligations, and the terms of each Parity Lien Document to which it is a party, shall continue to be in full force and effect and such additional secured debt shall be entitled to all of the benefits of such Parity Lien Documents.

 

Governing Law and Miscellaneous Provisions. The provisions of Article 7 of the Collateral Trust Agreement will apply with like effect to this Reaffirmation Agreement.

 

IN WITNESS WHEREOF, each of the undersigned has caused this Reaffirmation Agreement to be duly executed as of the date written above.

 

	
 
    	
[names of the Company and Guarantors]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

A-3

 

EXHIBIT B

 

[FORM OF]
 COLLATERAL TRUST JOINDER — ADDITIONAL DEBT

 

Reference is made to the Collateral Trust Agreement, dated as of May 1, 2015 (as amended, supplemented, amended and restated or otherwise modified and in effect from time to time, the “Collateral Trust Agreement”), among Halcón Resources Corporation, a Delaware corporation (the “Company”), the Guarantors from time to time party thereto, U.S. Bank National Association, as Trustee under the Indenture (as defined therein), and U.S. Bank National Association, as Collateral Trustee. Capitalized terms used but not otherwise defined herein have the meanings assigned to them in the Collateral Trust Agreement. This Collateral Trust Joinder is being executed and delivered pursuant to Section 3.8 of the Collateral Trust Agreement as a condition precedent to the debt for which the undersigned is acting as agent being entitled to the benefits of being additional Parity Lien Debt under the Collateral Trust Agreement.

 

[1.                             Joinder. The undersigned,                                           , a                                   , (the “New Representative”) as [trustee, administrative agent] under that certain [described applicable indenture, credit agreement or other document governing the additional secured debt] hereby agrees to become party as a Parity Lien Representative under the Collateral Trust Agreement for all purposes thereof on the terms set forth therein, and to be bound by the terms of the Collateral Trust Agreement as fully as if the undersigned had executed and delivered the Collateral Trust Agreement as of the date thereof.](1)

 

[1][2.]          Additional Secured Debt Designation

 

The undersigned, on behalf of itself and each holder of Obligations in respect of the [Additional Notes][Series of Parity Lien Debt] for which the undersigned is acting as Parity Lien Representative hereby agrees, for the enforceable benefit of each existing and future holder of Priority Lien Obligations, the Priority Lien Collateral Agent, all holders of each current and future Series of Parity Lien Debt, each other current and future Parity Lien Representative and each current and future holder of Parity Lien Obligations and as a condition to being treated as Parity Lien Debt under the Collateral Trust Agreement that:

 

(a)                                 all Parity Lien Obligations will be and are secured equally and ratably by all Parity Liens at any time granted by the Company or any other Grantor to secure any Obligations in respect of any [Additional Notes][Series of Parity Lien Debt], whether or not upon property otherwise constituting collateral for such Series of Parity Lien Debt, and that all such Parity Liens will be enforceable by the Collateral Trustee for the benefit of all holders of Parity Lien Obligations equally and ratably;

 

(b)                                 the undersigned and each holder of Obligations in respect of the [Additional Notes][Series of Parity Lien Debt] for which the undersigned is acting as Parity Lien Representative are bound by the provisions of this Agreement, including the provisions relating

 

(1)  Delete if Additional Parity Lien Debt constitutes Additional Notes.

 

B-1

 

to the ranking of Parity Liens and the order of application of proceeds from the enforcement of Parity Liens; and

 

(c)                                  the Collateral Trustee shall perform its obligations under the Collateral Trust Agreement, the other Parity Lien Security Documents and the Intercreditor Agreement.

 

3.                                      Governing Law and Miscellaneous Provisions.  The provisions of Article 7 of the Collateral Trust Agreement will apply with like effect to this Collateral Trust Joinder.

 

IN WITNESS WHEREOF, the parties hereto have caused this Collateral Trust Joinder to be executed by their respective officers or representatives as of                                       , 20        .

 

	
 
    	
[insert name of the new representative or the Trustee]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

The Collateral Trustee hereby acknowledges receipt of this Collateral Trust Joinder and agrees to act as Collateral Trustee for the [New Representative][Trustee] and the holders of the Obligations represented thereby:

 

	
 
    	
U.S.   Bank National Association, as Collateral Trustee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

B-2

 

EXHIBIT C

 

[FORM OF]
 COLLATERAL TRUST JOINDER — ADDITIONAL GRANTOR

 

Reference is made to the Collateral Trust Agreement, dated as of May 1, 2015 (as amended, supplemented, amended and restated or otherwise modified and in effect from time to time, the “Collateral Trust Agreement”), among Halcón Resources Corporation, a Delaware corporation (the “Company”), the Guarantors from time to time party thereto, U.S. Bank National Association, as Trustee under the Indenture (as defined therein), and U.S. Bank National Association, as Collateral Trustee. Capitalized terms used but not otherwise defined herein have the meanings assigned to them in the Collateral Trust Agreement. This Collateral Trust Joinder is being executed and delivered pursuant to Section 7.18 of the Collateral Trust Agreement.

 

1.                                      Joinder.  The undersigned,                                       , a                                       , hereby agrees to become party as a Grantor under the Collateral Trust Agreement for all purposes thereof on the terms set forth therein, and to be bound by the terms of the Collateral Trust Agreement as fully as if the undersigned had executed and delivered the Collateral Trust Agreement as of the date thereof.

 

2.                                      Governing Law and Miscellaneous Provisions.  The provisions of Article 7 of the Collateral Trust Agreement will apply with like effect to this Collateral Trust Joinder.

 

IN WITNESS WHEREOF, the parties hereto have caused this Collateral Trust Joinder to be executed by their respective officers or representatives as of                                   , 20        .

 

	
 
    	
[                                                                      ]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

The Collateral Trustee hereby acknowledges receipt of this Collateral Trust Joinder and agrees to act as Collateral Trustee with respect to the Collateral pledged by the new Grantor:

 

	
 
    	
U.S.   Bank National Association, as Collateral Trustee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

C-1Exhibit 10.3

 

Reference is made to the Intercreditor Agreement described below.  Each Secured Party, by accepting the benefits of the security provided hereby, (i) consents (or is deemed to consent), to the subordination of Liens provided for in the Intercreditor Agreement, (ii) agrees (or is deemed to agree) that it will be bound by, and will take no actions contrary to, the provisions of the Intercreditor Agreement, (iii) authorizes (or is deemed to authorize) the Collateral Trustee on behalf of such Person to enter into, and perform under, the Intercreditor Agreement and (iv) acknowledges (or is deemed to acknowledge) that a copy of the Intercreditor Agreement was delivered, or made available, to such Secured Party.

 

Notwithstanding any other provision contained herein, this Agreement, the Liens created hereby and the rights, remedies, duties and obligations provided for herein are subject in all respects to the provisions of the Intercreditor Agreement.  In the event of any conflict or inconsistency between the provisions of this Agreement and the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall control.

 

SECOND LIEN SECURITY AGREEMENT

 

made by

 

each of the Grantors (as defined herein)

 

in favor of

 

U.S. BANK NATIONAL ASSOCIATION,

 

as Collateral Trustee

 

Dated as of May 1, 2015

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    
	
ARTICLE I Definitions
    	
2
    
	
 
    	
 
    
	
Section 1.01                Definitions
    	
2
    
	
Section 1.02                Other Definitional   Provisions; References
    	
3
    
	
 
    	
 
    
	
ARTICLE II [RESERVED] 
    	
3
    
	
 
    	
 
    
	
ARTICLE III Grant of Security   Interest 
    	
3
    
	
 
    	
 
    
	
Section 3.01                Grant of Security Interest
    	
3
    
	
Section 3.02                Transfer of Pledged   Securities
    	
4
    
	
Section 3.03                Grantors Remain Liable   under Accounts, Chattel Paper and Payment Intangibles
    	
5
    
	
 
    	
 
    
	
ARTICLE IV Acknowledgments,   Waivers and Consents 
    	
5
    
	
 
    	
 
    
	
Section 4.01                Acknowledgments, Waivers   and Consents
    	
5
    
	
Section 4.02                No Subrogation,   Contribution or Reimbursement
    	
7
    
	
 
    	
 
    
	
ARTICLE V Representations   and Warranties 
    	
8
    
	
 
    	
 
    
	
Section 5.01                Reserved
    	
8
    
	
Section 5.02                Validity, Etc.
    	
8
    
	
Section 5.03                Authorization,   Approval, Etc.
    	
8
    
	
Section 5.04                Title; No Other Liens
    	
8
    
	
Section 5.05                Perfected Liens
    	
9
    
	
Section 5.06                Legal Name, Organizational   Status, Chief Executive Office
    	
9
    
	
Section 5.07                Prior Names, Addresses,   Locations of Tangible Assets
    	
9
    
	
Section 5.08                Pledged Securities
    	
9
    
	
Section 5.09                Goods
    	
9
    
	
Section 5.10                Instruments and Chattel   Paper
    	
9
    
	
Section 5.11                Truth of Information;   Accounts
    	
10
    
	
Section 5.12                Governmental Obligors
    	
10
    
	
 
    	
 
    
	
ARTICLE VI Covenants 
    	
10
    
	
 
    	
 
    
	
Section 6.01                Reserved
    	
10
    
	
Section 6.02                Maintenance of Perfected   Security Interest; Further Documentation
    	
10
    
	
Section 6.03                Maintenance of Records
    	
11
    
	
Section 6.04                Reserved
    	
11
    
	
Section 6.05                Further Identification of   Collateral
    	
11
    
	
Section 6.06                Changes in Locations,   Name, etc.
    	
11
    
	
Section 6.07                Reserved
    	
12
    

 

i

 

	
Section 6.08                Reserved
    	
12
    
	
Section 6.09                Pledged Securities
    	
12
    
	
Section 6.10                Limitations on   Modifications, Waivers, Extensions of Agreements Giving Rise to Accounts
    	
13
    
	
Section 6.11                Reserved
    	
14
    
	
Section 6.12                Instruments and Tangible   Chattel Paper
    	
14
    
	
Section 6.13                Reserved
    	
14
    
	
Section 6.14                Commercial Tort Claims
    	
14
    
	
 
    	
 
    
	
ARTICLE VII Remedial   Provisions 
    	
14
    
	
 
    	
 
    
	
Section 7.01                Pledged Securities
    	
14
    
	
Section 7.02                Collections on Accounts,   Etc.
    	
16
    
	
Section 7.03                Proceeds
    	
16
    
	
Section 7.04                NY UCC and Other Remedies
    	
16
    
	
Section 7.05                Private Sales of Pledged   Securities
    	
18
    
	
Section 7.06                Waiver; Deficiency
    	
18
    
	
Section 7.07                Non-Judicial Enforcement
    	
18
    
	
 
    	
 
    
	
ARTICLE VIII The Collateral   Trustee 
    	
18
    
	
 
    	
 
    
	
Section 8.01                Collateral Trustee’s Appointment   as Attorney-in-Fact, Etc.
    	
18
    
	
Section 8.02                Duty of Collateral Trustee
    	
20
    
	
Section 8.03                Execution of Financing   Statements
    	
21
    
	
Section 8.04                Authority of Collateral   Trustee
    	
21
    
	
 
    	
 
    
	
ARTICLE IX Subordination of   Indebtedness 
    	
21
    
	
 
    	
 
    
	
Section 9.01                Subordination of All   Grantor Claims
    	
21
    
	
Section 9.02                Claims in Bankruptcy
    	
21
    
	
Section 9.03                Payments Held in Trust
    	
22
    
	
Section 9.04                Liens Subordinate
    	
22
    
	
Section 9.05                Notation of Records
    	
22
    
	
 
    	
 
    
	
ARTICLE X Miscellaneous 
    	
22
    
	
 
    	
 
    
	
Section 10.01         Waiver
    	
22
    
	
Section 10.02         Notices
    	
23
    
	
Section 10.03         Payment of   Expenses, Indemnities, Etc.
    	
23
    
	
Section 10.04         Amendments in Writing
    	
23
    
	
Section 10.05         Successors and Assigns
    	
23
    
	
Section 10.06         Invalidity
    	
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Section 10.07         Counterparts
    	
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Section 10.08         Survival
    	
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Section 10.09         Captions
    	
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Section 10.10         No Oral Agreements
    	
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Section 10.11         Governing Law; Submission to   Jurisdiction
    	
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Section 10.12         Acknowledgments
    	
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Section 10.13         Additional Grantors
    	
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Section 10.14         Set-Off
    	
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Section 10.15         Releases
    	
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Section 10.16         Reinstatement
    	
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Section 10.17         Acceptance
    	
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Section 10.18         Intercreditor Agreement Controls
    	
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SCHEDULES:

 

1.              Notice Addresses of Grantors

2.              Description of Pledged Securities

3.              Filings and Other Actions Required to Perfect Security Interests

4.              Legal Name, Location of Jurisdiction of Organization, Organizational Identification Number, Taxpayer Identification Number and Chief Executive Office

5.              Prior Names, Prior Chief Executive Office, Location of Tangible Assets

 

ANNEX:

 

I.                Form of Assumption Agreement

 

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This SECOND LIEN SECURITY AGREEMENT, dated as of May 1, 2015, is made by Halcón Resources Corporation, a corporation duly formed and existing under the laws of the State of Delaware (the “Company”), and each of the other signatories hereto other than the Collateral Trustee (the Company and each of the other signatories hereto other than the Collateral Trustee, together with any other Subsidiary of the Company that becomes a party hereto from time to time after the date hereof, the “Grantors”), in favor of U.S. Bank National Association, as Collateral Trustee (the “Collateral Trustee”), for the ratable benefit of the Secured Parties (as defined below).

 

W I T N E S S E T H:

 

A. The Company will issue its 8.625% Senior Secured Notes due 2020 in an initial aggregate principal amount of $700,000,000, pursuant to an Indenture dated as of the date hereof (as amended, supplemented, amended and restated or otherwise modified from time to time, the “Indenture”) by and among the Company, the guarantors party thereto from time to time and U.S. Bank National Association, as the Trustee.

 

B. The Indenture requires the Grantors to enter into this Agreement and grant to the Collateral Trustee, for the ratable benefit of the Secured Parties, a security interest in the Collateral (as hereinafter defined).

 

C. In connection with the Indenture, the Grantors, the Trustee and the Collateral Trustee are entering into that certain Collateral Trust Agreement dated as of the date hereof (as amended, supplemented, amended and restated or otherwise modified from time to time, the “Collateral Trust Agreement”), which sets forth the terms on which the Collateral Trustee will receive, hold, administer, maintain, enforce and distribute the proceeds of all liens upon any property of any Grantor at any time held by the Collateral Trustee, in trust for the benefit of the current and future holders of the Parity Lien Obligations, including the Secured Parties.

 

D. Certain Priority Lien Obligations and Junior Lien Obligations may be outstanding from time to time and, as such, to set forth the relative rights of the holders of the Priority Lien Obligations, the holders of the Parity Lien Obligations (including the Secured Parties), and the holders of the Junior Lien Obligations, JPMorgan Chase Bank, N.A., as the Priority Lien Agent, and the Collateral Trustee are entering into that certain Intercreditor Agreement dated as of the date hereof (as amended, supplemented, amended and restated or otherwise modified from time to time, the “Intercreditor Agreement”).

 

E. The board of directors or equivalent governing body of each Grantor, as applicable, has determined that such Grantor’s execution, delivery and performance of this Agreement may reasonably be expected to provide substantial benefit to such Grantor, directly or indirectly, and are in the best interests of such Grantor.

 

F. Each Grantor has duly authorized the execution, delivery and performance of this Agreement.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

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ARTICLE I
 DEFINITIONS

 

Section 1.01                             Definitions.

 

(a)                                 As used in this Agreement, each term defined above shall have the meaning indicated above.  Unless otherwise defined herein, terms defined in the Indenture and used herein shall have the meanings given to them in the Indenture, and the following terms as well as all uncapitalized terms which are defined in the NY UCC on the date hereof are used herein as so defined:  Accounts, As-Extracted Collateral, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Electronic Chattel Paper, Equipment, Fixtures, General Intangibles, Goods, Instruments, Inventory, Investment Property, Letter-of-Credit Rights, Payment Intangibles, Proceeds, Supporting Obligations, and Tangible Chattel Paper.

 

(b)                                 The following terms shall have the following meanings:

 

“Account Debtor” means a Person (other than any Grantor) obligated on an Account, Chattel Paper, or General Intangible.

 

“Agreement” means this Second Lien Security Agreement, as the same may be amended, supplemented or otherwise modified from time to time.

 

“Collateral” shall have the meaning assigned such term in Section 3.01.

 

“Collateral Trust Agreement” has the meaning set forth in the recitals.

 

“Indenture” has the meaning set forth in the recitals.

 

“Intercreditor Agreement” has the meaning set forth in the recitals.

 

“Issuers” means, collectively, each issuer of a Pledged Security.

 

“NY UCC” means the Uniform Commercial Code, as it may be amended, from time to time in effect in the State of New York.

 

“Pledged Securities” means: (i) the Equity Interests described or referred to in Schedule 2; and (ii) (a) the certificates or instruments, if any, representing such Equity Interests, (b) all dividends (cash, stock or otherwise), cash, instruments, rights to subscribe, purchase or sell and all other rights and property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Equity Interests, (c) all replacements, additions to and substitutions for any of the property referred to in this definition, including, without limitation, claims against third parties, (d) the proceeds, interest, profits and other income of or on any of the property referred to in this definition and (e) all books and records relating to any of the property referred to in this definition.

 

“Secured Obligation” means any and all Notes Obligations now or hereafter existing under this Agreement, the Indenture or any other Note Document, whether for principal, interest, costs, fees, expenses or otherwise, howsoever created, arising or evidenced, whether

 

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direct or indirect, primary or secondary, fixed or absolute or contingent, joint or several, or now or hereafter existing under this Agreement and each other Note Document

 

“Secured Parties” means, collectively, the Trustee, the Collateral Trustee, the Holders, any other holder of any Secured Obligation and any other Parity Lien Secured Party (as defined in the Collateral Trust Agreement).

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Subsidiary Grantor” means, collectively, each Grantor other than the Company.

 

Section 1.02                             Other Definitional Provisions; References.  The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.  The gender of all words shall include the masculine, feminine, and neuter, as appropriate.  The words “herein,” “hereof,” “hereunder” and other words of similar import when used in this Agreement refer to this Agreement as a whole, and not to any particular article, section or subsection.  Any reference herein to a Section shall be deemed to refer to the applicable Section of this Agreement unless otherwise stated herein.  Any reference herein to an exhibit, schedule or annex shall be deemed to refer to the applicable exhibit, schedule or annex attached hereto unless otherwise stated herein.  Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Grantor, shall refer to such Grantor’s Collateral or the relevant part thereof.

 

ARTICLE II
 [RESERVED]

 

ARTICLE III
 GRANT OF SECURITY INTEREST

 

Section 3.01                             Grant of Security Interest.  Each Grantor hereby pledges, assigns and transfers to the Collateral Trustee, and grants to the Collateral Trustee, for the ratable benefit of the Secured Parties, a security interest in all of the following property now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest and whether now existing or hereafter coming into existence (collectively, the “Collateral”), as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Secured Obligations:

 

(1)                                 all Accounts;

 

(2)                                 all Chattel Paper (whether Tangible Chattel Paper or Electronic Chattel Paper);

 

(3)                                 all Commercial Tort Claims;

 

(4)                                 all Deposit Accounts other than payroll, withholding tax and other fiduciary Deposit Accounts;

 

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(5)                                 all Documents;

 

(6)                                 all General Intangibles (including, without limitation, rights in and under any agreements in respect of Hedging Obligations);

 

(7)                                 all Goods (including, without limitation, all Inventory and all Equipment, but excluding all Fixtures);

 

(8)                                 all Instruments;

 

(9)                                 all Investment Property;

 

(10)                          all Letter-of-Credit Rights (whether or not the letter of credit is evidenced by a writing);

 

(11)                          all Pledged Securities;

 

(12)                          all Supporting Obligations;

 

(13)                          all books and records pertaining to the Collateral;

 

(14)                          to the extent not otherwise included, any other property insofar as it consists of personal property of any kind or character defined in and subject to the NY UCC; and

 

(15)                          to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security, income, royalties and other payments now or hereafter due and payable with respect to, and guarantees and supporting obligations relating to, any and all of the Collateral and, to the extent not otherwise included, all payments of insurance (whether or not the Collateral Trustee is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral, all other claims, including all cash, guarantees and other Supporting Obligations given with respect to any of the foregoing.

 

Notwithstanding anything to the contrary contained in this Agreement (including this Section 3.01) or in any other Note Document, the term “Collateral” shall not include any Excluded Collateral.

 

Section 3.02                             Transfer of Pledged Securities.  Subject to the terms of the Intercreditor Agreement, all certificates and instruments, if any, representing or evidencing the Pledged Securities shall be delivered to and held pursuant hereto by the Collateral Trustee or a Person designated by the Collateral Trustee and, in the case of an instrument or certificate in registered form, shall be duly indorsed to the Collateral Trustee or in blank by an effective endorsement (whether on the certificate or instrument or on a separate writing), and accompanied by any required transfer tax stamps to effect the pledge of the Pledged Securities to the Collateral Trustee.  Notwithstanding the preceding sentence, all Pledged Securities must be delivered or transferred in such manner, and each Grantor shall take all such further action as may be

 

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requested by the Collateral Trustee, as to permit the Collateral Trustee to be a “protected purchaser” to the extent of its security interest as provided in Section 8-303 of the NY UCC (if the Collateral Trustee otherwise qualifies as a protected purchaser).

 

Section 3.03                             Grantors Remain Liable under Accounts, Chattel Paper and Payment Intangibles.  Anything herein to the contrary notwithstanding, each Grantor shall remain liable under each of the Accounts, Chattel Paper and Payment Intangibles to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise to each such Account, Chattel Paper or Payment Intangible.  Neither the Collateral Trustee nor any other Secured Party shall have any obligation or liability under any Account, Chattel Paper or Payment Intangible (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Collateral Trustee or any such other Secured Party of any payment relating to such Account, Chattel Paper or Payment Intangible, pursuant hereto, nor shall the Collateral Trustee or any other Secured Party be obligated in any manner to perform any of the obligations of any Grantor under or pursuant to any Account, Chattel Paper or Payment Intangible (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any Account, Chattel Paper or Payment Intangible (or any agreement giving rise thereto), to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.

 

ARTICLE IV
 ACKNOWLEDGMENTS, WAIVERS AND CONSENTS

 

Section 4.01                             Acknowledgments, Waivers and Consents.

 

(a)                                 Each Subsidiary Grantor acknowledges and agrees that the obligations undertaken by it under this Agreement involve the provision of collateral security for the obligations of Persons other than such Subsidiary Grantor and that such Subsidiary Grantor’s provision of collateral security for the Secured Obligations are absolute, irrevocable and unconditional under any and all circumstances.  In full recognition and furtherance of the foregoing, each Subsidiary Grantor understands and agrees, to the fullest extent permitted under applicable law and except as may otherwise be expressly and specifically provided in the Note Documents, that each Subsidiary Grantor shall remain obligated hereunder (including, without limitation, with respect to the collateral security provided by such Subsidiary Grantor herein) and the enforceability and effectiveness of this Agreement and the liability of such Subsidiary Grantor, and the rights, remedies, powers and privileges of the Collateral Trustee and the other Secured Parties under this Agreement and the other Note Documents shall not be affected, limited, reduced, discharged or terminated in any way:

 

(i)                                     notwithstanding that, without any reservation of rights against any Subsidiary Grantor and without notice to or further assent by any Subsidiary Grantor, (A) any demand for payment of any of the Secured Obligations made by the Collateral Trustee or any other Secured Party may be rescinded by the Collateral Trustee or such other Secured Party and any of the Secured Obligations continued; (B) the Obligations, the liability of any other Person upon or for any part thereof or any collateral security therefore or right of offset with respect

 

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thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by, or any indulgence or forbearance in respect thereof granted by, the Collateral Trustee or any other Secured Party; (C) the Indenture, the other Note Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Collateral Trustee (or the Holders, as the case may be) may deem advisable from time to time; (D) the Company, any Subsidiary Grantor or any other Person may from time to time accept or enter into new or additional agreements, security documents, guarantees or other instruments in addition to, in exchange for or relative to, any Note Document, all or any part of the Secured Obligations or any Collateral now or in the future serving as security for the Secured Obligations; (E) any collateral security, guarantee or right of offset at any time held by the Collateral Trustee or any other Secured Party for the payment of the Secured Obligations may be sold, exchanged, waived, surrendered or released; and (F) any other event shall occur which constitutes a defense or release of sureties generally; and

 

(ii)                                  without regard to, and each Subsidiary Grantor hereby expressly waives to the fullest extent permitted by law any defense now or in the future arising by reason of, (A) the illegality, invalidity or unenforceability of the Indenture, any other Note Document, any of the Secured Obligations or any other collateral security therefore or guarantee or right of offset with respect thereto at any time or from time to time held by the Collateral Trustee or any other Secured Party, (B) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by any Subsidiary Grantor or any other Person against the Collateral Trustee or any other Secured Party, (C) the insolvency, bankruptcy arrangement, reorganization, adjustment, composition, liquidation, disability, dissolution or lack of power of any Subsidiary Grantor or any other Person at any time liable for the payment of all or part of the Secured Obligations or the failure of the Collateral Trustee or any other Secured Party to file or enforce a claim in bankruptcy or other proceeding with respect to any Person; or any sale, lease or transfer of any or all of the assets of the any Subsidiary Grantor, or any changes in the partners of any Subsidiary Grantor; (D) the fact that any Collateral or Lien contemplated or intended to be given, created or granted as security for the repayment of the Secured Obligations shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other Lien, it being recognized and agreed by each of the Subsidiary Grantors that it is not entering into this Agreement in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectability or value of any of the Collateral for the Secured Obligations; (E) any failure of the Collateral Trustee or any other Secured Party to marshal assets in favor of any Subsidiary Grantor or any other Person, to exhaust any collateral for all or any part of the Secured Obligations, to pursue or exhaust any right, remedy, power or privilege it may have against any Subsidiary Grantor or any other Person or to take any action whatsoever to mitigate or reduce any Subsidiary Grantor’s liability under this Agreement or any other Note Document; (F) any law which provides that the obligation of a surety or Subsidiary Grantor must neither be larger in amount nor in other respects more burdensome than that of the principal or which reduces a surety’s or Subsidiary Grantor’s obligation in proportion to the principal obligation; (G) the possibility that the Secured Obligations may at any time and from time to time exceed the aggregate liability of such Subsidiary Grantor under this Agreement; or (H) any other circumstance or act whatsoever, including any action or omission of the type described in Section 4.01(a)(i) (with or without notice to or knowledge of any Subsidiary Grantor), which constitutes, or might be construed to constitute, an equitable or legal discharge

 

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or defense of the Company for the Secured Obligations, or with respect to the collateral security provided by such Subsidiary Grantor herein, or which might be available to a surety or Subsidiary Grantor, in bankruptcy or in any other instance.

 

(b)                                 Each Subsidiary Grantor hereby waives to the extent permitted by law:  (i) except as expressly provided otherwise in any Note Document, all notices to such Subsidiary Grantor, or to any other Person, including but not limited to, notices of the acceptance of this Agreement, or the provision of collateral security provided herein, or the creation, renewal, extension, modification, accrual of any Secured Obligations, or notice of or proof of reliance by the Collateral Trustee or any other Secured Party upon the collateral security provided herein, or of default in the payment or performance of any of the Secured Obligations owed to the Collateral Trustee or any other Secured Party and enforcement of any right or remedy with respect thereto; or notice of any other matters relating thereto; the Secured Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the collateral security provided herein and no notice of creation of the Secured Obligations or any extension of credit already or hereafter contracted by or extended to the Company need be given to any Subsidiary Grantor; and all dealings between the Company and any of the Subsidiary Grantors, on the one hand, and the Collateral Trustee and the other Secured Parties, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the collateral security provided herein; (ii) diligence and demand of payment, presentment, protest, dishonor and notice of dishonor; (iii) any statute of limitations affecting any Subsidiary Grantor’s liability hereunder or the enforcement thereof; (iv) all rights of revocation with respect to the Secured Obligations and the provision of collateral security herein; and (v) all principles or provisions of law which conflict with the terms of this Agreement and which can, as a matter of law, be waived.

 

(c)                                  When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Subsidiary Grantor, the Collateral Trustee or any other Secured Party may, but shall be under no obligation to, join or make a similar demand on or otherwise pursue or exhaust such rights and remedies as it may have against the Company, any other Subsidiary Grantor or any other Person or against any collateral security or guarantee for the Secured Obligations or any right of offset with respect thereto, and any failure by the Collateral Trustee or any other Secured Party to make any such demand, to pursue such other rights or remedies or to collect any payments from the Company, any other Subsidiary Grantor or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Company, any Subsidiary Grantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Subsidiary Grantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Collateral Trustee or any other Secured Party against any Subsidiary Grantor.  For the purposes hereof “demand” shall include the commencement and continuance of any legal proceedings.  Neither the Collateral Trustee nor any other Secured Party shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Secured Obligations or any property subject thereto.

 

Section 4.02                             No Subrogation, Contribution or Reimbursement.  Notwithstanding any payment made by any Subsidiary Grantor hereunder or any set-off or application of funds of any Subsidiary Grantor by the Collateral Trustee or any other Secured Party, no Subsidiary Grantor

 

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shall be entitled to be subrogated to any of the rights of the Collateral Trustee or any other Secured Party against the Company or any other Subsidiary Grantor or any collateral security or guarantee or right of offset held by the Collateral Trustee or any other Secured Party for the payment of the Secured Obligations, nor shall any Subsidiary Grantor seek or be entitled to seek any indemnity, exoneration, participation, contribution or reimbursement from the Company or any other Subsidiary Grantor in respect of payments made by such Subsidiary Grantor hereunder, and each Subsidiary Grantor hereby expressly waives, releases, and agrees not to exercise any all such rights of subrogation, reimbursement, indemnity and contribution.  Each Subsidiary Grantor further agrees that to the extent that such waiver and release set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement, indemnity and contribution such Subsidiary Grantor may have against the Company, any other Subsidiary Grantor or against any collateral or security or guarantee or right of offset held by the Collateral Trustee or any other Secured Party shall be junior and subordinate to any rights the Collateral Trustee and the other Secured Parties may have against the Company and such Subsidiary Grantor and to all right, title and interest the Collateral Trustee and the other Secured Parties may have in any collateral or security or guarantee or right of offset.  The Collateral Trustee, for the benefit of the Secured Parties, may use, sell or dispose of any item of Collateral or security as it sees fit without regard to any subrogation rights any Subsidiary Grantor may have, and upon any disposition or sale, any rights of subrogation any Subsidiary Grantor may have shall terminate.

 

ARTICLE V
 REPRESENTATIONS AND WARRANTIES

 

Each Grantor hereby represents and warrants to the Collateral Trustee and each other Secured Party that:

 

Section 5.01                             Reserved.

 

Section 5.02                             Validity, Etc..  This Agreement and the other Security Documents to which such Grantor is a party constitute the legal, valid and binding obligations of such Grantor, enforceable against such Grantor in accordance with their respective terms (except, in any case, as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally and by principles of equity).

 

Section 5.03                             Authorization, Approval, Etc..  Except as have been obtained or made and are in full force and effect, no consent, authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or any other third party is required either (a) for the grant by such Grantor of the security interest granted hereby or for the execution, delivery and performance of this Agreement by such Grantor, (b) for the perfection or maintenance of the security interests hereunder, or (c) for the exercise by the Administrative Agent of the voting or other rights provided for in this Agreement.

 

Section 5.04                             Title; No Other Liens.  Except for the security interest granted to the Collateral Trustee for the ratable benefit of the Secured Parties pursuant to this Agreement and Permitted Liens, such Grantor is the legal and beneficial owner of, and has good and defensible title to (and has full right and authority to pledge, grant and assign), its respective items of the

 

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Collateral free and clear of any and all Liens.  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 as have been filed in favor of the Collateral Trustee, for the ratable benefit of the Secured Parties, pursuant to this Agreement, the Security Documents or as are filed to secure Priority Liens.

 

Section 5.05                             Perfected Liens.  The security interests granted pursuant to this Agreement (a) upon completion of the filings and other actions specified on Schedule 3 (which, in the case of all filings and other documents referred to one said Schedule, have been delivered to the Collateral Trustee in completed and duly executed form) will constitute valid perfected security interests in all of the Collateral in favor of the Collateral Trustee, for the ratable benefit of the Secured Parties, as collateral security for such Grantor’s obligations, enforceable in accordance with the terms hereof against all creditors of such Grantor and any Persons purporting to purchase any Collateral from such Grantor and (b) are prior to all other Liens on the Collateral in existence on the date hereof except for (i) Permitted Liens which have priority over the Liens on the Collateral by operation of law and (ii) the Priority Liens.

 

Section 5.06                             Legal Name, Organizational Status, Chief Executive Office.  On the date hereof, the correct legal name of such Grantor, such Grantor’s jurisdiction of organization, organizational number, taxpayer identification number and the location of such Grantor’s chief executive office or sole place of business are specified on Schedule 4.

 

Section 5.07                             Prior Names, Addresses, Locations of Tangible Assets.  Schedule 5 correctly sets forth (a) all names and trade names that such Grantor has used in the last five years and (b) the chief executive officer of such Grantor over the last five years (if different from that which is set forth in Section 5.06 above).

 

Section 5.08                             Pledged Securities.  The shares (or such other interests) of Pledged Securities pledged by such Grantor hereunder constitute all the issued and outstanding shares (or such other interests) of all classes of the capital stock or other Equity Interests of each Issuer owned by such Grantor.  All the shares (or such other interests) of the Pledged Securities have been duly and validly issued and, in the case of shares of stock of a corporation, are fully paid and nonassessable; and such Grantor is the record and beneficial owner of, and has good title to, the Pledged Securities pledged by it hereunder, free of any and all Liens except Permitted Liens or options, warrants, puts, calls or other rights of any other Person, and restrictions or options in favor of, or claims of, any other Person, except the security interest created by this Agreement.  The pledged LLC interests and the pledged partnership interests do not, by their terms, provide that they are securities to be governed by Article 8 of the NY UCC.

 

Section 5.09                             Goods.  No portion of the Collateral constituting Goods is in the possession of a bailee that has issued a negotiable or non-negotiable document covering such Collateral.

 

Section 5.10                             Instruments and Chattel Paper.  Such Grantor has delivered to the Collateral Trustee (or to the Priority Lien Collateral Agent pursuant to the terms of the Intercreditor Agreement) all Collateral constituting Instruments and Chattel Paper having in value in excess of $1,000,000.  No Collateral constituting Chattel Paper or Instruments contains any statement therein to the effect that such Collateral has been assigned to an identified party

 

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other than the Collateral Trustee, and the grant of a security interest in such Collateral in favor of the Collateral Trustee hereunder does not violate the rights of any other Person as a secured party.

 

Section 5.11                             Truth of Information; Accounts.  All information with respect to the Collateral set forth in any schedule, certificate or other writing at any time heretofore or hereafter furnished by such Grantor to the Collateral Trustee or any other Secured Party, and all other written information heretofore or hereafter furnished by such Grantor to the Collateral Trustee or any other Secured Party is and will be true and correct in all material respects as of the date furnished.  The amount represented by such Grantor to the Collateral Trustee and the Lenders from time to time as owing by each Account Debtor or by all Account Debtors in respect of the Accounts, Chattel Paper and Payment Intangibles will at such time be the correct amount actually owing by such Account Debtor or Account Debtors thereunder.  The place where each Grantor keeps its records concerning the Accounts, Chattel Paper and Payment Intangibles is 1000 Louisiana St., Suite 6700, Houston, TX 77002.

 

Section 5.12                             Governmental Obligors.  None of the Account Debtors on such Grantor’s Accounts, Chattel Paper or Payment Intangibles is a Governmental Authority.

 

ARTICLE VI
 COVENANTS

 

Each Grantor covenants and agrees with the Collateral Trustee and the other Secured Parties that, from and after the date of this Agreement until the Secured Obligations shall have been paid in full:

 

Section 6.01                             Reserved.

 

Section 6.02                             Maintenance of Perfected Security Interest; Further Documentation.

 

(a)                                 Such Grantor shall maintain the security interest created by this Agreement as a perfected security interest having at least the priority described in Section 5.05 and shall defend such security interest against the claims and demands of all Persons whomsoever except for Permitted Liens.

 

(b)                                 Subject to the terms of the Intercreditor Agreement, at any time and from time to time, upon the request of the Collateral Trustee or any other Secured Party, and at the sole expense of such Grantor, such Grantor will promptly and duly give, execute, deliver, indorse, file or record any and all financing statements, continuation statements, amendments, notices (including, without limitation, notifications to financial institutions and any other Person), contracts, agreements, assignments, certificates, stock powers or other instruments, obtain any and all governmental approvals and consents and take or cause to be taken any and all steps or acts that may be necessary or advisable or as the Collateral Trustee may reasonably request to create, perfect, establish the priority of, or to preserve the validity, perfection or priority of, the Liens granted by this Agreement or to enable the Collateral Trustee or any other Secured Party to enforce its rights, remedies, powers and privileges under this Agreement with respect to such Liens or to otherwise obtain or preserve the full benefits of this Agreement and the rights, powers and privileges herein granted.

 

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(c)                                  Without limiting the obligations of the Grantors under Section 6.02(b), but subject in each case to the terms of the Intercreditor Agreement:  (i) upon the request of the Collateral Trustee or any other Secured Party, such Grantor shall take or cause to be taken all actions (other than any actions required to be taken by the Collateral Trustee) requested by the Collateral Trustee to cause the Collateral Trustee to (A) have “control” (within the meaning of Sections 9-104, 9-105, 9-106, and 9-107 of the NY UCC) over any Collateral constituting Deposit Accounts, Electronic Chattel Paper, Investment Property (including the Pledged Securities), or Letter-of-Credit Rights, including, without limitation, executing and delivering any agreements, in form and substance satisfactory to the Collateral Trustee, with securities intermediaries, Issuers or other Persons in order to establish “control”, and each Grantor shall promptly notify the Collateral Trustee and the other Secured Parties of such Grantor’s acquisition of any such Collateral, and (B) be a “protected purchaser” (as defined in Section 8-303 of the NY UCC); (ii) with respect to Collateral other than certificated securities and goods covered by a document in the possession of a Person other than such Grantor or the Collateral Trustee, such Grantor shall obtain written acknowledgment that such Person holds possession for the Collateral Trustee’s benefit; and (iii) with respect to any Collateral constituting Goods that are in the possession of a bailee, such Grantor shall provide prompt notice to the Collateral Trustee and the other Secured Parties of any such Collateral then in the possession of such bailee, and such Grantor shall take or cause to be taken all actions (other than any actions required to be taken by the Collateral Trustee or any other Secured Party) necessary or requested by the Collateral Trustee to cause the Collateral Trustee to have a perfected security interest in such Collateral under applicable law.

 

(d)                                 This Section 6.02 and the obligations imposed on each Grantor by this Section 6.02 shall be interpreted as broadly as possible in favor of the Collateral Trustee and the other Secured Parties in order to effectuate the purpose and intent of this Agreement.

 

Section 6.03                             Maintenance of Records.  Such Grantor will keep and maintain at its own cost and expense satisfactory and complete records of the Collateral, including, without limitation, a record of all payments received and all credits granted with respect to the Accounts.  For the Collateral Trustee’s and the other Secured Parties’ further security, the Collateral Trustee, for the ratable benefit of the Secured Parties, shall have a security interest in all of such Grantor’s books and records pertaining to the Collateral, and such Grantor shall turn over any such books and records to the Collateral Trustee or to its representatives during normal business hours at the request of the Collateral Trustee and shall provide such clerical and other assistance as may be reasonably requested with regard thereto.

 

Section 6.04                             Reserved.

 

Section 6.05                             Further Identification of Collateral.  Such Grantor will furnish to the Collateral Trustee from time to time, at such Grantor’s sole cost and expense, statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Trustee may reasonably request, all in reasonable detail.

 

Section 6.06                             Changes in Locations, Name, etc.  Such Grantor recognizes that financing statements pertaining to the Collateral have been or may be filed where such Grantor maintains any Collateral or is organized.  Without limitation of any other covenant herein, such Grantor

 

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will not cause or permit (i) any change to be made in its name, identity or corporate structure or (ii) any change to (A) the identity of any warehouseman, common carrier, other third-party transporter, bailee or any agent or processor in possession or control of any Collateral or (iii) such Grantor’s jurisdiction of organization or (iv) the location of any Collateral, unless such Grantor shall have first (1) notified the Collateral Trustee of such change at least ten (10) days prior to the effective date of such change, and (2) taken all action reasonably requested by the Collateral Trustee for the purpose of maintaining the perfection and priority of the Collateral Trustee’s security interests under this Agreement.  In any notice furnished pursuant to this Section 6.06, such Grantor will expressly state in a conspicuous manner that the notice is required by this Agreement and contains facts that may require additional filings of financing statements or other notices for the purposes of continuing perfection of the Collateral Trustee’s security interest in the Collateral.

 

Section 6.07                             Reserved.

 

Section 6.08                             Reserved.

 

Section 6.09                             Pledged Securities.

 

(a)                                 If such Grantor shall become entitled to receive or shall receive any stock certificate or other instrument (including, without limitation, any certificate or instrument representing a dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate or instrument issued in connection with any reorganization), option or rights in respect of the capital stock or other Equity Interests of any Issuer, whether in addition to, in substitution of, as a conversion of, or in exchange for, any shares (or such other interests) of the Pledged Securities, or otherwise in respect thereof, such Grantor shall accept the same as the agent of the Collateral Trustee and the other Secured Parties, hold the same in trust for the Collateral Trustee and the other Secured Parties and deliver the same forthwith to the Collateral Trustee in the exact form received, duly indorsed by such Grantor to the Collateral Trustee, if required, together with an undated stock power or other equivalent instrument of transfer, if applicable, acceptable to the Collateral Trustee covering such certificate or instrument duly executed in blank by such Grantor and with, if the Collateral Trustee so requests, signature guaranteed, to be held by the Collateral Trustee, subject to the terms hereof, as additional collateral security for the Secured Obligations.

 

(b)                                 Subject in each case to the Intercreditor Agreement, without the prior written consent of the Collateral Trustee or as expressly permitted by the Indenture, such Grantor will not (i) unless otherwise permitted hereby, vote to enable, or take any other action to permit, any Issuer to issue any stock or other Equity Interests of any nature or to issue any other securities or interests convertible into or granting the right to purchase or exchange for any stock or other Equity Interests of any nature of any Issuer, (ii) sell, assign, transfer, exchange or otherwise dispose of, or grant any option with respect to, the Pledged Securities or Proceeds thereof (except pursuant to a transaction expressly permitted by the Indenture), (iii) create, incur or permit to exist any Lien except for Permitted Liens or option in favor of, or any claim of any Person with respect to, any of the Pledged Securities or Proceeds thereof, or any interest therein, except for the security interests created by this Agreement or (iv) enter into any agreement or

 

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undertaking restricting the right or ability of such Grantor or the Collateral Trustee to sell, assign or transfer any of the Pledged Securities or Proceeds thereof.

 

(c)                                  In the case of each Grantor which is an Issuer, such Issuer agrees that (i) it will be bound by the terms of this Agreement relating to the Pledged Securities issued by it and will comply with such terms insofar as such terms are applicable to it, (ii) it will notify the Collateral Trustee promptly in writing of the occurrence of any of the events described in Section 6.09(a) with respect to the Pledged Securities issued by it and (iii) the terms of Section 7.01(c) and Section 7.05 shall apply to it, mutatis mutandis, with respect to all actions that may be required of it pursuant to Section 7.01(c) or Section 7.05 with respect to the Pledged Securities issued by it.

 

(d)                                 Subject to the terms of the Intercreditor Agreement, such Grantor shall furnish to the Collateral Trustee such stock powers and other equivalent instruments of transfer, if applicable, as may be required by the Collateral Trustee to assure the transferability of and the perfection of the security interest in the Pledged Securities when and as often as may be reasonably requested by the Collateral Trustee.

 

(e)                                  The Pledged Securities will at all times constitute not less than 100% of the capital stock or other Equity Interests of the Issuer thereof owned by any Grantor.  Each Grantor will not permit any Issuer of any of the Pledged Securities to issue any new shares (or other interests) of any class of capital stock or other Equity Interests of such Issuer without the prior written consent of the Collateral Trustee or as expressly permitted by the Indenture.

 

(f)                                   Each Pledgor shall not agree to any amendment of a partnership agreement, LLC agreement or other organic document relating to any Pledged Security that in any way adversely affects the perfection of the security interest of the Collateral Trustee in the Pledged Securities, including any amendment electing to treat the membership interest or partnership interest of such Pledgor as a security under Section 8-103 of the NY UCC.  In the event of a foreclosure or a taking of Pledged Securities consisting of partnership interests or LLC interests in lieu of foreclosure pursuant to any Security Document executed in connection with the Indenture, the Collateral Trustee or its assignee or transferee, at any of their option, will, without any further action or consent, become a member or partner upon the exercise of such option by the Collateral Trustee, its assignee or transferee, having all of the rights, powers and privileges of a member or partner with respect to such Equity Interest, including, without limitation, the right to participate in the management of the business, to vote such Equity Interest and to receive distributions hereunder.

 

Section 6.10                             Limitations on Modifications, Waivers, Extensions of Agreements Giving Rise to Accounts.  Such Grantor will not (i) amend, modify, terminate or waive any provision of any Chattel Paper, Instrument or any agreement giving rise to an Account or Payment Intangible in any manner which could reasonably be expected to materially adversely affect the value of such Chattel Paper, Instrument, Payment Intangible or Account as Collateral, or (ii) fail to exercise promptly and diligently each and every material right which it may have under any Chattel Paper, Instrument and each agreement giving rise to an Account or Payment Intangible (other than any right of termination).  Such Grantor shall deliver to the Collateral Trustee a copy

 

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of each material demand, notice or document received by it relating in any way to any Chattel Paper, Instrument or any agreement giving rise to an Account or Payment Intangible.

 

Section 6.11                             Reserved.

 

Section 6.12                             Instruments and Tangible Chattel Paper.  If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument or Tangible Chattel Paper, such Instrument or Tangible Chattel Paper shall be immediately delivered to the Collateral Trustee (or to the Priority Lien Collateral Agent pursuant to the terms of the Intercreditor Agreement), duly endorsed in a manner satisfactory to the Collateral Trustee, to be held as Collateral pursuant to this Agreement.

 

Section 6.13                             Reserved.

 

Section 6.14                             Commercial Tort Claims.  If such Grantor shall at any time hold or acquire a Commercial Tort Claim that satisfies the requirements of the following sentence, such Grantor shall, within thirty (30) days after such Commercial Tort Claim satisfies such requirements, notify the Collateral Trustee in a writing signed by such Grantor containing a brief description thereof, and granting to the Collateral Trustee in such writing (for the benefit of the Secured Parties) a security interest therein and in the Proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to the Collateral Trustee.  The provisions of the preceding sentence shall apply only to a Commercial Tort Claim that satisfies the following requirements:  (i) the monetary value claimed by or payable to the relevant Grantor in connection with such Commercial Tort Claim shall exceed $1,000,000, and either (ii) (A) such Grantor shall have filed a law suit or counterclaim or otherwise commenced legal proceedings (including, without limitation, arbitration proceedings) against the Person against whom such Commercial Tort Claim is made, or (B) such Grantor and the Person against whom such Commercial Tort Claim is asserted shall have entered into a settlement agreement with respect to such Commercial Tort Claim.  In addition, to the extent that the existence of any Commercial Tort Claim held or acquired by any Grantor is disclosed by such Grantor in any public filing with the Securities Exchange Commission or any successor thereto or analogous Governmental Authority, or to the extent that the existence of any such Commercial Tort Claim is disclosed in any press release issued by any Grantor, then, upon the request of the Collateral Trustee, the relevant Grantor shall, within thirty (30) days after such request is made, transmit to the Collateral Trustee a writing signed by such Grantor containing a brief description of such Commercial Tort Claim and granting to the Collateral Trustee in such writing (for the benefit of the Secured Parties) a security interest therein and in the Proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to the Collateral Trustee.

 

ARTICLE VII
 REMEDIAL PROVISIONS

 

Section 7.01                             Pledged Securities.

 

(a)                                 Unless an Event of Default shall have occurred and be continuing and the Collateral Trustee shall have given notice to the relevant Grantor of the Collateral Trustee’s

 

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intent to exercise its corresponding rights pursuant to Section 7.01(b), each Grantor shall be permitted to receive all cash dividends paid in respect of the Pledged Securities paid in the normal course of business of the relevant Issuer, to the extent permitted in the Indenture, and to exercise all voting and corporate rights with respect to the Pledged Securities.

 

(b)                                 If an Event of Default shall occur and be continuing, then at any time in the Collateral Trustee’s discretion without notice but in each case subject to the terms of the Intercreditor Agreement, (i) the Collateral Trustee shall have the right to receive any and all cash dividends, payments or other Proceeds paid in respect of the Pledged Securities and make application thereof to the Secured Obligations in accordance with the Collateral Trust Agreement, and (ii) any or all of the Pledged Securities shall be registered in the name of the Collateral Trustee or its nominee, and the Collateral Trustee or its nominee may thereafter exercise (x) all voting, corporate and other rights pertaining to such Pledged Securities at any meeting of shareholders (or other equivalent body) of the relevant Issuer or Issuers or otherwise and (y) any and all rights of conversion, exchange and subscription and any other rights, privileges or options pertaining to such Pledged Securities as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Securities upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the organizational structure of any Issuer, or upon the exercise by any Grantor or the Collateral Trustee of any right, privilege or option pertaining to such Pledged Securities, and in connection therewith, the right to deposit and deliver any and all of the Pledged Securities with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Collateral Trustee may determine), all without liability except to account for property actually received by it, but the Collateral Trustee shall have no duty to any Grantor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing.

 

(c)                                  Each Grantor hereby authorizes and instructs each Issuer of any Pledged Securities pledged by such Grantor hereunder (and each Issuer party hereto hereby agrees) to (i) comply with any instruction received by it from the Collateral Trustee in writing that (x) states that an Event of Default has occurred and is continuing and (y) is otherwise in accordance with the terms of the Intercreditor Agreement and this Agreement, without any other or further instructions from such Grantor, and each Grantor agrees that each Issuer shall be fully protected in so complying, and (ii) unless otherwise expressly prohibited by the Intercreditor Agreement, pay any dividends or other payments with respect to the Pledged Securities directly to the Collateral Trustee.

 

(d)                                 After the occurrence and during the continuation of an Event of Default, if the Issuer of any Pledged Securities is the subject of bankruptcy, insolvency, receivership, custodianship or other proceedings under the supervision of any Governmental Authority, then all rights of the Grantor in respect thereof to exercise the voting and other consensual rights which such Grantor would otherwise be entitled to exercise with respect to the Pledged Securities issued by such Issuer shall cease, and all such rights shall, subject to the Intercreditor Agreement, thereupon become vested in the Collateral Trustee who shall thereupon have the sole right to exercise such voting and other consensual rights, but the Collateral Trustee shall have no duty to exercise any such voting or other consensual rights and shall not be responsible for any failure to do so or delay in so doing.

 

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Section 7.02                             Collections on Accounts, Etc.  The Collateral Trustee hereby authorizes each Grantor to collect upon the Accounts, Instruments, Chattel Paper and Payment Intangibles subject to the Collateral Trustee’s direction and control, and the Collateral Trustee may curtail or terminate said authority at any time after the occurrence and during the continuance of an Event of Default.  Upon the request of the Collateral Trustee at any time after the occurrence and during the continuance of an Event of Default but subject to the terms of the Intercreditor Agreement, each Grantor shall notify the Account Debtors that the applicable Accounts, Chattel Paper and Payment Intangibles have been assigned to the Collateral Trustee for the ratable benefit of the Secured Parties and that payments in respect thereof shall be made directly to the Collateral Trustee.  The Collateral Trustee may in its own name or in the name of others communicate with the Account Debtors to verify with them to its satisfaction the existence, amount and terms of any Accounts, Chattel Paper or Payment Intangibles.

 

Section 7.03                             Proceeds.  If required by the Collateral Trustee at any time after the occurrence and during the continuance of an Event of Default but subject to the terms of the Intercreditor Agreement, any payments of Accounts, Instruments, Chattel Paper and Payment Intangibles, when collected or received by each Grantor, and any other cash or non-cash Proceeds received by each Grantor upon the sale or other disposition of any Collateral, shall be forthwith (and, in any event, within two Business Days) deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the Collateral Trustee if required, in a special collateral account maintained by the Collateral Trustee, subject to withdrawal by the Collateral Trustee for the ratable benefit of the Secured Parties only, as hereinafter provided, and, until so turned over, shall be held by such Grantor in trust for the Collateral Trustee for the ratable benefit of the Secured Parties, segregated from other funds of any such Grantor.  Each deposit of any such Proceeds shall be accompanied by a report identifying in reasonable detail the nature and source of the payments included in the deposit.  All Proceeds (including, without limitation, Proceeds constituting collections of Accounts, Chattel Paper, Instruments) while held by the Collateral Trustee (or by any Grantor in trust for the Collateral Trustee for the ratable benefit of the Secured Parties) shall continue to be collateral security for all of the Secured Obligations and shall not constitute payment thereof until applied as hereinafter provided.  At such intervals as may be agreed upon by each Grantor and the Collateral Trustee, or, if an Event of Default shall have occurred and be continuing, at any time at the Collateral Trustee’s election, the Collateral Trustee shall apply all or any part of the funds on deposit in said special collateral account on account of the Secured Obligations in such order as the Collateral Trustee may elect, and any part of such funds which the Collateral Trustee elects not so to apply and deems not required as collateral security for the Secured Obligations shall be paid over from time to time by the Collateral Trustee to each Grantor or to whomsoever may be lawfully entitled to receive the same.

 

Section 7.04                             NY UCC and Other Remedies.

 

(a)                                 If an Event of Default shall occur and be continuing, the Collateral Trustee, on behalf of the Secured Parties, may exercise in its discretion, in addition to all other rights, remedies, powers and privileges granted to them in this Agreement, the other Note Documents and in any other instrument or agreement securing, evidencing or relating to the Secured Obligations, all rights, remedies, powers and privileges of a secured party under the NY UCC (whether the NY UCC is in effect in the jurisdiction where such rights, remedies, powers or

 

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privileges are asserted) or any other applicable law or otherwise available at law or equity.  Without limiting the generality of the foregoing, the Collateral Trustee, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Grantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker’s board or office of the Collateral Trustee or any other Secured Party or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk.  The Collateral Trustee or any other Secured Party shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in any Grantor, which right or equity is hereby waived and released.  If an Event of Default shall occur and be continuing, each Grantor further agrees, at the Collateral Trustee’s request, to assemble the Collateral and make it available to the Collateral Trustee at places which the Collateral Trustee shall reasonably select, whether at such Grantor’s premises or elsewhere.  Any such sale or transfer by the Collateral Trustee either to itself or to any other Person shall be absolutely free from any claim of right by Grantor, including any equity or right of redemption, stay or appraisal which Grantor has or may have under any rule of law, regulation or statute now existing or hereafter adopted.  Upon any such sale or transfer, the Collateral Trustee shall have the right to deliver, assign and transfer to the purchaser or transferee thereof the Collateral so sold or transferred.  The Collateral Trustee shall apply the net proceeds of any action taken by it pursuant to this Section 7.04, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Collateral Trustee and the other Secured Parties hereunder, including, without limitation, reasonable attorneys’ fees and disbursements, to the payment in whole or in part of the Secured Obligations, in accordance with the Collateral Trust Agreement, and only after such application and after the payment by the Collateral Trustee of any other amount required by any provision of law, including, without limitation, Section 9-615 of the NY UCC, need the Collateral Trustee account for the surplus, if any, to any Grantor.  To the extent permitted by applicable law, each Grantor waives all claims, damages and demands it may acquire against the Collateral Trustee or any other Secured Party arising out of the exercise by them of any rights hereunder.  If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition.

 

(b)                                 In the event that the Collateral Trustee elects not to sell the Collateral, the Collateral Trustee retains its rights to dispose of or utilize the Collateral or any part or parts thereof in any manner authorized or permitted by law or in equity, and to apply the proceeds of the same towards payment of the Secured Obligations.  Each and every method of disposition of the Collateral described in this Agreement shall constitute disposition in a commercially reasonable manner.  The Collateral Trustee may appoint any Person as agent to perform any act or acts necessary or incident to any sale or transfer of the Collateral.

 

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Section 7.05                             Private Sales of Pledged Securities.  Each Grantor recognizes that the Collateral Trustee may be unable to effect a public sale of any or all the Pledged Securities, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof.  Each Grantor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner.  The Collateral Trustee shall be under no obligation to delay a sale of any of the Pledged Securities for the period of time necessary to permit the Issuer thereof to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if such Issuer would agree to do so.  Each Grantor agrees to use its best efforts to do or cause to be done all such other acts as may reasonably be necessary to make such sale or sales of all or any portion of the Pledged Securities pursuant to this Section 7.05 valid and binding and in compliance with any and all other applicable Governmental Requirements.  Each Grantor further agrees that a breach of any of the covenants contained in this Section 7.05 will cause irreparable injury to the Collateral Trustee and the other Secured Parties, that the Collateral Trustee and the other Secured Parties have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 7.05 shall be specifically enforceable against such Grantor, and such Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants.

 

Section 7.06                             Waiver; Deficiency.  Each Grantor waives and agrees not to assert any rights or privileges which it may acquire under the NY UCC or any other applicable law.  Each Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay its Secured Obligations and the fees and disbursements of any attorneys employed by the Collateral Trustee or any other Secured Party to collect such deficiency.

 

Section 7.07                             Non-Judicial Enforcement.  The Collateral Trustee may enforce its rights hereunder without prior judicial process or judicial hearing, and to the extent permitted by law, each Grantor expressly waives any and all legal rights which might otherwise require the Collateral Trustee to enforce its rights by judicial process.

 

ARTICLE VIII
 THE COLLATERAL TRUSTEE

 

Section 8.01                             Collateral Trustee’s Appointment as Attorney-in-Fact, Etc.

 

(a)                                 Each Grantor hereby irrevocably constitutes and appoints the Collateral Trustee and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Grantor and in the name of such Grantor or in its own name, for the purpose of carrying out the terms of this Agreement, to take any and all reasonably appropriate action and to execute any and all documents and instruments which may be reasonably necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, each Grantor

 

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hereby gives the Collateral Trustee the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do any or all of the following subject to the terms of the Intercreditor Agreement:

 

(i)                                     unless being disputed, pay or discharge taxes and Liens levied or placed on or threatened against the Collateral, effect any repairs or any insurance called for by the terms of this Agreement and pay all or any part of the premiums therefore and the costs thereof;

 

(ii)                                  execute, in connection with any sale provided for in Section 7.04 or Section 7.05, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral; and

 

(iii)                               (A) direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Collateral Trustee or as the Collateral Trustee shall direct; (B) take possession of and indorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Account, Instrument, General Intangible, Chattel Paper or Payment Intangible or with respect to any other Collateral, and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Collateral Trustee for the purpose of collecting any and all such moneys due under any Account, Instrument or General Intangible or with respect to any other Collateral whenever payable; (C) ask or demand for, collect, and receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (D) sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral; (E) receive, change the address for delivery, open and dispose of mail addressed to any Grantor, and to execute, assign and indorse negotiable and other instruments for the payment of money, documents of title or other evidences of payment, shipment or storage for any form of Collateral on behalf of and in the name of any Grantor; (F) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any portion thereof and to enforce any other right in respect of any Collateral; (G) defend any suit, action or proceeding brought against such Grantor with respect to any Collateral; (H) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, give such discharges or releases as the Collateral Trustee may deem appropriate; and (I) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Collateral Trustee were the absolute owner thereof for all purposes, and do, at the Collateral Trustee’s option and such Grantor’s expense, at any time, or from time to time, all acts and things which the Collateral Trustee deems necessary to protect, preserve or realize upon the Collateral and the Collateral Trustee’s and the other Secured Parties’ security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Grantor might do.

 

Anything in this Section 8.01(a) to the contrary notwithstanding, the Collateral Trustee agrees that it will not exercise any rights under the power of attorney provided for in this Section 8.01(a) unless an Event of Default shall have occurred and be continuing.

 

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(b)                                 If any Grantor fails to perform or comply with any of its agreements contained herein within the applicable grace periods, the Collateral Trustee, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement.

 

(c)                                  The expenses of the Collateral Trustee incurred in connection with actions undertaken as provided in this Section 8.01, together with interest thereon from the date of payment by the Collateral Trustee to the date reimbursed by the relevant Grantor, shall be payable by such Grantor to the Collateral Trustee on demand.

 

(d)                                 Each Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue and in compliance hereof.  All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released.

 

Section 8.02                             Duty of Collateral Trustee.  The Collateral Trustee’s sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the NY UCC or otherwise, shall be to deal with it in the same manner as the Collateral Trustee deals with similar property for its own account and shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which comparable secured parties accord comparable collateral.  Neither the Collateral Trustee, any other Secured Party nor any of their respective officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof.  The powers conferred on the Collateral Trustee and the other Secured Parties hereunder are solely to protect the Collateral Trustee’s and the other Secured Parties’ interests in the Collateral and shall not impose any duty upon the Collateral Trustee or any other Secured Party to exercise any such powers.  The Collateral Trustee and the other Secured Parties shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct.  To the fullest extent permitted by applicable law, the Collateral Trustee shall be under no duty whatsoever to make or give any presentment, notice of dishonor, protest, demand for performance, notice of non-performance, notice of intent to accelerate, notice of acceleration, or other notice or demand in connection with any Collateral or the Secured Obligations, or to take any steps necessary to preserve any rights against any Grantor or other Person or ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not it has or is deemed to have knowledge of such matters.  Each Grantor, to the extent permitted by applicable law, waives any right of marshaling in respect of any and all Collateral, and waives any right to require the Collateral Trustee or any other Secured Party to proceed against any Grantor or other Person, exhaust any Collateral or enforce any other remedy which the Collateral Trustee or any other Secured Party now has or may hereafter have against each Subsidiary Grantor, any Grantor or other Person.

 

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Section 8.03                             Execution of Financing Statements.  Pursuant to the NY UCC and any other applicable law, each Grantor authorizes the Collateral Trustee, its counsel or its representative, at any time and from time to time, to file or record financing statements, continuation statements, amendments thereto and other filing or recording documents or instruments with respect to the Collateral without the signature of such Grantor in such form and in such offices as the Collateral Trustee reasonably determines appropriate to perfect the security interests of the Collateral Trustee under this Agreement.  Additionally, each Grantor authorizes the Collateral Trustee, its counsel or its representative, at any time and from time to time, to file or record such financing statements that describe the collateral covered thereby as “all assets of the Grantor”, “all personal property of the Grantor” or words of similar effect.  A photographic or other reproduction of this Agreement shall be sufficient as a financing statement or other filing or recording document or instrument for filing or recording in any jurisdiction.

 

Section 8.04                             Authority of Collateral Trustee.  Each Grantor acknowledges that the rights and responsibilities of the Collateral Trustee under this Agreement with respect to any action taken by the Collateral Trustee or the exercise or non-exercise by the Collateral Trustee of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Collateral Trustee and the other Secured Parties, be governed by the Collateral Trust Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Collateral Trustee and the Grantors, the Collateral Trustee shall be conclusively presumed to be acting as agent for the Secured Parties with full and valid authority so to act or refrain from acting, and no Grantor shall be under any obligation, or entitlement, to make any inquiry respecting such authority.

 

ARTICLE IX
 SUBORDINATION OF INDEBTEDNESS

 

Section 9.01                             Subordination of All Grantor Claims.  As used herein, the term “Grantor Claims” means all debts and obligations of the Company or any other Grantor to any Grantor, whether such debts and obligations now exist or are hereafter incurred or arise, or whether the obligation of the debtor thereon be direct, contingent, primary, secondary, several, joint and several, or otherwise, and irrespective of whether such debts or obligations be evidenced by note, contract, open account, or otherwise, and irrespective of the Person or Persons in whose favor such debts or obligations may, at their inception, have been, or may hereafter be created, or the manner in which they have been or may hereafter be acquired by. After and during the continuation of an Event of Default, no Grantor shall receive or collect, directly or indirectly, from any obligor in respect thereof any amount upon the Grantor Claims.

 

Section 9.02                             Claims in Bankruptcy.  In the event of receivership, bankruptcy, reorganization, arrangement, debtor’s relief or other insolvency proceedings involving any Grantor, the Collateral Trustee on behalf of the Secured Parties shall have the right to prove their claim in any proceeding, so as to establish their rights hereunder and receive directly from the receiver, trustee or other court custodian, dividends and payments which would otherwise be payable upon Grantor Claims.  Each Grantor hereby assigns such dividends and payments to the Collateral Trustee for the benefit of the Secured Parties for application against the Secured Obligations as provided under the Collateral Trust Agreement.  Should any Agent or Secured

 

21

 

Party receive, for application upon the Secured Obligations, any such dividend or payment which is otherwise payable to any Grantor, and which, as between such Grantor, shall constitute a credit upon the Grantor Claims, then upon payment in full of the Secured Obligations, the intended recipient shall become subrogated to the rights of the Collateral Trustee and the other Secured Parties to the extent that such payments to the Collateral Trustee and the other Secured Parties on the Grantor Claims have contributed toward the liquidation of the Secured Obligations, and such subrogation shall be with respect to that proportion of the Secured Obligations which would have been unpaid if the Collateral Trustee and the other Secured Parties had not received dividends or payments upon the Grantor Claims.

 

Section 9.03                             Payments Held in Trust.  In the event that notwithstanding Section 9.01 and Section 9.02, any Grantor should receive any funds, payments, claims or distributions which is prohibited by such Sections, then it agrees: (a) to hold in trust for the Collateral Trustee and the other Secured Parties an amount equal to the amount of all funds, payments, claims or distributions so received, and (b) that it shall have absolutely no dominion over the amount of such funds, payments, claims or distributions except to pay them promptly to the Collateral Trustee, for the benefit of the Secured Parties; and each Grantor covenants promptly to pay the same to the Collateral Trustee.

 

Section 9.04                             Liens Subordinate.  Each Grantor agrees that, until the Secured Obligations are paid in full, any Liens securing payment of the Grantor Claims shall be and remain inferior and subordinate to any Liens securing payment of the Secured Obligations, regardless of whether such encumbrances in favor of such Grantor, the Collateral Trustee or any other Secured Party presently exist or are hereafter created or attach.  Without the prior written consent of the Collateral Trustee, no Grantor, during the period in which any of the Secured Obligations are outstanding, shall (a) exercise or enforce any creditor’s right it may have against any debtor in respect of the Grantor Claims, or (b) foreclose, repossess, sequester or otherwise take steps or institute any action or proceeding (judicial or otherwise, including without limitation the commencement of or joinder in any liquidation, bankruptcy, rearrangement, debtor’s relief or insolvency proceeding) to enforce any Lien held by it.

 

Section 9.05                             Notation of Records.  Upon the request of the Collateral Trustee, all promissory notes and all accounts receivable ledgers or other evidence of the Grantor Claims accepted by or held by any Grantor shall contain a specific written notice thereon that the indebtedness evidenced thereby is subordinated under the terms of this Agreement.

 

ARTICLE X
 MISCELLANEOUS

 

Section 10.01                      Waiver.  No failure on the part of the Collateral Trustee or any other Secured Party to exercise and no delay in exercising, and no course of dealing with respect to, any right, remedy, power or privilege under any of the Note Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under any of the Note Documents preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges provided herein are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.  The exercise by the Collateral Trustee of any one or more of the rights, powers and remedies

 

22

 

herein shall not be construed as a waiver of any other rights, powers and remedies, including, without limitation, any rights of set-off.

 

Section 10.02                      Notices.  All notices and other communications provided for herein shall be given in the manner and subject to the terms of Section 11.2 of the Indenture; provided that any such notice, request or demand to or upon any Subsidiary Grantor shall be addressed to such Subsidiary Grantor at its notice address set forth on Schedule 1.

 

Section 10.03                      Payment of Expenses, Indemnities, Etc.

 

(a)                                 Each Grantor agrees to pay or promptly reimburse the Collateral Trustee and each other Secured Party for all advances, charges, costs and expenses (including, without limitation, all costs and expenses of holding, preparing for sale and selling, collecting or otherwise realizing upon the Collateral and all attorneys’ fees, legal expenses and court costs) incurred by any Secured Party in connection with the exercise of its respective rights and remedies hereunder, including, without limitation, any advances, charges, costs and expenses that may be incurred in any effort to enforce any of the provisions of this Agreement or any obligation of any Grantor in respect of the Collateral or in connection with (i) the preservation of the Lien of, or the rights of the Collateral Trustee or any other Secured Party under this Agreement, (ii) any actual or attempted sale, lease, disposition, exchange, collection, compromise, settlement or other realization in respect of, or care of, the Collateral, including all such costs and expenses incurred in any bankruptcy, reorganization, workout or other similar proceeding, or (iii) otherwise enforcing or preserving any rights under this Agreement and the other Note Documents to which such Grantor is a party.

 

(b)                                 Each Grantor agrees to pay, and to save the Collateral Trustee and the other Secured Parties harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including, without limitation, court costs and attorneys’ fees, 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) incurred because of, incident to, or with respect to, the Collateral (including, without limitation, any exercise of rights or remedies in connection therewith) or the execution, delivery, enforcement, performance and administration of this Agreement, to the extent the Company would be required to do so pursuant to Sections 7.7 or 10.1 of the Indenture.  All amounts for which any Grantor is liable pursuant to this Section 10.03 shall be due and payable by such Grantor to the Secured Parties upon demand.

 

Section 10.04                      Amendments in Writing.  None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in accordance with the Collateral Trust Agreement.

 

Section 10.05                      Successors and Assigns.  This Agreement shall be binding upon the successors and assigns of each Grantor and shall inure to the benefit of the Collateral Trustee and the other Secured Parties and their successors and assigns; provided that except as set forth in the Indenture, no Grantor may assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Collateral Trustee.

 

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Section 10.06                      Invalidity.  In the event that any one or more of the provisions contained in this Agreement or in any of the Note Documents to which a Grantor is a party shall, for any reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or such other Note Document.

 

Section 10.07                      Counterparts.  This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Agreement by signing any such counterpart.

 

Section 10.08                      Survival.  The obligations of the parties under Section 10.03 shall survive the repayment of the Notes and the termination of the Indenture.  To the extent that any payments on the Secured Obligations or proceeds of any Collateral are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver or other Person under any bankruptcy law, common law or equitable cause, then to such extent, the Secured Obligations so satisfied shall be revived and continue as if such payment or proceeds had not been received and the Collateral Trustee’s and the other Secured Parties’ Liens, security interests, rights, powers and remedies under this Agreement and each Security Document shall continue in full force and effect.  In such event, each Security Document shall be automatically reinstated and each Grantor shall take such action as may be reasonably requested by the Collateral Trustee and the other Secured Parties to effect such reinstatement.

 

Section 10.09                      Captions.  Captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement.

 

Section 10.10                      No Oral Agreements.  The Note Documents embody the entire agreement and understanding between the parties and supersede all other agreements and understandings between such parties relating to the subject matter hereof and thereof.  The Note Documents represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties.  There are no unwritten oral agreements between the parties.

 

Section 10.11                      Governing Law; Submission to Jurisdiction.

 

(a)                                 This Agreement shall be governed by, and construed in accordance with, the laws of the state of New York.

 

(b)                                 Any legal action or proceeding with respect to this Agreement or any other Note Documents to which a Grantor is a party shall be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and each of the Collateral Trustee and the Grantors hereby accepts for itself and (to the extent permitted by law) in respect of its Property, generally and unconditionally, the jurisdiction of the aforesaid courts.  Each of the Collateral Trustee and the Grantors hereby irrevocably waives any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any such action or

 

24

 

proceeding in such respective jurisdictions.  This submission to jurisdiction is non-exclusive and does not preclude the Collateral Trustee from obtaining jurisdiction over such Grantor in any court otherwise having jurisdiction.

 

(c)                                  Each of the Collateral Trustee and the Grantors irrevocably consents to the service of process of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such Person at the address specified on Schedule 1 of this Agreement or in the Indenture, as applicable, such service to become effective thirty (30) days after such mailing.  Nothing herein shall affect the right of the Collateral Trustee or any holder of a Note or Grantor to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against such Grantor in any other jurisdiction.

 

(d)                                 Each Grantor hereby (i) irrevocably and unconditionally waive, to the fullest extent permitted by law, trial by jury in any legal action or proceeding relating to this Agreement or any other Note Document and for any counterclaim therein; (ii) irrevocably waive, to the maximum extent not prohibited by law, any right it may have to claim or recover in any such litigation any special, exemplary, punitive or consequential damages, or damages other than, or in addition to, actual damages; (iii) certify that no party hereto nor any representative or agent or counsel for any party hereto has represented, expressly or otherwise, or implied that such party would not, in the event of litigation, seek to enforce the foregoing waivers, and (iv) acknowledge that it has been induced to enter into this Agreement, the Note Documents and the transactions contemplated hereby and thereby by, among other things, the mutual waivers and certifications contained in this Section 10.11.

 

Section 10.12                      Acknowledgments.  Each Grantor hereby acknowledges that:

 

(a)                                 it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Note Documents to which it is a party;

 

(b)                                 neither the Collateral Trustee nor any other Secured Party has any fiduciary relationship with or duty to any Grantor arising out of or in connection with this Agreement or any of the other Note Documents, and the relationship between the Grantors, on the one hand, and the Collateral Trustee and the other Secured Parties, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

 

(c)                                  no joint venture is created hereby or by the other Note Documents or otherwise exists by virtue of the transactions contemplated hereby among the Secured Parties or among the Grantors and the Lenders.

 

(d)                                 each of the parties hereto specifically agrees that it has a duty to read this Agreement and the Security Documents and agrees that it is charged with notice and knowledge of the terms of this Agreement and the Security Documents; that it has in fact read this Agreement and is fully informed and has full notice and knowledge of the terms, conditions and effects of this Agreement; that it has been represented by independent legal counsel of its choice throughout the negotiations preceding its execution of this Agreement and the Security Documents; and has received the advice of its attorney in entering into this Agreement and the

 

25

 

Security Documents; and that it recognizes that certain of the terms of this Agreement and the Security Documents result in one party assuming the liability inherent in some aspects of the transaction and relieving the other party of its responsibility for such liability.  Each party hereto agrees and covenants that it will not contest the validity or enforceability of any exculpatory provision of this Agreement and the Security Documents on the basis that the party had no notice or knowledge of such provision or that the provision is not “conspicuous.”

 

(e)                                  each Grantor warrants and agrees that each of the waivers and consents set forth in this Agreement are made voluntarily and unconditionally after consultation with outside legal counsel and with full knowledge of their significance and consequences, with the understanding that events giving rise to any defense or right waived may diminish, destroy or otherwise adversely affect rights which such Grantor otherwise may have against the Company, any other Grantor, the Secured Parties or any other Person or against any collateral.  If, notwithstanding the intent of the parties that the terms of this Agreement shall control in any and all circumstances, any such waivers or consents are determined to be unenforceable under applicable law, such waivers and consents shall be effective to the maximum extent permitted by law.

 

Section 10.13                      Additional Grantors.  Each Subsidiary of the Company that becomes a Guarantor under the Indenture and is not a signatory hereto shall become a Grantor for all purposes of this Agreement upon execution and delivery by such Subsidiary of an Assumption Agreement in the form of Annex I hereto.

 

Section 10.14                      Set-Off.  Each Grantor agrees that, in addition to (and without limitation of) any right of set-off, bankers’ lien or counterclaim a Secured Party may otherwise have, each Secured Party shall have the right and be entitled (after consultation with the Collateral Trustee), at its option, to offset balances held by it or by any of its Affiliates for account of any Grantor or any Subsidiary at any of its offices, in Dollars or in any other currency, against any principal of or interest on any of the Secured Obligations owed to such Secured Party, or any other amount due and payable to such Secured Party hereunder, which is not paid when due (regardless of whether such balances are then due to such Person), in which case it shall promptly notify the Company and the Collateral Trustee thereof, provided that such Secured Party’s failure to give such notice shall not affect the validity thereof.

 

Section 10.15                      Releases.

 

(a)                                 Release upon Payment in Full.  The grant of a security interest hereunder and all of rights, powers and remedies in connection herewith shall remain in full force and effect until the Collateral Trustee has (i) retransferred and delivered all Collateral in its possession to the Grantors, and (ii) executed a written release or termination statement and reassigned to the Grantors without recourse or warranty any remaining Collateral and all rights conveyed hereby.  Upon the complete payment of the Secured Obligations, the termination of the Indenture and the compliance by the Grantors with all covenants and agreements hereof, the Collateral Trustee, at the written request and expense of the Company, will promptly release, reassign and transfer the Collateral to the Grantors and declare this Agreement to be of no further force or effect.

 

26

 

(b)                                 Further Assurances.  If any of the Collateral shall be sold, transferred or otherwise disposed of by any Grantor in a transaction permitted by the Indenture or to the extent that such Collateral is permitted to be released pursuant to the terms of the Indenture and the Collateral Trust Agreement, then the Collateral Trustee, at the request and sole expense of such Grantor, shall promptly execute and deliver to such Grantor all releases or other documents reasonably necessary or desirable for the release of the Liens created hereby on such Collateral and the capital stock of such Grantor.  At the request and sole expense of the Company, a Grantor shall be released from its obligations hereunder in the event that all the capital stock of such Grantor shall be sold, transferred or otherwise disposed of in a transaction permitted by the Indenture; provided that the Company shall have delivered to the Collateral Trustee, at least ten Business Days prior to the date of the proposed release, a written request for release identifying the relevant Grantor and the terms of the sale or other disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a certification by the Company stating that such transaction is in compliance with the Indenture and the other Note Documents.

 

(c)                                  Retention in Satisfaction.  Except as may be expressly applicable pursuant to Section 9-620 of the NY UCC, no action taken or omission to act by the Collateral Trustee or the other Secured Parties hereunder, including, without limitation, any exercise of voting or consensual rights or any other action taken or inaction, shall be deemed to constitute a retention of the Collateral in satisfaction of the Secured Obligations or otherwise to be in full satisfaction of the Secured Obligations, and the Secured Obligations shall remain in full force and effect, until the Collateral Trustee and the other Secured Parties shall have applied payments (including, without limitation, collections from Collateral) towards the Secured Obligations in the full amount then outstanding or until such subsequent time as is provided in Section 10.15(a).

 

Section 10.16                      Reinstatement.  The obligations of each Grantor under this Agreement (including, without limitation, with respect to the provision of collateral herein) shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Secured Obligations is rescinded or must otherwise be restored or returned by the Collateral Trustee or any other Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company or any Grantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Company or any Grantor or any substantial part of its property, or otherwise, all as though such payments had not been made.

 

Section 10.17                      Acceptance.  Each Grantor hereby expressly waives notice of acceptance of this Agreement, acceptance on the part of the Collateral Trustee and the other Secured Parties being conclusively presumed by their request for this Agreement and delivery of the same to the Collateral Trustee.

 

Section 10.18                      Intercreditor Agreement Controls.

 

(a)                                 Each Secured Party, by accepting the benefits of the security provided hereby, (i) consents (or is deemed to consent), to the subordination of Liens provided for in the Intercreditor Agreement, (ii) agrees (or is deemed to agree) that it will be bound by, and will take no actions contrary to, the provisions of the Intercreditor Agreement, (iii) authorizes (or is

 

27

 

deemed to authorize) the Collateral Trustee on behalf of such Person to enter into, and perform under, the Intercreditor Agreement and (iv) acknowledges (or is deemed to acknowledge) that a copy of the Intercreditor Agreement was delivered, or made available, to such Secured Party.

 

(b)                                 Notwithstanding any other provision contained herein, this Agreement, the Liens created hereby and the rights, remedies, duties and obligations provided for herein are subject in all respects to the provisions of the Intercreditor Agreement. In the event of any conflict or inconsistency between the provisions of this Agreement and the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall control.

 

(c)                                  Without limiting the foregoing, at any time prior to the Discharge of Priority Lien Obligations (as defined in the Intercreditor Agreement), any provision hereof requiring any Grantor to deliver possession of any Collateral to the Collateral Trustee, or to cause the Collateral Trustee to control any Collateral, shall be deemed to have been complied with, if and for so long as (i) the Intercreditor Agreement is in full force and effect and (ii) the Priority Lien Collateral Agent shall have such possession or control for the benefit of the Secured Parties and as bailee or sub-agent of the Collateral Trustee as provided in the Intercreditor Agreement.

 

[SIGNATURE PAGES FOLLOW]

 

28

 

IN WITNESS WHEREOF, each of the undersigned has caused this Second Lien Security Agreement to be duly executed and delivered as of the date first above written.

 

	
COMPANY:
    	
HALCÓN   RESOURCES CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Mark J. Mize
    
	
 
    	
Name:
    	
Mark   J. Mize
    
	
 
    	
Title:
    	
Executive   Vice President, Chief Financial Officer and Treasurer
    

 

 

	
SUBSIDIARY GRANTORS:
    	
HALCÓN ENERGY   PROPERTIES, INC.
    
	
 
    	
HALCÓN FIELD   SERVICES, LLC
    
	
 
    	
HALCÓN HOLDINGS, INC.
    
	
 
    	
HALCÓN OPERATING   CO., INC.
    
	
 
    	
HALCÓN RESOURCES   OPERATING, INC.
    
	
 
    	
HALCÓN LOUISIANA   OPERATING, L.P.
    
	
 
    	
 
    	
By: HALCÓN GULF   STATES, LLC,
    
	
 
    	
 
    	
its General Partner
    
	
 
    	
HALCÓN GULF STATES,   LLC
    
	
 
    	
HRC ENERGY LOUISIANA,   LLC
    
	
 
    	
HRC ENERGY, LLC
    
	
 
    	
HRC OPERATING, LLC
    
	
 
    	
HRC ENERGY RESOURCES   (WV), INC.
    
	
 
    	
HALCÓN ENERGY   HOLDINGS, LLC
    
	
 
    	
HALCÓN WILLISTON I,   LLC
    
	
 
    	
HALCÓN WILLISTON II,   LLC
    
	
 
    	
HRC PRODUCTION   COMPANY
    
	
 
    	
HK OIL &   GAS, LLC
    
	
 
    	
HK ENERGY OPERATING,   LLC
    
	
 
    	
HK LOUISIANA   OPERATING, LLC
    
	
 
    	
HK ENERGY, LLC
    
	
 
    	
HK RESOURCES, LLC
    
	
 
    	
THE 7711 CORPORATION
    

 

 

	
 
    	
By:
    	
/s/   Mark J. Mize
    
	
 
    	
Name:   
    	
Mark   J. Mize
    
	
 
    	
Title:
    	
Executive   Vice President, Chief Financial Officer and Treasurer, for and on behalf of   each of the foregoing Subsidiary Guarantors
    

 

SIGNATURE PAGE
 SECOND LIEN SECURITY AGREEMENT

 

 

	
 
    	
Acknowledged   and Agreed to as of the date hereof by:
    
	
 
    	
 
    
	
 
    	
 
    
	
COLLATERAL   TRUSTEE:
    	
U.S.   BANK NATIONAL ASSOCIATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Steven A. Finklea
    
	
 
    	
Name:
    	
Steven   A. Finklea
    
	
 
    	
Title:
    	
Vice   President
    

 

SIGNATURE PAGE
 SECOND LIEN SECURITY AGREEMENT

 

 

Schedule 1

 

NOTICE ADDRESSES OF GRANTORS

 

Halcón Resources Corporation

Halcón Energy Holdings, LLC

Halcón Energy Properties, Inc.

Halcón Field Services, LLC

Halcón Gulf States, LLC

Halcón Holdings, Inc.

Halcón Louisiana Operating, L.P.

Halcón Operating Co., Inc.

Halcón Resources Operating, Inc.

Halcón Williston I, LLC

Halcón Williston II, LLC

HK Energy, LLC

HK Energy Operating, LLC

HK Louisiana Operating, LLC

HK Oil & Gas, LLC

HK Resources, LLC

HRC Energy, LLC

HRC Energy Louisiana, LLC

HRC Energy Resources (WV), Inc.

HRC Operating, LLC

HRC Production Company

The 7711 Corporation

 

	
Notice   Address:
    	
1000   Louisiana St., Suite 6700
    
	
 
    	
Houston,   TX 77002
    
	
 
    	
Attn:   Mark J. Mize
    
	
 
    	
Phone:   832-538-0303
    
	
 
    	
Fax:   832-538-0220
    

 

Schedule 1 - 1

 

Schedule 2

 

DESCRIPTION OF PLEDGED SECURITIES

 

Pledged Securities:

 

	
Owner
    	
 
    	
Issuer
    	
 
    	
Class of Stock or 
   other Equity Interest
    	
 
    	
No. of
   Shares
    	
 
    	
Certificate
   No.
    
	
Halcón   Resources Corporation
    	
 
    	
Halcón   Energy Holdings, LLC
    	
 
    	
LLC   Membership Interest
    	
 
    	
100%
    	
 
    	
n/a
    
	
Halcón   Holdings, Inc.
    	
 
    	
Halcón   Energy Properties, Inc.
    	
 
    	
Common   Stock
    	
 
    	
1,000
    	
 
    	
1
    
	
Halcón   Holdings, Inc.
    	
 
    	
Halcón   Field Services, LLC
    	
 
    	
LLC   Membership Interest
    	
 
    	
100%
    	
 
    	
n/a
    
	
Halcón   Holdings, Inc.
    	
 
    	
Halcón   Gulf States, LLC
    	
 
    	
LLC   Membership Interest
    	
 
    	
100%
    	
 
    	
n/a
    
	
Halcón   Resources Corporation
    	
 
    	
Halcón   Holdings, Inc.
    	
 
    	
Common   Stock
    	
 
    	
1,000
    	
 
    	
1
    
	
Halcón   Gulf States, LLC
    	
 
    	
Halcón   Louisiana Operating, L.P.
    	
 
    	
General   Partnership Interest
    	
 
    	
1%
    	
 
    	
n/a
    
	
Halcón   Operating Co., Inc.
    	
 
    	
Halcón   Louisiana Operating, L.P.
    	
 
    	
Limited   Partnership Interest
    	
 
    	
99%
    	
 
    	
n/a
    
	
Halcón   Energy Properties, Inc.
    	
 
    	
Halcón   Operating Co., Inc.
    	
 
    	
Common   Stock
    	
 
    	
1,000
    	
 
    	
1
    
	
Halcón   Resources Corporation
    	
 
    	
Halcón   Resources Operating, Inc.
    	
 
    	
Common   Stock
    	
 
    	
1,000
    	
 
    	
1
    
	
Halcón   Energy Properties, Inc.
    	
 
    	
Halcón   Williston I, LLC
    	
 
    	
LLC   Membership Interest
    	
 
    	
100%
    	
 
    	
n/a
    
	
Halcón   Energy Properties, Inc.
    	
 
    	
Halcón   Williston II, LLC
    	
 
    	
LLC   Membership Interest
    	
 
    	
100%
    	
 
    	
n/a
    
	
Halcón   Energy Holdings, LLC
    	
 
    	
HK   Energy, LLC
    	
 
    	
LLC   Membership Interest
    	
 
    	
100%
    	
 
    	
n/a
    
	
HK   Energy, LLC
    	
 
    	
HK   Energy Operating, LLC
    	
 
    	
LLC   Membership Interest
    	
 
    	
100%
    	
 
    	
n/a
    
	
HK   Energy, LLC
    	
 
    	
HK   Louisiana Operating, LLC
    	
 
    	
LLC   Membership Interest
    	
 
    	
100%
    	
 
    	
n/a
    
	
HK   Energy, LLC
    	
 
    	
HK   Oil & Gas, LLC
    	
 
    	
LLC   Membership Interest
    	
 
    	
100%
    	
 
    	
n/a
    
	
Halcón   Holdings, Inc.
    	
 
    	
HK   Resources, LLC
    	
 
    	
LLC   Membership Interest
    	
 
    	
100%
    	
 
    	
n/a
    
	
Halcón   Energy Holdings, LLC
    	
 
    	
HRC   Energy, LLC
    	
 
    	
LLC   Membership Interest
    	
 
    	
100%
    	
 
    	
n/a
    
	
Halcón   Resources Operating, Inc.
    	
 
    	
HRC   Energy Louisiana, LLC
    	
 
    	
LLC   Membership Interest
    	
 
    	
100%
    	
 
    	
n/a
    
	
Halcón   Resources Operating, Inc.
    	
 
    	
HRC   Energy Resources (WV), Inc.
    	
 
    	
Common   Stock
    	
 
    	
1,000
    	
 
    	
1
    
	
Halcón   Energy Holdings, LLC
    	
 
    	
HRC   Operating, LLC
    	
 
    	
LLC   Membership Interest
    	
 
    	
100%
    	
 
    	
n/a
    
	
Halcón   Resources Operating, Inc.
    	
 
    	
HRC   Production Company
    	
 
    	
Common   Stock
    	
 
    	
1,000
    	
 
    	
1
    
	
HK   Resources, LLC
    	
 
    	
The   7711 Corporation
    	
 
    	
Common   Stock
    	
 
    	
1,000
    	
 
    	
7
    

 

Schedule 2 - 1

 

Schedule 3

 

FILINGS AND OTHER ACTIONS
 REQUIRED TO PERFECT SECURITY INTERESTS

 

Uniform Commercial Code Filings

 

1.                                      Financing Statements in respect of the Second Lien Security Agreement dated as of May 1, 2015 by the Company, the Restricted Subsidiaries party thereto as Subsidiary Grantors, in favor of the Collateral Trustee for the following entities:

 

(a)                                 Company (Delaware)

(b)                                 Halcón Energy Holdings, LLC (Delaware)

(c)                                  Halcón Energy Properties, Inc. (Delaware)

(d)                                 Halcón Field Services, LLC (Delaware)

(e)                                  Halcón Gulf States, LLC (Oklahoma)

(f)                                   Halcón Holdings, Inc. (Delaware)

(g)                                  Halcón Louisiana Operating, L.P. (Delaware)

(h)                                 Halcón Operating Co., Inc. (Texas)

(i)                                     Halcón Resources Operating, Inc. (Delaware)

(j)                                    Halcón Williston I, LLC (Texas)

(k)                                 Halcón Williston II, LLC (Texas)

(l)                                     HK Energy, LLC (Texas)

(m)                             HK Energy Operating, LLC (Texas)

(n)                                 HK Louisiana Operating, LLC (Texas)

(o)                                 HK Oil & Gas, LLC (Texas)

(p)                                 HK Resources, LLC (Delaware)

(q)                                 HRC Energy, LLC (Colorado)

(r)                                    HRC Energy Louisiana, LLC (Delaware)

(s)                                   HRC Energy Resources (WV), Inc. (Delaware)

(t)                                    HRC Operating, LLC (Colorado)

(u)                                 HRC Production Company (Texas)

(v)                                 The 7711 Corporation (Texas)

 

Schedule 3 - 1

 

Schedule 4

 

CORRECT LEGAL NAME, LOCATION OF JURISDICTION OF ORGANIZATION, ORGANIZATIONAL IDENTIFICATION NUMBER, TAXPAYER IDENTIFICATION NUMBER AND CHIEF EXECUTIVE OFFICE

 

Halcón Resources Corporation, a Delaware corporation

Organizational Identification Number:                                                                                3761452

Taxpayer Identification Number:                                                                                                           20-0700684

 

Halcón Energy Holdings, LLC, a Delaware limited liability company

Organizational Identification Number:                                                                                5137784

Taxpayer Identification Number:                                                                                                           80-0840538

 

Halcón Energy Properties, Inc., a Delaware corporation

Organizational Identification Number:                                                                                3643530

Taxpayer Identification Number:                                                                                                           02-0685292

 

Halcón Field Services, LLC, a Delaware limited liability company

Organizational Identification Number:                                                                                5142987

Taxpayer Identification Number:                                                                                                           45-5240280

 

Halcón Gulf States, LLC, a Oklahoma limited liability company

Organizational Identification Number:                                                                                3500587288

Taxpayer Identification Number:                                                                                                           73-1522976

 

Halcón Holdings, Inc., a Delaware corporation

Organizational Identification Number:                                                                                2139048

Taxpayer Identification Number:                                                                                                           52-1535102

 

Halcón Louisiana Operating, L.P., a Delaware limited partnership

Organizational Identification Number:                                                                                5155725

Taxpayer Identification Number:                                                                                                           45-5409727

 

Halcón Operating Co., Inc., a Texas corporation

Organizational Identification Number:                                                                                157984000

Taxpayer Identification Number:                                                                                                           75-2883588

 

Halcón Resources Operating, Inc., a Delaware corporation

Organizational Identification Number:                                                                                3823574

Taxpayer Identification Number:                                                                                                           03-0544856

 

Halcón Williston I, LLC, a Texas limited liability company

Organizational Identification Number:                                                                                801690854

Taxpayer Identification Number:                                                                                                           80-0869550

 

Halcón Williston II, LLC, a Texas limited liability company

Organizational Identification Number:                                                                                801690872

Taxpayer Identification Number:                                                                                                           46-1459676

 

Schedule 4 - 1

 

HK Energy, LLC, a Texas limited liability company

Organizational Identification Number:                                                                                800707128

Taxpayer Identification Number:                                                                                                           26-0418956

 

HK Energy Operating, LLC, a Texas limited liability company

Organizational Identification Number:                                                                                800387104

Taxpayer Identification Number:                                                                                                           35-2238107

 

HK Louisiana Operating, LLC, a Texas limited liability company

Organizational Identification Number:                                                                                800697019

Taxpayer Identification Number:                                                                                                           42-1654549

 

HK Oil & Gas, LLC, a Texas limited liability company

Organizational Identification Number:                                                                                800756317

Taxpayer Identification Number:                                                                                                           32-0190502

 

HK Resources, LLC, a Delaware limited liability company

Organizational Identification Number:                                                                                5448363

Taxpayer Identification Number:                                                                                                           46-4369194

 

HRC Energy, LLC, a Colorado limited liability company

Organizational Identification Number:                                                                                20061374654

Taxpayer Identification Number:                                                                                                           20-8875010

 

HRC Energy Louisiana, LLC, a Delaware limited liability company

Organizational Identification Number:                                                                                3823142

Taxpayer Identification Number:                                                                                                           84-1651433

 

HRC Energy Resources (WV), Inc., a Delaware corporation

Organizational Identification Number:                                                                                3990621

Taxpayer Identification Number:                                                                                                           84-1682713

 

HRC Operating, LLC, a Colorado limited liability company

Organizational Identification Number:                                                                                20071117034

Taxpayer Identification Number:                                                                                                           20-8875129

 

HRC Production Company, a Texas corporation

Organizational Identification Number:                                                                                0073647200

Taxpayer Identification Number:                                                                                                           74-2353501

 

The 7711 Corporation, a Texas corporation

Organizational Identification Number:                                                                                140061700

Taxpayer Identification Number:                                                                                                           74-2784003

 

Chief Executive Office of each Grantor:                                                                       1000 Louisiana Street, Suite 6700
 Houston, TX 77002

 

Schedule 4 - 2

 

Schedule 5

 

PRIOR AND/OR TRADE NAMES AND PRIOR CHIEF EXECUTIVE OFFICE

 

1.                                      Halcón Resources Corporation
  Prior Name:                                                                                                                                                                   RAM Energy Resources, Inc.
 Prior Chief Executive Office:                                                                        5100 East Skelly Dr., Ste. 650, Tulsa, OK 74135

 

2.                                      Halcón Energy Holdings, LLC 
  Prior Names:                                                                                                                                                              Halcón Geo Holdings, LLC
                                                                                                                                                                                                                                      Leopard Sub II, LLC

 

3.                                      Halcón Energy Properties, Inc. 
  Prior Name:                                                                                                                                                                   RWG Energy, Inc. 
 Prior Chief Executive Office:                                                                        5100 East Skelly Dr., Ste. 650, Tulsa, OK 74135

 

4.                                      Halcón Field Services, LLC 
  Trade Name:                                                                                                                                                            Hawk Clean Fuels

 

5.                                     Halcón Gulf States, LLC 
  Prior Names:                                                                                                                                                              HLP Gulf States, LLC
                                                                                                                                                                                                                                      RLP Gulf States, L.L.C. 
 Prior Chief Executive Office:                                                                        5100 East Skelly Dr., Ste. 650, Tulsa, OK 74135

 

6.                                      Halcón Holdings, Inc. 
  Prior Names:                                                                                                                                                              RAM Energy, Inc. 
 Prior Chief Executive Office:                                                                        5100 East Skelly Dr., Ste. 650, Tulsa, OK 74135

 

7.                                      Halcón Louisiana Operating, L.P. 
  Prior Name:                                                                                                                                                                   None.

 

8.                                      Halcón Operating Co., Inc. 
  Prior Name:                                                                                                                                                                   WG Operating, Inc. 
 Prior Chief Executive Office:                                                                        5100 East Skelly Dr., Ste. 650, Tulsa, OK 74135

 

9.                                      Halcón Resources Operating, Inc. 
  Prior Names:                                                                                                                                                              RAM Operating Company, Inc. 
 Prior Chief Executive Office:                                                                        5100 East Skelly Dr., Ste. 650, Tulsa, OK 74135

 

10.                               Halcón Williston I, LLC 
  Prior Names:                                                                                                                                                              None.

 

11.                               Halcón Williston II, LLC 
  Prior Names:                                                                                                                                                              None.

 

12.                               HK Energy, LLC 
  Prior Names:                                                                                                                                                              Southern Bay Energy, LLC
 Prior Chief Executive Office:                                                                        110 Cypress Station Dr., Ste. 220 Houston, TX 77090

 

13.                               HK Energy Operating, LLC 
  Prior Names:                                                                                                                                                              Southern Bay Operating, L.L.C. 
 Prior Chief Executive Office:                                                                        110 Cypress Station Dr., Ste. 220 Houston, TX 77090

 

14.                               HK Louisiana Operating, LLC 
  Prior Names:                                                                                                                                                              Southern Bay Louisiana, LLC
 Prior Chief Executive Office:                                                                        110 Cypress Station Dr., Ste. 220 Houston, TX 77090

 

Schedule 5 -1

 

15.                               HK Oil & Gas, LLC 
  Prior Names:                                                                                                                                                              Catena Oil & Gas, LLC
 Prior Chief Executive Office:                                                                        110 Cypress Station Dr., Ste. 220 Houston, TX 77090

 

16.                               HK Resources, LLC 
  Prior Names:                                                                                                                                                              None.

 

17.                               HRC Energy, LLC 
  Prior Names:                                                                                                                                                              G3 Energy, LLC
 Prior Chief Executive Office:                                                                        110 Cypress Station Dr., Ste. 220 Houston, TX 77090

 

18.                               HRC Energy Louisiana, LLC 
  Prior Names:                                                                                                                                                              RAM Energy Louisiana, LLC 
 Prior Chief Executive Office:                                                                        5100 East Skelly Dr., Ste. 650, Tulsa, OK 74135

 

19.                               HRC Energy Resources (WV), Inc. 
  Prior Names:                                                                                                                                                              RAM Energy Resources (WV), Inc. 
 Prior Chief Executive Office:                                                                        5100 East Skelly Dr., Ste. 650, Tulsa, OK 74135

 

20.                               HRC Operating, LLC 
  Prior Names:                                                                                                                                                              G3 Operating, LLC
 Trade Name:                                                                                                                                                            Halcón Williston Operating, LLC

 

21.                               HRC Production Company 
  Prior Names:                                                                                                                                                              Pontotoc Production Company, Inc. 
 Prior Chief Executive Office:                                                                        5100 East Skelly Dr., Ste. 650, Tulsa, OK 74135

 

22.                               The 7711 Corporation 
 Prior Names:                                                                                                                                                              None.
 Prior Chief Executive Office:                                                                        P.O. Box BJ, College Station, TX 77841

 

Schedule 5 -2

 

ACKNOWLEDGMENT AND CONSENT

 

The undersigned hereby acknowledges receipt of a copy of the Second Lien Security Agreement dated as of May 1, 2015 (the “Agreement”), made by the Grantors parties thereto for the benefit of U.S. Bank National Association, as Collateral Trustee.  The undersigned agrees for the benefit of the Collateral Trustee and the Secured Parties as follows:

 

1.                                      The undersigned will be bound by the terms of the Agreement and will comply with such terms insofar as such terms are applicable to the undersigned.

 

2.                                      The terms of Sections 7.01(c) and 7.03 of the Agreement shall apply to it, mutatis mutandis, with respect to all actions that may be required of it pursuant to Sections 7.01(c) or 7.03 of the Agreement.

 

	
 
    	
[NAME OF ISSUER]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
Address   for Notices:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Fax:
    	
 
    

 

*This consent is necessary only with respect to any Issuer which is not also a Grantor.  This consent may be modified or eliminated with respect to any Issuer that is not controlled by a Grantor.

 

Acknowledgement and Consent

 

 

Annex I

 

Assumption Agreement

 

ASSUMPTION AGREEMENT, dated as of [                        ], 201[    ], made by                                                             , a [                                        ] duly formed and existing under the laws of the state of [                ] (the “Additional Grantor”), in favor of U.S. Bank National Association, as Collateral Trustee (in such capacity, the “Collateral Trustee”) for the Secured Parties (as defined in the Second Lien Security Agreement referred to below.  All capitalized terms not defined herein shall have the meaning assigned to them in such Indenture.

 

W I T N E S S E T H:

 

WHEREAS, Halcón Resources Corporation (the “Company”), the guarantors party thereto from time to time and U.S. Bank National Association, as the Trustee (as defined therein), have entered into an Indenture, dated as of May 1, 2015 (as amended, supplemented or otherwise modified from time to time, the “Indenture”);

 

WHEREAS, in connection with the Indenture, the Company and certain of its Subsidiaries have entered into the Second Lien Security Agreement, dated as of May 1, 2015 (as amended, supplemented or otherwise modified from time to time, the “Second Lien Security Agreement”) in favor of the Collateral Trustee for the benefit of the Secured Parties (as defined therein);

 

WHEREAS, the Indenture requires the Additional Grantor to become a party to the Second Lien Security Agreement; and

 

WHEREAS, the Additional Grantor has agreed to execute and deliver this Assumption Agreement in order to become a party to the Second Lien Security Agreement;

 

NOW, THEREFORE, IT IS AGREED:

 

1.                                      Second Lien Security Agreement.  By executing and delivering this Assumption Agreement, the Additional Grantor, as provided in Section 10.13 of the Second Lien Security Agreement, hereby becomes a party to the Second Lien Security Agreement as a Grantor thereunder with the same force and effect as if originally named therein as a Grantor and, without limiting the generality of the foregoing, hereby expressly assumes all obligations and liabilities of a Grantor thereunder and expressly grants to the Collateral Trustee, for the benefit of the Secured Parties, a security interest in all Collateral owned by such Additional Grantor to secure all of such Additional Grantor’s obligations and liabilities thereunder.  The information set forth in Annex 1-A hereto is hereby added to the information set forth in Schedules 1 through 5 to the Second Lien Security Agreement.  The Additional Grantor hereby represents and warrants that each of the representations and warranties contained in Article IV of the Second Lien Security Agreement is true and correct on and as the date hereof (after giving effect to this Assumption Agreement) as if made on and as of such date.

 

Annex I - 1

 

2.                                      Governing Law.  THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be duly executed and delivered as of the date first above written.

 

	
 
    	
[ADDITIONAL GRANTOR]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

Annex I - 2

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