Document:

Exhibit 10.43

 

 

SECURITY AGREEMENT

 

MADE BY

 

WARREN RESOURCES, INC.

 

AND CERTAIN OF ITS SUBSIDIARIES

 

IN FAVOR OF

 

WILMINGTON TRUST, NATIONAL ASSOCIATION,

 

AS ADMINISTRATIVE AGENT

 

DATED AS OF MAY 22, 2015

 

 

 

TABLE OF CONTENTS

 

	
ARTICLE I   Definitions
    	
1
    
	
 
    	
 
    	
 
    
	
Section 1.01
    	
Definitions
    	
1
    
	
Section 1.02
    	
Other Definitional   Provisions; References
    	
4
    
	
 
    	
 
    
	
ARTICLE II   Grant of Security Interest
    	
4
    
	
 
    	
 
    	
 
    
	
Section 2.01
    	
Grant of Security   Interest
    	
4
    
	
Section 2.02
    	
[Reserved]
    	
6
    
	
Section 2.03
    	
Grantors Remain Liable   under Accounts, Chattel Paper and Payment Intangibles
    	
6
    
	
 
    	
 
    
	
ARTICLE III   Acknowledgments, Waivers and Consents
    	
6
    
	
 
    	
 
    	
 
    
	
Section 3.01
    	
Acknowledgments,   Waivers and Consents
    	
6
    
	
Section 3.02
    	
No Subrogation,   Contribution or Reimbursement
    	
9
    
	
 
    	
 
    
	
ARTICLE IV   Representations and Warranties
    	
9
    
	
 
    	
 
    	
 
    
	
Section 4.01
    	
Representations in   Credit Agreement
    	
9
    
	
Section 4.02
    	
Perfected Liens
    	
10
    
	
Section 4.03
    	
Legal Name,   Organizational Status, Chief Executive Office
    	
10
    
	
Section 4.04
    	
Prior Names, Addresses,   Locations of Tangible Assets
    	
10
    
	
Section 4.05
    	
[Reserved]
    	
10
    
	
Section 4.06
    	
Instruments and Chattel   Paper
    	
10
    
	
Section 4.07
    	
Accounts
    	
10
    
	
Section 4.08
    	
Governmental Obligors
    	
10
    
	
Section 4.09
    	
Commercial Tort Claims
    	
11
    
	
Section 4.10
    	
Intellectual Property
    	
11
    
	
 
    	
 
    
	
ARTICLE V   Covenants
    	
11
    
	
 
    	
 
    	
 
    
	
Section 5.01
    	
Covenants in Credit   Agreement
    	
11
    
	
Section 5.02
    	
Maintenance of   Perfected Security Interest; Further Documentation
    	
11
    
	
Section 5.03
    	
Maintenance of Records
    	
12
    
	
Section 5.04
    	
Further Identification   of Collateral
    	
13
    
	
Section 5.05
    	
[Reserved]
    	
13
    
	
Section 5.06
    	
Notices
    	
13
    
	
Section 5.07
    	
Changes in Name;   Location, etc
    	
13
    
	
Section 5.08
    	
Instruments and   Tangible Chattel Paper
    	
13
    
	
Section 5.09
    	
Commercial Tort Claims
    	
13
    
	
Section 5.10
    	
Intellectual Property
    	
14
    
	
 
    	
 
    
	
ARTICLE VI   Remedial Provisions
    	
15
    
	
 
    	
 
    	
 
    
	
Section 6.01
    	
[Reserved]
    	
15
    
	
Section 6.02
    	
Collections on   Accounts, Etc.
    	
15
    
	
Section 6.03
    	
Proceeds
    	
15
    
	
Section 6.04
    	
Remedies
    	
16
    
	
Section 6.05
    	
[Reserved]
    	
17
    
	
Section 6.06
    	
Deficiency
    	
17
    

 

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Section 6.07
    	
Non-Judicial   Enforcement
    	
17
    
	
Section 6.08
    	
IP Licenses
    	
18
    
	
 
    	
 
    	
 
    
	
ARTICLE VII   The Administrative Agent
    	
18
    
	
 
    	
 
    	
 
    
	
Section 7.01
    	
Administrative Agent’s   Appointment as Attorney-in-Fact, Etc.
    	
18
    
	
Section 7.02
    	
Duty of Administrative   Agent
    	
20
    
	
Section 7.03
    	
Financing Statements
    	
20
    
	
Section 7.04
    	
Authority of   Administrative Agent
    	
21
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII   Subordination of Indebtedness
    	
21
    
	
 
    	
 
    	
 
    
	
Section 8.01
    	
Subordination of All Grantor   Claims
    	
21
    
	
Section 8.02
    	
Claims in Bankruptcy
    	
21
    
	
Section 8.03
    	
Payments Held in Trust
    	
22
    
	
Section 8.04
    	
Liens Subordinate
    	
22
    
	
Section 8.05
    	
Notation of Records
    	
22
    
	
 
    	
 
    	
 
    
	
ARTICLE IX   Miscellaneous
    	
22
    
	
 
    	
 
    	
 
    
	
Section 9.01
    	
Waiver
    	
22
    
	
Section 9.02
    	
Notices
    	
22
    
	
Section 9.03
    	
Payment of   Expenses, Indemnities, Etc.
    	
23
    
	
Section 9.04
    	
Amendments in Writing
    	
23
    
	
Section 9.05
    	
Successors and Assigns
    	
23
    
	
Section 9.06
    	
Invalidity
    	
23
    
	
Section 9.07
    	
Counterparts
    	
23
    
	
Section 9.08
    	
Survival
    	
23
    
	
Section 9.09
    	
Captions
    	
24
    
	
Section 9.10
    	
No Oral Agreements
    	
24
    
	
Section 9.11
    	
Governing Law;   Submission to Jurisdiction
    	
24
    
	
Section 9.12
    	
Waiver of Jury Trial
    	
24
    
	
Section 9.13
    	
Acknowledgments
    	
25
    
	
Section 9.14
    	
Additional Grantors
    	
25
    
	
Section 9.15
    	
Set-Off
    	
25
    
	
Section 9.16
    	
Releases
    	
26
    
	
Section 9.17
    	
Intercreditor   Agreements
    	
27
    
	
Section 9.18
    	
Reinstatement
    	
27
    
	
Section 9.19
    	
Acceptance
    	
27
    

 

ii

 

SCHEDULES:

 

1.                                      Notice Addresses of Grantors

2.                                      [Reserved]

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

6.                                      Locations of Inventory, Equipment and Other Assets Constituting Collateral and Books and Records Pertaining to the Collateral

7.                                      Commercial Tort Claims

8.                                      Deposit and Securities Accounts

9.                                      Intellectual Property

 

ANNEX:

 

1.                                      Form of Assumption Agreement

2.                                      Form of Intellectual Property Security Agreement

 

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This SECURITY AGREEMENT, dated as of May 22, 2015, is made by WARREN RESOURCES, INC., a Maryland (the “Borrower”), and each of the other signatories party hereto as of the date hereof other than the Administrative Agent (together with any other entity that becomes a party hereto from time to time after the date hereof to Section 9.14 below, the “Grantors”) in favor of Wilmington Trust, National Association, as administrative agent for the Secured Parties (as defined below) (in such capacity, together with its successors in such capacity, the “Administrative Agent”).

 

R E C I T A L S

 

A.            WHEREAS, Borrower is party to that certain Credit Agreement (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) dated as of even date herewith among the Borrower, the financial institutions or other entities from time to time party thereto (the “Lenders”) and the Administrative Agent.

 

B.            WHEREAS, the Borrower is a member of an affiliated group of companies that includes each Grantor;

 

C.            WHEREAS, it is a condition precedent to the obligation of each of the Initial Lenders (as defined in the Credit Agreement) to extend credit that each Grantor shall have executed and delivered this Agreement to the Administrative Agent for the ratable benefit of the Lenders.

 

D.            NOW, THEREFORE, in consideration of the premises herein and to induce the Administrative Agent and the Initial Lenders to enter into the Credit Agreement, to induce the Initial Lenders to extend credit, each Grantor hereby agrees with the Administrative Agent, for the ratable benefit of the Lenders, as follows:

 

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 Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement, and the following terms, as well as all uncapitalized terms which are defined in the UCC on the date hereof, are used herein as so defined: Accounts, 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” shall mean a Person (other than any Grantor) obligated on an Account, Chattel Paper, or General Intangible.

 

 

“Administrative Agent” shall have the meaning assigned to such term in the preamble hereto.

 

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

 

“Applicable IP Office” means the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency within or outside the United States.

 

“Borrower” shall have the meaning assigned to such term in the preamble hereto.

 

“Collateral” shall have the meaning assigned to such term in Section 2.01.

 

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.).

 

“Contract Rights” means all rights, title and interests in and to all “contracts,” as such term is defined in the UCC of any applicable jurisdiction, now owned or hereafter acquired by any Grantor, in any event, including all contracts, undertakings, or agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under which any Grantor may now or hereafter have any right, title or interest, including any agreement relating to the terms of payment or the terms of performance of any Account.

 

“Copyrights” means all rights, title and interests (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to copyrights and all mask work, database and design rights, whether or not registered or published, all registrations and recordations thereof and all applications in connection therewith.

 

“Credit Agreement” shall have the meaning assigned such term in the recitals hereto.

 

“Excluded Property” means: (a) rights of any Grantor in any general intangible to the extent such intangible by its terms or by the terms of any related agreement with a Person other than a Subsidiary or by the terms of any applicable law under which it arises (A) validly prohibits the creation of a security interest therein by such Grantor or the type otherwise created hereby, (B) validly requires the consent of any third party to the creation of a security interest of the type otherwise created hereby and said third party refuses to provide such consent, or (C) validly gives rise to any right of termination or default remedy by reason of the creation of a security interest therein of the type otherwise created hereby; (b) rights of any Grantor in any property in respect of which the terms of any related agreement with a Person other than a Subsidiary or by the terms of any applicable law (A) validly prohibits the creation of a security interest therein by such Grantor of the type otherwise created hereby, (B) validly requires the consent of any third party to the creation of a security interest therein of the type otherwise created hereby and said third party refuses to provide such consent, or (C) validly gives rise to any right of termination or default remedy by reason of the creation of a security interest therein

 

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of the type otherwise created hereby; and (c) rights of any Grantor in Equity Interests in Unrestricted Subsidiaries.(1)

 

“Excluded Swap Obligation” means, with respect to any Grantor, any guarantee of any Swap Obligations under a Secured Swap Agreement if, and only to the extent that and for so long as, all or a portion of the guarantee of such Grantor of, or the grant by such Grantor of a security interest to secure, such Swap Obligation under a Secured Swap Agreement (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Grantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act at the time the guarantee of such Grantor or the grant of such security interest becomes effective with respect to such Swap Obligation under a Secured Swap Agreement. If a Swap Obligation under a Secured Swap Agreement arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation under a Secured Swap Agreement that is attributable to swaps for which such guarantee or security interest is or becomes illegal.

 

“Grantors” shall have the meanings assigned such terms in the preamble hereto.

 

“Intellectual Property” means all rights, title and interests in or relating to intellectual property and industrial property arising under any Requirement of Law and all IP Ancillary Rights relating thereto, including all Copyrights, Patents, Trademarks and IP Licenses.

 

“Investment Property” means the collective reference to all “investment property” as such term is defined in Section 9-102(a)(49) of the UCC, including, for avoidance doubt, all certificated securities, uncertificated securities, security entitlements, securities accounts, commodity contracts or commodity accounts.

 

“IP Ancillary Rights” means, with respect to any Intellectual Property, as applicable, all foreign counterparts to, and all divisionals, reversions, continuations, continuations-in-part, reissues, reexaminations, renewals and extensions of, such Intellectual Property and all income, royalties, proceeds and Liabilities at any time due or payable or asserted under or with respect to any of the foregoing or otherwise with respect to such Intellectual Property, including all rights to sue or recover at law or in equity for any past, present or future infringement, misappropriation, dilution, violation or other impairment thereof, and, in each case, all rights to obtain any other IP Ancillary Right.

 

“IP License” means all Contractual Obligations (and all related IP Ancillary Rights), whether written or oral, granting any right, title and interest in or relating to any Intellectual Property.

 

“Lenders” shall have the meaning assigned to such term in the recitals hereto.

 

“Material Intellectual Property” means Intellectual Property that is owned by or licensed to a Grantor and material to the conduct of any Grantor’s business.

 

(1)  NTD: The definition of “Excluded Property” is consistent with the definition in the existing mortgages.

 

3

 

“Secured Parties” shall mean each Lender, the Administrative Agent, each Eligible Secured Swap Counterparty and their respective successors and assigns.

 

“Secured Swap Agreement” shall mean any Swap Agreement between the Borrower and any Eligible Secured Swap Counterparty.

 

“Security Termination” means such time as when each of the following shall have occurred: (i) the Obligations have been indefeasibly paid in full in cash, (ii) the Loans and all commitments under the Credit Agreement have been terminated and (iii) all Secured Swap Agreements have been terminated (other than Secured Swap Agreements with respect to which other arrangements satisfactory to the Eligible Secured Swap Counterparty and the Borrower have been made). For purposes of clarification, “Security Termination” shall have occurred for purposes of this Agreement if the four events provided in clauses (i)-(iii) above have occurred, and the occurrence of “Security Termination” shall not be affected by inchoate indemnity obligations under the Financing Documents that survive the termination of any such Financing Document.

 

“Swap Obligation” means, with respect to any Grantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.

 

“Trademark” means all rights, title and interests (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers and, in each case, all goodwill associated therewith, all registrations and recordations thereof and all applications in connection therewith.

 

“UCC” means the Uniform Commercial Code of the State of New York.

 

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. The rules of construction set forth in Sections 1.2 and 1.3 in the Credit Agreement shall apply to this Agreement as if specifically incorporated herein mutatis mutandis.

 

ARTICLE II
 Grant of Security Interest

 

Section 2.01          Grant of Security Interest. Each Grantor hereby pledges, assigns and transfers to the Administrative Agent, and grants to the Administrative Agent, for the ratable benefit of the Secured Parties, a security interest in all of the following property now owned or at

 

4

 

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 Obligations:

 

(1)           all Accounts, including all Receivables;

 

(2)           all cash and cash equivalents;

 

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

 

(4)           all Commercial Tort Claims set forth on Schedule 7;

 

(5)           all Contract Rights;

 

(6)           all Deposit Accounts;

 

(7)           all Documents;

 

(8)           all General Intangibles (including, without limitation, rights in and under any Swap Agreements);

 

(9)           all Goods (including, without limitation, all Inventory and all Equipment);

 

(10)         all Instruments;

 

(11)         all Insurance;

 

(12)         all Intellectual Property;

 

(13)         all Investment Property, including all Securities Accounts and Commodity Accounts;

 

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

 

(15)         all Money;

 

(16)         all Supporting Obligations;

 

(17)         all Vehicles;

 

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

 

(19)         all other personal property of any Grantor, whether tangible or intangible and wherever located;

 

5

 

(20)                          all other property of any Grantor held by the Administrative Agent or any other Secured Party, including all property of every description, in the possession or custody of or in transit to the Administrative Agent or such Secured Party for any purpose, including safekeeping, collection or pledge, for the account of such Grantor or as to which such Grantor may have any right or power; and

 

(21)                          to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security, guarantees and other Supporting Obligations given with respect to any of the foregoing.

 

Notwithstanding the foregoing, (x) this Section 2.01 does not grant a security interest in any Excluded Property and (y) such property under clause (x) shall not be included as “Collateral” for purposes of this Agreement.

 

Section 2.02                             [Reserved].

 

Section 2.03                             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 Administrative Agent 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 Administrative Agent or any such other Secured Party of any payment relating to such Account, Chattel Paper or Payment Intangible pursuant hereto, nor shall the Administrative Agent 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 III
 Acknowledgments, Waivers and Consents

 

Section 3.01                             Acknowledgments, Waivers and Consents.

 

(a)                                 Each Grantor acknowledges and agrees that the obligations undertaken by it under this Agreement may involve the guarantee and the provision of collateral security for the obligations of Persons other than such Grantor and that such Grantor’s guarantee and provision of collateral security for the Obligations are absolute, irrevocable and unconditional under any and all circumstances.  In full recognition and furtherance of the foregoing, each Grantor understands and agrees, to the fullest extent permitted under applicable law and except as may otherwise be expressly and specifically provided in the Credit Agreement or any other Financing Document, that each Grantor shall remain obligated hereunder (including, without limitation,

 

6

 

with respect to any guarantee made by such Grantor hereby and the collateral security provided by such Grantor herein) and the enforceability and effectiveness of this Agreement and the liability of such Grantor, and the rights, remedies, powers and privileges of the Administrative Agent and the other Secured Parties under this Agreement, the other Financing Documents and the Secured Swap Agreements shall not be affected, limited, reduced, discharged or terminated in any way:

 

(i)                                     notwithstanding that, without any reservation of rights against any Grantor and without notice to or further assent by any Grantor, (A) any demand for payment of any of the Obligations made by the Administrative Agent or any other Secured Party may be rescinded by the Administrative Agent at the direction of the Lead Lenders or such other Secured Party and any of the Obligations continued; (B) the Obligations, the liability of any other Person upon or for any part thereof or any collateral security or guarantee therefor or right of offset with respect 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 Administrative Agent at the direction of the Lead Lenders or any other Secured Party; (C) the Credit Agreement, the other Financing Documents, any Secured Swap Agreement and any other documents executed and delivered in connection therewith may be amended, restated, amended and restated, modified, supplemented or terminated, in whole or in part, in accordance with the terms thereof, as the Administrative Agent (or the Lead Lenders, or all Lenders, as the case may be) and the Eligible Secured Swap Counterpartys, as applicable, and the Borrower, as applicable, may deem advisable from time to time; (D) the Borrower, any other 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 Financing Document or Secured Swap Agreement, all or any part of the Obligations or any Collateral now or in the future serving as security for the Obligations, in each case pursuant to the terms and conditions thereof; (E) any collateral security, guarantee or right of offset at any time held by the Administrative Agent or any other Secured Party for the payment of the 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 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 against any Grantor of the Credit Agreement, any other Financing Document, any Secured Swap Agreement,  any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Administrative Agent 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 other Grantor or any other Person against the Administrative Agent or any other Secured Party, (C) the insolvency, bankruptcy arrangement, reorganization, adjustment, composition, liquidation, disability, dissolution or lack of power of any other Grantor or any other Person at any time liable for the payment of all or part of the Obligations or the failure of the Administrative Agent 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 any Grantor, or any changes in the shareholders of any 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 Obligations shall not be properly perfected or created, or shall prove to be

 

7

 

unenforceable or subordinate to any other Lien, it being recognized and agreed by each of the 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 Obligations; (E) any failure of the Administrative Agent or any other Secured Party to marshal assets in favor of any Grantor or any other Person, to exhaust any Collateral for all or any part of the Obligations, to pursue or exhaust any right, remedy, power or privilege it may have against any Grantor or any other Person or to take any action whatsoever to mitigate or reduce any Grantor’s liability under this Agreement, any other Financing Document, or any Secured Swap Agreement; (F) any law which provides that the obligation of a surety or guarantor must neither be larger in amount nor in other respects more burdensome than that of the principal or which reduces a surety’s or guarantor’s obligation in proportion to the principal obligation; (G) the possibility that the Obligations may at any time and from time to time exceed the aggregate liability of such Grantor under this Agreement; or (H) any other circumstance or act whatsoever, including any action or omission of the type described in this Section 3.01 (with or without notice to or knowledge of any Grantor), which constitutes, or might be construed to constitute, an equitable or legal discharge or defense of the Borrower for the Obligations, or of such Grantor under the guarantee contained in the Guaranty or with respect to the collateral security provided by such Grantor herein, or which might be available to a surety or guarantor, in bankruptcy or in any other instance.

 

(b)                                 Each Grantor hereby waives to the extent permitted by law:  (i) except as expressly provided otherwise in any Financing Document, all notices to such Grantor, or to any other Person, including but not limited to, notices of the acceptance of this Agreement, the guarantee contained in the Guaranty or the provision of collateral security provided herein, or the creation, renewal, extension, modification, accrual of any Obligations, or notice of or proof of reliance by the Administrative Agent or any other Secured Party upon the guarantee contained in the Guaranty or upon the collateral security provided herein, or of default in the payment or performance of any of the Obligations owed to the Administrative Agent or any other Secured Party and enforcement of any right or remedy with respect thereto; or notice of any other matters relating thereto; the 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 guarantee contained in the Guaranty and the collateral security provided herein and no notice of creation of the Obligations already or hereafter contracted by the Borrower need be given to any Grantor; and all dealings between the Borrower and any of the Grantors, on the one hand, and the Administrative Agent and the other Secured Parties, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in the Guaranty and on the collateral security provided herein; (ii) diligence and demand of payment, presentment, protest, dishonor and notice of dishonor; (iii) all rights of revocation with respect to the Obligations, the guarantee contained in the Guaranty and the provision of collateral security herein; and (iv) 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 Grantor, the Administrative Agent 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 Borrower, any other Grantor or any other Person or against any collateral security or guarantee for the Obligations or any right of

 

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offset with respect thereto, and any failure by the Administrative Agent or any other Secured Party to make any such demand, to pursue such other rights or remedies or to collect any payments from the Borrower, any other 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 Borrower, any Grantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any 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 Administrative Agent or any other Secured Party against any Grantor.  For the purposes hereof “demand” shall include the commencement and continuance of any legal proceedings.  Neither the Administrative Agent 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 Obligations or for the guarantee contained in the Guaranty or any property subject thereto.

 

Section 3.02                             No Subrogation, Contribution or Reimbursement. Notwithstanding any payment made by any Grantor hereunder or any set-off or application of funds of any Grantor by the Administrative Agent or any other Secured Party, no Grantor shall be entitled to be subrogated to any of the rights of the Administrative Agent or any other Secured Party against the Borrower or any other Grantor or any collateral security or guarantee or right of offset held by the Administrative Agent or any other Secured Party for the payment of the Obligations, nor shall any Grantor seek or be entitled to seek any indemnity, exoneration, participation, contribution or reimbursement from the Borrower or any other Grantor in respect of payments made by such Grantor hereunder until Security Termination, and each Grantor hereby expressly waives, releases, and agrees not to exercise any such rights of subrogation, reimbursement, indemnity and contribution until Security Termination.  Each 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 Grantor may have against the Borrower, any other Grantor or against any collateral or security or guarantee or right of offset held by the Administrative Agent or any other Secured Party shall be junior and subordinate to any rights the Administrative Agent and the other Secured Parties may have against the Borrower and such Grantor and to all right, title and interest the Administrative Agent and the other Secured Parties may have in any collateral or security or guarantee or right of offset.  Upon the occurrence and during the continuance of an Event of Default, the Administrative Agent, for the benefit of the Secured Parties, may use, sell or dispose of any item of Collateral or security as it sees fit, subject to Section 6.04, without regard to any subrogation rights any Grantor may have, and upon any disposition or sale, any rights of subrogation any Grantor may have shall terminate.

 

ARTICLE IV
 Representations and Warranties

 

To induce the Lenders to enter into the Credit Agreement and to extend credit, each Grantor hereby represents and warrants to the Administrative Agent and each Secured Party that:

 

Section 4.01                             Representations in Credit Agreement. In the case of each Grantor, the representations and warranties set forth in Article 3 of the Credit Agreement as they relate to such Grantor or to the Financing Documents to which such Grantor is a party are true and correct in all material respects (or, to the extent such representations and warranties specifically relate to

 

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an earlier date, on and as of such earlier date); provided that each reference in each such representation and warranty to the Borrower’s knowledge shall, for the purposes of this Section 4.01, be deemed to be a reference to such Grantor’s knowledge.

 

Section 4.02                             Perfected Liens. The security interests granted pursuant to this Agreement, upon filing of a UCC-1 financing statement in the appropriate filing office listed on Schedule 3, will constitute valid perfected first priority security interests (subject to Permitted Encumbrances) in all of the Collateral which may be perfected by filing such financing statement in favor of the Administrative Agent, 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.

 

Section 4.03                             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 4.04                             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 office of such Grantor over the last five years (if different from that which is set forth in Section 4.03 above). As of the date hereof, Schedule 6 correctly sets forth all of the locations where the Grantors hold inventory, equipment and other assets constituting Collateral (other than inventory or equipment in transit or out for repair) with a value in excess of $1,000,000 in the aggregate at any location and the locations of the books and records concerning the Collateral.

 

Section 4.05                             [Reserved].

 

Section 4.06                             Instruments and Chattel Paper. Such Grantor has delivered to the Administrative Agent all Collateral constituting Instruments and Chattel Paper having the outstanding or stated amount of greater than $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 other than the Administrative Agent, and the grant of a security interest in such Collateral in favor of the Administrative Agent hereunder does not violate the rights of any other Person as a secured party.

 

Section 4.07                             Accounts. The amount represented by such Grantor to the Administrative Agent 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 materially 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 the address set forth on Schedule 6.

 

Section 4.08                             Governmental Obligors. None of the Account Debtors on such Grantor’s Accounts, Chattel Paper or Payment Intangibles is a Governmental Authority.

 

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Section 4.09                             Commercial Tort Claims. On the Closing Date, except to the extent listed on Schedule 7, no Grantor has knowledge of rights in any Commercial Tort Claim with potential value in excess of $1,500,000.

 

Section 4.10                             Intellectual Property.

 

(a)                                 Schedule 9 sets forth as of the Closing Date a true and complete list of all Material Intellectual Property which is registered with the U.S. Patent and Trademark Office or the U.S. Copyright Office or is the subject of an application for registration, separately identifying that owned and licensed to such Grantor and including (1) the owner, (2) the title, (3) the jurisdiction in which such item has been registered or otherwise arises or in which an application for registration has been filed, (4) as applicable, the registration or application number and registration or application date and (5) any IP Licenses or other rights (including franchises) granted by the Grantor with respect thereto.

 

(b)                                 On the Closing Date, all Material Intellectual Property owned by such Grantor is valid, in full force and effect, subsisting, unexpired and enforceable, and no Material Intellectual Property has been abandoned. No breach or default of any material IP License shall be caused by any of the following, and none of the following shall limit or impair the ownership, use, validity or enforceability of, or any rights of such Grantor in, any Material Intellectual Property:

 

(i)                                     the consummation of the transactions contemplated by any Financing Document or (ii) any holding, decision, judgment or order rendered by any Governmental Authority.  There are no pending (or, to the knowledge of such Grantor, threatened) actions, investigations, suits, proceedings, audits, claims, demands, orders or disputes challenging the ownership, use, validity, enforceability of, or such Grantor’s rights in, any Material Intellectual Property of such Grantor. To such Grantor’s knowledge, no Person has been or is infringing, misappropriating, diluting, violating or otherwise impairing any Material Intellectual Property of such Grantor.  Such Grantor, and to such Grantor’s knowledge each other party thereto, is not in material breach or default of any material IP License.

 

ARTICLE V
 Covenants

 

Each Grantor covenants and agrees that, from and after the date of this Agreement until Security Termination:

 

Section 5.01                             Covenants in Credit Agreement. In the case of each Grantor, such Grantor shall take, or shall refrain from taking, as the case may be, each action that is necessary to be taken or not taken, as the case may be, so that no Default or Event of Default is caused by the failure to take such action or to refrain from taking such action by such Grantor or any of its Subsidiaries.

 

Section 5.02                             Maintenance of Perfected Security Interest; Further Documentation.

 

(a)                                 Such Grantor shall maintain the security interest created by this Agreement as a perfected security interest (subject only to Permitted Encumbrances) and shall defend such security interest against the claims and demands of all Persons whomsoever.

 

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(b)                                 At any time and from time to time, 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 as the Administrative Agent or any Secured Party 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 Administrative Agent 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.

 

(c)                                  Without limiting the obligations of the Grantors under Section 5.02(b):  (i) upon the reasonable request of the Administrative Agent at the direction of the Lead Lenders 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 Administrative Agent at the direction of the Lead Lenders or any Lender) reasonably requested by the Administrative Agent to cause the Administrative Agent to (A) have “control” (within the meaning of Sections 9-104, 9-105, 9-106, and 9-107 of the UCC) over any Collateral constituting Deposit Accounts, Electronic Chattel Paper, Investment Property, or Letter-of-Credit Rights, including, without limitation, executing and delivering any agreements, in form and substance satisfactory to the Lead Lenders, with securities intermediaries, Borrowers or other Persons in order to establish “control”, and each Grantor shall promptly notify the Administrative Agent 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 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 Administrative Agent, such Grantor shall obtain written acknowledgment that such Person holds possession for the Administrative Agent’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 Administrative Agent 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 Administrative Agent or any other Secured Party) necessary or reasonably requested by the Administrative Agent to cause the Administrative Agent to have a perfected security interest in such Collateral under applicable law.

 

(d)                                 This Section 5.02 and the obligations imposed on each Grantor by this Section 5.02 shall be interpreted as broadly as possible in favor of the Administrative Agent and the other Secured Parties in order to effectuate the purpose and intent of this Agreement.

 

Section 5.03                             Maintenance of Records.  Such Grantor will keep and maintain, at its own cost and expense records of the Collateral in accordance with sound and prudent business practices. For the Administrative Agent’s and the other Secured Parties’ further security, the Administrative Agent, 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 allow inspection of any such books and records by the Administrative Agent, any Lender or by their representatives during normal business hours at the reasonable request of the

 

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Administrative Agent or any Lender and shall provide such clerical and other assistance as may be reasonably requested with regard thereto.

 

Section 5.04                             Further Identification of Collateral.  Such Grantor will furnish to the Administrative Agent and the Secured Parties 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 Administrative Agent may reasonably request, all in reasonable detail.

 

Section 5.05                             [Reserved].

 

Section 5.06                             Notices. Each Grantor will advise the Administrative Agent and the Lenders promptly, in reasonable detail, of:

 

(a)                                 any Lien (other than security interests created hereby or Permitted Encumbrances) on any of the Collateral which could adversely affect the ability of the Administrative Agent to exercise any of its remedies; or

 

(b)                                 the occurrence of any other event which could reasonably be expected to have a Material Adverse Effect on the aggregate value of the Collateral or on the security interests created hereby.

 

Section 5.07                             Changes in Name; Location, etc.  Except upon ten (10) days’ prior written notice to the Administrative Agent and delivery to the Administrative Agent of all additional financing statements and other documents reasonably requested in writing by the Administrative Agent or the Required Lenders to maintain the validity, perfection and priority of the security interests provided for herein, such Grantor will not:

 

(a)                                 change its jurisdiction of organization or the location of its chief executive office; or.

 

(b)                                 change its name, identity or corporate structure to such an extent that would render any financing statement filed in connection with this Agreement “seriously misleading” (as such term in used in Section 9-506(b) of the UCC).

 

Section 5.08                             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 in the outstanding or stated amount of greater than $1,000,000, such Instrument or Tangible Chattel Paper shall be promptly, but in any event within twenty (20) days, delivered to the Administrative Agent, duly endorsed in a manner satisfactory to the Lead Lenders, to be held as Collateral pursuant to this Agreement.

 

Section 5.09                             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 Administrative Agent and the other Secured Parties in a writing signed by such Grantor containing a brief description thereof, and granting to the Administrative Agent in such writing (for the benefit of the Secured Parties) a security interest therein and in the Proceeds

 

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thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to the Lead Lenders.  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 $1,500,000, and (ii) either (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 Administrative Agent or the Lead Lenders, the relevant Grantor shall, within thirty (30) days after such request is made, transmit to the Administrative Agent and the other Secured Parties a writing signed by such Grantor containing a brief description of such Commercial Tort Claim and granting to the Administrative Agent 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 Lead Lenders.

 

Section 5.10                             Intellectual Property.

 

(a)                                 Within thirty (30) days after any change to Schedule 9 for such Grantor, such Grantor shall provide Administrative Agent and the Lead Lenders notification thereof and the short-form intellectual property agreements and assignments as described in this Section 5.10 and any other documents that Administrative Agent reasonably requests with respect thereto.

 

(b)                                 Such Grantor shall (and shall cause all its licensees to) (i) (1) continue to use each Trademark included in the Material Intellectual Property in order to maintain such Trademark in full force and effect with respect to each class of goods for which such Trademark is currently used, free from any claim of abandonment for non-use, (2) maintain at least the same standards of quality of products and services offered under such Trademark as are currently maintained, (3) use such Trademark with the appropriate notice of registration and all other notices and legends required by applicable Requirements of Law and (4) not adopt or use any other Trademark that is confusingly similar or a colorable imitation of such Trademark unless the Administrative Agent shall obtain a perfected security interest in such other Trademark pursuant to this Agreement and (ii) not do any act or omit to do any act whereby (w) such Trademark (or any goodwill associated therewith) may become destroyed, invalidated, impaired or harmed in any way, (x) any Patent included in the Material Intellectual Property may become forfeited, misused, unenforceable, abandoned or dedicated to the public, or (y) any portion of the Copyrights included in the Material Intellectual Property may become invalidated, otherwise impaired or fall into the public domain.

 

(c)                                  Such Grantor shall notify the Administrative Agent and the Lead Lenders immediately if it knows, or has reason to know, that any application or registration relating to any Material Intellectual Property may become forfeited, misused, unenforceable, abandoned or dedicated to the public, or of any adverse determination or development regarding the validity or

 

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enforceability or such Grantor’s ownership of, interest in, right to use, register, own or maintain any Material Intellectual Property (including the institution of, or any such determination or development in, any proceeding relating to the foregoing in any Applicable IP Office).  Such Grantor shall take all actions that are necessary or reasonably requested by Administrative Agent to maintain and pursue each application (and to obtain the relevant registration or recordation) and to maintain each registration and recordation included in the Material Intellectual Property.

 

(d)                                 Such Grantor shall not knowingly do any act or omit to do any act to infringe, misappropriate, dilute, violate or otherwise impair the Intellectual Property of any other Person. In the event that any Material Intellectual Property of such Grantor is or has been infringed, misappropriated, violated, diluted or otherwise impaired by a third party, such Grantor shall take such action as it reasonably deems appropriate under the circumstances in response thereto, including promptly bringing suit and recovering all damages therefor.

 

(e)                                  Such Grantor shall execute and deliver to Administrative Agent in form and substance reasonably acceptable to Administrative Agent and suitable for filing in the Applicable IP Office the short-form intellectual property security agreements in the form attached hereto as Annex 2 for all Copyrights, Trademarks, Patents and IP Licenses of such Grantor.

 

ARTICLE VI
 Remedial Provisions

 

Section 6.01                             [Reserved].

 

Section 6.02                             Collections on Accounts, Etc.  The Administrative Agent hereby authorizes each Grantor to collect upon the Accounts, Instruments, Chattel Paper and Payment Intangibles and the Administrative Agent may (in consultation with the Lead Lenders) 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 Administrative Agent (at the direction of the Lead Lenders), at any time after the occurrence and during the continuance of an Event of Default, each Grantor shall notify the Account Debtors that the applicable Accounts, Chattel Paper and Payment Intangibles have been assigned to the Administrative Agent for the ratable benefit of the Secured Parties and that payments in respect thereof shall be made directly to the Administrative Agent. Upon the occurrence and during the continuance of an Event of Default, the Administrative Agent may in its own name or in the name of others communicate with the Account Debtors to verify with them to its satisfaction (as determined in consultation with the Lead Lenders) the existence, amount and terms of any Accounts, Chattel Paper or Payment Intangibles.

 

Section 6.03                             Proceeds. If required by the Administrative Agent at any time after the occurrence and during the continuance of an Event of Default, 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 (2) Business Days) deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the Administrative Agent if required, in a special collateral account maintained by the Administrative Agent, subject to withdrawal by the Administrative Agent at the direction of the Lead Lenders for the ratable benefit of the Secured Parties only, as hereinafter provided, and,

 

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until so turned over, shall be held by such Grantor in trust for the Administrative Agent 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 Administrative Agent (or by any Grantor in trust for the Administrative Agent for the ratable benefit of the Secured Parties) shall continue to be collateral security for all of the 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 Administrative Agent, or, if an Event of Default shall have occurred and be continuing, at any time at the Lead Lenders’ election, the Administrative Agent shall apply all or any part of the funds on deposit in said special collateral account on account of the Obligations in accordance with Section 2.10 of the Credit Agreement.

 

Section 6.04                             Remedies.

 

(a)                                 If an Event of Default t shall occur and be continuing, the Administrative Agent at the direction of the Lead Lenders, 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 Financing Documents, any Secured Swap Agreement, and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights, remedies, powers and privileges of a secured party under applicable law or otherwise available at law or equity. Without limiting the generality of the foregoing, the Administrative Agent at the direction of the Lead Lenders, 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 Administrative Agent 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 Administrative Agent 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 Administrative Agent’s request (acting at the direction of the Lead Lenders), to assemble the Collateral and make it available to the Administrative Agent at places which the Lead Lenders shall reasonably select, whether at such Grantor’s premises or elsewhere.  Any such sale or transfer by the Administrative Agent 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 Administrative Agent at the direction of the Lead Lenders shall have the right to deliver, assign and transfer to the purchaser or transferee thereof the Collateral so sold or transferred.  The Administrative Agent shall apply

 

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the net proceeds of any action taken by it pursuant to this Section 6.04, 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 Administrative Agent and the other Secured Parties hereunder, including, without limitation, reasonable attorneys’ fees and disbursements, in accordance with the applicable Intercreditor Agreement, or if no Intercreditor Agreement is then in effect, then in accordance with Section 2.10 of the Credit Agreement, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-615 of the UCC, will the Administrative Agent 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 Administrative Agent or any other Secured Party arising out of the exercise by them of any rights hereunder, except to the extent caused by the gross negligence or willful misconduct of the Administrative Agent or such Secured Parties or their respective agents (as determined by a final non-appealable judgment of a court of competent jurisdiction).  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 ten (10) days before such sale or other disposition.

 

(b)                                 In the event that the Administrative Agent at the direction of the Lead Lenders elects not to sell the Collateral, the Administrative Agent 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 Obligations.  Each and every method of disposition of the Collateral described in this Agreement shall constitute disposition in a commercially reasonable manner.  The Administrative Agent at the direction of the Lead Lenders may appoint any Person as agent to perform any act or acts necessary or incident to any sale or transfer of the Collateral.

 

Section 6.05                             [Reserved].

 

Section 6.06                             Deficiency. 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 Obligations and the fees and disbursements of any attorneys employed by the Administrative Agent or any other Secured Party to collect such deficiency.

 

Section 6.07                             Non-Judicial Enforcement. The Administrative Agent at the direction of the Lead Lenders 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 Administrative Agent to enforce its rights by judicial process. The proceeds of any sale of the Collateral or any part thereof and all other monies received by any Secured Party in any proceedings for the enforcement hereof or otherwise, whose application has not elsewhere herein been specifically provided for, shall be applied in the following order: first, to all fees, costs, indemnities, liabilities, obligations and expenses incurred by or owing to Administrative Agent with respect to this Agreement, the other Financing Documents or the Collateral, second, to all fees, costs, indemnities and expenses incurred by or owing to any Lender with respect to this Agreement, the other Financing Documents or the Collateral, third, to accrued and unpaid interest on the Obligations, fourth, to the principal

 

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amount of the Obligations outstanding, and fifth, to any other indebtedness or obligations of Borrower owing to Administrative Agent or any Lender under the Financing Documents.

 

Section 6.08                             IP Licenses.  For the purpose of enabling the Administrative Agent to exercise rights and remedies under this Article VI (including in order to take possession of, collect, receive, assemble, process, appropriate, remove, realize upon, sell, assign, convey, transfer or grant options to purchase any Collateral) at such time as Administrative Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to Administrative Agent, for the benefit of the Secured Parties, (i) an irrevocable, nonexclusive, worldwide license (exercisable without payment of royalty or other compensation to such Grantor), including in such license the right to sublicense, use and practice any Intellectual Property now owned or hereafter acquired by such Grantor and (ii) an irrevocable license (without payment of rent or other compensation to such Grantor) to use, operate and occupy all real Property owned, operated, leased, subleased or otherwise occupied by such Grantor.

 

ARTICLE VII
 The Administrative Agent

 

Section 7.01                             Administrative Agent’s Appointment as Attorney-in-Fact, Etc.

 

(a)                                 Each Grantor hereby irrevocably constitutes and appoints the Administrative Agent 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 hereby gives the Administrative Agent 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:

 

(i)                                     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 therefor and the costs thereof;

 

(ii)                                  execute, in connection with any sale provided for in Section 6.04 or Section 6.05, 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 Administrative Agent or as the Administrative Agent at the direction of the Lead Lenders 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 Administrative Agent at the direction of the Lead Lenders for the purpose of collecting any all such moneys due under any Account, Instrument or  General

 

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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 Administrative Agent at the direction of the Lead Lenders may deem appropriate; (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 Administrative Agent were the absolute owner thereof for all purposes, and do, at the Administrative Agent’s option, at the direction of the Lead Lenders, and such Grantor’s expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the Administrative Agent’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, (J) in the case of any Intellectual Property owned by or licensed to such Grantor, execute, deliver and have recorded any document that Administrative Agent may request to evidence, effect, publicize or record Administrative Agent’s security interest in such Intellectual Property and the goodwill and general intangibles of such Grantor relating thereto or represented thereby and (K) assign any Intellectual Property owned by such Grantor or any IP Licenses of such Grantor throughout the world on such terms and conditions and in such a manner as Administrative Agent shall determine (in consultation with the Lead Lenders), including the execution and filing of any document necessary to effectuate and record such assignment.

 

Anything in this Section 7.01(a) to the contrary notwithstanding, the Administrative Agent agrees that it will not exercise any rights under the power of attorney provided for in this Section 7.01(a) unless an Event of Default shall have occurred and be continuing.

 

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

 

(c)                                  The reasonable expenses of the Administrative Agent incurred in connection with actions undertaken as provided in this Section 7.01, together with interest thereon at the Default Rate, but in no event to exceed the Highest Lawful Rate, from the date of payment by the Administrative Agent to the date reimbursed by the relevant Grantor, shall be payable by such Grantor to the Administrative Agent on demand.

 

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(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 7.02                             Duty of Administrative Agent. The Administrative Agent’s sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the UCC or otherwise, shall be to deal with it in the same manner as the Administrative Agent 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 Administrative Agent, 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 Administrative Agent and the other Secured Parties hereunder are solely to protect the Administrative Agent’s and the other Secured Parties’ interests in the Collateral and shall not impose any duty upon the Administrative Agent or any other Secured Party to exercise any such powers.  The Administrative Agent 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 (as determined by a final non-appealable judgment of a court of competent jurisdiction).  To the fullest extent permitted by applicable law, the Administrative Agent and the Secured Parties shall be under no duty whatsoever to make or give any presentment, notice of dishonor, protest, demand for performance, notice of non­performance, notice of intent to accelerate, notice of acceleration, or other notice or demand in connection with any Collateral or the 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 Administrative Agent or any other Secured Party to proceed against any Grantor or other Person, exhaust any Collateral or enforce any other remedy which the Administrative Agent or any other Secured Party now has or may hereafter have against each Grantor, any Grantor or other Person.

 

Section 7.03                             Financing Statements. Pursuant to the UCC and any other applicable law, each Grantor authorizes the Administrative Agent, 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 Lead Lenders reasonably determine necessary or appropriate to perfect the security interests of the Administrative Agent under this Agreement. Additionally, each Grantor authorizes the Administrative Agent, 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

 

20

 

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 7.04                             Authority of Administrative Agent.  Each Grantor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent 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 Administrative Agent and the other Secured Parties, be governed by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Grantors, the Administrative Agent 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 VIII
 Subordination of Indebtedness

 

Section 8.01                             Subordination of All Grantor Claims. As used herein, the term “Grantor Claims” shall mean all debts and obligations of 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 8.02                             Claims in Bankruptcy.  In the event of receivership, bankruptcy, reorganization, arrangement, debtor’s relief or other insolvency proceedings involving any Grantor, (a) the Administrative Agent 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 and (b) each Grantor hereby assigns such dividends and payments to the Administrative Agent for the benefit of the Secured Parties for application against the Obligations as provided under the terms of the applicable Intercreditor Agreement, and if no Intercreditor Agreement is then in effect, then as provided in Section 2.10 of the Credit Agreement.  Should the Administrative Agent or any Secured Party receive, for application upon the 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 Security Termination, the intended recipient shall become subrogated to the rights of the Administrative Agent and the other Secured Parties to the extent that such payments to the Administrative Agent and the other Secured Parties on the Grantor Claims have contributed toward the liquidation of the Obligations, and such subrogation shall be with respect to that proportion of the Obligations which would have been unpaid if the Administrative Agent and the other Secured Parties had not received dividends or payments upon the Grantor Claims.

 

21

 

Section 8.03                             Payments Held in Trust.  In the event that notwithstanding Section 8.01 and Section 8.02, any Grantor should receive any funds, payments, claims or distributions that are prohibited by such Sections, then it agrees: (a) to hold in trust for the Administrative Agent 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 Administrative Agent, for the benefit of the Secured Parties; and each Grantor covenants promptly to pay the same to the Administrative Agent.

 

Section 8.04                             Liens Subordinate. Each Grantor agrees that, until Security Termination, any Liens securing payment of the Grantor Claims shall be and remain inferior and subordinate to any Liens securing payment of the Obligations, regardless of whether such encumbrances in favor of such Grantor, the Administrative Agent or any other Secured Party presently exist or are hereafter created or attach.  Without the prior written consent of the Administrative Agent, no Grantor, during the period prior to Security Termination, 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 8.05                             Notation of Records. Upon the reasonable request of the Administrative Agent, 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 IX
 Miscellaneous

 

Section 9.01                             Waiver. No failure on the part of the Administrative Agent 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 Financing Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under any of the Financing 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 Administrative Agent or any Secured Party of any one or more of the rights, powers and remedies herein shall not be construed as a waiver of any other rights, powers and remedies, including, without limitation, any rights of set-off.

 

Section 9.02                             Notices. All notices and other communications provided for herein shall be given in the manner and subject to the terms of Section 11.3 of the Credit Agreement; provided that any such notice, request or demand to or upon any Grantor shall be addressed to such Grantor at its notice address set forth on Schedule 1.

 

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Section 9.03                             Payment of Expenses, Indemnities, Etc.

 

(a)                                 Each Grantor agrees that the Administrative Agent and each other Secured Party shall be entitled to reimbursement of its expenses incurred hereunder and indemnification as provided in Article 9 of the Credit Agreement.

 

(b)                                 Any such amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Financing Documents.  The provisions of this Section 9.03 shall remain operative and in full force and effect regardless of of the termination of this Agreement or any other Financing Document, the consummation of the transactions contemplated hereby, the repayment of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Financing Document, or any investigation made by or on behalf of the Administrative Agent or any other Secured Party.

 

Section 9.04                             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 Credit Agreement.

 

Section 9.05                             Successors and Assigns. The provisions of this Agreement shall be binding upon each Grantor and its successors and assigns and shall inure to the benefit of the Administrative Agent and the other Secured Parties and their respective successors and assigns; provided that such transfers and assignments are permitted by and have been made pursuant to the Credit Agreement.

 

Section 9.06                             Invalidity.  In the event that any one or more of the provisions contained in this Agreement or in any of the Financing 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 Financing Document.

 

Section 9.07                             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 9.08                             Survival. The obligations of the parties under Section 9.03 shall survive Security Termination.  To the extent that any payments on the 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 Obligations so satisfied shall be revived and continue as if such payment or proceeds had not been received and the Administrative Agent’s and the other Secured Parties’ Liens, security interests, rights, powers and remedies under this Agreement and each Collateral Document shall continue in full force and effect. In such event, each Collateral Document shall be automatically reinstated and each Grantor shall take such action as may be reasonably requested by the Administrative Agent to effect such reinstatement.

 

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Section 9.09                             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 9.10                             No Oral Agreements. This Agreement, the Credit Agreement, the other Financing Documents and the Secured Swap Agreements 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.  This Agreement, the Credit Agreement, the other Financing Documents and the Secured Swap Agreements 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 9.11                             Governing Law; Submission to Jurisdiction.EXCEPT AS OTHERWISE SET FORTH IN THE MORTGAGES, THIS AGREEMENT, EACH NOTE AND EACH OTHER FINANCING DOCUMENT, AND ALL MATTERS RELATING HERETO OR THERETO OR ARISING THEREFROM (WHETHER SOUNDING IN CONTRACT LAW, TORT LAW OR OTHERWISE), SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE BOROUGH OF MANHATTAN, CITY OF NEW YORK, STATE OF NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO ADMINISTRATIVE AGENT’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS.  BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS.  BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

Section 9.12                             Waiver of Jury Trial. EACH OF BORROWER, ADMINISTRATIVE AGENT AND LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH OF BORROWER, ADMINISTRATIVE AGENT AND EACH LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS.  EACH OF BORROWER, ADMINISTRATIVE AGENT AND EACH LENDER WARRANTS AND REPRESENTS THAT EACH HAS HAD THE OPPORTUNITY OF

 

24

 

REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

Section 9.13                             Acknowledgments.  Each Grantor hereby acknowledges that:

 

(a)                                 it has been advised by counsel in the negotiation, execution and delivery of this Agreement;

 

(b)                                 neither the Administrative Agent nor any other Secured Party has any fiduciary relationship with or duty to any Grantor arising out of or in connection with this Agreement, the Credit Agreement, any of the other Financing Documents, or any Secured Swap Agreement and the relationship between the Grantors, on the one hand, and the Administrative Agent 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, by the Credit Agreement, any Secured Swap Agreement or any other Financing Document or by or otherwise exists by virtue of the transactions contemplated hereby among the Secured Parties or among the Grantors and the Lenders.

 

(d)                                 Each party hereto agrees and covenants that it will not contest the validity or enforceability of any exculpatory provision of this Agreement and the other Collateral 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 Borrower, any other Grantor, the Administrative Agent or the other 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 9.14                             Additional Grantors. Each Subsidiary of the Borrower that is required to become a party to this Agreement pursuant to the Credit Agreement 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.

 

Section 9.15                             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 Administrative Agent), at its option, to offset (i) balances held by it or by any of its Affiliates for account of any Grantor or any Subsidiary at any of its offices, in U.S. dollars or in any other currency, and (ii) amounts due and payable to such Secured Party under any Secured Swap Agreement, against any principal of or interest on any of such Secured Party’s Loans, or any other amount due and

 

25

 

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 Borrower, the Administrative Agent and Lead Lenders thereof, provided that such Secured Party’s failure to give such notice shall not affect the validity thereof.

 

Section 9.16                             Releases.

 

(a)                                 Releases Upon Payment in Full. The grant of a security interest hereunder and all of rights, powers and remedies in connection herewith shall, to the extent permitted by law, remain in full force and effect until Security Termination or in connection with a transaction described in clause (b) below.  Upon the occurrence of Security Termination or a transaction described in clause (b) below, the Administrative Agent, at the written request and expense of the Borrower, will promptly release, reassign and transfer the Collateral to the Grantors and declare this Agreement to be of no further force or effect subject to the first sentence of Section 9.08 of this Agreement.

 

(b)                                 Further Assurances. Pursuant to Section 10.9 of the Credit Agreement, the Administrative Agent shall (i) release any Lien granted to or held by the Administrative Agent under any Security Document constituting property sold or disposed of as part of or in connection with any disposition permitted under any Financing Document (it being understood and agreed that Administrative Agent may conclusively rely without further inquiry on a certificate of a Responsible Officer as to the sale or other disposition of property being made in full compliance with the provisions of the Financing Documents) and (ii) release or subordinate any Lien granted to or held by the Administrative Agent under any Security Document constituting property described in Section 5.2(d) of the Credit Agreement (it being understood and agreed that Administrative Agent may conclusively rely without further inquiry on a certificate of a Responsible Officer as to the identification of any property described in Section 5.2(d)), in each case, unless such release is prohibited by any Intercreditor Agreement.  At the request and sole expense of the Borrower, 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 Credit Agreement; provided that the Borrower shall have delivered to the Administrative Agent, at least ten (10) 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 Borrower stating that such transaction is in compliance with the Credit Agreement, the Secured Swap Agreements and the other Financing Documents, in each case, unless such release is prohibited by any Intercreditor Agreement.

 

(c)                                  Retention in Satisfaction. Except as may be expressly applicable pursuant to Section 9-620 of the UCC, no action taken or omission to act by the Administrative Agent 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 Obligations or otherwise to be in full satisfaction of the Obligations, and the Obligations shall remain in full force and effect, until the Administrative Agent and the other Secured Parties shall have applied payments (including, without limitation,

 

26

 

collections from Collateral) towards the Obligations in the full amount then outstanding or until such subsequent time as is provided in Section 9.16(a).

 

Section 9.17                             Intercreditor Agreements. Notwithstanding anything herein to the contrary, this Agreement and the exercise of any right or remedy hereunder are subject to the provisions of any applicable Intercreditor Agreements, and further, to the extent any provision herein contained shall be inconsistent with any provision contained in any Intercreditor Agreement, the provisions of such Intercreditor Agreement shall prevail.

 

Section 9.18                             Reinstatement. The obligations of each Grantor under this Agreement (including, without limitation, with respect to the guarantee contained in the Guaranty and 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 Obligations is rescinded or must otherwise be restored or returned by the Administrative Agent or any other Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower 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 Borrower or any Grantor or any substantial part of its property, or otherwise, all as though such payments had not been made.

 

Section 9.19                             Acceptance.  Each Grantor hereby expressly waives notice of acceptance of this Agreement, acceptance on the part of the Administrative Agent and the other Secured Parties being conclusively presumed by their request for this Agreement and delivery of the same to the Administrative Agent.

 

[Signatures begin next page]

 

27

 

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

 

	
GRANTORS:
    	
Warren Resources, Inc.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 /s/ Stewart P. Skelly 
    
	
 
    	
Name: 
    	
Stewart P. Skelly 
    
	
 
    	
Title: 
    	
Vice President and   Chief Financial 

Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Warren E&P, Inc. 

Warren Marcellus LLC 

Warren Resources of   California, Inc.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Stewart P. Skelly 
    
	
 
    	
Name:
    	
 Stewart P. Skelly 
    
	
 
    	
Title:
    	
 Vice President and Treasurer
    

 

Signature Page to
 Security Agreement

 

 

	
ADMINISTRATIVE   AGENT:
    	
Wilmington Trust, National   Association
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 /s/ Joshua G. James 
    
	
 
    	
Name:
    	
Joshua G. James 
    
	
 
    	
Title:
    	
Vice President
    

 

Signature Page to
 Security Agreement

 

 

Schedule 1

 

NOTICE ADDRESSES OF GRANTORS

 

Warren Resources, Inc.
 1114 Ave of the Americas, 34th Floor
 New York, NY 10036

 

Warren E&P, Inc.
  100 Oceangate, Suite 950
 Long Beach, CA 90802

 

Warren Marcellus LLC
  1331 17th Street, Suite 720
 Denver, CO 80202

 

Warren Resources of California, Inc.
  100 Oceangate, Suite 950
 Long Beach, CA 90802

 

 

Schedule 2

 

[RESERVED]

 

 

Schedule 3

 

FILINGS AND OTHER ACTIONS
 REQUIRED TO PERFECT SECURITY INTERESTS

 

1.                                      Filing of UCC-1 Financing Statements with respect to the Collateral with the Secretary of State of the state set forth below opposite each Grantor’s name:

 

	
Owner/Pledgor
    	
 
    	
State(s)
    
	
Warren Resources, Inc.
    	
 
    	
Maryland
    
	
Warren E&P, Inc.
    	
 
    	
New Mexico
    
	
Warren Marcellus LLC
    	
 
    	
Delaware
    
	
Warren Resources of California, Inc.
    	
 
    	
California
    

 

 

Schedule 4

 

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

 

Warren Resources, Inc.

 

Jurisdiction of Organization: Maryland
 Organizational Identification Number: D10015659 (MD)
 EIN: 11-3024080
 Chief Executive Office: 1114 Ave of the Americas, 34th Floor, New York, NY 10036

 

Warren E&P, Inc.

 

Jurisdiction of Organization: New Mexico
 Organizational Identification Number: 762948(NM)
 EIN: 85-0224052
 Chief Executive Office: 100 Oceangate, Suite 950, Long Beach, CA 90802

 

Warren Marcellus LLC

 

Jurisdiction of Organization: Delaware
 Organizational Identification Number: 5557132 (DE)
 EIN: 47-1370150
 Chief Executive Office: 1331 17th Street, Suite 720, Denver, CO 80202

 

Warren Resources of California, Inc.

 

Jurisdiction of Organization: California
 Organizational Identification Number: 2181533(CA)
 EIN: 33-0980072
 Chief Executive Office: 100 Oceangate, Suite 950, Long Beach, CA 90802

 

 

Schedule 5

 

PRIOR NAMES AND PRIOR CHIEF EXECUTIVE OFFICE

 

1.                                      Warren Resources, Inc.

 

a.                                      Prior Names: N/A

b.                                      Prior Chief Executive Offices:

(a)                                 105 W. 3rd St., Suite 302, Roswell, NM 88201

(b)                                 800 Werner Court, Suite 295, Casper WY 82601

(c)                                  322 4th St., Rawlins, WY 82301     Delivery Address: PO Box 1619, Rawlins, WY 82301

 

2.                                      Warren E&P, Inc.

 

a.                                      Prior Names: Petroleum Development Corporation (name change in 2003)

b.                                      Prior Chief Executive Offices:
 same as above

 

3.                                      Warren Marcellus LLC

 

a.                                      Prior Names: N/A

b.                                      Prior Chief Executive Offices:
 same as above

 

4.                                      Warren Resources of California, Inc.

 

a.                                      Prior Names: N/A

b.                                      Prior Chief Executive Offices:
 same as above

 

 

Schedule 6

 

LOCATIONS OF INVENTORY, EQUIPMENT AND OTHER ASSETS CONSTITUTING
 COLLATERAL AND BOOKS AND RECORDS PERTAINING TO THE COLLATERAL

 

(excluding Oil and Gas Properties as defined in the Credit Agreement)

 

	
Company
    	
 
    	
Address
    	
 
    	
Landlord
    	
 
    	
Lease Term
    
	
Warren Resources, Inc.
    	
 
    	
1114 AVE OF THE AMERICAS, NEW YORK, NY 10036
    	
 
    	
1114 6TH AVENUE CO. LLC
    	
 
    	
May 31, 2023
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Warren E&P, Inc.
    	
 
    	
100 OCEANGATE, SUITE 950, LONG BEACH, CA 90802
    
   And
    
   39 WASHINGTON PARK ROAD, TUNKHANNOCK, PA 18657
    	
 
    	
SEE BELOW
    
    
    
   And
    
   ALDERICE CO.
    	
 
    	
See below
    
    
    
   And
    
   September 1, 2017 (yard lease)
    
   September 1, 2019 (office lease)
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Warren Marcellus LLC
    	
 
    	
1331 17TH STREET, SUITE 720, DENVER, CO 80202
    	
 
    	
ZELLER-GBB, L.L.C.
    	
 
    	
78 months; on or about June 1, 2021
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Warren Resources of California, Inc.
    	
 
    	
100 OCEANGATE, SUITE 950, LONG BEACH, CA 90802
    	
 
    	
LEGACY PARTNERS I LONG BEACH OCEANGATE, LLC
    	
 
    	
September 30, 2020
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

 

Schedule 7

 

COMMERCIAL TORT CLAIMS

 

None having a potential value in excess of $1,500,000.

 

 

Schedule 8

 

DEPOSIT AND SECURITIES ACCOUNTS

 

	
Company
    	
 
    	
Name and Address
    	
 
    	
Type of Account
    	
 
    	
Account Number
    
	
Warren Resources, Inc.
    	
 
    	
JPMorgan Chase Bank
   395 North Service Road
   Suite 302
   Melville, NY 11747
    	
 
    	
Checking
    	
 
    	
4591517471
    
	
Warren Resources, Inc.
    	
 
    	
JPMorgan Chase Bank
   395 North Service Road
   Suite 302
   Melville, NY 11747
    	
 
    	
Checking
    	
 
    	
9015477
    
	
Warren E&P, Inc.
    	
 
    	
JPMorgan Chase Bank
   395 North Service Road
   Suite 302
   Melville, NY 11747
    	
 
    	
Checking
    	
 
    	
530503751
    
	
Warren Marcellus LLC
    	
 
    	
JPMorgan Chase Bank
   395 North Service Road
   Suite 302
   Melville, NY 11747
    	
 
    	
Checking
    	
 
    	
622696115
    
	
Warren Energy Services
    	
 
    	
JPMorgan Chase Bank
   395 North Service Road
   Suite 302
   Melville, NY 11747
    	
 
    	
Checking
    	
 
    	
957035209
    
	
Warren Resources, Inc.
    	
 
    	
JPMorgan Chase Bank
   395 North Service Road
   Suite 302
   Melville, NY 11747
    	
 
    	
Checking
    	
 
    	
530393794
    
	
Warren Development Corporation
    	
 
    	
JPMorgan Chase Bank
   395 North Service Road
   Suite 302
   Melville, NY 11747
    	
 
    	
Checking
    	
 
    	
910859222
    
	
Warren Resources of California, Inc.
    	
 
    	
JPMorgan Chase Bank
   395 North Service Road
   Suite 302
   Melville, NY 11747
    	
 
    	
Checking
    	
 
    	
556892888
    

 

 

Schedule 9

 

INTELLECTUAL PROPERTY

 

None that is owned by a Company and that is material to the conduct of any Company’s business.

 

 

Annex I

 

Form of Assumption Agreement

 

ASSUMPTION AGREEMENT, dated as of                 , 201  , made by                               , a                [corporation] (the “Additional Grantor”), in favor of Wilmington Trust, National Association, as Administrative Agent for the Secured Parties (as defined below) (in such capacity, the “Administrative Agent”). All capitalized terms not defined herein shall have the meaning ascribed to them in such Credit Agreement.

 

W I T N E S S E T H:

 

WHEREAS, Warren Resources, Inc. (the “Borrower”), the Lenders and the Administrative Agent have entered into a Credit Agreement, dated as of May 22, 2015 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”);

 

WHEREAS, in connection with the Credit Agreement, the Borrower has entered into the Security Agreement, dated as of May 22, 2015 (as amended, supplemented or otherwise modified from time to time, the “Security Agreement”) in favor of the Administrative Agent for the benefit of the Secured Parties (as defined in the Security Agreement);

 

WHEREAS, the Credit Agreement requires the Additional Grantor to become a party to the Security Agreement; and

 

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

 

NOW, THEREFORE, IT IS AGREED:

 

1.                                      Security Agreement. By executing and delivering this Assumption Agreement, the Additional Grantor, as provided in Section 9.14 of the Security Agreement, hereby becomes a party to the 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 Administrative Agent, 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 6 to the Security Agreement.  The Additional Grantor hereby represents and warrants that each of the representations and warranties contained in Article IV of the 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.

 

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.

 

A-1-1

 

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:
    	
 
    

 

A-1-2

 

Annex II

 

Form of Intellectual Property Security Agreement

 

FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT(2)

 

THIS [COPYRIGHT] [PATENT] [TRADEMARK] SECURITY AGREEMENT, dated as of May 22, 2015, is made by each of the entities listed on the signature pages hereof (each a “Grantor” and, collectively, the “Grantors”), in favor of Wilmington Trust, National Association, as Administrative Agent (in such capacity, together with its successors and permitted assigns, the “Administrative Agent”) for the Secured Parties (as defined in the Credit Agreement referred to below) and the other Secured Parties.

 

W I T N E S S E T H:

 

WHEREAS, pursuant to the Credit Agreement, dated as of May 22, 2015 (as the same may be amended, restated, supplemented and/or modified from time to time, the “Credit Agreement”), among Warren Resources, Inc. as Borrower, the financial institutions and other entities from time to time party thereto (the “Lenders”) and the Administrative Agent;

 

WHEREAS, each Grantor has agreed, pursuant to a Security Agreement of even date herewith in favor of the Administrative Agent (and such agreement may be amended, restated, supplemented or otherwise modified from time to time, the “Security Agreement”), to guarantee the Obligations (as defined in the Credit Agreement) of the Borrower; and

 

WHEREAS, all of the Grantors are party to the Security Agreement pursuant to which the Grantors are required to execute and deliver this [Copyright] [Patent] [Trademark] Security Agreement;

 

NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and the Lenders to enter into the Credit Agreement, each Grantor hereby agrees with the Administrative Agent as follows:

 

Section 9.20                             Defined Terms.  Capitalized terms used herein without definition are used as defined in the Security Agreement.

 

Section 9.21                             Grant of Security Interest in [Copyright] [Trademark] [Patent] Collateral. Each Grantor, as collateral security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Obligations of such Grantor, hereby mortgages, pledges and hypothecates to the Administrative Agent for the benefit of the Secured Parties, and grants to the Administrative Agent for the benefit of the Secured Parties a Lien on and security interest in, all of its right, title and interest in, to and under the following Collateral of such Grantor (the “[Copyright] [Patent] [Trademark] Collateral”):

 

(2) NTD: Separate agreements should be executed relating to each Grantor’s respective Copyrights, Patents, and Trademarks.

 

A-2-1

 

(i)                                     [all of its Copyrights and all IP Licenses providing for the grant by or to such Grantor of any right under any Copyright, including, without limitation, those referred to on Schedule 1 hereto;

 

(ii)                                  all renewals, reversions and extensions of the foregoing; and

 

(iii)                               all income, royalties, proceeds and Liabilities at any time due or payable or asserted under and with respect to any of the foregoing, including, without limitation, all rights to sue and recover at law or in equity for any past, present and future infringement, misappropriation, dilution, violation or other impairment thereof.]

 

or

 

(b)                                 [all of its Patents and all IP Licenses providing for the grant by or to such Grantor of any right under any Patent, including, without limitation, those referred to on Schedule 1 hereto;

 

(i)                                     all reissues, reexaminations, continuations, continuations-in-part, divisionals, renewals and extensions of the foregoing; and

 

(ii)                                  all income, royalties, proceeds and Liabilities at any time due or payable or asserted under and with respect to any of the foregoing, including, without limitation, all rights to sue and recover at law or in equity for any past, present and future infringement, misappropriation, dilution, violation or other impairment thereof.]

 

or

 

(c)                                  [all of its Trademarks and all IP Licenses providing for the grant by or to such Grantor of any right under any Trademark, including, without limitation, those referred to on Schedule 1 hereto;

 

(i)                                     all renewals and extensions of the foregoing;

 

(ii)                                  all goodwill of the business connected with the use of, and symbolized by, each such Trademark; and

 

(iii)                               all income, royalties, proceeds and Liabilities at any time due or payable or asserted under and with respect to any of the foregoing, including, without limitation, all rights to sue and recover at law or in equity for any past, present and future infringement, misappropriation, dilution, violation or other impairment thereof.]

 

Section 9.22                             Security Agreement. The security interest granted pursuant to this [Copyright] [Patent] [Trademark] Security Agreement is granted in conjunction with the security interest granted to the Administrative Agent pursuant to the Security Agreement and each Grantor hereby acknowledges and agrees that the rights and remedies of the Administrative Agent with respect to the security interest in the [Copyright] [Patent] [Trademark] Collateral made and granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.

 

A-2-2

 

Section 9.23                             Grantor Remains Liable. Each Grantor hereby agrees that, anything herein to the contrary notwithstanding, such Grantor shall assume full and complete responsibility for the prosecution, defense, enforcement or any other necessary or desirable actions in connection with their [Copyrights] [Patents] [Trademarks] and IP Licenses subject to a security interest hereunder.

 

Section 9.24                             Counterparts. This [Copyright] [Patent] [Trademark] Security Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.  Signature pages may be detached from multiple separate counterparts and attached to a single counterpart.

 

Section 9.25                             Governing Law. This [Copyright] [Patent] [Trademark] Security Agreement and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.

 

[SIGNATURE PAGES FOLLOW]

 

A-2-3

 

IN WITNESS WHEREOF, each Grantor has caused this [Copyright] [Patent] [Trademark] Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

 

 

	
 
    	
[GRANTOR] 
    
	
 
    	
as   Grantor
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
ACCEPTED AND AGREED
    	
 
    
	
as of the date first   above written:
    	
 
    
	
Wilmington Trust,   National Association
    
	
as   Administrative Agent
    
	
 
    
	
 
    
	
By:
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    

 

[SIGNATURE PAGE TO [COPYRIGHT] [PATENT] [TRADEMARK] SECURITY AGREEMENT]

 

A-2-4

 

ACKNOWLEDGMENT OF GRANTOR

 

 

	
State   of                                               
    	
)
    	
 
    
	
  
    	
)
    	
ss.
    
	
County   of                                           
    	
)
    	
 
    

 

 

On this     day of                , 201   before me personally appeared                       , proved to me on the basis of satisfactory evidence to be the person who executed the foregoing instrument on behalf of                 , who being by me duly sworn did depose and say that he is an authorized officer of said corporation, that the said instrument was signed on behalf of said corporation as authorized by its Board of Directors and that he acknowledged said instrument to be the free act and deed of said corporation.

 

	
 
    	
 
    
	
 
    	
Notary   Public
    

 

[SIGNATURE PAGE TO [COPYRIGHT] [PATENT] [TRADEMARK] SECURITY AGREEMENT]

 

A-2-5

 

SCHEDULE I
 TO
  [COPYRIGHT] [PATENT] [TRADEMARK] SECURITY AGREEMENT

 

[Copyright] [Patent] [Trademark] Registrations

 

1.                                      REGISTERED [COPYRIGHTS] [PATENTS] [TRADEMARKS]

 

[Include Registration Number and Date]

 

2.                                      [COPYRIGHT] [PATENT] [TRADEMARK] APPLICATIONS

 

[Include Application Number and Date]

 

3.                                      IP LICENSES

 

[Include complete legal description of agreement (name of
 agreement, parties and date)]

 

Annex II - Schedule to [Copyright][Patent][Trademark] Security AgreementExhibit 10.44

 

PLEDGE AGREEMENT

 

THIS PLEDGE AGREEMENT (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, this “Agreement”) is dated as of May 22, 2015 and is among WARREN RESOURCES, INC., a Maryland corporation (the “Borrower”), WARREN RESOURCES OF CALIFORNIA, INC., a California corporation (“Warren California”), WARREN RESOURCES E&P, a New Mexico corporation (“Warren E&P”), WARREN MARCELLUS LLC, a Delaware limited liability company (“Warren Marcellus” and together with the Borrower, Warren California and Warren E&P, the “Pledgors”), and WILMINGTON TRUST, NATIONAL ASSOCIATION, in its capacity as Administrative Agent under the Credit Agreement described below (“Administrative Agent”).

 

W I T N E S S E T H

 

WHEREAS, the Borrower is party to that certain Credit Agreement (as amended, restated, amended and restated, supplemented or otherwise modified in writing from time to time, the “Credit Agreement”; capitalized terms used and not otherwise defined herein shall have the respective meanings provided for in the Credit Agreement) dated as of even date herewith among the Borrower, the financial institutions or other entities from time to time party thereto (the “Lenders”) and the Administrative Agent;

 

WHEREAS, Warren California, Warren E&P and Warren Marcellus are Subsidiaries of the Borrower; and

 

WHEREAS, it is a condition precedent to the availability of such loans and other financial accommodations under the Credit Agreement that each Pledgor shall have made the pledges and granted the security interests contemplated by this Agreement in order to secure the payment and performance of the Obligations.

 

NOW, THEREFORE, in consideration of the foregoing, and in order to induce Lenders to make the Loans and other financial accommodations available to the Borrower under the Credit Agreement, each Pledgor hereby agrees with Administrative Agent, for its benefit and the benefit of Lenders, as follows:

 

1.                                      Definitions.  Capitalized terms defined in the Credit Agreement and not otherwise defined herein shall have the respective meanings provided for in the Credit Agreement.  References to “Sections” shall be to Sections of this Agreement unless otherwise specifically provided.  For purposes hereof, “including” is not limiting and “or” is not exclusive.  All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations.

 

2.                                      Pledge.  To secure the payment and performance of the Obligations, each Pledgor hereby pledges to Administrative Agent, for its benefit and the benefit of the Lenders, and grants to Administrative Agent, for its benefit and the benefit of the Lenders, a security interest in, any and all right, title and interest in and to the following (the “Pledged Collateral”):

 

PLEDGE AGREEMENT

 

 

(a)                                 all of the shares of the Capital Stock, membership interests, partnership interests and all other equity interests of each corporation, limited liability company, limited partnership or other legal entity (collectively, the “Issuers” and each, an “Issuer”), identified on Exhibit A attached hereto held by each Pledgor (the “Pledged Securities”), and the certificates (if any), representing the Pledged Securities, all options, warrants and other rights to acquire additional shares of Capital Stock, membership interests, partnership interests and all other equity interests of each Issuer, and the shares, membership interests, partnership interests and other equity interests underlying such rights and all distributions, dividends (in the form of cash, securities or otherwise), cash, instruments, chattel paper and other rights, property or proceeds and products from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Securities;

 

(b)                                 all additional shares of the Capital Stock, membership interests, partnership interests and all other equity interests of each Issuer at any time acquired by the Pledgors in any manner, and the certificates (if any), representing such additional shares, membership interests, partnership interests and other equity interests (and any such additional shares, membership interests, partnership interests and other equity interests, with respect to which the Pledgors shall execute and deliver to Administrative Agent a pledge supplement in the form of Exhibit B attached hereto (a “Pledge Supplement”), shall constitute part of the Pledged Securities under this Agreement), together with all distributions, dividends (in the form of cash, securities or otherwise), cash, instruments, chattel paper and other rights, property or proceeds and products from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such additional shares, membership interests, partnership interests and other equity interests; and

 

(c)                                  all proceeds of any of the foregoing.

 

Notwithstanding the foregoing or anything else to the contrary herein, the Pledged Collateral shall not include any Excluded Capital Stock.

 

“Excluded Capital Stock” shall mean (a) any Capital Stock with respect to which, in the reasonable judgment of the Lead Lenders and the Borrower, the cost or other consequences of pledging such Capital Stock shall be excessive in view of the benefits to be obtained by Administrative Agent and the Lenders therefrom, (b) solely in the case of any pledge of Capital Stock of any Foreign Subsidiary or FSHCO (in each case, that is owned directly by the Borrower or a Guarantor) to secure the Obligations, any Capital Stock that is voting stock of such Foreign Subsidiary or FSHCO in excess of 65% of the voting stock of such Subsidiary, (c) any Capital Stock to the extent the pledge thereof would be prohibited by any Requirement of Law, (d) Capital Stock of any Person other than a Subsidiary to the extent the pledge of such Capital Stock is prohibited by contractual obligations existing on the Closing Date or at the time such Capital Stock is acquired, (e) Capital Stock of any Subsidiary of a Foreign Subsidiary or FSHCO and (f) any Capital Stock of any Subsidiary to the extent that the pledge of such Equity Interests would result in material adverse tax consequences to the Borrower or any Subsidiary as reasonably determined by the Borrower in consultation with the Lead Lenders (such consultation limited to the tax consequences of such pledge of such Capital Stock).  For the avoidance of doubt, “Capital Stock” shall include Capital Stock an membership interests, partnership interests and all other equity interests of each Issuer.

 

2

 

3.                                      Delivery of Pledged Collateral; UCC Financing Statements.

 

(a)                                 All certificates or instruments (if any), representing or evidencing any Pledged Collateral shall be delivered to and held by or on behalf of Administrative Agent pursuant hereto and shall either be in suitable form for transfer by delivery, or shall be accompanied by duly executed undated instruments of transfer or assignment in blank, all in form and substance satisfactory to Administrative Agent.  Notwithstanding the preceding sentence, all Pledge Collateral must be delivered or transferred in such manner, and each Pledgor shall take all such further action as may be requested by Administrative Agent, as to permit Administrative Agent to be a “protected purchaser” to the extent of its security interest as provided in Section 8-303 of the UCC (if Administrative Agent otherwise qualifies as a protected purchaser).

 

(b)                                 Each Pledgor hereby authorizes Administrative Agent to file one or more UCC financing or continuation statements, and amendments thereto (or similar documents required by any laws of any applicable jurisdiction), relating to all or any part of the Pledged Collateral without the signature of such Pledgor (to the extent such signature is required under the laws of any applicable jurisdiction).

 

4.                                      Representations and Warranties.  Each Pledgor represents and warrants as follows:

 

(a)                                 Exhibit A attached hereto completely and accurately identifies, as of the Closing Date, (i) the number of issued and outstanding equity interests of each Issuer held by each Pledgor and (ii) the percentage of each Pledgor’s ownership of the aggregate issued and outstanding equity interests of each Issuer.  Each Pledged Security has been duly and validly authorized and issued to each Pledgor and, if applicable, is fully paid and non-assessable.

 

(b)                                 The delivery of the Pledged Securities to Administrative Agent pursuant to this Agreement (and, with respect to Pledged Securities consisting of membership interests or partnership interests that are not “securities” under Article 8 of the UCC, the filing in the appropriate filing office of a UCC financing statement describing the same as collateral), is effective to create a valid and perfected first priority security interest in the Pledged Collateral, free of any adverse claim, securing the payment of the Obligations.  Subject only to the consummation of the delivery described in the immediately preceding sentence (and, if applicable, the filing of a financing statement described in such sentence), Administrative Agent has a valid and perfected first priority security interest in the Pledged Collateral, securing the payment of the Obligations, and such security interest is entitled to all of the rights, priorities and benefits afforded by the UCC or other applicable law as enacted in any relevant jurisdiction which relates to perfected security interests.

 

(c)                                  To the extent any Pledged Security consisting of either (i) a membership interest in an Issuer that is a limited liability company or (ii) a partnership interest in an Issuer that is a partnership, such Pledged Security shall, by its terms, provide that it is a “security” governed by Article 8 of the UCC.

 

(d)                                 This Agreement constitutes a valid and binding obligation of each Pledgor, enforceable against such Pledgor in accordance with its terms, except as enforcement may be

 

3

 

limited by bankruptcy, insolvency, or similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles.

 

(e)                                  No authorization, approval or other action by, and no notice to or filing with, any domestic or foreign governmental authority or regulatory body or consent of any other Person is required for (i) the pledge and grant of a security interest by each Pledgor pursuant to this Agreement, (ii) the execution, delivery or performance of this Agreement by each Pledgor or (iii) the exercise by Administrative Agent of its rights and remedies hereunder (except as may have been taken by or at the direction of such Pledgor or Administrative Agent and except as may be required in connection with any disposition of the Pledged Collateral by laws affecting the offering and sale of securities generally).  Except for the filing of a UCC financing statement in the case of any Pledged Securities consisting of membership interests or partnership interests that are not “securities” under Article 8 of the UCC, no authorization, approval or other action by, and no notice to or filing with, any domestic or foreign governmental authority or regulatory body or consent of any other Person is required for the perfection of Administrative Agent’s security interest in the Pledged Collateral.

 

(f)                                   None of the Pledged Securities constitutes margin stock, as defined in Regulation T, U or X of the Board of Governors of the Federal Reserve System.

 

(g)                                  All information heretofore, herein or hereafter supplied to Administrative Agent by or on behalf of each Pledgor with respect to the Pledged Collateral is and will be accurate and complete in all material respects.

 

(h)                                 Each Pledgor has caused each Issuer to record on its books and records that the Pledged Securities are subject to the pledge and security interest created hereby.

 

(i)                                     All representations and warranties of each Pledgor contained in this Agreement shall survive the execution and delivery of this Agreement.

 

5.                                      Covenants; Further Assurances.

 

(a)                                 Each Pledgor shall, from time to time, at its expense, promptly execute and deliver all further instruments, documents and notices and take all further action that Administrative Agent or Lenders may reasonably request, in order to create, perfect and protect any security interest granted or purported to be granted by this Agreement or to enable Administrative Agent to exercise and enforce its rights and remedies hereunder.  Without limiting the generality of the foregoing, each Pledgor will, upon Administrative Agent or Lenders’ request, appear in and defend any action or proceeding that may affect each Pledgor’s title to or Administrative Agent’s security interest in the Pledged Collateral.

 

(b)                                 Each Pledgor shall furnish to Administrative Agent, from time to time upon request, statements and schedules further identifying, updating, and describing the Pledged Collateral and such other information, reports and evidence concerning the Pledged Collateral as Administrative Agent or Lenders may reasonably request, all in reasonable detail.

 

(c)                                  Each Pledgor shall not change its name, type of organization or jurisdiction of organization.

 

4

 

(d)                                 Except as otherwise permitted herein or by the Credit Agreement, each Pledgor shall not (i) sell, assign (by operation of law or otherwise), or otherwise dispose of, or grant any option or similar right with respect to, any of the Pledged Collateral; or (ii) create or suffer to exist any Lien upon or with respect to any of the Pledged Collateral except for the Lien in favor of Administrative Agent securing the Obligations.  In addition, each Pledgor shall not use or permit the use of any Pledged Collateral in violation of any provision of applicable law and shall not do anything to impair the rights of Administrative Agent in any of the Pledged Collateral.

 

(e)                                  Except as otherwise permitted herein or by the Credit Agreement, each Pledgor agrees that it will not vote to enable, and will not otherwise permit, any Issuer to (i) issue any stock, membership interests or other securities (including any warrants, options, subscriptions or the like for the purchase of stock, membership interests or other securities), in addition to or in substitution for any of the Pledged Securities to any Person other than the Pledgors or a Wholly Owned Subsidiary of the Pledgors or (ii) dissolve, liquidate, retire any of its stock or membership interests, reduce its capital or merge or otherwise consolidate with any other Person.

 

(f)                                   If, while this Agreement is in effect, the Pledgors shall become entitled to receive or shall receive any shares of Capital Stock, membership interests, partnership interests or any other equity interests of any Issuer, the Pledgors agree, in each case, to accept the same as Administrative Agent’s agent and to hold the same in trust for Administrative Agent, and to deliver the same forthwith to Administrative Agent in the exact form received, with the endorsement of the Pledgors where necessary and/or with duly executed undated instruments of transfer or assignment, in blank, all in form and substance satisfactory to Administrative Agent, to be held by Administrative Agent, subject to the terms hereof, as part of the Pledged Securities.  Each Pledgor shall promptly deliver to Administrative Agent a Pledge Supplement, duly executed by such Pledgor, with respect to such additional equity interests.  Each Pledgor hereby authorizes Administrative Agent to attach each Pledge Supplement to this Agreement.

 

(g)                                  Each Pledgor shall at all times cause any membership interest or partnership interest comprising the Pledged Collateral to be a “security” within the meaning of, and to be governed by Article 8 of the UCC as in effect under the laws of any state having jurisdiction and shall not cause or permit any Issuer to “opt out” or to take any other action seeking to establish that any membership interest or partnership interest of the Pledged Collateral is not as a “security” or is not be certificated.

 

6.                                      [Reserved].

 

7.                                      Additional Pledgors.  The initial Pledgors hereunder shall be the Persons that are signatories hereto.  From time to time subsequent to the date hereof, additional Persons may become parties hereto as additional Pledgors (each an “Additional Pledgor”) by executing a Pledge Supplement in the form of Exhibit B attached hereto (or such other form as may be satisfactory to the Lead Lenders and Administrative Agent).  Upon delivery of any such Pledge Supplement to Administrative Agent, notice of which is hereby waived by Pledgors, each such Additional Pledgor shall be a Pledgor and shall be a party hereto as if such Additional Pledgor were an original signatory hereof.  Each Pledgor expressly agrees that its obligations arising

 

5

 

hereunder shall not be affected or diminished by the addition or release of any other Pledgor hereunder, or by any election by Administrative Agent or any Lenders not to cause any Subsidiary of the Borrower to become an Additional Pledgor hereunder.  This Agreement shall be fully effective as to any Pledgor that is or becomes a party hereto regardless of whether any such Person becomes or fails to become or ceases to be a Pledgor hereunder.

 

8.                                      Voting Rights; Dividends; Etc.

 

(a)                                 So long as no Event of Default has occurred and is then continuing:

 

(i)                                     Each Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral, or any part thereof, for any purpose not inconsistent with the terms of this Agreement or the Credit Agreement; and

 

(ii)                                  To the extent permitted under the Credit Agreement, each Pledgor shall be entitled to receive all distributions, dividends (in the form of cash, securities or otherwise), cash, instruments, chattel paper and other rights, property or proceeds and products from time to time received, receivable or otherwise distributed in respect of the Pledged Collateral.

 

(b)                                 At any time that an Event of Default has occurred and is then continuing:

 

(i)                                     All rights of each Pledgor to exercise voting and other consensual rights in respect of the Pledged Collateral shall immediately cease to be effective and all such voting and other consensual rights shall become vested in Administrative Agent and Administrative Agent shall thereupon have the sole right to exercise such voting and other consensual rights (including, without limitation, the right to vote in favor of, and to exchange any or all of the Pledged Collateral upon, the consolidation, recapitalization, merger or other reorganization with respect to an Issuer).  In order to effect the foregoing, each Pledgor hereby grants to Administrative Agent an irrevocable proxy to vote the Pledged Collateral and, any time that an Event of Default exists, each Pledgor agrees to execute such other proxies as Administrative Agent may request; and

 

(ii)                                  All rights of each Pledgor to receive and retain any distributions, dividends (in the form of cash, securities or otherwise), instruments, chattel paper or other property paid or payable with respect to any of the Pledged Collateral shall immediately cease and any such distributions, dividends (in the form of cash, securities or otherwise), instruments, chattel paper or other property paid or payable with respect to any of the Pledged Collateral shall be paid to Administrative Agent (for application to the Obligations as set forth in Section 14, with respect to any cash or cash equivalents, or to be held by Administrative Agent as additional security for the Obligations, with respect to any other type of property).  Any distributions, dividends (in the form of cash, securities or otherwise), instruments, chattel paper or other property paid or payable with respect to any of the Pledged Collateral and received by each Pledgor contrary to the provisions of this Agreement shall be received in trust for the benefit of Administrative Agent, shall be segregated from other assets (including, in the case of cash or cash equivalents, other funds), of the Pledgors and shall be forthwith paid to Administrative Agent (for application to the Obligations as set forth in Section 14, with respect to any cash or

 

6

 

cash equivalents, or to be held by Administrative Agent as additional security for the Obligations, with respect to any other type of property).

 

9.                                      Administrative Agent Appointed Attorney-in-Fact.  Each Pledgor hereby irrevocably appoints Administrative Agent, its nominee, and any other Person whom Administrative Agent may designate, as each Pledgor’s attorney-in-fact, with full power during the existence of any Event of Default to take any action (including the completion and presentation of any proxy) and to execute any instrument that such attorney-in-fact may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, to (i) receive, endorse and collect all instruments (or other property, as applicable), made payable to each Pledgor representing any distribution in respect of the Pledged Collateral or any part thereof; (ii) exercise the voting and other consensual rights pertaining to the Pledged Collateral; and (iii) sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Pledged Collateral as fully and completely as though such attorney-in-fact was the absolute owner thereof for all purposes, and to do, at such attorney-in-fact’s option and each Pledgor’s expense, at any time or from time to time, all acts and things that such attorney-in-fact deems necessary to protect, preserve or realize upon the Pledged Collateral.  Each Pledgor hereby ratifies and approves all acts of any such attorney-in-fact made or taken pursuant to this Section 9 and agrees that neither Administrative Agent nor any other Person designated as an attorney-in-fact by Administrative Agent shall be liable for any acts, omissions, errors of judgment or mistakes of fact or law (other than, and only to the extent of, such Person’s gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction).  The foregoing powers of attorney, being coupled with an interest, are irrevocable until the Obligations have been fully paid.

 

10.                               Administrative Agent May Perform.  If any Pledgor fails to perform any agreement contained herein, Administrative Agent may itself perform, or cause performance of, such agreement, and the expenses of Administrative Agent incurred in connection therewith shall be payable by any Pledgor under Section 15 hereof, and be a part of the Obligations.

 

11.                               Limitation on Duty of Administrative Agent with Respect to the Pledged Collateral.  Beyond the safe custody thereof, each Pledgor agrees that Administrative Agent shall have no duties concerning the custody and preservation of any Pledged Collateral in its possession (or in the possession of any agent of Administrative Agent), or with respect to any income thereon or the preservation of rights against prior parties or any other rights pertaining thereto.  Administrative Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if the Pledged Collateral is accorded treatment substantially equal to that which it accords its own property.  Administrative Agent shall not be liable or responsible for any loss or damage to any of the Pledged Collateral, or for any diminution in the value thereof, by reason of the act or omission of any agent selected by Administrative Agent in good faith.  It is expressly agreed that Administrative Agent shall have no responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Pledged Collateral, whether or not Administrative Agent has or is deemed to have knowledge of such matters, or (ii) taking any necessary steps to preserve rights against any parties with respect to any Pledged Collateral, but Administrative Agent may do so and all expenses incurred in connection therewith shall be payable by and for the sole account of each Pledgor.

 

7

 

12.                               Remedial Provisions.

 

(a)                                 Upon the occurrence and during the continuance of an Event of Default, Administrative Agent and its attorneys may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party under the UCC (whether or not the UCC applies to the affected Pledged Collateral), and Administrative Agent may also, without demand, advertisement or notice of any kind (other than the notice specified below relating to a public or private sale), sell the Pledged Collateral or any part thereof in one or more portions at one or more public or private sales or dispositions, at any exchange, broker’s board or at any of Administrative Agent’s offices (or those of Administrative Agent’s attorneys), or elsewhere, for cash, on credit, or for future delivery, at such price or prices and upon such other terms as Administrative Agent deems advisable.  Each Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days’ notice to such Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification of such matters; provided, that no notification need be given to such Pledgor if it has authenticated after default a statement renouncing or modifying any right to notification of sale or other intended disposition.  At any sale of the Pledged Collateral, if permitted by law, Administrative Agent may bid (which bid may be, in whole or in part, in the form of cancellation of indebtedness), for the purchase of the Pledged Collateral or any portion thereof free of any right or equity of redemption in each Pledgor.  Administrative Agent shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given.  Administrative Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

 

(b)                                 Each Pledgor recognizes that Administrative Agent may be unable to effect a public sale of all or part of the Pledged Collateral and may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obligated to agree, among other things, to acquire such Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof.  Each Pledgor acknowledges that any such private sales may be at prices and on terms less favorable to the seller than if sold at public sales and agrees that such private sales shall be deemed to have been made in a commercially reasonable manner, and that Administrative Agent shall be under no obligation to delay a sale of any of the Pledged Collateral for the period of time necessary to permit the Issuer of such Pledged Collateral to register such securities for public sale under the Securities Act of 1933, or under any other applicable requirement of law, even if such Issuer would agree to do so.  To the extent permitted by law, each Pledgor hereby specifically waives (and, as applicable, releases), any right or equity of redemption, and any right of stay or appraisal, which such Pledgor has or may have under any law now existing or hereafter enacted.

 

(c)                                  Each Pledgor acknowledges that neither Administrative Agent nor any of the Lenders shall be liable for any failure or delay in realizing upon or collecting the Obligations, or any guaranty thereof or collateral security therefore; and each Pledgor further acknowledges that neither Administrative Agent nor any Lender shall have any duty to take any action with respect thereto.

 

8

 

13.                               Remedies Cumulative.  No failure on the part of Administrative Agent to exercise, and no delay in exercising and no course of dealing with respect to, any power, privilege or right under this Agreement or any other Financing Document shall operate as a waiver thereof; nor shall any single or partial exercise by Administrative Agent of any power, privilege or right under this Agreement or any other Financing Document preclude any other or further exercise thereof or the exercise of any other such power, privilege or right.  The powers, privileges and rights in this Agreement and the other Financing Documents are cumulative and are not exclusive of any other remedies provided by law.

 

14.                               Application of Proceeds.  Upon the occurrence and during the continuance of an Event of Default, the proceeds of any sale or disposition of, or other realization upon, all or any part of the Pledged Collateral shall be applied in a manner consistent with the provisions of Section 8.6 of the Credit Agreement.  Any excess balance remaining shall be delivered to each Pledgor, and each Pledgor shall remain liable for any deficiency remaining unpaid after the foregoing application.

 

15.                               Expenses.  Without limiting each Pledgor’s obligations under the Credit Agreement or any other Financing Document, each Pledgor hereby agrees to promptly pay all fees, costs and expenses (including attorney’s fees and expenses), in connection with (a) maintaining the Pledged Collateral, (b) creating, perfecting, protecting and enforcing Administrative Agent’s Lien on the Pledged Collateral, (c) selling or otherwise disposing of the Pledged Collateral, (d) paying any amount required under any provision of applicable law (including, without limitation, Section 9-615(a)(3) of the UCC) or (e) any other matters contemplated by or arising out of this Agreement with respect to the Pledged Collateral.  If any Pledgor fails to promptly pay any portion of the above fees, costs and expenses when due or to perform any other obligation of such Pledgor under this Agreement, Administrative Agent or any Lender may, at its option, but shall not be required to, pay or perform the same and charge such Pledgor’s account for all fees, costs and expenses incurred therefor, and such Pledgor agrees to reimburse Administrative Agent or such Lender therefor on demand.  All sums so paid or incurred by Administrative Agent or any Lender for any of the foregoing, any and all other sums for which any Pledgor may become liable hereunder and all fees, costs and expenses (including attorneys’ fees, legal expenses and court costs) incurred by Administrative Agent or any Lender in enforcing or protecting any of their rights or remedies under this Agreement shall be payable on demand, shall constitute Obligations, shall bear interest until paid at the highest rate provided in the Credit Agreement and shall be secured by the Pledged Collateral.  Notwithstanding the forgoing, it is understood and agreed that the expense provisions of Section 9.1 of the Credit Agreement shall be incorporated herein as is specifically set forth herein, mutatis mutandis.

 

16.                               Termination of Lien; Release of Pledged Collateral.  Administrative Agent and Lenders agree that upon payment in full of all Obligations and the termination of all Revolving Loan Commitments and all Support Agreements, the Lien provided for hereunder shall terminate and all rights to the Pledged Collateral shall revert to each Pledgor.  Administrative Agent and Lenders further agree that upon such termination, Administrative Agent shall, at the expense of the Pledgors, execute and deliver to the Pledgors such documents as the Pledgors shall reasonably request to evidence such termination.

 

9

 

17.                               Changes in Writing.  No amendment, modification, termination or waiver of any provision of this Agreement shall be effective except by a written instrument executed by the affected Pledgor(s) and Administrative Agent in accordance with Section 11.5 of the Credit Agreement; provided, however, that this Agreement may be supplemented (but no existing provisions may be modified and no Collateral may be released) through agreements substantially in the form of Exhibit B, in each case duly executed by each Pledgor directly affected thereby.

 

18.                               Notices.  All notices, approvals, requests, demands and other communications hereunder shall be given in accordance with the notice provision of the Credit Agreement.

 

19.                               Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Pledgors may not assign its rights or obligations hereunder without the prior written consent of Administrative Agent.  No sales of participations, other sales, assignments, transfers or other dispositions of any agreement governing or instrument evidencing the Obligations or any portion thereof or interest therein shall in any manner impair the Lien granted to Administrative Agent, for the benefit of Administrative Agent and Lenders, hereunder.

 

20.                               Waivers.  In addition to, and not in lieu of, any other waivers herein, each Pledgor waives to the greatest extent it may lawfully do so, and agrees that it shall not at any time insist upon, plead or in any manner whatever claim or take the benefit or advantage of, any appraisal, valuation, stay, extension, marshalling of assets, redemption or similar law, or exemption, whether now or at any time hereafter in force, which may delay, prevent or otherwise affect the performance by each Pledgor of its obligations under, or the enforcement by Administrative Agent of, this Agreement.  Each Pledgor hereby waives diligence, presentment and demand (whether for nonpayment or protest or of acceptance, maturity, extension of time, change in nature or form of the Obligations, acceptance of further security, release of further security, composition or agreement arrived at as to the amount of, or the terms of the Obligations, notice of adverse change in any Person’s financial condition or any other fact which might materially increase the risk to each Pledgor), with respect to any of the Obligations or all other demands whatsoever and waives the benefit of all provisions of law which are or might be in conflict with the terms of this Agreement.

 

21.                               Indemnity.  Each Pledgor hereby agrees to indemnify, pay and hold harmless Administrative Agent and the Lenders and the officers, directors, employees and counsel of Administrative Agent and the Lenders (collectively called the “Indemnitees”), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the fees and disbursements of counsel for such Indemnitee), in connection with any investigative, administrative or judicial proceeding, whether or not such Indemnitee shall be designated a party thereto and including any such proceeding initiated by or on behalf of any Pledgor or an Issuer, which may be imposed on, incurred by or asserted against such Indemnitee as a result of or in connection with this Agreement or the enforcement by Administrative Agent or any Lender of its rights and remedies hereunder, except that each Pledgor shall have no obligation hereunder to an Indemnitee with respect to any liability resulting from the gross negligence or willful misconduct of such Indemnitee, as determined by a final non-appealable judgment of court of competent jurisdiction.  To the extent that the undertaking set forth in the immediately preceding sentence

 

10

 

may be unenforceable, each Pledgor shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all such indemnified liabilities incurred by the Indemnitees or any of them.  The obligations to indemnify and pay the Indemnitees for fees and disbursements of counsel in connection with any litigation, dispute, suit or proceeding relating to any Financing Document and in connection with any workout, collection, bankruptcy, insolvency and other enforcement proceedings under any and all Financing Documents shall be limited to such costs and expenses for counsel to Administrative Agent and for only one counsel acting for all Lenders (other than Administrative Agent).  Notwithstanding the forgoing, it is understood and agreed that the indemnity provisions of Section 9.2 of the Credit Agreement shall be incorporated herein as is specifically set forth herein, mutatis mutandis.

 

22.                               GOVERNING LAW; SUBMISSION TO JURISDICTION.  THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.  EACH PLEDGOR HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE BOROUGH OF MANHATTAN, CITY OF NEW YORK, STATE OF NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO ADMINISTRATIVE AGENT’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE LITIGATED IN SUCH COURTS.  EACH PLEDGOR EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS.  EACH PLEDGOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON EACH PLEDGOR BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO EACH PLEDGOR IN ACCORDANCE WITH THE PROVISIONS OF SECTION 18 HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

23.                               WAIVER OF JURY TRIAL.  EACH OF THE PLEDGORS AND ADMINISTRATIVE AGENT HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

 

24.                               Counterparts; Integration.  This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  Delivery of an executed signature page by facsimile or other electronic transmission (e.g.  “pdf” or “tif” format) shall be effective as delivery of a manually executed counterparty hereof.  This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.

 

11

 

25.                               Intercreditor Agreements.  Notwithstanding anything herein to the contrary, this Agreement and the exercise of any right or remedy hereunder are subject to the provisions of any applicable Intercreditor Agreements, and further, to the extent any provision herein contained shall be inconsistent with any provision contained in any Intercreditor Agreement, the provisions of such Intercreditor Agreement shall prevail.

 

26.                               Headings.  Headings and captions used in this Agreement are included for convenience of reference and shall not be given any substantive effect.

 

27.                               General Terms and Conditions.  In addition to and without limitation of any of the foregoing, this Agreement shall be deemed to be a Financing Document and shall otherwise be subject to all of general terms and conditions contained in Article 11 of the Credit Agreement, mutatis mutandi.

 

12

 

Witness the due execution hereof by the respective duly authorized officer of the undersigned as of the day first above written.

 

	
 
    	
WARREN RESOURCES, INC., a Maryland 
    
	
 
    	
corporation,   as Pledgor
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Stewart P. Skelly
    
	
 
    	
Name:
    	
Stewart   P. Skelly
    
	
 
    	
Title:
    	
Vice   President and Chief Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
WARREN RESOURCES OF CALIFORNIA, INC.,
    
	
 
    	
a   California corporation, as Pledgor
    
	
 
    	
 
    
	
 
    	
WARREN   E&P, INC., a New Mexico   corporation, as
    
	
 
    	
Pledgor
    
	
 
    	
 
    
	
 
    	
WARREN   MARCELLUS LLC, a Delaware limited
    
	
 
    	
liability company, as   Pledgor
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Stewart P. Skelly
    
	
 
    	
Name:
    	
Stewart   P. Skelly
    
	
 
    	
Title:
    	
Vice   President and Treasurer
    

 

Signature Page to
 Pledge Agreement

 

 

	
 
    	
WILMINGTON TRUST, NATIONAL
    
	
 
    	
ASSOCIATION, as   Administrative Agent
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Joshua G. James
    
	
 
    	
Name:
    	
Joshua   G. James
    
	
 
    	
Title:
    	
Vice   President
    

 

Signature Page to
 Pledge Agreement

 

 

Acknowledgement of Issuers

 

Dated May 22, 2015

 

Each of the undersigned Issuers (as defined in the foregoing Pledge Agreement; capitalized terms used herein having the meanings assigned in such Pledge Agreement), hereby (i) acknowledges that it has received an executed copy of the Pledge Agreement, (ii) agrees to record in its records the pledge of the equity interests of such Issuer as provided in the Pledge Agreement, and (iii) waives any right to at any time hereafter be provided with a copy of the foregoing Pledge Agreement in connection with any exercise by Administrative Agent (or its agent or nominee) of voting or other consensual rights in respect of the Pledged Collateral or any registration of any of the Pledged Collateral in the name of Administrative Agent (or its agent or nominee

 

Each Issuer agrees to comply with instructions originated by Administrative Agent with respect to the Pledged Collateral without further consent of the Pledgors and acknowledges that it is the intention of the Pledge Agreement to grant “control” to Administrative Agent within the meaning of Articles 8 and 9 of the UCC, to the extent the same may be applicable to the Pledged Collateral.

 

Acknowledgment - 1

 

	
 
    	
WARREN RESOURCES OF CALIFORNIA, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
WARREN E&P, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Stewart P. Skelly
    
	
 
    	
Name:
    	
Stewart   P. Skelly
    
	
 
    	
Title:
    	
Vice   President and Treasurer
    

 

Acknowledgment - 2

 

Exhibit A

 

Identification of Pledged Securities

 

	
Pledgor
    	
 
    	
Issuer
    	
 
    	
Class or 
   Other 
   Description 
   of Pledged 
   Securities
    	
 
    	
Certificate 
   Number (if 
   applicable)
    	
 
    	
Number of 
   Pledged 
   Securities
    	
 
    	
Total 
   Outstanding 
   Securities
    	
 
    	
Percentage of 
   Total 
   Outstanding 
   Securities 
   Pledged
    
	
Warren Resources, Inc.
    	
 
    	
Warren Resources of   California, Inc., a California corporation
    	
 
    	
Common stock
    	
 
    	
2
    	
 
    	
100
    	
 
    	
100
    	
 
    	
100%
    
	
Warren Resources, Inc.
    	
 
    	
Warren   E&P, Inc., a New Mexico corporation
    	
 
    	
Common stock
    	
 
    	
1
    	
 
    	
223,662
    	
 
    	
223,662
    	
 
    	
100%
    

 

Exhibit A - 1

 

Exhibit B

 

Pledge Supplement

 

This Pledge Supplement is dated as of           , , 20      and is provided in accordance with the terms of the Pledge Agreement referenced below.  The undersigned directs that this Pledge Supplement be attached to the Pledge Agreement, dated as of May 22, 2015, between the undersigned and WILMINGTON TRUST, NATIONAL ASSOCIATION, in its capacity as Administrative Agent (the “Pledge Agreement”; capitalized terms used and not defined herein having the meanings assigned thereto in the Pledge Agreement), and that the equity interests listed below shall be deemed to be part of the Pledged Collateral.

 

[The undersigned agrees by its signature below to become a Pledgor under the Pledge Agreement with the same force and effect as if originally named therein as a Pledgor, and the undersigned hereby agrees to all the terms and provisions of the Pledge Agreement applicable to it as a Pledgor thereunder.]

 

The undersigned hereby certifies that the representations and warranties in Section 4 of the Pledge Agreement are and continue to be true and correct, both as to the shares, instruments and any other property pledged prior to this Pledge Supplement and as to the shares, instruments and any other property pledged pursuant to this Pledge Supplement.

 

The undersigned hereby represents and warrants that Exhibit A attached hereto completely and accurately identifies, as of the date set forth above, (i) the number of issued and outstanding equity interests of each Issuer held by the undersigned and (ii) the percentage of the undersigned’s ownership of the aggregate issued and outstanding equity interests of each Issuer.  Each Pledged Security has been duly and validly authorized and issued to the undersigned and, if applicable, is fully paid and non-assessable.

 

The undersigned further agrees that this Pledge Supplement may be attached to the Pledge Agreement and that the Pledged Securities listed on this Pledge Supplement are a part of the Pledged Securities referred to in the Pledge Agreement and shall secure all Obligations referred to in the Pledge Agreement.

 

This Pledge Supplement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  Delivery of an executed signature page by facsimile or other electronic transmission (e.g.  “pdf” or “tif” format) shall be effective as delivery of a manually executed counterparty hereof.  This Pledge Supplement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.

 

THIS PLEDGE SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

Exhibit B - 1

 

Any provision of this Pledge Supplement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof and in the Pledge Agreement, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

 

All notices, requests and demands pursuant hereto shall be made in accordance with Section 18 of the Pledge Agreement.  All communications and notices hereunder to each party that becomes a Pledgor pursuant to this Pledge Supplement shall be given to it in care of the Borrower at the Borrower’s address set forth in Section 13.2 of the Credit Agreement.

 

In witness whereof, the undersigned and Administrative Agent have duly executed this Pledge Supplement as of the date first written above.

 

	
 
    	
[NAME OF PLEDGOR],   a [·], as Pledgor
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
WILMINGTON TRUST, NATIONAL
    
	
 
    	
ASSOCIATION,   as Administrative Agent
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

Exhibit B - 2

 

Exhibit A to Pledge Supplement

 

Identification of Pledged Securities

 

	
Pledgor
    	
 
    	
Issuer
    	
 
    	
Class or 
   Other 
   Description 
   of Pledged 
   Securities
    	
 
    	
Certificate 
   Number (if 
   applicable)
    	
 
    	
Number of 
   Pledged 
   Securities
    	
 
    	
Total
   Outstanding 
   Securities
    	
 
    	
Percentage of 
   Total
   Outstanding
   Securities

Pledged
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

Exhibit B - 3

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