Document:

exv10w23w2

 

EXHIBIT
10.23.2

AMENDED AND RESTATED

SECURITY AGREEMENT

BETWEEN

PRIMEENERGY CORPORATION

PRIMEENERGY MANAGEMENT CORPORATION

PRIME OPERATING COMPANY

EASTERN OIL WELL SERVICE COMPANY

SOUTHWEST OILFIELD CONSTRUCTION COMPANY

EOWS MIDLAND COMPANY

(DEBTOR)

AND

GUARANTY BANK, FSB, AS

AGENT 
(SECURED PARTY)

DECEMBER 28, 2006

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	ARTICLE I DEFINITIONS AND INTERPRETATION 
	 	 	1	 
	1.1          Terms Defined Above 
	 	 	1	 
	1.2          Terms Defined in Credit Agreement 
	 	 	1	 
	1.3          Additional Defined Terms 
	 	 	1	 
	1.4          Undefined Financial Accounting Terms 
	 	 	3	 
	1.5          References 
	 	 	4	 
	1.6          Articles and Sections 
	 	 	4	 
	1.7          Number and Gender 
	 	 	4	 
	 
	 	 	 	 
	ARTICLE II GRANT OF SECURITY INTEREST 
	 	 	4	 
	 
	 	 	 	 
	ARTICLE III REPRESENTATIONS AND WARRANTIES 
	 	 	5	 
	3.1          Validity, Perfection and Priority 
	 	 	5	 
	3.2          No Liens; Other Financing Statements 
	 	 	5	 
	3.3          Location of Debtor and Collateral 
	 	 	5	 
	3.4          Accounts 
	 	 	5	 
	3.5          Tradenames; Prior Names 
	 	 	5	 
	 
	 	 	 	 
	ARTICLE IV COVENANTS 
	 	 	6	 
	4.1          Further Assurances 
	 	 	6	 
	4.2          Change of Chief Executive Office 
	 	 	6	 
	4.3          Change of Name or Corporate Structure 
	 	 	7	 
	4.4          Maintain Records and Accounts 
	 	 	7	 
	4.5          Right of Inspection 
	 	 	7	 
	4.6          Possession of Collateral 
	 	 	7	 
	4.7          Financing Statement Filings; Notifications 
	 	 	7	 
	 
	 	 	 	 
	ARTICLE V ACCOUNTS 
	 	 	8	 
	5.1          Debtor Remains Liable under Accounts 
	 	 	8	 
	5.2          Collections on Accounts 
	 	 	8	 
	 
	 	 	 	 
	ARTICLE VI POWER OF ATTORNEY 
	 	 	8	 
	6.1          Appointment as Attorney-in-Fact 
	 	 	8	 
	6.2          No Duty on the Part of Secured Party 
	 	 	10	 
	 
	 	 	 	 
	ARTICLE VII REMEDIES; RIGHTS UPON DEFAULT 
	 	 	10	 
	7.1          Rights and Remedies Generally 
	 	 	10	 
	7.2          Proceeds 
	 	 	10	 
	7.3          Collection of Accounts 
	 	 	10	 
	7.4          Disposition of Collateral 
	 	 	11	 
	7.5          Debtor’s Accounts 
	 	 	11	 
	7.6          Possession of Collateral 
	 	 	11	 

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	 	 	Page
	7.7          Disposition of the Collateral 
	 	 	12	 
	7.8          Recourse 
	 	 	12	 
	7.9          Expenses; Attorneys’ Fees 
	 	 	12	 
	7.10         Application of Proceeds 
	 	 	13	 
	7.11         Limitation on Duties Regarding Preservation of Collateral 
	 	 	13	 
	7.12         Waiver of Claims 
	 	 	13	 
	7.13         Discontinuance of Proceedings 
	 	 	14	 
	 
	 	 	 	 
	ARTICLE VIII INDEMNITY 
	 	 	14	 
	8.1          INDEMNITY 
	 	 	14	 
	8.2          Indemnity Obligations Secured by Collateral; Survival 
	 	 	15	 
	 
	ARTICLE IX MISCELLANEOUS 
	 	 	15	 
	9.1          No Waiver; Remedies Cumulative 
	 	 	15	 
	9.2          Termination; Release 
	 	 	16	 
	9.3          Counterparts 
	 	 	16	 
	9.4          Marshalling 
	 	 	16	 
	9.5          Severability 
	 	 	16	 
	9.6          Financing Statement Filing 
	 	 	16	 
	9.7          Notices and Other Communications 
	 	 	16	 
	9.8          Parties in Interest 
	 	 	16	 
	9.9          Amendments 
	 	 	16	 
	9.10         ENTIRE AGREEMENT 
	 	 	17	 
	9.11         GOVERNING LAW 
	 	 	17	 
	9.12         JURISDICTION AND VENUE 
	 	 	17	 

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AMENDED AND RESTATED

SECURITY AGREEMENT

     This
AMENDED AND RESTATED SECURITY AGREEMENT (this “Agreement”), dated as of
December 28, 2006, is by and between PRIMEENERGY CORPORATION, a Delaware corporation
(“PEC”), PRIMEENERGY MANAGEMENT CORPORATION, a New York corporation, PRIME OPERATING
COMPANY, a Texas corporation, EASTERN OIL WELL SERVICE COMPANY, a West Virginia
corporation, SOUTHWEST OILFIELD CONSTRUCTION COMPANY, an Oklahoma corporation, and EOWS
MIDLAND COMPANY, a Texas corporation (collectively, the “:Debtor”), and GUARANTY
BANK, FSB, a federal savings bank, as Agent for the benefit of the Lenders (“Secured
Party”).

W I T
N E S S E T H:

     WHEREAS, pursuant to the terms and conditions of the Amended and Restated Credit
Agreement dated December 28, 2006, by and among Debtor, et al., and the Secured Party
and the Lenders signatory thereto (as amended, restated, or supplemented from time to
time, the “Credit Agreement”), the Secured Party and the Lenders have agreed to
extend credit to or for the benefit of Debtor; and

     WHEREAS, the Debtor and the Secured Party entered into a Security Agreement dated
as of December 19, 2002, and the parties hereto desire to amend and restate such
Security Agreement;

     WHEREAS, pursuant to the Credit Agreement and as an inducement to the Secured Party
and the Lenders to extend credit to or for the benefit of the Debtor pursuant to the
Credit Agreement, Debtor has agreed to execute this Agreement in favor of the Secured
Party;

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

ARTICLE I 

DEFINITIONS AND INTERPRETATION

     1.1 Terms Defined Above. As used herein, each of the terms
“Agreement,” “Credit Agreement,”
“Debtor,” and “Secured
Party” shall have the meaning assigned to such term hereinabove.

     1.2 Terms Defined in Credit Agreement. Each capitalized term used but not
defined herein shall have the meaning assigned to such term in the Credit Agreement.

     1.3 Additional Defined Terms. As used herein, each of the following terms
shall have the following meanings:

 

 

     “Accounts” shall mean all accounts receivable, book
debts, notes, drafts, instruments, documents, acceptances, and other forms of
obligations now owned or hereafter received or acquired by or belonging or owing
to Debtor (including, without limitation, under any trade names, styles, or
divisions thereto), whether arising from the sale or lease of goods or the
rendition of services or any other transaction (including, without limitation,
any such obligation which might be characterized as an account, general
intangible, other than contract rights under contracts containing prohibitions
against assignment of or the granting of a security interest in the rights of a
party thereunder, or chattel paper under the Uniform Commercial Code in effect in
any jurisdiction), and all rights of Debtor in, to, and under all purchase orders
now owned or hereafter received or acquired by it for goods or services, and all
rights of Debtor to any goods the sale or lease of which gave rise to any of the
foregoing (including, without limitation, returned or repossessed goods and
rights of unpaid sellers), and all moneys due or to become due to Debtor under
all contracts for the sale or lease of goods or the performance of services
(whether or not earned by performance) or in connection with any other
transaction, now in existence or hereafter arising, including, without
limitation, all collateral security and guarantees of any kind given by any
Person with respect to any of the foregoing.

     “Account Debtor” shall mean each Person obligated on an Account,
Chattel Paper, or General Intangible.

     “Account Records” shall mean (a) all original copies of all
documents, instruments, or other writings evidencing the Accounts, (b) all
books, correspondence, credit or other files, records, ledger sheets or cards,
invoices, and other papers relating to the Accounts, including, without
limitation, all tapes, cards, computer tapes, computer discs, computer runs,
record keeping systems, and other papers and documents relating to the Accounts,
whether in the possession or under the control of Debtor or any computer bureau
or agent from time to time acting for or on behalf of Debtor or otherwise, (c)
all evidences of the filing of financing statements and the registration of
other instruments in connection therewith and amendments, supplements, or other
modifications thereto, notices to other creditors or secured parties, and
certificates, acknowledgements, or other writings, including, without
limitation, lien search reports, from filing or other registration offices, (d)
all credit information, reports, and memoranda relating thereto, and (e) all
other written or non-written forms of information related in any way to the
foregoing or any Account.

     “Chattel Paper” shall mean all chattel paper (as such term is
defined in Section 9-105(a)(2) of the UCC) of the Debtor.

     “Collateral” shall have the meaning assigned to it in Article II.

     “Commodity Hedge Agreement” shall mean any agreement, device or
arrangement entered into by one Person with another Person providing for
payments which are related to fluctuations in the price of petroleum (or any

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fraction thereof), natural gas, or natural gas liquids (including, but
not limited to, swaps, caps, collars, options, puts, calls, futures and
forward contracts).

     “General Intangibles” shall mean all general intangibles (as
such term is defined in Section 9-106 of the UCC) of Debtor, including,
without limitation, rights to the payment of money (other than Accounts),
net profit interests, contracts, farmout agreements, licenses, and
franchises (excluding licenses and franchises which prohibit the assignment
or grant of a security interest by Debtor), federal income tax refunds,
trade names, distributions on certificated securities (as defined in
§8-102(a)(l) of the UCC) and uncertificated securities (as defined in
§8-102(a)(2) of the UCC), computer programs and other computer software,
inventions, designs, trade secrets, goodwill, proprietary rights, customer
lists, supplier contracts, sale orders, correspondence, advertising
materials, payments due in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of any property, reversionary interests
in pension and profit-sharing plans and reversionary, beneficial and
residual interests in trusts, credits with and other claims against any
Person, together with any collateral for any of the foregoing and the
rights under any security agreement granting a security interest in such
collateral.

     “Indemnitees” shall mean the Secured Party and its
shareholders, officers, directors, employees, agents, attorneys-in-fact,
and affiliates.

     “Proceeds” shall mean proceeds (as such term is defined in
Section 9-306(a)of the UCC).

     “Rate Management Transaction” shall mean any transaction
(including an agreement with respect thereto) now existing or hereafter
entered into between Borrower and Lenders which is a rate swap, basis swap,
forward rate transaction, commodity swap, commodity option, equity or
equity index swap, equity or equity index option, bond option, interest
rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, forward transaction, currency swap
transaction, cross-currency rate swap transaction, currency option or any
other similar transaction (including any option with respect to any of
these transactions) or any combination thereof, whether linked to on or
more interest rates, foreign currencies, commodity prices, equity prices or
other financial measures.

     “Secured Obligations” shall mean the Obligations.

     “UCC” shall mean the Uniform Commercial Code as in effect from
time to time in the State of Texas.

     1.4 Undefined Financial Accounting Terms. Undefined financial
accounting terms used in this Agreement shall have the meanings assigned to such terms
according to GAAP.

- 3 -

 

     1.5 References. The words “hereby,” “herein,” “hereinabove,”
“hereinafter,” “hereinbelow,” “hereof,” “hereunder,” and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any particular
Article, Section, or provision of this Agreement. References in this Agreement to
Articles, Sections, or Exhibits are to such Articles, Sections, or Exhibits of this
Agreement unless otherwise specified.

     1.6 Articles and Sections. This Agreement, for convenience only, has been
divided into Articles and Sections; and it is understood that the rights and other legal
relations of the parties hereto shall be determined from this instrument as an entirety
and without regard to the aforesaid division into Articles and Sections and without
regard to headings prefixed to such Articles or Sections.

     1.7 Number and Gender. Whenever the context requires, reference herein made
to the single number shall be understood to include the plural; and likewise, the plural
shall be understood to include the singular. Words denoting sex shall be construed to
include the masculine, feminine and neuter, when such construction is appropriate; and
specific enumeration shall not exclude the general but shall be construed as cumulative.
Definitions of terms defined in the singular or plural shall be equally applicable to
the plural or singular, as the case may be, unless otherwise indicated.

ARTICLE II

GRANT OF SECURITY INTEREST

     As security for the prompt and complete payment and performance in full of all
Secured Obligations, Debtor hereby assigns and transfers for the purpose of security and
pledges to the Secured Party and grants to the Secured Party a security interest in and
continuing lien on all right, title, and interest of Debtor in, to, and under the
following, in each case, whether now owned or existing or hereafter acquired or arising,
and wherever located (all of which is herein collectively called the
“Collateral”):

	 	(a)	 	all Accounts;
	 
	 	(b)	 	all Account Records;
	 
	 	(c)	 	all Chattel Paper;
	 
	 	(d)	 	all General Intangibles;
	 
	 	(e)	 	all Commodity Hedge Agreements;
	 
	 	(f)	 	all Rate Management Transactions; and
	 
	 	(g)	 	all accessions and additions to any or all of the foregoing, all
substitutions and replacements for any or all of the foregoing,
and all Proceeds and products of any or all of the foregoing.

- 4 -

 

ARTICLE III

 REPRESENTATIONS AND WARRANTIES

     Debtor hereby represents and warrants to the Secured Party, which representations
and warranties shall survive execution and delivery of this Agreement, as follows:

     3.1 Validity, Perfection and Priority. The security interests in the
Collateral granted to the Secured Party hereunder constitute valid and continuing
security interests in the Collateral. Upon the filing of financing statements, naming
Debtor as “debtor” and the Secured Party as “secured party” and describing the
Collateral, in the filing offices set forth on Exhibit A, the security interests granted
to the Secured Party hereunder will constitute valid first-priority perfected security
interests in all Collateral with respect to which a security interest can be perfected by
the filing of a financing statement, subject only to Permitted Liens.

     3.2
No Liens; Other Financing Statements. (a) Except for the Lien granted
to the Secured Party hereunder and Permitted Liens, Debtor owns each item of the
Collateral free and clear of any and all Liens, rights, or claims of all other Persons,
and Debtor shall defend the Collateral against all claims and demands of all Persons at
any time claiming the same or any interest therein adverse to the Secured Party.

     (b) No financing statement or other evidence of Lien covering or purporting to
cover any of the Collateral is on file in any public office other than (i) financing
statements in favor of the Secured Party, (ii) financing statements for which proper
termination statements have been delivered to the Secured Party for filing, and (iii)
financing statements filed in connection with Permitted Liens.

     3.3 Location of Debtor and Collateral. The chief executive office of Debtor
is located at One Landmark Square, Stamford, Connecticut 06901. The primary copies of
the Account Records are located at, and all Accounts and General Intangibles are
maintained at, and controlled and directed (including, without limitation, for general
accounting purposes) from, such chief executive office.

     3.4
Accounts. (a) Each Account (i) is and will be, in all material
respects, the genuine, legal, valid, and binding obligation of the Account Debtor in
respect thereof, representing an unsatisfied obligation of such Account Debtor, (ii) is
and will be, in all material respects, enforceable in accordance with its terms, (iii)
is not and will not be subject to any setoffs, defenses, taxes, counterclaims (except
(A) with respect to refunds, returns, and allowances in the ordinary course of business,
and (B) to the extent that such Account may not yet have been earned by performance),
and (iv) is and will be, in all material respects, in compliance with all applicable
laws, whether federal, state, local, or foreign.

          (b) No Accounts which are evidenced by Chattel Paper require the consent of the
Account Debtor in respect thereof in connection with their assignment hereunder.

     3.5
Tradenames; Prior Names. Debtor has not conducted business under any
name other than its current name during the last five years.

- 5 -

 

ARTICLE IV

COVENANTS

     Debtor covenants and agrees with the Secured Party that from and after the date of
this Agreement:

     4.1 Further Assurances. At any time and from time to time, upon the request
of the
Secured Party, and at the sole expense of Debtor, Debtor will promptly and duly
execute and
deliver any and all such further instruments, endorsements, powers of attorney, and
other
documents, make such filings, give such notices, and take such further action as the
Secured
Party may reasonably deem desirable in obtaining the full benefits of this Agreement
and the
rights, remedies, and powers herein granted, including, without limitation, the
following:

     (a) the filing of financing statements, in form acceptable to the
Secured Party under the Uniform Commercial Code in effect in any
jurisdiction with respect to the liens and security interests granted
hereby;

     (b) the performance of all searches of public records deemed necessary
by the Secured Party to establish and determine the priority of the
security interests of the Secured Party or to determine the presence or
priority of other secured parties; and

     (c) the furnishing to the Secured Party from time to time of reports
and schedules in connection with the Collateral as required pursuant to
the Credit Agreement, all in reasonable detail and in form reasonably
satisfactory to the Secured Party.

     4.2 Change of Chief Executive Office. Debtor will not move its chief
executive
office except to such new location as Debtor may establish in accordance with the
last sentence
of this Section. The originals of all Account Records and General Intangibles will
be kept at
such chief executive office or at the locations referred to in Section 3.3, or at
such new locations
as Debtor may establish in accordance with the last sentence of this Section. All
Accounts,
Account Records, and General Intangibles of Debtor will be maintained at and
controlled and
directed (including, without limitation, for general accounting purposes) from the
locations
referred to in Section 3.3 or such new locations as the Debtor may establish in
accordance with
the last sentence of this Section. With respect to any new location, promptly upon
the request of
the Secured Party, Debtor shall take all such action as the Secured Party may
request to maintain
the security interest of the Secured Party in the Collateral granted hereby at all
times fully
perfected with the same or better priority and in full force and effect. Debtor
shall not establish a
new location for its chief executive office or such activities (or move any such
activities from the
locations referred to in Section 3.3) until it shall have given to the Secured
Party not less than ten
days’ prior written notice of its intention to do so, clearly describing such new
location and
providing such other information in connection therewith as the Secured Party may
reasonably
request.

- 6 -

 

     4.3 Change of Name or Corporate Structure. Debtor shall not change its name
or corporate structure or conduct business under any name other than its current name
without giving notice thereof to the Secured Party within ten days thereafter, clearly
describing such new name, or corporate structure or such new tradename and providing such
other information in connection therewith as the Secured Party may reasonably request.
With respect to such new name, corporate structure, or tradename, promptly upon the
request of the Secured Party, Debtor shall take all such action as the Secured Party may
reasonably request to maintain the security interest of the Secured Party in the
Collateral granted hereby at all times fully perfected with the same or better priority
and in full force and effect.

     4.4 Maintain Records and Accounts. Debtor will keep and maintain, or cause
to be kept and maintained, at its own cost and expense satisfactory and complete records
of the Collateral, including, but not limited to, the originals of all documentation
with respect to all Accounts and General Intangibles and records of all payments
received and all credits granted on the Accounts, all merchandise returned, and all
other dealings therewith.

     4.5 Right of Inspection. The Secured Party shall upon reasonable notice to
Debtor have full and free access during normal business hours of Debtor to all the
books, correspondence, and records of Debtor; and the Secured Party and its
representatives may examine the same, take extracts therefrom, and make photocopies
thereof.

     4.6 Possession of Collateral. The Secured Party shall be deemed to have
possession of any of the Collateral in transit to it or set apart for it. Otherwise the
Collateral shall remain in Debtor’s constructive possession and control at all times, at
Debtor’s risk of loss, and shall (except for sales permitted by Section 6.4 of the
Credit Agreement) be kept at the locations represented in Section 3.3.

     4.7
Financing Statement Filings; Notifications. Debtor recognizes that
financing statements pertaining to the Collateral have been or will be filed with the
offices of the Secretary of State for the States listed in Exhibit A hereto. Debtor will
immediately notify the Secured Party of any condition or event that may change the
proper location for the filing of any financing statement or other public notice or
recording for the purpose of perfecting a security interest in the Collateral. Without
limiting the generality of the foregoing, Debtor will (a) notify the Secured Party
within a reasonable period of time in advance of any change to a jurisdiction other than
as represented in Section 3.3 hereof, (i) in the location of Debtor’s chief place of
business, (ii) in the location of the office where Debtor keeps its records concerning
the Accounts and the General Intangibles and the original of all the Accounts Records,
or (iii) in the “location” of Debtor within the meaning of Section 9-103(c) of the UCC,
and (b) immediately notify Secured Party of any change in Debtor’s name. In any notice
furnished pursuant to this Section, Debtor will expressly state that the notice is
required by this Agreement and contains facts that will or may require additional
filings of financing statements or other notices for the purpose of continuing
perfection of the Secured Party’s security interest in the Collateral.

- 7 -

 

ARTICLE V

 ACCOUNTS

     5.1 Debtor Remains Liable under Accounts. Anything herein to the contrary
notwithstanding (including, without limitation, the grant of any rights to the Secured
Party), Debtor shall remain liable under each of the Accounts 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. The Secured
Party shall have no obligation or liability under any Account (or any agreement giving
rise thereto) by reason of or arising out of this Agreement or the receipt by the
Secured Party of any payment relating to such Account pursuant hereto, nor shall the
Secured Party be obligated in any manner to perform any of the obligations of Debtor
under or pursuant to any Account (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 (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.

     5.2 Collections on Accounts. Prior to the occurrence of an Event of Default,
the Secured Party hereby authorizes Debtor to collect the Accounts. At any time following
and during the continuance of any Event of Default, the Secured Party may curtail or
terminate said authority at any time and itself, or by its agents, collect all Accounts,
and any payments of Accounts collected by Debtor shall be held by Debtor in trust for the
Secured Party, segregated from other funds of Debtor. All Proceeds, while held by the
Secured Party (or by Debtor in trust for the Secured Party) shall continue to be
Collateral securing all of the Secured Obligations and shall not constitute payment
thereof until applied as hereinafter provided.

ARTICLE VI

 POWER OF ATTORNEY

     6.1 Appointment as Attorney-in-Fact. Debtor hereby irrevocably constitutes
and appoints the Secured Party 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 Debtor and in the name of Debtor or in its own name,
from time to time in the discretion of the Secured Party, for the purpose of carrying
out the terms of this Agreement, to take any and all appropriate action and to execute
any and all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, and, without limiting the generality of the foregoing,
Debtor hereby gives the Secured Party the power and right, on behalf of Debtor, without
notice to or assent by the Debtor, to do the following:

     (a) in the case of any Account, at any time when the authority of
Debtor to collect the Accounts has been curtailed or terminated pursuant
hereto, or in the case of any other Collateral, at any time when any Event
of Default shall have occurred and be continuing, in the name of Debtor or
its own name, or otherwise, to take possession of and indorse and collect
any checks, drafts, notes,

- 8 -

 

acceptances, or other instruments for the payment of moneys due
under, or with respect to, any Collateral; in the name of Debtor or
otherwise to 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 Secured Party or as the Secured Party shall
direct; to ask or demand for, collect, 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;

     (b) at any time when an Event of Default shall have occurred and be
continuing, to prepare, sign, and file financing statements and amendments
thereto in the name of Debtor;

     (c) at any time when an Event of Default shall have occurred and be
continuing, to take or cause to be taken all actions necessary to perform
or comply or cause performance or compliance with the terms of this
Agreement, including, without limitation, actions to pay or discharge taxes
and Liens levied or placed on or threatened against the Collateral, to
effect any repairs or obtain any insurance called for by the terms of this
Agreement, and to pay all or any part of the premiums therefor and the
costs thereof;

     (d) upon the occurrence and during the continuance of any Event of
Default, (i) to sign and indorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtor,
assignments, verifications, notices, and other documents in connection with
any of the Collateral, (ii) to commence and prosecute any suits, actions,
or proceedings at law or in equity in any court of competent jurisdiction
to collect the Collateral or any portion thereof and to enforce any other
right in respect of any Collateral, (iii) to defend any suit, action, or
proceeding brought against Debtor with respect to any Collateral, (iv) to
settle, compromise, or adjust any suit, action, or proceeding described in
the preceding clause and, in connection therewith, to give such discharges
or releases as the Secured Party may deem appropriate, and (v) generally,
to sell or transfer and make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as though the
Secured Party were the absolute owner thereof for all purposes, and to do,
at the option of the Secured Party and the expense of Debtor, at any time,
or from time to time, all acts and things which the Secured Party deems
necessary to protect, preserve, or realize upon the Collateral and the
Liens of the Secured Party thereon and to effect the intent of this
Agreement, all as fully and effectively as Debtor might do; and

     (e) at any time when an Event of Default shall have occurred and be
continuing, to execute, in connection with any foreclosure, any
endorsements, assignments, or other instruments of conveyance or transfer
with respect to the Collateral.

     Debtor hereby ratifies all that said attorneys shall lawfully do or cause to be done
by virtue hereof. This power of attorney is a power coupled with an interest and shall be
irrevocable

- 9 -

 

so long as any Obligation remains outstanding or any Commitment exists. Debtor
hereby acknowledges and agrees that in acting pursuant to this power-of-attorney the
Secured Party shall be acting in its own interest and shall have no fiduciary duties to
the Debtor, and Debtor hereby waives any claims to the rights of a beneficiary of a
fiduciary relationship hereunder.

     6.2 No Duty on the Part of Secured Party. The powers conferred on the
Secured Party hereunder are solely to protect the interests of the Secured Party in the
Collateral and shall not impose any duty upon the Secured Party to exercise any such
powers. The Secured Party shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers, and, except for its own gross
negligence, neither it nor any of its officers, directors, employees, or agents shall be
responsible to the Debtor for any act or failure to act hereunder.

ARTICLE VII

REMEDIES; RIGHTS UPON DEFAULT

     7.1 Rights and Remedies Generally. If an Event of Default shall occur and
be continuing, then and in every such case, the Secured Party shall have all the rights
of a secured party under the UCC, all rights now or hereafter existing under all other
applicable laws, and, subject to any mandatory requirements of applicable law then in
effect, all rights set forth in this Agreement and the other Loan Documents. No
enumeration of rights in this Section or elsewhere in this Agreement or in any other
Loan Document or other agreement shall be deemed to in any way limit the rights of the
Secured Party as described in this Section.

     7.2 Proceeds. If an Event of Default shall occur and be continuing, in
addition to the rights of the Secured Party specified with respect to the payment of
Accounts, (a) all Proceeds received by Debtor consisting of cash, checks, and other
near-cash items shall be held by Debtor in trust for the Secured Party, segregated from
other funds of Debtor, and shall forthwith upon receipt by Debtor, be turned over to the
Secured Party, in the same form received by Debtor (appropriately indorsed or assigned
by the Debtor to the order of the Secured Party or in such other manner as shall be
satisfactory to the Secured Party), and (b) any and all such Proceeds received by the
Secured Party (whether from Debtor or otherwise), or any part thereof, shall be applied
by the Secured Party as provided in Section 7.10 hereof.

     7.3 Collection of Accounts. If an Event of Default shall occur and be
continuing:

     (a) the Secured Party may instruct the obligor or obligors on any
obligation owing or purporting to be owed to Debtor constituting the
Collateral (including, without limitation, the Accounts) to make any
payment required by the terms of such obligation directly to the Secured
Party;

     (b) the Secured Party shall have the right from time to time to
modify (including, without limitation, to extend the time for payment or
arrange for payment in installments) or waive rights under any such
obligation and to compromise or settle counterclaims or setoffs with the
obligor under any such obligation; and

- 10 -

 

     (c) any and all of such proceeds of such collections paid to the
Secured Party, or any part thereof, (after deduction of the Secured Party’s
expenses of collection, including, without limitation, reasonable
attorneys’ fees and disbursements), shall be applied by the Secured Party
as provided in Section 7.10 hereof.

     7.4 Disposition of Collateral. If an Event of Default shall occur and be
continuing:

     (a) the Secured Party may direct Debtor to sell, assign, or otherwise
liquidate or dispose of all or from time to time any portion of the
Collateral, and Debtor shall do so, and the Secured Party may take
possession of the Proceeds of such Collateral. The Secured Party may direct
Debtor to direct that all Proceeds of such Collateral be paid directly to
the Secured Party or may permit the Proceeds of such Collateral to be paid
to Debtor and all such Proceeds consisting of cash, checks, or near-cash
items shall be held by Debtor in trust for the Secured Party, segregated
from other funds of Debtor in a separate deposit account containing only
Proceeds and shall forthwith upon receipt by Debtor, be turned over to the
Secured Party, in the same form received by Debtor (appropriately indorsed
or assigned by Debtor to the order of the Secured Party or in such other
manner as shall be satisfactory to the Secured Party); and

     (b) any and all such Proceeds received by the Secured Party (whether
from Debtor or otherwise), shall be applied by the Secured Party as
provided in Section 7.10 hereof.

     7.5 Debtor’s Accounts. If an Event of Default shall occur and be
continuing, the Secured Party may liquidate any securities held in any accounts of
Debtor and apply the proceeds thereof and any other amounts held in any accounts of
Debtor as provided in Section 7.10 hereof.

     7.6 Possession of Collateral. If an Event of Default shall occur and be
continuing, (a) the Secured Party may, personally or by agents or attorneys, immediately
retake possession of the Collateral (including the originals of all or any Accounts and
Account Records) or any part thereof, from Debtor or any other Person which then has
possession of any part thereof with or without notice or judicial process, and for that
purpose may enter upon Debtor’s premises where any of the Collateral is located and
remove the same and may make reasonable use in connection with such removal of any and
all services, supplies, aids, and other facilities of Debtor, and (b) upon three days’
notice to Debtor, Debtor shall, at its own expense, assemble the Collateral, including,
without limitation, the originals of all Account Records (or from time to time any
portion thereof) and make it available to the Secured Party by delivery to the Secured
Party at any location designated by the Secured Party which is reasonably convenient to
both parties, whether at the premises of Debtor or the Secured Party or elsewhere. Debtor
shall, at its sole expense, store and keep any Collateral so assembled at such place or
places pending further action by the Secured Party and while the Collateral shall be so
stored and kept, provide such guards and maintenance services as shall be reasonably
necessary to protect the same and to preserve and maintain the Collateral in good
condition. Debtor’s obligation to so assemble and deliver the Collateral is of the
essence of this Agreement and, accordingly, upon application to a

- 11 -

 

court of equity having jurisdiction, the Secured Party shall be entitled to a decree
requiring specific performance by the Debtor of such obligation.

     7.7 Disposition of the Collateral. If an Event of Default shall occur and
be continuing, the Secured Party may sell, assign, lease, give an option or options to
purchase, or otherwise dispose of the Collateral (or contract to do any of the
foregoing) under one or more contracts or as an entirety, and, to the extent permitted
by applicable law, without the necessity of gathering at the place of sale the property
to be sold, at public or private sale or sales, conducted by any officer, nominee or
agent of, or auctioneer or attorney for the Secured Party at any location of any third
party conducting or otherwise involved in such sale or any office of the Secured Party
or elsewhere and in general in such manner, at such time or times and upon such terms
and conditions and at such price as may be commercially reasonable, for cash or on
credit or for future delivery without assumption of any credit risk. Any of the
Collateral may be sold, leased, assigned, or options or contracts entered to do so, or
otherwise disposed of, in the condition in which the same existed when taken by the
Secured Party or after any overhaul or repair which may be commercially reasonable. Any
such disposition which shall be a private sale or other private proceeding shall be made
upon not less than ten days’ written notice to Debtor specifying the time after which
such disposition is to be made and the intended sale price or other consideration
therefor. Any such disposition which shall be a public sale shall be made upon not less
than ten days’ written notice to Debtor (which Debtor agrees to be commercially
reasonable) specifying the time and place of such sale and, in the absence of applicable
requirements of law to the contrary, shall be by public auction (which may, at the
option or the Secured Party, be subject to reserve), after publication of commercially
reasonable notice of such auction. To the extent permitted by applicable law, the
Secured Party may bid for and become the purchaser of the Collateral or any item
thereof, offered for sale in accordance with this Section without accountability to
Debtor (except to the extent of surplus money received) as provided below. In the
payment of the purchase price of the Collateral, the purchaser shall be entitled to have
credit on account of the purchase price thereof of amounts owing to such purchaser on
account of any of the Secured Obligations and any such purchaser may deliver notes,
claims for interest, or claims for other payment with respect to such Secured
Obligations in lieu of cash up to the amount which would, upon distribution of the net
proceeds of such sale, be payable thereon. Such notes, if the amount payable hereunder
shall be less than the amount due thereon, shall be returned to the holder thereof after
being appropriately stamped to show partial payment. Notwithstanding the foregoing, if
the Collateral or any portion thereof is perishable or threatens to decline speedily in
value or is of a type customarily sold in a recognized market only such notice as shall
be reasonably practicable shall be required.

     7.8 Recourse. Debtor shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Collateral are insufficient to satisfy the
Secured Obligations. Debtor shall also be liable for all reasonable expenses of the
Secured Party incurred in connection with collecting such deficiency, including, without
limitation, the reasonable fees and disbursements of any attorneys employed by the
Secured Party to collect such deficiency.

     7.9 Expenses; Attorneys’ Fees. Debtor shall reimburse the Secured Party for
all its reasonable expenses in connection with the exercise of its rights and remedies
hereunder, including, without limitation, reasonable attorneys’ fees and legal expenses
incurred by the Secured Party.

- 12 -

 

     7.10 Application of Proceeds. The proceeds of any disposition of
Collateral shall be
applied as follows:

	 	(a)	 	first, to payment or reimbursement of that portion
of the Obligations constituting fees, expenses and indemnities payable
to the Agent in its capacity as such;
	 
	 	(b)	 	second, pro rata to payment or reimbursement of that
portion of the Obligations constituting fees, expenses and indemnities
payable to the Lenders;
	 
	 	(c)	 	third, pro rata to payment of accrued interest on the Loans;
	 
	 	(d)	 	fourth, pro rata to payment of principal
outstanding on the Loans and Obligations owed to any Lender or
affiliate of any Lender under any Commodity Hedge Agreement or Rate
Management Transaction;
	 
	 	(e)	 	fifth, pro rata to any other Obligations;
	 
	 	(f)	 	sixth, to serve as cash collateral to be held by
the Agent to secure the LC Exposure; and
	 
	 	(g)	 	seventh, any excess, after all of the Obligations
shall have been indefeasibly paid in full in cash, shall be paid to
the Borrower or as otherwise required by any Governmental Authority.

     7.11 Limitation on Duties Regarding Preservation of Collateral. The Secured
Party’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 Secured Party deals with similar property for
its own account. The Secured Party shall have no obligation to take any steps to
preserve rights against prior parties to any Collateral. Except for matters constituting
gross negligence, neither the Secured Party nor any of its directors, officers,
employees, or agents shall be liable for failure to demand, collect, or realize upon all
or any part 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 the Debtor
or otherwise.

     7.12 Waiver of Claims. Except as otherwise provided in this Agreement,
Debtor hereby waives, to the extent permitted by applicable law, notice of and judicial
hearing in connection with the Secured Party’s taking possession or the Secured Party’s
disposition of any of the Collateral in accordance herewith, including, without
limitation, any and all prior notice and hearing for any prejudgment remedy or remedies
and any such right which the Debtor would otherwise have under the constitution or any
statute of the United States or any state, and Debtor hereby further waives, to the
extent permitted by law:

     (a) all damages occasioned by such taking of possession except any
damages which are the direct result of the gross negligence of the Secured
Party;

- 13 -

 

     (b) all other requirements as to the time, place, and terms of
sale or other requirements with respect to the enforcement of the rights of
the Secured Party hereunder;

     (c) demand of performance or other demand, notice of intent to demand
or accelerate, notice of acceleration, presentment, protest, advertisement,
or notice of any kind to or upon Debtor or any other Person, except as may
be required by the Credit Agreement; and

     (d) all rights of redemption, appraisement, valuation, diligence,
stay, extension, or moratorium now or hereafter in force under any
applicable law in order to stay or delay the enforcement of this Agreement,
including the absolute sale of the Collateral or any portion thereof, and
Debtor, for itself and all who may claim under it, insofar as it or they
now or hereafter lawfully may, hereby waives the benefit of all such laws.

     7.13 Discontinuance of Proceedings. In case the Secured Party shall have
instituted any proceeding to enforce any right, power, or remedy under this Agreement by
foreclosure, sale, entry, or otherwise, and such proceeding shall have been discontinued
or abandoned for any reason, then and in every such case, Debtor and the Secured Party
shall be returned to their former positions and rights hereunder with respect to the
Collateral subject to the security interest created under this Agreement, and all rights,
remedies, and powers of the Secured Party shall continue as if no such proceeding had
been instituted.

ARTICLE VIII

INDEMNITY

     8.1 INDEMNITY. (a) DEBTOR AGREES TO INDEMNIFY, REIMBURSE, AND HOLD THE
INDEMNITEES HARMLESS FROM ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, CLAIMS, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS
(INCLUDING REASONABLE ATTORNEYS’ FEES AND EXPENSES) (FOR THE PURPOSES OF THIS SECTION
ALL OF THE FOREGOING ARE COLLECTIVELY CALLED “EXPENSES”) OF WHATSOEVER KIND OR NATURE
WHICH MAY BE IMPOSED ON, ASSERTED AGAINST, OR INCURRED BY ANY OF SUCH INDEMNITEES IN ANY
WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR THE DOCUMENTS EXECUTED IN CONNECTION
HEREWITH OR IN ANY OTHER WAY CONNECTED WITH THE ADMINISTRATION OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THE ENFORCEMENT OF ANY OF THE TERMS OF OR THE PRESERVATION OF ANY
RIGHTS HEREUNDER, INCLUDING, WITHOUT LIMITATION, THOSE ARISING FROM THE NEGLIGENCE,
WHETHER SOLE OR CONCURRENT, OF ANY INDEMNITEE; PROVIDED THAT NO SUCH INDEMNITEE SHALL BE
INDEMNIFIED PURSUANT TO THIS SECTION FOR EXPENSES TO THE EXTENT ARISING FROM THE GROSS
NEGLIGENCE OF SUCH INDEMNITEE.

- 14 -

 

          (b) Debtor agrees that upon written notice by any such Indemnitee of any
assertion that could give rise to an Expense, Debtor shall assume full responsibility for
the defense thereof. Without limiting the application of part (a) of this Section, Debtor
agrees to pay or reimburse such Indemnitee on demand for any and all reasonable fees,
costs, and expenses of whatever kind or nature incurred in connection with the creation,
preservation, or protection of the Secured Party’s Liens on, and security interests in,
the Collateral, including, without limitation, all reasonable fees and taxes in
connection with the recording or filing of instruments and documents in public offices,
payment, or discharge of any taxes or Liens or security interests upon or in respect of
the Collateral, premiums for insurance with respect to the Collateral, all reasonable
expenses incurred in the custody, preservation, use, or operation of the Collateral when
Collateral is in the Secured Party’s possession, and all other reasonable fees, costs,
and expenses in connection with protecting, maintaining, or preserving the Collateral and
the Secured Party’s interest therein, whether through judicial proceedings or otherwise,
or in defending or prosecuting any actions, suits, or proceedings arising out of or
relating to the Collateral.

          (c) Without limiting the application of parts (a) or (b) of this Section, Debtor
agrees to pay, indemnify, and hold each Indemnitee harmless from and against any
Expenses which such Indemnitee may suffer, expend, or incur in consequence of or growing
out of any misrepresentation by any Debtor in this Agreement or in any statement or
writing contemplated by or made or delivered pursuant to or in connection with this
Agreement.

          (d) If and to the extent that the obligations of Debtor under this Section are
unenforceable for any reason, Debtor hereby agrees to make the maximum contribution to
the payment and satisfaction of such obligations which is permissible under applicable
law.

     8.2 Indemnity Obligations Secured by Collateral; Survival. Any amounts paid
by any Indemnitee as to which such Indemnitee has the right to reimbursement shall
constitute Secured Obligations secured by the Collateral. The indemnity obligations of
the Debtor contained in this Article VIII shall continue in full force and effect
notwithstanding the full payment and performance of the Secured Obligations and the
termination of this Agreement.

ARTICLE IX

MISCELLANEOUS

     9.1 No Waiver; Remedies Cumulative. No failure or delay on the part of the
Secured Party in exercising any right, power, or privilege hereunder and no course of
dealing between any Debtor and the Secured Party shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power, or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other right,
power, or privilege. A waiver by the Secured Party of any right or remedy hereunder on
any one occasion shall not be construed as a bar to any right or remedy which the
Secured Party would otherwise have on any future occasion. The rights and remedies
herein expressly provided are cumulative, may be exercised singly or concurrently and as
often and in such order as the Secured Party deems expedient, and are not exclusive of
any rights or remedies which the Secured Party would otherwise have whether by agreement
or now or hereafter existing under applicable law. No notice to or demand on Debtor in
any case shall entitle Debtor to any other or further notice or demand in similar or
other circumstances or

- 15 -

 

constitute a waiver of the rights of the Secured Party to any other or further
action in any circumstances without notice or demand.

     9.2 Termination; Release. When the Secured Obligations have been
indefeasibly paid and performed in full and the Commitment has terminated, this Agreement
shall terminate, and the Secured Party, at the request and sole expense of Debtor, will
execute and deliver to Debtor the proper instruments (including Uniform Commercial Code
termination statements) acknowledging the termination of this Agreement, and will duly
assign, transfer, and deliver to Debtor, without recourse, representation, or warranty of
any kind whatsoever, such of the Collateral as may be in possession of the Secured Party
and has not theretofore been disposed of, applied, or released.

     9.3 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each of which
when so executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.

     9.4 Marshalling. The Secured Party shall not be under any obligation to
marshall any assets in favor of Debtor or any other Person or against or in payment of
any or all of the Secured Obligations.

     9.5 Severability. In case any provision in or obligation under this
Agreement or the Secured Obligations shall be invalid, illegal, or unenforceable in any
jurisdiction, the validity, legality, and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall not in
any way be affected or impaired thereby.

     9.6 Financing Statement Filing. A photocopy or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in lieu of the
original to the extent permitted by applicable law.

     9.7 Notices and Other Communications. Except as to oral notices expressly
authorized herein, all notices, requests, and communications under this Agreement shall
be in writing (including by telecopy). Unless otherwise expressly provided herein, any
such notice, request, or communication shall be deemed to have been duly given or made
when provided in accordance with the terms of the Credit Agreement.

     9.8 Parties in Interest. This Agreement shall be binding upon and inure to
the benefit of Debtor, the Secured Party, and their respective legal representatives,
successors, and assigns. No other Person shall have any right, benefit, priority, or
interest hereunder or as a result hereof or have standing to require satisfaction of
provisions hereof in accordance with their terms, and any or all of such provisions may
be freely waived in whole or in part by the Secured Party at any time if the Secured
Party in its sole discretion deems it advisable to do so.

     9.9 Amendments. Neither this Agreement nor any provision hereof may be
amended, supplemented, modified, discharged, or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the amendment,
supplement, modification, discharge, or termination is sought.

- 16 -

 

     9.10 ENTIRE AGREEMENT. THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT
BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL SUPERSEDE ANY
PRIOR AGREEMENTS, WHETHER WRITTEN OR ORAL, BETWEEN THE PARTIES HERETO RELATING TO THE
SUBJECT HEREOF. FURTHERMORE, IN THIS REGARD, THIS AGREEMENT AND THE OTHER WRITTEN LOAN
DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS
OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.

     9.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAWS).

     9.12 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO,
ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT TO WHICH ANY DEBTOR IS A PARTY MAY BE LITIGATED, AT
THE SOLE DISCRETION AND ELECTION OF THE SECURED PARTY, IN COURTS HAVING SITUS IN
HOUSTON, HARRIS COUNTY, TEXAS. DEBTOR HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL,
STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS COUNTY, TEXAS, AND HEREBY WAIVES ANY
RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION
BROUGHT AGAINST IT BY THE SECURED PARTY IN ACCORDANCE WITH THIS SECTION.

- 17 -

 

     IN WITNESS WHEREOF, this Agreement is executed as of the date first above written.

	 	 	 
	 

	 	DEBTOR:
	 
	 	 
	 

	 	PRIMEENERGY CORPORATION
	 

	 	PRIMEENERGY MANAGEMENT
	 

	 	CORPORATION, PRIME OPERATING
	 

	 	COMPANY, EASTERN OIL WELL SERVICE
	 

	 	COMPANY, SOUTHWEST OIL FIELD
	 

	 	CONSTRUCTION COMPANY
	 

	 	EOWS MIDLAND COMPANY

	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Beverly A. Cummings
 

Beverly A. Cummings
	 	 
	 

	 	 	 	Executive Vice President, Treasurer, and	 	 
	 

	 	 	 	Chief Financial Officer	 	 

- 18 -

 

	 	 	 
	 

	 	SECURED PARTY:
	 
	 	 
	 

	 	GUARANTY BANK, FSB, as Agent

	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David M. Butler
 

David M. Butler
	 	 
	 

	 	 	 	Vice President	 	 

- 19 -

 

EXHIBIT A

	 	 	 
	Section 3.1:

	 	FILING LOCATIONS
	 
	 	 
	 

	 	Secretary of State of Delaware
	 
	 	 
	 

	 	Secretary of State of New York
	 
	 	 
	 

	 	Secretary of State of Texas
	 
	 	 
	 

	 	Secretary of State of West Virginia
	 
	 	 
	 

	 	County Clerk of Oklahoma County, Oklahoma

A-iexv10w23w3

 

EXHIBIT
10.23.3

 

AMENDED AND RESTATED SECURITY AGREEMENT

(Membership Pledge)

BY

PRIMEENERGY CORPORATION

IN FAVOR OF

GUARANTY BANK, FSB, as Agent

December 28, 2006

 

CREDIT FACILITY TO PRIMEENERGY CORPORATION

PRIMEENERGY MANAGEMENT CORPORATION

PRIME OPERATING COMPANY

EASTERN OIL WELL SERVICE COMPANY

SOUTHWEST OILFIELD CONSTRUCTION COMPANY

EOWS MIDLAND COMPANY

 

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	ARTICLE 1 DEFINITIONS AND INTERPRETATION	 	 	1	 
	 

	 	 	1.1	 	 	Terms Defined Above
	 	 	1	 
	 

	 	 	1.2	 	 	Terms Defined in Credit Agreement
	 	 	1	 
	 

	 	 	1.3	 	 	Additional Defined Terms
	 	 	2	 
	 

	 	 	1.4	 	 	Undefined Financial Accounting Terms
	 	 	2	 
	 

	 	 	1.5	 	 	Terms Defined in Texas Business and Commerce Code
	 	 	2	 
	 

	 	 	1.6	 	 	References
	 	 	2	 
	 

	 	 	1.7	 	 	Articles and Sections
	 	 	2	 
	 

	 	 	1.8	 	 	Number and Gender
	 	 	2	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 2 SECURITY INTEREST	 	 	3	 
	 

	 	 	2.1	 	 	Grant of Security Interest in Collateral
	 	 	3	 
	 

	 	 	2.2	 	 	Delivery of Collateral
	 	 	3	 
	 

	 	 	2.3	 	 	Power of Attorney
	 	 	3	 
	 
	ARTICLE 3 REPRESENTATIONS AND WARRANTIES	 	 	4	 
	 

	 	 	3.1	 	 	Status of Collateral
	 	 	4	 
	 

	 	 	3.2	 	 	No Material Misstatements
	 	 	4	 
	 

	 	 	3.3	 	 	Ownership and Liens
	 	 	4	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 4 COVENANTS AND AGREEMENTS	 	 	5	 
	 

	 	 	4.1	 	 	Payment of Assessments and Charges
	 	 	5	 
	 

	 	 	4.2	 	 	Delivery of Collateral
	 	 	5	 
	 

	 	 	4.3	 	 	Further Assurances
	 	 	5	 
	 

	 	 	4.4	 	 	Prohibited Liens and Filings
	 	 	5	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 5 RIGHTS AND REMEDIES	 	 	5	 
	 

	 	 	5.1	 	 	Remedies Upon Default
	 	 	5	 
	 

	 	 	5.2	 	 	Voting Rights, Dividends, Etc. Prior to Default
	 	 	6	 
	 

	 	 	5.3	 	 	Voting Rights, Dividends, Etc. After Default
	 	 	7	 
	 

	 	 	5.4	 	 	Proceeds
	 	 	7	 
	 

	 	 	5.5	 	 	Agent Duties
	 	 	8	 
	 

	 	 	5.6	 	 	The Agent’s Actions
	 	 	8	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE 6 MISCELLANEOUS	 	 	8	 
	 

	 	 	6.1	 	 	Transfer of Obligations and Collateral
	 	 	8	 
	 

	 	 	6.2	 	 	Cumulative Security
	 	 	9	 
	 

	 	 	6.3	 	 	Continuing Agreement
	 	 	9	 
	 

	 	 	6.4	 	 	Cumulative Rights
	 	 	9	 
	 

	 	 	6.5	 	 	Exercise of Rights
	 	 	9	 
	 

	 	 	6.6	 	 	Remedy and Waiver
	 	 	9	 
	 

	 	 	6.7	 	 	Non-Judicial Remedies
	 	 	9	 
	 

	 	 	6.8	 	 	Preservation of Liability
	 	 	10	 

- i -

 

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 

	 	 	6.9	 	 	Notices and Other Communications
	 	 	10	 
	 

	 	 	6.10	 	 	Parties in Interest
	 	 	10	 
	 

	 	 	6.11	 	 	Amendment and Waiver
	 	 	10	 
	 

	 	 	6.12	 	 	Invalidity
	 	 	10	 
	 

	 	 	6.13	 	 	Governing Law
	 	 	11	 
	 

	 	 	6.14	 	 	Jurisdiction and Venue
	 	 	11	 
	 

	 	 	6.15	 	 	Waiver of Rights to Jury Trial
	 	 	11	 
	 

	 	 	6.16	 	 	Entire Agreement
	 	 	11	 
	 

	 	 	6.17	 	 	Counterparts
	 	 	11	 

- ii -

 

AMENDED AND RESTATED SECURITY AGREEMENT

(MEMBERSHIP PLEDGE)

     THIS AMENDED AND RESTATED SECURITY AGREEMENT (Membership Pledge) (this “Security
Agreement”) dated as of December 28, 2006, is entered into by and between PRIMEENERGY CORPORATION,
a Delaware corporation (the “Pledgor”), and GUARANTY BANK, FSB, a federal savings bank as agent for
the benefit of the Lenders (the “Agent”).

W I T N E S S E T H:

     WHEREAS, pursuant to the terms and conditions of the Credit Agreement dated December
19, 2002, executed in connection with a revolving loan extended to PRIMEENERGY CORPORATION, et
al., by Agent and the Lenders, as amended by First Amendment dated June 1, 2003 and Second
Amendment dated September 22, 2003, as amended by Third Amendment to Credit Agreement dated
effective as of February 17, 2004, as amended by Fourth Amendment to Credit Agreement dated
December 28, 2004, as amended by Fifth Amendment to Credit Agreement dated March 18, 2005, and as
amended by Letter Amendments to Credit Agreement dated August 4, 2005, December 16, 2005 and May
12, 2006, as amended by Amended and Restated Credit Agreement dated December 28, 2006, as such
agreement may be amended, restated, or supplemented from time to time (the “Credit Agreement”),
the Agent and the Lenders have agreed to extend credit to or for the benefit of the Pledgor;

     WHEREAS, the Pledgor is the owner of the shares of issued and outstanding membership interest
described in Schedule I hereof (the “Securities”); and

     WHEREAS, the Pledgor and Agent entered into a Security Agreement (Membership Pledge) dated as
of June 6, 2006, and the parties hereto desire to amend and restate such Security Agreement
(Membership Pledge);

     WHEREAS, pursuant to the terms of the Credit Agreement, and as an inducement to the Agent and
the Lenders to extend credit to or for the benefit of the Pledgor pursuant to the Credit Agreement
the Pledgor has agreed to execute this Security Agreement in favor of the Agent for the benefit of
the Lenders;

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

ARTICLE 1

DEFINITIONS AND INTERPRETATION

     1.1 Terms Defined Above. As used in this Security Agreement, the terms
“Agent,” “Credit Agreement,”
“Pledgor,” “Security Agreement,” and “Securities” will have the
meanings indicated above.

     1.2
Terms Defined in Credit Agreement. Each capitalized term used but not defined
herein shall have the meaning assigned to such term in the Credit Agreement.

 

 

     1.3 Additional Defined Terms. As used in this Security Agreement, the following
terms will have the meanings indicated:

     (a) “Collateral” will mean the Securities and all certificates or agreements
representing or granting rights in the Securities; all dividends, cash, instruments and
other Property from time to time received, receivable or otherwise distributed in respect of
or in exchange for any or all of the Securities, including, without limitation, all
additional shares of stock of the entities listed on Schedule I from time to time acquired
by the Pledgor by way of stock dividend or stock split; the certificates representing such
additional shares; all dividends, cash, instruments or other Property from time to time
received, receivable or otherwise distributed in respect of or in exchange for any or all of
such additional shares; and all proceeds of any of the foregoing in this definition.

     (b) “Event of Default” shall mean any Event of Default, as defined in the
Credit Agreement, or the failure of the Pledgor to comply with Regulations G, T, U or X of
the Board of Governors of the Federal Reserve System, as amended.

     1.4 Undefined Financial Accounting Terms. Undefined financial accounting terms used
in this Security Agreement shall have the meanings assigned to such terms according to GAAP.

     1.5 Terms Defined in Texas Business and Commerce Code. Any term used herein that is
defined in the Texas Business and Commerce Code shall have the meaning assigned to such term
therein, unless the context otherwise requires or such term is otherwise defined herein.

     1.6 References. The words “hereby,” “herein,” “hereinabove,”
“hereinafter,” “hereinbelow,” “hereof,” “hereunder,” and words of similar import when used in this
Security Agreement shall refer to this Security Agreement as a whole and not to any particular
Article, Section, or provision of this Security Agreement. References in this Security Agreement
to Article or Section numbers are to such Articles or Sections of this Security Agreement unless
otherwise specified.

     1.7 Articles and Sections. This Security Agreement, for convenience only, has been
divided into Articles and Sections; and it is understood that the rights and other legal relations
of the parties hereto shall be determined from this instrument as an entirety and without regard to
the aforesaid division into Articles and Sections and without regard to headings prefixed to such
Articles or Sections.

     1.8 Number and Gender. Whenever the context requires, reference herein made to the
single number shall be understood to include the plural; and likewise, the plural shall be
understood to include the singular. Words denoting sex shall be construed to include the
masculine, feminine and neuter, when such construction is appropriate; and specific enumeration
shall not exclude the general but shall be construed as cumulative. Definitions of terms defined in
the singular or plural shall be equally applicable to the plural or singular, as the case may be,
unless otherwise indicated.

- 2 -

 

ARTICLE 2

SECURITY INTEREST

     2.1 Grant of Security Interest in Collateral. The Pledgor, for value
received, the receipt and sufficiency of which are hereby acknowledged, and to induce the Agent to
extend credit to or for the benefit of the Pledgor, hereby pledges to the Agent, and its successors
and assigns, and hereby grants to the Agent, and its successors and assigns, a first lien on and a
security interest in the membership interest described on Schedule I (“Collateral”) to secure the
Obligations.

     2.2 Delivery of Collateral. All certificates or instruments representing or
evidencing the Securities shall be delivered to and held by the Agent for the sole purpose of
possession of the Collateral or any portion thereof pursuant to this Security Agreement, and shall
be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments
of transfer or assignment in blank, all in form and substance satisfactory to the Agent. The Agent
shall at all times have actual possession of the Securities and shall be deemed to have possession
of any of the Collateral in transit to it or set apart for it.

     2.3 Power of Attorney. The Pledgor hereby irrevocably constitutes and appoints the
Agent and any authorized officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the
Pledgor and in the name of the Pledgor or in its own name, from time to time in the discretion of
the Agent, for the purpose of carrying out the terms of this Security Agreement, and without notice
to the Pledgor, to take any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of this Security
Agreement, including, without limitation, the following:

     (a) to transfer to or register any or all of the Collateral in the name of the Agent or
any of its nominees;

     (b) to exchange the certificates or instruments representing or evidencing the
Collateral for certificates or instruments of smaller or larger denominations;

     (c) upon the occurrence and during the continuance of any Event of Default, (i) to
receive payment of and receipt for any and all moneys, claims and other amounts due and to
become due at any time in respect of or arising out of any Collateral, (ii) to commence and
prosecute any suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and to enforce any other right in
respect of any Collateral, (iii) to defend any suit, action or proceeding brought against
the Pledgor with respect to any Collateral, (iv) to settle, compromise or adjust any suit,
action or proceeding described above and, in connection therewith, to give such discharges
or releases as the Agent may deem appropriate, and (v) to complete any blanks contained in
any instruments of transfer or assignment appended to or delivered with the certificates
representing the Securities; and

     (d) to exchange any of the Collateral for other Property upon reorganization,
recapitalization or other readjustment of any of the issuers of the Securities and in

- 3 -

 

connection therewith to deposit any of the Collateral with any committee or depository upon
such terms as the Agent may determine; and, subsequent to any Event of Default, to
exercise, at the option of the Agent, voting rights as to any of the Collateral;

all without notice and without liability except to account for Property actually received by the
Agent.

     The Pledgor hereby ratifies all that said attorney shall lawfully do or cause to be done
within the scope of the power of attorney granted hereunder. This power of attorney is a power
coupled with an interest and shall be irrevocable so long as any Obligation remains outstanding or
any Commitment exists. The powers conferred on the Agent hereunder are solely to protect the
interests of the Agent in the Collateral and shall not impose any duty upon it to exercise any
such powers. The Agent shall be accountable only for amounts that it actually receives as a result
of the exercise of such powers, and neither it nor any of its officers, directors, employees, or
agents shall be responsible to the Pledgor for any act or failure to act, except for gross
negligence.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

     To induce the Agent to enter into the Credit Agreement and to make Loans to or for the
benefit of the Pledgor, the Pledgor represents and warrants to the Agent (which representations
and warranties shall survive the delivery of this Security Agreement and the other Loan Documents)
that:

     3.1 Status of Collateral. All signatures on the certificates evidencing the
Securities are genuine or authorized; the transfer of the Securities by the Pledgor to the Agent
are effective; and the Pledgor knows of no fact that might impair the validity of the Securities.
The Securities (a) have been duly authorized, validly issued, drawn, made, and/or accepted, (b) are
genuine, validly outstanding, fully paid, and nonassessable, (c) were not issued in violation of
the preemptive rights of any Person or any agreement by which the Pledgor or any issuer of such
Collateral is bound, and (d) have not been materially altered.

     3.2 No Material Misstatements. No information, exhibit, or report furnished by the
Pledgor to the Agent in connection with the negotiation of this Security Agreement contained or
contains any material misstatement of fact or omitted to state a material fact or any fact
necessary to make the statements contained therein, in light of the circumstances in which they
were made, not misleading.

     3.3 Ownership and Liens. Except for the security interest in favor of the Agent, the
Pledgor owns (and at the time of transfer or delivery of the Collateral to the Agent owned or will
own) good and indefeasible title to the Collateral free and clear of any other security interests,
liens, adverse claims, or options; the Pledgor has (and at the time of transfer or delivery of the
Collateral to the Agent had or will have) full right, power, and authority to convey, assign,
transfer, and deliver the Collateral to the Agent and to grant a security interest in the
Collateral to the Agent in the manner provided herein.

- 4 -

 

ARTICLE 4

COVENANTS AND AGREEMENTS

     Unless agreed in writing by the Agent to the contrary, the Pledgor agrees, so long as any
Obligation remains outstanding or unpaid or any Commitment exists:

     4.1 Payment of Assessments and Charges. To pay all taxes, charges, liens and
assessments against the Collateral; and upon the failure of the Pledgor to do so, the Agent at its
option may, but will not be obligated to, pay any of them.

     4.2 Delivery of Collateral. That any and all (a) dividends paid or payable other than
in cash and all instruments and other property received, receivable or otherwise distributed in
respect of or in exchange for any Collateral, (b) dividends and other distributions paid or payable
in cash in respect of any Collateral in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital surplus or paid-in surplus, and
(c) cash paid, payable or otherwise distributed in respect of principal of, in redemption of or in
exchange for any Collateral, shall be forthwith delivered to the Agent to hold as Collateral for
the benefit of the Agent and shall, if received by the Pledgor, be received in trust for the
benefit of the Agent, be segregated from the other property or funds of the Pledgor, and be
forthwith delivered to the Agent as Collateral in the same form as so received (with any necessary
endorsement).

     4.3 Further Assurances. To promptly cure any defects in the execution and delivery of
this Security Agreement and execute, acknowledge, and deliver such other assurances and instruments
and take such other action as shall, in the opinion of the Agent, be necessary to fulfill the terms
of this Security Agreement and to confirm, perfect, and preserve the security interest created and
intended to be created hereby and to vest more completely in and assure to the Agent its rights
under this Security Agreement.

     4.4 Prohibited Liens and Filings. That it will not pledge, mortgage, or otherwise
encumber, create, or suffer a security interest to exist in any of the Collateral (other than in
favor of the Agent) or sell, assign, or otherwise transfer any of the Collateral to anyone other
than the Agent or file or permit to be filed any financing statement or other security instrument
with respect to the Collateral other than in favor of the Agent.

ARTICLE 5

RIGHTS AND REMEDIES

     5.1 Remedies Upon Default. Upon the occurrence and during the continuance of an Event
of Default, the Agent may, at its option, declare all Obligations immediately due and payable,
without presentment, demand, protest, notice of protest, default or dishonor, notice of intent to
accelerate maturity, notice of acceleration of maturity or other notice of any kind, all of which
are hereby expressly waived by the Pledgor, and may exercise any and all other remedies provided
by law or pursuant to the Loan Documents.

     (a) If all or any part of the Obligations shall become due and payable, the Agent may
then, or at any time thereafter, apply, set-off, collect, sell in one or more sales, or
otherwise dispose of, any or all of the Collateral, in its then condition or following any

- 5 -

 

commercially reasonable preparation or processing, in such order as the Agent may elect. Any
such sale may be made either at public or private sale at the place of business of the
Agent, any brokers’ board or securities exchange or elsewhere, either for cash or upon
credit or for future delivery, at such price as the Agent may deem fair. The Agent may be
the purchaser of any or all Collateral so sold and may hold the same thereafter in its own
right free from any claim of the Pledgor or right of redemption. No such purchase or holding
by the Agent shall be deemed a retention by the Agent in satisfaction of the Obligations.
All demands, notices, and advertisements, and the presentment of property at sale are hereby
waived. If, notwithstanding the foregoing provisions, any applicable provision of the
Uniform Commercial Code or other law requires the Agent to give reasonable notice of any
such sale or disposition or other action, ten days’ prior written notice shall constitute
reasonable notice. The Agent may require the Pledgor to assemble the Collateral and make it
available to the Agent at a place designated by the Agent that is reasonably convenient to
the Agent and the Pledgor. Any sale hereunder may be conducted by an auctioneer or any
officer or agent of the Agent.

     (b) In connection with the sale of Collateral which is stock or other investment
securities, the Agent must limit prospective purchasers to the extent deemed necessary or
advisable by the Agent to render such sale exempt from the registration requirements of the
Securities Act of 1933, as amended (the “Act”), and any applicable state securities laws.
No sale so made in good faith by the Agent shall be deemed not to be “commercially
reasonable” because so made; provided, however, that nothing in this Security Agreement
shall be deemed to impose any obligation whatsoever to file a registration statement under
the Act or any state securities law with respect to any sale of Collateral by the Agent.

     5.2
Voting Rights, Dividends, Etc. Prior to Default. So long as no Event of
Default shall have occurred and be continuing:

     (a) the Pledgor will be entitled to exercise any and all voting and other consensual
rights pertaining to the Collateral or any part thereof for any purpose not inconsistent
with the terms of this Security Agreement;

     (b) subject to the further provisions of this Security Agreement, the Pledgor shall be
entitled to receive and retain any and all dividends paid in respect of the Collateral;
provided, however, that any and all

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

- 6 -

 

     (3) cash paid, payable or otherwise distributed in respect of
principal of, in redemption of or in exchange for any Collateral,

shall be forthwith delivered to the Agent to hold as Collateral and shall, if received by
the Pledgor, be received in trust for the benefit of the Agent, be segregated from the other
property or funds of the Pledgor, and be forthwith delivered to the Agent as Collateral in
the same form as so received (with any necessary endorsement); and

     (c) the Agent shall execute and deliver (or cause to be executed and delivered) to the
Pledgor all such proxies and other instruments as the Pledgor may reasonably request for
the purpose of enabling the Pledgor to exercise the voting and other rights which it is
entitled to exercise pursuant to Section 5.2(a) above and to receive the dividends which it
is authorized to receive and retain.

     5.3
Voting Rights, Dividends, Etc. After Default. Upon the occurrence and during the
continuance of an Event of Default:

     (a) at the option of the Agent with notice to the Pledgor, all rights of the Pledgor to
exercise the voting and other consensual rights which it would otherwise be entitled to
exercise pursuant to Section 5.2(a) above and to receive the dividends which it would
otherwise be authorized to receive and retain pursuant to Section 5.2(b) above shall cease
and shall thereupon become vested in the Agent, who shall thereupon have the sole right to
exercise such voting and other consensual rights and to receive and hold as Collateral such
dividends; and

     (b) all dividends which are received by the Pledgor contrary to the provisions of
Section 5.3(a) above shall be received in trust for the benefit of the Agent, shall be
segregated from other funds of the Pledgor and shall be forthwith paid over to the Agent as
Collateral in the same form as so received (with any necessary endorsement).

     5.4 Proceeds. Prior to all or any part of the Obligations becoming due and payable as
specified in Section 5.1, all cash sums or other property received by the Agent on account of the
Collateral shall be held as Collateral. After all or any part of the Obligations shall become due
and payable as specified in Section 5.1, the proceeds of any sale or other disposition of the
Collateral and all sums received or collected by the Agent from or on account of the Collateral
shall be applied by the Agent as follows:

     (a) first, to payment or reimbursement of that portion of the Obligations constituting
fees, expenses and indemnities payable to the Agent in its capacity as such;

     (b) second, pro rata to payment or reimbursement of that portion of the Obligations
constituting fees, expenses and indemnities payable to the Lenders;

     (c) third, pro rata to payment of accrued interest on the Loans;

     (d) fourth, pro rata to payment of principal outstanding on the Loans and Obligations
owed to any Lender or affiliate of any Lender under any Commodity Hedge Agreement or Rate
Management Transaction;

- 7 -

 

     (e) fifth, pro rata to any other Obligations;

     (f) sixth, to serve as cash collateral to be held by the Agent to secure the LC
Exposure; and

     (g) seventh, any excess, after all of the Obligations shall have been
indefeasibly paid in full in cash, shall be paid to the Borrower or as otherwise required
by any Governmental Authority.

     5.5 Agent Duties. The Agent shall be under no duty whatsoever to make or give any
presentment, demand for performance, notice of nonperformance, protest, notice of protest, notice
of dishonor, or other notice or demand in connection with any Collateral or the Obligations, or to
take any steps necessary to preserve any rights against prior parties. The Agent shall not be
liable for failure to collect or realize upon any or all of the Obligations or Collateral, or for
any delay in so doing, nor shall the Agent be under any duty to take any action whatsoever with
regard thereto. The Agent shall use reasonable care in the custody and preservation of any
Collateral in its possession. The Agent shall have no duty to comply with any recording, filing,
or other legal requirements necessary to establish or maintain the validity, priority, or
enforceability of, or the rights of the Agent in or to, any of the Collateral.

     5.6 The Agent’s Actions. The Pledgor waives any right to require the Agent to
proceed against any Person, exhaust any collateral or pursue any other remedy in the power of the
Agent; waives any and all notice of acceptance of this Security Agreement or of creation,
modification, renewal, or extension for any period of any Obligations; and waives any defense
arising by reason of any disability or other defense of any guarantor or other Person primarily or
secondarily liable with respect to all or any portion of the Obligations (“Other Liable Party”), or
by reason of the cessation from any cause whatsoever of the liability of any Other Liable Party.
All dealings between the Pledgor and the Agent shall conclusively be presumed to have been had or
consummated in reliance upon this Security Agreement. Until all Obligations shall have been paid
and/or performed in full and the Commitment shall have terminated, the Pledgor (a) shall have no
right to subrogation, (b) waives any right to enforce any remedy that the Agent now has or may
hereafter have against any Other Liable Party, and (c) except as otherwise expressly provided in
this Security Agreement, waives any benefit of and right to participate in any collateral or
security whatsoever now or hereafter held by the Agent.

ARTICLE 6

MISCELLANEOUS

     6.1 Transfer of Obligations and Collateral. Subject to the terms of the Credit
Agreement, the Pledgor hereby agrees that the Agent may transfer any or all of the Obligations.
Upon any such transfer, the Agent may transfer its rights in the Collateral and shall be fully
discharged thereafter from all liability with respect to the Collateral so transferred, and the
transferee shall be vested with all rights, powers, and remedies of the Agent hereunder with
respect to Collateral so transferred. With respect to any Collateral not so transferred, the Agent
shall retain all rights, powers, and remedies hereby given. The Agent may at any time deliver any
or all of the Collateral to the Pledgor, whose receipt shall be a complete and full acquittance

- 8 -

 

for the Collateral so delivered, and the Agent shall thereafter be discharged from any liability
therefor.

     6.2 Cumulative Security. The execution and delivery of this Security Agreement in no
manner shall impair or affect any other security (by endorsement or otherwise) for the payment of
the Obligations. No security taken hereafter as security for payment of all or any portion of the
Obligations shall impair in any manner or affect this Security Agreement. All such present and
future additional security is to be considered as cumulative security.

     6.3 Continuing Agreement. This is a continuing agreement and the conveyance
hereunder shall remain in full force and effect and all the rights, powers, and remedies of the
Agent hereunder shall continue to exist until the Obligations shall be paid in full as the same
become due and payable, the Commitment has terminated, and the Agent, upon request of the Pledgor,
has executed a written termination statement, reassigned to the Pledgor, without recourse, the
Collateral and all rights and liens conveyed hereby and returned possession of the Collateral to
the Pledgor. Furthermore, it is contemplated by the parties hereto that there may be times when no
Obligations shall be owing. Notwithstanding such occurrences, this Security Agreement shall
remain valid and shall be in full force and effect as to subsequent Obligations provided that the
Agent has not executed a written termination statement and returned possession of the Collateral to
the Pledgor. Otherwise, this Security Agreement shall continue irrespective of the fact that the
liability of the Pledgor or any Other Liable Party may have ceased and notwithstanding the death or
incapacity of the Pledgor or any Other Liable Party or any other event or proceeding affecting the
Pledgor and/or any Other Liable Party.

     6.4 Cumulative Rights. The rights, powers, and remedies of the Agent hereunder shall
be in addition to all rights, powers, and remedies given by statute or rule of law and are
cumulative. The exercise of any one or more of the rights, powers, and remedies provided herein
shall not be construed as a waiver of any other rights, powers, and remedies. The Agent shall have
the rights, powers, and remedies of a secured party under the Texas Business and Commerce Code, as
amended.

     6.5 Exercise of Rights. Time shall be of the essence for the performance of any act
under this Security Agreement by the Pledgor, but neither the Agent’s acceptance of partial or
delinquent payments nor any forbearance, failure, or delay by the Agent in exercising any right,
power or remedy shall be deemed a waiver of any obligation of the Pledgor or any Other Liable Party
or of any right, power, or remedy of the Agent or preclude any other or further exercise thereof;
and no single or partial exercise of any right, power, or remedy shall preclude any other or
further exercise thereof or the exercise of any other right, power, or remedy.

     6.6 Remedy and Waiver. The Agent may remedy or waive any default hereunder without
waiving the default remedied or waiving any prior or subsequent default.

     6.7 Non-Judicial Remedies. The Agent may enforce its rights hereunder without prior
judicial process or judicial hearing. The Pledgor expressly waives, renounces, and knowingly
relinquishes any and all legal rights which might otherwise require the Agent to enforce its rights
by judicial process. In so providing for non-judicial remedies, the Pledgor recognizes and
concedes that such remedies are consistent with the usage of the trade, are

- 9 -

 

responsive to commercial necessity and are the result of bargain at arm’s length. Nothing herein is
intended to prevent the Agent or the Pledgor from resorting to judicial process at such party’s
option.

     6.8 Preservation of Liability. Neither this Security Agreement nor the exercise by the
Agent of (or the failure to so exercise) any right, power, or remedy conferred herein or by law
shall be construed as relieving the Pledgor or any Other Liable Party from full liability thereon
and for any deficiency thereon.

     6.9 Notices and Other Communications. Except as to verbal notices expressly
authorized herein, which verbal notices shall be confirmed in writing, all notices, requests, and
communications hereunder shall be in writing (including by telecopy). Unless otherwise expressly
provided herein, any such notice, request, demand, or other communication shall be deemed to have
been duly given or made when delivered by hand, or, in the case of delivery by mail, when deposited
in the mail, certified mail, return receipt requested, postage prepaid, or, in the case of telecopy
notice, when receipt thereof is acknowledged orally or by written confirmation report, addressed as
follows:

     (a)   if to the Agent, to:

Guaranty Bank, FSB

333 Clay Street, Suite 4400

Houston, Texas 77002

Attention: Kelly L. Elmore, III 

Telecopy: (713) 890-8868

     (b)   if to the Pledgor, to:

PrimeEnergy Corporation

One Landmark Square

Stamford, Connecticut 06901

Attention: Ms. Beverly A. Cummings

Telecopy: (203) 358-5786

Any party may, by proper written notice hereunder to the others, change the individuals or
addresses to which such notices to it shall thereafter be sent.

     6.10 Parties in Interest. All covenants and agreements herein contained by or on
behalf of the Pledgor or the Agent shall be binding upon and inure to the benefit of the Pledgor or
the Agent, as the case may be, and their respective legal representatives, successors, and assigns.

     6.11 Amendment and Waiver. This Security Agreement may not be amended nor may any of
its terms be waived except in writing duly signed by the party against whom enforcement of the
amendment or waiver is sought.

     6.12 Invalidity. If any provision of this Security Agreement is rendered or declared
illegal, invalid, or unenforceable by reason of any existing or subsequently enacted legislation or

- 10 -

 

by a judicial decision that has become final, the
 Pledgor and the Agent shall promptly meet and
negotiate substitute provisions for those rendered illegal, invalid, or unenforceable, but all of
the remaining provisions shall remain in full force and effect.

     6.13 
Governing Law. This Security Agreement shall be deemed to be a
contract made under and shall be construed in accordance with and governed by the laws of
the State of Texas without giving effect to principles thereof relating to conflicts of law,
provided, however, that Vernon’s Texas Civil Statutes, Article 5069, Chapter 15
(which regulates certain revolving credit loan accounts and revolving tri-party accounts) shall
not apply.

     6.14 
Jurisdiction and Venue. All actions or proceedings with respect to,
arising directly or indirectly in connection with, out of, related to, or from this
Security Agreement or any other Loan Document to which the Pledgor is a party
may be litigated, at the sole discretion and election of the agent, in courts having situs in
Houston, Harris County, Texas. The Pledgor hereby submits to the jurisdiction of any local, state,
or federal court located in Houston, Harris County, Texas, and hereby waives any rights it may
have to transfer or change the jurisdiction or venue of any litigation brought against it by the
agent in accordance with this section.

     6.15 
Waiver of Rights to Jury Trial. The Pledgor and the Agent hereby
knowingly, voluntarily, intentionally, irrevocably, and unconditionally waive all rights to
trial by jury in any action, suit, proceeding, counterclaim, or other litigation that relates to
or arises out of any of this security agreement or any other loan document or the acts or
omissions of the agent in the enforcement of any of the terms or provisions of this Security
Agreement or any other loan document or otherwise with respect thereto. The provisions of this
Section are a material inducement for the Agent entering into the Credit Agreement.

     6.16 
Entire Agreement. This Security Agreement constitutes the entire
Agreement between the parties hereto with respect to the subject hereof and shall supersede any
prior agreements, whether written or oral, between the parties hereto relating to the subject
hereof. Furthermore, in this regard, this Security Agreement and the other written loan
documents represent, collectively, the final agreement among the parties thereto and may not be
contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of such
parties. There are no unwritten oral agreements among such parties.

     6.17
Counterparts.
For the convenience of the parties, this Security Agreement
may be executed in multiple counterparts and by different parties hereto in separate counterparts,
each of which for all purposes shall be deemed to be an original and all of which together shall
constitute one and the same Security Agreement.

     IN WITNESS WHEREOF,
this Security Agreement is executed as of the date first above written.

- 11 -

 

	 	 	 	 	 
	 	PLEDGOR:

PRIMEENERGY CORPORATION

 	 
	 	By:   	/s/
Beverly A. Cummings 	 
	 	 	Beverly A. Cummings 	 
	 	 	Executive Vice President, Treasurer, and

Chief Financial Officer 	 
	 

- 12 -

 

	 	 	 	 	 
	 	AGENT AND LENDER: 

GUARANTY BANK, FSB 

 	 
	 	By:  	/s/
David M. Butler  	 
	 	 	David M. Butler  	 
	 	 	Vice President 	 
	 

- 13 -

 

SCHEDULE I

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

Schedule I - i

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