Document:

crr-ex104_31.htm

 

Exhibit 10.4

WARRANT

THIS SECURITY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.  THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN ACCORDANCE WITH ITS TERMS, INCLUDING THE TRANSFER RESTRICTIONS SET FORTH IN ARTICLE IV BELOW, AND IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION.

Warrant Certificate No.:  01

Original Issue Date:  March 2, 2017

This WARRANT dated as of March 2, 2017 (the “Warrant”), between CARBO Ceramics Inc., a Delaware corporation (the “Company”), and Wilks Brothers, LLC, a Texas limited liability company (the “Initial Holder” and the Initial Holder and any person who acquires this Warrant in accordance with the restrictions set forth herein, the “Holder”).

WHEREAS, the Company has entered into that certain Amended and Restated Credit Agreement, dated as of March 2, 2017, pursuant to which the Initial Holder has agreed to provide certain financing to the Company (the “Credit Agreement”).

WHEREAS, in connection with entry into the Credit Agreement, the Company has agreed to issue this Warrant to the Initial Holder, entitling the Initial Holder to purchase the number of shares of Common Stock set forth in Section 2.01, subject to adjustment as provided in, and subject to the other provisions of, this Warrant.

WHEREAS, in connection with entry into the Credit Agreement and the Warrant, the Company and the Initial Holder have entered into an agreement (the “Stockholder Agreement”), dated as of the date hereof pursuant to which the Initial Holder and the Company have agreed to certain other matters, including certain registration rights with respect to the Warrant Shares and that the Company shall request that the stockholders of the Company approve the issuance of 523,022 shares of Common Stock to the Initial Holder upon exercise of this Warrant in accordance with Section 312 of the New York Stock Exchange Listed Company Manual (such approval, the “Stockholder Approval”).

 

 

NOW, THEREFORE, each party agrees as follows for the benefit of the other party hereto: 

Article I

DEFINITIONS

Section 1.01. Definitions.

“Accredited Investor” has the meaning ascribed to such term in Regulation D under the Securities Act.

“Affiliate” means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with, such other Person; provided, however, that the Company, any of its subsidiaries, or any of the Company’s other controlled Affiliates, in each case, will not be deemed to be Affiliates of the Holder for purposes of this Warrant.  For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) when used with respect to any Person, means the possession, directly or indirectly, of the power to cause the direction of management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

“Beneficial Owner” or “Beneficially Own” have the meanings given to such terms in Rule 13d-3 under the Exchange Act as in effect on the Original Issue Date.

“Board” means the Board of Directors of the Company or any duly authorized committee thereof.

“Business Day” means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York generally are authorized or required by law or other governmental action to close.

“Capital Stock” of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, but excluding any debt securities convertible into such equity.

“Code” has the meaning set forth in Section 2.04(b).

“Common Stock” means collectively, the Company’s common stock, par value $0.01 per share. 

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

“Constituent Person” has the meaning set forth in Section 3.03.

“Credit Agreement” has the meaning set forth in the Preamble.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.  

“Exchange Property” has the meaning set forth in Section 3.03.

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“Exercise Date” means the day on which the Warrant is exercised pursuant to Section 2.03; provided, that if the date the exercise procedures set forth in Section 2.03 are satisfied is not a Business Day, then the Exercise Date will be deemed to be the immediately following Business Day.

“Exercise Price” has the meaning set forth in Section 2.01. 

“Expiration Date” has the meaning set forth in Section 2.02.

“Holder” has the meaning set forth in the Preamble.

“Initial Holder” has the meaning set forth in the Preamble. 

“Market Disruption Event” means the occurrence or existence for more than a one‐half hour period in the aggregate on any scheduled Trading Day for the Common Stock of any suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the stock exchange or otherwise) in the Common Stock or in any options, contracts or future contracts relating to the Common Stock, and such suspension or limitation occurs or exists at any time before 1:00 p.m. (New York City time) on such day.

“Market Price” means with respect to the Common Stock or any other security for which a Market Price must be determined, (x) the average closing price of a share of such securities as reported on the principal national securities exchange on which the shares of such securities are listed or admitted for trading, (y) if not listed or admitted for trading on any national securities exchange, the average of the closing bid and asked prices of a share of such securities in the over-the-counter market as reported by the Nasdaq National Market or any comparable system or (z) in all other cases, as determined in good faith by the Board of Directors of the Company, following the receipt of a valuation by an independent bank of national standing selected by the Board of Directors.  The Market Price shall be determined without reference to extended or after hours trading.  In the case of clause (x) or (y), the average closing price shall be averaged over a period of fifteen (15) consecutive Trading Days consisting of the day immediately preceding the day on which the “Market Price” is being determined and the fourteen (14) consecutive Trading Days prior to such day.

“Original Issue Date” means March 2, 2017.

“Person” includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and political subdivisions thereof, including any syndicate or group that would be deemed to be a “person” under Section 13(d)(3) of the Exchange Act.

“Permitted Transferee” has the meaning set forth in Section 4.01(a). 

“Regulation D” means Regulation D as promulgated under the Securities Act and any successor thereto as in effect from time to time. 

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“Reorganization Event” has the meaning set forth in Section 3.03. 

“Rule 144” means Rule 144 promulgated under the Securities Act and any successor thereto as in effect from time to time.

“SEC” means the U.S. Securities and Exchange Commission.

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

“Stockholder Agreement” has the meaning set forth in the Preamble.

“Stockholder Approval” has the meaning set forth in the Preamble.

“Trading Day” means a day during which (i) trading in Common Stock generally occurs and (ii) there is no Market Disruption Event; provided, that if the Common Stock (or other security for which a Market Price must be determined) is not admitted for trading or quotation on or by any exchange, bureau or other organization referred to in the definition of Market Price (excluding the last two sentences of that definition), Trading Day means any Business Day. 

“Transfer” by any Person means, with respect to the Warrant or any Warrant Shares, directly or indirectly, to sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, the Warrant or Warrant Shares Beneficially Owned by such Person or of any interest (including any voting interest) in the Warrant or Warrant Shares Beneficially Owned by such Person; provided, however, that, notwithstanding anything to the contrary in this Warrant, a Transfer shall not include (i) the exercise of the Warrant or (ii) the redemption or other acquisition of the Warrant by the Company. 

“Warrant” has the meaning given to such term in the Preamble.

“Warrant Exercise Notice” has the meaning set forth in Section 2.03.

“Warrant Shares” mean the shares of Common Stock for which the Warrant is exercisable or which have been issued upon exercise of the Warrant.

Section 1.02. Rules of Construction.  Wherever required by the context of this Warrant:

(a) the singular shall include the plural and vice versa; 

(b) the masculine gender shall include the feminine and neuter genders and vice versa;

(c) references to any agreement, document or instrument shall be deemed to refer to such agreement, document or instrument as amended, supplemented or modified from time to time; 

(d) all article, section, paragraph or clause references not attributed to a particular document shall be references to such parts of this Warrant;

(e) all exhibit references not attributed to a particular document shall be references to the exhibits to this Warrant;  

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(f) the word “or” is not exclusive;

(g) the words “including,” “includes,” “included” and “include” are deemed to be followed by the words “without limitation;” 

(h) the terms “herein,” “hereof” and “hereunder” and other words of similar import refer to this Warrant as a whole and not to any particular section, paragraph or subdivision; 

(i) the article, section, paragraph and clause captions herein are for convenience of reference only, do not constitute part of this Warrant and will not be deemed to limit or otherwise affect any of the provisions hereof; and

(j) all accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles in the United States.

Article II

EXERCISE AND EXPIRATION TERMS 

Section 2.01. Exercise.  

(a) From and after the Original Issue Date, this Warrant shall entitle the Holder to purchase (subject to the terms and conditions contained herein, including Section 2.01(b)) 523,022 shares of Common Stock at a price of $14.91 per share of Common Stock (the “Exercise Price”), in each case subject to adjustment pursuant to Article III‎.

(b) Notwithstanding anything to the contrary contained herein, until receipt of the Stockholder Approval the Holder shall not be entitled to exercise this Warrant to the extent that the number of shares of Common Stock to be purchased upon such exercise, plus the number of shares of Common Stock purchased on any prior exercise of this Warrant, exceeds 271,414 shares of Common Stock‎.  

(c) The Warrant shall be exercisable at the option of the Holder at any time from and after the Original Issue Date and on or prior to the Expiration Date.

Section 2.02. Expiration of the Warrant.  The Warrant shall expire at 11:59 p.m., New York City time, on December 31, 2022 (the “Expiration Date”), and the Warrant may not be exercised thereafter.  

Section 2.03. Manner of Exercise.  

(a) The Warrant may be exercised by the surrender to the Company at the office of the Company of this Warrant together with the form of election attached hereto as Exhibit A (the “Warrant Exercise Notice”) duly filled in and signed by the Holder, stipulating the applicable number of Warrant Shares to be exercised, the manner of payment of the Warrant together with payment to the Company of the aggregate Exercise Price due in respect of such exercise as provided in the immediately following sentence.  Such payment shall be made, at the option of the Holder, in cash or by certified or official bank check payable to the order of the Company, or by wire transfer of funds to an account designated by the Company for such purpose, in an 

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amount equal to the product of (A) the Exercise Price as of the Exercise Date and (B) the number of Warrant Shares to be exercised as set forth in such Warrant Exercise Notice.  The rights represented by the Warrant shall be exercisable at the election of the Holder either in full at any time or from time to time in part.  Notwithstanding anything to the contrary in this Warrant, a Warrant Exercise Notice will become irrevocable when executed and delivered to the Company.

(b) Unless the purchase rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, at the time of delivery of the Warrant Shares being issued in accordance with Section 2.04 hereof, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unexpired and unexercised Warrant Shares called for by this Warrant.  Such new Warrant shall in all other respects be identical to this Warrant.

Section 2.04. Issuance of Warrant Shares.  

(a) Subject to the other provisions of this Warrant, no later than the third Business Day following the Exercise Date of the Warrant, the Company shall issue and cause the Company’s stock transfer agent to countersign and deliver to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate for the number of Warrant Shares so purchased upon the exercise of such Warrant, together with any cash to be paid in respect of any fractional Warrant Shares pursuant to Section 2.05; provided, however, that, at the Company’s election, the Company may deliver such Warrant Shares in uncertificated form.  The Person in whose name any Warrant Share is to be issued upon exercise of the Warrant in accordance with its terms will be deemed to become the holder of record of such Warrant Share as of the related Exercise Date.

(b) The Company shall pay any and all documentary, stamp and similar issue or transfer tax due on the issuance of shares of Common Stock upon the exercise of the Warrant, provided, that the Holder of the Warrant shall pay any tax or governmental charge that may be imposed with respect to any applicable withholding or any tax which is due because the Holder requests any such shares of Common Stock to be issued in a name other than the Holder’s name if such taxes would not have been due had such shares of Common Stock been issued in the Holder’s name.  Notwithstanding anything to the contrary, if the Company is required to pay withholding taxes or backup withholding on or with respect to any deemed (or constructive) distribution on behalf of the Holder of the Warrant under Section 305(c) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) (including as a result of an adjustment pursuant to Article III or the lack thereof), the Company may, at its option, set off such payments against subsequent deliveries of, or with respect to, the Warrant.

Section 2.05. Fractional Warrant Shares.  Notwithstanding anything to the contrary in this Warrant, the Company shall not be required to issue fractional Warrant Shares on the exercise of the Warrant.  If any fraction of a Warrant Share would, except for the provisions of this Section 2.05, be issuable upon the exercise of the Warrant, the Company shall, in lieu of issuing fractional shares, either (i) pay an amount in cash equal to the Market Price per Warrant Share on the Exercise Date, multiplied by such fraction, computed to the nearest whole cent or (ii) deliver an additional whole share of Common Stock.

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Section 2.06. Reservation and Authorization of Warrant Shares.  

(a) At any time that the Warrant is outstanding, the Company shall take all lawful action within its control to reserve a sufficient number of authorized but unissued shares of Common Stock to satisfy the exercise requirements of the Warrant (giving effect to any adjustments to the number of shares of Common Stock to be issued upon exercise of the Warrants pursuant to Article III). 

(b) Before taking any action which would cause an adjustment pursuant to Article III to reduce the Exercise Price below the then-par value of the Common Stock, the Company shall use its commercially reasonable efforts to take any and all corporate action which may, in the opinion of its counsel (which may be counsel employed by the Company), be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock at the Exercise Price as so adjusted.

(c) The Company covenants that all Warrant Shares which may be issued upon exercise of the Warrant shall, upon issue, be fully paid, nonassessable, free of preemptive rights, free from all taxes and free from all liens, charges and security interests created by the Company with respect to the issue thereof (other than restrictions arising under applicable securities laws or liens created by the Holder).

Section 2.07. Stock Exchange Listing.  The Company shall from time to time use its commercially reasonable efforts to take all actions that may be necessary so that the Warrant Shares, after their issuance upon the exercise of the Warrant, will be listed on the principal securities exchange or other market within the United States of America, if any, on which other shares of Common Stock are then listed (including all actions that may be required under any federal or state law now or in the future applicable to any such listing or any applicable governing rule or regulation of such securities exchange or other market).

Section 2.08. Replacement of Warrant on Loss. Upon receipt of evidence of the loss, theft, destruction or mutilation of this Warrant and upon delivery of an indemnity, in each case reasonably satisfactory to the Company and, in case of mutilation, upon surrender of such Warrant for cancellation to the Company, the Company shall execute and deliver to the Holder, in lieu hereof, a new Warrant of like tenor and exercisable for an equivalent number of Warrant Shares as the Warrant so lost, stolen, mutilated or destroyed; provided, that, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation.

Article III

ANTIDILUTION AND RELATED PROVISIONS

Section 3.01. Adjustment for Change In Capital Stock.  

(a) Excluding distributions covered by Section 3.01(b), if the Company (i) pays a dividend or makes a distribution on any class of its Common Stock in shares of any class of its Common Stock; (ii) subdivides its outstanding shares of any class of Common Stock into a greater number of shares; (iii) combines its outstanding shares of any class of Common Stock into a smaller number of shares; or (iv) makes a distribution on any class of its Common Stock in 

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shares of its Capital Stock (other than such class of Common Stock) or in the form of any other security (including, without limitation, any rights, options or warrants to acquire any security); then, the Exercise Price and number and class of Warrant Shares to be issued for the Warrant shall be proportionately adjusted and/or changed such that the Holder of the Warrant shall be entitled to receive the aggregate number and kind of shares of Common Stock, Capital Stock or other securities which the Holder would have owned or would have been entitled to receive if the Warrant had been exercised immediately prior to such action.  Distributions or adjustments pursuant to this Section 3.01(a) shall be made successively whenever any event listed in (i) – (iv) above shall occur.  Distributions and adjustments to the Warrant shall become effective immediately after the effective date of the related action or event.

(b) If the Company at any time or from time to time after the date hereof shall distribute to all holders of its Common Stock rights, options, warrants or other securities exercisable for or convertible into Common Stock at a price per share of Common Stock less than the Market Price of the Common Stock on the record date for such distribution, then, in each case, the relevant Exercise Price shall be adjusted in accordance with the following formula:

E2 = E1 x [ [O + (N x P)] ÷ (O + N)]

                    M 

where:

E2 = the adjusted Exercise Price.

E1 = the current Exercise Price.

O = the number of shares of Common Stock outstanding on the record date for such distribution.

N = the number of additional shares of Common Stock issuable pursuant to such rights, options, warrants or other securities.

P = the exercise price per share of the additional shares of Common Stock issuable pursuant to such rights, options, warrants or other securities.

M = the Market Price of the Common Stock on the record date for such distribution.

The adjustment shall be made successively whenever any such options, warrants or other rights (however classified) are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive the options, warrants or other rights (however classified). If at the end of the period during which such rights, options or warrants are exercisable, not all options, warrants or other rights (however classified) shall have been exercised, the Exercise Price shall be immediately readjusted to what it would have been if "N" in the above formula had been the number of shares actually issued.

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Section 3.02. When No Adjustment Required.  

(a) No other adjustments are required to be made under this Article III other than as expressly specified herein, including the amount of any dividend or distribution in cash or other assets (other than Common Stock or Capital Stock pursuant to Section 3.01) or any issuance of Common Stock or other interests exchangeable for or convertible into Common Stock.

(b) No adjustment shall be made to the Exercise Price or the number and class of Warrant Shares to be issued for the Warrant for any event listed in (i) – (iv) of Section 3.01(a) if the Company makes provisions for the Holder to participate in such transaction without exercising the Warrant on a basis and with notice that the Board determines in good faith to be fair and appropriate. 

(c) If the Company takes a record of the holders of Common Stock for the purpose of entitling them to receive a dividend or other distribution, and thereafter (and before the dividend or distribution has been paid or delivered to stockholders) legally abandons its plan to pay or deliver such dividend or distribution, then no adjustment to the Exercise Price or the number and class of Warrant Shares to be issued for the Warrant then in effect shall be required by reason of the taking of such record.

Section 3.03. Reorganization Events.

(a) In the event of any reclassification, recapitalization or reorganization of the Common Stock (other than in connection with an event to which Section 3.01 applies) or any statutory exchange, merger, consolidation or other similar business combination of the Company with or into another Person, or the sale of all or substantially all of the Company’s assets, pursuant to which, in any such case, the Common Stock is changed or converted into, or exchanged for, or entitled to receive, cash, securities or other property of the Company or another Person (each of which is referred to as a “Reorganization Event”), the Warrant will, without the consent of the Holder and subject to Section 3.03(b), remain outstanding, but shall become exercisable for the number, kind and amount of securities, cash and other property (the “Exchange Property”) that the Holder of the Warrant would have received in such Reorganization Event had the Holder exercised the Warrant into the applicable number of shares of Common Stock immediately prior to the effective date of the Reorganization Event.  The Company shall not affect any such Reorganization Event unless prior to the consummation thereof, the successor entity (if other than the Company) resulting from such transaction or the entity purchasing such assets assumes by written instrument the obligation to deliver to the Holder such Exchange Property as, in accordance with the foregoing provisions, such Holder may be entitled to acquire.  For this purpose,

(i) if the Reorganization Event provides for different treatment of Common Stock held by the Person (other than the Company) that is a party to such Reorganization Event (any such Person, a “Constituent Person”), or an Affiliate of a Constituent Person, the Holder shall be deemed to not be a Constituent Person or an Affiliate of a Constituent Person; and

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(ii) if the kind or amount of securities, cash and other property receivable upon such Reorganization Event is not the same for each share of Common Stock held immediately prior to such Reorganization Event (other than shares held by a Constituent Person or an Affiliate thereof), the kind and amount of securities, cash and other property receivable upon such Reorganization Event will be deemed to be the weighted average of the types and amounts of consideration received by the holders of Common Stock (other than the Constituent Person and its Affiliates).

(b) Successive Reorganization Events.  The provisions of Section 3.03(a) shall similarly apply to successive Reorganization Events and the provisions of Article III shall apply to any securities received by the holders of the Common Stock in any such Reorganization Event.

Section 3.04. Notice of Certain Transactions.  In the event that (a) the Board authorizes any of the actions listed in Section 3.01(b) or in clauses (i) – (iv) of Section 3.01(a) or (b) the Company enters into a binding agreement for a Reorganization Event, the Company shall send to the Holder a notice of such action or agreement.  Such notice shall specify the record date (if applicable) for such action, or the date such action is to take place and the date of participation therein by the holders of Common Stock, if any such date is to be fixed, and shall briefly indicate the effect, if any, of such action on the Common Stock and the Warrant and the manner in which any election to be made by the Holder shall be notified to the Company.  Such notice shall be given at least ten (10) Business Days prior to any applicable record date or the date of the taking of such proposed action or the date of participation therein by the holders of Common Stock, whichever shall be the earlier.

Section 3.05. Stockholder Rights Plans.  To the extent the Company has a rights plan in effect upon exercise of the Warrant, the Holder shall receive, in addition to any shares of Common Stock issuable upon such exercise, the associated rights issued under such rights plan unless, prior to exercise, the rights have separated from the Common Stock, in which case, the Company shall distribute to the Holder the number of such rights as the Holder would have been entitled to receive if the Warrant had been exercised immediately prior to such separation, subject to readjustment in the event of the expiration, termination or redemption of such rights.  In lieu of any such adjustment, the Company may amend such applicable rights plan to provide that upon exercise of Warrant the Holder will receive, in addition to the Common Stock issuable upon such conversion, the rights which would have attached to such Common Stock if the rights had not become separated from the Common Stock under such applicable rights plan. 

Article IV

TRANSFERS

Section 4.01. Transfer Restrictions Generally.  

(a) The Holder may, subject to compliance with the terms and conditions of the Stockholder Agreement and applicable law, Transfer the Warrant (in whole, but not any portion thereof) without the Company’s prior written consent to any Person that, pursuant to an instrument reasonably acceptable to the Company, including, if required by the Company, an opinion of its counsel reasonably satisfactory to the Company to the effect that such transfer is exempt from the registration requirements of the Securities Act, agrees to be bound by the 

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provisions of this Warrant as if it were the Holder hereunder (a “Permitted Transferee”).  Any purported Transfer that does not comply with all applicable terms of this Warrant shall be null and void and of no force or effect, and the Company shall not recognize or be bound by any such purported Transfer.  The Company may require payment of a sum sufficient to cover any transfer tax, assessments or similar governmental charge required to be paid in connection with any permitted Transfer of the Warrant.

(b) Notwithstanding the foregoing, the Initial Holder or any Permitted Transferee thereof may, upon not less than five (5) Business Days prior written notice to the Company, create a security interest, lien or charge on the Warrant, or with respect to the Warrant, in favor of a financial institution in the ordinary course of business, which security interest, lien or charge shall not be deemed to constitute a “Transfer” subject to the restrictions on Transfers in Section 4.01(a) and this Warrant may thereafter be Transferred to such financial institution solely in connection with an exercise of remedies by such financial institution.  Such financial institution shall be subject to all terms and conditions of this Warrant (including the transfer restrictions set forth in this Article IV).

Section 4.02. Compliance with the Securities Act.  

(a) Unless issued pursuant to an effective registration statement, all Warrant Shares issued upon exercise of the Warrant shall bear a legend in substantially the following form:

“THIS SECURITY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. 

THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (I) TO THE COMPANY, (II) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (III) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (IV) OTHERWISE IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND, IN EACH OF CASES (I) THROUGH (IV), IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.” 

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(b) In connection with a Transfer of Warrant Shares pursuant to clause (II) in the legend set forth in Section 4.02(a), the Company shall promptly cause the legend to be removed from any such Warrant Shares upon delivery by the holder of such Warrant Share(s) to the Company and/or and the transfer agent for such shares of Common Stock such legal opinions, certificates or other documentation or evidence as may reasonably be required by either of them to determine that such transfer complies with the Securities Act and other applicable U.S. securities laws.

(c) Representations of the Holder. In connection with the issuance of the Warrant, the Holder specifically represents, as of the date hereof, to the Company by acceptance of the Warrant as follows:  

(i) The Holder acknowledges that the offer and sale of the Warrant and the Warrant Shares to be issued upon exercise thereof have not been registered under the Securities Act or under any state securities laws and agrees that it will not sell or otherwise dispose of any of the Warrant or Warrant Shares issued pursuant to the Warrant, except in compliance with the registration requirements or exemption provisions of the Securities Act and any other applicable securities laws.  

(ii) The Holder is an Accredited Investor.  The Holder is acquiring the Warrant and the Warrant Shares to be issued upon exercise thereof for investment for its own account and not with a view towards, or for resale in connection with, the public sale or distribution of the Warrant or the Warrant Shares.

(iii) The Holder acknowledges that it can bear the economic and financial risk of its investment for an indefinite period, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Warrant and the Warrant Shares.  The Holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant and the business, properties, prospects and financial condition of the Company.

Article V

MISCELLANEOUS

Section 5.01. Rights of the Holder.  Except as expressly contemplated by Section 3.04 hereof, nothing contained in this Warrant shall be construed as conferring upon the Holder the right to (i) receive notice of or vote at any meeting of the stockholders, (ii) consent to any action of the stockholders, (iii) receive notice of any other proceedings of the Company, (iv) without limiting the provisions of Article III, receive any cash dividends, stock dividends, allotments or rights or other distributions paid, allotted or distributed or distributable to the holders of Common Stock prior to, or for which the relevant record date precedes, the date of the exercise of the Warrant or (v) exercise any other rights whatsoever as stockholders of the Company.

Section 5.02. Termination.  This Warrant shall terminate upon the earlier to occur of (i) the date on which all of the Warrant Shares underlying the Warrant have been exercised, exchanged or converted into shares of Common Stock and (ii) the date on which the Warrant has 

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expired pursuant to the terms of Section 2.02.  Nothing herein shall relieve any party from any liability for the breach of any of the agreements set forth in this Warrant prior to any such termination.

Section 5.03. Amendments and Waivers.  Except as otherwise provided herein, no modification, amendment, restatement, amendment and restatement, or waiver of any provision of this Warrant shall be effective unless executed by the Company and the Holder.  No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

Section 5.04. Successors, Assigns and Permitted Transferees.  This Warrant shall bind and inure to the benefit of and be enforceable by the parties hereto and their respective successors and permitted assigns.  Except as contemplated by Section 4.01, none of the parties may assign any of their rights and delegate any of their obligations hereunder without the prior written consent of the other parties.  Any purported assignment in violation of this Section 5.04 shall be null and void.

Section 5.05. Notices.  Any notice, request, instruction or other document to be given hereunder by any party to the other will be in writing and will be deemed to have been duly given (a) on the date of delivery if delivered personally or by facsimile or e-mail, upon confirmation of receipt, (b) on the first Business Day following the date of dispatch if delivered by a recognized next-day courier service or (c) on the third Business Day following the date of mailing if sent overnight by registered or certified mail, return receipt requested, postage prepaid.  Any notice received on a day that is not a Business Day or after 5:00 pm Eastern time on any day shall be deemed received on the next following Business Day.  All notices hereunder shall be sent as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice.

	
 
	
(a)
	
If to the Holder:

Wilks Brothers, LLC

17010 IH-20

Cisco, TX 76437

	
Attention:
	
 
	
Morgan Neff

	
 
	
 
	
Matthew Wilks

	
Facsimile:
	
 
	
(817) 850-3698

	
Email:
	
 
	
MNeff@wilksbrothers.com

	
 
	
 
	
MWilks@ie-llc.net

with a copy to (which copy alone shall not constitute notice):

Brown Rudnick LLP

7 Times Square

New York, New York 10036

Attention:     John F. Storz

Facsimile:    (212) 209-4801

13

 

Email:       jstorz@brownrudnick.com

(b)If to the Company:

CARBO Ceramics Inc.

575 North Dairy Ashford, Suite 300

Houston, Texas 77079

Attention:     Ernesto Bautista III

Facsimile: (281) 931-8302

Email: ernesto.bautista@carboceramics.com 

with a copy to (which copy alone shall not constitute notice):

Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, New York 10006
Attention:     Christopher E. Austin
Facsimile:     (212) 225‐3999
Email:           caustin@cgsh.com

Each party hereto may designate by written notice to the other parties hereto additional or different addresses for subsequent notices or communications. 

Section 5.06. Further Assurances.  At any time or from time to time after the Original Issue Date, the parties hereto agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby and to otherwise carry out the intent of the parties hereunder.

Section 5.07. Entire Agreement.  Except as otherwise expressly set forth herein, this Warrant together with the Credit Agreement and the Stockholder Agreement embody the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, that may have related to the subject matter hereof in any way.  

Section 5.08. Delays or Omissions.  It is agreed that no delay or omission to exercise any right, power or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Warrant, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach, default or noncompliance thereafter occurring.  It is further agreed that any waiver, permit, consent or approval of any kind or character on the part of any party hereto of any breach, default or noncompliance under this Warrant or any waiver on such party’s part of any provisions or conditions of this Warrant, must be in writing and shall be effective only to the extent specifically set forth in such writing.  All remedies, either under this Warrant, by law or otherwise afforded to any party shall be cumulative and not alternative.

14

 

Section 5.09. Governing Law; Jurisdiction; Waiver of Jury Trial.

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

(b) All actions and proceedings arising out of or relating to this Warrant (whether in contract or tort or by statute or otherwise) shall be heard and determined in the Court of Chancery of the State of Delaware located in the City of Wilmington, or, in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, the federal courts of the United States of America located in the City of Wilmington in the State of Delaware; and the Company and the Holder hereby irrevocably submit to the exclusive jurisdiction and venue of such courts in any such action or proceeding and irrevocably waive the defense of an inconvenient forum or lack of jurisdiction to the maintenance of any such action or proceeding.  The Company and the Holder agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable law.

(c) THE COMPANY AND THE HOLDER ACKNOWLEDGE AND AGREE THAT ANY ACTION OR PROCEEDING ARISING OUT OF, IN CONNECTION WITH OR RELATING TO THIS WARRANT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER IN CONTRACT OR TORT OR BY STATUTE OR OTHERWISE) IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF SUCH ACTION OR PROCEEDING.  EACH PARTY HERETO CERTIFIES AND ACKNOWLEDGES THAT:  (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF SUCH ACTION OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER; (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER; (C) IT MAKES THIS WAIVER VOLUNTARILY AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS WARRANT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 5.09.

Section 5.10. Severability.  Whenever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Warrant shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. 

Section 5.11. Enforcement.  Each party hereto acknowledges that money damages would not be an adequate remedy in the event that any of the covenants or agreements in this Warrant are not performed in accordance with its terms, and it is therefore agreed that in addition to and without limiting any other remedy or right it may have, the non-breaching party will have the right to an injunction, temporary restraining order or other equitable relief in any court of 

15

 

competent jurisdiction enjoining any such breach and enforcing specifically the terms and provisions hereof, without any requirement to provide security or post a bond.

Section 5.12. Titles and Subtitles.  The titles of the sections and subsections of this Warrant are for convenience of reference only and are not to be considered in construing this Warrant.

Section 5.13. No Third-Party Beneficiaries.  This Warrant shall be binding upon and inure solely to the benefit of each party hereto and its successors and permitted assigns, and nothing in this Warrant, express or implied, is intended to or shall be construed to confer upon any other Person any legal or equitable rights, benefits or remedies of any nature whatsoever under or by reason of this Warrant.  This Warrant may be amended or terminated, and any provision of this Warrant may be waived, in accordance with the terms hereof without the consent of any Person other than the parties hereto.

Section 5.14. Counterparts; Facsimile Signatures. This Warrant may be executed in two or more counterparts and delivered by facsimile, portable document format or other electronic transmission with the same effect as if all signatory parties had signed and delivered the same original document, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 

[Signature page follows.]

 

 

 

16

 

IN WITNESS WHEREOF, the parties have caused this Warrant to be duly executed as of the date first written above.

 

	
CARBO Ceramics Inc.

	
 

	
By:
	
 
	
/s/ Ernesto Bautista III

	
Name:
	
 
	
Ernesto Bautista III

	
Title:
	
 
	
Vice President and Chief Financial Officer

	
 
	
 
	
 

	
Wilks Brothers, LLC

	
 
	
 
	
 

	
By:
	
 
	
/s/ Morgan D. Neff

	
Name:
	
 
	
Morgan D. Neff

	
Title:
	
 
	
Senior Portfolio Manager

	
 
	
 
	
 

	
By:
	
 
	
/s/ Matthew Wilks

	
Name:
	
 
	
Matthew Wilks

	
Title:
	
 
	
Portfolio Manager and Vice President of Capital Investments

 

 

 

Signature Page to Warrant

 

EXHIBIT A

FORM OF ELECTION TO PURCHASE WARRANT SHARES

(to be executed only upon exercise of the warrant)

CARBO Ceramics inc.

The undersigned hereby irrevocably elects to exercise the Warrant, dated as of March 2, 2017, by and between CARBO Ceramics Inc. and Wilks Brothers, LLC (the “Warrant”), for _____________ shares of common stock, par value $0.01 per share (the “Common Stock”) at the Exercise Price in effect on the Exercise Date, and otherwise on the terms and conditions specified in the Warrant, and the undersigned hereby surrenders the Warrant and all right, title and interest therein to CARBO Ceramics Inc. (subject to Section 2.03(b) of the Warrant) and directs that the shares of Common Stock deliverable upon the exercise of the Warrant be registered or placed in the name and at the address specified below and delivered thereto.

In connection with the foregoing exercise, the undersigned hereby elects to pay the Exercise Price therefor as follows (check one):

	
 
	
☐
	
in cash;

	
 
	
☐
	
by certified or official bank check; 

	
 
	
☐
	
or by wire transfer,

in each case as provided in, and subject to, the Warrant.  Capitalized terms used in this Election to Purchase without definition will have the respective meanings ascribed to them in the Warrant.

 

	
Date:
	
 
	
 
	
 

	
 
	
 
	
 

	
 
	
 
	
(Warrant Holder)

	
 
	
 
	
 

	
 
	
 
	
By:
	
 

	
 
	
 
	
 

	
 
	
 
	
(Authorized Signature)

	
 
	
 
	
 

	
 
	
 
	
Name:

	
 
	
 
	
Address:

	
 
	
 
	
 

	
 
	
 
	
Telephone:

 

Securities and/or check to be issued to:

Please insert social security or identifying number:

Name: 

Street Address:

City, State and Zip Code:crr-ex105_178.htm

 

Exhibit 10.5

EXECUTION VERSION

SECOND AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT

This SECOND AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT, dated as of March 2, 2017 (as amended, supplemented, amended and restated or otherwise modified from time to time, this “Security Agreement”), is by and among CARBO CERAMICS INC., a Delaware corporation (the “Borrower”), each Material Domestic Subsidiary of the Borrower party hereto from time to time (collectively with the Borrower, the “Grantors” and individually, a “Grantor”), and WILKS BROTHERS, LLC, as Administrative Agent (in such capacity, the “Administrative Agent”) for the ratable benefit of the Secured Parties (as defined in the Credit Agreement referred to herein).

W I T N E S S E T H:

WHEREAS, reference is made to that certain Credit Agreement dated as of January 29, 2010, among the Borrower, the lenders party thereto (the “Existing Lenders”), and Wells Fargo Bank, National Association, in its capacity as Administrative Agent (the “Existing Agent”), (as modified, supplemented and amended through the date hereof but before giving effect to the Credit Agreement (hereinafter defined), the “Existing Agreement”);

WHEREAS, pursuant to the Existing Agreement, the Borrower had previously executed and delivered the Amended and Restated Pledge and Security Agreement dated April 27, 2015 (the “Existing Security Agreement”) between the Borrower, the other Grantors party thereto, and the Existing Lenders; 

WHEREAS, pursuant to that certain Partial Assignment of Mortgages, Notes, Liens, Security Interests and Other Rights (the “Assignment”), (i) the Existing Agent has resigned and Administrative Agent has been appointed as the successor “Administrative Agent” under the Existing Agreement, and (ii) the Existing Lenders have assigned the Assigned Obligations (as defined in the Assignment), and all of their right title and interest in the Existing Agreement and the other Credit Documents (as defined in the Existing Agreement) to Wilks Brothers, LLC;

WHEREAS, the Existing Agreement is being amended, restated and replaced by that certain Amended and Restated Credit Agreement dated as of March 2, 2017 among the Borrower, the lenders party thereto from time to time (the “Lenders”), and Wilks Brothers, LLC as administrative agent, (as may be amended, restated, supplemented or otherwise modified from time to time after the date hereof in accordance with the terms thereof and of this Agreement, the “Credit Agreement”); 

WHEREAS, as a condition precedent to the effectiveness of the Credit Agreement, the Borrower and each additional Grantor is required to execute and deliver this Security Agreement, which shall amend and restate the Existing Security Agreement; and 

WHEREAS, it is in the best interests of each Grantor to execute this Security Agreement inasmuch as each Grantor will derive substantial direct and indirect benefits from the transactions contemplated by the Credit Agreement and the other Credit Documents (as defined in the Credit Agreement), and each Grantor is willing to execute, deliver and perform its obligations under this Security Agreement to secure the Obligations (as defined in the Credit Agreement).

Second Amended and Restated Pledge and Security Agreement

Page 1 of 29

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Grantor agrees, for the benefit of each Secured Party, as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1.  Certain Terms.  The following terms (whether or not underscored) when used in this Security Agreement, including its preamble and recitals, shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof):

“Administrative Agent” has the meaning set forth in the preamble.

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

“Certificated Equipment” means any Equipment the ownership of which is evidenced by, or under applicable Legal Requirement is required to be, evidenced by a certificate of title.

“Collateral” has the meaning set forth in Section 2.1(a).

“Collateral Account” has the meaning set forth in Section 4.1(b).

“Computer Hardware and Software Collateral” means (a) all computer and other electronic data processing hardware, integrated computer systems, central processing units, memory units, display terminals, printers, features, computer elements, card readers, tape drives, hard and soft disk drives, cables, electrical supply hardware, generators, power equalizers, accessories and all peripheral devices and other related computer hardware, including all operating system software, utilities and application programs in whatsoever form owned by a Grantor or leased or licensed to Grantor, (b) software programs (including both source code, object code and all related applications and data files), designed for use on the computers and electronic data processing hardware described in clause (a) above owned by a Grantor or leased or licensed to a Grantor, (c) all firmware associated therewith, (d) all documentation (including flow charts, logic diagrams, manuals, guides, specifications, training materials, charts and pseudo codes) with respect to such hardware, software and firmware described in the preceding clauses (a) through (c), and (e) all rights with respect to all of the foregoing, including copyrights (including renewal rights) and trade secrets rights, contract rights of a Grantor with respect to all or any of the foregoing, licenses, options, warranties, service contracts, program services, test rights, maintenance rights, support rights, improvement rights, renewal rights and indemnifications and any substitutions, replacements, improvements, error corrections, updates, additions or model conversions of any of the foregoing.

“Credit Agreement” has the meaning set forth in the fourth recital.

 “Equipment” has the meaning set forth in Section 2.1(a)(i).

“Equity Interests” means all equity interests owned by the Grantors.

“Excluded Collateral” has the meaning set forth in Section 2.1(b).

“Excluded Contract” means any contract (and any contract rights arising thereunder) to which any of the Grantors is a party on the date hereof or which is entered into by any Grantor after the date hereof which complies with Section 6.5 of the Credit Agreement (and the provisions of which are not agreed to by a Grantor for the purposes of excluding such contract from the Lien granted hereunder), in any case to the extent (but only to the extent) that a Grantor is prohibited from granting a security interest 

Second Amended and Restated Pledge and Security Agreement

Page 2 of 29

 

in, pledge of, or charge, mortgage or lien upon any such Property by reason of (a) a negative pledge, anti-assignment provision or other contractual restriction in existence on the date hereof or, as to contracts entered into after the date hereof, in existence in compliance with Section 6.5 of the Credit Agreement (and the provisions of which are not agreed to by a Grantor for the purposes of excluding such contract from the Lien granted hereunder), or (b) applicable Legal Requirement to which such Grantor or such Property is subject; provided, however, to the extent that (i) either of the prohibitions discussed in clause (a) and (b) above is ineffective or subsequently rendered ineffective under Sections 9.406, 9.407, 9.408 or 9.409 of the UCC or under any other Legal Requirement or is otherwise no longer in effect or enforceable, or (ii) the applicable Grantor has obtained the consent of the other parties to such Excluded Contract to the creation of a lien and security interest in, such Excluded Contract, then such contract (and any contract rights arising thereunder) shall cease to be an “Excluded Contract” and shall automatically be subject to the lien and security interests granted hereby and to the terms and provisions of this Security Agreement as a “Collateral”; provided further, that any proceeds received by any Grantor from the sale, transfer or other disposition of Excluded Contracts shall constitute Collateral unless any Property constituting such proceeds are themselves subject to the exclusions set forth above.

“Excluded Governmental Approvals” means any Governmental Approval to the extent (but only to the extent) that a Grantor is prohibited from granting a security interest in, pledge of, or charge, mortgage or lien upon any such Property by reason of (a) a negative pledge, anti-assignment provision or other contractual restriction or (b) applicable Legal Requirement to which such Grantor or such Property is subject; provided, however, to the extent that (i) either of the prohibitions discussed in clause (a) and (b) above is ineffective or subsequently rendered ineffective under Sections 9-406, 9-407, 9-408 or 9-409 of the UCC or under any other Legal Requirement or is otherwise no longer in effect or enforceable, or (ii) the applicable Grantor has obtained the consent of the applicable Governmental Authority to the creation of a lien and security interest in, such Excluded Governmental Approval, then such Governmental Approval shall cease to be an “Excluded Governmental Approval” and shall automatically be subject to the lien and security interests granted hereby and to the terms and provisions of this Security Agreement as “Collateral”; provided further, that any proceeds received by any Grantor from the sale, transfer or other disposition of Excluded Governmental Approval shall constitute Collateral unless any Property constituting such proceeds are themselves subject to the exclusions set forth above or otherwise constitute Excluded Collateral.

“General Intangibles” means all “general intangibles” and all “payment intangibles”, each as defined in the UCC, and shall include all tax refunds, all licenses, permits, contract rights (including rights under leases, whether entered into as lessor or lessee, deeds to secure debt, whether entered into as grantor or grantor and other agreements) and all concessions and authorizations (in each case, regardless of whether characterized as general intangibles under the UCC).

“Governmental Approval” has the meaning set forth in Section 2.1(a)(vi).

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

“Indemnitee” has the meaning set forth in Section 6.3(a).

“Intellectual Property” means any and all rights in and to (a) patents; (b) trademarks; (c) works of authorship, copyrightable works, copyrights and any applications, registrations and/or renewals for any of the foregoing; (d) know-how, inventions, data, processes, specifications, designs, methods and other confidential and/or proprietary information; (e) any other titles, rights and interests and intangible assets recognized under any laws and/or international conventions in any country in the world as intellectual property to which rights of ownership accrue pursuant to such laws or conventions or under any applicable license or contract, whether now existing or hereafter created, together with all modifications, 

Second Amended and Restated Pledge and Security Agreement

Page 3 of 29

 

enhancements and improvements thereto; and, (f) any and all tangible embodiments of each and all of the foregoing; but not including Computer Hardware and Software Collateral and Trade Secrets.

“Inventory” has the meaning set forth in Section 2.1(a)(ii).

“Lenders” has the meaning set forth in the fourth recital.

 “Pledged Facilities” means the Grantors’ real property and improvements listed on Schedule 1.1 of the Security Agreement.

“Receivables” has the meaning set forth in Section 2.1(a)(iii).

“Related Contracts” has the meaning set forth in Section 2.1(a)(iii).

“Secured Parties” has the meaning set forth in the Credit Agreement.

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

“Termination Date” means the date that (i) all Obligations have been paid in full in cash (other than reimbursement and indemnity obligations for which no notice of a claim has been made), and all Commitments shall have terminated or (ii) the Liens granted herein are otherwise terminated in full pursuant to the terms of the Credit Agreement.

“Trade Secrets” means all common law and statutory trade secrets and all other confidential, proprietary or useful information and all know how obtained by or used in or contemplated at any time for use in the business of any Grantor, excluding any trademarks, patents, or any patent applications in preparation for filing (all of the foregoing being collectively called a “Trade Secret”), including all documents and things embodying, incorporating or referring in any way to such Trade Secret, all Trade Secret licenses.

“UCC” means the Uniform Commercial Code, as in effect in the State of Texas, as the same may be amended from time to time.

SECTION 1.2.  Credit Agreement Definitions.  Unless otherwise defined herein or the context otherwise requires, terms used in this Security Agreement, including its preamble and recitals, have the meanings provided in the Credit Agreement.

SECTION 1.3.  UCC Definitions.  Unless otherwise defined herein or the context otherwise requires, terms for which meanings are provided in the UCC are used in this Security Agreement, including its preamble and recitals, with such meanings.

Second Amended and Restated Pledge and Security Agreement

Page 4 of 29

 

SECTION 1.4.  Miscellaneous.  Article, Section, Schedule, and Exhibit references are to Articles and Sections of and Schedules and Exhibits to this Security Agreement, unless otherwise specified.  All references to instruments, documents, contracts, and agreements (including this Security Agreement) are references to such instruments, documents, contracts, and agreements as the same may be amended, supplemented, and otherwise modified from time to time, unless otherwise specified and shall include all schedules and exhibits thereto unless otherwise specified.  The words “hereof”, “herein”, and “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 provision of this Security Agreement.  The term “including” means “including, without limitation,”.  Paragraph headings have been inserted in this Security Agreement as a matter of convenience for reference only and it is agreed that such paragraph headings are not a part of this Security Agreement and shall not be used in the interpretation of any provision of this Security Agreement.

ARTICLE II

SECURITY INTEREST

SECTION 2.1.  Grant of Security Interest.  

(a) Each Grantor hereby pledges, hypothecates, assigns, charges, mortgages, delivers, and transfers to the Administrative Agent, for the ratable benefit of each Secured Party, and hereby grants to the Administrative Agent, for the ratable benefit of each Secured Party, a continuing security interest in all of such Grantor’s right, title and interest in, to and under, all of the following, whether now owned or hereafter acquired, existing or arising (collectively, the “Collateral”):

(i)  all equipment in all of its forms of such Grantor, and all surface or subsurface machinery, equipment, facilities, supplies, or other tangible personal property, including tubing, rods, pumps, pumping units and engines, pipe, pipelines, meters, apparatus, boilers, compressors, liquid extractors, connectors, valves, fittings, power plants, poles, lines, cables, wires, transformers, starters and controllers, machine shops, tools, machinery and parts, storage yards and equipment stored therein, buildings and camps, telegraph, telephone, and other communication systems, loading docks, loading racks, and shipping facilities, and any manuals, instructions, blueprints, computer software (including software that is imbedded in and part of the equipment), and similar items which relate to the above, and any and all additions, substitutions and replacements of any of the foregoing, in each case solely to the extent that any of the foregoing is located upon any of the Pledged Facilities and is used or useful in the operations of the Grantor conducted thereon, together with all improvements thereon and all attachments, components, parts, equipment and accessories installed thereon or affixed thereto (any and all of the foregoing being the “Equipment”);

(ii)  all inventory in all of its forms of such Grantor, wherever located, including (A) all raw materials and work in process therefore, finished goods thereof, and materials used or consumed in the manufacture or production thereof, (B) all documents of title covering any inventory, including work in process, materials used or consumed in any Grantor’s business, now owned or hereafter acquired or manufactured by any Grantor and held for sale in the ordinary course of its business (C) all goods in which such Grantor has an interest in mass or a joint or other interest or right of any kind (including goods in which such Grantor has an interest or right as consignee), (D) all goods which are returned to or repossessed by such Grantor, and all accessions thereto, products thereof and documents therefore, and (E) any other item constituting “inventory” under the UCC (any and all such inventory, materials, goods, accessions, products and documents being the “Inventory”);

Second Amended and Restated Pledge and Security Agreement

Page 5 of 29

 

(iii)  all accounts receivable of such Grantor arising out of or in connection with the sale or lease of inventory or the rendering of services, and all rights of such Grantor now or hereafter existing in and to all security agreements, guaranties, Instruments, Chattel Paper, and other agreements securing any such accounts receivable (any and all such accounts receivable being the “Receivables”, and any and all such security agreements, guaranties, and other agreements being the “Related Contracts”);

(iv)  all Computer Hardware and Software Collateral, in each case solely to the extent reasonably related to or associated with the operation of the Pledged Facilities;

(v)  all books, correspondence, credit files, records, invoices, tapes, cards, computer runs, writings, data bases, information in all forms, paper and documents and other property relating to, used or useful in connection with, evidencing, embodying, incorporating or referring to, any of the foregoing in this Section 2.1(a);

(vi)  all governmental approvals, permits, licenses, authorizations, consents, rulings, tariffs, rates, certifications, waivers, exemptions, filings, claims, orders, judgments and decrees and other Legal Requirements, in each case solely to the extent reasonably related to or associated with the Pledged Facilities and the operations of  such Grantor conducted thereon (each a “Governmental Approval”);

(vii)  to the extent not included in the foregoing, all fixtures of such Grantor and located on any Pledged Facility; 

(viii)  the deposit accounts listed on Schedule 2.1(a)(viii) and all amounts on deposit therein and all cash equivalent investments carried therein and all proceeds thereof;

(ix)  (A) all policies of insurance now or hereafter held by or on behalf of such Grantor, including casualty, liability, key man life insurance, business interruption, foreign credit insurance, and any title insurance, (B) all proceeds of insurance, and (C) all rights, now or hereafter held by such Grantor to any warranties of any manufacturer or contractor of any other Person, in each case solely to the extent reasonably related to, covering or associated with the Pledged Facilities and the operations of  such Grantor conducted thereon; 

(x)  all accessions, substitutions, replacements, products, offspring, rents, issues, profits, returns, income General Intangibles (excluding Intellectual Property), Documents and Proceeds of and from any and all of the foregoing Collateral (including proceeds which constitute property of the types described in sub-clauses (i)-(ix), and, to the extent not otherwise included, all payments and proceeds under insurance (whether or not the Administrative Agent is the loss payee thereof), or any condemnation award, indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the Collateral); and

(xi)  all Certificated Equipment (excluding motor vehicles) located upon any of the Pledged Facilities and is used or useful in the operations of the Grantor conducted thereon.

(b) Notwithstanding anything to the contrary contained in Section 2.1(a) and other than to the extent set forth in this Section 2.1(b), the following property shall be excluded from the lien and security interest granted hereunder (and shall, as applicable, not be included as “Accounts”, “Chattel Paper”, “Collateral”, “Commodity Accounts”, “Commodity Contracts”, “Deposit Accounts”, “Documents”, “Equipment”, “Fixtures”, “General Intangibles”, “Goods”, “Instruments”, “Inventory”, 

Second Amended and Restated Pledge and Security Agreement

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“Investment Property”, “Money”, “Payment Intangibles”, “Proceeds”, or “Supporting Obligations” for purposes of this Security Agreement) (collectively, the “Excluded Collateral”):

(i) commercial tort claims;

(ii) letter of credit rights;

(iii) Excluded Contracts; 

(iv) Excluded Governmental Approvals; 

(v) Equity Interests; 

(vi) Intellectual Property;

provided, however, that (x) the exclusion from the Lien and security interest granted by any Grantor hereunder of any Excluded Collateral shall not limit, restrict or impair the grant by such Grantor of the Lien and security interest in any Receivables arising under any such Excluded Collateral unless the conditions in effect which qualify such Property as Excluded Collateral applies with respect to such Receivables and (y) any proceeds received by any Grantor from the sale, transfer or other disposition of Excluded Collateral shall constitute Collateral unless the conditions in effect which qualify such Property as Excluded Collateral applies with respect to such proceeds.

SECTION 2.2.  Security for Obligations.  

(a) This Security Agreement, and the Collateral in which the Administrative Agent for the benefit of the Secured Parties is granted a security interest hereunder by each Grantor, secures the prompt and payment in full in cash and performance of all Obligations.

(b) Notwithstanding anything contained herein to the contrary, it is the intention of each Grantor, the Administrative Agent and the other Secured Parties that the amount of the Obligations secured by each Grantor’s interests in any of its Property shall be in, but not in excess of, the maximum amount permitted by fraudulent conveyance, fraudulent transfer and other similar law, rule or regulation of any Governmental Authority applicable to such Grantor. Accordingly, notwithstanding anything to the contrary contained in this Security Agreement or in any other agreement or instrument executed in connection with the payment of any of the Obligations, the amount of the Obligations secured by each Grantor’s interests in any of its Property pursuant to this Security Agreement shall be limited to an aggregate amount equal to the largest amount that would not render such Grantor’s obligations hereunder or the Liens and security interest granted to the Administrative Agent hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provision of any other applicable law. 

SECTION 2.3.  Continuing Security Interest; Reinstatement.  This Security Agreement shall create continuing security interests in the Collateral and shall (a) except as otherwise provided in the Credit Agreement, remain in full force and effect until the Termination Date, (b) be binding upon each Grantor and its successors, transferees and assigns, and (c) inure, together with the rights and remedies of the Administrative Agent hereunder, to the benefit of the Administrative Agent and each other Secured Party and its respective permitted successors, transferees and assigns, subject to the limitations as set forth in the Credit Agreement.  Without limiting the generality of the foregoing clause (c), any Lender may assign or otherwise transfer (in whole or in part) any extension of credit, and any successor or assignee thereof shall thereupon become vested with all the rights and benefits in respect thereof granted to such 

Second Amended and Restated Pledge and Security Agreement

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Secured Party under any Credit Document (including this Security Agreement), or otherwise, subject, however, to any contrary provisions in such assignment or transfer, and as applicable to the provisions of Section 9.7 and Article 8 of the Credit Agreement.  If at any time all or any part of any payment theretofore applied by the Administrative Agent or any other Secured Party to any of the Obligations is or must be rescinded or returned by the Administrative Agent or any such Secured Party for any reason whatsoever (including the insolvency, bankruptcy, reorganization or other similar proceeding of any Grantor or any other Person), such Obligations shall, for purposes of this Security Agreement, to the extent that such payment is or must be rescinded or returned, be deemed to have continued to be in existence, notwithstanding any application by the Administrative Agent or such Secured Party or any termination agreement or release provided to any Grantor, and this Security Agreement shall continue to be effective or reinstated, as the case may be, as to such Obligations, all as though such application by the Administrative Agent or such Secured Party had not been made.

SECTION 2.4.  Grantors Remain Liable.  Anything herein to the contrary notwithstanding, (a) each Grantor shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein, and will perform all of its duties and obligations under such contracts and agreements to the same extent as if this Security Agreement had not been executed, (b) the exercise by the Administrative Agent of any of its rights hereunder shall not release any Grantor from any of its duties or obligations under any such contracts or agreements included in the Collateral, and (c) neither the Administrative Agent nor any other Secured Party shall have any obligation or liability under any contracts or agreements included in the Collateral by reason of this Security Agreement, nor shall the Administrative Agent nor any Secured Party be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

SECTION 2.5.  Security Interest Absolute, etc.  This Security Agreement shall in all respects be a continuing, absolute, unconditional and irrevocable grant of security interest, and shall remain in full force and effect until the Termination Date; provided that upon the consummation of any Permitted Disposition, the Administrative Agent shall promptly release its Lien as to any asset subject to such Permitted Disposition.  All rights of the Secured Parties and the security interests granted to the Administrative Agent (for its benefit and the ratable benefit of each other Secured Party) hereunder, and all obligations of each Grantor hereunder, shall, in each case, be absolute, unconditional and irrevocable irrespective of (a) any lack of validity, legality or enforceability of any Credit Document, (b) the failure of any Secured Party (i) to assert any claim or demand or to enforce any right or remedy against any Grantor or any other Person under the provisions of any Credit Document or otherwise, or (ii) to exercise any right or remedy against any other guarantor of, or collateral securing, any Obligations, (c) any change in the time, manner or place of payment of, or in any other term of, all or any part of the Obligations, or any other extension, compromise or renewal of any Obligations, (d) any reduction, limitation, impairment or termination of any Obligations (except in the case of the occurrence of the Termination Date) for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and each Grantor hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any Obligations or otherwise, (e) any amendment to, rescission, waiver, or other modification of, or any consent to or departure from, any of the terms of any Credit Document, (f) any addition, exchange or release of any Collateral of the Obligations, or any surrender or non-perfection of any collateral, or any amendment to or waiver or release or addition to, or consent to or departure from, any other guaranty held by any Secured Party securing any of the Obligations, or (g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, any Grantor or any other Credit Party, any surety or any guarantor. 

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SECTION 2.6.  Waiver of Subrogation.  Until 91 days after the Termination Date, each Grantor hereby irrevocably waives any claim or other rights which it may now or hereafter acquire against any Credit Party that arise from the existence, payment, performance or enforcement of such Grantor’s obligations under this Security Agreement or any other Credit Document, including any right of subrogation, reimbursement, exoneration or indemnification, any right to participate in any claim or remedy of any Secured Party against any Credit Party or any collateral which any Secured Party now has or hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including the right to take or receive from any Credit Party, directly or indirectly, in cash or other property or by set-off or in any manner, payment or security on account of such claim or other rights.  If any amount shall be paid to any Grantor in violation of the preceding sentence and the Termination Date shall not have occurred, then such amount shall be deemed to have been paid to such Grantor for the benefit of, and held in trust for, the Administrative Agent (on behalf of the Secured Parties), and shall forthwith be paid to the Administrative Agent to be credited and applied upon the Obligations, whether matured or unmatured.  Each Grantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Credit Agreement and that the waiver set forth in this Section 2.6 is knowingly made in contemplation of such benefits.

SECTION 2.7.  Election of Remedies.  Except as otherwise provided in the Credit Agreement, if any Secured Party may, under applicable law, proceed to realize its benefits under any of this Security Agreement or the other Credit Documents giving any Secured Party a Lien upon any Collateral, either by judicial foreclosure or by non-judicial sale or enforcement, such Secured Party may, at its sole option, determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under this Security Agreement.  If, in the exercise of any of its rights and remedies, any Secured Party shall forfeit any of its rights or remedies, including its right to enter a deficiency judgment against any Credit Party or any other Person, whether because of any applicable laws pertaining to “election of remedies” or the like, each Grantor hereby consents to such action by such Secured Party and waives any claim based upon such action, even if such action by such Secured Party shall result in a full or partial loss of any rights of subrogation that such Grantor might otherwise have had but for such action by such Secured Party.

SECTION 2.8.  Delivery of Instruments and Tangible Chattel Paper.   All certificates or instruments representing or evidencing Collateral consisting of Instruments and Tangible Chattel Paper individually evidencing amounts payable in excess of $1,000,000, or collectively, evidencing amounts payable in excess of $2,000,000, shall be delivered to and held by or on behalf of the Administrative Agent pursuant hereto, shall be in suitable form for transfer by delivery, and shall be accompanied by all necessary endorsements or instruments of transfer or assignment, duly executed in blank.  

ARTICLE III

REPRESENTATIONS AND WARRANTIES

In order to induce the Secured Parties to enter into the Credit Agreement and make extensions of credit thereunder each Grantor represents and warrants unto each Secured Party as set forth in this Article.

SECTION 3.1.  Ownership, No Liens, etc.  Such Grantor is the legal and beneficial owner of, and has good title to (and has full right and authority to pledge, grant and assign) the Collateral, free and clear of all Liens, except for any Lien that is a Permitted Lien.  No effective UCC financing statement or other filing similar in effect covering all or any part of the Collateral is on file in any recording office, except those filed in favor of the Administrative Agent relating to this Security Agreement, Permitted Liens or as to which a duly authorized termination statement relating to such UCC financing statement or other instrument has been delivered to the Administrative Agent on date hereof.  This Security Agreement creates a valid security interest in the Collateral, securing the payment of the Obligations, and, except for 

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(a)  the proper filing of the applicable financing statements with the filing offices listed on Item A-1 of Schedule I attached hereto, all filings and other actions necessary to perfect and protect such security interest in the Collateral have been duly taken and, subject to Permitted Liens, such security interest shall be a first priority security interest.

SECTION 3.2.  Grantor’s Name, Location, etc.

(a) Other than as otherwise permitted pursuant to any Credit Document, (i) the jurisdiction in which such Grantor is located for purposes of Sections 9.301 and 9.307 of the UCC is set forth in Item A-1 of Schedule I hereto, (ii) as of the date hereof or such later date on which such Grantor joins this Security Agreement, the place of business of such Grantor or, if such Grantor has more than one place of business, the chief executive office of such Grantor and the office where such Grantor keeps its records concerning the Receivables, is set forth in Item A-2 of Schedule I hereto, and (iii) such Grantor’s federal taxpayer identification number is set forth in Item A-3 of Schedule I hereto.

(b) Within the past five years, such Grantor has not been known by any legal name different from the one set forth on the signature page hereto, nor has such Grantor been the subject of any merger or other corporate reorganization, except as set forth in Item B of Schedule I hereto.

(c) None of the Receivables in excess of $500,000 is evidenced by a promissory note or other instrument other than a promissory note or instrument that has been delivered to the Administrative Agent (with appropriate endorsements).

(d) As of the date hereof or such later date on which such Grantor joins this Security Agreement, the name set forth on the signature page attached hereto (or, if applicable, the signature page to the supplement document pursuant to which such Grantor joins this Security Agreement) is the true and correct legal name (as defined in the UCC) of such Grantor.

SECTION 3.3.  Possession of Inventory; Control.  Such Grantor has exclusive possession and control, subject to Permitted Liens, of the Inventory, except as otherwise required, necessary or customary in the ordinary course of its business.  Such Grantor has not consented to, and is otherwise unaware of, any Person (other than, if applicable, the Administrative Agent pursuant to Section 4.1(b) hereof) having control (within the meaning of Section 9.104 or Section 8.106 of the UCC) over any Collateral, or any other interest in any of such Grantor’s rights in respect thereof.

SECTION 3.4.  Instruments and Tangible Chattel Paper.  Such Grantor has, contemporaneously herewith or as otherwise permitted herein, delivered (or will deliver as required herein) to the Administrative Agent possession of all originals of all certificates or instruments representing or evidencing any Collateral consisting of Instruments and Tangible Chattel Paper that individually, or collectively, evidence amounts payable in excess of $1,000,000, owned or held by such Grantor (duly endorsed, in blank, if requested by the Administrative Agent).

SECTION 3.5.  Authorization, Approval, etc.  Except as have been obtained or made and are in full force and effect, no Governmental Approval, authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or any other third party is required (a) for the grant by such Grantor of the security interest granted hereby, (b) for the perfection or maintenance of the security interests hereunder including the first priority (subject to Permitted Liens) nature of such security interest or the exercise by the Administrative Agent of its rights and remedies hereunder or (c) for the exercise by the Administrative Agent of the voting or other rights provided for in this Security Agreement.

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SECTION 3.6.  Best Interests.  It is in the best interests of each Grantor to execute this Security Agreement in as much as such Grantor will, as a result of being the Borrower, or a Material Domestic Subsidiary of the Borrower, derive substantial direct and indirect benefits from the extensions of credit made from time to time to the Borrower or any other Grantor by the Lenders pursuant to the Credit Agreement, and each Grantor agrees that the Secured Parties are relying on this representation in agreeing to make such extensions of credit pursuant to the Credit Agreement to the Borrower.  Furthermore, such extensions of credit are (i) in furtherance of each Grantor’s corporate purposes, and (ii) necessary or convenient to the conduct, promotion or attainment of each Grantor’s business.

ARTICLE IV

COVENANTS

Each Grantor covenants and agrees that, until the Termination Date, it will perform, comply with and be bound by the obligations set forth below.

SECTION 4.1.  As to Receivables.

(a) Each Grantor shall have the right to collect all Receivables so long as no Event of Default shall have occurred and be continuing.

(b) Upon (i) the occurrence and continuance of an Event of Default and (ii) the delivery of notice by the Administrative Agent to each Grantor, all Proceeds of Collateral received by any Grantor shall be delivered in kind to the Administrative Agent for deposit in a Deposit Account of such Grantor maintained at a depositary bank to which such Grantor, the Administrative Agent and the depositary bank have entered into a Control Agreement in form and substance acceptable to the Administrative Agent in its sole discretion providing that the depositary bank will comply with the instructions originated by the Administrative Agent directing disposition of the funds in the account without further consent by such Grantor (any such Deposit Accounts, a “Collateral Account,” and collectively, the “Collateral Accounts”), and such Grantor shall not commingle any such Proceeds, and shall hold separate and apart from all other property, all such Proceeds in express trust for the benefit of the Administrative Agent until delivery thereof is made to the Administrative Agent.

(c) Following the delivery of notice pursuant to clause (b)(ii) during the continuance of an Event of Default, the Administrative Agent shall have the right to apply any amount in the Collateral Account to the payment of any Obligations which are due and payable or in accordance with Section 7.6 of the Credit Agreement.

(d) With respect to each of the Collateral Accounts, it is hereby confirmed and agreed that (i) deposits in such Collateral Account are subject to a security interest as contemplated hereby, (ii) such Collateral Account shall be under the control of the Administrative Agent after the occurrence and during the continuance of an Event of Default (unless otherwise agreed to by the Borrower and the Majority Lenders), and (iii) the Administrative Agent shall have the sole right of withdrawal over such Collateral Account; provided that such withdrawals shall only be made during the existence of an Event of Default.

(e) No Grantor shall adjust, settle, or compromise the amount or payment of any Receivable, nor release wholly or partly any account debtor or obligor thereof, nor allow any credit or discount thereon; provided that, a Grantor may make such adjustments, settlements or compromises and release wholly or partly any account debtor or obligor thereof and allow any credit or discounts thereon so long as (i) such action is taken in the ordinary course of business, and (ii) such action is, in such Grantor’s good faith business judgment, advisable.

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SECTION 4.2.  As to Grantor’s Use of Collateral.

(a) Subject to clause (b), each Grantor (i) may in the ordinary course of its business, at its own expense, sell, lease or furnish under the contracts of service any of the Inventory held by such Grantor for such purpose, and use and consume any raw materials, work in process or materials held by such Grantor for such purpose, (ii) following the occurrence and during the continuance of an Event of Default, shall, at its own expense, endeavor to collect, as and when due, all amounts due with respect to any of the Collateral, including the taking of such action with respect to such collection as the Administrative Agent may request or, in the absence of such request, as such Grantor may deem advisable, and (iii) may grant, in the ordinary course of business, to any party obligated on any of the Collateral, any rebate, refund or allowance to which such party may be lawfully entitled, and may accept, in connection therewith, the return of Goods, the sale or lease of which shall have given rise to such Collateral.

(b) At any time following the occurrence and during the continuance of an Event of Default, whether before or after the maturity of any of the Obligations, the Administrative Agent may (i) revoke any or all of the rights of any Grantor set forth in clause (a), (ii) notify any parties obligated on any of the Collateral to make payment to the Administrative Agent of any amounts due or to become due thereunder, and (iii) enforce collection of any of the Collateral by suit or otherwise and surrender, release, or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder or evidenced thereby.

(c) Upon request of the Administrative Agent following the occurrence and during the continuance of an Event of Default, each Grantor will, at its own expense, notify any parties obligated on any of the Collateral to make payment to the Administrative Agent of any amounts due or to become due thereunder.

(d) At any time following the occurrence and during the continuation of an Event of Default, the Administrative Agent may endorse, in the name of the applicable Grantor, any item, howsoever received by the Administrative Agent, representing any payment on or other Proceeds of any of the Collateral.

SECTION 4.3.  As to Equipment and Inventory.   Each Grantor agrees to take such action (or cause its Subsidiaries that are also Credit Parties to take such action), including endorsing certificates of title or executing applications for transfer of title, as is reasonably required by the Administrative Agent to enable it to properly perfect and protect its Lien on all Certificated Equipment owned on the Effective Date and to transfer the same.  Each Grantor agrees to take such action (or cause its Subsidiaries that are also Credit Parties to take such action) as is reasonably requested by the Administrative Agent to enable it to properly perfect and protect its Lien on Equipment and Inventory constituting Collateral that such Grantor has transferred from a jurisdiction within the United States of America or its offshore waters to a jurisdiction outside of the United States of America or its offshore waters.

SECTION 4.4.   As to Electronic Chattel Paper and Transferable Records.  If any Grantor at any time holds or acquires an interest in any electronic chattel paper or any “transferable record,” as that term is defined in Section 201 of the U.S. Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the U.S. Uniform Electronic Transactions Act as in effect in any relevant jurisdiction which constitutes Collateral and with a value in excess of $1,000,000, such Grantor shall promptly notify the Administrative Agent thereof and, at the reasonable request of the Administrative Agent, shall take such action as the Administrative Agent may reasonably request to vest in the Administrative Agent control (for the ratable benefit of Secured Parties) under Section 9.105 of the UCC of such electronic chattel paper or control under Section 201 of the Federal Electronic Signatures in 

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Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record.  The Administrative Agent agrees with each Grantor that the Administrative Agent will arrange, pursuant to procedures reasonably satisfactory to the Administrative Agent and so long as such procedures will not result in the Administrative Agent’s loss of control, for such Grantor to make alterations to the electronic chattel paper or transferable record permitted under Section 9.105 of the UCC or, as the case may be, Section 201 of the U.S. Federal Electronic Signatures in Global and National Commerce Act or Section 16 of the U.S. Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by such Grantor with respect to such electronic chattel paper or transferable record.

SECTION 4.5.  Further Assurances, etc.  Each Grantor shall warrant and defend the right and title herein granted unto the Administrative Agent in and to the Collateral (and all right, title and interest represented by the Collateral) against the claims and demands of all Persons whomsoever.  Each Grantor agrees that, from time to time at its own expense, it will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that the Administrative Agent may reasonably request, in order to perfect, preserve and protect any security interest granted or purported to be granted hereby or to enable the Administrative Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral subject to the terms hereof.  Each Grantor agrees that, upon the acquisition after the date hereof by such Grantor of any Collateral, with respect to which the security interest granted hereunder is not perfected automatically upon such acquisition, to take such actions with respect to such Collateral or any part thereof as required by the Credit Documents. Without limiting the generality of the foregoing, each Grantor will:

(a) from time to time upon the request of the Administrative Agent, promptly deliver to the Administrative Agent such instruments and similar documents, reasonably satisfactory in form and substance to the Administrative Agent, with respect to such Collateral representing an amount payable in excess of $1,000,000 as the Administrative Agent may reasonably request and will, from time to time upon the request of the Administrative Agent, after the occurrence and during the continuance of any Event of Default, (i) promptly transfer any securities constituting Collateral into the name of any nominee designated by the Administrative Agent and (ii) if any Collateral shall be evidenced by an Instrument, negotiable Document, promissory note or tangible Chattel Paper, deliver and pledge to the Administrative Agent hereunder such Instrument, negotiable Document, promissory note, or tangible Chattel Paper duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Administrative Agent;

(b) file (and hereby authorize the Administrative Agent to file) such financing statements or continuation statements, or amendments thereto, and such other instruments or notices (including any assignment of claim form under or pursuant to the federal assignment of claims statute, 31 U.S.C. § 3726, any successor or amended version thereof or any regulation promulgated under or pursuant to any version thereof), as may be necessary or that the Administrative Agent may reasonably request in order to perfect and preserve the security interests in accordance with the UCC and other applicable Texas law and other rights granted or purported to be granted to the Administrative Agent hereby; and

(c) furnish to the Administrative Agent, from time to time at the Administrative Agent’s reasonable request, statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Administrative Agent may reasonably request, all in reasonable detail.

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The authorization contained in Section 4.5(b) above shall be irrevocable and continuing until the Termination Date.  Each Grantor agrees that a carbon, photographic or other reproduction of this Security Agreement or any UCC financing statement covering the Collateral or any part thereof shall be sufficient as a UCC financing statement where permitted by law.

SECTION 4.6.  [Reserved.].

SECTION 4.7.  Trade Secret License Option.  With respect to all Trade Secrets that are reasonably related to any Pledged Facility or used or useful in the operation of the Grantors’ business on such Pledged Facility as presently conducted on the date hereof, in the event of any transfer or other encumbrance on any interest in the Trade Secrets (other than the grant of a non-exclusive limited license to use such Trade Secrets), the Grantors shall provide the Administrative Agent with notice thereof  no later than 10 days prior to the occurrence of such transfer or encumbrance.  Concurrently with any transfer or encumbrance, at the request of the Administrative Agent, the Grantors will obtain a perpetual, non-exclusive, transferable,  royalty-free license to use such transferred Trade Secrets pursuant to which the Grantors’ shall have the right to continue to use such Trade Secrets in connection with the operation of their business, including the operation of the Pledged Facility to make proppant as manufactured on the date hereof at such Pledged Facility.  For the avoidance of doubt, any such license shall not apply to or provide any rights to the holder thereof to use any present or future patents or trademarks of any Grantor.  In addition, at the request of the Administrative Agent, the Grantors shall collaterally assign such license to the Administrative Agent on terms and conditions reasonably acceptable to the Administrative Agent.

SECTION 4.8.  As to Deposit Accounts.   With respect to any Deposit Account owned or held by any Grantor and listed on Schedule 2.1(a)(viii) that is required to be subject to an Account Control Agreement pursuant to the terms of the Credit Agreement, such Grantor will cause the depositary bank maintaining such Deposit Account to execute an Account Control Agreement relating to such Deposit Account and the funds therein pursuant to which such depositary bank agrees to comply with the Administrative Agent’s instructions with respect to such Deposit Account without further consent by such Grantor.

ARTICLE V

THE ADMINISTRATIVE AGENT

SECTION 5.1.  Administrative Agent Appointed Attorney‐in‐Fact.  Each Grantor hereby irrevocably appoints the Administrative Agent its attorney‐in‐fact, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time in the Administrative Agent’s discretion, following the occurrence and during the continuance of an Event of Default, to take any action and to execute any instrument which the Administrative Agent may deem necessary or advisable to accomplish the purposes of this Security Agreement, including (a) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral, (b) to receive, endorse, and collect any drafts or other Instruments, Documents and Chattel Paper constituting Collateral, in connection with clause (a) above, (c) to file any claims or take any action or institute any proceedings which the Administrative Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Administrative Agent with respect to any of the Collateral, and (d) to perform the affirmative obligations of such Grantor hereunder. EACH GRANTOR HEREBY ACKNOWLEDGES, CONSENTS AND AGREES THAT THE POWER OF ATTORNEY GRANTED PURSUANT TO THIS SECTION 5.1 IS IRREVOCABLE AND COUPLED WITH AN INTEREST AND SHALL BE EFFECTIVE UNTIL THE TERMINATION DATE.

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SECTION 5.2.  Administrative Agent May Perform.  If any Grantor fails to perform any agreement contained herein, the Administrative Agent may, during the continuance of any Event of Default, itself perform, or cause performance of, such agreement, and the expenses of the Administrative Agent incurred in connection therewith shall be payable by such Grantor pursuant to Section 6.3 hereof and Section 9.1 of the Credit Agreement and the Administrative Agent may from time to time take any other action which the Administrative Agent reasonably deems necessary for the maintenance, preservation or protection of any of the Collateral or of its security interest therein.

SECTION 5.3.  Administrative Agent Has No Duty.  The powers conferred on the Administrative Agent hereunder are solely to protect its interest (on behalf of the Secured Parties) in the Collateral and shall not impose any duty on it to exercise any such powers.  Except for reasonable care of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Administrative Agent shall have no duty as to any Collateral or responsibility for taking any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral.

SECTION 5.4.  Reasonable Care.  The Administrative Agent is required to exercise reasonable care in the custody and preservation of any of the Collateral in its possession; provided, that the Administrative Agent shall be deemed to have exercised reasonable care in the custody and preservation of any of the Collateral (a) if such Collateral is accorded treatment substantially equal to that which the Administrative Agent accords its own personal property, or (b) if the Administrative Agent takes such action for that purpose as any Grantor reasonably requests in writing at times other than upon the occurrence and during the continuance of an Event of Default; provided, further, that failure of the Administrative Agent to comply with any such request at any time shall not in itself be deemed a failure to exercise reasonable care.

ARTICLE VI

REMEDIES

SECTION 6.1.  Certain Remedies.  If any Event of Default shall have occurred and be continuing:

(a) The Administrative Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the UCC (whether or not the UCC applies to the affected Collateral) and also may (i) take possession of any Collateral not already in its possession without demand and without legal process, (ii) require any Grantor to, and each Grantor hereby agrees that it will, at its expense and upon request of the Administrative Agent forthwith, assemble all or part of the Collateral as directed by the Administrative Agent and make it available to the Administrative Agent at a place to be designated by the Administrative Agent that is reasonably convenient to both parties, (iii) subject to applicable law or agreements with landlords, bailees, or warehousemen, enter onto the property where any Collateral is located and take possession thereof without demand and without legal process, (iv) without notice except as specified below, lease, license, sell or otherwise dispose of the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Administrative Agent’s offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Administrative Agent may deem commercially reasonable.  Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days’ prior notice to the applicable Grantor of the time and place of any public sale or the time of any private sale is to be made shall constitute reasonable notification; provided, however, that with respect to Collateral that is (x) perishable or threatens to decline speedily in value, or (y) is of a type customarily sold on a recognized market (including Investment Property), no notice of sale or disposition need be given. For purposes of this Article VI, notice of any intended sale or disposition of any Collateral may be given by first-class mail, hand-delivery (through a delivery service or otherwise), facsimile or 

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email, and shall be deemed to have been “sent” upon deposit in the U.S. Mails with adequate postage properly affixed, upon delivery to an express delivery service or upon electronic submission through telephonic or internet services, as applicable.  The Administrative Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given.  The Administrative Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

(b) Each Grantor that is or may become a fee estate owner of property where any Collateral  is located (regardless of ownership thereof by any other Grantor) agrees and acknowledges that (i)  Administrative Agent may remove the Collateral or any part thereof from such property in accordance with statutory law appertaining thereto without objection, delay, hindrance or interference by such Grantor and in such case such Grantor will make no claim or demand whatsoever against the Collateral, (ii)  it will (x) cooperate with Administrative Agent in its efforts to assemble and/or remove all of the Collateral located on such property; (y) permit Administrative Agent and its agents to enter upon such property and occupy the property at any or all times to conduct an auction or sale, and/or to inspect, audit, examine, safeguard, assemble, appraise, display, remove, maintain, prepare for sale or lease, repair, lease, transfer, auction and/or sell the Collateral; and (z) not hinder Administrative Agent’s actions in enforcing its security interest in the Collateral.

(c) Each Grantor agrees and acknowledges that a commercially reasonable disposition of Inventory, Equipment, Goods, or Computer Hardware and Software Collateral may be by lease or license of, in addition to the sale of, such Collateral.  Each Grantor further agrees and acknowledges that the following shall be deemed a reasonable commercial disposition:  (i) a disposition made in the usual manner on any recognized market, (ii) a disposition at the price current in any recognized market at the time of disposition, and (iii) a disposition in conformity with reasonable commercial practices among dealers in the type of property subject to the disposition.

(d) All cash Proceeds received by the Administrative Agent in respect of any sale of, collection from, or other realization upon, all or any part of the Collateral shall be applied by the Administrative Agent against, all or any part of the Obligations as set forth in Section 7.6 of the Credit Agreement. The Administrative Agent shall not be obligated to apply or pay over for application noncash proceeds of collection or enforcement unless (i) the failure to do so would be commercially unreasonable, and (ii) the affected party has provided the Administrative Agent with a written demand to apply or pay over such noncash proceeds on such basis.

(e) The Administrative Agent may do any or all of the following: (i) transfer all or any part of the Collateral into the name of the Administrative Agent or its nominee, with or without disclosing that such Collateral is subject to the Lien hereunder, (ii) notify the parties obligated on any of the Collateral to make payment to the Administrative Agent of any amount due or to become due thereunder, (iii) withdraw, or cause or direct the withdrawal, of all funds with respect to the Collateral Account, (iv) enforce collection of any of the Collateral by suit or otherwise, and surrender, release or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any obligations of any nature of any party with respect thereto, (v) endorse any checks, drafts, or other writings in the applicable Grantor’s name to allow collection of the Collateral, (vi) take control of any Proceeds of the Collateral, or (vii) execute (in the name, place and stead of the applicable Grantor) endorsements, assignments, and other instruments of conveyance or transfer with respect to all or any of the Collateral.

SECTION 6.2.  Compliance with Restrictions.  Each Grantor agrees that in any sale of any of the Collateral whenever an Event of Default shall have occurred and be continuing, the Administrative Agent is hereby authorized to comply with any limitation or restriction in connection with such sale as it may be 

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advised by counsel is necessary in order to avoid any violation of applicable law (including compliance with such procedures as may restrict the number of prospective bidders and purchasers, require that such prospective bidders and purchasers have certain qualifications, and restrict such prospective bidders and purchasers to Persons who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or resale of such Collateral), or in order to obtain any required approval of the sale or of the purchaser by any Governmental Authority or official, and each Grantor further agrees that such compliance shall not result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Administrative Agent be liable nor accountable to such Grantor for any discount allowed by the reason of the fact that such Collateral is sold in compliance with any such limitation or restriction.

SECTION 6.3.  Indemnity and Expenses.

(a) Without limiting the generality of the provisions of Section 9.2 of the Credit Agreement, each Grantor hereby AGREES TO, JOINTLY AND SEVERALLY, indemnifY and hold harmless the Administrative Agent, each Secured Party and each of their respective officers, directors, employees, agents AND ADVISORS (any of the foregoing being, an “Indemnitee”) FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LOSSES, LIABILITIES, COSTS, AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES) THAT MAY BE INCURRED BY OR ASSERTED OR AWARDED AGAINST ANY INDEMNITEE, IN EACH CASE ARISING OUT OF OR IN CONNECTION WITH OR BY REASON OF (INCLUDING, WITHOUT LIMITATION, IN CONNECTION WITH ANY INVESTIGATION, LITIGATION, OR PROCEEDING OR PREPARATION OF DEFENSE IN CONNECTION THEREWITH), THIS SECURITY AGREEMENT, THE CREDIT DOCUMENTS, ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THE ACTUAL OR PROPOSED USE OF THE PROCEEDS OF THE EXTENSIONS OF CREDIT, INCLUDING SUCH INDEMNITEE’S OWN NEGLIGENCE, EXCEPT TO THE EXTENT SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE IS FOUND IN A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED FROM SUCH INDEMNITEE’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.  IN THE CASE OF AN INVESTIGATION, LITIGATION OR OTHER PROCEEDING TO WHICH THE INDEMNITY IN THIS SECTION 6.3 APPLIES, SUCH INDEMNITY SHALL BE EFFECTIVE WHETHER OR NOT SUCH INVESTIGATION, LITIGATION OR PROCEEDING IS BROUGHT BY ANY CREDIT PARTY, ITS DIRECTORS, SHAREHOLDERS OR CREDITORS OR AN INDEMNITEE OR ANY OTHER PERSON OR ANY INDEMNITEE IS OTHERWISE A PARTY THERETO AND WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED HEREBY ARE CONSUMMATED.  

(b) Other than as set forth in clause (c) below and for any limitations provided in the Credit Agreement, each Grantor will upon demand pay to the Administrative Agent the amount of any and all reasonable out-of-pocket costs and expenses, including the reasonable fees and out-of-pocket expenses of its counsel, which the Administrative Agent may incur in connection herewith, including in connection with the administration of this Security Agreement and the custody, preservation, use or operation of, any of the Collateral.

(c) Each Grantor will upon demand pay to the Administrative Agent the amount of any and all out-of-pocket costs expenses, including the fees and expense of its outside counsel and of outside counsel of each Lender, which the Administrative Agent may incur in connection (i) the sale of, collection from, or other realization upon, any of the Collateral, (ii) the exercise or enforcement of any of 

Second Amended and Restated Pledge and Security Agreement

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the rights of the Administrative Agent or any of the Secured Parties hereunder, or (iii) the failure by any Grantor to perform or observe any of the provisions hereof.

SECTION 6.4.  Warranties.  The Administrative Agent may sell the Collateral without giving any warranties or representations as to the Collateral.  The Administrative Agent may disclaim any warranties of title or the like.  Each Grantor agrees that this procedure will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.

ARTICLE VII

MISCELLANEOUS PROVISIONS

SECTION 7.1.  Credit Document.  This Security Agreement is a Credit Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions thereof, including Article 9 thereof.

SECTION 7.2.  Binding on Successors, Transferees and Assigns; Assignment.  This Security Agreement shall remain in full force and effect until the Termination Date has occurred, shall be binding upon each Grantor and its successors, transferees and assigns and, subject to the limitations set forth in the Credit Agreement, shall inure to the benefit of and be enforceable by each Secured Party and its successors, transferees and assigns; provided that, no Grantor shall assign any of its obligations hereunder (unless otherwise permitted under the terms of the Credit Agreement or this Security Agreement).

SECTION 7.3.  Amendments, etc.  No amendment to or waiver of any provision of this Security Agreement, nor consent to any departure by any Grantor from its obligations under this Security Agreement, shall in any event be effective unless the same shall be in writing and signed by the Administrative Agent (on behalf of the Lenders or the Majority Lenders, as the case may be, pursuant to Section 9.3 of the Credit Agreement) and such Grantor and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

SECTION 7.4.  Notices.  Except as otherwise provided in this Security Agreement, all notices and other communications provided for hereunder shall be in writing and hand delivered with written receipt, telecopied, sent by facsimile (with a hard copy sent as otherwise permitted pursuant to the Credit Agreement), sent by a nationally recognized overnight courier, or sent by certified mail, return receipt requested to the appropriate party at the address or facsimile number of such party specified in the Credit Agreement, on the signature pages of this Security Agreement or at such other address or facsimile number as may be designated by such party in a notice to the other party.  Except as otherwise provided in this Security Agreement, all such notices and communications shall be effective when delivered.  

SECTION 7.5.  No Waiver; Remedies.  In addition to, and not in limitation of Section 2.5, no right, power, or remedy conferred to any Secured Party in this Security Agreement, or now or hereafter existing at law, in equity, by statute, or otherwise shall be exclusive, and each such right, power, or remedy shall to the full extent permitted by law be cumulative and in addition to every other such right, power or remedy.  No course of dealing and no delay in exercising any right, power, or remedy conferred to any Secured Party in this Security Agreement or now or hereafter existing at law, in equity, by statute, or otherwise shall operate as a waiver of or otherwise prejudice any such right, power, or remedy.  Any Secured Party may cure any Event of Default without waiving the Event of Default.  No notice to or demand upon any Grantor shall entitle such Grantor or any other Grantor to similar notices or demands in the future.

SECTION 7.6.  Headings.  Paragraph headings have been inserted in this Security Agreement as a matter of convenience for reference only and it is agreed that such paragraph headings are not a part of 

Second Amended and Restated Pledge and Security Agreement

Page 18 of 29

 

this Security Agreement and shall not be used in the interpretation of any provision of this Security Agreement.

SECTION 7.7.  Severability.  In case one or more provisions of this Security Agreement or the other Credit Documents shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality, and enforceability of the remaining provisions contained herein or therein shall not be affected or impaired thereby.

SECTION 7.8.  Counterparts.  This Security Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page of this Security Agreement by facsimile or by e-mail “PDF” copy shall be effective as delivery of a manually executed counterpart of this Security Agreement

SECTION 7.9.  [Intentionally Omitted]. 

SECTION 7.10.  Additional Grantors.  Additional Material Domestic Subsidiaries of Borrower may from time to time enter into this Security Agreement as a Grantor.  Upon execution and delivery after the date hereof by the Administrative Agent and such Material Domestic Subsidiary of an instrument in the form of Annex 1, such Material Domestic Subsidiary shall become a Grantor hereunder with the same force and effect as if originally named as a Grantor herein.  The execution and delivery of any instrument adding an additional Grantor as a party to this Security Agreement shall not require the consent of any other Grantor hereunder.  The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Security Agreement.

SECTION 7.11.  [Intentionally Omitted]. 

SECTION 7.12.  Conflicts with Credit Agreement.  To the fullest extent possible, the terms and provisions of the Credit Agreement shall be read together with the terms and provisions of this Security Agreement so that the terms and provisions of this Security Agreement do not conflict with the terms and provisions of the Credit Agreement; provided, however, notwithstanding the foregoing, in the event that any of the terms or provisions of this Security Agreement conflict with any terms or provisions of the Credit Agreement, the terms or provisions of the Credit Agreement shall govern and control for all purposes; provided that the inclusion in this Security Agreement of terms and provisions, supplemental rights or remedies in favor of the Administrative Agent not addressed in the Credit Agreement shall not be deemed to be in conflict with the Credit Agreement and all such additional terms, provisions, supplemental rights or remedies contained herein shall be given full force and effect.

SECTION 7.13.  Governing Law.  This Security Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Texas.  

SECTION 7.14.  Submission to Jurisdiction.  Each grantor hereby irrevocably submits to the jurisdiction of any Texas state or federal court sitting in Houston, Texas in any action or proceeding arising out of or relating to this Security Agreement or the other Credit Documents, and each Grantor hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such court.  Each Credit Party hereby unconditionally and irrevocably waives, to the fullest extent it may effectively do so, any right it may have to the defense of an inconvenient forum to the maintenance of such action or proceeding.  Each Grantor hereby agrees that service 

Second Amended and Restated Pledge and Security Agreement

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of copies of the summons and complaint and any other process which may be served in any such action or proceeding may be made by mailing or delivering a copy of such process to such Grantor at its address set forth in this Security Agreement.  Each Grantor hereby agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Section shall affect the rights of any Lender to serve legal process in any other manner permitted by the law or affect the right of any Lender to bring any action or proceeding against any Grantor or its Property in the courts of any other jurisdiction.

SECTION 7.15.  [Reserved].

SECTION 7.16.  Amendment and Restatement; Ratification.  Each of the Grantors hereby (a) ratifies and affirms its obligations under the Existing Security Agreement, as amended and restated herein, (b) agrees that all of the liens and security interests granted to secure the Obligations hereunder, and which were created by and existing under the Existing Security Agreement shall continue to be valid and subsisting liens and security interests securing the obligations under the Credit Agreement, and the other Credit Documents, (c) agrees that the Existing Security Agreement and the liens and security interests granted to secure the Obligations hereunder and created thereunder shall remain in full force and effect, as amended and restated herein, and (d) agrees that all rights, titles, interests, liens and security interests granted to secure the Obligations hereunder and existing under the Existing Security Agreement are renewed, extended, carried forward and conveyed hereby to secure all of the obligations of the Grantors under the Credit Agreement, and the other Credit Documents.

SECTION 7.17.  Waiver of Jury.  EACH GRANTOR, THE LENDERS, AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN RESPECT OF ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT, ANY OTHER CREDIT DOCUMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

THIS SECURITY AGREEMENT AND THE OTHER CREDIT DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND SUPERSEDE ALL PRIOR UNDERSTANDINGS AND AGREEMENTS, WHETHER WRITTEN OR ORAL, RELATING TO THE TRANSACTIONS PROVIDED FOR HEREIN AND THEREIN.  ADDITIONALLY, this Security Agreement AND THE CREDIT DOCUMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[Remainder of this page intentionally left blank.  Signature pages to follow.]

 

 

 

Second Amended and Restated Pledge and Security Agreement

Page 20 of 29

 

IN WITNESS WHEREOF, each of the parties hereto has caused this Security Agreement to be duly executed and delivered by its Responsible Officer as of the date first above written.

 

	
GRANTORS

	
 

	
CARBO CERAMICS INC.

	
 

	
By:
	
 
	
/s/ Ernesto Bautista III

	
Name:
	
 
	
Ernesto Bautista III

	
Title:
	
 
	
Vice President and Chief Financial Officer

 

	
ASSET GUARD PRODUCTS INC. F/K/A FALCON TECHNOLOGIES AND SERVICES, INC.

	
 

	
By:
	
 
	
/s/ Ernesto Bautista III

	
Name:
	
 
	
Ernesto Bautista III

	
Title:
	
 
	
Vice President and Chief Financial Officer

 

	
STRATAGEN, INC.

	
 

	
By:
	
 
	
/s/ Ernesto Bautista III

	
Name:
	
 
	
Ernesto Bautista III

	
Title:
	
 
	
Vice President and Chief Financial Officer

 

 

 

Signature Page to Second Amended and Restated Pledge and Security Agreement

 

 

	
ADMINISTRATIVE AGENT:

	
 

	
Wilks Brothers, LLC

	
 
	
 
	
 

	
By:
	
 
	
/s/ Morgan D. Neff

	
Name:
	
 
	
Morgan D. Neff

	
Title:
	
 
	
Senior Portfolio Manager

	
 
	
 
	
 

	
By:
	
 
	
/s/ Matthew Wilks

	
Name:
	
 
	
Matthew Wilks

	
Title:
	
 
	
Portfolio Manager and Vice President of Capital Investments

 

 

 

Signature Page to Second Amended and Restated Pledge and Security Agreement

 

SCHEDULE I

to Second Amended and Restated Pledge and Security 

Agreement

Item A-1. Location of Grantor for purposes of UCC.

 

	
Borrower:
	
 

	
 
	
 

	
CARBO Ceramics Inc.
	
Delaware

	
 
	
 

	
Grantor:
	
 

	
 
	
 

	
Asset Guard Products Inc.
	
Delaware

	
 
	
 

	
Grantor:
	
 

	
 
	
 

	
StrataGen, Inc.
	
Delaware

Item A-2. Grantor’s place of business or principal office.

Borrower:

CARBO Ceramics Inc.

575 N. Dairy Ashford Road, Suite 300

Houston, Texas 77079

Grantor:

Asset Guard Products Inc.

575 N. Dairy Ashford Road, Suite 300

Houston, Texas 77079

Grantor:

StrataGen, Inc..

575 N. Dairy Ashford Road, Suite 300

Houston, Texas 77079

Item A-3. Taxpayer ID number.

 

	
Borrower:
	
 

	
 
	
 

	
CARBO Ceramics Inc.
	
72-1100013

	
 
	
 

	
Grantor:
	
 

	
 
	
 

	
Asset Guard Products Inc.
	
27-0996422

	
 
	
 

	
Grantor:
	
 

	
 
	
 

	
StrataGen, Inc.
	
94-3165205

Item B. Merger or other corporate reorganization.

None.

 

 

 

Second Amended and Restated Pledge and Security Agreement

Schedule I

 

SCHEDULE 2.1(a)(viii)

to Second Amended and Restated Pledge and Security 

Agreement

PLEDGED DEPOSIT ACCOUNTS

 

	
Company
	
Bank
	
Bank Account Number

	
Carbo Ceramics Inc.
	
Wells Fargo 
	
4950031153

 

	
Asset Guard Products Inc. d/b/a/Falcon Technologies and Services, Inc.

 
	
Wells Fargo
	
4122000599

	
StrataGen Inc.
	
Wells Fargo 
	
4121685424

 

 

 

 

Second Amended and Restated Pledge and Security Agreement

Schedule 2.1

 

SCHEDULE 1.1

to Second Amended and Restated Pledge and Security 

Agreement

PLEDGED FACILITIES

 

	
Type
	
 
	
Address
	
 
	
City
	
 
	
State
	
 
	
Zip

	
Plant
	
 
	
1800 Dent Rd
	
 
	
Toomsboro
	
 
	
GA
	
 
	
31090

	
Plant
	
 
	
2301 East 4th Street
	
 
	
Marshfield
	
 
	
WI
	
 
	
54449

	
Minerals Sand - Grufbowski
	
 
	
6473 Highway 13 North
	
 
	
Pittsville
	
 
	
WI
	
 
	
54466

	
Minerals Sand - Hason
	
 
	
11575 MacArthur Drive
	
 
	
Marshfield
	
 
	
WI
	
 
	
54449

	
Minerals Sublease - Kaolin Allen North
	
 
	
 
	
 
	
Wilkinson County 
	
 
	
GA
	
 
	
 

	
Minerals Sublease - Kaolin CM Shepherd 2N
	
 
	
 
	
 
	
Wilkinson County 
	
 
	
GA
	
 
	
 

	
Distribution Center
	
 
	
51 Main St.
	
 
	
Douglas
	
 
	
ND
	
 
	
58735

	
Distribution Center
	
 
	
2346 County Road 115
	
 
	
Alice
	
 
	
TX
	
 
	
78332

	
Distribution Center
	
 
	
1975 Blairtown Ave
	
 
	
Rock Springs
	
 
	
WY
	
 
	
82901

	
Distribution Center
	
 
	
8000 IH 10W, Ste 600
	
 
	
San Antonio
	
 
	
TX
	
 
	
78230

 

 

 

Second Amended and Restated Pledge and Security Agreement

Schedule 1.1

 

Annex 1 to Second Amended and Restated Pledge and Security 

Agreement 

SUPPLEMENT NO.  _______  dated as of ______________, 20___ (the “Supplement”), to the Second Amended and Restated Pledge and Security Agreement dated as of March 2, 2017 (as amended, supplemented, restated, or otherwise modified from time to time, the “Security Agreement”), among CARBO CERAMICS INC., a Delaware corporation (the “Borrower”) and each Material Domestic Subsidiary of the Borrower party thereto from time to time (collectively with the Borrower, the “Grantors” and individually, a “Grantor”), and WILKS BROTHERS, LLC (“Wilks Brothers”), as Administrative Agent (the “Administrative Agent”) for the ratable benefit of the Secured Parties (as defined in the Credit Agreement referred to herein).

A. Reference is made to that certain Credit Agreement, dated as of March 2, 2017 (as amended, supplemented, amended and restated or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the lenders party thereto from time to time (the “Lenders”), and Wilks Brothers, as the Administrative Agent.

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

C. Section 7.10 of the Security Agreement provides that additional Material Domestic Subsidiaries of the Borrower may become Grantors under the Security Agreement by execution and delivery of an instrument in the form of this Supplement.  The undersigned Material Domestic Subsidiary of the Borrower (the “New Grantor”) is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Grantor under the Security Agreement.

Accordingly, the Administrative Agent and the New Grantor agree as follows:

SECTION 1. In accordance with Section 7.10 of the Security Agreement, the New Grantor by its signature below becomes a Grantor under the Security Agreement with the same force and effect as if originally named therein as a Grantor and the New Grantor hereby agrees (a) to all the terms and provisions of the Security Agreement applicable to it as a Grantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Grantor thereunder are true and correct on and as of the date hereof.  In furtherance of the foregoing, the New Grantor, as security for the payment and performance in full of the Obligations (as defined in the Credit Agreement), does hereby create and grant to the Administrative Agent, its successors and assigns, for the benefit of the Secured Parties, their successors and assigns as provided in the Security Agreement, a continuing security interest in and Lien on all of the New Grantor’s right, title and interest in and to the Collateral (as defined in the Security Agreement) of the New Grantor.  Each reference to a “Grantor” in the Security Agreement shall be deemed to include the New Grantor.  The Security Agreement is hereby incorporated herein by reference.

SECTION 2. The New Grantor represents and warrants to the Administrative Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors’ rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)).

SECTION 3. This Supplement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  This Supplement shall become effective when the Administrative Agent shall have received counterparts of this Supplement 

Second Amended and Restated Pledge and Security Agreement

Annex 1

that, when taken together, bear the signatures of the New Grantor and the Administrative Agent.  Delivery of an executed signature page to this Supplement by facsimile or other electronic transmission shall be as effective as delivery of a manually signed counterpart of this Supplement.

SECTION 4. The New Grantor hereby agrees that the schedules attached to the Security Agreement are hereby supplemented by the corresponding schedules attached to this Supplement.  The New Grantor hereby represents and warrants that the information provided in the schedules attached hereto are true and correct as of the date hereof.

SECTION 5. The New Grantor hereby expressly acknowledges and agrees to the terms of Section 6.3. (Indemnity and Expenses) of the Security Agreement.

SECTION 6. Except as expressly supplemented hereby, the Security Agreement shall remain in full force and effect.

SECTION 7. In case one or more provisions of this Supplement shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality, and enforceability of the remaining provisions contained herein or therein shall not be affected or impaired thereby.

SECTION 8. All communications and notices hereunder shall be in writing and given as provided in the Security Agreement.  All communications and notices hereunder to the New Grantor shall be given to it at the address set forth under its signature hereto.

SECTION 9. The New Grantor agrees to reimburse the Administrative Agent for its reasonable out-of-pocket costs and expenses in connection with this Supplement, including the reasonable fees and out-of-pocket expenses of outside counsel for the Administrative Agent.

SECTION 10. Governing Law.  This Security Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Texas.  

SECTION 11. Submission to Jurisdiction.  Each Grantor hereby irrevocably submits to the jurisdiction of any Texas state or federal court sitting in Houston, Texas in any action or proceeding arising out of or relating to this Security Agreement or the other Credit Documents, and each Grantor hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such court.  Each Credit Party hereby unconditionally and irrevocably waives, to the fullest extent it may effectively do so, any right it may have to the defense of an inconvenient forum to the maintenance of such action or proceeding.  Each Grantor hereby agrees that service of copies of the summons and complaint and any other process which may be served in any such action or proceeding may be made by mailing or delivering a copy of such process to such Grantor at its address set forth in this supplement.  Each Grantor hereby agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Section shall affect the rights of any Lender to serve legal process in any other manner permitted by the law or affect the right of any Lender to bring any action or proceeding against any Grantor or its Property in the courts of any other jurisdiction.

SECTION 12. Waiver of Jury.  EACH GRANTOR, THE LENDERS, AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN RESPECT OF ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO 

Second Amended and Restated Pledge and Security Agreement

Annex 1

THIS SUPPLEMENT, ANY OTHER CREDIT DOCUMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

THIS SUPPLEMENT, THE SECURITY AGREEMENT AND THE OTHER CREDIT DOCUMENTS, AS DEFINED IN THE CREDIT AGREEMENT REFERRED TO IN THIS SUPPLEMENT, REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO.

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

[Name of New Grantor],

 

	
By:
	
 
	
 

	
Name:
	
 
	
 

	
Title:
	
 
	
 

	
 
	
 
	
 

	
Address:
	
 
	
 

	
 
	
 
	
 

	
 
	
 
	
 

 

WILKS BROTHERS, LLC, as Administrative Agent

 

	
By:
	
 
	
 

	
Name:
	
 
	
 

	
Title:
	
 
	
 

 

	
By:
	
 
	
 

	
Name:
	
 
	
 

	
Title:
	
 
	
 

 

 

 

Second Amended and Restated Pledge and Security Agreement

Annex 1

 

SCHEDULES TO SUPPLEMENT NO. 1

[AS APPROPRIATE]

 

Second Amended and Restated Pledge and Security Agreement

Annex 1

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