Document:

Exhibit 10.52

 

EXCHANGE AGREEMENT

 

THIS EXCHANGE AGREEMENT (this “Agreement”) is made and entered into as of October 22, 2015, by and between the funds listed on the signature pages hereof (each, a “Holder”) and Warren Resources, Inc., a Maryland corporation (the “Company”).

 

RECITALS:

 

WHEREAS, the Holders beneficially own certain 9.00% Senior Notes due 2022 (the “Existing Notes”) issued by the Company under the Indenture (the “Indenture”) dated as of August 11, 2014, among the Company, the subsidiary guarantors named therein and U.S. Bank National Association, as trustee (the “Trustee”);

 

WHEREAS, the parties hereto desire to have, pursuant to the terms and conditions set forth herein, the Holders exchange (the “Exchange”) certain of the Existing Notes (including accrued and unpaid interest on such Existing Notes) for (i) loans (“Converted Term Loans”) under the Second Lien Credit Agreement to be dated on or about the date hereof among the Company, the Holders and the other financial institutions or other entities from time to time parties thereto, and Cortland Products Corp., as administrative agent (the “Credit Agreement”) and (ii) an aggregate of 4,000,000 shares of common stock, $0.0001 par value, of the Company (the “Common Shares”); and

 

WHEREAS, simultaneously with the consummation of the Exchange, the Holders will make additional New Term Loans (as defined in the Credit Agreement) under the Credit Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants, agreements and understandings contained herein and intending to be legally bound, the parties hereto hereby agree as follows:

 

AGREEMENT:

 

On and subject to the terms hereof, the parties hereto agree as follows:

 

Article I:  Exchange of the Existing Notes for Converted Term Loans and Common Shares

 

Subject to the terms set forth in this Agreement, at the Closing (as defined herein), each Holder agrees to exchange and deliver to the Company the aggregate principal amount of the Existing Notes (including the rights to the accrued and unpaid interest on such Existing Notes) specified opposite such Holder’s name under the captions “Principal Amount of Existing Notes” and “Accrued Interest on Existing Notes” in the table on Exhibit A (the exchanged Existing Notes, collectively the “Conversion Notes”) and in exchange therefor each Holder will receive (a) Converted Term Loans in the principal amount specified opposite such Holder’s name under the caption “Principal Amount of Converted Term Loans Received in Exchange for Existing Notes and Accrued Interest” in the table on Exhibit A, and (b) the number of Common Shares specified opposite such Holder’s name under the caption “Issued Common Shares” in the table on Exhibit A (collectively, the “Issued Common Shares”).

 

 

The closing of the Exchange (the “Closing”) shall occur on the Closing Date (as defined in the Credit Agreement). At the Closing, (a) each Holder shall deliver or cause to be delivered, through The Depository Trust Company’s (“DTC”) Deposit/Withdrawal at Custodian system, or by other due and proper agreements or instruments of transfer reasonably acceptable to the Company, all right, title and interest in and to its Conversion Notes (and no other consideration) free and clear of any mortgage, lien, pledge, charge, security interest, encumbrance, title retention agreement, option, equity or other adverse claim thereto (collectively, “Liens”), and (b) the “Commitment Annex” to the Credit Agreement shall reflect Converted Term Loans in an amount equal to the aggregate principal amount specified under the caption “Aggregate Principal Amount of Converted Term Loans Received” in the table on Exhibit A. The Holders acknowledge that following the Closing they will not be entitled to any accrued and unpaid interest on the Conversion Notes. Upon consummation of the Exchange, the Company shall promptly take such actions as are required under the Indenture to cancel, or to cause the Trustee to cancel, the Conversion Notes.

 

The settlement of the Issued Common Shares to be issued to each Holder at Closing shall be by delivery by electronic book-entry at American Stock Transfer and Trust Co., the Company’s transfer agent and registrar, and registered in such Holder’s name, address and tax identification number as set forth on Exhibit A.

 

Article II:  Covenants, Representations and Warranties of the Holders

 

Each Holder hereby covenants (solely as to itself) as follows, and makes the following representations and warranties (solely as to itself), each of which is and shall be true and correct on the date hereof and at the Closing, to the Company, and all such covenants, representations and warranties shall survive the Closing.

 

Section 2.1            Power and Authorization. Such Holder has the power, authority and capacity to execute and deliver this Agreement, to perform its obligations hereunder, and to consummate the Exchange contemplated hereby. With respect to each Holder, Exhibit A hereto is a true, correct and complete list of (i) the name of each Holder, (ii) the principal amount of such Holder’s Conversion Notes and (iii) the DTC Participant holding such Holder’s Conversion Notes.

 

Section 2.2            Valid and Enforceable Agreement; No Violations. This Agreement has been duly executed and delivered by such Holder and constitutes a legal, valid and binding obligation of such Holder, enforceable against such Holder in accordance with its terms, except that such enforcement may be subject to (a) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally, and (b) general principles of equity, whether such enforceability is considered in a proceeding at law or in equity (the “Enforceability Exceptions”). This Agreement and consummation of the Exchange will not violate, conflict with or result in a breach of or default under (i) such Holder’s organizational documents, (ii) any agreement or instrument to which such Holder is a party or by which such Holder or any of their respective assets are bound, or (iii) any laws, regulations or governmental or judicial decrees, injunctions or orders applicable to such Holder.

 

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Section 2.3            Title to the Conversion Notes. Such Holder is the sole beneficial owner of the Conversion Notes set forth opposite its name on Exhibit A hereto. Such Holder has good and valid title to its Conversion Notes, free and clear of any Liens (other than pledges or security interests that such Holder may have created in favor of a prime broker under and in accordance with its prime brokerage agreement with such broker), and at the Closing such Holder will transfer to the Company good and valid title to its Conversion Notes, free and clear of any Liens. Such Holder has not, in whole or in part, except as described in the preceding sentence, (a) assigned, transferred, hypothecated, pledged, exchanged or otherwise disposed of any of its Conversion Notes or its rights in its Conversion Notes, or (b) given any person or entity any transfer order, power of attorney or other authority of any nature whatsoever with respect to its Conversion Notes. Upon such Holder’s delivery of its Conversion Notes to the Company pursuant to the Exchange, such Conversion Notes shall be free and clear of all Liens created by such Holder.

 

Section 2.4            No Finder’s Fees. Such Holder is not party to any contract, agreement or understanding with any person that would give rise to a valid claim against the Company for a brokerage commission, finder’s fee or like payment in connection with the Exchange.

 

Section 2.5            Sophisticated Party. Such Holder is sophisticated in transactions of this type and capable of evaluating the merits and risks of the transactions contemplated hereby and has the capacity to protect its own interests. Such Holder has retained its own advisors and counsel, each of which is sophisticated in transactions of this type and capable of evaluating the merits and risks of the transactions contemplated hereby, in connection with the negotiation of and entry into this Agreement.

 

Section 2.6            Investment Purpose. Such Holder is an “accredited investor,” as such term is defined in Regulation D of the Securities Act of 1933, as amended (the “Securities Act”). Such Holder is acquiring the Issued Common Shares solely for investment for its own account, not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof in any transaction in violation of the federal or state securities laws. Such Holder understands that the Issued Common Shares have not been registered under the Securities Act or applicable state securities laws by reason of a specific exemption from the registration provisions of the Securities Act and applicable state securities laws, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of such Holder’s representations as expressed herein. Such Holder understands that the Company is relying, in part, upon the representations and warranties contained in this Section 2.6 for the purpose of determining whether this transaction meets the requirements for such exemption.

 

Section 2.7            Securities Acknowledgment. Such Holder understands that at Closing, the Issued Common Shares will be characterized as “restricted securities” under federal securities laws and that under such laws and applicable regulations the Issued Common Shares cannot be sold or otherwise disposed of without registration under the Securities Act or an exemption therefrom. To the extent physical certificates are issued representing the Issued Common Shares, it is understood that such certificates will bear a legend in substantially the following form: “THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR

 

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HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER AND, IN THE CASE OF A TRANSACTION EXEMPT FROM REGISTRATION, UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT OR THE ISSUER HAS RECEIVED DOCUMENTATION REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER SUCH ACT.”

 

Article III:  Covenants, Representations and Warranties of the Company

 

The Company hereby covenants as follows, and makes the following representations and warranties, each of which is and shall be true and correct on the date hereof and at the Closing, to the Holders, and all such covenants, representations and warranties shall survive the Closing.

 

Section 3.1            Power and Authorization. The Company is duly organized and existing under the laws of the State of Maryland and in good standing, and has the power and authority to execute and deliver this Agreement, to perform its obligations hereunder and thereunder, and to consummate the Exchange contemplated hereby.

 

Section 3.2            Valid and Enforceable Agreements; No Violations. This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that such enforcement may be subject to the Enforceability Exceptions. This Agreement and consummation of the Exchange will not violate, conflict with or result in a breach of or default under (i) the charter or the by-laws of the Company (the “Governing Documents”), (ii) any agreement or instrument to which the Company is a party or by which any of its assets are bound, or (iii) any laws, regulations or governmental or judicial decrees, injunctions or orders applicable to the Company. True, correct and complete copies of the Company’s Governing Documents as in effect on the date hereof are available electronically on the Securities and Exchange Commission’s website (at the address www.sec.gov) or have otherwise been provided to the Holders prior to the Closing Date, including any and all documents setting forth the terms of, restrictions on or otherwise affecting the Issued Common Shares.

 

Section 3.3            Capitalization of the Company. The Issued Common Shares, when issued and delivered to the Holders pursuant to the terms of this Agreement, will be duly authorized and validly issued in accordance with all applicable laws and the Company’s Governing Documents and will be validly issued, fully paid and nonassessable. Except as expressly set forth in this Agreement and Company’s Governing Documents: (i) none of the Issued Common Shares is entitled or subject to, or will be issued in violation of, any preemptive right, right of repurchase or forfeiture, right of participation, right of maintenance or any similar right; and (ii) none of the Issued Common Shares is subject to any right of first refusal.

 

Section 3.4            Issuance of the Issued Common Shares. The Company has authorized the sale and issuance of the Issued Common Shares to the Holders, upon the terms and conditions set forth herein.

 

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Section 3.5            Financial Condition of the Company. After giving effect to the Exchange and the making of new loans under the Credit Agreement on the Closing Date (as defined in the Credit Agreement): the Company and its subsidiaries project adequate liquidity from operations, cash on hand, and the proceeds of asset sales and borrowings to pay their debts and liabilities, direct, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, at least through June 30, 2016. As of the Closing Date, the Company has no present intention to file a petition as a debtor under the United States Bankruptcy Code and has taken no steps to authorize such a filing or prepare pleadings or documents for such a filing.

 

Article IV:  Conditions to Obligations of the Holders

 

The obligations of the Holders hereunder to consummate the Exchange in accordance with the provisions herein are subject to the satisfaction at or prior to the Closing of the following conditions:

 

Section 4.1            Representations and Warranties. The representations and warranties of the Company (i) set forth in Article III shall be true, correct and complete as of the date of this Agreement and as of the Closing Date and (ii) set forth in Article 3 of the Credit Agreement shall be true, correct and complete in all material respects on and as of the Closing Date, except to the extent that any such representation or warranty relates to a specific date in which case such representation or warranty shall be true and correct as of such earlier date.

 

Section 4.2            Credit Agreement. A counterpart to the Credit Agreement, dated as of the Closing Date and otherwise in the form satisfactory to the Holders, shall have been duly executed on behalf of the Company by a duly authorized executive officer of the Company and the conditions in Article 7 thereunder shall have been satisfied.

 

Section 4.3            Opinions of Counsel. Counsel to the Company shall have furnished to the Holders their written opinions, dated the date hereof and addressed to the Holders, in form and substance reasonably satisfactory to the Holders.

 

Section 4.4            Listing of Common Shares. The Common Shares shall be listed or quoted on the NASDAQ Global Market on the Closing Date.

 

Section 4.5            Registration Rights Agreement. A counterpart to the Registration Rights Agreement, dated as of the Closing Date and substantially in the form of Exhibit B attached hereto, shall have been duly executed on behalf of the Company by a duly authorized executive officer of the Company.

 

Section 4.6            Other Deliverables. The Company shall have furnished to the Holders such further information, certificates and documents as the Holders may reasonably request, including, without limitation, those set forth on the closing checklist delivered in connection herewith.

 

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Article V:  Conditions to Obligations of the Company

 

The obligations of the Company hereunder to consummate the Exchange in accordance with the provisions herein are subject to the satisfaction at or prior to the Closing of the following conditions:

 

Section 5.1            Representations and Warranties. The representations and warranties of the Holders set forth in Article II shall be true, correct and complete as of the date of this Agreement and as of the Closing Date.

 

Section 5.2            Credit Agreement. A counterpart to the Credit Agreement, dated as of the Closing Date and otherwise in the form satisfactory to the Company, shall have been duly executed on behalf of the Holders and the administrative agent thereunder.

 

Section 5.3            Other  Deliverables.  Each  Holder  shall  have  complied  with  its  obligations under Article I.

 

Article VI:  Miscellaneous

 

Section 6.1            Entire Agreement. This Agreement and any documents and agreements executed in connection with the Exchange, including the Credit Agreement, embody the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersede all prior and contemporaneous oral or written agreements, representations, warranties, contracts, correspondence, conversations, memoranda and understandings between or among the parties or any of their agents, representatives or affiliates relative to such subject matter, including, without limitation, any term sheets, emails or draft documents, and is not intended to confer upon any person any rights or remedies hereunder other than the parties hereto.

 

Section 6.2            Construction. References in the singular shall include the plural, and vice versa, unless the context otherwise requires. Headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meanings of the provisions hereof. Neither party, nor its respective counsel, shall be deemed the drafter of this Agreement for purposes of construing the provisions of this Agreement, and all language in all parts of this Agreement shall be construed in accordance with its fair meaning, and not strictly for or against either party.

 

Section 6.3            Governing Law; Jurisdiction. This Agreement shall in all respects be construed in accordance with and governed by the substantive laws of the State of New York, without reference to its choice of law rules. All actions or proceedings arising out of or relating to this Agreement shall be heard and determined exclusively in any federal court of the United States of America sitting in the City of New York, Borough of Manhattan; provided, however, that if such federal court does not have jurisdiction over such action or proceeding, such action or proceeding shall be heard and determined exclusively in any state court sitting in the City of New York, Borough of Manhattan. Consistent with the preceding sentence, the parties hereto hereby (a) submit to the exclusive jurisdiction of any federal or state court sitting in City of New York, Borough of Manhattan, for the purpose of any action or proceeding arising out of or relating to this Agreement brought by any party hereto and (b) irrevocably waive, and agree not to assert by way of motion, defense, or otherwise, in any such action or proceeding, any claim

 

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that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the action or proceeding is brought in an inconvenient forum, that the venue of the action or proceeding is improper, or that this Agreement or the transactions contemplated by this Agreement may not be enforced in or by any of the above-named courts.

 

Section 6.4            Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

Section 6.5            Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Any counterpart or other signature hereon delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery of this Agreement by such party.

 

[Signature Page Follows]

 

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

 

	
 
    	
WARREN RESOURCES, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Stewart P. Skelly
    
	
 
    	
Name:
    	
Stewart   P. Skelly
    
	
 
    	
Title:
    	
Vice   President and Chief Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CLAREN ROAD CREDIT MASTER FUND, LTD.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Albert Marino
    
	
 
    	
Name:
    	
Albert   Marino
    
	
 
    	
Title:
    	
Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CLAREN ROAD CREDIT OPPORTUNITIES MASTER   FUND, LTD.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Albert Marino
    
	
 
    	
Name:
    	
Albert   Marino
    
	
 
    	
Title:
    	
Director
    

 

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EXHIBIT A

 

SCHEDULE OF HOLDERS

 

	
Name and
   Address of
   Holder
    	
 
    	
Address
    	
 
    	
DTC
   Participant
    	
 
    	
Participant
   or
   Custodian
   Number
    	
 
    	
Principal
   Amount of
   Existing Notes
    	
 
    	
Accrued
   Interest on
   Existing
   Notes
    	
 
    	
Principal
   Amount of
   Converted
   Term Loans
   Received in
   Exchange for
    Existing Notes
   and Accrued
   Interest
    	
 
    	
Issued
   Common
   Shares
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Claren Road Credit Master Fund, Ltd.
    	
 
    	
c/o Claren Road Asset   Management, LLC
   51 Astor Place, 12th Floor
   New York, NY 10003
    	
 
    	
JP   Morgan Clearing Corp 
    	
 
    	
# 352
    	
 
    	
$
    	
36,886,000
    	
 
    	
$
    	
746,942
    	
 
    	
$
    	
24,046,946
    	
 
    	
2,400,000
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Claren Road Credit Master Fund, Ltd.
    	
 
    	
 
    	
 
    	
Goldman,   Sachs & Co.
    	
 
    	
# 005
    	
 
    	
$
    	
1,000,000
    	
 
    	
$
    	
20,250
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Claren Road Credit Opportunities Master Fund, Ltd.
    	
 
    	
c/o Claren Road Asset   Management, LLC
   51 Astor Place, 12th Floor
   New York, NY 10003
    	
 
    	
JP   Morgan Clearing Corp 
    	
 
    	
# 352
    	
 
    	
$
    	
24,258,000
    	
 
    	
$
    	
491,224
    	
 
    	
$
    	
16,031,720
    	
 
    	
1,600,000
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Claren Road Credit Opportunities Master Fund, Ltd.
    	
 
    	
 
    	
 
    	
Goldman,   Sachs & Co.
    	
 
    	
# 005
    	
 
    	
$
    	
1,000,000
    	
 
    	
$
    	
20,250
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Total
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
$
    	
63,144,000
    	
 
    	
$
    	
1,278,666
    	
 
    	
$
    	
40,078,666
    	
 
    	
4,000,000
    	
 
    

 

 

EXHIBIT B

 

FORM OF REGISTRATION RIGHTS AGREEMENT

 

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is executed as of the     day of          , 2015 (the “Execution Date”), and is among Warren Resources, Inc., a Maryland corporation (the “Company”) and the funds listed on the signature pages hereof (the “Funds”). Each of the Funds and the Company are each referred to as a “Party” and collectively referred to as the “Parties.”

 

WHEREAS, this Agreement is made in connection with the closing of the transactions contemplated by the Exchange Agreement, dated          , 2015 by and among the Funds and the Company (the “Exchange Agreement”), and the issuance of an aggregate of 4,000,000 shares of Common Stock (the “Stock Consideration”) to the Funds on the Closing Date pursuant to the Exchange Agreement;

 

WHEREAS, the Company has agreed to provide the registration and other rights set forth in this Agreement for the benefit of the Funds; and

 

WHEREAS, it is a condition to the obligations of the Company and the Funds under the Exchange Agreement that this Agreement be executed and delivered.

 

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each Party hereto, the Parties hereby agree as follows:

 

1.                                      Defined Terms. Capitalized terms used in this Agreement and not defined herein shall have the meanings ascribed to such terms in the Exchange Agreement. As used in this Agreement, the following terms have the meanings indicated:

 

“Affiliate” of any specified Person means any other person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such specified Person. For purposes of this definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

 

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

 

“Automatic Shelf Registration Statement” means an “automatic shelf registration statement” as defined under Rule 405.

 

“Board” means the board of directors of the Company.

 

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

 

“Citrus Holders” means any holder of Citrus Registrable Securities.

 

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“Citrus Registrable Securities” means Registrable Securities under (and as such terms are defined in) the Citrus Registration Rights Agreement.

 

“Citrus Registration Rights Agreement” means that certain registration rights agreement, made as of August 11, 2014, by and between the Company and Citrus Energy Corporation.

 

“Commission” means the Securities and Exchange Commission or any other federal agency then administering the Securities Act or Exchange Act.

 

“Common Stock” means common stock, par value $0.0001 per share, of the Company.

 

“Common Stock Price” means $0.50 per share.

 

“Company” has the meaning set forth in the preamble to this Agreement.

 

“Company Indemnified Persons” has the meaning set forth in Section 5(b).

 

“Company Securities” means any equity interest of any class or series in the Company.

 

“Effective Date” means the time and date that a Registration Statement is first declared effective by the Commission or otherwise becomes effective.

 

“Effectiveness Period” has the meaning set forth in Section 2(a).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.

 

“Exchange Agreement” has the meaning set forth in the recitals to this Agreement.

 

“Execution Date” has the meaning set forth in the preamble to this Agreement.

 

“Funds” has the meaning set forth in the preamble to this Agreement.

 

“Holder” means (i) each of the Funds until such Fund ceases to hold any Registrable Securities and (ii) any holder of Registrable Securities to whom registration rights conferred by this Agreement have been transferred in compliance with Section 6(f) hereof; provided that any Person referenced in clause (ii) shall be a Holder only if such Person agrees in writing to be bound by and subject to the terms set forth in this Agreement.

 

“Holder Indemnified Persons” has the meaning set forth in Section 5(a).

 

“Losses” has the meaning set forth in Section 5(a).

 

“Party” and “Parties” have the meanings set forth in the preamble to this Agreement.

 

“Person” means an individual or group, corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

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“Piggyback Notice” has the meaning set forth in Section 2(b).

 

“Piggyback Registration” has the meaning set forth in Section 2(b).

 

“Piggyback Request” has the meaning set forth in Section 2(b).

 

“Preferred Holders” means any holder of Preferred Registrable Securities.

 

“Preferred Registrable Securities” means Registrable Securities under (and as such terms are defined in) the Preferred Registration Rights Agreement.

 

“Preferred Registration Rights Agreement” means that certain registration rights agreement, made as of December 12, 2002, by and between the Company and the holders of the Company’s Preferred Stock.

 

“Preferred Stock” means the Company’s 8% cumulative convertible preferred stock.

 

“Proceeding” means any action, claim, suit, proceeding or investigation (including a preliminary investigation or partial proceeding, such as a deposition) pending or, to the knowledge of the Company, to be threatened.

 

“Prospectus” means the prospectus included in a Registration Statement (including a prospectus that includes any information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A, Rule 430B or Rule 430C promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

 

“Registrable Securities” means the Shares; provided, however, that any Registrable Security will cease to be a Registrable Security (a) when a registration statement covering such Registrable Security becomes or has been declared effective by the Commission and such Registrable Security has been sold or disposed of pursuant to such effective registration statement; (b) when such Registrable Security is eligible to be sold or disposed of (excluding transfers or assignments by a Holder to an Affiliate) pursuant to Rule 144 (or any successor or similar provision adopted by the Commission then in effect) under the Securities Act without volume or manner-of-sale restrictions and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144(c)(1), as set forth in a written opinion letter to such effect, addressed, delivered and reasonably acceptable to the applicable transfer agent and the holders of such securities; or (c) when such Registrable Security has been sold or disposed of in a private transaction in which the transferor’s rights under this Agreement are not assigned to the transferee of such securities pursuant to Section 6(f) hereof.

 

“Registration Expenses” has the meaning set forth in Section 4.

 

“Registration Statement” means a registration statement in the form required to register the resale of the Registrable Securities under the Securities Act and other applicable law, and

 

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including any Prospectus, amendments and supplements to each such registration statement or Prospectus, including pre-and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement, and includes, for the avoidance of doubt, the Shelf Registration Statement.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act.

 

“Rule 405” means Rule 405 promulgated by the Commission pursuant to the Securities Act.

 

“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act.

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.

 

“Selling Expenses” means all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities and fees and disbursements of counsel for any Holder.

 

“Shares” means the Stock Consideration and any other equity interests of the Company or equity interests in any successor of the Company issued in respect of such Stock Consideration by reason of or in connection with any stock dividend, stock split, combination, reorganization, recapitalization, conversion to another type of entity or similar event involving a change in the capital structure of the Company.

 

“Stock Consideration” has the meaning set forth in the recitals to this Agreement.

 

“Suspension Notice” has the meaning set forth in Section 6(b).

 

“Suspension Period” has the meaning set forth in Section 6(b).

 

“Trading Market” means the principal national securities exchange on which Registrable Securities are listed.

 

“VWAP” means, as of a specified date and in respect of Registrable Securities, the volume weighted average price for such security on the Trading Market with respect to the Registrable Securities for the five (5) trading days immediately preceding, but excluding, such date.

 

“WKSI” means a “well known seasoned issuer” as defined under Rule 405.

 

Unless the context requires otherwise: (a) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms; (b) references to Sections refer

 

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to Sections of this Agreement; (c) the terms “include”, “includes”, “including” or words of like import shall be deemed to be followed by the words “without limitation”; (d) the terms “hereof”, “herein” or “hereunder” refer to this Agreement as a whole and not to any particular provision of this Agreement; (e) unless the context otherwise requires, the term “or” is not exclusive and shall have the inclusive meaning of “and/or”; (f) defined terms herein will apply equally to both the singular and plural forms and derivative forms of defined terms will have correlative meanings; (g) references to any law or statute shall include all rules and regulations promulgated thereunder, and references to any law or statute shall be construed as including any legal and statutory provisions consolidating, amending, succeeding or replacing the applicable law or statute; (h) references to any Person include such Person’s successors and permitted assigns; and (i) references to “days” are to calendar days unless otherwise indicated.

 

2.                                      Registration.

 

(a)                                 Shelf Registration.

 

(i)                                     No later than 30 days following the Closing Date, the Company shall use its reasonable best efforts to prepare and file a registration statement under the Securities Act to permit the public resale of all Registrable Securities from time to time as permitted by Rule 415 (or any successor or similar provision adopted by the Commission then in effect) under the Securities Act, on the terms and conditions specified in this Section 2(a)(i) (a “Shelf Registration Statement”). The Shelf Registration Statement filed with the Commission pursuant to this Section 2(a)(i) shall be on Form S-3 (or such successor form thereto permitting shelf registration of securities under the Securities Act), and if the Company becomes a WKSI, the Shelf Registration Statement shall be effected pursuant to an Automatic Shelf Registration Statement, which shall be on Form S-3 or any equivalent or successor form under the Securities Act (if available to the Company), covering the Registrable Securities, which shall contain a prospectus in such form as to permit any Holder to sell its Registrable Securities pursuant to Rule 415 (or any successor or similar rule adopted by the Commission then in effect) under the Securities Act at any time beginning on the effective date thereof. The Company shall use its reasonable best efforts to cause the Shelf Registration Statement filed pursuant to this Section 2(a)(i) to become or be declared effective 90 days after the Closing Date. The Shelf Registration Statement shall provide for the resale pursuant to any method or combination of methods legally available to, and requested by, the Holders of Registrable Securities covered by such Shelf Registration Statement. During the Effectiveness Period, the Company shall use its reasonable best efforts to cause such Shelf Registration Statement filed pursuant to this Section 2(a)(i) to remain effective, and to be supplemented and amended to the extent necessary to ensure that such Shelf Registration Statement is available or, if not available, that another registration statement is available for the resale of the Registrable Securities until all Registrable Securities have ceased to be Registrable Securities (the “Effectiveness Period”). The Shelf Registration Statement when effective (including the documents incorporated therein by reference) will comply as to form in all material respects with all applicable requirements of the Securities Act and the Exchange Act and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any prospectus contained in such Shelf Registration Statement, in the light of the circumstances under which a statement is made). As soon as practicable following the date that the Shelf Registration Statement becomes effective, but in any event within two (2)

 

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Business Days of such date, the Company shall provide the Holders with written notice of the effectiveness of the Shelf Registration Statement.

 

(ii)                                  In the event a Holder transfers Registrable Securities included on the Shelf Registration Statement and such Registrable Securities remain Registrable Securities following such transfer, at the request of such Holder, the Company shall amend or supplement such Shelf Registration Statement as may be necessary in order to enable such transferee to offer and sell such Registrable Securities pursuant to such Shelf Registration Statement; provided that in no event shall the Company be required to file a post-effective amendment to the Shelf Registration Statement unless (A) such Shelf Registration Statement includes only Registrable Securities held by the Holder, Affiliates of the Holder or transferees of the Holder or (B) the Company has received written consent therefor from whom Registrable Securities have been registered on (but not yet sold under) such Shelf Registration Statement, other than the Holder, Affiliates of the Holder or transferees of the Holder.

 

(b)                                 Piggyback Registration.

 

(i)                                     So long as a Holder has Registrable Securities, if the Company shall at any time propose to conduct a public offering of Common Stock for cash (whether in connection with a public offering of Common Stock by the Company, a public offering of Common Stock by stockholders, or both, but excluding an offering relating solely to an employee benefit plan, an offering relating to a transaction on Form S-4 or S-8 or an offering on any registration statement form that does not permit secondary sales), the Company shall promptly notify all Holders of such proposal reasonably in advance of (and in any event at least five Business Days before) the commencement of the offering (the “Piggyback Notice”). The Piggyback Notice shall offer to each Holder holding at least $1.25 million of Registrable Securities based on the VWAP of such Registrable Securities on the date of such Piggyback Notice the opportunity to include for registration in such Registration Statement the number of Registrable Securities as they may request (a “Piggyback Registration”). The Company shall use commercially reasonable efforts to include in each such Piggyback Registration such Registrable Securities for which the Company has received a written request from a Holder within three Business Days after delivery of the Piggyback Notice to such Holder (“Piggyback Request”) for inclusion therein. If a Holder decides not to include all of its Registrable Securities in any Registration Statement thereafter filed by the Company, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of Common Stock, all upon the terms and conditions set forth herein.

 

(ii)                                  If the Registration Statement under which the Company gives notice under this Section 2(b) is for an underwritten offering, the Company shall so advise the Holders of Registrable Securities. In such event, the right of any such Holder to be included in a registration pursuant to this Section 2(b) shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. If the managing underwriter or managing underwriters of such offering advise the Company and the Holders in

 

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writing that in their reasonable opinion that the inclusion of all of the Holders’ Registrable Securities in the subject Registration Statement (or any other Common Stock proposed to be included in such offering) would likely have an adverse effect in any material respect on the price, timing or distribution of Common Stock proposed to be included in such offering, the Company shall include in such offering only that number of shares of Common Stock proposed to be included in such offering that, in the reasonable opinion of the managing underwriter or managing underwriters, will not have such effect, with such number to be allocated as follows:

 

(A)                               If such registration statement is filed other than pursuant to a demand registration initiated by the Preferred Holders pursuant to the terms of the Preferred Registration Rights Agreement, (i) first, to the Company, (ii) if there remains availability for additional shares of Common Stock to be included in such registration, second pro rata among the Preferred Holders desiring to register Preferred Registrable Securities based on the number of Preferred Registrable Securities held by all such Preferred Holders, (iii) if there remains availability for additional shares of Common Stock to be included in such registration, third pro rata among the Citrus Holders desiring to register Citrus Registrable Securities based on the number of Citrus Registrable Securities held by all such Citrus Holders, (iv) if there remains availability for additional shares of Common Stock to be included in such registration, fourth pro rata among all Holders desiring to register Registrable Securities based on the number of Registrable Securities held by all such Holders and (v) if there remains availability for additional shares of Common Stock to be included in such registration, fifth pro-rata among all other holders of Common Stock who may be seeking to register such Common Stock based on the number of shares of Common Stock such holder is entitled to include in such registration.

 

(B)                               If such registration statement is filed pursuant to a demand registration initiated by the Preferred Holders pursuant to the terms of the Preferred Registration Rights Agreement, (i) first, to the Preferred Holders, (ii) if there remains availability for additional shares of Common Stock to be included in such registration, second pro rata to the Citrus Holders desiring to register Citrus Registrable Securities based on the number of Citrus Registrable Securities held by all such Citrus Holders, (iii) if there remains availability for additional shares of Common Stock to be included in such registration, third pro rata to the Holders desiring to register Registrable Securities based on the number of Registrable Securities held by all such Holders, and (iv) if there remains availability for additional shares of Common Stock to be included in such registration, fourth pro-rata among all other holders of Common Stock who may be seeking to register such Common Stock based on the number of shares of Common Stock such holder is entitled to include in such registration.

 

If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the managing underwriter(s) delivered on or prior to the time of the commencement of such offering. Any Registrable Securities withdrawn from such underwriting shall be excluded and withdrawn from the registration.

 

(iii)                               The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2(b) at any time in its sole discretion whether or not any Holder has elected to include Registrable Securities in such Registration Statement. Unless otherwise agreed to by a Holder with the Company, any Holder that has elected to include Registrable Securities in a Piggyback Registration shall have the right to withdraw such Holder’s

 

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request for inclusion of such Holder’s Registrable Securities in such offering by giving written notice to the Company of such withdrawal at or prior to the time of pricing of such offering. The registration expenses of such withdrawn registration shall be borne by the Company in accordance with Section 4 hereof.

 

(iv)                              The rights of the Holders under this Section 2(b) shall terminate upon such Holder (together with its Affiliates) ceasing to hold at least $1.25 million of Registrable Securities based on the Common Stock Price.

 

3.                                      Registration Procedures.

 

The procedures to be followed by the Company and each Holder electing to sell Registrable Securities in a Registration Statement pursuant to this Agreement, and the respective rights and obligations of the Company and such Holders, with respect to the preparation, filing and effectiveness of such Registration Statement, are as follows:

 

(a)                                 In connection with the Shelf Registration Statement, the Company will at least five Business Days prior to the anticipated filing of the Shelf Registration Statement and any related Prospectus or any amendment or supplement thereto (other than, after effectiveness of the Shelf Registration Statement, any filing made under the Exchange Act that is incorporated by reference into the Registration Statement), (i) furnish to such Holders copies of all such documents prior to filing and (ii) use commercially reasonable efforts to address in each such document when so filed with the Commission such comments as such Holders reasonably shall propose prior to the filing thereof.

 

(b)                                 In connection with a Piggyback Registration, the Company will at least five days prior to the anticipated filing of the initial Registration Statement that identifies the Holders and any related Prospectus or any amendment or supplement thereto (other than amendments and supplements that do not materially alter the previous disclosure or do nothing more than name Holders and provide information with respect thereto), (i) furnish to such Holders copies of all Registration Statements that identify the Holders and any related Prospectus or any amendment or supplement thereto (other than amendments and supplements that do not materially alter the previous disclosure or do nothing more than name Holders and provide information with respect thereto) prior to filing and (ii) use commercially reasonable efforts to address in each such document when so filed with the Commission such comments as such Holders reasonably shall propose prior to the filing thereof.

 

(c)                                  The Company will use commercially reasonable efforts to as promptly as reasonably practicable (i) prepare and file with the Commission such amendments, including post-effective amendments, and supplements to each Registration Statement and the Prospectus used in connection therewith as may be necessary under applicable law to keep such Registration Statement continuously effective with respect to the disposition of all Registrable Securities covered thereby for its Effectiveness Period and, subject to the limitations contained in this Agreement, prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities held by the Holders; (ii) cause the related Prospectus to be amended or supplemented by any required prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424; and

 

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(iii) respond to any comments received from the Commission with respect to each Registration Statement or any amendment thereto and, as promptly as reasonably practicable provide such Holders true and complete copies of all correspondence from and to the Commission relating to such Registration Statement that pertains to such Holders as selling Holders but not any comments that would result in the disclosure to such Holders of material and non-public information concerning the Company.

 

(d)                                 The Company will comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the Registration Statements and the disposition of all Registrable Securities covered by each Registration Statement.

 

(e)                                  The Company will notify such Holders who are included in a Registration Statement as promptly as reasonably practicable: (i) (A) when a Prospectus or any prospectus supplement or post-effective amendment to a Registration Statement in which such Holder is included has been filed; (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement (in which case the Company shall provide true and complete copies thereof and all written responses thereto to each of such Holders that pertain to such Holders as selling Holders); and (C) with respect to each such Registration Statement or any post-effective amendment thereto, when the same has been declared effective; (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to such Registration Statement or Prospectus or for additional information that pertains to such Holders as sellers of Registrable Securities; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of such Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (v) of the occurrence of any event or passage of time that makes any statement made in such Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to such Registration Statement, Prospectus or other documents so that, in the case of such Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided, however, that no notice by the Company shall be required pursuant to this clause (v) in the event that the Company either promptly files a prospectus supplement to update the Prospectus or a Form 8-K or other appropriate Exchange Act report that is incorporated by reference into the Registration Statement, which in either case, contains the requisite information that results in such Registration Statement no longer containing any untrue statement of material fact or omitting to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading).

 

(f)                                   The Company will use commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, as promptly as reasonably

 

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practicable, or if any such order or suspension is made effective during any Suspension Period, as promptly as reasonably practicable after such Suspension Period is over.

 

(g)                                  During the Effectiveness Period, the Company will furnish to each such Holder, without charge, at least one conformed copy of each Registration Statement and each amendment thereto and all exhibits to the extent requested by such Holder (including those incorporated by reference) promptly after the filing of such documents with the Commission; provided, that the Company will not have any obligation to provide any document pursuant to this clause that is available on the Commission’s EDGAR system.

 

(h)                                 The Company will promptly deliver to each Holder, without charge, as many copies of each Prospectus or Prospectuses (including each form of prospectus) authorized by the Company for use and each amendment or supplement thereto as such Holder may reasonably request during the Effectiveness Period. Subject to the terms of this Agreement, the Company consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto.

 

(i)                                     Unless any Registrable Securities shall be in book-entry form only, the Company will cooperate with such Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free of all restrictive legends indicating that the Registrable Securities are unregistered or unqualified for resale under the Securities Act, Exchange Act or other applicable securities laws, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request in writing.

 

(j)                                    Upon the occurrence of any event contemplated by Section 3(e)(v), subject to this Section 3(j), as promptly as reasonably practicable, the Company will prepare a supplement or amendment, including a post-effective amendment, if required by applicable law, to the affected Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, no Registration Statement nor any Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

(k)                                 The Company will use its reasonable best efforts to cause the Registrable Securities to be listed on the principal national securities exchange on which the Common Stock is then listed or, if the Common Stock is not then listed, on another national securities exchange selected by the Company in its sole discretion, subject to the Company meeting the listing requirements of such exchange.

 

4.                                      Registration Expenses. All reasonable Registration Expenses, as determined in good faith by the Company, incident to the Parties’ performance of or compliance with their respective obligations under this Agreement (excluding any Selling Expenses) shall be borne by the Company, whether or not any Registrable Securities are sold pursuant to a Registration Statement. “Registration Expenses” shall include, without limitation, (i) all registration and

 

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filing fees (including fees and expenses (A) with respect to filings required to be made with the Trading Market and (B) in compliance with applicable state securities or “Blue Sky” laws or fees of the Financial Industry Regulatory Authority, Inc.), (ii) printing expenses (including expenses of printing certificates for Company Securities and of printing prospectuses if the printing of prospectuses is reasonably requested by a Holder of Registrable Securities included in the Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel, auditors, independent engineers and accountants for the Company, including the expenses of any special audits or “cold comfort” letters required by or incident to such performance and compliance, (v) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement, including, but not limited to, fees of transfer agents and registrars, and (vi) all expenses relating to marketing the sale of the Registrable Securities, including expenses related to conducting a “road show.” In addition, the Company shall be responsible for all of its expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including expenses payable to third parties and including all salaries and expenses of their officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on the Trading Market. Notwithstanding the foregoing, the Company shall not be responsible for the legal fees incurred by Holders in connection with the exercise of such Holders’ rights hereunder, and each Selling Holder shall pay its pro rata share of all Selling Expenses in connection with any sale of its Registrable Securities hereunder.

 

5.                                      Indemnification.

 

(a)                                 The Company shall indemnify and hold harmless each Holder, its officers and directors and any Person who controls any such Holder (within the meaning of the Securities Act) and any agent thereof (collectively, the “Holder Indemnified Persons”), to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, joint or several, costs (including reasonable costs of preparation and reasonable attorneys’ fees) and expenses, judgments, fines, penalties, interest, settlements or other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which any Indemnified Person may be involved, or is threatened to be involved, as a party or otherwise, under the Securities Act or otherwise (collectively, “Losses”), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in (which, for the avoidance of doubt, includes documents incorporated by reference in) any Registration Statement under which any Registrable Securities were registered, in any preliminary prospectus (if the Company authorized the use of such preliminary prospectus prior to the Effective Date), or in any summary or final prospectus or free writing prospectus (if such free writing prospectus was authorized for use by the Company) or in any amendment or supplement thereto (if used during the period the Company is required to keep the Registration Statement current), or arising out of, based upon or resulting from the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances in which they were made, not misleading; provided, however, that the Company shall not be liable to any Holder Indemnified Person to the extent that any such claim arises out of, is based upon or results from an untrue or alleged untrue statement or omission or alleged omission made in such Registration Statement, such preliminary, summary or final prospectus or free writing prospectus

 

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or such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Holder Indemnified Person or any underwriter specifically for use in the preparation thereof. The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding of which the Company is aware in connection with the transactions contemplated by this Agreement. Notwithstanding anything to the contrary herein, this Section 5 shall survive any termination or expiration of this Agreement indefinitely.

 

(b)                                 In connection with any Registration Statement in which a Holder participates, such Holder shall indemnify and hold harmless the Company, its Affiliates and each of their respective officers, directors and any Person who controls the Company (within the meaning of the Securities Act) and any agent thereof (collectively, the “Company Indemnified Persons”), to the fullest extent permitted by applicable law, from and against any and all Losses as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in any such Registration Statement, in any preliminary prospectus (if used prior to the Effective Date of such Registration Statement), or in any summary or final prospectus or free writing prospectus or in any amendment or supplement thereto (if used during the period the Company is required to keep the Registration Statement current), or arising out of, based upon or resulting from the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances in which they were made, not misleading, but only to the extent that the same are made in reliance and in conformity with information relating to the Holder furnished in writing to the Company by such Holder specifically for use therein; provided, however, that the liability of each such Holder shall not be greater in amount than the dollar amount of the proceeds (net of any Selling Expenses) received by such Holder from the sale of the Registrable Securities giving rise to such indemnification.

 

(c)                                  Any Person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any Person’s right to indemnification hereunder to the extent such failure has not prejudiced the indemnifying party) and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent shall not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. Failure to give prompt written notice shall not release the indemnifying party from its obligations hereunder.

 

(d)                                 If the indemnification provided for in this Section 5 is held by a court or government agency of competent jurisdiction to be unavailable to any indemnified party or is insufficient to hold them harmless in respect of any Losses, then each such indemnifying party,

 

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in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Loss in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of such indemnified party on the other in connection with the statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations; provided, however, that in no event shall such Holder be required to contribute an aggregate amount in excess of the dollar amount of proceeds (net of Selling Expenses) received by such Holder from the sale of Registrable Securities giving rise to such indemnification. The relative fault of the indemnifying party on the one hand and the indemnified party on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact has been made by, or relates to, information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this paragraph were to be determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to herein. The amount paid by an indemnified party as a result of the Losses referred to in the first sentence of this paragraph shall be deemed to include any legal and other expenses reasonably incurred by such indemnified party in connection with investigating, defending or resolving any Loss that is the subject of this paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who is not guilty of such fraudulent misrepresentation.

 

(e)                                  Other Indemnification. The provisions of this Section 5 shall be in addition to any other rights to indemnification or contribution that an indemnified party may have pursuant to law, equity, contract or otherwise.

 

6.                                    Miscellaneous.

 

(a)                                 Remedies. Any Person having rights under any provision of this Agreement shall be entitled to enforce such rights specifically to recover damages caused by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or other security) for specific performance and for other injunctive relief in order to enforce or prevent violation of the provisions of this Agreement.

 

(b)                                 Discontinued Disposition. Each Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in clauses (ii) through (v) of Section 3(e) (a “Suspension Notice”), such Holder will forthwith discontinue disposition of such Registrable Securities under the Registration Statement until such Holder’s receipt of the copies of the supplemental Prospectus or amended Registration Statement as contemplated by Section 3(j) or until it is advised in writing by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement (a “Suspension Period”). The Company may provide appropriate stop orders to enforce the provisions of this Section 6(b).

 

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(c)                                  Recapitalization, Exchanges, Etc. Affecting the Shares. The provisions of this Agreement shall apply to the full extent set forth herein with respect to any and all securities of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) that may be issued in respect of, in exchange for or in substitution of, the Registrable Securities, and shall be appropriately adjusted for combinations, splits, recapitalizations, pro rata distributions of securities and the like occurring after the date of this Agreement

 

(d)                                 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission that may permit the sale of the Registrable Securities to the public without registration, the Company agrees to:

 

(i)                                     make and keep public information regarding the Company available, as those terms are understood and defined in Rule 144 (or any successor or similar provision adopted by the Commission then in effect) under the Securities Act, at all times from and after the date hereof;

 

(ii)                                  use its reasonable best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act at all times from and after the date hereof; and

 

(iii)                               so long as a Holder owns any Registrable Securities, furnish, unless otherwise available electronically at no additional charge via the Commission’s EDGAR system, to such Holder forthwith upon request a copy of the most recent annual or quarterly report of the Company, and such other reports and documents as such Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing such Holder to sell any such securities without registration.

 

(e)                                  Amendments and Waivers. Except as otherwise provided herein, the provisions of this Agreement may be amended or waived only upon the prior written consent of the Company and the Holders of at least a majority of the outstanding Registrable Securities as of the date of such amendment or waiver. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any Party to exercise any right hereunder in any manner impair the exercise of any such right.

 

(f)                                   Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns. Except as provided in this Section 6(f), this Agreement, and any rights or obligations hereunder, may not be assigned without the prior written consent of the Company and the Holders. Notwithstanding anything in the foregoing to the contrary, the rights of a Holder pursuant to this Agreement with respect to all or any portion of its Registrable Securities may be assigned without such consent (but only with all related obligations) with respect to such Registrable Securities (and any Registrable Securities issued as a dividend or other distribution with respect to, in exchange for or in replacement of such Registrable Securities) by such Holder to a transferee of such Registrable Securities; provided (i) the

 

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Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the Registrable Securities with respect to which such registration rights are being assigned and (ii) such transferee or assignee agrees in writing to be bound by and subject to the terms set forth in this Agreement. The Company may not assign its rights or obligations hereunder without the prior written consent of the Funds (to the extent such Fund(s) is currently a Holder).

 

(g)                                  Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the Parties shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the Parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

(h)                                 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together shall constitute one and the same Agreement.

 

(i)                                     Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

 

(j)                                    Limitation on Subsequent Registration Rights. From and after the date hereof, the Company shall not, without the prior written consent of the Holders of at least a majority of the then outstanding Registrable Securities, enter into any agreement with any current or future holder of any securities of the Company that would allow such current or future holder to require the Company to include securities in any registration statement filed by the Company on a basis other than expressly subordinate to the rights of, the Holders of Registrable Securities hereunder.

 

(k)                                 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York, without reference to the choice of law provisions thereof. Each of the Parties irrevocably submits to the exclusive jurisdiction of the courts of the State of New York located in the Borough of Manhattan in the City of New York and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each Party anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Each of the Parties irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND

 

15

 

REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

(l)                                     Notices. All notices and communications required or permitted to be given hereunder shall be in writing and shall be delivered personally, or sent by bonded overnight courier, or mailed by U.S. Express Mail or by certified or registered United States Mail with all postage fully prepaid, or sent by electronic mail (“email”) transmission (provided that a receipt of such email is requested and received), addressed to the appropriate Party at the address for such Party shown below or at such other address as such Party shall have theretofore designated by written notice delivered to the Party giving such notice:

 

	
If to the Company:
    	
 
    	
Warren Resources, Inc. 34th Floor
    
	
 
    	
 
    	
1114 Avenue Of The Americas
    
	
 
    	
 
    	
New York, New York 10036
    
	
 
    	
 
    	
Attention: Saema Somalya, General 
   Counsel
    
	
 
    	
 
    	
Email: ssomalya@warrenresources.com
    
	
 
    	
 
    	
 
    
	
If to the Funds:
    	
 
    	
Claren Road Asset Management LLC
    
	
 
    	
 
    	
51 Astor Place, 12th Floor
    
	
 
    	
 
    	
New York, NY 10003
    
	
 
    	
 
    	
Phone: 212-888-1433
    
	
 
    	
 
    	
Attention: Albert Marino
    
	
 
    	
 
    	
Email: 
    	
marino@clarenroad.com
    
	
 
    	
 
    	
 
    	
clarenmo@clarenroad.com
    
	
 
    	
 
    	
 
    	
Kozinn@clarenroad.com
    
	
 
    	
 
    	
 
    
	
If to any other Person who is then a registered   Holder:
    	
 
    	
To the address of such Holder as it appears in the   applicable register for the Registrable Securities or such other address as   may be designated in writing hereafter, in the same manner, by such Person.
    

 

(m)                             Legend Removal. Certificates (or electronic versions thereof to the extent the Shares are held in book-entry form) evidencing the Shares shall not contain any legend: (i) following any sale of the Shares pursuant to Rule 144 or any resale of the Shares pursuant to a registration statement (including the Registration Statement), (ii) following the six-month anniversary of the Closing Date if the Shares are eligible for sale under Rule 144 without volume or manner-of-sale restrictions and as of such date the Company is in compliance with the current public information required under Rule 144 as to the Shares, or (iii) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) (each such event being a “Legend Removal Qualification Event”). Upon request, the Company shall cause its counsel to issue a legal opinion to the Transfer Agent, if required by the Transfer Agent, promptly after a Legend Removal Qualification Event and the delivery to the Company or the Company’s counsel of any reasonable certifications requested by the Company or the Company’s counsel in connection

 

16

 

with the issuance of such opinion to effect the removal of the legend hereunder with respect to any qualifying Shares. Following an applicable Legend Removal Qualification Event, the Company will no later than three (3) trading days following the delivery by a Holder to the Company or the Transfer Agent (with notice to the Company) of a legended certificate representing the Shares (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer) or an electronic version thereof (to the extent the Shares are held in book-entry form) and any reasonable certifications from the Holder requested by the Company or the Company’s counsel in order to effectuate a legend removal, deliver or cause to be delivered to such Holder a certificate representing such Shares that is free from all restrictive and other legends (or to the extent the Shares are held in book-entry form, effect the removal of restrictive and other legends on such Shares held by the Depository Trust Company). In addition, promptly upon request of a Holder, the Company shall cause its counsel to promptly, but in no event later than two (2) trading days after such request and the delivery to the Company or the Company’s counsel of any reasonable certifications requested by the Company or the Company’s counsel, issue a legal opinion to the Transfer Agent at any time after the six month anniversary of the Closing Date if required by the Transfer Agent to transfer any of the Shares, which legal opinion shall provide that a Holder may transfer any of the Shares free of restriction during the 10 trading days following the date of such legal opinion and that the transferee thereof shall receive the Shares free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Agreement. Certificates for Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company System as directed by such Holder if the Company is then a participant in such system.

 

(n)                                 Entire Agreement. This Agreement constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes all prior contracts or agreements with respect to the subject matter hereof and the matters addressed or governed hereby, whether oral or written.

 

[Remainder of page intentionally left blank. Signature page follows.]

 

17

 

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

 

	
 
    	
CLAREN ROAD CREDIT   MASTER FUND, LTD.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    
	
 
    	
Name:
    
	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
CLAREN ROAD CREDIT   OPPORTUNITIES 
   MASTER FUND, LTD.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    
	
 
    	
 
    

 

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

 

 

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

 

	
 
    	
WARREN RESOURCES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name: Lance Peterson
    
	
 
    	
Title:   Interim Chief Executive Officer
    

 

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]Exhibit 10.53

	
 
    

 

SECURITY AGREEMENT

 

MADE BY

 

WARREN RESOURCES, INC.

 

AND CERTAIN OF ITS SUBSIDIARIES

 

IN FAVOR OF

 

CORTLAND PRODUCTS CORP.,

 

AS ADMINISTRATIVE AGENT

 

DATED AS OF OCTOBER 22, 2015

	
 
    

 

 

TABLE OF CONTENTS

 

	
ARTICLE I Definitions
    	
 
    	
1
    
	
 
    	
Section 1.01
    	
Definitions
    	
1
    
	
 
    	
Section 1.02
    	
Other Definitional   Provisions; References
    	
4
    
	
 
    	
Section 1.03
    	
Bailee For Perfection
    	
4
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE II Grant of Security Interest
    	
 
    	
4
    
	
 
    	
Section 2.01
    	
Grant of Security   Interest
    	
4
    
	
 
    	
Section 2.02
    	
[Reserved]
    	
5
    
	
 
    	
Section 2.03
    	
Grantors Remain Liable   under Accounts, Chattel Paper and Payment Intangibles
    	
5
    
	
 
    	
 
    	
 
    
	
ARTICLE III Acknowledgments, Waivers and   Consents
    	
6
    
	
 
    	
Section 3.01
    	
Acknowledgments,   Waivers and Consents
    	
6
    
	
 
    	
Section 3.02
    	
No Subrogation,   Contribution or Reimbursement
    	
8
    
	
 
    	
 
    	
 
    
	
ARTICLE IV Representations and Warranties
    	
9
    
	
 
    	
Section 4.01
    	
Representations in   Credit Agreement
    	
9
    
	
 
    	
Section 4.02
    	
Perfected Liens
    	
9
    
	
 
    	
Section 4.03
    	
Legal Name,   Organizational Status, Chief Executive Office
    	
9
    
	
 
    	
Section 4.04
    	
Prior Names, Addresses,   Locations of Tangible Assets
    	
9
    
	
 
    	
Section 4.05
    	
[Reserved]
    	
10
    
	
 
    	
Section 4.06
    	
Instruments and Chattel   Paper
    	
10
    
	
 
    	
Section 4.07
    	
Accounts
    	
10
    
	
 
    	
Section 4.08
    	
Governmental Obligors
    	
10
    
	
 
    	
Section 4.09
    	
Commercial Tort Claims
    	
10
    
	
 
    	
Section 4.10
    	
Intellectual Property
    	
10
    
	
 
    	
 
    	
 
    
	
ARTICLE V Covenants
    	
11
    
	
 
    	
Section 5.01
    	
Covenants in Credit   Agreement
    	
11
    
	
 
    	
Section 5.02
    	
Maintenance of   Perfected Security Interest; Further Documentation
    	
11
    
	
 
    	
Section 5.03
    	
Maintenance of Records
    	
12
    
	
 
    	
Section 5.04
    	
Further Identification   of Collateral
    	
12
    
	
 
    	
Section 5.05
    	
[Reserved]
    	
12
    
	
 
    	
Section 5.06
    	
Notices
    	
13
    
	
 
    	
Section 5.07
    	
Changes in Name;   Location, etc.
    	
13
    
	
 
    	
Section 5.08
    	
Instruments and Tangible   Chattel Paper
    	
13
    
	
 
    	
Section 5.09
    	
Commercial Tort Claims
    	
13
    
	
 
    	
Section 5.10
    	
Intellectual Property
    	
14
    
	
 
    	
 
    	
 
    
	
ARTICLE VI Remedial Provisions
    	
15
    
	
 
    	
Section 6.01
    	
[Reserved]
    	
15
    
	
 
    	
Section 6.02
    	
Collections on   Accounts, Etc.
    	
15
    
	
 
    	
Section 6.03
    	
Proceeds
    	
15
    
	
 
    	
Section 6.04
    	
Remedies
    	
16
    
	
 
    	
Section 6.05
    	
[Reserved]
    	
17
    
	
 
    	
Section 6.06
    	
Deficiency
    	
17
    
	
 
    	
Section 6.07
    	
Non-Judicial   Enforcement
    	
17
    
	
 
    	
Section 6.08
    	
IP Licenses
    	
17
    
					

 

i

 

	
ARTICLE VII The Administrative Agent
    	
 
    	
18
    
	
 
    	
Section 7.01
    	
Administrative Agent’s   Appointment as Attorney-in-Fact, Etc.
    	
18
    
	
 
    	
Section 7.02
    	
Duty of Administrative   Agent
    	
19
    
	
 
    	
Section 7.03
    	
Financing Statements
    	
20
    
	
 
    	
Section 7.04
    	
Authority of   Administrative Agent
    	
20
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE VIII Subordination of Indebtedness
    	
 
    	
21
    
	
 
    	
Section 8.01
    	
Subordination of All   Grantor Claims
    	
21
    
	
 
    	
Section 8.02
    	
Claims in Bankruptcy
    	
21
    
	
 
    	
Section 8.03
    	
Payments Held in Trust
    	
21
    
	
 
    	
Section 8.04
    	
Liens Subordinate
    	
21
    
	
 
    	
Section 8.05
    	
Notation of Records
    	
22
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE IX Miscellaneous
    	
22
    
	
 
    	
Section 9.01
    	
Waiver
    	
22
    
	
 
    	
Section 9.02
    	
Notices
    	
22
    
	
 
    	
Section 9.03
    	
Payment of   Expenses, Indemnities, Etc.
    	
22
    
	
 
    	
Section 9.04
    	
Amendments in Writing
    	
23
    
	
 
    	
Section 9.05
    	
Successors and Assigns
    	
23
    
	
 
    	
Section 9.06
    	
Invalidity
    	
23
    
	
 
    	
Section 9.07
    	
Counterparts
    	
23
    
	
 
    	
Section 9.08
    	
Survival
    	
23
    
	
 
    	
Section 9.09
    	
Captions
    	
23
    
	
 
    	
Section 9.10
    	
No Oral Agreements
    	
23
    
	
 
    	
Section 9.11
    	
Governing Law;   Submission to Jurisdiction
    	
23
    
	
 
    	
Section 9.12
    	
Waiver of Jury Trial
    	
24
    
	
 
    	
Section 9.13
    	
Acknowledgments
    	
24
    
	
 
    	
Section 9.14
    	
Additional Grantors
    	
25
    
	
 
    	
Section 9.15
    	
Set-Off
    	
25
    
	
 
    	
Section 9.16
    	
Releases
    	
25
    
	
 
    	
Section 9.17
    	
Intercreditor   Agreements
    	
26
    
	
 
    	
Section 9.18
    	
Reinstatement
    	
27
    
	
 
    	
Section 9.19
    	
Acceptance
    	
27
    
					

 

ii

 

SCHEDULES:

 

1.                                      Notice Addresses of Grantors

2.                                      [Reserved]

3.                                      Filings and Other Actions Required to Perfect Security Interests

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

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

6.                                      Commercial Tort Claims

 

ANNEX:

 

1.                                      Form of Assumption Agreement

2.                                      Form of Intellectual Property Security Agreement

 

iii

 

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

 

R E C I T A L S

 

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

 

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

 

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

 

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

 

ARTICLE I
 Definitions

 

Section 1.01                             Definitions.

 

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

 

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

 

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

 

1

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Patent” means all rights, title and interests (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to letters patent and applications therefor and, in each case, all goodwill associated therewith, all registrations and recordations thereof and all applications in connection therewith

 

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

 

“Security Termination” means such time as when each of the following shall have occurred: (i) the Obligations have been indefeasibly paid in full in cash and (ii) the Loans and all commitments under the Credit Agreement have been terminated.  For purposes of clarification, “Security Termination” shall have occurred for purposes of this Agreement if the events provided in clauses (i) and (ii) above have occurred, and the occurrence of “Security Termination” shall not be affected by inchoate indemnity obligations under the Financing Documents that survive the termination of any such Financing Document.

 

“Trademark” means all rights, title and interests (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks,

 

3

 

logos and other source or business identifiers and, in each case, all goodwill associated therewith, all registrations and recordations thereof and all applications in connection therewith.

 

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

 

Section 1.02                             Other Definitional Provisions; References.  The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.  The gender of all words shall include the masculine, feminine, and neuter, as appropriate.  The words “herein,” “hereof,” “hereunder” and other words of similar import when used in this Agreement refer to this Agreement as a whole, and not to any particular article, section or subsection.  Any reference herein to a Section shall be deemed to refer to the applicable Section of this Agreement unless otherwise stated herein.  Any reference herein to an exhibit, schedule or annex shall be deemed to refer to the applicable exhibit, schedule or annex attached hereto unless otherwise stated herein.  Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Grantor, shall refer to such Grantor’s Collateral or the relevant part thereof.  The rules of construction set forth in Sections 1.2 and 1.3 in the Credit Agreement shall apply to this Agreement as if specifically incorporated herein mutatis mutandis.

 

Section 1.03                             Bailee For Perfection.  So long as the First Lien Agent is acting as bailee and as agent for perfection or control on behalf of the Administrative Agent pursuant to the terms of the First/Second Lien Intercreditor Agreement, any obligation of any Grantor in this Agreement that requires delivery or control of Collateral to, or in the possession or control of such Collateral with, the Administrative Agent shall be deemed complied with and satisfied if such delivery of such Collateral is made to, or such possession or control of such Collateral is with, the First Lien Agent.

 

ARTICLE II
 Grant of Security Interest

 

Section 2.01                             Grant of Security Interest.  Each Grantor hereby pledges, assigns and transfers to the Administrative Agent, and grants to the Administrative Agent, for the ratable benefit of the Secured Parties, a security interest in all of the following property now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest and whether now existing or hereafter coming into existence (collectively, the “Collateral”), as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations:

 

(1)                                 all Accounts, including all Receivables;

 

(2)                                 all cash and cash equivalents;

 

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

 

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

 

(5)                                 all Contract Rights;

 

4

 

(6)                                 all Deposit Accounts;

 

(7)                                 all Documents;

 

(8)                                 all General Intangibles;

 

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

 

(10)                          all Instruments;

 

(11)                          all Insurance;

 

(12)                          all Intellectual Property;

 

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

 

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

 

(15)                          all Money;

 

(16)                          all Supporting Obligations;

 

(17)                          all Vehicles;

 

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

 

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

 

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

 

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

 

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

 

Section 2.02                             [Reserved].

 

Section 2.03                             Grantors Remain Liable under Accounts, Chattel Paper and Payment Intangibles.  Anything herein to the contrary notwithstanding, each Grantor shall remain liable

 

5

 

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

 

ARTICLE III
 Acknowledgments, Waivers and Consents

 

Section 3.01                             Acknowledgments, Waivers and Consents.

 

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

 

(i)                                     notwithstanding that, without any reservation of rights against any Grantor and without notice to or further assent by any Grantor, (A) any demand for payment of any of the Obligations made by the Administrative Agent or any other Secured Party may be rescinded by the Administrative Agent at the direction of the Lead Lenders or such other Secured Party and any of the Obligations continued; (B) the Obligations, the liability of any other Person upon or for any part thereof or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by, or any indulgence or forbearance in respect thereof granted by, the Administrative Agent at the direction of the Lead Lenders or any other Secured Party; (C) the Credit Agreement, the other Financing Documents and any other documents executed and delivered in connection therewith may be amended, restated, amended and restated, modified, supplemented or terminated, in whole or in part, in accordance

 

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with the terms thereof, as the Administrative Agent or the Lead Lenders (or all Lenders, as the case may be) and the Borrower, as applicable, may deem advisable from time to time; (D) the Borrower, any other Grantor or any other Person may from time to time accept or enter into new or additional agreements, security documents, guarantees or other instruments in addition to, in exchange for or relative to, any Financing Document, all or any part of the Obligations or any Collateral now or in the future serving as security for the Obligations, in each case pursuant to the terms and conditions thereof; (E) any collateral security, guarantee or right of offset at any time held by the Administrative Agent or any other Secured Party for the payment of the Obligations may be sold, exchanged, waived, surrendered or released; and (F) any other event shall occur which constitutes a defense or release of sureties generally; and

 

(ii)                                  without regard to, and each Grantor hereby expressly waives to the fullest extent permitted by law any defense now or in the future arising by reason of, (A) the illegality, invalidity or unenforceability against any Grantor of the Credit Agreement, any other Financing Document, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Administrative Agent or any other Secured Party, (B) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by any other Grantor or any other Person against the Administrative Agent or any other Secured Party, (C) the insolvency, bankruptcy arrangement, reorganization, adjustment, composition, liquidation, disability, dissolution or lack of power of any other Grantor or any other Person at any time liable for the payment of all or part of the Obligations or the failure of the Administrative Agent or any other Secured Party to file or enforce a claim in bankruptcy or other proceeding with respect to any Person; or any sale, lease or transfer of any or all of the assets of any Grantor, or any changes in the shareholders of any Grantor; (D) the fact that any Collateral or Lien contemplated or intended to be given, created or granted as security for the repayment of the Obligations shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other Lien, it being recognized and agreed by each of the Grantors that it is not entering into this Agreement in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectability or value of any of the Collateral for the Obligations; (E) any failure of the Administrative Agent or any other Secured Party to marshal assets in favor of any Grantor or any other Person, to exhaust any Collateral for all or any part of the Obligations, to pursue or exhaust any right, remedy, power or privilege it may have against any Grantor or any other Person or to take any action whatsoever to mitigate or reduce any Grantor’s liability under this Agreement, any other Financing Document; (F) any law which provides that the obligation of a surety or guarantor must neither be larger in amount nor in other respects more burdensome than that of the principal or which reduces a surety’s or guarantor’s obligation in proportion to the principal obligation; (G) the possibility that the Obligations may at any time and from time to time exceed the aggregate liability of such Grantor under this Agreement; or (H) any other circumstance or act whatsoever, including any action or omission of the type described in this Section 3.01 (with or without notice to or knowledge of any Grantor), which constitutes, or might be construed to constitute, an equitable or legal discharge or defense of the Borrower for the Obligations, or of such Grantor under the guarantee contained in the Guaranty or with respect to the collateral security provided by such Grantor herein, or which might be available to a surety or guarantor, in bankruptcy or in any other instance.

 

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

 

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

 

Section 3.02                             No Subrogation, Contribution or Reimbursement.  Notwithstanding any payment made by any Grantor hereunder or any set-off or application of funds of any Grantor by the Administrative Agent or any other Secured Party, no Grantor shall be entitled to be subrogated to any of the rights of the Administrative Agent or any other Secured Party against the Borrower or any other Grantor or any collateral security or guarantee or right of offset held by the Administrative Agent or any other Secured Party for the payment of the Obligations, nor shall any Grantor seek or be entitled to seek any indemnity, exoneration, participation,

 

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contribution or reimbursement from the Borrower or any other Grantor in respect of payments made by such Grantor hereunder until Security Termination, and each Grantor hereby expressly waives, releases, and agrees not to exercise any such rights of subrogation, reimbursement, indemnity and contribution until Security Termination.  Each Grantor further agrees that to the extent that such waiver and release set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement, indemnity and contribution such Grantor may have against the Borrower, any other Grantor or against any collateral or security or guarantee or right of offset held by the Administrative Agent or any other Secured Party shall be junior and subordinate to any rights the Administrative Agent and the other Secured Parties may have against the Borrower and such Grantor and to all right, title and interest the Administrative Agent and the other Secured Parties may have in any collateral or security or guarantee or right of offset.  Upon the occurrence and during the continuance of an Event of Default, the Administrative Agent, for the benefit of the Secured Parties, may use, sell or dispose of any item of Collateral or security as it sees fit, subject to Section 6.04, without regard to any subrogation rights any Grantor may have, and upon any disposition or sale, any rights of subrogation any Grantor may have shall terminate.

 

ARTICLE IV
 Representations and Warranties

 

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

 

Section 4.01                             Representations in Credit Agreement.  In the case of each Grantor, the representations and warranties set forth in Article 3 of the Credit Agreement as they relate to such Grantor or to the Financing Documents to which such Grantor is a party are true and correct in all material respects (or, to the extent such representations and warranties specifically relate to an earlier date, on and as of such earlier date); provided that each reference in each such representation and warranty to the Borrower’s knowledge shall, for the purposes of this Section 4.01, be deemed to be a reference to such Grantor’s knowledge.

 

Section 4.02                             Perfected Liens.  The security interests granted pursuant to this Agreement, upon filing of a UCC-1 financing statement in the appropriate filing office listed on Schedule 3, will constitute valid perfected second priority security interests (subject to Permitted Encumbrances and Liens in favor of the First Lien Agent permitted under the Credit Agreement) in all of the Collateral which may be perfected by filing such financing statement in favor of the Administrative Agent, for the ratable benefit of the Secured Parties, as collateral security for such Grantor’s obligations, enforceable in accordance with the terms hereof against all creditors of such Grantor and any Persons purporting to purchase any Collateral from such Grantor.

 

Section 4.03                             Legal Name, Organizational Status, Chief Executive Office.  On the date hereof, the correct legal name of such Grantor, such Grantor’s jurisdiction of organization, organizational number, taxpayer identification number and the location of such Grantor’s chief executive office or sole place of business are specified on Schedule 4.

 

Section 4.04                             Prior Names, Addresses, Locations of Tangible Assets.  Schedule 5 correctly sets forth (a) all names and trade names that such Grantor has used in the last five years

 

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

 

Section 4.05                             [Reserved].

 

Section 4.06                             Instruments and Chattel Paper.  Such Grantor has delivered to the Administrative Agent (or the First Lien Agent as required by the terms of the First/Second Lien Intercreditor Agreement) all Collateral constituting Instruments and Chattel Paper having the outstanding or stated amount of greater than $1,000,000.  No Collateral constituting Chattel Paper or Instruments contains any statement therein to the effect that such Collateral has been assigned to an identified party other than the Administrative Agent (or the First Lien Agent as required by the terms of the First/Second Lien Intercreditor Agreement), and the grant of a security interest in such Collateral in favor of the Administrative Agent hereunder does not violate the rights of any other Person as a secured party.

 

Section 4.07                             Accounts.  The amount represented by such Grantor to the Administrative Agent and the Lenders from time to time as owing by each Account Debtor or by all Account Debtors in respect of the Accounts, Chattel Paper and Payment Intangibles will at such time be the materially correct amount actually owing by such Account Debtor or Account Debtors thereunder.  The place where each Grantor keeps its records concerning the Accounts, Chattel Paper and Payment Intangibles is the address set forth on Schedule 6.

 

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

 

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

 

Section 4.10                             Intellectual Property.

 

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

 

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

 

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

 

ARTICLE V
 Covenants

 

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

 

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

 

Section 5.02                             Maintenance of Perfected Security Interest; Further Documentation.

 

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

 

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

 

(c)                                  Without limiting the obligations of the Grantors under Section 5.02(b) and subject to the terms of the First/Second Lien Intercreditor Agreement: (i) upon the reasonable request of the Administrative Agent (acting at the direction of any Secured Party), such Grantor shall take or cause to be taken all actions (other than any actions required to be taken by the Administrative Agent at the direction of the Lead Lenders or any Lender) reasonably requested by the

 

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Administrative Agent to cause the Administrative Agent to (A) have “control” (within the meaning of Sections 9-104, 9-105, 9-106, and 9-107 of the UCC) over any Collateral constituting Deposit Accounts, Electronic Chattel Paper, Investment Property, or Letter-of-Credit Rights, including, without limitation, executing and delivering any agreements, in form and substance satisfactory to the Lead Lenders, with securities intermediaries, Borrowers or other Persons in order to establish “control”, and each Grantor shall promptly notify the Administrative Agent and the other Secured Parties of such Grantor’s acquisition of any such Collateral, and (B) be a “protected purchaser” (as defined in Section 8-303 of the UCC); (ii) with respect to Collateral other than certificated securities and Goods covered by a document in the possession of a Person other than such Grantor or the Administrative Agent (or the First Lien Agent as required by the terms of the First/Second Lien Intercreditor Agreement), such Grantor shall obtain written acknowledgment that such Person holds possession for the Administrative Agent’s (or the First Lien Agent’s as required by the terms of the First/Second Lien Intercreditor Agreement) benefit; and (iii) with respect to any Collateral constituting Goods that are in the possession of a bailee, such Grantor shall provide prompt notice to the Administrative Agent of any such Collateral then in the possession of such bailee, and such Grantor shall take or cause to be taken all actions (other than any actions required to be taken by the Administrative Agent or any other Secured Party) necessary or reasonably requested by the Administrative Agent to cause the Administrative Agent to have a perfected security interest in such Collateral under applicable law.

 

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

 

Section 5.03                             Maintenance of Records.  Such Grantor will keep and maintain, at its own cost and expense records of the Collateral in accordance with sound and prudent business practices.  For the Administrative Agent’s and the other Secured Parties’ further security, the Administrative Agent, for the ratable benefit of the Secured Parties, shall have a security interest in all of such Grantor’s books and records pertaining to the Collateral, and such Grantor shall allow inspection of any such books and records by the Administrative Agent, any Lender or by their representatives during normal business hours at the reasonable request of the Administrative Agent or any Lender and shall provide such clerical and other assistance as may be reasonably requested with regard thereto.

 

Section 5.04                             Further Identification of Collateral.  Such Grantor will furnish to the Administrative Agent and the Secured Parties from time to time, at such Grantor’s sole cost and expense, statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Administrative Agent may reasonably request, all in reasonable detail.

 

Section 5.05                             [Reserved].

 

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

 

(a)                                 any Lien (other than security interests created hereby, Liens in favor of the First Lien Agent permitted under the Credit Agreement or Permitted Encumbrances) on any of the Collateral which could adversely affect the ability of the Administrative Agent to exercise any of its remedies; or

 

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

 

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

 

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

 

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

 

Section 5.08                             Instruments and Tangible Chattel Paper.  If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument or Tangible Chattel Paper in the outstanding or stated amount of greater than $1,000,000, such Instrument or Tangible Chattel Paper shall be promptly, but in any event within twenty (20) days, delivered to the Administrative Agent (or First Lien Agent pursuant to the terms of the First/Second Lien Intercreditor Agreement), duly endorsed in a manner satisfactory to the Lead Lenders, to be held as Collateral pursuant to this Agreement.

 

Section 5.09                             Commercial Tort Claims.  If such Grantor shall at any time hold or acquire a Commercial Tort Claim that satisfies the requirements of the following sentence, such Grantor shall, within thirty (30) days after such Commercial Tort Claim satisfies such requirements, notify the Administrative Agent and the other Secured Parties in a writing signed by such Grantor containing a brief description thereof, and granting to the Administrative Agent in such writing (for the benefit of the Secured Parties) a security interest therein and in the Proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to the Lead Lenders. The provisions of the preceding sentence shall apply only to a Commercial Tort Claim that satisfies the following requirements: (i) the monetary value claimed by or payable to the relevant Grantor in connection with such Commercial Tort Claim shall exceed $1,500,000, and (ii) either (A) such Grantor shall have filed a law suit or counterclaim or otherwise commenced legal proceedings (including, without limitation, arbitration proceedings) against the Person against whom such Commercial Tort Claim is made, or (B) such Grantor and the Person against whom such Commercial Tort Claim is asserted shall have entered into a

 

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settlement agreement with respect to such Commercial Tort Claim. In addition, to the extent that the existence of any Commercial Tort Claim held or acquired by any Grantor is disclosed by such Grantor in any public filing with the Securities Exchange Commission or any successor thereto or analogous Governmental Authority, or to the extent that the existence of any such Commercial Tort Claim is disclosed in any press release issued by any Grantor, then, upon the request of the Administrative Agent or the Lead Lenders, the relevant Grantor shall, within thirty (30) days after such request is made, transmit to the Administrative Agent and the other Secured Parties a writing signed by such Grantor containing a brief description of such Commercial Tort Claim and granting to the Administrative Agent in such writing (for the benefit of the Secured Parties) a security interest therein and in the Proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to the Lead Lenders.

 

Section 5.10                             Intellectual Property.

 

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

 

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

 

(c)                                  Such Grantor shall notify the Administrative Agent and the Lead Lenders immediately if it knows, or has reason to know, that any application or registration relating to any Material Intellectual Property may become forfeited, misused, unenforceable, abandoned or dedicated to the public, or of any adverse determination or development regarding the validity or enforceability or such Grantor’s ownership of, interest in, right to use, register, own or maintain any Material Intellectual Property (including the institution of, or any such determination or development in, any proceeding relating to the foregoing in any Applicable IP Office).  Such Grantor shall take all actions that are necessary or reasonably requested by Administrative Agent to maintain and pursue each application (and to obtain the relevant registration or recordation) and to maintain each registration and recordation included in the Material Intellectual Property.

 

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

 

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

 

ARTICLE VI
 Remedial Provisions

 

Section 6.01                             [Reserved].

 

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

 

Section 6.03                             Proceeds.  If required by the Administrative Agent at any time after the occurrence and during the continuance of an Event of Default, any payments of Accounts, Instruments, Chattel Paper and Payment Intangibles, when collected or received by each Grantor, and any other cash or non-cash Proceeds received by each Grantor upon the sale or other disposition of any Collateral, shall be forthwith (and, in any event, within two (2) Business Days) deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the Administrative Agent if required, in a special collateral account maintained by the Administrative Agent, subject to withdrawal by the Administrative Agent at the direction of the Lead Lenders for the ratable benefit of the Secured Parties only, as hereinafter provided, and, until so turned over, shall be held by such Grantor in trust for the Administrative Agent for the ratable benefit of the Secured Parties, segregated from other funds of any such Grantor. Each deposit of any such Proceeds shall be accompanied by a report identifying in reasonable detail the nature and source of the payments included in the deposit.  All Proceeds (including, without limitation, Proceeds constituting collections of Accounts, Chattel Paper, Instruments) while held by the Administrative Agent (or by any Grantor in trust for the Administrative Agent for the ratable benefit of the Secured Parties) shall continue to be collateral security for all of the

 

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Obligations and shall not constitute payment thereof until applied as hereinafter provided.  At such intervals as may be agreed upon by each Grantor and the Administrative Agent, or, if an Event of Default shall have occurred and be continuing, at any time at the Lead Lenders’ election, the Administrative Agent shall apply all or any part of the funds on deposit in said special collateral account on account of the Obligations in accordance with Section 8.6 of the Credit Agreement.

 

Section 6.04          Remedies.

 

(a)           If an Event of Default shall occur and be continuing, the Administrative Agent may in its discretion, and at the direction of the Lead Lenders shall, exercise, in addition to all other rights, remedies, powers and privileges granted to them in this Agreement, the other Financing Documents, and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights, remedies, powers and privileges of a secured party under applicable law or otherwise available at law or equity. Without limiting the generality of the foregoing, the Administrative Agent at the direction of the Lead Lenders, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Grantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker’s board or office of the Administrative Agent or any other Secured Party or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk.  The Administrative Agent or any other Secured Party shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in any Grantor, which right or equity is hereby waived and released.  If an Event of Default shall occur and be continuing, each Grantor further agrees, at the Administrative Agent’s request (acting at the direction of the Lead Lenders), to assemble the Collateral and make it available to the Administrative Agent at places which the Lead Lenders shall reasonably select, whether at such Grantor’s premises or elsewhere.  Any such sale or transfer by the Administrative Agent either to itself or to any other Person shall be absolutely free from any claim of right by Grantor, including any equity or right of redemption, stay or appraisal which Grantor has or may have under any rule of law, regulation or statute now existing or hereafter adopted.  Upon any such sale or transfer, the Administrative Agent at the direction of the Lead Lenders shall have the right to deliver, assign and transfer to the purchaser or transferee thereof the Collateral so sold or transferred.  The Administrative Agent shall apply the net proceeds of any action taken by it pursuant to this Section 6.04, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Administrative Agent and the other Secured Parties hereunder, including, without limitation, reasonable attorneys’ fees and disbursements, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-615 of the UCC, will the Administrative Agent account for the surplus, if any, to any Grantor. To the extent permitted by

 

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applicable law, each Grantor waives all claims, damages and demands it may acquire against the Administrative Agent or any other Secured Party arising out of the exercise by them of any rights hereunder, except to the extent caused by the gross negligence or willful misconduct of the Administrative Agent or such Secured Parties or their respective agents (as determined by a final non-appealable judgment of a court of competent jurisdiction).  If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least ten (10) days before such sale or other disposition.

 

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

 

Section 6.05          [Reserved].

 

Section 6.06          Deficiency.  Each Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay its Obligations and the fees and disbursements of any attorneys employed by the Administrative Agent or any other Secured Party to collect such deficiency.

 

Section 6.07          Non-Judicial Enforcement.  The Administrative Agent at the direction of the Lead Lenders may enforce its rights hereunder without prior judicial process or judicial hearing, and to the extent permitted by law, each Grantor expressly waives any and all legal rights which might otherwise require the Administrative Agent to enforce its rights by judicial process.  The proceeds of any sale of the Collateral or any part thereof and all other monies received by any Secured Party in any proceedings for the enforcement hereof or otherwise, whose application has not elsewhere herein been specifically provided for, shall be applied in the following order: first, to all fees, costs, indemnities, liabilities, obligations and expenses incurred by or owing to Administrative Agent with respect to this Agreement, the other Financing Documents or the Collateral, second, to all fees, costs, indemnities and expenses incurred by or owing to any Lender with respect to this Agreement, the other Financing Documents or the Collateral, third, to accrued and unpaid interest on the Obligations, fourth, to the principal amount of the Obligations outstanding, and fifth, to any other indebtedness or obligations of Borrower owing to Administrative Agent or any Lender under the Financing Documents.

 

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

 

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Property now owned or hereafter acquired by such Grantor and (ii) an irrevocable license (without payment of rent or other compensation to such Grantor) to use, operate and occupy all real Property owned, operated, leased, subleased or otherwise occupied by such Grantor.

 

ARTICLE VII
 The Administrative Agent

 

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

 

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

 

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

 

(ii)           execute, in connection with any sale provided for in Section 6.04, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral; and

 

(iii)          (A) direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Administrative Agent or as the Administrative Agent at the direction of the Lead Lenders shall direct; (B) take possession of and indorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Account, Instrument, General Intangible, Chattel Paper or Payment Intangible or with respect to any other Collateral, and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Administrative Agent at the direction of the Lead Lenders for the purpose of collecting any all such moneys due under any Account, Instrument or General Intangible or with respect to any other Collateral whenever payable; (C) ask or demand for, collect, and receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (D) sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral; (E) receive, change the address for delivery, open and dispose of mail addressed to any Grantor, and to execute, assign and indorse negotiable and other instruments for the payment of money, documents of title or other evidences of payment, shipment or storage for any form of Collateral on behalf of and in the name of any Grantor; (F) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any portion thereof and to enforce any other right in respect of any

 

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Collateral; (G) defend any suit, action or proceeding brought against such Grantor with respect to any Collateral; (H) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, give such discharges or releases as the Administrative Agent at the direction of the Lead Lenders may deem appropriate; (I) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and do, at the Administrative Agent’s option, at the direction of the Lead Lenders, and such Grantor’s expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the Administrative Agent’s and the other Secured Parties’ security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Grantor might do, (J) in the case of any Intellectual Property owned by or licensed to such Grantor, execute, deliver and have recorded any document that Administrative Agent may request to evidence, effect, publicize or record Administrative Agent’s security interest in such Intellectual Property and the goodwill and general intangibles of such Grantor relating thereto or represented thereby and (K) assign any Intellectual Property owned by such Grantor or any IP Licenses of such Grantor throughout the world on such terms and conditions and in such a manner as Administrative Agent shall determine (in consultation with the Lead Lenders), including the execution and filing of any document necessary to effectuate and record such assignment.

 

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

 

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

 

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

 

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

 

Section 7.02          Duty of Administrative Agent.  The Administrative Agent’s sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the UCC or otherwise, shall be to deal with it in the same manner as the Administrative Agent deals with similar property for its own account and shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which comparable secured parties accord comparable collateral. Neither the Administrative Agent, any other Secured Party

 

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nor any of their respective officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof.  The powers conferred on the Administrative Agent and the other Secured Parties hereunder are solely to protect the Administrative Agent’s and the other Secured Parties’ interests in the Collateral and shall not impose any duty upon the Administrative Agent or any other Secured Party to exercise any such powers.  The Administrative Agent and the other Secured Parties shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct (as determined by a final non-appealable judgment of a court of competent jurisdiction).  To the fullest extent permitted by applicable law, the Administrative Agent and the Secured Parties shall be under no duty whatsoever to make or give any presentment, notice of dishonor, protest, demand for performance, notice of nonperformance, notice of intent to accelerate, notice of acceleration, or other notice or demand in connection with any Collateral or the Obligations, or to take any steps necessary to preserve any rights against any Grantor or other Person or ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not it has or is deemed to have knowledge of such matters.  Each Grantor, to the extent permitted by applicable law, waives any right of marshaling in respect of any and all Collateral, and waives any right to require the Administrative Agent or any other Secured Party to proceed against any Grantor or other Person, exhaust any Collateral or enforce any other remedy which the Administrative Agent or any other Secured Party now has or may hereafter have against each Grantor, any Grantor or other Person.

 

Section 7.03          Financing Statements.  Pursuant to the UCC and any other applicable law, each Grantor authorizes the Administrative Agent, its counsel or its representative, at any time and from time to time, to file or record financing statements, continuation statements, amendments thereto and other filing or recording documents or instruments with respect to the Collateral without the signature of such Grantor in such form and in such offices as the Lead Lenders reasonably determine necessary or appropriate to perfect the security interests of the Administrative Agent under this Agreement.  Additionally, each Grantor authorizes the Administrative Agent, its counsel or its representative, at any time and from time to time, to file or record such financing statements that describe the collateral covered thereby as “all assets of the Grantor”, “all personal property of the Grantor” or words of similar effect.  A photographic or other reproduction of this Agreement shall be sufficient as a financing statement or other filing or recording document or instrument for filing or recording in any jurisdiction.

 

Section 7.04          Authority of Administrative Agent.  Each Grantor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the other Secured Parties, be governed by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Grantors, the Administrative Agent shall be conclusively presumed to be acting as agent for the Secured

 

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Parties with full and valid authority so to act or refrain from acting, and no Grantor shall be under any obligation, or entitlement, to make any inquiry respecting such authority.

 

ARTICLE VIII
 Subordination of Indebtedness

 

Section 8.01          Subordination of All Grantor Claims.  As used herein, the term “Grantor Claims” shall mean all debts and obligations of any Grantor, whether such debts and obligations now exist or are hereafter incurred or arise, or whether the obligation of the debtor thereon be direct, contingent, primary, secondary, several, joint and several, or otherwise, and irrespective of whether such debts or obligations be evidenced by note, contract, open account, or otherwise, and irrespective of the Person or Persons in whose favor such debts or obligations may, at their inception, have been, or may hereafter be created, or the manner in which they have been or may hereafter be acquired by. After and during the continuation of an Event of Default, no Grantor shall receive or collect, directly or indirectly, from any obligor in respect thereof any amount upon the Grantor Claims.

 

Section 8.02          Claims in Bankruptcy.  In the event of receivership, bankruptcy, reorganization, arrangement, debtor’s relief or other insolvency proceedings involving any Grantor, (a) the Administrative Agent on behalf of the Secured Parties shall have the right to prove their claim in any proceeding, so as to establish their rights hereunder and receive directly from the receiver, trustee or other court custodian, dividends and payments which would otherwise be payable upon Grantor Claims and (b) each Grantor hereby assigns such dividends and payments to the Administrative Agent for the benefit of the Secured Parties for application against the Obligations. Should the Administrative Agent or any Secured Party receive, for application upon the Obligations, any such dividend or payment which is otherwise payable to any Grantor, and which, as between such Grantor, shall constitute a credit upon the Grantor Claims, then upon Security Termination, the intended recipient shall become subrogated to the rights of the Administrative Agent and the other Secured Parties to the extent that such payments to the Administrative Agent and the other Secured Parties on the Grantor Claims have contributed toward the liquidation of the Obligations, and such subrogation shall be with respect to that proportion of the Obligations which would have been unpaid if the Administrative Agent and the other Secured Parties had not received dividends or payments upon the Grantor Claims.

 

Section 8.03          Payments Held in Trust.  In the event that notwithstanding Section 8.01 and Section 8.02, any Grantor should receive any funds, payments, claims or distributions that are prohibited by such Sections, then it agrees: (a) to hold in trust for the Administrative Agent and the other Secured Parties an amount equal to the amount of all funds, payments, claims or distributions so received, and (b) that it shall have absolutely no dominion over the amount of such funds, payments, claims or distributions except to pay them promptly to the Administrative Agent, for the benefit of the Secured Parties; and each Grantor covenants promptly to pay the same to the Administrative Agent.

 

Section 8.04          Liens Subordinate.  Each Grantor agrees that, until Security Termination, any Liens securing payment of the Grantor Claims shall be and remain inferior and subordinate to any Liens securing payment of the Obligations, regardless of whether such encumbrances in favor of such Grantor, the Administrative Agent or any other Secured Party presently exist or are

 

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hereafter created or attach.  Without the prior written consent of the Administrative Agent, no Grantor, during the period prior to Security Termination, shall (a) exercise or enforce any creditor’s right it may have against any debtor in respect of the Grantor Claims, or (b) foreclose, repossess, sequester or otherwise take steps or institute any action or proceeding (judicial or otherwise, including without limitation the commencement of or joinder in any liquidation, bankruptcy, rearrangement, debtor’s relief or insolvency proceeding) to enforce any Lien held by it.

 

Section 8.05          Notation of Records.  Upon the reasonable request of the Administrative Agent, all promissory notes and all accounts receivable ledgers or other evidence of the Grantor Claims accepted by or held by any Grantor shall contain a specific written notice thereon that the indebtedness evidenced thereby is subordinated under the terms of this Agreement.

 

ARTICLE IX
 Miscellaneous

 

Section 9.01          Waiver.  No failure on the part of the Administrative Agent or any other Secured Party to exercise and no delay in exercising, and no course of dealing with respect to, any right, remedy, power or privilege under any of the Financing Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under any of the Financing Documents preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges provided herein are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.  The exercise by the Administrative Agent or any Secured Party of any one or more of the rights, powers and remedies herein shall not be construed as a waiver of any other rights, powers and remedies, including, without limitation, any rights of set-off.

 

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

 

Section 9.03          Payment of Expenses, Indemnities, Etc.

 

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

 

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

 

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Section 9.04          Amendments in Writing.  None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in accordance with the Credit Agreement.

 

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

 

Section 9.06          Invalidity.  In the event that any one or more of the provisions contained in this Agreement or in any of the Financing Documents to which a Grantor is a party shall, for any reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or such other Financing Document.

 

Section 9.07          Counterparts.  This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Agreement by signing any such counterpart.

 

Section 9.08          Survival.  The obligations of the parties under Section 9.03 shall survive Security Termination.  To the extent that any payments on the Obligations or proceeds of any Collateral are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver or other Person under any bankruptcy law, common law or equitable cause, then to such extent, the Obligations so satisfied shall be revived and continue as if such payment or proceeds had not been received and the Administrative Agent’s and the other Secured Parties’ Liens, security interests, rights, powers and remedies under this Agreement and each Collateral Document shall continue in full force and effect.  In such event, each Collateral Document shall be automatically reinstated and each Grantor shall take such action as may be reasonably requested by the Administrative Agent to effect such reinstatement.

 

Section 9.09          Captions.  Captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement.

 

Section 9.10          No Oral Agreements.  This Agreement, the Credit Agreement, the other Financing Documents embody the entire agreement and understanding between the parties and supersede all other agreements and understandings between such parties relating to the subject matter hereof and thereof.  This Agreement, the Credit Agreement, the other Financing Documents represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties.  There are no unwritten oral agreements between the parties.

 

Section 9.11          Governing Law; Submission to Jurisdiction.  EXCEPT AS OTHERWISE SET FORTH IN THE MORTGAGES, THIS AGREEMENT, EACH NOTE AND EACH OTHER FINANCING DOCUMENT, AND ALL MATTERS RELATING HERETO OR

 

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THERETO OR ARISING THEREFROM (WHETHER SOUNDING IN CONTRACT LAW, TORT LAW OR OTHERWISE), SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.  BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE BOROUGH OF MANHATTAN, CITY OF NEW YORK, STATE OF NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO ADMINISTRATIVE AGENT’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS.  BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS.  BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

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

 

Section 9.13          Acknowledgments.  Each Grantor hereby acknowledges that:

 

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

 

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

 

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(c)           no joint venture is created hereby, by the Credit Agreement or any other Financing Document or by or otherwise exists by virtue of the transactions contemplated hereby among the Secured Parties or among the Grantors and the Lenders.

 

(d)           Each party hereto agrees and covenants that it will not contest the validity or enforceability of any exculpatory provision of this Agreement and the other Collateral Documents on the basis that the party had no notice or knowledge of such provision or that the provision is not “conspicuous.”

 

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

 

Section 9.14          Additional Grantors.  Each Subsidiary of the Borrower that is required to become a party to this Agreement pursuant to the Credit Agreement and is not a signatory hereto shall become a Grantor for all purposes of this Agreement upon execution and delivery by such Subsidiary of an Assumption Agreement in the form of Annex I.

 

Section 9.15          Set-Off.  Each Grantor agrees that, in addition to (and without limitation of) any right of set-off, bankers’ lien or counterclaim a Secured Party may otherwise have, each Secured Party shall have the right and be, at its option, entitled to offset balances held by it or by any of its Affiliates for account of any Grantor or any Subsidiary at any of its offices, in U.S. dollars or in any other currency against any principal of or interest on any of such Secured Party’s Loans, or any other amount due and payable to such Secured Party hereunder, which is not paid when due (regardless of whether such balances are then due to such Person), in which case it shall promptly notify the Borrower, the Administrative Agent and Lead Lenders thereof, provided that such Secured Party’s failure to give such notice shall not affect the validity thereof.

 

Section 9.16          Releases.

 

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

 

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(b)                                 Further Assurances.  Pursuant to Section 10.9 of the Credit Agreement, the Administrative Agent shall (i) release any Lien granted to or held by the Administrative Agent under any Security Document constituting property sold or disposed of as part of or in connection with any disposition permitted under any Financing Document (it being understood and agreed that Administrative Agent may conclusively rely without further inquiry on a certificate of a Responsible Officer as to the sale or other disposition of property being made in full compliance with the provisions of the Financing Documents) and (ii) release or subordinate any Lien granted to or held by the Administrative Agent under any Security Document constituting property described in Section 5.2(d) of the Credit Agreement (it being understood and agreed that Administrative Agent may conclusively rely without further inquiry on a certificate of a Responsible Officer as to the identification of any property described in Section 5.2(d) of the Credit Agreement). At the request and sole expense of the Borrower, a Grantor shall be released from its obligations hereunder in the event that all the Capital Stock of such Grantor shall be sold, transferred or otherwise disposed of in a transaction permitted by the Credit Agreement; provided that the Borrower shall have delivered to the Administrative Agent, at least ten (10) Business Days prior to the date of the proposed release, a written request for release identifying the relevant Grantor and the terms of the sale or other disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a certification by the Borrower stating that such transaction is in compliance with the Credit Agreement and the other Financing Documents.

 

(c)                                  Retention in Satisfaction.  Except as may be expressly applicable pursuant to Section 9-620 of the UCC, no action taken or omission to act by the Administrative Agent or the other Secured Parties hereunder, including, without limitation, any exercise of voting or consensual rights or any other action taken or inaction, shall be deemed to constitute a retention of the Collateral in satisfaction of the Obligations or otherwise to be in full satisfaction of the Obligations, and the Obligations shall remain in full force and effect, until the Administrative Agent and the other Secured Parties shall have applied payments (including, without limitation, collections from Collateral) towards the Obligations in the full amount then outstanding or until such subsequent time as is provided in Section 9.16(a).

 

Section 9.17                             Intercreditor Agreements.  Notwithstanding anything herein to the contrary, (i) the liens and security interests granted to the Administrative Agent for the benefit of the Secured Parties pursuant to this Agreement are expressly subject and subordinate to the liens and security interests granted to Wilmington Trust, National Association, as collateral agent (and its permitted successors), for the benefit of the secured parties referred to below, pursuant to the Security Agreement, dated as of May 22, 2015, (as amended, restated, amended and restated, supplemented or otherwise modified from time to time), from the Borrower and the other “Obligors” referred to therein, in favor of Wilmington Trust, National Association, as collateral agent for the benefit of the secured parties referred to therein and other First Lien Collateral Documents (as defined in the First/Second Lien Intercreditor Agreement) and to the liens and security interests granted to any Other First Priority Lien Obligations Agent (as defined in the First/Second Lien Intercreditor Agreement) pursuant to any Other First Priority Lien Obligations Security Document (as defined in the First/Second Lien Intercreditor Agreement) (as amended, supplemented or otherwise modified from time to time), and (ii) the exercise of any right or remedy by the Administrative Agent hereunder is subject to the limitations and provisions of the First/Second Lien Intercreditor Agreement. In the event of any conflict between the terms of the

 

26

 

First/Second Lien Intercreditor Agreement and the terms of this Agreement, the terms of the First/Second Lien Intercreditor Agreement shall govern.

 

Section 9.18                             Reinstatement.  The obligations of each Grantor under this Agreement (including, without limitation, with respect to the guarantee contained in the Guaranty and the provision of Collateral herein) shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Administrative Agent or any other Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any Grantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any Grantor or any substantial part of its property, or otherwise, all as though such payments had not been made.

 

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

 

[Signatures begin next page]

 

27

 

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

 

	
GRANTORS:
    	
Warren Resources, Inc.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Stewart P. Skelly
    
	
 
    	
Name:
    	
Stewart P. Skelly
    
	
 
    	
Title:
    	
Vice President and   Chief Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Warren E&P, Inc.
    
	
 
    	
Warren Marcellus LLC
    
	
 
    	
Warren Resources of   California, Inc.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Stewart P. Skelly
    
	
 
    	
Name:
    	
Stewart P. Skelly
    
	
 
    	
Title:
    	
Vice President and   Treasurer
    

 

[Signature Page to Security Agreement]

 

 

Acknowledged and Agreed to
 as of the date hereof by:

 

	
ADMINISTRATIVE AGENT:
    	
CORTLAND PRODUCTS CORP.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Emily Ergang Pappas
    
	
 
    	
Name:
    	
Emily Ergang Pappas
    
	
 
    	
Title:
    	
Associate Counsel
    

 

[Signature Page to Security Agreement]

 

 

Schedule 1

 

NOTICE ADDRESSES OF GRANTORS

 

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

 

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

 

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

 

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

 

Schedule 1 - 1

 

Schedule 2

 

[RESERVED]

 

Schedule 2 - 1

 

Schedule 3

 

FILINGS AND OTHER ACTIONS 
 REQUIRED TO PERFECT SECURITY INTERESTS

 

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

 

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

 

Schedule 3 - 1

 

Schedule 4

 

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

 

Warren Resources, Inc.

 

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

 

Warren E&P, Inc.

 

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

 

Warren Marcellus LLC

 

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

 

Warren Resources of California, Inc.

 

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

 

Schedule 4 - 1

 

Schedule 5

 

PRIOR NAMES AND PRIOR CHIEF EXECUTIVE OFFICE

 

1.                                      Warren Resources, Inc.

 

a.                                      Prior Names: N/A

 

b.                                      Prior Chief Executive Offices:

 

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

 

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

 

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

 

2.                                      Warren E&P, Inc.

 

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

 

b.                                      Prior Chief Executive Offices:
 same as above

 

3.                                      Warren Marcellus LLC

 

a.                                      Prior Names: N/A

 

b.                                      Prior Chief Executive Offices:
 same as above

 

4.                                      Warren Resources of California, Inc.

 

a.                                      Prior Names: N/A

 

b.                                      Prior Chief Executive Offices:
 same as above

 

Schedule 5 - 1

 

Schedule 6

 

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

 

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

 

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

 

Schedule 6 - 1

 

Schedule 7

 

COMMERCIAL TORT CLAIMS

 

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

 

Schedule 7 - 1

 

Schedule 8

 

DEPOSIT AND SECURITIES ACCOUNTS

 

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

 

Schedule 8 - 1

 

Schedule 9

 

INTELLECTUAL PROPERTY

 

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

 

Schedule 9 - 1

 

Annex I

 

Form of Assumption Agreement

 

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

 

W I T N E S S E T H:

 

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

 

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

 

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

 

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

 

NOW, THEREFORE, IT IS AGREED:

 

1.                                      Security Agreement.  By executing and delivering this Assumption Agreement, the Additional Grantor, as provided in Section 9.14 of the Security Agreement, hereby becomes a party to the Security Agreement as a Grantor thereunder with the same force and effect as if originally named therein as a Grantor and, without limiting the generality of the foregoing, hereby expressly assumes all obligations and liabilities of a Grantor thereunder and expressly grants to the Administrative Agent, for the benefit of the Secured Parties, a security interest in all Collateral owned by such Additional Grantor to secure all of such Additional Grantor’s obligations and liabilities thereunder. The information set forth in Annex 1-A hereto is hereby added to the information set forth in Schedules 1 through 6 to the Security Agreement.  The Additional Grantor hereby represents and warrants that each of the representations and warranties contained in Article IV of the Security Agreement is true and correct on and as the date hereof (after giving effect to this Assumption Agreement) as if made on and as of such date.

 

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

 

A1 - 1

 

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

 

	
 
    	
[ADDITIONAL   GRANTOR]
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    

A1 - 2

 

Annex II

 

Form of Intellectual Property Security Agreement

 

FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT(1)

 

 

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

 

W I T N E S S E T H:

 

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

 

WHEREAS, each Grantor has agreed, pursuant to the terms of the Security Agreement, dated as of October 22, 2015, in favor of the Administrative Agent (as such agreement may be amended, restated, supplemented or otherwise modified from time to time, the “Security Agreement”), to grant to the Administrative Agent, for the benefit of the Secured Parties, a security interest in, among other property, the [Copyright] [Patent] [Trademark] Collateral (as defined below);

 

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

 

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

 

Section 1.01.                          Defined Terms.  Capitalized terms used herein without definition are used as defined in the Security Agreement.

 

Section 1.02.                          Grant of Security Interest in [Copyright] [Trademark] [Patent] Collateral.  Each Grantor, as collateral security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Obligations of such Grantor, hereby mortgages, pledges and hypothecates to the Administrative Agent for the benefit of the Secured Parties, and grants to the Administrative Agent for the

 

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

 

A2 - 1

 

benefit of the Secured Parties a Lien on and security interest in, all of its right, title and interest in, to and under the following Collateral of such Grantor (the “[Copyright] [Patent] [Trademark] Collateral”):

 

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

 

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

 

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

 

or

 

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

 

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

 

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

 

or

 

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

 

(i)                                     all renewals and extensions of the foregoing;

 

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

 

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

 

Section 1.03.                          Security Agreement.  The security interest granted pursuant to this [Copyright] [Patent] [Trademark] Security Agreement is granted in conjunction with the security interest granted to the Administrative Agent pursuant to the Security Agreement and

 

A2 - 2

 

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

 

Section 1.04.                          Grantor Remains Liable.  Each Grantor hereby agrees that, anything herein to the contrary notwithstanding, such Grantor shall assume full and complete responsibility for the prosecution, defense, enforcement or any other necessary or desirable actions in connection with their [Copyrights] [Patents] [Trademarks] and IP Licenses subject to a security interest hereunder.

 

Section 1.05.                          Counterparts.  This [Copyright] [Patent] [Trademark] Security Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.  Signature pages may be detached from multiple separate counterparts and attached to a single counterpart.

 

Section 1.06.                          Governing Laws.  This [Copyright] [Patent] [Trademark] Security Agreement and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.

 

[SIGNATURE PAGES FOLLOW]

 

A2 - 3

 

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

 

	
 
    	
[GRANTOR]
    
	
 
    	
 
    	
as Grantor
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
ACCEPTED   AND AGREED
    	
 
    
	
as   of the date first above written:
    	
 
    
	
 
    	
 
    
	
CORTLAND   PRODUCTS CORP.,
    	
 
    
	
 
    	
as   Administrative Agent
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    	
 
    

 

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

 

A2 - 4

 

ACKNOWLEDGMENT OF GRANTOR

 

	
State of
    	
)
    	
 
    
	
 
    	
)
    	
ss.
    
	
County of
    	
)
    	
 
    

 

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

 

 

	
 
    	
 
    
	
 
    	
Notary Public
    

 

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

 

A2 - 5

 

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

 

[Copyright] [Patent] [Trademark] Registrations

 

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

 

[Include Registration Number and Date]

 

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

 

[Include Application Number and Date]

 

3.                                      IP LICENSES

 

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

 

Annex II - Schedule to [Copyright][Patent][Trademark] Security Agreement

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