Document:

Exhibit 10.5

 

PROMISSORY NOTE

 

	
  $35,714,285.71

  	
  June 26, 2009

  

 

FOR VALUE RECEIVED, the
undersigned, RESACA EXPLOITATION, INC., a Texas corporation (“Borrower”),
hereby promises to pay to the order of CIT BANK (“Lender”), the
principal sum of THIRTY-FIVE MILLION SEVEN HUNDRED FOURTEEN THOUSAND TWO
HUNDRED EIGHTY-FIVE DOLLARS AND 71/100 ($35,714,285.71), or, if greater or
less, the aggregate unpaid principal amount of the Loans made by Lender to
Borrower pursuant to the terms of the Credit Agreement (as hereinafter
defined), together with interest on the unpaid principal balance thereof as set
forth in the Credit Agreement, both principal and interest payable as herein
provided in lawful money of the United States of America at the offices of
Administrative Agent under the Credit Agreement, or at such other place within
Harris County, Texas, as from time to time may be designated by the holder of
this Note.

 

This Note (a) is issued
and delivered under that certain Second Amended and Restated Credit Agreement
of dated as of June 26, 2009 among Borrower, CIT Capital USA Inc., as
Administrative Agent, and the lenders (including Lender) referred to therein
(as from time to time supplemented, amended or restated, the “Credit
Agreement”), and is a “Note” as defined therein, (b) is subject to the
terms and provisions of the Credit Agreement, which contains provisions for
payments and prepayments hereunder and acceleration of the maturity hereof upon
the happening of certain stated events, and (c) is secured by and entitled
to the benefits of certain Security Documents (as identified and defined in the
Credit Agreement).  Payments on this Note
shall be made and applied as provided in the Credit Agreement.  Reference is hereby made to the Credit
Agreement for a description of certain rights, limitations of rights,
obligations and duties of the parties hereto and for the meanings assigned to
terms used and not defined herein and to the Security Documents for a
description of the nature and extent of the security thereby provided and the
rights of the parties thereto.

 

Notwithstanding the
foregoing paragraph and all other provisions of this Note, in no event shall
the interest payable hereon, whether before or after maturity, exceed the
maximum interest which, under applicable Law, may be contracted for, charged,
or received on this Note, and this Note is expressly made subject to the
provisions of the Credit Agreement which more fully set out the limitations on
how interest accrues hereon.

 

If this Note is placed in
the hands of an attorney for collection after default, or if all or any part of
the indebtedness represented hereby is proved, established or collected in any
court or in any bankruptcy, receivership, debtor relief, probate or other court
proceedings, Borrower and all endorsers, sureties and guarantors of this Note
jointly and severally agree to pay reasonable attorneys’ fees and collection
costs to the holder hereof in addition to the principal and interest payable
hereunder.

 

Borrower and all endorsers,
sureties and guarantors of this Note hereby severally waive demand,
presentment, notice of demand and of dishonor and nonpayment of this

 

 

Note, protest, notice of
protest, notice of intention to accelerate the maturity of this Note,
declaration or notice of acceleration of the maturity of this Note, diligence
in collecting, the bringing of any suit against any party and any notice of or
defense on account of any extensions, renewals, partial payments or changes in
any manner of or in this Note or in any of its terms, provisions and covenants,
or any releases or substitutions of any security, or any delay, indulgence or
other act of any trustee or any holder hereof, whether before or after
maturity.

 

This Note and the rights and
duties of the parties hereto shall be governed by the Laws of the State of New
York (without regard to principles of conflicts of law), except to the extent
the same are governed by applicable federal Law.

 

	
   

  	
  RESACA EXPLOITATION, INC.,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Chris Work

  
	
   

  	
   

  	
  Chris
  Work, as Vice President and

  
	
   

  	
   

  	
  Chief Financial OfficerExhibit 10.6

 

AMENDED AND
RESTATED SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT
(this “Agreement”) is made as of June 26, 2009, by RESACA EXPLOITATION, INC., a Texas corporation (“Debtor”),
in favor of CIT CAPITAL USA INC., as
collateral agent (in such capacity, together with its successors in such
capacity, the “Secured Party”) for benefit of the Secured Creditors (as
defined below).

 

W I T N E S S E T H:

 

WHEREAS,
the Borrower, NGP Capital Resources Company (the “Prior Administrative Agent”)
and other financial institutions named and defined therein as lenders and
agents entered into that certain Credit Agreement dated May 1, 2006,, as
amended by Limited Consent and Waiver and Amendment dated May 7, 2006, a
First Amendment to Credit Agreement dated May 31, 2007, a Second Amendment
to Credit Agreement dated August 1, 2007, a Third Amendment to Credit
Agreement dated October 12, 2007, a Limited Consent and Waiver and
Amendment dated January 15, 2008, and a Fourth Amendment to Credit
Agreement dated June 11, 2008 (as amended, the “Original Credit
Agreement”).

 

WHEREAS,
on May 1, 2006, in connection with the Original Credit Agreement, the
Borrower and each of the signatories thereto entered into that certain Security
Agreement (as heretofore amended, modified or supplemented, the “Existing
Security Agreement”)

 

WHEREAS,
the Borrower, the Prior Administrative Agent and other financial institutions
named and defined therein as lenders and agents amended and restated the
Original Credit Agreement by entering into an Amended and Restated Credit
Agreement dated July 11, 2008 pursuant to which such lenders provided
certain loans to the Borrower (as heretofore amended, modified or supplemented,
the “Existing Credit Agreement”).

 

WHEREAS,
the Prior Administrative Agent resigned 
as Administrative Agent under the Existing Credit Agreement and the
other Loan Documents (as defined in the Existing Credit Agreement) and pursuant
to that certain Resignation and Appointment of Administrative Agent Agreement,
as of even date herewith, the parties to the Existing Credit Agreement mutually
agreed to ratify the appointment of CIT Capital USA Inc. as successor
Administrative Agent (in such capacity, the “Successor Agent”)  under the Existing Credit Agreement and the
other Loan Documents (as defined in the Existing Credit Agreement) and CIT
Capital USA Inc. accepted such appointment

 

WHEREAS,
the Borrower has requested the Lenders, and the Lenders have agreed, to amend
and restate the Existing Credit Agreement, subject to the terms and conditions
of that certain Second Amended and Restated Credit Agreement dated as of June 26,
2009 (as the same may be further amended, the “Credit Agreement”), of
even date herewith by and among the Borrower, the Successor Agent and the
Lenders parties thereto.

 

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WHEREAS, it is a condition
precedent to the effectiveness of the Credit Agreement that the parties hereto
amend and restate the Existing Security Agreement, subject to the terms and
conditions of this Agreement.

 

NOW, THEREFORE, in
consideration of the premises and in order to induce Lenders to extend such
credit under the Credit Agreement, Debtor hereby agrees with Secured Party, for
the benefit of Secured Creditors (as defined below) and Secured Party, as
follows:

 

ARTICLE I — Definitions
and References

 

Section 1.1.                                   General Definitions. 
As used herein, the terms “Agreement”, “Debtor”, “Lenders”, and “Credit
Agreement” shall have the meanings indicated above, and the following terms
shall have the following meanings:

 

“Approved Hedge
Counterparties” shall have the meaning assigned to such term in the Credit
Agreement.

 

“Collateral” means
all property, of whatever type, which is described in Section 2.1 as being
at any time subject to a security interest granted hereunder to Secured Party.

 

“Commercial Tort
Claims” means a claim arising in tort with respect to which the claimant is
Debtor.

 

“Commitment” means
the agreement or commitment by Lenders to make loans or otherwise extend credit
to Debtor under the Credit Agreement, and any other agreement, commitment,
statement of terms or other document contemplating the making of loans or
advances or other extension of credit by Lenders to or for the account of
Debtor which is now or at any time hereafter intended to be secured by the
Collateral under this Agreement.

 

“Deposit Accounts”
means all “deposit accounts” (as defined in the UCC) or other demand, time,
savings, passbook, or similar accounts maintained with a bank, including
nonnegotiable certificates of deposit.

 

“Documents” means
all “documents” (as defined in the UCC) or other receipts covering, evidencing
or representing inventory, equipment, or other goods.

 

“Equipment” means
all “equipment” (as defined in the UCC) in whatever form, wherever located, and
whether now or hereafter existing, and all parts thereof, all accessions
thereto, and all replacements therefor.

 

“General Intangibles”
means all “general intangibles” (as defined in the UCC) of any kind (including
choses in action, Commercial Tort Claims, Software, Payment Intangibles, tax
refunds, insurance proceeds, and contract rights), and all instruments,
security agreements, leases, contracts, and other rights (except those
constituting Receivables, Documents, or Instruments) to receive payments of
money or the ownership or possession of property, including

 

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all general intangibles under which an account debtor’s principal
obligation is a monetary obligation.

 

“Instruments”
means all “instruments”, “chattel paper” or “letters of credit” (as each is
defined in the UCC) and all Letter-of-Credit Rights.

 

“Inventory” means
all “inventory” (as defined in the UCC) in all of its forms, wherever located
and whether now or hereafter existing, including (a) all movable property
and other goods held for sale or lease, all movable property and other goods
furnished or to be furnished under contracts of service, all raw materials and
work in process, and all materials and supplies used or consumed in a business,
(b) all movable property and other goods which are part of a product or
mass, (c) all movable property and other goods which are returned to or
repossessed by the seller, lessor, or supplier thereof, (d) all goods and
substances in which any of the foregoing is commingled or to which any of the
foregoing is added, and (e) all accessions to, products of, and documents
for any of the foregoing.

 

“Investment Property”
means all “investment property” (as defined in the UCC) and all other
securities, whether certificated or uncertificated, securities entitlements,
securities accounts, commodity contracts, or commodity accounts.

 

“Letter-of-Credit
Rights” means all rights to payment or performance under a “letter of
credit” (as defined in the UCC) whether or not the beneficiary has demanded or
is at the time entitled to demand payment or performance.

 

“Obligation Documents”
means the Credit Agreement, the Notes, the Loan Documents, and all other
documents and instruments under, by reason of which, or pursuant to which any
or all of the Secured Obligations are evidenced, governed, secured, or
otherwise dealt with, and all other agreements, certificates, and other
documents, instruments and writings heretofore or hereafter delivered in
connection herewith or therewith.

 

“Other Liable Party”
means any Person, other than Debtor, who may now or may at any time hereafter
be primarily or secondarily liable for any of the Secured Obligations or who
may now or may at any time hereafter have granted to Secured Party or Lenders a
Lien upon any property as security for the Secured Obligations.

 

“Payment Intangibles”
means all “payment intangibles” (as defined in the UCC).

 

“Proceeds” means,
with respect to any property of any kind, all proceeds of, and all other
profits, products, rentals or receipts, in whatever form, arising from any
sale, exchange, collection, lease, licensing or other disposition of,
distribution in respect of, or other realization upon, such property, including
all claims against third parties for loss of, damage to or destruction of, or
for proceeds payable under (or unearned premiums with respect to) insurance in
respect of, such property (regardless of whether Secured Party is named a loss
payee thereunder), and any payments paid or owing by any third party under any
indemnity, warranty,

 

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or guaranty with respect to such property, and any condemnation or
requisition payments with respect to such property, in each case whether now
existing or hereafter arising.

 

“Receivables”
means (a) all “accounts” (as defined in the UCC) and all other rights to
payment for goods or other personal property which have been (or are to be)
sold, leased, or exchanged or for services which have been (or are to be)
rendered, regardless of whether such accounts or other rights to payment have
been earned by performance and regardless of whether such accounts or other
rights to payment are evidenced by or characterized as accounts receivable,
contract rights, book debts, notes, drafts or other obligations of
indebtedness, (b) all Documents and Instruments of any kind relating to
such accounts or other rights to payment or otherwise arising out of or in
connection with the sale, lease or exchange of goods or other personal property
or the rendering of services, (c) all rights in, to, or under all security
agreements, leases and other contracts securing or otherwise relating to any
such accounts, rights to payment, Documents, or Instruments, (d) all
rights in, to and under any purchase orders, service contracts, or other
contracts out of which such accounts and other rights to payment arose (or will
arise on performance), and (e) all rights in or pertaining to any goods
arising out of or in connection with any such purchase orders, service
contracts, or other contracts, including rights in returned or repossessed
goods and rights of replevin, repossession, and reclamation.

 

“Secured Creditors”
shall have the meaning assigned to such term in the Credit Agreement.

 

“Secured Obligations”
has the meaning given such term in Section 2.2.

 

“Secured Party”
means the Person named as such at the beginning of this Agreement, together
with its successors and assigns as the “Administrative Agent” under the Credit
Agreement.

 

“Software” means
all “software” (as defined in the UCC), including all computer programs, any
supporting information provided in connection with a transaction relating to a
computer program, all licenses or other rights to use any of such computer
programs, and all license fees and royalties arising from such use to the
extent permitted by such license or rights.

 

“UCC” means the
Uniform Commercial Code in effect in the State of New York from time to time.

 

Section 1.2.                                   Other Definitions. 
Reference is hereby made to the Credit Agreement for a statement of the
terms thereof.  All capitalized terms
used in this Agreement which are defined in the Credit Agreement and not
otherwise defined herein shall have the same meanings herein as set forth therein.  All terms used in this Agreement which are
defined in the UCC and not otherwise defined herein or in the Credit Agreement
shall have the same meanings herein as set forth therein, except where the
context otherwise requires.  The parties
intend that the terms used herein which are defined in the UCC have, at all
times, the broadest and most inclusive meanings possible.  Accordingly, if the UCC shall in the future
be amended or held by a court to define any term used herein more broadly or
inclusively than the UCC in effect on the date hereof, then 

 

4

 

such term, as used herein, shall be given such broadened meaning.  If the UCC shall in the future be amended or
held by a court to define any term used herein more narrowly, or less inclusively,
than the UCC in effect on the date hereof, such amendment or holding shall be
disregarded in defining terms used herein.

 

Section 1.3.                                   Attachments. 
All exhibits or schedules which may be attached to this Agreement are a
part hereof for all purposes.

 

Section 1.4.                                   Amendment of Defined Instruments. 
Unless the context otherwise requires or unless otherwise provided
herein, references in this Agreement to a particular agreement, instrument or
document (including, but not limited to, references in Section 2.1) also
refer to and include all renewals, extensions, amendments, modifications,
supplements or restatements of any such agreement, instrument or document,
provided that nothing contained in this Section shall be construed to
authorize any Person to execute or enter into any such renewal, extension,
amendment, modification, supplement or restatement.

 

Section 1.5.                                   References and Titles. 
All references in this Agreement to Exhibits, Articles, Sections,
subsections, and other subdivisions refer to the Exhibits, Articles, Sections,
subsections and other subdivisions of this Agreement unless expressly provided
otherwise.  Titles appearing at the
beginning of any subdivision are for convenience only and do not constitute any
part of any such subdivision and shall be disregarded in construing the
language contained in this Agreement. 
The words “this Agreement”, “herein”, “hereof”, “hereby”, “hereunder”
and words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited.  The phrases “this Section” and “this
subsection” and similar phrases refer only to the Sections or subsections
hereof in which the phrase occurs.  The
word “or” is not exclusive, and the word “including” (in all of its forms)
means “including without limitation”. 
Pronouns in masculine, feminine and neuter gender shall be construed to
include any other gender, and words in the singular form shall be construed to
include the plural and vice versa unless the context otherwise requires.

 

ARTICLE II — Security
Interest

 

Section 2.1.                                   Grant of Security Interest. 
As collateral security for all of the Secured Obligations, Debtor hereby
pledges and assigns to Secured Party and grants to Secured Party a continuing
security interest, for the benefit of the Secured Creditors, in and to all
right, title and interest of Debtor in and to any and all of the following
property, whether now owned or existing or hereafter acquired or arising and
regardless of where located:

 

(a)                                  all Receivables.

 

(b)                                 all General Intangibles.

 

(c)                                  all Documents.

 

(d)                                 all Instruments

 

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(e)                                  all Inventory.

 

(f)                                    all Equipment.

 

(g)                                 all Deposit Accounts.

 

(h)                                 all Investment Property.

 

(i)                                     All books and records (including, without
limitation, customer lists, marketing information, credit files, price lists,
operating records, vendor and supplier price lists, sales literature, computer
software, computer hardware, computer disks and tapes and other storage media,
printouts and other materials and records) of Debtor pertaining to any of the
Collateral.

 

(j)                                     All moneys and property of any kind of
Debtor in the possession or under the control of Secured Party.

 

(k)                                  All Proceeds of any and all of the
foregoing Collateral.

 

In each case, the foregoing shall be covered by this Agreement, whether
Debtor’s ownership or other rights therein are presently held or hereafter
acquired and howsoever Debtor’s interests therein may arise or appear (whether
by ownership, security interest, claim or otherwise).

 

Section 2.2.                                   Secured Obligations Secured. 
The security interest created hereby in the Collateral constitutes
continuing collateral security for all of the following obligations,
indebtedness and liabilities, whether now existing or hereafter incurred or
arising:

 

(a)                                  Credit Agreement Indebtedness. 
The payment by Debtor, as and when due and payable, of all amounts from
time to time owing by Debtor under or in respect of the Credit Agreement, the
Notes or any of the other Obligation Documents.

 

(b)                                 Other Indebtedness. 
All loans and future advances made by Lenders to Debtor and all other
debts, obligations and liabilities of every kind and character of Debtor now or
hereafter existing in favor of Lenders, whether such debts, obligations or
liabilities be direct or indirect, primary or secondary, joint or several,
fixed or contingent, and whether originally payable to Lenders or to a third
party and subsequently acquired by Lenders and whether such debts, obligations
or liabilities are evidenced by notes, open account, overdraft, endorsement,
security agreement, guaranty or otherwise (it being contemplated that Debtor
may hereafter become indebted to Lenders in further sum or sums but Lenders
shall have no obligation to extend further indebtedness by reason of this
Agreement).

 

(c)                                  Renewals.  All renewals,
extensions, amendments, modifications, supplements, or restatements of or
substitutions for any of the foregoing.

 

6

 

(d)                                 Performance. 
The due performance and observance by Debtor of all of its other
obligations from time to time existing under or in respect of any of the
Obligation Documents.

 

(e)                                  Hedging Contracts. 
Payment of and performance of any and all present or future obligations
of Debtor according to the terms of any present or future swap agreements, cap,
floor, collar, exchange transaction, forward agreement or other exchange or
protection agreements relating to crude oil, natural gas or other hydrocarbons,
or any option with respect to any such transaction now existing or hereafter
entered into between Debtor and one or more Lenders (or any one or more
affiliates of any Lender) or any Approved Hedge Counterparty from time to time
a party to an Intercreditor and Collateral Agency Agreement among Debtor,
Secured Party and the Approved Hedge Counterparties from time to time a party
thereto; provided, if such counterparty (other than an Approved Hedge
Counterparty) ceases to be a Lender (or affiliate of a Lender), such foregoing
obligations shall only include such obligations to the extent arising from
transactions entered into at the time such counterparty was a Lender (or
affiliate of a Lender);

 

As used herein, the term “Secured Obligations” refers to all present
and future indebtedness, obligations and liabilities of whatever type which are
described above in this section, including any interest which accrues after the
commencement of any case, proceeding, or other action relating to the
bankruptcy, insolvency, or reorganization of Debtor.  Debtor hereby acknowledges that the Secured
Obligations are owed to the various Lenders and that each Lender is entitled to
the benefits of the Liens given under this Agreement.

 

ARTICLE III — Representations,
Warranties and Covenants

 

Section 3.1.                                   Representations and Warranties. 
Each of the representations and warranties in the Credit Agreement made
by Debtor or any Restricted Person is true and correct.  In addition, Debtor hereby represents and
warrants to Secured Party and Lenders as follows:

 

(a)                                  Name, Place of Business and Formation. 
Debtor is a corporation organized under the laws of the State of Texas,
which is Debtor’s location pursuant to the UCC. 
Except as set forth on Schedule 3.1(a), Debtor has not conducted
business under any name except the name in which it has executed this
Agreement, which is the exact name as it appears in Debtor’s organizational
documents, as amended, as filed with the State of Texas.  Debtor’s principal place of business and
chief executive office, and the place where Debtor kept its books and records
concerning the Collateral has been located at Debtor’s address set forth in the
Credit Agreement since Debtor’s formation.

 

(b)                                 Ownership Free of Liens. 
Debtor has good and defensible title to the Collateral, free and clear of
all Liens, encumbrances or adverse claims except for the security interest
created by this Agreement and any Permitted Liens.  No effective financing statement or other
registration or instrument similar in effect covering all or any part of the
Collateral is on file in any recording office except any which have been filed
in favor of Secured Party relating to this Agreement.  None of the Collateral is in the possession
of any Person other than Debtor or Secured Party, except for Collateral being
transported in the ordinary course of business.

 

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(c)                                  No Conflicts or Consents. 
Neither the ownership nor the intended use of the Collateral by Debtor,
nor the grant of the security interest by Debtor to Secured Party herein, nor
the exercise by Secured Party of its rights or remedies hereunder, will (i) conflict
with any provision of (a) any domestic or foreign law, statute, rule or
regulation, (b) the articles of incorporation or bylaws of Debtor, or (c) any
agreement, judgment, license, order or permit applicable to or binding upon
Debtor, or (ii) result in or require the creation of any Lien, charge or
encumbrance upon any assets or properties of Debtor or of any Restricted
Person.  Except as expressly contemplated
in the Obligation Documents, no consent, approval, authorization or order of,
and no notice to or filing with any court, governmental authority or third
party is required in connection with the grant by Debtor of the security
interest herein, or the exercise by Secured Party of its rights and remedies
hereunder.

 

(d)                                 Security Interest. 
Debtor has and will have at all times full right, power and authority to
grant a security interest in the Collateral to Secured Party as provided
herein, free and clear of any Lien, adverse claim, or encumbrance other than
Permitted Liens.  This Agreement creates
a valid and binding security interest in favor of Secured Party in the
Collateral, which security interest secures all of the Secured Obligations.

 

(e)                                  Perfection.  The taking
possession by Secured Party of all money constituting Collateral from time to
time will perfect, and establish the first priority of, Secured Party’s
security interest hereunder in such Collateral. 
Secured Party’s control of all Investment Property, Deposit Accounts,
and Letter-of-Credit Rights constituting Collateral from time to time will
perfect, and establish the first priority of, Secured Party’s security interest
hereunder in such Collateral. The filing of a financing statement with the
secretary of state (or equivalent governmental official) of Texas which
sufficiently indicates all other Collateral will perfect, and establish the
first priority of, Secured Party’s security interest hereunder in such
Collateral.  No further or subsequent
filing, recording, registration, other public notice or other action is
necessary or desirable to perfect or otherwise continue, preserve or protect
such security interest except (i) for continuation statements described in
UCC §9-515(d), (ii) for filings required to be filed in the event of a
change in the name, identity, or organizational structure of Debtor, or (iii) in
the event any financing statement filed by Secured Party relating hereto
otherwise becomes inaccurate or incomplete.

 

(f)                                    General Intangibles. 
Each General Intangible included within the Collateral which is material
to Debtor’s business represents the valid and legally binding obligation of
each other Person who is a party thereto or who is otherwise stated to be
obligated thereunder, subject to no contra-accounts, setoffs, defenses,
counterclaims, discounts, allowances, rebates, credits or adjustments by or
available to account debtors obligated thereon, except for those which (i) in
the case of General Intangibles under which money is owing to Debtor, do not in
the aggregate exceed five percent (5%) of the aggregate face amount of all such
General Intangibles, and (ii) in the case of other General Intangibles, do
not materially impair the value to Debtor or the enforcement by Debtor of such
General Intangibles.

 

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(g)                                 Documents and Instruments. 
All Documents and Instruments included within the Collateral are valid
and genuine.  Any such Document or
Instrument has only one original counterpart which constitutes collateral
within the meaning of the UCC or the law of any applicable jurisdiction, and
all such original counterparts (other than checks delivered in payment of
Receivables in the ordinary course of business) have been delivered into the
possession of Secured Party.

 

(h)                                 Goods.  None of the
Collateral which constitutes goods (i) is covered by any Document (other
than Documents which are subject hereto and have been delivered to Secured
Party), (ii) is subject to any landlord’s lien or similar Lien, (iii) has
been related to, attached to, or used in connection with any real property so
as to constitute a fixture upon such real property (except for real property
which is subject to a Lien in favor of Secured Party), (iv) is installed
in or affixed to other goods so as to be an accession to such other goods (unless
such other goods are included in the Collateral), or (v) has been produced
in violation of the Fair Labor Standards Act, as amended.  All such goods are insured to the extent
required under the Credit Agreement.

 

Section 3.2.                                   General Covenants Applicable to Collateral. 
Unless Secured Party shall otherwise consent in writing, Debtor will at
all times comply with the covenants contained in the Credit Agreement which are
applicable to Debtor for so long as any part of the Secured Obligations or the
Commitment is outstanding.  In addition,
Debtor will at all times comply with the covenants contained in this Section 3.2.

 

(a)                                  Change of Name, Location, or Structure;
Additional Filings.  Debtor recognizes that financing statements
pertaining to the Collateral have been or may be filed with the secretary of
state (or equivalent governmental official) of the state in which Debtor is
organized.  Without limitation of any
other covenant herein, Debtor will not cause or permit any change to be made in
its name, identity or corporate structure, or any change to be made to its
jurisdiction of organization, unless Debtor shall have first (1) notified
Secured Party of such change at least forty-five (45) days prior to the
effective date of such change, (2) taken all action requested by Secured
Party (under the following subsection (b) or otherwise) for the purpose of
further confirming and protecting Secured Party’s security interests and rights
under this Agreement and the perfection and priority thereof, and (3) if
requested by Secured Party, provided to Secured Party a legal opinion to its
satisfaction confirming that such change will not adversely affect in any way
Secured Party’s security interests and rights under this Agreement or the
perfection or priority thereof.  In any
notice furnished pursuant to this subsection, Debtor will expressly state that
the notice is required by this Agreement and contains facts that may require
additional filings of financing statements or other notices for the purposes of
continuing perfection of Secured Party’s security interest in the Collateral.

 

(b)                                 Further Assurances. 
Debtor will, at its expense as from time to time requested by Secured
Party, promptly execute and deliver all further instruments, agreements,
filings and registrations, and take all further action, in order:  (i) to confirm and validate this
Agreement and Secured Party’s rights and remedies hereunder, (ii) to
correct any errors or omissions in the descriptions herein of the Secured
Obligations or the Collateral or in any other provisions hereof, (iii) to
perfect, register and protect the security interests and rights created or
purported to be 

 

9

 

created hereby or to maintain or upgrade in rank the priority of such
security interests and rights, (iv) to enable Secured Party to exercise
and enforce its rights and remedies hereunder in respect of the Collateral, or (v) to
otherwise give Secured Party the full benefits of the rights and remedies
described in or granted under this Agreement. 
As part of the foregoing Debtor will, whenever requested by Secured
Party (1) execute and file any financing statements, continuation
statements, and other filings or registrations relating to Secured Party’s
security interests and rights hereunder, and any amendments thereto, and (2) mark
its books and records relating to any Collateral to reflect that such
Collateral is subject to this Agreement and the security interests
hereunder.  To the extent requested by
Secured Party from time to time, Debtor will obtain from any material account
debtor or other obligor on the Collateral the acknowledgment of such account
debtor or obligor that such Collateral is subject to this Agreement.

 

(c)                                  Inspection of Collateral. 
Debtor will keep adequate records concerning the Collateral and will
permit Secured Party and all representatives appointed by Secured Party,
including independent accountants, agents, attorneys, appraisers and any other
persons, to inspect any of the Collateral and the books and records of or
relating to the Collateral at any time during normal business hours, and to
make photocopies and photographs thereof, and to write down and record any
information which such representatives obtain.

 

(d)                                 Information. 
Upon request from time to time by Secured Party, Debtor will furnish to
Secured Party (i) any information concerning any covenant, provision or
representation contained herein or any other matter in connection with the
Collateral or Debtor’s business, properties, or financial condition, and (ii) statements
and schedules identifying and describing the Collateral and other reports and
information requested in connection with the Collateral, all in reasonable
detail.

 

(e)                                  Ownership, Liens, Possession and
Transfers.  Except for the security interest created by
this Agreement and any Permitted Liens, Debtor will maintain good and
defensible title to all Collateral, free and clear of all Liens, encumbrances
or adverse claims and Debtor will not grant or allow any such Liens, encumbrances
or adverse claims to exist.  Debtor will
not grant or allow to remain in effect, and Debtor will cause to be terminated,
any financing statement or other registration or instrument similar in effect
covering all or any part of the Collateral, except any which have been filed in
favor of Secured Party relating to this Agreement.  Debtor will defend Secured Party’s right,
title and special property and security interest in and to the Collateral
against the claims of any Person.  Debtor
(i) will insure that all of the Collateral — whether goods, Documents,
Instruments, or otherwise — is and remains in the possession of Debtor or
Secured Party (or a bailee selected by Secured Party who is holding such
Collateral for the benefit of Secured Party), except for goods being
transported in the ordinary course of business, and (ii) will not sell,
assign (by operation of law or otherwise), transfer, exchange, lease or
otherwise dispose of any of the Collateral except as expressly permitted in Section 9.5
of the Credit Agreement.

 

(f)                                    Impairment of Security Interest. 
Debtor will not take or fail to take any action which would in any
manner impair the value or enforceability of Secured Party’s security interest
in any Collateral.

 

10

 

(g)                                 Insurance.

 

(i)                                     Debtor will, at its own expense, maintain
insurance with respect to all Collateral which constitutes goods in such
amounts, against such risks, in such form and with such insurers, as shall be
satisfactory to Secured Party from time to time.  Each policy for liability insurance shall
provide for all losses to be paid on behalf of Secured Party (for the benefit
of the Secured Creditors) and Debtor as their respective interests may appear,
and each policy for property damage insurance shall provide for all losses to
be paid directly to Secured Party.  Each
such policy shall in addition (A) name Debtor and Secured Party as insured
parties thereunder (without any representation or warranty by or obligation
upon Secured Party) as their interests may appear, (B) contain the
agreement by the insurer that any loss thereunder shall be payable to Secured
Party notwithstanding any action, inaction or breach of representation or
warranty by Debtor, (C) provide that there shall be no recourse against
Secured Party for payment of premiums or other amounts with respect thereto and
(D) provide that at least thirty (30) days’ prior written notice of
cancellation or of lapse shall be given to Secured Party by the insurer.  Debtor will, if so requested by Secured
Party, deliver to Secured Party original or duplicate policies of such
insurance and, as often as Secured Party may reasonably request, a report of a
reputable insurance broker with respect to such insurance.  Debtor will also, at the request of Secured
Party, duly execute and deliver instruments of assignment of such insurance
policies and cause the respective insurers to acknowledge notice of such
assignment.

 

(ii)                                  Reimbursement under any liability
insurance maintained by Debtor pursuant to this Section 3.2(g) may be
paid directly to the Person who has incurred the liability covered by such
insurance.  With respect to any loss
involving damage to Collateral which constitutes goods as to which subsection (iii) of
this Section 3.2(g) is not applicable, Debtor will make or cause to
be made the necessary repairs to or replacements of such Collateral, and any
proceeds of insurance maintained by Debtor pursuant to this Section 3.2(g) shall
be paid to Debtor by Secured Party as reimbursement for the costs of such
repairs or replacements as such repairs or replacements are made or acquired.

 

(iii)                               Upon the occurrence and during the
continuance of an Event of Default or upon the occurrence of a loss in excess
of $100,000 per occurrence of any Collateral which constitutes goods, all
insurance payments in respect of such Collateral shall be paid to Secured Party
and applied as specified in Section 4.3 hereof.

 

Section 3.3.                                   Covenants for Specified Types of Collateral. 
Unless Secured Party shall otherwise consent in writing, Debtor will at
all times comply with the covenants contained in this Section 3.3 from the
date hereof and so long as any part of the Secured Obligations or the
Commitment is outstanding.

 

11

 

(a)                                  Receivables. 
Debtor will, except as otherwise provided in Sections 4.1(e) and
4.2(a), collect at its own expense all amounts due or to become due under each
Receivable which is included within the Collateral.  In connection with such collections, Debtor
may (and, at Secured Party’s direction, will) take such action (not otherwise
forbidden hereunder) as Debtor or Secured Party may deem necessary or advisable
to enforce collection or performance of each such Receivable.  Except for actions and omissions in the
ordinary course of business which do not in the aggregate cause losses or
reductions in excess of five percent (5%) of the aggregate face amount of all
such Receivables outstanding at any time, Debtor (i) will duly perform and
cause to be performed all of its obligations with respect to the goods or
services, the sale or lease or rendering of which gave rise or will give rise
to each such Receivable, and (ii) will not (whether through failure to
duly perform its obligations under any contracts, instruments, and agreements
which are related to any such Receivable, or by any written instrument, or
otherwise) take or allow any action or omission which causes any such
Receivable to become subject to any contra-accounts, setoffs, defenses, counterclaims,
discounts, allowances, rebates, credits or adjustments by or available to
account debtors obligated on such Receivable.

 

(b)                                 General Intangibles. 
Debtor will, except as otherwise provided in Sections 4.1(e) and
4.2(a), collect at its own expense all amounts due or to become due under each
General Intangible included within the Collateral.  In connection with such collections, Debtor
may (and, at Secured Party’s direction, will) take such action (not otherwise
forbidden hereunder) as Debtor or Secured Party may deem necessary or advisable
to enforce collection or performance of each such General Intangible.  Debtor will duly perform and cause to be
performed all of its obligations under any contracts, instruments, and
agreements which are, or which are related to, any General Intangibles of
Debtor.  Debtor will not (whether through
failure to duly perform its obligations under any contracts, instruments, and
agreements which are related to any such General Intangibles, or by any written
instrument, or otherwise) take or allow any action or omission which causes any
such General Intangibles to become subject to any contra-accounts, setoffs,
defenses, counterclaims, discounts, allowances, rebates, credits or adjustments
by or available to account debtors obligated on such General Intangibles,
except for those which (i) in the case of such General Intangibles under
which money is owing to Debtor, do not in the aggregate exceed five percent
(5%) of the aggregate face amount of all such General Intangibles, and (ii) in
the case of other General Intangibles included within the Collateral, do not
materially impair the value or enforcement of such General Intangibles.

 

(c)                                  Documents and Instruments. 
Debtor will at all times cause any Documents or Instruments which are
included within the Collateral to be valid and genuine.  Debtor will cause all Instruments included
within the Collateral to have only one original counterpart.  Unless otherwise requested by Secured Party,
Debtor will promptly deliver to Secured Party all originals of Documents or
Instruments which are included within the Collateral.  Debtor will not (whether through failure to
duly perform its obligations under any contracts, instruments, and agreements
which are related to any Documents or Instruments which are included within the
Collateral, or by any written instrument, or otherwise) take or allow any
action or omission which causes any Documents or Instruments which are included
within the Collateral to become subject to any contra-accounts, setoffs,
defenses, counterclaims, discounts, allowances, rebates, credits or adjustments
by or available to the Persons obligated thereon.  Upon request by Secured Party, 

 

12

 

Debtor will mark each chattel paper which is included within the
Collateral with a legend indicating that such chattel paper is subject to the
security interest granted by this Agreement.

 

(d)                                 Inventory.  Debtor will
maintain, preserve, protect and store all Inventory included within the Collateral
in good condition, repair and working order and in a manner which will not make
void or cancelable any insurance with respect to such Collateral.  Debtor will promptly furnish to Secured Party
a statement respecting any loss or damage to any such Inventory with an
aggregate value in excess of $100,000. 
Except for Documents delivered into the possession of Secured Party,
Debtor will not allow any Inventory included within the Collateral to be
covered by any Document.  Debtor will not
cause or permit the removal of any item of Inventory from Debtor’s possession,
control and risk of loss, and Debtor will not sell, assign (by operation of law
or otherwise), transfer, exchange, lease or otherwise dispose of any Inventory,
other than in connection with the following:

 

(i)                                     Sales or leases, other than during the
continuance of an Event of Default, of Inventory in the ordinary course of
business, and

 

(ii)                                  Possession of Inventory by Secured Party
or by a bailee selected by Secured Party who is holding such Inventory for the
benefit of Secured Party.

 

(e)                                  Equipment.  Debtor will
maintain, preserve, protect and keep all Equipment included within the
Collateral in good condition, repair and working order and will cause such
Equipment to be used and operated in a good and workmanlike manner, in
accordance with applicable law and in a manner which will not make void or
cancelable any insurance with respect to such Equipment.  Debtor will promptly make or cause to be made
all repairs, replacements and other improvements to or in connection with such
Equipment which are necessary or desirable or that Secured Party may request to
such end.  Debtor will promptly furnish
to Secured Party a statement respecting any loss or damage to any of such
Equipment with an aggregate value in excess of $100,000.  Debtor will not cause or permit the removal
of any item of Equipment from Debtor’s possession, control and risk of loss,
and Debtor will not sell, assign (by operation of law or otherwise), transfer,
exchange, lease or otherwise dispose of any Equipment, other than in connection
with the following:

 

(i)                                     Sale or other disposal, other than during
the continuance of an Event of Default, of any item of Equipment which is worn
out or obsolete and which has been replaced by an item of equal suitability and
value, owned by Debtor and made subject to the security interest under this
Agreement, but which is otherwise free and clear of any Liens, encumbrances or
adverse claims other than Permitted Liens,

 

(ii)                                  Possession of Equipment by Secured Party
or by a bailee selected by Secured Party who is holding such Equipment for the
benefit of Secured Party;

 

(iii)                               Sales of Equipment in connection with
sales of Qualified Properties expressly permitted under the Credit Agreement;
and

 

13

 

(iv)                              other sales of Equipment as expressly
permitted under the Credit Agreement.

 

Debtor will not permit any of the Collateral which constitutes
Equipment to at any time become so related to, attached to, or used in
connection with any particular real property so as to become a fixture upon
such real property, or to be installed in or affixed to other goods so as to
become an accession to such other goods unless such other goods are also
included in the Collateral.

 

(f)                                    Deposit Accounts. 
For each Deposit Account that Debtor at any time opens and maintains,
Debtor shall, at Secured Party’s request and option, pursuant to an agreement
in form and substance satisfactory to Secured Party, either (i) cause the
depository bank which maintains such Deposit Account to agree to comply at any
time with instructions from Secured Party to such depository bank directing the
disposition of funds from time to time credited to such Deposit Account,
without further consent of Debtor, or (ii) arrange for Secured Party to
become the customer of such depository bank with respect to the Deposit
Account, with Debtor being permitted, only with the consent of Secured Party,
to exercise rights to withdraw funds from such Deposit Account.  Secured Party agrees with Debtor that Secured
Party shall not give any such instructions or withhold any withdrawal rights
from Debtor unless an Event of Default has occurred and is continuing.  The provisions of this Section 3.3(f) shall
not apply to (x) any Deposit Account for which Debtor, the applicable
depository bank, and Secured Party have entered into a cash collateral
agreement specially negotiated among Debtor, such depository bank, and Secured
Party for the specific purpose set forth therein, (y) Deposit Accounts for
which Secured Party is the depository bank, and (z) Deposit Accounts
specially and exclusively used for payroll, payroll taxes, and other employee
wage and benefit payments to or for the benefit of Debtor’s salaried employees.

 

(g)                                 Investment Property.  
If Debtor shall at any time hold or acquire any certificated securities,
Debtor shall forthwith endorse, assign, and deliver the same to Secured Party,
accompanied by such instruments of transfer or assignment duly executed in
blank as Secured Party may from time to time specify.  If any securities now or hereafter acquired
by Debtor are uncertificated and are issued to Debtor or its nominee directly
by the issuer thereof, Debtor shall immediately notify Secured Party of such
issuance and, at Secured Party’s request and option, pursuant to an agreement
in form and substance satisfactory to Secured Party, either (i) cause the
issuer thereof to agree to comply with instructions from Secured Party as to
such securities, without further consent of Debtor or such nominee, or (ii) arrange
for Secured Party to become the registered owner of such securities.  If any securities, whether certificated or
uncertificated, or other Investment Property now or hereafter acquired by
Debtor, are held by Debtor or its nominee through a securities intermediary or
commodity intermediary, Debtor shall immediately notify Secured Party thereof,
and, at Secured Party’s request and option, pursuant to an agreement in form
and substance satisfactory to Secured Party, either (i) cause such
securities intermediary or (as the case may be) commodity intermediary to agree
to comply with entitlement orders or other instructions from Secured Party to
such securities intermediary as to such securities or other Investment Property,
or (as the case may be) to apply any value distributed on account of any
commodity contract as directed by Secured Party to such commodity intermediary,
in each case without further consent of Debtor or such nominee, or (ii) 

 

14

 

in the case of financial assets or other Investment Property held
through a securities intermediary, arrange for Secured Party to become the
entitlement holder with respect to such Investment Property, with Debtor being
permitted, only with the consent of Secured Party, to exercise rights to
withdraw or otherwise deal with such Investment Property.  Secured Party agrees with Debtor that Secured
Party shall not give any such entitlement orders or instructions or directions
to any issuer, securities intermediary, or commodity intermediary of Investment
Property, and shall not withhold its consent to the exercise of any withdrawal
or dealing rights by Debtor, unless an Event of Default has occurred and is
continuing.  The provisions of this Section 3.3(g) shall
not apply to any financial assets credited to a securities account for which
Secured Party or an Affiliate of Secured Party is the securities
intermediary.  The Investment Property
required to be pledged hereunder and under the Credit Agreement by the Debtor
as of the Closing Date are listed in Schedule 3.3(g) hereto.

 

(h)                                 Letter of Credit Rights. 
If Debtor is at any time a beneficiary under a letter of credit now or
hereafter issued in favor of Debtor, Debtor shall promptly notify Secured Party
thereof and, at the request and option of Secured Party, Debtor shall, pursuant
to an agreement in form and substance satisfactory to Secured Party, either (i) arrange
for the issuer and any confirmer of such letter of credit to consent to an
assignment to Secured Party of the proceeds of any drawing under such letter of
credit or (ii) arrange for Secured Party to become the transferee
beneficiary of such letter of credit, with Secured Party agreeing, in each
case, that the proceeds of any drawing under such letter of credit are to be
applied as specified in Section 4.3.

 

(i)                                     Commercial Tort Claims. 
If Debtor shall at any time hold or acquire a Commercial Tort Claim,
Debtor shall immediately notify Secured Party in writing of the details thereof
and grant to Secured Party in such writing 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 acceptable to Secured Party.

 

ARTICLE IV. — Remedies,
Powers and Authorizations

 

Section 4.1.                                   Normal Provisions Concerning the Collateral.

 

(a)                                  Authorization to File Financing
Statements.  Debtor hereby irrevocably authorizes Secured
Party at any time and from time to time to file, without the signature of
Debtor, in any jurisdiction any amendments to existing financing statements and
any initial financing statements and amendments thereto that (a) indicate
the Collateral (i) as “all assets of Debtor and all proceeds thereof, and
all rights and privileges with respect thereto” or words of similar effect,
regardless of whether any particular asset comprised in the Collateral falls
within the scope of Chapter 9 of the UCC, or (ii) as being of an equal or
lesser scope or with greater detail; (b) contain any other information
required by subchapter E of Chapter 9 of the UCC for the sufficiency or filing
office acceptance of any financing statement or amendment, including whether
Debtor is an organization, the type of organization and any organization
identification number issued to Debtor; and (c) are necessary to properly
effectuate the transactions described in the Loan Documents, as determined by
Secured Party in its discretion.  Debtor
agrees to furnish any such information to Secured Party promptly upon request.  Debtor further agrees that a carbon,
photographic or other reproduction of this Agreement or any financing statement

 

15

 

describing any Collateral is sufficient as a financing statement and
may be filed in any jurisdiction by Secured Party.

 

(b)                                 Power of Attorney. 
Debtor hereby appoints Secured Party as Debtor’s attorney-in-fact and
proxy, with full authority in the place and stead of Debtor and in the name of
Debtor or otherwise, from time to time in Secured Party’s discretion, to take
any action and to execute any instrument which Secured Party may deem necessary
or advisable to accomplish the purposes of this Agreement including any action
or instrument:  (i) to obtain and
adjust any insurance required to be paid to Secured Party pursuant hereto; (ii) to
ask, demand, collect, sue for, recover, compound, receive and give acquittance
and receipts for moneys due and to become due under or in respect of any of the
Collateral; (iii) to receive, indorse and collect any drafts or other
Instruments or Documents; (iv) to enforce any obligations included among
the Collateral; and (v) to file any claims or take any action or institute
any proceedings which Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Debtor or Secured Party with respect to any of the Collateral.  Debtor hereby acknowledges that such power of
attorney and proxy are coupled with an interest, are irrevocable, and are to be
used by Secured Party for the sole benefit of Lenders.

 

(c)                                  Performance by Secured Party. 
If Debtor fails to perform any agreement or obligation contained herein,
Secured Party may itself perform, or cause performance of, such agreement or
obligation, and the expenses of Secured Party incurred in connection therewith
shall be payable by Debtor under Section 4.5.

 

(d)                                 Bailees.  If any
Collateral is at any time in the possession or control of any warehouseman,
bailee or any of Debtor’s agents or processors, Debtor shall, upon the request
of Secured Party, notify such warehouseman, bailee, agent or processor of
Secured Party’s rights hereunder and instruct such Person to hold all such
Collateral for Secured Party’s account subject to Secured Party’s
instructions.  (No such request by
Secured Party shall be deemed a waiver of any provision hereof which was
otherwise violated by such Collateral being held by such Person prior to such
instructions by Debtor.)

 

(e)                                  Collection.  Secured Party
shall have the right at any time, upon the occurrence and during the
continuance of a Default or an Event of Default, to notify (or to require
Debtor to notify) any and all obligors under any Receivables, General
Intangibles, Instruments, or other rights to payment included among the Collateral
of the assignment thereof to Secured Party under this Agreement and to direct
such obligors to make payment of all amounts due or to become due to Debtor
thereunder directly to Secured Party and, upon such notification and at the
expense of Debtor and to the extent permitted by law, to enforce collection of
any such Receivables, General Intangibles, Instruments, or other rights to
payment and to adjust, settle or compromise the amount or payment thereof, in
the same manner and to the same extent as Debtor could have done.  After Debtor receives notice that Secured
Party has given (and after Secured Party has required Debtor to give) any
notice referred to above in this subsection:

 

(i)                                     all amounts and proceeds (including
instruments and writings) received by Debtor in respect of such Receivables,
General Intangibles, Instruments, or other rights to

 

16

 

payment shall be received in trust for the benefit of
Secured Party hereunder, shall be segregated from other funds of Debtor and
shall be forthwith paid over to Secured Party in the same form as so received
(with any necessary indorsement) to be, at Secured Party’s discretion, either (A) held
as cash collateral and released to Debtor upon the remedy of all Defaults and
Events of Default, or (B) while any Event of Default is continuing,
applied as specified in Section 4.3, and

 

(ii)                                  Debtor will not adjust, settle or
compromise the amount or payment of any such Receivable, General Intangible,
Instrument, or other right to payment or release wholly or partly any account
debtor or obligor thereof or allow any credit or discount thereon.

 

Section 4.2.                                   Event of Default Remedies. 
If an Event of Default shall have occurred and be continuing, Secured
Party may from time to time in its discretion, without limitation and without
notice except as expressly provided below:

 

(a)                                  exercise in respect of the Collateral, in
addition to any other rights and remedies provided for herein, under the other
Obligation Documents, or otherwise available to it, all the rights and remedies
of a secured party on default under the UCC (whether or not the UCC applies to
the affected Collateral);

 

(b)                                 require Debtor to, and Debtor hereby
agrees that it will at its expense and upon request of Secured Party forthwith,
assemble all or part of the Collateral as directed by Secured Party and make it
(together with all books, records and information of Debtor relating thereto)
available to Secured Party at a place to be designated by Secured Party which
is reasonably convenient to both parties;

 

(c)                                  prior to the disposition of any
Collateral, (i) to the extent permitted by applicable law, enter, with or
without process of law and without breach of the peace, any premises where any
of the Collateral is or may be located, and without charge or liability to
Secured Party seize and remove such Collateral from such premises, (ii) have
access to and use Debtor’s books, records, and information relating to the
Collateral, and (iii) store or transfer any of the Collateral without
charge in or by means of any storage or transportation facility owned or leased
by Debtor, process, repair or recondition any of the Collateral or otherwise
prepare it for disposition in any manner and to the extent Secured Party deems
appropriate and, in connection with such preparation and disposition, use
without charge any copyright, trademark, trade name, patent or technical
process used by Debtor;

 

(d)                                 reduce its claim to judgment or foreclose
or otherwise enforce, in whole or in part, the security interest created hereby
by any available judicial procedure;

 

(e)                                  dispose of, at its office, on the
premises of Debtor or elsewhere, all or any part of the Collateral, as a unit
or in parcels, by public or private proceedings, and by way of one or more
contracts (it being agreed that the sale of any part of the Collateral shall
not exhaust Secured Party’s power of sale, but sales may be made from time to
time, and at any time, until all 

 

17

 

of the Collateral has been sold or until the Secured Obligations have
been paid and performed in full), and at any such sale it shall not be
necessary to exhibit any of the Collateral;

 

(f)                                    buy (or allow one or more of the Lenders
to buy) the Collateral, or any part thereof, at any public sale;

 

(g)                                 buy (or allow one or more of the Lenders
to buy) the Collateral, or any part thereof, at any private sale if the
Collateral is of a type customarily sold in a recognized market or is of a type
which is the subject of widely distributed standard price quotations; and

 

(h)                                 apply by appropriate judicial proceedings
for appointment of a receiver for the Collateral, or any part thereof, and
Debtor hereby consents to any such appointment.

 

Debtor agrees that, to the extent notice of sale shall be required by
law, at least ten (10) days’ notice to Debtor of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. 
Secured Party shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. 
Secured Party may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.

 

Section 4.3.                                   Application of Proceeds.  If any Event
of Default shall have occurred and be continuing, Secured Party may in its
discretion apply any cash held by Secured Party as Collateral, and any cash
proceeds received by Secured Party in respect of any sale of, collection from,
or other realization upon all or any part of the Collateral, to any or all of
the following in such order as Secured Party may (subject to the rights of
Lenders under the Credit Agreement) elect:

 

(a)                                  To the repayment of the reasonable costs
and expenses, including reasonable attorneys’ fees and legal expenses, incurred
by Secured Party in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or the
sale of, collection from, or other realization upon, any Collateral, (iii) the
exercise or enforcement of any of the rights of Secured Party hereunder, or (iv) the
failure of Debtor to perform or observe any of the provisions hereof;

 

(b)                                 To the payment or other satisfaction of
any Liens, encumbrances, or adverse claims upon or against any of the
Collateral;

 

(c)                                  To the reimbursement of Secured Party for
the amount of any obligations of Debtor or any Other Liable Party paid or
discharged by Secured Party pursuant to the provisions of this Agreement or the
other Obligation Documents, and of any expenses of Secured Party payable by
Debtor hereunder or under the other Obligation Documents;

 

(d)                                 To the satisfaction of any other Secured
Obligations;

 

18

 

(e)                                  By holding the same as Collateral;

 

(f)                                    To the payment of any other amounts
required by applicable law (including any provision of the UCC); and

 

(g)                                 By delivery to Debtor or to whoever shall
be lawfully entitled to receive the same or as a court of competent
jurisdiction shall direct.

 

Section 4.4.                                   Deficiency.  In the event
that the proceeds of any sale, collection or realization of or upon Collateral
by Secured Party are insufficient to pay all Secured Obligations and any other
amounts to which Secured Party is legally entitled, Debtor shall be liable for
the deficiency, together with interest thereon as provided in the governing
Obligation Documents or (if no interest is so provided) at such other rate as
shall be fixed by applicable law, together with the costs of collection and the
reasonable fees of any attorneys employed by Secured Party or Lenders to
collect such deficiency.

 

Section 4.5.                                   Indemnity and Expenses.  In addition
to, but not in qualification or limitation of, any similar obligations under
other Obligation Documents:

 

(a)                                  Debtor will indemnify Secured
Party and each Lender from and against any and all claims, losses and
liabilities growing out of or resulting from this Agreement (including
enforcement of this Agreement), WHETHER OR NOT SUCH CLAIMS, LOSSES AND
LIABILITIES ARE IN ANY WAY OR TO ANY EXTENT CAUSED BY OR ARISING OUT OF SUCH
INDEMNIFIED PARTY’S OWN NEGLIGENCE OR STRICT LIABILITY, except to the extent
such claims, losses or liabilities are proximately caused by such indemnified party’s
individual gross negligence or willful misconduct.

 

(b)                                 Debtor will upon demand pay to Secured
Party the amount of any and all costs and expenses, including the fees and
disbursements of Secured Party’s counsel and of any experts and agents, which Secured
Party may incur in connection with (i) the transactions which give rise to
this Agreement, (ii) the preparation of this Agreement and the perfection
and preservation of this security interest created under this Agreement, (iii) the
administration of this Agreement; (iv) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
Collateral; (v) the exercise or enforcement of any of the rights of
Secured Party hereunder; or (vi) the failure by Debtor to perform or
observe any of the provisions hereof, except expenses resulting from Secured
Party’s individual gross negligence or willful misconduct.

 

Section 4.6.                                   Non-Judicial Remedies.  In granting
to Secured Party the power to enforce its rights hereunder without prior
judicial process or judicial hearing, Debtor expressly waives, renounces and
knowingly relinquishes any legal right which might otherwise require Secured
Party to enforce its rights by judicial process.  In so providing for non-judicial remedies,
Debtor recognizes and concedes that such remedies are consistent with the usage
of trade, are responsive to commercial necessity, and are the result of a
bargain at arm’s length.  Nothing herein
is intended, however, to prevent Secured Party from resorting to judicial
process at its option.

 

19

 

Section 4.7.                                   Other Recourse.  Debtor waives
any right to require Secured Party or any Lender to proceed against any other
Person, to exhaust any Collateral or other security for the Secured
Obligations, to have any Other Liable Party joined with Debtor in any suit
arising out of the Secured Obligations or this Agreement, or to pursue any
other remedy in Secured Party’s power. 
Debtor further waives any and all notice of acceptance of this Agreement
and of the creation, modification, rearrangement, renewal or extension for any
period of any of the Secured Obligations of any Other Liable Party from time to
time.  Debtor further waives any defense
arising by reason of any disability or other defense of any Other Liable Party
or by reason of the cessation from any cause whatsoever of the liability of any
Other Liable Party.  This Agreement shall
continue irrespective of the fact that the liability of any Other Liable Party
may have ceased and irrespective of the validity or enforceability of any other
Obligation Document to which Debtor or any Other Liable Party may be a party,
and notwithstanding any death, incapacity, reorganization, or bankruptcy of any
Other Liable Party or any other event or proceeding affecting any Other Liable
Party.  Until all of the Secured
Obligations shall have been paid in full, Debtor shall have no right to
subrogation and Debtor waives the right to enforce any remedy which Secured Party
or any Lender has or may hereafter have against any Other Liable Party, and
waives any benefit of and any right to participate in any other security
whatsoever now or hereafter held by Secured Party.  Debtor authorizes Secured Party and each
Lender, without notice or demand, without any reservation of rights against
Debtor, and without in any way affecting Debtor’s liability hereunder or on the
Secured Obligations, from time to time to (a) take or hold any other
property of any type from any other Person as security for the Secured
Obligations, and exchange, enforce, waive and release any or all of such other
property, (b) apply the Collateral or such other property and direct the
order or manner of sale thereof as Secured Party may in its discretion determine,
(c) renew, extend for any period, accelerate, modify, compromise, settle
or release any of the obligations of any Other Liable Party in respect to any
or all of the Secured Obligations or other security for the Secured
Obligations, (d) waive, enforce, modify, amend or supplement any of the
provisions of any Obligation Document with any Person other than Debtor, and (e) release
or substitute any Other Liable Party.

 

Section 4.8.                                   Limitation on Duty of Secured Party in Respect of
Collateral.  Beyond the exercise of reasonable care in the
custody thereof, Secured Party shall have no duty as to any Collateral in its
possession or control or in the possession or control of any agent or bailee or
as to the preservation of rights against prior parties or any other rights
pertaining thereto.  Secured Party shall
be deemed to have exercised reasonable care in the custody of the Collateral in
its possession if the Collateral is accorded treatment substantially equal to
that which it accords its own property, and shall not be liable or responsible
for any loss or damage to any of the Collateral, or for any diminution in the
value thereof, by reason of the act or omission of any warehouseman, carrier,
forwarding agency, consignee or other agent or bailee selected by Secured Party
in good faith.

 

Section 4.9.                                   Appointment of Collateral Agents. 
At any time or times, in order to comply with any legal requirement in
any jurisdiction, Secured Party may appoint any bank or trust company or one or
more other Persons, either to act as co-agent or co-agents, jointly with
Secured Party, or to act as separate agent or agents on behalf of the Lenders,
with such power 

 

20

 

and authority as may be necessary for the effectual operation of the
provisions hereof and may be specified in the instrument of appointment.  In so doing Secured Party may, in the name
and on behalf of Debtor, give to such co-agent or separate agent indemnities
and other protections similar to those provided in Section 4.5.

 

ARTICLE V. — Miscellaneous

 

Section 5.1.                                   Notices.  Any notice or
communication required or permitted hereunder shall be given as provided in the
Credit Agreement.

 

Section 5.2.                                   Amendments.  No amendment
of any provision of this Agreement shall be effective unless it is in writing
and signed by Debtor and Secured Party, and no waiver of any provision of this
Agreement, and no consent to any departure by Debtor therefrom, shall be
effective unless it is in writing and signed by Secured Party, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given and to the extent specified in such
writing.  In addition, all such
amendments and waivers shall be effective only if given with the necessary
approvals of Lenders as required in the Credit Agreement.

 

Section 5.3.                                   Preservation of Rights.  No failure on
the part of Secured Party or any Lender to exercise, and no delay in
exercising, any right hereunder or under any other Obligation Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of
any other right.  Neither the execution
nor the delivery of this Agreement shall in any manner impair or affect any
other security for the Secured Obligations. 
The rights and remedies of Secured Party provided herein and in the
other Obligation Documents are cumulative and are in addition to, and not exclusive
of, any rights or remedies provided by law or otherwise.  The rights of Secured Party under any
Obligation Document against any party thereto are not conditional or contingent
on any attempt by Secured Party to exercise any of its rights under any other
Obligation Document against such party or against any other Person.

 

Section 5.4.                                   Unenforceability.  Any provision
of this Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or invalidity without invalidating the remaining portions hereof or
thereof or affecting the validity or enforceability of such provision in any
other jurisdiction.

 

Section 5.5.                                   Survival of Agreements.  All
representations and warranties of Debtor herein, and all covenants and
agreements herein shall survive the execution and delivery of this Agreement,
the execution and delivery of any other Obligation Documents and the creation
of the Secured Obligations.

 

Section 5.6.                                   Other Liable Parties.  Neither this
Agreement nor the exercise by Secured Party or the failure of Secured Party to
exercise any right, power or remedy conferred herein or by law shall be
construed as relieving any Other Liable Party from liability on the Secured
Obligations or any deficiency thereon.

 

21

 

Section 5.7.                                   Binding Effect and Assignment. 
This Agreement creates a continuing security interest in the Collateral
and (a) shall be binding on Debtor and its successors and permitted
assigns and (b) shall inure, together with all rights and remedies of
Secured Party hereunder, to the benefit of Secured Party and Lenders and their
respective successors, transferees and assigns. 
Without limiting the generality of the foregoing, Secured Party and any
Lender may (except as otherwise provided in the Credit Agreement) pledge,
assign or otherwise transfer any or all of their respective rights under any or
all of the Obligation Documents to any other Person, and such other Person
shall thereupon become vested with all of the benefits in respect thereof
granted herein or otherwise.  None of the
rights or duties of Debtor hereunder may be assigned or otherwise transferred
without the prior written consent of Secured Party.

 

Section 5.8.                                   Termination.  It is
contemplated by the parties hereto that there may be times when no Secured
Obligations are outstanding, but notwithstanding such occurrences, this
Agreement shall remain valid and shall be in full force and effect as to
subsequent outstanding Secured Obligations. 
Upon the satisfaction in full of the Secured Obligations and the
termination or expiration of the Credit Agreement and any other commitment of
Lenders to extend credit to Debtor, then upon written request for the
termination hereof delivered by Debtor to Secured Party this Agreement and the
security interest created hereby shall terminate and all rights to the
Collateral shall revert to Debtor. 
Secured Party will thereafter, upon Debtor’s request and at Debtor’s
expense, (a) return to Debtor such of the Collateral in Secured Party’s
possession as shall not have been sold or otherwise disposed of or applied
pursuant to the terms hereof, and (b) execute and deliver to Debtor such
documents as Debtor shall reasonably request to evidence such termination.

 

Section 5.9.                                   Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE, EXCEPT AS REQUIRED BY MANDATORY
PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE PERFECTION AND THE EFFECT
OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST CREATED HEREBY
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL, ARE GOVERNED BY THE LAWS OF
A JURISDICTION OTHER THAN THE STATE OF NEW YORK.

 

Section 5.10.                             Final Agreement.  THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES HERETO.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES HERETO.

 

22

 

Section 5.11.                             Counterparts; Fax.  This
Agreement may be separately executed in any number of counterparts, all of
which when so executed shall be deemed to constitute one and the same
Agreement.  This Agreement may be validly
executed and delivered by facsimile or other electronic transmission.

 

Section 5.12.                             “Loan Document”.  This
Agreement is a “Loan Document”, as defined in the Credit Agreement, and, except
as expressly provided herein to the contrary, this Agreement is subject to all
provisions of the Credit Agreement governing such Loan Documents.

 

[Remainder of
page intentionally left blank; signature page follows]

 

23

 

IN WITNESS WHEREOF, Debtor has executed and delivered
this Agreement as of the date first above written.

 

 

	
  BORROWER:

  	
  RESACA EXPLOITATION, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Chris Work

  
	
   

  	
   

  	
  Chris Work, as Vice President and

  
	
   

  	
   

  	
  Chief
  Financial Officer

  

 

 

Signature Page to 

Amended and Restated Security Agreement

 

 

Acknowledged and Agreed to as

of the date hereof by:

 

	
  COLLATERAL
  AGENT:

  	
  CIT CAPITAL USA
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David M. Bornstein

  
	
   

  	
   

  	
  David M. Bornstein, as Vice President

  

 

 

Signature Page to

Amended and Restated Security Agreement

 

 

Schedule 3.1(a)

 

NAME,
PLACE OF BUSINESS AND FORMATION

 

Prior to July 10, 2008,
the Borrower was known as Resaca Exploitation, L.P., a Delaware limited
partnership with its principal place of business and chief executive office at
1331 Lamar, Suite 1450, Houston, Texas 77010.

 

 

Schedule 3.3(g)

 

DESCRIPTION
OF PLEDGED INVESTMENT PROPERTY

 

Securities pledged:

 

	
  Owner

  	
   

  	
  Issuer

  	
   

  	
  Percentage

  Owned

  	
   

  	
  Percentage

  Pledged

  	
   

  	
  Class of

  Stock or other

  Equity Interest

  	
   

  	
  No. of

  Shares

  	
   

  	
  Certificate

  No.

  	
   

  
	
  Resaca
  Exploitation, Inc.

  	
   

  	
  Resaca
  Operating Company

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  	
  Common

  	
   

  	
  1000

  	
   

  	
  1

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