EXHIBIT 10.39
SECURITY AGREEMENT
BETWEEN
HOWELL CRUDE OIL COMPANY
(DEBTOR)
AND
BANK ONE, TEXAS, NATIONAL ASSOCIATION
(SECURED PARTY)
December 23, 1994
LETTER OF CREDIT FACILITY TO HOWELL CRUDE OIL COMPANY
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND INTERPRETATION 1
1.1 Terms Defined Above 1
1.2 Terms Defined in Credit Agreement 1
1.3 Additional Defined Terms 1
1.4 Undefined Financial Accounting Terms 3
1.5 References. 4
1.6 Articles and Sections 4
1.7 Number and Gender 4
ARTICLE II GRANT OF SECURITY INTEREST 4
ARTICLE III REPRESENTATIONS AND WARRANTIES 5
3.1 Validity, Perfection and Priority 5
3.2 No Liens; Other Financing Statements 5
3.3 Location of Debtor and Collateral 5
3.4 Accounts 6
3.5 Tradenames; Prior Names 6
3.6 Inventory not Covered by Documents 6
ARTICLE IV COVENANTS 6
4.1 Further Assurances 6
4.2 Change of Chief Executive Office 7
4.3 Change of Name or Corporate Structure 7
4.4 Maintain Records and Accounts 8
4.5 Right of Inspection 8
4.6 Possession of Collateral 8
4.7 Financing Statement Filings; Notifications 8
ARTICLE V ACCOUNTS 9
5.1 Debtor Remains Liable under Accounts 9
5.2 Collections on Accounts 9
ARTICLE VI POWER OF ATTORNEY 9
6.1 Appointment as Attorney-in-Fact 9
6.2 No Duty on the Part of Secured Party 11
ARTICLE VII REMEDIES; RIGHTS UPON DEFAULT 11
7.1 Rights and Remedies Generally 11
7.2 Proceeds 12
7.3 Collection of Accounts 12
7.4 Disposition of Collateral 12
7.5 Debtor's Accounts 13
7.6 Possession of Collateral 13
7.7 Disposition of the Collateral 13
7.8 Recourse 14
7.9 Expenses; Attorneys' Fees 15
7.10 Application of Proceeds 15
7.11 Limitation on Duties Regarding Preservation
of Collateral 15
7.12 Waiver of Claims 15
7.13 Discontinuance of Proceedings 16
ARTICLE VIII INDEMNITY 16
8.1 INDEMNITY 16
8.2 Indemnity Obligations Secured by Collateral;
Survival 17
ARTICLE IX MISCELLANEOUS 18
9.1 No Waiver; Remedies Cumulative 18
9.2 Termination; Release 18
9.3 Counterparts 18
9.4 Marshalling 18
9.5 Severability 18
9.6 Financing Statement Filing 19
9.7 Notices and Other Communications 19
9.8 Parties in Interest 19
9.9 Amendments 19
9.10 ENTIRE AGREEMENT 19
9.11 GOVERNING LAW 19
9.12 JURISDICTION AND VENUE 19
9.13 WAIVER OF RIGHTS TO JURY TRIAL 20
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement"), dated as of December 23,
1994, is between HOWELL CRUDE OIL COMPANY, a Delaware corporation (the
"Debtor"), and BANK ONE, TEXAS, NATIONAL ASSOCIATION, a national banking
association (the "Secured Party").
W I T N E S S E T H:
WHEREAS, pursuant to the terms and conditions of the Credit Agreement
dated of even date herewith, by and between the Debtor and the Secured Party (as
amended, restated, or supplemented from time to time, the "Credit Agreement"),
the Secured party has agreed to issue Letters of Credit for the account of the
Debtor; and
WHEREAS, pursuant to the terms of the Credit Agreement and as an
inducement to the Secured Party to issue letters of credit for the account of
the Debtor pursuant to the Credit Agreement, the Debtor has agreed to execute
this Agreement in favor of the Secured Party;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Debtor hereby agrees with the Secured Party as follows:
DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above. As used herein, each of the terms "Agreement,"
"Credit Agreement," "Debtor," and "Secured Party" shall have the meaning
assigned to such term hereinabove.
1.2 Terms Defined in Credit Agreement. Each capitalized term used but not
defined herein shall have the meaning assigned to such term in the Credit
Agreement.
1.3 Additional Defined Terms. As used herein, each of the following terms
shall have the following meanings:
"Accounts" shall mean all accounts receivable, book debts, notes, drafts,
instruments, documents, acceptances, and other forms of obligations now owned or
hereafter received or acquired by or belonging or owing to the Debtor
(including, without limitation, under any trade names, styles, or divisions
thereto), whether arising from the sale or lease of goods or the rendition of
services or any other transaction (including, without limitation, any such
obligation which might be characterized as an account, general intangible, other
than contract rights under contracts containing prohibitions against assignment
of or the granting of a security interest in the rights of a party thereunder,
or chattel paper under the Uniform Commercial Code in effect in any
jurisdiction), and all rights of the Debtor in, to, and under all purchase
orders now owned or hereafter received or acquired by it for goods or services,
and all rights of the Debtor to any goods the sale or lease of which gave rise
to any of the foregoing (including, without limitation, returned or repossessed
goods and rights of unpaid sellers), and all moneys due or to become due to the
Debtor under all contracts for the sale or lease of goods or the performance of
services (whether or not earned by performance) or in connection with any other
transaction, now in existence or hereafter arising, including, without
limitation, all collateral security and guarantees of any kind given by any
Person with respect to any of the foregoing.
"Account Debtor" shall mean each Person obligated on an Account, Chattel Paper,
or General Intangible.
"Account Records" shall mean (a) all original copies of all documents,
instruments, or other writings evidencing the Accounts, (b) all books,
correspondence, credit or other files, records, ledger sheets or cards,
invoices, and other papers relating to the Accounts, including, without
limitation, all tapes, cards, computer tapes, computer discs, computer runs,
record keeping systems, and other papers and documents relating to the Accounts,
whether in the possession or under the control of the Debtor or any computer
bureau or agent from time to time acting for or on behalf of the Debtor or
otherwise, (c) all evidences of the filing of financing statements and the
registration of other instruments in connection therewith and amendments,
supplements, or other modifications thereto, notices to other creditors or
secured parties, and certificates, acknowledgements, or other writings,
including, without limitation, lien search reports, from filing or other
registration offices, (d) all credit information, reports, and memoranda
relating thereto, and (e) all other written or non-written forms of information
related in any way to the foregoing or any Account.
"Chattel Paper" shall mean all chattel paper (as such term is defined in Section
9-105(a)(2) of the UCC) of the Debtor.
"Collateral" shall have the meaning assigned to it in Article II.
"General Intangibles" shall mean all general intangibles (as such term is
defined in Section 9-106 of the UCC) of the Debtor, including, without
limitation, rights to the payment of money (other than Accounts), net profit
interests, contracts, licenses, and franchises (excluding licenses and
franchises which prohibit the assignment or grant of a security interest by the
Debtor), federal income tax refunds, trade names, distributions on certificated
securities (as defined in 8-102(a)(1) of the UCC) and uncertificated securities
(as defined in 8-102(a)(2) of the UCC), computer programs and other computer
software, inventions, designs, trade secrets, goodwill, proprietary rights,
customer lists, supplier contracts, sale orders, correspondence, advertising
materials, payments due in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of any property, reversionary interests in
pension and profit-sharing plans and reversionary, beneficial and residual
interests in trusts, credits with and other claims against any Person, together
with any collateral for any of the foregoing and the rights under any security
agreement granting a security interest in such collateral.
"Indemnitees" shall mean the Secured Party and its shareholders, officers,
directors, employees, agents, attorneys-in-fact, and affiliates.
"Inventory" shall mean all inventory (as such term is defined in 9-109(4) of
the UCC) of the Debtor, including, without limitation, all goods (whether such
goods are in the possession of the Debtor or of a bailee or other Person for
sale, lease, storage, transit, processing, use or otherwise and whether
consisting of whole goods, spare parts, components, supplies, materials or
consigned or returned or repossessed goods), including, without limitation, all
such goods which are held for sale or lease or are to be furnished (or which
have been furnished) under any contract of service or which are raw materials or
work in progress or materials used or consumed in the business of the Debtor.
"Proceeds" shall mean proceeds (as such term is defined in Section 9-306(a) of
the UCC).
"Secured Obligations" shall mean the Obligations.
"UCC" shall mean the Uniform Commercial Code as in effect from time to time in
the State of Texas.
1.4 Undefined Financial Accounting Terms. Undefined financial accounting terms
used in this Agreement shall have the meanings assigned to such terms according
to GAAP.
1.5 References. The words "hereby," "herein," "hereinabove," "hereinafter,"
"hereinbelow," "hereof," "hereunder," and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular Article, Section, or provision of this Agreement. References in this
Agreement to Articles, Sections, or Exhibits are to such Articles, Sections, or
Exhibits of this Agreement unless otherwise specified.
1.6 Articles and Sections. This Agreement, for convenience only, has been
divided into Articles and Sections; and it is understood that the rights and
other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
1.7 Number and Gender. Whenever the context requires, reference herein made to
the single number shall be understood to include the plural; and likewise, the
plural shall be understood to include the singular. Words denoting sex shall be
construed to include the masculine, feminine and neuter, when such construction
is appropriate; and specific enumeration shall not exclude the general but shall
be construed as cumulative. Definitions of terms defined in the singular or
plural shall be equally applicable to the plural or singular, as the case may
be, unless otherwise indicated.
ARTICLE II
GRANT OF SECURITY INTEREST
As security for the prompt and complete payment and performance in full of all
Secured Obligations, the Debtor hereby assigns and transfers for the purpose of
security and pledges to the Secured Party and grants to the Secured Party a
security interest in and continuing lien on all right, title, and interest of
the Debtor in, to, and under the following, in each case, whether now owned or
existing or hereafter acquired or arising, and wherever located (all of which is
herein collectively called the "Collateral"):
(a) all Accounts;
(b) all Account Records;
(c) all Chattel Paper;
(d) all General Intangibles;
(e) all Inventory; and
(f) all accessions and additions to any or all of the foregoing, all
substitutions and replacements for any or all of the foregoing, and all
Proceeds and products of any or all of the foregoing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Debtor hereby represents and warrants to the Secured Party, which
representations and warranties shall survive execution and delivery of this
Agreement, as follows:
3.1 Validity, Perfection and Priority. The security interests in the
Collateral granted to the Secured Party hereunder constitute valid and
continuing security interests in the Collateral. Upon the filing of financing
statements, naming the Debtor as "debtor" and the Secured Party as "secured
party" and describing the Collateral, in the filing offices set forth on Exhibit
A, the security interests granted to the Secured Party hereunder will constitute
valid first-priority perfected security interests in all Collateral with respect
to which a security interest can be perfected by the filing of a financing
statement, subject only to Permitted Liens.
3.2 No Liens; Other Financing Statements.
(a) Except for the Lien granted to the Secured Party hereunder and Permitted
Liens, the Debtor owns each item of the Collateral free and clear of any and all
Liens, rights, or claims of all other Persons, and the Debtor shall defend the
Collateral against all claims and demands of all Persons at any time claiming
the same or any interest therein adverse to the Secured Party.
(b) No financing statement or other evidence of Lien covering or purporting to
cover any of the Collateral is on file in any public office other than (i)
financing statements in favor of the Secured Party, (ii) financing statements
for which proper termination statements have been delivered to the Secured Party
for filing, and (iii) financing statements filed in connection with Permitted
Liens.
3.3 Location of Debtor and Collateral. The chief executive office of the
Debtor is located at 1111 Fannin, Suite 1500, Houston, Texas 77002. The
primary copies of the Account Records are located at, and all Accounts and
General Intangibles are maintained at, and controlled and directed (including,
without limitation, for general accounting purposes) from, such chief executive
office. The Inventory is located in the states listed on Exhibit A.
3.4 Accounts.
(a) Each Account (i) is and will be, in all material respects, the genuine,
legal, valid, and binding obligation of the Account Debtor in respect thereof,
representing an unsatisfied obligation of such Account Debtor, (ii) is and will
be, in all material respects, enforceable in accordance with its terms, (iii) is
not and will not be subject to any setoffs, defenses, taxes, counterclaims
(except (A) with respect to refunds, returns, and allowances in the ordinary
course of business, and (B) to the extent that such Account may not yet have
been earned by performance), and (iv) is and will be, in all material respects,
in compliance with all applicable laws, whether federal, state, local, or
foreign.
(b) No Accounts which are evidenced by Chattel Paper require the consent of the
Account Debtor in respect thereof in connection with their assignment hereunder.
3.5 Tradenames; Prior Names. The Debtor has not conducted business under any
name other than its current name during the last five years.
3.6 Inventory not Covered by Documents. None of the Inventory, and at the time
the security interest in favor of the Secured Party attaches hereunder, none of
the Inventory hereafter acquired will be, covered by any document as defined in
the UCC (i.e., a document of title) unless such document is prepared, endorsed,
and delivered to the Secured Party in such manner so as to permit the Secured
Party, at all times while the Inventory is covered by such document, to maintain
a perfected security interest in such document and the Inventory covered
thereby. The Debtor will designate the Secured Party's security interest on all
documents and will mark its books and records to indicate such security
interest.
ARTICLE IV
COVENANTS
The Debtor covenants and agrees with the Secured Party that from and after the
date of this Agreement:
4.1 Further Assurances. At any time and from time to time, upon the request of
the Secured Party, and at the sole expense of the Debtor, the Debtor will
promptly and duly execute and deliver any and all such further instruments,
endorsements, powers of attorney, and other documents, make such filings, give
such notices, and take such further action as the Secured Party may reasonably
deem desirable in obtaining the full benefits of this Agreement and the rights,
remedies, and powers herein granted, including, without limitation, the
following:
(a) the filing of financing statements, in form acceptable to the Secured Party
under the Uniform Commercial Code in effect in any jurisdiction with respect to
the liens and security interests granted hereby;
(b) the performance of all searches of public records deemed necessary by the
Secured Party to establish and determine the priority of the security interests
of the Secured Party or to determine the presence or priority of other secured
parties; and
(c) the furnishing to the Secured Party from time to time of reports and
schedules in connection with the Collateral as required pursuant to the Credit
Agreement, all in reasonable detail and in form reasonably satisfactory to the
Secured Party.
4.2 Change of Chief Executive Office. The Debtor will not move its chief
executive office except to such new location as the Debtor may establish in
accordance with the last sentence of this Section. The originals of all Account
Records and General Intangibles will be kept at such chief executive office or
at the locations referred to in Section 3.3, or at such new locations as the
Debtor may establish in accordance with the last sentence of this Section. All
Accounts, Account Records, and General Intangibles of the Debtor will be
maintained at and controlled and directed (including, without limitation, for
general accounting purposes) from the locations referred to in Section 3.3 or
such new locations as the Debtor may establish in accordance with the last
sentence of this Section. With respect to any new location, promptly upon the
request of the Secured Party, the Debtor shall take all such action as the
Secured Party may request to maintain the security interest of the Secured Party
in the Collateral granted hereby at all times fully perfected with the same or
better priority and in full force and effect. The Debtor shall not establish a
new location for its chief executive office or such activities (or move any such
activities from the locations referred to in Section 3.3) until it shall have
given to the Secured Party not less than ten days' prior written notice of its
intention to do so, clearly describing such new location and providing such
other information in connection therewith as the Secured Party may reasonably
request.
4.3 Change of Name or Corporate Structure. The Debtor shall not change its
name or corporate structure or conduct business under any name other than its
current name without giving notice thereof to the Secured Party within ten days
thereafter, clearly describing such new name, or corporate structure or such new
tradename and providing such other information in connection therewith as the
Secured Party may reasonably request. With respect to such new name, corporate
structure, or tradename, promptly upon the request of the Secured Party, the
Debtor shall take all such action as the Secured Party may reasonably request to
maintain the security interest of the Secured Party in the Collateral granted
hereby at all times fully perfected with the same or better priority and in full
force and effect.
4.4 Maintain Records and Accounts. The Debtor will keep and maintain, or cause
to be kept and maintained, at its own cost and expense satisfactory and complete
records of the Collateral, including, but not limited to, the originals of all
documentation with respect to all Accounts and General Intangibles and records
of all payments received and all credits granted on the Accounts, all
merchandise returned, and all other dealings therewith.
4.5 Right of Inspection. The Secured Party shall upon reasonable notice to the
Debtor have full and free access during normal business hours of the Debtor to
all the books, correspondence, and records of the Debtor; and the Secured Party
and its representatives may examine the same, take extracts therefrom, and make
photocopies thereof.
4.6 Possession of Collateral. The Secured Party shall be deemed to have
possession of any of the Collateral in transit to it or set apart for it.
Otherwise the Collateral shall remain in the Debtor's constructive possession
and control at all times, at the Debtor's risk of loss, and shall (except for
sales permitted by Section 6.4 of the Credit Agreement) be kept at the locations
represented in Section 3.3.
4.7 Financing Statement Filings; Notifications. The Debtor recognizes that
financing statements pertaining to the Collateral have been or will be filed
with the offices of the Secretary of State for the States listed in Exhibit A
hereto. The Debtor will immediately notify the Secured Party of any condition
or event that may change the proper location for the filing of any financing
statement or other public notice or recording for the purpose of perfecting a
security interest in the Collateral. Without limiting the generality of the
foregoing, the Debtor will (a) notify the Secured Party within a reasonable
period of time in advance of any change to a jurisdiction other than as
represented in Section 3.3 hereof, (i) in the location of the Debtor's chief
place of business, (ii) in the location of the Inventory, (iii) in the location
of the office where the Debtor keeps its records concerning the Accounts and the
General Intangibles and the original of all the Accounts Records, or (iv) in the
"location" of the Debtor within the meaning of Section 9-103(c) of the UCC, and
(b) immediately notify Secured Party of any change in the Debtor's name. In any
notice furnished pursuant to this Section, the Debtor will expressly state that
the notice is required by this Agreement and contains facts that will or may
require additional filings of financing statements or other notices for the
purpose of continuing perfection of the Secured Party's security interest in the
Collateral.
ARTICLE V
ACCOUNTS
5.1 Debtor Remains Liable under Accounts. Anything herein to the contrary
notwithstanding (including, without limitation, the grant of any rights to the
Secured Party), the Debtor shall remain liable under each of the Accounts to
observe and perform all the conditions and obligations to be observed and
performed by it thereunder, all in accordance with the terms of any agreement
giving rise to each such Account. The Secured Party shall not have any
obligation or liability under any Account (or any agreement giving rise thereto)
by reason of or arising out of this Agreement or the receipt by the Secured
Party of any payment relating to such Account pursuant hereto, nor shall the
Secured Party be obligated in any manner to perform any of the obligations of
the Debtor under or pursuant to any Account (or any agreement giving rise
thereto), to make any payment, to make any inquiry as to the nature or the
sufficiency of any payment received by it or as to the sufficiency of any
performance by any party under any Account (or any agreement giving rise
thereto), to present or file any claim, to take any action to enforce any
performance, or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
5.2 Collections on Accounts. Prior to the occurrence of an Event of Default,
the Secured Party hereby authorizes the Debtor to collect the Accounts. At any
time following and during the continuance of any Event of Default, the Secured
Party may curtail or terminate said authority at any time and itself, or by its
agents, collect all Accounts, and any payments of Accounts collected by the
Debtor shall be held by the Debtor in trust for the Secured Party, segregated
from other funds of the Debtor. All Proceeds, while held by the Secured Party
(or by the Debtor in trust for the Secured Party) shall continue to be
Collateral securing all of the Secured Obligations and shall not constitute
payment thereof until applied as hereinafter provided.
ARTICLE VI
POWER OF ATTORNEY
6.1 Appointment as Attorney-in-Fact. The Debtor hereby irrevocably constitutes
and appoints the Secured Party and any officer or agent thereof, with full power
of substitution, as its true and lawful attorney-in-fact, with full irrevocable
power and authority in the place and stead of the Debtor and in the name of the
Debtor or in its own name, from time to time in the discretion of the Secured
Party, for the purpose of carrying out the terms of this Agreement, to take any
and all appropriate action and to execute any and all documents and instruments
which may be necessary or desirable to accomplish the purposes of this
Agreement, and, without limiting the generality of the foregoing, the Debtor
hereby gives the Secured Party the power and right, on behalf of the Debtor,
without notice to or assent by the Debtor, to do the following:
(a) in the case of any Account, at any time when the authority of the Debtor to
collect the Accounts has been curtailed or terminated pursuant hereto, or in the
case of any other Collateral, at any time when any Event of Default shall have
occurred and be continuing, in the name of the Debtor or its own name, or
otherwise, to take possession of and indorse and collect any checks, drafts,
notes, acceptances, or other instruments for the payment of moneys due under, or
with respect to, any Collateral; in the name of the Debtor or otherwise to
direct any party liable for any payment under any of the Collateral to make
payment of any and all moneys due or to become due thereunder directly to the
Secured Party or as the Secured Party shall direct; to ask or demand for,
collect, receive payment of, and receipt for, any and all moneys, claims, and
other amounts due or to become due at any time in respect of or arising out of
any Collateral;
(b) at any time when an Event of Default shall have occurred and be continuing,
to prepare, sign, and file financing statements and amendments thereto in the
name of the Debtor;
(c) at any time when an Event of Default shall have occurred and be continuing,
to take or cause to be taken all actions necessary to perform or comply or cause
performance or compliance with the terms of this Agreement, including, without
limitation, actions to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, to effect any repairs or obtain any insurance
called for by the terms of this Agreement, and to pay all or any part of the
premiums therefor and the costs thereof;
(d) upon the occurrence and during the continuance of any Event of Default, (i)
to sign and indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices, and other documents in connection with any of the
Collateral, (ii) to commence and prosecute any suits, actions, or proceedings at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any portion thereof and to enforce any other right in respect of
any Collateral, (iii) to defend any suit, action, or proceeding brought against
the Debtor with respect to any Collateral, (iv) to settle, compromise, or adjust
any suit, action, or proceeding described in the preceding clause and, in
connection therewith, to give such discharges or releases as the Secured Party
may deem appropriate, and (v) generally, to sell or transfer and make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though the Secured Party were the absolute owner thereof for
all purposes, and to do, at the option of the Secured Party and the expense of
the Debtor, at any time, or from time to time, all acts and things which the
Secured Party deems necessary to protect, preserve, or realize upon the
Collateral and the Liens of the Secured Party thereon and to effect the intent
of this Agreement, all as fully and effectively as the Debtor might do; and
(e) at any time when an Event of Default shall have occurred and be continuing,
to execute, in connection with any foreclosure, any endorsements, assignments,
or other instruments of conveyance or transfer with respect to the Collateral.
The Debtor hereby ratifies all that said attorneys shall lawfully do or cause to
be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable so long as any Obligation remains outstanding
or any Commitment exists. The Debtor hereby acknowledges and agrees that in
acting pursuant to this power-of-attorney the Secured Party shall be acting in
its own interest and shall have no fiduciary duties to the Debtor, and the
Debtor hereby waives any claims to the rights of a beneficiary of a fiduciary
relationship hereunder.
6.2 No Duty on the Part of Secured Party. The powers conferred on the Secured
Party hereunder are solely to protect the interests of the Secured Party in the
Collateral and shall not impose any duty upon the Secured Party to exercise any
such powers. The Secured Party shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers, and, except for
its own gross negligence, neither it nor any of its officers, directors,
employees, or agents shall be responsible to the Debtor for any act or failure
to act hereunder.
ARTICLE VII
REMEDIES; RIGHTS UPON DEFAULT
7.1 Rights and Remedies Generally. If an Event of Default shall occur and be
continuing, then and in every such case, the Secured Party shall have all the
rights of a secured party under the UCC, all rights now or hereafter existing
under all other applicable laws, and, subject to any mandatory requirements of
applicable law then in effect, all rights set forth in this Agreement and the
other Loan Documents. No enumeration of rights in this Section or elsewhere in
this Agreement or in any other Loan Document or other agreement shall be deemed
to in any way limit the rights of the Secured Party as described in this
Section.
7.2 Proceeds. If an Event of Default shall occur and be continuing, in
addition to the rights of the Secured Party specified with respect to the
payment of Accounts, (a) all Proceeds received by the Debtor consisting of cash,
checks, and other near-cash items shall be held by the Debtor in trust for the
Secured Party, segregated from other funds of the Debtor, and shall forthwith
upon receipt by the Debtor, be turned over to the Secured Party, in the same
form received by the Debtor (appropriately indorsed or assigned by the Debtor to
the order of the Secured Party or in such other manner as shall be satisfactory
to the Secured Party), and (b) any and all such Proceeds received by the Secured
Party (whether from the Debtor or otherwise), or any part thereof, shall be
applied by the Secured Party as provided in Section 7.10 hereof.
7.3 Collection of Accounts. If an Event of Default shall occur and be
continuing:
(a) the Secured Party may instruct the obligor or obligors on any obligation
owing or purporting to be owed to the Debtor constituting the Collateral
(including, without limitation, the Accounts) to make any payment required by
the terms of such obligation directly to the Secured Party;
(b) the Secured Party shall have the right from time to time to modify
(including, without limitation, to extend the time for payment or arrange for
payment in installments) or waive rights under any such obligation and to
compromise or settle counterclaims or setoffs with the obligor under any such
obligation; and
(c) any and all of such proceeds of such collections paid to the Secured Party,
or any part thereof, (after deduction of the Secured Party's expenses of
collection, including, without limitation, reasonable attorneys' fees and
disbursements), shall be applied by the Secured Party as provided in Section
7.10 hereof.
7.4 Disposition of Collateral. If an Event of Default shall occur and be
continuing:
(a) the Secured Party may direct the Debtor to sell, assign, or otherwise
liquidate or dispose of all or from time to time any portion of the Collateral,
and the Debtor shall do so, and the Secured Party may take possession of the
Proceeds of such Collateral. The Secured Party may direct the Debtor to direct
that all Proceeds of such Collateral be paid directly to the Secured Party or
may permit the Proceeds of such Collateral to be paid to the Debtor and all such
Proceeds consisting of cash, checks, or near-cash items shall be held by the
Debtor in trust for the Secured Party, segregated from other funds of the Debtor
in a separate deposit account containing only Proceeds and shall forthwith upon
receipt by the Debtor, be turned over to the Secured Party, in the same form
received by the Debtor (appropriately indorsed or assigned by the Debtor to the
order of the Secured Party or in such other manner as shall be satisfactory to
the Secured Party); and
(b) any and all such Proceeds received by the Secured Party (whether from the
Debtor or otherwise), shall be applied by the Secured Party as provided in
Section 7.10 hereof.
7.5 Debtor's Accounts. If an Event of Default shall occur and be continuing,
the Secured Party may liquidate any securities held in any accounts of the
Debtor and apply the proceeds thereof and any other amounts held in any accounts
of the Debtor as provided in Section 7.10 hereof.
7.6 Possession of Collateral. If an Event of Default shall occur and be
continuing, (a) the Secured Party may, personally or by agents or attorneys,
immediately retake possession of the Collateral (including the originals of all
or any Accounts and Account Records) or any part thereof, from the Debtor or any
other Person which then has possession of any part thereof with or without
notice or judicial process, and for that purpose may enter upon the Debtor's
premises where any of the Collateral is located and remove the same and may make
reasonable use in connection with such removal of any and all services,
supplies, aids, and other facilities of the Debtor, and (b) upon three days'
notice to the Debtor, the Debtor shall, at its own expense, assemble the
Collateral, including, without limitation, the originals of all Account Records
(or from time to time any portion thereof) and make it available to the Secured
Party by delivery to the Secured Party at any location designated by the Secured
Party which is reasonably convenient to both parties, whether at the premises of
the Debtor or the Secured Party or elsewhere. The Debtor shall, at its sole
expense, store and keep any Collateral so assembled at such place or places
pending further action by the Secured Party and while the Collateral shall be so
stored and kept, provide such guards and maintenance services as shall be
reasonably necessary to protect the same and to preserve and maintain the
Collateral in good condition. The Debtor's obligation to so assemble and
deliver the Collateral is of the essence of this Agreement and, accordingly,
upon application to a court of equity having jurisdiction, the Secured Party
shall be entitled to a decree requiring specific performance by the Debtor of
such obligation.
7.7 Disposition of the Collateral. If an Event of Default shall occur and be
continuing, the Secured Party may sell, assign, lease, give an option or options
to purchase, or otherwise dispose of the Collateral (or contract to do any of
the foregoing) under one or more contracts or as an entirety, and, to the extent
permitted by applicable law, without the necessity of gathering at the place of
sale the property to be sold, at public or private sale or sales, conducted by
any officer, nominee or agent of, or auctioneer or attorney for the Secured
Party at any location of any third party conducting or otherwise involved in
such sale or any office of the Secured Party or elsewhere and in general in such
manner, at such time or times and upon such terms and conditions and at such
price as may be commercially reasonable, for cash or on credit or for future
delivery without assumption of any credit risk. Any of the Collateral may be
sold, leased, assigned, or options or contracts entered to do so, or otherwise
disposed of, in the condition in which the same existed when taken by the
Secured Party or after any overhaul or repair which may be commercially
reasonable. Any such disposition which shall be a private sale or other private
proceeding shall be made upon not less than ten days' written notice to the
Debtor specifying the time after which such disposition is to be made and the
intended sale price or other consideration therefor. Any such disposition which
shall be a public sale shall be made upon not less than ten days' written notice
to the Debtor (which the Debtor agrees to be commercially reasonable) specifying
the time and place of such sale and, in the absence of applicable requirements
of law to the contrary, shall be by public auction (which may, at the option or
the Secured Party, be subject to reserve), after publication of commercially
reasonable notice of such auction. To the extent permitted by applicable law,
the Secured Party may bid for and become the purchaser of the Collateral or any
item thereof, offered for sale in accordance with this Section without
accountability to the Debtor (except to the extent of surplus money received) as
provided below. In the payment of the purchase price of the Collateral, the
purchaser shall be entitled to have credit on account of the purchase price
thereof of amounts owing to such purchaser on account of any of the Secured
Obligations and any such purchaser may deliver notes, claims for interest, or
claims for other payment with respect to such Secured Obligations in lieu of
cash up to the amount which would, upon distribution of the net proceeds of such
sale, be payable thereon. Such notes, if the amount payable hereunder shall be
less than the amount due thereon, shall be returned to the holder thereof after
being appropriately stamped to show partial payment. Notwithstanding the
foregoing, if the Collateral or any portion thereof is perishable or threatens
to decline speedily in value or is of a type customarily sold in a recognized
market only such notice as shall be reasonably practicable shall be required.
7.8 Recourse. The Debtor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient to
satisfy the Secured Obligations. The Debtor shall also be liable for all
reasonable expenses of the Secured Party incurred in connection with collecting
such deficiency, including, without limitation, the reasonable fees and
disbursements of any attorneys employed by the Secured Party to collect such
deficiency.
7.9 Expenses; Attorneys' Fees. The Debtor shall reimburse the Secured Party
for all its reasonable expenses in connection with the exercise of its rights
and remedies hereunder, including, without limitation, reasonable attorneys'
fees and legal expenses incurred by the Secured Party.
7.10 Application of Proceeds. The proceeds of any disposition of Collateral
shall be applied as follows:
(a) to the payment of any and all reasonable expenses and fees (including
attorneys' fees and disbursements) incurred by the Secured Party in connection
with the exercise of its rights and remedies hereunder, including, without
limitation, reasonable expenses and fees in connection with obtaining, taking
possession of, removing, holding, insuring, repairing, preparing for sale or
lease, storing and disposing of Collateral;
(b) to the satisfaction of the Secured Obligations in such order as the Secured
Party may elect; and
(c) after the indefeasible payment in full in cash of all Secured Obligations,
to the Debtor or to whomever may lawfully be entitled to receive the same or as
a court of competent jurisdiction may direct.
7.11 Limitation on Duties Regarding Preservation of Collateral. The Secured
Party's sole duty with respect to the custody, safekeeping, and physical
preservation of the Collateral in its possession, under Section 9.207 of the UCC
or otherwise, shall be to deal with it in the same manner as the Secured Party
deals with similar property for its own account. The Secured Party shall have
no obligation to take any steps to preserve rights against prior parties to any
Collateral. Except for matters constituting gross negligence, neither the
Secured Party nor any of its directors, officers, employees, or agents shall be
liable for failure to demand, collect, or realize upon all or any part of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of the Debtor or
otherwise.
7.12 Waiver of Claims. Except as otherwise provided in this Agreement, the
Debtor hereby waives, to the extent permitted by applicable law, notice of and
judicial hearing in connection with the Secured Party's taking possession or the
Secured Party's disposition of any of the Collateral in accordance herewith,
including, without limitation, any and all prior notice and hearing for any
prejudgment remedy or remedies and any such right which the Debtor would
otherwise have under the constitution or any statute of the United States or any
state, and the Debtor hereby further waives, to the extent permitted by law:
(a) all damages occasioned by such taking of possession except any damages
which are the direct result of the gross negligence of the Secured Party;
(b) all other requirements as to the time, place, and terms of sale or other
requirements with respect to the enforcement of the rights of the Secured Party
hereunder;
(c) demand of performance or other demand, notice of intent to demand or
accelerate, notice of acceleration, presentment, protest, advertisement, or
notice of any kind to or upon the Debtor or any other Person, except as may be
required by the Credit Agreement; and
(d) all rights of redemption, appraisement, valuation, diligence, stay,
extension, or moratorium now or hereafter in force under any applicable law in
order to stay or delay the enforcement of this Agreement, including the absolute
sale of the Collateral or any portion thereof, and the Debtor, for itself and
all who may claim under it, insofar as it or they now or hereafter lawfully may,
hereby waives the benefit of all such laws.
7.13 Discontinuance of Proceedings. In case the Secured Party shall have
instituted any proceeding to enforce any right, power, or remedy under this
Agreement by foreclosure, sale, entry, or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason, then and in every such case,
the Debtor and the Secured Party shall be returned to their former positions and
rights hereunder with respect to the Collateral subject to the security interest
created under this Agreement, and all rights, remedies, and powers of the
Secured Party shall continue as if no such proceeding had been instituted.
ARTICLE VII
INDEMNITY
8.1 INDEMNITY.
(a) THE DEBTOR AGREES TO INDEMNIFY, REIMBURSE, AND HOLD THE INDEMNITEES
HARMLESS FROM ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
CLAIMS, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS (INCLUDING
REASONABLE ATTORNEYS' FEES AND EXPENSES) (FOR THE PURPOSES OF THIS SECTION ALL
OF THE FOREGOING ARE COLLECTIVELY CALLED "EXPENSES") OF WHATSOEVER KIND OR
NATURE WHICH MAY BE IMPOSED ON, ASSERTED AGAINST, OR INCURRED BY ANY OF SUCH
INDEMNITEES IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR THE
DOCUMENTS EXECUTED IN CONNECTION HEREWITH OR IN ANY OTHER WAY CONNECTED WITH THE
ADMINISTRATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ENFORCEMENT OF ANY
OF THE TERMS OF OR THE PRESERVATION OF ANY RIGHTS HEREUNDER, INCLUDING, WITHOUT
LIMITATION, THOSE ARISING FROM THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF
ANY INDEMNITEE; PROVIDED THAT NO SUCH INDEMNITEE SHALL BE INDEMNIFIED PURSUANT
TO THIS SECTION FOR EXPENSES TO THE EXTENT ARISING FROM THE GROSS NEGLIGENCE OF
SUCH INDEMNITEE.
(b) The Debtor agrees that upon written notice by any such Indemnitee of any
assertion that could give rise to an Expense, the Debtor shall assume full
responsibility for the defense thereof. Without limiting the application of
part (a) of this Section, the Debtor agrees to pay or reimburse the Secured
Party on demand for any and all reasonable fees, costs, and expenses of whatever
kind or nature incurred in connection with the creation, preservation, or
protection of the Secured Party's Liens on, and security interests in, the
Collateral, including, without limitation, all reasonable fees and taxes in
connection with the recording or filing of instruments and documents in public
offices, payment, or discharge of any taxes or Liens or security interests upon
or in respect of the Collateral, premiums for insurance with respect to the
Collateral, all reasonable expenses incurred in the custody, preservation, use,
or operation of the Collateral when Collateral is in the Secured Party's
possession, and all other reasonable fees, costs, and expenses in connection
with protecting, maintaining, or preserving the Collateral and the Secured
Party's interest therein, whether through judicial proceedings or otherwise, or
in defending or prosecuting any actions, suits, or proceedings arising out of or
relating to the Collateral.
(c) Without limiting the application of parts (a) or (b) of this Section, the
Debtor agrees to pay, indemnify, and hold each Indemnitee harmless from and
against any Expenses which such Indemnitee may suffer, expend, or incur in
consequence of or growing out of any misrepresentation by the Debtor in this
Agreement or in any statement or writing contemplated by or made or delivered
pursuant to or in connection with this Agreement.
(d) If and to the extent that the obligations of the Debtor under this Section
are unenforceable for any reason, Debtor hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law.
8.2 Indemnity Obligations Secured by Collateral; Survival. Any amounts paid by
any Indemnitee as to which such Indemnitee has the right to reimbursement shall
constitute Secured Obligations secured by the Collateral. The indemnity
obligations of the Debtor contained in this Article VIII shall continue in full
force and effect notwithstanding the full payment and performance of the Secured
Obligations and the termination of this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 No Waiver; Remedies Cumulative. No failure or delay on the part of the
Secured Party in exercising any right, power, or privilege hereunder and no
course of dealing between the Debtor and the Secured Party shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power, or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power, or privilege. A waiver by the Secured Party
of any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Secured Party would otherwise have on any
future occasion. The rights and remedies herein expressly provided are
cumulative, may be exercised singly or concurrently and as often and in such
order as the Secured Party deems expedient, and are not exclusive of any rights
or remedies which the Secured Party would otherwise have whether by agreement or
now or hereafter existing under applicable law. No notice to or demand on the
Debtor in any case shall entitle the Debtor to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights of
the Secured Party to any other or further action in any circumstances without
notice or demand.
9.2 Termination; Release. When the Secured Obligations have been indefeasibly
paid and performed in full and the Commitment has terminated, this Agreement
shall terminate, and the Secured Party, at the request and sole expense of the
Debtor, will execute and deliver to the Debtor the proper instruments (including
Uniform Commercial Code termination statements) acknowledging the termination of
this Agreement, and will duly assign, transfer, and deliver to the Debtor,
without recourse, representation, or warranty of any kind whatsoever, such of
the Collateral as may be in possession of the Secured Party and has not
theretofore been disposed of, applied, or released.
9.3 Counterparts. This Agreement may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which when
so executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
9.4 Marshalling. The Secured Party shall not be under any obligation to
marshall any assets in favor of the Debtor or any other Person or against or in
payment of any or all of the Secured Obligations.
9.5 Severability. In case any provision in or obligation under this Agreement
or the Secured Obligations shall be invalid, illegal, or unenforceable in any
jurisdiction, the validity, legality, and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
9.6 Financing Statement Filing. A photocopy or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in lieu
of the original to the extent permitted by applicable law.
9.7 Notices and Other Communications. Except as to oral notices expressly
authorized herein, all notices, requests, and communications under this
Agreement shall be in writing (including by telecopy). Unless otherwise
expressly provided herein, any such notice, request, or communication shall be
deemed to have been duly given or made when provided in accordance with the
terms of the Credit Agreement.
9.8 Parties in Interest. This Agreement shall be binding upon and inure to the
benefit of the Debtor, the Secured Party, and their respective legal
representatives, successors, and assigns. No other Person shall have any right,
benefit, priority, or interest hereunder or as a result hereof or have standing
to require satisfaction of provisions hereof in accordance with their terms, and
any or all of such provisions may be freely waived in whole or in part by the
Secured Party at any time if the Secured Party in its sole discretion deems it
advisable to do so.
9.9 Amendments. Neither this Agreement nor any provision hereof may be
amended, supplemented, modified, discharged, or terminated orally, but only by
an instrument in writing signed by the party against whom enforcement of the
amendment, supplement, modification, discharge, or termination is sought.
9.10 ENTIRE AGREEMENT. THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT BETWEEN
THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL SUPERSEDE ANY
PRIOR AGREEMENTS, WHETHER WRITTEN OR ORAL, BETWEEN THE PARTIES HERETO RELATING
TO THE SUBJECT HEREOF. FURTHERMORE, IN THIS REGARD, THIS AGREEMENT AND THE
OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG
THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.
9.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAWS).
9.12 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO,
ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO OR FROM
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT TO WHICH THE DEBTOR IS A PARTY MAY BE
LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE SECURED PARTY, IN COURTS
HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. THE DEBTOR HEREBY SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS
COUNTY, TEXAS, AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE
THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY THE SECURED
PARTY IN ACCORDANCE WITH THIS SECTION.
9.13 WAIVER OF RIGHTS TO JURY TRIAL. THE DEBTOR AND THE SECURED PARTY HEREBY
KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVE
ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR
OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF ANY OF THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE SECURED PARTY IN THE
ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO. THE PROVISIONS OF THIS SECTION
ARE A MATERIAL INDUCEMENT FOR THE SECURED PARTY ENTERING INTO THE CREDIT
AGREEMENT.
IN WITNESS WHEREOF, the Debtor and the Secured Party have caused this
Agreement to be duly executed and delivered as of the date first above written.
DEBTOR:
HOWELL CRUDE OIL COMPANY
By: /s/ Mark J. Gorman
Printed Name: Mark J. Gorman
Title: President
SECURED PARTY:
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By: /s/ Stephen M. Smith
Stephen M. Smith
Vice President
EXHIBIT A
Section 3.1: FILING LOCATIONS
Secretaries of State of Florida, Louisiana, Mississippi, and
Texas
Section 3.3: LOCATIONS OF INVENTORY
Florida
Louisiana
Mississippi
Texas