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SECURITY AGREEMENT
(PLEDGE)
THIS SECURITY AGREEMENT (Pledge) is made as of January 16, 1997, by
James F. Farr, an individual, with his principal business at 2507 North
Frazier, P.O. Box 1863, Conroe, Texas 77305 ("Pledgor"); in favor of Dailey
Petroleum Services Corp., a Delaware corporation, with its principal business
at 2507 North Frazier, P.O. Box 1863, Conroe, Texas 77305 ("Secured Party").
RECITALS
A. On the date hereof, the Pledgor entered into a $250,000
Promissory Note (the "Promissory Note"), with the obligations thereunder to be
secured by a pledge of certain shares of stock owned by Pledgor.
B. Therefore, in view of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor and Secured Party agree as follows:
ARTICLE I
Definitions
Section 1.01 Terms Defined Above or in the Promissory Note. As
used in this Security Agreement, the terms defined above shall have the
meanings respectively assigned to them. Other capitalized terms which are
defined in the Promissory Note, but which are not defined herein shall have the
same meanings as defined in the Promissory Note.
Section 1.02 Certain Definitions. As used in this Security
Agreement, the following terms shall have the following meanings, unless the
context otherwise requires:
"Code" shall mean the Uniform Commercial Code as presently in effect
in the State of Texas. Unless otherwise indicated by the context herein, all
uncapitalized terms which are defined in the Code shall have their respective
meanings as used in Article 8 and 9 of the Code.
"Collateral" shall mean the following types or items of property:
(a) The securities described or referred to in Exhibit A attached
hereto and made a part hereof; and
(b) (i) shares of, all securities convertible or exchangeable
into, and all warrants, options or other rights to purchase shares of, stock of
Secured Party; (ii) all certificates or instruments representing such
additional shares, convertible or exchangeable securities, warrants, and other
rights and all proceeds, income and profits thereon, and all interest,
dividends and other payments, property and
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distribution with respect thereto; (iii) all proceeds received or receivable by
the Pledgor in cash, stock or otherwise, from any sale of substantially all the
assets of Secured Party; (iv) all proceeds received or receivable by the
Pledgor, in cash, stock or otherwise, from any recapitalization,
reclassification, merger, dissolution, liquidation or other termination of the
existence of Secured Party; (v) all other proceeds or assets received or
receivable by the Pledgor in respect of its status as a shareholder of the
Issuer; and (vi) any proceeds of any of the foregoing. The inclusion of
proceeds in this Agreement does not authorize the Pledgor to sell, dispose of
or otherwise use the Collateral in any manner not specifically authorized
hereby. Contemporaneously with the execution and delivery hereof, the Pledgor
is delivering to Secured Party in pledge hereunder the certificates and other
instruments evidencing all Pledged Securities owned by the Pledgor as of the
date hereof.
(c) It is expressly contemplated that additional securities or
other property may from time to time be pledged, assigned or granted to Secured
Party as additional security for the Obligations, and the term "Collateral" as
used herein shall be deemed for all purposes hereof to include all such
additional securities and property, together with all other property of the
types described above related thereto.
"Event of Default" shall mean any event specified in Section 6.01.
"Obligations" shall mean: (i) the indebtedness described in the
Promissory Note and any and all renewals, extensions for any period,
rearrangements or enlargements thereof and any interest accrued thereon,
whether pre-petition or post-petition; (ii) the performance of all obligations
and agreements under this Security Agreement; and (iii) all interest accrued
and earned, charges, expenses, attorney's or other fees and any other sums
payable to or incurred by Secured Party in connection with the execution,
administration or enforcement of their rights and remedies hereunder or in the
Promissory Note.
"Obligor" shall mean any Person, other than Pledgor, liable (whether
directly or indirectly, primarily or secondarily) for the payment or
performance of any of the Obligations whether as maker, co-maker, endorser,
guarantor, accommodation party, general partner or otherwise.
"Pledged Securities" shall mean all of the securities and other
property (whether or not the same constitutes a "security" under the Code)
referred to in Section 1.02 and all additional securities (as that term is
defined in the Code), if any, constituting Collateral under this Security
Agreement.
"Security Agreement" shall mean this Security Agreement, as the same
may from time to time be amended or supplemented.
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ARTICLE II
Security Interest
Section 2.01 Pledge. Pledgor hereby pledges, assigns and grants
to Secured Party, for its benefit, a security interest in the Collateral to
secure the prompt payment and performance of the Obligations. This security
interest is granted as security only and shall not subject Secured Party to, or
transfer or in any way affect or modify, any obligation or liability of the
Pledgor or any Obligor with respect to any of the Collateral, the Obligations
or any transaction in connection therewith.
Section 2.02 Transfer of Collateral. All certificates or
instruments representing or evidencing the Pledged Securities shall be
delivered to and held pursuant hereto by Secured Party or a person designated
by Secured Party and shall be in suitable form for transfer by delivery, or
shall be accompanied by duly executed instruments of transfer or assignment in
blank, and accompanied by any required transfer tax stamps, or (in the case of
either certificated or uncertificated securities) Secured Party shall have been
provided with evidence that the Pledged Securities have been otherwise
transferred to Secured Party in accordance with Section 8.301 of the Code, all
in form and substance satisfactory to Secured Party. Notwithstanding the
preceding sentence, at Secured Party's discretion, all Pledged Securities must
be delivered or transferred in such manner as to permit Secured Party to be a
"protected purchaser" to the extent of its security interest as provided in
Section 8.303 of the Code (if Secured Party otherwise qualifies as a bona fide
purchaser). Upon the occurrence and continuance of an Event of Default and
Secured Party shall have the right, at any time in its discretion and without
notice to Pledgor, to transfer to or to register in the name of Secured Party
or any of its nominees any or all of the Pledged Securities, subject only to
the revocable rights specified in Section 6.06. In addition, upon the
occurrence and continuance of an Event of Default, Secured Party shall have the
right at any time to exchange certificates or instruments representing or
evidencing Pledged Securities for certificates or instruments of smaller or
larger denominations.
ARTICLE III
Representations and Warranties
In order to induce Secured Party to accept this Security Agreement,
Pledgor represents and warrants to Secured Party (which representations and
warranties will survive the creation and payment of the Obligations) that:
Section 3.01 Ownership of Collateral; Encumbrances. Other than
subject to vesting provisions contained in the Restricted Stock Agreement
between Pledgor and Secured Party governing the Collateral, Pledgor is the
legal and beneficial owner of the Collateral free and clear of any adverse
claim, lien, security interest, option or other charge or encumbrance except
for the security interest created by this Security Agreement, and Pledgor has
full right, power and authority to pledge, assign and grant a security interest
in the Collateral to Secured Party.
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Section 3.02 Certain Actions. Pledgor has not performed or will
perform any acts which might prevent Secured Party from enforcing any of the
terms and conditions of this Security Agreement or which would limit Secured
Party in any such enforcement.
Section 3.03 Spousal Consent. Pledgor has notified his spouse of
the terms and conditions of this Security Agreement and the Promissory Note and
such spouse has raised no objection to such terms and conditions.
Section 3.01 First Priority Security Interest. The pledge of
Pledged Securities pursuant to this Security Agreement creates a valid and
perfected first priority security interest in the Collateral, enforceable
against Pledgor and all third parties and securing payment of the Obligations.
ARTICLE IV
Covenants and Agreements
Pledgor will at all times comply with the covenants and agreements
contained in this Article IV, from the date hereof and for so long as any part
of the Obligations are outstanding.
Section 4.01 Sale, Disposition or Encumbrance of Collateral.
Pledgor will not in any way encumber any of the Collateral (or permit or suffer
any of the Collateral to be encumbered) or sell, pledge, assign, lend or
otherwise dispose of or transfer any of the Collateral to or in favor of any
Person other than Secured Party. The Pledgor is not and will not become a
party to or otherwise be bound by any agreement, other than this Agreement,
which restricts in any manner the rights of any present or future holder of any
of the Pledged Securities with respect thereto.
Section 4.02 Dividends or Distributions. So long as no Event of
Default shall have occurred and be continuing, Pledgor shall be entitled to
receive and retain any and all dividends and interest paid in respect of the
Collateral, provided, however, that any and all:
(a) dividends and interest paid or payable other than in
cash in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in exchange for
(including, without limitation, any certificate or share purchased or
exchanged in connection with a tender offer or merger agreement), any
Collateral,
(b) dividends and other distributions paid or payable in
cash in respect of any Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in surplus, or reclassification, and
(c) cash paid, payable or otherwise distributed in
respect of principal of, or in redemption of, or in exchange for, any
Collateral.
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shall be, and shall be forthwith delivered to Secured Party to hold as,
Collateral and shall, if received by Pledgor, be received in trust for the
benefit of Secured Party, be segregated from the other property or funds of
Pledgor, and be forthwith delivered to Secured Party as Collateral in the same
form as so received (with any necessary indorsement).
Section 4.03 Further Assurances. Upon the request of Secured
Party, Pledgor shall execute and deliver all such assignments, certificates,
instruments, securities, financing statements, notifications to financial
intermediaries, clearing corporation, issuers of securities or other third
parties or other documents and give further assurances and do all other acts
and things as Secured Party may reasonably request to perfect Secured Party's
interest in the Collateral or which is necessary to protect, enforce or
otherwise effect Secured Party's rights and remedies hereunder.
Section 4.04 Stock Powers. Pledgor shall furnish to Secured Party
such stock powers and other instruments as may be required by Secured Party to
assure the transferability of the Collateral when and as often as may be
requested by Secured Party.
Section 4.05 Reserved
Section 4.06 Voting and Other Consensual Rights. Except to the
extent otherwise provided in Section 6.06(d), Pledgor shall be entitled to
exercise any and all voting and other consensual rights pertaining to the
Collateral or any part thereof for any purpose not inconsistent with the terms
of this Security Agreement; provided however, that Pledgor shall not exercise
or refrain from exercising any such right if such action would have a material
adverse effect on the value of the Collateral or any part thereof, and,
provided, further, that upon request of Secured Party at any time or from time
to time, Pledgor shall give Secured Party prompt written notice of the manner
in which Pledgor has exercised, or the reasons for refraining from exercising,
any such right.
ARTICLE V
Rights, Duties and Powers of Secured Party
The following rights, duties and powers of Secured Party are
applicable irrespective of whether an Event of Default occurs and is
continuing:
Section 5.01 Discharge Encumbrances. Secured Party may, at its
option, after giving Pledgor three (3) days prior notice, discharge any taxes,
liens, security interests or other encumbrances at any time levied or placed on
the Collateral. Pledgor agrees to reimburse Secured Party within 30 days of
demand for any payment so made, plus interest on the portion thereof from time
to time remaining unpaid from the date of Secured Party's demand at the rate of
interest set forth in the Promissory Note.
Section 5.02 Transfer of Collateral. Secured Party may, at its
option, after giving Pledgor three (3) days prior notice, transfer any or all
of the Obligations, and
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upon and such transfer Secured Party may transfer its interest in any or all of
the Collateral and shall be fully discharged thereafter from all liability
therefor. Any transferee of the Collateral shall be vested with all rights,
powers and remedies of Secured Party hereunder.
Section 5.03 Cumulative and Other Rights. The rights, powers and
remedies of Secured Party hereunder are in addition to all rights, powers and
remedies given by law or in equity. The exercise by Secured Party of any one
or more of the rights, powers and remedies herein shall not be construed as a
waiver of any other rights, powers and remedies, including, without limitation,
any other rights of set-off. If any of the Obligations are given in renewal,
extension for any period or rearrangement, or applied toward the payment of
debt secured by any lien, Secured Party shall be, and is hereby, subrogated to
all the rights, titles, interests and liens securing the debt so renewed,
extended, rearranged or paid.
Section 5.04 Disclaimer of Certain Duties.
(a) The powers conferred upon Secured Party by this
Agreement are to protect its interest in the Collateral and shall not
impose any duty upon Secured Party. Pledgor hereby agrees that
Secured Party shall not be liable for, nor shall the indebtedness
evidenced by the Obligations be diminished by, Secured Party's delay
or failure to collect upon, foreclose, sell, take possession of or
otherwise obtain value for the Collateral.
(b) To the fullest extent permitted by applicable law,
Secured Party shall be under no duty whatsoever (except as may be
required under the Promissory Note) to make or give any presentment,
notice of dishonor, protest, demand for performance, notice of
non-performance, notice of intent to accelerate, notice of
acceleration, or other notice or demand in connection with any
Collateral or the Obligations, or to take any steps necessary to
preserve any rights against any Obligor or other Person. Pledgor
waives any right of marshaling in respect of any and all Collateral,
and waives any right to require Secured Party, to proceed against any
Obligor or other person or entity, exhaust any Collateral or enforce
any other remedy which Secured Party, now has or may hereafter have
against any Obligor or other person or entity.
Section 5.05 Modification of Obligations; Other Security. Pledgor
waives (i) any and all notice of acceptance, creation, modification,
rearrangement, renewal or extension for any period of any instrument executed
by any Obligor in connection with the Obligations and (ii) to the fullest
extent permitted by applicable law, any defense of any Obligor by reason of
disability, lack of authorization, cessation of the liability of any Obligor or
for any other reason. Pledgor authorizes Secured Party, without notice or
demand and without any reservation of rights against Pledgor and without
affecting Pledgor's liability hereunder or on the Obligations, from time to
time to (x) take and hold other property, other than the Collateral, as
security for the Obligations, and exchange, enforce, waive and release any or
all of the Collateral, (y) apply the Collateral in the manner permitted by this
Security Agreement and (z) renew, extend for any period, accelerate, amend or
modify, supplement, enforce, compromise, settle, waive or
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release the obligations of any Obligor or any instrument or agreement of such
other Person with respect to any or all of the Obligations or Collateral.
Section 5.06 Custody and Preservation of the Collateral. Secured
Party shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which comparable secured parties accord
comparable collateral, it being understood and agreed, however, that Secured
Party shall not have responsibility for (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other matters
relative to any Collateral, whether or not Secured party has or is deemed to
have knowledge of such matters, or (ii) taking any necessary steps to preserve
rights against any person or entities with respect to any Collateral.
ARTICLE VI
Events of Default
Section 6.01 Events. It shall constitute an Event of Default
under this Security Agreement if an Event of Default occurs and is continuing
under the Promissory Note.
Section 6.02 Remedies. Upon the occurrence and during the
continuance of any Event of Default, Secured Party may take any or all of the
following actions without notice (except where expressly required below or in
the Promissory Note) or demand to Pledgor;
(a) Declare all or part of the indebtedness pursuant to
the Obligations immediately due and payable and enforce payment of the
same by Pledgor or any Obligor.
(b) Sell, in one or more sales and in one or more
parcels, or otherwise dispose of any or all of the Collateral in any
commercially reasonable manner as Secured Party may elect, in a public
or private transaction, at any location as deemed reasonable by
Secured Party either for cash or credit or for future delivery at such
price as Secured Party may deem fair, and (unless prohibited by the
Code, as adopted in any applicable jurisdiction) Secured Party may
purchase of any or all Collateral so sold and may apply upon the
purchase price therefor any obligations secured hereby. Any such sale
or transfer by Secured Party either to itself or to any other person
or entity shall be absolutely free from any claim of right by Pledgor,
including any equity or right of redemption, stay or appraisal which
Pledgor has or may have under any rule of law, regulation or statute
now existing or hereafter adopted. Upon any such sale or transfer,
Secured Party shall have the right to deliver, assign and transfer to
the purchaser or transferee thereof the Collateral so sold or
transferred. If Secured Party deems it advisable to do so, it may
restrict the bidders or purchasers of any such sale or transfer to
Persons or entities who will represent and agree that they are
purchasing the Collateral for their own account and not with the view
to the distribution or resale of any of the Collateral. Secured Party
may, at its discretion, provide for a public sale, and any such public
sale shall be held at
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such time or times within ordinary business hours and at such place or
places as Secured Party may fix in the notice of such sale. Secured
Party shall not be obligated to make any sale pursuant to any such
notice. Secured Party may, without notice or publication, adjourn any
public or private sale by announcement at any time and place fixed for
such sale, and such sale may be made at any time or place to which the
same may be so adjourned. In the event any sale or transfer hereunder
is not completed or is defective in the opinion of Secured Party, such
sale or transfer shall not exhaust the rights of Secured Party
hereunder, and Secured Party shall have the right to cause one or more
subsequent sales or transfers to be made hereunder. If only part of
the Collateral is sold or transferred such that the Obligations remain
outstanding (in whole or in part), Secured Party's rights and remedies
hereunder shall not be exhausted, waived or modified, and Secured
Party is specifically empowered to make one or more successive sales
or transfers until all the Collateral shall be sold or transferred and
all the Obligations are paid. In the event that Secured Party elects
not to sell the Collateral, Secured Party retains its rights to
dispose of or utilize the Collateral or any part or parts thereof in
any manner authorized or permitted by law or in equity, and to apply
the proceeds of the same towards payment of the Obligations. Each and
every method of disposition of the Collateral described in this
subsection or in subsection (d) shall constitute disposition in a
commercially reasonable manner.
(c) Apply proceeds of the disposition of the Collateral
to the Obligations in any manner elected by Secured Party and
permitted by the Code or otherwise permitted by law or in equity.
Such application may include, without limitation, the reasonable
attorneys' fees and legal expenses incurred by Secured Party.
(d) Appoint any Person as agent to perform any act or
acts necessary or incident to any sale or transfer by Secured Party of
the Collateral.
(e) Execute, assign and endorse negotiable and other
instruments for the payment of money, documents of title or other
evidences of payment, shipment or storage for any form of Collateral
on behalf of and in the name of Pledgor.
Section 6.03 Attorney-in-Fact. Pledgor hereby irrevocably
appoints Secured Party as Pledgor's attorney-in-fact, with full authority in
the place and stead of Pledgor and in the name of Pledgor or otherwise, from
time to time in Secured Party's reasonable discretion upon the occurrence and
during the continuance of an Event of Default and after any applicable notice
and cure period provided for in the Credit Agreement, but at Pledgor's cost and
expense, to take any action and to execute any assignment, certificate,
financing statement, stock power, notification, document or instrument which
Secured Party may deem necessary or advisable to accomplish the purposes of
this Security Agreement, including, without limitation, to receive, endorse and
collect all instruments made payable to Pledgor representing any dividend,
interest payment or other distribution in respect of the Collateral or any part
thereof and to give full discharge for the same.
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Section 6.04 Liability for Deficiency. If any sale or other
disposition of Collateral by Secured Party or any other action of Secured Party
hereunder results in reduction of the Obligations, such action will not release
Pledgor from its liability to Secured Party for any unpaid Obligations,
including reasonable costs, charges and expenses incurred in the liquidation of
Collateral, together with interest thereon, and the same shall be immediately
due and payable to Secured Party at Secured Party's address set forth in the
opening paragraph hereof.
Section 6.05 Reasonable Notice. If any applicable provision of
any law requires Secured Party to give reasonable notice of any sale or
disposition or other action, Pledgor hereby agrees that fifteen (15) days'
prior written notice shall constitute reasonable notice thereof. Such notice,
in the case of public sale, shall state the time and place fixed for such sale
and, in the cases of private sale, the time after which such sale is to be
made.
Section 6.06 Pledged Securities. Upon the occurrence and during
the continuance of an Event of Default:
(a) All rights of Pledgor to receive the dividends and
interest payments which it would otherwise be authorized to receive
and retain pursuant to Section. 4.02 shall cease, and all such rights
shall thereupon become vested in Secured Party who shall thereupon
have the sole right to receive and hold as Collateral such dividends
and interest payments, but Secured Party shall have no duty to receive
and hold such dividends and interest payments and shall not be
responsible for any failure to do so or delay in so doing.
(b) All dividends and interest payments which are
received by Pledgor contrary to the provisions of this Section 6.06
shall be received in trust for the benefit of Secured Party, shall be
segregated from other funds of Pledgor and shall be forthwith paid
over to Secured Party as Collateral in the same form as so received
(with any necessary indorsement).
(c) Secured Party may exercise any and all rights of
conversion, exchange, subscription or any other rights, privileges or
options pertaining to any of the Pledged Securities as if it were the
absolute owner thereof, including without limitation, the right to
exchange at its discretion, any and all of the Pledged Securities upon
the merger, consolidation, reorganization, recapitalization or other
readjustment of any issuer of such Pledged Securities or upon the
exercise by Secured Party of any right, privilege or option pertaining
to any of the Pledged Securities, and in connection therewith, to
deposit and deliver any and all of the Pledged Securities with any
committee, depository, transfer agent, registrar or other designated
agency upon such terms and conditions as it may determine, all without
liability except to account for property actually received by it, but
Secured Party shall have no duty to exercise any of the aforesaid
rights, privileges or options and shall not be responsible for any
failure to do so or delay in so doing.
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(d) All rights of Pledgor to exercise the voting and
other consensual rights which Pledgor would otherwise be entitled to
exercise pursuant to Section 4.07 with respect to the Pledged
Securities issued by such Issuer shall cease, and all such rights
shall thereupon become vested in Secured arty who shall thereupon have
the sole right to exercise such voting and other consensual rights,
but Secured Party shall have no duty to exercise any such voting or
other consensual rights and shall not be responsible for any failure
to do so or delay in so doing.
Section 6.07 Non-judicial Enforcement. Secured Party may enforce
its rights hereunder without prior judicial process or judicial hearing, and to
the extent permitted by law Pledgor expressly waives any and all legal rights
which might otherwise require Secured Party to enforce its rights by judicial
process.
Section 6.08 Private Sale of Pledged Securities. Pledgor
recognizes that Secured Party may deem it impracticable to effect a public sale
of all or any part of the Pledged Securities and that Secured Party may,
therefore, determine to make one or more private sales of any such Pledged
Securities to a restricted group of purchasers who will be obligated to agree
among other things, to acquire such Pledged Securities for their own account,
for investment and not with a view to the distribution or resale thereof.
Pledgor acknowledges that any such private sale may be at prices and on terms
less favorable to the seller than the prices and other terms in which might
have been obtained at a public sale and, notwithstanding the foregoing, agrees
that such private sale shall be deemed to have been made in a commercially
reasonably manner and that Secured Party shall have no obligation to delay sale
of any such Pledged Securities for the period of time necessary to permit
Pledgor to register such Pledged Securities for public sale under the
Securities Act of 1933, as amended (the "Securities Act"). Pledgor further
acknowledges and agrees that any offer to sell such Pledged Securities which
has been (i) publicly advertised on a bona fide basis in a newspaper or other
publication of general circulation in the financial community of Houston, Texas
(to the extent that such an offer may be so advertised without prior
registration under the Securities Act), or (ii) made privately in the manner
described above to not less than fifteen (15) bona fide offerees shall be
deemed to involve a "public sale" for the purposes of Section 9-504(c) of the
Code (or any successor or similar, applicable statutory provision) as then in
effect in the State of Texas, notwithstanding that such sale may not constitute
a "public offering" under the Securities Act and that Secured Party or any
Lender may, in such event, bid for the purchase of such Pledged Securities.
ARTICLE VII
Miscellaneous
Section 7.01 Notices. Any notice required or permitted to be
given under or in connection with this Security Agreement shall be given in
writing at the addresses listed in the preamble to this Security Agreement or
at such other place as a party hereto may designate in writing.
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Section 7.02 Amendments and Waivers. Secured Party's acceptance
of partial or delinquent payments or any forbearance, failure or delay by
Secured Party in exercising any right, power or remedy hereunder shall not be
deemed a waiver of any obligation of Pledgor or any Obligor, or of any right,
power or remedy of Secured Party; and no partial exercise of any right, power
or remedy shall preclude any other or further exercise thereof. Secured Party
may remedy any Event of Default hereunder or in connection with the Obligations
without waiving the Event of Default so remedied. Pledgor hereby agrees that
if Secured Party agrees to a waiver of any provision hereunder, or an exchange
of or release of the Collateral, or the addition or release of any Obligor or
other Person, any such action shall not constitute a waiver of any of Secured
Party's other rights or of Pledgor's obligations hereunder. This Security
Agreement may be amended only by an instrument in writing and may be
supplemented only by documents delivered or to be delivered in accordance with
the express terms hereof.
Section 7.03 Copy as Financing Statement. A photocopy or other
reproduction of this Security Agreement may be delivered by Pledgor or Secured
Party to any financial intermediary or other third party for the purpose of
transferring or perfecting any or all of the Pledged Securities to Secured
Party or its designee or assignee.
Section 7.04 Possession of Collateral. Secured Party shall be
deemed to have possession of any Collateral in transit to it or set apart for
it (or, in either case, any of its agents, affiliates or correspondents).
Section 7.05 Redelivery of Collateral. If any sale or transfer of
Collateral by Secured Party results in full satisfaction of the Obligations,
and after such sale or transfer and discharge there remains a surplus of
proceeds, Secured Party will deliver to Pledgor or such other Person as may be
required by a court of competent jurisdiction such excess proceeds in a
commercially reasonable time; provided, however, that Secured Party shall not
have any liability for any interest, cost or expense in connection with any
reasonable delay in delivering such proceeds to Pledgor.
Section 7.06 Governing Law; Jurisdiction. This Security Agreement
and the security interest granted hereby shall be construed in accordance with
and governed by the laws of the State of Texas (except to the extent that the
laws of any other jurisdiction govern the perfection and priority of the
security interests granted hereby).
Section 7.07 Continuing Security Agreement.
(a) Except as may be expressly applicable pursuant to
Section 9-505 of the Code, no action taken or omission to act by Secured Party,
including, without limitation, any exercise of voting or consensual rights
pursuant to Section 4.07 or any other action taken or inaction pursuant to
Section 6.02, shall be deemed to constitute a retention of the Collateral in
satisfaction of the Obligations or otherwise to be in full satisfaction of the
Obligations, and the Obligations shall remain in full force and effect, until
Secured Party shall have applied payments (including, without limitation,
collections from Collateral) towards the Obligations in the full amount then
outstanding or until such subsequent time as is hereinafter provided in
subsection (b) below.
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(b) To the extent that any payments on the Obligations or
proceeds of the Collateral are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
debtor in possession, receiver or other Person under any bankruptcy law, common
law or equitable cause, then to such extent the Obligations so satisfied shall
be revived and continue as if such payment or proceeds had not been received by
Secured Party, and Secured Party's security interest, rights, powers and
remedies hereunder shall continue in full force and effect. In such event,
this Security Agreement shall be automatically reinstated if it shall
theretofore have been terminated pursuant to Section 7.08.
Section 7.08 Termination. The grant of a security interest
hereunder and all of Secured Party's, the Issuing Banks' and the Lenders'
rights, powers and remedies in connection therewith shall remain in full force
and effect until the complete payment of the Obligations and the compliance by
Pledgor with all covenants and agreements hereof and the termination of the
Promissory Note, at which time Secured Party, at the written request and
expense of Pledgor, will release, reassign and transfer the Collateral to
Pledgor and declare this Security Agreement to be of no further force or
effect. Notwithstanding the foregoing, the provisions of Section 7.07(b) shall
survive the termination of this Security Agreement.
Section 7.09 Counterparts, Effectiveness. This Security Agreement
may be executed in two or more counterparts. Each counterpart is deemed an
original, but all such counterparts taken together constitute one and the same
instrument. This Security Agreement becomes effective upon the execution
hereof by Pledgor and delivery of the same to Secured Party, and it is not
necessary for Secured Party, any Issuing Bank or any Lender to execute any
acceptance hereof or otherwise signify or express its acceptance hereof.
Section 7.10 Amendment and Restatement. This Security Agreement
amends and restates in its entirety the Prior Security Agreement and all its
terms, provisions and conditions. Pledgor acknowledges that the liens, claims,
rights, titles, interests and benefits created and granted by the Prior
Security Agreement continue to exist, remain valid and subsisting, shall not be
impaired or released hereby, shall remain in full force and effect and are
hereby renewed, extended, carried forward and conveyed as security for the
Obligations.
[SIGNATURES BEGIN NEXT PAGE]
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PLEDGOR:
By: /s/ James F. Farr
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James F. Farr
SECURED PARTY: DAILEY PETROLEUM SERVICES CORP.
By: /s/ William D. Sutton
-----------------------------
Name: William D. Sutton
---------------------------
Title: Senior Vice President
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EXHIBIT A
36,000 shares of Class A Common Stock, $.01 par value, of Dailey Petroleum
Services Corp. registered in the name of James F. Farr.
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