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CASH
COLLATERAL AGREEMENT
CASH COLLATERAL AGREEMENT dated as of February 14, 2008 (as
amended, restated, supplemented or otherwise modified from time to
time, this “ Agreement
”) among each of MORRIS GAD , an
individual residing at 592 5 th
Avenue, New York, New York, 10036 (“ Pledgor ”),
PNC BANK, NATIONAL
ASSOCIATION , a national banking association, as depository
institution (the “ Bank
” ) and
PNC BANK, NATIONAL
ASSOCIATION , a national banking association as agent for
the Lenders (as defined below) party to the Loan Agreement referred
to below (in such capacity, “ Agent
”).
WHEREAS , reference is made to the Revolving Credit, Term
Loan and Security Agreement dated as of February 14, 2008 (as
amended, modified, supplemented and/or restated from time to time,
the “ Loan
Agreement ”) among PNC Bank, National Association
(“ PNC
”), the various financial institutions named in or which
hereafter become a party to the Loan Agreement (PNC and such other
various other financial institutions, collectively, the “
Lenders
”), Agent, Hybrook Resources Corp. (to be renamed Best Energy
Services, Inc.), a corporation organized under the laws of the
State of Nevada (“ Best
”), Bob Beeman Drilling Company, a corporation organized
under the laws of the State of Utah (“ BBD
”), and Best Well Service, Inc., a corporation organized
under the laws of the State of Kansas (“ BWS
”) (Best, BBD and BWS, each a “ Borrower
”, and collectively “ Borrowers
”).
WHEREAS , as an inducement for Agent and Lenders to make
certain advances to Borrowers under the Loan Agreement, Pledgor has
agreed to enter into this Agreement;
NOW, THEREFORE , in consideration of the premises and for
other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as
follows:
Section
1. Defined
Terms . Except as otherwise defined herein,
terms defined in the Loan Agreement are used herein as defined
therein. The following terms shall have the
following meanings for purposes of this
Agreement:
“
Account
” shall have the meaning assigned to such term in
Section 2 hereof.
“
Obligations
” shall mean, collectively, all obligations and
liabilities of Borrowers under the Loan Agreement,
including, without limitation, principal, interest, expenses
relating or incidental to the enforcement or protection of the
rights of Agent and Lenders hereunder or thereunder, and all
modifications, amendments, replacements, extensions and
renewals thereof and substitutions therefor, whether now
existing or hereafter at any time created, arising or incurred
without limit to amount, except as expressly stated in the
Loan Agreement.
“
Side
Collateral ” shall mean cash equal to the Side
Collateral Amount, and all interest or other income with
respect to the Side Collateral and all proceeds thereof,
deposited to or for the credit of the Account.
“
Side
Collateral Amount ” shall mean $2,500,000, less
the amount of any Side Collateral which has been applied to
the Obligations or released pursuant to Section 6
hereof.
Section
2. Establishment
and Maintenance of the Account.
(a) The
Pledgor shall transfer and deposit, in immediately available
funds, an amount equal to the Side Collateral
Amount. The Side Collateral shall be
transferred to and deposited in immediately available funds in
Account No. 31900325348 (the “ Account
”) in the name of the Pledgor, which account shall be
maintained at the Bank.
(b) Pledgor,
Agent and the Bank each hereby agree that (i) the Account
shall be a segregated non-demand, interest bearing deposit
account used only for the purposes of this Agreement and all
amounts to the credit thereof shall be separate and
identifiable as credited to such Account, (ii) the Account
shall at all times be subject to the exclusive dominion and
control of the Agent and (iii) except for remittances
permitted pursuant to Section 6 of this Agreement, the Pledgor
shall have no right or power to withdraw the Side Collateral
from the Account and the Agent is hereby authorized by the
Pledgor to provide such instructions, and make such notations
on the records relating to the Account, to give effect to the
foregoing.
Section
3. Pledge and
Assignment of the Account. As collateral
security for the prompt payment in full when due (whether at
stated maturity, by acceleration or otherwise) of the
Obligations, Pledgor does hereby pledge, grant and assign to
the Agent, for its benefit and for the ratable benefit of
Lenders, a security interest in, to and under, and a
continuing lien on, the Side Collateral and the
Account.
Section
4. Withdrawal of
Deposits . All amounts and items
deposited in the Account shall remain in the Account until
released or withdrawn in accordance with the terms of this
Agreement.
Section
5. Remedies
. Upon the occurrence and during the
continuance of an Event of Default under the Loan
Agreement:
(a) The
Agent may, in addition to those rights and remedies which may
be available to the Agent under applicable law, at any time or
from time to time, at its option and without further demand or
notice to Pledgor, withdraw or cause to be withdrawn, charge,
set-off or otherwise apply all or any part of the Side
Collateral against the Obligations in such order as it shall
determine in its sole discretion; and
(b) The
Agent may, in addition to the other rights and remedies
provided for herein or otherwise available to it, exercise all
the rights and remedies of a secured party under the Uniform
Commercial Code as in effect in any applicable
jurisdiction.
No
failure on the part of the Agent or any of its agents to
exercise, and no course of dealing with respect to, or delay
in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial
exercise by the Agent or any of its agents of any right, power
or remedy hereunder preclude the exercise of any other right,
power or remedy. The remedies herein are cumulative
and are not exclusive of any remedies provided by
law.
In
furtherance of the foregoing, Pledgor hereby expressly waives
diligence, presentment of payment, protest, demand of
performance and all notices whatsoever, and any requirement
that the Agent exhaust any right, power or remedy under the
Loan Agreement or any Other Document, or against any person
under any guarantee of, or security for, any of the
Obligations. Notwithstanding anything to the
contrary contained in this Agreement, Agent shall use
commercially reasonably efforts to notify Pledgor of any Event
of Default under the Loan Agreement, but any failure on the
part of Agent to provide such notice shall not prejudice its
rights under this Agreement.
2
Pledgor
hereby agrees to pay all of the Agent’s expenses
(including, without limitation, reasonable legal fees and
disbursements) of every kind directly related to any dispute
with Pledgor arising out of this Agreement, which obligation
to reimburse shall be secured under this Agreement and be
deemed to be Obligations for purposes hereof.
Section
6. Release of Side
Collateral; Termination .
(a) Pledgor
shall have to direct Agent from time to time to release any
interest that has accrued on the Side Collateral Amount and
that is available for withdrawal from the Account without
penalty by the Bank, and upon receipt of such direction Agent
shall promptly remit or cause to be remitted to the Pledgor,
without any recourse to, or warranty or representation by the
Agent whatsoever, any such interest on the Side Collateral
Amount.
(b) If
as of the date Agent receives the audited financial statements
required to be delivered to Agent and the Lenders pursuant to
Section 9.7 of the Loan Agreement (the “Audited
Financial Statements”) for any fiscal year of the
Borrowers, commencing with the fiscal year ending December 31,
2008, (x) no Default or Event of Default has occurred and is
continuing under the Loan Agreement and (y) such Audited
Financial Statements demonstrate to Agent’s reasonably
satisfaction that the net income of the Borrowers on a
Consolidated Basis was greater than $4,000,000, then the Agent
shall promptly remit or cause to be remitted to the Pledgor,
without any recourse to, or warranty or representation by the
Agent whatsoever, a portion of the Side Collateral Amount
equal to 25% of the difference between the Borrowers net
income for such fiscal year (as demonstrated by such Audited
Financial Statements) and $4,000,000, so long as after giving
effect to the foregoing there shall be Undrawn Availability of
not less than $2,500,000.
(c) If,
after the Closing Date, Best issues any additional Equity
Interests in accordance with the Loan Agreement such that the
aggregate amount of proceeds received by Best from the
issuance of Equity Interests in connection with the
Transactions (whether prior to or after the Closing Date)
(such amount, the “Aggregate Equity Proceeds”)
exceeds $9,500,000 (the “Target Amount”), and the
proceeds of such issuance of Equity Interests are utilized to
repay the outstanding Advances under (and as required by) the
Loan Agreement, then, so long as no Default or Event of
Default shall have occurred and be continuing, the Agent shall
s promptly (but in no event later than three (3) Business Days
after the repayment of the outstanding Advances under the Loan
Agreement with such proceeds) remit or cause to be remitted to
the Pledgor, without any recourse to, or warranty or
representation by the Agent whatsoever, a portion of the Side
Collateral Amount equal to the amount by which the Aggregate
Equity Proceeds exceed the Target Amount.
(d) Ninety-one
(91) days after the (i) termination or expiration of the Loan
Agreement, and (ii) the payment in full in cash of all
Obligations, this Agreement shall terminate, and the Agent
shall promptly remit or cause to be remitted to the Pledgor,
without any recourse to, or warranty or representation by the
Agent whatsoever, all of the Side Collateral in the
Account.
Section
7. Representations
and Warranties . Pledgor represents
and warrants to the Agent as follows:
(a) The
execution, delivery and performance of this Agreement are
within the capacity of Pledgor.
(b) Except
as limited by any applicable bankruptcy, reorganization,
insolvency, moratorium, fraudulent conveyances and other
similar laws, this Agreement
3
constitutes a legal, valid and binding obligation of Pledgor
enforceable against Pledgor in accordance with its
terms.
(c) This
Agreement creates a valid, perfected and first priority
security interest in the Side Collateral, securing the payment
of all Obligations.
(d) Pledgor
is the sole beneficial owner of the Side Collateral and no
security interest, lien, charge, encumbrance or other interest
exists in favor of any Person except for the
Agent.
Section
8. Covenants of the
Pledgors . Pledgor covenants and agrees for
the benefit of the Agent as follows:
(a) Pledgor
will not permit any notice creating or otherwise relating to
liens on the Side Collateral and the Account or any portion
thereof to exist or be on file in any public office, except in
favor of the Agent.
(b) Pledgor
will, promptly upon request by the Agent, execute and deliver
or use its best efforts to obtain any document, give any
notices, execute and file any financing statements or other
documents (all in form and substance satisfactory to the
Agent), deliver any instruments to the Agent, and take any
other actions that are necessary or, in the opinion of the
Agent, desirable to perfect or continue the perfection and the
first priority of the Agent’s security interest in the
Side Collateral and the Account, to protect the Side
Collateral and the Account against the rights, claims or
interests of any persons or to effect the intent and purposes
of this Agreement. The Pledgor will pay all
reasonable costs incurred in connection with any of the
foregoing.
(c) The
Pledgor will not in any way hypothecate or create or permit to
exist any lien, security interest, charge or
encumbr
