PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT is
entered into as of May 21, 2009 by and between Teton Energy
Corporation, a Delaware corporation (the “
Borrower ”), and JPMorgan Chase Bank, N.A., a
national banking association, in its capacity as agent (the “
Administrative Agent ”) for the lenders party
to the Credit Agreement referred to below.
PRELIMINARY
STATEMENT
The Borrower, the Administrative
Agent and the Lenders entered into that Credit Agreement dated as
of April 2, 2008 (as heretofore amended and as it may
hereafter be amended or modified from time to time, the “
Credit Agreement ”). The Borrower is entering
into this Pledge and Security Agreement (as it may be amended or
modified from time to time, the “ Security
Agreement ”) in order to induce the Lenders to
continue to extend credit to the Borrower under the Credit
Agreement.
ACCORDINGLY, the Borrower and the
Administrative Agent, on behalf of the Lenders, hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Terms Defined in Credit
Agreement . All capitalized terms used herein and not otherwise
defined shall have the meanings assigned to such terms in the
Credit Agreement.
1.2 Terms Defined in Uniform
Commercial Code . Terms defined in the UCC which are not
otherwise defined in this Security Agreement are used herein as
defined in the UCC.
1.3 Definitions of Certain Terms
Used Herein . As used in this Security Agreement, in addition
to the terms defined in the Preliminary Statement, the following
terms shall have the following meanings:
“ Accounts
” shall have the meaning set forth in Article 9 of the
UCC.
“ Article
” means a numbered article of this Security Agreement, unless
another document is specifically referenced.
“ Chattel Paper
” shall have the meaning set forth in Article 9 of the
UCC.
“ Collateral
” means all Accounts, Chattel Paper, Documents, Equipment,
General Intangibles, Instruments, Inventory, Investment Property,
Pledged Deposits, and Other Collateral, wherever located, in which
the Borrower now has or hereafter acquires any right or interest,
and the proceeds (including Stock Rights), insurance proceeds and
products thereof, together with all books and records, customer
lists, credit files, computer files, programs, printouts and other
computer materials and records related thereto.
“ Control
” shall have the meaning set forth in Article 8 or, if
applicable, in Section 9.104, 9.105, 9.106 or 9.107 of
Article 9 of the UCC.
“ Default
” means an event described in Section 5.1.
“ Deposit
Accounts ” shall have the meaning set forth in
Article 9 of the UCC.
“ Documents
” shall have the meaning set forth in Article 9 of the
UCC.
“ Equipment
” shall have the meaning set forth in Article 9 of the
UCC.
“ Exhibit
” refers to a specific exhibit to this Security Agreement,
unless another document is specifically referenced.
“ General
Intangibles ” shall have the meaning set forth in
Article 9 of the UCC.
“ Instruments
” shall have the meaning set forth in Article 9 of the
UCC.
“ Inventory
” shall have the meaning set forth in Article 9 of the
UCC.
“ Investment
Property ” shall have the meaning set forth in
Article 9 of the UCC.
“ Lenders
” means the lenders party to the Credit Agreement and their
successors and assigns.
“ Obligations
” means any and all existing and future indebtedness,
obligation and liability of every kind, nature and character,
direct or indirect, absolute or contingent (including all renewals,
extensions and modifications thereof and all fees, costs and
expenses incurred by the Administrative Agent or the Lenders in
connection with the preparation, administration, collection or
enforcement thereof), of the Borrower to the Administrative Agent
or any Lender or any branch, subsidiary or affiliate thereof,
arising under or pursuant to this Security Agreement, the Credit
Agreement and any promissory note or notes now or hereafter issued
under the Credit Agreement.
“ Other
Collateral ” means any property of the Borrower,
other than real estate, not included within the defined terms
Accounts, Chattel Paper, Documents, Equipment, General Intangibles,
Instruments, Inventory, Investment Property and Pledged Deposits,
including, without limitation, all cash on hand, letter-of-credit
rights, letters of credit, Stock Rights and Deposit Accounts or
other deposits (general or special, time or demand, provisional or
final) with any bank or other financial institution, it being
intended that the Collateral include all property of the Borrower
other than real estate.
“ Pledged
Deposits ” means all time deposits of money (other
than Deposit Accounts and Instruments), whether or not evidenced by
certificates, which the Borrower may from time to time designate as
pledged to the Administrative Agent or to any Lender as security
for any Obligation, and all rights to receive interest on said
deposits.
“ Rate Management
Transaction ” means any transaction (including an
agreement with respect thereto) now existing or hereafter entered
into between the Borrower and any Lender or Affiliate thereof which
is a rate swap, basis swap, forward rate transaction, commodity
swap, commodity option, equity or equity index swap, equity or
equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar
transaction, forward transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any other
similar transaction (including any option with respect to any of
these transactions) or any combination thereof, whether linked to
one or more interest rates, foreign currencies, commodity prices,
equity prices or other financial measures.
“ Rate Management
Obligations ” means any and all obligations of the
Borrower, whether absolute or contingent and howsoever and
whensoever created, arising, evidenced or acquired (including all
renewals, extensions and modifications thereof and substitutions
therefor), under (i) any and all Rate Management Transactions,
and (ii) any and all cancellations, buy backs, reversals,
terminations or assignments of any Rate Management
Transactions.
“ Receivables
” means the Accounts, Chattel Paper, Documents, Investment
Property, Instruments or Pledged Deposits, and any other rights or
claims to receive money which are General Intangibles or which are
otherwise included as Collateral.
“ Required Secured
Parties ” means (a) prior to an acceleration of
the obligations under the Credit Agreement, the Majority Lenders,
(b) after an acceleration of the obligations under the Credit
Agreement but prior to the date upon which the Credit Agreement has
terminated by its terms and all of the obligations thereunder have
been paid in full, Lenders and their Affiliates holding in the
aggregate at least 66?% of the total of (i) the unpaid
principal amount of outstanding Loans and (ii) the aggregate
net early termination payments and all other amounts then due and
unpaid from the Borrower to the Lenders or their Affiliates under
Rate Management Transactions, as determined by the Administrative
Agent in its reasonable discretion, and (c) after the Credit
Agreement has terminated by its terms and all of the obligations
thereunder have been paid in full (whether or not the obligations
under the Credit Agreement were ever accelerated), Lenders and
their Affiliates holding in the aggregate at least 66?% of the
aggregate net early termination payments and all other amounts then
due and unpaid from the Borrower to the Lenders or their Affiliates
under Rate Management Transactions, as determined by the
Administrative Agent in its reasonable discretion.
“ Section
” means a numbered section of this Security Agreement, unless
another document is specifically referenced.
“ Secured
Obligations ” means the Obligations and Rate
Management Obligations entered into with one or more of the Lenders
or their Affiliates.
“ Security
” has the meaning set forth in Article 8 of the Texas
UCC.
“ Stock Rights
” means any securities, dividends or other distributions and
any other right or property which the Borrower shall receive or
shall become entitled to receive for any reason whatsoever with
respect to, in substitution for or in exchange for any securities
or other ownership interests in a corporation, partnership, joint
venture or limited liability company constituting Collateral and
any securities, any right to receive securities and any right to
receive earnings, in which the Borrower now has or hereafter
acquires any right, issued by an issuer of such securities.
“ UCC ”
means the Uniform Commercial Code as in effect from time to time of
the governing jurisdiction set forth in Section 8.14
hereof.
“ Unmatured
Default ” means an event which but for the lapse of
time or the giving of notice, or both, would constitute a
Default.
The foregoing definitions shall be
equally applicable to both the singular and plural forms of the
defined terms.
ARTICLE II
GRANT OF SECURITY
INTEREST
The Borrower hereby pledges, assigns
and grants to the Administrative Agent, on behalf of and for the
ratable benefit of the Lenders and (to the extent specifically
provided herein) their Affiliates, a security interest in all of
the Borrower’s right, title and interest in and to the
Collateral to secure the prompt and complete payment and
performance of the Secured Obligations.
ARTICLE III
REPRESENTATIONS AND
WARRANTIES
The Borrower represents and warrants
to the Administrative Agent and the Lenders that:
3.1 Title, Authorization, Validity
and Enforceability . The Borrower has good and valid rights in
or the power to transfer the Collateral and title to the Collateral
with respect to which it has purported to grant a security interest
hereunder, free and clear of all Liens except for Liens permitted
under Section 4.1(f), and has full power and authority to
grant to the Administrative Agent the security interest in such
Collateral pursuant hereto. The execution and delivery by the
Borrower of this Security Agreement has been duly authorized by
proper corporate proceedings, and this Security Agreement
constitutes a legal, valid and binding obligation of the Borrower
and creates a security interest which is enforceable against the
Borrower in all now owned and hereafter acquired Collateral.
3.2 Conflicting Laws and
Contracts . Neither the execution and delivery by the Borrower
of this Security Agreement, the creation and perfection of the
security interest in the Collateral granted hereunder, nor
compliance with the terms and provisions hereof will violate any
law, rule, regulation, order, writ, judgment, injunction, decree or
award binding on the Borrower or the Borrower’s articles or
certificate of incorporation or by-laws, the provisions of any
indenture, instrument or agreement to which the Borrower is a party
or is subject, or by which it, or its property, is bound, or
conflict with or constitute a default thereunder, or result in the
creation or imposition of any Lien pursuant to the terms of any
such indenture, instrument or agreement (other than any Lien of the
Administrative Agent on behalf of the Lenders).
3.3 Type and Jurisdiction of
Organization . The Borrower is a corporation organized under
the laws of the State of Delaware.
3.4 Principal Location . The
Borrower’s mailing address and the location of its place of
business (if it has only one) or its chief executive office (if it
has more than one place of business), is disclosed in
Exhibit A ; the Borrower has no other places of
business except those set forth in Exhibit A .
3.5 Property Locations . The
Inventory and Equipment are located solely at the locations
described in Exhibit A . All of said locations are
owned by the Borrower except for locations (a) which are
leased by the Borrower as lessee and designated in Part B of
Exhibit A and (b) at which Inventory is held in a
public warehouse or is otherwise held by a bailee or on consignment
as designated in Part C of Exhibit A , with
respect to which Inventory the Borrower has delivered bailment
agreements, warehouse receipts, financing statements or other
documents satisfactory to the Lenders to protect the Administrative
Agent’s and the Lenders’ security interest in such
Inventory.
3.6 No Other Names . The
Borrower has not conducted business under any name except the name
in which it has executed this Security Agreement, which is the
exact name as it appears in the Borrower’s organizational
documents, as amended, as filed with the Borrower’s
jurisdiction of organization.
3.7 No Default . No Default or
Unmatured Default exists.
3.8 Accounts and Chattel Paper
. The names of the obligors, amounts owing, due dates and other
information with respect to the Accounts and Chattel Paper are and
will be correctly stated in all records of the Borrower relating
thereto and in all invoices and reports with respect thereto
furnished to the Administrative Agent by the Borrower from time to
time. As of the time when each Account or each item of Chattel
Paper arises, the Borrower shall be deemed to have represented and
warranted that such Account or Chattel Paper, as the case may be,
and all records relating thereto, are genuine and in all respects
what they purport to be.
3.9 Intentionally deleted
.
3.10 No Financing Statements .
No financing statement describing all or any portion of the
Collateral which has not lapsed or been terminated naming the
Borrower as debtor has been filed in any jurisdiction except
(a) financing statements naming the Administrative Agent on
behalf of the Lenders as the secured party and (b) as
described in Exhibit B and (c) as permitted by
Section 4.1(f).
3.11 Federal Employer
Identification Number . The Borrower’s Federal employer
identification number is 84-1482290.
3.12 State Organization Number
. If the Borrower is a registered organization, the
Borrower’s State organization number is 2896826.
ARTICLE IV
COVENANTS
From the date of this Security
Agreement, and thereafter until this Security Agreement is
terminated:
4.1 General .
(a) Inspection . The
Borrower will permit the Administrative Agent or any Lender, by its
representatives and Administrative Agents (i) to inspect the
Collateral, (ii) to examine and make copies of the records of
the Borrower relating to the Collateral and (iii) to discuss
the Collateral and the related records of the Borrower with, and to
be advised as to the same by, the Borrower’s officers and
employees (and, in the case of any Receivable, with any person or
entity which is or may be obligated thereon), all at such
reasonable times and intervals as the Administrative Agent or such
Lender may determine, and all at the Borrower’s expense.
(b) Taxes . The Borrower
will pay when due all taxes, assessments and governmental charges
and levies upon the Collateral, except those which are being
contested in good faith by appropriate proceedings and with respect
to which no Lien exists.
(c) Records and Reports;
Notification of Default . The Borrower will maintain complete
and accurate books and records with respect to the Collateral, and
furnish to the Administrative Agent, with sufficient copies for
each of the Lenders, such reports relating to the Collateral as the
Administrative Agent shall from time to time request. The Borrower
will give prompt notice in writing to the Administrative Agent and
the Lenders of the occurrence of any Default or Unmatured Default
and of any other development, financial or otherwise, which might
materially and adversely affect the Collateral.
(d) Financing Statements and
Other Actions; Defense of Title . The Borrower hereby
authorizes the Administrative Agent to file, and if requested will
execute and deliver to the Administrative Agent, all financing
statements and other documents and take such other actions as may
from time to time be requested by the Administrative Agent in order
to maintain a first perfected security interest in and, if
applicable, Control of, the Collateral. The Borrower will take any
and all actions necessary to defend title to the Collateral against
all persons and to defend the security interest of the
Administrative Agent in the Collateral and the priority thereof
against any Lien not expressly permitted hereunder.
(e) Disposition of
Collateral . The Borrower will not sell, lease or otherwise
dispose of the Collateral except (i) prior to the occurrence
of a Default or Unmatured Default, dispositions specifically
permitted pursuant to Section 9.11 of the Credit Agreement,
(ii) until such time following the occurrence of a Default as
the Borrower receives a notice from the Administrative Agent
instructing the Borrower to cease such transactions, sales or
leases of Inventory in the ordinary course of business, and
(iii) until such time as the Borrower receives a notice from
the Administrative Agent pursuant to Article VII, proceeds of
Inventory and Accounts collected in the ordinary course of
business.
(f) Liens . The Borrower
will not create, incur, or suffer to exist any Lien on the
Collateral except (i) the security interest created by this
Security Agreement, and (ii) other Liens permitted pursuant to
Section 9.03 of the Credit Agreement (including those Liens
securing Permitted Convertible Debt which are subordinated to the
Liens securing the Indebtedness pursuant to the Intercreditor
Agreement).
(g) Change in Corporate
Existence, Type or Jurisdiction of Organization, Location, Name
. The Borrower will:
(i) preserve
its existence as a corporation and not, in one transaction or a
series of related transactions, merge into or consolidate with any
other entity, or sell all or substantially all of its assets;
(ii) not
change its state of organization;
(iii) not
maintain its place of business (if it has only one) or its chief
executive office (if it has more than one place of business) at a
location other than a location specified on Exhibit A ;
and
(iv) not
(A) have any Inventory or Equipment or proceeds or products
thereof (other than Inventory and proceeds thereof disposed of as
permitted by Section 4.1(e)) at a location other than a
location specified in Exhibit A , (B) change its
name or taxpayer identification number or (C) change its
mailing address,
unless the Borrower shall have given the Administrative Agent
not less than 30 days’ prior written notice of such
event or occurrence and the Administrative Agent shall have either
(x) determined that such event or occurrence will not
adversely affect the validity, perfection or priority of the
Administrative Agent’s security interest in the Collateral,
or (y) taken such steps (with the cooperation of the Borrower
to the extent necessary or advisable) as are necessary or advisable
to properly maintain the validity, perfection and priority of the
Administrative Agent’s security interest in the
Collateral.
(h) Other Financing
Statements . The Borrower will not sign or authorize the
signing on its behalf or the filing of any financing statement
naming it as debtor covering all or any portion of the Collateral,
except as permitted by Section 4.1(f).
4.2 Receivables .
(a) Certain Agreements on
Receivables. The Borrower will not make or agree to make any
discount, credit, rebate or other reduction in the original amount
owing on a Receivable or accept in satisfaction of a Receivable
less than the original amount thereof, except that, prior to the
occurrence of a Default, the Borrower may reduce the amount of
Accounts arising from the sale of Inventory in accordance with its
present policies and in the ordinary course of business.
(b) Collection of
Receivables . Except as otherwise provided in this Security
Agreement, the Borrower will collect and enforce, at the
Borrower’s sole expense, all amounts due or hereafter due to
the Borrower under the Receivables.
(c) Delivery of Invoices
. The Borrower will deliver to the Administrative Agent immediately
upon its request after the occurrence of a Default duplicate
invoices with respect to each Account bearing such language of
assignment as the Administrative Agent shall specify.
(d) Disclosure of
Counterclaims on Receivables . If (i) any discount, credit
or agreement to make a rebate or to otherwise reduce the amount
owing on a Receivable exists or (ii) if, to the knowledge of the
Borrower, any dispute, setoff, claim, counterclaim or defense
exists or has been asserted or threatened with respect to a
Receivable, the Borrower will disclose such fact to the
Administrative Agent in writing in connection with the inspection
by the Administrative Agent of any record of the Borrower relating
to such Receivable and in connection with any invoice or
