SECURITY AGREEMENT
(All Assets)
THIS
SECURITY AGREEMENT (this “ Security Agreement
”), is made and entered into as of July 29, 2008, by DORAL
ENERGY CORP., a Nevada corporation (“ Debtor ”),
whose address is 111 N. Sepulveda Blvd., Suite 250, Manhattan
Beach, California 90266, in favor of MACQUARIE BANK LIMITED, a bank
incorporated under the laws of Australia, as Administrative Agent
for the ratable benefit of Lenders (as defined in the Credit
Agreement) (“ Secured Party ”), whose address is
Level 15, No. 1 Martin Place, Metals and Energy Capital, Sydney,
NSW 2000, Australia.
Background:
1.
On July 29, 2008, Debtor, as Borrower, the other Lenders party
thereto from time to time, and Secured Party, as Administrative
Agent for such Lenders and as a Lender, executed that certain
Senior First Lien Secured Loan Credit Agreement (as amended,
modified or supplemented from time to time, the “ Credit
Agreement ”) pursuant to which, Secured Party agreed to
make loans to Debtor from time to time on the conditions set forth
in the Credit Agreement.
2.
Secured Party has conditioned its obligations under the Credit
Agreement upon, among other things, the execution and delivery by
Debtor of this Security Agreement, and Debtor has agreed to enter
into this Security Agreement.
Agreements:
In
order to comply with the terms and conditions of the Credit
Agreement and for and in consideration of the premises and the
agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor hereby agrees with Secured Party as
follows:
ARTICLE I
DEFINITIONS
1.1
Terms Defined Above . As used in this Security Agreement,
the terms “ Debtor ,” “ Secured
Party ,” and “ Credit Agreement ”
shall have the meanings indicated above.
1.2
Definitions Contained in the Credit Agreement . Unless
otherwise defined herein or context otherwise requires, all
capitalized terms used but not defined in this Security Agreement
have the meanings given to those terms in the Credit
Agreement.
1.3
Certain Definitions . As used in this Security Agreement,
the following terms shall have the following meanings, unless the
context otherwise requires:
“
Accounts ” has the meaning indicated in subsection
2.1(a) hereof.
“
Code ” means the Uniform Commercial Code as presently
in effect in the State of New York, and as amended from time to
time.
“
Collateral ” means all property, including without
limitation cash or other proceeds, in which Secured Party shall
have a security interest pursuant to Section 2.1 of this
Security Agreement.
“
Default ” means the occurrence of any of the events
specified in Section 5.3 hereof, whether or not any
requirement for notice or lapse of time or other condition
precedent has been satisfied.
“
Equipment ” has the meaning indicated in subsection
2.1(b) hereof.
“
Event of Default ” means the occurrence of any of the
events specified in Section 5.3 hereof; provided that
any requirement for notice or lapse of time or other condition
precedent has been satisfied.
“
General Intangibles ” has the meaning indicated in
subsection 2.1(c) hereof.
“
Inventory ” has the meaning indicated in subsection
2.1(d) hereof.
“
Other Liable Party ” means any person, other than
Debtor, who is or becomes primarily or secondarily liable for any
of the Secured Obligations or who grants Secured Party a lien on
any property as security for the Secured Obligations.
“
Permitted Liens ” has the meaning indicated in
Section 3.1 .
“
Related Rights ” means all chattel papers, electronic
chattel papers, payment intangibles, promissory notes, letter of
credit rights, supporting obligations, documents and instruments
relating to the Accounts or the General Intangibles and all rights
now or hereafter existing in and to all security agreements,
leases, and other contracts securing or otherwise relating to any
Accounts or General Intangibles or any such chattel papers,
electronic chattel papers, payment intangibles, promissory notes,
letter of credit rights, documents and instruments.
“
Secured Obligations ” has the meaning indicated in
Section 2.2 hereof.
“
Security Agreement ” means this Security Agreement, as
the same may from time to time be amended or
supplemented.
“
Security Documents ” means this Security Agreement
together with all financing statements filed in connection with
this Security Agreement.
1.4
Terms Defined in Code . Unless otherwise defined herein, all
terms used herein which are defined in the Code shall have the same
meaning herein.
ARTICLE II
SECURITY INTEREST
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2.1
Grant of Security Interest . As collateral security for all
of the Secured Obligations, Debtor hereby grants to Secured Party a
security interest in, a general lien upon, and a right of set-off
against all of Debtor’s assets, tangible or intangible,
including but not limited to the following and whether now owned or
later acquired:
(a) all
of Debtor’s accounts (as is defined in the Code) of any kind
(the “ Accounts ”); all chattel papers,
electronic chattel papers, payment intangibles, promissory notes,
letter of credit rights, documents and instruments relating to the
Accounts; and all rights in and to all security agreements, leases,
and other contracts securing or otherwise relating to any Accounts
or any such chattel papers, documents and instruments;
(b) all
of Debtor’s equipment (as defined in the Code) in all of its
forms, and wherever located, together with all parts thereof and
all accessions or additions thereto, (collectively, the “
Equipment ”);
(c) all
of Debtor’s general intangibles (as defined in the Code) of
any kind (the “ General Intangibles ”); all
chattel papers, electronic chattel papers, payment intangibles,
promissory notes, letter of credit rights, documents and
instruments relating to the General Intangibles; and all rights in
and to all security agreements, leases, and other contracts
securing or otherwise relating to any General Intangibles or any
such chattel papers, documents and instruments;
(d) all
of Debtor’s inventory (as defined in the Code) in all of its
forms, and wherever located, together with all accessions or
additions thereto and products thereof (collectively the “
Inventory ”);
(e)
all of Debtor’s investment property (as defined in the Code)
wherever located;
(f)
all of Debtor’s deposit accounts (as defined in the Code)
wherever located;
(g) any
additional tangible or intangible property from time to time
delivered to or deposited with Secured Party as security for the
Secured Obligations or otherwise pursuant to the terms of this
Security Agreement; and
(h)
the proceeds, products, supporting obligations, Related Rights,
additions to, substitutions for and accessions of any and all
Collateral described in subparagraphs (a)–(g) in this
Section 2.1 .
2.2
Secured Obligations . The security interest in, general lien
upon, and right of set-off against the Collateral is granted to
secure the following (collectively, the “ Secured
Obligations ”):
(a)
the payment of all the Obligations (as defined in the Credit
Agreement) of Debtor to Secured Party now or hereafter existing
including, without limitation, the Debt of Debtor under the
Promissory Note, and any and all renewals, extensions for any
period or rearrangement of the Obligations; and
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(b) the
performance of all obligations of Debtor under this Security
Agreement and the other agreements giving rise to the Obligations
(as defined in the Credit Agreement).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
In
order to induce Secured Party to accept this Security Agreement,
Debtor represents and warrants to Secured Party (which
representations and warranties will survive the creation of any
Secured Obligations and the extension of any credit under the
Credit Agreement) that:
3.1
Ownership and Liens . Except for the security interest of
Secured Party granted in this Security Agreement and except for
Liens, security interests and other encumbrances permitted under
the Credit Agreement (“ Permitted Liens ”),
Debtor owns good and valid title to the Collateral free and clear
of any other Liens, adverse claims or options other than Permitted
Liens. Debtor has rights in or the right, power and authority to
grant a security interest in the Collateral to Secured Party in the
manner provided herein, free and clear of any other Liens, adverse
claims and options other than Permitted Liens. No other Lien,
adverse claim or option has been created by Debtor or is known by
Debtor to exist with respect to any Collateral other than Permitted
Liens. No financing statement or other security instrument is on
file in any jurisdiction covering any part of the Collateral other
than those in favor of Secured Party other than Permitted Liens. At
the time the security interest in favor of Secured Party attaches,
good and valid title to all after-acquired property included within
the Collateral, free and clear of any other Liens, adverse claims
or options (other than those permitted by the first sentence of
this Section 3.1 ) will be vested in Debtor.
3.2
Status of Accounts . Each Account hereafter arising will
represent and to the best knowledge of Debtor, each Account now
existing represents, the valid and legally enforceable obligations
of a bona fide account debtor and is not and will not be subject to
contra accounts, set-offs, defenses or counterclaims by or
available to account debtors obligated on the Accounts except as
disclosed to Secured Party in writing; and the amount shown as to
each Account on Debtor’s books will be the true and
undisputed amount owing and unpaid thereon, subject to any
discounts, allowances, rebates, credits and adjustments to which
the account debtor has a right and which have arisen in
Debtor’s ordinary course of business or which have otherwise
been disclosed to Secured Party in writing.
3.3
Status of Related Rights . All Related Rights are, and those
hereafter arising will be, valid and genuine.
3.4
Inventory Not Covered by Other Documents . None of the
Inventory is, and at the time the security interest in favor of
Secured Party attaches none of the Inventory hereafter acquired
will be, covered by any document (as defined in the
Code).
3.5
Name; Organization; Authority . The exact legal name of
Debtor is set forth in the opening paragraph of this Security
Agreement. Debtor is a corporation, duly organized, validly
existing, and in good standing under the laws of the State of
Nevada. Debtor is qualified to do business and in good standing in
each other state in which the nature of its business requires it
to
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be so
qualified, except where the failure to so qualify could not
reasonably be expected to cause a Material Adverse Effect. The
execution, delivery and performance of this Security Agreement has
been duly authorized by all corporate action, and this Security
Agreement constitutes the valid and binding obligation of Debtor,
enforceable against Debtor in accordance with its terms, except as
the enforceability thereof may be limited or affected by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors rights generally and by
general equitable principles.
3.6
Location . Debtor’s chief executive office and chief
place of business is located at the address set forth in the
opening paragraph of this Security Agreement. The office where
Debtor keeps its records concerning the Accounts and the General
Intangibles and the original of all the Related Rights has the same
address as Debtor’s chief executive office and chief place of
business. Debtor’s Inventory and Equipment (other than mobile
goods) are located in the States of California, Nevada and New
Mexico and such other states as Debtor shall have from time to time
given notice of to Lender.
3.7
Secured Party’s Security Interest . This Security
Agreement creates a valid and binding security interest in the
Collateral securing the Secured Obligations. Upon filing the
financing statements described in Section 4.10 of this
Security Agreement covering the Collateral in the Office of the
Secretary of State of the State of Nevada, Secured Party will have
a fully perfected security interest in that Collateral in which a
security interest may be perfected by filing, subject only to
Permitted Liens. No further or subsequent filing, recording,
registration or other public notice of such security interest is
necessary in any office or jurisdiction in order to perfect such
security interest or to continue, preserve or protect such security
interest except for continuation statements or for filings upon the
occurrence of any of the events stated in Section 4.10 of
this Security Agreement. Such perfected security interest in the
Collateral constitutes a first-priority security interest under the
Code, subject only to Permitted Liens.
ARTICLE IV
COVENANTS AND AGREEMENTS
A
deviation from the provisions of this Article IV shall not
constitute a Default under this Security Agreement if such
deviation is consented to in writing (in the manner provided in the
Credit Agreement) in advance by Secured Party. Without the prior
written consent of Secured Party, Debtor will at all times comply
with the covenants contained in this Article IV , from the
date hereof and for so long as any part of the Secured Obligations
(other than indemnity obligations and similar obligations that
survive the termination of the Loan Documents for which no notice
of a claim has been received by Debtor) or the commitment of
Secured Party to make loans under the Credit Agreement is
outstanding.
4.1
Title; Prohibited Liens and Filings . Debtor agrees to
protect the title to the Collateral. Debtor will not pledge,
mortgage, otherwise encumber, create or suffer a Lien to exist on
any of the Collateral (other than in favor of Secured Party or as
permitted by the Credit Agreement) or sell, assign or otherwise
transfer any of the Collateral (other than as permitted by the
Credit Agreement) to or in favor of any person other than Secured
Party. Debtor will not file or permit to be filed or recorded any
financing statement or other security instrument with
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respect to
the Collateral other than in favor of Secured Party or as permitted
by the Credit Agreement.
4.2
Taxes, Etc . Debtor agrees to pay prior to delinquency all
taxes, charges, Liens and assessments against the Collateral which,
if unpaid, might result in the imposition of a Lien on the
Collateral; provided , however , Debtor shall not be
required to pay any tax, charge, Lien or assessment that is not yet
past due or is being contested in good faith by appropriate
proceedings diligently conducted by or on behalf of Debtor and if
Debtor shall have set up reserves therefor adequate under
GAAP.
4.3
Possession of Collateral . 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
Debtor’s possession or control at all times (except where
Secured Party chooses to perfect its security interest by
possession in addition to the filing of a financing statement) at
Debtor’s risk of loss and shall (except for temporary removal
consistent with its normal use) be kept at locations owned or
leased by Borrowers.
4.4
Inspection of Collateral . Upon reasonable notice, Secured
Party may from time to time during normal business hours, inspect
Debtor’s records concerning the Accounts and the General
Intangibles, the originals of the Related Rights, the Equipment,
the Inventory and other Collateral but not as to unreasonably
interfere with the business of Debtor.
4.5
Further Assurances . Debtor will from time to time sign,
execute, deliver and file, alone or with Secured Party, upon
reasonable request, any financing statements, security agreements
or other documents necessary or convenient to perfect or continue
in favor of Secured Party a first-priority security interest in the
Collateral; procure any necessary instruments or documents as may
be reasonably requested by Secured Party; and take all further
action that may be necessary or desirable, or that Secured Party
may reasonably request, to confirm, perfect, preserve and protect
the security interests intended to be granted hereby.
Notwithstanding the previous sentence, however, Debtor hereby
authorizes Secured Party to execute and deliver on behalf of Debtor
and to file such financing statements, security agreements and
other documents without the signature of Debtor either in Secured
Party’s name or in the name of Debtor and as attorney-in-fact
for Debtor. Debtor shall do all such additional and further acts or
things, give such assurances and execute such documents or
instruments as Secured Party reasonably requires to vest more
completely in and assure to Secured Party its rights under this
Security Agreement, including, without limiting the generality of
the foregoing, (a) marking conspicuously each chattel paper or
electronic chattel paper included in the Collateral and, at the
request of Secured Party, each of Debtor’s records pertaining
to the Collateral with a legend, in form and substance satisfactory
to Secured Party, indicating that such chattel paper or Collateral
is subject to the security interest granted by this Security
Agreement and (b) if any Account, General Intangible or Related
Right is evidenced by a promissory note, chattel paper, electronic
chattel paper or other instrument, transferring, delivering,
assigning to Secured Party such promissory note, chattel paper,
electronic chattel paper or other instrument duly endorsed and
authenticated and accompanied by duly executed instruments of
transfer and assignment, all in form and substance reasonably
satisfactory to Secured Party, to be held by Secured Party as
Collateral under this Security Agreement.
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4.6
Filing Reproductions . At the option of Secured Party, a
carbon, photographic or other reproduction of this Security
Agreement or of a financing statement covering the Collateral shall
be sufficient as a financing statement and may be filed as a
financing statement.
4.7
Delivery of Information . Debtor will transmit promptly to
Secured Party all information that Debtor may have or receive with
respect to (a) the Collateral or (b) account debtors or obligors in
respect of the Accounts, the General Intangibles and the Related
Rights, in each case which could reasonably be expected to
materially and adversely affect the aggregate value of the
Collateral or Secured Party’s rights or remedies with respect
thereto.
4.8
Compromise of Collateral . Debtor will not adjust, settle or
compromise any of the Accounts, the General Intangibles or the
Related Rights without the prior written consent of Secured Party,
other than in a manner that does not materially affect the
aggregate value of the Collateral and is in the ordinary course of
business.
4.9
Expenses . Debtor agrees to pay to Secured Party at Secured
Party’s offices, all advances, charges, costs and expenses
(including reasonable attorneys’ fees and legal expenses)
incurred by Secured Party in connection with the transaction which
gives rise to this Security Agreement, in connection with
confirming, perfecting and preserving the security interest created
under this Security Agreement, in connection with protecting
Secured Party against the claims or interests of any Person against
the Collateral, and in exercising any right, power or remedy
conferred by this Security Agreement or by law or in equity
(including, but not limited to, reasonable attorneys’ fees
and legal expenses incurred by Secured Party in the collection of
instruments deposited with or purchased by Secured Party and
amounts incurred in connection with the operation, maintenance or
foreclosure of any or all of the Collateral). The amount of all
such advances, charges, costs and expenses shall be due and payable
by Debtor to Secured Party upon ten (10) days after invoice or
demand by Secured Party together with interest thereon from the due
date at the Default Rate as provided in the Credit
Agreement.
4.10
Financing Statement Filings; Notifications . Debtor
recognizes that financing statements pertaining to the Collateral
will be filed with the Office of the Secretary of State of the
State of Nevada. Debtor will promptly notify Secured Party of any
condition or event that may change the proper location for the
filing of any financing statements or other public notice or
recordings for the purpose of perfecting a security interest in the
Collateral. Without limiting the generality of the foregoing,
Debtor will (a) promptly notify Secured Party of any change to a
jurisdiction other than as represented in Section 3.5 or
Section 3.6 ( i ) in the location of Debtor’s
chief executive office or chief plac
