Exhibit 10.2
SECURITY AND COLLATERAL AGENT AGREEMENT
THIS
SECURITY AND COLLATERAL AGENT AGREEMENT is made as of January
26,
2005, by Investrust, N.A., a nationally chartered trust company
(including any
successor thereto, the "Collateral Agent"), The Beard Company, an
Oklahoma
corporation (the "Borrower"), and Beard Technologies, Inc., an
Oklahoma
corporation ("BTI"), for the benefit of the holders (the "Note
Holders") of
Borrower's 12% Convertible Subordinated Notes due February 15, 2010
(the
"Notes"). All terms used but not otherwise defined in this
Agreement have the
same meanings as set forth in the Notes.
The
parties agree as follows:
1.
Appointment of Collateral Agent. In the Notes each of the Note
Holders
appointed Collateral Agent to serve as collateral agent on the
terms in this
Agreement and for the benefit of the Note Holders. Collateral Agent
accepts this
appointment.
2.
Grant of Security Interest.
(a)
BTI grants to Collateral Agent, for the benefit of the Note
Holders, a
security interest in all equipment of BTI now owned or hereafter
acquired and
all additions and accessions thereto (the "Collateral").
(b)
This Agreement secures the following (the "Obligations"):
(i) Borrower's obligations under the Notes and this Agreement;
(ii) The repayment of (a) any amounts that Collateral Agent may
advance or spend for the maintenance or preservation of the
Collateral and
(b)
any other expenditures that Collateral Agent may make under
this
Agreement or for the benefit of the Note Holders;
(iii) All amounts owed by Borrower or BTI under any
modifications,
renewals, or extensions of any of the foregoing obligations;
and
(iv) Any of the foregoing that arise after the filing of a petition
by
or
against Borrower or BTI under the U.S. Bankruptcy Code, even if
the
obligations do not accrue because of the automatic stay under ss.
362 of
the
Bankruptcy Code or otherwise.
3.
Perfection of Security Interest. BTI authorizes Collateral Agent
to
file, and ratifies any filing by the Collateral Agent prior to the
execution of
this Agreement of, any financing statements, continuation
statements,
certificates, and other documents requested by Collateral Agent to
perfect or
renew the security interest created by this Agreement. BTI will
execute and
deliver to Collateral Agent financing statements, certificates, and
other
documents requested by Collateral Agent to perfect the security
interest in any
Collateral now owned or hereafter acquired by Borrower or in any
replacements or
proceeds of the Collateral.
4.
Termination of Security Interest. The Security Interest shall
terminate
upon Borrower's delivery of a certificate (the "Termination
Notice") signed by
an officer of Borrower certifying to Collateral Agent that Borrower
has obtained
capital (by any combination of USDA-guaranteed financing, bank
financing,
additional equity or debt offerings, the proceeds from the Notes,
or a sale of
an equity interest in Borrower's subsidiary formed to perform the
Pinnacle
Project) in an amount not less than $7,400,000 to finance the pond
fines
recovery project in West Virginia for Pinnacle Mining Company, LLC
(the
"Pinnacle Project"). Upon delivery of the Termination Notice, this
Agreement
shall terminate and Collateral Agent shall cause the secured party
of record for
any financing statements filed pursuant to this Agreement to
promptly file a
termination statement for any financing statements so filed.
5.
Possession. BTI shall have possession of the Collateral, except
where
expressly otherwise provided in this Agreement. Where Collateral is
in the
possession of a third party, BTI will join with Collateral Agent in
notifying
the third party of Collateral Agent's security interest and
obtaining an
acknowledgment in an authenticated record from the third party that
it is
holding the Collateral for the benefit of Collateral Agent.
6.
Covenants Concerning BTI and Collateral.
(a)
Inspection. Collateral Agent may inspect the Collateral at any
time
upon reasonable notice.
(b)
No Disposition. Except as approved in writing by Collateral Agent,
BTI
shall not sell, transfer, lease, or otherwise dispose of any item
of Collateral,
other than replacing such items in the ordinary course of business,
or grant any
other security interest in any of the Collateral.
(c)
Risk of Loss and Insurance. BTI has the risk of loss of the
Collateral.
Collateral Agent is not responsible for any injury to, loss to, or
loss in value
of the Collateral. BTI will continuously maintain insurance on the
Collateral
with types and amounts of coverages no less than the lesser of (a)
the types and
amounts as of the execution of this Agreement, and (b) such types
and amounts as
are usual and customary in BTI's industry, with Collateral Agent
named as loss
payee and as an additional insured. BTI will, upon request by
Collateral Agent,
deliver to Collateral Agent certificates evidencing such coverage
and evidence
of the payment of all premiums.
(d)
Maintenance. BTI will maintain the Collateral in operating
condition,
ordinary wear and tear and casualty excepted.
(e)
Taxes. BTI will pay before delinquency any tax or other
governmental
charge on the Collateral.
(f)
Existence. BTI shall preserve its corporate existence 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.
BTI shall not
change the state of its incorporation and shall not change its
corporate name
without providing Collateral Agent with 30 days prior notice.
(g)
Personal Property. BTI will not affix any Collateral to any
real
property in any manner that would change the nature of the property
from that of
personal property.
(h)
Liens. BTI will not create, incur or permit to exist on the
Collateral
any security interest, mortgage, pledge, lien, claim, charge, or
encumbrance,
whether statutory, consensual, or otherwise (collectively, "Liens")
and shall
defend the Collateral and Collateral Agent's first priority
security interest in
the Collateral against the claims of all other persons.
(i)
Use. BTI shall use the Collateral and operate its business in
compliance with all applicable laws, regulations, and
ordinances.
7.
BTI's Representations and Warranties. BTI represents and warrants
to
Collateral Agent that:
(a)
Title. BTI owns the Collateral free and clear of all Liens. There
is no
financing statement covering or purporting to cover any interest of
BTI in the
Collateral filed in any jurisdiction.
(b)
State of Organization and Name. BTI is and has always been a
corporation organized and in good standing under the laws of the
State of
Oklahoma. BTI's exact legal name is as stated in the introductory
paragraph of
this Agreement. Prior to April 1994, BTI's legal name was White
Eagle, Inc.
Since April 1994 BTI has never had or done business under any name
other than
its current name.
(c)
Company Authorization. The execution, delivery, and performance by
BTI
of this Agreement are within BTI's corporate powers, have been duly
authorized
by all necessary corporate action, require no action by or in
respect of, or
filing with, any governmental authority, and do not contravene, or
constitute a
default under, any provision of applicable law or regulation or of
the
certificate of incorporation or bylaws of BTI or of any judgment,
injunction,
order, or decree or any indenture, mortgage, deed of trust, credit
agreement, or
loan agreement, or any other material agreement or material
instrument binding
upon BTI, or result in the creation or imposition of any Lien on
any of the
Collateral.
(d)
Litigation. There is no action, suit, or proceeding pending
against, or
to the knowledge of BTI threatened against or affecting, BTI before
any court or
arbitrator or any governmental authority.
(e)
Collateral. All of the Collateral is and will be in operating
condition
and not subject to any licensing, patent, royalty, trademark, trade
name, or
copyright agreements with any third parties or any infringement
claims, and the
use, sale, or other disposition of any of the Inventory by
Collateral Agent
after an Event of Default shall not require the consent of any
person and shall
not constitute a breach or default under any contract or agreement
to which BTI
is a party or to which any of the Collateral is subject.
8.
Default. BTI will be in default under this Agreement if any of
the
following (each an "Event of Default") occurs:
(a)
Default under Notes. Any Event of Default by Borrower under the
Notes;
(b)
Unauthorized Transfer. BTI fails to perform any obligation under
this
Agreement or any of BTI's representations or warranties in this
Agreement are or
become inaccurate in any respect and such default or inaccuracy
continues after
[30] days notice from Collateral Agent;
(c)
Attachment. Any of the Collateral becomes subject to
attachment,
execution or levy;
(d)
Bankruptcy. Borrower or BTI voluntarily files a petition for
bankruptcy
or reorganization; a petition in bankruptcy is filed against
Borrower or BTI; a
receiver or other representative is appointed for Borrower or BTI
or its
business or assets; or Borrower or BTI makes an assignment for the
benefit of
its creditors; and
(e)
Evidence of Lack of Priority. Collateral Agent's security interest
in
the Collateral is or becomes not prior to all other security
interests.
9.
Remedies Upon Event of Default. Upon the written demand by Note
Holders
holding a majority of the aggregate outstanding principal amounts
of the Notes
(the "Majority Holders"), upon an Event of Default:
9.1
General. Collateral Agent may preserve any remedy at law
(including
those available to secured parties under the Uniform Commercial
Code) or in
equity to collect, enforce, or satisfy any obligations.
9.2
Specific. Collateral Agent may pursue any of the following
remedies
separately, successively, or simultaneously:
(a)
File suit and obtain judgment and, in conjunction with any action,
seek
any ancillary remedies provided by law, including levy of
attachment and
garnishment.
(b)
Take possession of any Collateral if not already in its
possession
without demand and without legal process. Upon Collateral Agent's
demand, BTI
shall assemble and make the Collateral available to Collateral
Agent as it
directs. BTI grants to Collateral Agent the right to enter into or
on any
premises where Collateral may be located.
(c)
Without taking possession, sell, lease or otherwise dispose of
the
Collateral a
