THIRD AMENDED AND RESTATED
SECURITY AGREEMENT
THIS THIRD AMENDED AND RESTATED
SECURITY AGREEMENT (this "Restated Security Agreement"), dated
effective as of November 4, 2005, is between and among UNIT
DRILLING COMPANY, an Oklahoma corporation ("Debtor") and BANK OF
OKLAHOMA, NATIONAL ASSOCIATION ("BOK"), as collateral agent for
BANK OF AMERICA, N.A. ("B of A"), HARRIS NESBITT FINANCING, INC.
("BMO"), COMPASS BANK ("Compass"), and BOK (together with any other
parties hereafter signatory to the Credit Agreement [hereinafter
defined] or amendments or restatements thereof being collectively
referred to herein as the "Lenders") (in such capacity BOK as
collateral agent, as secured party for such Lenders, is herein
referred to as the "Agent").
WHEREAS, Unit Corporation, a
Delaware corporation, Superior Pipeline Company, L.L.C., an
Oklahoma limited liability company, Unit Petroleum Company, an
Oklahoma corporation, Petroleum Supply Company, an Oklahoma
corporation, Unit Energy Canada Inc., an Alberta, Canada
corporation, SerDrilco, Inc., an Oklahoma corporation, and Debtor
(collectively, the "Borrowers") have entered into that certain
Credit Agreement dated as of January 30, 2004, as amended by the
First Amendment thereto dated as of June 1, 2005, and as further
amended by the Second Amendment thereto dated effective as of the
date hereof (as the same may be amended or modified from time to
time, collectively referred to herein as the "Credit Agreement")
with the Lenders signatory parties thereto and the Agent pursuant
to which the Lenders have agreed to make loans and extend credit to
the Borrowers, all as more particularly described in the Credit
Agreement, including without limitation, refinancing the Loans and
joint and several Obligations of the Borrowers incurred pursuant to
those several revolving credit facilities established in the
Existing Credit Agreement (as described and defined in the Credit
Agreement);
WHEREAS, the joint and several
Obligations of the Borrowers pursuant to the Existing Credit
Agreement have been secured by a first and prior security interest
in and lien against the Collateral more particularly described and
defined in that certain First Amended Security Agreement between
and among the Borrowers, as debtors, and the Agent, as secured
party for the benefit of the Lenders therein described and defined,
dated as of July 24, 2001, as amended by the Second Amended and
Restated Security Agreement dated as of January 30, 2004 (together
with the Prior Security Agreement therein described and defined,
collectively the "Prior Security Agreement");
WHEREAS, in connection with the
execution and delivery of the Second Amendment to Credit Agreement
dated as of even date herewith and the modification of the
Aggregate Commitment and the Maximum Credit Amount, it is a
condition precedent to the obligations of the Lenders under the
Credit Agreement that Debtor execute and deliver this Security
Agreement to restate and continue in full force and effect the
liens, including the priorities thereof, of the Prior Security
Agreement without any interruption whatsoever, against the
Collateral as therein and herein described and defined;
NOW, THEREFORE, for and in
consideration of the loans and extension of credit described in the
Credit Agreement and the mutual covenants and promises therein
contained, the Lenders, the Agent and Debtor agree as
follows:
1.
Definitions . When used herein, unless the context shall
otherwise require, the following terms shall have the following
meanings:
The terms "Default," "Material
Adverse Effect," "Note," "Obligations", "Permitted Encumbrances"
and all other terms used but not defined herein, shall have the
meanings assigned thereto in the Credit Agreement or in the UCC, as
applicable.
" Collateral " shall mean all
property or rights in which a security interest is granted
hereunder.
" Default Rate " shall mean
the rate(s) of interest set forth in Section 2.12 of the Credit
Agreement.
"Governmental
Authority " means any
federal, state, local or foreign court or governmental agency,
authority, instrumentality or regulatory body.
" UCC " shall mean the
Uniform Commercial Code now or hereafter in effect or modified,
amended or re-enacted from time to time in the State of Oklahoma
or, if it is determined by a court of law that the Laws of another
State or jurisdiction should be applied with respect to any of the
Collateral, then the Uniform Commercial Code or similar Laws now or
hereafter in effect or modified, amended or re-enacted from time to
time in the relevant State or jurisdiction with respect to that
portion of the Collateral.
Unless the context otherwise
requires, terms used herein that are defined in the UCC such as the
terms "accounts," "chattel," "commercial tort claims," "deposit
accounts," "equipment," "fixtures," "general intangibles," "goods,"
"instruments," "inventory," "payment intangibles," "proceeds" and
"supporting obligations" have the respective meanings set forth
therein.
The following rules of
interpretation shall apply, unless the context otherwise requires:
(a) all terms defined herein in the singular shall include the
plural, as the context requires, and vice-versa; (b) the
descriptive headings of the Articles and Sections of this Security
Agreement are inserted for convenience only and shall not be used
in the construction of the content of this Security Agreement; (c)
the term "or" is not exclusive; (d) the term "including" (or any
form thereof) shall not be limiting or exclusive; (e) all
references to the "Credit Agreement" include any and all
modifications, amendments or supplements thereto, any and all
restatements, renewals and extensions thereof, and any other loan
agreements or financing agreements (however designated) from time
to time entered into between Debtor and Agent.
2. Grant
of Security Interest . As security for the payment of the
Obligations, Debtor hereby assigns, confirms and grants to the
Agent, for the benefit of the Lenders, a first and prior continuous
and continuing security interest in, and assignment of, all of the
following, whether
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now or hereafter existing or
acquired (except as otherwise provided in the Credit Agreement or
herein):
(a)
All of Debtor's drilling rigs
identified on Schedule 1 hereto (collectively the "Rigs")
and related equipment, inventory, fixtures, parts, drill pipe,
machinery, tools, supplies and other items and types of goods now
or hereafter used or acquired in connection with the Rigs, together
with all additions, accessions, replacements or substitutions to or
for the Rigs, together with all accounts, general intangibles,
payment intangibles, chattel paper (including electronic chattel
paper), commercial tort claims, instruments (including promissory
notes) and supporting obligations relating to the Rigs and all
products and proceeds of and all additions and accessions to the
Rigs and all replacements and substitutions for the Rigs, including
without limitation, insurance proceeds; and
(b)
All money, proceeds and collections
arising from or by virtue of the sale, lease, rental, use or other
operation or disposition of any part of the property described in
Paragraph 2(a) above, and whatever else is received upon any
exchange, collection or other disposition of any such property,
including all guarantees, supporting obligations and other security
therefor, all right, title and interest of Debtor in such property
giving rise thereto, all insurance payable by reason of loss or
damage to any thereof, and any and all replacements and
substitutions therefor, including all proceeds thereof.
3.
Warranties . Debtor warrants that except as otherwise
expressly permitted in the Credit Agreement: (i) no financing
statement (other than any which may have been filed on behalf of
the Agent or the Lenders) covering any of the Collateral is on file
in any public office; (ii) Debtor is and will be the lawful owner
of all of the Collateral, free of all liens and claims whatsoever,
other than the security interest hereunder, with full power and
authority to execute this Security Agreement and to perform its
obligations hereunder, and to subject the Collateral to the
security interest hereunder; and (iii) all information with respect
to the Collateral set forth on any schedule, certificate or other
writing at any time heretofore or hereafter furnished by Debtor or
the Borrowers to the Agent or the Lenders, is and will be true and
correct in all material respects as of the date
furnished.
4. Use
and Possession . As long as there exists no Default, Debtor may
have possession of the Collateral and use the same in any lawful
manner not inconsistent with this Security Agreement, with any
applicable Law or regulation or with any policy of insurance on any
of such Collateral.
5.
Collateral Reports . Debtor will from time to time, as the
Agent may reasonably request, deliver to the Agent a schedule
identifying any and all items of the Collateral then owned by
Debtor. Nothing in this Section 5 shall be construed to authorize
the sale, transfer, exchange or other disposition of any item of
the Collateral by Debtor without the express written consent of the
Lenders. Debtor shall immediately notify the Agent of the
occurrence of any event causing loss or depreciation in value
(except for ordinary wear and tear and loss or depreciation in
value) of the Collateral and the amount of such loss or
depreciation.
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6.
Covenants . Debtor covenants and agrees
with Agent that, from and after the date of this Security Agreement
and until the Obligations are irrevocably paid and satisfied in
full and all commitments under the Credit Agreement have been
terminated:
(a)
Recordings; Filings; Further
Assurances . Debtor
authorizes Agent to file one or more financing or continuation
statements and amendments thereto relative to all or part of the
Collateral. From time to time, at the expense of Debtor, Debtor
will promptly execute and deliver all further instruments and
documents and take all further action that may be necessary, or
that Agent may reasonably request, in order to continue, perfect
and protect any security interest granted hereby or enable Agent to
exercise and enforce its rights and remedies hereunder with respect
to the Collateral. Without limiting the generality of the
foregoing, Debtor (i) authorizes the execution and filing such
instruments or notices as may be necessary or desirable, or as
Agent may reasonably request, in order to perfect and preserve the
security interest granted or purported to be granted by this
Security Agreement; and (ii) will prepare and furnish to Agent upon
request such lists of its Rigs as Agent may from time to time
reasonably request.
(b)
Records and Inspection
. Debtor will keep and make
available to Agent at reasonable times, accurate and complete books
and records with respect to the Collateral and Debtor's business
generally, in accordance with generally accepted accounting
principles consistently applied or other reasonable and sound
business practices, including a record of all payments received and
any credits granted on any of its accounts pertaining to a Rig.
Agent will have the right to inspect and copy such records and to
inspect the Collateral at reasonable times and to discuss Debtor's
affairs with officers of Debtor and with its independent
accountants. For the further security of Agent, Agent will have a
security interest in all such books and records pertaining to the
Collateral, and after the occurrence of any Event of Default,
Debtor will turn over any such books and records to Agent or to its
representatives during normal business hours at the written request
of Agent.
(c)
Location of Office and Records;
Change of Name . Debtor
will keep its chief place of business and chief executive office
and the office where it keeps its records concerning its accounts,
full and complete copies of its contracts pertaining to a Rig and
chattel paper at the location specified on the signature page
hereof, or, with the prior written consent of Agent (such consent
not to be unreasonably withheld, conditioned or delayed), at such
other location in a jurisdiction in which all actions required by
Section 6(a) of this Security Agreement have been taken with
respect to the Collateral. Debtor will not change its name,
identity or organizational structure (including the state or
jurisdiction in which Debtor is incorporated, i.e., its "location"
as a negotiated organization, as such terms are defined in the UCC)
unless it shall have given Agent at least 30 days' prior written
notice thereof, and prior to effecting any such change, taken such
steps as Agent may deem necessary or advisable to continue the
perfection and priority of the security interest granted
hereunder.
(d)
Debtor to Pay Taxes
. Debtor will pay promptly when due
all property and other taxes, assessments, and governmental charges
or levies imposed upon and claims
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(including claims for labor,
materials and supplies) against the Collateral, except to the
extent (i) the validity thereof is being contested in good faith
and by proper proceedings, (ii) proper reserves are being
maintained in connection therewith, in accordance with generally
accepted accounting principles, consistently applied, and (iii) the
proceedings referred to in clause (i) preceding could not subject
Agent to any civil or criminal penalty or liability or involve any
risk of sale, forfeiture or loss of any of the
Collateral.
(e)
Transfers and Other
Liens . Debtor will not:
(i) sell, assign, license or otherwise dispose of or grant any
option with respect to any of the Collateral (except sales of
Inventory in the ordinary course of business), (ii) create or
suffer to exist any Lien upon or with respect to any of its
Collateral, except for Permitted Encumbrances, or (iii) take any
action in connection with any Contract pertaining to a Rig that
would impair the value of the interest or rights of Debtor
thereunder or that would materially impair the interests or rights
of Agent.
(f)
Bailee . If any of the Collateral is at any time in the
possession or control of any warehouseman or bailee, Debtor will
notify in writing such warehouseman or bailee of the security
interest created hereby, will within 60 days obtain such
warehouseman's or bailee's agreement in writing to hold all such
Collateral for Agent's account subject to Agent's instructions, and
will cause such warehousemen or bailee to issue and deliver to
Agent warehouse receipts, bills of lading or any similar documents
relating to such Collateral in Agent's name and in form and
substance acceptable to Agent.
(g)
Possession and Control
. Debtor will (i) deliver to and
cause Agent to have possession of any Collateral, including
instruments, certificates of deposit and documents, as to which
possession is a proper method of perfection under the UCC, and (ii)
cause Agent to have control of any deposit accounts, certificates
of deposit, electronic chattel paper and other items of Collateral
as to which control is a proper method of perfection under the
UCC.
(x)
In connection with each deposit
account included in the Collateral, Debtor (excluding all Excluded
Accounts) will cause the depositary bank to agree that it will
comply with instructions originated by Agent directing disposition
of the funds in the deposit account without further consent of
Debtor or any other Person and subordinating any Lien or set-off
right of the depositary bank to the rights of Agent
hereunder.
(y)
With respect to each letter of
credit, Debtor will cause the issuer and each confirming bank or
other nominated Person to consent in writing to an assignment of
the proceeds thereof to Agent under the UCC and at the request of
Agent, Debtor will cause Agent to be substituted as beneficiary
thereunder. Prior to drawing on any letter of credit, Debtor will
give Agent at least five days' notice of its intent to do so. Any
funds received by Debtor as a result of drawing on a letter of
credit involving a Rig constitute Proceeds.
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(h)
Custody and Care of
Collateral . Agent will
have the duty to exercise reasonable care in the custody and
preservation of any instruments or securities in its possession
which are included in the Collateral, which duties shall be fully
satisfied if Agent maintains safe custody of any such instruments
or securities, and, with respect to maturities, calls, conversions,
exchanges, redemptions, offers, tenders, defaults, notices or
enforcement proceedings (each of which shall be hereinafter
referred to as "Occurrences"), if Agent, in the reasonable and good
faith exercise of its sole discretion, (i) endeavors to take such
action with respect to any of the Occurrences as Debtor may
reasonably and specifically request in writing in sufficient time
for such action to be evaluated and taken or (ii) determines that
the action requested might adversely affect the value of the
instruments or securities as collateral, the collection or
enforcement of any of the Obligations or otherwise prejudice the
interests of Agent, Agent gives reasonable notice to Debtor that
any such requested action will not be taken and if Agent makes such
determination or if Debtor fails to make such timely request, Agent
takes such other action as it deems advisable under the
circumstances. Agent will have no further obligation to ascertain
the occurrence of, or to notify Debtor with respect to, any
Occurrences and will not be deemed to assume any such obligation as
a result of the establishment by Agent of any internal procedures
with respect to any instruments or securities in its possession,
nor will Agent be deemed to assume any other responsibility for,
o
