AND RESTATED DEPOSIT ACCOUNT CONTROL AGREEMENT
EXHIBIT
99.5
AND
RESTATED DEPOSIT ACCOUNT CONTROL AGREEMENT
THIS
AMENDED AND RESTATED DEPOSIT ACCOUNT CONTROL AGREEMENT (this “Agreement”) is
entered into as of September 19, 2008, by and among the following
parties:
PARTIES:
VIKING
ASSET MANAGEMENT, LLC, a California limited liability company, as collateral
agent for the Buyers (as defined in the Purchase Agreement described below)
parties to that certain Securities Purchase Agreement dated as of April 1,
2008
(as amended, restated, supplemented or otherwise modified from time to time,
the
“Purchase Agreement”), by and among South Texas Oil Company, a Nevada
corporation, and the “Buyers” party thereto (in such capacity, the “Subordinated
Creditor”)
VIKING
ASSET MANAGEMENT, LLC, a California limited liability company, as collateral
agent for the Buyers (as defined in the Bridge Purchase Agreement described
below) parties to that certain Securities Purchase Agreement dated as of
September 19, 2008 (as amended, restated, supplemented or otherwise modified
from time to time, the “Bridge Purchase Agreement”), by and among South Texas
Oil Company, a Nevada corporation, and the “Buyers” party thereto (in such
capacity, the “Senior Creditor”; and together with the Subordinated Creditor,
the “Creditors”)
STO
Operating Company, a Texas corporation (“Customer”)
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FARGO BANK, NATIONAL ASSOCIATION (“Depository”)
BACKGROUND:
Customer
has granted to each Creditor a security interest in a deposit account maintained
by Customer with Depository and in all funds now in, or hereafter deposited
into, that account, including any interest earned thereon. The parties are
entering into this Agreement to perfect Creditors’ security interests in that
account.
NOW,
THEREFORE, in consideration of their mutual covenants and promises, the parties
agree as follows:
AGREEMENT:
1. The
Account.
Depository represents and warrants to each Creditor that:
(a) Customer
maintains deposit account number 7476-409011 with Depository (said account
and,
if it is a certificate of deposit or other time deposit, any renewal thereof
shall be referred to as the “Account”). The Account is a demand deposit account.
(b) As
of the
date of this Agreement Depository does not know of any claim to or interest
in
the Account, except for claims and interests of the parties hereto.
2. Control
of Account by Creditors; Customer’s Rights in Account.
(a) Depository
will comply with instructions (“Orders”) originated by Controlling Creditor for
the disposition of funds in the Account without further consent from Customer
or
the other Creditor and without regard to any inconsistent or conflicting Orders
given to Depository by Customer or the other Creditor. In addition, at all
times
when Subordinated Creditor is not the Controlling Creditor, Depository will
also, if, and only if, consented to in writing by Senior Creditor, comply with
all Orders originated by Subordinated Creditor for the disposition of funds
in
the Account without further consent from Customer and without regard to any
inconsistent or conflicting Orders given to Depository by Customer provided
that
Depository shall, in all cases, have a reasonable period of time to comply
with
any Order. As used herein, “Controlling Creditor” means (i) Senior Creditor,
until such time as Senior Creditor has provided the Depository with a written
notice that Senior Creditor has ceased to be the Controlling Creditor hereunder
(such notice being the “Controlling Creditor Notice”), and (ii) thereafter,
“Controlling Creditor ” shall mean the Subordinated Creditor. It is understood
and agreed hereby that the Depositor shall rely exclusively on a Controlling
Creditor Notice as to the determination of whether the Senior Creditor or the
Subordinated Creditor is the Controlling Creditor hereunder and shall be under
no obligation to make any independent investigation thereof.
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(b) The
provisions of the paragraph checked below shall apply (only one of the
paragraphs below should be checked, and if none or both of them are checked,
then the provisions of the first paragraph titled “Account Not Restricted
Immediately” shall apply):
_X__ Account
Not Restricted Immediately.
Notwithstanding the provisions of Section 2(a) hereof, unless and until
Controlling Creditor delivers to Depository an Order directing Depository not
to
act on Customer’s Orders (a “Control Notice”), Depository may continue to comply
with Orders originated by Customer, including Orders for the withdrawal of
funds
from the Account, the payment of interest earned on the Account and the renewal
or closing of the Account.
___ Account
Restricted Immediately.
Except
as provided in this Agreement or as otherwise agreed to by Controlling Creditor
in writing, as of and after the date of this Agreement Customer may not make
debits to or withdrawals from the Account and shall have no access to the
Account, and Controlling Creditor shall have exclusive access to the Account.
If
the Account is a certificate of deposit or other time deposit, then at the
expiration of its term, unless Depository has received an Order to the contrary
from Controlling Creditor, the Account shall be renewed for a term, which is
equal to the immediately preceding term.
(c) Before
Controlling Creditor attempts to give Depository any Orders concerning the
Account, Controlling Creditor shall deliver to Depository such documentation
as
Depository may from time to time reasonably request to evidence the authority
of
those partners, officers, employees or agents whom Controlling Creditor may
designate to give Orders.
(d) Unless
otherwise agreed in writing between Depository and Controlling Creditor,
Depository will transfer funds from the Account to Controlling Creditor in
response to an Order from Controlling Creditor in accordance with this Agreement
on a Banking Day (a day on which Depository is open to conduct its regular
banking business, other than a Saturday, Sunday or public holiday), if
Depository receives the Order on such Banking Day before the deadline
established by Depository from time to time for such transfer requests, and
the
amount requested to be transferred does not exceed the collected and available
balance in the Account at the beginning of such Banking Day as determined by
Depository after deducting the amount of all Returned Items (as defined in
Section 3(a) hereof).
(e) Unless
otherwise agreed in writing between Depository and Controlling Creditor,
transfers of funds from the Account to Controlling Creditor shall be made using
the Fedwire system unless for any reason the Fedwire system is unavailable,
in
which case Depository will determine the funds transfer system to be used in
making such transfer and the means by which such transfer will be made.
Controlling Creditor shall provide Depository with such information as
Depository may require to make such transfer, including the name and routing
number of Controlling Creditor’s bank and the account number of Controlling
Creditor’s account at such bank to which the funds are to be transferred.
Customer and Controlling Creditor understand that a funds transfer by Depository
may be delayed or not made if the transfer would cause Depository to violate
any
applicable law or regulation.
3. Priority
of Creditors’ Security Interest; Rights Reserved by Depository.
(a) All
of
Depository's present and future rights against the Account are subordinate
to
Creditors’ security interests therein; provided however, that Creditors agree
that nothing herein subordinates or waives, and that Depository expressly
reserves, all of Depository's present and future rights (whether described
as
rights of setoff, banker’s lien, chargeback or otherwise, and whether available
to Depository under law or any other agreement between Depository and Customer
concerning the Account, or otherwise) with respect to: (i) any item deposited
to
the Account and returned unpaid, whether for insufficient funds or for any
other
reason, and without regard to the timeliness of such return or the occurrence
or
timeliness of any drawee’s notice of non-payment; (ii) any item subject to a
claim against Depository of breach of transfer or presentment warranty under
the
Uniform Commercial Code, as adopted in the applicable state; (iii) any automated
clearing house (“ACH”) entry credited to the Account and returned unpaid or
subject to an adjustment entry under applicable clearing house rules, whether
for insufficient funds or for any other reason, and without regard to the
timeliness of such return or adjustment; (iv) any credit to the Account from
a
merchant card transaction, against which a contractual demand for chargeback
has
been made; (v) any credit to the Account made in error; and (vi) Depository’s
usual and customary charges for services rendered in connection with the
Account. Items, entries, and transactions described in clauses (i) through
(v)
of this paragraph are hereinafter collectively referred to as “Returned
Items”.
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(b) Except
as
otherwise required by law, Depository will not agree with any third party to
comply with Orders originated by such third party.
4. Returned
Item Amounts.
Customer and Creditors understand and agree that Depository will collect the
amount of each Returned Item by debiting the Account. Customer shall pay the
amount of each Returned Item immediately upon demand to the extent there are
not
sufficient funds in the Account to cover such amount on the day of the debit.
Controlling Creditor shall pay to Depository, within twenty (20) days after
demand on Controlling Creditor by Depository, any such amount that has not
been
paid in full by Customer within ten (10) days after demand on Customer by
Depository to the extent that a Control Notice was in effect at the time the
Returned Item arose and the Controlling Creditor received proceeds from the
corresponding Returned Item; provided however, that if Depository is stayed
from
making such demand upon Customer as a result of a bankruptcy or similar
proceeding, then Depository shall be deemed to have made such demand upon
Customer at the commencement of such proceeding. Depository agrees that any
demand upon Controlling Creditor for payment of such amount shall be made within
one hundred twenty (120) days after termination of this Agreement.
5. Statements;
Notices of Adverse Claims.
Depository will send copies of all statements for the Account simultaneously
to
Customer and Creditors. Depository may disclose to any Creditor such other
information concerning the Account as such Creditor may from time to time
request; provided however, that Depository shall have no duty or obligation
to
comply with any such request. Except as otherwise required by law, Depository
will use reasonable efforts promptly to notify Creditors and Customer if
Depository receives a notice that any other person claims that it has a property
interest in the Account. Customer and each Creditor shall have thirty (30)
days
after receipt of a statement of the Account to notify Depository of an error
in
such statement. Depository’s liability for any such error is limited in
accordance with Section 6 hereof.
6. Depository’s
Responsibility.
(a) Except
for permitting a withdrawal in violation of Section 2 hereof, Depository will
not be liable to any Creditor for complying with Orders from Customer that
are
received by Depository before Depository receives and has a reasonable
opportunity to act on a contrary Order from such Creditor.
(b) Depository
will not be liable to Customer for complying with Orders originated by
Controlling Creditor, even if Customer notifies Depository that Controlling
Creditor is not legally entitled to issue Orders, unless Depository takes the
action after it is served with an injunction, restraining order, or other legal
process enjoining it from doing so, issued by a court of competent jurisdiction,
and has had a reasonable opportunity to act on the injunction, restraining
order
or other legal process.
(c) This
Agreement does not create any obligation of Depository except for those
expressly set forth herein. In particular, Depository need not investigate
whether any Creditor is entitled under such Creditor’s agreements with Customer
to give Orders. Depository may rely on any and all notices and communications
it
believes are given by the appropriate party.
(d) Depository
will not have any liability to Customer or any Creditor for claims, losses,
liabilities or damages resulting from any failure to comply with Orders or
delay
in complying with Orders if such failure or delay is due to circumstances beyond
Depository’s reasonable control.
(e) Depository
will not have any liability to Customer or any Creditor for claims, losses,
liabilities or damages suffered or incurred by Customer or such Creditor as
a
result of or in connection with this Agreement except to the extent such losses,
liabilities and damages directly result from Depository’s gross negligence or
willful misconduct.
(f)
In no
event will Depository have any liability to Customer or any Creditor in
connection herewith for any consequential, special, punitive or indirect loss
or
damage whether or not any claim for such damages is based on tort or contract
or
Depository knew or should have known the likelihood of such damages in any
circumstances.
7. Indemnity.
(a) Customer
will indemnify Depository, its officers, directors, employees, and agents
against claims, demands, losses, liabilities, damages, costs and expenses
(including reasonable attorneys’ fees and disbursements and the reasonable
estimate of the allocated costs and expenses of Depository's
in-house
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legal
counsel and staff) arising out of this Agreement or Depository following any
Order or other instruction or request of Customer or any Creditor in connection
with this Agreement, except to the extent the claims, liabilities, costs and
expenses are caused by Depository’s gross negligence or willful
misconduct.
(b) Each
Creditor will indemnify Depository, its officers, directors, employees, and
agents against claims, demands, losses, liabilities, damages, costs and expenses
(including reasonable attorneys’ fees and disbursements and the reasonable
estimate of the allocated costs and expenses of Depository's in-house legal
counsel and staff), arising out of Depository following any Order or other
instruction or request of such Creditor (but not the other Creditor) in
connection with this Agreement, except to the extent the claims, liabilities,
costs and expenses are caused by Depository’s gross negligence or willful
misconduct. The applicable Creditor will pay such amount as may be due to
Depository under this indemnity within twenty (20) days of demand on such
Creditor by Depository to the extent such amount has not been paid in full
by
Customer within ten (10) days after demand on Customer by Depository; provided
however, that if Depository is stayed from making such demand upon Customer
as a
result of a bankruptcy or similar proceeding, then Depository shall be deemed
to
have made such demand upon Customer at the commencement of such
proceeding.
(c) A
Creditor’s and Customer’s liabilities to Depository under this Section are joint
and several; provided a Creditor’s liabilities to Depository under this section
are not joint and several with the liabilities of the other
Creditor.
8. Termination;
Survival.
(a) Controlling
Creditor may terminate this Agreement by notice to the Subordinated Creditor
(to
the extent the Subordinated Creditor is not the Controlling Creditor),
Depository and Customer; provided, however, that upon notice by the Senior
Creditor to the Depository and Customer of the termination of this Agreement
without the express written consent of the Subordinated Creditor, this Agreement
shall be deemed assigned to the Subordinated Creditor. Depository may terminate
this Agreement on thirty (30) day’s notice to Creditors and Customer; provided
however that, with respect to a particular Creditor, this Agreement may be
terminated immediately as to such Creditor (but not the other Creditor) by
notice from Depository to such Creditor and Customer should such Creditor fail
to make any payment when due to Depository hereunder.
(b)
This
Agreement shall terminate upon Depository's receipt of written notice from
Controlling Creditor expressly stating that Controlling Creditor no longer
claims any security interest in the Account; provided, however, that upon notice
by the Senior Creditor to the Depository and Customer of the termination of
this
Agreement without the express written consent of the Subordinated Creditor,
this
Agreement shall be deemed assigned to the Subordinated Creditor.
(c) Sections
4, “Returned Item Amounts,” 6, “Depository’s Responsibility,” and 7,
“Indemnity,” will survive termination of this Agreement.
9. Governing
Law.
This
Agreement and the Account shall be governed by and construed in accordance
with
the laws of the State of Texas. Depository may not change the law governing
the
Account without Creditors’ express written consent, which consent shall not be
unreasonably withheld.
10. Entire
Agreement.
This
Agreement is the entire agreement and supersedes any prior agreements and
contemporaneous oral agreements of the parties concerning its subject
matter.
11. Amendments;
Waivers.
This
Agreement may be amended or modified only in writing signed by all parties
hereto, and no waiver of any right under this Agreement will be binding unless
it is in writing and signed by the party to be charged.
12. Severability.
To the
extent a provision of this Agreement is unenforceable, this Agreement will
be
construed as if the unenforceable provision were omitted.
13. Other
Agreements.
As long
as this Agreement remains in effect, transactions involving the Account shall
be
subject, except to the extent inconsistent herewith, to the provisions of such
deposit account agreements, disclosures, and fee schedules as are in effect
from
time to time with respect to the Account.
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14. Successors
and Assigns.
The
provisions of this Agreement shall be binding upon and inure to the benefit
of
Depository, Creditors and Customer and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
15. Notices.
All
Orders, notices, requests and demands which any party is required or may desire
to give to any other party under any provision of this Agreement must be in
writing (unless otherwise specifically provided) and delivered to each party
at
the address or facsimile number set forth below its signature, or to such other
address or facsimile number as any party may designate by written notice to
all
other parties. Each such notice, request or demand shall be effective on
receipt. The delivery of any Order to Depository shall be effective only if
in
writing, signed by Controlling Creditor, and delivered to each of the addresses
of Depository set forth below, addressed to the attention of “Account Control
Agreement Demands”, by certified mail, return receipt requested, or by traceable
hand delivery. Electronic or facsimile delivery, or any other non-conforming
Order, shall not be binding upon Depository, although Depository may in its
sole
discretion accept and act on Orders conveyed in any manner, including orally,
if
believed to be authorized.
16. Amendment
and Restatement.
The
Depository, Customer and the Subordinated Creditor entered into that Deposit
Account Control Agreement dated as of April 1, 2008 (the “Existing Agreement”)
in order to set forth the parties’ relative rights and duties with respect to
the Account (as defined therein) established by Customer at Depository. The
parties to the Existing Agreement desire to amend and restate the Existing
Agreement in its entirety. In consideration of the foregoing and for other
good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree to amend and restate the Existing
Agreement in its entirety, without constituting a novation of the Existing
Agreement, any obligations of Despository, Subordinated Creditor or Customer,
as
set forth herein or the perfection of any lien effectuated through the entering
into of the Existing Agreement.
[CONTINUED
ON FOLLOWING PAGE]
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17. Counterparts.
This
Agreement may be executed in counterparts, each of which shall be an original,
and all of which shall constitute but one and the same instrument.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
set forth above.
LOAN
NUMBER:
DEPOSITORY:
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FARGO BANK, N.A.
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By:
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By:
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Name:
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Name:
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Title:
Relationship Manager
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Title:
Regional President
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Telephone:
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Telephone:
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Address
of Account Officer:
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Fargo Bank, N.A.
Attn:
Account Control Agreement Demands
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Address
of Regional President:
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Fargo Bank, N.A.
Attn:
Account Control Agreement Demands
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Address
for Notices:
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With
a copy to:
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Fargo Bank, National Association
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Fargo Bank, National Association
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VIKING
ASSET MANAGEMENT, LLC, as Subordinated Creditor
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STO
OPERATING COMPANY
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By:
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By:
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Name:
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Name:
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Title:
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Title:
President
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Address:
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Attention:
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Facsimile:
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Telephone:
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Address:
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Attention:
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Facsimile:
Telephone:
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VIKING
ASSET MANAGEMENT, LLC, as Senior Creditor
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By:
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Name:
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Title:
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Address:
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Attention:
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Facsimile:
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Telephone:
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