COLLATERAL AGENT AGREEMENT
COLLATERAL
AGENT AGREEMENT (this "Agreement") dated
as of April ___, 2005, among Xxxxxxx X. Xxxxxxx (the "Collateral
Agent"), and
the parties identified on Schedule A hereto (each, individually, a "Lender" and
collectively, the "Lenders"), who
hold or will acquire convertible promissory notes issued and to be issued by
Energy & Engine Technology Corporation (“Debtor”), a Nevada corporation, at
about or prior to the date of this Agreement as described in the Security
Agreements referred to in Section 1(a) below (collectively herein the
“Notes").
WHEREAS,
the Lenders have made, are making and will be making loans to Debtor to be
secured by certain collateral; and
WHEREAS,
it is desirable to provide for the orderly administration of such collateral by
requiring each Lender to appoint the Collateral Agent, and the Collateral Agent
has agreed to accept such appointment and to receive, hold and deliver such
collateral, all upon the terms and subject to the conditions hereinafter set
forth; and
WHEREAS,
it is desirable to allocate the enforcement of certain rights of the Lenders
under the Notes for the orderly administration thereof.
NOW,
THEREFORE, in consideration of the premises set forth herein and for other good
and valuable consideration, the parties hereto agree as follows:
1. |
Collateral. |
(a) |
Contemporaneously
with the execution and delivery of this Agreement by the Collateral Agent
and the Lenders, (i) the Collateral Agent has or will have entered into a
Security Agreement between the Collateral Agent and Debtor and between the
Collateral Agent and the subsidiaries of the Debtor identified on Schedule
B hereto (each a “Subsidiary”)
(each a "Security
Agreement"),
regarding the grant of a security interest in assets owned by Debtor and
Subsidiary (such assets are referred to herein and in the Security
Agreement as the "Collateral")
to the Collateral Agent, for the benefit of the Lenders, and (ii) Debtor
is issuing the Notes and in the future may issue additional Notes to the
Lenders pursuant to a “Subscription
Agreement”
dated at or about the date of this Agreement. Collectively, the Security
Agreements, the Notes and Subscription Agreement and other agreements are
referred to herein as “Borrower
Documents”.
|
(b) |
For
purposes solely of perfection of the security interests granted to the
Collateral Agent, as agent on behalf of the Lenders, and on its own behalf
under the Borrower Documents, the Collateral Agent hereby acknowledges
that any Collateral held by the Collateral Agent is held for the benefit
of the Lenders in accordance with this Agreement and the Borrower
Documents. No reference to the Borrower Documents or any other instrument
or document shall be deemed to incorporate any term or provision thereof
into this Agreement unless expressly so
provided. |
(c) |
The
Collateral Agent is to distribute in accordance with the Borrower
Documents any proceeds received from the Collateral which are
distributable to the Lenders in proportion to their respective interests
in the Obligations as defined in the Borrower
Documents. |
157
2. |
Appointment
of the Collateral Agent. |
The
Lenders hereby appoint the Collateral Agent (and the Collateral Agent
hereby accepts such appointment) to take any action including, without
limitation, the registration of any Collateral in the name of the
Collateral Agent or its nominees prior to or during the continuance of an
Event of Default (as defined in the Borrower Documents), the exercise of
voting rights upon the occurrence and during the continuance of an Event
of Default, the application of any cash collateral received by the
Collateral Agent to the payment of the Obligations, the making of any
demand under the Borrower Documents, the exercise of any remedies given to
the Collateral Agent pursuant to the Borrower Documents and the exercise
of any authority pursuant to the appointment of the Collateral Agent as an
attorney-in-fact pursuant to the Security Agreement that the Collateral
Agent deems necessary or proper for the administration of the Collateral
pursuant to the Borrower Documents. Upon disposition of the Collateral in
accordance with the Borrower Documents, the Collateral Agent shall
promptly distribute any cash or Collateral in accordance with Section 10.4
of the Security Agreement. Lenders must notify Collateral Agent in writing
of the issuance of Notes to Lenders by Debtor. The Collateral Agent will
not be required to act hereunder in connection with Notes the issuance of
which was not disclosed in writing to the Collateral Agent nor will the
Collateral Agent be required to act on behalf of any assignee of Notes
without the written consent of Collateral
Agent. |
3. |
Action
by the Majority in Interest. |
(a) |
Certain
Actions.
Each of the Lenders covenants and agrees that only a Majority in Interest
shall have the right, but not the obligation, to undertake the following
actions (it being expressly understood that less than a Majority in
Interest hereby expressly waive the following rights that they may
otherwise have under the Borrower Documents): |
(i) |
Acceleration.
If an Event of Default occurs, after the applicable cure period, if any, a
Majority in Interest may, on behalf of all the Lenders, instruct the
Collateral Agent to provide to Debtor notice to cure such default and/or
declare the unpaid principal amount of the Notes to be due and payable,
together with any and all accrued interest thereon and all costs payable
pursuant to such Notes; |
(ii) |
Enforcement.
Upon the occurrence of any Event of Default after the applicable cure
period, if any, a Majority in Interest may instruct the Collateral Agent
to proceed to protect, exercise and enforce, on behalf of all the Lenders,
their rights and remedies under the Borrower Documents against Debtor and
Subsidiary, and such other rights and remedies as are provided by law or
equity; |
(iii) |
Waiver
of Past Defaults. A
Majority in Interest may instruct the Collateral Agent to waive any Event
of Default by written notice to Debtor and Subsidiary, and the other
Lenders; and |
(iv) |
Amendment. A
Majority in Interest may instruct the Collateral Agent to waive, amend,
supplement or modify any term, condition or other provision in the Notes
or Borrower Documents in accordance with the terms of the Notes or
Borrower Documents so long as such waiver, amendment, supplement or
modification is made with respect to all of the Notes and with the same
force and effect with respect to each of the
Lenders. |
158
(b) |
Permitted
Subordination. A
Majority in Interest may instruct the Collateral Agent to agree to
subordinate any Collateral to any claim and may enter into any agreement
with Debtor and Subsidiary to evidence such subordination; provided,
however,
that subsequent to any such subordination, each Note shall remain
pari passu
with the other Notes held by the Lenders. |
(c) |
Further
Actions. A
Majority in Interest may instruct the Collateral Agent to take any action
that it may take under this Agreement by instructing the Collateral Agent
in writing to take such action on behalf of all the
Lenders. |
(d) |
Majority
in Interest.
For so long as any obligations remain outstanding on the Notes, Majority
in Interest shall mean Lenders who hold not less than eighty percent (80%)
of the outstanding principal amount of the
Notes. |
4. |
Power
of Attorney. |
(a) |
To
effectuate the terms and provisions hereof, the Lenders hereby appoint the
Collateral Agent as their attorney-in-fact (and the Collateral Agent
hereby accepts such appointment) for the purpose of carrying out the
provisions of this Agreement including, without limitation, taking any
action on behalf of, or at the instruction of, the Majority in Interest at
the written direction of the Majority in Interest and executing any
consent authorized pursuant to this Agreement and taking any action and
executing any instrument that the Collateral Agent may deem necessary or
advisable (and lawful) to accomplish the purposes
hereof. |
(b) |
All
acts done under the foregoing authorization are hereby ratified and
approved and neither the Collateral Agent nor any designee nor agent
thereof shall be liable for any acts of commission or omission, for any
error of judgment, for any mistake of fact or law except for acts of gross
negligence or willful misconduct. |
(c) |
This
power of attorney, being coupled with an interest, is irrevocable while
this Agreement remains in effect. |
5. |
Expenses
of the Collateral Agent.
The Lenders shall pay any and all costs and expenses incurred by the
Collateral Agent, all waivers, releases, discharges, satisfactions,
modifications and amendments of this Agreement, the administration and
holding of the Collateral, insurance expenses, and the enforcement,
protection and adjudication of the parties' rights hereunder by the
Collateral Agent, including, without limitation, the reasonable
disbursements, expenses and fees of the attorneys the Collateral Agent may
retain, if any, each of the foregoing in proportion to their holdings of
the Notes. |
6. |
Reliance
on Documents and Experts.
The Collateral Agent shall be entitled to rely upon any notice, consent,
certificate, affidavit, statement, paper, document, writing or
communication (which may be by telegram, cable, telex, telecopier, or
telephone) reasonably believed by it to be genuine and to have been
signed, sent or made by the proper person or persons, and upon opinions
and advice of its own legal counsel, independent public accountants and
other experts selected by the Collateral
Agent. |
159
7. |
Duties
of the Collateral Agent; Standard of Care. |
(a) |
The
Collateral Agent's only duties are those expressly set forth in this
Agreement, and the Collateral Agent hereby is authorized to perform those
duties in accordance with commercially reasonable practices. The
Collateral Agent may exercise or otherwise enforce any of its rights,
powers, privileges, remedies and interests under this Agreement and
applicable law or perform any of its duties under this Agreement by or
through its officers, employees, attorneys, or
agents. |
(b) |
The
Collateral Agent shall act in good faith and with that degree of care that
an ordinarily prudent person in a like position would use under similar
circumstances. |
(c) |
Any
funds held by the Collateral Agent hereunder need not be segregated from
other funds except to the extent required by law. The Collateral Agent
shall be under no liability for interest on any funds received by it
hereunder. |
8. |
Resignation.
The Collateral Agent may resign and be discharged of its duties hereunder
at any time by giving written notice of such resignation to the other
parties hereto, stating the date such resignation is to take effect.
Within five (5) days of the giving of such notice, a successor collateral
agent shall be appointed by the Majority in Interest; provided,
however,
that if the Lenders are unable so to agree upon a successor within such
time period, and notify the Collateral Agent during such period of the
identity of the successor collateral agent, the successor collateral agent
may be a person designated by the Collateral Agent, and any and all fees
of such successor collateral agent shall be the joint and several
obligation of the Lenders. The Collateral Agent shall continue to serve
until the effective date of the resignation or until its successor accepts
the appointment and receives the Collateral held by the Collateral Agent
but shall not be obligated to take any action hereunder. The Collateral
Agent may deposit any Collateral with the Supreme Court of the State of
New York for New York County or any such other court in New York State
that accepts such Collateral. |
9. |
Exculpation.
The Collateral Agent and its officers, employees, attorneys and agents,
shall not incur any liability whatsoever for the holding or delivery of
documents or the taking of any other action in accordance with the terms
and provisions of this Agreement, for any mistake or error in judgment,
for compliance with any applicable law or any attachment, order or other
directive of any court or other authority (irrespective of any conflicting
term or provision of this Agreement), or for any act or omission of any
other person engaged by the Collateral Agent in connection with this
Agreement, unless occasioned by the exculpated person's own gross
negligence or willful misconduct; and each party hereto hereby waives any
and all claims and actions whatsoever against the Collateral Agent and its
officers, employees, attorneys and agents, arising out of or related
directly or indirectly to any or all of the foregoing acts, omissions and
circumstances. |
10. |
Indemnification.
The Lenders hereby agree to indemnify, reimburse and hold harmless the
Collateral Agent and its directors, officers, employees, attorneys and
agents, jointly and severally, from and against any and all claims,
liabilities, losses and expenses that may be imposed upon, incurred by, or
asserted against any of them, arising out of or related directly or
indirectly to this Agreement or the Collateral, except such as are
occasioned by the indemnified person's own gross negligence or willful
misconduct. |
160
11. |
Miscellaneous. |
(a) |
Rights
and Remedies Not Waived.
No act, omission or delay by the Collateral Agent shall constitute a
waiver of the Collateral Agent's rights and remedies hereunder or
otherwise. No single or partial waiver by the Collateral Agent of any
default hereunder or right or remedy that it may have shall operate as a
waiver of any other default, right or remedy or of the same default, right
or remedy on a future occasion. |
(b) |
Governing
Law.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York without
regard to conflicts
of laws that
would result
in the application of the
substantive laws of another
jurisdiction. |
(c) |
Waiver
of Jury Trial and Setoff; Consent to Jurisdiction;
Etc. |
(i) |
In
any litigation in any court with respect to, in connection with, or
arising out of this Agreement or any instrument or document delivered
pursuant to this Agreement, or the validity, protection, interpretation,
collection or enforcement hereof or thereof, or any other claim or dispute
howsoever arising, between the Collateral Agent and the Lenders or any
Lender, then each Lender, to the fullest extent it may legally do so, (A)
waives the right to interpose any setoff, recoupment, counterclaim or
cross-claim in connection with any such litigation, irrespective of the
nature of such setoff, recoupment, counterclaim or cross-claim, unless
such setoff, recoupment, counterclaim or cross-claim could not, by reason
of any applicable federal or state procedural laws, be interposed, pleaded
or alleged in any other action; and (B) WAIVES
TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION AND ANY RIGHT IT MAY
HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES. EACH LENDER AGREES THAT THIS SECTION 11(c) IS
A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGE THAT THE
COLLATERAL AGENT WOULD NOT ENTER THIS AGREEMENT IF THIS SECTION 11(c) WERE
NOT PART OF THIS AGREEMENT. |
(ii) |
Each
Lender irrevocably consents to the exclusive jurisdiction of any State or
Federal Court located within the County of New York, State of New York, in
connection with any action or proceeding arising out of or relating to
this Agreement or any document or instrument delivered pursuant to this
Agreement or otherwise. In any such litigation, each Lender waives, to the
fullest extent it may effectively do so, personal service of any summons,
complaint or other process and agree that the service thereof may be made
by certified or registered mail directed to such Lender at its address for
notice determined in accordance with Section 11(e) hereof. Each Lender
hereby waives, to the fullest extent it may effectively do so, the
defenses of forum non conveniens and improper
venue. |
161
(d) |
Admissibility
of this Agreement.
Each of the Lenders agrees that any copy of this Agreement signed by it
and transmitted by telecopier for delivery to the Collateral Agent shall
be admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in
existence. |
(e) |
Address
for Notices.
Any notice or other communication under the provisions of this Agreement
shall be given in writing and delivered in person, by reputable overnight
courier or delivery service, by facsimile machine (receipt confirmed) with
a copy sent by first class mail on the date of transmissions, or by
registered or certified mail, return receipt requested, directed to such
party’s addresses set forth below (or to any new address of which any
party hereto shall have informed the others by the giving of notice in the
manner provided herein): |
In
the case of the Collateral Agent, to her
at: |
Xxxxxxx
X. Xxxxxxx
000
Xxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxx, Xxx Xxxx 00000
Fax:
(000) 000-0000 |
In
the case of the Lenders, to: |
To
the address and telecopier number set forth on
Schedule
A hereto. |
In
the case of Debtor and Subsidiaries, to: |
Energy
& Engine Technology Corporation 0000 Xxxx Xxxxx Xxxxxxx Xxxxx, XX
00000 Attn: Jolie X. Xxxx, Esq. Fax: (000)
000-0000 |
(f) |
Amendments
and Modification; Additional Lender.
No provision hereof shall be modified, altered, waived or limited except
by written instrument expressly referring to this Agreement and to such
provision, and executed by the parties hereto. Any transferee of a Note
who acquires a Note after the date hereof will become a party hereto by
signing the signature page and sending an executed copy of this Agreement
to the Collateral Agent and receiving a signed acknowledgement from the
Collateral Agent. |
(g) |
Fee.
Upon the occurrence of an Event of Default, the Lenders collectively shall
pay the Collateral Agent the sum of $10,000 to apply against an hourly fee
of $350 to be paid to the Collateral Agent by the Lenders for services
rendered pursuant to this Agreement. All payments due to the Collateral
Agent under this Agreement including reimbursements must be paid when
billed. The Collateral Agent may refuse to act on behalf of or make a
distribution to any Lender who is not current in payments to the
Collateral Agent. Payments required pursuant to this Agreement shall be
pari passu to
the Lenders' interests in the Notes. The Collateral Agent is hereby
authorized to deduct any sums due the Collateral Agent from Collateral in
the Collateral Agent's possession. |
162
(h) |
Counterparts/Execution.
This Agreement may be executed in any number of counterparts and by the
different signatories hereto on separate counterparts, each of which, when
so executed, shall be deemed an original, but all such counterparts shall
constitute but one and the same instrument. This Agreement may be executed
by facsimile signature and delivered by facsimile
transmission. |
(i) |
Successors
and Assigns.
Whenever in this Agreement reference is made to any party, such reference
shall be deemed to include the successors, assigns, heirs and legal
representatives of such party. No party hereto may transfer any rights
under this Agreement, unless the transferee agrees to be bound by, and
comply with all of the terms and provisions of this Agreement, as if an
original signatory hereto on the date
hereof. |
(j) |
Captions:
Certain Definitions.
The captions of the various sections and paragraphs of this Agreement have
been inserted only for the purposes of convenience; such captions are not
a part of this Agreement and shall not be deemed in any manner to modify,
explain, enlarge or restrict any of the provisions of this Agreement. As
used in this Agreement the term "person"
shall mean and include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency
thereof. |
(k) |
Severability.
In the event that any term or provision of this Agreement shall be finally
determined to be superseded, invalid, illegal or otherwise unenforceable
pursuant to applicable law by an authority having jurisdiction and venue,
that determination shall not impair or otherwise affect the validity,
legality or enforceability (i) by or before that authority of the
remaining terms and provisions of this Agreement, which shall be enforced
as if the unenforceable term or provision were deleted, or (ii) by or
before any other authority of any of the terms and provisions of this
Agreement. |
(l) |
Entire
Agreement.
This Agreement contains the entire agreement of the parties and supersedes
all other agreements and understandings, oral or written, with respect to
the matters contained herein. |
(m) |
Schedules.
The Collateral Agent is authorized to annex hereto any schedules referred
to herein. |
[THIS
SPACE INTENTIONALLY LEFT BLANK]
163
IN
WITNESS WHEREOF, the parties hereto have caused this Collateral Agent Agreement
to be signed, by their respective duly authorized officers or directly, as of
the date first written above.
“LENDERS”
LONGVIEW
FUND, LP |
LONGVIEW
EQUITY FUND, LP | |
LONGVIEW
INTERNATIONAL EQUITY |
||
FUND,
LP |
||
XXXXXXX
X. XXXXXXX - Collateral Agent |
Acknowledged:
ENERGY
& ENGINE TECHNOLOGY CORPORATION
By: |
|
Its: |
By: |
By: |
||
Its: |
Its: |
This
Collateral Agent Agreement may be signed by facsimile signature and delivered by
confirmed facsimile transmission.
164
SCHEDULE A TO COLLATERAL AGENT
AGREEMENT
LENDER |
INITIAL
CLOSING PURCHASE PRICE |
SECOND
CLOSING PURCHASE PRICE |
LONGVIEW
FUND, LP
000
Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxxxxxxx, XX 00000
Fax:
(000) 000-0000 |
$400,000.00 |
$200,000.00 |
LONGVIEW
EQUITY FUND, LP
000
Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxxxxxxx, XX 00000
Fax:
(000) 000-0000 |
$420,000.00 |
$210,000.00 |
LONGVIEW
INTERNATIONAL EQUITY FUND, LP
000
Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxxxxxxx, XX 00000
Fax:
(000) 000-0000 |
$180,000.00 |
$90,000.00 |
TOTALS |
$1,000,000.00 |
$500,000.00 |
XXXXX
X. XXXXX
0000
Xxxx Xxxxx Xxxxx
Xxxxxxx,
XX 00000
Fax:
(000) 000-0000 |
$800,000.00
of Obligations
(for
purposes of determining pro rata
apportionment
of collateral only) |
165