SECURITY AGREEMENT
This
SECURITY AGREEMENT, dated as of February 11, 2008 (this “Agreement”),
is
among
Solar
Thin Films, Inc., a Delaware corporation, having its principal offices located
at 00 Xxxxxxxx Xxxx., Xxx Xxxxx, Xxx Xxxx 00000 (the
“Debtor”), and
Solar
Thin Power, Inc., a Nevada corporation, having its principal offices located
at
00 Xxxxxxxx Xxxx., Xxx Xxxxx, Xxx Xxxx 00000 (together with its successors
and
assigns, the “Secured
Party”),
which
Secured Party is the holder of the Debtor’s Secured Term Note, issued on
February 11, 2008 in the aggregate original principal amount of $2,500,000
(the
“Note”).
WITNESSETH:
WHEREAS,
pursuant to the Note, the Lender has agreed to extend the loan to the Debtor
evidenced by the Note, a copy of which is annexed hereto as Exhibit
A;
WHEREAS,
the Debtor intends to utilize the proceeds of the loan in order to fund the
acquisition of up to a 15% interest in the Weihai Blue Star Terra Photovoltaic
Co. Ltd. (the “Blue Star Joint Venture”).
WHEREAS,
in order to induce the Secured Party to extend the loans evidenced by the Note,
the Debtor has agreed to execute and deliver to the Secured Party this Agreement
and to grant the Secured Party a security interest, in the proceeds of the
Debtor’s equity interest in the Blue Star Joint Venture to secure the prompt
payment, performance and discharge in full of all of the Debtor’s obligations
under the Note.
NOW,
THEREFORE, in consideration of the agreements herein contained and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Certain
Definitions.
As used
in this Agreement, the following terms shall have the meanings set forth in
this
Section 1.
(a) “Collateral”
means
the collateral in which the Secured Party is granted a security interest by
this
Agreement and which shall include the proceeds
of any and all equity interests, whether now held or hereinafter acquired by
the
Debtor in the Blue Star Joint Venture, up to a maximum interest of 15%.
2. Grant
of Security Interest in Collateral.
As an
inducement for the Secured Party to extend the loan as evidenced by the Note
and
to secure the complete and timely payment, performance and discharge in full,
as
the case may be, of all obligations under the Note, the Debtor hereby
unconditionally and irrevocably pledges, grants and hypothecates to the Secured
Party a security interest in and to, a lien upon, and a right of set-off
against, all of its respective right, title and interest of whatsoever kind
and
nature in and to the Collateral (a “Security
Interest”).
To
the extent there is at any time more than one Secured Party hereunder, the
Collateral will secure the obligations under the Note to the Secured Party
on a
pari passu basis, based on the then outstanding amount of such obligations
under
the Note.
3. Representations,
Warranties, Covenants and Agreements of the Debtor.
The
Debtor represents and warrants to, and covenants and agrees with, the Secured
Party as follows:
(a) The
Debtor has the requisite corporate, partnership, limited liability company
or
other power and authority to enter into this Agreement and otherwise to carry
out its obligations hereunder. The execution, delivery and performance by each
Debtor of this Agreement and the filings contemplated therein have been duly
authorized by all necessary action on the part of such Debtor and no further
action is required by such Debtor. This Agreement has been duly executed by
each
Debtor. This Agreement constitutes the legal, valid and binding obligation
of
each Debtor, enforceable against each Debtor in accordance with its terms except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws of general application relating to or affecting
the rights and remedies of creditors and by general principles of
equity.
(b) The
Debtor is the sole owner of the equity interest underlying the Collateral,
free
and clear of any liens, security interests, encumbrances, rights or claims,
and
is fully authorized to grant the Security Interest. There is not on file in
any
governmental or regulatory authority, agency or recording office an effective
financing statement, security agreement, license or transfer or any notice
of
any of the foregoing (other than those that will be filed in favor of the
Secured Party pursuant to this Agreement) covering or affecting any of the
Collateral. Except as pursuant to this Agreement, as long as this Agreement
shall be in effect, the Debtor shall not execute and shall not knowingly permit
to be on file in any such office or agency any other financing statement or
other similar document or instrument (except to the extent filed or recorded
in
favor of the Secured Party pursuant to the terms of this
Agreement).
(c) No
written claim has been received by the Debtor that the Collateral or Debtor's
use of the Collateral violates the rights of any third party. There has been
no
adverse decision to the Debtor's claim of ownership rights in or exclusive
rights to use the Collateral in any jurisdiction or to the Debtor's right to
keep and maintain such Collateral in full force and effect, and there is no
proceeding involving said rights pending or, to the best knowledge of the
Debtor, threatened before any court, judicial body, administrative or regulatory
agency, arbitrator or other governmental authority.
(d) The
Debtor shall at all times maintain its books of account and records relating
to
the equity interest underlying the Collateral at its principal place of business
(except when temporarily kept at the offices of its attorneys or accountants)
and may not relocate such books of account unless it delivers to the Secured
Party at least 30 days prior to such relocation written notice of such
relocation and the new location thereof (which must be within the United
States).
(e) This
Agreement creates in favor of the Secured Party a valid, security interest
in
the Collateral, securing the payment and performance of the obligations under
the Note. All security interests created hereunder in any Collateral may be
perfected by the shares underlying the Collateral being placed in escrow with
the escrow agent pursuant to the terms of the Escrow Agreement, a copy of which
is annexed hereto as Exhibit B. Except for the
delivery of the certificates and other instruments provided in Section
2,
no
action is necessary to create, perfect or protect the security interests created
hereunder. Without limiting the generality of the foregoing, no consent of
any
third parties and no authorization, approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is required
for
(i) the execution, delivery and performance of this Agreement, (ii) the creation
or perfection of the Security Interests created hereunder in the Collateral
or
(iii) the enforcement of the rights of the Secured Party hereunder.
(f) The
execution, delivery and performance of this Agreement by the Debtors do not
(i)
violate any of the provisions of any Organizational Documents of the Debtor
or
any judgment, decree, order or award of any court, governmental body or
arbitrator or any applicable law, rule or regulation applicable to the Debtor
or
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or
other
instrument (evidencing the Debtor's debt or otherwise) or other understanding
to
which the Debtor is a party or by which any property or asset of the Debtor
is
bound or affected. If any, all required consents (including, without limitation,
from stockholders or creditors of the Debtor) necessary for the Debtor to enter
into and perform its obligations hereunder have been obtained.
(g)
All of
the shares underlying the Collateral are validly issued, fully paid and
nonassessable, and the Debtor is the legal and beneficial owner of the shares
underlying the Collateral, free and clear of any lien, security interest or
other encumbrance except for the security interests created by this
Agreement.
The
Debtor shall cause the security interest of the Secured Party to be duly noted
in its corporate books and records.
(h) The
Debtor shall at all times maintain the Security Interests provided for hereunder
as valid and perfected first priority liens and security interests in the
Collateral in favor of the Secured Party until this Agreement and the Security
Interests hereunder shall be terminated pursuant to Section 8 hereof. Each
Debtor hereby agrees to use commercially reasonable efforts to defend the same
against the claims of any and all persons and entities and to safeguard and
protect all Collateral for the account of the Secured Party.
(i) The
Debtor will not transfer, pledge, hypothecate, encumber, license, sell or
otherwise dispose of any of the Collateral without first
providing written notice to the escrow agent pursuant to Section 1.4 of the
Escrow Agreement.
(j) The
Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the
Secured Party promptly, in sufficient detail, of any material adverse change
in
the Collateral, and of the occurrence of any event which would have a material
adverse effect on the value of the Collateral or on the Secured Party’s security
interest therein.
(k) The
Debtor shall take all steps reasonably necessary to diligently pursue and seek
to preserve, enforce and collect any rights, claims, causes of action and
accounts receivable in respect of the Collateral.
(l) The
Debtor shall promptly notify the Secured Party in sufficient detail upon
becoming aware of any attachment, garnishment, execution or other legal process
levied against any Collateral and of any other information received by such
Debtor that would have a material adverse effect on the value of the Collateral,
the Security Interest or the rights and remedies of the Secured Party
hereunder.
(m) All
information heretofore, herein or hereafter supplied to the Secured Party by
or
on behalf of any Debtor with respect to the Collateral is accurate and complete
in all material respects as of the date furnished.
(n) Each
Debtor was organized and remains organized solely under the laws of the state
set forth next to such Debtor’s name in Schedule
D
attached
hereto, which Schedule
D
sets
forth each Debtor’s organizational identification number or, if any Debtor does
not have one, states that one does not exist
4. Defaults.
The
following events shall be “Events
of Default”:
(a) The
occurrence of an Event of Default under the Note;
or
(b) Any
representation or warranty of the Debtor in this Agreement shall prove to have
been incorrect in any material respect when made.
|
5.
|
Rights
and Remedies Upon Default.
|
(a) Upon
the
occurrence of any Event of Default and at any time thereafter, the Secured
Party
shall have the right to exercise all of the remedies conferred under Section
3.2
of the Note.
(b)The
Debtor shall comply with any applicable law in connection with a disposition
of
Collateral and such compliance will not be considered adversely to affect the
commercial reasonableness of any sale of the Collateral. The Debtor shall sell
the shares underlying the Collateral in accordance with Section 1.4 of the
Escrow Agreement.
6. Applications
of Proceeds.
The
proceeds of any sale of shares underlying the Collateral made in accordance
with
Section 1.4 of the Escrow Agreement, shall
be
first applied to any obligations then outstanding under the Note. Including
accrued but unpaid interest. If,
upon
the sale of the Shares, the proceeds thereof are insufficient to pay all amounts
to which the Debtor is obligated under the note, including accrued but unpaid
interest, the Debtor will remain liable for the deficiency pursuant to the
terms
of the Note. If the sale of the Shares results in proceeds sufficient to satisfy
the Debtor’s then outstanding obligations under the Note, the Debtor shall be
entitled to any excess proceeds.
7. Security
Interests Absolute.
All
rights and all obligations of the parties hereunder, shall be absolute and
unconditional, irrespective of: (a) any lack of validity or enforceability
of
this Agreement, the Note, the Security Agreement, the Escrow Agreement or any
agreement entered into in connection with the foregoing, or any portion hereof
or thereof; (b) any change in the time, manner or place of payment or
performance of, or in any other term of, all or any of the obligations under
the
Note, or any other amendment or waiver of or any consent to any departure from
the Note or any other agreement entered into in connection with the foregoing;
(c) any exchange, release or nonperfection of any of the Collateral, or any
release or amendment or waiver of or consent to departure from any other
collateral for, or any guarantee, or any other security, for all or any of
the
obligations under the Note; (d) any action by the Secured Party to obtain,
adjust, settle and cancel in its reasonable discretion any insurance claims
or
matters made or arising in connection with the Collateral; or (e) any other
circumstance which might otherwise constitute any legal or equitable defense
available to the Debtor, or a discharge of all or any part of the Security
Interests granted hereby.
8. Term
of Agreement.
This
Agreement and the Security Interests shall terminate on the date on which all
payments under the Note have been indefeasibly paid or otherwise satisfied
in
full.
9. Notices.
Any
demand upon or notice to the Debtors hereunder shall be effective when delivered
by hand or when properly deposited in the mails postage prepaid, or sent by
telex, answerback received, or electronic facsimile transmission, receipt
acknowledged, or delivered to a telegraph company or overnight courier, in
each
case addressed to the Debtor at the address shown below or such other address
as
the Debtors may advise the Secured Party in writing. Any notice by the Debtors
to the Secured Party shall be given as aforesaid, addressed to the Secured
Party
at the address shown below or such other address as the Secured Party may advise
the Debtors in writing.
| Secured Party: |
Solar
Thin Power, Inc.
|
| 00 Xxxxxxxx Xxxx. |
| Xxx Xxxxx, XX 00000 |
| Debtor: | Solar Thin Films, Inc. |
| 00 Xxxxxxxx Xxxx. |
| Xxx Xxxxx, XX 00000 |
10. Miscellaneous.
(a) No
course
of dealing between the Debtor and the Secured Party, nor any failure to
exercise, nor any delay in exercising, on the part of the Secured Party, any
right, power or privilege hereunder or under the Notes shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
(b) All
of
the rights and remedies of the Secured Party with respect to the Collateral,
whether established hereby or by the Note, the Security Agreement, the Escrow
Agreement or by any other agreements, instruments or documents or by law shall
be cumulative and may be exercised singly or concurrently.
(c) This
Agreement,
together with the exhibits and schedules hereto, the Note, the Security
Agreement, the Escrow Agreement and the related agreements contemplated hereby
and thereby contain the entire understanding of the parties with respect to
the
subject matter hereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters, which the parties acknowledge
have been merged into this Agreement and the exhibits and schedules
hereto.
No
provision of this Agreement may be waived, modified, supplemented or amended
except in a written instrument signed, in the case of an amendment, by the
Debtor and the Secured Party or, in the case of a waiver, by the party against
whom enforcement of any such waived provision is sought.
(d) If
any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be
hereafter declared invalid, illegal, void or unenforceable.
(e) No
waiver
of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver
of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise
any
right hereunder in any manner impair the exercise of any such
right.
(f) This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Debtor may not assign this Agreement
or any rights or obligations hereunder without the prior written consent of
the
Secured Party (other than by merger). The Secured Party may assign any or all
of
its rights under this Agreement to any Person to whom the Secured Party assigns
or transfers the Note, provided such transferee agrees in writing to be bound,
with respect to the transferred Note, by the provisions of this Agreement that
apply to the “Secured Party.”
(g) Each
party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.
(h) All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. The Debtor agrees that all proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement, the Security Agreement, the Escrow Agreement
and
the Note (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, partners, members, employees or agents)
shall
be commenced exclusively in the state and federal courts sitting in the City
of
New York, Borough of Manhattan. The Debtor hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City
of
New York, Borough of Manhattan for the adjudication of any dispute hereunder
or
in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any
proceeding, any claim that it is not personally subject to the jurisdiction
of
any such court or that such proceeding is improper. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees
that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any
and
all right to trial by jury in any legal proceeding arising out of or relating
to
this Agreement or the transactions contemplated hereby. If any party shall
commence a proceeding to enforce any provisions of this Agreement, then the
prevailing party in such proceeding shall be reimbursed by the other party
for
its reasonable attorney’s fees and other reasonable costs and expenses incurred
with the investigation, preparation and prosecution of such
proceeding.
(i) This
Agreement may be executed in any number of counterparts, each of which when
so
executed shall be deemed to be an original and all of which taken together
shall
constitute one and the same Agreement. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
(j) The
Debtor shall indemnify, reimburse and hold harmless the Secured Party, and
each
of their respective partners, members, shareholders, officers, directors,
employees and agents (and any other persons with other titles that have similar
functions) (collectively, “Indemnitees”) from and against any and all losses,
claims, liabilities, damages, penalties, suits, costs and expenses, of any
kind
or nature, (including fees relating to the cost of investigating and defending
any of the foregoing) imposed on, incurred by or asserted against such
Indemnitee in any way related to or arising from or alleged to arise from this
Agreement or the Collateral, except any such losses, claims, liabilities,
damages, penalties, suits, costs and expenses which result from the gross
negligence or willful misconduct of the Indemnitee as determined by a final,
nonappealable decision of a court of competent jurisdiction. This
indemnification provision is in addition to, and not in limitation of, any
other
indemnification provision in the Note, the Security Agreement, the Escrow
Agreement or any other agreement, instrument or other document executed or
delivered in connection herewith or therewith.
[SIGNATURE
PAGES FOLLOW]
IN
WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above
written.
DEBTOR:
|
By:
/s/ Xxxxx Xxxxx
Name:
Xxxxx Xxxxx
Title:
Chief Executive Officer
|
|
SECURED
PARTY:
SOLAR
THIN POWER, INC.
|
|
By:
/s/ Xxxxxx Xxxxx
Name:Xxxxxx
Xxxxx
Title:Chief
Financial Officer
|
