COLLATERAL AGENT AGREEMENT
Exhibit 4.2
COLLATERAL
AGENT AGREEMENT (this “Agreement”) dated as
of April 9, 2009, among Axiom Capital Management, Inc. (the “Collateral Agent”),
and the parties identified on Schedule A hereto (each, individually, a “Lender” and
collectively, the “Lenders”), who hold
or will acquire a Senior Secured Note issued or to be issued by Advance
Nanotech, Inc. (“Company”), a Delaware
corporation, at or about the date of this Agreement as described in the Security
Agreement referred to in Section 1(a) below (the “Note”).
WHEREAS,
the Lenders have made, are making and will be making loans to Company to be
secured by certain collateral (“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 Note 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 Pledge and
Security Agreement (“Security Agreement”) among the
Collateral Agent and Company regarding the grant of a security interest in the
Collateral to the Collateral Agent, for the benefit of the Lenders, and (ii)
Company is issuing the Note to the Lenders pursuant to a “Subscription
Agreement” dated at or about the date of this Agreement. Collectively, the
Security Agreement, the Note and Subscription Agreement and other agreements
referred to therein are referred to herein as "Borrower
Documents".
(b) 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
Security Agreement.
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 Security Agreements. 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. Company and Lenders must notify Collateral
Agent in writing of the issuance of the Note to Lenders by
Company. The Collateral Agent will not be required to act hereunder
in connection with the Note 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 the Note 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 Company notice to cure such default and/or declare the unpaid
principal amount of the Note to be due and payable, together with any and all
accrued interest thereon and all costs payable pursuant to such
Note;
(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 Company, and such other rights and remedies
as are provided by law or equity; and
(iii) Waiver of Past
Defaults. A Majority in Interest may instruct the Collateral
Agent to waive any Event of Default by written notice to Company, and the other
Lenders, but not waive damages accrued or accruing until the effective date of
such waiver.
(b) Permitted Subordination and
Release. A Majority in Interest may instruct the Collateral
Agent to agree to release in whole or in part or to subordinate any Collateral
to any claim or other actual or proposed security interest and may enter into
any agreement with Company to evidence such subordination; provided, however, that
subsequent to any such release or subordination, the principal amount of the
Note held by each Lender shall remain pari passu with the other
principal amounts of the Note held by each other Lender.
(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 Note, “Majority in
Interest” for the purposes of this Agreement and the Borrower Documents
shall mean Lenders who hold not less than fifty-one percent (51%) of the
then-outstanding principal amount of the Note.
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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 reasonable costs and
expenses incurred by the Collateral Agent, including, without limitation,
reasonable costs and expenses relating to 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 Note.
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.
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.
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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 seven (7)
days of the giving of such notice, Harborview Capital Management LLC shall be
the successor collateral agent, or if such entity is unable or unwilling to
accept the duties and responsibilities as the collateral agent hereunder, 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
federal court within the County of New York, State of 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,
unless occasioned by the exculpated person’s own gross negligence or willful
misconduct.
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
reasonable 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.
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.
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(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.
(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:
Axiom Capital Management, Inc.
000 Xxxxx Xxxxxx, 00xx
xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxx,
President
with
copies to:
Reitler Xxxxx & Xxxxxxxxxx LLC
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention:
Xxxxxx Xxxxxx Xxxxx
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In the
case of the Lenders, to:
The
respective address and telecopier number set forth on Schedule A
hereto.
In the
case of Company, to:
000 Xxxxx
Xxxx., Xxxxx 000
Xxxxxxxxxx,
XX 00000
Attn:
Xxxxxx Xxxx, CFO
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 any principal amount of the Note who
acquires an interest in the 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 on account, 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 Note. The Collateral Agent is hereby authorized to
deduct any sums due the Collateral Agent from Collateral in the Collateral
Agent's possession.
(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.
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(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]
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SIGNATURE PAGE TO COLLATERAL
AGENT AGREEMENT
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”
[COMPLETE
NAME OF LENDER]
_______________________________________
By:____________________________________
Print
Name of Signatory:_____________________
Print
Title of Signatory:____________________
Acknowledged
and Agreed:
“COLLATERAL
AGENT”
AXIOM
CAPITAL MANAGEMENT, INC.
By:_____________________________
Print
Name of Signatory: Xxxx Xxxxxxx
Print
Title of Signatory: President
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Acknowledged
and Agreed:
“COMPANY”
By:_____________________________________
Print
Name of Signatory: Xxxxxx Xxxx
Print
Title of Signatory: Chief Financial Officer
This
Collateral Agent Agreement may be signed by facsimile signature and delivered by
confirmed facsimile transmission.
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SCHEDULE A TO COLLATERAL
AGENT AGREEMENT
|
LENDER
|
PRINCIPAL
AMOUNT OF NOTE TO BE ISSUED
|
