SECURITY AGREEMENT
THIS
SECURITY AGREEMENT
(this
“Agreement”)
is
made and entered into as of the 20th day of February, 2007, by and among
Celsia
Technologies, Inc., a Nevada corporation (the “Company”),
Celsia Technologies UK Limited, a company formed under the laws of England
and
Wales (“Celsia
UK”),
Axiom
Capital Management, Inc. (the “Agent”)
and
each other person or entity listed as a Secured Party on Schedule
1
attached
to this Agreement, as such Schedule I shall be revised from time to time
(the
“Purchasers”
and
together with the Agent the “Secured
Party”).
Recitals
WHEREAS,
the
Company desires to sell and issue Secured Convertible Promissory Notes in
the
aggregate principal amount of not less than Two Hundred Fifty Thousand Dollars
($250,000) and not more than One Million Dollars ($1,000,000) (individually,
a
“Convertible
Note,”
and
collectively, the “Convertible
Notes”);
WHEREAS,
the
Convertible Notes will be sold in multiple closings to the Purchasers pursuant
to Securities Purchase Agreements between the Company and each Purchaser
(each a
“Purchase
Agreement”
and
collectively the “Purchase
Agreements”);
and
WHEREAS,
Secured
Party has required, as a condition to purchasing the Convertible Notes, that
Company grant Secured Party a first priority security interest in all of
Company’s Collateral (as defined herein) and to that end has required the
execution and delivery of this Agreement by Company.
NOW,
THEREFORE,
in
consideration of the mutual covenants and agreements contained in the Purchase
Agreements, the parties hereto, intending to be legally bound, agree as
follows:
1. Incorporation
of Recitals.
The
foregoing Recitals are hereby incorporated herein in their entirety by this
reference.
2. Definitions.
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Convertible Notes. The following terms shall have the meanings
set forth below:
“Collateral”
shall
mean (i) all Accounts; (ii) all Inventory; (iii) all Goods;
(iv) all Equipment, Vehicles, furniture and Fixtures; (v) all Chattel
Paper, Instruments, Documents, General Intangibles and Investment Property;
(vi) all books and records (including, without limitation, customer lists,
credit files, computer programs, print-outs and other computer materials
and
records) of the Company pertaining to any of the foregoing; (vii) the
Pledged Securities; and (viii) Proceeds. The terms used herein to identify
the Collateral but not otherwise defined herein shall have the respective
meanings assigned to such terms as of the date hereof in the Uniform Commercial
Code of the State of New York (the “New
York UCC”).
“Obligations”
means
each and every debt, liability, and obligation of every kind and description
arising under or in connection with the Convertible Notes which the Company
may
now or at any time hereafter owe to Secured Party.
“Permitted
Liens”
shall
mean, collectively, the following: (i) liens for current taxes or other
governmental or regulatory assessments which are not delinquent, or which
are
being contested in good faith by the appropriate procedures and for which
appropriate reserves are maintained; (ii) liens in favor of Agent and/or
the Secured Party; (iii) liens relating to trade payables incurred in the
ordinary course of business, (iv) liens related to a Qualified Debenture
Financing, and (v) liens consented to by the Required Majority.
“Proceeds”
shall
mean any consideration received from the sale, exchange, lease or other
disposition of any asset or property which constitutes Collateral, any other
value received as a consequence of the possession of any Collateral and any
payment received from any insurer or other person or entity as a result of
the
destruction, loss, theft or other involuntary conversion of whatever nature
of
any asset or property that constitutes Collateral and all “proceeds” as defined
in the New York UCC.
“Security
Interest”
has
the
meaning given in Section 3(b).
3. Security
for Obligations; Pledge of Securities.
(a) This
Agreement secures, and the Collateral is collateral security for, the prompt
payment or performance in full when due, whether at stated maturity, by required
prepayment, declaration, acceleration, conversion, demand or otherwise
(including the payment of amounts that would become due but for the operation
of
the automatic stay under Section 363(a) of the Bankruptcy Code, 11 U.S.C.
§362(a)) of all obligations and liabilities of every nature of Company now
or
hereafter existing under or arising out of or in connection with the Convertible
Notes and this Agreement and all extensions or renewals thereof, whether
for
principal, interest, (including, without limitation, interest that, but for
the
filing of a petition in bankruptcy with respect to Company, would accrue
on such
obligations), fees, expenses, indemnities or otherwise, whether voluntary
or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not
from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid,
to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Agent or any Secured Party as a preference, fraudulent transfer
or otherwise (all such obligations of Company, together with the Obligations,
being the “Secured
Obligations”).
(b) Security
Interest.
As
security for the payment or performance, as the case may be, of the Secured
Obligations, the Company hereby creates and grants to the Agent, its successors
and its assigns, for its own benefit and for the pro rata benefit of the
Purchasers, their successors and their assigns, a security interest in the
Collateral (the “Security Interest”). Without limiting the foregoing, the Agent
is hereby authorized to file one or more financing statements, continuation
statements or other documents for the purpose of perfecting, confirming,
continuing, enforcing or protecting the Security Interest, naming the Company
as
debtors and the Secured Parties as secured parties. The Company agrees that
Agent may file any appropriate document in the appropriate index or filing
office as a financing statement for any of the items specified in this Agreement
as part of the Collateral and the Company shall reimburse Agent for all fees
and
expenses associated with such filing, including but not limited to reasonable
attorneys’ fees and expenses. In addition, the Company agrees to execute and
deliver to the Agent, upon the Agent’s request, any financing statements, as
well as extensions, renewals and amendments thereof, and reproductions of
this
Agreement in such form as the Agent may reasonably require to perfect a security
interest with respect to said items. The Company shall pay all costs of filing
such financing statements and any extensions, renewals, amendments, and releases
thereof, and shall pay all reasonable costs and expenses of any record searches
for financing statements that the Agent may reasonably require.
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(c) Pledge
of Subsidiary Shares.
As
collateral security for the payment and performance when due of all the Secured
Obligations, but subject to the limitations set forth herein, (i) the
Company hereby pledges, assigns, transfers and grants to the Agent for its
benefit and the benefit of the Purchasers, a continuing first priority security
interest in and to all of the right, title and interest of the Company in
all of
the shares of capital stock of Celsia UK owned by the Company (the “UK
Pledged Securities”)
and
(ii) Celsia UK hereby pledges, assigns, transfers and grants to the Agent
for its benefit and the benefit of the Purchasers, a continuing first priority
security interest in and to all of the right, title and interest of Celsia
UK in
all of the shares of capital stock of Celsia Technologies Korea, Inc. owned
by
Celsia UK (the “Korean
Pledged Securities”
and,
collectively with the UK Pledged Securities, the “Pledged
Securities”).
Prior
to or upon the execution hereof, all certificates, agreements or instruments
representing or evidencing the Pledged Securities shall have been delivered
to
and be held by or on behalf of Agent pursuant hereto. All certificated Pledged
Securities shall be in suitable form for transfer by delivery or shall be
accompanied by duly executed instruments of transfer or assignment in blank,
all
in form and substance satisfactory to Agent and subject to any applicable
law or
regulations. The Agent shall have the right, at any time upon the occurrence
and
during the continuance of any Event of Default and without notice to the
Company
or Celsia UK, to endorse, assign or otherwise transfer to or to register
in the
name of Agent or any of its nominees or endorse for negotiation any or all
of
the Pledged Securities, subject to any applicable law or regulations. In
addition, the Agent shall have the right at any time to exchange certificates
representing or evidencing the Pledged Securities for certificates of smaller
or
larger denominations.
(d) Certain
Limitations.
Notwithstanding
anything to the contrary contained herein, (i) the term “Collateral”
and
“Pledged
Securities”
shall
not include securities representing at any time more than 65% of the aggregate
voting power of the capital stock or other equity interests of a “controlled
foreign corporation,” as defined in Section 957 of the Internal Revenue
Code of 1986, as amended, and (ii) nothing contained herein shall be deemed
to constitute an assignment, pledge or encumbrance of any securities or leased
equipment, intellectual property or general intangibles, including licenses
thereof, to the extent that (A) they are not capable of being assigned, pledged
or encumbered as a matter of law or under the terms of any license or other
agreement applicable thereto or such assignment, pledge or encumbrance would
invalidate the rights under terms of any license, lease or other agreements
applicable thereto without the consent of the licensor thereof or other
applicable party thereto, and (B) such consent has not been obtained (in
each
case to the extent that such applicable law is not overridden by
Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable
law).
3
(e) Accounting
Records.
The
Company agrees at all times to keep in all material respects accurate and
complete accounting records with respect to the Collateral, including, but
not
limited to, a record of all payments and Proceeds received.
4. Representations
and Warranties.
Company
represents and warrants as follows:
(a) Financing
Statements.
Except
for the financing statements in favor of Secured Party, the Company agrees not
to execute or authorize the filing of any financing statement in favor of
any
person, entity or governmental agency (whether federal, state or local) other
than Secured Party as long as any portion of the Obligations evidenced by
the
Convertible Notes remain unsatisfied, other than with respect to Permitted
Liens.
(b) Legal
Name.
Company’s exact legal name is as set forth in the first paragraph of this
Security Agreement. Company shall not change its legal name or its form of
organization without 30 days’ prior written notice to Secured
Party.
(c) Title
and Authority.
Company
has (i) rights in and good title to the Collateral (other than the Korean
Pledged Securities) in which it is granting a security interest hereunder
and
(ii) the requisite corporate power and authority to grant to the Agent the
Security Interest in such Collateral pursuant hereto and to execute, deliver
and
perform its obligations in accordance with the terms of this Agreement, without
the consent or approval of any other person other than any consent or approval
which has been obtained. Celsia UK has (i) rights in and good title to the
Korean Pledged Securities and (ii) the requisite corporate power and authority
to grant to the Agent the Security Interest in such Collateral pursuant hereto
and to execute, deliver and perform its obligations in accordance with the
terms
of this Agreement, without the consent or approval of any other person other
than any consent or approval which has been obtained.
(d) Security
Interests.
Except
for Permitted Liens, the Company is the sole owner of the Collateral (except
for
the Korean Pledged Securities and non-exclusive licenses granted by the Company
in the ordinary course of business), free and clear of any liens, security
interests, encumbrances, rights or claims, and is fully authorized to grant
the
Security Interest in accordance with the terms hereof. Except
for Permitted Liens, Celsia UK is the sole owner of the Korean Pledged
Securities, free and clear of any liens, security interests, encumbrances,
rights or claims, and is fully authorized to grant the Security
Interest
in
accordance with the terms hereof.
(e) Validity
of Security Interest.
The
Security Interest constitutes a valid security interest in all of the Collateral
for payment and performance of the Secured Obligations subject only to Permitted
Liens and the limitations specifically set forth herein.
5. Covenants
and Agreements.
Company
covenants and agrees as follows:
(a) Restrictions.
Company
agrees that until the Obligations shall have been satisfied in full, Company
shall not, without the prior written consent of holders of a majority of
the
principal amount of the Convertible Notes then outstanding, assign, transfer,
encumber or otherwise dispose of the Collateral, or any interest therein,
other
than in the ordinary course of business.
4
(b) Defense.
Company
shall, at its own cost and expense, take any and all actions reasonably
necessary to defend title to the Collateral owned by it against all persons
and
to defend the Security Interest of the Agent in such Collateral, and the
priority thereof, against any adverse lien of any nature whatsoever (other
than
Permitted Liens).
(c) Maintenance.
Except
as otherwise provided herein, Company shall at all times and at its own expense
maintain and keep, or cause to be maintained and kept, the Collateral. Company
shall perform all acts and execute all documents reasonably requested by
the
Agent at any time to evidence, perfect, maintain, record and enforce the
Secured
Party’s interest in the Collateral or otherwise in furtherance of the provisions
of this Agreement, and Company hereby authorizes the Agent to execute and
file
one or more financing statements (and similar documents) or copies thereof
or of
this Agreement with respect to the Collateral signed only by the Agent.
(d) Secured
Party’s Right to Take Action.
If,
after fifteen (15) days written notice from Secured Party, Company fails
to
perform or observe any of its covenants or agreements set forth in this
Section 5 or if Company notifies Secured Party that it intends to abandon
all or any part of the Collateral, Secured Party may (but need not) perform
or
observe such covenant or agreement or take steps to prevent such intended
abandonment on behalf and in the name, place, and stead of Company (or, in
the
case of intended abandonment, in Secured Party’s own name) and may (but need
not) take any and all other actions that Secured Party may reasonably deem
necessary to cure or correct such failure or prevent such intended
abandonment.
(e) Costs
and Expenses.
Except
to the extent that the effect of such payment would be to render any loan
or
forbearance of money usurious or otherwise illegal under any applicable law,
Company shall pay Secured Party on demand the amount of all reasonable moneys
expended and all reasonable costs and expenses (including reasonable attorneys’
fees and disbursements) incurred by Secured Party in connection with or as
a
result of Secured Party’s taking action under subsection 5(d), except for
intended abandonment of the Collateral by Company, or exercising its rights
under Section 7.
(f) Use
and Disposition of Collateral.
Company
shall not make or permit to be made any assignment, pledge or hypothecation
of
the Collateral other than Permitted Liens, or grant any security interest
in the
Collateral except for the Security Interest and Permitted Liens. Company
shall
not make or permit to be made any transfer of any Collateral, except in the
ordinary course of business, and Company shall remain at all times in possession
of the Collateral owned by it other than transfers to the Secured Party pursuant
to the provisions hereof and except as otherwise provided in this Agreement.
The
Agent shall have the right, as the true and lawful agent of the Company,
with
power of substitution for the Company and in the Company's name, the Agent's
name or otherwise, for the use and benefit of the Secured Party and solely
as
and to the extent required to effect the terms of this Agreement, (i) to
endorse
the Company’s name upon any notes, acceptances, checks, drafts, money orders or
other evidences of payment with respect to the Collateral that may come into
its
possession; (ii) to sign the name of the Company on any invoice relating
to any
of the Collateral and (iii) upon the occurrence and during the continuance
of an
event of default under this Agreement or under the Convertible Notes, (A)
to
receive, endorse, assign and/or deliver any and all notes, acceptances, checks,
drafts, money orders or other evidences or instruments of payment relating
to
the Collateral or any part thereof, and Company hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed, (B) to
demand, collect, receive payment of, give receipt for, extend the time of
payment of and give discharges and releases of all or any of the Collateral
and/or release the obligor thereon, (C) to commence and prosecute any and
all
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect or otherwise realize on all or any of the Collateral
or
to enforce any rights in respect of any Collateral, (D) to settle, compromise,
compound, adjust or defend any actions, suits or proceedings relating to
or
pertaining to all or any of the Collateral, and (H) to use, sell, assign,
transfer, pledge, make any agreement with respect to or otherwise deal with
all
or any of the Collateral, and to do all other acts and things necessary to
carry
out the purposes of this Agreement, as fully and completely as though the
Secured Party was the absolute owner of the Collateral for all purposes;
provided,
however,
that
nothing herein contained shall be construed as requiring or obligating the
Secured Party to make any commitment or to make any inquiry as to the nature
or
sufficiency of any payment received by the Secured Party or to present or
file
any claim or notice, or to take any action with respect to the Collateral
or any
part thereof or the moneys due or to become due in respect thereof or any
property covered thereby, and no action taken by the Secured Party or omitted
to
be taken with respect to the Collateral or any part thereof shall give rise
to
any defense, counterclaim or offset in favor of Company or to any claim or
action against the Secured Party in the absence of the gross negligence or
willful misconduct of the Secured Party; and
provided further that,
the
Agent shall at all times act reasonably and in good faith. It is understood
and
agreed that the appointment of the Agent as the agent of the Company for
the
purposes set forth above in this Section 5(f) is coupled with an interest
and is irrevocable. The provisions of this Section 5(f) shall in no event
relieve Company of any of its obligations hereunder with respect to the
Collateral or any part thereof (other than obligations which are impaired
as a
result of actions taken by the Agent pursuant to this Section 5(f)) or
impose any obligation on the Secured Party to proceed in any particular manner
with respect to the Collateral or any part thereof, or in any way limit the
exercise by the Secured Party of any other or further right which it may
have on
the date of this Agreement or hereafter, whether hereunder or by law or
otherwise. Secured Party shall provide advance written notice to the Company
at
least ten days prior to taking any action hereunder; provided, however, that
if
in the Agent’s good faith determination such notice could not be provided within
such time period, advance notice shall be provided as soon as practicable
prior
to the taking of such action.
5
(g) Further
Assurances.
Company
agrees, at its expense, to execute, acknowledge, deliver and cause to be
duly
filed all such further instruments and documents and take all such actions
as
the Agent may from time to time reasonably request for the assuring and
preserving of the Security Interest and the rights and remedies created hereby,
including, without limitation, the payment of any fees and taxes required
in
connection with the execution and delivery of this Agreement, the granting
of
the Security Interest and the filing of any financing statements or other
documents in connection herewith. If any amount payable under or in connection
with any of the Collateral shall be or become evidenced by any promissory
note
or other instrument, such note or instrument shall be promptly pledged and
delivered to the Agent, duly endorsed in a manner satisfactory to the Agent.
Company agrees to notify promptly the Agent of any change in its corporate
name
or in the location of its chief executive office, its chief place of business
or
the office where it keeps its records.
6
6. Events
of Default.
Each of
the following occurrences shall constitute an event of default under this
Agreement (herein called “Event
of Default”):
(a) an
Event
of Default under the Convertible Notes shall occur (subject to any cure period
provided for in the Convertible Notes); or
(b) Company
shall fail promptly to observe or perform any covenant or agreement herein
binding on it or shall fail to satisfy any Obligations to the Secured Party
in
accordance with the terms of the Convertible Notes, if applicable, which
failure
is not cured within fifteen (15) days; or
(c) there
is
any levy, seizure, or attachment of all or any material portion of the
Collateral, other than as set forth in this Agreement; or
(d) any
of
the representations or warranties contained in Section 4 or in the Purchase
Agreement shall prove to have been incorrect in any material respect when
made.
7. Remedies.
Upon
the occurrence of an Event of Default and at any time thereafter, Agent may,
at
its option and on behalf of the Secured Party, take any or all of the following
actions:
(a) exercise
any or all remedies available under this Agreement including, without
limitation, any and all rights afforded to a secured party under, and subject
to
its obligations contained in, the Uniform Commercial Code as in effect in
any
state or other applicable law; or
(b) sell,
assign, transfer, pledge, encumber, or otherwise dispose of the Collateral;
or
(c) incur
reasonable expenses, including attorneys' fees at the regular hourly rates
of
Secured Party's counsel from time to time in effect, reasonable legal expenses
and costs for the exercise of any right or power under this Security Agreement,
which expenses are secured by this Security Agreement.
Any
disposition of Collateral by Agent shall be subject to the mandatory
requirements of applicable law and subject to the requirement that Agent
act
reasonably and in good faith. Subject to such conditions, Agent may sell
or
otherwise dispose of all or any part of the Collateral, at public or private
sale, for cash, upon credit or for future delivery as the Agent shall deem
appropriate. Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of the Company, and Company
hereby waives (to the extent permitted by law) all rights of redemption,
stay
and appraisal which Company now has or may at any time in the future have
under
any rule of law or statute now existing or hereafter enacted. The Agent shall
give the Company ten (10) days' written notice (which Company agrees is
reasonable notice within the meaning of Section 9-504(3) of the Uniform
Commercial Code) of the Agent's intention to make any sale of Collateral.
Such
notice, in the case of a public sale, shall state the time and place for
such
sale. Any such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Agent may fix and state
in the
notice (if any) of such sale. At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot, as an entirety or in separate
parcels, as the Agent may (in its sole and absolute discretion) determine.
The
Agent shall not be obligated to make any sale of any Collateral if it shall
determine not to do so, regardless of the fact that notice of sale of such
Collateral shall have been given. The Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from
time
to time by announcement at the time and place fixed for sale, and such sale
may,
without further notice, be made at the time and place to which the same was
so
adjourned. In case any sale of all or any part of the Collateral is made
on
credit or for future delivery, the Collateral so sold may be retained by
the
Agent until the sale price is paid by the purchaser or purchasers thereof,
but
the Agent shall not incur any liability in case any such purchaser or purchasers
shall fail to take up and pay for the Collateral so sold and, in case of
any
such failure, such Collateral may be sold again upon like notice. At any
public
sale made pursuant to this Section 7, any Purchaser may bid for or
purchase, free (to the extent permitted by law) from any right of redemption,
stay or appraisal on the part of Company (all said rights being also hereby
waived and released to the extent permitted by law), with respect to the
Collateral or any part thereof offered for sale and any such Purchaser may
make
payment on account thereof by using any claim then due and payable to any
such
Purchaser from Company as a credit against the purchase price, and any such
Purchaser may, upon compliance with the terms of sale, hold, retain and dispose
of such property without further accountability to Company therefor. For
purposes hereof, a written agreement to purchase the Collateral or any portion
thereof shall be treated as a sale thereof; the Agent shall be free to carry
out
such sale and purchase pursuant to such agreement, and Company shall not
be
entitled to the return of the Collateral or any portion thereof subject thereto,
notwithstanding the fact that after the Agent shall have entered into such
an
agreement all events of default shall have been remedied and the Secured
Obligations paid in full. Company shall remain liable for any deficiency.
As an
alternative to exercising the power of sale herein conferred upon it, the
Agent
may proceed by a suit or suits at law or in equity to foreclose this Agreement
and to sell the Collateral or any portion thereof pursuant to a judgment
or
decree of a court or courts having competent jurisdiction or pursuant to
a
proceeding by a court appointed receiver.
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8. Designation
of Agent; Indemnity.
(a) The
Purchasers hereby irrevocably designate Axiom (and its successors and assigns)
as their agent and Axiom hereby accepts such designation, in order to execute
any and all instruments or other documents on behalf of the Purchasers and
to do
any and all other acts or things on behalf of the Purchasers that Axiom (or
its
successors or assigns) in its sole discretion deems necessary or advisable
or
that may be required pursuant to this Agreement or otherwise, to exercise
Secured Party’s rights and remedies under this Agreement. None of the Purchasers
may take any action or exercise any rights under this Agreement except through
Axiom as their agent. Company hereby appoints the Agent the attorney-in-fact
of
Company solely for the purpose of carrying out the provisions of this Agreement
and taking any action and executing any instrument which the Agent may
reasonably deem necessary or advisable to accomplish the purposes hereof,
which
appointment is irrevocable so long as this Agreement and the Security Interest
have not been terminated and coupled with an interest. Notwithstanding anything
to the contrary set forth herein, this Agreement may be waived, modified,
amended, terminated or discharged only pursuant to Section 11
hereof.
8
(b) Axiom,
as
agent, shall have no duties or responsibilities whatsoever with respect to
the
Collateral except as are specifically set forth herein. Axiom, in its capacity
as agent for the Purchasers, shall neither be responsible for or under, nor
chargeable with knowledge of the terms and conditions of, any other agreement,
instrument or document in connection herewith. Axiom may conclusively rely
upon,
and shall be fully protected from all liability, loss, cost, damage or expense
in acting or omitting to act pursuant to any written notice, instrument,
request, consent, certificate, document, letter, telegram, opinion, order,
resolution or other writing hereunder without being required to determine
the
authenticity of such document, the correctness of any fact stated therein,
the
propriety of the service thereof or the capacity, identity or authority of
any
party purporting to sign or deliver such document. Axiom shall have no
responsibility for the contents of any such writing contemplated herein and
may
rely without any liability upon the contents thereof.
(c) Axiom,
in
its capacity as agent for the Purchasers, shall not be liable for any action
taken or omitted by it in good faith and reasonably believed by it to be
authorized hereby or with the rights or powers conferred upon it hereunder,
nor
for action taken or omitted by it in good faith, and in accordance with advice
of counsel (which counsel may be of Axiom’s own choosing), and shall not be
liable for any mistake of fact or error of judgment or for any acts or omissions
of any kind except for its own willful misconduct or gross
negligence.
(d) Each
of
the Purchasers (each, an “Indemnifying
Parties”)
agrees
to indemnify Axiom, in its capacity as agent for the Purchasers, and its
employees, directors, officers and agents and hold each harmless against
any and
all liabilities incurred by it hereunder as a consequence of such party's
action, and each Indemnifying Party agrees to indemnify Axiom, in its capacity
as agent for the Purchasers, and hold it harmless against any claims, costs,
payments, and expenses (including the reasonable fees and expenses of counsel)
and all liabilities incurred by it in connection with the performance of
its
duties hereunder, except in the case for claims, costs, payments, and expenses
(including the reasonable fees and expenses of counsel) and liabilities incurred
by Axiom resulting from its own willful misconduct or gross
negligence.
9. Application
of Proceeds.
The
proceeds of any collection or sale of Collateral, as well as any Collateral
consisting of cash, shall be applied by the Agent as follows:
FIRST,
to
the payment of all reasonable costs and expenses incurred by the Agent in
connection with such collection or sale or otherwise in connection with this
Agreement or any of the Secured Obligations, including, but not limited to,
all
court costs and the reasonable fees and expenses of its agents and legal
counsel, the repayment of all advances made by the Agent hereunder on behalf
of
the Company and any other reasonable costs or expenses incurred in connection
with the exercise of any right or remedy hereunder;
9
SECOND,
pro rata to the payment in full of the Obligations outstanding (pro rata
as
among the Purchasers in accordance with the outstanding Obligations held
by
them);
THIRD,
to
the Company or Celsia UK, as the case may be, its successors and assigns,
or as
a court of competent jurisdiction may otherwise direct.
10. Security
Interest Absolute.
All
rights of the Agent hereunder, the Security Interest, and all obligations
of the
Company hereunder, shall be absolute and unconditional irrespective of (i)
any
partial invalidity or unenforceability of any Obligations, any other agreement
with respect to any of the Secured Obligations or any other agreement or
instrument relating to any of the foregoing, (ii) any change in the time,
manner
or place of payment of, or in any other term of, all or any of the Secured
Obligations, or any other amendment or waiver of or consent to any departure
from the Convertible Notes or any other agreement or instrument, (iii) any
exchange, release or nonperfection of any other Collateral, or any release
or
amendment or waiver of or consent to or departure from any guarantee, for
all or
any of the Secured Obligations, or (iv) any other circumstance which might
otherwise constitute a defense available to, or discharge of the Company
in
respect of the Secured Obligations or in respect of this Agreement.
11. Miscellaneous.
This
Agreement can be waived, modified, amended, terminated or discharged only
explicitly in a writing signed by the Company and the Required Majority;
provided, however, that Schedule
1
hereto
shall be revised by the Company from time to time to reflect additional
Purchasers as parties to this Agreement without the written consent of any
other
party to this Agreement. A waiver signed by Secured Party shall be effective
only in the specific instance and for the specific purpose given. Mere delay
or
failure to act shall not preclude the exercise or enforcement of any of Secured
Party’s rights or remedies. All rights and remedies of Secured Party shall be
cumulative and may be exercised singularly or concurrently, at Secured Party’s
option, and the exercise or enforcement of any one such right or remedy shall
neither be a condition to nor bar the exercise or enforcement of any other.
Secured Party shall not be obligated to preserve any rights Company may have
against prior parties, to realize on the Collateral at all or in any particular
manner or order, or to apply any cash proceeds of the Collateral in any
particular order of application. This Agreement shall be binding upon and
inure
to the benefit of Company and Secured Party and their respective participants,
successors, and permitted assigns and shall take effect when signed by Company
and Secured Party, and Company waives notice of Secured Party’s acceptance
hereof; provided, however, that the Secured Party’s rights hereunder may not be
transferred or assigned to any third party without the prior written consent
of
Company. This Agreement shall be governed by the internal law of the State
of
New York without regard to conflicts of law provisions. Any legal action
or
proceeding with respect to this Agreement shall be brought exclusively in
the
courts of the State of New York or of the United States of America sitting
in
New York County, and, by execution and delivery of this Agreement, the parties
hereto hereby accept for itself and in respect of its property, generally
and
unconditionally, the jurisdiction of the aforesaid courts. If any provision
or
application of this Agreement is held unlawful or unenforceable in any respect,
such illegality or unenforceability shall not affect other provisions or
applications which can be given effect and this Agreement shall be construed
as
if the unlawful or unenforceable provision or application had never been
contained herein or prescribed hereby. All representations and warranties
contained in this Agreement shall survive until the indefeasable payment
of the
Secured Obligations or termination of this Agreement.
10
12. Waiver
of Jury Trial:
EACH
OF THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES
THE
RIGHT COMPANY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND
ANY
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE
OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF
EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR SECURED PARTY ENTERING
INTO THIS AGREEMENT.
13. Termination.
This
Agreement and the Security Interest shall terminate when all the Secured
Obligations have been fully and indefeasibly paid in full or upon the
consummation of a Qualified Debenture Financing, at which time the Agent
shall
execute and deliver to the Company all Uniform Commercial Code termination
statements and similar documents which the Company shall reasonably request
to
evidence such termination; provided,
however,
that
all indemnification obligations of the parties contained in this Agreement
shall
survive, and remain operative and in full force and effect regardless of,
the
termination of this Agreement for a period of six (6) months following the
termination of this Agreement.
14. Notices.
Any
notices, consents, waivers, or other communications required or permitted
to be
given under the terms of this Agreement (“Notices”)
shall
be given in accordance with Section 5.7 of the Purchase Agreements; provided,
however, that all Notices to Celsia UK shall be sent to the Company and Agent
shall be copied on all notices at Axiom Capital Management, Inc., 000 Xxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, attn: Xxxxxxx Xxxxxxx, facsimile
(000) 000-0000.
11
IN
WITNESS WHEREOF,
the
parties have duly executed and delivered this Security Agreement as of the
date
and year first written above.
|
SECURED
PARTY AND AGENT:
AXIOM
CAPITAL MANAGEMENT, INC.
|
||
| |
|
|
| By: | /s/ Xxxx X. Xxxxxxx | |
|
Name:
Xxxx X. Xxxxxxx
Title:
President
|
||
|
|
||
|
COMPANY:
|
||
| |
|
|
| By: | /s/ Xxxxxxx Xxxxxxxxx | |
|
Name:
Xxxxxxx Xxxxxxxxx
Title:
Chief Financial Officer
|
||
|
CELSIA
UK:
CELSIA
TECHNOLOGIES UK LIMITED
|
||
| |
|
|
| By: | /s/ Xxxxxxx Xxxxxxxxx | |
|
Name:
Xxxxxxx Xxxxxxxxx
Title:
Chief Financial Officer
|
||
12
COUNTERPART
SIGNATURE PAGE
DATED
FEBRUARY __, 2007
AMONG
CELSIA TECHNOLOGIES,
INC.,
AXIOM
CAPITAL MANAGEMENT, INC.
AND
THE
PURCHASERS IDENTIFIED THEREIN
The
undersigned hereby executes and delivers the Security Agreement to which
this
Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
“Purchasers” under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.
|
PURCHASER:___________________________*
|
||||
| By: | ||||
| Name: | ||||
|
Title:
|
|
|||
*
Executed by each Purchaser
13
