SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of February 10, 2006 (this "Agreement"),
among World Waste Technologies, Inc., a California corporation (the "Company")
and all of the Subsidiaries of the Company (other than the Immaterial
Subsidiaries (as defined herein)) (such Subsidiaries, the "Guarantors") (the
Company and Guarantors are collectively referred to as the "Debtors"), on the
one hand and the holders of the Company's 10% Secured Debentures issued on the
date hereof in the original aggregate principal amount of $6,265,000
(collectively referred to as, the "Debentures") and the Company's Senior Secured
Promissory Notes issued in November, 2005 (collectively referred to as the
"November Notes") , listed on Annex C hereto, their endorsees, transferees and
assigns (collectively referred to as, the "Secured Parties"), on the other hand.
W I T N E S S E T H:
WHEREAS, pursuant to the Debentures, the Secured Parties listed on Annex C
hereto have severally agreed to extend the loans to the Company evidenced by the
Debentures;
WHEREAS, pursuant to a certain Subsidiary Guarantee dated as of the date
hereof (the "Guaranty"), the Guarantors have jointly and severally agreed to
guaranty and act as surety for payment of such loans; and
WHEREAS, in order to induce the Secured Parties to extend the loans
evidenced by the Debentures, each Debtor has agreed to execute and deliver to
the Secured Parties this Agreement and to grant the Secured Parties, pari passu
with each other Secured Party and through the Agent, a perfected security
interest in certain property of such Debtor to secure the prompt payment,
performance and discharge in full of all of the Company's obligations under the
Debentures and the other Debtor's obligations under the Guaranty; and
WHEREAS, the holders of the November Notes entered into a Security
Agreement, dated November 1, 2005, with the Company (the "Prior Security
Agreement") which Prior Security Agreement provides that it may be amended with
the approval of the holders of at least 75% aggregate principal amount of the
November Notes;
WHEREAS, the holders of at least 75% aggregate principal amount of the
November Notes wish to amend and restate the Prior Security Agreement as set
forth herein and accordingly, the Prior Security Agreement shall be superseded
and replaced in its entirety by this Agreement.
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. Terms used but not
otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as "account", "chattel paper", "commercial tort claim", "deposit account",
"document", "equipment", "fixtures", "general intangibles", "goods",
"instruments", "inventory", "investment property", "letter-of-credit rights",
"proceeds" and "supporting obligations") shall have the respective meanings
given such terms in Article 9 of the UCC.
(a) "Agent" shall have the meaning set forth in Section 18.
(b) "Collateral" means the collateral in which the Secured Parties,
through the Agent, are granted a security interest by this Agreement and which
shall include the following personal property of the Debtors, whether presently
owned or existing or hereafter acquired or coming into existence, wherever
situated, and all additions and accessions thereto and all substitutions and
replacements thereof, and all proceeds, products and accounts thereof,
including, without limitation, all proceeds from the sale or transfer of the
Collateral and of insurance covering the same and of any tort claims in
connection therewith, and all dividends, interest, cash, notes, securities,
equity interest or other property at any time and from time to time acquired,
receivable or otherwise distributed in respect of, or in exchange for, any or
all of the Pledged Securities (as defined below):
(i) All goods, including, without limitations, (A) all
machinery, equipment, computers, motor vehicles, trucks, tanks, boats, ships,
appliances, furniture, special and general tools, fixtures, test and quality
control devices and other equipment of every kind and nature and wherever
situated, together with all documents of title and documents representing the
same, all additions and accessions thereto, replacements therefor, all parts
therefor, and all substitutes for any of the foregoing and all other items used
and useful in connection with any Debtor's businesses and all improvements
thereto; and (B) all inventory;
(ii) All contract rights and other general intangibles,
including, without limitation, all partnership interests, membership interests,
stock or other securities, rights under any of the Organizational Documents,
agreements related to the Pledged Securities (as defined in Section 4(i)),
licenses, distribution and other agreements, computer software (whether
"off-the-shelf", licensed from any third party or developed by any Debtor),
computer software development rights, leases, franchises, customer lists,
quality control procedures, grants and rights, goodwill, trademarks, service
marks, trade styles, trade names, patents, patent applications, copyrights, and
income tax refunds;
(iii) All accounts, together with all instruments, all
documents of title representing any of the foregoing, all rights in any
merchandising, goods, equipment, motor vehicles and trucks which any of the same
may represent, and all right, title, security and guaranties with respect to
each account, including any right of stoppage in transit;
(iv) All documents, letter-of-credit rights, instruments and
chattel paper;
(v) All commercial tort claims;
(vi) All deposit accounts and all cash (whether or not
deposited in such deposit accounts);
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(vii) All investment property;
(viii) All supporting obligations;
(ix) All files, records, books of account, business papers,
and computer programs; and
(x) the products and proceeds of all of the foregoing
Collateral set forth in clauses (i)-(ix) above.
Without limiting the generality of the foregoing, the "Collateral" shall
include all investment property and general intangibles respecting ownership
and/or other equity interests in each Guarantor, including, without limitation,
the shares of capital stock and the other equity interests listed on Schedule H
hereto (as the same may be modified from time to time pursuant to the terms
hereof), and any other shares of capital stock and/or other equity interests of
any other direct or indirect subsidiary of any Debtor obtained in the future,
and, in each case, all certificates representing such shares and/or equity
interests and, in each case, all rights, options, warrants, stock, other
securities and/or equity interests that may hereafter be received, receivable or
distributed in respect of, or exchanged for, any of the foregoing and all rights
arising under or in connection with the Pledged Securities, including, but not
limited to, all dividends, interest and cash.
Notwithstanding the foregoing, nothing herein shall be deemed to
constitute an assignment of any asset which, in the event of an assignment,
becomes void by operation of applicable law or the assignment of which is
otherwise prohibited by applicable law (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); provided, however, that to the extent
permitted by applicable law, this Agreement shall create a valid security
interest in such asset and, to the extent permitted by applicable law, this
Agreement shall create a valid security interest in the proceeds of such asset.
(c) "Intellectual Property" means the collective reference to all
rights, priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign laws or otherwise,
including, without limitation, (i) all copyrights arising under the laws of the
United States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished, all
registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, all registrations, recordings and
applications in the United States Copyright Office, (ii) all letters patent of
the United States, any other country or any political subdivision thereof, all
reissues and extensions thereof, and all applications for letters patent of the
United States or any other country and all divisions, continuations and
continuations-in-part thereof, (iii) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade dress,
service marks, logos, domain names and other source or business identifiers, and
all goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark Office
or in any similar office or agency of the United States, any State thereof or
any other country or any political subdivision thereof, or otherwise, and all
common law rights related thereto, (iv) all trade secrets arising under the laws
of the United States, any other country or any political subdivision thereof,
(v) all rights to obtain any reissues, renewals or extensions of the foregoing,
(vi) all licenses for any of the foregoing, and (vii) all causes of action for
infringement of the foregoing.
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(d) "Majority in Interest" shall mean, at any time of determination,
the majority in interest (based on then-outstanding principal amounts of
Debentures at the time of such determination) of the Secured Parties.
(e) "Necessary Endorsement" shall mean undated stock powers endorsed
in blank or other proper instruments of assignment duly executed and such other
instruments or documents as the Agent (as that term is defined below) may
reasonably request.
(f) "Obligations" means all of the liabilities and obligations
(primary, secondary, direct, contingent, sole, joint or several) due or to
become due, or that are now or may be hereafter contracted or acquired, or owing
to, of any Debtor to the Secured Parties, including, without limitation, all
obligations under this Agreement, the November Notes, the Debentures, the
Guaranty and any other instruments, agreements or other documents executed
and/or delivered in connection herewith or therewith, in each case, whether now
or hereafter existing, 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 any of the Secured Parties as a
preference, fraudulent transfer or otherwise as such obligations may be amended,
supplemented, converted, extended or modified from time to time. Without
limiting the generality of the foregoing, the term "Obligations" shall include,
without limitation: (i) principal of, and interest on the Debentures and the
November Notes and the loans extended pursuant thereto; (ii) any and all other
fees, indemnities, costs, obligations and liabilities of the Debtors from time
to time under or in connection with this Agreement, the Debentures, the November
Notes, the Guaranty and any other instruments, agreements or other documents
executed and/or delivered in connection herewith or therewith; and (iii) all
amounts (including but not limited to post-petition interest) in respect of the
foregoing that would be payable but for the fact that the obligations to pay
such amounts are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving any Debtor.
(g) "Organizational Documents" means with respect to any Debtor, the
documents by which such Debtor was organized (such as a certificate of
incorporation, certificate of limited partnership or articles of organization,
and including, without limitation, any certificates of designation for preferred
stock or other forms of preferred equity) and which relate to the internal
governance of such Debtor (such as bylaws, a partnership agreement or an
operating, limited liability or members agreement).
(h) "UCC" means the Uniform Commercial Code of the State of
California and or any other applicable law of any state or states which has
jurisdiction with respect to all, or any portion of, the Collateral or this
Agreement, from time to time. It is the intent of the parties that defined terms
in the UCC should be construed in their broadest sense so that the term
"Collateral" will be construed in its broadest sense. Accordingly if there are,
from time to time, changes to defined terms in the UCC that broaden the
definitions, they are incorporated herein and if existing definitions in the UCC
are broader than the amended definitions, the existing ones shall be
controlling.
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2. Grant of Perfected First Priority Security Interest. As an inducement
for the Secured Parties to extend the loans as evidenced by the Debentures and
to secure the complete and timely payment, performance and discharge in full, as
the case may be, of all of the Obligations, each Debtor hereby unconditionally
and irrevocably pledges, grants and hypothecates to the Agent, for the benefit
of the Secured Parties, a continuing and perfected security interest in and to,
a lien upon and a right of set-off against all of their respective right, title
and interest of whatsoever kind and nature in and to, the Collateral (the
"Security Interest").
3. Delivery of Certain Collateral. Contemporaneously or prior to the
execution of this Agreement, each Debtor shall deliver or cause to be delivered
to the Agent (a) any and all certificates and other instruments representing or
evidencing the Pledged Securities, and (b) any and all certificates and other
instruments or documents representing any of the other Collateral, in each case,
together with all Necessary Endorsements. The Debtors are, contemporaneously
with the execution hereof, delivering to Agent, or have previously delivered to
Agent, a true and correct copy of each Organizational Document governing any of
the Pledged Securities.
4. Representations, Warranties, Covenants and Agreements of the Debtors.
Except as set forth under the corresponding section of the disclosure schedules
delivered to the Agent concurrently herewith (the "Disclosure Schedules") which
Disclosure Schedules shall be deemed a part hereof, each Debtor represents and
warrants to, and covenants and agrees with, the Secured Parties as follows:
(a) Each 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 Debtors have no place of business or offices where their
respective books of account and records are kept (other than temporarily at the
offices of its attorneys or accountants) or places where Collateral is stored or
located, except as set forth on Schedule A attached hereto. Except as
specifically set forth on Schedule A, each Debtor is the record owner of the
real property where such Collateral is located, and there exist no mortgages or
other liens on any such real property except for Permitted Liens (as defined in
the Debentures). Except as disclosed on Schedule A, none of such Collateral is
in the possession of any consignee, bailee, warehouseman, agent or processor.
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(c) Except for Permitted Liens (as defined in the Debentures) and
except as set forth on Schedule B attached hereto, the Debtors are the sole
owner of the Collateral (except for non-exclusive licenses granted by any Debtor
in the ordinary course of business), free and clear of any liens, security
interests, encumbrances, rights or claims, and are fully authorized to grant the
Security Interest. Except as set forth on Schedule B, 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 Agent, for the benefit of the Secured Parties pursuant to this Agreement)
covering or affecting any of the Collateral. So long as this Agreement shall be
in effect, the Debtors shall not execute and shall not knowingly permit to be on
file in any such office or agency any other financing statement or other
document or instrument (except to the extent filed or recorded in favor of the
Agent, for the benefit of the Secured Parties pursuant to the terms of this
Agreement).
(d) No written claim has been received that any material portion of
the Collateral or Debtor's use of any material portion of the Collateral
violates the rights of any third party. There has been no adverse decision to
any Debtor's claim of ownership rights in or exclusive rights to use any
material portion of the Collateral in any jurisdiction or to any 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 any
Debtor, threatened before any court, judicial body, administrative or regulatory
agency, arbitrator or other governmental authority.
(e) Each Debtor shall at all times maintain its books of account and
records relating to the Collateral at its principal place of business and its
Collateral at the locations set forth on Schedule A attached hereto and may not
relocate such books of account and records or tangible Collateral unless it
delivers to the Agent at least 30 days prior to such relocation (i) written
notice of such relocation and the new location thereof (which must be within the
United States) and (ii) evidence that appropriate financing statements under the
UCC and other necessary documents have been filed and recorded and other steps
have been taken to perfect the Security Interest to create in favor of the
Secured Parties, through the Agent, a valid, perfected and continuing perfected
lien in the Collateral.
(f) This Agreement creates in favor of the Agent, for the benefit of
the Secured Parties a valid security interest in the Collateral, subject only to
Permitted Liens (as defined in the Debentures) securing the payment and
performance of the Obligations. Upon making the filings described in the
immediately following paragraph, all security interests created hereunder in any
Collateral which may be perfected by filing Uniform Commercial Code financing
statements shall have been duly perfected. Except for the filing of the Uniform
Commercial Code financing statements referred to in the immediately following
paragraph, the recordation of the Intellectual Property Security Agreement (as
defined below) with respect to copyrights and copyright applications in the
United States Copyright Office referred to in paragraph (m), the execution and
delivery of deposit account control agreements satisfying the requirements of
Section 9-104(a)(2) of the UCC with respect to each deposit account of the
Debtors, and the delivery of the certificates and other instruments provided in
Section 3, no action is necessary to create, perfect or protect the security
interests created hereunder. Without limiting the generality of the foregoing,
except for the filing of said financing statements, the recordation of said
Intellectual Property Security Agreement, and the execution and delivery of said
deposit account control agreements, 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 Agent and the Secured Parties hereunder.
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(g) Each Debtor hereby authorizes the Agent to file one or more
financing statements under the UCC, with respect to the Security Interest with
the proper filing and recording agencies in any jurisdiction deemed proper by
it.
(h) The execution, delivery and performance of this Agreement by the
Debtors does not (i) violate any of the provisions of any Organizational
Documents of any Debtor or any judgment, decree, order or award of any court,
governmental body or arbitrator or any applicable law, rule or regulation
applicable to any 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 any Debtor's debt or
otherwise) or other understanding to which any Debtor is a party or by which any
property or asset of any Debtor is bound or affected. No consent (including,
without limitation, from stockholders or creditors of any Debtor) is required
for any Debtor to enter into and perform its obligations hereunder.
(i) The capital stock and other equity interests listed on Schedule
H hereto (the "Pledged Securities") represent all of the capital stock and other
equity interests of the Guarantors, and represent all capital stock and other
equity interests owned, directly or indirectly, by the Company (other than the
stock of the Immaterial Subsidiaries). All of the Pledged Securities are validly
issued, fully paid and nonassessable, and the Company is the legal and
beneficial owner of the Pledged Securities, free and clear of any lien, security
interest or other encumbrance except for the security interests created by this
Agreement and other Permitted Liens (as defined in the Debentures).
(j) The ownership and other equity interests in partnerships and
limited liability companies (if any) included in the Collateral (the "Pledged
Interests") by their express terms do not provide that they are securities
governed by Article 8 of the UCC and are not held in a securities account or by
any financial intermediary.
(k) Except for Permitted Liens (as defined in the Debentures), each
Debtor shall at all times maintain the liens and Security Interest provided for
hereunder as valid and perfected first priority liens and security interests in
the Collateral in favor of the Agent for the benefit of the Secured Parties
until this Agreement and the Security Interest hereunder shall be terminated
pursuant to Section 11 hereof. Each Debtor hereby agrees to use commercially
reasonable efforts to defend the same against the claims of any and all persons
and entities. Each Debtor shall safeguard and protect all Collateral for the
account of the Secured Parties through the Agent. At the request of the Agent,
each Debtor will sign and deliver to the Agent on behalf of the Secured Parties
at any time or from time to time one or more financing statements pursuant to
the UCC in form reasonably satisfactory to the Agent and will pay the cost of
filing the same in all public offices wherever filing is, or is deemed by the
Agent to be, necessary or desirable to effect the rights and obligations
provided for herein. Without limiting the generality of the foregoing, each
Debtor shall pay all fees, taxes and other amounts necessary to maintain the
Collateral and the Security Interest hereunder, and each Debtor shall obtain and
furnish to the Agent from time to time, upon demand, such releases and/or
subordinations of claims and liens which may be required to maintain the
priority of the Security Interest hereunder.
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(l) No Debtor will transfer, pledge, hypothecate, encumber, license,
sell or otherwise dispose of any of the Collateral (except for non-exclusive
licenses granted by a Debtor in its ordinary course of business and sales of
inventory by a Debtor in its ordinary course of business) without the prior
written consent of a Majority in Interest.
(m) Each Debtor shall keep and preserve its equipment, inventory and
other tangible Collateral in good condition, repair and order and shall not
operate or locate any such Collateral (or cause to be operated or located) in
any area excluded from insurance coverage.
(n) Each Debtor shall maintain with financially sound and reputable
insurers, insurance with respect to the Collateral against loss or damage of the
kinds and in the amounts customarily insured against by entities of established
reputation having similar properties similarly situated and in such amounts as
are customarily carried under similar circumstances by other such entities and
otherwise as is prudent for entities engaged in similar businesses but in any
event sufficient to cover the full replacement cost thereof. Each Debtor shall
cause each insurance policy issued in connection herewith to provide, and the
insurer issuing such policy to certify to the Agent that (a) the Agent will be
named as lender loss payee and additional insured under each such insurance
policy; (b) if such insurance be proposed to be cancelled or materially changed
for any reason whatsoever, such insurer will promptly notify the Agent and such
cancellation or change shall not be effective as to the Agent for at least
thirty (30) days after receipt by the Agent of such notice, unless the effect of
such change is to extend or increase coverage under the policy; and (c) the
Agent will have the right (but no obligation) at its election to remedy any
default in the payment of premiums within thirty (30) days of notice from the
insurer of such default. If no Event of Default (as defined in the Debentures)
exists, loss payments in each instance will be applied by the applicable Debtor
to the repair and/or replacement of property with respect to which the loss was
incurred to the extent reasonably feasible, and any loss payments or the balance
thereof remaining, to the extent not so applied, shall be payable to the
applicable Debtor; provided, however, that payments received by any Debtor after
an Event of Default occurs and is continuing shall be paid to the Agent on
behalf of the Secured Parties and, if received by such Debtor, shall be held in
trust for the Secured Parties and immediately paid over to the Agent unless
otherwise directed in writing by the Agent. Copies of such policies or the
related certificates, in each case, naming the Agent on behalf of the Secured
Parties as lender loss payee and additional insured shall be delivered to the
Agent upon its request and at the time any new policy of insurance is issued.
(o) Each Debtor shall, within ten (10) days of obtaining knowledge
thereof, advise the Agent 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
Parties' security interest, through the Agent, therein.
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(p) Each Debtor shall promptly execute and deliver to the Agent such
further deeds, mortgages, assignments, security agreements, financing statements
or other instruments, documents, certificates and assurances and take such
further action as the Agent may from time to time request and may in its sole
discretion deem necessary to perfect, protect or enforce the Secured Parties'
security interest in the Collateral including, without limitation, if
applicable, the execution and delivery of a separate security agreement with
respect to each Debtor's Intellectual Property ("Intellectual Property Security
Agreement") in which the Secured Parties, through he Agent, have been granted a
security interest hereunder, substantially in a form reasonably acceptable to
the Agent, which Intellectual Property Security Agreement, other than as stated
therein, shall be subject to all of the terms and conditions hereof.
(q) Each Debtor shall permit the Agent and its representatives and
agents to inspect the Collateral during normal business hours and upon
reasonable prior notice, and to make copies of records pertaining to the
Collateral as may be reasonably requested by the Agent from time to time.
(r) Each 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.
(s) Each Debtor shall promptly notify the Agent in sufficient detail
upon becoming aware of any attachment, garnishment, execution or other legal
process levied against any material portion of the Collateral and of any other
information received by such Debtor that may materially affect the value of the
Collateral, the Security Interest or the rights and remedies of the Secured
Parties hereunder.
(t) All information heretofore, herein or hereafter supplied to the
Secured Parties 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.
(u) The Debtors shall at all times preserve and keep in full force
and effect their respective valid existence and good standing and any rights and
franchises material to its business.
(v) No Debtor will change its name, type of organization,
jurisdiction of organization, organizational identification number (if it has
one), legal or corporate structure, or identity, or add any new fictitious name
unless it provides at least 30 days' prior written notice to the Agent of such
change and, at the time of such written notification, such Debtor provides any
financing statements or fixture filings necessary to perfect and continue
perfected the perfected security interest granted and evidenced by this
Agreement.
(w) Except in the ordinary course of business, no Debtor may consign
any of its Inventory or sell any of its Inventory on xxxx and hold, sale or
return, sale on approval, or other conditional terms of sale without the consent
of the Agent which shall not be unreasonably withheld.
(x) No Debtor may relocate its chief executive office to a new
location without providing 30 days' prior written notification thereof to the
Agent and so long as, at the time of such written notification, such Debtor
provides any financing statements or fixture filings necessary to perfect and
continue perfected the perfected security interest granted and evidenced by this
Agreement.
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(y) 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 also sets forth each Debtor's organizational
identification number or, if any Debtor does not have one, states that one does
not exist.
(z) (i) The actual name of each Debtor is the name set forth in
Schedule D; (ii) no Debtor has any trade names except as set forth on Schedule E
attached hereto; (iii) no Debtor has used any name other than that stated in the
preamble hereto or as set forth on Schedule E for the preceding five years; and
(iv) no entity has merged into any Debtor or been acquired by any Debtor within
the past five years except as set forth on Schedule E.
(aa) At any time and from time to time that any Collateral consists
of instruments, certificated securities or other items that require possession
by the secured party to perfect the security interest created hereby, the
applicable Debtor shall deliver such Collateral to the Agent.
(bb) Each Debtor, in its capacity as issuer, hereby agrees to comply
with any and all orders and instructions of Agent regarding the Pledged
Interests consistent with the terms of this Agreement without the further
consent of any Debtor as contemplated by Section 8-106 (or any successor
section) of the UCC. Further, each Debtor agrees that it shall not enter into a
similar agreement (or one that would confer "control" within the meaning of
Article 8 of the UCC) with any other person or entity.
(cc) Each Debtor shall cause all tangible chattel paper constituting
Collateral to be delivered to the Agent, or, if such delivery is not possible,
then to cause such tangible chattel paper to contain a legend noting that it is
subject to the security interest created by this Agreement. To the extent that
any Collateral consists of electronic chattel paper, the applicable Debtor shall
cause the underlying chattel paper to be "marked" within the meaning of Section
9-105 of the UCC (or successor section thereto). (dd) If there is any investment
property or deposit account included as Collateral that can be perfected by
"control" through an account control agreement, the applicable Debtor shall
cause such an account control agreement, in form and substance in each case
satisfactory to the Agent, to be entered into and delivered to the Agent.
(ee) To the extent that any Collateral consists of letter-of-credit
rights, the applicable Debtor shall cause the issuer of each underlying letter
of credit to consent to an assignment of the proceeds thereof to the Agent for
the benefit of the Secured Parties.
(ff) To the extent that any Collateral is in the possession of any
third party, the applicable Debtor shall join with the Agent in notifying such
third party of the Secured Parties' security interest, through the Agent, in
such Collateral and shall use its best efforts to obtain an acknowledgement and
agreement from such third party with respect to the Collateral, in form and
substance reasonably satisfactory to the Agent.
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(gg) If any Debtor shall at any time hold or acquire a commercial
tort claim, such Debtor shall promptly notify the Agent in a writing signed by
such Debtor of the particulars thereof and grant to the Agent, for the benefit
of the Secured Parties, in such writing a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance reasonably satisfactory to the Agent.
(hh) Each Debtor shall promptly provide written notice to the Agent
of any and all accounts which arise out of contracts with any governmental
authority and, to the extent necessary to perfect or continue the perfected
status of the Security Interest in such accounts and proceeds thereof, shall
execute and deliver to the Agent an assignment of claims for such accounts and
cooperate with the Agent in taking any other steps required, in its reasonable
judgment, under the Federal Assignment of Claims Act or any similar federal,
state or local statute or rule to perfect or continue the perfected status of
the Security Interest in such accounts and proceeds thereof.
(ii) Other than any inactive subsidiaries which have no material
assets and which will be dissolved or merged with and into the Company or a
Subsidiary within 6 months from the date hereof (the "Immaterial Subsidiaries"),
each Debtor shall cause each subsidiary of such Debtor to promptly become a
party hereto (an "Additional Debtor"), by executing and delivering an Additional
Debtor Joinder in substantially the form of Annex A attached hereto and comply
with the provisions hereof applicable to the Debtors. Concurrent therewith, the
Additional Debtor shall deliver replacement schedules for, or supplements to all
other Schedules to (or referred to in) this Agreement, as applicable, which
replacement schedules shall supersede, or supplements shall modify, the
Schedules then in effect. The Additional Debtor shall also deliver authorizing
resolutions, good standing certificates, incumbency certificates, organizational
documents, financing statements and other information and documentation as the
Agent may reasonably request. Upon delivery of the foregoing to the Agent, the
Additional Debtor shall be and become a party to this Agreement with the same
rights and obligations as the Debtors, for all purposes hereof as fully and to
the same extent as if it were an original signatory hereto and shall be deemed
to have made the representations, warranties and covenants set forth herein as
of the date of execution and delivery of such Additional Debtor Joinder, and all
references herein to the "Debtors" shall be deemed to include each Additional
Debtor.
(jj) Each Debtor shall vote the Pledged Securities to comply with
the covenants and agreements set forth herein and in the Debentures and the
November Notes.
(kk) Each Debtor shall register the pledge of the applicable Pledged
Securities on the books of such Debtor. Each Debtor shall notify each issuer of
Pledged Securities to register the pledge of the applicable Pledged Securities
in the name of the Agent, for the benefit of the Secured Parties, on the books
of such issuer. Further, except with respect to certificated securities
delivered to the Agent, the applicable Debtor shall deliver to Agent an
acknowledgement of pledge (which, where appropriate, shall comply with the
requirements of the relevant UCC with respect to perfection by registration)
signed by the issuer of the applicable Pledged Securities, which acknowledgement
shall confirm that: (a) it has registered the pledge on its books and records;
and (b) at any time directed by Agent during the continuation of an Event of
Default, such issuer will transfer the record ownership of such Pledged
Securities into the name of any designee of Agent, will take such steps as may
be necessary to effect the transfer, and will comply with all other instructions
of Agent regarding such Pledged Securities without the further consent of the
applicable Debtor.
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(ll) In the event that, upon an occurrence of an Event of Default,
Agent shall sell all or any of the Pledged Securities to another party or
parties (herein called the "Transferee") or shall purchase or retain all or any
of the Pledged Securities, each Debtor shall, to the extent applicable: (i)
deliver to Agent or the Transferee, as the case may be, the articles of
incorporation, bylaws, minute books, stock certificate books, corporate seals,
deeds, leases, indentures, agreements, evidences of indebtedness, books of
account, financial records and all other Organizational Documents and records of
the Debtors and their direct and indirect subsidiaries; (ii) use its
commercially reasonable efforts to obtain resignations of the persons then
serving as officers and directors of the Debtors and their direct and indirect
subsidiaries, if so requested; and (iii) use commercially reasonable efforts to
obtain any approvals that are required by any governmental or regulatory body in
order to permit the sale of the Pledged Securities to the Transferee or the
purchase or retention of the Pledged Securities by Agent and allow the
Transferee or Agent to continue the business of the Debtors and their direct and
indirect subsidiaries.
(mm) Without limiting the generality of the other obligations of the
Debtors hereunder, each Debtor shall promptly (i) cause to be registered at the
United States Copyright Office all of its material copyrights and (ii) cause the
security interest contemplated hereby with respect to all Intellectual Property
registered at the United States Copyright Office or United States Patent and
Trademark Office to be duly recorded at the applicable office.
(nn) Each Debtor will from time to time, at the joint and several
expense of the Debtors, promptly execute and deliver all such further
instruments and documents, and take all such further action as may be necessary
or desirable, or as the Agent may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby or to
enable the Secured Parties, through the Agent, to exercise and enforce their
rights and remedies hereunder and with respect to any Collateral or to otherwise
carry out the purposes of this Agreement.
(oo) Schedule F attached hereto lists all of the patents, patent
applications, trademarks, trademark applications, registered copyrights, and
domain names owned by any of the Debtors as of the date hereof. Schedule F lists
all material licenses in favor of any Debtor for the use of any patents,
trademarks, copyrights and domain names as of the date hereof. All material
patents and trademarks of the Debtors have been duly recorded at the United
States Patent and Trademark Office and all material copyrights of the Debtors
have been duly recorded at the United States Copyright Office.
(pp) Except as set forth on Schedule G attached hereto, none of the
account debtors or other persons or entities obligated on any of the Collateral
is a governmental authority covered by the Federal Assignment of Claims Act or
any similar federal, state or local statute or rule in respect of such
Collateral.
5. Effect of Pledge on Certain Rights. If any of the Collateral subject to
this Agreement consists of nonvoting equity or ownership interests (regardless
of class, designation, preference or rights) that may be converted into voting
equity or ownership interests upon the occurrence of certain events (including,
without limitation, upon the transfer of all or any of the other stock or assets
of the issuer), it is agreed that the pledge of such equity or ownership
interests pursuant to this Agreement or the enforcement of any of Agent's rights
hereunder shall not be deemed to be the type of event which would trigger such
conversion rights notwithstanding any provisions in the Organizational Documents
or agreements to which any Debtor is subject or to which any Debtor is party.
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6. Defaults. The following events shall be "Events of Default":
(a) The occurrence of an Event of Default (as defined in the
Debentures) under the Debentures;
(b) Any representation or warranty of any Debtor in this Agreement
shall prove to have been incorrect in any material respect when made;
(c) The failure by any Debtor to observe or perform any of its
obligations hereunder for five (5) days after delivery to such Debtor of notice
of such failure by or on behalf of a Secured Party unless such default is
capable of cure but cannot be cured within such time frame and such Debtor is
using best efforts to cure same in a timely fashion; or
(d) If any material provision of this Agreement shall at any time
for any reason be declared to be null and void, or the validity or
enforceability thereof shall be contested by any Debtor, or a proceeding shall
be commenced by any Debtor, or by any governmental authority having jurisdiction
over any Debtor, seeking to establish the invalidity or unenforceability
thereof, or any Debtor shall deny that any Debtor has any liability or
obligation purported to be created under this Agreement.
7. Duty To Hold In Trust.
(a) Upon the occurrence of any Event of Default and at any time
thereafter, each Debtor shall, upon receipt of any revenue, income, dividend,
interest or other sums subject to the Security Interest, whether payable
pursuant to the Debentures, the November Notes or otherwise, or of any check,
draft, note, trade acceptance or other instrument evidencing an obligation to
pay any such sum, hold the same in trust for the Secured Parties and shall
forthwith endorse and transfer any such sums or instruments, or both, to the
Agent, for the benefit of the Secured Parties, pro-rata in proportion to their
initial purchases of Debentures and November Notes for application to the
satisfaction of the Obligations (and if any Debenture or November Note is not
outstanding, pro-rata in proportion to the initial purchases of the remaining
Debentures and November Notes).
(b) If any Debtor shall become entitled to receive or shall receive
any securities or other property (including, without limitation, shares of
Pledged Securities or instruments representing Pledged Securities acquired after
the date hereof, or any options, warrants, rights or other similar property or
certificates representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital, or
issued in connection with any reorganization of such Debtor or any of its direct
or indirect subsidiaries) in respect of the Pledged Securities (whether as an
addition to, in substitution of, or in exchange for, such Pledged Securities or
otherwise), such Debtor agrees to (i) accept the same as the agent of the
Secured Parties; (ii) hold the same in trust on behalf of and for the benefit of
the Secured Parties; and (iii) to deliver any and all certificates or
instruments evidencing the same to Agent on or before the close of business on
the fifth business day following the receipt thereof by such Debtor, in the
exact form received together with the Necessary Endorsements, to be held by
Agent subject to the terms of this Agreement as Collateral.
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8. Rights and Remedies Upon Default.
(a) Upon the occurrence of any Event of Default declared by holders
of at least 30% aggregate principal amount of Debentures and at any time
thereafter, the Secured Parties, acting through the Agent, shall have the right
to exercise all of the remedies conferred hereunder and under the Debentures,
and the Secured Parties shall have all the rights and remedies of a secured
party under the UCC. Without limitation, the Agent, for the benefit of the
Secured Parties, shall have the following rights and powers:
(i) The Agent shall have the right to take possession of the
Collateral and, for that purpose, enter, with the aid and assistance of any
person, any premises where the Collateral, or any part thereof, is or may be
placed and remove the same, and each Debtor shall assemble the Collateral and
make it available to the Agent at places which the Agent shall reasonably
select, whether at such Debtor's premises or elsewhere, and make available to
the Agent, without rent, all of such Debtor's respective premises and facilities
for the purpose of the Agent taking possession of, removing or putting the
Collateral in saleable or disposable form.
(ii) Upon notice to the Debtors by Agent, all rights of each
Debtor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise and all rights of each Debtor to receive the
dividends and interest which it would otherwise be authorized to receive and
retain, shall cease. Upon such notice, Agent shall have the right to receive,
for the benefit of the Secured Parties any interest, cash dividends or other
payments on the Collateral and, at the option of Agent, to exercise in such
Agent's discretion all voting rights pertaining thereto. Without limiting the
generality of the foregoing, Agent shall have the right (but not the obligation)
to exercise all rights with respect to the Collateral as it were the sole and
absolute owner thereof, including, without limitation, to vote and/or to
exchange, at its sole discretion, any or all of the Collateral in connection
with a merger, reorganization, consolidation, recapitalization or other
readjustment concerning or involving the Collateral or any Debtor or any of its
direct or indirect subsidiaries.
(iii) The Agent shall have the right to operate the business
of each Debtor using the Collateral and shall have the right to assign, sell,
lease or otherwise dispose of and deliver all or any part of the Collateral, at
public or private sale or otherwise, either with or without special conditions
or stipulations, for cash or on credit or for future delivery, in such parcel or
parcels and at such time or times and at such place or places, and upon such
terms and conditions as the Agent may deem commercially reasonable, all without
(except as shall be required by applicable statute and cannot be waived)
advertisement or demand upon or notice to any Debtor or right of redemption of a
Debtor, which are hereby expressly waived. Upon each such sale, lease,
assignment or other transfer of Collateral, the Agent, for the benefit of the
Secured Parties, may, unless prohibited by applicable law which cannot be
waived, purchase all or any part of the Collateral being sold, free from and
discharged of all trusts, claims, right of redemption and equities of any
Debtor, which are hereby waived and released.
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(iv) The Agent shall have the right (but not the obligation)
to notify any account debtors and any obligors under instruments or accounts to
make payments directly to the Agent, on behalf of the Secured Parties, and to
enforce the Debtors' rights against such account debtors and obligors.
(v) The Agent, for the benefit of the Secured Parties, may
(but are not obligated to) direct any financial intermediary or any other person
or entity holding any investment property to transfer the same to the Agent, on
behalf of the Secured Parties, or their designee.
(vi) The Agent may (but are not obligated to) transfer any or
all Intellectual Property registered in the name of any Debtor at the United
States Patent and Trademark Office and/or Copyright Office into the name of the
Secured Parties or any designee or any purchaser of any Collateral.
(b) The Agent 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 Agent may sell the Collateral without giving any warranties and may
specifically disclaim such warranties. If the Agent sells any of the Collateral
on credit, the Debtors will only be credited with payments actually made by the
purchaser. In addition, each Debtor waives any and all rights that it may have
to a judicial hearing in advance of the enforcement of any of the Agent's rights
and remedies hereunder, including, without limitation, its right following an
Event of Default to take immediate possession of the Collateral and to exercise
its rights and remedies with respect thereto.
(c) For the purpose of enabling the Agent to further exercise rights
and remedies under this Section 8 or elsewhere provided by agreement or
applicable law, each Debtor hereby grants to the Agent, for the benefit of the
Agent and the Secured Parties, an irrevocable, nonexclusive license (exercisable
without payment of royalty or other compensation to such Debtor) to use, license
or sublicense following an Event of Default, any Intellectual Property now owned
or hereafter acquired by such Debtor, and wherever the same may be located, and
including in such license access to all media in which any of the licensed items
may be recorded or stored and to all computer software and programs used for the
compilation or printout thereof.
9. Applications of Proceeds. The proceeds of any such sale, lease or other
disposition of the Collateral hereunder shall be applied first, to the expenses
of retaking, holding, storing, processing and preparing for sale, selling, and
the like (including, without limitation, any taxes, fees and other costs
incurred in connection therewith) of the Collateral, to the reasonable
attorneys' fees and expenses incurred by the Agent in enforcing the Secured
Parties' rights hereunder and in connection with collecting, storing and
disposing of the Collateral, and then to satisfaction of the Obligations pro
rata among the Secured Parties (based on then-outstanding principal amounts of
Debentures and November Notes at the time of any such determination), and to the
payment of any other amounts required by applicable law, after which the Secured
Parties shall pay to the applicable Debtor any surplus proceeds. If, upon the
sale, license or other disposition of the Collateral, the proceeds thereof are
insufficient to pay all amounts to which the Secured Parties are legally
entitled, the Debtors will be liable for the deficiency, together with interest
thereon, at the rate of 10% per annum or the lesser amount permitted by
applicable law (the "Default Rate"), and the reasonable fees of any attorneys
employed by the Secured Parties to collect such deficiency. To the extent
permitted by applicable law, each Debtor waives all claims, damages and demands
against the Secured Parties arising out of the repossession, removal, retention
or sale of the Collateral, unless due solely to the gross negligence or willful
misconduct of the Secured Parties as determined by a final judgment (not subject
to further appeal) of a court of competent jurisdiction.
15
10. Securities Law Provision. Each Debtor recognizes that Agent may be
limited in its ability to effect a sale to the public of all or part of the
Pledged Securities by reason of certain prohibitions in the Securities Act of
1933, as amended, or other federal or state securities laws (collectively, the
"Securities Laws"), and may be compelled to resort to one or more sales to a
restricted group of purchasers who may be required to agree to acquire the
Pledged Securities for their own account, for investment and not with a view to
the distribution or resale thereof. Each Debtor agrees that sales so made may be
at prices and on terms less favorable than if the Pledged Securities were sold
to the public, and that Agent has no obligation to delay the sale of any Pledged
Securities for the period of time necessary to register the Pledged Securities
for sale to the public under the Securities Laws. Each Debtor shall provide
reasonable cooperation with Agent in its attempt to satisfy any requirements
under the Securities Laws applicable to the sale of the Pledged Securities by
Agent.
11. Costs and Expenses. Each Debtor agrees to pay all reasonable
out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, including without limitation, any financing statements
pursuant to the UCC, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches
reasonably required by the Agent. The Debtors shall also pay all other claims
and charges which in the reasonable opinion of the Agent is reasonably likely to
prejudice, imperil or otherwise affect any material portion of the Collateral or
the Security Interest therein. The Debtors will also, upon demand, pay to the
Agent the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, which the Agent,
for the benefit of the Secured Parties, may incur in connection with (i) the
enforcement of this Agreement, (ii) the custody or preservation of, or the sale
of, collection from, or other realization upon, any of the Collateral, or (iii)
the exercise or enforcement of any of the rights of the Secured Parties under
the Debentures or November Notes. Until so paid, any fees payable hereunder
shall be added to the principal amount of the Debentures or November Notes and
shall bear interest at the Default Rate.
12. Responsibility for Collateral. The Debtors assume all liabilities and
responsibility in connection with all Collateral, and the Obligations shall in
no way be affected or diminished by reason of the loss, destruction, damage or
theft of any of the Collateral or its unavailability for any reason. Without
limiting the generality of the foregoing, (a) neither the Agent nor any Secured
Party (i) has any duty (either before or after an Event of Default) to collect
any amounts in respect of the Collateral or to preserve any rights relating to
the Collateral, or (ii) has any obligation to clean-up or otherwise prepare the
Collateral for sale, and (b) each Debtor shall remain obligated and liable under
each contract or agreement included in the Collateral to be observed or
performed by such Debtor thereunder. Neither the Agent nor any Secured Party
shall have any obligation or liability under any such contract or agreement by
reason of or arising out of this Agreement or the receipt by the Agent or any
Secured Party of any payment relating to any of the Collateral, nor shall the
Agent or any Secured Party be obligated in any manner to perform any of the
obligations of any Debtor under or pursuant to any such contract or agreement,
to make inquiry as to the nature or sufficiency of any payment received by the
Agent or any Secured Party in respect of the Collateral or as to the sufficiency
of any performance by any party under any such contract or agreement, to present
or file any claim, to take any action to enforce any performance or to collect
the payment of any amounts which may have been assigned to the Agent or to which
the Agent or any Secured Party may be entitled at any time or times.
16
13. [RESERVED].
14. Term of Agreement. This Agreement and the Security Interest shall
terminate on the date on which all payments under the Debentures and November
Notes have been indefeasibly paid in full and all other Obligations have been
paid or discharged; provided, however, that all indemnities of the Debtors
contained in this Agreement (including, without limitation, Annex B hereto)
shall survive and remain operative and in full force and effect regardless of
the termination of this Agreement.
15. Power of Attorney; Further Assurances.
(a) Each Debtor authorizes the Agent, and does hereby make,
constitute and appoint the Agent and its respective officers, agents, successors
or assigns with full power of substitution, as such Debtor's true and lawful
attorney-in-fact, with power, in the name of the Agent or such Debtor, to, after
the occurrence and during the continuance of an Event of Default, (i) endorse
any note, checks, drafts, money orders or other instruments of payment
(including payments payable under or in respect of any policy of insurance) in
respect of the Collateral that may come into possession of the Agent; (ii) to
sign and endorse any financing statement pursuant to the UCC or any invoice,
freight or express xxxx, xxxx of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications and notices in connection with
accounts, and other documents relating to the Collateral; (iii) to pay or
discharge taxes, liens, security interests or other encumbrances at any time
levied or placed on or threatened against the Collateral; (iv) to demand,
collect, receipt for, compromise, settle and xxx for monies due in respect of
the Collateral; (v) to transfer any Intellectual Property or provide licenses
respecting any Intellectual Property; and (vi) generally, at the option of the
Agent, and at the expense of the Debtors, at any time, or from time to time, to
execute and deliver any and all documents and instruments and to do all acts and
things which the Agent deem necessary to protect, preserve and realize upon the
Collateral and the Security Interest granted therein in order to effect the
intent of this Agreement and the Debentures and November Notes all as fully and
effectually as the Debtors might or could do; and each Debtor hereby ratifies
all that said attorney shall lawfully do or cause to be done by virtue hereof.
This power of attorney is coupled with an interest and shall be irrevocable for
the term of this Agreement and thereafter as long as any of the Obligations
shall be outstanding. The designation set forth herein shall be deemed to amend
and supersede any inconsistent provision in the Organizational Documents or
other documents or agreements to which any Debtor is subject or to which any
Debtor is a party. Without limiting the generality of the foregoing, after the
occurrence and during the continuance of an Event of Default, each Secured Party
is specifically authorized to execute and file any applications for or
instruments of transfer and assignment of any patents, trademarks, copyrights or
other Intellectual Property with the United States Patent and Trademark Office
and the United States Copyright Office.
17
(b) On a continuing basis, each Debtor will make, execute,
acknowledge, deliver, file and record, as the case may be, with the proper
filing and recording agencies in any jurisdiction, including, without
limitation, the jurisdictions indicated on Schedule C attached hereto, all such
instruments, and take all such action as may reasonably be deemed necessary or
advisable, or as reasonably requested by the Agent, to perfect the Security
Interest granted hereunder and otherwise to carry out the intent and purposes of
this Agreement, or for assuring and confirming to the Agent the grant or
perfection of a perfected security interest in all the Collateral under the UCC.
(c) Each Debtor hereby irrevocably appoints the Agent as such
Debtor's attorney-in-fact, with full authority in the place and instead of such
Debtor and in the name of such Debtor, from time to time in the Agent's
discretion, to take any action and to execute any instrument which the Agent may
deem necessary or advisable to accomplish the purposes of this Agreement,
including the filing, in its sole discretion, of one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of such Debtor where permitted by law, which
financing statements may (but need not) describe the Collateral as "all assets"
or "all personal property" or words of like import, and ratifies all such
actions taken by the Agent. This power of attorney is coupled with an interest
and shall be irrevocable for the term of this Agreement and thereafter as long
as any of the Obligations shall be outstanding.
16. Notices. All notices, requests, demands and other communications
hereunder shall be subject to the notice provision of the Purchase Agreement (as
such term is defined in the Debentures).
17. Other Security. To the extent that the Obligations are now or
hereafter secured by property other than the Collateral or by the guarantee,
endorsement or property of any other person, firm, corporation or other entity,
then the Agent shall have the right, in its sole discretion, to pursue,
relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any of the Secured Parties' rights and
remedies hereunder.
18. Appointment of Agent. The Secured Parties hereby appoint Midsummer
Investment Ltd. to act as their agent ("Midsummer" or "Agent") for purposes of
exercising any and all rights and remedies of the Secured Parties hereunder.
Such appointment shall continue until revoked in writing by a Majority in
Interest, at which time a Majority in Interest shall appoint a new Agent;
provided, that Midsummer may not be removed as Agent unless Midsummer shall then
hold less than $50,000 principal amount of Debentures. The Agent shall have the
rights, responsibilities and immunities set forth in Annex B hereto.
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19. Miscellaneous.
(a) No course of dealing between the Debtors and the Secured
Parties, nor any failure to exercise, nor any delay in exercising, on the part
of the Secured Parties, any right, power or privilege hereunder or under the
Debentures 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 Parties with
respect to the Collateral, whether established hereby or by the Debentures, the
November Notes or by any other agreements, instruments or documents or by law
shall be cumulative and may be exercised singly or concurrently.
(c) This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and is intended to supersede all prior
negotiations, understandings and agreements with respect thereto. Except as
specifically set forth in this Agreement, no provision of this Agreement may be
modified or amended except by a written agreement specifically referring to this
Agreement and signed by the Agent, the holders of at least 75% aggregate
principal amount of outstanding Debentures (which holders must include all
Qualified Purchasers (as defined in the Purchase Agreement)) and the Company.
(d) In the event any provision of this Agreement is held to be
invalid, prohibited or unenforceable in any jurisdiction for any reason, unless
such provision is narrowed by judicial construction, this Agreement shall, as to
such jurisdiction, be construed as if such invalid, prohibited or unenforceable
provision had been more narrowly drawn so as not to be invalid, prohibited or
unenforceable. If, notwithstanding the foregoing, any provision of this
Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions of
this Agreement and without affecting the validity or enforceability of such
provision or the other provisions of this Agreement in any other jurisdiction.
(e) No waiver of any breach or default or any right under this
Agreement shall be considered valid unless in writing and signed by the party
giving such waiver, and no such waiver shall be deemed a waiver of any
subsequent breach or default or right, whether of the same or similar nature or
otherwise.
(f) This Agreement shall be binding upon and inure to the benefit of
each party hereto and its successors and assigns.
(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.
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(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. Each Debtor agrees that
all proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and the Debentures (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. Each 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, 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 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) All Debtors shall jointly and severally be liable for the
obligations of each Debtor to the Secured Parties hereunder.
(k) Each Debtor shall indemnify, reimburse and hold harmless the
Agent and the Secured Parties and 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 reasonable 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 Debentures, the
November Notes, the Purchase Agreement or any other agreement, instrument or
other document executed or delivered in connection herewith or therewith.
20
(l) Nothing in this Agreement shall be construed to subject Agent or
any Secured Party to liability as a partner in any Debtor or any if its direct
or indirect subsidiaries that is a partnership or as a member in any Debtor or
any of its direct or indirect subsidiaries that is a limited liability company,
nor shall Agent or any Secured Party be deemed to have assumed any obligations
under any partnership agreement or limited liability company agreement, as
applicable, of any such Debtor or any if its direct or indirect subsidiaries or
otherwise, unless and until any such Secured Party exercises its right to be
substituted for such Debtor as a partner or member, as applicable, pursuant
hereto.
(m) To the extent that the grant of the security interest in the
Collateral and the enforcement of the terms hereof require the consent, approval
or action of any partner or member, as applicable, of any Debtor or any direct
or indirect subsidiary of any Debtor or compliance with any provisions of any of
the Organizational Documents, the Debtors hereby grant such consent and approval
and waive any such noncompliance with the terms of said documents.
(n) This Agreement supersedes and replaces any prior security
agreements or understandings regarding any of the Collateral entered into
between the Company and any of the Secured Parties, including the Prior Security
Agreement.
[SIGNATURE PAGES FOLLOW]
21
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed on the day and year first above written.
WORLD WASTE TECHNOLOGIES, INC.
By: /s/ XXXX XXXXXXXX
---------------------------
Name: Xxxx Xxxxxxxx
Title: CEO
WORLD WASTE OF AMERICA, INC.
By: /s/ XXXX XXXXXXXX
---------------------------
Name: Xxxx Xxxxxxxx
Title: CEO
WORLD WASTE OF ANAHEIM, INC.
By: /s/ XXXX XXXXXXXX
---------------------------
Name: Xxxx Xxxxxxxx
Title: CEO
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
22
[SIGNATURE PAGE OF HOLDERS TO WDWT SA]
Name of Investing Entity:
-------------------------------------------------------
Signature of Authorized Signatory of Investing Entity:
--------------------------
Name of Authorized Signatory:
---------------------------------------------------
Title of Authorized Signatory:
--------------------------------------------------
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
23
SCHEDULE A
Principal Place of Business of Debtors:
Locations Where Collateral is Located or Stored:
24
SCHEDULE B
25
SCHEDULE C
26
SCHEDULE D
Legal Names and Organizational Identification Numbers
27
SCHEDULE E
Names; Mergers and Acquisitions
28
SCHEDULE F
Intellectual Property
29
SCHEDULE G
Account Debtors
30
SCHEDULE H
Pledged Securities
31
ANNEX A
to
SECURITY
AGREEMENT
FORM OF ADDITIONAL DEBTOR JOINDER
Security Agreement dated as of [_____ ___, 200__ made by
[-------------
and its subsidiaries party thereto from time to time, as Debtors
to and in favor of
the Secured Parties identified therein (the "Security Agreement")
Reference is made to the Security Agreement as defined above; capitalized
terms used herein and not otherwise defined herein shall have the meanings given
to such terms in, or by reference in, the Security Agreement.
The undersigned hereby agrees that upon delivery of this Additional Debtor
Joinder to the Secured Parties referred to above, the undersigned shall (a) be
an Additional Debtor under the Security Agreement, (b) have all the rights and
obligations of the Debtors under the Security Agreement as fully and to the same
extent as if the undersigned was an original signatory thereto and (c) be deemed
to have made the representations and warranties set forth in Section 4 therein
as of the date of execution and delivery of this Additional Debtor Joinder.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY
GRANTS TO THE SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE
FULLY SET FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE
WAIVER OF JURY TRIAL PROVISIONS SET FORTH THEREIN.
Attached hereto are supplemental and/or replacement Schedules to the
Security Agreement, as applicable.
An executed copy of this Joinder shall be delivered to the Agent on behalf
of the Secured Parties, and the Secured Parties may rely on the matters set
forth herein on or after the date hereof. This Joinder shall not be modified,
amended or terminated without the prior written consent of the Agent and the
Qualified Purchasers (as defined in the Purchase Agreement).
32
IN WITNESS WHEREOF, the undersigned has caused this Joinder to be executed
in the name and on behalf of the undersigned.
[Name of Additional Debtor]
By:_______________________________
Name:_____________________________
Title:____________________________
Address:
Dated:
33
ANNEX B
to
SECURITY
AGREEMENT
THE AGENT
1. Appointment. The Secured Parties (all capitalized terms used herein and
not otherwise defined shall have the respective meanings provided in the
Security Agreement to which this Annex B is attached (the "Agreement")), by
their acceptance of the benefits of the Agreement, hereby designate Midsummer
Investment Ltd. ("Midsummer" or "Agent") as the Agent to act as specified herein
and in the Agreement. Each Secured Party shall be deemed irrevocably to
authorize the Agent to take such action on its behalf under the provisions of
the Agreement and any other Transaction Document (as such term is defined in the
Debentures) and to exercise such powers and to perform such duties hereunder and
thereunder as are specifically delegated to or required of the Agent by the
terms hereof and thereof and such other powers as are reasonably incidental
thereto. The Agent may perform any of its duties hereunder by or through its
agents or employees.
2. Nature of Duties. The Agent shall have no duties or responsibilities
except those expressly set forth in the Agreement. Neither the Agent nor any of
its partners, members, shareholders, officers, directors, employees or agents
shall be liable for any action taken or omitted by it as such under the
Agreement or hereunder or in connection herewith or therewith, be responsible
for the consequence of any oversight or error of judgment or answerable for any
loss, unless caused solely by its or their gross negligence or willful conduct
as determined by a final judgment (not subject to further appeal) of a court of
competent jurisdiction. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of the Agreement or
any other Transaction Document a fiduciary relationship in respect of any Debtor
or any Secured Party; and nothing in the Agreement or any other Transaction
Document, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of the Agreement or any other
Transaction Document except as expressly set forth herein and therein.
3. Lack of Reliance on the Agent. Independently and without reliance upon
the Agent, each Secured Party, to the extent it deems appropriate, has made and
shall continue to make (i) its own independent investigation of the financial
condition and affairs of the Company and its subsidiaries in connection with
such Secured Party's investment in the Debtors, the creation and continuance of
the Obligations, the transactions contemplated by the Transaction Documents, and
the taking or not taking of any action in connection therewith, and (ii) its own
appraisal of the creditworthiness of the Company and its subsidiaries, and of
the value of the Collateral from time to time, and the Agent shall have no duty
or responsibility, either initially or on a continuing basis, to provide any
Secured Party with any credit, market or other information with respect thereto,
whether coming into its possession before any Obligations are incurred or at any
time or times thereafter. The Agent shall not be responsible to the Debtors or
any Secured Party for any recitals, statements, information, representations or
warranties herein or in any document, certificate or other writing delivered in
connection herewith, or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of the
Agreement or any other Transaction Document, or for the financial condition of
the Debtors or the value of any of the Collateral, or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of the Agreement or any other Transaction Document, or
the financial condition of the Debtors, or the value of any of the Collateral,
or the existence or possible existence of any default or Event of Default under
the Agreement, the Debentures or any of the other Transaction Documents.
34
4. Certain Rights of the Agent. The Agent shall have the right to take any
action with respect to the Collateral, on behalf of all of the Secured Parties.
To the extent practical, the Agent shall request instructions from the Secured
Parties with respect to any material act or action (including failure to act) in
connection with the Agreement or any other Transaction Document, and shall be
entitled to act or refrain from acting in accordance with the instructions of
Secured Parties holding a majority in principal amount of Debentures (based on
then-outstanding principal amounts of Debentures at the time of any such
determination); if such instructions are not provided despite the Agent's
request therefor, the Agent shall be entitled to refrain from such act or taking
such action, and if such action is taken, shall be entitled to appropriate
indemnification from the Secured Parties in respect of actions to be taken by
the Agent; and the Agent shall not incur liability to any person or entity by
reason of so refraining. Without limiting the foregoing, (a) no Secured Party
shall have any right of action whatsoever against the Agent as a result of the
Agent acting or refraining from acting hereunder in accordance with the terms of
the Agreement or any other Transaction Document, and the Debtors shall have no
right to question or challenge the authority of, or the instructions given to,
the Agent pursuant to the foregoing and (b) the Agent shall not be required to
take any action which the Agent believes (i) could reasonably be expected to
expose it to personal liability or (ii) is contrary to this Agreement, the
Transaction Documents or applicable law.
5. Reliance. The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, radiogram, order
or other document or telephone message signed, sent or made by the proper person
or entity, and, with respect to all legal matters pertaining to the Agreement
and the other Transaction Documents and its duties thereunder, upon advice of
counsel selected by it and upon all other matters pertaining to this Agreement
and the other Transaction Documents and its duties thereunder, upon advice of
other experts selected by it.
6. Indemnification. To the extent that the Agent is not reimbursed and
indemnified by the Debtors, the Secured Parties will jointly and severally
reimburse and indemnify the Agent, in proportion to their initially purchased
respective principal amounts of Debentures, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in performing its duties
hereunder or under the Agreement or any other Transaction Document, or in any
way relating to or arising out of the Agreement or any other Transaction
Document except for those determined by a final judgment (not subject to further
appeal) of a court of competent jurisdiction to have resulted solely from the
Agent's own gross negligence or willful misconduct. Prior to taking any action
hereunder as Agent, the Agent may require each Secured Party to deposit with it
sufficient sums as it determines in good faith is necessary to protect the Agent
for costs and expenses associated with taking such action.
35
7. Resignation by the Agent.
(a) The Agent may resign from the performance of all its functions
and duties under the Agreement and the other Transaction Documents at any time
by giving 30 days' prior written notice (as provided in the Agreement) to the
Debtors and the Secured Parties. Such resignation shall take effect upon the
appointment of a successor Agent pursuant to clauses (b) and (c) below.
(b) Upon any such notice of resignation, the Secured Parties, acting
by a Majority in Interest, shall appoint a successor Agent hereunder.
(c) If a successor Agent shall not have been so appointed within
said 30-day period, the Agent shall then appoint a successor Agent who shall
serve as Agent until such time, if any, as the Secured Parties appoint a
successor Agent as provided above. If a successor Agent has not been appointed
within such 30-day period, the Agent may petition any court of competent
jurisdiction or may interplead the Debtors and the Secured Parties in a
proceeding for the appointment of a successor Agent, and all fees, including,
but not limited to, extraordinary fees associated with the filing of
interpleader and expenses associated therewith, shall be payable by the Debtors
on demand.
8. Rights with respect to Collateral. Each Secured Party agrees with all
other Secured Parties and the Agent (i) that it shall not, and shall not attempt
to, exercise any rights with respect to its security interest in the Collateral,
whether pursuant to any other agreement or otherwise (other than pursuant to
this Agreement), or take or institute any action against the Agent or any of the
other Secured Parties in respect of the Collateral or its rights hereunder
(other than any such action arising from the breach of this Agreement) and (ii)
that such Secured Party has no other rights with respect to the Collateral other
than as set forth in this Agreement and the other Transaction Documents.
36
