COLLATERAL AGENCY AGREEMENT
THIS
COLLATERAL AGENCY AGREEMENT
(this
"Agreement")
is
made as of May __, 2008 by and among TRISTATE TITLE & ESCROW, LLC, a
Delaware limited liability company (the “Collateral
Agent”),
and
the parties set forth on Schedule
I
annexed
hereto, as such Schedule may be amended from time to time in accordance with
the
terms of this Agreement (each a “Noteholder”
and
collectively the “Noteholders”).
WITNESSETH:
WHEREAS,
SJ
Electronics, Inc. (f/k/a Acheron, Inc.), a Nevada corporation (the “Company”)
has
entered into a Note Purchase Agreement dated as of the date hereof (as amended,
modified, restated or otherwise supplemented from time to time, the
“Note
Purchase Agreement”)
pursuant to which the Company will authorize and issue its 15% Senior Secured
Convertible Notes Due 2009 (the “Notes”)
to the
investors identified in the Note Purchase Agreement (the “Investors”);
and
WHEREAS,
as
collateral security for the payment and performance of the Company’s obligations
under the Notes the Company has granted to the Collateral Agent, for the benefit
of the Noteholders, a security interest in the Collateral (as defined below),
pursuant to the terms and conditions of that certain Pledge and Security
Agreement of even date herewith by and between the Company and the Collateral
Agent as the same may be amended from time to time (the "Pledge
and Security Agreement");
and
WHEREAS,
the
Collateral Agent desires to serve as collateral agent for the Noteholders with
respect to the Pledged Collateral on the terms and conditions hereinafter set
forth; and
WHEREAS,
the
Noteholders desire the Collateral Agent to serve in such capacity on the terms
and conditions hereinafter set forth.
NOW,
THEREFORE,
the
parties hereto agree as follows:
SECTION
1. DEFINITIONS
For
purposes of this Agreement, the following terms shall have the following
meanings:
1.1 "Business
Day"
shall
have the meaning ascribed thereto in Section
5.1
hereof.
1.2 "Pledged
Collateral"
shall
have the meaning ascribed thereto in the Pledge and Security
Agreement.
1.3 "Collections"
means
any payments or amounts realized, recovered or otherwise received by the
Collateral Agent in respect of the recovery of or realization on any Pledged
Collateral.
1.4 "Person"
means
an individual, a partnership, a corporation (including a business trust), a
joint stock company, a trust, an unincorporated association, a joint venture,
or
other entity; or any government, or any agency, instrumentality or political
subdivision thereof.
1.5 “Requisite
Noteholders”
means,
at any time, the Noteholders holding not less than 51% of the principal balance
of the Notes outstanding at that time.
1.6 “Security
Documents”
means
this Agreement and the Pledge and Security Agreement, as the same may be amended
from time to time.
1.7 “Pledge
and Security
Agreement”
has
the
meaning ascribed to such term in the recitals of this Agreement.
1.8 “Lockbox
Agent”
means
the Person from time to time serving as Lockbox Agent under the Lockbox
Agreement.
1.9 “Lockbox
Agreement”
means
that certain Lockbox Agreement dated as of the date hereof, by and between
the
Company and the Lockbox Agent.
SECTION
2. AGENCY
2.1 Appointment
of the Collateral Agent.
(a) Each
Noteholder hereby irrevocably designates and appoints the Collateral Agent
as
such Noteholder’s agent and attorney-in-fact to take such actions on behalf of
the Noteholders under the Security Documents, and to exercise such powers and
to
perform such duties (or to refrain therefrom) with respect to the management,
supervision, servicing, administration, collection and liquidation of the
Pledged Collateral and the Collections as may be reasonably contemplated by
the
Security Documents, as well as such other powers as are reasonably incidental
thereto, including, without limitation, the power to execute and deliver the
Security Documents as agent for the Noteholders. The Collateral Agent is hereby
authorized and empowered to amend, modify, or waive any provisions of the
Security Documents on behalf of the applicable Noteholders, subject to the
consent of the Requisite Noteholders. The Collateral Agent shall hold all
Pledged Collateral as the agent of the Noteholders, subject to the terms of
this
Agreement and of the Lockbox Agreement. The provisions of this Section
2.1
are
solely for the benefit of the Collateral Agent and the Noteholders, and neither
the Company nor any other Person shall have any rights, whether as a third
party
beneficiary or otherwise, under this Agreement. In performing its duties under
this Agreement, the Collateral Agent shall act solely as the agent of the
Noteholders and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for the Company or any other Person
(other than the Noteholders). The Collateral Agent may perform any of its duties
under the Security Documents by or through agents or employees, together with
such other powers as are incidental thereto, with full power of substitution,
and with the power to select one or more sub-agents or designees to exercise
the
powers and perform the obligations of the Collateral Agent hereunder. The
foregoing power of attorney is coupled with an interest and is irrevocable
while
this Agreement remains in effect.
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(b) The
Collateral Agent shall have no duties, responsibilities or liability except
as
expressly set forth in the Security Documents.
(c) The
Noteholders hereby acknowledge and agree as follows: (i) the duties of the
Collateral Agent are ministerial in nature; (ii) the Collateral Agent shall
not,
by reason of this Agreement, have any fiduciary obligations to any Noteholder;
(iii) nothing in the Security Documents, express or implied, is intended to
or
shall be construed to impose upon the Collateral Agent any obligations in
respect of the Security Documents except as expressly set forth therein; (iv)
each Noteholder has made or shall make its own independent investigation of
the
financial condition and creditworthiness of the Company in connection with
the
extension of credit evidenced by said Noteholder’s respective Note, as the case
may be, and the Collateral Agent shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Noteholder with any credit
or
other information with respect to the Company. The Noteholders further
acknowledge and agree that the Collateral Agent shall have no obligation
whatsoever to any Noteholder or any other Person to assure that any Pledged
Collateral exists or is owned by the Company; or is cared for, protected or
insured; or that any liens or security interests granted to the Collateral
Agent
have been properly or sufficiently or lawfully created, perfected, protected
or
enforced or are entitled to any particular priority; or to exercise at all
or in
any particular manner or under any duty of care, disclosure or fidelity, or
to
continue exercising, any of the rights, authorities and powers granted or
available to the Collateral Agent in the Security Documents; it being understood
and agreed that in respect of the Pledged Collateral or any act, omission or
event related thereto, subject to the terms of this Agreement, the Collateral
Agent may act in any manner it may deem appropriate, in its discretion, and
that
the Collateral Agent, acting in such capacity, shall have no duty or liability
whatsoever to any of the other Noteholders; provided,
however,
that
the Collateral Agent shall exercise the same care which it would exercise in
dealing with loans made and collateral security held solely for its own
account.
(d) The
Collateral Agent acknowledges that it has been granted a security interest
in
the Pledged Collateral for the ratable benefit of the Noteholders, and agrees
to
hold the Pledged Collateral in possession of the Collateral Agent for the
ratable benefit of each Noteholder.
2.2 Enforcement
of Rights in Pledged Collateral; Enforcement of Notes.
Each
Noteholder agrees that it will not have any right to enforce or seek to enforce
any rights individually or separately under the Security Documents or to realize
upon any Pledged Collateral individually or separately, unless instructed by
the
Collateral Agent in writing to do so on behalf of the Collateral Agent, it
being
understood and agreed that such rights and remedies may be exercised only by
the
Collateral Agent.
SECTION
3. COLLECTIONS
AND RELATED MATTERS
3.1 Pledged
Collateral and Collections.
(a) In
furtherance of and not in limitation of the rights and powers granted to the
Collateral Agent hereunder, the parties hereto hereby agree that the Collateral
Agent, in its capacity as such, has the exclusive right to collect and receive
all Collections. The Collateral Agent shall also have the exclusive right to
conduct secured party sales of the Pledged Collateral and to collect and
compromise any accounts or other obligations that are part of the Pledged
Collateral. All Collections shall be promptly distributed by the Collateral
Agent to the Noteholders in the form in which received by the Collateral Agent,
if reasonably practicable. Any money, property or securities realized upon
the
sale, disposition or other realization by the Collateral Agent upon all or
any
part of the Pledged Collateral, or otherwise received by Collateral Agent under
any provision of this Agreement, shall be applied by the Collateral Agent
according to Section 11 of the Pledge and Security Agreement.
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(b) All
Collections received by the Collateral Agent shall be held by the Collateral
Agent for the Noteholders and deposited by the Collateral Agent in one or more
of its bank accounts and applied as provided herein. The Collateral Agent does
not assume and shall not have any liability to the Noteholders for the repayment
of the Obligations.
3.2 Costs
and Expenses.
The
Collateral Agent may incur and pay reasonable costs and expenses to the extent
it deems reasonably necessary or appropriate for the performance and fulfillment
of its functions, powers and obligations pursuant to the Security Documents,
including, without limiting the generality of the foregoing, court costs,
reasonable attorneys' fees, costs of collection by outside collection agencies,
and auctioneers’, experts’ and appraisers’ fees and insurance premiums paid to
maintain the Pledged Collateral, whether or not the Company is obligated to
reimburse the Collateral Agent or the Noteholders for such expenses pursuant
to
the Security Documents or otherwise.
3.3 Defaults
and Remedies.
(a) The
Collateral Agent shall not be deemed to have knowledge or notice of the
occurrence of any Event of Default (as defined in the Pledge and Security
Agreement) unless the Collateral Agent shall have actually received written
notice from a Noteholder referring to this Agreement, describing such Event
of
Default and stating that such notice is a “notice of default.”
(b) On
or
after the occurrence of an Event of Default the Collateral Agent, in its
absolute discretion may, and at the written request of the Requisite Noteholders
shall, commence efforts to exercise any rights or remedies against the Company
under the Security Documents on behalf of the Noteholders (including, without
limitation, execution upon Pledged Collateral) provided that the Collateral
Agent shall have full discretion to determine the time, place and manner of
such
actions.
(c) Except
as
otherwise expressly provided herein, all rights and remedies provided in the
Security Documents with respect to the Pledged Collateral and the collection
of
the Notes shall inure to the benefit of the Collateral Agent on behalf of the
Noteholders collectively, and shall be exercised by the Collateral Agent only
and no other Person (unless such other Person is expressly authorized to do
so
by the Collateral Agent or by a court of competent jurisdiction) for the benefit
of the Noteholders in accordance with the terms thereof and hereof.
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3.4 Other
Acts.
The
Noteholders hereby irrevocably authorize the Collateral Agent, at its option
and
in its discretion, to release any lien and/or security interest granted to
or
held by the Collateral Agent on or in any Pledged Collateral (x) upon the
payment and satisfaction of all of the Obligations (as defined in the Security
Agreement) (other than contingent indemnification obligations to the extent
no
claims giving rise thereto have been asserted) or (y) upon the occurrence
of other facts or circumstances reasonably believed by the Collateral Agent
in
good faith not to prejudice the rights of the Noteholders under the Security
Documents. Without in any manner limiting the Collateral Agent’s authority to
act as described in the previous sentence, each Noteholder hereby agrees to
confirm in writing, upon request by the Collateral Agent, the authority
conferred upon the Collateral Agent under this Section
3.4
to
release any Pledged Collateral.
SECTION
4. SCOPE
OF COLLATERAL AGENT LIABILITY
4.1 Responsibility
of the Collateral Agent.
(a) Neither
the Collateral Agent nor any of its officers, directors, partners, managers,
employees, agents or representatives shall be liable to the Noteholders for
any
action taken or omitted to be taken under or in connection with the Security
Documents or otherwise (whether or not such action taken or omitted is within
the Collateral Agent's responsibilities and duties expressly set forth in the
Security Documents), except as a result of willful misconduct or gross
negligence on the part of the Collateral Agent as determined by a final
non-appealable order of a court of competent jurisdiction. The Collateral Agent
does not assume any responsibility for any failure of, or delay in performance
by, or breach by the Company or any Noteholder of his or its obligations under
any of the Security Documents, the Note Purchase Agreement or the Notes. The
Collateral Agent shall not be liable for any apportionment or distribution
of
payments made by it in good faith; and if any such apportionment or distribution
is subsequently determined to have been made in error, the sole recourse of
any
Noteholder to whom payment was due but not made shall be to recover from the
other Noteholders any payment in excess of the amount to which they are
determined to be entitled (and such other Noteholders hereby agree to return
to
such Noteholder any such erroneous payments received by them). In no event
shall
the Collateral Agent be liable for punitive, special, consequential, incidental,
exemplary or other similar damages. In performing its obligations hereunder,
neither the Collateral Agent nor any of its officers, directors, partners,
managers, employees, agents or representatives shall be responsible to any
Noteholder for any recitals, statements, representations or warranties herein
or
for the execution, effectiveness, genuineness, validity, enforceability,
collectability, or sufficiency of the Security Documents or the transactions
contemplated thereby, or for the financial condition of the Company. The
Collateral Agent shall not be required to make any inquiry concerning either
the
performance or observance of any of the terms, provisions or conditions of
the
Security Documents or the financial condition of the Company, or the existence
or possible existence of any default under any agreements to which the Company
and/or any one or more Noteholders is a party. The Collateral Agent may at
any
time request instructions from the Noteholders with respect to any matters
contemplated by this Agreement, and the Collateral Agent shall be absolutely
entitled, without any liability whatsoever to any Person, to refrain from taking
any action or granting any approval under the Security Documents until it shall
have received such instructions from the Requisite Noteholders. Without limiting
the foregoing, no Noteholder shall have any right of action whatsoever against
the Collateral Agent as a result of the Collateral Agent acting or refraining
from acting under the Security Documents in accordance with the instructions
of
the Requisite Noteholders; and, notwithstanding the instructions of the
Requisite Noteholders, the Collateral Agent shall have no obligation to take
any
action if it believes, in good faith, that such action is illegal or exposes
the
Collateral Agent to any liability it has not assumed or otherwise agreed to
under this Agreement for which it has not received satisfactory indemnification
in accordance with this Agreement.
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(b) In
exercising rights and remedies with respect to the Pledged Collateral, the
Collateral Agent and, subject to the provisions hereof, the Noteholders may
enforce the provisions of the Pledge and Security Agreement and exercise
remedies thereunder, all in such order and in such manner as it or they may
determine in the exercise of its or their sole business judgment. Such exercise
and enforcement shall include the rights to sell or otherwise dispose of Pledged
Collateral, to incur expenses in connection with such sale or disposition and
to
exercise all the rights and remedies of a secured lender under the Uniform
Commercial Code of any applicable jurisdiction. The Collateral Agent’s rights
with respect to the Pledged Collateral include the right to release any or
all
of the Pledged Collateral from the liens under the Security Documents in
connection with any sale of all or any portion of the Pledged Collateral
notwithstanding that the net proceeds of any such sale may not be used to
permanently prepay any Obligations (as defined in the Security Agreement).
The
Noteholders are hereby deemed to have consented to such sale(s) under the
Security Documents.
(c) The
Collateral Agent shall be entitled to act upon, and shall be fully protected
in
acting upon, any communication in whatever form believed by the Collateral
Agent
in good faith to be genuine and to have been signed or sent by a Person
authorized and entitled to do the same. The Collateral Agent shall be entitled
to act, and shall be fully protected in any action taken in good faith in
accordance with advice given by any counsel retained by the Collateral Agent.
The Collateral Agent shall not be liable for the default or misconduct of any
agents or attorneys-in-fact selected by the Collateral Agent with reasonable
care.
4.2 Indemnification.
The
Noteholders hereby jointly and severally agree to reimburse and indemnify and
defend the Collateral Agent for, from and against any and all advances,
disbursements, liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including, without limitation, attorneys’
fees and expenses) of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against the Collateral Agent in any way relating to
or
arising out of this Agreement or any action taken or omitted by the Collateral
Agent under the Security Documents; provided,
however,
that no
Noteholder shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, advances
or disbursements to the extent resulting from the Collateral Agent’s gross
negligence or willful misconduct as determined by a final non-appealable order
of a court of competent jurisdiction. If any indemnity furnished to the
Collateral Agent for any purpose shall, in the sole, reasonable opinion of
the
Collateral Agent, be insufficient or become impaired, the Collateral Agent
may
demand additional indemnity and cease, or not commence, to do the acts
indemnified against even if so directed by the Requisite Noteholders until
such
additional indemnity is furnished. The obligations of the Noteholders under
this
Section
4.2
shall
survive the payment and performance in full of the Obligations and the
termination of this Agreement.
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4.3 Collateral
Agent acting as Noteholder; Investment Transaction.
The
Collateral Agent shall have, and may exercise, the same rights and powers
hereunder and is subject to the same obligations and liabilities as, and to
the
extent set forth herein for, any other Noteholder. The terms “Noteholders,”
“Requisite Noteholders,” or any similar terms shall, unless the context clearly
otherwise indicates, include the Collateral Agent in its individual capacity
as
a Noteholder or one of the Requisite Noteholders, as the case may be. Further,
the parties hereto hereby acknowledge that some or all of the Noteholders may
acquire, from time to time, debt or equity securities of the Company (other
than
the Notes) in one or more equity or debt purchase transactions and that the
Collateral Agent may serve as a collateral agent for such other transactions
and
the parties hereto hereby agree that said acquisitions and such services shall
not be construed to increase or adversely affect the Collateral Agent’s duties
or liability to the Noteholders, whether under the Security Documents or under
any instruments or agreements executed and delivered in connection with any
such
equity or debt acquisitions.
4.4 Successor
Collateral Agent.
The
Collateral Agent may resign at any time by giving at least 10 days’ prior
written notice to the Noteholders, whereupon the resigning Collateral Agent
shall be discharged from all further duties and obligations hereunder, except
to
hold all Pledged Collateral then held by it for disposition pursuant to the
provisions of this Section
4.4.
The
Requisite Noteholders may, upon the resignation of the Collateral Agent or
at
any time upon the consent of the Requisite Noteholders, appoint a successor
Collateral Agent. Upon the acceptance of its appointment by any successor
Collateral Agent, such successor shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the resigning or replaced
Collateral Agent. In the event a successor Collateral Agent is appointed, the
resigning or replaced Collateral Agent shall, promptly upon receipt of notice
of
such appointment, deliver all Pledged Collateral then held by it to said
successor (such delivery to be effectuated by physical delivery, endorsement
of
instruments, or otherwise as the nature of the Pledged Collateral shall
require); and in the event a successor is not promptly appointed, the resigning
Collateral Agent may, in its discretion, deliver all Pledged Collateral then
held by it to a court of competent jurisdiction. After any resigning Collateral
Agent’s resignation, the provisions of Section
4.2
shall
continue to inure to its benefit as to any actions taken or omitted to be taken
by it in its capacity as Collateral Agent prior to the effective date of
resignation.
SECTION
5. MISCELLANEOUS
5.1 Notices.
All
notices and consents required or permitted hereunder must be in writing and
shall be deemed effectively given: (a) upon personal delivery to the party
to be
notified, (b) when sent by confirmed telex or facsimile if sent during normal
business hours of the recipient; if not, then on the next Business Day, (c)
three Business Days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one Business Day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt.
If
to the
Company:
0X,
Xx.000, Xxxxx 0xx
Xxxx
Xxxxx
Xxxxxxxx, Xxxxxx Xxxx
Xxxxxx
Attention:
Xxxxxx Xxxx
Telephone
No.: 000-0000-0000-0000
Facsimile
No.: 011-8862-8791-1368
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With
a
copy to:
Guzov
Ofsink, LLC
000
Xxxxxxx Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxx Xxxxxx, Esq.
Fax:
000.000.0000
If
to
Collateral Agent or any Noteholder, to its address set forth on the signature
page hereto.
For
purposes of this Agreement, “Business
Day”
shall
mean any day that is not a Saturday, Sunday or other day on which commercial
banks located in the State of New York are authorized or required to be
closed.
5.2 Term.
This
Agreement shall become effective upon the date hereof and shall continue in
full
force and effect until the indefeasible payment and satisfaction in full of
all
of the Obligations (as defined in the Security Agreement).
5.3 No
Benefit to Third Parties.
The
terms and provisions of this Agreement shall be for the sole benefit of the
Collateral Agent and the Noteholders and their successors and assigns; and
no
other person, firm, entity or corporation shall have any right, benefit,
priority or interest under, or because of the existence of, this Agreement.
5.4 Counterparts.
This
Agreement may be executed via facsimile and in one or more counterparts, each
of
which shall be deemed an original, but all of which, taken together, shall
constitute one and the same instrument.
5.5 Governing
Law;
Jury
Trial Waiver.
This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof. EACH
OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.
5.6 Entire
Agreement; Amendments.
This
Agreement contains the entire understanding with respect to the subject matter
hereof; and no amendment, modification, termination or waiver of any provision
of this Agreement shall in any event be effective unless the same shall be
in
writing and signed by the Collateral Agent and the Requisite
Noteholders.
5.7 Further
Assurances.
Each of
the Noteholders and the Collateral Agent hereby agree to execute and/or deliver
any and all further documents, instruments or Agreements reasonably requested
by
the other party in order to give effect to, and more fully carry out the terms
and provisions of this Agreement.
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5.8 Severability.
Any
provision of this Agreement that is prohibited or unenforceable in any
applicable jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof but shall be interpreted as if it were written
so as
to be enforceable to the maximum extent permitted by applicable law, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law
which
renders any provision hereof prohibited or unenforceable in any
respect.
5.9 Headings.
The
headings used herein are for convenience only and do not constitute matters
to
be considered in interpreting this Agreement.
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IN
WITNESS WHEREOF,
the
parties have caused this Agreement to be duly executed and delivered by their
duly authorized officers as of the day and year first written
above.
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THE
COLLATERAL AGENT:
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TRISTATE
TITLE & ESCROW, LLC
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By:
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Name:
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Title: | |
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Signature
pages for Noteholders follow]
[Noteholder Signature Page]
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IF
AN INDIVIDUAL:
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IF
A CORPORATION, PARTNERSHIP,
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TRUST, ESTATE OR OTHER ENTITY:
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_________________________________
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__________________________________
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(Signature)
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Print
name of entity
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_________________________________
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By:________________________________
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(Printed
Name)
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Name:___________________________
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Title:____________________________
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Address:
__________________________________
__________________________________
__________________________________
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Address:
____________________________________
____________________________________
____________________________________
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