FORM OF SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of February 9, 2007 (as the same may be
supplemented, modified, amended, restated or replaced from time to time in the
manner provided herein, this "Agreement"), is by and among Star Energy
Corporation, a Nevada corporation (the "Company"), all of the Subsidiaries of
the Company listed on the signature pages hereto (each a "Guarantor" and
collectively the "Guarantors", and together with the Company, each a "Debtor"
and collectively the "Debtors"), the Holders (as hereinafter defined) and
_________, as Collateral Agent (the "Agent", and together with the Holders, each
a "Secured Party" and collectively the "Secured Parties", and together with the
Debtors, each a "party" and collectively the "parties").
WITNESSETH:
WHEREAS, the Company is a party to the Securities Purchase Agreement dated
as of February 9, 2007 (as the same may be supplemented, modified, amended,
restated or replaced from time to time in the manner provided therein, the
"Purchase Agreement"), with the "Purchasers" who are signatories thereto (as
such term is defined therein), pursuant to which such Purchasers (together with
their respective successors and permitted assigns under the Debentures (as
defined below), each a "Holder" and collectively the "Holders") severally agreed
to extend the loans to the Company evidenced by the Company's 8% Secured
Convertible Debentures due February ___, 2010, in the original aggregate
principal amount of $[_____] and severally issued by the Company to the Holders
on February __, 2007 (as the same may be issued, supplemented, modified,
amended, restated or replaced from time to time in the manner provided therein,
each a "Debenture" and collectively, the "Debentures");
WHEREAS, the Guarantors have jointly and severally agreed to guarantee and
act as surety for payment of such Debentures pursuant to a certain Subsidiary
Guarantee dated as of the date hereof (as the same may be supplemented,
modified, amended, restated or replaced from time to time in the manner provided
therein, the "Guarantee"); 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 each Secured Party, pari passu
with each other Secured Party, which Secured Parties are acting through the
Agent as their collateral agent, a security interest in certain personal
property of each such Debtor to secure the prompt payment, performance and
discharge in full of all of the Company's obligations under the Debentures and
the Guarantors' respective obligations under the Guarantee.
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. Capitalized terms not otherwise
defined herein shall have the meanings set forth in the Purchase Agreement or
other applicable Transaction Document (as such term is defined in the Purchase
Document).
(a) "Collateral" means all of the personal assets and personal
property of each Debtor, including (without limitation) the following
personal property of each Debtor, in each case whether presently owned or
existing or hereafter acquired or created, 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 limitation, (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 goods used and
useful in connection with any Debtor's businesses and all
improvements thereto; and (B) all inventory;
(ii) All financial assets, security entitlements and 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, 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 evidencing such
accounts, all documents of title representing any merchandising,
goods, equipment, motor vehicles and trucks, 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;
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(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);
(vii) All investment property;
(viii) All supporting obligations;
(ix) All files, records, books of account, business papers, and computer
programs;
(x) All Intellectual Property; and
(xi) the products and proceeds of all of the foregoing Collateral set
forth in clauses (i)-(x) 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 issued by each
Guarantor, issued to or owned by any Debtor, 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 that, 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 fullest extent permitted by applicable law, this
Agreement shall create a valid security interest in such asset and the
products and proceeds thereof.
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(b) "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.
(c) "Majority in Interest" means, 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.
(d) "Necessary Endorsement" means 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.
(e) "Lien" shall have the meaning assigned to such term in the
Purchase Agreement.
(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, from any Debtor to the Secured Parties, including, without
limitation, all obligations under this Agreement, the Purchase Agreement,
the Debentures, the Guarantee 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 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 Purchase
Agreement, the Debentures, the Guarantee 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.
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(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), in each case as the same may be supplemented, modified,
amended, restated or replaced from time to time in the manner provided
therein.
(h) "Permitted Lien" shall have the meaning assigned to such term in
the Debenture.
(i) "Pledged Securities" shall have the meaning ascribed to such
term in Section 4(i).
(j) "UCC" means the Uniform Commercial Code of the State of New York
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.
2. Grant of Security Interest in Collateral. 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 each Secured Party and to the
Agent (for the benefit of the Secured Parties) a continuing 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
(a "Security Interest" and collectively, the "Security Interests").
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 ownership of the Pledged Securities, and (b) any and all title
certificates and other instruments or documents representing ownership 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 the issuer of any of the Pledged Securities.
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4. Representations, Warranties, Covenants and Agreements of the Debtors.
Except as otherwise set forth in the corresponding section of the disclosure
schedules delivered to the Secured Parties concurrently herewith (the
"Disclosure Schedules"), which Disclosure Schedules shall be deemed a part
hereof and incorporated herein by reference, each Debtor represents and warrants
to, and covenants and agrees with, the Secured Parties as follows as of the date
hereof (unless otherwise indicated) and solely with respect to itself:
(a) Each Debtor has the requisite corporate, partnership, limited liability
company or other entity 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 (i)
as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies, (iii) insofar as
indemnification and contribution provisions contained herein may be
limited by applicable law, and (iv) insofar as certain elections, waivers
and agreements to vary statutory provisions may be impermissible under the
UCC and other applicable law (clauses (i) through (iv) may be referred to
collectively as the "Enforceability Limits").
(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 named
leasehold tenant or record owner of the real property where such
Collateral is located. Except as disclosed on Schedule A, none of such
Collateral is in the possession of any consignee, bailee, warehouseman,
agent or processor.
(c) Except for Permitted Liens 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
Interests. Except as set forth on Schedule B attached hereto or in
connection with the Permitted Liens, the Debtors have not authorized the
filing of an effective financing statement, security agreement, collateral
assignment or any notice of any of the foregoing (other than those that
will be filed in favor of the Secured Parties or Agent pursuant to this
Agreement) covering or affecting any of the Collateral in any United
States governmental or regulatory authority, agency or recording office.
Except as set forth on Schedule B attached hereto and except pursuant to
this Agreement, as 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
authority, agency or recording office any other financing statement or
other document or instrument (except to the extent filed or recorded with
respect to a Permitted Lien or in favor of the Secured Parties pursuant to
the terms of this Agreement).
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(d) No written claim has been received by any Debtor that any Collateral or
such Debtor's use of any 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 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 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
to any location not listed on such Schedule unless it delivers to the
Secured Parties 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 if such Collateral were previously located 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 Interests to
create in favor of the Secured Parties a valid, perfected and continuing
perfected first priority lien in the Collateral.
(f) This Agreement creates in favor of the Secured Parties an effective
security interest in the Collateral, subject only to Permitted Liens
securing the payment and performance of the Obligations. Upon making the
filings described in the immediately following paragraph, all Security
Interests that may be perfected within the United States by filing UCC
financing statements shall have been duly perfected. Except for the filing
of UCC financing statements, the execution and delivery of deposit account
and securities account control agreements satisfying the requirements of
the UCC with respect to each deposit account and securities account of the
Debtors located or deemed located within the United States, the delivery
of the certificates and other instruments provided in Section 3, the
delivery of other Collateral perfected through possession (such as money),
and the Enforceability Limits noted above, (i) no authorization, approval
or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required, (ii) no consent of any other
third parties is required, and (iii) no other action on the part of the
Company or Secured Parties is required for (A) the execution, delivery and
performance of this Agreement, (B) the creation or perfection under the
UCC of the Security Interests created hereunder in the Collateral located
or deemed located in the United States, or (C) the enforcement of the
rights of the Agent and the Secured Parties hereunder in the Collateral
located or deemed located in the United States.
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(g) Each Debtor hereby authorizes the Agent to file from time to time one or
more financing statements, continuation statements and amendments thereto
under the UCC with respect to the Security Interests with the proper
filing and recording agencies in any United States jurisdiction deemed
proper by it and ratifies the authority of the Agent to have made any such
filing made prior to the date hereof. Each Debtor acknowledges and agrees
that such financing statements will be filed without the signature of such
Debtor where required or permitted by applicable law and may (but need
not) describe the Collateral as "all assets" or "all personal property" or
words of like import.
(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) 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 commercially reasonable right of termination, material
amendment, acceleration or cancellation (with or without notice, lapse of
time or both) of, any agreement, credit facility, debt or other instrument
or enforceable understanding evidencing any Debtor's material debt or
other material obligations to which any Debtor is a party or by which any
material property or asset of any Debtor is bound or affected. If any, all
required consents under such agreement, credit facility, debt or other
instrument or enforceable understanding (including, without limitation,
from stockholders or creditors of any Debtor) necessary for any Debtor to
enter into and perform its obligations hereunder have been obtained.
(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 in each of the direct and indirect subsidiaries of the
Company, each of whom is one of the Guarantors, and represent all capital
stock and other equity interests owned, directly or indirectly, by the
Company. All of the Pledged Securities are validly issued, fully paid and
nonassessable (which with respect to any non-U.S. Subsidiary is to the
best knowledge of the Company and such non-U.S. Subsidiary), 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.
(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 and Permitted Dispositions (as hereinafter
defined), each Debtor shall at all times maintain the liens and Security
Interests provided for hereunder as valid and perfected first priority
liens and security interests in the Collateral in favor of the Secured
Parties until this Agreement and the Security Interest hereunder shall be
terminated [or released] pursuant to Section 14 hereof. Each Debtor hereby
agrees to defend the same against the claims of any and all persons and
entities, and to safeguard and protect all Collateral for the account of
the Secured Parties, other than from those with Permitted Liens and from
Permitted Dispositions. At the request of the Agent, each Debtor will
sign, if necessary, 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
Interests 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 Interests required hereunder.
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(l) No Debtor will transfer, pledge, hypothecate, encumber, license, sell or
otherwise dispose of any of the Collateral without the prior written
consent of a Majority in Interest, except for (i) the Permitted Liens,
(ii) non-exclusive licenses granted by the Debtors in the ordinary course
of business, (iii) the sale, lease, consumption or other disposition of
inventory, equipment or other goods by the Debtors in the ordinary course
of business, (iv) the collection and reasonable compromise and settlement
of accounts, indebtedness, insurance claims, tort liability and
contractual claims, and other obligations owed to one or more of them by
the Debtors in an amount less than $_____, and (v) the receipt,
possession, retention and use of all proceeds of the foregoing and other
money and financial assets in the possession or accounts of the Debtors in
the ordinary course of business (clauses (ii) through (v) will be referred
to collectively as the "Permitted Dispositions").
(m) Each Debtor shall keep and preserve its equipment, inventory and other
tangible Collateral in good condition, repair and order, ordinary wear and
tear and reasonable retirement excepted, other than as such assets may
have been consumed or disposed of in accordance with this Agreement, and
shall not operate or locate any such Collateral (or cause to be operated
or located) in any area excluded from the applicable insurance coverage.
(n) Each Debtor shall maintain with financially sound and reputable insurers,
insurance with respect to the Collateral, including Collateral hereafter
acquired, 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 loss payee and an additional insured under
each such insurance policy [(as its interest may appear)]; (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 and if the proceeds arising out of any
claim or series of related claims do not exceed $300,000, loss payments in
each instance (to the extent received) will be delivered by the Agent to
the applicable Debtor and 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, may be retained by the
applicable Debtor, provided, however, that payments received by any Debtor
after an Event of Default occurs and is continuing without being waived by
the Holder or cured by the Company or in excess of $300,000 for any
occurrence or series of related occurrences 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 as
loss payee and additional insured [(as its interest may appear)] shall be
delivered to the Agent at least annually and at the time any new policy of
insurance is issued.
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(o) Each Debtor shall, within ten (10) days of obtaining knowledge thereof,
promptly advise the Secured Parties, 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 Security Interests therein.
(p) Except as otherwise provided in this Agreement, each Debtor shall promptly
execute and deliver to the Agent such further 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 Security Interests as contemplated
hereunder, including, without limitation, if applicable, the execution and
delivery of a separate security agreement with respect to each item of
each Debtor's Intellectual Property having material value (as the same may
be executed and thereafter supplemented, modified, amended, restated or
replaced from time to time in the manner provided therein, an
"Intellectual Property Security Agreement") in which the Secured Parties
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 other than
with respect to Permitted Liens and Permitted Dispositions.
(s) Each Debtor shall promptly notify the Secured Parties in sufficient detail
upon becoming aware of any attachment, garnishment, execution or other
legal process levied against any material part of the Collateral and of
any other information received by such Debtor that could reasonably be
expected to materially affect (i) the value of the Collateral, (ii) the
existence, perfection or priority of the Security Interests contemplated
hereunder or (iii) the rights and remedies of the Agent or Secured Parties
hereunder.
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(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,
and shall be, accurate and complete in all material respects as of the
date indicated, or if no date is indicated, as of the date furnished (it
being understood that the most recent such information supersedes prior
information as to the same matters).
(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
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 the
perfection of the Security Interests granted and evidenced by this
Agreement.
(w) Except in the ordinary course of business or as required by applicable
law, 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
Secured Parties, 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 the perfection of the Security Interests granted
and evidenced by this Agreement.
(y) Each Debtor was organized and remains organized solely under the laws of
the state or other jurisdiction set forth next to such Debtor's name in
Schedule D attached hereto, which Schedule D sets forth each Debtor's
organizational identification number or, if any Debtor does not have one,
specifies that one does not exist.
(z) (i) The actual and complete legal name of each Debtor is the name set
forth in Schedule D attached hereto; (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 or consolidated 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 under applicable law by the secured party in order to perfect
the Security Interest therein, the applicable Debtor shall deliver such
Collateral to the Agent, excluding those items subject to any of the
Permitted Liens or Permitted Dispositions.
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(bb) Each Debtor, in its capacity as an issuer of Pledged Securities, hereby
agrees to comply with any and all orders and instructions of Agent
regarding the Pledged Securities issued by it 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 an
agreement 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 practical, then
to cause such tangible chattel paper to contain a legend noting that it is
subject to the Security Interest. To the extent that any Collateral
consists of electronic chattel paper, the applicable Debtor shall cause
the underlying chattel paper to be "marked" respecting such Security
Interest 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, all upon the terms of this Agreement, in form and substance in
each case reasonably satisfactory to the Agent, to be entered into and
delivered to the Agent for the benefit of the Secured Parties. Such
agreements shall expressly permit the applicable Permitted Dispositions
unless and until the Agent gives the holder and Debtors specific written
notice to the contrary during the continuance of an Event of Default.
(ee) To the extent that any Collateral consists of letter-of-credit rights, the
applicable Debtor shall use its reasonable best efforts to cause the
issuer of each underlying letter of credit to consent to an assignment of
the proceeds thereof to the Secured Parties.
(ff) To the extent that any material Collateral is in the possession of any
third party, the applicable Debtor shall promptly provide notice to the
Agent of such possession and shall join with the Agent in notifying such
third party of the Secured Parties' security interest in such Collateral
and shall use its best efforts to obtain an acknowledgement and agreement
of the Security Interest therein from such third party with respect to the
Collateral, all upon the terms of this Agreement, in form and substance
satisfactory to the Agent.
(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 (at the Agent's request) grant to
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.
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(hh) Each Debtor shall immediately provide written notice to the Secured
Parties of any and all material accounts that arise out of contracts with
any governmental authority and, to the extent necessary to perfect or
continue the perfected status of the Security Interests in such accounts
and proceeds thereof, shall execute and deliver to the Agent a collateral
assignment of claims for such accounts, all upon the terms of this
Agreement, and cooperate with the Agent in taking any other steps
required, in its 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 Interests in such accounts and
proceeds thereof.
(ii) Each Debtor shall cause each subsidiary of such Debtor that becomes a
Guarantor to also immediately 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 such opinions of counsel, 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 "Debtor"
or "Debtors" shall be deemed to include each Additional Debtor.
(jj) Each Debtor agrees to not vote its ownership interests in the Pledged
Securities, to the extent matters are presented to it from time to time,
in such a manner as to cause an Event of Default under this Agreement or
the Debentures, provided that such agreement shall not require the Debtor
or its representatives to breach any fiduciary duty to another Person.
(jj) Each Debtor shall register the pledge of the applicable Pledged Securities
on the books of such Debtor. Each Debtor hereby notifies each other Debtor
that is the issuer of Pledged Securities to register the pledge of the
applicable Pledged Securities in the name of the Secured Parties on the
books of such Debtor that is an issuer of Pledged Securities. Further,
except with respect to certificated securities delivered to the Agent,
each issuing Debtor hereby acknowledges such pledge and confirms 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 (with the understanding and agreement of the Secured Parties that
such Pledged Securities will continue to constitute Collateral subject to
this Agreement and applicable law notwithstanding any of the following)
will transfer the record ownership of such Pledged Securities into the
name of any designee of Agent for perfection and protection purposes, 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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(kk) 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 any Secured Party shall purchase or
retain all or any of the Pledged Securities, in each case in accordance
with this Agreement and applicable law, 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 issuer of such Pledged
Securities and its direct and indirect subsidiaries; (ii) use its best
efforts to obtain resignations of the persons then serving as officers and
directors of the issuer of such Pledged Securities and their direct and
indirect subsidiaries, if so requested; and (iii) use its best 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 issuer
of the Pledged Securities and its direct and indirect subsidiaries.
(mm) Without limiting the generality of the other obligations of the Debtors
hereunder, each Debtor shall promptly (i) if any Security Interest has
been granted hereunder in any material copyright for which registration
under the federal laws of the United States is available, cause to be
registered at the United States Copyright Office an Intellectual Property
Security Agreement (as defined above) respecting the Security Interest
created hereunder in all of its material copyrights, for which
registration under the federal laws of the United States is available,
(ii) if any Security Interest has been granted hereunder in any material
patent or trademark for which registration under the federal laws of the
United States is available, cause to be registered at the United States
Patent and Trademark Office an Intellectual Property Security Agreement
respecting the Security Interest created hereunder in all of its material
patents and trademarks for which registration under the federal laws of
the United States is available, and (iii) give the Agent notice whenever
it acquires (whether absolutely or by recordable and transferable license)
or creates any additional material Intellectual Property for which
registration under the federal laws of the United States is available.
(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 as the
Agent may reasonably request, in order to perfect and protect, all upon
the terms of this Agreement, any security interest granted or purported to
be granted hereby or to enable the Secured Parties to exercise and enforce
their rights and remedies hereunder in accordance herewith 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 material 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 for which
registration under the federal laws of the United States of America is
available have been duly recorded at the United States Patent and
Trademark Office and all material copyrights of the Debtors for which
registration under the federal laws of the United States is available have
been duly recorded at the United States Copyright Office.
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(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 of the United
States 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.
6. Defaults. The following events shall be "Events of Default":
(a) The occurrence and continuance of an Event of Default (as
defined in the Debentures) that is not waived by the Holder or cured by
the Company 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) Business 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 reasonable 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.
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7. Duty To Hold In Trust.
(a) Upon the occurrence and continuance of any Event of Default that
is not waived by the Holder or cured by the Company, each Debtor shall,
upon receipt of any revenue, income, dividend, interest or other sums
subject to the Security Interests, whether payable pursuant to the
Debentures 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, who in turn
shall remit the same to the Secured Parties, pro rata in proportion to
their respective then-currently outstanding principal amount of the
remaining Debentures, for application to the satisfaction of the
Obligations (and if any Debentures are not outstanding, pro rata in
proportion to the initial purchases of the remaining Debentures).
(b) If any Debtor shall become entitled to receive or shall receive
any securities or other investment 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) hold the same in trust
on behalf of and for the benefit of the Secured Parties; and (ii) 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.
8. Rights and Remedies Upon Default.
(a) Upon the occurrence and continuance of any Event of Default that
is not waived by the Holder or cured by the Company, the Agent (for the
benefit of the Secured Parties) shall have the right to exercise all of
the remedies conferred on the Agent and Holders under this Agreement and
the Debentures (whether or not such rights are assigned specifically to a
"Holder", "Secured Party" or "Agent"), and 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 to the fullest extent permitted by applicable law:
(i) The Agent shall have the right to take possession of the Collateral, and,
for that purpose, to enter, with the aid and assistance of any person, any
premises where the Collateral, or any part thereof, is located and remove
the same, and at the request of the Agent, 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.
16
(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 shall 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 any applicable law that cannot be waived in this
Agreement, 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.
(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 is 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 its designee to hold as Collateral
pursuant hereto.
(vi) The Agent may (but is 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 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 as provided herein
without giving any warranties and may specifically disclaim such
warranties. The Agent may sell the Collateral as provided herein on
commercially reasonable credit terms, and 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.
17
(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 sale, lease or
other disposition of the Collateral and from payments and other amounts received
by the Agent or any other Secured Party pursuant to Section 8 hereof (including,
without limitation, payments made on account of any insurance policy insuring
any portion of the Collateral) shall be applied in the following order (i) 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, (ii) 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, (iii) to satisfaction of the Obligations pro rata
among the Secured Parties (based on then-outstanding principal amounts of their
respective Debentures at the time of any such determination), (iv) to the
payment of any other amounts required by applicable law, and (v) finally, if any
surplus remains, 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 (A)
such deficiency, together with interest thereon, at the rate of 18% per annum or
the lesser amount permitted by applicable law (the "Default Rate"), and (B) 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 bad faith, 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.
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 cooperate
with Agent in its attempt to satisfy any requirements under the Securities Laws
(including, without limitation, registration thereunder if requested by Agent)
applicable to the sale of the Pledged Securities by Agent.
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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 (other than (i) Permitted Liens and (ii) Permitted Indebtedness)
that in the reasonable opinion of the Agent is reasonably likely to prejudice,
imperil or otherwise affect the Collateral or the Security Interests therein
contemplated hereunder. 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. Until so paid, any fees payable hereunder shall be added to the
principal amount of the Debentures 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, to the fullest
extent permitted by applicable law, (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, (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; (c) 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; and (d) neither
the Agent nor any Secured Party shall 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.
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13. Security Interests Absolute. All rights of the Secured Parties
and all obligations of the Debtors hereunder shall be absolute and unconditional
in accordance with the terms of this Agreement, irrespective of: (a) any lack of
validity or enforceability of any provision of this Agreement, the Debentures or
any agreement entered into in connection with the foregoing; (b) any change in
the time, manner or place of payment or performance of, or in any other term of,
all or any of the Obligations, or any other amendment or waiver of or any
consent to any departure from the Debentures or any other agreement entered into
in connection with the foregoing; (c) any exchange, release or nonperfection of
any of the Collateral, or any release or amendment or waiver of or consent to
departure from any other collateral for, or any guarantee, or any other
security, for all or any of the Obligations; (d) any action by the Secured
Parties to obtain, adjust, settle and cancel in its sole discretion any
insurance claims or matters made or arising in connection with the Collateral;
or (e) any other circumstance which might otherwise constitute any legal or
equitable defense available to a Debtor, or a discharge of all or any part of
the Security Interests granted hereby. Until the Obligations shall have been
paid and performed in full, the rights of the Secured Parties shall continue
even if the Obligations are barred for any reason, including, without
limitation, the running of the statute of limitations or bankruptcy to the
fullest extent permitted by applicable law. Each Debtor expressly waives
[acceptance], presentment, protest, notice of protest, demand, notice of
nonpayment and demand for performance under this Agreement and the other
Transaction Documents. In the event that at any time any transfer of any
Collateral in accordance herewith or any application of any payment received by
the Secured Parties hereunder shall be deemed by final order of a court of
competent jurisdiction to have been a voidable preference or fraudulent
conveyance under the bankruptcy or insolvency laws of the United States, or
shall be deemed to be otherwise due to any party other than the Secured Parties,
then, in any such event, each Debtor's obligations hereunder shall survive
cancellation of this Agreement, and shall not be discharged or satisfied by any
prior payment thereof and/or cancellation of this Agreement, but shall remain a
valid and binding obligation enforceable in accordance with the terms and
provisions hereof. Each Debtor waives all right to require the Secured Parties
to proceed against any other person or entity or to apply any Collateral which
the Secured Parties may hold at any time, or to marshal assets, or to pursue any
other remedy. Each Debtor waives any defense arising by reason of the
application of the statute of limitations to any obligations secured hereby.
14. Term of Agreement; Releases and Subordinations of Certain
Security Interests. (a) This Agreement and the Security Interests shall
terminate on the date on which all payments under the Debentures have been
indefeasibly paid in full in cash and all other Obligations (other than any
contingent indemnification, defense or similar obligation that by its express
terms extends beyond such payment) have been paid in cash 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 in accordance with their
respective terms regardless of the termination of this Agreement.
15. Power of Attorney; Further Assurances.
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(a) Each Debtor authorizes the Agent, and does hereby make,
constitute and appoint the Agent, its successors and permitted assigns and
their respective officers 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, after the occurrence and during the continuance of
an Event of Default that is not waived by the Holder or cured by the
Company: (i) to 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 deems necessary
to protect, preserve and realize upon the Collateral and the Security
Interests granted therein in order to effect the intent of this Agreement
and the Debentures 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 Any Event of Default
that is not waived by the Holder or cured by the Company, each Secured
Party is specifically authorized to execute and file any applications for
or instruments of transfer and assignment to any purchaser thereof in
accordance herewith of any patents, trademarks, copyrights or other
Intellectual Property with the United States Patent and Trademark Office
and the United States Copyright Office.
(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 all such instruments in any jurisdiction
within the United States including, without limitation, the jurisdictions
indicated on Schedule C attached hereto, and will use commercially
reasonable best efforts to make, execute, acknowledge, deliver, file and
record all such instruments with the proper filing and recording agencies
in any other jurisdiction, and will take all such other actions as may
reasonably be necessary, or as reasonably requested by the Agent, in order
(i) to create or perfect the Security Interests as contemplated hereunder,
(ii) to otherwise to carry out the intent and purposes of this Agreement,
or (iii) to reasonable assure and confirm such perfection of the Security
Interests to the Agent.
(c) Each Debtor hereby irrevocably appoints the Agent, its
successors and permitted assigns and their respective officers 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.
21
16. Notices. All notices, requests, demands and other communications
hereunder shall be subject to the notice provision of the Purchase Agreement.
17. Other Security. To the extent that the Obligations are now or
hereafter secured by property other than the Collateral from any person other
than the Debtors or by the guarantee, endorsement or property of any other
person, firm, corporation or other entity (other than the Debtors), then the
Agent shall have the right, in its sole discretion, to release, relinquish,
subordinate or take any other similar action with respect to the Collateral or
Obligations, 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 the
Agent to act as their agent for purposes of receiving the grant of the Security
Interests for their benefit and 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 the current Agent may not be removed unless
such Agent shall then hold less than $_____ in principal amount of Debentures;
provided, further, that such removal may occur only if each of the other Secured
Parties shall then hold not less than an aggregate of $______ in principal
amount of Debentures. The Agent shall have the rights, responsibilities and
immunities set forth in Annex B hereto. However, nothing in Annex B is intended,
or shall be deemed or construed, to in any way confer on the Agent any right,
power, privilege, remedy or interest under any Transaction Document not
conferred on the Agent, Holder, Purchaser or Secured Party (as applicable) under
applicable law or the express terms of the applicable Transaction Document.
19. Miscellaneous.
(a) No course of dealing between or among the parties, nor any
failure to exercise, nor any delay in exercising, on the part of any of
the 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 parties with respect to
the Collateral, whether established by this Agreement, by the Debentures,
by any other agreements, instruments or documents among the parties, or by
applicable law, shall be cumulative and not alternatives and may be
exercised singly or concurrently.
(c) This Agreement, together with the exhibits and schedules hereto,
contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the
parties acknowledge have been merged into this Agreement and the exhibits
and schedules hereto. No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed,
in the case of an amendment, by the Debtors and the Secured Parties or, in
the case of a waiver, by the party against whom enforcement of any such
waived provision is sought. By accepting this Agreement, whether or not a
signatory hereto, each Holder acknowledges and agrees that the Holder (A)
is a "Secured Party", one of the "Secured Parties", a "party" and one of
the "parties" for the purposes of this Agreement and (A) is contractually
bound by the provisions hereof applicable to it as such a Secured Party,
one of the Secured Parties, a party or one of the parties.
22
(d) If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their commercially reasonable efforts to find and
employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(e) No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall
any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right.
(f) This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and permitted assigns. The Debtors may
not assign this Agreement or any rights or obligations hereunder without
the prior written consent of each Secured Party (other than by merger or
joinder of an additional Debtor as contemplated herein). Any Secured Party
may assign any or all of its rights under this Agreement to any Person to
whom such Secured Party also assigns or transfers any Debentures in
accordance with the terms thereof and of the Purchase Agreement, provided
such transferee agrees in writing to be bound, with respect to the
transferred Debentures and corresponding interests in the other
Transaction Documents, by the provisions of this Agreement, the
Debentures, the Guarantee and the Purchase Agreement that apply to the
"Purchasers", "Secured Parties" and the "Holders" hereunder and
thereunder.
(g) Each party shall take such further action and execute and
deliver such further documents as may be reasonably requested by the other
parties as necessary or appropriate in order to carry out (and provided
the same are not inconsistent with) the provisions and purposes of this
Agreement.
23
(h) All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall, to the fullest extent
permitted by applicable law, be governed by and construed and enforced in
accordance with the internal laws of the State of New York, and the
federal laws of the United States of America, without regard to any
principles of conflicts of law thereof that would defer to the substantive
laws of any other jurisdiction. 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. The preceding consents to New York governing law
and jurisdiction and venue in New York State's Supreme Court have been
made by the parties in reliance (at least in part) on Sections 5-1401 and
5-1402 of the General Obligations Law of the State of New York, as amended
(as and to the extent applicable), and other applicable law. 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. 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 of
the entire document or of the signature pages hereto, any of which may be
delivered by telecopy, email or other electronic means, and 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, e-mail, pdf or
similar format data file or other electronic means, 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, ".pdf" or electronically transmitted signature page
were an original thereof.
(j) All Debtors shall jointly and severally be liable for the
obligations of each Debtor to the Secured Parties hereunder to the same
extent as if set forth in the Guarantee.
24
(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) (each an
"Indemnitee" and collectively the "Indemnitees"), from and against any and
all losses, claims, liabilities, damages, penalties, suits, costs and
expenses, of any kind or nature, (including fees relating to the cost of
investigating and defending any of the foregoing) imposed on, incurred by
or asserted against such Indemnitee in any way related to or arising from
or alleged to arise from this Agreement or the Collateral, except to the
extent any such losses, claims, liabilities, damages, penalties, suits,
costs and expenses result from any act, omission or other conduct by any
Indemnitee that constitute fraud, gross negligence, willful misconduct or
malfeasance 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 Purchase Agreement (as such term is defined in the
Debentures) or any other agreement, instrument or other document executed
or delivered in connection herewith or therewith. Claims for
indemnification and defense by each Indemnitee shall be made as provided
in the Purchase Agreement.
(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 hereunder as a purchaser 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 Debtor as shareholder, partner or member, as
applicable, of any other Debtor or any direct or indirect subsidiary of
any Debtor or compliance with any provisions of any of the Organizational
Documents, each Debtor hereby grants such consent and approval and waives
any such noncompliance with the terms of said documents.
(n) This Agreement is the Security Agreement referred to in the
Purchase Agreement and other Transaction Documents. All of the applicable
provisions of the Purchase Agreement, including (without limitation) any
provision for limiting the maximum rate of interest payable hereunder, are
incorporated herein by reference and made a part hereof. In the event that
any specific provision of this Agreement conflicts or is inconsistent with
any specific term or provision contained in the Purchase Agreement, the
specific term or provision of the Purchase Agreement shall control and be
given effect. However, this Agreement contains provisions that are in
addition to those contained in the Purchase Agreement, which each are
cumulative with and not alternatives to each other, and which shall not be
deemed or construed to be in conflict or inconsistent with the Purchase
Agreement because they are not contained in it.
25
(o) No party has (directly or indirectly) offered, made, accepted or
acknowledged any representation, warranty, promise, assurance or other
agreement or understanding (whether written, oral, express, implied or
otherwise) to, with or for the benefit of any other party, any of their
respective Affiliates or representatives respecting any of the matters
contained in this Agreement except for those expressly set forth in this
Agreement. This Agreement, together with the exhibits and schedules
hereto, contain the entire understanding of the parties with respect to
the subject matter hereof and supersede all prior representations,
warranties, promises, assurances and other agreements and understandings
(whether written, oral, express, implied or otherwise) with respect to
such matters, which the parties acknowledge have been merged into this
Agreement and its exhibits and schedules.
(p) The headings herein are for convenience only, do not constitute
a part of this Agreement and shall not be deemed to limit or affect any of
the provisions hereof
(q) In any action, suit or proceeding in any jurisdiction brought by
any party against any other party, the parties each knowingly and
intentionally, to the greatest extent permitted by applicable law, hereby
absolutely, unconditionally, irrevocably and expressly waives forever
trial by jury.
SIGNATURE PAGES FOLLOW
26
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed on the day and year first above written.
STAR ENERGY CORPORATION
By:___________________________
Name:
Title:
[INSERT NAMES OF SUBSIDIARIES]
By:___________________________
Name:
Title:
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
27
[SIGNATURE PAGE OF HOLDERS TO SERG 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]
28
SCHEDULE A
Principal Place of Business of Debtors:
Locations Where Collateral is Located or Stored:
SCHEDULE B
SCHEDULE C
SCHEDULE D
Legal Names and Organizational Identification Numbers
SCHEDULE E
Names; Mergers and Acquisitions
SCHEDULE F
Intellectual Property
SCHEDULE G
Account Debtors
SCHEDULE H
Pledged Securities
29
ANNEX A
to
SECURITY
AGREEMENT
FORM OF ADDITIONAL DEBTOR JOINDER
Security Agreement dated as of February ___, 2007 made by
Star Energy Corporation
and its subsidiaries party thereto from time to time, as Debtors
to and in favor of
the Secured Parties identified therein (as the same may be
supplemented, modified, amended, restated or replaced from
time to time in the manner provided 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 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
AS 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 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 Secured Parties.
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:
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 (as the same may be supplemented, modified, amended, restated
or replaced from time to time in the manner provided therein, the "Agreement")
to which this Annex B is attached), by their acceptance of the benefits of the
Agreement, hereby designate _____ ("____" 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, and
in accordance with, the provisions of the Agreement and any other Transaction
Document (as such term is defined in the Purchase Agreement) 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
misconduct 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.
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. Anything to the contrary notwithstanding, the
Agent shall have no obligation whatsoever to any Secured Party to assure that
the Collateral exists or is owned by the Debtors or is cared for, protected or
insured or that the liens granted pursuant to the Agreement have been properly
or sufficiently or lawfully created, perfected, or enforced or are entitled to
any particular priority.
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.
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. Upon
the acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent and the retiring
Agent shall be discharged from its duties and obligations under the Agreement.
After any retiring Agent's resignation or removal hereunder as Agent, the
provisions of the Agreement including this Annex B shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was Agent.
